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What changed in OLD SECOND BANCORP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of OLD SECOND BANCORP INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+441 added−455 removedSource: 10-K (2026-02-26) vs 10-K (2025-03-06)

Top changes in OLD SECOND BANCORP INC's 2025 10-K

441 paragraphs added · 455 removed · 347 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

103 edited+45 added−31 removed146 unchanged
Biggest changeThe following table presents the composition of the commercial real estate portion of the loan portfolio at December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Commercial ​ Geographic Location December 31, 2024 ​ Outstanding Real Estate Loans Illinois Wisconsin Indiana Texas Other Commercial real estate ​ $ 1,762,112 ​ 100.0 % ​ 59.8 % ​ 3.9 % ​ 2.0 % ​ 4.2 % ​ 30.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investor ​ ​ 1,078,829 ​ 61.2 ​ ​ 35.5 ​ ​ 3.4 ​ ​ 1.7 ​ ​ 4.2 ​ ​ 16.4 ​ Retail ​ ​ 302,890 ​ 17.2 ​ ​ 15.6 ​ ​ 2.2 ​ ​ 0.2 ​ ​ 2.1 ​ ​ 8.0 ​ Office ​ ​ 235,538 ​ 13.4 ​ ​ 13.3 ​ ​ 1.9 ​ ​ 0.1 ​ ​ 0.4 ​ ​ 6.1 ​ Industrial ​ ​ 210,680 ​ 12.0 ​ ​ 16.7 ​ ​ - ​ ​ - ​ ​ 0.9 ​ ​ 2.0 ​ Mixed-use ​ ​ 67,877 ​ 3.9 ​ ​ 4.9 ​ ​ - ​ ​ - ​ ​ - ​ ​ 1.4 ​ Hotel ​ ​ 65,843 ​ 3.7 ​ ​ 1.0 ​ ​ 1.5 ​ ​ 0.3 ​ ​ 0.9 ​ ​ 2.4 ​ Other (less than $50 million) ​ ​ 196,001 ​ 11.1 ​ ​ 6.7 ​ ​ - ​ ​ 2.1 ​ ​ 2.5 ​ ​ 6.8 ​ Owner-occupied ​ ​ 683,283 ​ 38.8 ​ ​ 24.3 ​ ​ 0.5 ​ ​ 0.3 ​ ​ - ​ ​ 13.7 ​ Healthcare ​ ​ 266,882 ​ 15.1 ​ ​ 4.7 ​ ​ 1.2 ​ ​ - ​ ​ - ​ ​ 33.2 ​ Other services ​ ​ 75,480 ​ 4.3 ​ ​ 11.0 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ Retail trade ​ ​ 59,858 ​ 3.4 ​ ​ 8.7 ​ ​ - ​ ​ - ​ ​ - ​ ​ 0.1 ​ Manufacturing ​ ​ 56,089 ​ 3.2 ​ ​ 8.2 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ Real estate, leasing ​ ​ 55,299 ​ 3.1 ​ ​ 7.7 ​ ​ - ​ ​ 0.1 ​ ​ - ​ ​ 0.3 ​ Other (less than $50 million) ​ ​ 169,675 ​ 9.6 ​ ​ 22.5 ​ ​ - ​ ​ 0.6 ​ ​ - ​ ​ 1.7 ​ ​ To mitigate risk within the commercial real estate portfolio we maintain underwriting practices that provide for adequate cash flow margins and multiple repayment sources.
Biggest changeThe following table presents the composition of the commercial real estate portion of the loan portfolio at December 31, 2025. ​ ​ 6 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Commercial ​ Geographic Location December 31, 2025 ​ Outstanding ​ ​ ​ Real Estate Loans ​ ​ ​ Illinois ​ ​ ​ Wisconsin ​ ​ ​ Indiana ​ ​ ​ Texas ​ ​ ​ Other Commercial real estate ​ $ 1,918,951 ​ 100.0 % ​ 59.3 % ​ 5.2 % ​ 2.3 % ​ 4.1 % ​ 29.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investor ​ ​ 1,212,384 ​ 63.2 ​ ​ 35.0 ​ ​ 5.1 ​ ​ 1.3 ​ ​ 3.8 ​ ​ 17.9 ​ Retail ​ ​ 338,386 ​ 17.6 ​ ​ 15.8 ​ ​ 2.0 ​ ​ 0.2 ​ ​ 1.8 ​ ​ 8.0 ​ Industrial ​ ​ 294,409 ​ 15.3 ​ ​ 15.0 ​ ​ 1.6 ​ ​ 0.1 ​ ​ 0.6 ​ ​ 7.0 ​ Office ​ ​ 201,621 ​ 10.5 ​ ​ 13.9 ​ ​ 0.3 ​ ​ - ​ ​ 0.8 ​ ​ 1.8 ​ Hotel ​ ​ 78,993 ​ 4.1 ​ ​ 1.8 ​ ​ 2.8 ​ ​ 0.2 ​ ​ 0.8 ​ ​ 0.9 ​ Mixed-Use ​ ​ 66,554 ​ 3.5 ​ ​ 4.3 ​ ​ - ​ ​ - ​ ​ - ​ ​ 1.2 ​ Other (less than $50 million) ​ ​ 232,421 ​ 12.1 ​ ​ 4.7 ​ ​ 1.3 ​ ​ 1.6 ​ ​ 2.1 ​ ​ 9.4 ​ Owner-occupied ​ ​ 706,567 ​ 36.8 ​ ​ 24.3 ​ ​ 0.1 ​ ​ 0.9 ​ ​ 0.3 ​ ​ 11.2 ​ Healthcare ​ ​ 269,971 ​ 14.1 ​ ​ 8.0 ​ ​ - ​ ​ - ​ ​ - ​ ​ 30.2 ​ Other Services ​ ​ 81,806 ​ 4.3 ​ ​ 11.6 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ Retail Trade ​ ​ 67,246 ​ 3.5 ​ ​ 9.5 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ Manufacturing ​ ​ 58,199 ​ 3.0 ​ ​ 8.1 ​ ​ - ​ ​ 0.1 ​ ​ - ​ ​ - ​ Real Estate, Leasing ​ ​ 53,444 ​ 2.8 ​ ​ 7.4 ​ ​ - ​ ​ 0.1 ​ ​ - ​ ​ 0.1 ​ Other (less than $50 million) ​ ​ 175,901 ​ 9.2 ​ ​ 21.5 ​ ​ 0.1 ​ ​ 2.3 ​ ​ 0.7 ​ ​ 0.3 ​ ​ To mitigate risk within the commercial real estate portfolio we maintain underwriting practices that provide for adequate cash flow margins and multiple repayment sources.
The interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny: (i) total commercial real estate loans, as defined by CRE Guidance, outstanding plus any undrawn commitment exceeding 300% of capital, and the outstanding balance of total commercial real estate loans, as defined by CRE Guidance, plus any undrawn commitment has increased 50% or more in the preceding three years; or (ii) construction and land development loans outstanding plus any undrawn commitment exceeding 100% of capital.
The interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny: (i) total commercial real estate loans, as defined by CRE Guidance, outstanding plus any undrawn commitment exceeding 300% of capital, and where the outstanding balance of total commercial real estate loans, as defined by CRE Guidance, plus any undrawn commitment has increased 50% or more in the preceding three years; or (ii) construction and land development loans outstanding plus any undrawn commitment exceeding 100% of capital.
The 2.5% capital conservation buffer effectively results in the following effective minimum capital ratios (taking into account the capital conservation buffer): (i) a CET1 capital ratio of 7.0%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%. ​ Proposed new rules for U.S. implementation of capital requirements under Basel IV rules, more recently referred to as the “Basel III Endgame”, were issued by the U.S. federal banking agencies on July 27, 2023.
The 2.5% capital conservation buffer effectively results in the following effective minimum capital ratios (taking into account the capital conservation buffer): (i) a CET1 capital ratio of 7.0%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%. ​ Proposed rules for U.S. implementation of capital requirements under Basel IV rules, more recently referred to as the “Basel III Endgame”, were issued by the U.S. federal banking agencies on July 27, 2023.
Old Second National Bank (the “Bank”) is a national banking association headquartered in Aurora, Illinois, that operates through 53 banking centers located in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle and Will counties in Illinois. ​ In this report, unless the context suggests otherwise, references to the “Company” or “Old Second” refer to Old Second Bancorp, Inc. and references to “we,” “us,” and “our” mean the combined business of the Company, the Bank and its wholly-owned subsidiaries. ​ We conduct a full service community banking and trust business through the Bank and its wholly-owned subsidiaries, as follows: ​ ● Old Second Affordable Housing Fund, L.L.C., which was formed for the purpose of providing down payment assistance for home ownership to qualified individuals; ● Station I, LLC, Station II, LLC, and Station III, LLC, which were formed to hold property acquired by the Bank through foreclosure or in the ordinary course of collecting a debt previously contracted with borrowers; ● River Street Advisors, LLC, which was formed in May 2010 to provide investment advisory/management services; ​ Intercompany transactions and balances are eliminated in consolidation.
Old Second National Bank (the “Bank”) is a national banking association headquartered in Aurora, Illinois, that operates through 55 banking centers located in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle and Will counties in Illinois. ​ In this report, unless the context suggests otherwise, references to the “Company” or “Old Second” refer to Old Second Bancorp, Inc. and references to “we,” “us,” and “our” mean the combined business of the Company, the Bank and its wholly-owned subsidiaries. ​ We conduct a full service community banking and trust business through the Bank and its wholly-owned subsidiaries, as follows: ​ ● Old Second Affordable Housing Fund, L.L.C., which was formed for the purpose of providing down payment assistance for home ownership to qualified individuals; ● Station I, LLC, Station II, LLC, and Station III, LLC, which were formed to hold property acquired by the Bank through foreclosure or in the ordinary course of collecting a debt previously contracted with borrowers; and ● River Street Advisors, LLC, which was formed in May 2010 to provide investment advisory/management services. ​ Intercompany transactions and balances are eliminated in consolidation.
Accordingly, we seek to attract, develop and retain employees who can drive our financial and strategic growth objectives and build long-term stockholder value. ​ We seek to provide a compelling value proposition to our employees by providing market-competitive pay and benefits which include retirement programs, broad-based bonuses, health and welfare benefits, financial counseling, paid time off, family leave and flexible work schedules.
Accordingly, we seek to attract, develop and retain employees who can drive our financial and strategic growth objectives and build long-term stockholder value. ​ We seek to provide a compelling value proposition to our employees by providing market-competitive pay and benefits which include retirement programs, broad-based bonuses, health and welfare benefits, paid time off, family leave and flexible work schedules.
Under the Change in Bank Control Act, a person or company is required to file a notice with the Federal Reserve if it will, as a result of the transaction, own or control 10% or more of any class of voting securities or direct the management or policies of a bank or bank holding company and either if the bank or bank holding company has registered securities or if the acquirer would be the largest holder of that class of voting securities after the acquisition.
Under the Change in Bank Control Act (“CBCA”), a person or company is required to file a notice with the Federal Reserve if it will, as a result of the transaction, own or control 10% or more of any class of voting securities or direct the management or policies of a bank or bank holding company and either if the bank or bank holding company has registered securities or if the acquirer would be the largest holder of that class of voting securities after the acquisition.
The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator; ● the Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; ● the Fair Housing Act prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; ● the Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and ● Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners. ​ The deposit operations of the Bank are also subject to federal laws, such as: ​ ● the Federal Deposit Insurance Act (“FDIA”), which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking; ● the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; ● the Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and ● the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts. ​ In light of the growing concern by regulators about relationships between chartered financial institutions and their third party service providers, the OCC joined the other federal supervisory agencies in passing the Interagency Guidance on Third-Party Relationships: Risk Management.
The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annual registration as either a federal or state licensed mortgage loan originator; ● the Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancellation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; ● the Fair Housing Act prohibits discrimination in all aspects of residential real estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; ● the Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and ● Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners. ​ The deposit operations of the Bank are also subject to federal laws, such as: ​ ● the Federal Deposit Insurance Act (“FDIA”), which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking; ● the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; ● the Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and ● the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts. ​ In light of the growing concern by regulators about relationships between chartered financial institutions and their third-party service providers, the OCC joined the other federal supervisory agencies in issuing the Interagency Guidance on Third-Party Relationships: Risk Management.
In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of the Company or the Bank, or a principal stockholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. ​ ​ 15 ​ Table of Contents ​ On December 22, 2020, the federal banking agencies issued an interagency statement extending the temporary relief from enforcement action against banks or asset managers, which become principal stockholders of banks, with respect to certain extensions of credit by banks that otherwise would violate Regulation O, provided the asset managers and banks satisfy certain conditions designed to ensure that there is a lack of control by the asset manager over the bank.
In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of the Company or the Bank, or a principal stockholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. ​ On December 22, 2020, the federal banking agencies issued an interagency statement extending the temporary relief from enforcement action against banks or asset managers, which become principal stockholders of banks, with respect to certain extensions of credit by banks that otherwise would violate Regulation O, provided the asset managers and banks satisfy certain conditions designed to ensure that there is a lack of control by the asset manager over the bank.
We regularly perform stress testing on the commercial real estate portfolio by stressing in place cash flow and rental income, as well as the value of property securing the loans to calculate loss estimates that assist management with establishing appropriate reserve levels, setting concentration limits and ensuring adequate capital levels are maintained. ​ Multifamily Loans.
We regularly perform stress testing on the commercial real estate portfolio by stressing in place cash flow and rental income, as well as the value of property securing the loans to calculate loss estimates that assist management with establishing appropriate reserve levels, setting concentration limits and ensuring adequate capital levels are maintained. ​ Construction Loans.
As described above, the Bank exceeded its capital requirements under applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice.
As described above, the Bank exceeded its capital requirements under applicable guidelines as of December 31, 2025. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice.
The Dodd-Frank Act enhanced the requirements for certain transactions with affiliates, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained. ​ Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal stockholders of the Company and to “related interests” of such directors, officers and principal stockholders.
The Dodd-Frank Act enhanced the requirements for certain transactions with affiliates, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained. 15 ​ Table of Contents ​ Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal stockholders of the Company and to “related interests” of such directors, officers and principal stockholders.
This guidance reflects efforts to modernize CRA evaluations in light of evolving banking practices. ​ In May 2020, the OCC issued its final CRA rule, which was later rescinded in December 2021, replacing it with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended and superseded by an updated joint framework.
This guidance reflects efforts to modernize CRA evaluations in light of evolving banking practices. ​ ​ 17 ​ Table of Contents ​ In May 2020, the OCC issued its final CRA rule, which was later rescinded in December 2021, replacing it with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended and superseded by an updated joint framework.
The Bank offers its services to retail, commercial, industrial, and public entity customers in the Aurora, Bartlett, Batavia, Bensenville, Bloomingdale, Bolingbrook, Burlington, Carol Stream, Chicago, Chicago Heights, Darien, Downers Grove, Elburn, Elgin, Flossmoor, Frankfort, Glendale Heights, Joliet, Lombard, Montgomery, Naperville, North Aurora, Oakbrook Terrace, Oswego, Ottawa, Palos Heights, Plano, Romeoville, South Elgin, South Holland, St.
The Bank offers its services to retail, commercial, industrial, and public entity customers in the Aurora, Bartlett, Batavia, Bensenville, Bloomingdale, Bolingbrook, Burlington, Carol Stream, Chicago, Chicago Heights, Darien, Downers Grove, Elburn, Elgin, Evergreen Park, Flossmoor, Frankfort, Glendale Heights, Hinsdale, Joliet, Lombard, Montgomery, Naperville, North Aurora, Oakbrook Terrace, Oswego, Ottawa, Palos Heights, Plano, Romeoville, South Elgin, South Holland, St.
In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. ​ Anti-Money Laundering.
In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. ​ ​ 18 ​ Table of Contents ​ Anti-Money Laundering.
This new guidance provided risk management oversight guidelines for financial institutions to incorporate in their ongoing relationships with third party vendors. ​ 20 ​ Table of Contents The CFPB is an independent regulatory authority housed within the Federal Reserve. The CFPB has broad authority to regulate the offering and provision of consumer financial products and services.
This guidance provided risk management oversight guidelines for financial institutions to incorporate in their ongoing relationships with third party vendors. ​ 21 ​ Table of Contents The CFPB is an independent regulatory authority housed within the Federal Reserve. The CFPB has broad authority to regulate the offering and provision of consumer financial products and services.
In 2024, our commercial lending team, specifically the sponsor finance team, grew their line of business with an increase in loan originations focusing on lower middle market private equity-backed businesses.
In 2025, our commercial lending team, specifically the sponsor finance team, grew their line of business with an increase in loan originations focusing on lower middle market private equity-backed businesses.
For example, a banking organization that is well-capitalized may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii) qualify for expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits.
For example, a banking organization that is well-capitalized may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii) qualify for expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits, subject to applicable regulatory restriction.
Installment lending includes direct loans to consumers and commercial customers. ​ We also offer a full complement of electronic banking services such as online and mobile banking and corporate cash management products including remote deposit capture, mobile deposit capture, investment sweep accounts, zero balance accounts, automated tax payments, ATM access, telephone banking, lockbox accounts, automated clearing house transactions, account reconciliation, controlled disbursement, detail and general information reporting, foreign and domestic wire transfers, vault services for currency and coin, and checking accounts.
Consumer lending includes direct and indirect loans to consumers. ​ We also offer a full complement of electronic banking services such as online and mobile banking and corporate cash management products including remote deposit capture, mobile deposit capture, investment sweep accounts, zero balance accounts, automated tax payments, ATM access, telephone banking, lockbox accounts, automated clearing house transactions, account reconciliation, controlled disbursement, detail and general information reporting, foreign and domestic wire transfers, vault services for currency and coin, and checking accounts.
Interest rates on commercial loans are a mixture of fixed and variable rates, with these rates often tied to the prime rate, a spread over the Federal Home Loan Bank of Chicago (the “FHLBC”) index rate, a Treasury constant maturity index, or a Secured Overnight Financing Rate (“SOFR”). ​ Repayment of commercial loans is primarily dependent upon the cash flows generated by the operations of the commercial borrower.
Interest rates on commercial loans are a mixture of fixed and variable rates, with these rates often tied to the prime rate, a spread over the Federal Home Loan Bank of Chicago (the “FHLBC”) index rate, a Treasury constant maturity index, or a Secured Overnight Financing Rate (“SOFR”). ​ Repayment of commercial loans is primarily dependent upon the cash flows generated by the operations of the commercial borrower or conversion of short-term assets.
The amount of the assessment is calculated using a formula that considers the Bank’s size and its supervisory condition. During the year ended December 31, 2024, the Bank paid supervisory assessments to the OCC totaling $616,000. ​ Capital Requirements. Banks are generally required to maintain capital levels in excess of other businesses.
The amount of the assessment is calculated using a formula that considers the Bank’s size and its supervisory condition. During the year ended December 31, 2025, the Bank paid supervisory assessments to the OCC totaling $530,000. ​ Capital Requirements. Banks are generally required to maintain capital levels in excess of other businesses.
It is our policy to comply at all times with the various consumer protection laws and regulations including, but not limited to, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Truth in Lending Act, and the Home Mortgage Disclosure Act. ​ Commercial Loans.
It is our policy to comply at all times with the various consumer protection laws and regulations including, but not limited to, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Truth in Lending Act, and the Home Mortgage Disclosure Act. ​ 5 ​ Table of Contents ​ Commercial Loans.
Our updated clawback policies were approved by our Compensation Committee in August 2023. ​ ​ 14 ​ Table of Contents ​ Regulation and Supervision of the Bank ​ General. The Bank is a national bank, chartered by the OCC under the National Bank Act.
Our updated clawback policies were approved by our Compensation Committee in August 2023. ​ Regulation and Supervision of the Bank ​ General. The Bank is a national bank, chartered by the OCC under the National Bank Act.
We primarily focus on originating multifamily loans within our primary geographic footprint, with 82.7% of multifamily loans secured by properties in Illinois, Wisconsin and Indiana. ​ ​ 7 ​ Table of Contents ​ To mitigate risk within the multifamily portfolio we maintain underwriting practices that provide for adequate cash flow margins and multiple repayment sources.
We focus on originating multifamily loans within our primary geographic footprint, with 89.7% of multifamily loans secured by properties in Illinois, Wisconsin and Indiana. ​ To mitigate risk within the multifamily portfolio, we maintain underwriting practices that provide for adequate cash flow margins and multiple repayment sources.
These proposed rules include broad-based changes to the risk-weighting framework for various credit exposures and operational risk capital requirements. However, the proposed rules generally apply only to large banking organizations with total assets of $100 billion or more, and are expected to not be applicable to us.
These proposed rules include broad-based changes to the risk-weighting framework for various credit exposures and operational risk capital requirements. The proposed rules are generally intended to apply only to large banking organizations with total assets of $100 billion or more, and, if finalized as proposed, are not expected to be applicable to us.
Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “Regulation and Supervision of the Bank—Dividend Payments.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws. ​ ​ 13 ​ Table of Contents ​ Dividend Payments.
Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “Regulation and Supervision of the Bank—Dividend Payments.” We are also able to raise capital for contribution to the Bank by issuing securities without prior regulatory approval, subject to compliance with federal and state securities laws. ​ Dividend Payments.
Our Healthcare and Sponsor Finance teams do originate nationwide and are the only portfolios that consistently lend outside our primary market. As of December 31, 2024, approximately 65.8% of our commercial real estate portfolio was secured by property located in Illinois, Wisconsin or Indiana.
Our Healthcare and Sponsor Finance teams do originate nationwide and are the only commercial real estate loan portfolios that consistently lend outside our primary market. As of December 31, 2025, approximately 66.8% of our commercial real estate portfolio was secured by property located in Illinois, Wisconsin or Indiana.
We have also created internal programs to support employee development and retention, which has contributed to our long-term tenure rates, with 35% of our employees having tenure of over ten years and 26% of our employees having at least 15 years of service.
We have also created internal programs to support employee development and retention, which has contributed to our long-term tenure rates, with 33% of our employees having tenure of over ten years and 23% of our employees having at least 15 years of service.
In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends will have to maintain the 2.5% capital conservation buffer. See “Regulatory Emphasis on Capital” above. ​ Affiliate and Insider Transactions.
In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends are required to maintain the 2.5% capital conservation buffer. See “Regulatory Emphasis on Capital” above. ​ Affiliate and Insider Transactions.
Financial institutions must comply with requirements regarding risk-based procedures for conducing ongoing customer due diligence, which requires us to take appropriate steps to understand the nature and purpose of customer relationships and identify and verify the identity of the beneficial owners of legal entity customers. ​ Current laws, such as the USA PATRIOT Act (which amended the BSA), as described below, provide law enforcement authorities with increased access to financial information maintained by banks.
Financial institutions must comply with requirements regarding risk-based procedures for conducting ongoing customer due diligence, which requires us to take appropriate steps to understand the nature and purpose of customer relationships and identify and verify the identity of the beneficial owners of legal entity customers to the extent required under applicable FinCEN regulations. ​ Current laws, such as the USA PATRIOT Act (which amended the BSA), as described below, provide law enforcement authorities with increased access to financial information maintained by banks.
We regularly perform stress testing on the multifamily portfolio by stressing rental income and the value of the property securing the loans to calculate loss estimates that assist management with establishing appropriate reserve levels and ensuring adequate capital levels are maintained. ​ Construction Loans.
We regularly perform stress testing on the multifamily portfolio by stressing rental income and the value of the property securing the loans to calculate loss estimates that assist management with establishing appropriate reserve levels and ensuring adequate capital levels are maintained. ​ Home Equity Lines of Credit .
Effective July 1, 2016, the FDIC changed its pricing system for banks under $10 billion, so that minimum and maximum initial base assessment rates are based on supervisory ratings. The initial base assessment rates currently range from three basis points to 30 basis points.
Effective July 1, 2016, the FDIC changed its pricing system for banks under $10 billion, so that minimum and maximum initial base assessment rates are based on supervisory ratings. The initial base assessment rates currently range from approximately five basis points to approximately 32 basis points.
On September 30, 2024, the Federal Housing Finance Agency issued a notice of proposed rulemaking on that would improve Federal Home Loan Banks’ ability to provide liquidity to members by aligning the treatment of interest-bearing deposit accounts and other authorized overnight investments with the treatment of Federal Funds sales. 16 ​ Table of Contents ​ Transaction Account Reserves.
On September 30, 2024, the Federal Housing Finance Agency issued a notice of proposed rulemaking that would improve Federal Home Loan Banks’ ability to provide liquidity to members by aligning the treatment of interest-bearing deposit accounts and other authorized overnight investments with the treatment of Federal Funds sales.
As of December 31, 2024, commercial real estate loans represented approximately 44.3% (45.3% at year-end 2023) of our loan portfolio, residential mortgages, including multi-family, represented approximately 15.3% (16.8% at year-end 2023), general commercial loans represented approximately 20.1% (20.8% at year-end 2023), home equity lines of credit represented approximately 2.6% (2.6% at year-end 2023), construction lending represented approximately 5.1% (4.1% at year-end 2023), leases represented approximately 12.4% (9.8% at year-end 2023), and consumer and other lending represented less than 1.0% (less than 1.0% at year-end 2023).
As of December 31, 2025, commercial real estate loans represented approximately 36.5% (44.3% at year-end 2024) of our loan portfolio, powersport loans represented approximately 13.3% (0.0% at year-end 2024), residential mortgages, including multi-family, represented approximately 12.2% (15.3% at year-end 2024), general commercial loans represented approximately 16.0% (20.1% at year-end 2024), home equity lines of credit represented approximately 4.5% (2.6% at year-end 2024), construction lending represented approximately 3.3% (5.1% at year-end 2024), leases represented approximately 10.4% (12.4% at year-end 2024), and consumer and other lending represented approximately 3.8% (less than 1.0% at year-end 2024).
Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to pursue a merger or other strategic transaction; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) restricting or prohibiting the acceptance of brokered deposits; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities, changes in the discount rate on bank borrowings and changes in reserve requirements against bank deposits.
Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities, changes in the discount rate on bank borrowings and changes in reserve requirements against bank deposits (which are currently set at zero).
In May 2022, the CFPB announced the establishment of an Office of Competition and Innovation. ​ On September 17, 2024, the OCC approved a final rule updating its regulations on business combinations involving national banks and federal savings associations, revising its approach to evaluating mergers under the Bank Merger Act.
In May 2022, the CFPB announced the establishment of an Office of Competition and Innovation. ​ On September 17, 2024, the OCC finalized a rule updating its regulations on business combinations involving national banks and federal savings associations, adopting a principles-based approach to evaluating mergers under the Bank Merger Act.
As of December 31, 2024 and 2023, capital measures of the Company exclude $951,000 and $1.9 million, respectively, which is primarily the Day One impact of CECL adoption to retained earnings recorded in 2020 less partial runoff since January 2022. ​ In November 2019, the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets.
As of December 31, 2024, capital measures of the Company excluded $951,000, which was primarily the Day One impact of CECL adoption to retained earnings recorded in 2020 less partial runoff since January 2022. ​ In November 2019, the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets.
At December 31, 2024, we had approximately $1.98 billion in assets under administration and/or management. ​ Competition ​ Our market area is highly competitive and our business activities require us to compete with many other financial institutions.
At December 31, 2025, we had approximately $2.29 billion in assets under administration and/or management. ​ Competition ​ Our market area is highly competitive, and our business activities require us to compete with many other financial institutions.
Commercial Loans decreased from $841.7 million in 2023, to $800.5 million in 2024. We continue to focus on identifying commercial and industrial prospects in our new business pipeline. As noted above, we are an active commercial lender in the Chicago metropolitan area, with primary markets in the city of Chicago, as well as west and south of Chicago.
Commercial loans increased from $800.5 million in 2024 to $842.1 million in 2025. We continue to focus on identifying commercial and industrial prospects in our new business pipeline. As noted above, we are an active commercial lender in the Chicago metropolitan area, with primary markets in the city of Chicago, as well as west and south of Chicago.
In addition, under the Basel III Rule, financial institutions that seek to pay dividends will have to maintain the 2.5% capital conservation buffer.
In addition, under the Basel III Rule, financial institutions that seek to pay dividends are required to maintain the 2.5% capital conservation buffer.
Residential first mortgage loans and second mortgages are included in this category. First mortgage loans may include fixed rate loans that are generally sold to investors. We are a direct seller to the Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and to several large financial institutions.
First mortgage loans may include fixed rate loans that are generally sold to investors. We are a direct seller to the Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and to several large financial institutions.
In March 2022, FinCEN issued an alert advising increased vigilance for potential Russian Sanctions Evasion Attempts. Increased FinCEN scrutiny and sanctions against Russian entities continued in 2024. The Financial Action Task Force (“FATF”) continues to revise the list of high-risk jurisdictions.
In March 2022, FinCEN issued an alert advising increased vigilance for potential Russian sanctions evasion attempts. FinCEN scrutiny and sanctions enforcement actions related to Russia continued through 2024 and 2025. The Financial Action Task Force (“FATF”) continues to revise the list of high-risk jurisdictions.
The activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. This includes Title X of the Dodd-Frank Act, which prohibits engaging in any unfair, deceptive, or abusive acts or practices (“UDAAP”). UDAAP claims involve detecting and assessing risks to consumers and to markets for consumer financial products and services.
This includes Title X of the Dodd-Frank Act, which prohibits engaging in any unfair, deceptive, or abusive acts or practices (“UDAAP”). UDAAP claims involve detecting and assessing risks to consumers and to markets for consumer financial products and services.
Consumer loan collections are dependent on the borrower’s continuing financial stability and thus are more likely to be affected by adverse personal circumstances. ​ ​ 8 ​ Table of Contents ​ Deposit Products ​ We offer a full range of deposit products and services that are typically available from most banks and savings institutions.
Consumer loan collections are dependent on the borrower’s continuing financial stability and are more likely to be affected by adverse personal circumstances, and thus are more likely to be affected by economic conditions such as higher interest rates and unemployment. ​ Deposit Products ​ We offer a full range of deposit products and services that are typically available from most banks and savings institutions.
Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 Capital less all intangible assets), well above the minimum levels.
Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (generally reflecting Tier 1 Capital net of intangible assets), well above the minimum levels.
Proceeds from the sales of residential mortgage loans to third parties were $58.8 million in 2024. ​ Our loan portfolio is comprised of loans in the areas of commercial real estate, residential real estate, general commercial, construction real estate, leases, and consumer lending.
Proceeds from the sales of residential mortgage loans to third parties were $84.9 million in 2025. ​ Our loan portfolio is comprised of loans in the areas of commercial real estate, residential real estate, general commercial, construction real estate, leases, and consumer, which includes powersport, lending.
The authority of a national bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized (after deducting from capital the bank’s outstanding investments in financial subsidiaries). The Bank has not applied for approval to establish any financial subsidiaries. Federal Home Loan Bank System.
The authority of a national bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized (after deducting from capital the bank’s outstanding investments in financial subsidiaries).
Also new this year was a substantive Bank commitment to supporting Junior Achievement with over 40 employees volunteering at a local elementary school to deliver financial literacy education. ​ At December 31, 2024, we employed 877 full-time equivalent employees. ​ 9 ​ Table of Contents ​ Available Information ​ We file reports with the Securities and Exchange Commission (“SEC”).
The Bank continued our commitment to supporting Junior Achievement with over 40 employees volunteering at a local elementary school to deliver financial literacy education. ​ At December 31, 2025, we employed 1,062 full-time equivalent employees. 9 ​ Table of Contents ​ Available Information ​ We file reports with the Securities and Exchange Commission (“SEC”).
We also originate residential mortgages, offering a wide range of mortgage products including conventional, government, and jumbo loans. We also handle secondary marketing of those mortgages. ​ ​ 5 ​ Table of Contents ​ Market Area ​ Our main office is located at 37 South River Street, Aurora, Illinois 60507.
We originate residential mortgages, offering a wide range of mortgage products including conventional, government, and jumbo loans. We also handle secondary marketing of those mortgages. ​ Market Area ​ Our main office is located at 37 South River Street, Aurora, Illinois 60507. The city of Aurora is located in northeastern Illinois, approximately 40 miles west of Chicago.
Multifamily loans are commercial mortgage loans secured by residential apartment buildings with five or more units. As of December 31, 2024, approximately $351.3 million, or 8.8%, of the loan portfolio consisted of multifamily loans.
Multifamily loans are commercial mortgage loans secured by residential apartment buildings with five or more units. As of December 31, 2025, approximately $339.1 million, or 6.5%, of the loan portfolio consisted of multifamily loans.
The FFIEC, OCC, and the FDIC also continued their emphasis on the importance of oversight of third party vendors in the BSA/AML process through updated guidance, as well as continued examine and enforcement activity against financial institutions who failed to properly supervise their third party service providers’ BSA/AML activity. ​ Following the enactment of the Anti-Money Laundering Act of 2020, Financial Crimes Enforcement Network (“FinCEN”) began publishing rules pursuant to the Corporate Transparency Act which establishes a regime for many corporate entities to file a form with FinCEN disclosing their beneficial owners.
The FFIEC, OCC, and the FDIC also continued their emphasis on the importance of oversight of third-party vendors in the BSA/AML process through updated guidance, as well as continued examination and enforcement activity against financial institutions that failed to properly supervise their third-party service providers’ BSA/AML activity. ​ Following the enactment of the Anti-Money Laundering Act of 2020, the Financial Crimes Enforcement Network (“FinCEN”) issued rules under the Corporate Transparency Act (“CTA”) establishing a beneficial ownership reporting regime requiring many corporate entities to file reports with FinCEN identifying their beneficial owners.
As of December 31, 2024, approximately $683.3 million, or 38.8% (43.5% at year-end 2023) of the total commercial real estate loan portfolio of $1.76 billion consisted of loans to borrowers secured by owner occupied real estate.
As of December 31, 2025, approximately $706.6 million, or 36.8% (38.8% at year-end 2024) of the total commercial real estate loan portfolio of $1.92 billion consisted of loans to borrowers secured by owner occupied real estate.
Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of FDIC-insured institutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than stockholders.
The effect of these statutes, regulations, regulatory policies and accounting rules are significant to our operations and results. ​ Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of FDIC-insured institutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than stockholders.
The finalization of these rules could introduce new capital constraints for institutions seeking to maintain or increase dividend payments. ​ Incentive Compensation.
If finalized and implemented, these rules could introduce new capital constraints for institutions seeking to maintain or increase dividend payments. ​ Incentive Compensation.
As of December 31, 2024, the Bank was well-capitalized, as defined by OCC regulations. As of December 31, 2024, we had regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III Rule requirements to be well-capitalized. Prompt Corrective Action . An FDIC-insured institution’s capital plays an important role in connection with regulatory enforcement as well.
As of December 31, 2025, we exceeded the applicable regulatory capital requirements imposed by the Federal Reserve, and the Bank met the Basel III Rule requirements to be considered well-capitalized. Prompt Corrective Action . An FDIC-insured institution’s capital plays an important role in connection with regulatory enforcement as well.
Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction to extend the CRA final rule’s effective date, originally set for April 1, 2024.
Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction preventing the CRA final rule from taking effect.
The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE lending.
The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk.
Changes in leadership and evolving policy priorities within regulatory agencies have led to speculation about potential delays or modifications to the final rulemaking process. ​ As part of its response to the impact of the COVID-19 pandemic, in the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule that provided banking organizations that adopted the credit impairment model, the Current Expected Credit Loss, or CECL, during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total).
As of the date of this filing, the Basel III Endgame rules have not been finalized, and their scope, timing, and ultimate implementation remain uncertain. ​ As part of its response to the impact of the COVID-19 pandemic, in the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule that provided banking organizations that adopted the credit impairment model, the Current Expected Credit Loss, or CECL, during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total).
This supervisory and regulatory framework subjects banks and bank holding companies to regular examination by regulatory agencies, which results in examination reports and ratings that are not publicly available and that can impact the conduct and growth of their business.
In addition, regulatory developments implemented in response to the COVID-19 pandemic and the bank failures in 2023, will continue to have an impact on our operations. ​ This supervisory and regulatory framework subjects banks and bank holding companies to regular examination by regulatory agencies, which results in examination reports and ratings that are not publicly available and that can impact the conduct and growth of their business.
The city of Aurora is located in northeastern Illinois, approximately 40 miles west of Chicago. The Bank operates primarily in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle, and Will counties in Illinois, and it has developed a strong presence in these counties.
The Bank operates primarily in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle, and Will counties in Illinois, and it has developed a strong presence in these counties.
We continue to monitor concentration levels as we seek to manage to an acceptable level of risk with all loan portfolio segments. ​ Financial Privacy and Cybersecurity. Under privacy protection provisions of the Gramm-Leach-Bliley Act of 1999 and related regulations, we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties.
We continue to monitor concentration levels as we seek to manage to an acceptable level of risk with all loan portfolio segments. ​ Financial Privacy and Cybersecurity. We operate under the privacy protection provisions of the Gramm Leach Bliley Act of 1999 (GLBA) and its implementing regulations, which restrict the sharing of non-public consumer information with non-affiliated third parties.
The Federal Reserve, FDIC, and OCC have also introduced proposed rule changes to enhance resolution planning requirements and capital standards under Basel III Endgame, which may impact our capital and liquidity planning strategies. Additionally, recent amendments to the Community Reinvestment Act (“CRA”) regulations could impact our compliance obligations and lending strategies in certain markets.
The Federal Reserve, FDIC, and OCC have also introduced proposed rule changes to enhance resolution planning requirements and capital standards under Basel III Endgame, which may impact our capital and liquidity planning strategies.
For a change in control at the holding company level, both the Federal Reserve and the subsidiary bank’s primary federal regulator must approve the change in control; at the bank level, only the bank’s primary federal regulator is involved.
For a change in control at the holding company level, the Federal Reserve is the primary reviewing agency, and the subsidiary bank’s primary federal regulator is provided notice and an opportunity to comment; at the bank level, only the bank’s primary federal regulator is involved.
Specifically, the final rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” within the meaning attributed to those terms by the final rule.
Banking organizations must notify their primary federal regulator as soon as possible and no later than 36 hours after determining that a “computer security incident” rises to a “notification incident” under the rule.
Companies that qualify as either a “domestic reporting company” or a “foreign reporting company” must file with FinCEN unless one of the 23 exemptions (such as the exemptions for select banks and credit unions) apply. ​ Following Russia’s invasion of Ukraine, OFAC took several sanctions related actions related to the Russian financial services sector pursuant to Executive Order 14024 beginning in February 2022 including: (i) a determination by the Secretary of the Treasury with respect to the financial services sector of the Russian Federation that authorizes sanctions against persons determined to operate or to have operated in that sector; (ii) correspondent or payable-through account and payment processing prohibitions on certain Russian financial institutions; (iii) the blocking of certain Russian financial institutions; (iv) expanding sovereign debt prohibitions to apply to new issuances in the secondary market; (v) prohibitions related to new debt and equity for certain Russian entities; and (vi) a prohibition on transactions involving certain Russian government entities, including the Central Bank of the Russian Federation.
Shortly thereafter, on March 21, 2025, FinCEN announced that, as a matter of regulatory discretion, it would remove beneficial ownership reporting requirements for domestic reporting companies while it continues to assess potential modifications to the CTA framework in light of public interest considerations, litigation risk, and regulatory burden. ​ Following Russia’s invasion of Ukraine, OFAC took several sanctions related actions related to the Russian financial services sector pursuant to Executive Order 14024 beginning in February 2022 including: (i) a determination by the Secretary of the Treasury with respect to the financial services sector of the Russian Federation that authorizes sanctions against persons determined to operate or to have operated in that sector; (ii) correspondent or payable-through account and payment processing prohibitions on certain Russian financial institutions; (iii) the blocking of certain Russian financial institutions; (iv) expanding sovereign debt prohibitions to apply to new issuances in the secondary market; (v) prohibitions related to new debt and equity for certain Russian entities; and (vi) a prohibition on transactions involving certain Russian government entities, including the Central Bank of the Russian Federation.
We retain servicing rights for mortgages sold to FNMA and FHLMC. The retention of such servicing rights is a source of noninterest income and also allows us an opportunity to have regular contact with mortgage customers and can help to solidify our community involvement.
The retention of such servicing rights is a source of noninterest income and also allows us an opportunity to have regular contact with mortgage customers and can help to solidify our community involvement. Other loans that are not sold include adjustable rate mortgages, lot loans, and construction loans that are held in our portfolio.
However, the Federal Reserve has not joined the proposed rulemaking. In January 2025, the OCC, FDIC, and Federal Reserve issued additional guidance clarifying that digital and fintech-driven activities may be eligible for CRA credit provided they meet established criteria.
However, the Federal Reserve did not join the proposed rulemaking. That proposed rulemaking was later superseded and is no longer in effect. In January 2025, the OCC, the FDIC, and the Federal Reserve issued interagency guidance clarifying that digital and fintech-driven activities may be eligible for CRA consideration, provided they meet applicable CRA criteria.
See “Regulatory Emphasis on Capital – Basel III Capital Standards” above. ​ Under the proposed Basel III Endgame rules, banks subject to the new framework may face increased capital requirements that could impact dividend policies and capital distribution strategies.
See “Regulatory Emphasis on Capital – Basel III Capital Standards” above. ​ Under the proposed Basel III Endgame rules, which have not been finalized as of the date of this filing and are generally expected to apply only to large banking organizations, banks subject to the new framework could face increased capital requirements that may impact dividend policies and capital distribution strategies.
Management closely monitors and stress tests concentrations within its commercial real estate portfolio so that we remain well diversified. Exposure to various real estate types is managed through board approved concentration limits which include, but are not limited to retail, office, industrial, mixed-use, hotel and healthcare.
Exposure to various real estate types is managed through board approved concentration limits which include, but are not limited to retail, office, industrial, mixed-use, hotel and healthcare.
National banks headquartered in Illinois, such as the Bank, have the same branching rights in Illinois as banks chartered under Illinois law, subject to OCC approval. Illinois law grants Illinois-chartered banks the authority to establish branches anywhere in the State of Illinois, subject to receipt of all required regulatory approvals.
National banks headquartered in Illinois, such as the Bank, have the same branching rights in Illinois as banks chartered under Illinois law, subject to OCC approval.
Nominal growth occurred in the portfolio as a result of originations as well as those obtained through the FRME branch acquisition. ​ Consumer Loans. We also provide many types of consumer loans including primarily motor vehicle, home improvement and signature loans.
We provide many types of consumer loans including primarily motor vehicle, home improvement, manufactured home and signature loans. Consumer loan growth occurred as a result of those obtained through the acquisition of Evergreen and include originated loans and a solar loan pool purchase.
We originated approximately $98.8 million of residential mortgage loans in 2024, which includes originations of loans held for sale of $58.0 million.
We originated approximately $153.4 million of residential mortgage loans in 2025, which includes originations of loans held for sale of $85.7 million.
Following multiple interest rate hikes in 2022 and 2023, the Federal Reserve has signaled a shift toward a more data-dependent approach in 2024, with the potential for rate cuts depending on inflation trends and economic conditions. This evolving monetary policy environment may impact our net interest margin and overall earnings performance. ​ Corporate Governance .
Following multiple interest rate increases during 2022 and 2023, the Federal Reserve has emphasized a data-dependent approach to monetary policy, with future policy actions dependent on inflation, labor market conditions, and broader economic trends. This evolving monetary policy environment may impact our net interest margin and overall earnings performance. 14 ​ Table of Contents ​ Corporate Governance .
We evaluate our operations as one operating segment, which is community banking. Financial information concerning our operations can be found in the financial statements in this annual report. ​ 4 ​ Table of Contents Mergers and Acquisitions ​ On December 6, 2024, we completed our branch transaction with First Merchants Bank (“FRME”).
We evaluate our operations as one operating segment, which is community banking. Financial information concerning our operations can be found in the financial statements in this annual report. ​ Mergers and Acquisitions ​ On July 1, 2025, we completed our previously announced acquisition of Bancorp Financial, Inc.
On December 22, 2022, the federal banking agencies issued a revised interagency statement extending the temporary relief from such enforcement, which was set to expire on January 1, 2024; however, on December 15, 2023, the federal banking agencies again issued a revised interagency statement extending the temporary relief from such enforcement which will expire the sooner of January 1, 2025, or the effective date of a final Federal Reserve rule having a revision to Regulation O that addresses the treatment of extensions of credit by a bank to fund complex-controlled portfolio companies that are insiders of a bank. ​ Safety and Soundness Standards/Risk Management.
Most recently in December 2025, the Federal Reserve extended relief from such enforcement until the sooner of January 1, 2027, or the effective date of a final Federal Reserve rule revising Regulation O that addresses the treatment of extensions of credit by a bank to fund complex-controlled portfolio companies that are insiders of a bank. ​ Safety and Soundness Standards/Risk Management.
The effective date will be extended each day the injunction remains in place, pending the resolution of the lawsuit. Management has and will continue to evaluate any changes to the CRA’s regulations and their impact to the Bank. ​ Fair Lending Requirements. We are subject to certain fair lending requirements and reporting obligations involving lending operations.
In April 2025, the Fifth Circuit granted the agencies’ motion. Management has and will continue to evaluate any changes to the CRA’s regulations and their impact to the Bank. ​ Fair Lending Requirements. We are subject to certain fair lending requirements and reporting obligations involving lending operations.
The Bank is a member of the Federal Home Loan Bank of Chicago (the “FHLBC”), which serves as a central credit facility for its members. The FHLBC is funded primarily from proceeds from the sale of obligations of the FHLBC system. It makes loans to member banks in the form of FHLBC advances.
The FHLBC is funded primarily from proceeds from the sale of obligations of the Federal Home Loan Bank system. It makes loans to member banks in the form of FHLBC advances. All advances from the FHLBC are required to be fully collateralized as determined by the FHLBC.
Consumer loans typically have shorter terms and lower balances with higher yields as compared to other loans but generally carry higher risks of default.
Powersport loans typically have shorter terms and lower balances with higher yields as compared to other loans but generally carry a higher risk of default. Similar to consumer loans, collection of these loans is highly dependent on the borrowers’ continuing financial stability.
We continued to grow our lease portfolio in 2024 with organic lease originations, primarily stemming from our growth with our investment grade leases as well as small to mid-size business equipment financing.
Stress testing is regularly performed on the commercial loan portfolio to ensure appropriate reserve levels and adequate capital levels are maintained. ​ Leases. We continued to grow our lease portfolio in 2025 with organic lease originations, primarily stemming from our growth with our investment grade leases as well as small to mid-size business equipment financing.
This type of growth presents some economic risks should local demand for commercial buildings and multi-family housing shift. We address these risks by closely monitoring local real estate activity, adhering to proper underwriting procedures, closely monitoring construction projects, and limiting the amount of construction development lending by project type and obligor. ​ Residential Real Estate Loans.
We address these risks by closely monitoring local real estate activity, adhering to proper underwriting procedures, closely monitoring construction projects, and limiting the amount of construction development lending by project type and obligor. ​ ​ 7 ​ Table of Contents Residential Real Estate Loans. Residential first mortgage loans and second mortgages are included in this category.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese provisions in our certificate of incorporation could also discourage proxy contests and make it more difficult and expensive for holders of our common stock to elect directors other than the candidates nominated by our board of directors or otherwise remove existing directors and management, even if current management is not performing adequately. ​ Risks Relating to the Consummation of the Merger with Bancorp Financial and the Combined Company Following the Merger ​ Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the merger. ​ Before the merger and the bank merger may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve Board, the OCC and other regulatory authorities.
Biggest changeThese provisions in our certificate of incorporation could also discourage proxy contests and make it more difficult and expensive for holders of our common stock to elect directors other than the candidates nominated by our board of directors or otherwise remove existing directors and management, even if current management is not performing adequately. ​ ​ 37 ​ Table of Contents ​ ​
Any factor described in this Annual Report on Form 10-K could, by itself or together with one or more other factors, adversely affect our business, results of operations and/or financial condition. Additional risks and uncertainties not currently known to us or that we currently consider to not be material also may materially and adversely affect us.
Any factor described in this Annual Report on Form 10-K could, by itself or together with one or more other factors, adversely affect our business, results of operations and/or financial condition. Additional risks and uncertainties not currently known to us or that we currently consider not to be material also may materially and adversely affect us.
As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect our business, financial condition or results of operations. ​ We are at risk of increased losses from fraud . ​ Criminals committing fraud increasingly are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective.
As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect on our business, financial condition or results of operations. ​ We are at risk of increased losses from fraud . ​ Criminals committing fraud increasingly are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective.
Because these third parties and related environments such as the point-of-sale are not under our direct control, future security breaches or cyber-attacks affecting any of these third parties could impact us and in some cases we may have exposure and suffer losses for breaches or attacks.
Because these third parties and related environments such as the point-of-sale are not under our direct control, future security breaches or cyber-attacks affecting any of these third parties could impact us, and in some cases, we may have risk exposure and suffer losses for breaches or attacks.
Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in which we operate could affect our business, including causing one or more of the following negative developments: ​ ● an increase in our deposit and funding costs; ● a decrease in the demand for loans, mortgage banking products and services and other products and services we offer; ● a decrease in our deposit account balances as customers move funds to seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates; ● a decrease in the value of the collateral securing our residential or commercial real estate loans; ● a permanent impairment of our assets; or ● an increase in the number of customers or other counterparties who default on their loans or other obligations to us, which could result in a higher level of NPAs, net charge-offs and provision for credit losses. ​ Our trust and wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance . ​ Our trust and wealth management business may be negatively impacted by changes in general economic and market conditions because the performance of this business is directly affected by conditions in the financial and securities markets.
Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in which we operate could affect our business, causing one or more of the following negative developments: ​ ● an increase in our deposit and funding costs; ● a decrease in the demand for loans, mortgage banking products and services and other products and services we offer; ● a decrease in our deposit account balances as customers move funds to seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates; ● a decrease in the value of the collateral securing our residential or commercial real estate loans; ● a permanent impairment of our assets; or ● an increase in the number of customers or other counterparties who default on their loans or other obligations to us, which could result in a higher level of nonperforming assets, net charge-offs and provision for credit losses. ​ Our trust and wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance . ​ Our trust and wealth management business may be negatively impacted by changes in general economic and market conditions because the performance of this business is directly affected by conditions in the financial and securities markets.
The fraudulent activity has taken many forms, ranging from check fraud, mechanical devices attached to ATMs, social engineering and phishing attacks to obtain personal information or impersonation of our clients through the use of falsified or stolen credentials.
The fraudulent activity has taken many forms, ranging from check fraud, mechanical devices attached to ATMs (“skimming”), social engineering and phishing attacks to obtain personal information or impersonation of our clients through the use of falsified or stolen credentials.
In 2024, we were able to maintain the level of our non-owner occupied commercial real estate loans under 300% of capital, as outlined in regulatory guidance, and are performing heightened monitoring over commercial real estate exposures, including concentration limits on commercial real estate type, sub-types and individual tenant exposure, frequent loan portfolio stress testing, as well as sensitivity analysis and using current and prospective market data during underwriting.
In 2025, we were able to maintain the level of our non-owner occupied commercial real estate loans under 300% of capital, as outlined in regulatory guidance, and are performing heightened monitoring over commercial real estate exposures, including concentration limits on commercial real estate type, sub-types and individual tenant exposure, frequent loan portfolio stress testing, as well as sensitivity analysis and using current and prospective market data during underwriting.
These include, among others, (a) provisions that empower our board of directors, without stockholder approval, to issue preferred stock, the terms of which, including voting power, are set by the board of directors, (b) we have a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board, and (c) the approval of certain business combinations require the affirmative vote of at least 75% of our outstanding shares of common stock.
These include, among others, (a) provisions that empower our board of directors, without stockholder approval, to issue preferred stock, the terms of which, including voting power, are set by the board of directors, (b) we have a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board, and (c) the approval of certain business combinations requires the affirmative vote of at least 75% of our outstanding shares of common stock.
Even in the absence of stringent federal action in the U.S., the global and market-driven emphasis on ESG-related practices is expected to persist, requiring ongoing adaptation and investment. ​ ​ 24 ​ Table of Contents ​ Climate change could have a material adverse impact on us and our customers. ​ We are exposed to risks of physical impacts of climate change and risks arising from the process of transitioning to a less carbon-dependent economy.
Even in the absence of stringent federal action in the U.S., the global and market-driven emphasis on ESG-related practices is expected to persist, requiring ongoing adaptation and investment. ​ ​ 23 ​ Table of Contents ​ Climate change could have a material adverse impact on us and our customers. ​ We are exposed to risks of physical impacts of climate change and risks arising from the process of transitioning to a less carbon-dependent economy.
We offer our customers protection against fraud and attendant losses for unauthorized use of debit cards in order to stay competitive in the marketplace. Offering such protection exposes us to potential losses which, in the event of a data breach at one or more retailers of considerable magnitude, may adversely affect our business, financial condition, and results of operation.
We offer our customers protection against fraud and attendant losses for unauthorized use of debit cards in order to stay competitive in the marketplace. Offering such protection exposes us to potential losses which, in the event of a data breach at one or more retailers of considerable magnitude, may adversely affect our business, financial condition, and results of operations.
We may be required to make significant increases in the provision for credit losses and to charge-off additional loans in the future. ​ The application of the purchase method of accounting in past acquisitions, more recently our five branch purchase and the resulting loans acquired from First Merchants Bank in 2024, our pending merger of Bancorp Financial, and any future acquisitions will impact our ACL.
We may be required to make significant increases in the provision for credit losses and to charge-off additional loans in the future. ​ The application of the purchase method of accounting in past acquisitions, more recently our five branch purchase and the resulting loans acquired from First Merchants Bank in 2024, our merger of Bancorp Financial in 2025, and any future acquisitions will impact our ACL.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. ​ ​ 34 ​ Table of Contents ​ We may be materially and adversely affected by the highly regulated environment in which we operate . ​ We are subject to extensive federal and state regulation, supervision and examination.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. ​ 32 ​ Table of Contents We may be materially and adversely affected by the highly regulated environment in which we operate . ​ We are subject to extensive federal and state regulation, supervision and examination.
If we are unable to compete effectively with those banking or other financial services businesses, we could find it more difficult to attract new and retain existing clients and our net interest margin, net interest income and wealth management fees could decline, which would adversely affect our results of operations and could cause us to incur losses in the future. ​ 28 ​ Table of Contents ​ In addition, our ability to successfully attract and retain wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities.
If we are unable to compete effectively with those banking or other financial services businesses, we could find it more difficult to attract new and retain existing clients and our net interest margin, net interest income and wealth management fees could decline, which would adversely affect our results of operations and could cause us to incur losses in the future. ​ In addition, our ability to successfully attract and retain wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities.
We expect that we will spend additional time and will incur additional costs going forward to modify and enhance protective measures and that effort and spending will continue to be required to investigate and remediate any information security vulnerabilities. ​ 30 ​ Table of Contents ​ We also face risks related to cyber-attacks and other security breaches in connection with credit card and debit card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties, including merchant-acquiring banks, payment processors, payment card networks and their processors.
We expect that we will spend additional time and will incur additional costs going forward to modify and enhance protective measures and that effort and spending will continue to be required to investigate and remediate any information security vulnerabilities. ​ We also face risks related to cyber-attacks and other security breaches in connection with credit card and debit card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties, including merchant-acquiring banks, payment processors, payment card networks and their processors.
Accordingly, inflation can result in material adverse effects upon our customers, their businesses and, as a result, our financial position and results of operation. ​ Inflationary pressures normally cause the Federal Reserve to increase interest rates, for instance, from March 2022 through July 2023.
Accordingly, inflation can result in material adverse effects upon our customers, their businesses and, as a result, our financial position and results of operations. ​ Inflationary pressures normally cause the Federal Reserve to increase interest rates, for instance, from March 2022 through July 2023.
The determination of fair value for securities categorized in Level 3 involves significant judgment due to the complexity of the factors contributing to the valuation, many of which are not readily observable in the market. Recent market disruptions and the resulting fluctuations in fair value have made the valuation process even more difficult and subjective.
The determination of fair value for securities categorized in Level 2 or Level 3 involves significant judgment due to the complexity of the factors contributing to the valuation, many of which are not readily observable in the market. Recent market disruptions and the resulting fluctuations in fair value have made the valuation process even more difficult and subjective.
Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures. ​ Growth and Strategic Risks ​ We may not be able to implement our growth strategy or manage costs effectively, resulting in lower earnings or profitability. ​ There can be no assurance that we will be able to continue to grow and to be profitable in future periods, or, if profitable, that our overall earnings will remain consistent or increase in the future.
Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures. ​ ​ 29 ​ Table of Contents ​ Growth and Strategic Risks ​ We may not be able to implement our growth strategy or manage costs effectively, resulting in lower earnings or profitability. ​ There can be no assurance that we will be able to continue to grow and to be profitable in future periods, or, if profitable, that our overall earnings will remain consistent or increase in the future.
Given the current daily average trading volume of our common stock, significant sales of our common stock in a brief period of time, or the expectation of these sales, could cause a significant decline in the price of our common stock. ​ The trading price of our common stock may be subject to continued significant fluctuations and volatility . ​ The market price of our common stock could be subject to significant fluctuations due to, among other things: ​ ● actual or anticipated quarterly fluctuations in our operating and financial results, particularly if such results vary from the expectations of management, securities analysts and investors, including with respect to further credit losses on loans or unfunded commitments we may incur; ● announcements regarding significant transactions in which we may engage; ● market assessments regarding such transactions; ● changes or perceived changes in our operations or business prospects; ● legislative or regulatory changes affecting our industry generally or our businesses and operations; ● a weakening of general market and economic conditions, particularly with respect to economic conditions in Illinois; ● the operating and share price performance of companies that investors consider to be comparable to us; ● future offerings by us of debt, preferred stock or trust preferred securities, each of which would be senior to our common stock upon liquidation and for purposes of dividend distributions; ● actions of our current stockholders, including future sales of common stock by existing stockholders and our directors and executive officers; and ● other changes in U.S. or global financial markets, economies and market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility. ​ As a result, the market price of our common stock may continue to be subject to similar market fluctuations that may or may not be related to our operating performance or prospects.
Given the current daily average trading volume of our common stock, significant sales of our common stock in a brief period of time, or the expectation of these sales, could cause a significant decline in the price of our common stock and increased volatility. ​ ​ 36 ​ Table of Contents ​ The trading price of our common stock may be subject to continued significant fluctuations and volatility . ​ The market price of our common stock could be subject to significant fluctuations due to, among other things: ​ ● actual or anticipated quarterly fluctuations in our operating and financial results, particularly if such results vary from the expectations of management, securities analysts and investors, including with respect to further credit losses on loans or unfunded commitments we may incur; ● announcements regarding significant transactions in which we may engage; ● market assessments regarding such transactions; ● changes or perceived changes in our operations or business prospects; ● legislative or regulatory changes affecting our industry generally or our businesses and operations; ● a weakening of general market and economic conditions, particularly with respect to economic conditions in Illinois; ● the operating and share price performance of companies that investors consider to be comparable to us; ● future offerings by us of debt, preferred stock or trust preferred securities, each of which would be senior to our common stock upon liquidation and for purposes of dividend distributions; ● actions of our current stockholders, including future sales of common stock by existing stockholders and our directors and executive officers; and ● other changes in U.S. or global financial markets, economies and market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility, or heightened volatility in the banking sector generally. ​ As a result, the market price of our common stock may continue to be subject to similar market fluctuations that may or may not be related to our operating performance or prospects.
Any decline in available funding could adversely affect our ability to continue to implement our business strategy which could have a material adverse effect on our liquidity, business, financial condition and results of operations. 37 ​ Table of Contents ​ Risks Related to an Investment in Our Common Stock ​ Our future ability to pay dividends is subject to restrictions . ​ We currently conduct substantially all of our operations through our subsidiaries, and a significant part of our income is attributable to dividends from the Bank.
Any decline in available funding could adversely affect our ability to continue to implement our business strategy which could have a material adverse effect on our liquidity, business, financial condition and results of operations. ​ Risks Related to an Investment in Our Common Stock ​ Our future ability to pay dividends is subject to restrictions . ​ We currently conduct substantially all of our operations through our subsidiaries, and a significant part of our income is attributable to dividends from the Bank.
We may be unable to successfully: ● maintain loan quality in the context of significant loan growth; ● identify and expand into suitable markets; ● retain employees and customers of the Company or the businesses that we acquire or merge with; ● attract sufficient deposits and capital to fund anticipated loan growth; ● maintain adequate common equity and regulatory capital; ● avoid diversion or disruption of our management and existing operations as well as those of the acquired or merged institution; ● maintain adequate management personnel and systems to oversee such growth; ● maintain adequate internal audit, risk management, loan review and compliance functions; and ● implement additional policies, procedures and operating systems required to support such growth. ​ Operating Results .
We may be unable to successfully: ● maintain loan quality in the context of significant loan growth; ● identify and expand into suitable markets; ● retain employees and customers of the Company or the businesses that we acquire or merge with; ● attract sufficient deposits and capital to fund anticipated loan growth; ● originate high quality loans in new markets; ● maintain adequate common equity and regulatory capital; ● avoid diversion or disruption of our management and existing operations as well as those of the acquired or merged institution; ● maintain adequate management personnel and systems to oversee such growth; ● maintain adequate internal audit, risk management, loan review and compliance functions; and ● implement additional policies, procedures and operating systems required to support such growth. ​ Operating Results .
These restrictions may also result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our financial condition, results of operations and share price. ​ We could experience an unexpected inability to obtain needed liquidity . ​ Liquidity measures the ability to meet current and future cash flow needs as they become due.
These restrictions may also result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our financial condition, results of operations and share price. ​ ​ 35 ​ Table of Contents ​ We could experience an unexpected inability to obtain needed liquidity . ​ Liquidity measures the ability to meet current and future cash flow needs as they become due.
These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition. ​ ​ 23 ​ Table of Contents ​ Inflationary pressures present a potential threat to our results of operation and financial condition. ​ The United States generally and the regions in which we operate experienced significant inflationary pressures in 2023, evidenced by higher gas prices, higher food prices and other consumer items.
These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition. ​ 22 ​ Table of Contents Inflationary pressures present a potential threat to our results of operation and financial condition. ​ The United States generally and the regions in which we operate experienced significant inflationary pressures in 2022 and 2023, evidenced by higher gas prices, higher food prices and other consumer items.
In addition, bank regulatory agencies periodically review our ACL and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different from those of management. If charge-offs in future periods exceed the ACL, we will need additional provisions to increase the allowance.
In addition, bank regulatory agencies 24 ​ Table of Contents periodically review our ACL and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different from those of management. If charge-offs in future periods exceed the ACL, we will need additional provisions to increase the allowance.
Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse impact on our financial condition and results of operations. ​ 36 ​ Table of Contents ​ We are defendants in a variety of litigation and other actions . ​ Currently, there are certain other legal proceedings pending against the Company and our subsidiaries in the ordinary course of business.
Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse impact on our financial condition and results of operations. ​ We are defendants in a variety of litigation and other actions . ​ Currently, there are certain other legal proceedings pending against the Company and our subsidiaries in the ordinary course of business.
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to the Company, or at all, which could have a material adverse effect on our business, financial condition, results of operation and future prospects. ​ If we are unable to offer our key management personnel long-term incentive compensation, including options, restricted stock, and restricted stock units, as part of their total compensation package, we may have difficulty retaining such personnel, which would adversely affect our operations and financial performance .
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to the Company, or at all, which could have a material adverse effect on our business, financial condition, results of operation and future prospects. ​ If we are unable to offer our key management personnel long-term incentive compensation, including options, restricted stock, and restricted stock units, as part of their total compensation package, we may have difficulty retaining such personnel, which would adversely affect our operations and financial performance . ​ We have historically granted equity awards, including restricted stock units and stock options, to key management personnel as part of a competitive compensation package.
Our inability to manage our growth successfully or to continue to expand into new markets could have a material adverse effect on our business, financial condition or results of operations. ​ ​ 31 ​ Table of Contents ​ Our strategic growth plans contemplate additional organic growth and potential growth through additional mergers and acquisitions, which exposes us to additional risks . ​ Our strategic growth plans include organic growth and growth through additional mergers and acquisitions.
Our inability to manage our growth successfully or to continue to expand into new markets could have a material adverse effect on our business, financial condition or results of operations. ​ Our strategic growth plans contemplate additional organic growth and potential growth through additional mergers and acquisitions, which exposes us to additional risks . ​ Our strategic growth plans include organic growth and growth through additional mergers and acquisitions.
Our strategy is focused on organic growth, supplemented by opportunistic acquisitions, including our five branch purchase from First Merchants Bank in 2024, and our pending merger with Bancorp Financial.
Our strategy is focused on organic growth, supplemented by opportunistic acquisitions, including our five-branch purchase from First Merchants Bank in 2024, and our merger with Bancorp Financial in 2025.
Stockholder advisory groups have implemented guidelines and issued voting recommendations related to how much equity companies should be able to grant to employees. These advisors influence certain shareholder votes regarding approval of a company’s request for approval of new equity compensation plans.
Stockholder advisory groups have implemented guidelines and issued voting recommendations related to how much equity companies 27 ​ Table of Contents should be able to grant to employees. These advisors influence certain shareholder votes regarding approval of a company’s request for approval of new equity compensation plans.
A disruption or breach of security may ultimately have a material adverse effect on our financial condition and results of operations. ​ 29 ​ Table of Contents ​ Our use of third party vendors and our other ongoing third party business relationships are subject to regulatory requirements and attention . ​ We regularly use third party vendors as part of our business.
A disruption or breach of security may ultimately have a material adverse effect on our financial condition and results of operations. ​ Our use of third-party vendors and our other ongoing third-party business relationships are subject to regulatory requirements and attention . ​ We regularly use third party vendors as part of our business.
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, and, in turn, our financial condition and results of operations. ​ Any enhanced regulatory scrutiny of bank mergers and acquisitions and revision of the framework for merger application review may adversely affect the marketplace for such transactions, could result in our acquisitions in future periods being delayed, impeded or restricted in certain respects and result in new rules that possibly limit the size of financial institutions we may be able to acquire in the future and alter the terms for such transactions. ​ ​ 32 ​ Table of Contents ​ We may be exposed to difficulties in combining the operations of acquired or merged businesses, including First Merchants, and if completed, our merger with Bancorp Financial, into our own operations, which may prevent us from achieving the expected benefits from our merger and acquisition activities. ​ We may not be able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our merger and acquisition activities, including with respect to our merger with our five branch acquisition from First Merchants Bank, and our pending merger with Bancorp Financial.
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, and, in turn, our financial condition and results of operations. ​ Any enhanced regulatory scrutiny of bank mergers and acquisitions and revision of the framework for merger application review may adversely affect the marketplace for such transactions, could result in our acquisitions in future periods being delayed, impeded or restricted in certain respects and result in new rules that possibly limit the size of financial institutions we may be able to acquire in the future and alter the terms for such transactions. ​ We may be exposed to difficulties in combining the operations of acquired or merged businesses, including First Merchants and Bancorp Financial, into our own operations, which may prevent us from achieving the expected benefits from our merger and acquisition activities. ​ We may not be able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our merger and acquisition activities, including with respect to First Merchants Bank and Bancorp Financial.
If we choose to raise capital by selling shares of our common stock or securities convertible into common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock. 38 ​ Table of Contents ​ Certain banking laws and our governing documents may have an anti-takeover effect and may make it difficult and expensive to remove current management . ​ Certain federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our stockholders.
If we choose to raise capital by selling shares of our common stock or securities convertible into common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock and on our earnings per share. ​ Certain banking laws and our governing documents may have an anti-takeover effect and may make it difficult and expensive to remove current management . ​ Certain federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our stockholders.
We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, other financial service businesses, including investment advisory and wealth management firms, mutual fund companies, and securities brokerage and investment banking firms, as well as super-regional, national and international financial institutions that operate offices in our primary market areas and elsewhere.
We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, other financial service businesses, including investment advisory and wealth management firms, mutual fund companies, and securities brokerage and investment banking firms, as well as super-regional, national and international financial institutions that operate offices in 26 ​ Table of Contents our primary market areas and elsewhere.
We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all.
We may fail to pursue, evaluate or complete strategic and 30 ​ Table of Contents competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all.
If our competitors raise the rates they pay on deposits in response to interest rate changes initiated by the FRBC Open Market Committee or for other reasons of their choice, our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding.
If our competitors raise the rates they pay on deposits in response to interest rate changes initiated by the Federal Reserve’s Federal Open Market Committee (“FOMC”), or for other reasons of their choice, our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding.
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able 28 ​ Table of Contents to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers.
The potential impact of the unified Republican government and any additional changes in agency personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
The potential impact of changes in government leadership and agency personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
However, applying guidance from the Federal Financial Institutions Examination Council, we have identified security risks and employ risk mitigation controls. Following a layered security approach, we have analyzed and will continue to analyze security related to device specific considerations, user access topics, transaction-processing and network integrity.
However, applying guidance from the Federal Financial Institutions Examination Council and our primary federal regulator, we have identified security risks and employed risk mitigation controls. Following a layered security approach, we have analyzed and will continue to analyze security related to device specific considerations, user access topics, transaction-processing and network integrity.
The development and use of AI presents a number of risks and challenges to our business.
The development and use of AI present a number of risks and challenges to our business.
We may issue additional shares of our common stock (or securities convertible into common stock), for instance, in the pending merger with Bancorp Financial, for a number of reasons, including to finance our operations and business strategy (including mergers and acquisitions), to adjust our ratio of debt to equity, to address regulatory capital concerns, or to satisfy our obligations upon the exercise of outstanding stock awards.
We may issue additional shares of our common stock (or securities convertible into common stock) for a number of reasons, including to finance our operations and business strategy (including mergers and acquisitions), to adjust our ratio of debt to equity, to address regulatory capital concerns, or to satisfy our obligations upon the exercise of outstanding stock awards.
We also have substantial ongoing business relationships with other third parties. These types of third party relationships are subject to demanding regulatory requirements and attention by our federal bank regulators. Recent regulation requires us to enhance our due diligence, risk assessment, ongoing monitoring and control over our third party vendors and other ongoing third party business relationships.
We also have substantial ongoing business relationships with other third parties. These types of third-party relationships are subject to demanding regulatory requirements and attention by our federal bank regulators. Recent supervisory guidance and examination practices require us to enhance our due diligence, risk assessment, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships.
At December 31, 2024, our outstanding commercial real estate loans and undrawn commercial real estate commitments, excluding owner occupied real estate, were equal to 273.3% of our Tier 1 capital plus allowance for credit losses, a decrease from 286.9% at December 31, 2023.
At December 31, 2025, our outstanding commercial real estate loans and undrawn commercial real estate commitments, excluding owner occupied real estate, were equal to approximately 220.3% of our Tier 1 capital plus allowance for credit losses, a decrease from 273.3% at December 31, 2024.
We actively monitor and manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market conditions. ​ ​ 27 ​ Table of Contents ​ Nonperforming assets take significant time to resolve, adversely affect our results of operations and financial condition and could result in further losses in the future. ​ Our nonperforming loans (which consist of nonaccrual loans and loans past due 90 days or more still accruing interest), were $30.3 million at December 31, 2024, a decrease of 55.9%, compared to $68.8 million at December 31, 2023.
We actively monitor and manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market conditions. ​ Nonperforming assets take significant time to resolve, adversely affect our results of operations and financial condition and could result in further losses in the future. ​ Our nonperforming loans (which consist of nonaccrual loans and loans past due 90 days or more still accruing interest), were $52.8 million at December 31, 2025, an increase of 74.4%, compared to $30.3 million at December 31, 2024.
AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful.
AI models, particularly generative AI models, may produce output or take action that is incorrect, resulting in “hallucinations”, or including biases in the data on which they are trained, resulting in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful or false.
As a result, we may experience significant loan, lease or commitment credit losses that may have a material adverse effect on our operating results and financial condition. ​ ​ 25 ​ Table of Contents ​ We maintain an ACL at a level we believe is adequate to absorb estimated credit losses that are expected to occur within the existing loan portfolio through their contractual terms.
As a result, we may experience significant loan, lease or commitment credit losses that may have a material adverse effect on our operating results and financial condition. ​ We maintain an ACL at a level we believe is adequate to absorb estimated credit losses that are expected to occur within the existing loan portfolio through their contractual terms in accordance with applicable accounting standards.
Inherent uncertainties exist in integrating the operations of an acquired or merged business. We may lose our customers or the customers of acquired or merged entities as a result of an acquisition. We may also lose key personnel from the acquired entity as a result of an acquisition.
Inherent uncertainties exist in integrating the operations of an acquired or merged business. Such integration could cause us to lose our customers or the customers of acquired or merged entities as a result of an acquisition. We may also lose key personnel from the acquired entity as a result of an acquisition.
Failure to successfully address these and other issues related to our expansion could have a material adverse effect on our business, financial condition and results of operations, including short-term and long-term liquidity, and could adversely affect our ability to successfully implement our business strategy. ​ Future acquisitions may be delayed, impeded, or prohibited due to regulatory issues.
Failure to successfully address these and other issues related to our expansion could have a material adverse effect on our business, financial condition and results of operations, including short-term and long-term liquidity, and could adversely affect our ability to successfully implement our business strategy. ​ Future acquisitions may be delayed, impeded, or prohibited due to regulatory issues. ​ Our future acquisitions, particularly those of financial institutions, are subject to approval by a variety of federal and state regulatory agencies.
In addition, the Federal Reserve announced it would make available additional funding to eligible depository institutions under a Bank Term Funding Program to help assure banks have the ability to meet the needs of all their depositors.
In addition, the Federal Reserve announced it would make available additional funding to eligible depository institutions under a Bank Term Funding Program to help assure banks have the ability to meet the needs of all their depositors. However, the Federal Reserve ceased extending credit under the Bank Term Funding Program on March 11, 2024.
Because we operate in areas that saw rapid historical growth, real estate lending of all types is a significant portion of our loan portfolio. Total real estate lending was $2.68 billion, or approximately 67.2%, of our loan portfolio at December 31, 2024, compared to $2.78 billion, or approximately 68.8%, at December 31, 2023.
Because we operate in areas that have seen rapid historical growth, real estate lending of all types is a significant portion of our loan portfolio. Total real estate lending was $2.97 billion, or approximately 56.5%, of our loan portfolio at December 31, 2025, compared to $2.68 billion, or approximately 67.2%, at December 31, 2024.
The burden of regulatory compliance has increased under the Dodd-Frank Act and has increased our costs of doing business and, as a result, may create an advantage for our competitors who may not be subject to similar legislative and regulatory requirements. ​ We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. ​ In 2025, the U.S. political landscape remains uncertain, with the Republicans holding the majority in both the U.S.
The burden of regulatory compliance has increased under the Dodd-Frank Act and has increased our costs of doing business and, as a result, may create an advantage for our competitors who may not be subject to similar legislative and regulatory requirements. ​ We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. ​ The U.S. political landscape remains fluid, and changes in Congressional composition, presidential administrations, and agency leadership may result in shift in regulatory priorities and policy direction.
Economic uncertainty remains elevated in 2025, driven by persistent inflationary pressures, higher interest rates, geopolitical conflicts, and the potential for continued volatility in global markets. These factors may lead to a significant increase in our ACL in future periods.
Economic uncertainty remains elevated entering 2026, driven by persistent inflationary pressures, higher interest rates, geopolitical conflicts, and the potential for continued volatility in global markets—despite forecasts for moderate growth in the U.S. and abroad. These factors may lead to a significant increase in our ACL in future periods.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have been reported under a different alternative. ​ ​ 35 ​ Table of Contents ​ Certain accounting policies are critical to presenting our financial condition and results of operations.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have been reported under a different alternative.
The combination of these laws and provisions in our certificate of incorporation may inhibit certain business combinations, including a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.
In addition, federal banking regulators must approve certain changes in control under applicable banking laws. The combination of these laws and provisions in our certificate of incorporation may inhibit certain business combinations, including a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.
A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.
A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations. ​ We could be subject to changes in tax laws, regulations, and interpretations or challenges to our income tax provision. ​ We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate.
While the outcome of any legal proceeding is inherently uncertain, based on information currently available, the Company’s management believes that any liabilities arising from pending legal matters would not have a material adverse effect on us or our consolidated financial statements.
While the outcome of any legal proceeding is inherently uncertain, based on information currently available, the Company’s management believes that any liabilities arising from pending legal matters would not have a material adverse effect on us or our consolidated financial statements. However, adverse rulings, settlements, or regulatory actions could result in outcomes that differ materially from management’s expectations.
Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. ​ In addition, deferred tax assets are reported as assets on our balance sheet and represent the decrease in taxes expected to be paid in the future because of net operating losses (“NOLs”) and tax credit carryforwards and because of future reversals of temporary differences in the bases of assets and liabilities as measured by enacted tax laws and their bases as reported in the financial statements.
Any adverse change in state or local tax laws or interpretations, or any adverse outcome of a state or local tax audit, review, inquiry or VDA process, could increase our tax liabilities, result in the assessment of penalties or interest, and adversely affect our financial position and results of operations. ​ Deferred tax assets are reported as assets on our balance sheet and represent the decrease in taxes expected to be paid in the future because of net operating losses (“NOLs”) and tax credit carryforwards and because of future reversals of temporary differences in the bases of assets and liabilities as measured by enacted tax laws and their bases as reported in the financial statements.
In addition, the Company and the Bank are each required by federal regulatory authorities to maintain adequate levels of capital to support their operations. ​ Our ability to raise capital will depend on, among other things, conditions in the capital markets, which are outside of our control, and our financial performance.
In addition, the Company and the Bank are each required by federal regulatory authorities to maintain adequate levels of capital to support their operations and to comply with evolving regulatory capital expectations, including stress testing, capital planning, and concentration risk considerations. ​ Our ability to raise capital will depend on, among other things, conditions in the capital markets and market listing rules—which are outside of our control—and our financial performance.
As of December 31, 2024, we had net deferred tax assets of $26.6 million, which included a $18.6 million tax effect of adjustments related to other comprehensive income.
As of December 31, 2025, we had net deferred tax assets of $31.3 million, which included a $11.2 million tax effect of adjustments related to other comprehensive income.
Nonetheless, we may incur a temporary disruption in our ability to conduct our business or process our transactions, or incur damage to our reputation if a third-party vendor fails to adequately maintain internal controls or institute necessary changes to systems.
Nonetheless, we may incur a temporary disruption in our ability to conduct our business or process our transactions, or incur damage to our reputation if a third-party vendor fails to adequately maintain internal controls or institute necessary changes to systems. Our reliance on third-party vendors for critical systems and services therefore increases our exposure to cybersecurity risks.
Other real estate owned, or OREO, totaled $21.6 million at December 31, 2024, an increase of 322.0%, compared to $5.1 million at December 31, 2023. Our nonperforming assets adversely affect our net income in various ways.
Other real estate owned, or OREO, totaled $1.4 million at December 31, 2025, a decrease of 93.4%, compared to $21.6 million at December 31, 2024. Our nonperforming assets adversely affect our net income in various ways.
Any of these could have a material adverse effect on our business, financial condition or results of operations. ​ We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties .
Any of these could have a material adverse effect on our business, financial condition or results of operations. ​ We are subject to fair lending laws, and failure to comply with these laws could lead to material penalties . ​ Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions.
These restrictions could negatively affect our ability to operate or further expand our operations through loan growth, acquisitions or the establishment of additional branches.
These restrictions could negatively affect our ability to operate or further expand our operations through loan growth, acquisitions or the establishment of additional branches. Regulators could also limit capital distributions, including dividends or share repurchases.
While labor conditions have improved, talent retention and competition for skilled workers remain key concerns for many industries.
While labor conditions have continued to evolve through 2024 and 2025, talent retention and competition for skilled workers remain key concerns for many industries.
Moreover, the financial services industry could become even more competitive as a result of legislative and regulatory changes, and many large scale competitors can leverage economies of scale to offer better pricing for products and services compared to what we can offer. ​ We compete with these institutions in attracting deposits and assets under management, processing payment transactions, and in making loans.
Moreover, the financial services industry could become even more competitive as a result of legislative and regulatory changes, and many large scale competitors can leverage economies of scale to offer better pricing for products and services compared to what we can offer.
Although we currently expect to continue to pay quarterly dividends, any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors. We are subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies.
Although we currently expect to continue to pay quarterly dividends, any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors.
Realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in which existing deferred tax assets are expected to become deductible for income tax purposes.
Realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in which existing deferred tax assets are expected to become deductible for income tax purposes. Adverse economic conditions or reduced profitability could limit our ability to realize these deferred tax assets.
An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators.
The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators.
Further, if we need to raise capital in the future we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors.
Market volatility, increased regulatory scrutiny of financial institutions, or adverse perceptions regarding the banking industry could further constrain capital availability. Further, if we need to raise capital in the future we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. ​ ​ 33 ​ Table of Contents ​ Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings .
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. ​ 31 ​ Table of Contents Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings . ​ The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to $250,000 per insured depositor category.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
The DOJ, the CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
In the future, we may seek stockholder approval to adopt or amend equity compensation plans so that we may issue additional equity awards to management in order for the equity component of our compensation packages to remain competitive in the industry.
Our ability to grant equity compensation awards as a part of our total compensation package has been vital to attracting, retaining and aligning stockholder interest with a talented management team in a highly competitive marketplace. ​ In the future, we may seek stockholder approval to adopt or amend equity compensation plans so that we may issue additional equity awards to management in order for the equity component of our compensation packages to remain competitive in the industry.
In 2024 and into 2025, continued concerns regarding the stability of certain regional banks and potential liquidity risks have further contributed to market volatility and investor caution.
In 2024 and into 2025, continued concerns regarding the stability of certain regional banks and potential liquidity risks have further contributed to market volatility and investor caution. The failure of the Santa Anna National Bank and Pulaski Savings Bank in 2025, and the early 2026 bank failure of Metropolitan Capital Bank & Trust, has only added to this uncertainty.
They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include the allowance for credit losses and fair value methodologies.
Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include the allowance for credit losses and fair 33 ​ Table of Contents value methodologies.
The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgements, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm. ​ Capital and Liquidity Risks ​ Our business needs and future growth may require us to raise additional capital, but that capital may not be available or may be dilutive. ​ We may need to raise additional capital, in the form of debt or equity securities, in the future to have sufficient capital resources to meet our commitments and fund our business needs and future growth, particularly if the quality of our assets or earnings were to deteriorate significantly.
Even where no enforcement action is ultimately taken, responding to such matters may result in significant management distraction and expense. ​ Capital and Liquidity Risks ​ Our business needs and future growth may require us to raise additional capital, but that capital may not be available or may be dilutive. ​ We may need to raise additional capital, in the form of debt or equity securities, in the future to have sufficient capital resources to meet our commitments and fund our business needs and future growth, particularly if the quality of our assets or earnings were to deteriorate significantly.
If our regulators require us to maintain higher levels of capital than we would otherwise be expected to maintain due to our commercial real estate concentration, this could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects. ​ ​ 26 ​ Table of Contents ​ Real estate market volatility and future changes in disposition strategies could result in net proceeds that differ significantly from our fair value appraisals of loan collateral and OREO and could negatively impact our operating performance . ​ Many of our nonperforming real estate loans are collateral-dependent, meaning the repayment of the loan is largely dependent upon the value of the property securing the loan and the borrower’s ability to refinance, recapitalize or sell the property.
If the OCC, our primary regulator, were to impose restrictions on the amount of commercial real estate loans we can hold in our portfolio, our earnings would be adversely affected. ​ Real estate market volatility and future changes in disposition strategies could result in net proceeds that differ significantly from our fair value appraisals of loan collateral and OREO and could negatively impact our operating performance . ​ Many of our nonperforming real estate loans are collateral-dependent, meaning the repayment of the loan is largely dependent upon the value of the property securing the loan and the borrower’s ability to refinance, recapitalize or sell the property.
The prospects for the enactment of major banking reform legislation remain unclear at this time. ​ Furthermore, leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment. Since the change in presidential administration in 2020, key positions across agencies—including the Comptroller of the Currency, CFPB, CFTC, SEC, and the U.S. Treasury—experienced significant turnover.
Because of this kind of oscillation in regulation, the prospects for the enactment of major banking reform legislation remain unclear at this time. ​ Furthermore, leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment.
The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. We seek to ensure that our funding needs are met by maintaining an appropriate level of liquidity through asset and liability management.
We seek to ensure that our funding needs are met by maintaining an appropriate level of liquidity through asset and liability management.
Customers make claims and on occasion take legal action pertaining to our performance of our fiduciary responsibilities.
Customers make claims and on occasion take legal action pertaining to our performance of our fiduciary responsibilities. In addition, evolving regulatory standards, litigation theories, and fiduciary expectations may increase the scope or frequency of such claims.
This risk has been exacerbated in recent years by the effects of the COVID-19 pandemic, which disrupted global economic activity, caused supply chain challenges, and increased financial stress on borrowers. Additionally, this risk may be further impacted by future events with similar widespread economic effects, such as other pandemics, geopolitical conflicts, natural disasters, or significant market disruptions.
This risk may be further impacted by future events with widespread economic effects, such as other pandemics, geopolitical conflicts, natural disasters, or significant market disruptions.
Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such determination is made. ​ We could become subject to claims and litigation pertaining to our fiduciary responsibility . ​ Some of the services we provide, such as wealth management services through River Street Advisors, LLC, require us to act as fiduciaries for our customers and others.
Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such determination is made. ​ Given our expanded retail business we are subject to various state consumer protection laws and tax codes. ​ As a result of our expanded retail and nationwide consumer lending activities, including powersport and other specialty consumer loan programs, some of which are originated through third-party dealers or acquired portfolios, we are subject to a broad and evolving array of federal and state consumer protection laws and tax requirements that vary by jurisdiction and product type.
We compete with banks and other financial services companies for deposits.
Changes in depositor behavior, including increased rate sensitivity and the ease of transferring deposits through digital channels, may increase deposit volatility. We compete with banks and other financial services companies for deposits.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeMonitoring includes quarterly assessments by our Chief Information Security Officer (“CISO”) and on an ongoing basis by our security engineers. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties. ​ Governance ​ Our Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
Biggest changeThis approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties. ​ ​ 38 ​ Table of Contents ​ Governance ​ Our Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
These briefings encompass a broad range of topics, including: ​ ● Maturity of our cyber landscape commensurate to inherent risks of environment; ● Emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; ● Compliance with regulatory requirements and industry standards; and ● Results of internal and external testing of cybersecurity controls. ​ In addition to our scheduled meetings, CISO maintains an ongoing dialogue with management and the Board of Directors regarding emerging or potential cybersecurity risks.
These briefings encompass a broad range of topics, including: ​ ● maturity of our cyber landscape commensurate to inherent risks of environment; ● emerging threats; ● status of ongoing cybersecurity initiatives and strategies; ● incident reports and learnings from any cybersecurity events; ● compliance with regulatory requirements and industry standards; and ● results of internal and external testing of cybersecurity controls. ​ In addition to our scheduled meetings, the CISO maintains an ongoing dialogue with management and the Board of Directors regarding emerging or potential cybersecurity risks.
The ITSC and Board of Directors is periodically provided with updates on the Information Security Program, recommended changes, cybersecurity policies and practices, ongoing efforts to improve security, as well as our efforts regarding significant cybersecurity events. ​ The CISO manages the Security Operations Center (SOC) and is responsible for implementing and maintaining controls designed to detect and defend us against cyber-attacks and includes a dedicated function for incident response and ongoing monitoring for cybersecurity threats and vulnerabilities, including those among the Bank’s third-party suppliers.
The ITSC and Board of Directors are periodically provided with updates on the Information Security Program, recommended changes, cybersecurity policies and practices, ongoing efforts to improve security, as well as our efforts regarding significant cybersecurity events. ​ The CISO manages the Security Operations Center (SOC) and is responsible for implementing and maintaining controls designed to detect and defend us against cyber-attacks and includes a dedicated function for incident response and ongoing monitoring for cybersecurity threats and vulnerabilities, including those among the Bank’s third-party suppliers.
While, as of the date of this Annual Report on Form 10-K, we have not encountered cybersecurity challenges that have materially impaired our operations or financial standing, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. ​ ​ Management’s Role Managing Risk ​ While the ITSC and our Board of Directors to which it reports oversees cybersecurity risk management, management is responsible for the day-to-day cybersecurity risk management processes.
While, as of the date of this Annual Report on Form 10-K, we have not encountered cybersecurity challenges that have materially impaired our operations or financial standing, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. ​ Management’s Role Managing Risk ​ While the ITSC and our Board of Directors, to which it reports, oversee cybersecurity risk management, management is responsible for the day-to-day cybersecurity risk management processes.
The incident response teams (i) include subject matter experts to address cyber threats and (ii) includes representatives from the accounting team to monitor threat escalation and identify events that may warrant Board notification and a Form 8-K cybersecurity notice. ​ Reporting to Board of Directors ​ The CISO, in his capacity, regularly informs the ITSC and Board Risk Committee of all aspects related to cybersecurity risks and incidents.
The incident response team includes (i) subject matter experts to address cyber threats and (ii) representatives from the accounting team to monitor threat escalation and identify events that may warrant Board notification and a Form 8-K cybersecurity notice. ​ Reporting to Board of Directors ​ The CISO, in his capacity, regularly informs the ITSC and Board Risk Committee of all aspects related to cybersecurity risks and incidents.
Recognizing the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk management systems. These partnerships enable us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes.
Recognizing the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk management systems. These partnerships enable us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain effective.
Our risk management team works closely with our IT department to continuously evaluate and address cybersecurity risks in alignment with our strategic objectives, business environment and operational needs. ​ ​ 42 ​ Table of Contents ​ Engage Third-parties on Risk Management ​ Ongoing business expansions may expose us to potential new threats as well as expanded regulatory scrutiny including the introduction of new cybersecurity requirements.
Our risk management team works closely with our IT department to continuously evaluate and address cybersecurity risks in alignment with our strategic objectives, business environment and operational needs. ​ Engage Third Parties on Risk Management ​ Ongoing business expansions may expose us to potential new threats as well as expanded regulatory scrutiny including the introduction of new cybersecurity requirements.
We have implemented precautionary measures and controls reasonably designed that follow the National Institute of Standards and Technology (NIST) and other industry standards to address this increased risk. ​ Managing Material Risks & Integrated Overall Risk Management ​ We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management.
We have implemented precautionary measures and controls reasonably designed to align with the National Institute of Standards and Technology (NIST) and other industry standards to address this increased risk. ​ Managing Material Risks and Integrated Overall Risk Management ​ We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management.
This review helps in measuring the effectiveness of controls and identifying areas for improvement ensuring cyber controls is commensurate with our inherent risk profile and the Board’s risk appetite. ​ Monitoring Cybersecurity Incidents ​ The CISO continually monitors for the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
This review helps in measuring the effectiveness of controls and identifying areas for improvement ensuring cyber controls are commensurate with our inherent risk profile and the Board’s risk appetite. ​ ​ 39 ​ Table of Contents ​ Monitoring Cybersecurity Incidents ​ The CISO continually monitors for the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity efforts with the overall risk management framework. ​ 43 ​ Table of Contents ​ Risk Management Personnel ​ Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO.
The CISO conducts a quarterly review of our cybersecurity posture and the effectiveness of our risk management strategies. This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity efforts with the overall risk management framework. ​ Risk Management Personnel ​ Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO.
Removed
The CISO conducts a quarterly review of our cybersecurity posture and the effectiveness of our risk management strategies.
Added
Monitoring includes quarterly assessments by our Chief Information Security Officer (“CISO”) and on an ongoing basis by our security engineers.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur eight leased locations are under agreements that end from June 30, 2025 through September 30, 2044. We believe that all of our properties and equipment are well maintained, in good operating condition and adequate for all of our present and anticipated needs. ​
Biggest changeOur nine leased locations are under agreements that expire between July 31, 2026 through February 12, 2043. We believe that all of our properties and equipment are well maintained, in good operating condition and adequate for all of our present and anticipated needs. ​
Item 2. Propertie s ​ We conduct our business primarily at 53 banking locations in various communities throughout the greater western and southern Chicago metropolitan area. The principal business office of the Company is located at 37 South River Street, Aurora, Illinois. We own 45 of our properties and lease eight of our locations.
Item 2. Propertie s ​ We conduct our business primarily at 55 banking locations in various communities throughout the greater western and southern Chicago metropolitan area. The principal business office of the Company is located at 37 South River Street, Aurora, Illinois. We own 46 of our properties and lease nine of our locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement, after consultation with legal counsel, believes that the ultimate liabilities, if any, resulting from these actions will not have a material adverse effect on the financial position of the Bank or on the consolidated financial position of the Company. 44 ​ Table of Contents ​
Biggest changeManagement, after consultation with legal counsel, believes that the ultimate liabilities, if any, resulting from these actions will not have a material adverse effect on the financial position of the Bank or on the consolidated financial position of the Company. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe information assumes that $100 was invested at the closing price at December 31, 2019, in the common stock of the Company and each index and that all dividends were reinvested. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Old Second Bancorp, Inc. ​ 100.00 75.30 95.07 122.86 119.95 139.97 ​ S&P 500 Index ​ 100.00 118.40 ​ 152.39 ​ 124.79 ​ 157.59 ​ 197.02 ​ KBW Nasdaq Bank Index ​ 100.00 89.69 124.06 97.52 96.65 132.60 ​ ​
Biggest changeThe information assumes that $100 was invested at the closing price at December 31, 2020, in the common stock of the Company and each index and that all dividends were reinvested. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index ​ ​ ​ 12/31/2020 ​ ​ ​ 12/31/2021 ​ ​ ​ 12/31/2022 ​ ​ ​ 12/31/2023 ​ ​ ​ 12/31/2024 ​ ​ ​ 12/31/2025 Old Second Bancorp, Inc. ​ 100.00 126.26 163.16 159.30 185.89 206.81 ​ S&P 500 Index ​ 100.00 128.71 ​ 105.40 ​ 133.10 ​ 166.40 ​ 196.16 ​ KBW Nasdaq Bank Index ​ 100.00 138.33 108.73 107.76 147.85 196.00 ​ ​ The stock performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. ​
This Repurchase Program expires on December 31, 2025. ​ The actual means and timing of any repurchases, quantity of purchased shares and prices will be, subject to certain limitations, at the discretion of management and will depend on a number of factors, including, without limitation, market prices of our common stock, general market and economic conditions, and applicable legal and regulatory requirements.
This Repurchase Program expires on December 31, 2026. ​ The actual means and timing of any repurchases, quantity of purchased shares and prices will be, subject to certain limitations, at the discretion of management and will depend on a number of factors, including, without limitation, market prices of our common stock, general market and economic conditions, and applicable legal and regulatory requirements.
Repurchases under the Repurchase Program may be initiated, discontinued, suspended or restarted at any time; provided that repurchases under the Repurchase Program after December 31, 2025, would require Federal Reserve non-objection or approval.
Repurchases under the Repurchase Program may be initiated, discontinued, suspended or restarted at any time; provided that repurchases under the Repurchase Program after December 31, 2026, would require Federal Reserve non-objection or approval.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ For information regarding securities authorized for issuance under the Company’s equity compensation plans, see Part III, Item 12. ​ Market for the Company’s Common Stock ​ Our common stock trades on the NASDAQ Global Select Market under the symbol “OSBC.” As of December 31, 2024, we had 1,154 stockholders of record for our common stock.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ For information regarding securities authorized for issuance under the Company’s equity compensation plans, see Part III, Item 12. ​ Market for the Company’s Common Stock ​ Our common stock trades on the NASDAQ Global Select Market under the symbol “OSBC.” As of December 31, 2025, we had 1,238 stockholders of record for our common stock.
The following graph indicates, for the period commencing December 31, 2019, and ending December 31, 2024, a comparison of cumulative total returns for the Company, S&P 500 Index and the KBW NASDAQ Bank Index.
The following graph indicates, for the period commencing December 31, 2020, and ending December 31, 2025, a comparison of cumulative total returns for the Company, S&P 500 Index and the KBW NASDAQ Bank Index.
The following table sets forth the high and low trading prices of our common stock on the NASDAQ Global Select Market, and information about declared dividends during each quarter for 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ High Low Dividend High Low Dividend First quarter ​ $ 15.85 ​ $ 13.00 ​ $ 0.05 ​ $ 17.70 ​ $ 13.11 ​ $ 0.05 ​ Second quarter ​ 14.99 ​ 13.20 ​ 0.05 ​ 14.29 ​ 10.79 ​ 0.05 ​ Third quarter ​ 17.46 ​ 14.41 ​ 0.05 ​ 16.47 ​ 12.69 ​ 0.05 ​ Fourth quarter ​ 19.37 ​ 14.78 ​ 0.06 ​ 16.76 ​ 13.08 ​ 0.05 ​ ​ Dividends ​ The Company’s stockholders are entitled to receive dividends when, as and if declared by the board of directors out of funds legally available therefor.
The following table sets forth the high and low trading prices of our common stock on the NASDAQ Global Select Market, and information about declared dividends during each quarter for 2025 and 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ 2024 ​ ​ ​ ​ ​ ​ ​High ​ ​ ​ ​ ​ ​Low ​ ​ ​ Dividend ​ ​ ​ ​ ​ ​High ​ ​ ​ ​ ​ ​Low ​ ​ ​ Dividend First quarter ​ $ 19.46 ​ $ 16.14 ​ $ 0.06 ​ $ 15.85 ​ $ 13.00 ​ $ 0.05 ​ Second quarter ​ 17.86 ​ 14.14 ​ 0.06 ​ 14.99 ​ 13.20 ​ 0.05 ​ Third quarter ​ 19.25 ​ 16.43 ​ 0.06 ​ 17.46 ​ 14.41 ​ 0.05 ​ Fourth quarter ​ 20.96 ​ 16.65 ​ 0.07 ​ 19.37 ​ 14.78 ​ 0.06 ​ ​ Dividends ​ The Company’s stockholders are entitled to receive dividends when, as and if declared by the board of directors out of funds legally available therefor.
We are not obligated to repurchase any shares under the Repurchase Program. ​ 45 ​ Table of Contents Recent Sales of Unregistered Securities ​ None. ​ Form 10-K and Other Information ​ Transfer Agent/Stockholder Services ​ Inquiries related to stockholders’ records, stock transfers, changes of ownership, change of address and dividend payments should be sent to the transfer agent at the following address: ​ Old Second Bancorp, Inc. c/o Shirley Cantrell Stockholder Relations Department 37 South River Street Aurora, Illinois 60507 (630) 906-2303 scantrell@oldsecond.com ​ Stockholder Return Performance Graph.
Inquiries related to stockholders’ records, stock transfers, changes of ownership, change of address and dividend payments should be sent to the transfer agent at the following address: ​ Old Second Bancorp, Inc. c/o Shirley Cantrell Stockholder Relations Department 37 South River Street Aurora, Illinois 60507 (630) 906-2303 scantrell@oldsecond.com ​ Stockholder Return Performance Graph.
In December 2024, our board of directors re-authorized the repurchase of up to 2,234,896 shares of our common stock (the “Repurchase Program”).
In January 2026, our board of directors re-authorized the repurchase of up to 1,908,042 shares of our common stock (the “Repurchase Program”).
See “Supervision and Regulation—Regulation and Supervision of the Company.” ​ Stock Repurchases ​ In November 2023, our board of directors authorized the repurchase of up to 2,234,896 shares of our common stock. We made no repurchases in the year ended 2023 or during 2024 prior to the program expiring on December 31, 2024.
See “Supervision and Regulation—Regulation and Supervision of the Company.” ​ Stock Repurchases ​ In December 2024, our board of directors re-authorized the repurchase of up to 2,234,896 shares of our common stock (the “Repurchase Program”). We made repurchases of 326,854 shares in 2025, none of which occurred in the fourth quarter of 2025.
Added
We are not obligated to repurchase any shares under the Repurchase Program. ​ 41 ​ Table of Contents Recent Sales of Unregistered Securities ​ None. ​ Form 10-K and Other Information ​ Transfer Agent/Stockholder Services .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

131 edited+28 added−25 removed67 unchanged
Biggest changeSee the discussion entitled “Non-GAAP Financial Measures” on page 51 and the table below, which provides a reconciliation of this non-GAAP measure and related items, to the most comparable GAAP equivalents. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ 2022 Net Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes (GAAP) ​ ​ $ 112,956 ​ $ 124,408 ​ $ 91,549 Pre-tax income adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Litigation related expenses ​ ​ ​ - ​ ​ 1,200 ​ ​ - Death benefit related to BOLI ​ ​ ​ (905) ​ ​ - ​ ​ - Merger related costs, net of losses/(gains) on branch sales ​ ​ ​ 1,992 ​ ​ (258) ​ ​ 9,144 Liquidation and deconversion costs on Visa credit card portfolio ​ ​ ​ - ​ ​ 629 ​ ​ - Gains on the sale of Visa credit card and land trust portfolios ​ ​ ​ - ​ ​ - ​ ​ (923) Adjusted net income before taxes ​ ​ ​ 114,043 ​ ​ 125,979 ​ ​ 99,770 Taxes on adjusted net income ​ ​ ​ 28,176 ​ ​ 33,092 ​ ​ 26,341 Adjusted net income (non-GAAP) ​ ​ $ 85,867 ​ $ 92,887 ​ $ 73,429 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share (GAAP) ​ ​ $ 1.90 ​ $ 2.05 ​ $ 1.51 Diluted earnings per share (GAAP) ​ ​ ​ 1.87 ​ ​ 2.02 ​ ​ 1.49 Adjusted basic earnings per share (non-GAAP) ​ ​ ​ 1.92 ​ ​ 2.08 ​ ​ 1.65 Adjusted diluted earnings per share (non-GAAP) ​ ​ ​ 1.88 ​ ​ 2.05 ​ ​ 1.62 ​ Adjusted net income provides for a comparative analysis of our performance excluding those one-time matters, such as transaction-related costs for our purchase of five FRME branches, litigation expense related to a claim regarding prior years’ overdraft fee compliance, net gains or net losses stemming from branch sales completed to eliminate duplicative geographic locations due to past acquisitions, and the Visa credit card and land trust portfolio sales, which were executed to exit products that were not within our strategic plan. ​ Net interest and dividend income decreased $10.3 million, or 4.1% for 2024 compared to 2023, due primarily to increased interest expense due to higher market rates on deposits throughout 2024, partially offset by the impact of market interest rates on loans, and lower average balances on FHLBC advances.
Biggest changeSee the discussion entitled “Non-GAAP Financial Measures” on page 48 and the table below, which provides a reconciliation of this non-GAAP measure and related items, to the most comparable GAAP equivalents. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ ​ ​ 2025 ​ 2024 ​ 2023 ​ Net Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes (GAAP) ​ $ 107,751 ​ $ 112,956 ​ $ 124,408 ​ Pre-tax income adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for credit losses - Day Two ​ ​ 13,153 ​ ​ - ​ ​ - ​ Litigation related expenses ​ ​ - ​ ​ - ​ ​ 1,200 ​ Securities (gains) losses, net ​ ​ (7) ​ ​ - ​ ​ 4,148 ​ Death benefit related to BOLI ​ ​ (430) ​ ​ (905) ​ ​ - ​ MSR losses ​ ​ 1,918 ​ ​ 723 ​ ​ 1,425 ​ Acquisition related costs, net of (gains) losses on branch sales ​ ​ 15,068 ​ ​ 1,992 ​ ​ (258) ​ Liquidation and deconversion costs on Visa credit card portfolio ​ ​ - ​ ​ - ​ ​ 629 ​ Adjusted net income before taxes ​ ​ 137,453 ​ ​ 114,766 ​ ​ 131,552 ​ Taxes on adjusted net income ​ ​ 34,883 ​ ​ 28,340 ​ ​ 34,566 ​ Adjusted net income (non-GAAP) ​ $ 102,570 ​ $ 86,426 ​ $ 96,986 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share (GAAP) ​ $ 1.64 ​ $ 1.90 ​ $ 2.05 ​ Diluted earnings per share (GAAP) ​ ​ 1.62 ​ ​ 1.87 ​ ​ 2.02 ​ Adjusted basic earnings per share (non-GAAP) ​ ​ 2.10 ​ ​ 1.93 ​ ​ 2.17 ​ Adjusted diluted earnings per share (non-GAAP) ​ ​ 2.07 ​ ​ 1.89 ​ ​ 2.14 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total average assets ​ ​ 6,347,633 ​ ​ 5,642,950 ​ ​ 5,820,173 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets (GAAP) ​ ​ 1.27 % ​ 1.51 % ​ 1.58 % Adjusted return on average assets (non-GAAP) ​ ​ 1.62 ​ ​ 1.53 ​ ​ 1.67 ​ ​ Adjusted net income provides a comparative analysis of our performance excluding those one-time matters, such as transaction-related costs for our acquisition of Bancorp Financial and our purchase of five FRME branches, Day Two provision for credit losses from our acquisition of Bancorp Financial, net securities (gains)/losses, death benefits realized on BOLI, litigation expense related to a claim regarding prior years’ overdraft fee compliance, and net gains or net losses stemming from branch sales completed to eliminate duplicative geographic locations due to past acquisitions. ​ ​ 45 ​ Table of Contents ​ Net interest and dividend income increased $51.3 million, or 21.2% for 2025 compared to 2024, due primarily to increased interest and dividend income stemming from our acquisition of Bancorp Financial as well as decreased borrowing costs on the lower average balances on FHLBC advances.
The decrease in 2024 is primarily due to a decrease of $29.3 million of Commercial real estate – investor loans and $27.0 million of commercial real estate – owner occupied, and partially offset by an increase of $16.3 million of commercial, compared to 2023.
The decrease in 2024, compared to 2023, is primarily due to a decrease of $29.3 million of commercial real estate – investor loans and $27.0 million of commercial real estate – owner occupied, and partially offset by an increase of $16.3 million of commercial, compared to 2023.
Our liquidity principally depends on cash flows from net operating activities, including pledging requirements, investment in, and both maturity and repayment of assets, changes in balances of deposits and borrowings, and our ability to borrow funds. In addition, the Company’s liquidity depends on the Bank’s ability to pay dividends, which is subject to certain regulatory requirements. See Item 1.
Our liquidity principally depends on cash flows from net operating activities, including pledging requirements, investment in assets, and both maturity and repayment of assets, changes in balances of deposits and borrowings, and our ability to borrow funds. In addition, the Company’s liquidity depends on the Bank’s ability to pay dividends, which is subject to certain regulatory requirements. See Item 1.
Management reviews its process quarterly using an extensive and detailed loan review process, makes changes as needed, and reports those results at meetings of our Board of Directors and Audit Committee. 64 ​ Table of Contents ​ Although management believes the ACL is sufficient to cover expected losses over the estimated life of our loan portfolio, there can be no assurance that the allowance will prove sufficient to cover actual loan and lease losses or that regulators, in reviewing the loan portfolio, would not request us to materially adjust our ACL at the time of their examination.
Management reviews its process quarterly using an extensive and detailed loan review process, makes changes as needed, and reports those results at meetings of our Board of Directors and Audit Committee. 60 ​ Table of Contents ​ Although management believes the ACL is sufficient to cover expected losses over the estimated life of our loan portfolio, there can be no assurance that the allowance will prove sufficient to cover actual loan and lease losses or that regulators, in reviewing the loan portfolio, would not request us to materially adjust our ACL at the time of their examination.
We continue to take steps to control operating expenses and increase noninterest income. ​ As we focused on reducing noninterest expenses, exclusive of acquisition-related activity, we were also able to maintain our profitable wealth management business, and continue profitability, though to a lesser extent, with the mortgage banking business as originations and sales are negatively impacted by elevated interest rates. ​ For information comparing our financial condition and results of operations for the year ended December 31, 2023, to year ended December 31, 2022, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 7, 2024. ​ Critical accounting estimates ​ Our consolidated financial statements are prepared based on the application of accounting policies in accordance with GAAP and follow general practices within the banking industry.
We continue to take steps to control operating expenses and increase noninterest income. ​ As we focused on reducing noninterest expenses, exclusive of acquisition-related activity, we were also able to maintain our profitable wealth management business, and continue profitability, though to a lesser extent, with the mortgage banking business as originations and sales are negatively impacted by elevated interest rates. ​ For information comparing our financial condition and results of operations for the year ended December 31, 2024, to year ended December 31, 2023, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 6, 2025. ​ Critical Accounting Estimates ​ Our consolidated financial statements are prepared based on the application of accounting policies in accordance with GAAP and follow general practices within the banking industry.
Classified assets include both classified loans and OREO. Loans classified as substandard are inadequately protected by either the current net worth and ability to meet payment obligations of the obligor, or by the collateral pledged to secure the loan, if any.
Classified assets include both classified loans, OREO and repossessed assets. Loans classified as substandard are inadequately protected by either the current net worth and ability to meet payment obligations of the obligor, or by the collateral pledged to secure the loan, if any.
The junior subordinated debentures outstanding at December 31, 2024 consist of $25.8 million of the Trust II issuance, including both the preferred and common stock components related to this trust preferred issuance. ​ In the second quarter of 2021, we entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers pursuant to which we sold and issued $60.0 million in aggregate principal amount of our 3.50% Fixed-to-Floating Rate Subordinated Notes due April 15, 2031 (the “Notes”).
The junior subordinated debentures outstanding at December 31, 2025, consist of $25.8 million of the Trust II issuance, including both the preferred and common stock components related to this trust preferred issuance. ​ In the second quarter of 2021, we entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers pursuant to which we sold and issued $60.0 million in aggregate principal amount of our 3.50% Fixed-to-Floating Rate Subordinated Notes due April 15, 2031 (the “Notes”).
In 2023, we recorded a provision for credit losses of $16.5 million, comprised of an $18.1 million provision for credit loss expense on loans, and a $1.6 million release of provision for credit losses on unfunded commitments.
In 2023, we recorded a provision for credit losses of $16.5 million, comprised of a $18.1 million provision for credit loss expense on loans, and a $1.6 million release of provision for credit losses on unfunded commitments.
We also offer extensive wealth management services, which include a registered investment advisory platform in addition to trust administration and trust services related to personal and corporate trusts, including employee benefit plan administration services. ​ Our primary deposit products are checking, NOW, money market, savings, and certificate of deposit accounts, and our primary lending products are commercial mortgages, leases, construction lending, commercial loans, residential mortgages, and consumer loans.
We also offer extensive wealth management services, which include a registered investment advisory platform in addition to trust administration and trust services related to personal and corporate trusts, including employee benefit plan administration services. ​ Our primary deposit products are checking, NOW, money market, savings, and certificate of deposit accounts, and our primary lending products are commercial mortgages, leases, construction lending, commercial loans, residential mortgages, powersport, and other consumer loans.
As of December 31, 2024, and December 31, 2023, total trust preferred proceeds of $25.0 million qualified as Tier 1 regulatory capital at the bank holding company level. ​ In the fourth quarter of 2023, our Board of Directors authorized the repurchase of up to 2,234,896 shares (or approximately 5%) of our outstanding common stock, which authorization expired on December 31, 2024.
As of December 31, 2025, and December 31, 2024, total trust preferred proceeds of $25.0 million qualified as Tier 1 regulatory capital at the bank holding company level. ​ In the fourth quarter of 2024, our Board of Directors authorized the repurchase of up to 2,234,896 shares (or approximately 5%) of our outstanding common stock, which authorization expired on December 31, 2025.
For additional information regarding our cautionary disclosures, see the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this annual report. ​ Business overview ​ We provide a wide range of financial services through our 53 banking locations located in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle and Will counties in Illinois.
For additional information regarding our cautionary disclosures, see the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this annual report. ​ Business Overview ​ We provide a wide range of financial services through our 55 banking locations located in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle and Will counties in Illinois.
Recent accounting pronouncements and standards that have impacted or could potentially affect us are also discussed in Note 1 of the consolidated financial statements. ​ ​ 50 ​ Table of Contents ​ Allowance for credit losses for loans ​ The allowance for credit losses (“ACL”) for loans represents management’s estimate of all expected credit losses over the expected contractual life of our loan portfolio.
Recent accounting pronouncements and standards that have impacted or could potentially affect us are also discussed in Note 1 of the consolidated financial statements. ​ ​ 46 ​ Table of Contents ​ Allowance for credit losses for loans ​ The allowance for credit losses (“ACL”) for loans represents management’s estimate of all expected credit losses over the expected contractual life of our loan portfolio.
Nonaccrual loans are included in the above stated average balances. ​ ​ 53 ​ Table of Contents ​ For purposes of discussion, net interest income and net interest income to interest earning assets have been adjusted to a non-GAAP (TE) basis to more appropriately compare returns on tax-exempt loans and securities to other earning assets.
Nonaccrual loans are included in the above stated average balances. ​ ​ 49 ​ Table of Contents ​ For purposes of discussion, net interest income and net interest income to interest earning assets have been adjusted to a non-GAAP (TE) basis to more appropriately compare returns on tax-exempt loans and securities to other earning assets.
A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is presented below or alongside the first instance where each non-GAAP financial measure is used. 51 ​ Table of Contents ​ Results of operations ​ Net interest income ​ Net interest income, which is our primary source of earnings, is the difference between interest income and fees earned on interest-earning assets, such as loans and investment securities, as well as accretion income on purchased loans, and interest incurred on interest-bearing liabilities, such as deposits and borrowings.
A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is presented below or alongside the first instance where each non-GAAP financial measure is used. ​ Results of Operations ​ Net interest income ​ Net interest income, which is our primary source of earnings, is the difference between interest income and fees earned on interest-earning assets, such as loans and investment securities, as well as accretion income on purchased loans, and interest incurred on interest-bearing liabilities, such as deposits and borrowings.
As of April 15, 2026 forward, the interest rate on the Notes will generally reset quarterly to a rate equal to Three-Month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears.
From April 15, 2026, forward, the interest rate on the Notes will generally reset quarterly to a rate equal to Three-Month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears.
Changes in underlying factors, estimates, assumptions or judgements could have a material impact on our future financial condition and results of operations. ​ Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.
Changes in underlying factors, estimates, assumptions or judgments could have a material impact on our future financial condition and results of operations. ​ Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different from originally reported.
The net decrease in treasury stock increased stockholders’ equity, and also decreased earnings per share by increasing the number of shares outstanding. ​ The Basel III rules impose minimum capital requirements for bank holding companies and banks.
The net decrease in treasury stock increased stockholders’ equity, and also decreased earnings per share by increasing the number of shares outstanding. ​ ​ 63 ​ Table of Contents The Basel III rules impose minimum capital requirements for bank holding companies and banks.
Proceeds from sales of loans held-for-sale, net of funds used to originate loans held-for-sale, was a source of inflows for 2024, 2023, and 2022. Interest received, net of interest paid, combined with changes in other assets and liabilities were a source of inflows for 2024, a source of outflows for 2023, and a source of inflows for 2022.
Proceeds from sales of loans held-for-sale, net of funds used to originate loans held-for-sale, was a source of outflows for 2025, but a source of inflows for 2024 and 2023. Interest received, net of interest paid, combined with changes in other assets and liabilities were a source of inflows for 2025 and 2024, but a source of outflows for 2023.
CLO credit enhancement is achieved through over-collateralization and/or subordination. 58 ​ Table of Contents ​ The following table presents the expected maturities or call dates and weighted average yield (nontax equivalent) of securities by major category as of December 31, 2024. Weighted average yield is based on amortized costs and not calculated on a tax equivalent basis.
CLO credit enhancement is achieved through over-collateralization and/or subordination. 54 ​ Table of Contents ​ The following table presents the expected maturities or call dates and weighted average yield (nontax equivalent) of securities by major category as of December 31, 2025. Weighted average yield is based on amortized costs and not calculated on a tax equivalent basis.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation s ​ The following discussion provides additional information regarding our operations for the twelve-month periods ending December 31, 2024, 2023 and 2022, and financial condition at December 31, 2024 and 2023 and should be read in conjunction with our consolidated financial statements and the related notes.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation s ​ The following discussion provides additional information regarding our operations for the twelve-month periods ended December 31, 2025, 2024 and 2023, and financial condition at December 31, 2025 and 2024 and should be read in conjunction with our consolidated financial statements and the related notes.
Additional sources of funding include a $30.0 million undrawn line of credit held by the Company with a third party financial institution. ​ Net cash inflows from operating activities were $131.5 million during 2024, compared with inflows of $116.4 million in 2023 and inflows of $97.3 million in 2022.
Additional sources of funding include a $30.0 million undrawn line of credit held by the Company with a third-party financial institution. ​ Net cash inflows from operating activities were $122.3 million during 2025, compared with inflows of $131.5 million in 2024 and inflows of $116.4 million in 2023.
See Note 17 “Fair Value Measurements” and Note 18 “Fair Values of Financial Instruments,” to the consolidated financial statements which include information about the extent to which fair value is used to measure assets and liabilities, and the valuation methodologies and key inputs used for further information regarding the valuation processes. ​ Non-GAAP Financial Measures ​ This annual report contains references to financial measures that are not defined in GAAP.
See Note 16 “Fair Value Measurements” and Note 17 “Fair Values of Financial Instruments,” to the consolidated financial statements which include information about the extent to which fair value is used to measure assets and liabilities, and the valuation methodologies and key inputs used for further information regarding the valuation processes. ​ ​ 47 ​ Table of Contents ​ Non-GAAP Financial Measures ​ This annual report contains references to financial measures that are not defined in GAAP.
A more detailed description of these loans can be found in Note 5 to the Consolidated Financial Statements, as listed in the credit quality indicators discussion. ​ Allowance for Credit Losses ​ At December 31, 2024, the ACL on loans totaled $43.6 million, and the ACL on unfunded commitments, included in other liabilities, totaled $1.9 million, compared to the ACL on loans of $44.3 million and ACL on unfunded commitments of $2.7 million at December 31, 2023.
A more detailed description of these loans can be found in Note 5 to the Consolidated Financial Statements, as listed in the credit quality indicators discussion. ​ Allowance for Credit Losses ​ At December 31, 2025, the ACL on loans totaled $72.3 million, and the ACL on unfunded commitments, included in other liabilities, totaled $2.1 million, compared to the ACL on loans of $43.6 million and ACL on unfunded commitments of $1.9 million at December 31, 2024.
These policies require the reliance on estimates, assumptions and judgements, which may prove inaccurate or are subject to variations.
These policies require the reliance on estimates, assumptions and judgments, which may prove inaccurate or are subject to variations.
An analysis of the provision for income taxes for the three years ended December 31, 2024, is detailed in Note 11 of the consolidated financial statements and our income tax accounting policies are described in Note 1 to the consolidated financial statements. ​ Our income tax expense totaled $27.7 million for December 31, 2024 compared to an income tax expense of $32.7 million in 2023 and $24.1 million for 2022.
An analysis of the provision for income taxes for the three years ended December 31, 2025, is detailed in Note 11 of the consolidated financial statements and our income tax accounting policies are described in Note 1 to the consolidated financial statements. ​ Our income tax expense totaled $27.4 million for the year ended December 31, 2025, compared to an income tax expense of $27.7 million in 2024 and $32.7 million for 2023.
Management’s policy is to mitigate the impact of changes in market interest rates to the extent possible as part of our balance sheet management process. ​ Net cash inflows from investing activities were $322.7 million in 2024, compared to $161.6 million of inflows in 2023, and outflows of $432.8 million in 2022.
Management’s policy is to mitigate the impact of changes in market interest rates to the extent possible as part of our balance sheet management process. ​ Net cash inflows from investing activities were $159.8 million in 2025, compared to $322.7 million of inflows in 2024, and inflows of $161.6 million in 2023.
While there are no significant concentrations of loans where the customers’ ability to honor loan terms is dependent upon a single economic sector, the real estate categories represented 67.2% and 68.8% of the portfolio at December 31, 2024 and 2023, respectively. Our lending exposure is diversified across our each of our segments presented above.
While there are no significant concentrations of loans where the customers’ ability to honor loan terms is dependent upon a single economic sector, the real estate categories represented 56.5% and 67.2% of the portfolio at December 31, 2025 and 2024, respectively. Our lending exposure is diversified across each of our segments presented above.
The reduction in accumulated other comprehensive loss on available-for-sale securities in 2024 contributed to the growth in these ratios, as the numerator was increased.
The reduction in accumulated other comprehensive loss on available-for-sale securities in 2025 contributed to the growth of these ratios, as the numerator was increased.
At December 31, 2023, accumulated other comprehensive loss, net of deferred taxes, was $62.8 million, compared to $93.1 million as of year-end 2022. ​ We issued $25.8 million of cumulative trust preferred securities through a private placement completed by a second unconsolidated subsidiary, Trust II, in April 2007.
At December 31, 2024, accumulated other comprehensive loss, net of deferred taxes, was $47.7 million, compared to $62.8 million as of year-end 2023. ​ We issued $25.8 million of cumulative trust preferred securities through a private placement completed by a second unconsolidated subsidiary, Trust II, in April 2007.
Our provision for credit losses in 2024 totaled $12.8 million, compared to $16.5 million in 2023, and $6.6 million in 2022. Net charge-offs recorded in 2024 totaled $14.2 million, compared to net charge-offs of $23.3 million recorded in 2023, and net charge-offs of $1.6 million in 2022.
Our provision for credit losses in 2025 totaled $27.6 million, compared to $12.8 million in 2024, and $16.5 million in 2023. Net charge-offs recorded in 2025 totaled $16.2 million, compared to net charge-offs of $14.2 million recorded in 2024, and net charge-offs of $23.3 million in 2023.
See the discussion entitled “Non-GAAP Financial Measures” on page 51 and the table on page 54 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. ​ 2 Interest income from loans is shown on a tax equivalent basis, which is a non-GAAP financial measure, discussed below, and includes net costs of $1.8 million for 2024, net costs of $2.7 million for 2023, and net fees of $3.0 million for 2022.
See the discussion entitled “Non-GAAP Financial Measures” on page 48 and the table on page 50 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. ​ 2 Interest income from loans is shown on a tax equivalent basis, which is a non-GAAP financial measure, discussed below, and includes net fees of $4.0 million for 2025, net costs of $1.8 million for 2024, and net costs of $2.7 million for 2023.
Additionally, provision expense may be more volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance. ​ During 2024, the release of credit losses on unfunded commitments totaled $834,000, and the allowance for unfunded commitments totaled $1.9 million as of December 31, 2024.
Additionally, provision expense may be more volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance. ​ During 2025, the provision of credit losses on unfunded commitments totaled $185,000, and the allowance for unfunded commitments totaled $2.1 million as of December 31, 2025.
The change in total stockholders’ equity from 2022 to 2023 was also increased by a $28.3 million increase in the fair value adjustments on securities available for sale, and a $2.0 million increase in the fair value adjustments on swaps within accumulated other comprehensive loss, net of tax .
The change in total stockholders’ equity from 2023 to 2024 was also increased by a $15.0 million increase in the fair value adjustments on securities and swaps available for sale, within accumulated other comprehensive loss, net of tax .
We recorded net loan charge-offs of $14.2 million in 2024, $23.3 million in 2023, and $1.6 million in 2022. 59 ​ Table of Contents ​ The quality of our loan portfolio is in large part a reflection of the economic health of the communities in which we operate. Our local communities have been relatively stable in the past five years.
We recorded net loan charge-offs of $16.2 million in 2025, $14.2 million in 2024, and $23.3 million in 2023. 55 ​ Table of Contents ​ The quality of our loan portfolio is in large part a reflection of the economic health of the communities in which we operate. Our local communities have been relatively stable in the past five years.
These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and carry the distinct possibility that we will sustain some loss if deficiencies remain uncorrected. ​ ​ 61 ​ Table of Contents ​ Total classified loans decreased in 2024 by $40.8 million compared to 2023, and increased in 2023 by $23.9 million compared to 2022.
These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and carry the distinct possibility that we will sustain some loss if deficiencies remain uncorrected. ​ 57 ​ Table of Contents ​ Total classified loans increased in 2025 by $58.1 million compared to 2024, and decreased in 2024 by $40.8 million compared to 2023.
The unrealized mark to market adjustment on securities was a $68.6 million unrealized loss as of December 31, 2024, compared to an $84.2 million unrealized loss at December 31, 2023, due primarily to changes in market interest rates and the portfolio holdings mix year over year.
The unrealized mark to market adjustment on securities was a $43.1 million unrealized loss as of December 31, 2025, compared to a $68.6 million unrealized loss at December 31, 2024, due primarily to changes in market interest rates and the portfolio holdings mix year over year.
The ACL as a percentage of total loans was 1.1% as of December 31, 2024 and as of December 31, 2023.
The ACL as a percentage of total loans was 1.4% as of December 31, 2025, and 1.1% as of December 31, 2024.
Management monitors a metric of classified assets to the sum of Bank Tier 1 capital and the ACL, which is referred to as the “classified assets ratio.” Our classified assets ratio decreased to 17.37% at December 31, 2024, compared to 21.66% at December 31, 2023, from 18.36% at December 31, 2022. ​ Problem Loans ​ We utilize an internal asset classification system as a means of reporting problem and potential problem assets.
Management monitors a metric of classified assets to the sum of Bank Tier 1 capital and the ACL, which is referred to as the “classified assets ratio.” Our classified assets ratio increased to 17.82% at December 31, 2025, compared to 17.45% at December 31, 2024, and 21.66% at December 31, 2023. ​ Problem Loans ​ We utilize an internal asset classification system as a means of reporting problem and potential problem assets.
Interest income, which would have been recognized during 2024, 2023 and 2022, had these loans been on an accrual basis throughout the year, was approximately $4.2 million, $7.3 million and $2.7 million, respectively. ​ Total past due loans, including accruing and nonaccrual loans, totaled $27.3 million at year-end 2024, a $22.1 million decrease from year end 2023, resulting in the rate of past due loans to total loans decreasing to 0.7% at year-end 2024 compared to 1.2% at year-end 2023, and 0.6% at year-end 2022.
Interest income, which would have been recognized during 2025, 2024 and 2023, had these loans been on an accrual basis throughout the year, was approximately $3.8 million, $4.2 million and $7.3 million, respectively. ​ Total past due loans, including accruing and nonaccrual loans, totaled $85.7 million at year-end 2025, a $58.4 million increase from year end 2024, resulting in the rate of past due loans to total loans increasing to 1.6% at year-end 2025 compared to 0.7% at year-end 2024, and 1.2% at year-end 2023.
The change in interest due to both rate and volume has been allocated between factors in proportion to the relationship of absolute dollar amounts of the change in each . ​ Provision for credit losses ​ The provision for credit losses is the expense necessary to maintain the ACL at levels appropriate to absorb our estimate of credit losses expected over the life of our loan portfolio and unfunded lending commitments. ​ We recorded a $12.8 million provision for credit losses in 2024, a decrease of $3.8 million, from 2023.
The change in interest due to both rate and volume has been allocated between factors in proportion to the relationship of absolute dollar amounts of the change in each . ​ Provision for credit losses ​ The provision for credit losses is the expense necessary to maintain the ACL at levels appropriate to absorb our estimate of credit losses expected over the life of our loan portfolio and unfunded lending commitments. ​ ​ 50 ​ Table of Contents ​ We recorded a $27.6 million provision for credit losses in 2025, an increase of $14.8 million from 2024.
During 2023, the release of credit losses on unfunded commitments totaled $1.6 million, and allowance for unfunded commitments totaled $2.7 million as of December 31, 2023. Management reviewed the securities portfolio for credit loss exposure and determined that no allowance for credit losses on securities was required for 2024 or 2023.
During 2024, the release of credit losses on unfunded commitments totaled $834,000, and allowance for unfunded commitments totaled $1.9 million as of December 31, 2024. Management reviewed the securities portfolio for credit loss exposure and determined that no allowance for credit losses on securities was required for 2025 or 2024.
Nonperforming loans as a percent of total loans decreased to 0.8% as of December 31, 2024, from 1.7% as of December 31, 2023, and 0.9% December 31, 2022.
Nonperforming loans as a percent of total loans increased to 1.0% as of December 31, 2025, from 0.8% as of December 31, 2024, and 1.7% December 31, 2023.
At December 31, 2024, accumulated other comprehensive loss, net of deferred taxes, was $47.7 million, compared to $62.8 million as of year-end 2023. Equity in 2024 was reduced for the payment of dividends to common stockholders, which totaled $9.4 million for the year.
At December 31, 2025, accumulated other comprehensive loss, net of deferred taxes, was $28.7 million, compared to $47.7 million as of year-end 2024. Equity in 2025 was reduced for the payment of dividends to common stockholders, which totaled $12.2 million for the year.
Cash and cash equivalents at the end of 2024 totaled $99.3 million, compared to $100.1 million at December 31, 2023, and $115.2 million as of December 31, 2022.
Cash and cash equivalents at the end of 2025 totaled $124.0 million, compared to $99.3 million at December 31, 2024, and $100.1 million as of December 31, 2023.
See Note 4 to the Consolidated Financial Statements for more detail on the ACL for securities analysis performed. ​ Other Real Estate Owned ​ Other real estate owned (“OREO”) increased to $21.6 million as of December 31, 2024, compared to $5.1 million as of December 31, 2023, reflecting a $16.5 million increase.
See Note 4 to the Consolidated Financial Statements for more detail on the ACL for securities analysis performed. ​ Other Real Estate Owned ​ Other real estate owned (“OREO”) decreased to $1.4 million as of December 31, 2025, compared to $21.6 million as of December 31, 2024, reflecting a $20.2 million decrease.
In 2024, the decrease to classified commercial real estate – owner occupied and commercial real estate – investor loans were driven by loan risk rating upgrades of $20.1 million for commercial real estate – owner occupied and $8.8 million for commercial real estate – investor, primarily in the healthcare industry.
In 2024, the decrease to classified commercial real estate – owner occupied and commercial real estate – investor loans were driven by loan risk rating upgrades of $20.1 million for commercial real estate – owner occupied and $8.8 million for commercial real estate – investor, primarily in the healthcare industry. ​ Total classified assets, which includes OREO and repossessed assets, increased $38.8 million in 2025 compared to 2024.
We recorded total loan originations, excluding renewals, of $1.03 billion in 2024, but we also experienced accelerated paydowns in 2024 due to higher levels of customer liquidity. ​ We strive to serve customers in and around our geographic locations and continue to seek opportunities in our primary lending markets; however, our markets remain very competitive for new loan business. ​ Management continues to emphasize loan portfolio quality, and credit remediation continued in 2024.
We recorded total loan originations, excluding renewals, of $1.36 billion in 2025. ​ We strive to serve customers in and around our geographic locations and continue to seek opportunities in our primary lending markets; however, our markets remain very competitive for new loan business. ​ Management continues to emphasize loan portfolio quality, and credit remediation continued in 2025.
Management’s Discussion and Analysis of Financial Condition. ​ Noninterest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest Income for the Twelve Months ending December 31, ​ Percent Change From (Dollars in thousands) 2024 ​ 2023 ​ 2022 ​ 2024-2023 ​ 2023-2022 Wealth management $ 11,426 ​ $ 9,803 ​ $ 9,887 ​ 16.6 ​ (0.8) Service charges on deposits ​ 10,226 ​ ​ 9,817 ​ ​ 9,562 ​ 4.2 ​ 2.7 Residential mortgage banking revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Secondary mortgage fees ​ 287 ​ ​ 259 ​ ​ 332 ​ 10.8 ​ (22.0) Mortgage servicing rights mark to market (loss) gain ​ (723) ​ ​ (1,425) ​ ​ 3,177 ​ 49.3 ​ (144.9) Mortgage servicing income ​ 1,942 ​ ​ 2,029 ​ ​ 2,130 ​ (4.3) ​ (4.7) Net gain on sales of mortgage loans ​ 1,805 ​ ​ 1,477 ​ ​ 2,022 ​ 22.2 ​ (27.0) Total residential mortgage banking revenue ​ 3,311 ​ ​ 2,340 ​ ​ 7,661 ​ 41.5 ​ (69.5) Securities (losses) gains, net ​ - ​ ​ (4,148) ​ ​ (944) ​ 100.0 ​ (339.4) Increase in cash surrender value of BOLI ​ 3,619 ​ ​ 2,120 ​ ​ 718 ​ 70.7 ​ 195.3 Death benefit realized on BOLI ​ 905 ​ ​ - ​ ​ - ​ N/M ​ N/M Card related income ​ 10,114 ​ ​ 10,051 ​ ​ 10,989 ​ 0.6 ​ (8.5) Other income ​ 4,218 ​ ​ 4,196 ​ ​ 5,243 ​ 0.5 ​ (20.0) Total noninterest income $ 43,819 ​ $ 34,179 ​ $ 43,116 ​ 28.2 ​ (20.7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ N/M - Not meaningful ​ Our total noninterest income increased $9.6 million, or 28.2%, to $43.8 million for 2024, compared to $34.2 million for 2023.
Management’s Discussion and Analysis of Financial Condition. ​ Noninterest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest Income for the Twelve Months ending December 31, ​ Percent Change From (Dollars in thousands) 2025 ​ 2024 ​ 2023 ​ 2025-2024 ​ 2024-2023 Wealth management $ 13,244 ​ $ 11,426 ​ $ 9,803 ​ 15.9 ​ 16.6 Service charges on deposits ​ 11,282 ​ ​ 10,226 ​ ​ 9,817 ​ 10.3 ​ 4.2 Residential mortgage banking revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Secondary mortgage fees ​ 372 ​ ​ 287 ​ ​ 259 ​ 29.6 ​ 10.8 Mortgage servicing rights mark to market loss ​ (1,918) ​ ​ (723) ​ ​ (1,425) ​ (165.3) ​ 49.3 Mortgage servicing income ​ 1,865 ​ ​ 1,942 ​ ​ 2,029 ​ (4.0) ​ (4.3) Net gain on sales of mortgage loans ​ 2,291 ​ ​ 1,805 ​ ​ 1,477 ​ 26.9 ​ 22.2 Total residential mortgage banking revenue ​ 2,610 ​ ​ 3,311 ​ ​ 2,340 ​ (21.2) ​ 41.5 Securities gains (losses), net ​ 7 ​ ​ - ​ ​ (4,148) ​ N/M ​ 100.0 Increase in cash surrender value of BOLI ​ 3,197 ​ ​ 3,619 ​ ​ 2,120 ​ (11.7) ​ 70.7 Death benefit realized on BOLI ​ 430 ​ ​ 905 ​ ​ - ​ (52.5) ​ N/M Card related income ​ 10,619 ​ ​ 10,114 ​ ​ 10,051 ​ 5.0 ​ 0.6 Other income ​ 4,973 ​ ​ 4,218 ​ ​ 4,196 ​ 17.9 ​ 0.5 Total noninterest income $ 46,362 ​ $ 43,819 ​ $ 34,179 ​ 5.8 ​ 28.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ N/M - Not meaningful ​ Our total noninterest income increased $2.5 million, or 5.8%, to $46.4 million for 2025, compared to $43.8 million for 2024.
In 2024, security transactions resulted in net cash inflows of $44.0 million, and proceeds from the sales of OREO assets accounted for inflows of $3.2 million. In 2023, security transactions resulted in net cash inflows of $378.4 million, and proceeds from the sales of OREO assets accounted for inflows of $2.0 million.
In 2025, security transactions resulted in net cash inflows of $213.9 million, and proceeds from the sales of OREO assets accounted for inflows of $24.7 million. In 2024, security transactions resulted in net cash inflows of $44.0 million, and proceeds from the sales of OREO assets accounted for inflows of $3.2 million.
In 2024, our available-for-sale securities portfolio decreased $31.1 million, compared to year-end 2023, due primarily to $304.2 million of paydowns, maturities, and calls and $5.3 million of strategic sales. These decreases in 2024 were partially offset by security purchases of $265.5 million.
In 2025, our available-for-sale securities portfolio decreased $71.2 million, compared to year-end 2024, due primarily to $279.6 million of paydowns, maturities, and calls and $7.5 million of strategic sales. These decreases in 2025 were partially offset by security purchases of $191.6 million.
See Note 1 – Basis of Presentation and Changes in Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this annual report for a discussion of our ACL. ​ As a result of management’s modeling, we decreased our ACL on loans to $43.6 million as of December 31, 2024; in addition, we decreased our ACL on unfunded commitments to $1.9 million as of December 31, 2024, included within other liabilities.
See Note 1 – Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this annual report for a discussion of our ACL. ​ As a result of management’s modeling, we increased our ACL on loans to $72.3 million as of December 31, 2025; in addition, we increased our ACL on unfunded commitments to $2.1 million as of December 31, 2025, included within other liabilities.
Remediation work is ongoing in all relevant segments. Nonperforming loans decreased year over year by $38.5 million, or 56.0%, to $30.3 million at December 31, 2024, but increased by $35.9 million to $68.8 million at December 31, 2023, compared to December 31, 2022.
Remediation work is ongoing in all relevant segments. Nonperforming loans increased year over year by $22.5 million, or 74.4%, to $52.8 million at December 31, 2025, but decreased by $38.5 million to $30.3 million at December 31, 2024, compared to December 31, 2023.
This line of credit has not been drawn upon since January 2019. ​ There were no other categories of short-term borrowings that had an average balance greater than 30% of our stockholders’ equity as of December 31, 2024 or 2023. ​ The average junior subordinated debentures included one issuance of trust preferred securities, Old Second Capital Trust II (“Trust II”), which totals $25.0 million as of December 31, 2024 and 2023.
This line of credit renews every February and must be repaid within 360 days, if drawn. ​ There were no other categories of short-term borrowings that had an average balance greater than 30% of our stockholders’ equity as of December 31, 2025 or 2024. ​ The average junior subordinated debentures included one issuance of trust preferred securities, Old Second Capital Trust II (“Trust II”), which totals $25.0 million as of December 31, 2025 and 2024.
In 2022, securities transactions accounted for net inflows of $9.2 million, and proceeds from the sales of OREO assets accounted for inflows of $941,000. ​ ​ 69 ​ Table of Contents ​ Net cash outflows from financing activities in 2024 were $455.1 million, compared to $293.0 million of outflows in 2023, and $301.5 million of outflows in 2022.
In 2023, securities transactions accounted for net inflows of $378.4 million, and proceeds from the sales of OREO assets accounted for inflows of $2.0 million. ​ ​ 65 ​ Table of Contents ​ Net cash outflows from financing activities in 2025 were $257.4 million, compared to $455.1 million of outflows in 2024, and $293.0 million of outflows in 2023.
Our ACL on loans to average loans was 1.1% as of December 31, 2024 and 2023, compared to 1.4% at December 31, 2022. ​ The following table shows our allocation of the ACL by loan type at December 31 for the years indicated, and, for each category of loans, the percent of total loans represented by that category: ​ Allocation of the Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ ​ ​ ​ % of Loans ​ ​ ​ % of Loans ​ ​ ​ % of Loans ​ ​ ​ ​ ​ ​ in Each ​ ​ ​ ​ in Each ​ ​ ​ ​ in Each ​ ​ ​ ​ ​ ​ Category to ​ ​ ​ ​ Category to ​ ​ ​ ​ Category to ​ (Dollars in thousands) ​ Amount ​ Total Loans ​ Amount ​ Total Loans ​ Amount ​ Total Loans ​ Commercial ​ $ 7,813 20.1 ​ $ 3,998 20.8 ​ $ 11,968 21.7 ​ Leases ​ ​ 2,136 ​ 12.4 ​ ​ 2,952 ​ 9.8 ​ ​ 2,865 ​ 7.2 ​ Commercial real estate – investor ​ 14,528 27.1 ​ 17,105 25.6 ​ 10,674 25.5 ​ Commercial real estate – owner occupied ​ 10,036 17.2 ​ 12,280 19.7 ​ 15,001 22.1 ​ Construction ​ 3,581 5.1 ​ 1,038 4.1 ​ 1,546 4.7 ​ Real estate – investor ​ 553 1.2 ​ 669 1.3 ​ 768 1.5 ​ Real estate – owner occupied ​ ​ 1,509 ​ 5.2 ​ ​ 1,821 ​ 5.6 ​ ​ 2,046 ​ 5.7 ​ Multifamily ​ ​ 1,876 ​ 8.8 ​ ​ 2,728 ​ 9.9 ​ ​ 2,453 ​ 8.4 ​ HELOC ​ ​ 1,578 ​ 2.6 ​ ​ 1,656 ​ 2.6 ​ ​ 1,806 ​ 2.8 ​ Other 1 ​ 9 0.3 ​ 17 0.6 ​ 353 0.4 ​ Total ​ $ 43,619 100.0 ​ $ 44,264 100.0 ​ $ 49,480 100.0 ​ ​ 1 The “Other” class includes consumer loans and overdrafts for each year presented. ​ Allocations of the allowance may be made for specific loans, but the entire allowance is available for losses in the loan portfolio.
Our ACL on loans to total loans was 1.4% at December 31, 2025, and 1.1% at December 31, 2024 and 2023. ​ The following table shows our allocation of the ACL by loan type at December 31 for the years indicated, and, for each category of loans, the percent of total loans represented by that category: ​ Allocation of the Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ % of Loans ​ ​ ​ ​ ​ % of Loans ​ ​ ​ ​ ​ ​ % of Loans ​ ​ ​ ​ ​ ​ in Each ​ ​ ​ ​ in Each ​ ​ ​ ​ in Each ​ ​ ​ ​ ​ ​ Category to ​ ​ ​ ​ Category to ​ ​ ​ ​ Category to ​ (Dollars in thousands) ​ Amount ​ Total Loans ​ Amount ​ Total Loans ​ Amount ​ Total Loans ​ Commercial ​ $ 11,183 16.0 ​ $ 7,813 20.1 ​ $ 3,998 20.8 ​ Leases ​ ​ 2,370 ​ 10.4 ​ ​ 2,136 ​ 12.4 ​ ​ 2,952 ​ 9.8 ​ Commercial real estate – investor ​ 21,672 23.1 ​ 14,528 27.1 ​ 17,105 25.6 ​ Commercial real estate – owner occupied ​ 4,583 13.5 ​ 10,036 17.2 ​ 12,280 19.7 ​ Construction ​ 1,527 3.3 ​ 3,581 5.1 ​ 1,038 4.1 ​ Real estate – investor ​ 759 1.3 ​ 553 1.2 ​ 669 1.3 ​ Real estate – owner occupied ​ ​ 1,879 ​ 4.4 ​ ​ 1,509 ​ 5.2 ​ ​ 1,821 ​ 5.6 ​ Multifamily ​ ​ 1,493 ​ 6.5 ​ ​ 1,876 ​ 8.8 ​ ​ 2,728 ​ 9.9 ​ HELOC ​ ​ 3,628 ​ 4.5 ​ ​ 1,578 ​ 2.6 ​ ​ 1,656 ​ 2.6 ​ Powersport ​ ​ 17,449 ​ 13.3 ​ ​ - ​ - ​ ​ - ​ - ​ Other 1 ​ 5,758 3.7 ​ 9 0.3 ​ 17 0.6 ​ Total ​ $ 72,301 100.0 ​ $ 43,619 100.0 ​ $ 44,264 100.0 ​ ​ 1 The “Other” class includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts for each year presented. ​ Allocations of the allowance may be made for specific loans, but the entire allowance is available for losses in the loan portfolio.
Our net interest margin, which is net interest income divided by total interest-earning assets, was 4.61% for the year ended 2024, compared to 4.64% for the year ended 2023, a decrease of three basis points.
Our net interest margin, which is net interest income divided by total interest-earning assets, was 4.96% for the year ended 2025, compared to 4.61% for the year ended 2024, an increase of 35 basis points.
The table below provides a reconciliation of each non-GAAP (TE) measure to the GAAP equivalent: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of Tax Equivalent Adjustment (In thousands) 2024 ​ 2023 2022 Interest income (GAAP) ​ $ 297,904 ​ ​ $ 291,970 ​ ​ $ 216,473 ​ Taxable equivalent adjustment - loans ​ 43 ​ ​ 39 ​ ​ 23 ​ Taxable equivalent adjustment - securities ​ 1,373 ​ ​ 1,417 ​ ​ 1,405 ​ Interest income (TE) ​ 299,320 ​ ​ 293,426 ​ ​ 217,901 ​ Less: interest expense (GAAP) ​ 56,269 ​ ​ 40,039 ​ ​ 10,317 ​ Net interest income (TE) ​ $ 243,051 ​ ​ $ 253,387 ​ ​ $ 207,584 ​ Net interest income (GAAP) ​ $ 241,635 ​ ​ $ 251,931 ​ ​ $ 206,156 ​ Average interest earning assets ​ $ 5,244,445 ​ ​ $ 5,429,801 ​ ​ $ 5,684,862 ​ Net interest margin (GAAP) ​ 4.61 % ​ 4.64 % ​ 3.63 % Net interest margin (TE) ​ 4.63 % ​ 4.67 % ​ 3.65 % ​ The following table allocates the changes in net interest income to changes in either average balances or average rates for interest earning assets and interest bearing liabilities.
The table below provides a reconciliation of each non-GAAP (TE) measure to the GAAP equivalent: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of Tax Equivalent Adjustment (In thousands) ​ ​ ​ 2025 ​ ​ ​ ​ 2024 ​ ​ ​ ​ ​ ​ 2023 Interest income (GAAP) ​ $ 355,181 ​ ​ $ 297,904 ​ ​ $ 291,970 ​ Taxable equivalent adjustment - loans ​ 37 ​ ​ 43 ​ ​ 39 ​ Taxable equivalent adjustment - securities ​ 1,314 ​ ​ 1,373 ​ ​ 1,417 ​ Interest income (TE) ​ 356,532 ​ ​ 299,320 ​ ​ 293,426 ​ Less: interest expense (GAAP) ​ 62,217 ​ ​ 56,269 ​ ​ 40,039 ​ Net interest income (TE) ​ $ 294,315 ​ ​ $ 243,051 ​ ​ $ 253,387 ​ Net interest income (GAAP) ​ $ 292,964 ​ ​ $ 241,635 ​ ​ $ 251,931 ​ Average interest earning assets ​ $ 5,911,966 ​ ​ $ 5,244,445 ​ ​ $ 5,429,801 ​ Net interest margin (GAAP) ​ 4.96 % ​ 4.61 % ​ 4.64 % Net interest margin (TE) ​ 4.98 % ​ 4.63 % ​ 4.67 % ​ The following table allocates the changes in net interest income to changes in either average balances or average rates for interest earning assets and interest bearing liabilities.
Additional funding sources at the end of 2024 include unused borrowing capacity available from the Federal Home Loan Bank of Chicago, Federal Reserve Bank and correspondent banks of $1.02 billion and unencumbered securities available for sale of $444.2 million.
Additional funding sources at the end of 2025 include unused borrowing capacity available from the Federal Home Loan Bank of Chicago, Federal Reserve Bank and correspondent banks of $850.7 million and unencumbered securities available for sale of $410.3 million.
Our total stockholders’ equity also increased in 2023, ending at $577.3 million, compared to $461.1 million at year end 2022, primarily attributable to net income of $91.7 million.
Our total stockholders’ equity also increased in 2024, ending at $671.0 million, compared to $577.3 million at year-end 2023, primarily attributable to net income of $85.3 million.
This process is discussed in more detail in the section entitled “Interest Rate Risk” in “Quantitative and Qualitative Disclosures about Market Risk.” ​ Our net interest income decreased $10.3 million, or 4.1%, to $241.6 million for 2024, from $251.9 million for 2023.
This process is discussed in more detail in the section entitled “Interest Rate Risk” in “Quantitative and Qualitative Disclosures about Market Risk.” ​ Our net interest income increased $51.3 million, or 21.2%, to $293.0 million for 2025, from $241.6 million for 2024.
The OREO valuation reserve increased to $1.9 million in 2024 compared to $118,000 in 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OREO Properties by Type as of December 31, ​ Percent Change From (Dollars in thousands) ​ 2024 ​ ​ 2023 ​ ​ 2022 ​ 2024-2023 ​ 2023-2022 Single family residence $ - ​ $ - ​ $ - ​ - ​ - Lots (single family and commercial) ​ - ​ ​ - ​ ​ 1,261 ​ - ​ (100.0) Vacant land ​ 197 ​ ​ 197 ​ ​ 300 ​ - ​ (34.3) Multi-family ​ - ​ ​ - ​ ​ - ​ - ​ - Commercial property ​ 21,420 ​ ​ 4,926 ​ ​ - ​ 334.8 ​ N/M Total OREO properties $ 21,617 ​ $ 5,123 ​ $ 1,561 ​ 322.0 ​ 228.2 ​ N/M - Not meaningful ​ Other real estate assets transferred from loans are recorded at the fair value of the property when transferred, less estimated costs to sell, establishing a new cost basis.
Net gains on the sale of OREO properties during 2025 totaled $201,000, compared to net gains on sale of OREO properties of $390,000 in 2024 and $256,000 in 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OREO Properties by Type as of December 31, ​ Percent Change From (Dollars in thousands) ​ 2025 ​ ​ 2024 ​ ​ 2023 ​ 2025-2024 ​ 2024-2023 Single family residence $ - ​ $ - ​ $ - ​ - ​ - Lots (single family and commercial) ​ - ​ ​ - ​ ​ - ​ - ​ - Vacant land ​ - ​ ​ 197 ​ ​ 197 ​ (100.0) ​ - Multi-family ​ - ​ ​ - ​ ​ - ​ - ​ - Commercial property ​ 1,427 ​ ​ 21,420 ​ ​ 4,926 ​ (93.3) ​ 334.8 Total OREO properties $ 1,427 ​ $ 21,617 ​ $ 5,123 ​ (93.4) ​ 322.0 ​ Other real estate assets transferred from loans are recorded at the fair value of the property when transferred, less estimated costs to sell, establishing a new cost basis.
Subsequent to closing, results reflect all post-transaction activity. 47 ​ Table of Contents ​ Summary Financial Data ​ Old Second Bancorp, Inc. and Subsidiaries Financial Highlights (Dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 2022 Balance sheet items at year-end ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 5,649,377 ​ $ 5,722,799 ​ $ 5,888,317 ​ Total earning assets ​ 5,211,188 ​ 5,315,070 ​ 5,488,534 ​ Average assets ​ 5,642,978 ​ 5,820,173 ​ 6,071,220 ​ Loans, gross ​ 3,981,336 ​ 4,042,953 ​ 3,869,609 ​ Allowance for credit losses on loans ​ 43,619 ​ 44,264 ​ 49,480 ​ Deposits ​ 4,768,731 ​ 4,570,746 ​ 5,110,723 ​ Securities sold under agreement to repurchase ​ 36,657 ​ 26,470 ​ 32,156 ​ Other short-term borrowings ​ 20,000 ​ 405,000 ​ 90,000 ​ Junior subordinated debentures ​ 25,773 ​ 25,773 ​ 25,773 ​ Subordinated debentures ​ 59,467 ​ 59,382 ​ 59,297 ​ Senior notes ​ ​ - ​ ​ - ​ ​ 44,585 ​ Notes payable and other borrowings ​ - ​ - ​ 9,000 ​ Stockholders’ equity ​ 671,034 ​ 577,281 ​ 461,141 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Results of operations for the year ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 297,904 ​ $ 291,970 ​ $ 216,473 ​ Interest expense ​ 56,269 ​ 40,039 ​ 10,317 ​ Net interest and dividend income ​ 241,635 ​ 251,931 ​ 206,156 ​ Provision for credit losses ​ 12,750 ​ 16,501 ​ 6,550 ​ Noninterest income ​ 43,819 ​ 34,179 ​ 43,116 ​ Noninterest expense ​ 159,748 ​ 145,201 ​ 151,173 ​ Income before taxes ​ 112,956 ​ 124,408 ​ 91,549 ​ Provision for income taxes ​ 27,692 ​ 32,679 ​ 24,144 ​ Net income available to common stockholders ​ $ 85,264 ​ $ 91,729 ​ $ 67,405 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ratio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average total assets ​ 1.51 % ​ 1.58 % ​ 1.11 % Return on average equity ​ 13.63 % ​ 17.70 % ​ 14.46 % Average equity to average assets ​ 11.08 % ​ 8.91 % ​ 7.68 % Dividend payout ratio ​ 11.05 % ​ 9.76 % ​ 13.25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per share data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings ​ $ 1.90 ​ $ 2.05 ​ $ 1.51 ​ Diluted earnings ​ $ 1.87 ​ $ 2.02 ​ $ 1.49 ​ Common book value per share ​ $ 14.95 ​ $ 12.92 ​ $ 10.34 ​ Weighted average diluted shares outstanding ​ 45,639,351 ​ 45,395,010 ​ 45,213,088 ​ Weighted average basic shares outstanding ​ 44,828,290 ​ 44,663,722 ​ 44,526,655 ​ Shares outstanding at year-end ​ 44,873,467 ​ 44,697,917 ​ 44,582,311 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan quality ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses on loans to total loans at end of the year ​ 1.10 % 1.09 % 1.28 % Provision for credit losses on loans to total loans ​ 0.32 % 0.41 % 0.17 % Net loans charged-off to average total loans ​ 0.36 % 0.58 % 0.04 % Nonaccrual loans to total loans at end of the year ​ 0.72 % 1.67 % 0.82 % Nonperforming assets to total assets at end of the year ​ 0.92 % 1.29 % 0.59 % Allowance for credit losses on loans to nonaccrual loans ​ 151.19 % 65.50 % 156.57 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 48 ​ Table of Contents Old Second Bancorp, Inc. and Subsidiaries Quarterly Financial Information (Dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 4th 3rd 2nd 1st 4th 3rd 2nd 1st Interest income ​ $ 75,279 ​ $ 76,072 ​ $ 73,223 ​ $ 73,330 ​ $ 73,696 ​ $ 74,229 ​ $ 73,886 ​ $ 70,159 ​ Interest expense ​ 13,695 ​ 15,494 ​ 13,533 ​ 13,547 ​ 12,461 ​ 11,199 ​ 10,306 ​ 6,073 ​ Net interest income ​ 61,584 ​ 60,578 ​ 59,690 ​ 59,783 ​ 61,235 ​ 63,030 ​ 63,580 ​ 64,086 ​ Provision for credit losses ​ 3,500 ​ 2,000 ​ 3,750 ​ 3,500 ​ 8,000 ​ 3,000 ​ 2,000 ​ 3,501 ​ Securities losses, net ​ - ​ (1) ​ - ​ 1 ​ (2) ​ (924) ​ (1,547) ​ (1,675) ​ Income before taxes ​ 25,372 ​ 29,851 ​ 29,190 ​ 28,543 ​ 24,938 ​ 32,484 ​ 34,973 ​ 32,013 ​ Net income ​ 19,110 ​ 22,951 ​ 21,891 ​ 21,312 ​ 18,225 ​ 24,335 ​ 25,562 ​ 23,607 ​ Basic earnings per share ​ 0.42 ​ 0.52 ​ 0.48 ​ 0.48 ​ 0.40 ​ 0.55 ​ 0.57 ​ 0.53 ​ Diluted earnings per share ​ 0.42 ​ 0.50 ​ 0.48 ​ 0.47 ​ 0.40 ​ 0.54 ​ 0.56 ​ 0.52 ​ Dividends paid per share ​ 0.06 ​ 0.05 ​ 0.05 ​ 0.05 ​ 0.05 ​ 0.05 ​ 0.05 ​ 0.05 ​ ​ 2024 Financial Overview ​ In 2024, we recorded net income of $85.3 million, or $1.87 per fully diluted share, compared to $91.7 million, or $2.02 per fully diluted share, in 2023, and $67.4 million, or $1.49 per fully diluted share, in 2022.
Subsequent to closing, results reflect all post-transaction activity. 43 ​ Table of Contents ​ Summary Financial Data ​ Old Second Bancorp, Inc. and Subsidiaries Financial Highlights (Dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ 2024 ​ ​ 2023 Balance sheet items at year-end ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 6,902,675 ​ $ 5,649,377 ​ $ 5,722,799 ​ Total earning assets ​ 6,450,684 ​ 5,211,188 ​ 5,315,070 ​ Average assets ​ 6,347,633 ​ 5,642,950 ​ 5,820,173 ​ Loans, gross ​ 5,252,131 ​ 3,981,336 ​ 4,042,953 ​ Allowance for credit losses on loans ​ 72,301 ​ 43,619 ​ 44,264 ​ Deposits ​ 5,596,069 ​ 4,768,731 ​ 4,570,746 ​ Securities sold under agreement to repurchase ​ 23,769 ​ 36,657 ​ 26,470 ​ Other short-term borrowings ​ 215,000 ​ 20,000 ​ 405,000 ​ Junior subordinated debentures ​ 25,774 ​ 25,773 ​ 25,773 ​ Subordinated debentures ​ 59,552 ​ 59,467 ​ 59,382 ​ Notes payable and other borrowings ​ 14,825 ​ - ​ - ​ Stockholders’ equity ​ 896,768 ​ 671,034 ​ 577,281 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Results of operations for the year ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 355,181 ​ $ 297,904 ​ $ 291,970 ​ Interest expense ​ 62,217 ​ 56,269 ​ 40,039 ​ Net interest and dividend income ​ 292,964 ​ 241,635 ​ 251,931 ​ Provision for credit losses ​ 27,553 ​ 12,750 ​ 16,501 ​ Noninterest income ​ 46,362 ​ 43,819 ​ 34,179 ​ Noninterest expense ​ 204,022 ​ 159,748 ​ 145,201 ​ Income before taxes ​ 107,751 ​ 112,956 ​ 124,408 ​ Provision for income taxes ​ 27,441 ​ 27,692 ​ 32,679 ​ Net income available to common stockholders ​ $ 80,310 ​ $ 85,264 ​ $ 91,729 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average total assets ​ 1.27 % ​ 1.51 % ​ 1.58 % Return on average equity ​ 10.27 % ​ 13.63 % ​ 17.70 % Average equity to average assets ​ 12.31 % ​ 11.08 % ​ 8.91 % Dividend payout ratio ​ 15.24 % ​ 11.05 % ​ 9.76 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per share data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings ​ $ 1.64 ​ $ 1.90 ​ $ 2.05 ​ Diluted earnings ​ $ 1.62 ​ $ 1.87 ​ $ 2.02 ​ Common book value per share ​ $ 17.03 ​ $ 14.95 ​ $ 12.92 ​ Weighted average diluted shares outstanding ​ 49,669,539 ​ 45,639,351 ​ 45,395,010 ​ Weighted average basic shares outstanding ​ 48,875,540 ​ 44,828,290 ​ 44,663,722 ​ Shares outstanding at year-end ​ 52,669,224 ​ 44,873,467 ​ 44,697,917 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan quality ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses on loans to total loans at end of the year ​ 1.38 % 1.10 % 1.09 % Provision for credit losses on loans to total loans ​ 0.52 % 0.32 % 0.41 % Net loans charged-off to average total loans ​ 0.35 % 0.36 % 0.58 % Nonaccrual loans to total loans at end of the year ​ 0.91 % 0.72 % 1.67 % Nonperforming assets to total assets at end of the year ​ 0.81 % 0.92 % 1.29 % Allowance for credit losses on loans to nonaccrual loans ​ 150.78 % 151.19 % 65.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 44 ​ Table of Contents Old Second Bancorp, Inc. and Subsidiaries Quarterly Financial Information (Dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ 2024 ​ ​ ​ ​ 4th ​ ​ ​ 3rd ​ ​ ​ 2nd ​ ​ ​ 1st ​ ​ ​ 4th ​ ​ ​ 3rd ​ ​ ​ 2nd ​ ​ ​ 1st Interest income ​ $ 102,303 ​ $ 104,075 ​ $ 75,238 ​ $ 73,565 ​ $ 75,279 ​ $ 76,072 ​ $ 73,223 ​ $ 73,330 ​ Interest expense ​ 19,252 ​ 21,300 ​ 11,004 ​ 10,661 ​ 13,695 ​ 15,494 ​ 13,533 ​ 13,547 ​ Net interest income ​ 83,051 ​ 82,775 ​ 64,234 ​ 62,904 ​ 61,584 ​ 60,578 ​ 59,690 ​ 59,783 ​ Provision for credit losses ​ 3,000 ​ 19,653 ​ 2,500 ​ 2,400 ​ 3,500 ​ 2,000 ​ 3,750 ​ 3,500 ​ Securities gains (losses), net ​ 8 ​ (1) ​ - ​ - ​ - ​ (1) ​ - ​ 1 ​ Income before taxes ​ 39,270 ​ 13,068 ​ 29,213 ​ 26,200 ​ 25,372 ​ 29,851 ​ 29,190 ​ 28,543 ​ Net income ​ 28,787 ​ 9,871 ​ 21,822 ​ 19,830 ​ 19,110 ​ 22,951 ​ 21,891 ​ 21,312 ​ Basic earnings per share ​ 0.55 ​ 0.19 ​ 0.49 ​ 0.44 ​ 0.42 ​ 0.52 ​ 0.48 ​ 0.48 ​ Diluted earnings per share ​ 0.54 ​ 0.18 ​ 0.48 ​ 0.43 ​ 0.42 ​ 0.50 ​ 0.48 ​ 0.47 ​ Dividends paid per share ​ 0.07 ​ 0.06 ​ 0.06 ​ 0.06 ​ 0.06 ​ 0.05 ​ 0.05 ​ 0.05 ​ ​ 2025 Financial Overview ​ In 2025, we recorded net income of $80.3 million, or $1.62 per fully diluted share, compared to $85.3 million, or $1.87 per fully diluted share, in 2024, and $91.7 million, or $2.02 per fully diluted share, in 2023.
During 2023, we recorded an $18.1 million provision for credit losses expense on loans, and a $1.6 release of provision for credit losses on unfunded commitments. ​ ​ 62 ​ Table of Contents ​ Summary of Loan Loss Experience ​ The following table summarizes, for the years indicated, activity in the ACL, including amounts charged-off, amounts of recoveries, additions to the allowance charged to operating expense, and the ratio of net charge-offs to loans outstanding: ​ Analysis of Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) 2024 2023 2022 Total average loans (exclusive of loans held–for–sale) ​ $ 3,985,552 ​ $ 3,998,937 ​ $ 3,634,570 ​ ​ Allowance at beginning of year ​ 44,264 ​ 49,480 ​ 44,281 ​ ​ Charge–offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ 8,686 ​ 885 ​ 151 ​ ​ Leases ​ ​ 149 ​ ​ 882 ​ ​ 371 ​ ​ Commercial real estate – investor ​ 4,596 ​ 11,816 ​ 1,401 ​ ​ Commercial real estate – owner occupied ​ 5,154 ​ 10,691 ​ 133 ​ ​ Construction ​ - ​ - ​ - ​ ​ Real estate – investor ​ ​ - ​ ​ - ​ ​ - ​ ​ Real estate – owner occupied ​ 242 ​ - ​ 2 ​ ​ Multifamily ​ ​ - ​ ​ - ​ ​ - ​ ​ HELOC ​ ​ - ​ ​ - ​ ​ - ​ ​ Other 1 ​ ​ 284 ​ ​ 368 ​ ​ 402 ​ ​ Total charge–offs ​ 19,111 ​ 24,642 ​ 2,460 ​ ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ 149 ​ 632 ​ 95 ​ ​ Leases ​ ​ 103 ​ ​ 119 ​ ​ 2 ​ ​ Commercial real estate – investor ​ 425 ​ 77 ​ 81 ​ ​ Commercial real estate – owner occupied ​ 3,907 ​ 29 ​ 104 ​ ​ Construction ​ - ​ 100 ​ - ​ ​ Real estate – investor ​ ​ 25 ​ ​ 30 ​ ​ 30 ​ ​ Real estate – owner occupied ​ 36 ​ 79 ​ 226 ​ ​ Multifamily ​ ​ - ​ ​ - ​ ​ 63 ​ ​ HELOC ​ ​ 91 ​ ​ 105 ​ ​ 140 ​ ​ Other 1 ​ ​ 146 ​ ​ 169 ​ ​ 168 ​ ​ Total recoveries ​ 4,882 ​ 1,340 ​ 909 ​ ​ Net charge-offs ​ 14,229 ​ 23,302 ​ 1,551 ​ ​ Provision for credit losses on loans ​ 13,584 ​ 18,086 ​ 6,750 ​ ​ Allowance at end of year ​ $ 43,619 ​ $ 44,264 ​ $ 49,480 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to total average loans ​ 0.4 % 0.6 % 0.0 % ​ ACL on loans at year end to total average loans ​ 1.1 % 1.1 % 1.4 % ​ Nonaccrual loans to total loans outstanding ​ ​ 0.7 % ​ 1.7 % ​ 0.8 % ​ Nonperforming loans to total loans outstanding ​ ​ 0.8 % ​ 1.7 % ​ 0.9 % ​ ACL on loans at year end to nonaccrual loans ​ ​ 151.2 % ​ 65.5 % ​ 156.6 % ​ ​ 1 The “Other” class includes consumer loans and overdrafts. ​ ​ 63 ​ Table of Contents ​ The following table summarizes, for the years indicated, net charge-offs per loan class and the percentage of total average loans per class: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Total ​ ​ ​ % of Total ​ ​ ​ % of Total ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Loans Per ​ ​ ​ ​ Loans Per ​ ​ ​ ​ Loans Per ​ 2024 ​ Class ​ 2023 ​ Class ​ 2022 ​ Class Commercial $ 8,537 ​ 1.1 ​ $ 253 ​ - ​ $ 56 ​ - Leases ​ 46 ​ - ​ ​ 763 ​ 0.2 ​ ​ 369 ​ 0.1 Commercial real estate – investor ​ 4,171 ​ 0.4 ​ ​ 11,739 ​ 1.1 ​ ​ 1,320 ​ 0.1 Commercial real estate – owner occupied ​ 1,247 ​ 0.2 ​ ​ 10,662 ​ 1.4 ​ ​ 29 ​ - Construction ​ - ​ - ​ ​ (100) ​ (0.1) ​ ​ - ​ - Residential real estate – investor ​ (25) ​ (0.1) ​ ​ (30) ​ (0.1) ​ ​ (30) ​ (0.1) Residential real estate – owner occupied ​ 206 ​ 0.1 ​ ​ (79) ​ - ​ ​ (224) ​ (0.1) Multifamily ​ - ​ - ​ ​ - ​ - ​ ​ (63) ​ - HELOC ​ (91) ​ (0.1) ​ ​ (105) ​ (0.1) ​ ​ (140) ​ (0.1) Other 1 ​ 138 ​ 1.2 ​ ​ 199 ​ 0.8 ​ ​ 234 ​ 2.1 Net charge–offs $ 14,229 ​ 0.4 ​ $ 23,302 ​ 0.6 ​ $ 1,551 ​ - ​ 1 The “Other” class includes consumer loans and overdrafts. ​ The provision for credit losses on loans is based upon management’s estimate of future expected credit losses in the loan and lease portfolio and its evaluation of the adequacy of the ACL.
During 2024, we recorded a $13.6 million of provision for credit losses expense on loans and a $834,000 release of provision for credit losses on unfunded commitments. ​ ​ 58 ​ Table of Contents ​ Summary of Loan Loss Experience ​ The following table summarizes, for the years indicated, activity in the ACL, including amounts charged-off, amounts of recoveries, additions to the allowance charged to operating expense, and the ratio of net charge-offs to loans outstanding: ​ Analysis of Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ 2025 ​ 2024 ​ 2023 ​ ​ Total average loans (exclusive of loans held–for–sale) ​ $ 4,606,984 ​ $ 3,985,552 ​ $ 3,998,937 ​ ​ Allowance at beginning of year ​ 43,619 ​ 44,264 ​ 49,480 ​ ​ Charge–offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ 5,051 ​ 8,686 ​ 885 ​ ​ Leases ​ ​ 970 ​ ​ 149 ​ ​ 882 ​ ​ Commercial real estate – investor ​ - ​ 4,596 ​ 11,816 ​ ​ Commercial real estate – owner occupied ​ 1,173 ​ 5,154 ​ 10,691 ​ ​ Construction ​ 834 ​ - ​ - ​ ​ Real estate – investor ​ ​ - ​ ​ - ​ ​ - ​ ​ Real estate – owner occupied ​ - ​ 242 ​ - ​ ​ Multifamily ​ ​ 181 ​ ​ - ​ ​ - ​ ​ HELOC ​ ​ - ​ ​ - ​ ​ - ​ ​ Powersport ​ ​ 8,821 ​ ​ - ​ ​ - ​ ​ Other 1 ​ ​ 1,633 ​ ​ 284 ​ ​ 368 ​ ​ Total charge–offs ​ 18,663 ​ 19,111 ​ 24,642 ​ ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ 203 ​ 149 ​ 632 ​ ​ Leases ​ ​ 17 ​ ​ 103 ​ ​ 119 ​ ​ Commercial real estate – investor ​ 57 ​ 425 ​ 77 ​ ​ Commercial real estate – owner occupied ​ 12 ​ 3,907 ​ 29 ​ ​ Construction ​ 396 ​ - ​ 100 ​ ​ Real estate – investor ​ ​ 7 ​ ​ 25 ​ ​ 30 ​ ​ Real estate – owner occupied ​ 56 ​ 36 ​ 79 ​ ​ Multifamily ​ ​ - ​ ​ - ​ ​ - ​ ​ HELOC ​ ​ 90 ​ ​ 91 ​ ​ 105 ​ ​ Powersport ​ ​ 1,375 ​ ​ - ​ ​ - ​ ​ Other 1 ​ ​ 223 ​ ​ 146 ​ ​ 169 ​ ​ Total recoveries ​ 2,436 ​ 4,882 ​ 1,340 ​ ​ Net charge-offs ​ 16,227 ​ 14,229 ​ 23,302 ​ ​ Day 1 PCD credit evaluation ​ ​ 17,540 ​ ​ - ​ ​ - ​ ​ Provision for credit losses on loans ​ 27,369 ​ 13,584 ​ 18,086 ​ ​ Allowance at end of year ​ $ 72,301 ​ $ 43,619 ​ $ 44,264 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to total average loans ​ 0.4 % 0.4 % 0.6 % ​ ACL on loans at year end to total loans ​ 1.4 % 1.1 % 1.1 % ​ ACL on loans at year end to nonaccrual loans ​ ​ 150.8 % ​ 151.2 % ​ 65.5 % ​ ​ 1 The “Other” class includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts. ​ ​ 59 ​ Table of Contents ​ The following table summarizes, for the years indicated, net charge-offs per loan class and the percentage of total average loans per class: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Total ​ ​ ​ % of Total ​ ​ ​ % of Total ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ ​ ​ ​ Loans Per ​ ​ ​ ​ Loans Per ​ ​ ​ ​ Loans Per ​ 2025 ​ Class ​ 2024 ​ Class ​ 2023 ​ Class Commercial $ 4,848 ​ 0.7 ​ $ 8,537 ​ 1.1 ​ $ 253 ​ - Leases ​ 953 ​ 0.2 ​ ​ 46 ​ 0.0 ​ ​ 763 ​ 0.2 Commercial real estate – investor ​ (57) ​ (0.0) ​ ​ 4,171 ​ 0.4 ​ ​ 11,739 ​ 1.1 Commercial real estate – owner occupied ​ 1,161 ​ 0.2 ​ ​ 1,247 ​ 0.2 ​ ​ 10,662 ​ 1.4 Construction ​ 438 ​ 0.3 ​ ​ - ​ - ​ ​ (100) ​ (0.1) Residential real estate – investor ​ (7) ​ (0.0) ​ ​ (25) ​ (0.1) ​ ​ (30) ​ (0.1) Residential real estate – owner occupied ​ (56) ​ (0.0) ​ ​ 206 ​ 0.1 ​ ​ (79) ​ (0.0) Multifamily ​ 181 ​ 0.1 ​ ​ - ​ - ​ ​ - ​ - HELOC ​ (90) ​ (0.0) ​ ​ (91) ​ (0.1) ​ ​ (105) ​ (0.1) Powersport ​ 7,446 ​ 1.2 ​ ​ - ​ - ​ ​ - ​ - Other 1 ​ 1,410 ​ 0.8 ​ ​ 138 ​ 1.2 ​ ​ 199 ​ 0.8 Net charge–offs $ 16,227 ​ 0.4 ​ $ 14,229 ​ 0.4 ​ $ 23,302 ​ 0.6 ​ 1 The “Other” class includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts. ​ The provision for credit losses on loans is based upon management’s estimate of future expected credit losses in the loan and lease portfolio and its evaluation of the adequacy of the ACL.
These decreases in 2024 were partially offset by security purchases of $265.5 million as well as the $15.5 million reduction of unrealized losses recorded in 2024.
These decreases in 2025 were partially offset by security purchases of $191.6 million as well as the $25.6 million reduction of unrealized losses recorded in 2025.
The decrease in classified loans year over year was negatively offset by a $16.5 million increase in OREO in 2024 compared to 2023, primarily due to the transfer of five properties with a net fair value of $19.4 million, net of participations and valuation adjustments. Our OREO portfolio increased $3.6 million in 2023 from 2022.
Our OREO portfolio increased $16.5 million in 2024 from 2023, primarily due to the transfer of five properties with a net fair value of $19.4 million, net of participations and valuation adjustments.
Nonperforming assets decreased slightly in 2024 and 2023 relative to total assets, with nonperforming assets of $51.9 million, or 0.92%, of total assets for 2024, compared to $73.9 million, or 1.29% of total assets for 2023, and $34.5 million, or 0.59% of total assets, for 2022.
Nonperforming assets relative to total assets decreased slightly in 2025 and 2024, with nonperforming assets of $55.6 million, or 0.81%, of total assets for 2025, compared to $52.4 million, or 0.92% of total assets for 2024, and $73.9 million, or 1.29% of total assets, for 2023.
Management considers this non-GAAP measure a valuable performance measurement for capital analysis. ​ ​ 68 ​ Table of Contents ​ The following table provides a reconciliation of the GAAP tangible common equity to tangible assets ratio to the non-GAAP ratio for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ December 31, 2023 ​ Tangible common equity GAAP ​ ​ Non-GAAP ​ ​ GAAP ​ ​ Non-GAAP ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Equity $ 671,034 ​ ​ $ 671,034 ​ ​ $ 577,281 ​ ​ $ 577,281 ​ Less: Goodwill and intangible assets ​ 115,291 ​ ​ ​ 115,291 ​ ​ ​ 97,695 ​ ​ ​ 97,695 ​ Add: Limitation of exclusion of core deposit intangible (80%) ​ N/A ​ ​ ​ 4,406 ​ ​ ​ N/A ​ ​ ​ 2,243 ​ Adjusted goodwill and intangible assets ​ 115,291 ​ ​ ​ 110,885 ​ ​ ​ 97,695 ​ ​ ​ 95,452 ​ Tangible common equity $ 555,743 ​ ​ $ 560,149 ​ ​ $ 479,586 ​ ​ $ 481,829 ​ Tangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets $ 5,649,377 ​ ​ $ 5,649,377 ​ ​ $ 5,722,799 ​ ​ $ 5,722,799 ​ Less: Adjusted goodwill and intangible assets ​ 115,291 ​ ​ ​ 110,885 ​ ​ ​ 97,695 ​ ​ ​ 95,452 ​ Tangible assets $ 5,534,086 ​ ​ $ 5,538,492 ​ ​ $ 5,625,104 ​ ​ $ 5,627,347 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common equity to total assets ​ 11.88 % ​ ​ 11.88 % ​ ​ 10.09 % ​ ​ 10.09 % Tangible common equity to tangible assets ​ 10.04 % ​ ​ 10.11 % ​ ​ 8.53 % ​ ​ 8.56 % ​ The non-GAAP intangible asset exclusion reflects the 80% core deposit limitation per Basel III guidelines within risk based capital calculations, and is useful for the Company when reviewing risk based capital ratios and equity performance metrics. ​ Liquidity ​ Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customer’s credit needs, and to meet maturing obligations and existing commitments.
Management considers this non-GAAP measure a valuable performance measurement for capital analysis. ​ ​ 64 ​ Table of Contents ​ The following table provides a reconciliation of the GAAP tangible common equity to tangible assets ratio to the non-GAAP ratio for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ ​ December 31, 2024 ​ Tangible common equity GAAP ​ ​ Non-GAAP ​ ​ GAAP ​ ​ Non-GAAP ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Equity $ 896,768 ​ ​ $ 896,768 ​ ​ $ 671,034 ​ ​ $ 671,034 ​ Less: Goodwill and intangible assets ​ 152,888 ​ ​ ​ 152,888 ​ ​ ​ 115,291 ​ ​ ​ 115,291 ​ Add: Limitation of exclusion of core deposit intangible (80%) ​ N/A ​ ​ ​ 4,738 ​ ​ ​ N/A ​ ​ ​ 4,406 ​ Adjusted goodwill and intangible assets ​ 152,888 ​ ​ ​ 148,150 ​ ​ ​ 115,291 ​ ​ ​ 110,885 ​ Tangible common equity $ 743,880 ​ ​ $ 748,618 ​ ​ $ 555,743 ​ ​ $ 560,149 ​ Tangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets $ 6,902,675 ​ ​ $ 6,902,675 ​ ​ $ 5,649,377 ​ ​ $ 5,649,377 ​ Less: Adjusted goodwill and intangible assets ​ 152,888 ​ ​ ​ 148,150 ​ ​ ​ 115,291 ​ ​ ​ 110,885 ​ Tangible assets $ 6,749,787 ​ ​ $ 6,754,525 ​ ​ $ 5,534,086 ​ ​ $ 5,538,492 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common equity to total assets ​ 12.99 % ​ ​ 12.99 % ​ ​ 11.88 % ​ ​ 11.88 % Tangible common equity to tangible assets ​ 11.02 % ​ ​ 11.08 % ​ ​ 10.04 % ​ ​ 10.11 % ​ The non-GAAP intangible asset exclusion reflects the 80% core deposit limitation per Basel III guidelines within risk based capital calculations, and is useful for the Company when reviewing risk based capital ratios and equity performance metrics. ​ Liquidity ​ Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customers’ credit needs, and to meet maturing obligations and existing commitments.
Repurchases under the Repurchase Program may be initiated, discontinued, suspended or restarted at any time; provided that repurchases under the Repurchase Program after December 31, 2025 would require Federal Reserve non-objection or approval.
Repurchases under the Repurchase Program may be initiated, discontinued, suspended or restarted at any time; provided that repurchases under the Repurchase Program after December 31, 2026, would require Federal Reserve non-objection or approval. We are not obligated to repurchase any shares under the Repurchase Program, and we did not engage in any repurchases under the Repurchase Program in 2024.
The capital conservation buffer consists of an additional amount of common equity equal to 2.5% of risk-weighted assets. ​ The following table shows the regulatory capital ratios and the current minimum and well capitalized regulatory requirements at the dates indicated: ​ Risk Based Capital Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ Well Capitalized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adequacy with ​ Under Prompt ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Conservation ​ ​ Corrective Action ​ December 31, ​ December 31, ​ December 31, ​ ​ Buffer, if applicable 1 ​ Provisions 2 ​ 2024 ​ 2023 ​ 2022 The Company ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common equity tier 1 capital ratio ​ 7.00 % ​ N/A ​ ​ 12.82 % ​ 11.37 % ​ 9.67 % Total risk-based capital ratio ​ 10.50 ​ ​ N/A ​ ​ 15.54 ​ ​ 14.06 ​ ​ 12.52 ​ Tier 1 risk-based capital ratio ​ 8.50 ​ ​ N/A ​ ​ 13.34 ​ ​ 11.89 ​ ​ 10.20 ​ Tier 1 leverage ratio ​ 4.00 ​ ​ N/A ​ ​ 11.30 ​ ​ 10.06 ​ ​ 8.14 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Bank ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common equity tier 1 capital ratio ​ 7.00 % ​ 6.50 % ​ 12.89 % ​ 12.32 % ​ 11.70 % Total risk-based capital ratio ​ 10.50 ​ ​ 10.00 ​ ​ 13.82 ​ ​ 13.24 ​ ​ 12.75 ​ Tier 1 risk-based capital ratio ​ 8.50 ​ ​ 8.00 ​ ​ 12.89 ​ ​ 12.32 ​ ​ 11.70 ​ Tier 1 leverage ratio ​ 4.00 ​ ​ 5.00 ​ ​ 10.90 ​ ​ 10.41 ​ ​ 9.32 ​ ​ 1 Amounts are shown inclusive of a capital conservation buffer of 2.50%. 2 Prompt corrective action provisions are only applicable at the Bank level. ​ The Company, on a consolidated basis, exceeded the minimum capital ratios to be deemed “well capitalized” at December 31, 2024, 2023 and 2022 pursuant to the capital requirements in effect at that time.
These internal guidelines are subject to change from time to time based on the Bank’s risk profile, strategic objectives and regulatory considerations. ​ The following table shows the regulatory capital ratios and the current minimum and well capitalized regulatory requirements at the dates indicated: ​ Risk Based Capital Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ Well Capitalized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adequacy with ​ Under Prompt ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Conservation ​ ​ Corrective Action ​ December 31, ​ December 31, ​ December 31, ​ ​ Buffer, if applicable 1 ​ Provisions 2 ​ 2025 ​ 2024 ​ 2023 The Company ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common equity tier 1 capital ratio ​ 7.00 % ​ N/A ​ ​ 12.99 % ​ 12.82 % ​ 11.37 % Total risk-based capital ratio ​ 10.50 ​ ​ N/A ​ ​ 15.46 ​ ​ 15.54 ​ ​ 14.06 ​ Tier 1 risk-based capital ratio ​ 8.50 ​ ​ N/A ​ ​ 13.41 ​ ​ 13.34 ​ ​ 11.89 ​ Tier 1 leverage ratio ​ 4.00 ​ ​ N/A ​ ​ 11.70 ​ ​ 11.30 ​ ​ 10.06 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Bank ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common equity tier 1 capital ratio ​ 7.00 % ​ 6.50 % ​ 13.17 % ​ 12.89 % ​ 12.32 % Total risk-based capital ratio ​ 10.50 ​ ​ 10.00 ​ ​ 14.22 ​ ​ 13.82 ​ ​ 13.24 ​ Tier 1 risk-based capital ratio ​ 8.50 ​ ​ 8.00 ​ ​ 13.17 ​ ​ 12.89 ​ ​ 12.32 ​ Tier 1 leverage ratio ​ 4.00 ​ ​ 5.00 ​ ​ 11.49 ​ ​ 10.90 ​ ​ 10.41 ​ ​ 1 Amounts are shown inclusive of a capital conservation buffer of 2.50%. 2 Prompt corrective action provisions are only applicable at the Bank level. ​ The Company, on a consolidated basis, exceeded the applicable minimum regulatory capital requirements (including the capital conservation buffer, as applicable) at December 31, 2025, 2024 and 2023.
Though 2024 experienced a net decline in the overall portfolio, leases and commercial real estate – investor continued to grow. We had no concentration of loans exceeding 10% of total loans that were not otherwise disclosed as a category of loans at December 31, 2024.
In 2025, excluding the Bancorp Financial acquisition, we experienced a net increase in the overall portfolio, and leases and commercial real estate – investor continue to be the largest segments of growth. We had no concentration of loans exceeding 10% of total loans that were not otherwise disclosed as a category of loans at December 31, 2025.
The increase in interest expense in 2024 compared to 2023 was due primarily to an expense increase in all interest bearing deposit categories due to higher rates, partially offset by lower average balances in our short-term funding (FHLBC advances) throughout 2024. ​ Our average earning assets decreased $185.4 million, or 3.4%, to $5.24 billion in 2024, from $5.43 billion in 2023.
The increase in interest expense in 2025 compared to 2024 was due primarily to an expense increase in all interest bearing deposit categories due to higher rates and the interest bearing deposits assumed from the Bancorp Financial acquisition, partially offset by lower average balances in our short-term funding (overnight FHLBC advances) throughout 2025. ​ Our average earning assets increased $667.5 million, or 12.7%, to $5.91 billion in 2025, from $5.24 billion in 2024.
For all periods presented, management determined that the realization of the deferred tax asset was “more likely than not” as required by GAAP. ​ 57 ​ Table of Contents ​ Financial condition ​ General ​ Our total assets were $5.65 billion at December 31, 2024, a decrease of $73.4 million, or 1.3%, from December 31, 2023.
For all periods presented, management determined that the realization of the deferred tax asset was “more likely than not” as required by GAAP. ​ 53 ​ Table of Contents Financial condition ​ General ​ Our total assets were $6.90 billion at December 31, 2025, an increase of $1.25 billion, or 22.2%, from December 31, 2024.
Partially offsetting the decrease in our average borrowings was an increase of $10.7 million in average securities sold under repurchase agreements. ​ The following table sets forth certain information relating to our average Consolidated Balance Sheets and reflects the yield on average interest earning assets and cost of average interest bearing liabilities for the years indicated obtained by dividing the related interest by the average balance of assets or liabilities.
Partially offsetting the decrease in our average borrowings was an increase of $7.5 million in notes payable due to FHLB long-term putable advances that were assumed in the Bancorp Financial acquisition. ​ The following table sets forth certain information relating to our average Consolidated Balance Sheets and reflects the yield on average interest earning assets and cost of average interest bearing liabilities for the years indicated obtained by dividing the related interest by the average balance of assets or liabilities.
Average balances are derived from daily balances. ​ 52 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Average Balances, Tax Equivalent Income / Expense and Rates (Dollars in thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 ​ 2023 ​ 2022 ​ Average ​ Income / ​ Rate ​ Average ​ Income / ​ Rate ​ Average Income / ​ Rate ​ Balance ​ Expense ​ % ​ Balance ​ Expense ​ % ​ Balance Expense ​ % Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest earning deposits with financial institutions $ 49,202 ​ $ 2,393 ​ 4.86 ​ $ 49,303 ​ $ 2,503 ​ 5.08 ​ $ 308,845 ​ $ 2,175 ​ 0.70 Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 1,015,046 ​ ​ 34,656 ​ 3.41 ​ ​ 1,177,860 ​ ​ 37,940 ​ 3.22 ​ ​ 1,537,655 ​ ​ 31,566 ​ 2.05 Non-taxable (TE) 1 ​ 164,015 ​ ​ 6,537 ​ 3.99 ​ ​ 170,018 ​ ​ 6,746 ​ 3.97 ​ ​ 181,496 ​ ​ 6,692 ​ 3.69 Total securities (TE) 1 ​ 1,179,061 ​ ​ 41,193 ​ 3.49 ​ ​ 1,347,878 ​ ​ 44,686 ​ 3.32 ​ ​ 1,719,151 ​ ​ 38,258 ​ 2.23 Dividends from FHLBC and FRBC ​ 29,282 ​ ​ 2,278 ​ 7.78 ​ ​ 32,351 ​ ​ 1,920 ​ 5.93 ​ ​ 19,051 ​ ​ 936 ​ 4.91 Loans and loans held-for-sale 1, 2 ​ 3,986,900 ​ ​ 253,456 ​ 6.36 ​ ​ 4,000,269 ​ ​ 244,317 ​ 6.11 ​ ​ 3,637,815 ​ ​ 176,532 ​ 4.85 Total interest earning assets ​ 5,244,445 ​ ​ 299,320 ​ 5.71 ​ ​ 5,429,801 ​ ​ 293,426 ​ 5.40 ​ ​ 5,684,862 ​ ​ 217,901 ​ 3.83 Cash and due from banks ​ 54,359 ​ ​ - ​ - ​ ​ 56,592 ​ ​ - ​ - ​ ​ 52,333 ​ ​ - ​ - Allowance for credit losses on loans ​ (43,872) ​ ​ - ​ - ​ ​ (51,880) ​ ​ - ​ - ​ ​ (45,742) ​ ​ - ​ - Other noninterest bearing assets ​ 388,046 ​ ​ - ​ - ​ ​ 385,660 ​ ​ - ​ - ​ ​ 379,767 ​ ​ - ​ - Total assets $ 5,642,978 ​ ​ ​ ​ ​ ​ $ 5,820,173 ​ ​ ​ ​ ​ ​ $ 6,071,220 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW accounts $ 562,890 ​ $ 2,826 ​ 0.50 ​ $ 585,304 ​ $ 1,591 ​ 0.27 ​ $ 610,072 ​ $ 564 ​ 0.09 Money market accounts ​ 699,302 ​ ​ 11,878 ​ 1.70 ​ ​ 752,025 ​ ​ 6,039 ​ 0.80 ​ ​ 1,004,992 ​ ​ 958 ​ 0.10 Savings accounts ​ 921,801 ​ ​ 3,162 ​ 0.34 ​ ​ 1,052,750 ​ ​ 1,131 ​ 0.11 ​ ​ 1,188,771 ​ ​ 378 ​ 0.03 Time deposits ​ 628,446 ​ ​ 20,147 ​ 3.21 ​ ​ 458,918 ​ ​ 6,636 ​ 1.45 ​ ​ 468,476 ​ ​ 1,448 ​ 0.31 Interest bearing deposits ​ 2,812,439 ​ ​ 38,013 ​ 1.35 ​ ​ 2,848,997 ​ ​ 15,397 ​ 0.54 ​ ​ 3,272,311 ​ ​ 3,348 ​ 0.10 Securities sold under repurchase agreements ​ 38,248 ​ ​ 337 ​ 0.88 ​ ​ 27,518 ​ ​ 93 ​ 0.34 ​ ​ 35,157 ​ ​ 40 ​ 0.11 Other short-term borrowings ​ 271,257 ​ ​ 14,607 ​ 5.38 ​ ​ 356,014 ​ ​ 18,774 ​ 5.27 ​ ​ 12,534 ​ ​ 480 ​ 3.83 Junior subordinated debentures ​ 25,773 ​ ​ 1,127 ​ 4.37 ​ ​ 25,773 ​ ​ 1,095 ​ 4.25 ​ ​ 25,773 ​ ​ 1,136 ​ 4.41 Subordinated debentures ​ 59,425 ​ ​ 2,185 ​ 3.68 ​ ​ 59,340 ​ ​ 2,185 ​ 3.68 ​ ​ 59,255 ​ ​ 2,185 ​ 3.69 Senior note ​ - ​ ​ - ​ - ​ ​ 22,000 ​ ​ 2,408 ​ 10.95 ​ ​ 44,533 ​ ​ 2,682 ​ 6.02 Notes payable and other borrowings ​ - ​ ​ - ​ - ​ ​ 1,332 ​ ​ 87 ​ 6.53 ​ ​ 13,239 ​ ​ 446 ​ 3.37 Total interest bearing liabilities ​ 3,207,142 ​ ​ 56,269 ​ 1.75 ​ ​ 3,340,974 ​ ​ 40,039 ​ 1.20 ​ ​ 3,462,802 ​ ​ 10,317 ​ 0.30 Noninterest bearing deposits ​ 1,747,890 ​ ​ - ​ - ​ ​ 1,906,633 ​ ​ - ​ - ​ ​ 2,097,151 ​ ​ - ​ - Other liabilities ​ 62,508 ​ ​ - ​ - ​ ​ 54,243 ​ ​ - ​ - ​ ​ 44,986 ​ ​ - ​ - Stockholders' equity ​ 625,438 ​ ​ - ​ - ​ ​ 518,323 ​ ​ - ​ - ​ ​ 466,281 ​ ​ - ​ - Total liabilities and stockholders' equity $ 5,642,978 ​ ​ ​ ​ ​ ​ $ 5,820,173 ​ ​ ​ ​ ​ ​ $ 6,071,220 ​ ​ ​ ​ ​ Net interest income (GAAP) ​ ​ ​ $ 241,635 ​ ​ ​ ​ ​ ​ $ 251,931 ​ ​ ​ ​ ​ ​ $ 206,156 ​ ​ Net interest margin (GAAP) ​ ​ ​ ​ ​ ​ 4.61 ​ ​ ​ ​ ​ ​ ​ 4.64 ​ ​ ​ ​ ​ ​ ​ 3.63 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (TE) 1 ​ ​ ​ $ 243,051 ​ ​ ​ ​ ​ ​ $ 253,387 ​ ​ ​ ​ ​ ​ $ 207,584 ​ ​ Net interest margin (TE) 1 ​ ​ ​ ​ ​ ​ 4.63 ​ ​ ​ ​ ​ ​ ​ 4.67 ​ ​ ​ ​ ​ ​ ​ 3.65 Interest bearing liabilities to earning assets ​ 61.15 % ​ ​ ​ ​ ​ ​ 61.53 % ​ ​ ​ ​ ​ ​ 60.91 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 Tax equivalent basis is calculated using a marginal tax rate of 21% in 2024, 2023 and 2022.
Average balances are derived from daily balances. ​ 48 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Average Balances, Tax Equivalent Income / Expense and Rates (Dollars in thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2025 ​ 2024 ​ 2023 ​ Average ​ Income / ​ Rate ​ Average ​ Income / ​ Rate ​ Average Income / ​ Rate ​ Balance ​ Expense ​ % ​ Balance ​ Expense ​ % ​ Balance Expense ​ % Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest earning deposits with financial institutions $ 112,449 ​ $ 4,625 ​ 4.11 ​ $ 49,202 ​ $ 2,393 ​ 4.86 ​ $ 49,303 ​ $ 2,503 ​ 5.08 Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 1,015,384 ​ ​ 38,194 ​ 3.76 ​ ​ 1,015,046 ​ ​ 34,656 ​ 3.41 ​ ​ 1,177,860 ​ ​ 37,940 ​ 3.22 Non-taxable (TE) 1 ​ 151,201 ​ ​ 6,257 ​ 4.14 ​ ​ 164,015 ​ ​ 6,537 ​ 3.99 ​ ​ 170,018 ​ ​ 6,746 ​ 3.97 Total securities (TE) 1 ​ 1,166,585 ​ ​ 44,451 ​ 3.81 ​ ​ 1,179,061 ​ ​ 41,193 ​ 3.49 ​ ​ 1,347,878 ​ ​ 44,686 ​ 3.32 Dividends from FHLBC and FRBC ​ 23,707 ​ ​ 1,517 ​ 6.40 ​ ​ 29,282 ​ ​ 2,278 ​ 7.78 ​ ​ 32,351 ​ ​ 1,920 ​ 5.93 Loans and loans held-for-sale 1, 2 ​ 4,609,225 ​ ​ 305,939 ​ 6.64 ​ ​ 3,986,900 ​ ​ 253,456 ​ 6.36 ​ ​ 4,000,269 ​ ​ 244,317 ​ 6.11 Total interest earning assets ​ 5,911,966 ​ ​ 356,532 ​ 6.03 ​ ​ 5,244,445 ​ ​ 299,320 ​ 5.71 ​ ​ 5,429,801 ​ ​ 293,426 ​ 5.40 Cash and due from banks ​ 50,955 ​ ​ - ​ - ​ ​ 54,359 ​ ​ - ​ - ​ ​ 56,592 ​ ​ - ​ - Allowance for credit losses on loans ​ (57,913) ​ ​ - ​ - ​ ​ (43,872) ​ ​ - ​ - ​ ​ (51,880) ​ ​ - ​ - Other noninterest earning assets ​ 442,625 ​ ​ - ​ - ​ ​ 388,018 ​ ​ - ​ - ​ ​ 385,660 ​ ​ - ​ - Total assets $ 6,347,633 ​ ​ ​ ​ ​ ​ $ 5,642,950 ​ ​ ​ ​ ​ ​ $ 5,820,173 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW accounts $ 658,387 ​ $ 2,951 ​ 0.45 ​ $ 562,890 ​ $ 2,826 ​ 0.50 ​ $ 585,304 ​ $ 1,591 ​ 0.27 Money market accounts ​ 887,516 ​ ​ 16,853 ​ 1.90 ​ ​ 699,302 ​ ​ 11,878 ​ 1.70 ​ ​ 752,025 ​ ​ 6,039 ​ 0.80 Savings accounts ​ 1,045,344 ​ ​ 7,664 ​ 0.73 ​ ​ 921,801 ​ ​ 3,162 ​ 0.34 ​ ​ 1,052,750 ​ ​ 1,131 ​ 0.11 Time deposits ​ 989,403 ​ ​ 28,898 ​ 2.92 ​ ​ 628,446 ​ ​ 20,147 ​ 3.21 ​ ​ 458,918 ​ ​ 6,636 ​ 1.45 Interest bearing deposits ​ 3,580,650 ​ ​ 56,366 ​ 1.57 ​ ​ 2,812,439 ​ ​ 38,013 ​ 1.35 ​ ​ 2,848,997 ​ ​ 15,397 ​ 0.54 Securities sold under repurchase agreements ​ 31,673 ​ ​ 229 ​ 0.72 ​ ​ 38,248 ​ ​ 337 ​ 0.88 ​ ​ 27,518 ​ ​ 93 ​ 0.34 Other short-term borrowings ​ 47,123 ​ ​ 1,969 ​ 4.18 ​ ​ 271,257 ​ ​ 14,607 ​ 5.38 ​ ​ 356,014 ​ ​ 18,774 ​ 5.27 Junior subordinated debentures ​ 25,774 ​ ​ 1,152 ​ 4.47 ​ ​ 25,773 ​ ​ 1,127 ​ 4.37 ​ ​ 25,773 ​ ​ 1,095 ​ 4.25 Subordinated debentures ​ 59,510 ​ ​ 2,185 ​ 3.67 ​ ​ 59,425 ​ ​ 2,185 ​ 3.68 ​ ​ 59,340 ​ ​ 2,185 ​ 3.68 Senior notes ​ - ​ ​ - ​ - ​ ​ - ​ ​ - ​ - ​ ​ 22,000 ​ ​ 2,408 ​ 10.95 Notes payable and other borrowings ​ 7,467 ​ ​ 316 ​ 4.23 ​ ​ - ​ ​ - ​ - ​ ​ 1,332 ​ ​ 87 ​ 6.53 Total interest bearing liabilities ​ 3,752,197 ​ ​ 62,217 ​ 1.66 ​ ​ 3,207,142 ​ ​ 56,269 ​ 1.75 ​ ​ 3,340,974 ​ ​ 40,039 ​ 1.20 Noninterest bearing deposits ​ 1,749,363 ​ ​ - ​ - ​ ​ 1,747,890 ​ ​ - ​ - ​ ​ 1,906,633 ​ ​ - ​ - Other liabilities ​ 64,381 ​ ​ - ​ - ​ ​ 62,480 ​ ​ - ​ - ​ ​ 54,243 ​ ​ - ​ - Stockholders' equity ​ 781,692 ​ ​ - ​ - ​ ​ 625,438 ​ ​ - ​ - ​ ​ 518,323 ​ ​ - ​ - Total liabilities and stockholders' equity $ 6,347,633 ​ ​ ​ ​ ​ ​ $ 5,642,950 ​ ​ ​ ​ ​ ​ $ 5,820,173 ​ ​ ​ ​ ​ Net interest income (GAAP) ​ ​ ​ $ 292,964 ​ ​ ​ ​ ​ ​ $ 241,635 ​ ​ ​ ​ ​ ​ $ 251,931 ​ ​ Net interest margin (GAAP) ​ ​ ​ ​ ​ ​ 4.96 ​ ​ ​ ​ ​ ​ ​ 4.61 ​ ​ ​ ​ ​ ​ ​ 4.64 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (TE) 1 ​ ​ ​ $ 294,315 ​ ​ ​ ​ ​ ​ $ 243,051 ​ ​ ​ ​ ​ ​ $ 253,387 ​ ​ Net interest margin (TE) 1 ​ ​ ​ ​ ​ ​ 4.98 ​ ​ ​ ​ ​ ​ ​ 4.63 ​ ​ ​ ​ ​ ​ ​ 4.67 Interest bearing liabilities to earning assets ​ 63.47 % ​ ​ ​ ​ ​ ​ 61.15 % ​ ​ ​ ​ ​ ​ 61.53 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 Tax equivalent basis is calculated using a marginal tax rate of 21% in 2025, 2024 and 2023.
As of December 31, 2023, net unrealized losses on available-for-sale securities totaled $84.2 million, which after the impact of the related deferred income taxes, resulted in an overall decrease to equity capital of $60.6 million. ​ Loans ​ The following table presents the composition of the loan portfolio at December 31 for the year indicated: ​ Loan Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ % of ​ ​ % of (Dollars in thousands) ​ 2024 ​ Total ​ 2023 ​ Total ​ 2022 ​ Total Commercial ​ $ 800,476 ​ 20.1 ​ $ 841,697 ​ 20.8 ​ $ 840,964 ​ 21.7 Leases ​ 491,748 ​ 12.4 ​ 398,223 ​ 9.8 ​ 277,385 ​ 7.2 Commercial real estate – investor ​ 1,078,829 ​ 27.1 ​ 1,034,424 ​ 25.6 ​ 987,635 ​ 25.5 Commercial real estate – owner occupied ​ 683,283 ​ 17.2 ​ 796,538 ​ 19.7 ​ 854,879 ​ 22.1 Construction ​ 201,716 ​ 5.1 ​ 165,380 ​ 4.1 ​ 180,535 ​ 4.7 Residential real estate – investor ​ 49,598 ​ 1.2 ​ 52,595 ​ 1.3 ​ 57,353 ​ 1.5 Residential real estate – owner occupied ​ ​ 206,949 ​ 5.2 ​ ​ 226,248 ​ 5.6 ​ ​ 219,718 ​ 5.7 Multifamily ​ ​ 351,325 ​ 8.8 ​ ​ 401,696 ​ 9.9 ​ ​ 323,691 ​ 8.4 HELOC ​ ​ 103,388 ​ 2.6 ​ ​ 103,237 ​ 2.6 ​ ​ 109,202 ​ 2.8 Other 1 ​ 14,024 ​ 0.3 ​ 22,915 ​ 0.6 ​ 18,247 ​ 0.4 Total loans ​ $ 3,981,336 ​ 100.0 ​ $ 4,042,953 ​ 100.0 ​ $ 3,869,609 ​ 100.0 ​ 1 The “Other” class includes consumer loans and overdrafts. ​ Our total loans were $3.98 billion as of December 31, 2024, a decrease of $61.6 million from $4.04 billion as of December 31, 2023.
As of December 31, 2024, net unrealized losses on available-for-sale securities totaled $68.6 million, which after the impact of the related deferred income taxes, resulted in an overall decrease to equity capital of $49.4 million. ​ Loans ​ The following table presents the composition of the loan portfolio at December 31 for the year indicated: ​ Loan Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of (Dollars in thousands) ​ 2025 ​ Total ​ 2024 ​ Total ​ 2023 ​ Total Commercial ​ $ 842,130 ​ 16.0 ​ $ 800,476 ​ 20.1 ​ $ 841,697 ​ 20.8 Leases ​ 548,256 ​ 10.4 ​ 491,748 ​ 12.4 ​ 398,223 ​ 9.8 Commercial real estate – investor ​ 1,212,384 ​ 23.1 ​ 1,078,829 ​ 27.1 ​ 1,034,424 ​ 25.6 Commercial real estate – owner occupied ​ 706,567 ​ 13.5 ​ 683,283 ​ 17.2 ​ 796,538 ​ 19.7 Construction ​ 173,630 ​ 3.3 ​ 201,716 ​ 5.1 ​ 165,380 ​ 4.1 Residential real estate – investor ​ 70,225 ​ 1.3 ​ 49,598 ​ 1.2 ​ 52,595 ​ 1.3 Residential real estate – owner occupied ​ ​ 230,432 ​ 4.4 ​ ​ 206,949 ​ 5.2 ​ ​ 226,248 ​ 5.6 Multifamily ​ ​ 339,131 ​ 6.5 ​ ​ 351,325 ​ 8.8 ​ ​ 401,696 ​ 9.9 HELOC ​ ​ 235,293 ​ 4.5 ​ ​ 103,388 ​ 2.6 ​ ​ 103,237 ​ 2.6 Powersport ​ ​ 696,959 ​ 13.3 ​ ​ - ​ - ​ ​ - ​ - Other 1 ​ 197,124 ​ 3.7 ​ 14,024 ​ 0.3 ​ 22,915 ​ 0.6 Total loans ​ $ 5,252,131 ​ 100.0 ​ $ 3,981,336 ​ 100.0 ​ $ 4,042,953 ​ 100.0 ​ 1 The “Other” class includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts. ​ Our total loans were $5.25 billion as of December 31, 2025, an increase of $1.27 billion from $3.98 billion as of December 31, 2024.
Our nonperforming loans by performance metric is shown in the following table. ​ ​ Risk Elements ​ The following table sets forth the amounts of nonperforming assets by performance metric at December 31 for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) 2024 2023 2022 Nonaccrual loans ​ $ 28,851 ​ $ 67,583 ​ $ 31,602 ​ Performing troubled debt restructured loans accruing interest ​ N/A ​ N/A ​ 49 ​ Loans past due 90 days or more and still accruing interest ​ 1,436 ​ 1,196 ​ 1,262 ​ Total nonperforming loans ​ 30,287 ​ 68,779 ​ 32,913 ​ Other real estate owned ​ 21,617 ​ 5,123 ​ 1,561 ​ Total nonperforming assets ​ $ 51,904 ​ $ 73,902 ​ $ 34,474 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other real estate owned ("OREO") as % of nonperforming assets ​ 41.6 % 6.9 % 4.5 % ​ ​ 60 ​ Table of Contents ​ Accrual of interest is discontinued on a loan when principal or interest is 90 days or more past due, unless the loan is well secured and in the process of collection.
Our nonperforming loans by performance metric is shown in the following table. ​ Risk Elements ​ The following table sets forth the amounts of nonperforming assets by performance metric at December 31 for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ 2025 ​ 2024 ​ 2023 ​ Nonaccrual loans ​ $ 47,952 ​ $ 28,851 ​ $ 67,583 ​ Loans past due 90 days or more and still accruing interest ​ 4,879 ​ 1,436 ​ 1,196 ​ Total nonperforming loans ​ 52,831 ​ 30,287 ​ 68,779 ​ Other real estate owned ​ 1,427 ​ 21,617 ​ 5,123 ​ Repossessed Assets ​ 1,363 ​ 484 ​ - ​ Total nonperforming assets ​ $ 55,621 ​ $ 52,388 ​ $ 73,902 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans to total loans outstanding ​ ​ 0.9 % ​ 0.7 % ​ 1.7 % Nonperforming loans to total loans outstanding ​ ​ 1.0 % ​ 0.8 % ​ 1.7 % Nonperforming assets to total loans plus OREO and repossessed assets ​ ​ 1.1 % ​ 1.3 % ​ 1.8 % 56 ​ Table of Contents ​ ​ Accrual of interest is discontinued on a loan when principal or interest is 90 days or more past due, unless the loan is well secured and in the process of collection.
Our basic earnings per share for the periods presented were $1.90 in 2024, $2.05 in 2023 and $1.51 in 2022. ​ Our 2024 net income, as compared to the prior year, decreased primarily as a result of deposit interest expense outpacing our increased interest income throughout much of 2024, as well as additional costs incurred with our FRME branch transaction.
Our basic earnings per share for the periods presented were $1.64 in 2025, $1.90 in 2024 and $2.05 in 2023. ​ Our 2025 net income, as compared to the prior year, decreased primarily as a result of additional costs incurred with the Bancorp Financial acquisition.
Significant cash outflows from financing activities in 2024 included reductions in other short-term borrowings of $385.0 million as we paid down overnight FHLBC advances with funds received from the five branches acquired from FRME. Deposits were a net outflow of $69.8 million in 2024, $538.8 million in 2023, and $353.9 million in 2022.
Significant cash outflows from financing activities in 2024 included reductions in other short-term borrowings of $385.0 million as we paid down overnight FHLBC advances with funds received from the five branches acquired from FRME. Significant cash inflows from financing activities in 2023 included an increase in other short-term borrowings of $315.0 million as we obtained overnight FHLBC advances throughout 2023.
In the fourth quarter of 2024, our Board of Directors re-authorized the repurchase of up to 2,234,896 shares of our common stock. We may engage in repurchases under the Repurchase Program from time to time through open market purchases, trading plans established in accordance with SEC rules, privately negotiated transactions, or by other means.
We may engage in repurchases under the Repurchase Program from time to time through open market purchases, trading plans established in accordance with SEC rules, privately negotiated transactions, or by other means.
Refer to Note 5, “Loans and Allowance for Credit Losses on Loans”, in our Consolidated Financial Statements, below, for further detail of past due loans by classification for 2024 and 2023. ​ Classified Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Classified assets as of December 31, ​ Percent Change From (Dollars in thousands) 2024 ​ 2023 ​ 2022 ​ 2024-2023 ​ 2023-2022 Commercial $ 24,748 ​ $ 8,414 ​ $ 26,485 ​ 194.1 ​ (68.2) Leases ​ 523 ​ ​ 818 ​ ​ 1,876 ​ (36.1) ​ (56.4) Commercial real estate – investor ​ 14,489 ​ ​ 43,798 ​ ​ 27,410 ​ (66.9) ​ 59.8 Commercial real estate – owner occupied ​ 27,619 ​ ​ 54,613 ​ ​ 40,890 ​ (49.4) ​ 33.6 Construction ​ 19,351 ​ ​ 17,155 ​ ​ 1,333 ​ 12.8 ​ N/M Residential real estate – investor ​ 1,690 ​ ​ 1,331 ​ ​ 1,714 ​ 27.0 ​ (22.3) Residential real estate – owner occupied ​ 1,851 ​ ​ 3,216 ​ ​ 3,854 ​ (42.4) ​ (16.6) Multifamily ​ 1,165 ​ ​ 1,775 ​ ​ 2,954 ​ (34.4) ​ (39.9) HELOC ​ 547 ​ ​ 1,664 ​ ​ 2,411 ​ (67.1) ​ (31.0) Other (1) ​ 10 ​ ​ - ​ ​ 2 ​ N/M ​ (100.0) Total classified loans ​ 91,993 ​ ​ 132,784 ​ ​ 108,929 ​ (30.7) ​ 21.9 Other real estate owned ​ 21,617 ​ ​ 5,123 ​ ​ 1,561 ​ 322.0 ​ 228.2 Total classified assets $ 113,610 ​ $ 137,907 ​ $ 110,490 ​ (17.6) ​ 24.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ N/M - Not meaningful ​ 1 The “ Other ” class includes consumer loans and overdrafts. ​ Classified loans include nonaccrual and all other loans considered substandard.
Refer to Note 5, “Loans and Allowance for Credit Losses on Loans”, in our Consolidated Financial Statements, below, for further detail of past due loans by classification for 2025 and 2024. ​ Classified Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Classified assets as of December 31, ​ Percent Change From (Dollars in thousands) 2025 ​ 2024 ​ 2023 ​ 2025-2024 ​ 2024-2023 Commercial $ 51,587 ​ $ 24,748 ​ $ 8,414 ​ 108.4 ​ 194.1 Leases ​ 2,428 ​ ​ 523 ​ ​ 818 ​ 364.2 ​ (36.1) Commercial real estate – investor ​ 14,245 ​ ​ 14,489 ​ ​ 43,798 ​ (1.7) ​ (66.9) Commercial real estate – owner occupied ​ 64,081 ​ ​ 27,619 ​ ​ 54,613 ​ 132.0 ​ (49.4) Construction ​ 11,421 ​ ​ 19,351 ​ ​ 17,155 ​ (41.0) ​ 12.8 Residential real estate – investor ​ 1,142 ​ ​ 1,690 ​ ​ 1,331 ​ (32.4) ​ 27.0 Residential real estate – owner occupied ​ 1,897 ​ ​ 1,851 ​ ​ 3,216 ​ 2.5 ​ (42.4) Multifamily ​ 1,494 ​ ​ 1,165 ​ ​ 1,775 ​ 28.2 ​ (34.4) HELOC ​ 1,466 ​ ​ 547 ​ ​ 1,664 ​ 168.0 ​ (67.1) Powersport ​ 68 ​ ​ - ​ ​ - ​ N/M ​ N/M Other 1 ​ 270 ​ ​ 10 ​ ​ - ​ N/M ​ N/M Total classified loans ​ 150,099 ​ ​ 91,993 ​ ​ 132,784 ​ 63.2 ​ (30.7) Other real estate owned ​ 1,427 ​ ​ 21,617 ​ ​ 5,123 ​ (93.4) ​ 322.0 Repossessed assets ​ 1,363 ​ ​ 484 ​ ​ - ​ 181.6 ​ N/M Total classified assets $ 152,889 ​ $ 114,094 ​ $ 137,907 ​ 34.0 ​ (17.3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ N/M - Not meaningful ​ 1 The “Other” class includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts. ​ Classified loans include nonaccrual and all other loans considered substandard.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+1 added−1 removed8 unchanged
Biggest changeComparatively, we have a slightly less sensitive profile relative to December 31, 2023 should interest rates rise. ​ The following table summarizes the effect on annual income before income taxes based upon an immediate increase or decrease in interest rates of 0.5%, 1%, and 2% and no change in the slope of the yield curve. 71 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Net Interest Income Sensitivity ​ ​ Immediate Changes in Rates (Dollars in thousands) ​ (2.0) % ​ (1.0) % (0.5) % 0.5 % 1.0 % 2.0 % December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (38,905) ​ ​ $ (19,660) ​ ​ $ (9,740) ​ ​ $ 9,513 ​ ​ $ 19,168 ​ ​ $ 35,813 ​ Percent change ​ ​ (15.0) % ​ ​ (7.6) % ​ ​ (3.7) % ​ ​ 3.7 % ​ ​ 7.4 % ​ ​ 13.8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (36,337) ​ ​ $ (18,117) ​ ​ $ (8,982) ​ ​ $ 9,354 ​ ​ $ 18,818 ​ ​ $ 36,453 ​ Percent change ​ ​ (14.7) % ​ ​ (7.3) % ​ ​ (3.6) % ​ ​ 3.8 % ​ ​ 7.6 % ​ ​ 14.7 % ​ The amounts and assumptions used in the simulation model should not be viewed as indicative of expected actual results.
Biggest changeWe experienced a notable flattening of our interest rate risk profile over last year due to the fixed rate consumer loan portfolio from the Bancorp Financial acquisition. 67 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Net Interest Income Sensitivity ​ ​ Immediate Changes in Rates (Dollars in thousands) ​ ​ ​ ​ (2.0) % ​ ​ ​ ​ (1.0) % ​ ​ ​ ​ (0.5) % ​ ​ ​ ​ 0.5 % ​ ​ ​ ​ 1.0 % ​ ​ ​ ​ 2.0 % December 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (35,505) ​ ​ $ (18,190) ​ ​ $ (9,026) ​ ​ $ 8,817 ​ ​ $ 17,732 ​ ​ $ 31,490 ​ Percent change ​ ​ (10.6) % ​ ​ (5.4) % ​ ​ (2.7) % ​ ​ 2.6 % ​ ​ 5.3 % ​ ​ 9.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (38,905) ​ ​ $ (19,660) ​ ​ $ (9,740) ​ ​ $ 9,513 ​ ​ $ 19,168 ​ ​ $ 35,813 ​ Percent change ​ ​ (15.0) % ​ ​ (7.6) % ​ ​ (3.7) % ​ ​ 3.7 % ​ ​ 7.4 % ​ ​ 13.8 % ​ The amounts and assumptions used in the simulation model should not be viewed as indicative of expected actual results.
Our interest rate risk exposures at December 31, 2024 and December 31, 2023 are outlined in the table below. ​ Our net income can be significantly influenced by a variety of external factors, including: overall economic conditions, policies and actions of regulatory authorities, the amounts of and rates at which assets and liabilities reprice, variances in prepayment of loans and securities other than those that are assumed, early withdrawal of deposits, exercise of call options on borrowings or securities, competition, a general rise or decline in interest rates, changes in the slope of the yield-curve, changes in historical relationships between indices (such as SOFR and Prime), and balance sheet growth or contraction.
Our interest rate risk exposures at December 31, 2025, and December 31, 2024, are outlined in the table below. ​ Our net income can be significantly influenced by a variety of external factors, including: overall economic conditions, policies and actions of regulatory authorities, the amounts of and rates at which assets and liabilities reprice, variances in prepayment of loans and securities other than those that are assumed, early withdrawal of deposits, exercise of call options on borrowings or securities, competition, a general rise or decline in interest rates, changes in the slope of the yield curve, changes in historical relationships between indices (such as SOFR and Prime), and balance sheet growth or contraction.
Item 7A. Quantitative and Qualitative Disclosures about Market Ris k ​ Interest Rate Risk ​ We are subject to interest rate risk from changes on assets (loans and securities), liabilities (customer deposits and borrowed funds) and off balance sheet derivatives (interest rate swaps).
Item 7A. Quantitative and Qualitative Disclosures about Market Ris k ​ Interest Rate Risk ​ We are subject to interest rate risk from changes in assets (loans and securities), liabilities (customer deposits and borrowed funds) and off-balance sheet derivatives (interest rate swaps).
Furthermore, higher costs of living may weaken the financial condition of our borrowers which could affect our credit profile. Inflation at the levels currently experienced has a minimal impact to our financial results. ​ ​ ​ ​ 72 ​ Table of Contents ​
Furthermore, higher costs of living may weaken the financial condition of our borrowers which could affect our credit profile. Inflation at the levels currently experienced has a minimal impact to our financial results. ​ ​ ​ 68 ​ Table of Contents ​
Our asset-liability committee seeks to manage interest rate risk under a variety of rate environments by structuring our on-balance sheet and off-balance sheet positions, which includes interest rate swap derivatives as discussed in Note 19 of our consolidated financial statements found in in our Annual Report on Form 10-K for the year ended December 31, 2024.
Our asset-liability committee seeks to manage interest rate risk under a variety of rate environments by structuring our on-balance sheet and off-balance sheet positions, which includes interest rate swap derivatives as discussed in Note 18 of our consolidated financial statements found in in our Annual Report on Form 10-K for the year ended December 31, 2025.
Such presentations discuss our current and historical interest rate risk posture, shifts in the balance sheet composition, and the impact of interest rate movements on earnings and equity. Our current balance sheet is a moderately asset sensitive profile, our variable rate assets reprice faster than our longer duration, low beta deposit base.
Such presentations discuss our current and historical interest rate risk posture, shifts in the balance sheet composition, and the impact of interest rate movements on earnings and equity. Our current balance sheet is a moderately asset sensitive profile, our variable rate assets reprice faster than our longer duration, low beta deposit base. Our asset-liability committee monitors our liquidity management.
The current forward curve implies two rate cuts in 2025. The FRB continued to shrink its balance sheet, ending 2024 at $6.9 trillion, down from a peak of $8.7 trillion in March 2023. ​ We manage interest rate risk within guidelines established by the asset liability policy which are intended to limit the amount of rate exposure.
The current forward curve implies 1 to 2 rate cuts in 2026. The FRB’s balance sheet continued to shrink, ending 2025 at $6.6 trillion, down from a peak of $8.7 trillion in March 2023. ​ We manage interest rate risk within guidelines established by the asset liability policy which are intended to limit the amount of rate exposure.
The annual U.S. inflation rate for December 2024 was 2.9%, up from 2.4% quarter-over-quarter, while Core CPI remained moderate at 3.2%. Management believes the inflation rate will moderate at the current level, an imperfect but acceptable level by the FRB. The downside risks of high inflation put upwards pressure on our expenses, which could impact our profits.
The annual U.S. inflation rate for December 2025 was 2.4%, down from 3.0% quarter-over-quarter, while Core CPI further reduced to 2.7%. Management believes the inflation rate will moderate at the current level, an acceptable level by the FRB. The downside risks of high inflation put upwards pressure on our expenses, which could impact our profits.
Prudently, we added new measures to assess liquidity risk and enhanced our internal reports to segment deposits by insured, uninsured, collateralized deposits, and we monitor the bank’s funding sources and uses on a regular basis. ​ We also have a risk committee, chaired by our Chief Risk Officer, which reports no less than quarterly to senior management as well as our Board of Directors regarding compliance with risk tolerance limits, key risk factor changes, both internally and externally, due to portfolio changes as well as market conditions.
The committee concluded that we possess a strong liquidity profile, and we continue to monitor the Bank’s funding sources and uses on a regular basis. ​ We also have a risk committee, chaired by our Chief Risk Officer, which reports no less than quarterly to senior management as well as our Board of Directors regarding compliance with risk tolerance limits, and key risk factor changes, both internally and externally, due to portfolio changes as well as market conditions.
As of December 31, 2024, our net interest income profile remained sensitive to earnings gains (in both dollars and percentage) should market interest rates rise.
As of December 31, 2025, our net interest income profile (in both dollars and percentage) remained sensitive to movements in interest rates, with earnings expected to increase when interest rates rise and to decrease when interest rates fall.
We believe a financial institution’s ability to effectively tune its interest rate risk profile and strategically position its balance sheet through rate cycles helps sustain financial performance of our institution. ​ In the second half of 2024, the Federal Reserve Board (“FRB”) cut the Federal Funds (“FF”) target rate by 100 basis points to a target range of 4.25-4.50%, after holding the FF target range at 5.25-5.50% for 14 months.
We believe a financial institution’s ability to effectively manage its interest rate risk profile and strategically position its balance sheet through rate cycles sustains financial performance. ​ In the second half of 2025, the Federal Reserve Board (“FRB”) continued with additional cuts of the Federal Funds (“FF”) target rate by 75 basis points to a target range of 3.50-3.75%.
Removed
The market events of failed liquidity management at other banks in 2023 have been discussed and reviewed by the asset-liability committee. The committee concluded that we possess a strong liquidity profile and no new liquidity risks were identified.
Added
Furthermore, our overall interest rate sensitivity is significantly lower than it was as of December 31, 2024. ​ The following table summarizes the effect on annual income before income taxes based upon an immediate increase or decrease in interest rates of 0.5%, 1%, and 2% and no change in the slope of the yield curve.

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