Key Points
Criticized loans declined 38% during the third quarter.
Old Second repurchased 1.5 million shares during the third quarter.
45% of the loan book reprices over four quarters.
On its third-quarter 2026 earnings call, held on Oct. 22, 2026, Old Second (NASDAQ:OSBC) reported net income of $28.9 million. For long-term investors, changing credit quality and capital allocation choices drive the bank's underlying earnings power.
Management’s three key takeaways explain where the business is headed.
1. Asset Quality Improves as Problem Loans Fall
Old Second absorbed $12.7 million in net loan charge-offs (debts written off as uncollectible) during the quarter, mostly from one commercial customer. However, underlying credit health improved, as criticized loans (loans flagged for potential repayment risks) fell by 38%.
Criticized loans, an early indicator of stress, declined by $61.3 million or 38% during the quarter. As a percentage of loans, classified loans have not been this low since before COVID.
-- James L. Eccher, Chairman, President, and Chief Executive Officer
2. Capital Strategy Focuses on Share Buybacks and Dividends
The bank repurchased 1.5 million shares during the quarter and raised its dividend 14%. Leadership plans to keep buying back stock while preserving capital for strategic M&A (mergers and acquisitions).
I think it is reasonable for investors to expect us to take out 5% of shares a year and still have the ability to execute on the type of M&A that we are looking for.
-- Bradley S. Adams, Chief Operating Officer and Chief Financial Officer
3. Loan and Asset Repricing Provide Margin Support
High deposit competition creates near-term margin pressure, but upcoming asset repricing offers a natural counterweight. Over the next four quarters, Old Second expects a significant portion of its loans and investments to adjust upward to current interest rates.
45% of our loan book is going to reprice in the next 3 to 4 quarters. 25% of our securities portfolio is going to reprice at the same time.
-- Bradley S. Adams, Chief Operating Officer and Chief Financial Officer
Looking Ahead
Troubled loan balances are dropping rapidly, and leadership isn't hiding its satisfaction about the credit trajectory. Old Second relies on a short-duration loan book and commercial lending discipline, while tracking deposit competition closely.
The improvement in key credit metrics, including reductions in classified and criticized during the third quarter, will allow us to finish the year over the next quarter in a much better position.
-- James L. Eccher, Chairman, President, and Chief Executive Officer
Core deposit trends are stabilizing as asset repricing tailwinds begin to materialize.
If those trends remain stable from here and high-cost deposit attrition slows, I would expect to maintain exceptional margin performance.
-- Bradley S. Adams, Chief Operating Officer and Chief Financial Officer
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