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): October 18, 2023

(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 October 18, 2023, Old Second Bancorp, Inc. (the “Company’s”) issued a press release announcing its financial results for the third quarter ended September 30, 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 October 18, 2023

99.2		Loan Portfolio Disclosures for Old Second Bancorp, Inc. dated September 30, 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: October 18, 2023	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	October 18, 2023
	(630) 906-5484

Old Second Bancorp, Inc. Reports Third Quarter 2023 Net Income of $24.3 Million,

or $0.54 per Diluted Share

AURORA, IL, October 18, 2023 – 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 third quarter of 2023. Our net income was $24.3 million, or $0.54 per diluted share, for the third quarter of 2023, compared to net income of $25.6 million, or $0.56 per diluted share, for the second quarter of 2023, and net income of $19.5 million, or $0.43 per diluted share, for the third quarter of 2022. Adjusted net income, a non-GAAP financial measure that excludes Visa portfolio and land trust portfolio gains on sale, Visa portfolio liquidation and deconversion costs, and any merger related costs, as applicable, was $24.8 million, or $0.55 per diluted share, for the third quarter of 2023, compared to $25.6 million, or $0.56 per diluted share, for the second quarter of 2023, and $19.6 million, or $0.43 per diluted share, for the third quarter of 2022. 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.

Net income decreased $1.2 million in the third quarter of 2023 compared to the second quarter of 2023. The decrease was primarily due to the increase of $1.0 million in provision for credit losses, and an increase in noninterest expense of $2.6 million in the third quarter of 2023, which were partially offset by a $1.7 million increase in noninterest income and a $1.3 million decrease in provision for income taxes. Net income increased $4.8 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to an increase in net interest income of $7.5 million year over year due to rising market interest rates and a $1.5 million decrease in provision for credit losses. The increase in net income in the third quarter of 2023 was partially offset by a $1.6 million decrease in noninterest income and a $1.4 million increase in noninterest expense. The third quarter of 2023 was impacted by a pre-tax net loss on the sale of securities of $924,000, compared to pre-tax net losses on the sale of securities of $1.5 million and $1,000 in the second quarter of 2023 and the third quarter of 2022, respectively. In addition, the third quarter of 2023 was also impacted by $629,000 of deconversion and liquidation costs from the 2022 sale of our Visa credit card portfolio.

Operating Results

●	Third quarter 2023 net income was $24.3 million, reflecting a $1.2 million decrease from the second quarter 2023, and an increase of $4.8 million from the third quarter of 2022. Adjusted net income, as defined above, was $24.8 million for the third quarter of 2023, a decrease of $776,000 from adjusted net income for the second quarter of 2023, and an increase of $5.2 million from adjusted net income for the third quarter of 2022.
●	Net interest and dividend income was $63.0 million for the third quarter of 2023, reflecting a decrease of $550,000, or 0.9%, from the second quarter of 2023, and an increase of $7.5 million, or 13.4%, from the third quarter of 2022.
---	---
●	We recorded a net provision for credit losses of $3.0 million in the third quarter of 2023, compared to a net provision for credit losses of $2.0 million in the second quarter of 2023, and a net provision for credit losses of $4.5 million in the third quarter of 2022.
---	---
●	Noninterest income was $9.9 million for the third quarter of 2023, an increase of $1.7 million, or 20.1%, compared to $8.2 million for the second quarter of 2023, and a decrease of $1.6 million, or 14.1%, compared to $11.5 million for the third quarter of 2022.
---	---

●	Noninterest expense was $37.4 million for the third quarter of 2023, an increase of $2.6 million, or 7.4% compared to $34.8 million for the second quarter of 2023, and an increase of $1.4 million, or 4.0%, compared to $36.0 million for the third quarter of 2022.
●	We had a provision for income tax of $8.1 million for the third quarter of 2023, compared to a provision for income tax of $9.4 million for the second quarter of 2023 and a provision of $7.1 million for the third quarter of 2022. The effective tax rate for each of the periods presented was 25.1%, 26.9%, and 26.5%, respectively.
---	---
●	On October 17, 2023, our Board of Directors declared a cash dividend of $0.05 per share payable on November 6, 2023, to stockholders of record as of October 27, 2023.
---	---

Financial Highlights


	Quarters Ended
(Dollars in thousands)	September 30, 2023			June 30, 2023			September 30, 2022
Balance sheet summary
Total assets	$	5,758,156		$	5,883,942		$	5,967,705
Total securities available-for-sale		1,229,618			1,335,622			1,609,759
Total loans		4,029,543			4,015,525			3,869,334
Total deposits		4,614,320			4,717,582			5,281,359
Total liabilities		5,225,598			5,369,987			5,533,991
Total equity		532,558			513,955			433,714

Total tangible assets	$	5,659,858		$	5,785,028		$	5,866,904
Total tangible equity		434,260			415,041			332,913

Income statement summary
Net interest income	$	63,030		$	63,580		$	55,569
Provision for credit losses		3,000			2,000			4,500
Noninterest income		9,877			8,223			11,496
Noninterest expense		37,423			34,830			35,988
Net income		24,335			25,562			19,523
Effective tax rate		25.09	%		26.91	%		26.54	%

Profitability ratios
Return on average assets (ROAA)		1.67	%		1.73	%		1.29	%
Return on average equity (ROAE)		18.21			20.04			16.70
Net interest margin (tax-equivalent)		4.66			4.64			3.96
Efficiency ratio		50.08			46.84			53.08
Return on average tangible common equity (ROATCE)		22.80			25.30			21.87
Tangible common equity to tangible assets (TCE/TA)		7.67			7.17			5.67

Per share data
Diluted earnings per share	$	0.54		$	0.56		$	0.43
Tangible book value per share		9.72			9.29			7.47

Company capital ratios^1^
Common equity tier 1 capital ratio		11.00	%		10.29	%		9.16	%
Tier 1 risk-based capital ratio		11.52			10.80			9.68
Total risk-based capital ratio		13.84			13.16			11.99
Tier 1 leverage ratio		9.62			8.96			7.70

Bank capital ratios ^1, 2^
Common equity tier 1 capital ratio		12.49	%		11.70	%		11.60	%
Tier 1 risk-based capital ratio		12.49			11.70			11.60
Total risk-based capital ratio		13.57			12.83			12.64
Tier 1 leverage ratio		10.43			9.70			9.24

^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 “Old Second reported strong results in the third quarter as we earned $24.3 million in net income, ROAA of 1.67% and ROATCE of 22.80%. Adjusting for merger related expenses, the gain on the land trust sale and Visa portfolio related items, our earnings per share increased by 28% over the third quarter 2022. Our tangible book value per share has increased by more than 30% over the last year and capital ratios continue to build very quickly with our tangible common equity ratio increasing by 50 basis points on a linked quarter basis to 7.67%. Our focus over the near term will continue to be on assessing risks both within the loan portfolio and more broadly and optimizing the earning asset mix while reducing our overall sensitivity to interest rates. We believe the ability to deliver exceptional returns and compound book value, at a time when marginal spreads in deposit and lending markets are tight, illustrates the quality of the franchise we have built. With a strong balance sheet, low-cost granular funding and continuing excellent overall profitability, Old Second is well positioned for the remainder of 2023 and beyond.”

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 $63.6 million at September 30, 2023, $61.2 million at June 30, 2023, and $52.9 million at September 30, 2022. Nonperforming loans, as a percent of total loans, were 1.6% at September 30, 2023, 1.5% at June 30, 2023, and 1.4% at September 30, 2022. The increase in the third quarter of 2023 is driven by the downgrade of a few credits during the quarter, due primarily to office-related loans within the commercial real estate-investor portfolio and debt service coverage shortfalls.
●	Total loans were $4.03 billion at September 30, 2023, reflecting an increase of $14.0 million compared to June 30, 2023, and an increase of $160.2 million compared to September 30, 2022. The increase year over year was largely driven by the growth in leases, commercial real estate-investor, construction, and multifamily portfolios. Average loans (including loans held-for-sale) for the third quarter of 2023 totaled $4.01 billion, reflecting a decrease of $29.3 million from the second quarter of 2023 and an increase of $257.7 million from the third quarter of 2022.
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●	Available-for-sale securities totaled $1.23 billion at September 30, 2023, compared to $1.34 billion at June 30, 2023, and $1.61 billion at September 30, 2022. The unrealized mark to market loss on securities totaled $120.5 million as of September 30, 2023, compared to $112.4 million as of June 30, 2023, and $131.0 million as of September 30, 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 September 30, 2023, securities sales of $65.6 million resulted in net realized losses of $924,000, compared to sales of $74.0 million during the quarter ended June 30, 2023, which resulted in net realized losses of $1.5 million, and no security sales for the quarter ended September 30, 2022, with a loss of $1,000 on the call of securities. 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
	September 30, 2023						June 30, 2023						September 30, 2022
	Average			Income /		Rate	Average			Income /		Rate	Average			Income /		Rate
	Balance			Expense		%	Balance			Expense		%	Balance			Expense		%
Assets
Interest earning deposits with financial institutions	$	49,737		$	659	5.26	$	50,309		$	643	5.13	$	131,260		$	663	2.00
Securities:
Taxable		1,125,688			8,946	3.15		1,231,994			9,930	3.23		1,525,258			9,116	2.37
Non-taxable (TE)^1^		169,523			1,687	3.95		172,670			1,692	3.93		178,090			1,686	3.76
Total securities (TE)^1^		1,295,211			10,633	3.26		1,404,664			11,622	3.32		1,703,348			10,802	2.52
FHLBC and FRBC Stock		35,954			597	6.59		34,029			396	4.67		19,565			261	5.29
Loans and loans held-for-sale^1, 2^		4,010,859			62,705	6.20		4,040,202			61,591	6.11		3,753,117			46,642	4.93
Total interest earning assets		5,391,761			74,594	5.49		5,529,204			74,252	5.39		5,607,290			58,368	4.13
Cash and due from banks		57,279			-	-		56,191			-	-		56,265			-	-
Allowance for credit losses on loans		(54,581)			-	-		(53,480)			-	-		(45,449)			-	-
Other noninterest bearing assets		384,059			-	-		379,576			-	-		377,850			-	-
Total assets	$	5,778,518					$	5,911,491					$	5,995,956

Liabilities and Stockholders' Equity
NOW accounts	$	576,138		$	440	0.30	$	600,957		$	312	0.21	$	612,174		$	148	0.10
Money market accounts		720,488			1,767	0.97		762,967			1,245	0.65		967,106			157	0.06
Savings accounts		1,027,987			351	0.14		1,073,172			185	0.07		1,186,001			75	0.03
Time deposits		466,250			1,982	1.69		436,524			1,156	1.06		459,925			335	0.29
Interest bearing deposits		2,790,863			4,540	0.65		2,873,620			2,898	0.40		3,225,206			715	0.09
Securities sold under repurchase agreements		24,945			27	0.43		25,575			7	0.11		33,733			10	0.12
Other short-term borrowings		427,174			5,840	5.42		402,527			5,160	5.14		5,435			44	3.21
Junior subordinated debentures		25,773			245	3.77		25,773			281	4.37		25,773			285	4.39
Subordinated debentures		59,350			547	3.66		59,329			546	3.69		59,265			546	3.66
Senior notes		-			-	-		44,134			1,414	12.85		44,546			728	6.48
Notes payable and other borrowings		-			-	-		-			-	-		10,989			111	4.01
Total interest bearing liabilities		3,328,105			11,199	1.34		3,430,958			10,306	1.20		3,404,947			2,439	0.28
Noninterest bearing deposits		1,867,201			-	-		1,920,448			-	-		2,092,301			-	-
Other liabilities		53,164			-	-		48,434			-	-		34,949			-	-
Stockholders' equity		530,048			-	-		511,651			-	-		463,759			-	-
Total liabilities and stockholders' equity	$	5,778,518					$	5,911,491					$	5,995,956
Net interest income (GAAP)				$	63,030					$	63,580					$	55,569
Net interest margin (GAAP)						4.64						4.61						3.93

Net interest income (TE)^1^				$	63,395					$	63,946					$	55,929
Net interest margin (TE)^1^						4.66						4.64						3.96
Interest bearing liabilities to earning assets		61.73	%					62.05	%					60.72	%

^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 measures 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 $780,000 for the third quarter of 2023, and loan fee expense of $242,000 and $588,000 for the second quarter of 2023 and the third quarter of 2022, respectively. Nonaccrual loans are included in the above stated average balances.

The increased yield of 10 basis points on interest earning assets compared to the linked period was driven by higher yields on loan originations than those in the previous period as well as repricing within the existing variable rate portfolios for securities available-for-sale and loans. 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 136 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 4

benchmark interest rates impacted yields on the securities portfolio through the inverse relationship between interest 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 third quarter of 2022 through the third quarter of 2023, from $3.23 billion to $2.79 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 65 basis points for the quarter ended September 30, 2023, from 40 basis points for the quarter ended June 30, 2023, and from nine basis points for the quarter ended September 30, 2022. A 32 basis point increase in the cost of money market funds for the quarter ended September 30, 2023 compared to prior linked quarter, and a 91 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 September 30, 2023 increased by 63 basis points and 140 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 third quarter of 2023, compared to the second quarter of 2023, primarily due to the redemption of the senior notes as of June 30, 2023, partially offset by an increase in average short-term borrowings of $24.6 million stemming from increased average FHLB advances over the prior quarter. The increase of $421.7 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) increased three basis points to 4.64% for the third quarter of 2023, compared to 4.61% for the second quarter of 2023, and increased 71 basis points compared to 3.93% for the third quarter of 2022. Our net interest margin (TE) increased two basis points to 4.66% for the third quarter of 2023, compared to 4.64% for the second quarter of 2023, and increased 70 basis points compared to 3.96% for the third quarter of 2022. The increase in the third quarter, compared to the prior quarter, is primarily due to the growth in interest income due to the rising interest rate environment, and a decrease in borrowing interest expense due to the redemption of the senior notes in June 2023. The increase in the third quarter, compared to the prior year like quarter, is primarily due to an increase in market interest rates, and the related rate resets on loans and securities during the past year, as well as continuing loan growth relative to a more modest 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


										3rd Quarter 2023
Noninterest Income	Three Months Ended									Percent Change From
(Dollars in thousands)	September 30,			June 30,			September 30,			June 30,		September 30,
	2023		****	2023		****	2022		****	2023	****	2022
Wealth management	$	2,475		$	2,458		$	2,280		0.7		8.6
Service charges on deposits		2,504			2,362			2,661		6.0		(5.9)
Residential mortgage banking revenue
Secondary mortgage fees		66			76			81		(13.2)		(18.5)
MSRs mark to market gain		281			96			548		192.7		(48.7)
Mortgage servicing income		519			499			514		4.0		1.0
Net gain on sales of mortgage loans		407			398			449		2.3		(9.4)
Total residential mortgage banking revenue		1,273			1,069			1,592		19.1		(20.0)
Securities losses, net		(924)			(1,547)			(1)		40.3		N/M
Change in cash surrender value of BOLI		919			418			146		119.9		529.5
Card related income		2,606			2,690			2,653		(3.1)		(1.8)
Other income		1,024			773			2,165		32.5		(52.7)
Total noninterest income	$	9,877		$	8,223		$	11,496		20.1		(14.1)

N/M - Not meaningful.

Noninterest income increased $1.7 million, or 20.1%, in the third quarter of 2023, compared to the second quarter of 2023, and decreased $1.6 million, or 14.1%, compared to the third quarter of 2022. The increase from the second quarter of 2023 was primarily driven by a $204,000 increase in residential mortgage banking revenue, a $623,000 decrease in securities losses, net, based on strategic sales, a $501,000 increase in the cash surrender value of BOLI, and a $251,000 increase in other income primarily due to contract incentives achieved on brokerage activities, as well as various recoveries on prior year sold mortgage claims.

The decrease in noninterest income of $1.6 million in the third quarter of 2023, compared to the third quarter of 2022, is primarily due to an increase in security losses, net, of $923,000 on strategic sales for the quarter ended September 30, 2023, a decrease of $267,000 on mortgage servicing rights mark to market gains, and a $1.1 million decrease in other income due to a $743,000 pretax gain on a Visa credit card portfolio sale and a $180,000 pretax gain on the sale of a land trust portfolio recorded in the third quarter of 2022. These decreases were partially offset by a $773,000 increase in the cash surrender value of BOLI due to market interest rate changes. 6

Noninterest Expense


										3rd Quarter 2023
Noninterest Expense	Three Months Ended									Percent Change From
(Dollars in thousands)	September 30,			June 30,			September 30,			June 30,		September 30,
	2023		****	2023		****	2022		****	2023	****	2022
Salaries	$	17,279		$	16,310		$	14,711		5.9		17.5
Officers incentive		2,773			2,397			2,787		15.7		(0.5)
Benefits and other		3,063			3,091			3,513		(0.9)		(12.8)
Total salaries and employee benefits		23,115			21,798			21,011		6.0		10.0
Occupancy, furniture and equipment expense		3,506			3,639			4,119		(3.7)		(14.9)
Computer and data processing		1,922			1,290			2,543		49.0		(24.4)
FDIC insurance		744			794			659		(6.3)		12.9
Net teller & bill paying		534			515			504		3.7		6.0
General bank insurance		300			306			257		(2.0)		16.7
Amortization of core deposit intangible asset		616			618			657		(0.3)		(6.2)
Advertising expense		93			103			83		(9.7)		12.0
Card related expense		1,347			1,222			1,453		10.2		(7.3)
Legal fees		97			283			212		(65.7)		(54.2)
Consulting & management fees		549			520			607		5.6		(9.6)
Other real estate owned expense, net		(27)			(98)			21		72.4		(228.6)
Other expense		4,627			3,840			3,862		20.5		19.8
Total noninterest expense	$	37,423		$	34,830		$	35,988		7.4		4.0
Efficiency ratio (GAAP)^1^		50.08	%		46.84	%		53.08	%
Adjusted efficiency ratio (non-GAAP)^2^		48.82	%		46.49	%		51.90	%

^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, and acquisition-related costs, net of gains on branch sales, 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 third quarter of 2023 increased $2.6 million, or 7.4%, compared to the second quarter of 2023, and increased $1.4 million, or 4.0%, compared to the third quarter of 2022. The increase in the third quarter of 2023 compared to the second quarter of 2023 was attributable to a $1.3 million increase in salaries and employee benefits, primarily due to an increase in salaries and the officer incentive accrual. Also contributing to the increase in the third quarter of 2023 was a $632,000 increase in computer and data processing costs as the second quarter reflects software contract incentives, and a $787,000 increase in other expenses primarily due to $629,000 of liquidation costs recorded from the September 2023 Visa credit card portfolio deconversion, which we sold in the third quarter of 2022 and continued to service through the third quarter of 2023. Partially offsetting the increase in noninterest expense in the third quarter of 2023 was a $186,000 decrease in legal fees, as the second quarter of 2023 experienced higher legal costs due to senior debt redemption, the proxy filing, and benefit plan reviews.

The year over year increase in noninterest expense is primarily attributable to a $2.1 million increase in salaries and employee benefits, primarily due to an increase in salaries due to higher wage rates in the current year. Also contributing to the increase was a $765,000 increase in other expense, which was primarily due to $629,000 of liquidation and deconversion costs recorded on the Visa credit card portfolio liquidation in the third quarter of 2023. Partially offsetting the increase in noninterest expense in the third quarter of 2023, compared to the third quarter of 2022, was a $613,000 decrease in furniture and equipment expenses, a $621,000 decrease in computer and data processing expenses, and a $115,000 decrease in legal fees, all stemming from acquisition related costs that were recorded in the third quarter of 2022. 7

Earning Assets


							September 30, 2023
Loans	As of						Percent Change From
(Dollars in thousands)	September 30,		June 30,		September 30,		June 30,		September 30,
	2023		2023		2022		2023	****	2022
Commercial	$	834,877	$	820,027	$	888,081	1.8		(6.0)
Leases		354,827		314,919		251,603	12.7		41.0
Commercial real estate – investor		1,047,122		1,080,073		941,910	(3.1)		11.2
Commercial real estate – owner occupied		809,050		824,277		876,951	(1.8)		(7.7)
Construction		202,546		189,058		176,700	7.1		14.6
Residential real estate – investor		53,762		55,935		59,580	(3.9)		(9.8)
Residential real estate – owner occupied		227,446		218,205		220,969	4.2		2.9
Multifamily		372,020		383,184		322,856	(2.9)		15.2
HELOC		102,055		102,058		116,108	(0.0)		(12.1)
Other^1^		25,838		27,789		14,576	(7.0)		77.3
Total loans	$	4,029,543	$	4,015,525	$	3,869,334	0.3		4.1

^1^Other class includes consumer loans and overdrafts.

Total loans increased by $14.0 million at September 30, 2023, compared to June 30, 2023, and increased $160.2 million for the year over year period. Loan growth of $160.2 million in the year over year period was driven by growth in leasing, commercial real estate – investor, construction, and multifamily loans.


										September 30, 2023
Securities		As of								Percent Change From
(Dollars in thousands)		September 30,			June 30,			September 30,		June 30,		September 30,
	****	2023		****	2023		****	2022		2023	****	2022
Securities available-for-sale, at fair value
U.S. Treasury		$	216,777		$	214,613		$	211,097	1.0		2.7
U.S. government agencies			55,821			55,981			55,963	(0.3)		(0.3)
U.S. government agency mortgage-backed			104,569			115,140			127,626	(9.2)		(18.1)
States and political subdivisions			220,100			229,534			224,260	(4.1)		(1.9)
Corporate bonds			4,961			4,882			9,543	1.6		(48.0)
Collateralized mortgage obligations			386,679			407,495			587,846	(5.1)		(34.2)
Asset-backed securities			66,916			134,319			219,587	(50.2)		(69.5)
Collateralized loan obligations			173,795			173,658			173,837	0.1		(0.0)
Total securities available-for-sale		$	1,229,618		$	1,335,622		$	1,609,759	(7.9)		(23.6)

Our securities portfolio totaled $1.23 billion as of September 30, 2023, a decrease of $106.0 million from $1.34 billion as of June 30, 2023, and a decrease of $380.1 million since September 30, 2022. The portfolio decrease of $106.0 million in the third quarter of 2023, compared to the prior quarter-end, was due to security sales of $65.6 million, which resulted in a net realized loss of $924,000, as well as paydowns of $29.6 million. Net unrealized losses at September 30, 2023 were $120.5 million, compared to $112.4 million at June 30, 2023 and $131.0 million at September 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. 8

Asset Quality


										September 30, 2023
Nonperforming assets	As of									Percent Change From
(Dollars in thousands)	September 30,			June 30,			September 30,			June 30,	September 30,
	2023		****	2023		****	2022		****	2023	2022
Nonaccrual loans	$	62,116		$	60,925		$	32,126		2.0	93.4
Performing troubled debt restructured loans accruing interest ^1^		N/A			N/A			22		N/A	N/A
Loans past due 90 days or more and still accruing interest		1,485			308			20,752		382.1	(92.8)
Total nonperforming loans		63,601			61,233			52,900		3.9	20.2
Other real estate owned		407			761			1,561		(46.5)	(73.9)
Total nonperforming assets	$	64,008		$	61,994		$	54,461		3.2	17.5



30-89 days past due loans and still accruing interest	$	28,219		$	12,449		$	8,197
Nonaccrual loans to total loans		1.5	%		1.5	%		0.8	%
Nonperforming loans to total loans		1.6	%		1.5	%		1.4	%
Nonperforming assets to total loans plus OREO		1.6	%		1.5	%		1.4	%
Purchased credit-deteriorated loans to total loans		1.5	%		1.6	%		2.1	%

Allowance for credit losses	$	51,729		$	55,314		$	48,847
Allowance for credit losses to total loans		1.3	%		1.4	%		1.3	%
Allowance for credit losses to nonaccrual loans		83.3	%		90.8	%		152.1	%

N/A - Not applicable.

^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 $61.2 million, net of purchase accounting adjustments, at September 30, 2023. PCD loans that meet the definition of nonperforming loans are included in our nonperforming disclosures. Nonperforming loans to total loans was 1.6% as of September 30, 2023, 1.5% as of June 30, 2023, and 1.4% as of September 30, 2022. Nonperforming assets to total loans plus OREO was 1.6% as of September 30, 2023, 1.5% as of June 30, 2023, and 1.4% as of September 30, 2022. Our allowance for credit losses to total loans was 1.3% as of September 30, 2023, 1.4% as of June 30, 2023, and 1.3% as of September 30, 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.


										September 30, 2023
Classified loans		As of								Percent Change From
(Dollars in thousands)		September 30,			June 30,			September 30,		June 30,		September 30,
	****	2023		****	2023		****	2022		2023	****	2022
Commercial		$	18,298		$	22,245		$	31,722	(17.7)		(42.3)
Leases			574			974			235	(41.1)		144.3
Commercial real estate – investor			54,126			57,041			28,252	(5.1)		91.6
Commercial real estate – owner occupied			55,292			38,495			42,698	43.6		29.5
Construction			17,263			116			1,347	N/M		N/M
Residential real estate – investor			1,502			1,714			1,285	(12.4)		16.9
Residential real estate – owner occupied			3,627			3,660			3,929	(0.9)		(7.7)
Multifamily			1,141			1,191			1,982	(4.2)		(42.4)
HELOC			1,434			2,152			2,278	(33.4)		(37.1)
Other^1^			-			-			2	-		(100.0)
Total classified loans		$	153,257		$	127,588		$	113,730	20.1		34.8

N/M - Not meaningful.

^1^Other class includes consumer loans and overdrafts. 9

Classified loans as of September 30, 2023 increased $25.7 million from June 30, 2023, and $39.5 million from September 30, 2022. The net increase from the second quarter of 2023 was driven by two additions totaling $17.6 million in commercial real estate – owner occupied, two additions totaling $17.3 million in construction, and offset by $6.8 million charged off in commercial real estate - investor. Remediation work continues on these three credits, with the goal of cash flow improvements with increased tenancy. Reductions in commercial and multifamily classified loans were noted in the third quarter of 2023 from the linked quarter and prior year like quarter due to ongoing remediation efforts.

Allowance for Credit Losses on Loans and Unfunded Commitments

At September 30, 2023, our allowance for credit losses (“ACL”) on loans totaled $51.7 million, and our ACL on unfunded commitments, included in other liabilities, totaled $2.9 million. In the third quarter of 2023, we recorded provision expense of $3.0 million based on historical loss rate updates, loan growth, our assessment of nonperforming loan metrics and trends, and estimated future credit losses. The third quarter’s provision expense 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. The decrease in 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 $6.6 million in the third quarter of 2023, which reduced the ACL. The majority of the third quarter charge offs were specific to two borrowers within commercial real estate on which we had existing specific allocations within the ACL of $4.7 million at June 30, 2023. The second quarter 2023 provision expense of $2.0 million consisted of a $2.4 million provision for credit losses on loans, and a $427,000 reversal of provision for credit losses on unfunded commitments. We recorded net charge-offs of $505,000 in the second quarter of 2023. In the third quarter of 2022, we recorded provision expense of $4.5 million based on our assessment of nonperforming loan metrics and trends and estimated future credit losses. We recorded net charge-offs of $68,000 in the third quarter of 2022, which reduced the ACL. Our ACL on loans to total loans was 1.3% as of September 30, 2023 and 1.4% as of June 30, 2023, and 1.3% as of September 30, 2022.

The $235,000 decrease in our ACL on unfunded commitments at September 30, 2023, compared to June 30, 2023, was driven by a $11,000 reversal of provision expense in the quarter discussed above, as well as purchase accounting accretion on unfunded commitments recorded during the quarter. The ACL on unfunded commitments totaled $2.9 million as of September 30, 2023, $3.1 million as of June 30, 2023, and $5.4 million as of September 30, 2022.

Net Charge-off Summary


Loan charge–offs, net of recoveries	Quarters Ended
(Dollars in thousands)	September 30,		% of	June 30,		% of	September 30,		% of
	2023		Total ^2^	2023		Total ^2^	2022		Total ^2^
Commercial	$	8	0.1	$	298	59.0	$	20	29.4
Leases		(95)	(1.4)		(7)	(1.4)		178	261.8
Commercial real estate – Investor		6,754	102.4		51	10.1		105	154.4
Commercial real estate – Owner occupied		23	0.3		198	39.2		(75)	(110.3)
Construction		(100)	(1.5)		-	-		-	-
Residential real estate – Investor		(3)	-		(5)	(1.0)		(8)	(11.8)
Residential real estate – Owner occupied		(25)	(0.4)		(36)	(7.1)		(113)	(166.2)
Multifamily		-	-		-	-		(63)	(92.6)
HELOC		(35)	(0.5)		(24)	(4.8)		(35)	(51.5)
Other^1^		70	1.0		30	6.0		59	86.8
Net charge–offs / (recoveries)	$	6,597	100.0	$	505	100.0	$	68	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 third quarter of 2023 were $6.9 million, compared to $733,000 for the second quarter of 2023 and $484,000 for the third quarter of 2022. Gross recoveries were $339,000 for the third quarter of 2023, compared to $228,000 for the second quarter of 2023, and $416,000 for the third 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 $4.61 billion at September 30, 2023, a decrease of $103.3 million, or 2.2%, compared to $4.72 billion at June 30, 2023, primarily due to a decline in savings of $47.0 million, followed by a decrease of $35.0 million in non-interest bearing deposits and $29.3 million in money markets. The bulk of the linked quarter decline in deposit balances occurred in August 2023 and is consistent with seasonal historical trends related to tax payments and commercial customer business volumes. Total quarterly average deposits decreased $659.4 million, or 12.4%, in the year over year period, driven by declines in our average demand deposits of $225.1 million, and savings, NOW and money markets combined of $440.7 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 September 30, 2023, we had $435.0 million in other short-term borrowings due to short-term FHLB advances, compared to $485.0 million at June 30, 2023, and $25.0 million as of September 30, 2022.

During the second quarter of 2023, we redeemed all of the $45.0 million senior notes that were due in 2026. This senior debt issuance carried an interest rate of 9.39% at the time of redemption, and upon redemption, the related deferred debt issuance costs of $362,000 were also recorded as interest expense, resulting in an effective cost of this debt issuance of 12.85% for the second quarter of 2023.

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,” “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 11

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 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; (8) any increases in FDIC assessment which has increased, and may continue to increase, our cost of doing business; and (9) 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, October 19, 2023, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss our third quarter 2023 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code: 243040. 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 October 26, 2023, by dialing 877-481-4010, using Conference ID: 49156. 12

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)


		(unaudited)
		September 30,		December 31,
	****	2023		2022
Assets
Cash and due from banks		$	55,548	$	56,632
Interest earning deposits with financial institutions			53,485		58,545
Cash and cash equivalents			109,033		115,177
Securities available-for-sale, at fair value			1,229,618		1,539,359
Federal Home Loan Bank Chicago (“FHLBC”) and Federal Reserve Bank Chicago (“FRBC”) stock			35,830		20,530
Loans held-for-sale			2,297		491
Loans			4,029,543		3,869,609
Less: allowance for credit losses on loans			51,729		49,480
Net loans			3,977,814		3,820,129
Premises and equipment, net			76,472		72,355
Other real estate owned			407		1,561
Mortgage servicing rights, at fair value			11,461		11,189
Goodwill			86,478		86,478
Core deposit intangible			11,820		13,678
Bank-owned life insurance (“BOLI”)			108,187		106,608
Deferred tax assets, net			44,051		44,750
Other assets			64,688		56,012
Total assets		$	5,758,156	$	5,888,317

Liabilities
Deposits:
Noninterest bearing demand		$	1,862,659	$	2,051,702
Interest bearing:
Savings, NOW, and money market			2,273,671		2,617,100
Time			477,990		441,921
Total deposits			4,614,320		5,110,723
Securities sold under repurchase agreements			25,894		32,156
Other short-term borrowings			435,000		90,000
Junior subordinated debentures			25,773		25,773
Subordinated debentures			59,361		59,297
Senior notes			-		44,585
Notes payable and other borrowings			-		9,000
Other liabilities			65,250		55,642
Total liabilities			5,225,598		5,427,176

Stockholders’ Equity
Common stock			44,705		44,705
Additional paid-in capital			201,553		202,276
Retained earnings			377,320		310,512
Accumulated other comprehensive loss			(90,619)		(93,124)
Treasury stock			(401)		(3,228)
Total stockholders’ equity			532,558		461,141
Total liabilities and stockholders’ equity		$	5,758,156	$	5,888,317

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)


		(unaudited)						(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
	****	2023		****	2022		****	2023		****	2022		****
Interest and dividend income
Loans, including fees		$	62,665		$	46,614		$	181,436		$	121,209
Loans held-for-sale			29			22			60			111
Securities:
Taxable			8,946			9,116			29,611			21,071
Tax exempt			1,333			1,332			4,007			3,946
Dividends from FHLBC and FRBC stock			597			261			1,273			677
Interest bearing deposits with financial institutions			659			663			1,887			1,714
Total interest and dividend income			74,229			58,008			218,274			148,728
Interest expense
Savings, NOW, and money market deposits			2,558			380			5,449			1,124
Time deposits			1,982			335			3,802			877
Securities sold under repurchase agreements			27			10			43			30
Other short-term borrowings			5,840			44			13,345			44
Junior subordinated debentures			245			285			805			849
Subordinated debentures			547			546			1,639			1,639
Senior notes			-			728			2,408			1,791
Notes payable and other borrowings			-			111			87			309
Total interest expense			11,199			2,439			27,578			6,663
Net interest and dividend income			63,030			55,569			190,696			142,065
Provision for credit losses			3,000			4,500			8,501			5,050
Net interest and dividend income after provision for credit losses			60,030			51,069			182,195			137,015
Noninterest income
Wealth management			2,475			2,280			7,203			7,484
Service charges on deposits			2,504			2,661			7,290			7,063
Secondary mortgage fees			66			81			201			270
Mortgage servicing rights mark to market gain (loss)			281			548			(148)			3,608
Mortgage servicing income			519			514			1,534			1,612
Net gain on sales of mortgage loans			407			449			1,111			1,682
Securities losses, net			(924)			(1)			(4,146)			(34)
Change in cash surrender value of BOLI			919			146			1,579			342
Card related income			2,606			2,653			7,540			8,194
Other income			1,024			2,165			3,286			3,949
Total noninterest income			9,877			11,496			25,450			34,170
Noninterest expense
Salaries and employee benefits			23,115			21,011			67,161			62,310
Occupancy, furniture and equipment			3,506			4,119			10,620			10,864
Computer and data processing			1,922			2,543			4,986			12,817
FDIC insurance			744			659			2,122			1,771
Net teller & bill paying			534			504			1,551			3,245
General bank insurance			300			257			911			923
Amortization of core deposit intangible			616			657			1,858			1,981
Advertising expense			93			83			338			459
Card related expense			1,347			1,453			3,785			3,044
Legal fees			97			212			699			648
Consulting & management fees			549			607			1,859			1,746
Other real estate expense, net			(27)			21			181			96
Other expense			4,627			3,862			12,104			11,585
Total noninterest expense			37,423			35,988			108,175			111,489
Income before income taxes			32,484			26,577			99,470			59,696
Provision for income taxes			8,149			7,054			25,966			15,906
Net income		$	24,335		$	19,523		$	73,504		$	43,790

Basic earnings per share		$	0.55		$	0.43		$	1.65		$	0.98
Diluted earnings per share			0.54			0.43			1.62			0.97
Dividends declared per share			0.05			0.05			0.15			0.15


Ending common shares outstanding	44,684,987	44,572,544	44,684,987	44,572,544
Weighted-average basic shares outstanding	44,675,489	44,565,626	44,653,451	44,509,072
Weighted-average diluted shares outstanding	45,428,409	45,221,541	45,390,218	45,207,992

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
Cash and due from banks		$	42,972		$	53,371		$	56,265		$	56,531		$	55,140	$	56,191		$	57,279
Interest earning deposits with financial institutions			635,302			426,820			131,260			50,377			49,310		50,309			49,737
Cash and cash equivalents			678,274			480,191			187,525			106,908			104,450		106,500			107,016

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
FHLBC and FRBC stock			16,066			20,994			19,565			19,534			24,905		34,029			35,954
Loans held-for-sale			6,707			3,050			2,020			1,224			813		1,150			1,641
Loans			3,397,827			3,505,806			3,751,097			3,877,004			3,931,679		4,039,052			4,009,218
Less: allowance for credit losses on loans			44,341			44,354			45,449			48,778			49,398		53,480			54,581
Net loans			3,353,486			3,461,452			3,705,648			3,828,226			3,882,281		3,985,572			3,954,637

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

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
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
Time			495,452			469,009			459,925			450,111			434,655		436,524			466,250
Total deposits			5,488,242			5,461,298			5,317,507			5,214,381			4,998,349		4,794,068			4,658,064

Securities sold under repurchase agreements			39,204			34,496			33,733			33,275			31,080		25,575			24,945
Other short-term borrowings			-			-			5,435			44,293			200,833		402,527			427,174
Junior subordinated debentures			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
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
Total liabilities			5,736,763			5,671,070			5,532,197			5,483,311			5,416,621		5,399,840			5,248,470

Stockholders' equity
Common stock			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
Retained earnings			258,073			267,912			284,302			301,753			324,785		346,042			368,732
Accumulated other comprehensive loss			(3,074)			(49,151)			(63,216)			(100,817)			(86,736)		(78,940)			(84,167)
Treasury stock			(5,900)			(4,985)			(3,602)			(3,303)			(2,125)		(746)			(566)
Total stockholders' equity			496,632			461,025			463,759			444,311			482,026		511,651			530,048
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

Total Earning Assets		$	5,863,777		$	5,748,769		$	5,607,290		$	5,524,143		$	5,510,326	$	5,529,204		$	5,391,761
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

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

Basic earnings per share (GAAP)	$	0.27		$	0.28		$	0.43		$	0.53		$	0.53	$	0.57		$	0.55
Diluted earnings per share (GAAP)		0.27			0.27			0.43			0.52			0.52		0.56			0.54
Dividends paid per share		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
	September 30,			June 30,		September 30,
	2023		****	2023		2022
Net Income
Income before income taxes (GAAP)	$	32,484		$	34,973	$	26,577
Pre-tax income adjustments:
Merger-related costs, net of losses/(gains) on branch sales		-			29		1,061
Liquidation and deconversion costs on Visa credit card portfolio		629			-		-
Gains on the sale of Visa credit card and land trust portfolios		-			-		(923)
Adjusted net income before taxes		33,113			35,002		26,715
Taxes on adjusted net income		8,307			9,419		7,091
Adjusted net income (non-GAAP)	$	24,806		$	25,583	$	19,624

Basic earnings per share (GAAP)	$	0.55		$	0.57	$	0.43
Diluted earnings per share (GAAP)		0.54			0.56		0.43
Adjusted basic earnings per share excluding acquisition-related costs (non-GAAP)		0.55			0.58		0.44
Adjusted diluted earnings per share excluding acquisition-related costs (non-GAAP)		0.55			0.56		0.43


	Quarters Ended
	September 30,			June 30,			September 30,
	2023		****	2023			2022
Net Interest Margin
Interest income (GAAP)	$	74,229		$	73,886		$	58,008
Taxable-equivalent adjustment:
Loans		11			11			6
Securities		354			355			354
Interest income (TE)		74,594			74,252			58,368
Interest expense (GAAP)		11,199			10,306			2,439
Net interest income (TE)	$	63,395		$	63,946		$	55,929
Net interest income (GAAP)	$	63,030		$	63,580		$	55,569
Average interest earning assets	$	5,391,761		$	5,529,204		$	5,607,290
Net interest margin (GAAP)		4.64	%		4.61	%		3.93	%
Net interest margin (TE)		4.66	%		4.64	%		3.96	%


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

Noninterest expense	$	37,423		$	34,830		$	35,988		$	37,423		$	34,830		$	35,988
Less amortization of core deposit		616			618			657			616			618			657
Less other real estate expense, net		(27)			(98)			21			(27)			(98)			21
Less acquisition related costs, net of losses/(gains) on branch sales		N/A			N/A			N/A			-			29			1,061
Less liquidation and deconversion costs on Visa credit card portfolio		N/A			N/A			N/A			629			-			-
Noninterest expense less adjustments	$	36,834		$	34,310		$	35,310		$	36,205		$	34,281		$	34,249

Net interest income	$	63,030		$	63,580		$	55,569		$	63,030		$	63,580		$	55,569
Taxable-equivalent adjustment:
Loans		N/A			N/A			N/A			11			11			6
Securities		N/A			N/A			N/A			354			355			354
Net interest income including adjustments		63,030			63,580			55,569			63,395			63,946			55,929
Noninterest income		9,877			8,223			11,496			9,877			8,223			11,496
Less securities losses		(924)			(1,547)			(1)			(924)			(1,547)			(1)
Less MSRs mark to market gains		281			96			548			281			96			548
Less gain on Visa credit card portfolio sale		N/A			N/A			N/A			-			-			743
Less gain on sale of land trust portfolio		N/A			N/A			N/A			-			-			180
Taxable-equivalent adjustment:
Change in cash surrender value of BOLI		N/A			N/A			N/A			245			111			39
Noninterest income (excluding) / including adjustments		10,520			9,674			10,949			10,765			9,785			10,065

Net interest income including adjustments plus noninterest income (excluding) / including adjustments	$	73,550		$	73,254		$	66,518		$	74,160		$	73,731		$	65,994
Efficiency ratio / Adjusted efficiency ratio		50.08	%		46.84	%		53.08	%		48.82	%		46.49	%		51.90	%

N/A - Not applicable.


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

Net income (GAAP)	$	24,335		$	25,562		$	19,523

Income before income taxes (GAAP)	$	32,484		$	34,973		$	26,577
Pre-tax income adjustments:
Amortization of core deposit intangibles		616			618			657
Net income, excluding intangibles amortization, before taxes		33,100			35,591			27,234
Taxes on net income, excluding intangible amortization, before taxes		8,304			9,578			7,228
Net income, excluding intangibles amortization (non-GAAP)	$	24,796		$	26,013		$	20,006


Total Average Common Equity	$	530,048			511,651		$	463,759
Less Average goodwill and intangible assets		98,596			99,186			100,894
Average tangible common equity (non-GAAP)	$	431,452		$	412,465		$	362,865


Return on average common equity (GAAP)		18.21	%		20.04	%		16.70	%
Return on average tangible common equity (non-GAAP)		22.80	%		25.30	%		21.87	%

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 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.