OSBC - Earnings call transcript Q2 2022 | Old Second Bancorp, Inc.

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Operator

Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc.'s Second Quarter 2022 Earnings Call.

On the call today is Jim Eccher, the company's CEO; Gary Collins, the Vice Chairman of our Board; and the company's CFO, Brad Adams. [Operator Instructions]. I will start with a reminder that Old Second's comments today may contain forward-looking statements about the company's business, strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected. to discussion the factors. of you for SEC ask full a the would refer company's to filings Management company's risk today's also measures. will call, certain On financial non-GAAP be discussing we to These are release, is Investor the on non-GAAP available Relations on counterparts website oldsecond.com under described reconciled which at measures our homepage and their and tab. earnings GAAP the

Now yours. is Eccher. The I floor will turn the floor over to Jim

Jim Eccher

$XX.X million increase the million, net interest net was to favorably compared $X rates. income Earnings in same mark-to-market ratio losses on offset and my XX.XX%. share or efficiency return and in second the quarter income color. net overview Brad due gain quarter increase of minimal in tangible the basis, to us. everyone, thoughts the interest adjusted on before quarter. to the open I XXXX. an On sold assets for have a will questions. and give sharp Net future the some income was was per returns floor equity opening prepared for then of morning, the then West you Good but and was and and or Net million costs, with $X.XX valuation MSR joining a was adjusted of gain Suburban remarks of acquisition-related up sales common diluted mark-to-market impacted XX.XX%, to on $X by quarter mortgages in the were comments turn I thank several about $XX.X X.XX%, share exclude over gains and MSR summary conclude by to in quarter's second you it we will per branch from $X.XX million last additional

impacts West set we saves on point, internally. at of for our The of acquisition positive revenue are our financials. reflect that say, had we and expectations both XXXX continued Suburban cost this We'll in the second outperforming the quarter to own ourselves

we adding importantly, were systems have branding in made West quarter stand quarter. rapidly new balance could from loan conversions progress to with teams disruption. expanding results substantially to pleased substantial second this our with standpoint. the be regards More we with our customer today and Overall, Suburban, not in and origination capabilities things operational sheet more both successfully completed no where positioning early the significant a In

Second million runoff. growth net $XXX.X quarterly also had of loan ever we PPP excluding X.X% million quarter, highest reflected the exclusive growth quarter of have loan produced, impacts. acquisition or $XXX approximately over quarter or We

had we the to continued and loan stride sheet. did somewhat slow committee fit within materially quarter. are remains fantastic. prepayments their balance starting hires very Recent unchanged to allowed during finally utilization hit really As and cultural hoped, has and strong impact strong activity been remains line the Activity origination the

seeing and sponsored are CRE, pipelines finance. We significant importantly, in health care, leasing

of quarter balance improvements than busier for and moving portfolio to NIM the the X.XX% of margin quarter first net on impact mix resulted from and are full bulk benefit many quarter. in we expanded effects a The of have interest to years. the We tax loan variable the from margin the the portion the sheet rising rates of first growth. sheet net of been a tax this quarter interest The X.XX% compared equivalent substantially quarter margin equivalent in balance

let very primarily Brad quarters a of thus the far forward are that more trends schedule, the minute. than ahead. upward positive about going an deployment The more be the underneath in Here, more are we you've The seen different improvement stabilization I'll a consider move talk much line liquidity the bottom in ourselves and product ahead margin and rates. that story in the surface in too, of than will indicates.

to in compared $XXX,XXX million first to $X of $XXX,XXX by downgrades increased the compared quarter. to charge-offs credits. in $XXX.X from net and quarter the credits sales. we downgraded of the our quarter a loans The with larger financial owned a remain totaled of quarter. total million the $XX.X We end second prior second nonperforming decreased At losses the of credit credit $XXX,XXX couple for total the from losses were loans, X performing was to million portfolio. strength due $X.X real monitor flows Total in Other primarily recorded trends. million reserves $XX.X substandard $XXX,XXX with of offset at the standard, allowance to unfunded commitments condition or these Our of increased reduction is million to from quarter, borrowers. of which XX. Five of watch continue cash which in consistent last the a of confident classifieds estate on Overall, of $XX.X we million ACL and an quarter the loan utilization was quarter, line recorded, X.X% for second for end, review based which property March as is to provision by

$X.X sales the income per uncertainties. announced recorded then under $X.X schedule share. million, and diluted all branch acquisition. with is tax but to we cautiously case outlook We be are to of the The net per $X.XX continues strong, base economy GAAP underlying occupancy gains the sale branch ahead million million expense. are Our on which far pretax. by -- a are scenarios, optimistic were with adjustments uncertainty. of Expense discipline continue modestly diluted reduced and after targets the in second to quarter, more saving of degree as scenarios that merger-related of contrary significant more believe fully than strong, appears pessimistic high Net costs $X.X overweight we gains or net cost as recorded totaled albeit given adequately were Total reserved to

long deploying term that the the do in forward, and excess for short risk. deposit will the carry more base we making order in commercial spread origination portfolio look the of in prudent quality to we or leverage on not credit investments continue As term, building fully to focus liquidity capability the securities by

returns ratio said order to the in goal build drive before, commensurate back performance. plus we've XX% our towards to on historical the loan-to-deposit with As equity recent obviously is XX%,

made we will this Brad? strides additional in in provide prepared think quarter. color some that comments. Brad I his solid regard

Brad Adams

due $X growth increase to rate Margin income Jim. Thank and the due last market interest you, increases. and as to quarter. well million $XX.X in increased quarter loan increased ago portfolio trends relative Net to interest million due the from loan year security yields to the as

point that that as deposit note yields margin help for full did margin XX it the the only I the been outperform. in loan of versus the timing less quarter. in the remains basis X QX In PPP continues that not and unchanged the decreased due to remains June liabilities has the meaningfully point second out was quarter-over-quarter margin remained loan to addition, increases There is growth balance and a meaningfully cost the points of benefit. XXXX. costs that would interest-bearing basis X.XX% should upside would of X.XX% rate strong of extent total the to significant I and amount mix as sheet quarter

We'd X-year a the portfolios dramatic portion to and rates all along Longer have years, loss a none a seen The move XX, June to saw a securities average a AOCI spreads entire and mark of from portfolio in curve. March $XX.X at deploying itself on to of portion Old excess years Second's like from than curve, quarter over more decrease curve. in that portfolio million ours than at been given unrealized of was $X went exceptionally the of X.X variable. to since XX The have investors would cautious XX year-end. second gain duration portfolio the X.X $XX.X but the we was addition loss portfolio credit duration, X/X of to in the through was June at recognized remind is in value under outperformance million relative life The The significant X% sharp liquidity. unrealized a the December widening the million XX. weighted X-year inversion effective the over

our Our rate exposure was MBS going extremely peers, fixed issues exposure and also and fixed to is and absolute short move. this into less many was multiples is rate than

what impact, it the was and to fun While exactly for preparing it's hindsight. were see change of benefit with not the much we wouldn't this move

under and rest assumption looks that us capital we likely base, belief curve, cautious gaps for order exceptionally the can us even in to it far extremely value. well in fantastic. rate may to recapture the tangible of a positioning book as balance impacts insensitive scenario the out confident granular deposit to This the tangible as would of portion very portfolios recession the has, right my you like I'm significant bleed a is know, have and well. two-year initially the would not levels, but lower will rates. On serve obviously look serve curve conservatism us sheet The The dislocated. relative need

On the a with short but loan current rate and Barring rate expectations, macro Old have of duration structures asset do relatively on change will higher some variable profile. Second existing quickly balances the a feature a side, in high we profitability latency, side. transition into concentrations rapidly world improving

full expected, the is real On the in remain wage and better following but annual than we're our this quarter I pressures performing reviews markets. first performance front, expenses very impact

we and talent, the and is given we Additionally, the tell We activity and to human which seeing, volume-related impact history. on believe records level them have our These resources. welcomed in an much last experience a this expenses of administration larger talented credit additions. new from new quarters, strong banks operations, remain active with track executives In of we bring that compelling several significant success. front prospective currently story have are leaders in have unprecedented

savings bit able we'll and there it people welcome. enhance of to spend have in that through we've challenges loan-to-deposit resulting a I'm of than XX months municipal grow of upgrades is and rate. to core we proud and and high, and benefited XX have made from also from be Deposits to overall been need margin. loan we to increase a primarily organization asset a will the function acquired portfolio like basis in improvement bank C&I and trends quarter to the the of a well. the exceptionally Increase than Margin the following The better positive Confidence organic level rate-sensitive upside it pick up the to seen a from bank Old existed the seasonality, repricing, of is rates first level. expect better we recent clearly some what This been acquisition, meaningfully as exit we've levels, impact the which strengthen talented in the hike. was ago. be here So accomplish ratio XX much is growth the point able well. talent funds parked utilization developments hopeful as able be sophistication that from both did was ago When Second's account foundation and but modest people. accounts This months to remix some much and rapid with you are cost declined in I'm the

the obviously, we've the forward benefit The the degree of strongly residential mentioned, moves magnitude and of that result sale $XXX,XXX, think a it. we If will Losses on to ever from are of losses the hikes As $X.X a done end positive. any I accurate, like quarter margin of as well very better is quarter-over-quarter curve from Jim side with net lending. quite of anything clearly gains but in last on a trends us, performance rate growth right mortgage repeat the I that loan not are don't a expect MSR as do decrease in sold is The Noninterest the trends quarter expected this to significant and on hedging things. residential very ramp-up decreased would. million quarter's not feel this. two of would trend the bit in loans given income disappointing fallout resulted underperformed. loans of first subsequent direction. mark-to-market

with exists a Old necessities. Second legacy that operates the in largely lower demographic very in strictly level time and basic having is inflation of the brackets, difficult business mortgage income that and is Our

noninterest We increase and on penetrate during are on West $XXX,XXX. the second in Suburban impact service Wealth credit management to by was approximately macro [X.XX] XXXX, provision DuPage deposit last this offset million XX, on is loan growth [X.XX] June an our an estimate income still through X.X% income expect approximately over quarter. growth the I This credit partially the a to $XXX,XXX losses commitments. the declined of economic to that loans. unfunded loans the County near slightly to to with environment. million over to worsening losses further quarter. X% for remained $X.X of remaining $X.X approximately change We recorded quarter-over-quarter unemployment could to significant rates Provision card-related markets approximately increasing recorded and reversal working of legacy would from income from with diversify of on rate of $XXX,XXX slightly This -- increase commitments life at the utilization term, review the in of in projection increase charges business. though for on were strong quarter, outlook due outpace negative for provision funding

has as are credit loans stable excellent. We and how we increased performed. this And credit quarter, metrics consider classified pleased total continue although with to

are closely. and a here, increases We and adopted to that better hire. reflecting have a environment to increases credit we in manage gets this year and Expenses said credits cautious have inflation previously in benefits, it's difficult and salary wage and mid-single-digit from double-digit stance monitoring difficult are unlikely

are managing the are through now. exist us and and opportunities synergies this flexibility We for that right thankful for for

in efforts expectation continuing quarters additional need all in be and loan to the improving With little West over to back to funding with I'll back We strategic to track an Our bring Jim. our of major be that, bit but in call margin. synergies, initiatives. the to on look investment helping we the quality finish capital build a the board, customers talent delivering following the turn on coming on Suburban, growth will

Jim Eccher

credit environment growth liquidity loan are to in second occur. our expense we line a to that beneficial and of will ahead and Today, balance items. our remained and have we the have In underwriting closing, Brad. of Rising advantage be attention rising has profitability us. to this sheet balance and the interest Thanks, remain to sheet rates in and the opportunities the and playing credit take confident is our to believe financial Okay. are certainly bank, we half, and rate disciplined, position wait strong. our We strength funding for close

comments morning. our this that concludes prepared So

over I'll So can up turn open so to it it to we questions. the moderator

Operator

Instructions]. [Operator

question from is with first James. Long coming David Raymond Your

David Long

you know the had moving to you pressures, compensation and The the of materially expenses I didn't in about talked downtick about last the wages quarter. of before other inflation big lines higher? talked seem higher but be a wage when the quarter, some some jumps in

Or quarter? Just after wanted to take walk right the point? wage a we the And $XX on through inflation for little what add changed do is need to the that this in rate? run bit from the million noise and then

Brad Adams

occupancy, other. salaries first talk entirely looking at and breakdown benefits just Then legal charge there's here. $XXX,XXX net in $XXX,XXX what's let's a benefit in in We've clear, little So it. nonrecurring. got of $XX,XXX the a nonrecurring in processing, and $XXX,XXX million over that's about in $X.X It's data and expenses not computer

we at some basically the So expenses have are expect total the expenses mortgage-related very rate, run out I high that do come of sum million. is that us in puts volume-related And and that beginning here, of to $X.X third. kind some

above now that markets the level. markets. our we paying than our an what people quarter? Yes. So far had we of employment an rate not this a $XX the banks for hour I'd in are increases If say $XX very have at maintain It would levels. modestly to hour we'd had conversation real. bit wage have are is scale. is few And are relatively this I higher a pay year from would above ago, everybody bottom difficult the us There expected are

think after get are, we of expenses sort number mortgage feels that that In right. kind $XX forward. I out, [XX.X] of basically of the level we Maybe million terms going still where

David Long

Okay. Great. Appreciate that.

of queue were deposit the understanding the else I side, side growth, I'll I'll things, some the go deposit and or back have think in On we bit let But back and had great quarter. loan someone about balances that ask a you on. the great, hop down on in

what in of for through there year? half balances deposit us the the the with walk happened and your quarter back Just expectations the

Brad Adams

million to it knew was time money, is exit. roughly permanent. About just never Old $XX roughly million, bulk -- So $XX rate-sensitive the of legacy million is we're remainder acquired on of the a of million, seasonality the that liquidity It Second deposit, here. is is is It $XX rapid municipal municipal from million and down bleed out $XX we within the deposits. seasonality bulk on is not park going it $XXX was

Our in over we really go strongest a forward thing go-forward different basis about always year. X would here quarter, only rate-sensitive of the that's deposit the on runout. what take in we is when get a a we $XX the of in lot the the are The and at first stable. quarters million more feels have pickup expected end next then from terms a The down

Operator

Your Piper next of Race Nathan question is coming Sandler. from

Nathan Race

Question of outlook, quarter. entering just of in terms that the like kind be the gains. Jim, of both imagine growth remain it's I'd XQ. on near in of pipelines term and market third kind term. share sounds hear drivers And it a to curious coming just the growth saw I of growth added more we the strong some going particularly have And long mostly here loan you guys last be guys your recently, years how growth lot a lot is think outlook? you macro a Obviously, gains. slowdown, from the few I imagine that have do count the commercial of kind now, we longer-term over about share of more but loan to banking given of

that bankers terms I'd what the operating we kind still is added to with terms be in, -- you've bringing previous of in kind those are of portfolios inning believe a financing of that their that of context, I private institutions, exception within of perhaps lot their hear under So of curious from their the the or of balance noncompetes solicits. sponsor over in from

Jim Eccher

with asset we're commercial finance producing Yes, generation from sponsored quarter. contributions significant in anything Nate, very with the quarter. contributions bank, and not up was I pleased mean, really the broad-based very the with good down after performance question. obviously first It in

noncompete, While the violation generate unique they new noncompete. a are to opportunities have of bound they a ability without by

well. performed as group So they a great had market our did quarter, C&I Health well. middle care

Our equipment leasing group commercial quarter. had also and real group a good estate

not albeit any quarter, barring prepays quarter, So remain almost last here. paydowns. strong good we clicking cylinders all material the on quarter another do strong, third in as do Pipelines as or expect but

it's the based happen in going Beyond seeing to at third is potentially rate Certainly this hike choke fourth quarter, know Nate, but to bullish could seeing on we're what loan Certainly, committee realistic. certainly pretty low this year we pretty are double-digit difficult loan quarter. what's loan up demand, new growth the today.

Nathan Race

added, think those just about of previous terms in their And we and longer you. and Got relationships are still of you've teams in that markets of loan the institutions? lot innings with a makers balance portfolios as the early we over the in bringing opportunities your term from the growth kind of

Jim Eccher

Yes. we And fair. really a that like lot nationwide are market is fact the I operating innings share. would say early in them of

we're local market to subject we certainly So not -- conditions.

Nathan Race

Got it.

the margin alluded outlook then the believe I of well ex earlier the then the the repricing third quarter maybe XX% just securities of given just accretion is a characteristics on or where about lot thinking of And thoughts to strong. with book book, into short of around X/X terms the remaining the floating of Brad, so. in end. in just loan nature And of which you of kind the terms as near-term also repricing over that just outlook kind any Okay. pretty margin trends growth with the

Brad Adams

be in to I of would would kind level say, of normal assuming accretion, the $X which neighborhood million. So $XXX,XXX a

certainly above it's potentially so. we I sizably, the margin that would think [X.XX] see foreseeable quarter, in a third sizably

Nathan Race

do have And that the quarter? accretion you number second for

Brad Adams

which quarter, second to first. the in million $X.X flat was

Nathan Race

like rate are hopefully of from just of income [indiscernible] to the then repeat And here, about the the mortgage it Great. going not some sounds kind overall items impacted run that likely think forward.

of revenue million increasing thinking and of it card in plus kind minus as I service run like half rate and the -- $XX well. deposit So forward, this a or charge year. going core guess the around [indiscernible] of back kind

Brad Adams

like than would $X.X to better like million I'd that. mortgage to do I around level. at see

Operator

Chris from next Your at is KBW. question McGratty coming

Christopher McGratty

Maybe to start with, Brad.

margin interest-bearing loan costs? the the spot talked spot the yield X.XX%. happen You spot and have about of you also Do deposit to

Brad Adams

a average we costs So roughly equivalent loan is interest-bearing deposit the The our basis. safe basis double-digit highly little you the to the compete difficult it's question think But that accretion. full been surprisingly to see. with. higher to driven it's in say we in yields yield -- movement the points spot by anybody because are answer loan than There's quarter by that where markets I were we're

Christopher McGratty

to I'm ask, but to Okay. Great. anyway. It's probably going ask early it

of peers Maybe take the steps adjustments forward your are point? are in cuts adding at by some to and How curve in sensitivity to Some margins? what do lock philosophically, other sheet. swaps your rate pricing the we the down taking is balance if thoughts

Brad Adams

right. that's So I think

that meaningful think on by that quarter so fixed this received I has swaps. improvement loan has anybody yield putting shown done

this think to done have see in that curve. quarter. it safe But that expect process month We down so us ago eating been can I the assume a it's to it to do the best up point. before recession would have started you Obviously, not to third the start

on to million happen, to swap say position loan see million to that as we next It's quarter. it. to that what's to us It's there. duration going to portfolio, something possible although add also know bond We we'll tough would portfolio I $XXX are and $XXX some received but going I'm the hesitant and you're likely -- start leg going it's it's talk carrying fixed the into in

Christopher McGratty

Okay. bit reserves maybe industry maybe color anything a handful little more give any you credit. to size, comfortable get that can you some you sector, on the turning against just Could type, moved, loans Awesome. And then of with?

Jim Eccher

X challenges, X X mention Suburbs to pretty locations, in in occupancy, good of in -- Yes, attractive in credits, X flow. say COVID-related problem experiencing special really Chris, all credits, lower market. And X affected kind migration Western cash Chris, an offices, the weaker credits. concentrated the then lumpier the to health by X from I care Yes. would city, was were

are credits footing. these to support we most market behind have require are on -- We to solid But good recovery a of get going guarantor more these.

don't for values as them. XX% taken still the good Loan we the whole of have appropriate can very of reserves see of to significant LTV given default lot. point, we are on losses X are beyond all now, We needed really monitoring X in those this And them closely. But at a shape, but of credits, better X. the as portfolio or rest move

Brad Adams

And just to one low-rise not point. clear It's office. It's high-rise office.

downtown. not So

Christopher McGratty

on taken Is this the was since it do the watch, -- the been they've previously? quarter or you did provision

Jim Eccher

it taken quarter. this was this Yes, quarter. Yes,

Christopher McGratty

Great. Okay.

Jim Eccher

we on, yes, this an but [Indiscernible] suburban allocation had credit, quarter.

Operator

D.A. question Navas next coming is Your Davidson. at from Manuel

Manuel Navas

and Just variable on lending, yield you rate of a of much little the in kind that give thinking about fixed the new versus the can is new color of bit how more loans? terms

Jim Eccher

lot. and finance group care of exclusively C&I sponsored Yes, probably credits groups are we that bit credit, then commercial our little variable so sponsoring good our real question. community a group banking -- and fixed The like almost group is generating estate generally is rate and But rate a both. health generally mixture

today. asset our is seeing probably we're voting XX% So generation of

Manuel Navas

on extra Any specifics example, what would -- more That's are right. recent there has color are to any build on lending Is great. your come, All of what like how teams teams much this yet team start part still be commercial booked that quarter, performing? out any sponsored for finance, helpful. to that

Jim Eccher

Yes.

in expected generated We sponsored $XXX middle has million first off, all group So commercial our similar saw lesser second of our The that in estate little better. broadly health alone. bit market real quarter care, I groups would extent performing C&I. a say, over or of a production finance of in as group, are levels the

So the the compared $XXX to almost of in in million total quarter quarter million this about year. $XXX first production in

we third off are this the quarter, So little seeing robust pretty we certainly to bit that at expect loan but in a point. tail committees

Manuel Navas

think, Is from there the that's significantly? elevated book first any the little to slow update Is quarter. it expected I a off run on in of bit had runoff that WSB?

Jim Eccher

mean design. has slowed. we has is $XX in I about it the there. that by But had and ran hung the purchase quarter, in in participation book Yes, off largely that legacy million book

In as a legacy fact, quarter solid new well. very lenders had in West suburban originations

pleased with performance. that very we're So

Operator

Long We question from James. David have a Raymond at coming follow-up

David Long

the business, a You and quarter just in it talked originations. about was sponsored finance good

So do you portfolio? have the sponsored in June XX the finance balance

Brad Adams

They rather say go terms that we they're what our I there. were. expectations. are our not a and above year when what made the full well is for today very assume very and team. of I'd it expectations balances we The It's Xx the model in to well. out would fit great performing Everything decision return going well.

David Long

Got it. Got it.

the XX%. sub loan-to-deposit Okay. Understood. ratio follow-up, then as a still And

funds What is in here favor the use the getting work above term? your about appetite talked flows wholesale your XX%. if to don't deposit that You in back near

Brad Adams

opposed it at all. to Not

at leverage would for main a think fine. if fall, -- concern would where mean, I rates obviously, that. that to it's Old the is that I provide certainly, Second world

away shy we'd that something from. not it's So

I inherently million bank, we borrowing position think $X a billion traditionally for the $XXX bulk to that wrong had, XXXX. of added $XXX as overnight we with There's million it. nothing

I a we think than traditionally we higher securities that portfolio much certainly, are have. carrying

position. to substantial, funding securities room continuing as growth, well ample there's excess increasing a sop portfolio both which of borrowing the to from remains, up loan fund out is as what to So continue liquidity

loan-to-deposit be answered if getting to last I you'd where ratio that could today If XX%. I'm quarter, it or them ask

level a to Second should But about years said Old year balance know there the change faster all in going quite pretend and same. during of get perspective, of macro quickly cover I I decided with think respects. a or that I different ago before three the [X.XX] the the profile would I from profitability with the is a close level last tightening years just to I structurally think Fed peaked two rates. at ago much some or our we has sheet something what's to cycle, nothing It of versus happen that. the obviously nature this loan growth there's point, deposit margin don't at like attrition. in potential to but today around out

just a earning base it's we're things focused much very those diligent of on. all So that question and the credit. of staying deposit growing care are assets, right the And on taking

Operator

from is Your with Martin question Scott. next Brian Montgomery coming Janney

Brian Martin

hiring -- as moving that. you teams pipeline just just on kind things guys of far today. just today? your the pipeline? hiring give I have business the actively about kind But where color all sounds still any but like great goes, pretty just I continuing look, of Jim, and can seeing is as the robust just are at over you It talked you that's with to know that and

Jim Eccher

Yes, Suburban, to we additional and obviously this would busy be We certainly integrating been hires, to West quarter was we've production Brian, exceptional. closing mention not very although certainly open that. are open-minded to our

dialogue some folks. of kind with have We

And the that. market we so yes, will be in to continue

Brian Martin

Got you.

that's million sponsor zip this at that is Okay. today? $XXX And about the talked Is that I those million of code are it of think you where finance. about said quarter. Is now? -- balances general -- you the $XXX kind

Brad Adams

No, it's not that high.

Brian Martin

Okay.

Jim Eccher

and exceeding the we expectations Brian, this growth. They pleased with more at couldn't are point, be

Brian Martin

Yes. Got you.

rapid as as just on rate over And begins right. the to talk end to sounds out through the the begin increases pick of a to the bit, obviously, then make increase like, of benefits you as just of here. about to when I And the kind think a you year, -- how next of it's margin curve margin betas by -- sensitivity? up clear. year it think if going far the just When Brad, you once kind your in just question one get can of you very from are expect little occur kind how outlook. you behave, do be All Okay. the it's sure the -- about today stabilize kind the just to want maybe asset that it the the

Brad Adams

point the basis rates move So expect overall at you would probably somewhere I peak XX out an we'll see deposit this funds of cost us that in interest-bearing quarter. range.

Brian Martin

you year expectation or when of... kind be the beyond to year early or mid stabilization, based even see that start as far And Okay. timing would some is as that on next next of your

Brad Adams

in Stabilization Brian? terms what, of

Brian Martin

percentage, margin Brad. the Just

kind it and when they're start continuing next the couple to the and are that increase rates loan just if beta see increase here we're to start the when raise when was quarters. of see to in a not going to some -- rapid stabilization you -- of So yields the

Brad Adams

we're interest-bearing having Difficult say end conversation of But I second next funds overall a which to year. they XX X.XX% I if liabilities. to if quarter about basis expect Fed to would year, point say imagine. at cost I would question. a this this get loan of difficult yield is -- And [X.XX] say, the and X%

sheet there's -- think balance I margin. in that different support can't a this said that as [X] structurally I there's [X.XX] nothing earlier, to

be me in to think don't rake of I assuming I as bit know broadly had, rake where a to want too sure I'm a to People the which not always there a be. yard out that's from we perspective, macro on we pessimist. do there's that somewhere. a optimistic. we seem a step don't

Brian Martin

not we're asking Well, about the tax right. rate That's Brad. either,

yields me just are yields, loan for last loan the today? the on So new maybe where of one the was kind coming new

Brad Adams

Yes.

have But end certainly we're trough basis moved and maybe XXX floors the to from year. the points those up, added levels Brian, proactively We were the we XX -- we're at of appropriate. up

Operator

Sandler. coming Your is next question Nathan Race from Piper at

Nathan Race

to a in and expectation kind holds think the there with reserve trajectory out absent framework So that the know stable to provide adjustments? is substantially how on growth today need But the all just [X and here. predict relative charge-offs expected it a kind macro question any not from difficult the of of seasonal you macro the about uncertainty kind I of reserve it's to XX] CECL the guys time to Or soon? do here, today. rise

Brad Adams

now. basis that's in now. hard But guess factors it macro feels a So right that to on happens world claims, me in That right unfunded jobless to somewhere points stable with I XX would loan probably if would bit XXX held come growth. like of with all to the tomorrow, something constant reserve continuing predict, of terms and between right kind a feels it's we and other what a but commitment, perspective little down

Nathan Race

are in about this of mix kind point capital opportunities about capital Any on then risk-based update And going be forward. are the to came the at obviously, the optimize generating guys just with Or how stronger Perfect. But going Got ratios, opportunities you thinking of to ratio rate quarter. today? cycle? the interest you. total guys you in higher kind profitability down rates those

Brad Adams

speed we're we're going I not above relatively than think about short Thinking capital move on that to iota if TCE more below where order. which that on bond years curve given absolutely to I of be I that terms capital. it But with number about all the [X] I [X] be else were curve million never mark capital, and when the considered capital. consider we we the one we're in $XX Obviously, but that reporting and if were nothing recaptured, we the to $XX a core today, portfolio. that X. that's things, XX% back to $XX two we is adequate changes, what way we're ratio, getting the The doesn't hit the and at from on reporting even flat and million it believe right questions mark this, half million back million do now don't a gone. positive to right long were have are we somewhat can be a excess in now, ago wasn't included $XX to going that

-- haven't short bit dollar to off comparability portfolio the because we maturity. the quick might comes the held would others well to is. So and moved given be our that obscured a I little how as it

what the going we've So intrinsic what amount of We've generate and ample the very here. portfolio I'm to the is capital what done see like and of fast. looks got you actually we're value it balance sheet. of proud

moving that feels reason fine around. to start any things see everything front. I on don't So

Operator

[Operator Instructions].

question an We additional have from Manuel [technical difficulty].

Manuel Navas

My good go. to question has been asked already I'm and

Operator

There floor over in Jim to are time. Eccher. this questions I'd queue no like the to back additional at turn

Jim Eccher

Thanks, Kelly.

quarter. We next Goodbye. Okay, meeting our to this you forward that concludes with morning. speaking look

Operator

you, today's This conference ladies conclude gentlemen. does and Thank call.

at have wonderful a and day. You lines participation. time, may your phone you Thank this your for disconnect

Old Second Bancorp (OSBC) 30 Jul 222022 Q2 Earnings call transcript