资深财务报告分析助理任务完成报告 报告概述 本报告旨在根据提供的报告大纲内容，生成一份清晰、专业且结构化的英文财务报告大纲。报告将严格遵循以下要求： 1. **结构要求**： * 将所有内容翻译成英文，并确保单位（如billion, million）的准确性。 * 使用适当的Markdown标题样式（、、）。 * 为每个章节提供一个简洁的单句总结（约100字符），捕捉核心内容，避免冗余。 * 为每个章节标题添加页面跳转链接，格式为`[Chapter Title](index=page_num&type=section&id=item_id)`，其中`page_num`为起始页码，`item_id`需进行URL编码。 * “insight”类型的关键点以无序列表展示，关键指标和结论加粗。 * “table”类型的关键点使用Markdown表格，表格标题作为子标题，列标题中包含单位。 * “insight”类型的关键点若有chunk引用，以`[chunk_num](index=chunk_num&type=chunk)`格式在句末按升序添加。表格不添加引用。 2. **语言风格要求**： * 使用正式书面语言，避免解释性短语。 * 章节总结应为简洁的单句，不重复关键点内容。 * 不添加“Report Title”等冗余前缀。 * 使用专业财务术语和表达。 * 输出为英文，句末不使用句号。 报告生成过程 1. **内容翻译与单位转换**：仔细审查大纲中的所有中文内容和单位，将其准确翻译成英文。特别注意“千”到“thousand”的转换，并确保“million”和“billion”的正确使用。表格中的“In thousands”将转换为列标题中的“(Thousands)”。 2. **章节总结生成**：对于大纲中已提供总结的章节，直接使用。对于`summary: null`的章节，根据章节标题和其下的关键点，提炼出符合“简洁单句，约100字符，不重复关键点内容”要求的英文总结。 3. **标题与链接格式化**：根据`level`字段确定Markdown标题级别。使用`start_page`作为`page_num`，并对`item_id`进行URL编码，构建页面跳转链接。 4. **关键点处理**： * **Insight类型**：将`content`作为列表项，识别并加粗关键财务数据和结论。将`chunk_num`按升序排列并格式化为引用链接，附加在句末。 * **Table类型**：将`content`中的表格标题提取为``子标题。将表格内容转换为Markdown表格，并调整列标题以包含单位（如“(Thousands)”）。 5. **语言风格检查**：全程确保输出符合正式、专业的财务报告语言风格，无冗余前缀，无解释性短语，且句末无句号。 报告大纲输出 [Form 10-Q General Information](index=1&type=section&id=Form%2010-Q%20General%20Information) Provides key administrative details of the quarterly report, including registrant information and filing status - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[1](index=1&type=chunk) Registrant Information | Detail | Value | | :--- | :--- | | Exact Name | Old Second Bancorp, Inc. | | Commission File Number | 000-10537 | | State of Incorporation | Delaware | | Trading Symbol | OSBC | | Exchange | The Nasdaq Stock Market | | Filer Status | Accelerated filer | | Shell Company | No | | Common Stock Outstanding (as of Aug 5, 2025) | 52,650,413 shares | [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) Highlights that forward-looking statements are subject to risks and uncertainties, and the company does not commit to updating them - Forward-looking statements are based on current beliefs, expectations, and assumptions, and are subject to risks and uncertainties that could cause actual results to differ materially[8](index=8&type=chunk) - Key potential risks include the ability to execute growth strategy, negative economic conditions (inflation, real estate values), successful integration of acquired businesses (Bancorp Financial, Inc.), changes in U.S. monetary policy and interest rates, competitive pressures, and adverse effects on information technology systems[8](index=8&type=chunk)[10](index=10&type=chunk) - The Company undertakes no obligation to update any forward-looking statements in light of new information or future events, except as required by applicable law[9](index=9&type=chunk) [PART I – FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) Presents the unaudited consolidated financial statements and related notes for the reporting period [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Old Second Bancorp, Inc. and its subsidiaries for the period ended June 30, 2025, including the balance sheets, statements of income, comprehensive income, cash flows, and changes in stockholders' equity. It also includes detailed notes explaining the basis of presentation, significant accounting policies, recent acquisitions, securities portfolio, loans and credit losses, deposits, borrowings, equity compensation, earnings per share, regulatory capital, fair value measurements, derivatives, and segment information [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Summarizes the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Consolidated Balance Sheet Highlights (Thousands) | Item | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | Change (2025 vs 2024) (Thousands) | | :--- | :--- | :--- | :--- | | **Assets:** | | | | | Total assets | $5,701,294 | $5,649,377 | +$51,917 | | Cash and cash equivalents | $141,767 | $99,329 | +$42,438 | | Securities available-for-sale | $1,177,688 | $1,161,701 | +$15,987 | | Net loans | $3,955,677 | $3,937,717 | +$17,960 | | **Liabilities:** | | | | | Total deposits | $4,798,439 | $4,768,731 | +$29,708 | | Total liabilities | $4,982,645 | $4,978,343 | +$4,302 | | **Stockholders' Equity:** | | | | | Total stockholders' equity | $718,649 | $671,034 | +$47,615 | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Details the company's financial performance, including revenues, expenses, and net income over specific periods Consolidated Statements of Income Highlights (Thousands, except per share data) | Item | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Total interest and dividend income | $75,238 | $73,223 | $148,803 | $146,553 | | Total interest expense | $11,004 | $13,533 | $21,665 | $27,080 | | Net interest and dividend income | $64,234 | $59,690 | $127,138 | $119,473 | | Provision for credit losses | $2,500 | $3,750 | $4,900 | $7,250 | | Total noninterest income | $10,898 | $11,127 | $21,099 | $21,628 | | Total noninterest expense | $43,419 | $37,877 | $87,924 | $76,118 | | Net income | $21,822 | $21,891 | $41,652 | $43,203 | | Basic earnings per share | $0.49 | $0.48 | $0.93 | $0.96 | | Diluted earnings per share | $0.48 | $0.48 | $0.91 | $0.95 | | Dividends declared per share | $0.06 | $0.05 | $0.12 | $0.10 | [Consolidated Statements of Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Presents net income and other comprehensive income components, reflecting total changes in equity from non-owner sources Consolidated Statements of Comprehensive Income Highlights (Thousands) | Item | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $21,822 | $21,891 | $41,652 | $43,203 | | Other comprehensive income (net of tax) | $3,953 | $2,592 | $10,322 | $2,012 | | Total comprehensive income | $25,775 | $24,483 | $51,974 | $45,215 | - Accumulated other comprehensive loss, net, improved from **$(47,748) thousand** at January 1, 2025, to **$(37,426) thousand** at June 30, 202

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]

分组1 - Old Second Bancorp (OSBC) reported quarterly earnings of $0.48 per share, missing the Zacks Consensus Estimate of $0.49 per share, but showing an increase from $0.46 per share a year ago, resulting in an earnings surprise of -2.04% [1] - The company posted revenues of $75.13 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.46%, compared to year-ago revenues of $70.82 million [2] - Over the last four quarters, Old Second Bancorp has surpassed consensus revenue estimates four times, but has only exceeded consensus EPS estimates once [2] 分组2 - The stock has added about 5% since the beginning of the year, while the S&P 500 has gained 7.3%, indicating underperformance relative to the broader market [3] - The current consensus EPS estimate for the coming quarter is $0.48 on revenues of $89.6 million, and for the current fiscal year, it is $1.95 on revenues of $326.65 million [7] - The Zacks Industry Rank for Banks - Midwest is currently in the top 30% of over 250 Zacks industries, suggesting a favorable outlook for the industry [8]

Executive Summary [Q2 2025 Financial Performance Overview](index=1&type=section&id=Q2%202025%20Financial%20Performance%20Overview) Old Second Bancorp, Inc. reported net income of $21.8 million, or $0.48 per diluted share, for Q2 2025, showing an increase from Q1 2025 but a slight decrease from Q2 2024, with adjusted net income indicating stronger underlying operational performance Net Income and EPS (GAAP & Adjusted) (Dollars in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----------------------- | :------ | :------ | :------ | | Net Income (GAAP) | $21.8M | $19.8M | $21.9M | | Diluted EPS (GAAP) | $0.48 | $0.43 | $0.48 | | Adjusted Net Income (Non-GAAP) | $22.8M | $20.6M | $21.2M | | Adjusted Diluted EPS (Non-GAAP) | $0.50 | $0.45 | $0.46 | - Net income increased by **$2.0 million** QoQ, driven by a **$1.7 million** increase in interest and dividend income, a **$697,000** increase in noninterest income, and a **$1.1 million** decrease in noninterest expense, partially offset by a **$343,000** increase in interest expense and a **$1.0 million** increase in provision for income taxes[2](index=2&type=chunk) - Net income decreased by **$69,000** YoY, primarily due to a **$5.5 million** increase in noninterest expense and a **$229,000** decrease in noninterest income, partially offset by a **$4.5 million** increase in net interest and dividend income and a **$1.3 million** decrease in provision for credit losses[2](index=2&type=chunk) [CEO Commentary and Strategic Outlook](index=5&type=section&id=CEO%20Commentary%20and%20Strategic%20Outlook) CEO Jim Eccher highlighted strong Q2 2025 results, emphasizing exceptional margin performance, disciplined operating efficiency, and a robust balance sheet, with the recent acquisition of Bancorp Financial, Inc. expected to enhance consumer lending capabilities and improve profitability - Key performance indicators for Q2 2025 included a Return on Average Assets (ROAA) of **1.53%**, Return on Average Tangible Common Equity (ROATCE) of **15.29%**, a tax-equivalent net interest margin of **4.85%**, and an efficiency ratio of **55.99%**[10](index=10&type=chunk) - The balance sheet remains strong with a Common Equity Tier 1 ratio of **13.77%**, a loan-to-deposit ratio of **83%**, and cash and marketable securities exceeding **23%** of total assets[10](index=10&type=chunk) - On July 1, 2025, Old Second acquired Bancorp Financial, Inc., a **$1.4 billion** bank holding company, to add meaningful consumer lending capabilities and enhance balance sheet flexibility and profitability[10](index=10&type=chunk) Financial Highlights & Key Metrics [Income Statement Summary](index=3&type=section&id=Income%20Statement%20Summary) The income statement highlights show an increase in net interest income and net income QoQ, but a slight decrease in net income YoY, with provision for credit losses remaining stable QoQ but decreasing YoY Income Statement Summary (Dollars in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :------------ | | Net interest income | $64,234 | $62,904 | $59,690 | | Provision for credit losses | $2,500 | $2,400 | $3,750 | | Noninterest income | $10,898 | $10,201 | $11,127 | | Noninterest expense | $43,419 | $44,505 | $37,877 | | Net income | $21,822 | $19,830 | $21,891 | | Effective tax rate | 25.30% | 24.31% | 25.01% | [Balance Sheet Summary](index=3&type=section&id=Balance%20Sheet%20Summary) Total assets and deposits saw minor fluctuations QoQ, while total equity and tangible equity continued to grow, reflecting a strengthening capital base Balance Sheet Summary (Dollars in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :------------ | | Total assets | $5,701,294 | $5,727,686 | $5,662,700 | | Total loans | $3,998,667 | $3,940,232 | $3,976,595 | | Total deposits | $4,798,439 | $4,852,791 | $4,521,728 | | Total equity | $718,649 | $694,491 | $619,335 | | Total tangible equity | $605,445 | $580,265 | $522,794 | [Profitability and Capital Ratios](index=3&type=section&id=Profitability%20and%20Capital%20Ratios) Profitability ratios generally improved QoQ, with ROAA and ROAE increasing, and capital ratios for both the Company and the Bank remained strong and above regulatory minimums, indicating robust financial health Profitability Ratios | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :------------ | | Return on average assets (ROAA) | 1.53% | 1.42% | 1.57% | | Return on average equity (ROAE) | 12.39% | 11.76% | 14.55% | | Net interest margin (tax-equivalent) | 4.85% | 4.88% | 4.63% | | Efficiency ratio | 55.99% | 56.46% | 53.29% | | Return on average tangible common equity (ROATCE) | 15.29% | 14.70% | 17.66% | | Tangible common equity to tangible assets (TCE/TA) | 10.83% | 10.34% | 9.39% | Company Capital Ratios | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :------------ | | Common equity tier 1 capital ratio | 13.77% | 13.47% | 12.41% | | Tier 1 risk-based capital ratio | 14.31% | 14.01% | 12.94% | | Total risk-based capital ratio | 16.55% | 16.24% | 15.12% | | Tier 1 leverage ratio | 11.83% | 11.58% | 10.96% | - Both Company and Bank capital ratios are inclusive of a capital conservation buffer of **2.50%** and exceed minimum capital adequacy guidelines[7](index=7&type=chunk) [Per Share Data](index=3&type=section&id=Per%20Share%20Data) Diluted earnings per share remained stable YoY at $0.48, while tangible book value per share continued its double-digit growth trend Per Share Data | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------ | :------------ | :------------- | :------------ | | Diluted earnings per share | $0.48 | $0.43 | $0.48 | | Tangible book value per share | $13.44 | $12.88 | $11.66 | | Cash dividend per share | $0.06 | N/A | N/A | - The Board of Directors declared a cash dividend of **$0.06 per share** of common stock, payable on August 4, 2025[9](index=9&type=chunk) Detailed Operating Results [Net Interest Income Analysis](index=6&type=section&id=Net%20Interest%20Income%20Analysis) Net interest income increased QoQ and YoY, driven by higher earning asset balances and improved securities yields, despite a slight decline in net interest margin QoQ due to market interest rates and one more day in the period with larger interest earning asset balances Net Interest Income (Dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :---------------------- | :------ | :------ | :------ | | Net interest income (GAAP) | $64,234 | $62,904 | $59,690 | | Net interest income (TE) | $64,570 | $63,248 | $60,044 | | Net interest margin (GAAP) | 4.83% | 4.85% | 4.60% | | Net interest margin (TE) | 4.85% | 4.88% | 4.63% | - The QoQ decrease in net interest margin was driven by market interest rates and one more day in the period with larger interest earning asset balances. The YoY increase was primarily due to higher security yields and a decrease in average other short-term borrowings[20](index=20&type=chunk) [Interest Income and Expense Trends](index=6&type=section&id=Interest%20Income%20and%20Expense%20Trends) Interest income from earning assets increased QoQ and YoY, primarily due to higher yielding securities replacing older ones, while interest expense on deposits saw a slight QoQ increase but a YoY decrease, and borrowing costs decreased significantly YoY due to reduced FHLB advances Interest Income (Dollars in thousands) | Source | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Total interest earning assets (Avg Bal) | $5,336,339 | $5,257,416 | $5,216,248 | | Total interest income (TE) | $75,574 | $73,909 | $73,577 | | Yield on interest earning assets | 5.68% | 5.70% | 5.67% | Interest Expense (Dollars in thousands) | Source | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Total interest bearing liabilities (Avg Bal) | $3,241,585 | $3,216,946 | $3,172,132 | | Total interest expense | $11,004 | $10,661 | $13,533 | | Cost of interest bearing liabilities | 1.36% | 1.34% | 1.72% | | Cost of interest bearing deposits | 1.30% | 1.28% | 1.33% | - The decreased yield on interest earning assets QoQ was driven by a lower yield on FHLBC and FRBC Stock and repricing within the loan portfolio. The YoY increase was due to planned turnover in the securities portfolio, replacing lower-yielding securities with higher-yielding investments[15](index=15&type=chunk)[17](index=17&type=chunk) - Borrowing costs decreased QoQ due to a **$1.4 million** decrease in average other short-term borrowings and significantly YoY (**$242.9 million** decrease in average FHLB advances), leading to a **$3.3 million** reduction in interest expense on other short-term borrowings[19](index=19&type=chunk) [Noninterest Income Analysis](index=9&type=section&id=Noninterest%20Income%20Analysis) Noninterest income increased QoQ, primarily due to higher card-related income and an increase in the cash surrender value of BOLI, but decreased YoY mainly due to the absence of a death benefit realized on BOLI in 2025 and a decrease in residential mortgage banking revenue Noninterest Income (Dollars in thousands) | Category | Q2 2025 | Q1 2025 | Q2 2024 | % Change QoQ | % Change YoY | | :------------------------------------ | :------ | :------ | :------ | :----------- | :----------- | | Wealth management | $3,103 | $3,089 | $2,779 | 0.5% | 11.7% | | Service charges on deposits | $2,788 | $2,719 | $2,508 | 2.5% | 11.2% | | Total residential mortgage banking revenue | $575 | $447 | $808 | 28.6% | (28.8%) | | Change in cash surrender value of BOLI | $690 | $498 | $820 | 38.6% | (15.9%) | | Death benefit realized on BOLI | $- | $- | $893 | - | (100.0%) | | Card related income | $2,716 | $2,412 | $2,577 | 12.6% | 5.4% | | Other income | $1,026 | $1,036 | $742 | (1.0%) | 38.3% | | **Total noninterest income** | **$10,898** | **$10,201** | **$11,127** | **6.8%** | **(2.1%)** | - The QoQ increase was primarily driven by a **$304,000** increase in card related income and a **$192,000** increase in the cash surrender value of BOLI[21](index=21&type=chunk) - The YoY decrease was mainly due to no death benefits realized on BOLI in 2025 (compared to **$893,000** in Q2 2024) and a **$233,000** decrease in residential mortgage banking revenue, partially offset by increases in wealth management income, service charges on deposits, and other income[22](index=22&type=chunk) [Noninterest Expense Analysis](index=10&type=section&id=Noninterest%20Expense%20Analysis) Noninterest expense decreased QoQ, mainly due to a significant reduction in other real estate owned (OREO) expense, but increased YoY, primarily driven by higher salaries and employee benefits, and increased computer and data processing costs related to acquisitions Noninterest Expense (Dollars in thousands) | Category | Q2 2025 | Q1 2025 | Q2 2024 | % Change QoQ | % Change YoY | | :------------------------------------ | :------ | :------ | :------ | :----------- | :----------- | | Total salaries and employee benefits | $26,950 | $26,993 | $23,424 | (0.2%) | 15.1% | | Occupancy, furniture and equipment expense | $4,477 | $4,548 | $3,899 | (1.6%) | 14.8% | | Computer and data processing | $2,692 | $2,348 | $2,184 | 14.7% | 23.3% | | Amortization of core deposit intangible asset | $1,022 | $1,037 | $574 | (1.4%) | 78.0% | | Other real estate owned expense, net | $35 | $1,873 | $(87) | (98.1%) | N/M | | **Total noninterest expense** | **$43,419** | **$44,505** | **$37,877** | **(2.4%)** | **14.6%** | | Efficiency ratio (GAAP) | 55.99% | 56.46% | 53.29% | | | | Adjusted efficiency ratio (non-GAAP) | 54.54% | 55.48% | 52.68% | | | - The QoQ decrease was mainly due to a **$1.8 million** decrease in OREO expense, net, reflecting a gain on OREO sale in Q2 2025 versus a net loss in Q1 2025, and lower operating costs from a large OREO property sale[27](index=27&type=chunk) - The YoY increase was primarily attributable to a **$3.5 million** increase in salaries and employee benefits, and increases in occupancy, computer and data processing, and core deposit intangible, partly due to the FRME branches acquisition and Bancorp Financial merger-related costs[28](index=28&type=chunk) Balance Sheet and Asset Quality [Earning Assets](index=5&type=section&id=Earning%20Assets) Total loans increased QoQ and YoY, driven by growth in leases, commercial real estate-investor, and construction portfolios, while the available-for-sale securities portfolio also increased, with a reduction in net unrealized losses - Total loans were **$4.00 billion** at June 30, 2025, an increase of **$58.4 million** QoQ and **$22.1 million** YoY[11](index=11&type=chunk) - Available-for-sale securities totaled **$1.18 billion** at June 30, 2025, an increase of **$31.0 million** QoQ and **$4.0 million** YoY. Net unrealized losses decreased to **$54.7 million** from **$59.7 million** QoQ and **$82.6 million** YoY[11](index=11&type=chunk)[32](index=32&type=chunk) [Loan Portfolio Composition and Trends](index=12&type=section&id=Loan%20Portfolio%20Composition%20and%20Trends) Loan growth QoQ was primarily in construction, leases, and commercial real estate – investor segments, while commercial, commercial real estate – owner occupied, and multifamily loans decreased, with year-over-year growth following similar trends, with significant increases in leases and construction Total Loans by Segment (Dollars in thousands) | Segment | June 30, 2025 | March 31, 2025 | June 30, 2024 | % Change QoQ | % Change YoY | | :-------------------------------- | :------------ | :------------- | :------------ | :----------- | :----------- | | Commercial | $718,927 | $732,874 | $809,443 | (1.9%) | (11.2%) | | Leases | $524,513 | $505,455 | $452,957 | 3.8% | 15.8% | | Commercial real estate – investor | $1,118,782 | $1,105,440 | $1,014,345 | 1.2% | 10.3% | | Commercial real estate – owner occupied | $652,449 | $669,964 | $745,938 | (2.6%) | (12.5%) | | Construction | $251,692 | $205,839 | $185,634 | 22.3% | 35.6% | | Multifamily | $333,787 | $341,253 | $388,743 | (2.2%) | (14.1%) | | **Total loans** | **$3,998,667** | **$3,940,232** | **$3,976,595** | **1.5%** | **0.6%** | - The increase in total loans QoQ was primarily due to increased originations in leases (**$19.1 million**), commercial real estate – investor (**$13.3 million**), and construction loans (**$45.9 million**)[31](index=31&type=chunk) - Year-over-year loan growth was driven by leases (**$71.6 million**), commercial real estate – investor (**$104.4 million**), and construction (**$66.1 million**)[31](index=31&type=chunk) [Securities Portfolio](index=12&type=section&id=Securities%20Portfolio) The securities available-for-sale portfolio increased QoQ due to purchases and a reduction in unrealized losses, maintaining high quality with over 99% of publicly issued securities rated AA or better Securities Available-for-Sale (Dollars in thousands) | Category | June 30, 2025 | March 31, 2025 | June 30, 2024 | % Change QoQ | % Change YoY | | :------------------------------------ | :------------ | :------------- | :------------ | :----------- | :----------- | | U.S. Treasury | $190,446 | $160,191 | $191,274 | 18.9% | (0.4%) | | Collateralized mortgage obligations | $395,014 | $390,891 | $386,055 | 1.1% | 2.3% | | Collateralized loan obligations | $201,071 | $199,845 | $177,020 | 0.6% | 13.6% | | **Total securities available-for-sale** | **$1,177,688** | **$1,146,721** | **$1,173,661** | **2.7%** | **0.3%** | - The QoQ increase in the securities portfolio was due to **$79.6 million** in purchases and a **$5.0 million** reduction in unrealized losses, partially offset by **$53.2 million** in maturities, calls, and paydowns[32](index=32&type=chunk) - The year-over-year decrease in net unrealized losses is attributed to changes in market interest rates and the replacement of matured securities with higher-yielding, short-duration investments[32](index=32&type=chunk) [Asset Quality](index=5&type=section&id=Asset%20Quality) Asset quality improved with a decrease in nonperforming loans QoQ and YoY, while total nonperforming assets saw a slight QoQ increase but a significant YoY decrease, and classified loans increased QoQ but decreased YoY, with ongoing remediation efforts - Nonperforming loans totaled **$32.2 million** at June 30, 2025, a decrease of **$2.5 million** QoQ and **$14.7 million** YoY. As a percent of total loans, nonperforming loans were **0.8%** at June 30, 2025, down from **0.9%** QoQ and **1.2%** YoY[11](index=11&type=chunk)[34](index=34&type=chunk) - Total nonperforming assets were **$39.0 million** at June 30, 2025, a **2.1%** increase QoQ but a **27.6%** decrease YoY[34](index=34&type=chunk) [Nonperforming Assets](index=14&type=section&id=Nonperforming%20Assets) Nonaccrual loans and loans past due 90 days or more significantly decreased QoQ and YoY, while other real estate owned (OREO) increased QoQ but decreased YoY Nonperforming Assets (Dollars in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | % Change QoQ | % Change YoY | | :------------------------------------ | :------------ | :------------- | :------------ | :----------- | :----------- | | Nonaccrual loans | $31,902 | $33,394 | $41,957 | (4.5%) | (24.0%) | | Loans past due 90 days or more and still accruing interest | $345 | $1,397 | $4,909 | (75.3%) | (93.0%) | | **Total nonperforming loans** | **$32,247** | **$34,791** | **$46,866** | **(7.3%)** | **(31.2%)** | | Other real estate owned | $6,486 | $2,878 | $6,920 | 125.4% | (6.3%) | | **Total nonperforming assets** | **$38,967** | **$38,153** | **$53,786** | **2.1%** | **(27.6%)** | - The **$2.5 million** decrease in nonperforming loans QoQ was driven by nonaccrual loan outflows of **$6.6 million**, primarily due to one relationship transferred to OREO, partially offset by inflows of **$5.1 million**[11](index=11&type=chunk) [Classified Loans](index=14&type=section&id=Classified%20Loans) Classified loans increased QoQ, mainly due to a large commercial real estate – owner occupied downgrade, but decreased significantly YoY, with remediation efforts ongoing to improve cash flow and tenancy Classified Loans by Segment (Dollars in thousands) | Segment | June 30, 2025 | March 31, 2025 | June 30, 2024 | % Change QoQ | % Change YoY | | :-------------------------------- | :------------ | :------------- | :------------ | :----------- | :----------- | | Commercial | $23,354 | $20,807 | $19,142 | 12.2% | 22.0% | | Commercial real estate – owner occupied | $51,335 | $26,818 | $48,387 | 91.4% | 6.1% | | Construction | $1,624 | $18,201 | $5,740 | (91.1%) | (71.7%) | | Multifamily | $1,099 | $332 | $6,810 | 231.0% | (83.9%) | | **Total classified loans** | **$97,620** | **$85,043** | **$122,405** | **14.8%** | **(20.2%)** | - The QoQ increase in classified loans was primarily driven by **$35.4 million** in inflows, mostly from one large commercial real estate – owner occupied downgrade, offset by **$22.8 million** in outflows (paid off, upgraded, transferred to OREO, principal reductions, and charge-offs)[39](index=39&type=chunk) [Allowance for Credit Losses and Net Charge-offs](index=15&type=section&id=Allowance%20for%20Credit%20Losses%20and%20Net%20Charge-offs) The Allowance for Credit Losses (ACL) on loans remained stable as a percentage of total loans, provision expense for credit losses was consistent QoQ but decreased YoY, and net charge-offs significantly decreased QoQ and YoY, with continued strong recoveries Allowance for Credit Losses (Dollars in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :------------ | | ACL on loans | $42,990 | $41,551 | $42,269 | | ACL on unfunded commitments | $2,300 | $2,000 | $2,500 | | Provision for credit losses | $2,500 | $2,400 | $3,750 | | Net charge-offs | $785 | $4,353 | $5,794 | | ACL on loans to total loans | 1.1% | 1.1% | 1.1% | | ACL on loans to nonaccrual loans | 134.8% | 124.4% | 100.7% | - The Q2 2025 provision expense of **$2.5 million** consisted of **$2.2 million** for credit losses on loans and **$277,000** for unfunded commitments, based on historical loss rates and nonperforming loan trends[40](index=40&type=chunk) - Net charge-offs of **$785,000** in Q2 2025 were primarily within the commercial portfolio, representing a significant decrease from **$4.4 million** in Q1 2025 and **$5.8 million** in Q2 2024[40](index=40&type=chunk)[42](index=42&type=chunk) - Gross recoveries were **$447,000** in Q2 2025, indicating aggressive management efforts to resolve prior charge-offs[45](index=45&type=chunk) [Deposits](index=16&type=section&id=Deposits) Total deposits decreased QoQ, mainly due to declines in savings, NOW, demand, and time deposits, with the bulk of the decline occurring in June, but total quarterly average deposits increased YoY, driven by the acquisition of FRME branches in December 2024 - Total deposits were **$4.80 billion** at June 30, 2025, a decrease of **$54.4 million** (**1.1%**) compared to March 31, 2025[46](index=46&type=chunk) - The QoQ decrease was primarily due to decreases in savings accounts (**$23.2 million**), NOW accounts (**$11.8 million**), demand deposits (**$9.6 million**), and time deposits (**$10.4 million**)[46](index=46&type=chunk) - Total quarterly average deposits increased **$274.0 million** (**6.0%**) YoY, driven by the acquisition of FRME branches in December 2024[47](index=47&type=chunk) [Borrowings](index=16&type=section&id=Borrowings) Other short-term borrowings were eliminated by June 30, 2025, a significant reduction from the prior year, primarily due to an influx of cash from the FRME branch acquisition, which provided lower-cost funding - As of June 30, 2025, and March 31, 2025, there were no other short-term borrowings, compared to **$330.0 million** at June 30, 2024, which were all short-term FHLB advances[48](index=48&type=chunk) - The substantial decrease in short-term FHLB advances resulted from cash influx due to the FRME branch acquisition in December 2024, allowing the use of purchased deposits for lower-cost funding[48](index=48&type=chunk) Non-GAAP Financial Measures Reconciliation [Non-GAAP Presentations Overview](index=16&type=section&id=Non-GAAP%20Presentations%20Overview) Management uses non-GAAP financial measures, such as adjusted net income, tax-equivalent net interest income/margin, and adjusted efficiency ratio, to provide supplemental information for evaluating performance and period-to-period comparisons - Non-GAAP measures are used for financial and operational decision-making and evaluating period-to-period comparisons, by excluding expenditures or assets not indicative of primary business operations or by presenting metrics on a fully taxable equivalent basis[50](index=50&type=chunk) - These non-GAAP measures should not be considered a substitute for GAAP financial measures, and investors are encouraged to review GAAP measures and not rely solely on non-GAAP information[51](index=51&type=chunk) [Reconciliation Tables](index=22&type=section&id=Reconciliation%20Tables) Detailed reconciliations are provided for adjusted net income, net interest margin (tax-equivalent), efficiency ratio, adjusted efficiency ratio, and return on average tangible common equity, bridging GAAP figures to their non-GAAP counterparts by adjusting for specific items Adjusted Net Income Reconciliation (Dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------------ | :------ | :------ | :------ | | Income before income taxes (GAAP) | $29,213 | $26,200 | $29,190 | | Pre-tax income adjustments: | | | | | Death benefit related to BOLI | $- | $- | $(893) | | MSR losses | $531 | $570 | $238 | | Merger related costs, net of losses/(gains) on branch sales | $810 | $454 | $- | | Adjusted net income before taxes | $30,554 | $27,224 | $28,535 | | Taxes on adjusted net income | $7,730 | $6,619 | $7,359 | | **Adjusted net income (non-GAAP)** | **$22,824** | **$20,605** | **$21,176** | | Adjusted diluted earnings per share (non-GAAP) | $0.50 | $0.45 | $0.46 | Net Interest Margin Reconciliation (Tax-Equivalent) (Dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | | Net interest income (GAAP) | $64,234 | $62,904 | $59,690 | | Taxable-equivalent adjustment | $336 | $344 | $354 | | **Net interest income (TE)** | **$64,570** | **$63,248** | **$60,044** | | Net interest margin (GAAP) | 4.83% | 4.85% | 4.60% | | **Net interest margin (TE)** | **4.85%** | **4.88%** | **4.63%** | Efficiency Ratio / Adjusted Efficiency Ratio Reconciliation | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Efficiency ratio (GAAP) | 55.99% | 56.46% | 53.29% | | **Adjusted efficiency ratio (non-GAAP)** | **54.54%** | **55.48%** | **52.68%** | | Return on average tangible common equity (non-GAAP) | 15.29% | 14.70% | 17.66% | Forward-Looking Statements [Cautionary Note Regarding Forward-Looking Statements](index=17&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements regarding future economic outlook, balance sheet growth, capital building, and anticipated strategic and financial benefits of the Bancorp Financial merger, which are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements include expectations regarding economic outlook, balance sheet growth, capital building, and the anticipated strategic and financial benefits of the Bancorp Financial merger, including integration progress and competitive positioning[52](index=52&type=chunk) - Key risk factors include the strength of the U.S. and local economies, loan delinquencies and charge-offs, changes in legislation/regulation, risks related to acquisitions, adverse capital market conditions (including interest rates), elevated inflation, and other events beyond the company's control[52](index=52&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[52](index=52&type=chunk) Conference Call Information [Q2 2025 Earnings Conference Call](index=17&type=section&id=Q2%202025%20Earnings%20Conference%20Call) Old Second Bancorp, Inc. will host a conference call on Thursday, July 24, 2025, to discuss its second quarter 2025 financial results, with replay available until July 31, 2025 - Conference call to discuss Q2 2025 financial results will be held on Thursday, July 24, 2025, at **10:00 a.m. Eastern Time** (**9:00 a.m. Central Time**)[53](index=53&type=chunk) - Investors can access the call by dialing **888-506-0062** (Entry Code: **566890**). A replay will be available until July 31, 2025, by dialing **877-481-4010** (Conference ID: **52648**)[53](index=53&type=chunk)[54](index=54&type=chunk) Consolidated Financial Statements [Consolidated Balance Sheets](index=18&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet as of June 30, 2025, shows total assets of $5.70 billion, with net loans at $3.96 billion and total deposits at $4.80 billion, and total stockholders' equity increased to $718.6 million from $671.0 million at December 31, 2024 Consolidated Balance Sheets (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total assets | $5,701,294 | $5,649,377 | | Net loans | $3,955,677 | $3,937,717 | | Total deposits | $4,798,439 | $4,768,731 | | Total liabilities | $4,982,645 | $4,978,343 | | Total stockholders' equity | $718,649 | $671,034 | [Consolidated Statements of Income](index=19&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income for the three and six months ended June 30, 2025, reflect increased net interest and dividend income compared to the prior year, alongside higher noninterest expense, resulting in net income of $21.8 million for Q2 2025 and $41.7 million for the six-month period Consolidated Statements of Income (In thousands, except share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest and dividend income | $75,238 | $73,223 | $148,803 | $146,553 | | Total interest expense | $11,004 | $13,533 | $21,665 | $27,080 | | Net interest and dividend income | $64,234 | $59,690 | $127,138 | $119,473 | | Provision for credit losses | $2,500 | $3,750 | $4,900 | $7,250 | | Total noninterest income | $10,898 | $11,127 | $21,099 | $21,628 | | Total noninterest expense | $43,419 | $37,877 | $87,924 | $76,118 | | Net income | $21,822 | $21,891 | $41,652 | $43,203 | | Diluted earnings per share | $0.48 | $0.48 | $0.91 | $0.95 | [Quarterly Consolidated Average Balance](index=20&type=section&id=Quarterly%20Consolidated%20Average%20Balance) The quarterly consolidated average balance sheet shows an increase in total earning assets and total interest-bearing liabilities QoQ and YoY, reflecting growth in the bank's operations Quarterly Consolidated Average Balance (In thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Total assets | $5,736,706 | $5,674,317 | $5,615,458 | | Total Earning Assets | $5,336,339 | $5,257,416 | $5,216,248 | | Total Interest Bearing Liabilities | $3,241,585 | $3,216,946 | $3,172,132 | | Total deposits | $4,850,180 | $4,799,104 | $4,576,146 | | Stockholders' equity | $706,254 | $683,578 | $605,253 | [Quarterly Consolidated Statements of Income](index=21&type=section&id=Quarterly%20Consolidated%20Statements%20of%20Income) Quarterly consolidated statements of income provide a detailed breakdown of revenues and expenses over the past several quarters, illustrating trends in net interest income, noninterest income, and noninterest expense, which collectively led to the reported net income and EPS figures Quarterly Consolidated Statements of Income (In thousands, except per share data) | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | :------ | :------ | | Net interest and dividend income | $64,234 | $62,904 | $61,584 | $60,578 | $59,690 | $59,783 | | Provision for credit losses | $2,500 | $2,400 | $3,500 | $2,000 | $3,750 | $3,500 | | Total noninterest income | $10,898 | $10,201 | $11,610 | $10,581 | $11,127 | $10,501 | | Total noninterest expense | $43,419 | $44,505 | $44,322 | $39,308 | $37,877 | $38,241 | | Net income | $21,822 | $19,830 | $19,110 | $22,951 | $21,891 | $21,312 | | Diluted earnings per share (GAAP) | $0.48 | $0.43 | $0.42 | $0.50 | $0.48 | $0.47 | | Dividends paid per share | $0.06 | $0.06 | $0.06 | $0.05 | $0.05 | $0.05 |

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]