OSBC - Earnings call 3 2023 | Old Second Bancorp, Inc.

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Operator

Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc.

Third Quarter 2023 Earnings Call.

On the call today are Jim Eccher, the company's Chairman, President and Chief Executive Officer; Brad Adams, the company's Chief Operating Officer and Chief Financial Officer; and Gary Collins, the Vice Chairman of our Board.

I will start with a reminder that Old Second's comments today will 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 company will any statements. On undertake financial does update The forward-looking such measures. duty today's discussing be to we certain non-GAAP call, not measures on to GAAP These tab. under Investor the our homepage are counterparts our on and is Relations which and release, available described website in reconciled non-GAAP their earnings at oldsecond.com the

I Eccher. Now turn to it Jim Mr. will over

James Eccher

us joining today. morning, and for Good you thank

As several quarter, give I'll will Brad Q&A. have future certain customary, overview turn my we the details. about with additional before to to we'll I summary open remarks, opening prepared thoughts up comments over of I then the conclude for and then it it

or diluted third per was Net per share was million million income Adjusted quarter. share or $XX.X quarter. the diluted third $XX.X $X.XX income net the in in $X.XX

assets common basis, the XX.XX% was third tangible average efficiency equivalent on same XX.XX%. quarter adjusted on ratio was On equity the X.XX% tax return and return and was XXXX

sale the combined losses earnings credit were items per and Third securities in in third liquidation pretax $X.XX net as the strategic related diluted $XXX,XXX security by quarter. impact sales costs of to $XXX,XXX these earnings negatively well portfolio deconversion The impacted card as quarter last reduced on year. in Visa X share by

the along million favorably or to with increases year asset continue compared income be to quarter prior by manageable a quarter impacted in sheet. across XX.X% the in expansion increase funding late elevated rates net $X.X the financials yields to Our third interest significant balance in market with cost due interest

million linked expanded to be loan the XXXX $XX growth of last million modest. year. $XXX.X for quarter continue period the X.X% of prepayments period same third over Loan reflected and or The

remains rates loan due However, the impacts. has X and higher both to interest origination to committee months. Activity significantly periods slowed relative seasonal modest last activity within over prior

expand driven quarter, XXX by partially basis year-over-year. by higher quarter points this deposits. by slightly the of expanded margin during and interest cost points linked offset to yields, increasing increased net quarter basis The modestly continued the loan the yields over X Loan

equivalent tax the of of The rates continuing loan in XX, XXXX. The on last sheet XX% loan September year-over-year impact XX% and to from ratio quarter XX% quarter of and of quarter the was loan-to-deposit compared to is margin net variable X.XX% of The interest portion XX September mix in as improvement, portfolio for third has third the as compared now year. X.XX% rising the benefited margin balance the last XXXX. growth

we optimization, continues As let said I'll be sheet to that last Brad a quarter, focus talk in our about balance minute. and

downgraded metrics We designed credit a to plans to this prior had linked quarter. materialize report place improve a to had previously in with credits quarter expected these we in workout plans for few flow Unfortunately, quarters. cash in improvement fail metrics

outlook has although the of Our than slower be speed hoped. resolution will not though, changed,

flags overall at has news for raised is any us. trends the well testing basis an The red stress and behaved rates on good new renewal remain not the portfolio

and the credits. X On largely were an a loans under some covers. nonaccruals with overall basis, due to this bit pluses unchanged largely quarter, Classified tick up did minuses

this We are looking point is don't sponsors liquidate characterized unimproved, if million leased project any. $XX is complete property. here, First mixed-use losses a expect that and half significant multifamily at half and to is the

rates of health higher nicely to related, renewal the below other and and ratios combination credits labor occupied debt care are cost inputs. at higher significantly coverage service The par due while

significant criticize Beyond And at stable. deterioration have the these estate impacts office ongoing within point. are trends evaluations commercial and real are revealed assets of this not

weakness office and Clearly health potential estate real commercial monitoring focus specifically. in our remains care and on

been and refreshing very rates renewal result, changed. under credits valuations. as maturing our outlook broad-based And on not credit risk. We've stressed proactive for we on has see have We believe a don't

I important And is nearly our X% owner-occupied, book. is estate exposure very watching only half office that exposure portfolio. refer in much We unusual which commercial size. exposure of we here, disclosures have on the color our bank real release it loan about don't and of our to for the remember a are our earnings think more of it's simply believe for additional to Please we closely. the is

of estate million commercial net current period quarter. real charge-offs majority in of the specific X ACL $XXX,XXX June existing quarter at in net second during million the borrowers we within decrease total sales to $XXX,XXX compared a allocations property of owned at OREO. on which in were recorded $X.X transfer the within estate of X third charge-offs had quarter, The $X.X of charge-offs on to net We based into one end quarter the real specific reflected third XXXX in $XXX,XXX XX. of to Other the the

$XX.X the quarter, from from as XX. at September loans million million June credit total XX September of down of is allowance of XXXX, on to decreased total XX, gross ACL the to of end The of as $XX.X X.X% losses as for X.X% previous which loans loans

Unemployment future loss last used assumptions from rate in forecast remained quarter. static GDP and fairly

which our credits portfolios should and that continue work credits of allowance previously the we've towards the the in same talked reduction the investors and think monitor about to strength remediation we I we and remain know or in the confident driving sale. of

to earlier, compared by other well, gains increased sales restructuring, to continued discussed quarter and losses BOLI XXXX driven noninterest on of security $X gains income to income excluding on and million income income. perform second due the MSR Noninterest

be Expense third sales to repositioning types be certain our strategic security on portfolio. to within $XXX,XXX were and discipline to quarter efficiency ratio excellent. strong the continues in of continues in related incurred the losses Pretax

order the loan it liquidity origination to a to performance. I'll we towards As we're now is look focused The doing goal commercial Brad in managing and is stable to long obviously continue more color more securities comments. for for to mix featuring maintain of forward, returns on and with in recent building commensurate sheet less equity capability the the same, long-term term. over more build turn balance which his on loans our more

Bradley Adams

income the you, decreased Net $X.X significant $XX to in though third slower quarter. of rate million this last. yields increased the recent grow at or last year a and but continued quarter yields to of relative quarter, quarter prior for Loan securities Thank due the since pace the XX.X% quarter ago interest to million than from issues variable slightly $XX.X declined Jim. million, to and periods, slightly quarter the sales

interest-earning which the and assets interest-bearing increased basis on increase XX interest-bearing mitigated and points in by to basis partially XXX a believe XX of be yield was Total a deposits in increase liabilities basis a taxable X basis from quarter performance. result XX The point equivalent to increase in was cost points margin exceptional end to to aggregate. XXX, basis last the continues we point point NIM

senior of of quarter's redeemed the outstanding approximately XX. issuance points redemption cost X call, last basis net in June discussed alternative we funding This costs. net As a debt provided margin on savings interest

based inverse flow of of XXXX with nature latter in The leakage the and an bank, throughout character saw XXXX. payments into the like beginning quarter modest the in commercial see customers flows and decline of through largely for this rolling the half new activities the showed personal we out move the looks and we along decline summer. the Deposit always business customers on quarter, high tax typical third on end, seasonal

we flexibility than to and and Fortunately, remix adapt liquidity to will and the rather have beta high the balance deposits. sheet optimize continue chase

over fairly sensitivity progress last the still aren't reducing made in including reducing have asset securities some We lurching significant but variable rate at anything, year, concentrations.

now and XX%, right with it are Variable bond this, a within was rates doing give-up approximately associated higher. half the to rate has issues income significant but is There the some roughly it's level been margin profile duration the started a return normal that portfolio to within time moving before where portfolio.

considerably point sheet opinion. excellent, away has longer the duration the flexibility for still to some is don't is other and as is opportunity hold, of higher see balance we my in I taken reduce issues on sensitivity, to tightened well. bond in numerous added belief but and ways years. sensitivity the slowly Effective X.X much at positioning hedge Duration spreads rate now this portfolio hold. asset being variable asset have As on

quarter much significantly more out further curve. moved the during the Rates

some liquidity to we as has come from source saw fair to effectively. So rate gave has deterioration less Second back loan-to-deposit of to here and value allowed relative you out portfolio quarter. the increased our that significantly move bid The a last experienced. ratio ability excess variable The us perhaps has peers I than Old the on and our low, color quite bit remains said, issues, positioning

capital linked XX build net the XX improvement in The The even the very recaptured that the by points means securities Old evidenced over Second remains be from the AOCI, as quickly. on in we've continue year. first will X basis basis high quarter, points months this should tailwind of the without to which basis mark but added result TCE XXX is TCE a combined quickly point the portfolio ratio with relatively

approximately the As strong undrawn unpledged the position $XXX in additional and as today, excellent, company liquidity here bank short securities holding million and we in is sit we an capacity $XXX at have a in borrowing and million well. is

to seek We likely repurchases soon. to stock resume are non-objection

repricing the very hike year here with still come of to by borrowings rate are expected continued much. the be outpace overnight asset relatively to over reliance increased expected not to the on trends from stable and Margin the from remainder benefits last our

Net was on losses term, I attributable roughly provision environment. that provision of on with loan loans. growth to with be recorded to reversal during expect was consistent of change credit over commitments worsening during the Provision near could significant and macro quarter the growth million an immaterial the losses for quarter. primarily in of though $X would unfunded credit the

expenses card liquidation Noninterest deconversion going $XX the higher near from million and quarter, from continue to between driven I in to and term. expect $X.X be previous to the wages fees employee expense by well portfolio. $XX million forward as Visa credit salaries related benefits quarterly benefits million the increased as and and

not given of the available I relative we really are to yields dial origination. chase investment sense the didn't really in to associated here. be would performance, that cost revenue remiss to marginal add much conditions the marginal market with high, the make will been Doesn't growth funding running if we ability as Given back warrant. employee costs and I have but maintain the the cost

we be earnings earnings focused we much such, many indicate job can good the more people continue, I from pretty balance efficiency. absent sheet we our potentially and so can It far. us. a this expect are grow believe I darn at perhaps believe on doing can remain than At least, believe very results growth. that I resilient As optimization and

With Jim. call to that, I'd back like to turn the

James Eccher

the and both sheet Brad. that for expenses. Thanks, balance close underwriting opportunities Okay. position closing, in we We attention remain confident strong. paying credit our to funding disciplined, We're are has In remained and is our ahead our us. and believe

We the and maintain a and look to continue aggressive excel rate at to higher levels we sheet talent in environment. adding balance and Capital and above be targets, grow flexibility levels to will have should relationships.

That this concludes our comments morning. prepared

moderator So I'll to over it for open the up questions. to turn it

Operator

Our from is coming with first Jeff Instructions] question [Operator Rulis D.A. Davidson.

Jeff Rulis

of credit to credits -- to want extended comments on Are there resolution maybe a trying I pace of from Jim, bit the line line a maybe check kind some that some nonaccruals. I I'm to Are of nonaccruals. there chunkier may for a sense dig a balance to have in time time shorter in just you trying I think of balance on the mentioned resolution the the but to perspective. of your into little resolution? there that appreciate get of kind bit, side.

James Eccher

But And are in is their is it's purchased. will Yes, challenging that that it And has taken feel working Jeff. will couple are care. We're a under credits credits some the no have just with of to do bank the shared at concentrated a these. write What's bit resolution. and contract. longer this lead resolution used we little I office a tell closely there CRE We to. ones, made than chunkier we're seems taking properties resolve to sale as primarily longer. it of time of though There's there so It's looking just health on participation couple what you, options. a

Jeff Rulis

of mostly were kind CRE or just charge-offs Got from within that something looks those the the classifieds that's were like in And credits bucket, new to existing... it.

James Eccher

allocated sale. already charges office took X and we are them quarters to Those buildings had position we that for sale for either or prior the no

Bradley Adams

calls, These we've the are been about the same talking in last credits X Jeff.

Jeff Rulis

Yes.

guess I first lot where you there to I making said soon. think occurring detail. increase like those a then that Just expected the to appreciate care not mixed-use didn't I -- health guess know liquidation of and which, that I related. multifamily in sure And of losses I sounded perhaps classifieds and a

-- health X On detail what those credits? the care front, are more these any on

James Eccher

give you largest XX% owner-occupied and net little to would being that obviously. The one then think just longer. loss construction is retail. real the have isolated we I'll equity the owner-occupied care It's is collateralized. value substantial Sure. in a backed sponsors estate. some Sure. The are bit We project. I owner-occupied on health there, just -- SBA issues Again, these addition a project a say there's this. the abort classified don't It's we are construction properties process color. decided taking commercial mixed-use from of behind were well credits And backed construction-related or the to estate in pretty sold. by the to some real loan commercial multifamily us see

care of are still both just one the in few as dealing at a The flow with occupancy. Surprisingly, appraisals both are in we've cost they're hanging refreshed weaker properties, there, struggling we're labor about last within just one X got COVID, for cash health from to and and higher aftermaths those and loan appraisals credits, of perspective months, the sub-XX% XX%. values about talking

more workouts So Jeff? your a ask to back going really there's longer-term situation That to the to to we're the answer where going rightsize going have be to transactions. to be questions, sponsors for go and and probably equity

Jeff Rulis

pace -- feel of No, about. these. with of kind on mean and you like -- credit. the Yes. good the up true color. I loss Jim, appreciate pretty that kind But overall sounds of trying I your in that's the content, thoughts to positioning It frustrated some while by

one you quarter positioning -- other So going just Do with on on security happened this do think the just happy got could what that color. quiet you've Maybe pretty be I there? you're appreciate the sales. similar to question Or forward? and

Bradley Adams

the Yes, a We of out peaked world. were make we're going portfolio keep sure to just protected were when XX% we variable in being rates higher selling. around rate to at X

probably in stability we've on movement of we've XX%. rates, slow of as type to level We're kind out down have XX% about. long-term started that, the As told down to now, we moving you rate been good is like a

of of sheet. on don't balance know, duration have you As we a lot side the asset the

the as typically, when this. a to -- existed out should now of us both move are for for that securities of warehouse a we and asymmetric couldn't So X does duration serve moving we out and expect rates but you liquidity portfolio it, did so us, kind to do we that were we of continue risk given it. And

great transaction doing to involve step hedge months cost-effective that it X they up we in issues. strength pat the This what but manner we and and which earnings above of rate towards, that be of now But fees the doesn't accounting and a And it. would deal. so. variable execution margin given couple of that's fees less this, and everybody to fair be be if value just having -- our one, want just our I we're has are, deposit such to a A because we're various last we susbtantially things. progressing stood probably we in I'm is broker what issues can mean, the is hadn't X out done the will asset higher. way tightened has most have decided we over right grateful And always sensitive it base, a and paying

Jeff Rulis

been the little you bit go have on expectation it securities less a legwork wind as be got, if down, more. you losses well. would narrowing that like the a it, appreciate Brad. a you done if guess, XX%, Well, I as But income been to the the become statement? as Would that has sounds It you of drag looks XX% and it lot Okay. of get

Bradley Adams

mean is I all days. sell these the we to got rage what

we're So pretty well. doing

Operator

is Stephens. McEvoy question next coming Our from with Terry

Terence McEvoy

building? first opportunities? mentioned the of repurchase in-market future take what going Maybe you thoughts do are M&A of to on you your building to any advantage program, you're question. stock are capital it Brad, all with What but kind

Bradley Adams

rates is It's know not, a in is when we itself. of to that's with raise to XXX, a to some of capital to It's value show But know times sort I serves that it this not And hard say going something the of I level why be form lot XX you of far, in also effectively valuation. to a or me which what present floor do buyback don't going accretion. that share lost ready recession. the and you environment, some the need marks earn as takes out of on per in book fast is to stomach as whether this lot this when enter of well. order tangible know up I

I by investors that are us floor. raising think well protected So our

carry are There's given excess little yields $X.X cost capital right alternative ]. now, to funding very the million [

a on of is excess lower much than it carrying cost typically today relative So the basis, capital is.

all of all prudence that and in more to just that's much. tail now, shocks carry doing. is protecting and to Minimizing some level I capital terms right than So stock against that risks. do too that recognize not what potential of argues we're the price, of

is prepared And I the will imagine condition you of no at step itself. to so be. to my in least term, objection, ready that near but in term, there be be there some tell the you near and there be we there it can't should we hope would we will in present tell can't I return are that I can that's

sense. thinking that Terry, if is, makes So kind what that's my of

Terence McEvoy

margin balance specials talked the funding to outlook? you've of just loan cost. Tough the did new yields flexibility called I pricing looked, you some that's keep deposit CD. And what and sheet incremental offset near-term X.X% got I your a your if CD are -- about earlier Can thoughts the on and margin out you pressure. X-month

Bradley Adams

do at just, some. money year. to few The doing we're fight And you they when want you deposits Well, XX% business. flows is only to. almost What system for it just growing was And but a I lot money the we the a X.X%. in fight if genius to that make It's to, banking can cost to those I'm just Money in of nothing balance tried like not were with everybody. this flexibility do everybody a anything stupid. to can't mystified, inflows, is places decided is okay. stomach we sheet we're has growing outflows the a mean flows can we've the bit And maintain reality execution will you flowing you right, the into do a of stomach go optimizing. that

to. So that's what of kind we're up

As said one, more still I is the side a But my one, that loan far of probably minus as like margin. higher some another rate -- basis there's have quarter, I maybe X another I I likely. our that the If we're for bias plus from it hike. side If to last minus come points. was We plus on that benefit would more say but not repricing there's last was goes, intention didn't. X margin said certain basis or was I the think Maybe it, points. it do

what selling and given the current variable positioning. Given on our we're portion

points few this. minus a more rate if there's with like minus basis should likely or plus everything hikes, much but no pretty stable, further be So

Terence McEvoy

the and that next rates of question, last loan maybe to was higher you borrowers terms And early of quarter ahead what have I of in in part CRE one incorporated? maturities year, could that fourth do those could. and if gotten

Bradley Adams

you hair much pulling been shocking know have And don't me, out, Terry, anyway we've so... hair [indiscernible] stuff. our I

Operator

Chris So from McGratty our next question KBW. is coming with

Christopher McGratty

of with your they restructuring balance peers made Some for are sheets mistakes rates.

just to the given open talked you more do willing them. to could but You about. also deposit question I prove guess to max optimization have to you you're don't guys the that had seemingly run ended with if you and on loan that,

Bradley Adams

mark-to-market about order are mark-to-market? that in So you're perfectly different buy are selling talking to securities perfectly securities that

Christopher McGratty

Just -- any [indiscernible] the yes, I would piece is then but there that you think bond, know about? of within but it

Bradley Adams

whereby that. we second I'm absolutely X.X-year are. do see We we're we part... means would I no very darn And duration scenario shape. where happy the in No. good what with -- was

James Eccher

whole I they're think are, lot Chris, loan-to-deposit could to growth from XX, not loan take of our about think a expect mean whole they I X/X the a year for kind this what XX. of where I this we of on ago. a lot based comfortably year a up I Yes, balance of standpoint, pipelines were would of growth,

and focused really credit. we're expense on control So optimization,

Christopher McGratty

Okay.

putting You talked Brad. NII, about these the around guess, I I mean, together margin. pieces levels,

Bradley Adams

Yes.

so. think I

balance it. I that's money expectations us we're I tails are. for mean we're But on I'm doing healthy think reducing going of and while our any we've of little got making a a sensitivity, we're right for money. and focus a are asset that continue what lot making just sure positioned chance to of the as is kind the out a which thing prudent they make now, of amount growing to is. as surprised that still sheet, pessimistic there

Christopher McGratty

BOLI Maybe last The X. high. little a just the looked

you capital, get let binding binding what's the you, you that. that And just you prevent nonobjection, the back the ratio to comment keeps I going -- but buyback? just guess, the then So metric? What's do on the or what's

Bradley Adams

be I shape way an of CETX, real we're here. can't which can would guess evaluate mean good bank. the in there any I we're much -- you on. I imagine healthy a It's objection pretty in almost

that feel good pretty on front. things So

Operator

from Nathan is next with question Race Piper Our Sandler. coming

Nathan Race

does of reduce there. the opportunity of maybe Brad, to balance outlook. kind which But drivers Going that kind an hear It there's balances some terms NII least support funding, near in the in would overall of that question sheet to sounds back of underlying to wholesale contemplate sheet. get here from size What deposit on Chris' to the of continue of terms growing at just curious to term. like, of kind

Bradley Adams

But bond inflation maturities Should XXXX, that borrowings. we it we was portfolio transitory right? was obviously smaller money ourselves their amount stagger the everybody to to in that manifest a can through which smaller tried overnight convinced we try healthy add relatively we Optimization, itself, such get what has. a situation when do back find quickly. today, So during of as present

XX the treasury coming hundred several anyway we we us. -- million that to yielding have basis of dollars to be points are months, a million dollars next Over couple well, it securities that of will back got sub-XX hundred us

again, that to And about improvement. asset can through loans, in it manifest order the just either coming which last the manifest can appropriate for basis we've is reposition XXX earning earning at point have point through and a smaller what been earning borrowings, mix, optimize the XXX basis talking overnight We time improvement or year. spread spread in money

we've right? coming that job. you're a in but you've optimize mix to asset And win, us terms months. nice tough, opportunities done continue people a It's off ample next to got and good You of the in try position at the got tell XX we've maturities rolling earning what over

Nathan Race

the seems going Got still Okay. to think, And CRE to Suburban. you you're charge-offs it April It accounting, of I potentially and guys resolved how flagged, office like about content in in there's the that tied thinking those loans some like that chunky value kind loss coming us Can sounds of XQ you of purchase just back loans just holding quarter. forward you're just and also back these earnings were as forward? fair it. to kind that remind against the of are going out nonperformers acquisition. those credit And West are going credits marks what tied

James Eccher

loans. our And no leading. charges Chicago positioning are took before, to those just on of One, COVID. So yes, result both we the in a properties a struggling amount nonaccruals, that had were, for mentioned that been downtown regards chunky. With as the participations fact, that they're of we're both fair like not of again, I sale office were the sale. And or them

bank there. to the with lead resolution equitable find working we're So an

As marks, accounting far talk let as the of about I'll Brad purchase that.

Bradley Adams

used accrete little different tried allocations to purchase you marks that, -- to and the the we concerned that can that's So rebuild is think substantial we occurred. have credit We as provision accounting to about. And right? anything what it is a do than the see we do are be, I

in as that's we really interrupted credits. earnings why falls So to bottom streams of of work these what terms line shouldn't out be the

downgrading I'd we've the what one like generation done certainly, and that It been the is timed deal. are they was from weakness that going problems, very content of very bulk within asset remains that syndicated poorly even an know it executed. were originated rated far loans down. our that no is are of purchased investors at to our Old in side we'll loss continue absolute and our move come Second of seen without for so work portfolio in acquisition both realistically What from was we've to the downgrades, strong. out problems well overwhelming we of half think that I this those, and But majority we've well the in has acquisition run investors. and beginning perfect. And home on we've cut the the last to do the you deal that syndications the from weakness is point, basically told within credits acquisitions. we And terms that -- we and

people pretty is And that acquisition acquisition the still for good. darn through but an on have is perspective we'll to -- to helpful So is in a continue of what's execution terms that XX% XXX, everything even get this. not

Nathan Race

loan pretty kind the like least sounds near outlook near-term it modest And is Understood. at of growth term.

peers. guys at material So sound a just horizon like moving pretty to from charge-offs on your what curious healthy from how you here? we a lot today. see guys of can still You are the thinking sit level trajectory it reserve additional does about compared there's the And

going So on forward? just just the any thoughts reserve trends how

Bradley Adams

just allocated it at a one And of maybe probably a tiny been is kind and hold we'll for. we'll tail point. recession see a up of where what bleed we've then it think risk take largely but worried more this be lot I is, it's do don't which it probably about But I to just the against potential bit. charge-off, doing, protect

Nathan Race

ask Okay. if just could Great. And expenses. I on one more

kind to I to And XX% Does you that fourth in term. [indiscernible]. flattish think overall comp how translate thoughts expenses near just of any mentioned terms quarter? get XX% on you in of kind the of

Bradley Adams

bit too, par in your fourth what is and BOLI. existing. that the sorry, absolute about to forgot an acquisitions quarter, reminds We from case, restructured previous today. little Chris, that BOLI question terms me both below the that ridiculously flattish that slightly improvement. portfolio maybe we better I'm is in answer I I'm the of of kind our acquired from And did we a asset the awful to with and asset a that, the of

So quarter what buy never and rate still ever But is it's awful at it run seeing at any rate. run we'll again. is you're this

Nathan Race

I'm sorry.

XQ stay Brad? suggesting, around So should BOLI the you're Is level. that what

Bradley Adams

correct. apologize failing That's I to that answer for earlier. Yes.

Nathan Race

of on expenses. No problem. And I thoughts your... expenses, know on overall kind in then any any early just process thoughts XXXX about thinking but it's and the high-level

Bradley Adams

and we expensive be to bacon X% our to to still open We much treated employees here. are a X%, well, that work how make right? gallon have is. of And Right to a want of people milk I'm now, happy pound more for sure given

we our mirror. we and repaving deferred new and of that got So do do was that a We've our mindful higher all stuff. rocketing buying be do headwinds inflationary in whole have rearview what lots margin maintenance parking But to as computers and any we some have bunch that as of. did

ahead CapEx So have we don't lot us. a of of

Nathan Race

the been And days. front X% RM X% to these is that materialize -- make any on that contemplate opportunities things that to hire of there's did outlook, on sure opportunities to side

Bradley Adams

we're to better. always Yes, looking get

Operator

Our James. Long David next coming is with from question Raymond

David Long

can to growth benign between marketplace? versus want Old the On but is see based appetite the obviously, just it how here, expectations, down loan in if you Second's much break demand on

James Eccher

We're Well, would verticals. finance and a our is seeing CapEx a some sponsored demand just back I our of overall deal right now. and still pull borrowers muted first, amount in lot loan of flow decent leasing David, expansion. seeing of kind say on We're pretty group of

of We're look don't have looking fund we're today dormant. but still commercial at make at real really sense C&I the just the seeing and opportunities, when returns it Beyond we margin. lot a largely is risk-adjusted that, where at on to estate you what

selective. very be we'll So

think paydowns, is low looking the the and I keep what have single-digit and near what probably long with in we pipeline growth our we're over up runoff at probably but with will term.

David Long

Got it.

a Okay. When in a have question. it follow-up have you best And of before, the done obviously, I've point? look liquidity earning But said you how then and using securities that guys managing running look that you that through is portfolio of portfolio, the off, assets pandemic. you jobs at you as at getting at when low percentage a the one do -- this see base,

Bradley Adams

it's what right can to like go -- XX It it's I can now, think from yes. XX, go

Operator

Martin from Janney. question Our next with coming is Instructions] Brian [Operator

Brian Martin

we see of type of of I as in see X.XX if think I quarter, margin than about level. I in -- that Brad, that I the kind quarter, margin just we people's and bottom if you the rates Is next lower, more realistic we -- see talked it's last kind on I goes, talked mean of could don't here I comment their the occurring if cuts. range. pessimism guess, see of to that, if X I did think, we to before kind went kind don't you the don't rate guess, cuts? far -- margin is that bottom the mean the we hold longer, in as maybe if for you about higher going mean, the are XXX outlook, these

Bradley Adams

interest the rates. see rate I'm X. think see If tried you'd you're a that basis points If XXX-plus can And give is there cuts, a when us don't are at rate you points base, here. the I've XXX probably like X hedge margin If to cuts, -- quality which to cuts anyway. from not you are deposit enough in is see there in inherently don't I try smart we cuts. There's -- look that. are bank. Second, XXX rate you to X.XX volatile to no We'll that to Yes. probably candor and rate We X.XX. is Old -- there's retail any basis

X. rates money X are X, to we perfectly aren't don't when lot that make soon. of rates think accept a I'm less make money we But willing and back So anytime going to when I we're

ills. X% X, of all a an absolute disaster bank. are strategy of even with a been it's ROA they think still if I But kinds we're

amount accept the right lot you So make that's of do to -- be be except normal when do. thing, protect when a and what money a willing you against tails, and willing make just money, accept we make you to of -- when

Brian Martin

Yes.

those the that for quarter, going board content And message came like Okay. just were new that. in those. low general, it I classified, then of ones of this X all is with... that to appreciate what kind sounded the credits, on X the the Is pretty just is that back loss

James Eccher

how all fault the we've major just still refreshed here. behind sponsors place. of supporting say now, are didn't don't was given then and the appraisals. it I and downgrade. enough flow prior That's list felt still we see weak workout any necessitated in now, the And strategies cash it just questions, see but Brian, credits, got of on these classified that losses they paying, we overall the are but new have We've Right we

Brian Martin

potentially previous charge-off still talked Okay. was coming a that debt Brad that credit the identical. about And already from

Bradley Adams

the April. since stuff we've been that's Yes, about talking same

Brian Martin

Okay.

that's up where Just credits making where you from. then the size today? Can these that. portfolio, clear come on you And of some participation the mentioned have portfolio at

Bradley Adams

million $XXX million. $XXX to

Brian Martin

much So $XXX million today? million. is And how classified to the of that $XXX currently

Bradley Adams

X%. X%, What

James Eccher

say less that. than I'd Yes,

Brian Martin

the I to what's kind ability back. struggle X to hire guess and today? opportunities, get loan going opportunities out a like given talent there it to I to the %. find always talked X% getting the I today? to mean, about economy, it sounds then you are talent Brad, Okay, of to moving just improvements better, seeing mean wanted And in weak is is add -- Or the engine contribute currently? on you demand are to there

James Eccher

relationship quarter. even we this still this even some managers to budget we've And -- we year, some had add continued one-off We've for success it every year.

we'll in So look those opportunities for 'XX. the continue to

Bradley Adams

The to else when everybody gets is best time grow scared.

kind of is. what viewpoint So that's our

Operator

of question-and-answer our the session. We have end reached

remarks. back his the now will closing to I So over for turn Eccher Mr. call

James Eccher

you we with and the you today. us next We appreciate company, Okay. speaking joining your in quarter. for to Goodbye. Thank look interest forward

Operator

conference, concludes and This lines time, you we you. this today's and may your your Thank participation. at disconnect thank you for

Old Second Bancorp (OSBC) 19 Oct 232023 Q3 Earnings call transcript