Oct 22, 2026 earnings call — Credit improvement, strong margins and capital returns
Company raised the common dividend by 14% and reported net interest margin of 5.27%.
Revenue $0.1B (est $0.1B) · EPS $0.55 (est $0.58)
Key quotes
"Asset quality trends improved significantly during the quarter excluding the elevated charge offs resulting from the single credit we just discussed."
"Our financials reflect an exceptionally strong net interest margin at 5.27%."
"In addition, based on the strength of the balance sheet and resilient income statements trends, Old Second elected to increase the common dividend in the fourth quarter of 2026 by 14%."
Analyst Q&A 6
credit quality and future charge-offs
Q (Nathan Race · Piper Sandler): He asked how confident management is that charge-offs will remain lower, referencing a 35–40 basis point normalized range. He also asked about margin beta for Q4, repricing tied to short-term rates, and their appetite for buybacks versus M&A.
A: Management said the big charge-off was a lingering credit they now have largely behind them and that classified and special mention balances fell to levels not seen since October 2019, so they believe they have "turned the corner." They said some powersport charge-offs will continue quarter to quarter, but they feel as good about the loan book as in several years. On margin, Bradley said repurchases reduce free funding and loan-to-deposit is nearing a ceiling, so they expect to give back a few basis points in Q4, but he still expects to remain "solidly above a 25 margin" near term and believes they have capital to buy back about "5% of shares a year" while executing smaller M&A.
"We feel as good about the loan book today as we have in several years." — James L. Eccher (CEO·CHAIR)
loan pipeline and near-term growth
Q (KBW): He asked why loans were roughly flat despite an outlook for low single-digit growth and where future loan growth will come from. He wanted color on the loan pipeline and what held down the quarter.
A: Management said loan production was stronger than the reported result, but outsized prepayments (about 2x normal) and active reduction of the syndications portfolio reduced balances. They said they reduced the syndications book by "$53 million this quarter alone" and that the pipeline looks like one of the more solid fourth quarters in a long time, with optimism for a good start to next year.
powersports loan demand and credit risk
Q (Jeff Rulis · D.A. Davidson): He asked whether consumer powersports loan demand is pulling back and whether higher rates create repricing risk for borrowers. He also asked if the bank is helping borrowers facing repricing stress.
A: Management said they are not seeing a pullback: application volume is up slightly year over year and originations are similar, although they have turned down about "7%" of applications due to consumer distress. They noted strong demand in electric vehicle business and broad-based pipeline growth across small business, middle market, C&I, health care, CRE and leasing. On credit risk, they said the loan book is short duration, they stress test constantly, early-stage indicators are low, and they believe they are through the spike in classified and criticized credits.
"we have turned down, as I said, about 7%, but originations is very similar to the same time last year." — Darin Campbell
deposit runoff and outlook
Q (Raymond James): He asked how much of the higher-cost deposit runoff from the Evergreen acquisition remains and whether deposit attrition will continue. He wanted to know if deposits will grow from here.
A: Bradley said most of the post-acquisition attrition is largely behind them and he expects deposit growth in the fourth quarter. He said some growth may come at slightly higher rates and they will consider supplementing the deposit base through M&A when appropriate.
"I think you will see deposit growth in the fourth quarter." — Bradley S. Adams (CFO)
reserve level and near-term expenses
Q (Stephens): He asked whether any specific reserve allocations remain or if the 1.23% reserve is the steady state, and separately whether $51.5 million in expenses and 3%–4% annual growth is a reasonable near-term expectation.
A: Bradley said there are still some reserve allocations, but the recent drawdown mainly reflects a significant decline in classified loans; he does not expect reserves to run much lower because they will need to replace powersports charge-offs quarter over quarter and does not see a majority drawdown now. On expenses, he agreed that about $51.5 million near term and roughly 3%–4% annual growth is reasonable.
"there is certainly some reserve allocations built into the portfolio, but I think the drawdown in that reserve is largely reflective of the fact that our classified have come down significantly." — Bradley S. Adams (CFO)
expenses, M&A, rates, syndications
Q (Brian Martin · Janney Capital): He asked whether resolving credits gives a tailwind to expenses and if that helps hit expense guidance. He also asked about the M&A opportunity set, new yields on securities and loans, and the status of the syndication book runoff.
A: Bradley said expenses have many ins and outs each quarter (third-party costs elevated this quarter) and he still believes the 3%–4% expense growth guidance is achievable, though some captions may be up materially. Jim said M&A conversations are active but not more robust than a year ago and they are hopeful an opportunity will arise next year. Bradley said the securities book is largely static and new loan yields are in the "mid-6%s type range"; Jim said they have cut syndications materially — "over 60% since the end of 21" — leaving roughly "$285 million" and it will not be a material part of the balance sheet going forward.
"We have reduced that by over 60% since the end of 21." — James L. Eccher (CEO·CHAIR)