Old Second Bancorp reports Q2 2026 net income of $28.2M, up 10% on margin expansion

The company disclosed its second quarter 2026 financial results through a press release. The 8-K itself does not contain the actual financial figures; those are in the attached exhibits (press release and loan portfolio disclosures).

Old Second reported Q2 2026 net income of $28.2 million, or $0.54 per diluted share, up from $25.6 million ($0.48 per share) in Q1 2026. Return on average assets was 1.65% and return on average tangible common equity was 15.58%. The company declared a $0.07 per share quarterly dividend payable August 10, 2026.

The net interest margin on a fully tax-equivalent basis expanded 9 basis points to 5.23% in Q2 2026. This improvement was driven by loan yields increasing 12 basis points and investment yields rising 6 basis points, while the cost of deposits decreased 5 basis points to 1.00%. Net interest income increased $2.2 million to $83.3 million.

The provision for credit losses decreased to $7.5 million from $9.5 million in Q1. Nonperforming loans fell to $56.5 million from $75.5 million, and the nonperforming loans to total loans ratio improved to 1.08% from 1.46%. Net charge-offs were $9.2 million, primarily from one downtown Chicago office credit and one commercial relationship, plus powersport charge-offs of $2.8 million. The allowance for credit losses to total loans was 1.34%.

Old Second repurchased 732,183 shares during Q2 2026 at an average price of $21.08 per share, totaling $15.4 million net of excise taxes. Despite these repurchases, tangible book value per share grew to $14.77 from $14.35, and the tangible common equity to tangible assets ratio increased to 11.19% from 11.07%.

Old Second redeemed $30.0 million of its $60.0 million subordinated debt during Q2 2026, incurring $213,000 in accelerated issuance costs. This partial redemption contributed to a 2 basis point increase in the cost of funds, though the overall cost of deposits declined 5 basis points.

As of June 30, 2026, Old Second Bancorp reported total loans of $5,246 million with $132 million in classified loans and a 1.34% allowance for credit losses. The portfolio is diversified across commercial (28%), commercial real estate investor (22%), powersport (13%), and other segments. This disclosure provides investors visibility into the bank's loan mix and credit quality metrics.

The filing shows OREO (other real estate owned) and repossessed assets totaling $819 thousand as of June 30, 2026, down from $858 thousand at March 31, 2026. The criticized loans chart displays a multi-quarter trend, though specific criticized loan totals for Q2 2026 are not numerically stated in the text. The decline in OREO and repossessed assets suggests improving asset quality.

For Q2 2026, Old Second reported net charge-offs of $9,248 thousand, with trailing twelve-month net charge-offs of $30,113 thousand representing 0.57% of loans. The powersport portfolio drove the majority of charge-offs at $2,826 thousand for the quarter and $14,166 thousand trailing twelve months (2.07% NCO rate). Commercial real estate investor charge-offs were $2,804 thousand in Q2 2026. These metrics indicate credit costs are concentrated in specific portfolios.

The allowance for credit losses decreased from $72,126 thousand at March 31, 2026 to $70,380 thousand at June 30, 2026. The bank recorded a $7,502 thousand provision for credit losses in Q2 2026, offset by $9,248 thousand in net charge-offs. The Q3 2025 period shows significant day-one and day-two credit marks totaling $30,693 thousand, likely related to an acquisition. The declining allowance reflects charge-off activity exceeding provision expense.

The powersport portfolio, totaling $684 million, generated a 10.20% portfolio APR and 8.62% net contribution margin as of June 30, 2026. Net losses improved to 1.80% from 2.06% in the prior quarter, while the contribution margin expanded from 8.30% to 8.62%. The portfolio is 77% new units with a weighted average FICO of 730. This specialty lending segment shows improving profitability despite elevated loss rates.