Old Second Bancorp, Inc. (NASDAQ:OSBC) Q4 2023 Earnings Call Transcript January 25, 2024 11:00 AM ET

Company Participants

Jim Eccher - President and CEO

Brad Adams - COO and CFO

Conference Call Participants

Jeff Rulis - DA Davidson

Nathan Race - Piper Sandler

Terry McEvoy - Stephens

Brian Martin - Janney

Andrew Leischner - KBW

Kevin Roth - Black Maple Capital

Operator

Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc. Fourth Quarter 2023 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 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. Management would ask you refer to the company's SEC filings for a full discussion of the company's risk factors. The company does not undertake any duty to update such forward-looking statements.

On today's call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in our earnings release, which is available on our website at oldsecond.com on homepage and under the Investor Relations tab.

Now, I will turn the floor over to Jim Eccher. The floor is yours.

Jim Eccher

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

Net income was $18.2 million or $0.40 per diluted share in the fourth quarter of 2023. Adjusted net income was $19.1 million or $0.42 per diluted share in the fourth quarter. On the same adjusted basis, return on assets was 1.33%. There was also an additional $0.02 impact from the fair value of mortgage servicing rights in the fourth quarter.

Fourth quarter 2023 adjusted return on average tangible common equity was 17.21% and the tax equivalent efficiency ratio was 48.76%. Fourth quarter 2023 earnings were negatively impacted by $8 million of provision for credit losses and a $1.2 million estimated litigation accrual. The combined after-tax impact of these two items reduced diluted earnings per share by $0.15 in the fourth quarter. Despite these setbacks, profitability at Old Second remains exceptionally strong and balance sheet strengthening continues with our tangible common equity ratio increasing by 86 basis points linked quarter to 8.53%.