OSBC - Earnings call transcript Q3 2024 | 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 2024 Earnings Call.

On the call today are Jim Eccher, the company's Chairman, President and CEO; Brad Adams, the company's COO and CFO; and Gary Collins, the Vice Chairman of our Board. I will start with a reminder that Old Second's comments today 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 non-GAAP does update The forward-looking such financial duty measures. today's be also to we discussing certain call, not release, are oldsecond.com earnings on Relations and the is non-GAAP the in measures their tab. counterparts our Investor and homepage described These available to on reconciled GAAP our which at website under

Jim Now I turn will to Eccher. over it

James Eccher

for quarter, joining I remarks to to up you before I turn morning, have you summary opening thank Good additional will Q&A. everyone, over prepared us. and certain future with we my comments several and open details. it conclude for Brad overview and and it give then the will thoughts of the then about

income or $XX quarter XXXX, per and in X.XX%. share on million of diluted the assets is third return was Net $X.XX

tangible tax was was return Third equity XX.XX%, common XXXX the and XX.XX%. on quarter ratio efficiency average equivalent

XXXX earnings the absence Third in $X after-tax which loan growth, diluted provision significant earnings losses were reduced of share. by quarter $X.XX credit of per for negatively impacted by million

by with despite strong and continues, remains this, Second equity quarter our XX.XX%. points basis exceptionally tangible profitability ratio strengthening sheet However, linked balance of increasing to XX Old

to Common at positioning sheet quarter, and equity this both the in and point. increased Tier balance our we about X third XX.XX% feel profitability very good,

of common banks well-capitalized dividend reflective to deliver dividend regularly best to We are we balance the ourselves like quarter, the would and into Old a in Second common pleased We Chicago. position this in growth announce continuing increase one build continue sheet. the strong to of in XX% profitability as a to

strong net and strong. rates even to continue decline, pre-provision market interest interest margin, stable net exceptionally financials remained revenues Our reflect begin to as a

$X.X liabilities remixing due certain third expense interest rate on compared The increase or average pricing while interest-bearing million earning in year quarter and income interest X.X%, of to expense commercial and $X.X to average primarily period, and the increased or XXXX increased XX.X%. prior market like the deposits. assets is million For driven on

XXXX play third in loan relatively to large few the growth remains XXXX construction credits of activities. is the total loans in the quarters due commercial, committee in is to construction increase in The of how line to X third million, see any year growth lease growth. loan primarily is modest year third primarily during to prior seasonal and in within an of second reductions many the was a $XX.X net bank trend last due from linked Currently, our Comparatively, in results but due quarter linked to months. quarter. the loan improving, business up historical periods, of end, payoffs and out quarter market of interest quarter's customers prior million X rate portfolios, growth to on activity which volatility, including in the and loan further The with total next the and quarter reflected election $XX waiting

on time third in compared of to quarter margin XXXX increased to Loan the margin reflected of due XX-basis-point a the and higher this the yields third and funding by by interest net X was during increase deposits. and rates equivalent driven interest point quarter continuing costs. by linked variable higher tax The net for tax in X.XX% increased rates basis third for increase X.XX% partially increases compared in costs XX-basis-point quarter offset year. Funding quarter, year-over-year. quarter both last X.XX% equivalent loans, the The and securities to the growth second quarter

portfolios compared as portions as September ratio XX% relatively stable rates variable XXXX. on our September XX of the and is the to impact XX% Loan-to-deposit base as both XX, of due the interest net of well in has of security period at to deposit costs. the as The margin quarter rising short-term XX% last remained the and year-over-year borrowing loan and

in be said Brad our on past, have optimization. we that I'll a let continues sheet to focus balance about in the talk As minute. more

quarter third saw year. and asset since improving quality on taken The metrics XXXX substandard primarily late remediation trends last moderate credits, continuing of actions noted

of estate the began point inflection Our represented trends. substantially and quarter fourth of or nearly Second through XXXX. downgrading XXXX commercial a XXXX. $XXX in belief third an office X% quarter or remains first loans XXXX more health large X% end Substandard of the a of and and criticized than care, Old from XXXX accelerating over our at approximately million million credit real that that quarter little loans, in $XX including to amounts of loans the loans went of of peak

than million As less down of are than million, and The a expectation for flat loans improvement the from the XXXX third of rest special substandard peak Encouragingly, ago. quarter the $XX.X $XX.X decreased $XXX.X below levels. approximately or year-end XX% remains end year to million than and is more of XXXX, criticized more and last quarter the which XX% of loans further our year. through mention essentially

in of losses relatively continue remain half hopeful some the costly recover realized of can realization expect XXXX. those in the of second a to resolution near future on We a we of less nonperformers number and

quarter recorded third continued XXXX. and the the And second of resulted almost classified portfolio loans of the net decline, by recoveries loans. news the year good net charge-offs loans continue this of million to charge-offs stable $X.X net the elevated and in problem million for remainder on with third remediation allowance losses XXXX, we quarter behaved. compared the falling quarter the of current more in the quarter $XXX,XXX in net $X.X on is remaining of charge-off million credit a outlook that in In $XX quarter, efforts have well levels asset to of with of Prior credit third

has the higher will raised into transitioned and portfolio for environment, rate movements impacted and our downward with testing rate any forward. flags us, loan red bulk be new has stress going of not Continued the

X.XX% reduction in range XX-basis-point as September September unemployment of future $XX.X in assets year, reflects end relates on our at the XX, was assumptions in in criticized with which increased a XX, second of level quarter uptick Fed XXXX, allowance assumptions of of the forecast allocations The projections. loans largely on last the the quarter, end on $XX.X at losses loans, to loans. credit or quarter-over-linked The remained of provision million X.XX% rate XX% loss the for GDP Unemployment substandard used static on total million the from and recent allowance reduction upper loans fairly from since which in based the to change XXXX.

recorded service of of contract realized second fees, mortgage benefit income, XXXX. rights in be the in with think mortgage I continued to perform wealth quarter to third card-related aggressive final XXXX flat on well, know strong on should relatively quarter XXXX. of that BOLI quarter, $XXX,XXX we the in these investors and of continuing addressing servicing and confident profitability, credits, weak growth quarter strength proceeds of Noninterest in we of the excluding in true-up was XXXX, management in of impact with level with will was the one mark-to-market. remain life deposits, income compared and of our benefit charges income No our the linked portfolios. A death third the

to XXXX primarily the to quarter. due like for Expense in quarter expense than noninterest total and XXXX the a $X.X of Merchants recoveries third with portfolio. and accruals prior acquisition an Other strong, credit third income advances quarter the card to cost prior incurred at increase servicing more million to refunds linked be linked compared quarter prior vendor the continues increased discipline prior due incentive in the in quarter, on third contract quarter and of $XXX,XXX of a of First year the on

quarter quarter also to increased sale of XXXX net the quarter expenses of a the included prior third gain in on OREO as second $XXX,XXX. OREO of compared the the

the adjusted quarter. and was exclude Our acquisition linked for efficiency equivalent continues death ratio to tax for XX.XX% as quarter BOLI prior excellent be ratio to third efficiency costs the benefits compared XX.XX% to the

forward, create capability term. The As the we is the we building which also capital focused and of on more more loans for stable managing the our and liquidity, long-term performance. recent securities balance maintain sheet goal is continue commensurate building long order origination featuring more loan mix in a are to look to doing less to returns with same, obviously commercial on equity

it I'll With Brad turn over that, additional color. to for

Bradley Adams

Thanks, a don't I me talk more there's about. for Jim. to ton know

basis last increase but in This XX to of making liabilities similar XX a basis increase covered to in $XX.X XX-basis-point basically in the points by XX, much. of wrong interest again, Securities quarter yields guidance on increased little less is $XX.X the end loan offset XX-basis-point Jim lot interest-bearing XXX a a The income NIM, basis quarter yield result and cost in for points up of I X.X% to and increased $X to interest-bearing million by a relative interest-earning XX quarter. ended basis assets yields aggregate. was by that September increased or this a Net than X-basis-point deposits not points things. increase points. last million aggregate. by Total million partially yet my think from by a

does close and basis of by it's branches the That to hundred couple we points to before coming expected early X which near market cuts deposits terms in XX the basis points in that, in still the mitigated cuts of be around happen the I to and there. show I December. margin. we say and million of forward basis more the anything point in have impact that announced guidance somewhat that expect with are our impact have don't term different and per margin. a acquisition cut in tends rate now, XX indices will in X curve, actually the Obviously, up to think

million Deposit flows end Average and stable, that we or and year. saw nothing X% quarter, total much pretty volatility year deposits deposits last this like by period quarter-over-linked the were decreased million curve $XX this earlier remains quarter but exceptionally in is largely and markets levels. Deposit off better the a somewhat or aggressive $XX.X down pricing X.X%. come pricing borrowing our still overnight treasury at to bit, relative has it

in The level fiscal reflected are. and known My the of significant otherwise monetary recession without consumption, expectation of does real a declines as actually a table. recession. and forward the with demand Public for large funds markets cuts they a is to on currently our while include alternative asset bit inflationary easier some book to an as attractive than continue a trends overall to minute. remains, me, overall markets headwind position here has position talk income a remains My that I kill are a offer believe My provided that near-term and excuse not current curve rate not fixed far amount expectation in customers. the realistic of is

a As is this is compounding returns. value value focus Old marginal result, being out credit opportunities. With see tight, the curve no and at spreads so I and Second value variable rate on point this duration flows and point at continuing in little poor spreads persist cash there and are very risk, to book the reinvested to relative unbelievably maximizing simply

expenses For being careful us, that pricing with appropriately. and means risk

will and trends impact these upside deposits margin mentioned. reference Success a funding mitigated to remainder rate As cuts year are growth the market acquisition, of the I closure the on for by their be magnitude result, these down expected modestly. of for these to recent The with trend offers opportunity the loan the are expectations. as the indices branch expected acquired that newly in

the low The that down securities resulted this AOCI you and portfolio XX%, quarter, liquidity ratio which to in remains very saw. the the below some on source capital from still excellent. came ability by our of XX% portfolio loan-to-deposit build some is at

better portfolio that improvement curve think seeing we the portfolio. short are what overall at point duration that talking where in about than on have of and be given been somewhat may the the is that this positioned of I illustrates others terms seeing

an will like is return expense a gain table. the net from and Noninterest here. favorable does I will and to If think in credit build OREO is to accruals $X.X increased in overall come Old remediation, M&A the last increase very that due a to increase to officer the from acquisition-related ongoing capital capital. on remains with bank in costs, place fruition, expenses A quarter. previous recorded I quarter, primarily million do still the buyback And small not Second. slow OREO-related environment we an believe due in that incentive

Given been the will as employee high, performance, investment running to dial line the but maintain we bottom costs that ability conditions have back warrant.

over back With the call That's all I have. I'd really to turn that, Jim.

James Eccher

in confident balance Thanks, we closing, that are sheet our right. Brad. and In remain All opportunities ahead. the

margin mix on excellent optimizing the perhaps within efficiency some profitability. remains income asset remains loan expect in statement resilient to assessing risks and are than portfolio Net earning focus interest Our levels. record and order monitoring and maintain the trends more at

proud comments this is for up that am year the prepared morning. concludes the us risk I our have faced. we shaping of given That

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

Operator

Stephens. [Operator your is morning first from Terry Instructions] McEvoy And question coming this from

Terence McEvoy

Maybe you pipelines today about and several on the loan if bank? over organic could thoughts talk next loan the quarters growth for

James Eccher

a quarter a a Yes. Yes, time But quarters. second were ago. into softer softer were pipelines quarter, last year the than I us. Sure, traditionally, this generally are heading will is better they the say, little fourth is in Terry. the for are year of and the they the pipelines than quarter third

still mid-single-digit that think loans. in confident XXXX, organically I and be think we grower can into a we looking

Terence McEvoy

Kind a call a And then in growth year? preparing just spending, into technology larger XXXX, out to bank? you question And looking maybe do terms on spending, anything core next expense for of think of out about that how digital expenses. being

Bradley Adams

to next think growth year the is going benefits I for driver biggest salary be for and the line. on expense us

X% something to think to the in of range. see maybe digits, likely kind mid-single I you're X%

anticipate And the yet honest, technology fully terms going of there. to to a in of we're see X some the quite spend, infrastructure benefits spend to CapEx spending get of were that's year. moving like don't of place. that next infrastructure for years, not be the we and part what is of Most in baked a I sailor into the drunken lot the all better trying forward last

So of pretty I think modest what employee be expense growth will outside benefits. happens with

some we've the than inflation obviously, terms are parts suffering that, that scale seen. more of in of think wage I others the

And There's sure that are not think intend we no to if see we committed devastating that offer we care very making a excellent employees it's cumbersome, grocery we're honor value we many. to of the our and place store. to taking all proposition believe and I at good doubt to and an work, that.

Operator

Chris Your next from from coming KBW. question is McGratty

Christopher McGratty

if to point which it of or think -- given basis terminal market, Jim X balance the cut Brad, the debate. roughly the is can margin, you the transaction of a think X% I Is per kind like cut the position sheet the about believe right that mapping about pending? we to futures way and that's

Bradley Adams

a don't that, rates terminal of is know can we X% we think and to very I think is difficult to can all There's the talk enough better I Chris, honest. actually we've right get this -- right into of learned the that. where for is things on I economy. do it And level how interest what think than going be that damaging And lot rates about are. now.

I part think a it. an election plays in

we've be recent all history. we've gotten curve a in think it. And forward very wrong the I can mess the fiscal in seen into just part plays how

on going what's know to there. difficult it's So

example, think a margin far how funds given terminal X%, and where X% is significantly the north constructed. that, we I Fed are of if we say, are just we're for

anything X.X%, wouldn't is that think short a no curve at I north end, is higher why of be a margin. the Second above X% Old there reason which

Christopher McGratty

there Helpful. change And priorities buyback or in something -- today? mean, on end opportunities kind would you inorganic? either then, Are inorganic or how on any timing doing are of the Jim, up. markets describe that pulling capital, I maybe

James Eccher

to table maintain you building to of that Yes. at of is on deploy quarter, I point. capital. this high going We every All mean capital common, understand that we're obviously, mentioned the on return tangible some we're Chris. rapidly a level to need

on to The the growth. buyback is table. still are We inorganic open

that aware the saw capital, We're we XXXX. dividend of heading we're into quarter. be this it's and where going fully to with initiatives You key one at our raised of

Operator

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

Nathan Race

if on any that I additional And could that some also, to $XX was quarter? as million color million you in just loans describing the inflowed wondering nonperforming roughly the time $XX classified well. loan in moved the spend

James Eccher

thought of strategy process moving and increase But to going strained the We're one quarter. always C&I question, steps assessing that allow to be a take towards, was early next here. I stages Nate? our any And that's an identifier, late stemming nonaccrual. Nate. is with been part Cash has the loan flow hopefully, the commercial prudent to mitigate the We in there. nonaccruals Sure, mean, from remediation early in we're it this deteriorated company. that losses us in your is what was credit, in to significant of second still

Nathan Race

that across about down but loans inflow $XX.X based drivers? classified came was improvement terms on you in in quarter. in just other I classifieds had aggregate Yes, Obviously, of flowed loans, curious the just in million some the some

James Eccher

there credits accruing. significant We some mean, inflow $XX loans had obviously, well. both substandards to a by I had one office the this, paid or portfolio we was movement a around behind that and paid sponsor. the was are we've ranged that outflow, in was And curtailed still from was have are substandard, and took One a a I loans loan, we and to arms the that anywhere well We Chicago but classified. then in a our will health pretty lot the really more off, quarter. got million care they're actually feel we say reductions either although that Yes. off upgraded, in C&I reasons pretty loan office of no feel couple we collateralized. were

in down first $X office of time We're book. million loans the that's couple So that's only in the a years. happened classified in

by couple in a the of feel health feel we large, these that. about C&I It's at good portfolios. working really So confident still but loans, we still and really through very care

Nathan Race

on future not you're but you deterioration thinking somewhat like still guys and reserve be in going just content thoughts loss way levels very quarter, loan forward. broadly? provisioning seems growth helpful. fourth how the are And slow here just It trajectory thinking forward any seeing forward of Great. may provision Okay. then going of the That's much in any absent about and going the about just

James Eccher

Yes.

quarter, million down that last tweaked, some of were but a I quarters. run think bit little provision, we macro allowance $X couple this you the saw a had factors

north we feel comfortable X%. more lot a So of

going So in way range about $X it that good probably to quarter provisioning million I is think think future per forward. a

Nathan Race

one just offsets Brad Okay. Great. coming in of branch here another fourth I impact And then point have quarter you XX the in terms deal with the online believe each should some outlook. mentioned on following basis cut. margin that late X the

well? So just loan curious just you're branch the thinking also imagine that with about how #X the be priority that what thinking growth in could of yield on but how you're book curious there, the those as how magnitude proceeds. depending is thinking about I offset bond you're redeploying redeploying about

Bradley Adams

You framed we bit as we answered than we elected asked it what highly XX down unusual kind it our take accretive with If simple roughly to possible. earnings it. upon more borrowings accretive it's the to be We if do the X% to could in something would said it of basis it different that margin. to just you or that basis liquidity less. of points an be it that, and pay in dependent announcement is deal keep on as a do trying way that We overnight and

the more maybe is its So portfolio, but say, answer, we're impact if point it like instead and a in quarter margin, next of X pretty point really conservative like in put XX -- there's dependent. And a would It's margin wishy-washy the anywhere feels bond it's not. to in between maybe a much flat it's I decline basis more that margin. basis decline highly a a

to a have stance volatility seen this value more commercial of point errand. rate and somebody the I lot I'm points not as anything before variable occurred high is little we of point. given basically was. inflation it's the quite election. I on for a I at see of aggressive hell this around inflation Things over in reaching you the from end a fight Fed's alluded of I means a see credit the over the last XXX go to it's is the that X rejecting If the can corps it long weeks. moved tell year do bit. every entirely securities duration end a indicate fool's confident X-month in it curve, other kind months, the an Given that more tranche at on we point, last absolutely else we've X window that a backed basis than cuts be message things I side of bit. people that that could the of that the certainly by lot no thought a

So rate, and staying best could I don't the path when I very get we're forward me not. we're of short that some sort think the of for we're being cautious. doing just you impression We're about get taking the And that And opposite but Old wrong, speak Second. that's flexible. this, and

Nathan Race

Got it. One from last That's one me. helpful.

Could back you the size you discussions earlier. to of acquire partners M&A the road? going the guys down look that potential would of remind us to in terms just Just

James Eccher

I over in. areas. now. But think million Yes. market. we us, of Nate, right Chicago conversations in We anything is our for ongoing lot to a a obviously opportunity something would would are be $XXX $X banked interested active from be of lot there's obviously, and think in And core just still billion

Operator

next is coming Raymond from Your David question Long from James.

David Long

lend this the side, place, advantage people at in infrastructure seems backdrop. to like mid-single-digit what place was have seen to lending loan would point? to the more the more aggressively, it growth, On grow in If than it you increase for take appetite your guys appropriate Second Old take to it of

James Eccher

lot loan grower. of place a of growth benefit has chasing risk-adjusted sense. us. make you haven't the yields returns seeing to also to not ago, for margin, did a We're high-single-digit in improve. I there demand We have been a when around demand we like X.XX% the And months one, have be just XX at think, whole team X% Well, got do but don't

get I back the some think that's We'll do a to we I economy grower. teams become look available. cuts, around more evolve, But continues mid-single-digit kind of I think rate to XXXX. where few a as add as see we to clarity to election. the continue get we'll they get

Bradley Adams

and David, even pricing forum Xs. And immediately loans occurred as bidding the as cuts on saw, market for we get maybe we soon low that those the rate were on into

So wasting competitors time. if on you're a equity X% [indiscernible]. that just step not been. marginal XX-basis-point markets And and at is you X-year that's cost you're that think about are for talking your looking return funding at is marginal second, effectively any a you're and provision, take a earning X% about back then loan a that that have on And where you're

of some can you a curve you our that a want And it all of is that's impact pretend perhaps what of should inverted to us. yield times. from industry, haven't function you tried about And explain, inverted in an ineloquently as a you that that's But but doesn't lot heck just terms investing curve. at capital. deeply of And think we've why growth seen sure how

we aggressive That growing offers an curve in of is that assets terms I quite a where environment simply be flat. think in the could earning lot.

generally, volatility X the the of difficult and interest level X the last for in things earning that consistently. certainly, more years last growing of we've rates think very months terms in seen I specifically for makes assets certainly

David Long

for to given seems the from potential it have mentioned those of to But gross which or some you to time credit it. to you're time, be you but can record have resolutions question. another your most ahead bit recoveries moves quarter come. made, charge-offs? Got X Jim a of follow-up seems know another elevated I going more Old here a with And the peers. of exceeding -- Second could then

Bradley Adams

over As that that losses hopeful months. than charged is year. said to remain were us what expect XX we we less can be portion but costly efforts last that seen from of significant or we occurs off that we uncertain, mitigation you've said, a we not Whether last the recover have the

million $X there $X here about. the elect exit that show or Now may worried or and elect million as or pull we're up we to trigger something don't

don't real to big lumpy, takeaway. the hard see But and that's So guess, anything predict. is we I

Operator

next from question is coming Your FJ Capital. Friedman Martin from

Martin Friedman

on Congratulations that I to imminent me, a Brad. To the can't buy stock do both given any Jim the suggesting build, wanted capital expand why And discussion, quarter. can the you on the good looks that upon M&A front? M&A and something it Is same like this just at you quarter. is time?

Bradley Adams

can. no we In short, we why can't. There's reason

extreme, that's capital a little will capital. will of quarter, of this bit collapse XX basis come XX levels branch Now movement purchase AOCI us. basically The obviously, burn the that down points to with for is and reflective an just

least is for credit to curve make think on you Second, kind that Second. the add basis level, as no time. And cost. has a would building that at if through risk favorable a a think is what little some been be that us, problems, basis, on at valuation the reason and at about which I Now provided we from there a of an banks carries end work stability. in And than or time look relatively some where mistake, the or anybody higher down environment Old and And is was barriers of going it, skepticism capital, have about being trends at the [indiscernible] a some more something credit this we of M&A currently. at do significant respects. to happen too very equity some a alluded organically lot short future is capital entry quarter. with level recession tangible to a for to book XX as say I to I per have this least value point at But was carrying in potential the tangible don't And of expected is XX earnings a points of cycle our earnings been at more it the some there's looks we Second what Old recession people Old resilient

a is balance have it well-positioned We flexibility. lot what capital this which of a point, and takes at sheet

in What the you Jim we earnings that, not a that come of does You're tangible commitment likelihood capital goes return And right our if focused is mentioned. down, exponentially. the are have other. common, as on preclude one being returned up on

you earn We the are that primary to well. levels understand that and shareholders, return certainly know and capital the understand and will I as that, others focus. hope, with our that's smart provided be I I hope Martin, that we and and

Martin Friedman

I'll Great. the but another And have margin, ask you off-line. I question about

Operator

next your And Instructions] Davidson. question [Operator D.A. coming is Rulis from from Jeff

Jeff Rulis

in of follow to was related the as credit, classified if nonaccrual, mentioned that you've well? industry on inflows that the the inflows increase wanted the to there, terms Just was the and C&I on what the of

James Eccher

Yes. scrapping one C&I at this whole the have just credit we'd a remaining I share point, with that main thought main be inflow the in migrated don't that -- has substandard to and I the we downgrade. but been the aggressive that industry not was really was bucket. the performing the lot credit in credits was more

and downgrades one more health care coverage, downgrade accruing. X company solutions think many still but had that the -- mentioned facility I more in and upgrades the negative product than I service other ones quarter. death many main But

feel have, the to around take we going this from about hopefully time, get still and and overall, Obviously, portfolio. remediate. to So credits we good arms steps we'll south to some go time next one feel we're like our

Jeff Rulis

Okay.

terms of one-off you like of idiosyncratic. a The was in it a factors? credit not pretty sounds industry seeing scrapping So other bit

James Eccher

Correct.

Jeff Rulis

Okay. thing on deposit the other just -- one side. wanted to

seasonality... noninterest-bearing end quarter departures. larger mentioned of that of You Any some depositors, sense

James Eccher

I don't that. mentioning recall

don't what So point. look think when confused I this like look in Old at happens with Seconds be think deposit base, would of what at I terms we you anybody

our our denomination deposits, by funding checking is -- low are balance very We dominated accounts.

given softening some at given inflation, which look level is the where employment wage the stress low you is, at funding If end side. live we the is of of where the on in scale,

these for end We other in terms by in at years balance are true down not driven low account inflation. That's closures migration average either than seeing now. just difficulties impacts been that I X negative anything is or reflecting of believe the

namely as just we larger income loss industry are or we the like funds with customers. commercial not. people public many growth. that, that But not too, you seeing do saw deposit I that of And fixed or I that. you migrations is think it significant are funds accounts and the liquidity spigots some fled confuse into see open, when of markets, no, organic flowing assure anything

our As in of year, terms have we a here now industry you than a fact, West that is first more negative acquisition. it ratio of positive our of reason Suburban the closing, whole. very open-to-close often a don't matter is opening time which since accounts recently hear closure are we as -- for are the statistic And why we this about because overwhelmingly that

Jeff Rulis

Brad, the million I few guess I'm referencing that $XX a deposits by linked quarter. larger customers noninterest-bearing

flow, that again, Just it's... interested in

Bradley Adams

flows liquidity payment and seasonality significant. tax just and That's nothing flows,

Jeff Rulis

comes Got that with customers those it. to... you seasonality And believe back is there trying

Bradley Adams

Yes.

Jeff Rulis

that was a I'm sorry, yes?

Bradley Adams

Yes.

Operator

Your next question is Janney. Brian coming Martin from from

Brian Martin

but maybe of went it you Jim, criticized... where about quarter, just specifically, a this down. was you what criticized just last a I quarter? you classifieds criticized went about quarter We're maybe think went quarter to the in said, $XXX you think through that the went bit. this change meaning at We criticized thought I the equal missed quarter. linked talk know kind down up said or special million or I were bit I up relative last level. Can mention

James Eccher

that's Yes, pretty flat.

last and question. that hopefully, lot in above -- went down, were a and Brian, quarters from the that's then million substandards I mention tick, special $X to nonaccrual. was, migration answers out. that your think credit A of one up But

Brian Martin

Yes.

if up or net to or special million, the million kind classifieds $X and $X were of is So were total criticized, $X neutral then that fair? $X million down million mention

James Eccher

That's correct.

Brian Martin

Yes.

give far stock? talk at about on in as thought. maybe it then Brad, a some buying ago, I levels. what thoughts about the where the interested in do I maybe guess, pretty you're That's terms it is think I you buyback, as the while to talked inorganic like priority the attractive sounds you on Perfect. -- pricing And I just available. can the think one of buyback, it's Okay. if But

route available? based go thought on Some do you if on that what's

Bradley Adams

everybody that a about a current nothing will mean, But bargain, right? loves buyback. there's I preclude our valuation

Brian Martin

Got you. Okay.

rate rate into is gone the given we if that as these then with... fair forward especially I down cuts significant is inflation And it maybe relatively kind materialize. mean, of through or to or that cuts, modestly don't quite I isn't outlook, yet. fruition just come think your Brad, see curve flattish you go the next I mean, to margin say year, Okay.

Bradley Adams

Yes. My modestly. would say down gut

I eve because think an on I think declare good not are I an have willingness we of where being I'm on we'll this on if a record what other that blunt election. just the have But polarizing is is the victory that -- a very difficult sure that's correct. side very track of overly of Trump ever time if to of to is the election, economists winner that be an the very inflation a economist, election being not do.

relatively months. So I a and we'll maintained we've that's snap cautious positioning things And can in more aggressively. neutral. I'm that in direction that think pretty our And think either is few why know

Brian Martin

Yes.

then a you mention on think I couple here more in of mentioned Brad. little sheet, that And the next just the just Okay. optimization the guess I in little you quarters? on a terms bit thinking you're balance that Jim expand can how of -- of or bit might

Bradley Adams

a on to X% excess we like can sheet. then spread growth balance on sit in can't, earn the a would for if of I tight And bit. we marginal

Brian Martin

a last right, yours. know usually And Okay. Brad, item the one, of economists is I since not favorite are tax

little use the kind down decent Is was given to a we a look bit rate tax the this of as that forward quarter. probably rate So changes?

Bradley Adams

I'm then it give a turns next XX.XXX hard effective when how going to and question, going time going see I I'm rate guys Yes, can I guidance going to out. Brian. love wildly for answer see how rate your really just with tax specific about decided And We'll quarter. to I I we're an me And tax you with wrong. oddly going do. lot, a No. that go -- thought for the to go I'm this was I

Brian Martin

as can you big for are you're year, about picture next Okay. supposed And how with that? you give to thinking your... far a stick Or thought as

Bradley Adams

like I'll about. We'll really on good That's another there. call XX.XXXX. that I I digit add feel what XX.XXX, that,

Operator

no time. remarks. like back Jim floor queue to to the hand further I in now this Eccher for at are questions There closing would

James Eccher

the for company. us. Okay. next forward Thanks, again Look quarter. joining appreciate you with everyone, Goodbye. to interest speaking We in your

Operator

today's you. conference Thank does This call. conclude

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

Old Second Bancorp (OSBC) 17 Oct 242024 Q3 Earnings call transcript