EX-99.1 2 tmb-20240124xex99d1.htm EX-99.1

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(NASDAQ:OSBC) | Exhibit 99.1
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Contact: | Bradley S. Adams | For Immediate Release
​ | Chief Financial Officer | January 24, 2024
​ | (630) 906-5484 | ​

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Old Second Bancorp, Inc. Reports Fourth Quarter 2023 Net Income of $18.2 Million,

or $0.40 per Diluted Share

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AURORA, IL, January 24, 2024 – Old Second Bancorp, Inc. (the “Company,” “Old Second,” “we,” “us,” and “our”) (NASDAQ: OSBC), the parent company of Old Second National Bank (the “Bank”), today announced financial results for the fourth quarter of 2023. Our net income was $18.2 million, or $0.40 per diluted share, for the fourth quarter of 2023, compared to net income of $24.3 million, or $0.54 per diluted share, for the third quarter of 2023, and net income of $23.6 million, or $0.52 per diluted share, for the fourth quarter of 2022. Adjusted net income, a non-GAAP financial measure that excludes nonrecurring litigation related expenses and Visa portfolio liquidation and deconversion costs, as applicable, was $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2023, compared to $24.8 million, or $0.55 per diluted share, for the third quarter of 2023. See the discussion entitled “Non-GAAP Presentations” below and the tables beginning on page 17 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. Noteworthy items impacting fourth quarter 2023 results include a $1.2 million litigation reserve related to prior years’ overdraft fee compliance and $1.3 million in expense related to the fair value of mortgage servicing rights.

Net income decreased $6.1 million in the fourth quarter of 2023 compared to the third quarter of 2023. The decrease was primarily due to the increase of $5.0 million in provision for credit losses, a $1.3 million increase in interest expense, and a decrease in noninterest income of $1.1 million in the fourth quarter of 2023, which were partially offset by a $397,000 decrease in noninterest expense and a $1.4 million decrease in provision for income taxes. Net income decreased $5.4 million in the fourth quarter of 2023 compared to the fourth quarter of 2022, primarily due to an increase in provision for credit losses of $6.5 million and a decrease in net interest income of $2.9 million year over year due to rising market interest rates, which also resulted in an $8.8 million increase in interest expense. These decreases to net income in the fourth quarter of 2023 were partially offset by a decrease in noninterest expenses of $2.7 million. The fourth quarter of 2023 was minimally impacted by a pre-tax net loss on the call of securities of $2,000, compared to more significant pre-tax net losses on the sale of securities of $924,000 and $910,000 in the third quarter of 2023 and the fourth quarter of 2022, respectively.

Operating Results

| ● | Fourth quarter 2023 net income was $18.2 million, reflecting a $6.1 million decrease from the third quarter 2023, and a decrease of $5.4 million from the fourth quarter of 2022. Adjusted net income, as defined above, was $19.1 million for the fourth quarter of 2023, a decrease of $5.7 million from adjusted net income for the third quarter of 2023, and a decrease of $4.9 million from adjusted net income for the fourth quarter of 2022.

| ● | Net interest and dividend income was $61.2 million for the fourth quarter of 2023, reflecting a decrease of $1.8 million, or 2.8%, from the third quarter of 2023, and a decrease of $2.9 million, or 4.5%, from the fourth quarter of 2022.

| ● | We recorded a net provision for credit losses of $8.0 million in the fourth quarter of 2023, compared to a net provision for credit losses of $3.0 million in the third quarter of 2023, and a net provision for credit losses of $1.5 million in the fourth quarter of 2022.

| ● | Noninterest income was $8.7 million for the fourth quarter of 2023, a decrease of $1.1 million, or 11.6%, compared to $9.9 million for the third quarter of 2023, and a decrease of $217,000, or 2.4%, compared to $8.9 million for the fourth quarter of 2022.

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| ● | Noninterest expense was $37.0 million for the fourth quarter of 2023, a decrease of $397,000, or 1.1% compared to $37.4 million for the third quarter of 2023, and a decrease of $2.7 million, or 6.7%, compared to $39.7 million for the fourth quarter of 2022.

| ● | We had a provision for income tax of $6.7 million for the fourth quarter of 2023, compared to a provision for income tax of $8.1 million for the third quarter of 2023 and a provision of $8.2 million for the fourth quarter of 2022. The effective tax rate for each of the periods presented was 26.9%, 25.1%, and 25.9%, respectively.

| ● | On January 16, 2024, our Board of Directors declared a cash dividend of $0.05 per share payable on February 5, 2024, to stockholders of record as of January 26, 2024.

Financial Highlights

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Quarters Ended | ​
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ | ​ | 2023 | ​ | 2023 | ​ | 2022 | ​
Balance sheet summary | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total assets | ​ | $ | 5,722,799 | ​ | $ | 5,758,156 | ​ | $ | 5,888,317 | ​
Total securities available-for-sale | ​ | ​ | 1,192,829 | ​ | ​ | 1,229,618 | ​ | ​ | 1,539,359 | ​
Total loans | ​ | ​ | 4,042,953 | ​ | ​ | 4,029,543 | ​ | ​ | 3,869,609 | ​
Total deposits | ​ | ​ | 4,570,746 | ​ | ​ | 4,614,320 | ​ | ​ | 5,110,723 | ​
Total liabilities | ​ | ​ | 5,145,518 | ​ | ​ | 5,225,598 | ​ | ​ | 5,427,176 | ​
Total equity | ​ | ​ | 577,281 | ​ | ​ | 532,558 | ​ | ​ | 461,141 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total tangible assets | ​ | $ | 5,625,104 | ​ | $ | 5,659,858 | ​ | $ | 5,788,161 | ​
Total tangible equity | ​ | ​ | 479,586 | ​ | ​ | 434,260 | ​ | ​ | 360,985 | ​
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Income statement summary | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net interest income | ​ | $ | 61,235 | ​ | $ | 63,030 | ​ | $ | 64,091 | ​
Provision for credit losses | ​ | ​ | 8,000 | ​ | ​ | 3,000 | ​ | ​ | 1,500 | ​
Noninterest income | ​ | ​ | 8,729 | ​ | ​ | 9,877 | ​ | ​ | 8,946 | ​
Noninterest expense | ​ | ​ | 37,026 | ​ | ​ | 37,423 | ​ | ​ | 39,684 | ​
Net income | ​ | ​ | 18,225 | ​ | ​ | 24,335 | ​ | ​ | 23,615 | ​
Effective tax rate | ​ | ​ | 26.92 | % | ​ | 25.09 | % | ​ | 25.86 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Profitability ratios | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on average assets (ROAA) | ​ | ​ | 1.27 | % | ​ | 1.67 | % | ​ | 1.58 | %
Return on average equity (ROAE) | ​ | ​ | 13.18 | ​ | ​ | 18.21 | ​ | ​ | 21.09 | ​
Net interest margin (tax-equivalent) | ​ | ​ | 4.62 | ​ | ​ | 4.66 | ​ | ​ | 4.63 | ​
Efficiency ratio | ​ | ​ | 50.82 | ​ | ​ | 50.08 | ​ | ​ | 52.44 | ​
Return on average tangible common equity (ROATCE) | ​ | ​ | 16.43 | ​ | ​ | 22.80 | ​ | ​ | 27.80 | ​
Tangible common equity to tangible assets (TCE/TA) | ​ | ​ | 8.53 | ​ | ​ | 7.67 | ​ | ​ | 6.24 | ​
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Per share data | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Diluted earnings per share | ​ | $ | 0.40 | ​ | $ | 0.54 | ​ | $ | 0.52 | ​
Tangible book value per share | ​ | ​ | 10.73 | ​ | ​ | 9.72 | ​ | ​ | 8.10 | ​
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Company capital ratios 1 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Common equity tier 1 capital ratio | ​ | ​ | 11.37 | % | ​ | 11.00 | % | ​ | 9.67 | %
Tier 1 risk-based capital ratio | ​ | ​ | 11.89 | ​ | ​ | 11.52 | ​ | ​ | 10.20 | ​
Total risk-based capital ratio | ​ | ​ | 14.06 | ​ | ​ | 13.84 | ​ | ​ | 12.52 | ​
Tier 1 leverage ratio | ​ | ​ | 10.06 | ​ | ​ | 9.62 | ​ | ​ | 8.14 | ​
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Bank capital ratios 1, 2 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Common equity tier 1 capital ratio | ​ | ​ | 12.32 | % | ​ | 12.49 | % | ​ | 11.70 | %
Tier 1 risk-based capital ratio | ​ | ​ | 12.32 | ​ | ​ | 12.49 | ​ | ​ | 11.70 | ​
Total risk-based capital ratio | ​ | ​ | 13.24 | ​ | ​ | 13.57 | ​ | ​ | 12.75 | ​
Tier 1 leverage ratio | ​ | ​ | 10.41 | ​ | ​ | 10.43 | ​ | ​ | 9.32 | ​

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1 Both the Company and the Bank ratios are inclusive of a capital conservation buffer of 2.50%, and both are subject to the minimum capital adequacy guidelines of 7.00%, 8.50%, 10.50%, and 4.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

2 The prompt corrective action provisions are applicable only at the Bank level, and are 6.50%, 8.00%, 10.00%, and 5.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

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Chairman, President and Chief Executive Officer Jim Eccher said “Profitability at Old Second remains exceptionally strong and balance sheet strengthening continues with our tangible common equity to tangible assets ratio increasing by 86 basis points linked quarter to 8.53%. We believe we are being proactive in addressing commercial real estate loans facing deterioration from higher interest rates, declining appraisal values and cash flow pressures. Importantly, the total of substandard and criticized loans are now at their lowest levels since June 2022 as we have seen previously identified loans work toward resolution and the pace of downgrades has improved dramatically. The loan portfolio, exclusive of office CRE and healthcare, has remained well behaved and we remain confident in our credit quality overall. Absent a significant recession, I am optimistic that this quarter will mark the inflection point in our asset quality trends as we have seen the bulk of our loan portfolio reprice and transition into the current interest rate environment. This expectation comes despite Old Second maintaining an economic view that is significantly more cautious than consensus market forecasts. Our focus therefore remains on assessing and monitoring risks within the loan portfolio and optimizing the earning asset mix in order to reduce our overall sensitivity to interest rates. Net interest margin trends are stable and income statement efficiency remains at record levels. Marginal spreads in deposit and lending markets remain exceptionally tight but balance sheet flexibility and the expectation for continuing record efficiency gives me confidence we are well positioned to deliver another strong year in 2024. I look forward to the opportunity to demonstrate the strength of the franchise we have built.”

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Asset Quality & Earning Assets

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| ● | Nonperforming loans, comprised of nonaccrual loans plus loans past due 90 days or more and still accruing, and, prior to January 1, 2023, performing troubled debt restructurings, totaled $68.8 million at December 31, 2023, $63.3 million at September 30, 2023, and $32.9 million at December 31, 2022. Nonperforming loans, as a percent of total loans, were 1.7% at December 31, 2023, 1.6% at September 30, 2023, and 0.9% at December 31, 2022. The increase in the fourth quarter of 2023 is driven by the downgrade of a few credits during the quarter, due primarily to office-related loans and assisted living properties within the commercial real estate-investor portfolio and debt service coverage shortfalls.

| ● | Total loans were $4.04 billion at December 31, 2023, reflecting an increase of $13.4 million compared to September 30, 2023, and an increase of $173.3 million compared to December 31, 2022. The increase year over year was largely driven by the growth in leases, commercial real estate-investor, and multifamily portfolios. Average loans (including loans held-for-sale) for the fourth quarter of 2023 totaled $4.02 billion, reflecting an increase of $5.6 million from the third quarter of 2023 and an increase of $138.3 million from the fourth quarter of 2022.

| ● | Available-for-sale securities totaled $1.19 billion at December 31, 2023, compared to $1.23 billion at September 30, 2023, and $1.54 billion at December 31, 2022. The unrealized mark to market loss on securities totaled $84.2 million as of December 31, 2023, compared to $120.5 million as of September 30, 2023, and $123.5 million as of December 31, 2022, due to market interest rate fluctuations as well as changes year over year in the composition of the securities portfolio. During the quarter ended December 31, 2023, there were no securities sold, however $55.9 million of maturities and calls resulted in net realized losses of $2,000, compared to sales of $65.6 million during the quarter ended September 30, 2023, which resulted in net realized losses of $924,000, and security sales of $27.7 million for the quarter ended December 31, 2022, which resulted in net realized losses of $910,000. We may continue to sell strategically identified securities as opportunities arise.

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Net Interest Income

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Analysis of Average Balances,
Tax Equivalent Income / Expense and Rates
(Dollars in thousands - unaudited)
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​ | ​ | Quarters Ended
​ | ​ | December 31, 2023 | ​ | September 30, 2023 | ​ | December 31, 2022
​ | ​ | Average | ​ | Income / | ​ | Rate | ​ | Average | ​ | Income / | ​ | Rate | ​ | Average | ​ | Income / | ​ | Rate
​ | ​ | Balance | ​ | Expense | ​ | % | ​ | Balance | ​ | Expense | ​ | % | ​ | Balance | ​ | Expense | ​ | %
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest earning deposits with financial institutions | ​ | $ | 47,865 | ​ | $ | 616 | ​ | 5.11 | ​ | $ | 49,737 | ​ | $ | 659 | ​ | 5.26 | ​ | $ | 50,377 | ​ | $ | 461 | ​ | 3.63
Securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 1,027,366 | ​ | ​ | 8,329 | ​ | 3.22 | ​ | ​ | 1,125,688 | ​ | ​ | 8,946 | ​ | 3.15 | ​ | ​ | 1,404,437 | ​ | ​ | 10,495 | ​ | 2.96
Non-taxable (TE)1 | ​ | ​ | 164,655 | ​ | ​ | 1,674 | ​ | 4.03 | ​ | ​ | 169,523 | ​ | ​ | 1,687 | ​ | 3.95 | ​ | ​ | 171,567 | ​ | ​ | 1,697 | ​ | 3.92
Total securities (TE)1 | ​ | ​ | 1,192,021 | ​ | ​ | 10,003 | ​ | 3.33 | ​ | ​ | 1,295,211 | ​ | ​ | 10,633 | ​ | 3.26 | ​ | ​ | 1,576,004 | ​ | ​ | 12,192 | ​ | 3.07
FHLBC and FRBC Stock | ​ | ​ | 34,371 | ​ | ​ | 647 | ​ | 7.47 | ​ | ​ | 35,954 | ​ | ​ | 597 | ​ | 6.59 | ​ | ​ | 19,534 | ​ | ​ | 259 | ​ | 5.26
Loans and loans held-for-sale1, 2 | ​ | ​ | 4,016,480 | ​ | ​ | 62,793 | ​ | 6.20 | ​ | ​ | 4,010,859 | ​ | ​ | 62,705 | ​ | 6.20 | ​ | ​ | 3,878,228 | ​ | ​ | 55,195 | ​ | 5.65
Total interest earning assets | ​ | ​ | 5,290,737 | ​ | ​ | 74,059 | ​ | 5.55 | ​ | ​ | 5,391,761 | ​ | ​ | 74,594 | ​ | 5.49 | ​ | ​ | 5,524,143 | ​ | ​ | 68,107 | ​ | 4.89
Cash and due from banks | ​ | ​ | 57,723 | ​ | ​ | - | ​ | - | ​ | ​ | 57,279 | ​ | ​ | - | ​ | - | ​ | ​ | 56,531 | ​ | ​ | - | ​ | -
Allowance for credit losses on loans | ​ | ​ | (50,023) | ​ | ​ | - | ​ | - | ​ | ​ | (54,581) | ​ | ​ | - | ​ | - | ​ | ​ | (48,778) | ​ | ​ | - | ​ | -
Other noninterest bearing assets | ​ | ​ | 396,297 | ​ | ​ | - | ​ | - | ​ | ​ | 384,059 | ​ | ​ | - | ​ | - | ​ | ​ | 395,726 | ​ | ​ | - | ​ | -
Total assets | ​ | $ | 5,694,734 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 5,778,518 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 5,927,622 | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities and Stockholders' Equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
NOW accounts | ​ | $ | 563,603 | ​ | $ | 595 | ​ | 0.42 | ​ | $ | 576,138 | ​ | $ | 440 | ​ | 0.30 | ​ | $ | 623,408 | ​ | $ | 225 | ​ | 0.14
Money market accounts | ​ | ​ | 692,720 | ​ | ​ | 2,200 | ​ | 1.26 | ​ | ​ | 720,488 | ​ | ​ | 1,767 | ​ | 0.97 | ​ | ​ | 901,950 | ​ | ​ | 477 | ​ | 0.21
Savings accounts | ​ | ​ | 985,614 | ​ | ​ | 517 | ​ | 0.21 | ​ | ​ | 1,027,987 | ​ | ​ | 351 | ​ | 0.14 | ​ | ​ | 1,155,409 | ​ | ​ | 74 | ​ | 0.03
Time deposits | ​ | ​ | 497,472 | ​ | ​ | 2,833 | ​ | 2.26 | ​ | ​ | 466,250 | ​ | ​ | 1,982 | ​ | 1.69 | ​ | ​ | 450,111 | ​ | ​ | 571 | ​ | 0.50
Interest bearing deposits | ​ | ​ | 2,739,409 | ​ | ​ | 6,145 | ​ | 0.89 | ​ | ​ | 2,790,863 | ​ | ​ | 4,540 | ​ | 0.65 | ​ | ​ | 3,130,878 | ​ | ​ | 1,347 | ​ | 0.17
Securities sold under repurchase agreements | ​ | ​ | 28,526 | ​ | ​ | 51 | ​ | 0.71 | ​ | ​ | 24,945 | ​ | ​ | 27 | ​ | 0.43 | ​ | ​ | 33,275 | ​ | ​ | 10 | ​ | 0.12
Other short-term borrowings | ​ | ​ | 390,652 | ​ | ​ | 5,429 | ​ | 5.51 | ​ | ​ | 427,174 | ​ | ​ | 5,840 | ​ | 5.42 | ​ | ​ | 44,293 | ​ | ​ | 436 | ​ | 3.91
Junior subordinated debentures | ​ | ​ | 25,773 | ​ | ​ | 290 | ​ | 4.46 | ​ | ​ | 25,773 | ​ | ​ | 245 | ​ | 3.77 | ​ | ​ | 25,773 | ​ | ​ | 287 | ​ | 4.42
Subordinated debentures | ​ | ​ | 59,372 | ​ | ​ | 546 | ​ | 3.65 | ​ | ​ | 59,350 | ​ | ​ | 547 | ​ | 3.66 | ​ | ​ | 59,286 | ​ | ​ | 546 | ​ | 3.65
Senior notes | ​ | ​ | - | ​ | ​ | - | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | - | ​ | ​ | 44,572 | ​ | ​ | 891 | ​ | 7.93
Notes payable and other borrowings | ​ | ​ | - | ​ | ​ | - | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | - | ​ | ​ | 9,978 | ​ | ​ | 137 | ​ | 5.45
Total interest bearing liabilities | ​ | ​ | 3,243,732 | ​ | ​ | 12,461 | ​ | 1.52 | ​ | ​ | 3,328,105 | ​ | ​ | 11,199 | ​ | 1.34 | ​ | ​ | 3,348,055 | ​ | ​ | 3,654 | ​ | 0.43
Noninterest bearing deposits | ​ | ​ | 1,838,325 | ​ | ​ | - | ​ | - | ​ | ​ | 1,867,201 | ​ | ​ | - | ​ | - | ​ | ​ | 2,083,503 | ​ | ​ | - | ​ | -
Other liabilities | ​ | ​ | 63,971 | ​ | ​ | - | ​ | - | ​ | ​ | 53,164 | ​ | ​ | - | ​ | - | ​ | ​ | 51,753 | ​ | ​ | - | ​ | -
Stockholders' equity | ​ | ​ | 548,706 | ​ | ​ | - | ​ | - | ​ | ​ | 530,048 | ​ | ​ | - | ​ | - | ​ | ​ | 444,311 | ​ | ​ | - | ​ | -
Total liabilities and stockholders' equity | ​ | $ | 5,694,734 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 5,778,518 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 5,927,622 | ​ | ​ | ​ | ​ | ​
Net interest income (GAAP) | ​ | ​ | ​ | ​ | $ | 61,235 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 63,030 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 64,091 | ​ | ​
Net interest margin (GAAP) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4.59 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4.64 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4.60
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net interest income (TE)1 | ​ | ​ | ​ | ​ | $ | 61,598 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 63,395 | ​ | ​ | ​ | ​ | ​ | ​ | $ | 64,453 | ​ | ​
Net interest margin (TE)1 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4.62 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4.66 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4.63
Interest bearing liabilities to earning assets | ​ | ​ | 61.31 | % | ​ | ​ | ​ | ​ | ​ | ​ | 61.73 | % | ​ | ​ | ​ | ​ | ​ | ​ | 60.61 | % | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

1 Tax equivalent (TE) basis is calculated using a marginal tax rate of 21% in 2023 and 2022. See the discussion entitled “Non-GAAP Presentations” below and the tables beginning on page 17 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 as discussed in the table on page 17, and includes loan fee expense of $922,000 for the fourth quarter of 2023, loan fee expense of $780,000 for the third quarter of 2023, and loan fee income of $916,000 the fourth quarter of 2022. Nonaccrual loans are included in the above stated average balances.

The increased yield of six basis points on interest earning assets compared to the linked period was driven by repricing within the existing variable rate portfolios for securities available-for-sale. Changes in the market interest rate environment impact earning assets at varying intervals depending on the repricing timeline of loans, as well as the securities maturity, paydown and purchase activities.

The year over year increase of 66 basis points on interest earning assets was driven by significant increases to benchmark interest rates as well as strong loan growth throughout the period, specifically within the leases, commercial real estate and multifamily portfolios, as these loan segments generally produce the greatest yield. The increases in benchmark interest rates impacted yields on the securities portfolio through the inverse relationship between interest

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rates and market value coupled with maturities and strategic sales of lower yielding assets, as we work to increase the weighted average yield in the portfolio.

Average balances of interest-bearing deposit accounts have decreased steadily since the fourth quarter of 2022 through the fourth quarter of 2023, from $3.13 billion to $2.74 billion, with decreases reflected in all deposit categories, excluding time deposits. We have continued to control the cost of funds over the periods reflected, with the rate of overall interest-bearing deposits increasing to 89 basis points for the quarter ended December 31, 2023, from 65 basis points for the quarter ended September 30, 2023, and from 17 basis points for the quarter ended December 31, 2022. A 29 basis point increase in the cost of money market funds for the quarter ended December 31, 2023 compared to prior linked quarter, and a 105 basis point increase compared to the prior year like quarter were both due to select deposit account exception pricing, and drove a significant portion of the overall increase. Average rates paid on time deposits for the quarter ended December 31, 2023 increased by 57 basis points and 176 basis points in the quarter over linked quarter and year over year quarters, respectively, primarily due to CD rate specials we offered.

Borrowing costs decreased in the fourth quarter of 2023, compared to the third quarter of 2023, primarily due to the decrease in average other short-term borrowings of $36.5 million stemming from a decrease in average FHLB advances over the prior quarter. Partially offsetting the decrease in borrowing costs in the fourth quarter of 2023 was the increase in average securities sold under repurchase agreements of $3.6 million. The increase of $346.4 million year over year of average FHLB advances was based on daily liquidity needs. Subordinated and junior subordinated debt interest expense were essentially flat over each of the periods presented. Senior notes had the most significant interest expense decrease, as we had redeemed all of the $45.0 million senior notes, net of deferred issuance costs, in June 2023, resulting in senior notes having no balance after that time. In February 2023, we paid off the remaining balance of $9.0 million on the original $20.0 million term note issued in 2020, resulting in notes payable and other borrowings having no balance after that time.

Our net interest margin (GAAP) decreased five basis points to 4.59% for the fourth quarter of 2023, compared to 4.64% for the third quarter of 2023, and decreased one basis point compared to 4.60% for the fourth quarter of 2022. Our net interest margin (TE) decreased four basis points to 4.62% for the fourth quarter of 2023, compared to 4.66% for the third quarter of 2023, and decreased one basis point compared to 4.63% for the fourth quarter of 2022. The decrease in the fourth quarter, compared to the prior quarter, is primarily due to the growth in interest expense due to the rising interest rate environment and its effect on interest bearing deposits. The decrease in the fourth quarter of 2023, compared to the prior year like quarter, is primarily due to an increase in market interest rates, and the related increase in costs of interest-bearing liabilities. See the discussion entitled “Non-GAAP Presentations” and the tables beginning on page 17 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

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Noninterest Income

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4th Quarter 2023 | ​
Noninterest Income | ​ | Three Months Ended | ​ | Percent Change From | ​
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Wealth management | ​ | $ | 2,600 | ​ | $ | 2,475 | ​ | $ | 2,403 | ​ | 5.1 | ​ | 8.2 | ​
Service charges on deposits | ​ | ​ | 2,527 | ​ | ​ | 2,504 | ​ | ​ | 2,499 | ​ | 0.9 | ​ | 1.1 | ​
Residential mortgage banking revenue | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Secondary mortgage fees | ​ | ​ | 58 | ​ | ​ | 66 | ​ | ​ | 62 | ​ | (12.1) | ​ | (6.5) | ​
MSRs mark to market (loss) gain | ​ | ​ | (1,277) | ​ | ​ | 281 | ​ | ​ | (431) | ​ | (554.4) | ​ | (196.3) | ​
Mortgage servicing income | ​ | ​ | 495 | ​ | ​ | 519 | ​ | ​ | 518 | ​ | (4.6) | ​ | (4.4) | ​
Net gain on sales of mortgage loans | ​ | ​ | 366 | ​ | ​ | 407 | ​ | ​ | 340 | ​ | (10.1) | ​ | 7.6 | ​
Total residential mortgage banking revenue | ​ | ​ | (358) | ​ | ​ | 1,273 | ​ | ​ | 489 | ​ | (128.1) | ​ | (173.2) | ​
Securities losses, net | ​ | ​ | (2) | ​ | ​ | (924) | ​ | ​ | (910) | ​ | 99.8 | ​ | 99.8 | ​
Change in cash surrender value of BOLI | ​ | ​ | 541 | ​ | ​ | 919 | ​ | ​ | 376 | ​ | (41.1) | ​ | 43.9 | ​
Card related income | ​ | ​ | 2,511 | ​ | ​ | 2,606 | ​ | ​ | 2,795 | ​ | (3.6) | ​ | (10.2) | ​
Other income | ​ | ​ | 910 | ​ | ​ | 1,024 | ​ | ​ | 1,294 | ​ | (11.1) | ​ | (29.7) | ​
Total noninterest income | ​ | $ | 8,729 | ​ | $ | 9,877 | ​ | $ | 8,946 | ​ | (11.6) | ​ | (2.4) | ​

​

Noninterest income decreased $1.1 million, or 11.6%, in the fourth quarter of 2023, compared to the third quarter of 2023, and decreased $217,000, or 2.4%, compared to the fourth quarter of 2022. The decrease from the third quarter of 2023 was primarily driven by a $1.6 million decrease in residential mortgage banking revenue, a $378,000 decrease in the cash surrender value of BOLI, and a $114,000 decrease in other income, partially offset by a $922,000 decrease in security losses, net, based on strategic sales in the third quarter of 2023 compared to none during the fourth quarter of 2023.

The decrease in noninterest income of $217,000 in the fourth quarter of 2023, compared to the fourth quarter of 2022, is primarily due to an increase of $846,000 on mortgage servicing rights mark to market losses, a $284,000 decrease in card related income, and a $384,000 decrease in other income. These decreases were partially offset by a $197,000 increase in wealth management income, a $908,000 decrease in security losses, net, based on strategic sales in the fourth quarter of 2022 compared to none during the fourth quarter of 2023, and a $165,000 increase in the cash surrender value of BOLI due to market interest rate changes.

​

6

Noninterest Expense

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4th Quarter 2023 | ​
Noninterest Expense | ​ | Three Months Ended | ​ | Percent Change From | ​
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Salaries | ​ | $ | 16,738 | ​ | $ | 17,279 | ​ | $ | 18,268 | ​ | (3.1) | ​ | (8.4) | ​
Officers' incentive | ​ | ​ | 1,450 | ​ | ​ | 2,773 | ​ | ​ | 3,095 | ​ | (47.7) | ​ | (53.2) | ​
Benefits and other | ​ | ​ | 3,217 | ​ | ​ | 3,063 | ​ | ​ | 2,900 | ​ | 5.0 | ​ | 10.9 | ​
Total salaries and employee benefits | ​ | ​ | 21,405 | ​ | ​ | 23,115 | ​ | ​ | 24,263 | ​ | (7.4) | ​ | (11.8) | ​
Occupancy, furniture and equipment expense | ​ | ​ | 3,817 | ​ | ​ | 3,506 | ​ | ​ | 4,128 | ​ | 8.9 | ​ | (7.5) | ​
Computer and data processing | ​ | ​ | 2,291 | ​ | ​ | 1,922 | ​ | ​ | 2,978 | ​ | 19.2 | ​ | (23.1) | ​
FDIC insurance | ​ | ​ | 583 | ​ | ​ | 744 | ​ | ​ | 630 | ​ | (21.6) | ​ | (7.5) | ​
Net teller & bill paying | ​ | ​ | 564 | ​ | ​ | 534 | ​ | ​ | 485 | ​ | 5.6 | ​ | 16.3 | ​
General bank insurance | ​ | ​ | 301 | ​ | ​ | 300 | ​ | ​ | 298 | ​ | 0.3 | ​ | 1.0 | ​
Amortization of core deposit intangible asset | ​ | ​ | 603 | ​ | ​ | 616 | ​ | ​ | 645 | ​ | (2.1) | ​ | (6.5) | ​
Advertising expense | ​ | ​ | 383 | ​ | ​ | 93 | ​ | ​ | 130 | ​ | 311.8 | ​ | 194.6 | ​
Card related expense | ​ | ​ | 1,338 | ​ | ​ | 1,347 | ​ | ​ | 1,304 | ​ | (0.7) | ​ | 2.6 | ​
Legal fees | ​ | ​ | 228 | ​ | ​ | 97 | ​ | ​ | 225 | ​ | 135.1 | ​ | 1.3 | ​
Consulting & management fees | ​ | ​ | 556 | ​ | ​ | 549 | ​ | ​ | 679 | ​ | 1.3 | ​ | (18.1) | ​
Other real estate owned expense, net | ​ | ​ | 218 | ​ | ​ | (27) | ​ | ​ | 34 | ​ | 907.4 | ​ | 541.2 | ​
Other expense | ​ | ​ | 4,739 | ​ | ​ | 4,627 | ​ | ​ | 3,885 | ​ | 2.4 | ​ | 22.0 | ​
Total noninterest expense | ​ | $ | 37,026 | ​ | $ | 37,423 | ​ | $ | 39,684 | ​ | (1.1) | ​ | (6.7) | ​
Efficiency ratio (GAAP)1 | ​ | ​ | 50.82 | % | ​ | 50.08 | % | ​ | 52.44 | % | ​ | ​ | ​ | ​
Adjusted efficiency ratio (non-GAAP)2 | ​ | ​ | 48.76 | % | ​ | 48.82 | % | ​ | 51.29 | % | ​ | ​ | ​ | ​

​

1 The efficiency ratio shown in the table above is a GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits and OREO expenses, divided by the sum of net interest income and total noninterest income less net gains or losses on securities and mark to market gains or losses on MSRs.

2 The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits, OREO expenses, litigation expense, and acquisition-related costs, net of gains on branch sales (as applicable), Visa credit card portfolio liquidation and related deconversion costs, as well as any merger related costs, if applicable, divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains or losses on securities, mark to market gains or losses on MSRs, gain on the sale of our Visa credit card and land trust portfolios, and includes a tax equivalent adjustment on the change in cash surrender value of BOLI. See the discussion entitled “Non-GAAP Presentations” below and the table on page 18 that provides a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent.

Noninterest expense for the fourth quarter of 2023 decreased $397,000, or 1.1%, compared to the third quarter of 2023, and decreased $2.7 million, or 6.7%, compared to the fourth quarter of 2022. The decrease in the fourth quarter of 2023 compared to the third quarter of 2023 was attributable to a $1.7 million decrease in salaries and employee benefits, primarily due to a decrease in the officer incentive accrual and to a lesser extent various components of salary expense. Also contributing to the decrease in the fourth quarter of 2023 was a $161,000 decrease in FDIC insurance due to a reduction in total assets assessed. Partially offsetting the decrease in noninterest expense in the fourth quarter of 2023 was a $311,000 increase in occupancy, furniture and equipment, a $369,000 increase in computer and data processing, a $290,000 increase in advertising expense, and a $245,000 increase in OREO related expenses due to two additions to OREO during the fourth quarter of 2023 quarter totaling $4.9 million.

The year over year decrease in noninterest expense is primarily attributable to a $2.9 million decrease in salaries and employee benefits, primarily due to a decrease in various components of salary expense as well as officers’ incentives. Also contributing to the decrease was a $311,000 decrease in occupancy, furniture and equipment, a $687,000 decrease in computer and data processing, and a $123,000 decrease in consulting and management fees. The elevated expense totals in the fourth quarter of 2022 were driven by the final merger-related costs recorded stemming from the West Suburban acquisition in December 2021. Partially offsetting the decrease in noninterest expense in the fourth quarter of 2023, compared to the fourth quarter of 2022, was a $253,000 increase in advertising expenses, a $184,000 increase in OREO related expenses, and a $854,000 increase in other expenses due to a $1.2 million litigation expense recorded in the fourth quarter of 2023 for a pending overdraft fee compliance claim.

7

Earning Assets

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | December 31, 2023 | ​
Loans | ​ | As of | ​ | Percent Change From | ​
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Commercial | ​ | $ | 841,697 | ​ | $ | 834,877 | ​ | $ | 840,964 | ​ | 0.8 | ​ | 0.1 | ​
Leases | ​ | ​ | 398,223 | ​ | ​ | 354,827 | ​ | ​ | 277,385 | ​ | 12.2 | ​ | 43.6 | ​
Commercial real estate – investor | ​ | ​ | 1,034,424 | ​ | ​ | 1,047,122 | ​ | ​ | 987,635 | ​ | (1.2) | ​ | 4.7 | ​
Commercial real estate – owner occupied | ​ | ​ | 796,538 | ​ | ​ | 809,050 | ​ | ​ | 854,879 | ​ | (1.5) | ​ | (6.8) | ​
Construction | ​ | ​ | 165,380 | ​ | ​ | 202,546 | ​ | ​ | 180,535 | ​ | (18.3) | ​ | (8.4) | ​
Residential real estate – investor | ​ | ​ | 52,595 | ​ | ​ | 53,762 | ​ | ​ | 57,353 | ​ | (2.2) | ​ | (8.3) | ​
Residential real estate – owner occupied | ​ | ​ | 226,248 | ​ | ​ | 227,446 | ​ | ​ | 219,718 | ​ | (0.5) | ​ | 3.0 | ​
Multifamily | ​ | ​ | 401,696 | ​ | ​ | 372,020 | ​ | ​ | 323,691 | ​ | 8.0 | ​ | 24.1 | ​
HELOC | ​ | ​ | 103,237 | ​ | ​ | 102,055 | ​ | ​ | 109,202 | ​ | 1.2 | ​ | (5.5) | ​
Other1 | ​ | ​ | 22,915 | ​ | ​ | 25,838 | ​ | ​ | 18,247 | ​ | (11.3) | ​ | 25.6 | ​
Total loans | ​ | $ | 4,042,953 | ​ | $ | 4,029,543 | ​ | $ | 3,869,609 | ​ | 0.3 | ​ | 4.5 | ​

​

1 Other class includes consumer loans and overdrafts.

​

Total loans increased by $13.4 million at December 31, 2023, compared to September 30, 2023, and increased $173.3 million for the year over year period. Loan growth of $173.3 million in the year over year period was driven by growth in leasing, commercial real estate – investor, and multifamily loans.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | December 31, 2023
Securities | ​ | As of | ​ | Percent Change From
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31,
​ |  | 2023 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Securities available-for-sale, at fair value | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury | ​ | $ | 169,574 | ​ | $ | 216,777 | ​ | $ | 212,129 | ​ | (21.8) | ​ | (20.1)
U.S. government agencies | ​ | ​ | 56,959 | ​ | ​ | 55,821 | ​ | ​ | 56,048 | ​ | 2.0 | ​ | 1.6
U.S. government agency mortgage-backed | ​ | ​ | 106,370 | ​ | ​ | 104,569 | ​ | ​ | 124,990 | ​ | 1.7 | ​ | (14.9)
States and political subdivisions | ​ | ​ | 229,335 | ​ | ​ | 220,100 | ​ | ​ | 226,128 | ​ | 4.2 | ​ | 1.4
Corporate bonds | ​ | ​ | - | ​ | ​ | 4,961 | ​ | ​ | 9,622 | ​ | (100.0) | ​ | (100.0)
Collateralized mortgage obligations | ​ | ​ | 392,544 | ​ | ​ | 386,679 | ​ | ​ | 533,768 | ​ | 1.5 | ​ | (26.5)
Asset-backed securities | ​ | ​ | 66,166 | ​ | ​ | 66,916 | ​ | ​ | 201,928 | ​ | (1.1) | ​ | (67.2)
Collateralized loan obligations | ​ | ​ | 171,881 | ​ | ​ | 173,795 | ​ | ​ | 174,746 | ​ | (1.1) | ​ | (1.6)
Total securities available-for-sale | ​ | $ | 1,192,829 | ​ | $ | 1,229,618 | ​ | $ | 1,539,359 | ​ | (3.0) | ​ | (22.5)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

Our securities portfolio totaled $1.19 billion fair market value as of December 31, 2023, a decrease of $36.8 million from $1.23 billion as of September 30, 2023, and a decrease of $346.5 million since December 31, 2022. The portfolio reduction of $36.8 million in the fourth quarter of 2023, compared to the prior quarter-end, was due to maturities and calls of $55.9 million as well as paydowns of $25.6 million, partially offset by the effects of declining interest rates which increased fair market value. Net unrealized losses at December 31, 2023 were $84.2 million, compared to $120.5 million at September 30, 2023 and $123.5 million at December 30, 2022. The year over year decrease in net unrealized losses is due to changes in the market interest rate environment as well as the impact of security sales undertaken to further reduce the portfolio’s interest rate sensitivity. The portfolio continues to consist of high quality fixed-rate and floating-rate securities, with more than 99% of publicly issued securities rated AA or better.

​

8

​

Asset Quality

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | December 31, 2023
Nonperforming assets | ​ | As of | ​ | Percent Change From
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31,
​ |  | 2023 |  | 2023 |  | 2022 |  | 2023 | ​ | 2022
Nonaccrual loans | ​ | $ | 67,583 | ​ | $ | 62,116 | ​ | $ | 31,602 | ​ | 8.8 | ​ | 113.9
Performing troubled debt restructured loans accruing interest 1 | ​ |  | N/A | ​ |  | N/A | ​ |  | 49 | ​ | N/A | ​ | N/A
Loans past due 90 days or more and still accruing interest | ​ |  | 1,196 | ​ |  | 1,209 | ​ |  | 1,262 | ​ | (1.1) | ​ | (5.2)
Total nonperforming loans | ​ |  | 68,779 | ​ |  | 63,325 | ​ |  | 32,913 | ​ | 8.6 | ​ | 109.0
Other real estate owned | ​ |  | 5,123 | ​ |  | 407 | ​ |  | 1,561 | ​ | N/M | ​ | 228.2
Total nonperforming assets | ​ | $ | 73,902 | ​ | $ | 63,732 | ​ | $ | 34,474 | ​ | 16.0 | ​ | 114.4
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
30-89 days past due loans and still accruing interest | ​ | $ | 13,668 | ​ | $ | 28,486 | ​ | $ | 7,508 | ​ | ​ | ​ | ​
Nonaccrual loans to total loans | ​ | ​ | 1.7 | % | ​ | 1.5 | % | ​ | 0.8 | % | ​ | ​ | ​
Nonperforming loans to total loans | ​ | ​ | 1.7 | % | ​ | 1.6 | % | ​ | 0.9 | % | ​ | ​ | ​
Nonperforming assets to total loans plus OREO | ​ | ​ | 1.8 | % | ​ | 1.6 | % | ​ | 0.9 | % | ​ | ​ | ​
Purchased credit-deteriorated loans to total loans | ​ | ​ | 1.4 | % | ​ | 1.5 | % | ​ | 2.0 | % | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance for credit losses | ​ | $ | 44,264 | ​ | $ | 51,729 | ​ | $ | 49,480 | ​ | ​ | ​ | ​
Allowance for credit losses to total loans | ​ | ​ | 1.1 | % | ​ | 1.3 | % | ​ | 1.3 | % | ​ | ​ | ​
Allowance for credit losses to nonaccrual loans | ​ | ​ | 65.5 | % | ​ | 83.3 | % | ​ | 156.6 | % | ​ | ​ | ​

​

N/A - Not applicable.

​

N/M - Not meaningful.

​

1 As of January 1, 2023, the Company prospectively adopted ASU 2022-02, Topic 326 “Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures”, which eliminated the need for recognition, measurement and disclosure of TDRs going forward.

​

Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Prior to January 1, 2023, nonperforming loans also included performing troubled debt restructured loans accruing interest. Purchased credit-deteriorated (“PCD”) loans acquired in our acquisitions of West Suburban and ABC Bank totaled $55.7 million, net of purchase accounting adjustments, at December 31, 2023. PCD loans that meet the definition of nonperforming loans are included in our nonperforming disclosures. Nonperforming loans to total loans was 1.7% as of December 31, 2023, 1.6% as of September 30, 2023, and 0.9% as of December 31, 2022. Nonperforming assets to total loans plus OREO was 1.8% as of December 31, 2023, 1.6% as of September 30, 2023, and 0.9% as of December 31, 2022. Our allowance for credit losses to total loans was 1.1% as of December 31, 2023, and 1.3% as of September 30, 2023 and December 31, 2022.

The following table shows classified loans by segment, which include nonaccrual loans, PCD loans if the risk rating so indicates, and all other loans considered substandard, for the following periods.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | December 31, 2023 | ​
Classified loans | ​ | As of | ​ | Percent Change From | ​
(Dollars in thousands) | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2023 |  | 2022 |  | 2023 |  | 2022 | ​
Commercial | ​ | $ | 8,414 | ​ | $ | 18,298 | ​ | $ | 26,485 | ​ | (54.0) | ​ | (68.2) | ​
Leases | ​ | ​ | 818 | ​ | ​ | 574 | ​ | ​ | 1,876 | ​ | 42.5 | ​ | (56.4) | ​
Commercial real estate – investor | ​ | ​ | 43,798 | ​ | ​ | 54,126 | ​ | ​ | 27,410 | ​ | (19.1) | ​ | 59.8 | ​
Commercial real estate – owner occupied | ​ | ​ | 54,613 | ​ | ​ | 55,292 | ​ | ​ | 40,890 | ​ | (1.2) | ​ | 33.6 | ​
Construction | ​ | ​ | 17,155 | ​ | ​ | 17,263 | ​ | ​ | 1,333 | ​ | (0.6) | ​ | N/M | ​
Residential real estate – investor | ​ | ​ | 1,331 | ​ | ​ | 1,502 | ​ | ​ | 1,714 | ​ | (11.4) | ​ | (22.3) | ​
Residential real estate – owner occupied | ​ | ​ | 3,216 | ​ | ​ | 3,627 | ​ | ​ | 3,854 | ​ | (11.3) | ​ | (16.6) | ​
Multifamily | ​ | ​ | 1,775 | ​ | ​ | 1,141 | ​ | ​ | 2,954 | ​ | 55.6 | ​ | (39.9) | ​
HELOC | ​ | ​ | 1,664 | ​ | ​ | 1,434 | ​ | ​ | 2,411 | ​ | 16.0 | ​ | (31.0) | ​
Other1 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 2 | ​ | - | ​ | (100.0) | ​
Total classified loans | ​ | $ | 132,784 | ​ | $ | 153,257 | ​ | $ | 108,929 | ​ | (13.4) | ​ | 21.9 | ​

​

N/M - Not meaningful.

​

1 Other class includes consumer loans and overdrafts.

​

​

9

Classified loans as of December 31, 2023 decreased by $20.5 million from September 30, 2023, and increased by $23.9 million from December 31, 2022. The net decrease from the third quarter of 2023 was mostly driven by seven loans that had principal charge offs, totaling $15.8 million, seven loans that were upgraded totaling $11.8 million, and two loans that were transferred to OREO, totaling $4.9 million. These decreases in classified loans in the fourth quarter were offset by $18.6 million of additions, primarily driven by three loans in commercial real estate – owner occupied which totaled $11.1 million and seven loans in commercial which totaled $4.2 million. Remediation work continues on these credits, with the goal of cash flow improvements with increased tenancy. Reductions in commercial classified loans were noted in the fourth quarter of 2023 from the linked quarter due to ongoing remediation efforts.

​

Allowance for Credit Losses on Loans and Unfunded Commitments

​

At December 31, 2023, our allowance for credit losses (“ACL”) on loans totaled $44.3 million, and our ACL on unfunded commitments, included in other liabilities, totaled $2.7 million. In the fourth quarter of 2023, we recorded provision expense of $8.0 million based on historical loss rate updates, loan growth, our assessment of nonperforming loan metrics and trends, and estimated future credit losses. The fourth quarter’s provision expense consisted of a $8.0 million provision for credit losses on loans, and a $6,000 provision for credit losses on unfunded commitments. The increase in ACL on unfunded commitments was primarily due to an adjustment of historical benchmark assumptions, such as funding rates and the period used to forecast those rates, within the ACL calculation. We recorded net charge-offs of $15.5 million in the fourth quarter of 2023, which reduced the ACL. The majority of the fourth quarter charge offs were specific to seven borrowers within the commercial real estate portfolio on which we had existing specific allocations within the ACL of $2.5 million at September 30, 2023. The third quarter 2023 provision expense of $3.0 million consisted of a $3.0 million provision for credit losses on loans, and a $11,000 reversal of provision for credit losses on unfunded commitments. We recorded net charge-offs of $6.6 million in the third quarter of 2023. In the fourth quarter of 2022, we recorded provision expense of $1.5 million based on our assessment of nonperforming loan metrics and trends and estimated future credit losses. We recorded net charge-offs of $940,000 in the fourth quarter of 2022, which reduced the ACL. Our ACL on loans to total loans was 1.1% as of December 31, 2023 and 1.3% as of September 30, 2023 and December 31, 2022.

​

The $143,000 decrease in our ACL on unfunded commitments at December 31, 2023, compared to September 30, 2023, was driven by purchase accounting accretion of $149,000 on unfunded commitments recorded during the quarter, partially offset by $6,000 of provision expense in the quarter discussed above. The ACL on unfunded commitments totaled $2.7 million as of December 31, 2023, $2.9 million as of September 30, 2023, and $5.1 million as of December 31, 2022.

​

Net Charge-off Summary

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loan charge–offs, net of recoveries | Quarters Ended
(Dollars in thousands) | December 31, | ​ | % of | ​ | September 30, | ​ | % of | ​ | December 31, | ​ | % of
​ | 2023 | ​ | Total 2 | ​ | 2023 | ​ | Total 2 | ​ | 2022 | ​ | Total 2
Commercial | $ | 71 | ​ | 0.5 | ​ | $ | 8 | ​ | 0.1 | ​ | $ | (8) | ​ | (0.9)
Leases | ​ | (8) | ​ | (0.1) | ​ | ​ | (95) | ​ | (1.4) | ​ | ​ | 191 | ​ | 20.3
Commercial real estate – Investor | ​ | 4,951 | ​ | 32.0 | ​ | ​ | 6,754 | ​ | 102.4 | ​ | ​ | 776 | ​ | 82.6
Commercial real estate – Owner occupied | ​ | 10,443 | ​ | 67.5 | ​ | ​ | 23 | ​ | 0.3 | ​ | ​ | (2) | ​ | (0.2)
Construction | ​ | - | ​ | - | ​ | ​ | (100) | ​ | (1.5) | ​ | ​ | - | ​ | -
Residential real estate – Investor | ​ | (3) | ​ | - | ​ | ​ | (3) | ​ | - | ​ | ​ | (7) | ​ | (0.7)
Residential real estate – Owner occupied | ​ | (8) | ​ | (0.1) | ​ | ​ | (25) | ​ | (0.4) | ​ | ​ | - | ​ | -
Multifamily | ​ | - | ​ | - | ​ | ​ | - | ​ | - | ​ | ​ | (6) | ​ | (0.6)
HELOC | ​ | (17) | ​ | (0.1) | ​ | ​ | (35) | ​ | (0.5) | ​ | ​ | (38) | ​ | (4.0)
Other 1 | ​ | 31 | ​ | 0.3 | ​ | ​ | 70 | ​ | 1.0 | ​ | ​ | 34 | ​ | 3.5
Net charge–offs / (recoveries) | $ | 15,460 | ​ | 100.0 | ​ | $ | 6,597 | ​ | 100.0 | ​ | $ | 940 | ​ | 100.0
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

1 Other class includes consumer loans and overdrafts.

2 Represents the percentage of net charge-offs attributable to each category of loans.

​

Gross charge-offs for the fourth quarter of 2023 were $16.0 million, compared to $6.9 million for the third quarter of 2023 and $1.1 million for the fourth quarter of 2022. Gross recoveries were $491,000 for the fourth quarter of 2023, compared to $339,000 for the third quarter of 2023, and $136,000 for the fourth quarter of 2022. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.

​

10

​

Deposits

​

Total deposits were $4.57 billion at December 31, 2023, a decrease of $43.6 million, or 0.9%, compared to $4.61 billion at September 30, 2023, primarily due to a decline in savings of $32.2 million, followed by a decrease of $30.9 million in money markets and $27.8 million in non-interest bearing deposits. The large decreases were partially offset by an increase of $49.9 million in certificates of deposit. The bulk of the linked quarter decline in deposit balances occurred in October 2023 and is consistent with seasonal historical trends related to tax payments and commercial customer business volumes. Total quarterly average deposits decreased $636.6 million, or 12.2%, in the year over year period, driven by declines in our average demand deposits of $245.2 million, and savings, NOW and money markets combined of $438.8 million. In general, the bulk of the decline in deposits year over year can be characterized as rate sensitive with significant flows and transfers into investing activities, materially offsetting the significant expansion in those same accounts in the immediate aftermath of the pandemic.

​

Borrowings

​

As of December 31, 2023, we had $405.0 million in other short-term borrowings due to short-term FHLB advances, compared to $435.0 million at September 30, 2023, and $90.0 million as of December 31, 2022.

​

Non-GAAP Presentations

​

Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure our performance, including the presentation of adjusted net income, net interest income and net interest margin on a fully taxable equivalent basis, and our efficiency ratio calculations on a taxable equivalent basis. The net interest margin fully taxable equivalent is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Consistent with industry practice, management has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 7.

We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe these measures provide investors with information regarding balance sheet profitability, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing, and comparing past, present and future periods.

These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies’ non-GAAP financial measures having the same or similar names. The tables beginning on page 17 provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.

Cautionary Note Regarding Forward-Looking Statements

​

This earnings release and statements by our management may contain forward-looking statements within the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “should,” “anticipate,” “expect,” “estimate,” “intend,” “believe,” “may,” “likely,” “will,” “forecast,” “project,” “looking forward,” “optimistic,” “hopeful,” “potential,” “progress,” “prospect,” “remain,” “deliver,” “continue,” “trend,” “momentum,” “remainder,” “beyond,” “and “near” or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, loan growth, deposit trends and funding, asset-quality trends, balance sheet growth, and building capital. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, (1) the strength of the United States economy in general and the strength of the local economies in which we conduct our operations may be different than expected; (2) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (3) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (4) risks related to future

11

acquisitions, if any, including execution and integration risks; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on us; (6) changes in interest rates, which has and may continue to affect our deposit and funding costs, net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities; (7) elevated inflation which causes adverse risk to the overall economy, and could indirectly pose challenges to our clients and to our business; and (8) the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation. Additional risks and uncertainties are contained in the “Risk Factors” and forward-looking statements disclosure in our most recent Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q. The inclusion of this forward-looking information should not be construed as a representation by us or any person that future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

​

Conference Call

​

We will host a call on Thursday, January 25, 2024, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss our fourth quarter 2023 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code: 675276. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

​

A replay of the call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on February 1, 2024, by dialing 877-481-4010, using Conference ID: 49609.

12

​

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, | ​ | December 31,
​ |  | 2023 |  | 2022
Assets | ​ | ​ | ​ | ​ | ​ | ​
Cash and due from banks | ​ | $ | 55,534 | ​ | $ | 56,632
Interest earning deposits with financial institutions | ​ | ​ | 44,611 | ​ | ​ | 58,545
Cash and cash equivalents | ​ | ​ | 100,145 | ​ | ​ | 115,177
Securities available-for-sale, at fair value | ​ | ​ | 1,192,829 | ​ | ​ | 1,539,359
Federal Home Loan Bank Chicago (“FHLBC”) and Federal Reserve Bank Chicago (“FRBC”) stock | ​ | ​ | 33,355 | ​ | ​ | 20,530
Loans held-for-sale | ​ | ​ | 1,322 | ​ | ​ | 491
Loans | ​ | ​ | 4,042,953 | ​ | ​ | 3,869,609
Less: allowance for credit losses on loans | ​ | ​ | 44,264 | ​ | ​ | 49,480
Net loans | ​ | ​ | 3,998,689 | ​ | ​ | 3,820,129
Premises and equipment, net | ​ | ​ | 79,310 | ​ | ​ | 72,355
Other real estate owned | ​ | ​ | 5,123 | ​ | ​ | 1,561
Mortgage servicing rights, at fair value | ​ | ​ | 10,344 | ​ | ​ | 11,189
Goodwill | ​ | ​ | 86,478 | ​ | ​ | 86,478
Core deposit intangible | ​ | ​ | 11,217 | ​ | ​ | 13,678
Bank-owned life insurance (“BOLI”) | ​ | ​ | 109,318 | ​ | ​ | 106,608
Deferred tax assets, net | ​ | ​ | 31,077 | ​ | ​ | 44,750
Other assets | ​ | ​ | 63,592 | ​ | ​ | 56,012
Total assets | ​ | $ | 5,722,799 | ​ | $ | 5,888,317
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Deposits: | ​ | ​ | ​ | ​ | ​ | ​
Noninterest bearing demand | ​ | $ | 1,834,891 | ​ | $ | 2,051,702
Interest bearing: | ​ | ​ | ​ | ​ | ​ | ​
Savings, NOW, and money market | ​ | ​ | 2,207,949 | ​ | ​ | 2,617,100
Time | ​ | ​ | 527,906 | ​ | ​ | 441,921
Total deposits | ​ | ​ | 4,570,746 | ​ | ​ | 5,110,723
Securities sold under repurchase agreements | ​ | ​ | 26,470 | ​ | ​ | 32,156
Other short-term borrowings | ​ | ​ | 405,000 | ​ | ​ | 90,000
Junior subordinated debentures | ​ | ​ | 25,773 | ​ | ​ | 25,773
Subordinated debentures | ​ | ​ | 59,382 | ​ | ​ | 59,297
Senior notes | ​ | ​ | - | ​ | ​ | 44,585
Notes payable and other borrowings | ​ | ​ | - | ​ | ​ | 9,000
Other liabilities | ​ | ​ | 58,147 | ​ | ​ | 55,642
Total liabilities | ​ | ​ | 5,145,518 | ​ | ​ | 5,427,176
​ | ​ | ​ | ​ | ​ | ​ | ​
Stockholders’ Equity | ​ | ​ | ​ | ​ | ​ | ​
Common stock | ​ | ​ | 44,705 | ​ | ​ | 44,705
Additional paid-in capital | ​ | ​ | 202,223 | ​ | ​ | 202,276
Retained earnings | ​ | ​ | 393,311 | ​ | ​ | 310,512
Accumulated other comprehensive loss | ​ | ​ | (62,781) | ​ | ​ | (93,124)
Treasury stock | ​ | ​ | (177) | ​ | ​ | (3,228)
Total stockholders’ equity | ​ | ​ | 577,281 | ​ | ​ | 461,141
Total liabilities and stockholders’ equity | ​ | $ | 5,722,799 | ​ | $ | 5,888,317
​ | ​ | ​ | ​ | ​ | ​ | ​

​

13

​

​

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended December 31, | ​ | Year Ended December 31,
​ |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Interest and dividend income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans, including fees | ​ | $ | 62,751 | ​ | $ | 55,170 | ​ | $ | 244,187 | ​ | $ | 176,379 | ​
Loans held-for-sale | ​ | ​ | 31 | ​ | ​ | 19 | ​ | ​ | 91 | ​ | ​ | 130 | ​
Securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 8,329 | ​ | ​ | 10,495 | ​ | ​ | 37,940 | ​ | ​ | 31,566 | ​
Tax exempt | ​ | ​ | 1,322 | ​ | ​ | 1,341 | ​ | ​ | 5,329 | ​ | ​ | 5,287 | ​
Dividends from FHLBC and FRBC stock | ​ | ​ | 647 | ​ | ​ | 259 | ​ | ​ | 1,920 | ​ | ​ | 936 | ​
Interest bearing deposits with financial institutions | ​ | ​ | 616 | ​ | ​ | 461 | ​ | ​ | 2,503 | ​ | ​ | 2,175 | ​
Total interest and dividend income | ​ | ​ | 73,696 | ​ | ​ | 67,745 | ​ | ​ | 291,970 | ​ | ​ | 216,473 | ​
Interest expense | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Savings, NOW, and money market deposits | ​ | ​ | 3,312 | ​ | ​ | 776 | ​ | ​ | 8,761 | ​ | ​ | 1,900 | ​
Time deposits | ​ | ​ | 2,834 | ​ | ​ | 571 | ​ | ​ | 6,636 | ​ | ​ | 1,448 | ​
Securities sold under repurchase agreements | ​ | ​ | 50 | ​ | ​ | 10 | ​ | ​ | 93 | ​ | ​ | 40 | ​
Other short-term borrowings | ​ | ​ | 5,429 | ​ | ​ | 436 | ​ | ​ | 18,774 | ​ | ​ | 480 | ​
Junior subordinated debentures | ​ | ​ | 290 | ​ | ​ | 287 | ​ | ​ | 1,095 | ​ | ​ | 1,136 | ​
Subordinated debentures | ​ | ​ | 546 | ​ | ​ | 546 | ​ | ​ | 2,185 | ​ | ​ | 2,185 | ​
Senior notes | ​ | ​ | - | ​ | ​ | 891 | ​ | ​ | 2,408 | ​ | ​ | 2,682 | ​
Notes payable and other borrowings | ​ | ​ | - | ​ | ​ | 137 | ​ | ​ | 87 | ​ | ​ | 446 | ​
Total interest expense | ​ | ​ | 12,461 | ​ | ​ | 3,654 | ​ | ​ | 40,039 | ​ | ​ | 10,317 | ​
Net interest and dividend income | ​ | ​ | 61,235 | ​ | ​ | 64,091 | ​ | ​ | 251,931 | ​ | ​ | 206,156 | ​
Provision for credit losses | ​ | ​ | 8,000 | ​ | ​ | 1,500 | ​ | ​ | 16,501 | ​ | ​ | 6,550 | ​
Net interest and dividend income after provision for credit losses | ​ | ​ | 53,235 | ​ | ​ | 62,591 | ​ | ​ | 235,430 | ​ | ​ | 199,606 | ​
Noninterest income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Wealth management | ​ | ​ | 2,600 | ​ | ​ | 2,403 | ​ | ​ | 9,803 | ​ | ​ | 9,887 | ​
Service charges on deposits | ​ | ​ | 2,527 | ​ | ​ | 2,499 | ​ | ​ | 9,817 | ​ | ​ | 9,562 | ​
Secondary mortgage fees | ​ | ​ | 58 | ​ | ​ | 62 | ​ | ​ | 259 | ​ | ​ | 332 | ​
Mortgage servicing rights mark to market (loss) gain | ​ | ​ | (1,277) | ​ | ​ | (431) | ​ | ​ | (1,425) | ​ | ​ | 3,177 | ​
Mortgage servicing income | ​ | ​ | 495 | ​ | ​ | 518 | ​ | ​ | 2,029 | ​ | ​ | 2,130 | ​
Net gain on sales of mortgage loans | ​ | ​ | 366 | ​ | ​ | 340 | ​ | ​ | 1,477 | ​ | ​ | 2,022 | ​
Securities losses, net | ​ | ​ | (2) | ​ | ​ | (910) | ​ | ​ | (4,148) | ​ | ​ | (944) | ​
Change in cash surrender value of BOLI | ​ | ​ | 541 | ​ | ​ | 376 | ​ | ​ | 2,120 | ​ | ​ | 718 | ​
Card related income | ​ | ​ | 2,511 | ​ | ​ | 2,795 | ​ | ​ | 10,051 | ​ | ​ | 10,989 | ​
Other income | ​ | ​ | 910 | ​ | ​ | 1,294 | ​ | ​ | 4,196 | ​ | ​ | 5,243 | ​
Total noninterest income | ​ | ​ | 8,729 | ​ | ​ | 8,946 | ​ | ​ | 34,179 | ​ | ​ | 43,116 | ​
Noninterest expense | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Salaries and employee benefits | ​ | ​ | 21,405 | ​ | ​ | 24,263 | ​ | ​ | 88,566 | ​ | ​ | 86,573 | ​
Occupancy, furniture and equipment | ​ | ​ | 3,817 | ​ | ​ | 4,128 | ​ | ​ | 14,437 | ​ | ​ | 14,992 | ​
Computer and data processing | ​ | ​ | 2,291 | ​ | ​ | 2,978 | ​ | ​ | 7,277 | ​ | ​ | 15,795 | ​
FDIC insurance | ​ | ​ | 583 | ​ | ​ | 630 | ​ | ​ | 2,705 | ​ | ​ | 2,401 | ​
Net teller & bill paying | ​ | ​ | 564 | ​ | ​ | 485 | ​ | ​ | 2,115 | ​ | ​ | 3,730 | ​
General bank insurance | ​ | ​ | 301 | ​ | ​ | 298 | ​ | ​ | 1,212 | ​ | ​ | 1,221 | ​
Amortization of core deposit intangible | ​ | ​ | 603 | ​ | ​ | 645 | ​ | ​ | 2,461 | ​ | ​ | 2,626 | ​
Advertising expense | ​ | ​ | 383 | ​ | ​ | 130 | ​ | ​ | 721 | ​ | ​ | 589 | ​
Card related expense | ​ | ​ | 1,338 | ​ | ​ | 1,304 | ​ | ​ | 5,123 | ​ | ​ | 4,348 | ​
Legal fees | ​ | ​ | 228 | ​ | ​ | 225 | ​ | ​ | 927 | ​ | ​ | 873 | ​
Consulting & management fees | ​ | ​ | 556 | ​ | ​ | 679 | ​ | ​ | 2,415 | ​ | ​ | 2,425 | ​
Other real estate expense, net | ​ | ​ | 218 | ​ | ​ | 34 | ​ | ​ | 399 | ​ | ​ | 130 | ​
Other expense | ​ | ​ | 4,739 | ​ | ​ | 3,885 | ​ | ​ | 16,843 | ​ | ​ | 15,470 | ​
Total noninterest expense | ​ | ​ | 37,026 | ​ | ​ | 39,684 | ​ | ​ | 145,201 | ​ | ​ | 151,173 | ​
Income before income taxes | ​ | ​ | 24,938 | ​ | ​ | 31,853 | ​ | ​ | 124,408 | ​ | ​ | 91,549 | ​
Provision for income taxes | ​ | ​ | 6,713 | ​ | ​ | 8,238 | ​ | ​ | 32,679 | ​ | ​ | 24,144 | ​
Net income | ​ | $ | 18,225 | ​ | $ | 23,615 | ​ | $ | 91,729 | ​ | $ | 67,405 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings per share | ​ | $ | 0.40 | ​ | $ | 0.53 | ​ | $ | 2.05 | ​ | $ | 1.51 | ​
Diluted earnings per share | ​ | ​ | 0.40 | ​ | ​ | 0.52 | ​ | ​ | 2.02 | ​ | ​ | 1.49 | ​
Dividends declared per share | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.20 | ​ | ​ | 0.20 | ​

​

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Ending common shares outstanding | ​ | 44,697,917 | ​ | 44,582,311 | ​ | 44,697,917 | ​ | 44,582,311
Weighted-average basic shares outstanding | ​ | 44,694,200 | ​ | 44,578,830 | ​ | 44,663,722 | ​ | 44,526,655
Weighted-average diluted shares outstanding | ​ | 45,409,232 | ​ | 45,228,212 | ​ | 45,395,010 | ​ | 45,213,088

​

​

14

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Average Balance

(In thousands, unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | 2022 | ​ | ​ | 2023
Assets |  | 1st Qtr |  | 2nd Qtr |  | 3rd Qtr |  | 4th Qtr |  | 1st Qtr | ​ | 2nd Qtr |  | 3rd Qtr | ​ | 4th Qtr
Cash and due from banks | ​ | $ | 42,972 | ​ | $ | 53,371 | ​ | $ | 56,265 | ​ | $ | 56,531 | ​ | $ | 55,140 | ​ | $ | 56,191 | ​ | $ | 57,279 | ​ | $ | 57,723
Interest earning deposits with financial institutions | ​ | ​ | 635,302 | ​ | ​ | 426,820 | ​ | ​ | 131,260 | ​ | ​ | 50,377 | ​ | ​ | 49,310 | ​ | ​ | 50,309 | ​ | ​ | 49,737 | ​ | ​ | 47,865
Cash and cash equivalents | ​ | ​ | 678,274 | ​ | ​ | 480,191 | ​ | ​ | 187,525 | ​ | ​ | 106,908 | ​ | ​ | 104,450 | ​ | ​ | 106,500 | ​ | ​ | 107,016 | ​ | ​ | 105,588
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Securities available-for-sale, at fair value | ​ | ​ | 1,807,875 | ​ | ​ | 1,792,099 | ​ | ​ | 1,703,348 | ​ | ​ | 1,576,004 | ​ | ​ | 1,503,619 | ​ | ​ | 1,404,664 | ​ | ​ | 1,295,211 | ​ | ​ | 1,192,021
FHLBC and FRBC stock | ​ | ​ | 16,066 | ​ | ​ | 20,994 | ​ | ​ | 19,565 | ​ | ​ | 19,534 | ​ | ​ | 24,905 | ​ | ​ | 34,029 | ​ | ​ | 35,954 | ​ | ​ | 34,371
Loans held-for-sale | ​ | ​ | 6,707 | ​ | ​ | 3,050 | ​ | ​ | 2,020 | ​ | ​ | 1,224 | ​ | ​ | 813 | ​ | ​ | 1,150 | ​ | ​ | 1,641 | ​ | ​ | 1,709
Loans | ​ | ​ | 3,397,827 | ​ | ​ | 3,505,806 | ​ | ​ | 3,751,097 | ​ | ​ | 3,877,004 | ​ | ​ | 3,931,679 | ​ | ​ | 4,039,052 | ​ | ​ | 4,009,218 | ​ | ​ | 4,014,771
Less: allowance for credit losses on loans | ​ | ​ | 44,341 | ​ | ​ | 44,354 | ​ | ​ | 45,449 | ​ | ​ | 48,778 | ​ | ​ | 49,398 | ​ | ​ | 53,480 | ​ | ​ | 54,581 | ​ | ​ | 50,023
Net loans | ​ | ​ | 3,353,486 | ​ | ​ | 3,461,452 | ​ | ​ | 3,705,648 | ​ | ​ | 3,828,226 | ​ | ​ | 3,882,281 | ​ | ​ | 3,985,572 | ​ | ​ | 3,954,637 | ​ | ​ | 3,964,748
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Premises and equipment, net | ​ | ​ | 86,502 | ​ | ​ | 73,876 | ​ | ​ | 71,947 | ​ | ​ | 72,220 | ​ | ​ | 72,649 | ​ | ​ | 72,903 | ​ | ​ | 74,707 | ​ | ​ | 78,472
Other real estate owned | ​ | ​ | 2,399 | ​ | ​ | 1,850 | ​ | ​ | 1,578 | ​ | ​ | 1,561 | ​ | ​ | 1,508 | ​ | ​ | 1,132 | ​ | ​ | 472 | ​ | ​ | 2,004
Mortgage servicing rights, at fair value | ​ | ​ | 8,218 | ​ | ​ | 10,525 | ​ | ​ | 10,639 | ​ | ​ | 11,322 | ​ | ​ | 11,127 | ​ | ​ | 10,741 | ​ | ​ | 11,066 | ​ | ​ | 11,317
Goodwill | ​ | ​ | 86,332 | ​ | ​ | 86,332 | ​ | ​ | 86,333 | ​ | ​ | 86,477 | ​ | ​ | 86,477 | ​ | ​ | 86,477 | ​ | ​ | 86,477 | ​ | ​ | 86,477
Core deposit intangible | ​ | ​ | 15,977 | ​ | ​ | 15,286 | ​ | ​ | 14,561 | ​ | ​ | 13,950 | ​ | ​ | 13,327 | ​ | ​ | 12,709 | ​ | ​ | 12,119 | ​ | ​ | 11,502
Bank-owned life insurance ("BOLI") | ​ | ​ | 105,396 | ​ | ​ | 105,463 | ​ | ​ | 105,448 | ​ | ​ | 105,754 | ​ | ​ | 106,655 | ​ | ​ | 107,028 | ​ | ​ | 107,786 | ​ | ​ | 108,616
Deferred tax assets, net | ​ | ​ | 10,689 | ​ | ​ | 27,154 | ​ | ​ | 31,738 | ​ | ​ | 50,533 | ​ | ​ | 42,237 | ​ | ​ | 37,774 | ​ | ​ | 39,072 | ​ | ​ | 42,754
Other assets | ​ | ​ | 55,474 | ​ | ​ | 53,823 | ​ | ​ | 55,606 | ​ | ​ | 53,909 | ​ | ​ | 48,599 | ​ | ​ | 50,812 | ​ | ​ | 52,360 | ​ | ​ | 55,155
Total other assets | ​ | ​ | 370,987 | ​ | ​ | 374,309 | ​ | ​ | 377,850 | ​ | ​ | 395,726 | ​ | ​ | 382,579 | ​ | ​ | 379,576 | ​ | ​ | 384,059 | ​ | ​ | 396,297
Total assets | ​ | $ | 6,233,395 | ​ | $ | 6,132,095 | ​ | $ | 5,995,956 | ​ | $ | 5,927,622 | ​ | $ | 5,898,647 | ​ | $ | 5,911,491 | ​ | $ | 5,778,518 | ​ | $ | 5,694,734
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deposits: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Noninterest bearing demand | ​ | $ | 2,093,293 | ​ | $ | 2,119,667 | ​ | $ | 2,092,301 | ​ | $ | 2,083,503 | ​ | $ | 2,002,801 | ​ | $ | 1,920,448 | ​ | $ | 1,867,201 | ​ | $ | 1,838,325
Interest bearing: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Savings, NOW, and money market | ​ | ​ | 2,899,497 | ​ | ​ | 2,872,622 | ​ | ​ | 2,765,281 | ​ | ​ | 2,680,767 | ​ | ​ | 2,560,893 | ​ | ​ | 2,437,096 | ​ | ​ | 2,324,613 | ​ | ​ | 2,241,937
Time | ​ | ​ | 495,452 | ​ | ​ | 469,009 | ​ | ​ | 459,925 | ​ | ​ | 450,111 | ​ | ​ | 434,655 | ​ | ​ | 436,524 | ​ | ​ | 466,250 | ​ | ​ | 497,472
Total deposits | ​ | ​ | 5,488,242 | ​ | ​ | 5,461,298 | ​ | ​ | 5,317,507 | ​ | ​ | 5,214,381 | ​ | ​ | 4,998,349 | ​ | ​ | 4,794,068 | ​ | ​ | 4,658,064 | ​ | ​ | 4,577,734
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Securities sold under repurchase agreements | ​ | ​ | 39,204 | ​ | ​ | 34,496 | ​ | ​ | 33,733 | ​ | ​ | 33,275 | ​ | ​ | 31,080 | ​ | ​ | 25,575 | ​ | ​ | 24,945 | ​ | ​ | 28,526
Other short-term borrowings | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 5,435 | ​ | ​ | 44,293 | ​ | ​ | 200,833 | ​ | ​ | 402,527 | ​ | ​ | 427,174 | ​ | ​ | 390,652
Junior subordinated debentures | ​ | ​ | 25,773 | ​ | ​ | 25,773 | ​ | ​ | 25,773 | ​ | ​ | 25,773 | ​ | ​ | 25,773 | ​ | ​ | 25,773 | ​ | ​ | 25,773 | ​ | ​ | 25,773
Subordinated debentures | ​ | ​ | 59,222 | ​ | ​ | 59,244 | ​ | ​ | 59,265 | ​ | ​ | 59,286 | ​ | ​ | 59,308 | ​ | ​ | 59,329 | ​ | ​ | 59,350 | ​ | ​ | 59,372
Senior notes | ​ | ​ | 44,494 | ​ | ​ | 44,520 | ​ | ​ | 44,546 | ​ | ​ | 44,572 | ​ | ​ | 44,599 | ​ | ​ | 44,134 | ​ | ​ | - | ​ | ​ | -
Notes payable and other borrowings | ​ | ​ | 19,009 | ​ | ​ | 13,103 | ​ | ​ | 10,989 | ​ | ​ | 9,978 | ​ | ​ | 5,400 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | -
Other liabilities | ​ | ​ | 60,819 | ​ | ​ | 32,636 | ​ | ​ | 34,949 | ​ | ​ | 51,753 | ​ | ​ | 51,279 | ​ | ​ | 48,434 | ​ | ​ | 53,164 | ​ | ​ | 63,971
Total liabilities | ​ | ​ | 5,736,763 | ​ | ​ | 5,671,070 | ​ | ​ | 5,532,197 | ​ | ​ | 5,483,311 | ​ | ​ | 5,416,621 | ​ | ​ | 5,399,840 | ​ | ​ | 5,248,470 | ​ | ​ | 5,146,028
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Stockholders' equity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Common stock | ​ | ​ | 44,705 | ​ | ​ | 44,705 | ​ | ​ | 44,705 | ​ | ​ | 44,705 | ​ | ​ | 44,705 | ​ | ​ | 44,705 | ​ | ​ | 44,705 | ​ | ​ | 44,705
Additional paid-in capital | ​ | ​ | 202,828 | ​ | ​ | 202,544 | ​ | ​ | 201,570 | ​ | ​ | 201,973 | ​ | ​ | 201,397 | ​ | ​ | 200,590 | ​ | ​ | 201,344 | ​ | ​ | 201,824
Retained earnings | ​ | ​ | 258,073 | ​ | ​ | 267,912 | ​ | ​ | 284,302 | ​ | ​ | 301,753 | ​ | ​ | 324,785 | ​ | ​ | 346,042 | ​ | ​ | 368,732 | ​ | ​ | 389,776
Accumulated other comprehensive loss | ​ | ​ | (3,074) | ​ | ​ | (49,151) | ​ | ​ | (63,216) | ​ | ​ | (100,817) | ​ | ​ | (86,736) | ​ | ​ | (78,940) | ​ | ​ | (84,167) | ​ | ​ | (87,358)
Treasury stock | ​ | ​ | (5,900) | ​ | ​ | (4,985) | ​ | ​ | (3,602) | ​ | ​ | (3,303) | ​ | ​ | (2,125) | ​ | ​ | (746) | ​ | ​ | (566) | ​ | ​ | (241)
Total stockholders' equity | ​ | ​ | 496,632 | ​ | ​ | 461,025 | ​ | ​ | 463,759 | ​ | ​ | 444,311 | ​ | ​ | 482,026 | ​ | ​ | 511,651 | ​ | ​ | 530,048 | ​ | ​ | 548,706
Total liabilities and stockholders' equity | ​ | $ | 6,233,395 | ​ | $ | 6,132,095 | ​ | $ | 5,995,956 | ​ | $ | 5,927,622 | ​ | $ | 5,898,647 | ​ | $ | 5,911,491 | ​ | $ | 5,778,518 | ​ | $ | 5,694,734
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Earning Assets | ​ | $ | 5,863,777 | ​ | $ | 5,748,769 | ​ | $ | 5,607,290 | ​ | $ | 5,524,143 | ​ | $ | 5,510,326 | ​ | $ | 5,529,204 | ​ | $ | 5,391,761 | ​ | $ | 5,290,737
Total Interest Bearing Liabilities | ​ | ​ | 3,582,651 | ​ | ​ | 3,518,767 | ​ | ​ | 3,404,947 | ​ | ​ | 3,348,055 | ​ | ​ | 3,362,541 | ​ | ​ | 3,430,958 | ​ | ​ | 3,328,105 | ​ | ​ | 3,243,732

​

​

15

​

​

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Statements of Income

(In thousands, except per share data, unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2022 | ​ | 2023
​ |  | 1st Qtr |  | 2nd Qtr |  | 3rd Qtr |  | 4th Qtr |  | 1st Qtr | ​ | 2nd Qtr |  | 3rd Qtr | ​ | 4th Qtr
Interest and Dividend Income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans, including fees | ​ | $ | 36,366 | ​ | $ | 38,229 | ​ | $ | 46,614 | ​ | $ | 55,170 | ​ | $ | 57,210 | ​ | $ | 61,561 | ​ | $ | 62,665 | ​ | $ | 62,751
Loans held-for-sale | ​ | ​ | 57 | ​ | ​ | 32 | ​ | ​ | 22 | ​ | ​ | 19 | ​ | ​ | 12 | ​ | ​ | 19 | ​ | ​ | 29 | ​ | ​ | 31
Securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Taxable | ​ | ​ | 5,169 | ​ | ​ | 6,786 | ​ | ​ | 9,116 | ​ | ​ | 10,495 | ​ | ​ | 10,735 | ​ | ​ | 9,930 | ​ | ​ | 8,946 | ​ | ​ | 8,329
Tax exempt | ​ | ​ | 1,317 | ​ | ​ | 1,297 | ​ | ​ | 1,332 | ​ | ​ | 1,341 | ​ | ​ | 1,337 | ​ | ​ | 1,337 | ​ | ​ | 1,333 | ​ | ​ | 1,322
Dividends from FHLB and FRBC stock | ​ | ​ | 153 | ​ | ​ | 263 | ​ | ​ | 261 | ​ | ​ | 259 | ​ | ​ | 280 | ​ | ​ | 396 | ​ | ​ | 597 | ​ | ​ | 647
Interest bearing deposits with financial institutions | ​ | ​ | 269 | ​ | ​ | 782 | ​ | ​ | 663 | ​ | ​ | 461 | ​ | ​ | 585 | ​ | ​ | 643 | ​ | ​ | 659 | ​ | ​ | 616
Total interest and dividend income | ​ | ​ | 43,331 | ​ | ​ | 47,389 | ​ | ​ | 58,008 | ​ | ​ | 67,745 | ​ | ​ | 70,159 | ​ | ​ | 73,886 | ​ | ​ | 74,229 | ​ | ​ | 73,696
Interest Expense | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Savings, NOW, and money market deposits | ​ | ​ | 397 | ​ | ​ | 347 | ​ | ​ | 380 | ​ | ​ | 776 | ​ | ​ | 1,149 | ​ | ​ | 1,742 | ​ | ​ | 2,558 | ​ | ​ | 3,312
Time deposits | ​ | ​ | 277 | ​ | ​ | 265 | ​ | ​ | 335 | ​ | ​ | 571 | ​ | ​ | 664 | ​ | ​ | 1,156 | ​ | ​ | 1,982 | ​ | ​ | 2,834
Securities sold under repurchase agreements | ​ | ​ | 11 | ​ | ​ | 9 | ​ | ​ | 10 | ​ | ​ | 10 | ​ | ​ | 9 | ​ | ​ | 7 | ​ | ​ | 27 | ​ | ​ | 50
Other short-term borrowings | ​ | ​ | - | ​ | ​ | - | ​ | ​ | 44 | ​ | ​ | 436 | ​ | ​ | 2,345 | ​ | ​ | 5,160 | ​ | ​ | 5,840 | ​ | ​ | 5,429
Junior subordinated debentures | ​ | ​ | 280 | ​ | ​ | 284 | ​ | ​ | 285 | ​ | ​ | 287 | ​ | ​ | 279 | ​ | ​ | 281 | ​ | ​ | 245 | ​ | ​ | 290
Subordinated debentures | ​ | ​ | 546 | ​ | ​ | 547 | ​ | ​ | 546 | ​ | ​ | 546 | ​ | ​ | 546 | ​ | ​ | 546 | ​ | ​ | 547 | ​ | ​ | 546
Senior notes | ​ | ​ | 485 | ​ | ​ | 578 | ​ | ​ | 728 | ​ | ​ | 891 | ​ | ​ | 994 | ​ | ​ | 1,414 | ​ | ​ | - | ​ | ​ | -
Notes payable and other borrowings | ​ | ​ | 103 | ​ | ​ | 95 | ​ | ​ | 111 | ​ | ​ | 137 | ​ | ​ | 87 | ​ | ​ | - | ​ | ​ | - | ​ | ​ | -
Total interest expense | ​ | ​ | 2,099 | ​ | ​ | 2,125 | ​ | ​ | 2,439 | ​ | ​ | 3,654 | ​ | ​ | 6,073 | ​ | ​ | 10,306 | ​ | ​ | 11,199 | ​ | ​ | 12,461
Net interest and dividend income | ​ | ​ | 41,232 | ​ | ​ | 45,264 | ​ | ​ | 55,569 | ​ | ​ | 64,091 | ​ | ​ | 64,086 | ​ | ​ | 63,580 | ​ | ​ | 63,030 | ​ | ​ | 61,235
Provision for credit losses | ​ | ​ | - | ​ | ​ | 550 | ​ | ​ | 4,500 | ​ | ​ | 1,500 | ​ | ​ | 3,501 | ​ | ​ | 2,000 | ​ | ​ | 3,000 | ​ | ​ | 8,000
Net interest and dividend income after provision for credit losses | ​ | ​ | 41,232 | ​ | ​ | 44,714 | ​ | ​ | 51,069 | ​ | ​ | 62,591 | ​ | ​ | 60,585 | ​ | ​ | 61,580 | ​ | ​ | 60,030 | ​ | ​ | 53,235
Noninterest Income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Wealth management | ​ | ​ | 2,698 | ​ | ​ | 2,506 | ​ | ​ | 2,280 | ​ | ​ | 2,403 | ​ | ​ | 2,270 | ​ | ​ | 2,458 | ​ | ​ | 2,475 | ​ | ​ | 2,600
Service charges on deposits | ​ | ​ | 2,074 | ​ | ​ | 2,328 | ​ | ​ | 2,661 | ​ | ​ | 2,499 | ​ | ​ | 2,424 | ​ | ​ | 2,362 | ​ | ​ | 2,504 | ​ | ​ | 2,527
Secondary mortgage fees | ​ | ​ | 139 | ​ | ​ | 50 | ​ | ​ | 81 | ​ | ​ | 62 | ​ | ​ | 59 | ​ | ​ | 76 | ​ | ​ | 66 | ​ | ​ | 58
Mortgage servicing rights mark to market gain (loss) | ​ | ​ | 2,978 | ​ | ​ | 82 | ​ | ​ | 548 | ​ | ​ | (431) | ​ | ​ | (525) | ​ | ​ | 96 | ​ | ​ | 281 | ​ | ​ | (1,277)
Mortgage servicing income | ​ | ​ | 519 | ​ | ​ | 579 | ​ | ​ | 514 | ​ | ​ | 518 | ​ | ​ | 516 | ​ | ​ | 499 | ​ | ​ | 519 | ​ | ​ | 495
Net gain (loss) on sales of mortgage loans | ​ | ​ | 1,495 | ​ | ​ | (262) | ​ | ​ | 449 | ​ | ​ | 340 | ​ | ​ | 306 | ​ | ​ | 398 | ​ | ​ | 407 | ​ | ​ | 366
Securities losses, net | ​ | ​ | - | ​ | ​ | (33) | ​ | ​ | (1) | ​ | ​ | (910) | ​ | ​ | (1,675) | ​ | ​ | (1,547) | ​ | ​ | (924) | ​ | ​ | (2)
Change in cash surrender value of BOLI | ​ | ​ | 124 | ​ | ​ | 72 | ​ | ​ | 146 | ​ | ​ | 376 | ​ | ​ | 242 | ​ | ​ | 418 | ​ | ​ | 919 | ​ | ​ | 541
Card related income | ​ | ​ | 2,574 | ​ | ​ | 2,965 | ​ | ​ | 2,653 | ​ | ​ | 2,795 | ​ | ​ | 2,244 | ​ | ​ | 2,690 | ​ | ​ | 2,606 | ​ | ​ | 2,511
Other income | ​ | ​ | 862 | ​ | ​ | 924 | ​ | ​ | 2,165 | ​ | ​ | 1,294 | ​ | ​ | 1,489 | ​ | ​ | 773 | ​ | ​ | 1,024 | ​ | ​ | 910
Total noninterest income | ​ | ​ | 13,463 | ​ | ​ | 9,211 | ​ | ​ | 11,496 | ​ | ​ | 8,946 | ​ | ​ | 7,350 | ​ | ​ | 8,223 | ​ | ​ | 9,877 | ​ | ​ | 8,729
Noninterest Expense | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Salaries and employee benefits | ​ | ​ | 19,967 | ​ | ​ | 21,332 | ​ | ​ | 21,011 | ​ | ​ | 24,263 | ​ | ​ | 22,248 | ​ | ​ | 21,798 | ​ | ​ | 23,115 | ​ | ​ | 21,405
Occupancy, furniture and equipment | ​ | ​ | 3,699 | ​ | ​ | 3,046 | ​ | ​ | 4,119 | ​ | ​ | 4,128 | ​ | ​ | 3,475 | ​ | ​ | 3,639 | ​ | ​ | 3,506 | ​ | ​ | 3,817
Computer and data processing | ​ | ​ | 6,268 | ​ | ​ | 4,006 | ​ | ​ | 2,543 | ​ | ​ | 2,978 | ​ | ​ | 1,774 | ​ | ​ | 1,290 | ​ | ​ | 1,922 | ​ | ​ | 2,291
FDIC insurance | ​ | ​ | 410 | ​ | ​ | 702 | ​ | ​ | 659 | ​ | ​ | 630 | ​ | ​ | 584 | ​ | ​ | 794 | ​ | ​ | 744 | ​ | ​ | 583
Net teller & bill paying | ​ | ​ | 1,907 | ​ | ​ | 834 | ​ | ​ | 504 | ​ | ​ | 485 | ​ | ​ | 502 | ​ | ​ | 515 | ​ | ​ | 534 | ​ | ​ | 564
General bank insurance | ​ | ​ | 315 | ​ | ​ | 351 | ​ | ​ | 257 | ​ | ​ | 298 | ​ | ​ | 305 | ​ | ​ | 306 | ​ | ​ | 300 | ​ | ​ | 301
Amortization of core deposit intangible | ​ | ​ | 665 | ​ | ​ | 659 | ​ | ​ | 657 | ​ | ​ | 645 | ​ | ​ | 624 | ​ | ​ | 618 | ​ | ​ | 616 | ​ | ​ | 603
Advertising expense | ​ | ​ | 182 | ​ | ​ | 194 | ​ | ​ | 83 | ​ | ​ | 130 | ​ | ​ | 142 | ​ | ​ | 103 | ​ | ​ | 93 | ​ | ​ | 383
Card related expense | ​ | ​ | 534 | ​ | ​ | 1,057 | ​ | ​ | 1,453 | ​ | ​ | 1,304 | ​ | ​ | 1,216 | ​ | ​ | 1,222 | ​ | ​ | 1,347 | ​ | ​ | 1,338
Legal fees | ​ | ​ | 257 | ​ | ​ | 179 | ​ | ​ | 212 | ​ | ​ | 225 | ​ | ​ | 319 | ​ | ​ | 283 | ​ | ​ | 97 | ​ | ​ | 228
Consulting & management fees | ​ | ​ | 616 | ​ | ​ | 523 | ​ | ​ | 607 | ​ | ​ | 679 | ​ | ​ | 790 | ​ | ​ | 520 | ​ | ​ | 549 | ​ | ​ | 556
Other real estate expense, net | ​ | ​ | (12) | ​ | ​ | 87 | ​ | ​ | 21 | ​ | ​ | 34 | ​ | ​ | 306 | ​ | ​ | (98) | ​ | ​ | (27) | ​ | ​ | 218
Other expense | ​ | ​ | 3,444 | ​ | ​ | 4,279 | ​ | ​ | 3,862 | ​ | ​ | 3,885 | ​ | ​ | 3,637 | ​ | ​ | 3,840 | ​ | ​ | 4,627 | ​ | ​ | 4,739
Total noninterest expense | ​ | ​ | 38,252 | ​ | ​ | 37,249 | ​ | ​ | 35,988 | ​ | ​ | 39,684 | ​ | ​ | 35,922 | ​ | ​ | 34,830 | ​ | ​ | 37,423 | ​ | ​ | 37,026
Income before income taxes | ​ | ​ | 16,443 | ​ | ​ | 16,676 | ​ | ​ | 26,577 | ​ | ​ | 31,853 | ​ | ​ | 32,013 | ​ | ​ | 34,973 | ​ | ​ | 32,484 | ​ | ​ | 24,938
Provision for income taxes | ​ | ​ | 4,423 | ​ | ​ | 4,429 | ​ | ​ | 7,054 | ​ | ​ | 8,238 | ​ | ​ | 8,406 | ​ | ​ | 9,411 | ​ | ​ | 8,149 | ​ | ​ | 6,713
Net income | ​ | $ | 12,020 | ​ | $ | 12,247 | ​ | $ | 19,523 | ​ | $ | 23,615 | ​ | $ | 23,607 | ​ | $ | 25,562 | ​ | $ | 24,335 | ​ | $ | 18,225
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings per share (GAAP) | ​ | $ | 0.27 | ​ | $ | 0.28 | ​ | $ | 0.43 | ​ | $ | 0.53 | ​ | $ | 0.53 | ​ | $ | 0.57 | ​ | $ | 0.55 | ​ | $ | 0.40
Diluted earnings per share (GAAP) | ​ | ​ | 0.27 | ​ | ​ | 0.27 | ​ | ​ | 0.43 | ​ | ​ | 0.52 | ​ | ​ | 0.52 | ​ | ​ | 0.56 | ​ | ​ | 0.54 | ​ | ​ | 0.40
Dividends paid per share | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.05 | ​ | ​ | 0.05

​

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16

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Reconciliation of Non-GAAP Financial Measures

The tables below provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the periods indicated. Dollar amounts below in thousands:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Quarters Ended | ​
​ | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2023 | ​ | 2022 | ​
Net Income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income before income taxes (GAAP) | ​ | $ | 24,938 | ​ | $ | 32,484 | ​ | $ | 31,853 | ​
Pre-tax income adjustments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Litigation related expenses | ​ | ​ | 1,200 | ​ | ​ | - | ​ | ​ | - | ​
Merger-related costs, net of losses/(gains) on branch sales | ​ | ​ | 19 | ​ | ​ | - | ​ | ​ | 617 | ​
Liquidation and deconversion costs on Visa credit card portfolio | ​ | ​ | - | ​ | ​ | 629 | ​ | ​ | - | ​
Adjusted net income before taxes | ​ | ​ | 26,157 | ​ | ​ | 33,113 | ​ | ​ | 32,470 | ​
Taxes on adjusted net income | ​ | ​ | 7,041 | ​ | ​ | 8,307 | ​ | ​ | 8,398 | ​
Adjusted net income (non-GAAP) | ​ | $ | 19,116 | ​ | $ | 24,806 | ​ | $ | 24,072 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings per share (GAAP) | ​ | $ | 0.40 | ​ | $ | 0.55 | ​ | $ | 0.53 | ​
Diluted earnings per share (GAAP) | ​ | ​ | 0.40 | ​ | ​ | 0.54 | ​ | ​ | 0.52 | ​
Adjusted basic earnings per share excluding acquisition-related costs (non-GAAP) | ​ | ​ | 0.43 | ​ | ​ | 0.55 | ​ | ​ | 0.54 | ​
Adjusted diluted earnings per share excluding acquisition-related costs (non-GAAP) | ​ | ​ | 0.42 | ​ | ​ | 0.55 | ​ | ​ | 0.53 | ​

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Quarters Ended | ​
​ | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ |  | 2023 |  | 2023 | ​ | 2022 | ​
Net Interest Margin | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest income (GAAP) | ​ | $ | 73,696 | ​ | $ | 74,229 | ​ | $ | 67,745 | ​
Taxable-equivalent adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | ​ | 11 | ​ | ​ | 11 | ​ | ​ | 6 | ​
Securities | ​ | ​ | 352 | ​ | ​ | 354 | ​ | ​ | 356 | ​
Interest income (TE) | ​ | ​ | 74,059 | ​ | ​ | 74,594 | ​ | ​ | 68,107 | ​
Interest expense (GAAP) | ​ | ​ | 12,461 | ​ | ​ | 11,199 | ​ | ​ | 3,654 | ​
Net interest income (TE) | ​ | $ | 61,598 | ​ | $ | 63,395 | ​ | $ | 64,453 | ​
Net interest income (GAAP) | ​ | $ | 61,235 | ​ | $ | 63,030 | ​ | $ | 64,091 | ​
Average interest earning assets | ​ | $ | 5,290,737 | ​ | $ | 5,391,761 | ​ | $ | 5,524,143 | ​
Net interest margin (TE) | ​ | ​ | 4.62 | % | ​ | 4.66 | % | ​ | 4.63 | %
Net interest margin (GAAP) | ​ | ​ | 4.59 | % | ​ | 4.64 | % | ​ | 4.60 | %

​

​

17

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | GAAP | ​ | Non-GAAP | ​
​ | ​ | ​ | Three Months Ended | ​ | ​ | Three Months Ended | ​
​ | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ | ​ | 2023 | ​ | 2023 | ​ | 2022 | ​ | 2023 | ​ | 2023 | ​ | 2022 | ​
Efficiency Ratio / Adjusted Efficiency Ratio | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Noninterest expense | ​ | $ | 37,026 | ​ | $ | 37,423 | ​ | $ | 39,684 | ​ | $ | 37,026 | ​ | $ | 37,423 | ​ | $ | 39,684 | ​
Less amortization of core deposit | ​ | ​ | 603 | ​ | ​ | 616 | ​ | ​ | 645 | ​ | ​ | 603 | ​ | ​ | 616 | ​ | ​ | 645 | ​
Less other real estate (income) expense, net | ​ | ​ | 218 | ​ | ​ | (27) | ​ | ​ | 34 | ​ | ​ | 218 | ​ | ​ | (27) | ​ | ​ | 34 | ​
Less litigation related expense | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | 1,200 | ​ | ​ | ​ | ​ | ​ | ​ | ​
Less acquisition related costs, net of losses/(gains) on branch sales | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | 19 | ​ | ​ | - | ​ | ​ | 617 | ​
Less liquidation and deconversion costs on Visa credit card portfolio | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | - | ​ | ​ | 629 | ​ | ​ | - | ​
Noninterest expense less adjustments | ​ | $ | 36,205 | ​ | $ | 36,834 | ​ | $ | 39,005 | ​ | $ | 34,986 | ​ | $ | 36,205 | ​ | $ | 38,388 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net interest income | ​ | $ | 61,235 | ​ | $ | 63,030 | ​ | $ | 64,091 | ​ | $ | 61,235 | ​ | $ | 63,030 | ​ | $ | 64,091 | ​
Taxable-equivalent adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | 11 | ​ | ​ | 11 | ​ | ​ | 6 | ​
Securities | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | 352 | ​ | ​ | 354 | ​ | ​ | 356 | ​
Net interest income including adjustments | ​ | ​ | 61,235 | ​ | ​ | 63,030 | ​ | ​ | 64,091 | ​ | ​ | 61,598 | ​ | ​ | 63,395 | ​ | ​ | 64,453 | ​
Noninterest income | ​ | ​ | 8,729 | ​ | ​ | 9,877 | ​ | ​ | 8,946 | ​ | ​ | 8,729 | ​ | ​ | 9,877 | ​ | ​ | 8,946 | ​
Less securities losses | ​ | ​ | (2) | ​ | ​ | (924) | ​ | ​ | (910) | ​ | ​ | (2) | ​ | ​ | (924) | ​ | ​ | (910) | ​
Less MSRs mark to market (losses) gains | ​ | ​ | (1,277) | ​ | ​ | 281 | ​ | ​ | (431) | ​ | ​ | (1,277) | ​ | ​ | 281 | ​ | ​ | (431) | ​
Taxable-equivalent adjustment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Change in cash surrender value of BOLI | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | 144 | ​ | ​ | 245 | ​ | ​ | 100 | ​
Noninterest income (excluding) / including adjustments | ​ | ​ | 10,008 | ​ | ​ | 10,520 | ​ | ​ | 10,287 | ​ | ​ | 10,152 | ​ | ​ | 10,765 | ​ | ​ | 10,387 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net interest income including adjustments plus noninterest income (excluding) / including adjustments | ​ | $ | 71,243 | ​ | $ | 73,550 | ​ | $ | 74,378 | ​ | $ | 71,750 | ​ | $ | 74,160 | ​ | $ | 74,840 | ​
Efficiency ratio / Adjusted efficiency ratio | ​ | ​ | 50.82 | % | ​ | 50.08 | % | ​ | 52.44 | % | ​ | 48.76 | % | ​ | 48.82 | % | ​ | 51.29 | %

​

N/A - Not applicable.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Quarters Ended | ​
​ | ​ | December 31, | ​ | September 30, | ​ | December 31, | ​
​ | ​ | 2023 |  | 2023 | ​ | 2022 | ​
Return on Average Tangible Common Equity Ratio | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income (GAAP) | ​ | $ | 18,225 | ​ | $ | 24,335 | ​ | $ | 23,615 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income before income taxes (GAAP) | ​ | $ | 24,938 | ​ | $ | 32,484 | ​ | $ | 31,853 | ​
Pre-tax income adjustments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization of core deposit intangibles | ​ | ​ | 603 | ​ | ​ | 616 | ​ | ​ | 645 | ​
Net income, excluding intangibles amortization, before taxes | ​ | ​ | 25,541 | ​ | ​ | 33,100 | ​ | ​ | 32,498 | ​
Taxes on net income, excluding intangible amortization, before taxes | ​ | ​ | 6,875 | ​ | ​ | 8,304 | ​ | ​ | 8,405 | ​
Net income, excluding intangibles amortization (non-GAAP) | ​ | $ | 18,666 | ​ | $ | 24,796 | ​ | $ | 24,093 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Average Common Equity | ​ | $ | 548,706 | ​ | ​ | 530,048 | ​ | $ | 444,311 | ​
Less Average goodwill and intangible assets | ​ | ​ | 97,979 | ​ | ​ | 98,596 | ​ | ​ | 100,427 | ​
Average tangible common equity (non-GAAP) | ​ | $ | 450,727 | ​ | $ | 431,452 | ​ | $ | 343,884 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Return on average common equity (GAAP) | ​ | ​ | 13.18 | % | ​ | 18.21 | % | ​ | 21.09 | %
Return on average tangible common equity (non-GAAP) | ​ | ​ | 16.43 | % | ​ | 22.80 | % | ​ | 27.80 | %

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18