8-K - OSBC - Equibles

United States

Securities And Exchange Commission Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 24, 2024

(Exact name of registrant as specified in its charter)


Delaware	000-10537	36-3143493
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

37 South River Street Aurora , Illinois **** 60507 (Address of principal executive offices) (Zip code)

( 630 ) 892-0202 (Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ **** Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

<br><br>
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	OSBC	The Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition

On January 24, 2024, Old Second Bancorp, Inc. (the “Company’s”) issued a press release announcing its financial results for the fourth quarter ended December 31, 2023, along with certain other financial information. Copies of the Company’s press release and loan portfolio disclosures are attached as Exhibits 99.1 and 99.2, respectively.

Item 9.01 Financial Statements and Exhibits


Exhibit No.		Description
99.1		Press Release of Old Second Bancorp, Inc. dated January 24, 2024

99.2		Loan Portfolio Disclosures for Old Second Bancorp, Inc. dated December 31, 2023

104		Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	OLD SECOND BANCORP, INC.


Dated: January 24, 2024	By:	/s/ Bradley S. Adams
		Bradley S. Adams
		Executive Vice President,
		Chief Operating Officer and
		Chief Financial Officer

Old Second Bancorp, Inc



(NASDAQ:OSBC)		Exhibit 99.1

Contact:	Bradley S. Adams	For Immediate Release
	Chief Financial Officer	January 24, 2024
	(630) 906-5484

Old Second Bancorp, Inc. Reports Fourth Quarter 2023 Net Income of $18.2 Million,

or $0.40 per Diluted Share

AURORA, IL, January 24, 2024 – 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 fourth quarter of 2023. Our net income was $18.2 million, or $0.40 per diluted share, for the fourth quarter of 2023, compared to net income of $24.3 million, or $0.54 per diluted share, for the third quarter of 2023, and net income of $23.6 million, or $0.52 per diluted share, for the fourth quarter of 2022. Adjusted net income, a non-GAAP financial measure that excludes nonrecurring litigation related expenses and Visa portfolio liquidation and deconversion costs, as applicable, was $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2023, compared to $24.8 million, or $0.55 per diluted share, for the third quarter of 2023. See the discussion entitled “Non-GAAP Presentations” below and the tables beginning on page 17 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. Noteworthy items impacting fourth quarter 2023 results include a $1.2 million litigation reserve related to prior years’ overdraft fee compliance and $1.3 million in expense related to the fair value of mortgage servicing rights.

Net income decreased $6.1 million in the fourth quarter of 2023 compared to the third quarter of 2023. The decrease was primarily due to the increase of $5.0 million in provision for credit losses, a $1.3 million increase in interest expense, and a decrease in noninterest income of $1.1 million in the fourth quarter of 2023, which were partially offset by a $397,000 decrease in noninterest expense and a $1.4 million decrease in provision for income taxes. Net income decreased $5.4 million in the fourth quarter of 2023 compared to the fourth quarter of 2022, primarily due to an increase in provision for credit losses of $6.5 million and a decrease in net interest income of $2.9 million year over year due to rising market interest rates, which also resulted in an $8.8 million increase in interest expense. These decreases to net income in the fourth quarter of 2023 were partially offset by a decrease in noninterest expenses of $2.7 million. The fourth quarter of 2023 was minimally impacted by a pre-tax net loss on the call of securities of $2,000, compared to more significant pre-tax net losses on the sale of securities of $924,000 and $910,000 in the third quarter of 2023 and the fourth quarter of 2022, respectively.

Operating Results

●	Fourth quarter 2023 net income was $18.2 million, reflecting a $6.1 million decrease from the third quarter 2023, and a decrease of $5.4 million from the fourth quarter of 2022. Adjusted net income, as defined above, was $19.1 million for the fourth quarter of 2023, a decrease of $5.7 million from adjusted net income for the third quarter of 2023, and a decrease of $4.9 million from adjusted net income for the fourth quarter of 2022.
●	Net interest and dividend income was $61.2 million for the fourth quarter of 2023, reflecting a decrease of $1.8 million, or 2.8%, from the third quarter of 2023, and a decrease of $2.9 million, or 4.5%, from the fourth quarter of 2022.
---	---
●	We recorded a net provision for credit losses of $8.0 million in the fourth quarter of 2023, compared to a net provision for credit losses of $3.0 million in the third quarter of 2023, and a net provision for credit losses of $1.5 million in the fourth quarter of 2022.
---	---
●	Noninterest income was $8.7 million for the fourth quarter of 2023, a decrease of $1.1 million, or 11.6%, compared to $9.9 million for the third quarter of 2023, and a decrease of $217,000, or 2.4%, compared to $8.9 million for the fourth quarter of 2022.
---	---

●	Noninterest expense was $37.0 million for the fourth quarter of 2023, a decrease of $397,000, or 1.1% compared to $37.4 million for the third quarter of 2023, and a decrease of $2.7 million, or 6.7%, compared to $39.7 million for the fourth quarter of 2022.
●	We had a provision for income tax of $6.7 million for the fourth quarter of 2023, compared to a provision for income tax of $8.1 million for the third quarter of 2023 and a provision of $8.2 million for the fourth quarter of 2022. The effective tax rate for each of the periods presented was 26.9%, 25.1%, and 25.9%, respectively.
---	---
●	On January 16, 2024, our Board of Directors declared a cash dividend of $0.05 per share payable on February 5, 2024, to stockholders of record as of January 26, 2024.
---	---

Financial Highlights


	Quarters Ended
(Dollars in thousands)	December 31,			September 30,			December 31,
	2023			2023			2022
Balance sheet summary
Total assets	$	5,722,799		$	5,758,156		$	5,888,317
Total securities available-for-sale		1,192,829			1,229,618			1,539,359
Total loans		4,042,953			4,029,543			3,869,609
Total deposits		4,570,746			4,614,320			5,110,723
Total liabilities		5,145,518			5,225,598			5,427,176
Total equity		577,281			532,558			461,141

Total tangible assets	$	5,625,104		$	5,659,858		$	5,788,161
Total tangible equity		479,586			434,260			360,985

Income statement summary
Net interest income	$	61,235		$	63,030		$	64,091
Provision for credit losses		8,000			3,000			1,500
Noninterest income		8,729			9,877			8,946
Noninterest expense		37,026			37,423			39,684
Net income		18,225			24,335			23,615
Effective tax rate		26.92	%		25.09	%		25.86	%

Profitability ratios
Return on average assets (ROAA)		1.27	%		1.67	%		1.58	%
Return on average equity (ROAE)		13.18			18.21			21.09
Net interest margin (tax-equivalent)		4.62			4.66			4.63
Efficiency ratio		50.82			50.08			52.44
Return on average tangible common equity (ROATCE)		16.43			22.80			27.80
Tangible common equity to tangible assets (TCE/TA)		8.53			7.67			6.24

Per share data
Diluted earnings per share	$	0.40		$	0.54		$	0.52
Tangible book value per share		10.73			9.72			8.10

Company capital ratios^1^
Common equity tier 1 capital ratio		11.37	%		11.00	%		9.67	%
Tier 1 risk-based capital ratio		11.89			11.52			10.20
Total risk-based capital ratio		14.06			13.84			12.52
Tier 1 leverage ratio		10.06			9.62			8.14

Bank capital ratios ^1, 2^
Common equity tier 1 capital ratio		12.32	%		12.49	%		11.70	%
Tier 1 risk-based capital ratio		12.32			12.49			11.70
Total risk-based capital ratio		13.24			13.57			12.75
Tier 1 leverage ratio		10.41			10.43			9.32

^1^^^Both the Company and the Bank ratios are inclusive of a capital conservation buffer of 2.50%, and both are subject to the minimum capital adequacy guidelines of 7.00%, 8.50%, 10.50%, and 4.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

^2^The prompt corrective action provisions are applicable only at the Bank level, and are 6.50%, 8.00%, 10.00%, and 5.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

Chairman, President and Chief Executive Officer Jim Eccher said “Profitability at Old Second remains exceptionally strong and balance sheet strengthening continues with our tangible common equity to tangible assets ratio increasing by 86 basis points linked quarter to 8.53%. We believe we are being proactive in addressing commercial real estate loans facing deterioration from higher interest rates, declining appraisal values and cash flow pressures. Importantly, the total of substandard and criticized loans are now at their lowest levels since June 2022 as we have seen previously identified loans work toward resolution and the pace of downgrades has improved dramatically. The loan portfolio, exclusive of office CRE and healthcare, has remained well behaved and we remain confident in our credit quality overall. Absent a significant recession, I am optimistic that this quarter will mark the inflection point in our asset quality trends as we have seen the bulk of our loan portfolio reprice and transition into the current interest rate environment. This expectation comes despite Old Second maintaining an economic view that is significantly more cautious than consensus market forecasts. Our focus therefore remains on assessing and monitoring risks within the loan portfolio and optimizing the earning asset mix in order to reduce our overall sensitivity to interest rates. Net interest margin trends are stable and income statement efficiency remains at record levels. Marginal spreads in deposit and lending markets remain exceptionally tight but balance sheet flexibility and the expectation for continuing record efficiency gives me confidence we are well positioned to deliver another strong year in 2024. I look forward to the opportunity to demonstrate the strength of the franchise we have built.”

Asset Quality & Earning Assets

●	Nonperforming loans, comprised of nonaccrual loans plus loans past due 90 days or more and still accruing, and, prior to January 1, 2023, performing troubled debt restructurings, totaled $68.8 million at December 31, 2023, $63.3 million at September 30, 2023, and $32.9 million at December 31, 2022. Nonperforming loans, as a percent of total loans, were 1.7% at December 31, 2023, 1.6% at September 30, 2023, and 0.9% at December 31, 2022. The increase in the fourth quarter of 2023 is driven by the downgrade of a few credits during the quarter, due primarily to office-related loans and assisted living properties within the commercial real estate-investor portfolio and debt service coverage shortfalls.
●	Total loans were $4.04 billion at December 31, 2023, reflecting an increase of $13.4 million compared to September 30, 2023, and an increase of $173.3 million compared to December 31, 2022. The increase year over year was largely driven by the growth in leases, commercial real estate-investor, and multifamily portfolios. Average loans (including loans held-for-sale) for the fourth quarter of 2023 totaled $4.02 billion, reflecting an increase of $5.6 million from the third quarter of 2023 and an increase of $138.3 million from the fourth quarter of 2022.
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●	Available-for-sale securities totaled $1.19 billion at December 31, 2023, compared to $1.23 billion at September 30, 2023, and $1.54 billion at December 31, 2022. The unrealized mark to market loss on securities totaled $84.2 million as of December 31, 2023, compared to $120.5 million as of September 30, 2023, and $123.5 million as of December 31, 2022, due to market interest rate fluctuations as well as changes year over year in the composition of the securities portfolio. During the quarter ended December 31, 2023, there were no securities sold, however $55.9 million of maturities and calls resulted in net realized losses of $2,000, compared to sales of $65.6 million during the quarter ended September 30, 2023, which resulted in net realized losses of $924,000, and security sales of $27.7 million for the quarter ended December 31, 2022, which resulted in net realized losses of $910,000. We may continue to sell strategically identified securities as opportunities arise.
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Net Interest Income


Analysis of Average Balances,
Tax Equivalent Income / Expense and Rates
(Dollars in thousands - unaudited)

	Quarters Ended
	December 31, 2023						September 30, 2023						December 31, 2022
	Average			Income /		Rate	Average			Income /		Rate	Average			Income /		Rate
	Balance			Expense		%	Balance			Expense		%	Balance			Expense		%
Assets
Interest earning deposits with financial institutions	$	47,865		$	616	5.11	$	49,737		$	659	5.26	$	50,377		$	461	3.63
Securities:
Taxable		1,027,366			8,329	3.22		1,125,688			8,946	3.15		1,404,437			10,495	2.96
Non-taxable (TE)^1^		164,655			1,674	4.03		169,523			1,687	3.95		171,567			1,697	3.92
Total securities (TE)^1^		1,192,021			10,003	3.33		1,295,211			10,633	3.26		1,576,004			12,192	3.07
FHLBC and FRBC Stock		34,371			647	7.47		35,954			597	6.59		19,534			259	5.26
Loans and loans held-for-sale^1, 2^		4,016,480			62,793	6.20		4,010,859			62,705	6.20		3,878,228			55,195	5.65
Total interest earning assets		5,290,737			74,059	5.55		5,391,761			74,594	5.49		5,524,143			68,107	4.89
Cash and due from banks		57,723			-	-		57,279			-	-		56,531			-	-
Allowance for credit losses on loans		(50,023)			-	-		(54,581)			-	-		(48,778)			-	-
Other noninterest bearing assets		396,297			-	-		384,059			-	-		395,726			-	-
Total assets	$	5,694,734					$	5,778,518					$	5,927,622

Liabilities and Stockholders' Equity
NOW accounts	$	563,603		$	595	0.42	$	576,138		$	440	0.30	$	623,408		$	225	0.14
Money market accounts		692,720			2,200	1.26		720,488			1,767	0.97		901,950			477	0.21
Savings accounts		985,614			517	0.21		1,027,987			351	0.14		1,155,409			74	0.03
Time deposits		497,472			2,833	2.26		466,250			1,982	1.69		450,111			571	0.50
Interest bearing deposits		2,739,409			6,145	0.89		2,790,863			4,540	0.65		3,130,878			1,347	0.17
Securities sold under repurchase agreements		28,526			51	0.71		24,945			27	0.43		33,275			10	0.12
Other short-term borrowings		390,652			5,429	5.51		427,174			5,840	5.42		44,293			436	3.91
Junior subordinated debentures		25,773			290	4.46		25,773			245	3.77		25,773			287	4.42
Subordinated debentures		59,372			546	3.65		59,350			547	3.66		59,286			546	3.65
Senior notes		-			-	-		-			-	-		44,572			891	7.93
Notes payable and other borrowings		-			-	-		-			-	-		9,978			137	5.45
Total interest bearing liabilities		3,243,732			12,461	1.52		3,328,105			11,199	1.34		3,348,055			3,654	0.43
Noninterest bearing deposits		1,838,325			-	-		1,867,201			-	-		2,083,503			-	-
Other liabilities		63,971			-	-		53,164			-	-		51,753			-	-
Stockholders' equity		548,706			-	-		530,048			-	-		444,311			-	-
Total liabilities and stockholders' equity	$	5,694,734					$	5,778,518					$	5,927,622
Net interest income (GAAP)				$	61,235					$	63,030					$	64,091
Net interest margin (GAAP)						4.59						4.64						4.60

Net interest income (TE)^1^				$	61,598					$	63,395					$	64,453
Net interest margin (TE)^1^						4.62						4.66						4.63
Interest bearing liabilities to earning assets		61.31	%					61.73	%					60.61	%

^1^ Tax equivalent (TE) basis is calculated using a marginal tax rate of 21% in 2023 and 2022. See the discussion entitled “Non-GAAP Presentations” below and the tables beginning on page 17 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

^2^ Interest income from loans is shown on a tax equivalent basis, which is a non-GAAP financial measure as discussed in the table on page 17, and includes loan fee expense of $922,000 for the fourth quarter of 2023, loan fee expense of $780,000 for the third quarter of 2023, and loan fee income of $916,000 the fourth quarter of 2022. Nonaccrual loans are included in the above stated average balances.

The increased yield of six basis points on interest earning assets compared to the linked period was driven by repricing within the existing variable rate portfolios for securities available-for-sale. Changes in the market interest rate environment impact earning assets at varying intervals depending on the repricing timeline of loans, as well as the securities maturity, paydown and purchase activities.

The year over year increase of 66 basis points on interest earning assets was driven by significant increases to benchmark interest rates as well as strong loan growth throughout the period, specifically within the leases, commercial real estate and multifamily portfolios, as these loan segments generally produce the greatest yield. The increases in benchmark interest rates impacted yields on the securities portfolio through the inverse relationship between interest 4

rates and market value coupled with maturities and strategic sales of lower yielding assets, as we work to increase the weighted average yield in the portfolio.

Average balances of interest-bearing deposit accounts have decreased steadily since the fourth quarter of 2022 through the fourth quarter of 2023, from $3.13 billion to $2.74 billion, with decreases reflected in all deposit categories, excluding time deposits. We have continued to control the cost of funds over the periods reflected, with the rate of overall interest-bearing deposits increasing to 89 basis points for the quarter ended December 31, 2023, from 65 basis points for the quarter ended September 30, 2023, and from 17 basis points for the quarter ended December 31, 2022. A 29 basis point increase in the cost of money market funds for the quarter ended December 31, 2023 compared to prior linked quarter, and a 105 basis point increase compared to the prior year like quarter were both due to select deposit account exception pricing, and drove a significant portion of the overall increase. Average rates paid on time deposits for the quarter ended December 31, 2023 increased by 57 basis points and 176 basis points in the quarter over linked quarter and year over year quarters, respectively, primarily due to CD rate specials we offered.

Borrowing costs decreased in the fourth quarter of 2023, compared to the third quarter of 2023, primarily due to the decrease in average other short-term borrowings of $36.5 million stemming from a decrease in average FHLB advances over the prior quarter. Partially offsetting the decrease in borrowing costs in the fourth quarter of 2023 was the increase in average securities sold under repurchase agreements of $3.6 million. The increase of $346.4 million year over year of average FHLB advances was based on daily liquidity needs. Subordinated and junior subordinated debt interest expense were essentially flat over each of the periods presented. Senior notes had the most significant interest expense decrease, as we had redeemed all of the $45.0 million senior notes, net of deferred issuance costs, in June 2023, resulting in senior notes having no balance after that time. In February 2023, we paid off the remaining balance of $9.0 million on the original $20.0 million term note issued in 2020, resulting in notes payable and other borrowings having no balance after that time.

Our net interest margin (GAAP) decreased five basis points to 4.59% for the fourth quarter of 2023, compared to 4.64% for the third quarter of 2023, and decreased one basis point compared to 4.60% for the fourth quarter of 2022. Our net interest margin (TE) decreased four basis points to 4.62% for the fourth quarter of 2023, compared to 4.66% for the third quarter of 2023, and decreased one basis point compared to 4.63% for the fourth quarter of 2022. The decrease in the fourth quarter, compared to the prior quarter, is primarily due to the growth in interest expense due to the rising interest rate environment and its effect on interest bearing deposits. The decrease in the fourth quarter of 2023, compared to the prior year like quarter, is primarily due to an increase in market interest rates, and the related increase in costs of interest-bearing liabilities. See the discussion entitled “Non-GAAP Presentations” and the tables beginning on page 17 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Noninterest Income


										4th Quarter 2023
Noninterest Income	Three Months Ended									Percent Change From
(Dollars in thousands)	December 31,			September 30,			December 31,			September 30,		December 31,
	2023		****	2023		****	2022		****	2023	****	2022
Wealth management	$	2,600		$	2,475		$	2,403		5.1		8.2
Service charges on deposits		2,527			2,504			2,499		0.9		1.1
Residential mortgage banking revenue
Secondary mortgage fees		58			66			62		(12.1)		(6.5)
MSRs mark to market (loss) gain		(1,277)			281			(431)		(554.4)		(196.3)
Mortgage servicing income		495			519			518		(4.6)		(4.4)
Net gain on sales of mortgage loans		366			407			340		(10.1)		7.6
Total residential mortgage banking revenue		(358)			1,273			489		(128.1)		(173.2)
Securities losses, net		(2)			(924)			(910)		99.8		99.8
Change in cash surrender value of BOLI		541			919			376		(41.1)		43.9
Card related income		2,511			2,606			2,795		(3.6)		(10.2)
Other income		910			1,024			1,294		(11.1)		(29.7)
Total noninterest income	$	8,729		$	9,877		$	8,946		(11.6)		(2.4)

Noninterest income decreased $1.1 million, or 11.6%, in the fourth quarter of 2023, compared to the third quarter of 2023, and decreased $217,000, or 2.4%, compared to the fourth quarter of 2022. The decrease from the third quarter of 2023 was primarily driven by a $1.6 million decrease in residential mortgage banking revenue, a $378,000 decrease in the cash surrender value of BOLI, and a $114,000 decrease in other income, partially offset by a $922,000 decrease in security losses, net, based on strategic sales in the third quarter of 2023 compared to none during the fourth quarter of 2023.

The decrease in noninterest income of $217,000 in the fourth quarter of 2023, compared to the fourth quarter of 2022, is primarily due to an increase of $846,000 on mortgage servicing rights mark to market losses, a $284,000 decrease in card related income, and a $384,000 decrease in other income. These decreases were partially offset by a $197,000 increase in wealth management income, a $908,000 decrease in security losses, net, based on strategic sales in the fourth quarter of 2022 compared to none during the fourth quarter of 2023, and a $165,000 increase in the cash surrender value of BOLI due to market interest rate changes.

Noninterest Expense


										4th Quarter 2023
Noninterest Expense	Three Months Ended									Percent Change From
(Dollars in thousands)	December 31,			September 30,			December 31,			September 30,		December 31,
	2023		****	2023		****	2022		****	2023	****	2022
Salaries	$	16,738		$	17,279		$	18,268		(3.1)		(8.4)
Officers' incentive		1,450			2,773			3,095		(47.7)		(53.2)
Benefits and other		3,217			3,063			2,900		5.0		10.9
Total salaries and employee benefits		21,405			23,115			24,263		(7.4)		(11.8)
Occupancy, furniture and equipment expense		3,817			3,506			4,128		8.9		(7.5)
Computer and data processing		2,291			1,922			2,978		19.2		(23.1)
FDIC insurance		583			744			630		(21.6)		(7.5)
Net teller & bill paying		564			534			485		5.6		16.3
General bank insurance		301			300			298		0.3		1.0
Amortization of core deposit intangible asset		603			616			645		(2.1)		(6.5)
Advertising expense		383			93			130		311.8		194.6
Card related expense		1,338			1,347			1,304		(0.7)		2.6
Legal fees		228			97			225		135.1		1.3
Consulting & management fees		556			549			679		1.3		(18.1)
Other real estate owned expense, net		218			(27)			34		907.4		541.2
Other expense		4,739			4,627			3,885		2.4		22.0
Total noninterest expense	$	37,026		$	37,423		$	39,684		(1.1)		(6.7)
Efficiency ratio (GAAP)^1^		50.82	%		50.08	%		52.44	%
Adjusted efficiency ratio (non-GAAP)^2^		48.76	%		48.82	%		51.29	%

^1^The efficiency ratio shown in the table above is a GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits and OREO expenses, divided by the sum of net interest income and total noninterest income less net gains or losses on securities and mark to market gains or losses on MSRs.

^2^ The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits, OREO expenses, litigation expense, and acquisition-related costs, net of gains on branch sales (as applicable), Visa credit card portfolio liquidation and related deconversion costs, as well as any merger related costs, if applicable, divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains or losses on securities, mark to market gains or losses on MSRs, gain on the sale of our Visa credit card and land trust portfolios, and includes a tax equivalent adjustment on the change in cash surrender value of BOLI. See the discussion entitled “Non-GAAP Presentations” below and the table on page 18 that provides a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent.

Noninterest expense for the fourth quarter of 2023 decreased $397,000, or 1.1%, compared to the third quarter of 2023, and decreased $2.7 million, or 6.7%, compared to the fourth quarter of 2022. The decrease in the fourth quarter of 2023 compared to the third quarter of 2023 was attributable to a $1.7 million decrease in salaries and employee benefits, primarily due to a decrease in the officer incentive accrual and to a lesser extent various components of salary expense. Also contributing to the decrease in the fourth quarter of 2023 was a $161,000 decrease in FDIC insurance due to a reduction in total assets assessed. Partially offsetting the decrease in noninterest expense in the fourth quarter of 2023 was a $311,000 increase in occupancy, furniture and equipment, a $369,000 increase in computer and data processing, a $290,000 increase in advertising expense, and a $245,000 increase in OREO related expenses due to two additions to OREO during the fourth quarter of 2023 quarter totaling $4.9 million.

The year over year decrease in noninterest expense is primarily attributable to a $2.9 million decrease in salaries and employee benefits, primarily due to a decrease in various components of salary expense as well as officers’ incentives. Also contributing to the decrease was a $311,000 decrease in occupancy, furniture and equipment, a $687,000 decrease in computer and data processing, and a $123,000 decrease in consulting and management fees. The elevated expense totals in the fourth quarter of 2022 were driven by the final merger-related costs recorded stemming from the West Suburban acquisition in December 2021. Partially offsetting the decrease in noninterest expense in the fourth quarter of 2023, compared to the fourth quarter of 2022, was a $253,000 increase in advertising expenses, a $184,000 increase in OREO related expenses, and a $854,000 increase in other expenses due to a $1.2 million litigation expense recorded in the fourth quarter of 2023 for a pending overdraft fee compliance claim. 7

Earning Assets


							December 31, 2023
Loans	As of						Percent Change From
(Dollars in thousands)	December 31,		September 30,		December 31,		September 30,		December 31,
	2023		2023		2022		2023	****	2022
Commercial	$	841,697	$	834,877	$	840,964	0.8		0.1
Leases		398,223		354,827		277,385	12.2		43.6
Commercial real estate – investor		1,034,424		1,047,122		987,635	(1.2)		4.7
Commercial real estate – owner occupied		796,538		809,050		854,879	(1.5)		(6.8)
Construction		165,380		202,546		180,535	(18.3)		(8.4)
Residential real estate – investor		52,595		53,762		57,353	(2.2)		(8.3)
Residential real estate – owner occupied		226,248		227,446		219,718	(0.5)		3.0
Multifamily		401,696		372,020		323,691	8.0		24.1
HELOC		103,237		102,055		109,202	1.2		(5.5)
Other^1^		22,915		25,838		18,247	(11.3)		25.6
Total loans	$	4,042,953	$	4,029,543	$	3,869,609	0.3		4.5

^1^Other class includes consumer loans and overdrafts.

Total loans increased by $13.4 million at December 31, 2023, compared to September 30, 2023, and increased $173.3 million for the year over year period. Loan growth of $173.3 million in the year over year period was driven by growth in leasing, commercial real estate – investor, and multifamily loans.


										December 31, 2023
Securities		As of								Percent Change From
(Dollars in thousands)		December 31,			September 30,			December 31,		September 30,		December 31,
	****	2023		****	2023		****	2022		2023	****	2022
Securities available-for-sale, at fair value
U.S. Treasury		$	169,574		$	216,777		$	212,129	(21.8)		(20.1)
U.S. government agencies			56,959			55,821			56,048	2.0		1.6
U.S. government agency mortgage-backed			106,370			104,569			124,990	1.7		(14.9)
States and political subdivisions			229,335			220,100			226,128	4.2		1.4
Corporate bonds			-			4,961			9,622	(100.0)		(100.0)
Collateralized mortgage obligations			392,544			386,679			533,768	1.5		(26.5)
Asset-backed securities			66,166			66,916			201,928	(1.1)		(67.2)
Collateralized loan obligations			171,881			173,795			174,746	(1.1)		(1.6)
Total securities available-for-sale		$	1,192,829		$	1,229,618		$	1,539,359	(3.0)		(22.5)

Our securities portfolio totaled $1.19 billion fair market value as of December 31, 2023, a decrease of $36.8 million from $1.23 billion as of September 30, 2023, and a decrease of $346.5 million since December 31, 2022. The portfolio reduction of $36.8 million in the fourth quarter of 2023, compared to the prior quarter-end, was due to maturities and calls of $55.9 million as well as paydowns of $25.6 million, partially offset by the effects of declining interest rates which increased fair market value. Net unrealized losses at December 31, 2023 were $84.2 million, compared to $120.5 million at September 30, 2023 and $123.5 million at December 30, 2022. The year over year decrease in net unrealized losses is due to changes in the market interest rate environment as well as the impact of security sales undertaken to further reduce the portfolio’s interest rate sensitivity. The portfolio continues to consist of high quality fixed-rate and floating-rate securities, with more than 99% of publicly issued securities rated AA or better.

Asset Quality


										December 31, 2023
Nonperforming assets	As of									Percent Change From
(Dollars in thousands)	December 31,			September 30,			December 31,			September 30,	December 31,
	2023		****	2023		****	2022		****	2023	2022
Nonaccrual loans	$	67,583		$	62,116		$	31,602		8.8	113.9
Performing troubled debt restructured loans accruing interest ^1^		N/A			N/A			49		N/A	N/A
Loans past due 90 days or more and still accruing interest		1,196			1,209			1,262		(1.1)	(5.2)
Total nonperforming loans		68,779			63,325			32,913		8.6	109.0
Other real estate owned		5,123			407			1,561		N/M	228.2
Total nonperforming assets	$	73,902		$	63,732		$	34,474		16.0	114.4



30-89 days past due loans and still accruing interest	$	13,668		$	28,486		$	7,508
Nonaccrual loans to total loans		1.7	%		1.5	%		0.8	%
Nonperforming loans to total loans		1.7	%		1.6	%		0.9	%
Nonperforming assets to total loans plus OREO		1.8	%		1.6	%		0.9	%
Purchased credit-deteriorated loans to total loans		1.4	%		1.5	%		2.0	%

Allowance for credit losses	$	44,264		$	51,729		$	49,480
Allowance for credit losses to total loans		1.1	%		1.3	%		1.3	%
Allowance for credit losses to nonaccrual loans		65.5	%		83.3	%		156.6	%

N/A - Not applicable.

N/M - Not meaningful.

^1^As of January 1, 2023, the Company prospectively adopted ASU 2022-02, Topic 326 “Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures”, which eliminated the need for recognition, measurement and disclosure of TDRs going forward.

Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Prior to January 1, 2023, nonperforming loans also included performing troubled debt restructured loans accruing interest. Purchased credit-deteriorated (“PCD”) loans acquired in our acquisitions of West Suburban and ABC Bank totaled $55.7 million, net of purchase accounting adjustments, at December 31, 2023. PCD loans that meet the definition of nonperforming loans are included in our nonperforming disclosures. Nonperforming loans to total loans was 1.7% as of December 31, 2023, 1.6% as of September 30, 2023, and 0.9% as of December 31, 2022. Nonperforming assets to total loans plus OREO was 1.8% as of December 31, 2023, 1.6% as of September 30, 2023, and 0.9% as of December 31, 2022. Our allowance for credit losses to total loans was 1.1% as of December 31, 2023, and 1.3% as of September 30, 2023 and December 31, 2022.

The following table shows classified loans by segment, which include nonaccrual loans, PCD loans if the risk rating so indicates, and all other loans considered substandard, for the following periods.


										December 31, 2023
Classified loans		As of								Percent Change From
(Dollars in thousands)		December 31,			September 30,			December 31,		September 30,		December 31,
	****	2023		****	2023		****	2022		2023	****	2022
Commercial		$	8,414		$	18,298		$	26,485	(54.0)		(68.2)
Leases			818			574			1,876	42.5		(56.4)
Commercial real estate – investor			43,798			54,126			27,410	(19.1)		59.8
Commercial real estate – owner occupied			54,613			55,292			40,890	(1.2)		33.6
Construction			17,155			17,263			1,333	(0.6)		N/M
Residential real estate – investor			1,331			1,502			1,714	(11.4)		(22.3)
Residential real estate – owner occupied			3,216			3,627			3,854	(11.3)		(16.6)
Multifamily			1,775			1,141			2,954	55.6		(39.9)
HELOC			1,664			1,434			2,411	16.0		(31.0)
Other^1^			-			-			2	-		(100.0)
Total classified loans		$	132,784		$	153,257		$	108,929	(13.4)		21.9

N/M - Not meaningful.

^1^Other class includes consumer loans and overdrafts.

Classified loans as of December 31, 2023 decreased by $20.5 million from September 30, 2023, and increased by $23.9 million from December 31, 2022. The net decrease from the third quarter of 2023 was mostly driven by seven loans that had principal charge offs, totaling $15.8 million, seven loans that were upgraded totaling $11.8 million, and two loans that were transferred to OREO, totaling $4.9 million. These decreases in classified loans in the fourth quarter were offset by $18.6 million of additions, primarily driven by three loans in commercial real estate – owner occupied which totaled $11.1 million and seven loans in commercial which totaled $4.2 million. Remediation work continues on these credits, with the goal of cash flow improvements with increased tenancy. Reductions in commercial classified loans were noted in the fourth quarter of 2023 from the linked quarter due to ongoing remediation efforts.

Allowance for Credit Losses on Loans and Unfunded Commitments

At December 31, 2023, our allowance for credit losses (“ACL”) on loans totaled $44.3 million, and our ACL on unfunded commitments, included in other liabilities, totaled $2.7 million. In the fourth quarter of 2023, we recorded provision expense of $8.0 million based on historical loss rate updates, loan growth, our assessment of nonperforming loan metrics and trends, and estimated future credit losses. The fourth quarter’s provision expense consisted of a $8.0 million provision for credit losses on loans, and a $6,000 provision for credit losses on unfunded commitments. The increase in ACL on unfunded commitments was primarily due to an adjustment of historical benchmark assumptions, such as funding rates and the period used to forecast those rates, within the ACL calculation. We recorded net charge-offs of $15.5 million in the fourth quarter of 2023, which reduced the ACL. The majority of the fourth quarter charge offs were specific to seven borrowers within the commercial real estate portfolio on which we had existing specific allocations within the ACL of $2.5 million at September 30, 2023. The third quarter 2023 provision expense of $3.0 million consisted of a $3.0 million provision for credit losses on loans, and a $11,000 reversal of provision for credit losses on unfunded commitments. We recorded net charge-offs of $6.6 million in the third quarter of 2023. In the fourth quarter of 2022, we recorded provision expense of $1.5 million based on our assessment of nonperforming loan metrics and trends and estimated future credit losses. We recorded net charge-offs of $940,000 in the fourth quarter of 2022, which reduced the ACL. Our ACL on loans to total loans was 1.1% as of December 31, 2023 and 1.3% as of September 30, 2023 and December 31, 2022.

The $143,000 decrease in our ACL on unfunded commitments at December 31, 2023, compared to September 30, 2023, was driven by purchase accounting accretion of $149,000 on unfunded commitments recorded during the quarter, partially offset by $6,000 of provision expense in the quarter discussed above. The ACL on unfunded commitments totaled $2.7 million as of December 31, 2023, $2.9 million as of September 30, 2023, and $5.1 million as of December 31, 2022.

Net Charge-off Summary


Loan charge–offs, net of recoveries	Quarters Ended
(Dollars in thousands)	December 31,		% of	September 30,		% of	December 31,		% of
	2023		Total ^2^	2023		Total ^2^	2022		Total ^2^
Commercial	$	71	0.5	$	8	0.1	$	(8)	(0.9)
Leases		(8)	(0.1)		(95)	(1.4)		191	20.3
Commercial real estate – Investor		4,951	32.0		6,754	102.4		776	82.6
Commercial real estate – Owner occupied		10,443	67.5		23	0.3		(2)	(0.2)
Construction		-	-		(100)	(1.5)		-	-
Residential real estate – Investor		(3)	-		(3)	-		(7)	(0.7)
Residential real estate – Owner occupied		(8)	(0.1)		(25)	(0.4)		-	-
Multifamily		-	-		-	-		(6)	(0.6)
HELOC		(17)	(0.1)		(35)	(0.5)		(38)	(4.0)
Other^1^		31	0.3		70	1.0		34	3.5
Net charge–offs / (recoveries)	$	15,460	100.0	$	6,597	100.0	$	940	100.0

^1^Other class includes consumer loans and overdrafts.

^2^^^Represents the percentage of net charge-offs attributable to each category of loans.

Gross charge-offs for the fourth quarter of 2023 were $16.0 million, compared to $6.9 million for the third quarter of 2023 and $1.1 million for the fourth quarter of 2022. Gross recoveries were $491,000 for the fourth quarter of 2023, compared to $339,000 for the third quarter of 2023, and $136,000 for the fourth quarter of 2022. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.

Deposits

Total deposits were $4.57 billion at December 31, 2023, a decrease of $43.6 million, or 0.9%, compared to $4.61 billion at September 30, 2023, primarily due to a decline in savings of $32.2 million, followed by a decrease of $30.9 million in money markets and $27.8 million in non-interest bearing deposits. The large decreases were partially offset by an increase of $49.9 million in certificates of deposit. The bulk of the linked quarter decline in deposit balances occurred in October 2023 and is consistent with seasonal historical trends related to tax payments and commercial customer business volumes. Total quarterly average deposits decreased $636.6 million, or 12.2%, in the year over year period, driven by declines in our average demand deposits of $245.2 million, and savings, NOW and money markets combined of $438.8 million. In general, the bulk of the decline in deposits year over year can be characterized as rate sensitive with significant flows and transfers into investing activities, materially offsetting the significant expansion in those same accounts in the immediate aftermath of the pandemic.

Borrowings

As of December 31, 2023, we had $405.0 million in other short-term borrowings due to short-term FHLB advances, compared to $435.0 million at September 30, 2023, and $90.0 million as of December 31, 2022.

Non-GAAP Presentations

Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure our performance, including the presentation of adjusted net income, net interest income and net interest margin on a fully taxable equivalent basis, and our efficiency ratio calculations on a taxable equivalent basis. The net interest margin fully taxable equivalent is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Consistent with industry practice, management has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 7.

We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe these measures provide investors with information regarding balance sheet profitability, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing, and comparing past, present and future periods.

These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies’ non-GAAP financial measures having the same or similar names. The tables beginning on page 17 provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.

Cautionary Note Regarding Forward-Looking Statements

**** This earnings release and statements by our management may contain forward-looking statements within the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “should,” “anticipate,” “expect,” “estimate,” “intend,” “believe,” “may,” “likely,” “will,” “forecast,” “project,” “looking forward,” “optimistic,” “hopeful,” “potential,” “progress,” “prospect,” “remain,” “deliver,” “continue,” “trend,” “momentum,” “remainder,” “beyond,” “and “near” or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, loan growth, deposit trends and funding, asset-quality trends, balance sheet growth, and building capital. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, (1) the strength of the United States economy in general and the strength of the local economies in which we conduct our operations may be different than expected; (2) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (3) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (4) risks related to future 11

acquisitions, if any, including execution and integration risks; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on us; (6) changes in interest rates, which has and may continue to affect our deposit and funding costs, net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities; (7) elevated inflation which causes adverse risk to the overall economy, and could indirectly pose challenges to our clients and to our business; and (8) the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation. Additional risks and uncertainties are contained in the “Risk Factors” and forward-looking statements disclosure in our most recent Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q. The inclusion of this forward-looking information should not be construed as a representation by us or any person that future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Conference Call

We will host a call on Thursday, January 25, 2024, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss our fourth quarter 2023 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code: 675276. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

A replay of the call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on February 1, 2024, by dialing 877-481-4010, using Conference ID: 49609. 12

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)


		December 31,		December 31,
	****	2023		2022
Assets
Cash and due from banks		$	55,534	$	56,632
Interest earning deposits with financial institutions			44,611		58,545
Cash and cash equivalents			100,145		115,177
Securities available-for-sale, at fair value			1,192,829		1,539,359
Federal Home Loan Bank Chicago (“FHLBC”) and Federal Reserve Bank Chicago (“FRBC”) stock			33,355		20,530
Loans held-for-sale			1,322		491
Loans			4,042,953		3,869,609
Less: allowance for credit losses on loans			44,264		49,480
Net loans			3,998,689		3,820,129
Premises and equipment, net			79,310		72,355
Other real estate owned			5,123		1,561
Mortgage servicing rights, at fair value			10,344		11,189
Goodwill			86,478		86,478
Core deposit intangible			11,217		13,678
Bank-owned life insurance (“BOLI”)			109,318		106,608
Deferred tax assets, net			31,077		44,750
Other assets			63,592		56,012
Total assets		$	5,722,799	$	5,888,317

Liabilities
Deposits:
Noninterest bearing demand		$	1,834,891	$	2,051,702
Interest bearing:
Savings, NOW, and money market			2,207,949		2,617,100
Time			527,906		441,921
Total deposits			4,570,746		5,110,723
Securities sold under repurchase agreements			26,470		32,156
Other short-term borrowings			405,000		90,000
Junior subordinated debentures			25,773		25,773
Subordinated debentures			59,382		59,297
Senior notes			-		44,585
Notes payable and other borrowings			-		9,000
Other liabilities			58,147		55,642
Total liabilities			5,145,518		5,427,176

Stockholders’ Equity
Common stock			44,705		44,705
Additional paid-in capital			202,223		202,276
Retained earnings			393,311		310,512
Accumulated other comprehensive loss			(62,781)		(93,124)
Treasury stock			(177)		(3,228)
Total stockholders’ equity			577,281		461,141
Total liabilities and stockholders’ equity		$	5,722,799	$	5,888,317

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)


		Three Months Ended December 31,						Year Ended December 31,
	****	2023		****	2022		****	2023		****	2022		****
Interest and dividend income
Loans, including fees		$	62,751		$	55,170		$	244,187		$	176,379
Loans held-for-sale			31			19			91			130
Securities:
Taxable			8,329			10,495			37,940			31,566
Tax exempt			1,322			1,341			5,329			5,287
Dividends from FHLBC and FRBC stock			647			259			1,920			936
Interest bearing deposits with financial institutions			616			461			2,503			2,175
Total interest and dividend income			73,696			67,745			291,970			216,473
Interest expense
Savings, NOW, and money market deposits			3,312			776			8,761			1,900
Time deposits			2,834			571			6,636			1,448
Securities sold under repurchase agreements			50			10			93			40
Other short-term borrowings			5,429			436			18,774			480
Junior subordinated debentures			290			287			1,095			1,136
Subordinated debentures			546			546			2,185			2,185
Senior notes			-			891			2,408			2,682
Notes payable and other borrowings			-			137			87			446
Total interest expense			12,461			3,654			40,039			10,317
Net interest and dividend income			61,235			64,091			251,931			206,156
Provision for credit losses			8,000			1,500			16,501			6,550
Net interest and dividend income after provision for credit losses			53,235			62,591			235,430			199,606
Noninterest income
Wealth management			2,600			2,403			9,803			9,887
Service charges on deposits			2,527			2,499			9,817			9,562
Secondary mortgage fees			58			62			259			332
Mortgage servicing rights mark to market (loss) gain			(1,277)			(431)			(1,425)			3,177
Mortgage servicing income			495			518			2,029			2,130
Net gain on sales of mortgage loans			366			340			1,477			2,022
Securities losses, net			(2)			(910)			(4,148)			(944)
Change in cash surrender value of BOLI			541			376			2,120			718
Card related income			2,511			2,795			10,051			10,989
Other income			910			1,294			4,196			5,243
Total noninterest income			8,729			8,946			34,179			43,116
Noninterest expense
Salaries and employee benefits			21,405			24,263			88,566			86,573
Occupancy, furniture and equipment			3,817			4,128			14,437			14,992
Computer and data processing			2,291			2,978			7,277			15,795
FDIC insurance			583			630			2,705			2,401
Net teller & bill paying			564			485			2,115			3,730
General bank insurance			301			298			1,212			1,221
Amortization of core deposit intangible			603			645			2,461			2,626
Advertising expense			383			130			721			589
Card related expense			1,338			1,304			5,123			4,348
Legal fees			228			225			927			873
Consulting & management fees			556			679			2,415			2,425
Other real estate expense, net			218			34			399			130
Other expense			4,739			3,885			16,843			15,470
Total noninterest expense			37,026			39,684			145,201			151,173
Income before income taxes			24,938			31,853			124,408			91,549
Provision for income taxes			6,713			8,238			32,679			24,144
Net income		$	18,225		$	23,615		$	91,729		$	67,405

Basic earnings per share		$	0.40		$	0.53		$	2.05		$	1.51
Diluted earnings per share			0.40			0.52			2.02			1.49
Dividends declared per share			0.05			0.05			0.20			0.20


Ending common shares outstanding	44,697,917	44,582,311	44,697,917	44,582,311
Weighted-average basic shares outstanding	44,694,200	44,578,830	44,663,722	44,526,655
Weighted-average diluted shares outstanding	45,409,232	45,228,212	45,395,010	45,213,088

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Average Balance

(In thousands, unaudited)


			2022												2023
Assets	****	1st Qtr		****	2nd Qtr		****	3rd Qtr		****	4th Qtr		****	1st Qtr		2nd Qtr		****	3rd Qtr		4th Qtr
Cash and due from banks		$	42,972		$	53,371		$	56,265		$	56,531		$	55,140	$	56,191		$	57,279	$	57,723
Interest earning deposits with financial institutions			635,302			426,820			131,260			50,377			49,310		50,309			49,737		47,865
Cash and cash equivalents			678,274			480,191			187,525			106,908			104,450		106,500			107,016		105,588

Securities available-for-sale, at fair value			1,807,875			1,792,099			1,703,348			1,576,004			1,503,619		1,404,664			1,295,211		1,192,021
FHLBC and FRBC stock			16,066			20,994			19,565			19,534			24,905		34,029			35,954		34,371
Loans held-for-sale			6,707			3,050			2,020			1,224			813		1,150			1,641		1,709
Loans			3,397,827			3,505,806			3,751,097			3,877,004			3,931,679		4,039,052			4,009,218		4,014,771
Less: allowance for credit losses on loans			44,341			44,354			45,449			48,778			49,398		53,480			54,581		50,023
Net loans			3,353,486			3,461,452			3,705,648			3,828,226			3,882,281		3,985,572			3,954,637		3,964,748

Premises and equipment, net			86,502			73,876			71,947			72,220			72,649		72,903			74,707		78,472
Other real estate owned			2,399			1,850			1,578			1,561			1,508		1,132			472		2,004
Mortgage servicing rights, at fair value			8,218			10,525			10,639			11,322			11,127		10,741			11,066		11,317
Goodwill			86,332			86,332			86,333			86,477			86,477		86,477			86,477		86,477
Core deposit intangible			15,977			15,286			14,561			13,950			13,327		12,709			12,119		11,502
Bank-owned life insurance ("BOLI")			105,396			105,463			105,448			105,754			106,655		107,028			107,786		108,616
Deferred tax assets, net			10,689			27,154			31,738			50,533			42,237		37,774			39,072		42,754
Other assets			55,474			53,823			55,606			53,909			48,599		50,812			52,360		55,155
Total other assets			370,987			374,309			377,850			395,726			382,579		379,576			384,059		396,297
Total assets		$	6,233,395		$	6,132,095		$	5,995,956		$	5,927,622		$	5,898,647	$	5,911,491		$	5,778,518	$	5,694,734

Liabilities
Deposits:
Noninterest bearing demand		$	2,093,293		$	2,119,667		$	2,092,301		$	2,083,503		$	2,002,801	$	1,920,448		$	1,867,201	$	1,838,325
Interest bearing:
Savings, NOW, and money market			2,899,497			2,872,622			2,765,281			2,680,767			2,560,893		2,437,096			2,324,613		2,241,937
Time			495,452			469,009			459,925			450,111			434,655		436,524			466,250		497,472
Total deposits			5,488,242			5,461,298			5,317,507			5,214,381			4,998,349		4,794,068			4,658,064		4,577,734

Securities sold under repurchase agreements			39,204			34,496			33,733			33,275			31,080		25,575			24,945		28,526
Other short-term borrowings			-			-			5,435			44,293			200,833		402,527			427,174		390,652
Junior subordinated debentures			25,773			25,773			25,773			25,773			25,773		25,773			25,773		25,773
Subordinated debentures			59,222			59,244			59,265			59,286			59,308		59,329			59,350		59,372
Senior notes			44,494			44,520			44,546			44,572			44,599		44,134			-		-
Notes payable and other borrowings			19,009			13,103			10,989			9,978			5,400		-			-		-
Other liabilities			60,819			32,636			34,949			51,753			51,279		48,434			53,164		63,971
Total liabilities			5,736,763			5,671,070			5,532,197			5,483,311			5,416,621		5,399,840			5,248,470		5,146,028

Stockholders' equity
Common stock			44,705			44,705			44,705			44,705			44,705		44,705			44,705		44,705
Additional paid-in capital			202,828			202,544			201,570			201,973			201,397		200,590			201,344		201,824
Retained earnings			258,073			267,912			284,302			301,753			324,785		346,042			368,732		389,776
Accumulated other comprehensive loss			(3,074)			(49,151)			(63,216)			(100,817)			(86,736)		(78,940)			(84,167)		(87,358)
Treasury stock			(5,900)			(4,985)			(3,602)			(3,303)			(2,125)		(746)			(566)		(241)
Total stockholders' equity			496,632			461,025			463,759			444,311			482,026		511,651			530,048		548,706
Total liabilities and stockholders' equity		$	6,233,395		$	6,132,095		$	5,995,956		$	5,927,622		$	5,898,647	$	5,911,491		$	5,778,518	$	5,694,734

Total Earning Assets		$	5,863,777		$	5,748,769		$	5,607,290		$	5,524,143		$	5,510,326	$	5,529,204		$	5,391,761	$	5,290,737
Total Interest Bearing Liabilities			3,582,651			3,518,767			3,404,947			3,348,055			3,362,541		3,430,958			3,328,105		3,243,732

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Statements of Income

(In thousands, except per share data, unaudited)



	2022												2023
	1st Qtr		****	2nd Qtr		****	3rd Qtr		****	4th Qtr		****	1st Qtr		2nd Qtr		****	3rd Qtr		4th Qtr
Interest and Dividend Income
Loans, including fees	$	36,366		$	38,229		$	46,614		$	55,170		$	57,210	$	61,561		$	62,665	$	62,751
Loans held-for-sale		57			32			22			19			12		19			29		31
Securities:
Taxable		5,169			6,786			9,116			10,495			10,735		9,930			8,946		8,329
Tax exempt		1,317			1,297			1,332			1,341			1,337		1,337			1,333		1,322
Dividends from FHLB and FRBC stock		153			263			261			259			280		396			597		647
Interest bearing deposits with financial institutions		269			782			663			461			585		643			659		616
Total interest and dividend income		43,331			47,389			58,008			67,745			70,159		73,886			74,229		73,696
Interest Expense
Savings, NOW, and money market deposits		397			347			380			776			1,149		1,742			2,558		3,312
Time deposits		277			265			335			571			664		1,156			1,982		2,834
Securities sold under repurchase agreements		11			9			10			10			9		7			27		50
Other short-term borrowings		-			-			44			436			2,345		5,160			5,840		5,429
Junior subordinated debentures		280			284			285			287			279		281			245		290
Subordinated debentures		546			547			546			546			546		546			547		546
Senior notes		485			578			728			891			994		1,414			-		-
Notes payable and other borrowings		103			95			111			137			87		-			-		-
Total interest expense		2,099			2,125			2,439			3,654			6,073		10,306			11,199		12,461
Net interest and dividend income		41,232			45,264			55,569			64,091			64,086		63,580			63,030		61,235
Provision for credit losses		-			550			4,500			1,500			3,501		2,000			3,000		8,000
Net interest and dividend income after provision for credit losses		41,232			44,714			51,069			62,591			60,585		61,580			60,030		53,235
Noninterest Income
Wealth management		2,698			2,506			2,280			2,403			2,270		2,458			2,475		2,600
Service charges on deposits		2,074			2,328			2,661			2,499			2,424		2,362			2,504		2,527
Secondary mortgage fees		139			50			81			62			59		76			66		58
Mortgage servicing rights mark to market gain (loss)		2,978			82			548			(431)			(525)		96			281		(1,277)
Mortgage servicing income		519			579			514			518			516		499			519		495
Net gain (loss) on sales of mortgage loans		1,495			(262)			449			340			306		398			407		366
Securities losses, net		-			(33)			(1)			(910)			(1,675)		(1,547)			(924)		(2)
Change in cash surrender value of BOLI		124			72			146			376			242		418			919		541
Card related income		2,574			2,965			2,653			2,795			2,244		2,690			2,606		2,511
Other income		862			924			2,165			1,294			1,489		773			1,024		910
Total noninterest income		13,463			9,211			11,496			8,946			7,350		8,223			9,877		8,729
Noninterest Expense
Salaries and employee benefits		19,967			21,332			21,011			24,263			22,248		21,798			23,115		21,405
Occupancy, furniture and equipment		3,699			3,046			4,119			4,128			3,475		3,639			3,506		3,817
Computer and data processing		6,268			4,006			2,543			2,978			1,774		1,290			1,922		2,291
FDIC insurance		410			702			659			630			584		794			744		583
Net teller & bill paying		1,907			834			504			485			502		515			534		564
General bank insurance		315			351			257			298			305		306			300		301
Amortization of core deposit intangible		665			659			657			645			624		618			616		603
Advertising expense		182			194			83			130			142		103			93		383
Card related expense		534			1,057			1,453			1,304			1,216		1,222			1,347		1,338
Legal fees		257			179			212			225			319		283			97		228
Consulting & management fees		616			523			607			679			790		520			549		556
Other real estate expense, net		(12)			87			21			34			306		(98)			(27)		218
Other expense		3,444			4,279			3,862			3,885			3,637		3,840			4,627		4,739
Total noninterest expense		38,252			37,249			35,988			39,684			35,922		34,830			37,423		37,026
Income before income taxes		16,443			16,676			26,577			31,853			32,013		34,973			32,484		24,938
Provision for income taxes		4,423			4,429			7,054			8,238			8,406		9,411			8,149		6,713
Net income	$	12,020		$	12,247		$	19,523		$	23,615		$	23,607	$	25,562		$	24,335	$	18,225

Basic earnings per share (GAAP)	$	0.27		$	0.28		$	0.43		$	0.53		$	0.53	$	0.57		$	0.55	$	0.40
Diluted earnings per share (GAAP)		0.27			0.27			0.43			0.52			0.52		0.56			0.54		0.40
Dividends paid per share		0.05			0.05			0.05			0.05			0.05		0.05			0.05		0.05

Reconciliation of Non-GAAP Financial Measures

The tables below provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the periods indicated. Dollar amounts below in thousands:


	Quarters Ended
	December 31,			September 30,		December 31,
	2023		****	2023		2022
Net Income
Income before income taxes (GAAP)	$	24,938		$	32,484	$	31,853
Pre-tax income adjustments:
Litigation related expenses		1,200			-		-
Merger-related costs, net of losses/(gains) on branch sales		19			-		617
Liquidation and deconversion costs on Visa credit card portfolio		-			629		-
Adjusted net income before taxes		26,157			33,113		32,470
Taxes on adjusted net income		7,041			8,307		8,398
Adjusted net income (non-GAAP)	$	19,116		$	24,806	$	24,072

Basic earnings per share (GAAP)	$	0.40		$	0.55	$	0.53
Diluted earnings per share (GAAP)		0.40			0.54		0.52
Adjusted basic earnings per share excluding acquisition-related costs (non-GAAP)		0.43			0.55		0.54
Adjusted diluted earnings per share excluding acquisition-related costs (non-GAAP)		0.42			0.55		0.53


	Quarters Ended
	December 31,			September 30,			December 31,
	2023		****	2023			2022
Net Interest Margin
Interest income (GAAP)	$	73,696		$	74,229		$	67,745
Taxable-equivalent adjustment:
Loans		11			11			6
Securities		352			354			356
Interest income (TE)		74,059			74,594			68,107
Interest expense (GAAP)		12,461			11,199			3,654
Net interest income (TE)	$	61,598		$	63,395		$	64,453
Net interest income (GAAP)	$	61,235		$	63,030		$	64,091
Average interest earning assets	$	5,290,737		$	5,391,761		$	5,524,143
Net interest margin (TE)		4.62	%		4.66	%		4.63	%
Net interest margin (GAAP)		4.59	%		4.64	%		4.60	%


	GAAP											Non-GAAP
		Three Months Ended											Three Months Ended
	December 31,			September 30,			December 31,				December 31,				September 30,				December 31,
	2023			2023			2022				2023				2023				2022
Efficiency Ratio / Adjusted Efficiency Ratio

Noninterest expense	$	37,026		$	37,423			$	39,684			$	37,026			$	37,423			$	39,684
Less amortization of core deposit		603			616				645				603				616				645
Less other real estate (income) expense, net		218			(27)				34				218				(27)				34
Less litigation related expense		N/A			N/A				N/A				1,200
Less acquisition related costs, net of losses/(gains) on branch sales		N/A			N/A				N/A				19				-				617
Less liquidation and deconversion costs on Visa credit card portfolio		N/A			N/A				N/A				-				629				-
Noninterest expense less adjustments	$	36,205		$	36,834			$	39,005			$	34,986			$	36,205			$	38,388

Net interest income	$	61,235		$	63,030			$	64,091			$	61,235			$	63,030			$	64,091
Taxable-equivalent adjustment:
Loans		N/A			N/A				N/A				11				11				6
Securities		N/A			N/A				N/A				352				354				356
Net interest income including adjustments		61,235			63,030				64,091				61,598				63,395				64,453
Noninterest income		8,729			9,877				8,946				8,729				9,877				8,946
Less securities losses		(2)			(924)				(910)				(2)				(924)				(910)
Less MSRs mark to market (losses) gains		(1,277)			281				(431)				(1,277)				281				(431)
Taxable-equivalent adjustment:
Change in cash surrender value of BOLI		N/A			N/A				N/A				144				245				100
Noninterest income (excluding) / including adjustments		10,008			10,520				10,287				10,152				10,765				10,387

Net interest income including adjustments plus noninterest income (excluding) / including adjustments	$	71,243		$	73,550			$	74,378			$	71,750			$	74,160			$	74,840
Efficiency ratio / Adjusted efficiency ratio		50.82	%		50.08	%			52.44	%			48.76	%			48.82	%			51.29	%

N/A - Not applicable.


	Quarters Ended
	December 31,			September 30,			December 31,
	2023			2023			2022
Return on Average Tangible Common Equity Ratio

Net income (GAAP)	$	18,225		$	24,335		$	23,615

Income before income taxes (GAAP)	$	24,938		$	32,484		$	31,853
Pre-tax income adjustments:
Amortization of core deposit intangibles		603			616			645
Net income, excluding intangibles amortization, before taxes		25,541			33,100			32,498
Taxes on net income, excluding intangible amortization, before taxes		6,875			8,304			8,405
Net income, excluding intangibles amortization (non-GAAP)	$	18,666		$	24,796		$	24,093


Total Average Common Equity	$	548,706			530,048		$	444,311
Less Average goodwill and intangible assets		97,979			98,596			100,427
Average tangible common equity (non-GAAP)	$	450,727		$	431,452		$	343,884


Return on average common equity (GAAP)		13.18	%		18.21	%		21.09	%
Return on average tangible common equity (non-GAAP)		16.43	%		22.80	%		27.80	%

Exhibit 99.2


	Old Second Bancorp, Inc. Loan Portfolio Disclosures As of June 30, 2020

Loan Portfolio Composition Loan Portfolio Characteristics Balance Outstanding (000’s) $2,052,336 Total Commitment (000’s) $2,539,355 Average Loan Commitment $352,024 Number of Payment Deferrals /Modifications 449 Payment Modification Rate (% of Total Commitment)* 9.03% Loan Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with minimal exposure to high risk industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated Leasing, C&I, CRE, Healthcare and Professional Service lending teams Commercial & Industrial 28% Construction 6% CRE Investor 21% CRE Owner- Occupied Farm Land 13% 1% Residential Investor 3% Residential Owner-Occupied 5% HELOC 10% Leasing 5% Multifamily 8% Loan Type IL 81% CA 2% NY 2% WI 4% MI 2% MA 1% Other States 8% Geography* *Based on primary property collateral if available, otherwise borrower address. *Excludes $133.89 million in PPP loans

Commercial and Industrial (includes Leasing) Commercial and Industrial Portfolio Characteristics Balance Outstanding (000’s) $574,935 Total Commitment (000’s) $838,075 Average Loan Commitment $351,247 Number of Payment Deferrals /Modifications 164 Payment Modification Rate (% of Total Commitment)* 6.16%* Weighted Average Seasoning 3.50 years Commercial and Industrial Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with limited exposure to Accommodation and Food Services and Entertainment industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated Leasing, C&I, Healthcare and Professional Service lending teams • Modest exposure to syndicated or leveraged loans DuPage County (IL) 11% Kane County (IL) 26% Kendall County (IL) 2% Cook County (IL) 23% Will County (IL) 7% IL Other 2% CA 2% MA 3% MI 3% NY 6% TX 2% WI 2% Other States 11% Geography* *Based on primary property collateral if available, otherwise borrower address. Accomodation and Food Services 2% Agriculture 3% Health Care 8% Information and Finance 13% Manufacturing 18% Administration and Support 2% Construction 15% Other Services 2% Professional Services 6% Rental and Leasing 7% Retail Trade 4% Transportation and Warehousing 6% Wholesale Trade 13% Industry *Excludes $133.89 million in PPP loans


	CRE Owner-Occupied CRE Owner-Occupied Portfolio Characteristics Balance Outstanding (000’s) $343,982 Total Commitment (000’s) $357,453 Average Loan Commitment $549,928 Number of Payment Deferrals /Modifications 72 Payment Modification Rate (% of Total Commitment) 15.97% Weighted Average Seasoning 6.13 years Commercial and Industrial Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with limited exposure to the Accommodation and Food Service and Entertainment industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated C&I, Healthcare and Professional Service lending teams DuPage County (IL) 14% Kane County (IL) 28% Kendall County (IL) 5% Cook County (IL) 32% Will County (IL) 17% IL Other 2% Out of State 2% Geography* *Based on primary property collateral if available, otherwise borrower address. Accomodation and Food Services 3% Agriculture 3% Entertainment 7% Education 3% Health Care 9% Information and Finance 1% Manufacturing 10% Administration and Support 1% Construction 4% Other Services 23% Professional Services 4% Rental and Leasing 9% Retail Trade 18% Transportation and Warehousing 1% Wholesale Trade 3% Industry

CRE Owner-Occupied CRE Owner-Occupied Portfolio Characteristics Balance Outstanding (000’s) $343,982 Total Commitment (000’s) $357,453 Average Loan Commitment $549,928 Number of Payment Deferrals /Modifications 72 Payment Modification Rate (% of Total Commitment) 15.97% Weighted Average Seasoning 6.13 years Commercial and Industrial Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with limited exposure to the Accommodation and Food Service and Entertainment industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated C&I, Healthcare and Professional Service lending teams DuPage County (IL) 14% Kane County (IL) 28% Kendall County (IL) 5% Cook County (IL) 32% Will County (IL) 17% IL Other 2% Out of State 2% Geography* *Based on primary property collateral if available, otherwise borrower address. Accomodation and Food Services 3% Agriculture 3% Entertainment 7% Education 3% Health Care 9% Information and Finance 1% Manufacturing 10% Administration and Support 1% Construction 4% Other Services 23% Professional Services 4% Rental and Leasing 9% Retail Trade 18% Transportation and Warehousing 1% Wholesale Trade 3% Industry


	CRE Investor (includes Multifamily) CRE Investor Portfolio Characteristics Balance Outstanding (000’s) $723,235 Total Commitment (000’s) $735,069 Average Loan Commitment $1,287,336 Number of Payment Deferrals /Modifications 56 Payment Modification Rate (% of Total Commitment) 11.22% Weighted Average Seasoning 4.41 years CRE Investor Portfolio Characteristics • Lending focused on full relationship and strong sponsorship • Well diversified by property type with limited exposure to high-risk real estate sectors (Hotel, Restaurant, Recreational and “Big Box” Retail) • Repayment analysis based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Secured by seasoned properties with stabilized cash flow • Dedicated CRE and Healthcare lending teams Hotel 2% Industrial 13% Medical Office 2% Mini Storage 2% Mixed-Use 3% Office 16% Restaurant 2% Retail 15% Senior Housing 14% Multifamily 27% National Drugstore Chain 4% CRE Type DuPage County (IL) 12% Kane County (IL) 8% Cook County (IL) 47% Will County (IL) 7% IL Other 5% WI 8% MI 3% OH 2% CA 2% Other States 6% Geography* *Based on primary property collateral if available, otherwise borrower address.

CRE Investor (includes Multifamily) CRE Investor Portfolio Characteristics Balance Outstanding (000’s) $723,235 Total Commitment (000’s) $735,069 Average Loan Commitment $1,287,336 Number of Payment Deferrals /Modifications 56 Payment Modification Rate (% of Total Commitment) 11.22% Weighted Average Seasoning 4.41 years CRE Investor Portfolio Characteristics • Lending focused on full relationship and strong sponsorship • Well diversified by property type with limited exposure to high-risk real estate sectors (Hotel, Restaurant, Recreational and “Big Box” Retail) • Repayment analysis based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Secured by seasoned properties with stabilized cash flow • Dedicated CRE and Healthcare lending teams Hotel 2% Industrial 13% Medical Office 2% Mini Storage 2% Mixed-Use 3% Office 16% Restaurant 2% Retail 15% Senior Housing 14% Multifamily 27% National Drugstore Chain 4% CRE Type DuPage County (IL) 12% Kane County (IL) 8% Cook County (IL) 47% Will County (IL) 7% IL Other 5% WI 8% MI 3% OH 2% CA 2% Other States 6% Geography* *Based on primary property collateral if available, otherwise borrower address.