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- **Record NIM and Loan Growth**: Q3 NIM of 5.05% (up 20 bps) and $1.27 billion in loan growth, fueled by the Evergreen acquisition.
- **Profitability Boost**: Adjusted net income of $28.4 million, excluding one-time costs, with a 17% dividend hike.
- **Resilient Powersports Segment**: 30-39 bps charge-offs offset by 9%-9.5% loan yields, contributing to margin strength.
- **Strategic Deposit Refinement**: Plan to reduce high-cost deposits over 18 months, targeting core funding mix.
- **Credit Resilience**: ACL at 1.43% of loans, with minimal risk in classified assets and improving problem loan resolution.

**【CEO Summary Section】**
- **Q3 2025 Financial Highlights**: GAAP net income of $9.9 million ($0.18 per diluted share), return on assets (ROA) of 0.56%, and return on tangible common equity (ROTE) of 6.16%. Adjusted net income was $28.4 million ($0.53 per diluted share) after excluding acquisition-related costs and other one-time items.
- **Evergreen Acquisition Impact**: Added $1.19 billion in loans, driving total loan growth to $1.27 billion. Net interest margin (NIM) improved to 5.05% (up 20 basis points from Q2), benefiting from higher-yielding consumer credits, particularly Powersports loans.
- **Credit Quality**: Nonperforming loans (NPLs) increased modestly, but classified assets rose by $38.4 million, primarily due to macroeconomic challenges in transportation and warehousing. Allowance for credit losses (ACL) increased to $75 million (1.43% of loans) to reflect the new consumer loan mix.
- **Dividend Increase**: Announced a 17% dividend hike to $0.07 per share, reflecting confidence in future performance.

**【CFO Financial Commentary】**
- **Net Interest Income (NII)**: Increased by $18.5 million (29%) to $83 million, driven by a 67 basis point rise in loan yields and stable securities yields. NIM expanded to 5.05%, up 41 basis points year-over-year.
- **Expense Management**: Noninterest expense rose $19.7 million due to acquisition-related costs ($11.8 million) and higher personnel expenses. Efficiency ratio improved to 52.1% (excluding purchase accounting adjustments).
- **Balance Sheet Strength**: Loan-to-deposit ratio at 91.4%, with organic loan growth of $72 million. Deposit costs increased to 133 basis points, reflecting the integration of Evergreen's higher-cost deposits.
- **Capital Position**: Tangible book value per share increased, and Common Equity Tier 1 (CET1) ratio remained strong at 12.44%.

**【Q&A Key Highlights】**
- **Deposit Strategy**: Plan to reduce reliance on high-cost Evergreen deposits over 6-18 months, targeting a return to Old Second's traditional core deposit mix. Organic core deposits at Evergreen expanded post-acquisition.
- **Powersports Business**: Fee income is stable across quarters, with originations peaking in Q2-Q3. Despite higher charge-offs (30-39 basis points), loan yields (9%-9.5%) offset losses, making it a highly profitable segment.
- **Credit Outlook**: Optimistic about resolving $10 million in acquired problem loans by Q4. Classified assets are well-collateralized, with minimal risk exposure.
- **M&A Appetite**: Open to deposit-focused acquisitions but prioritizes organic growth. Stock buybacks are on the table if M&A opportunities don't materialize.
- **Margin Resilience**: NIM expected to remain stable (~5%) despite potential Fed rate cuts, due to asset sensitivity and Powersports' high yields.
- **Wealth Management Growth**: 26% YoY increase in wealth management fees, driven by new asset management hires and market performance.
- **Pipeline Strength**: C&I and sponsor finance pipelines at 2-year highs, supporting low-single-digit loan growth in 2026.

Old Second Bancorp, Inc. (OSBC) Q3 2025 Earnings Call Transcript

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