Business Context and Reporting Period
Company: Old Second Bancorp, Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended March 31, 2026
Overview: Old Second Bancorp is a bank holding company headquartered in Aurora, Illinois, operating primarily through its subsidiary, Old Second National Bank. The quarter was significantly influenced by the integration of the Bancorp Financial acquisition completed on July 1, 2025, which added approximately $1.43 billion in assets and $1.20 billion in loans to the portfolio.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Dec 31, 2025 |
|---|---|---|---|
| Net Income | $25.6 million | $19.8 million | $28.8 million (Q4 2025) |
| Diluted EPS | $0.48 | $0.43 | $0.54 (Q4 2025) |
| Total Assets | $6.85 billion | $5.67 billion | $6.90 billion |
| Total Loans | $5.19 billion | $3.94 billion | $5.25 billion |
| Total Deposits | $5.56 billion | $4.85 billion | $5.60 billion |
| Net Interest Income | $81.1 million | $62.9 million | $83.1 million (Q4 2025) |
| Net Interest Margin (GAAP) | 5.12% | 4.85% | 5.07% (Q4 2025) |
| Provision for Credit Losses | $9.5 million | $2.4 million | $3.0 million (Q4 2025) |
| Noninterest Expense | $50.2 million | $44.5 million | $52.9 million (Q4 2025) |
| Cash and Cash Equivalents | $115.7 million | $256.1 million | $124.0 million |
Material Changes vs. Prior Periods
- Profitability Growth: Net income increased 29% year-over-year (YoY) to $25.6 million, driven primarily by the Bancorp Financial acquisition which boosted net interest income by $18.2 million YoY.
- Asset Quality Deterioration: Nonperforming loans (NPLs) increased to $75.5 million (1.5% of total loans) from $52.8 million at year-end 2025. This increase was driven by inflows of $19.7 million on 37 loans, including ten commercial loans totaling $17.3 million.
- Provision Expense: The provision for credit losses rose to $9.5 million from $2.4 million in Q1 2025. This was driven by net charge-offs of $9.8 million, including a $3.9 million charge-off on a commercial real estate investor loan and $3.9 million in powersport loans.
- Expense Management: Noninterest expenses increased 12.8% YoY to $50.2 million, largely due to higher salaries and benefits from the acquired workforce and increased occupancy and data processing costs.
- Loan Portfolio: Total loans decreased $66.9 million quarter-over-quarter (QoQ) due to paydowns in commercial real estate and construction, but increased $1.25 billion YoY due to the acquisition.
Guidance, Outlook, and Risks
- Capital Position: The Bank remains "well capitalized," exceeding all regulatory minimums. The Tier 1 leverage ratio was 12.09% and the total risk-based capital ratio was 14.88% as of March 31, 2026.
- Interest Rate Risk: The balance sheet maintains a moderately asset-sensitive profile. Management expects net interest income to benefit from rising interest rates, though the profile shows slightly increased sensitivity compared to year-end 2025.
- Subsequent Events: On April 15, 2026, the Company redeemed $30.0 million of its $60.0 million subordinated debt. A cash dividend of $0.07 per share was declared on April 21, 2026.
- Risk Factors: Key risks include the ability to execute growth strategies, negative economic conditions affecting loan performance, interest rate volatility, and cyberattacks. The filing specifically notes risks related to the war in Ukraine, the war in Iran, and potential disruptions from U.S. federal government funding lapses.
- Outlook: Management notes that while the Bank is well-positioned to navigate uncertain macroeconomic conditions, reported capital ratios could be adversely impacted by further credit losses.
Investor Verification Checklist
- Asset Quality Trends: Verify the trajectory of nonperforming loans, which rose to 1.5% of the portfolio, and monitor the specific commercial real estate and powersport segments driving charge-offs.
- Deposit Runoff: Confirm the stability of the deposit base, particularly the runoff of higher-rate brokered time deposits acquired from Bancorp Financial, which totaled $115.0 million at acquisition.
- Provision Adequacy: Assess whether the $9.5 million provision expense is sufficient given the increase in classified assets and the specific large commercial charge-offs taken in the quarter.
- Acquisition Integration: Evaluate the realization of synergies from the Bancorp Financial acquisition against the $5.7 million increase in noninterest expenses.
- Liquidity Position: Review the decrease in cash and cash equivalents to $115.7 million and the reliance on FHLB borrowings ($200 million outstanding) to fund operations.