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DATE

Thursday, Oct. 22, 2026

CALL PARTICIPANTS

  • Chairman, President, and Chief Executive Officer - James L. Eccher
  • Chief Operating Officer and Chief Financial Officer - Bradley S. Adams
  • Head of National Specialty Lending - Darin Campbell

TAKEAWAYS

  • Net Income -- $28.9 million, or $0.56 per diluted share, reflecting strong net interest margin performance and disciplined operating efficiency despite elevated loan charge-offs.
  • Net Interest Margin -- 5.27% on a tax-equivalent basis, representing a 4 basis point improvement from the previous quarter and a 22 basis point increase versus last year.
  • Net Loan Charge-offs -- $12.7 million for the quarter, primarily driven by a single commercial relationship in the warehousing and distribution sector and $3.1 million in powersport loan losses.
  • Classified Loans -- $74.2 million, representing a significant decrease of $57.8 million during the quarter to the lowest level since before the COVID-19 pandemic.
  • Criticized Loans -- Declined by $61.3 million, or 38%, to 1.88% of total loans, which management identified as an early indicator of improved future credit trends.
  • Efficiency Ratio -- 52.34% on a GAAP basis, while the adjusted efficiency ratio was 52.06%, reflecting strong operating leverage.
  • Return on Average Tangible Common Equity -- 15.77% for the quarter, as the company continued to deliver high-level performance and solid earnings power.
  • Share Repurchases -- 1.5 million shares acquired for $39.5 million during the third quarter, reducing total outstanding shares by approximately 3%.
  • Dividend Increase -- Management announced a 14% increase in the common dividend to $0.08 per share, payable on Nov. 9, 2026.
  • Total Loans -- $5.24 billion, a nominal decline of $7.8 million due to outsized prepayment activity and a $53 million reduction in the syndication portfolio.
  • Total Deposits -- $5.33 billion, a decrease of $117.1 million reflecting the seasonal runoff of public funds and the intentional attrition of high-cost brokered deposits.
  • Cost of Deposits -- 1.02% for the quarter, compared to 1% in the prior linked quarter and 1.33% in the prior-year quarter.
  • Allowance for Credit Losses -- $64.2 million, or 1.23% of total loans, down from 1.34% at the end of the second quarter as credit metrics improved.
  • Mortgage Servicing Rights -- $10.7 million at fair value, benefiting from a $623,000 mark-to-market gain due to higher market interest rates.
  • Salaries and Employee Benefits -- $30.8 million, an increase of $743,000 from the prior quarter driven by higher incentive accruals and employee insurance premiums.
  • Net Interest Margin Guidance -- Management expects a compression of approximately 5 basis points in the fourth quarter due to intensified deposit competition and loan-to-deposit ratios nearing capacity.
  • Loan Growth Outlook -- Low single-digit growth targeted for the fourth quarter, supported by building pipelines in middle market and small business segments.
  • Repricing Tailwinds -- 45% of the loan book and 25% of the securities portfolio are expected to reprice within the next three to four quarters.
  • Expense Growth Outlook -- Targeted at 3% to 4% annually, despite a projected 20% increase in health insurance costs for the coming year.
  • Specialty Lending Partnership -- Signed a multiyear agreement with Ducati USA, which is expected to boost originations in late 2026 and throughout 2027.
  • Tangible Book Value Per Share -- $14.75 as of Sept. 30, a slight decline from $14.77 at June 30 due to share repurchases and market-driven changes in the securities portfolio value.
  • Loan to Deposit Ratio -- 98.3% at quarter end, up from 96.4% in the prior quarter, indicating a tighter funding environment.

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RISKS

  • Eccher stated, "this has been a lingering credit that we have been working out for the better part of a year," referring to a $9.2 million commercial and industrial charge-off that impacted quarterly earnings.
  • Adams warned that "we are likely to give back 5 basis points or so with our current loan growth expectations and the rapid rise we have seen in deposit competition recently," indicating potential near-term pressure on the net interest margin.
  • Campbell noted that the company has "turned down more applications this year compared to last year just for consumer distress," highlighting increased credit caution in the powersport segment.

SUMMARY

Old Second Bancorp, Inc. (OSBC -0.32%) reported net income of $28.9 million for the third quarter of 2026, characterized by high-level operating efficiency and a tax-equivalent net interest margin of 5.27%. While earnings were tempered by a $12.7 million net loan charge-off related to a specific commercial relationship and the powersports business, management reported a significant reduction in broader credit risk, with criticized loans falling by 38% during the quarter. The company maintained aggressive capital return through the repurchase of 1.5 million shares and a 14% increase in its quarterly dividend. Strategic initiatives remain focused on optimizing the deposit base and pivoting the loan portfolio away from transactional syndications toward franchise-focused specialty lending partnerships.

  • Management identified an inflection point in credit quality, with CEO Eccher stating, "classified loans have not been this low since before COVID."
  • The company expects significant repricing benefits in the near term as 45% of its loan portfolio is scheduled to reprice over the next three to four quarters.
  • A new multiyear partnership with Ducati USA is expected to provide a substantial boost to loan originations starting in the first quarter of 2027.
  • CFO Adams indicated that the company possesses enough capital to simultaneously pursue share repurchases of approximately 5% annually and selective acquisition opportunities.
  • Management is proactively managing the syndication portfolio, which has been reduced by more than 60% since the end of 2021 to approximately $285 million.
  • Despite a projected 20% increase in health insurance costs, the company expects to maintain annual expense growth between 3% and 4% through operating discipline.

INDUSTRY GLOSSARY

  • ACL: Allowance for Credit Losses; a reserve established to cover estimated credit losses in the loan portfolio.
  • BOLI: Bank-Owned Life Insurance; life insurance policies purchased by a bank on the lives of certain employees, with the bank as the beneficiary.
  • C&I: Commercial and Industrial loans; loans made to businesses for working capital or capital expenditures rather than for real estate.
  • Classified Loans: Loans that have well-defined weaknesses and carry a distinct possibility of loss if deficiencies are not corrected.
  • Criticized Loans: Loans designated as special mention, substandard, or doubtful, indicating they require close management attention.
  • HELOC: Home Equity Line of Credit; a revolving line of credit secured by the equity in a borrower's home.
  • MSR: Mortgage Servicing Rights; the right to provide servicing for a mortgage in exchange for a fee, recorded as an asset at fair value.
  • NIM: Net Interest Margin; the difference between the interest income earned and the interest expense paid, expressed as a percentage of earning assets.
  • ROATCE: Return on Average Tangible Common Equity; a measure of profitability that excludes intangible assets like goodwill.
  • SOFR: Secured Overnight Financing Rate; a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Full Conference Call Transcript

Operator: Good morning, everyone, and thank you for joining us today for Old Second Bancorp Inc. Third Quarter 26 Earnings Call. On the call today are Mr. James L. Eccher, the company's chairman, president, and chief executive officer. Mr. Bradley S. Adams, the company's chief operating officer and chief financial officer. And Mr. Darin Campbell, the company's head of National Specialty Lending. I will start with a reminder that Old Second's comments today will contain forward-looking statements about the company's business, strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected.

Management would also ask you to refer to the company's SEC filings for a full discussion of the company's risk factors. The company does not undertake any duty to update such forward-looking statements. On today's call, we will also be discussing certain non GAAP financial measures. These non GAAP measures are described and reconciled to their GAAP counterparts in the earnings release, which is available on our website at oldsecond.com. On the home page and under the investor relations tab. Now I would like to turn the call over to Mr. Jim Eccher.

James L. Eccher: Okay. Good morning, and thank you for joining us. As customary I have several prepared opening remarks, give you my overview of the quarter, then turn it over to Bradley for additional details. I will then conclude with certain summary comments and thoughts about the future. Before we open it up to questions. From a GAAP perspective, net income was $28.9 million or $0.56 per diluted share in the third quarter Return on assets was 1.69%. Third quarter 26 return on average tangible common equity was 15.77% and the efficiency ratio is 52.34%.

Excluding all adjusting items, which for the quarter was limited to MSR valuation adjustments, Net income for the third quarter was $28.5 million or $0.55 per diluted share. Third quarter 26 earnings were impacted by $12.7 million of net loan charge offs, which consisted of commercial and industrial loan net charge offs of $9.2 million primarily related to 1 relationship we have discussed on prior calls, $6.0 million of that $9.2 million was previously reserved for. This credit is a warehousing and distribution business that has seen its cash flow position deteriorate over the last year. We feel this credit is now largely behind us.

The remaining portion of the charge off is related to the powersport business, which totaled $3.1 million, which is comparable to the prior quarter powersport charge off level. Tangible book value per share declined slightly to $14.75 as of September 30 from $14.77 as of June 30. And the tangible equity to tangible asset ratio decreased 19 basis points from last quarter from 11.19% to 11%. The modest declines in these metrics are primarily due to stock repurchases of approximately $39.5 million and a change in the value of the securities portfolio due to higher rates during the quarter. Our financials reflect an exceptionally strong net interest margin at 5.27%.

For the third quarter 26. that is a 4 basis point improvement from last quarter and 22 basis point increase over the prior year on a tax equivalent basis. Pre provision net revenues increased in the third quarter of 2026 from the prior quarter primarily due to day count. Slightly higher average loan balances, and lower average savings and time deposit balances. Total cost of deposits was 102 basis points for the third quarter compared to 100 basis points for the prior linked quarter and 133 basis points for the third quarter 2025. The third quarter of 2026 compared to last quarter, tax equivalent income on average earning assets increased and interest expense on average interest bearing liabilities increased nominally.

Loan to deposit ratio is now 98.3% as the end of the third quarter compared to 96.4% last quarter and 91.4% as of September 30, 2025. Total loans declined nominally about $7.8 million during the third quarter, Tax equivalent loan yields increased 3 basis points during the quarter compared to the linked quarter, but reflected a 1 basis point decrease for the quarter year-over-year. The increase in yield in comparison to the prior quarter was driven by higher short term rates, and repricing of lower yielding loans. We expect this to continue in the near term. Turning to credit. Asset quality trends improved significantly during the quarter excluding the elevated charge offs resulting from the single credit we just discussed.

Classified loans decreased $57.8 million and non performing loans decreased $16.8 million. Criticized loans, an early indicator of stress, declined by $61.3 million or 38% during the quarter. As a percentage of loans, classified loans have not been this low since before COVID. Needless to say, we are extremely pleased with the credit trajectory and its implication for future quarters. The allowance for credit losses on loans was $64.2 million as of September 30, or 1.23% of total loans. from $70.4 million at the end of the second quarter, which was 1.34% of loans.

Unemployment and GDP forecast views and future loss rate assumptions remain fairly static from last quarter, with no material changes in the unemployment assumptions on the upper end of the range based on recent Fed projections. Non-interest income declined $191 thousand in the third quarter of 2026 compared to the prior linked quarter and nominally from the prior-year linked quarter. Wealth management continues to reflect strong performance and growth quarter-over-linked-quarter and prior-year linked quarters. Mortgage banking income increased $436 thousand compared to the linked quarter, and increased $762 thousand compared to the like period. Like prior year period, primarily due to the changes in mortgage servicing rights marked to market valuations.

MSR mark to market valuations increased $775 thousand quarter-over-linked-quarter. and $1 million over the prior year period. Total non interest expense for the third quarter of 2026 increased $370 thousand from the prior linked quarter driven by higher regular salaries, higher officer incentive, and employee insurance costs within salaries and employee benefits. An increase in occupancy furniture and equipment due to continued capital projects and growth in real estate taxes and office equipment cost. These increases were partially offset by a decrease in other expense from several 1-off expenses in the prior quarter.

Our efficiency ratio continues to be excellent, as the tax equivalent efficiency ratio adjusted to exclude core deposit intangibles OREO cost, and the adjustments to net income as noted earlier, was 52.06% for the third quarter compared to 50.8% for the second quarter. Overall, the company continues to perform at an exceptionally high level, Operating leverage is strong. The margin is largely stable, and feed businesses are performing well. The improvement in key credit metrics, including reductions in classified and criticized during the third quarter, will allow us to finish the year over the next quarter in a much better position. To demonstrate the full earnings power of Old Second.

I will now turn it over to Bradley for more color.

Bradley S. Adams: Thanks, Jim. Net interest income increased to $84.0 million relative to last quarter at $83.3 million. also increased $1.3 million from last year. Loan yields increased 3 basis points while securities yields declined 5 basis points in the third quarter. Total yield on earning assets increased 6 basis points over the linked quarter to 640 basis points. Cost of interest bearing deposits increased modestly at 2 basis points total cost of interest bearing liabilities increased 1 basis point to 1.74%. The end result was a 4 basis point increase in the tax equivalent NIM to 27, versus 23 last quarter. Obviously, we believe this continues to be exceptional margin performance. Average loans increased $5.5 million, or only 0.1%.

Over linked quarter and average deposits, however, decreased by $78 million or 1.4% Other runoff is largely seasonal this quarter, with some residual runoff and high beta effectively wholesale deposit captions. Origination activity in the third quarter was much better than it appears and in line with budget. But was offset by significant pay down and pay. payoff activity Loan prepayments through the first 3 quarters have already reached full year 2025 levels. Certainly, the market environment, including ongoing interest rate volatility, and due to high energy prices, broad based inflation has resulted in outsized payoffs, it appears to us.

Lending teams are continuing to work very hard and pipelines for the fourth quarter are building, which should also bode well. for the first quarter of 2027 as well. From a stock repurchase perspective, we acquired 1.5 million shares during the third quarter. Resulting in a reduction to equity and a growth in treasury stock of $39.2 million Year to date repurchases total 3.4 million shares at an average price of $22.74. that is a $74.7 million reduction in equity This has a negative impact on the net interest margin, obviously, but positive impact on earnings per share.

We do expect to continue being active in the repurchase shares given our extremely strong capital position and current and expected earnings trends. In addition, based on the strength of the balance sheet and resilient income statements trends, Old Second elected to increase the common dividend in the fourth quarter of 2026 by 14%. As we continue to deliver growth commensurate with the bank's performance. Overall, margin trends still feel very good. Obviously, rates along the curve went up quite a bit. With recent instability in The Middle East and previous expectations for rate cuts have reversed course to under rate hikes.

If those trends remain stable from here and high cost deposit attrition slows, I would expect to maintain exceptional margin performance. I do believe at this point, however, that we are likely to give back 5 basis points or so with our current loan growth expectations and the rapid rise we have seen in deposit competition recently. Loan growth in the fourth quarter of 2026 is being targeted in the low single level. Expense growth will continue to be modest in the quarters ahead. that is it from my view, and I will turn the call back over to Jim.

James L. Eccher: Thanks, Bradley. In closing, we feel despite the isolated charge-off, it was a pretty solid quarter for the company. We are optimistic due to the improvement in credit metrics this quarter. And the rest of the bank is performing ahead of our expectations. We remain positive about loan growth opportunities and the potential for more strategic growth opportunity as well. That concludes our prepared comments this morning. So I will turn it over to the moderator and open it up for questions.

Operator: Confirmation tone will indicate your line is in the question queue. And you may press star 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. 1 moment, please, while we poll for questions. Thank you. Our first question today is coming from Nathan Race with Piper Sandler. Your line is live.

Nathan Race: Hey, guys. Good morning. Thanks for taking my questions.

James L. Eccher: Morning, Nate.

Nathan Race: Jim, obviously, you know, a disappointing charge-off number. Obviously, you mentioned you had this, you know, previously allocated for And, we have been through several quarters with, you know, some credit noise, But just given the reductions in both nonperformers and criticized loans in the quarter, can you just help us in terms of your degree of confidence that we are now in a position today where we can expect charge-offs to be consistently lower. I think we have talked about a range of maybe 35 to 40 basis points as kind of a Yep. Normalized range going forward. But can you just talk to kind of your degree of confidence that we can expect that to unfold going forward?

James L. Eccher: Sure, Nate. Yeah. I mean, this is obviously the 1-- the 1 charge-off, this has been a lingering credit that we have been working out for the better part of a year. We have-- the company is under contract to be sold, albeit at a much lower price. So it is we feel we have got this now largely behind us. Think what we are most encouraged about, Nate, is that significant reductions in classifieds and even special mention we have got to go back to October 2019. Way before COVID to have classifieds at this level. So we think we have turned the corner an inflection point with a lot of this credit and understanding we are.

We are going to have a certain degree of powersport charge offs on quarter over quarter, but we feel as good about the loan book today as we have in several years.

Nathan Race: Okay. Great. that is helpful. And, Bradley, a little surprised to hear your comments around, giving back 5 bps of margin in the fourth quarter, just given how low beta your deposit franchise has historically been. You know, I appreciate deposit pricing competition's increasing these days, but just given how much repricing you have in assets tied to short term rates, curious if you can kind of just unpack some of that a bit. Just in terms of what your beta expectations are. For the fourth quarter. And, again, if you could remind us what kind of you have repricing on the left side of the balance sheet. Tied to short term rates.

Bradley S. Adams: So there is a couple things going on. What I would say from the expectation of giving back a few basis points the drivers of it. 1 is how many shares we have repurchased. Obviously, we. We are giving up a fair amount free funding in order to do that. That has a negative implication. The other thing is the loan to deposit ratio is pretty much nearing the ceiling at this point. So for the first time in a while, we are participating at the marginal funding rate relative to our loan growth expectations. And I think that is probably the biggest driver in what I am talking about.

There are, as you point out, things on the other side that are to the good. You know, at any given time, 50% of our of our book is variable. And generally, it reprices with a 30 day lag, and then we move relative to SOFR but SOFR is ahead of what the Fed's been doing, and that rate's been high for a while. So we have been seeing that benefit for quite some time. That being said, we do have some. Jim was positively giddy the other day talking about this 3.5% commercial real estate loan that repriced in the 45% of our loan book is going to reprice in the next 3 to 4 quarters.

25% of our securities portfolio is going to reprice at the same time. So there will be some tailwind there. The net of all that is we are going to hang out pretty high at these levels, but you know, guessing within plus or minus 5 basis points Clearly, I have been pretty bad at it over the last year or so, but I have been bad on the right side of it. So maybe I am hedging a bit. Maybe I am right. I still think we are we are solidly above a 25 margin for the near and intermediate term.

Nathan Race: Okay. Great. And then do you guys just kinda speak to just the buyback appetite? Obviously, really stepped up on the buybacks in 3Q and over the course of this year. You know, to what extent do you guys wanna continue down the path at similar clip to what we have seen recently? And, within that context, curious, you know, how you wanna balance buybacks with perhaps an acquisition at some point, perhaps sometime next year.

Bradley S. Adams: I have plenty of capital to do both, Nate. I mean, as you can see, even this quarter, we did not shrink capital, and we bought back 3% of shares. I think it is reasonable for investors to expect us to take out 5% of shares a year and still have the ability to execute on the type of M&A that we are looking for. Which as we have talked about in the past is relatively smaller than, you know, what we have talked about a couple of years ago. it is kind of fill-in type stuff is, from our perspective, is where the value would be at this point.

Nathan Race: Okay. that is really helpful. I will step back. Thanks, guys.

James L. Eccher: Yep. Thanks, mate.

Operator: Thank you. Our next question is coming from David Konrad with KBW. Your line is live.

Analyst: Hey. Good morning.

James L. Eccher: Good morning. So loans were roughly flat this quarter with prior prepayments. And I think you said the outlook is low single digit growth from here. But I was just curious how the pipeline's looking and where you expect to see that growth in the coming quarters? Yeah. I think Brad pointed out in his comments that loan production was better than maybe what the results showed. I mean, it is probably 1 of those stronger quarters in the last 6, 7 quarters. I think what we saw was outsized prepayments, 2x of what we would normally see in a quarter.

Couple that with the fact that we have been actively trying to work down our syndications portfolio As you know, we have had a significant syndication portfolio come over with West Suburban. We reduced that $53 million this quarter alone. So had we not had that and the outsized payoffs, we would have had a really good quarter. As far as the pipeline is concerned, as a. As of right now, it is looking like 1 of the more solid fourth quarters we have had in a long time, and we are optimistic we are going to get out of the gates pretty well in the first quarter of next year as well. that is helpful.

Appreciate it. that is it for me. Thank you.

Operator: Thank you. Our next question is coming from Jeff Rulis with D.A. Davidson. Your line is live.

Jeff Rulis: Thanks. Good morning. Wanted to kind of maybe jump off of the loan demand and higher rates. I guess, initially, you are seeing any pullback on the consumer power sports from a loan demand standpoint, is that any impact that you are seeing out there?

James L. Eccher: Yep. Yeah.

Darin Campbell: This is Darin Campbell. Yeah. No. We are not seeing any pullback at this point. Application volume for us this year is up a little bit over last year from that. Application process. I will say we have turned down more applications this year. Compared to last year just for consumer distress. So we. We are accounting for more debt that is we are seeing on credit reports. So we have turned down, as I said, about 7%, but originations is very similar to the same time last year. Applications is up a little bit. So overall, strong. Our electric car business is actually up quite a bit.

This year as well, so we are seeing a lot of demand in that area. as well. So overall good. Yeah.

James L. Eccher: Jeff, I think you look at the commercial bank, our pipeline build right now is pretty broad based. We are seeing it building in small business, middle market, C and I, health care. Investment CRE, and even sponsored investment leasing. So we are as pleased as we could be with. And normally, fourth quarter is pretty soft, but pipelines are really pretty good right now.

Jeff Rulis: Appreciate that. And I guess the other side of that is I think, Jim, you noted that nice to see the benefit of repricing in the book. The flip side of that is any thoughts on just kind of repricing risk on the credit side as maybe higher rates as customers face that I guess, color on are you helping with borrowers in terms of that repricing risk potentially?

James L. Eccher: Yeah. I mean, keep in mind our loan book you know, it is very short duration. So, you know, a significant part of some of these credits have already been in a higher rate environment, but you know, we stress test you know, constantly We have, you know, we feel you know, early stage indicators are low. And no concerns at this point. Darin, you want to add anything on the consumer side?

Darin Campbell: I think. Yeah. Brian, just 1 other thing that is worth mentioning on the call, we are very excited to announce that we signed a multiyear endorsed agreement with Ducati USA. So we have been working on for quite some time to get to the finish line. That partnership was announced and launched last week. The dealer feedback that we have received from the dealer network has been tremendous. The application flow has already started to come in. So that is been exciting. And as we think about growth going forward even in our fourth quarter, this will give us a little lift for the fourth quarter.

But if you think about 2027, there will be a substantial boost for us in originations next year. And Ducati is 1 of the, you know, the best motorcycle brands that is in the market. So we could not be more excited about this opportunity for us.

Jeff Rulis: Okay. Sounds good on the production side. But, again, on Jim, the credit and the repricing on the credit front, Feel good about that given the short duration.

Bradley S. Adams: Yeah. This is Bradley. I think what you have seen from us in terms of the spike in classified and criticized over the past 3 years has been that very thing. Got it. But, yeah, I think it is pretty safe to say we are through that.

Jeff Rulis: Okay. Fair enough. Thanks.

Operator: Our next question is coming from David Konrad with Raymond James. Your line is live.

Analyst: Hey. Good morning, guys. Thanks for taking my questions. I am filling in for David Konrad. A lot of my questions have been asked and answered, but maybe just on deposits. You have been talking about optimizing your deposit base. Really since the Evergreen acquisition closed to more resemble the legacy old second deposit base. We saw another step down in deposits this quarter, and you specifically called out the runoff of higher cost funding acquired from Evergreen. So I am just wondering how much work is left to do on that front and should we expect to see further deposit runoff in the coming quarters?

Bradley S. Adams: I think you will see deposit growth in the fourth quarter. And I think that most of the attrition post that acquisition is largely behind us. My expectation would be the deposits would grow from here. Some of that will come at a little bit more rate. And, obviously, we remain on the lookout, to supplement our deposit base through M&A activity as well. Great. Thanks, Graham.

Analyst: Yep.

Operator: Our next question is coming from Brandon Rudd with Stephens Inc. Your line is live.

Analyst: Morning. Thanks for taking my questions. The first 1, maybe kind of an adjacent question to a prior 1. Just on the reserve, it is come down for the past few quarters now. Are there any remaining specific allocations within that? Or is this 1.23% kind of the steady state you anticipate going forward?

Bradley S. Adams: Yeah. I mean, we. there is certainly some reserve allocations built into the portfolio, but I think the drawdown in that reserve is largely reflective of the fact that our classified have come down significantly. Right? Right. We will not run much lower from here just due to the fact we will continually have to replace you know, power sports charge offs quarter over quarter, but I do not see a majority drawdown of reserves at this moment. Okay. Perfect. Thank you. And then just 1 on expenses. It came in a touch higher than what we had in our model. Is this, like, 51.5 million a good expectation for the near term?

And then growing, you know, 3% to 4% annually after that? Yep. Yep. That makes perfect sense. Alright. Thank you very much. Thanks, Bradley.

Operator: Thank you. As a reminder, ladies and gentlemen, if you do have a question, please press 1 on your telephone keypad. Our next question is coming from Brian Martin with Janney Capital. Your line is live.

Brian Martin: Hey. Good morning, guys.

James L. Eccher: Hey, Brian. Hey, Brian.

Brian Martin: Bradley. Maybe just 1 follow-up on the expense 1. Just the resolution of some of these credits that you have gone through the last couple quarters, is that a tailwind to the expense line? I mean, I get your comments about the outlook, but is that the reason, I guess, maybe we get a little improvement or if there is any on the on the expense side?

Bradley S. Adams: So, I mean, that is the big delta between kind of the way you look at things and the way I look at things, Brian. Is there is always ins and outs and what have you in every quarter and this quarter, for example, our third party expenses are elevated. Next quarter, it will be something else. But there is always stuff coming and going. And I look at it much more granularly than probably it appears. Like, my income statement has, like, 42 captions for expenses, and yours has, like, 4. But there is always stuff moving around.

I think that you know, in a world where inflation in any real sense is probably between 4 and 5, being in that 3 to 4 range is a pretty good thing given I mean, I do not know if you have noticed. Your employer's probably cutting your health care benefits and increasing your cost, but our costs are projected in that caption to be up pretty close to 20% next year. it is shocking. So there is a lot of things going on, and I actually feel like that 3 to 4% range is doing pretty damn good. And I feel great about it. Yeah.

Brian Martin: that is what I meant, Bradley. I guess it seems like you will have other stuff. This gives you a little bit of a tailwind or at least a little help to offset some of those other items.

Bradley S. Adams: So just I mean, it helps us deliver on that. On that guidance I just gave for sure. Yeah. I would not expect. I think we are doing a lot of heavy lifting to be at that level. Is the point I would like to make. Gotcha. that is clear. Thank you, Bradley.

Brian Martin: And then just on the opportunity set on-- I know you talked about strategic opportunities, Jim. Just the opportunity set in terms of what is out there. Are you seeing more opportunities today? Are there less out there today? Just kind of how's the environment on opportunities in the market. Yeah.

James L. Eccher: I mean, Brian, you know Chicago as well as anybody who is been a handful of transactions obviously announced. And, you know, we continue to have conversations. I would not say it is more robust now than it was a year ago. They are active and ongoing. We are hopeful, you know, we are hopeful an opportunity arises next year. Yeah. Okay.

Brian Martin: And then the last 2 for me were just the new rates on loans in, I guess, what you are putting on the securities book, Bradley. Just kinda reconcile to those numbers Jim gave in terms of what is repricing here. What are new rates on securities you are thinking about? Is it kind of 5% ish and then on loans? I am--

Bradley S. Adams: I am not adding the securities book at this point given where we are in deposit competition. It would be largely static in terms of what you would see there. If there are you know, flows coming out, we will be replaced at similar rates. So I would not expect any real movement in the securities book. In terms of loans, you know, it. it is still in the kind of mid-6%s type range would be my guess. Okay.

Brian Martin: Gotcha. And then the last 1 was just on the syndication book. I know you mentioned it is been running off, Jim, obviously. Just where it stands today, and I guess if that runoff is just gonna continue. it is just a steady decline in that book. Is that how to think about that?

James L. Eccher: So it is not gonna really impact the. Yeah. I mean, we are. You know, at our peak, we were $550 million in syndications. We have reduced that by over 60% since the end of 21. Yeah. Roughly $285 million. Will we go to zero? No. it is just not going to be a material part of our balance sheet. We just view that business as transactional, not franchise enhancing type business, but we will continue to do some of it. it is just not gonna be a primary focus.

Brian Martin: Okay. And the payoffs will just. You know, I guess that is what I was getting at. The payoffs will not be a major factor in terms of as we go forward here. Like, maybe it has been as you wound it down. It will not be as much of a headwind as it has been.

James L. Eccher: You are correct. Yeah. Okay.

Brian Martin: that is all I had, guys. Thanks for the calls. Or the questions.

James L. Eccher: Yep. Thanks, Brian. Thanks, Brian.

Operator: Thank you. Ladies and gentlemen, if you do have any final questions or Okay. As there are no further questions on the lines at this time, I would like to turn the call back over to Mr. Jim Eccher for any closing remarks.

James L. Eccher: Okay. Thanks, everyone, for joining us this morning. Look forward to talking to you again next quarter. Goodbye.

Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time. And we thank you for your participation.