Old Second Bancorp's Q4 2024: Navigating Margin Pressures, M&A Aspirations, and Lending Strategies

Financial Performance and Net Interest Margin:
- Old Second Bancorp reported a tax equivalent net interest margin of 4.68% for Q4 2024, a 4 basis point increase from the previous quarter.
- The stable margin was attributed to a decrease in funding costs due to the acquisition of deposits from a branch purchase, which allowed for the repayment of short-term borrowings at the Federal Home Loan Bank.

Credit Quality and Loan Portfolio:
- Nonaccrual loans decreased by 47% this quarter, and substandard and criticized loans declined by 31%, contributing to a significant improvement in credit quality.
- The improvement was driven by addressing weak credits and a reduction in the allowance for credit losses, supported by better unemployment and GDP forecasts.

Expense Management and Efficiency:
- The tax equivalent efficiency ratio was 54.61% for Q4 2024, indicating strong expense discipline despite an increase in noninterest expenses due to acquisition-related costs.
- The focus on maintaining efficiency was attributed to cost management strategies, which helped mitigate the impact of rising expenses.

Deposit Growth and Funding Strategy:
- Average deposits increased by 2.5% in the fourth quarter, with period-end total deposits up 6.8% from the prior quarter.
- The growth was primarily due to the acquisition of deposits from a branch purchase, which reduced the need for overnight borrowing, improving the bank's funding mix.