Old Second Bancorp, Inc. (NASDAQ:OSBC) Q1 2024 Earnings Call Transcript

Brian Martin: Okay. I mean it seemed like last quarter, there was about $100 million on the treasury stuff that was coming due, but it sounds like now the expectation of loan demand is off that maybe you just redeploy that into securities book and maybe grow it from that when it becomes due.

Brad Adams: Jim, mentioned — and we still believe we can grow loans, and there’s no substitute for that. I don’t have a problem with being at a $400 million overnight borrowing level. No issue with that, especially as it gives us something that reprices if we’re wrong about short rates. So I don’t see any reason to shrink the balance sheet, I guess, is the main takeaway here. This quarter came in light on a period-end basis, a little better on an average basis. And I would guide you to the average balance sheet more so than the period end.

Brian Martin: Got you. Okay. That’s helpful. And then maybe just on the capital kind of the buyback versus the M&A. I mean, I guess how is the market given, absent your stock price and the impact that has. But just as far as the level of opportunities you’re seeing on the M&A side versus balancing that with stock price and then the potential for the earnings where tangible book is heading to, just thinking about M&A as a potential.

Brad Adams: M&A is still challenging here, right? I mean there’s an awful lot of people that, that certainly are struggling and are likely to underearn over the years ahead, especially in a higher for longer scenario, but those people also have a fair value problem in terms of where the balance sheet will be marked. So that kind of M&A takes an awful lot of capital. And I’m not terribly opposed to it, but it is onerous. And I think that there is some equilibrium level of rates where it balances the level of fair value marks versus pricing expectations versus going it alone and hoping for rates to fall. I don’t know where it is, but M&A activity is still muted and the people that — the easy transaction to do is somebody who’s got an awful lot of undeployed deposits. I think we’ve seen one of those recently, but that’s not something that we are going to be able to compete with on price at our current valuation.

Operator: Thank you. This does conclude the Q&A section. I would now like to turn the floor back over to Jim Eccher for closing remarks.

Jim Eccher: Okay. Thanks, everyone, for your interest in our company and for joining us this morning, and we look forward to speaking with you again next quarter. Goodbye.

Operator: Thank you, everyone. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.