OLD SECOND BANCORP INC

Previous wording

The following discussion provides additional information regarding our operations for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, and our financial condition at March 31, 2026, compared to December 31, 2025. This discussion should be read in conjunction with our consolidated financial statements as well as the financial and statistical data appearing elsewhere in this report and our Form 10-K for the year ended December 31, 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of future results. Dollar amounts presented in the following tables are in thousands, except per share data, and March 31, 2026 and 2025 amounts are unaudited. Certain items in prior periods have been reclassified to conform to the current presentation.

Current wording

The following discussion provides additional information regarding our operations for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, and our financial condition at June 30, 2026, compared to December 31, 2025. This discussion should be read in conjunction with our consolidated financial statements as well as the financial and statistical data appearing elsewhere in this report and our Form 10-K for the year ended December 31, 2025. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of future results. Dollar amounts presented in the following tables are in thousands, except per share data, and June 30, 2026 and 2025 amounts are unaudited. Certain items in prior periods have been reclassified to conform to the current presentation.

Previous wording

The Company is a bank holding company headquartered in Aurora, Illinois. Through our wholly-owned subsidiary bank, Old Second National Bank, a national banking organization also headquartered in Aurora, Illinois (the “Bank”), we offer a wide range of financial services through our 55 banking centers located in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle and Will counties in Illinois. These banking centers offer access to a full range of traditional retail and commercial banking services including treasury management operations as well as fiduciary and wealth management services. We focus our business on establishing and maintaining relationships with our clients while maintaining a commitment to provide for the financial services needs of the communities in which we operate. We emphasize relationships with individual customers as well as small to medium-sized businesses throughout our market area. We also have extensive wealth management services, which include a registered investment advisory platform in addition to trust administration and trust services related to personal and corporate trusts and employee benefit plan administration services.

Current wording

The Company is a bank holding company headquartered in Aurora, Illinois. Through our wholly-owned subsidiary bank, Old Second National Bank, a national banking organization also headquartered in Aurora, Illinois, we offer a wide range of financial services through our 54 banking centers located in Cook, DeKalb, DuPage, Kane, Kendall, LaSalle and Will counties in Illinois. These banking centers offer access to a full range of traditional retail and commercial banking services including treasury management operations as well as fiduciary and wealth management services. We focus our business on establishing and maintaining relationships with our clients while maintaining a commitment to provide for the financial services needs of the communities in which we operate. We emphasize relationships with individual customers as well as small to medium-sized businesses throughout our market area. We also have extensive wealth management services, which include a registered investment advisory platform in addition to trust administration and trust services related to personal and corporate trusts and employee benefit plan administration services.

Previous wording

As of July 1, 2025, Bancorp Financial had approximately $1.43 billion of total assets, $1.20 billion of total loans, and $1.23 billion of total deposits. The consideration paid totaled $189.4 million and consisted of 7.9 million shares of Old Second common stock and $48.9 million in cash. The systems conversion was successfully completed in October 2025.

Current wording

As of July 1, 2025, Bancorp Financial had approximately $1.43 billion of total assets, $1.20 billion of total loans, and $1.23 billion of total deposits. The consideration paid totaled $189.4 million and consisted of 7.9 million shares of Old Second common stock and $48.9 million in cash. The systems conversion was successfully completed in October 2025. As of June 30, 2026, all acquisition related expenses have been reported and the measurement period is closed.

Previous wording

Net income for the first quarter of 2026 was $25.6 million, or $0.48 per diluted share, compared to $28.8 million, or $0.54 per diluted share, for the fourth quarter of 2025, and $19.8 million, or $0.43 per diluted share, for the first quarter of 2025. Net income increased compared to the prior year like quarter, primarily due to the Bancorp Financial acquisition and the resulting growth in net interest income. Variances included an increase of $24.8 million in interest and dividend income and a $2.4 million increase in noninterest income, partially offset by a $6.5 million increase in interest expense, a $7.1 million increase in provision for credit losses, a $5.7 million increase in noninterest expense, and a $2.1 million increase in provision for income taxes. Net income in the first quarter of 2026 was negatively impacted by provision for credit losses of $9.5 million, compared to $3.0 million and $2.4 million recorded in the fourth quarter of 2025 and first quarter of 2025, respectively. Adjusted net income, a non-GAAP financial measure that excludes mortgage servicing rights mark to market gains or losses, net securities gains or losses, and acquisition related costs, net of gains on branch sales, as applicable, was $26.0 million for the first quarter of 2026, compared to $30.8 million for the fourth quarter of 2025, and $20.6 million for the first quarter of 2025.

Current wording

Net income for the second quarter of 2026 was $28.2 million, or $0.54 per diluted share, compared to $25.6 million, or $0.48 per diluted share, for the first quarter of 2026, and $21.8 million, or $0.48 per diluted share, for the second quarter of 2025. Net income increased compared to the prior year like quarter, primarily due to the Bancorp Financial acquisition and the related growth in net interest income. Variances in the year over year period included an increase of $26.0 million in interest and dividend income and a $2.4 million increase in noninterest income, partially offset by a $6.9 million increase in interest expense, a $5.0 million increase in provision for credit losses, a $7.8 million increase in noninterest expense, and a $2.3 million increase in provision for income taxes. Net income in the second quarter of 2026 was negatively impacted by provision for credit losses of $7.5 million, compared to $9.5 million and $2.5 million recorded in the first quarter of 2026 and second quarter of 2025, respectively. Adjusted net income, a non-GAAP financial measure that excludes mortgage servicing rights mark to market gains or losses, net securities gains or losses, and acquisition related costs, net of gains on branch sales, as applicable, was $28.7 million for the second quarter of 2026, compared to $26.0 million for the first quarter of 2026, and $22.8 million for the second quarter of 2025.

Previous wording

Our income before taxes was $34.1 million in the first quarter of 2026, compared to $26.2 million in the first quarter of 2025. Net interest and dividend income increased $18.2 million, and provision for credit losses increased $7.1 million in the first quarter of 2026, compared to the like 2025 quarter. Income before taxes was also affected by a $2.4 million increase in noninterest income and a $5.7 million increase in noninterest expense. The noninterest expense increase of $5.7 million is primarily due to a $2.7 million increase in salary and employee benefits expense primarily attributable to the additional employees retained in the Bancorp Financial acquisition and higher base salary rates, an $823,000 increase in occupancy, furniture and equipment, a $1.0 million increase in computer and data processing, a $1.5 million increase in consumer credit expense, and a $721,000 increase in other expenses, which were all primarily driven by the additional operations assumed from the Bancorp Financial acquisition. Total acquisition costs of $349,000 were recorded as a result of the Bancorp Financial acquisition during the three months ended March 31, 2026. Our net income was $25.6 million, or $0.48 per diluted share, for the first quarter of 2026, compared to net income of $19.8 million, or $0.43 per diluted share, for the first quarter of 2025. The Bank remains well positioned to navigate uncertain macroeconomic conditions. We have proactively addressed interest rate risk, maintained disciplined expense management, and ensured robust daily liquidity oversight. In addition, our liquidity metrics remain solid, and our short-duration securities portfolio provides flexibility for near-term funding requirements.

Current wording

Our income before taxes was $37.8 million in the second quarter of 2026, compared to $29.2 million in the second quarter of 2025. Net interest and dividend income increased $19.1 million, and provision for credit losses increased $5.0 million in the second quarter of 2026, compared to the like 2025 quarter. Income before taxes was also affected by a $2.4 million increase in noninterest income and a $7.8 million increase in noninterest expense. The noninterest expense increase of $7.8 million is primarily due to a $3.2 million increase in salary and employee benefits expense primarily attributable to the additional employees retained in the Bancorp Financial acquisition as well as increases in stock comp expense, payroll taxes, 401(k) expense, and deferred compensation expense. Also contributing to the increase in noninterest expense was a $641,000 increase in occupancy, furniture and equipment, a $525,000 increase in computer and data processing, a $1.7 million increase in consumer credit expense, and a $1.3 million increase in other expenses, which were all primarily driven by the additional operations assumed from the Bancorp Financial acquisition. Total acquisition costs of $526,000 were recorded as a result of the Bancorp Financial acquisition during the three months ended June 30, 2026. Our net income was $28.2 million, or $0.54 per diluted share, for the second quarter of 2026, compared to net income of $21.8 million, or $0.48 per diluted share, for the second quarter of 2025. The Bank remains well positioned to navigate uncertain macroeconomic conditions. We have proactively addressed interest rate risk, maintained disciplined expense management, and ensured robust daily liquidity oversight. In addition, our liquidity metrics remain solid, and our short-duration securities portfolio provides flexibility for near-term funding requirements.

Previous wording

Net interest and dividend income was $81.1 million in the first quarter of 2026, compared to $62.9 million in the first quarter of 2025. The $18.2 million increase was driven by a $24.8 million increase in interest and dividend income due to the acquisition of Bancorp Financial. A net increase of $6.5 million in interest expense in the first quarter of 2026 negatively impacted net interest and dividend income compared to the first quarter of 2025, driven by the higher cost deposits and increased short-term borrowing balances driven by the Bancorp Financial acquisition.

Current wording

Net interest and dividend income was $83.3 million in the second quarter of 2026, compared to $64.2 million in the second quarter of 2025. The $19.1 million increase was driven by an increase in interest income, primarily related to the powersport loan portfolio recorded due to the acquisition of Bancorp Financial. A net increase of $6.9 million in interest expense in the second quarter of 2026 negatively impacted net interest and dividend income compared to the second quarter of 2025, driven by the higher cost deposits assumed from Bancorp Financial, and increased short-term borrowing balances driven by the liquidity needed to fund the Bancorp Financial acquisition.

Previous wording

The year over year yield increase of 53 basis points on interest earning assets was primarily driven by higher loan balances and higher yielding consumer credits and related accretion on the Bancorp Financial portfolio acquired, as well as planned turnover in our securities portfolio with many older and lower yielding securities maturing and being replaced with higher yielding investments while maintaining the shorter duration portfolio composition. Average balances of loans and loans held for sale increased $1.25 billion in the first quarter of 2026 compared to the prior year like quarter, with a corresponding increase to the tax equivalent yield on the loan portfolio of 48 basis points year over year due to certain portfolios acquired from Bancorp Financial. Average balances of securities available for sale decreased $65.8 million in the first quarter of 2026 compared to the prior year like quarter, but showed an increase to the tax equivalent yield on the securities available for sale portfolio of seven basis points year over year primarily due to variable security rate resets and run-off of lower yielding investments.

Current wording

The year over year yield increase of 66 basis points on interest earning assets was primarily driven by higher loan balances and higher yielding consumer credits and related accretion on the acquired Bancorp Financial portfolio, partially offset by a slight decline on investment yields. Average balances of loans and loans held for sale increased $1.26 billion in the second quarter of 2026 compared to the prior year like quarter, with a corresponding increase to the tax equivalent yield on the loan portfolio of 63 basis points year over year due to loan portfolios acquired from Bancorp Financial. Average balances of securities available for sale decreased $94.1 million in the second quarter of 2026 compared to the prior year like quarter, and showed a decrease to the tax equivalent yield on the securities available for sale portfolio of three basis points year over year.

Previous wording

The cost of interest bearing deposits increased 24 basis points for the quarter ended March 31, 2026, from 128 basis points for the quarter ended March 31, 2025. A 41-basis point increase in the cost of savings accounts drove a significant portion of the overall increase from the prior year like quarter, primarily due to the higher rate deposit accounts assumed in the Bancorp Financial acquisition. In addition, average time deposits increased $337.3 million due to the Bancorp Financial acquisition; both higher average balances and higher rates offered by Bancorp Financial resulted in a $2.4 million increase in time deposit interest expense. We will continue to control the cost of funds by monitoring market activity as well as allowing previous exception-priced deposits and the brokered CDs acquired from Bancorp Financial to runoff naturally.

Current wording

The cost of interest bearing deposits increased 17 basis points for the quarter ended June 30, 2026, from 130 basis points for the quarter ended June 30, 2025. A 37-basis point increase in the cost of savings accounts drove a significant portion of the overall increase from the prior year like quarter, primarily due to the higher rate deposit accounts assumed in the Bancorp Financial acquisition. In addition, average time deposits increased $272.5 million due to the Bancorp Financial acquisition; both higher average balances and higher rates offered by Bancorp Financial resulted in a $1.7 million increase in time deposit interest expense. We will continue to control the cost of funds by monitoring market activity as well as allowing previously exception-priced deposits and the brokered CDs acquired from Bancorp Financial to runoff naturally.

Previous wording

The increase of $187.6 million year over year of average FHLB advances was based on daily liquidity needs due to the changes in the funding mix in part due to necessary use of cash on the Bancorp Financial acquisition and was the primary driver of the $1.8 million increase to interest expense on other short-term borrowings. The increase of $14.8 million year over year of average notes payable and other borrowings was due to the FHLB long-term putable advances assumed in the Bancorp Financial acquisition and was the reason for the $155,000 increase to interest expense on notes payable and other borrowings. Subordinated and junior subordinated debt interest expense were essentially flat over each of the periods presented.

Current wording

The increase of $312.8 million year over year of average FHLB advances was based on daily liquidity needs due to the changes in the funding mix in part due to necessary use of cash on the Bancorp Financial acquisition and was the primary driver of the $3.0 million increase to interest expense on other short-term borrowings. The elevated short-term borrowings balance is anticipated to continue, assuming continued loan growth and securities reinvestment. The increase of $14.8 million year over year of average notes payable and other borrowings was due to the FHLB long-term putable advances assumed in the Bancorp Financial acquisition and was the reason for the $156,000 increase to interest expense on notes payable and other borrowings. The $25.1 million decrease in average subordinated debt was due to the $30.0 million partial redemption in the second quarter of 2026, which reduced the prior $60.0 million principal balance then outstanding. The subordinated debt changed from a fixed to floating rate; in addition, debt issuance costs of $213,000 were accelerated, resulting in a $129,000 increase in interest expense on a lower average balance. Junior subordinated debt interest expense was essentially flat over each of the periods presented.

Previous wording

The decreased yield of three basis points on interest earning assets for the three months ended March 31, 2026 as compared to the linked period was primarily driven by the decreased yield on loans coupled with lower average loan balances. 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.

Current wording

The increased yield of 11 basis points on interest earning assets for the three months ended June 30, 2026 as compared to the linked period was primarily driven by the increased yields on loans and securities. 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.

Previous wording

Average balances of interest bearing deposit accounts have decreased significantly since the fourth quarter of 2025 through the first quarter of 2026, from $3.94 billion to $3.83 billion. Of the $119.2 million decrease in average interest bearing deposit account balances, time deposits accounted for $117.3 million of the decrease as exception priced deposits, mainly time deposits, and brokered deposits from the Bancorp Financial acquisition, run off. The significant time deposit average balance decrease led to the $1.4 million decrease in deposits costs, compared to the prior linked quarter, which accounted for a large majority of the $2.2 million total decrease in deposit costs. As a result, time deposits were the primary driver in the decrease in the costs of interest bearing deposits from 167 basis points for the quarter ended December 31, 2025, to 152 basis points for the quarter ended March 31, 2026.

Current wording

Average balances of interest bearing deposit accounts have decreased $81.7 million since the first quarter of 2026 through the second quarter of 2026, from $3.83 billion to $3.74 billion. The decrease is driven by a $94.2 million decrease in time deposits as exception priced deposits, mainly time deposits, and brokered deposits from the Bancorp Financial acquisition, run off, partially offset by a $19.8 million increase in lower cost NOW accounts. The significant time deposit average balance decrease led to the $1.0 million decrease in time deposit costs, compared to the prior linked quarter, which accounted for a large majority of the $653,000 total decrease in deposit interest expense, as all other deposit category interest costs increased. As a result, time deposits were the primary driver in the decrease in the costs of interest bearing deposits from 152 basis points for the quarter ended March 31, 2026, to 147 basis points for the quarter ended June 30, 2026.

Previous wording

Borrowing costs increased in the first quarter of 2026, compared to the fourth quarter of 2025. Changes in our borrowing costs are generally driven by fluctuations in balance and related rates on other short-term borrowings, which are overnight FHLB advances; these fluctuations are based on the daily liquidity needs during the period. The increase in borrowing expense over the prior linked period was primarily due to the $29.5 million increase in average balance of other short-term borrowings offset slightly by lower rates.

Current wording

Borrowing costs increased in the second quarter of 2026, compared to the first quarter of 2026. Changes in our borrowing costs are generally driven by fluctuations in balance and related rates on other short-term borrowings, which are overnight FHLB advances; these fluctuations are based on the daily liquidity needs during the period. The increase in borrowing expense over the prior linked period was primarily due to the $123.7 million increase in average balance of other short-term borrowings and the resulting increase in interest expense. Also contributing to the increase in interest expense was the subordinated debt changing from a fixed to floating rate and the acceleration of debt issuance costs of $213,000 due to the partial redemption, resulting in a net $129,000 increase to subordinated debt interest expense quarter over linked quarter.

Previous wording

Our net interest margin, for both GAAP and tax equivalent (“TE”) presentations, showed noticeable growth over the prior linked quarter period and over the prior year like quarter discussed above. Our net interest margin (GAAP) increased five basis points to 5.12% for the first quarter of 2026, compared to 5.07% for the fourth quarter of 2025, and increased 27 basis points compared to 4.85% for the first quarter of 2025. Our net interest margin (TE) increased five basis points to 5.14% for the first quarter of 2026, compared to 5.09% for the fourth quarter of 2025, and increased 26 basis points compared to 4.88% for the first quarter of 2025. The increase in net interest margin for the first quarter of 2026, compared to the prior linked quarter, was driven by the reduction in the cost of interest bearing liabilities. The net interest margin increased in the first quarter of 2026, compared to the prior year like quarter, was primarily due to the Bancorp Financial acquisition and the resulting increase in loan yields which outpaced the higher cost of deposits. See the discussion entitled “Non-GAAP Financial Measures,” above, and the tables beginning on page 48 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Current wording

Our net interest margin, for both GAAP and tax equivalent (“TE”) presentations, showed noticeable growth over the prior linked quarter period and over the prior year like quarter discussed above. Our net interest margin (GAAP) increased nine basis points to 5.21% for the second quarter of 2026, compared to 5.12% for the first quarter of 2026. Our net interest margin (TE) increased nine basis points to 5.23% for the second quarter of 2026, compared to 5.14% for the first quarter of 2026. The increase in net interest margin for the second quarter of 2026, compared to the prior linked quarter, was driven by the increase in yields on loans and loans held for sale, partially offset by an increase in the cost of interest bearing liabilities. See the discussion entitled “Non-GAAP Financial Measures,” above, and the table on page 53 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Previous wording

1Represents a non-GAAP financial measure. See the discussion entitled “Reconciliation of Tax-Equivalent Non-GAAP Financial Measures” below that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. Tax equivalent basis is calculated using a marginal tax rate of 21% in 2026 and 2025, respectively.

Current wording

1Represents a non-GAAP financial measure. See the discussion entitled “Reconciliation of Tax-Equivalent Non-GAAP Financial Measures” on page 53 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. Tax equivalent basis is calculated using a marginal tax rate of 21% in 2026 and 2025, respectively.

Previous wording

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 50, and includes loan fee income of $1.9 million for the first quarter of 2026, loan fee income of $1.9 million for the fourth quarter of 2025, and loan fee income of $545,000 for the first quarter of 2025. Nonaccrual loans are included in the above-stated average balances.

Current wording

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 53, and includes loan fee income of $2.0 million for the second quarter of 2026, loan fee income of $1.9 million for the first quarter of 2026, and loan fee income of $365,000 for the second quarter of 2025. Nonaccrual loans are included in the above-stated average balances.

Previous wording

Noninterest income increased $476,000, or 3.9%, in the first quarter of 2026, compared to the fourth quarter of 2025, and increased $2.4 million, or 23.8%, compared to the first quarter of 2025. The increase from the fourth quarter of 2025 was primarily driven by a $225,000 increase in residential mortgage banking revenue mainly due to a $276,000 increase in MSRs mark to market valuations, a $248,000 increase in the cash surrender value of BOLI due to changes in market interest rates, and a $358,000 increase in other income primarily driven by growth in powersport and consumer loan fees provided by the legacy Bancorp Financial loan portfolio. Partially offsetting the increases during the first quarter of 2026, compared to the fourth quarter of 2025, was a $154,000 decrease in wealth management income due to lower insurance – annuities fees, estate fees, and miscellaneous fees, and a $194,000 decrease in card related income due to a reduction in the volume of ATM activity and related fees.

Current wording

Noninterest income increased $631,000, or 5.0%, in the second quarter of 2026, compared to the first quarter of 2026, and increased $2.4 million, or 21.7%, compared to the second quarter of 2025. The increase from the first quarter of 2026 was primarily driven by a $245,000 increase in wealth management income due to growth in advisory, insurance – annuities, agent, estate, and person trust fees, and a $387,000 increase in the cash surrender value of BOLI due to changes in market interest rates on COLI investments. Also contributing to the increase in the second quarter of 2026, compared to the first quarter of 2026, was a $133,000 increase in card related income due to growth in debit card fees based on the higher volume of ATM activity and related fees. Partially offsetting the increases during the second quarter of 2026, compared to the first quarter of 2026, was a $176,000 decrease in other income due to a decrease in powersport related dealer charge-back income.

Previous wording

The increase in noninterest income of $2.4 million in the first quarter of 2026, compared to the first quarter of 2025, is primarily due to a $294,000 increase in wealth management income from growth in advisory fees, a $150,000 increase in service charges on deposits, a $584,000 increase in the cash surrender value of BOLI due to changes in market interest rates, and a $574,000 increase in residential mortgage banking revenue mainly due to a $418,000 increase in MSRs mark to market valuations. Also contributing to the increase in noninterest income during the quarter was a $714,000 increase in other income due to powersport and consumer loan fees provided by the legacy Bancorp Financial loan portfolio.

Current wording

The increase in noninterest income of $2.4 million in the second quarter of 2026, compared to the second quarter of 2025, is primarily due to a $525,000 increase in wealth management income from growth in advisory, agent, and person trust fees, a $543,000 increase in residential mortgage banking revenue, primarily due to a $379,000 increase in MSRs mark to market valuations, and a $779,000 increase in the cash surrender value of BOLI due to changes in market interest rates on our COLI investments. Also contributing to the increase in noninterest income during the quarter was a $551,000 increase in other income due to powersport and consumer loan fees provided by the acquired Bancorp Financial loan portfolio.

Previous wording

The year over year increase in noninterest expense is primarily attributable to a $2.7 million increase in salaries and employee benefits, primarily due to the increased workforce from the Bancorp Financial acquisition as well as increases in annual base salary rates and payroll taxes in the first quarter of 2026. Also contributing to the increase was an $823,000 increase in occupancy, furniture and equipment, a $1.0 million increase in computer and data processing expenses, a $1.5 million increase in consumer credit expense, and a $721,000 increase in other expense primarily due to the effect of the Bancorp Financial acquisition and the corresponding growth in expenses. Partially offsetting the year over year increase in noninterest expense was a $2.1 million decrease in net OREO expenses as a majority of OREO properties have been sold since the first quarter of 2025, resulting in a reduction of expenses.

Current wording

The year over year increase in noninterest expense is primarily attributable to a $3.2 million increase in salaries and employee benefits, primarily due to the increased workforce from the Bancorp Financial acquisition as well as increases in annual base salary rates, stock compensation expense, payroll taxes, 401(k) expense, and deferred employee compensation expense in the second quarter of 2026. Partially offsetting the increase to salaries and employee benefits was a decrease in the officer incentive accrual due to certain performance metrics compared to budget. Also contributing to the increase in noninterest expense year over year was a $641,000 increase in occupancy, furniture and equipment, a $525,000 increase in computer and data processing expenses, a $1.7 million increase in consumer credit expense, and a $1.3 million increase in other expense primarily due to the effect of the Bancorp Financial acquisition and the corresponding growth in expenses.

Previous wording

We recorded income tax expense of $8.5 million for the first quarter of 2026 on $34.1 million of pretax income, compared to income tax expense of $10.5 million on $39.3 million of pretax income in the fourth quarter of 2025, and income tax expense of $6.4 million on $26.2 million of pretax income in the first quarter of 2025. Our effective tax rate was 24.9% in the first quarter of 2026, 26.7% for the fourth quarter of 2025, and 24.3% for the first quarter of 2025.

Current wording

We recorded income tax expense of $9.7 million for the second quarter of 2026 on $37.8 million of pretax income, compared to income tax expense of $8.5 million on $34.1 million of pretax income in the first quarter of 2026, and income tax expense of $7.4 million on $29.2 million of pretax income in the second quarter of 2025. Our effective tax rate was 25.5% in the second quarter of 2026, 24.9% for the first quarter of 2026, and 25.3% for the second quarter of 2025.

Previous wording

Total assets decreased $53.5 million to $6.85 billion at March 31, 2026, from $6.90 billion at December 31, 2025, due primarily to the decrease of $66.9 million in total loans. This decrease was partially offset by an increase in securities available-for-sale of $24.9 million. We continue to actively assess potential investment opportunities to utilize our excess liquidity. Total deposits were $5.56 billion at March 31, 2026, a decrease of $31.1 million from December 31, 2025.

Current wording

Total assets decreased $32.4 million to $6.87 billion at June 30, 2026, from $6.90 billion at December 31, 2025, due primarily to the decrease of $49.8 million in securities available-for-sale and a decrease of $6.3 million in total loans. We continue to actively assess potential investment opportunities to utilize our excess liquidity. Total deposits were $5.44 billion at June 30, 2026, a decrease of $151.4 million from December 31, 2025.

Previous wording

Securities available-for-sale increased $24.9 million as of March 31, 2026, compared to December 31, 2025, but decreased $31.3 million compared to March 31, 2025. The increase in the portfolio during 2026 was driven by $106.9 million in purchases, partially offset by paydowns totaling $62.0 million along with maturities and calls totaling $16.2 million and a $3.3 million increase in unrealized losses on securities available-for-sale. We continue to position the portfolio in higher credit quality, shorter duration securities with an appropriate mix of fixed- and floating-rate exposures.

Current wording

Securities available-for-sale decreased $49.8 million as of June 30, 2026, compared to December 31, 2025, and decreased $136.9 million compared to June 30, 2025. The decrease in the portfolio during 2026 was driven by paydowns totaling $119.2 million, along with maturities and calls totaling $41.2 million and a $4.6 million increase in unrealized losses on securities available-for-sale. This was partially offset by $116.0 million in purchases. We continue to position the portfolio in higher credit quality, shorter duration securities with an appropriate mix of fixed- and floating-rate exposures.

Previous wording

Total loans were $5.19 billion as of March 31, 2026, a decrease of $66.9 million from December 31, 2025. The decrease in total loans in the first three months of 2026, compared to December 31, 2025, was primarily due to paydowns, net of originations, in commercial real estate – investor, construction, and powersport. Total loans increased $1.25 billion compared to March 31, 2025, which was primarily due to the $1.20 billion portfolio acquired from Bancorp Financial. Excluding the acquisition, the Bank achieved organic loan growth, net of paydowns, of $49.3 million, comprised of commercial, leases, residential real estate – owner occupied, and other, partially offset by net decreases in commercial real estate - investor, construction, and multifamily. As required by CECL, the balance (or amortized cost basis) of purchased credit deteriorated loans, or PCD loans (discussed below) is carried on a gross basis, rather than net of the associated credit loss estimate, and the expected credit losses for PCD loans are estimated and separately recognized as part of the allowance for credit losses, or ACL.

Current wording

Total loans were $5.25 billion as of June 30, 2026, a decrease of $6.3 million from December 31, 2025. The decrease in total loans in the first six months of 2026, compared to December 31, 2025, was primarily due to paydowns, net of originations, in commercial real estate – investor, commercial real estate – owner occupied, construction, and powersport. Total loans increased $1.25 billion compared to June 30, 2025, which was primarily due to the $1.20 billion portfolio acquired from Bancorp Financial. Excluding the acquisition, the Bank achieved organic loan growth, net of paydowns, of $51.5 million, driven by commercial and other, partially offset by net decreases in construction loans. As required by CECL, the balance (or amortized cost basis) of purchased credit deteriorated loans, or PCD loans (discussed below) is carried on a gross basis, rather than net of the associated credit loss estimate, and the expected credit losses for PCD loans are estimated and separately recognized as part of the allowance for credit losses, or ACL. Refer to Item 1. Note 1. Recent Accounting Pronouncements, for discussion of the Company’s adoption of ASU 2025-08, which will impact how PCD loans are recorded for any future acquisitions.

Previous wording

The addition of the powersports loan portfolio has given us a more balanced loan portfolio by broadening the scope of our consumer lending and offering a higher yield in a lower rate environment. During the three months ended March 31, 2026, we originated $79.1 million powersport loans with a weighted average yield of 10.67%. As of March 31, 2026, the weighted average FICO score, at the time of origination, of the entire powersport portfolio is 727.

Current wording

The powersports loan portfolio provides a more balanced loan portfolio overall by broadening the scope of our consumer lending and offering a higher yield in a lower rate environment. The initial credit considerations for powersport loans rely more heavily on FICO scores compared to other loan types in our loan portfolio. During the six months ended June 30, 2026, we originated $192.6 million powersport loans with a weighted average yield of 10.42%. As of June 30, 2026, the weighted average FICO score, at the time of origination, of the entire powersport portfolio is 728.

Previous wording

The quality of our loan portfolio is impacted not only by our credit decisions but also by the economic health of the communities in which we operate. Since we are located in a corridor with significant open space and undeveloped real estate, real estate lending (including commercial real estate, construction, residential, multifamily, and HELOCs) has been and continues to be a sizeable portion of our portfolio. These categories comprised 56.3% of the portfolio as of March 31, 2026, compared to 56.5% of the portfolio as of December 31, 2025. At March 31, 2026, our outstanding commercial real estate loans and undrawn commercial real estate commitments, excluding owner occupied real estate, were equal to 203.7% of our Tier 1 capital plus allowance for credit losses, a decrease from 220.3% at December 31, 2025. We continue to oversee and seek to manage our loan portfolio in accordance with interagency guidance on risk management.

Current wording

The quality of our loan portfolio is impacted not only by our credit decisions but also by the economic health of the communities in which we operate. Since we are located in a corridor with significant open space and undeveloped real estate, real estate lending (including commercial real estate, construction, residential, multifamily, and HELOCs) has been and continues to be a sizeable portion of our portfolio. These categories comprised 55.1% of the portfolio as of June 30, 2026, compared to 56.5% of the portfolio as of December 31, 2025. At June 30, 2026, our outstanding commercial real estate loans and undrawn commercial real estate commitments, excluding owner occupied real estate, were equal to 210.2% of our Tier 1 capital plus allowance for credit losses, a decrease from 220.3% at December 31, 2025. We continue to oversee and seek to manage our loan portfolio in accordance with interagency guidance on risk management.

Previous wording

Nonperforming loans consist of nonaccrual loans and loans 90 days or greater past due. Nonperforming loans increased by $22.7 million to $75.5 million at March 31, 2026, from $52.8 million at December 31, 2025, and increased by $40.7 million from $34.8 million at March 31, 2025. The increase in total nonperforming loans as of March 31, 2026 is driven by non-accrual additions of a few larger commercial relationships and two larger relationships that are 90 days past due and accruing. The two past due and accruing relationships, one in commercial real estate – owner occupied and another in commercial real estate – investor, are in the process of being renewed, and both relationships are well positioned from a collateral perspective. Purchased credit deteriorated loans, or PCD loans, are purchased loans that, as of the date of acquisition, we determined had experienced a more-than-insignificant deterioration in credit quality since origination. PCD loans are included in our nonperforming loan disclosures, if such loans otherwise meet the definition of a nonperforming loan. Management continues to carefully monitor loans considered to be in a classified status. Nonperforming loans as a percent of total loans were 1.5% as of March 31, 2026, 1.0% as of December 31, 2025, and 0.9% as of March 31, 2025. The distribution of our nonperforming loans is shown in the following table.

Current wording

Nonperforming loans consist of nonaccrual loans and loans 90 days or greater past due. Nonperforming loans increased by $3.7 million to $56.5 million at June 30, 2026, from $52.8 million at December 31, 2025, and increased by $24.2 million from $32.2 million at June 30, 2025. The increase from December 31, 2025 and June 30, 2025 was mostly driven by non-accrual additions of a few larger commercial relationships in the first quarter of 2026. Purchased credit deteriorated loans (“PCD”) are purchased loans that, as of the date of acquisition, we determined had experienced a more-than-insignificant deterioration in credit quality since origination. PCD loans are included in our nonperforming loan disclosures, if such loans otherwise meet the definition of a nonperforming loan. Total PCD loans are $62.2 million, of which $1.9 million meet the definition of nonperforming, as of June 30, 2026 and $78.6 million, of which $3.4 million meet the definition of nonperforming, as of December 31, 2025. Management continues to carefully monitor loans considered to be in a classified status. Nonperforming loans as a percent of total loans were 1.1% as of June 30, 2026, 1.0% as of December 31, 2025, and 0.8% as of June 30, 2025. The distribution of our nonperforming loans is shown in the following table.

Previous wording

Loan charge-offs, net of recoveries, for the first quarter of 2026 as compared to the prior linked quarter and year over year quarter are shown in the following table:

Current wording

Loan charge-offs, net of recoveries, for the second quarter of 2026 as compared to the prior linked quarter and year over year quarter are shown in the following table:

Previous wording

Net charge offs, reported in the above table, reflect continuing management attention to credit quality and remediation efforts. The increase in gross charge-offs for the first quarter of 2026, as compared to the prior quarters presented, were primarily due to powersport loans of $4.7 million, one commercial real estate charge-off for $3.9 million, and a $1.3 million charge-off on a commercial relationship. Powersport loans are measured for asset quality at origination based on FICO scores, then based on past due status through the life of the loan, and charge-off occurs once a loan is past due 120 days. We have continued our conservative loan valuations and aggressive recovery efforts on prior charge-offs.

Current wording

Net charge offs, reported in the above table, reflect continuing management attention to credit quality and remediation efforts. There was a decrease of $622,000 in gross charge offs, as compared to the linked quarter, primarily due to lower powersport and commercial real estate – investor charge offs, offset by increased commercial charge offs. Powersport loans are measured for asset quality at origination based on FICO scores, then based on past due status through the life of the loan, and charge-off occurs once a loan is past due 120 days. We have continued our conservative loan valuations and aggressive recovery efforts on prior charge-offs.

Previous wording

Total classified loans decreased $1.5 million as of March 31, 2026, from December 31, 2025, but increased $63.5 million compared to March 31, 2025. The decrease in classified loans since December 31, 2025, is due to outflows to classified loans of $10.2 million, offset by additions of $8.7 million. Outflows consisted of $6.0 million of loans paid off, $1.6 million of classified loans upgraded, $1.1 million of principal reductions through payments and partial charge offs, $1.3 million of loans charged off, and $235,000 of loans transferred into OREO. Classified assets decreased as of March 31, 2026, compared to the prior linked quarter end, due to the decreases to classified loans and a total decrease of $1.3 million related to OREO and repossessed assets. The $61.7 million increase in classified assets as of March 31, 2026, compared to March 31, 2025, is primarily due to the classified loan increase of $63.5 million, noted above, less a reduction in OREO balances year over year. Classified loans since March 31, 2025 had additions of $149.3 million and were offset by outflows of $85.8 million which consisted of $54.8 million of loans paid off, $16.7 million of classified loans upgraded, $2.4 million of loans charged off, $5.7 million of net principal reductions and partial charge offs, $5.2 million transferred to OREO, and $1.0 million repossessed. Management monitors a ratio of classified assets to the sum of Bank Tier 1 capital and the ACL on loans as another measure of overall change in loan related asset quality, which is referred to as the “classified assets ratio.” The classified assets ratio was 16.93% for the period ended March 31, 2026, compared to 17.82% as of December 31, 2025, and 13.12% as of March 31, 2025.

Current wording

Total classified loans decreased $18.0 million as of June 30, 2026, from December 31, 2025, but increased $34.5 million compared to June 30, 2025. The decrease in classified loans since December 31, 2025, is due to outflows from classified loans of $39.6 million, offset by additions of $21.6 million. Outflows consisted of $13.2 million of loans paid off, $16.1 million of classified loans upgraded, $5.8 million of principal reductions through payments and partial charge offs, $4.3 million of loans charged off, and $235,000 of loans transferred into OREO. Classified assets decreased as of June 30, 2026, compared to December 31, 2025, due to the decreases to classified loans and a total decrease of $1.3 million related to OREO and repossessed assets. The $29.2 million increase in classified assets as of June 30, 2026, compared to June 30, 2025, is primarily due to the classified loan increase of $34.5 million, noted above, and a $585,000 increase in repossessed assets, partially offset by a $5.9 million reduction to OREO. Classified loans since June 30, 2025 had additions of $126.9 million and were offset by outflows of $92.4 million which consisted of $51.8 million of loans paid off, $25.0 million of classified loans upgraded, $5.3 million of loans charged off, $9.1 million of net principal reductions and partial charge offs, $235,000 transferred to OREO, and $1.0 million repossessed. Management monitors a ratio of classified assets to the sum of Bank Tier 1 capital and the ACL on loans as another measure of overall change in loan related asset quality, which is referred to as the “classified assets ratio.” The classified assets ratio was 15.14% for the period ended June 30, 2026, compared to 17.82% as of December 31, 2025, and 14.91% as of June 30, 2025.

Previous wording

At March 31, 2026, our ACL on loans totaled $72.1 million, and our ACL on unfunded commitments, included in other liabilities, totaled $2.0 million. In the first quarter of 2026, we recorded a provision expense on loans of $9.6 million driven by increased charge-offs and the downgrade of one commercial relationship. Further, we recorded a $101,000 provision release on unfunded commitments, 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. These adjustments resulted in a $9.5 million net expense to the provision for credit losses for the first quarter of 2026.

Current wording

At June 30, 2026, our ACL on loans totaled $70.4 million, and our ACL on unfunded commitments, included in other liabilities, totaled $2.0 million. In the second quarter of 2026, we recorded a provision expense on loans of $7.5 million driven by increased charge-offs and the downgrade of one commercial relationship. Further, we recorded a $2,500 provision release on unfunded commitments, 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. These adjustments resulted in a $7.5 million net expense to the provision for credit losses for the second quarter of 2026.

Previous wording

Management estimates the amount of provision required on a quarterly basis and records the appropriate provision expense, or release of expense, to maintain an adequate reserve for all potential and estimated credit losses on loans, leases and unfunded commitments. The ACL on loans totaled $72.1 million as of March 31, 2026, $72.3 million as of December 31, 2025, and $41.6 million as of March 31, 2025. Our ACL on loans to total loans was 1.4% as of March 31, 2026 and December 31, 2025, and 1.1% March 31, 2025. See Item 7 –* Critical Accounting Estimates*in the Management Discussion and Analysis in our 2025 Annual Report in Form 10-K for discussion of our ACL methodology on loans. Allocations of the ACL may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged-off.

Current wording

Management estimates the amount of provision required on a quarterly basis and records the appropriate provision expense, or release of expense, to maintain an adequate reserve for all potential and estimated credit losses on loans, leases and unfunded commitments. The ACL on loans totaled $70.4 million as of June 30, 2026, $72.3 million as of December 31, 2025, and $43.0 million as of June 30, 2025. Our ACL on loans to total loans was 1.3% as of June 30, 2026, 1.4% as of December 31, 2025, and 1.1% as of June 30, 2025. See Item 7 –* Critical Accounting Estimates*in the Management Discussion and Analysis in our 2025 Annual Report in Form 10-K for discussion of our ACL methodology on loans. Allocations of the ACL may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged-off.

Previous wording

The coverage ratio of the ACL on loans to nonperforming loans was 95.5% as of March 31, 2026, which was a decrease from the coverage ratio of 136.9% as of December 31, 2025, and a decrease from 119.4% as of March 31, 2025. Excluding loans past due 90 days and accruing that are in the process of renewal, the coverage ratio for March 31, 2026 was 115.5%. Net charge-offs to average loans increased in the current quarter, though remaining manageable, at 0.76% for the quarter ended March 31, 2026, compared to 0.45% for the quarters ended December 31, 2025 and March 31, 2025.

Current wording

The coverage ratio of the ACL on loans to nonperforming loans was 124.6% as of June 30, 2026, which was a decrease from the coverage ratio of 136.9% as of December 31, 2025, and a decrease from 133.3% as of June 30, 2025. Annualized net charge-offs to average loans decreased slightly in the current quarter at 0.71% for the quarter ended June 30, 2026, compared to 0.76% for the quarters ended March 31, 2026 and was an increase from the prior year quarter of 0.08% as of June 30, 2025.

Previous wording

As of March 31, 2026, OREO totaled $632,000, reflecting a decrease of $795,000 from $1.4 million at December 31, 2025, and a decrease of $2.2 million from $2.9 million at March 31, 2025. In the first quarter of 2026, there was one OREO sale totaling $1.4 million, net of gains, and one property transferred with a value of $632,000. The valuation adjustment balance was reversed along with the related OREO balance due to the sale in the first quarter of 2026. There was no valuation adjustment in the fourth quarter of 2025 and we recorded a valuation adjustment of $454,000 in the first quarter of 2025.

Current wording

As of June 30, 2026, OREO totaled $622,000, reflecting a decrease of $805,000 from $1.4 million at December 31, 2025, and a decrease of $5.9 million from $6.5 million at June 30, 2025. There were no transfers or sales during the three months ended June 30, 2026. There was a valuation adjustment of $10,000 related to an updated annual appraisal. There was no valuation adjustment in the fourth quarter of 2025 and we recorded a valuation adjustment of $157,000 in the second quarter of 2025.

Previous wording

Total deposits were $5.56 billion at March 31, 2026, which reflects a $31.1 million decrease from total deposits of $5.60 billion at December 31, 2025, but an increase of $712.2 million from total deposits of $4.85 billion at March 31, 2025. The decrease in deposits at March 31, 2026, compared to December 31, 2025, was primarily due to decreases in savings accounts of $4.6 million and time deposits of $97.0 million, primarily due to the roll off of higher rate brokered deposits and other exception-priced time deposits acquired from the Bancorp Financial acquisition. These decreases were partially offset by increases in noninterest bearing deposits of $16.4 million, NOW accounts of $8.1 million and money market accounts of $46.0 million. The increase in deposits at March 31, 2026, compared to March 31, 2025, stemmed primarily from the acquisition of Bancorp Financial, which impacted all deposit types. Total quarterly average deposits increased $764.8 million, or 15.9%, in the year over year period, primarily driven by the acquisition of Bancorp Financial, which included an increase in average time deposits of $337.3 million, savings accounts of $178.1 million, money market accounts of $144.9 million, NOW accounts of $69.4 million, and noninterest bearing deposits of $35.1 million. Included in our quarterly average time deposits are $46.6 million of brokered deposits compared to none at March 31, 2025. Brokered deposits totaling $115.0 million were assumed in the acquisition of Bancorp Financial and we expect these deposits to run-off by early 2028.

Current wording

The increase in deposits at June 30, 2026, compared to June 30, 2025, stemmed primarily from the acquisition of Bancorp Financial, which impacted all deposit types. Total quarterly average deposits increased $638.9 million, or 13.2%, in the year over year period, primarily driven by the acquisition of Bancorp Financial, which included an increase in average time deposits of $272.5 million, savings accounts of $170.5 million, money market accounts of $115.5 million, NOW accounts of $64.1 million, and noninterest bearing deposits of $16.3 million. Included in our quarterly average time deposits for the three months ended June 30, 2026, are $31.2 million of brokered deposits, compared to none for the like period of 2025. Brokered deposits totaling $115.0 million were assumed in the acquisition of Bancorp Financial, and we expect these deposits to run-off by early 2028. Accordingly, as of June 30, 2026, we have $30.3 million brokered deposits remaining.

Previous wording

In addition to deposits, we used other liquidity sources for our funding needs in all periods presented, such as repurchase agreements and other short-term borrowings with the FHLBC. Our borrowings at the FHLBC require the Bank to be a member and invest in the stock of the FHLBC, and total borrowings are generally limited to the lower of 35% of total assets or the book value of eligible pledged assets after application of FHLBC margins and collateral valuation adjustments. Securities sold under repurchase agreements totaled $23.1 million at March 31, 2026, a $639,000, or 2.7% decrease from $23.8 million at December 31, 2025, and a decrease of $15.5 million, or 40.2%, from March 31, 2025. There were outstanding short-term FHLBC borrowings of $200.0 million as of March 31, 2026, compared to $215.0 million as of December 31, 2025, and no short-term FHLBC borrowings outstanding as of March 31, 2025.

Current wording

In addition to deposits, we used other liquidity sources for our funding needs in all periods presented, such as repurchase agreements and other short-term borrowings with the FHLBC. Our borrowings at the FHLBC require the Bank to be a member and invest in the stock of the FHLBC, and total borrowings are generally limited to the lower of 35% of total assets or the book value of eligible pledged assets after application of FHLBC margins and collateral valuation adjustments. Securities sold under repurchase agreements totaled $23.2 million at June 30, 2026, a $528,000, or 2.2% decrease from $23.8 million at December 31, 2025, and a decrease of $24.0 million, or 50.8%, from June 30, 2025. There were outstanding short-term FHLBC borrowings of $375.0 million as of June 30, 2026, compared to $215.0 million as of December 31, 2025, and no short-term FHLBC borrowings outstanding as of June 30, 2025.

Previous wording

We are also indebted on $25.8 million of junior subordinated debentures, net of deferred issuance costs, as of March 31, 2026, which are related to the trust preferred securities issued by its statutory trust subsidiary, Old Second Capital Trust II (“Trust II”). The Trust II issuance converted from fixed to floating rate at three month LIBOR, which is now three month Term SOFR, plus 150 basis points beginning June 15, 2017. Upon conversion to a floating rate, we initiated a cash flow hedge which resulted in net year to date interest rate paid on this debt of 4.66% as of March 31, 2026, as compared to 6.77%, which was the rate paid during the period prior to the June 15, 2017, rate reset.

Current wording

We are also indebted on $25.8 million of junior subordinated debentures, net of deferred issuance costs, as of June 30, 2026, which are related to the trust preferred securities issued by its statutory trust subsidiary, Old Second Capital Trust II (“Trust II”). The Trust II issuance converted from fixed to floating rate at three month LIBOR, which is now three month Term SOFR, plus 150 basis points beginning June 15, 2017. Upon conversion to a floating rate, we initiated a cash flow hedge which resulted in net year to date interest rate paid on this debt of 4.58% as of June 30, 2026, as compared to 6.77%, which was the rate paid during the period prior to the June 15, 2017, rate reset.

Previous wording

In the second quarter of 2021, we entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers pursuant to which we issued $60.0 million in aggregate principal amount of our 3.50% Fixed-to-Floating Rate Subordinated Notes due April 15, 2031 (the “Notes”). We sold the Notes to eligible purchasers in a private offering, and the proceeds of this issuance were used for general corporate purposes. The Notes bear interest at a fixed annual rate of 3.50% through April 14, 2026, payable semi-annually in arrears. As of April 15, 2026, forward, the interest rate on the Notes will generally reset quarterly to a rate equal to three-month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears. The Notes have a stated maturity of April 15, 2031, and are redeemable, in whole or in part, on April 15, 2026, or any interest payment date thereafter, and at any time upon the occurrence of certain events. As of March 31, 2026, we had $59.6 million of subordinated debentures outstanding, net of deferred issuance costs. On April 15, 2026, we redeemed $30.0 million aggregate principal amount of the Notes. See Note 1 – Subsequent Events for additional information.

Current wording

In the second quarter of 2021, we entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers pursuant to which we issued $60.0 million in aggregate principal amount of our 3.50% Fixed-to-Floating Rate Subordinated Notes due April 15, 2031 (the “Notes”). We sold the Notes to eligible purchasers in a private offering, and the proceeds of this issuance were used for general corporate purposes. The Notes bear interest at a fixed annual rate of 3.50% through April 14, 2026, payable semi-annually in arrears. As of April 15, 2026, forward, the interest rate on the Notes will generally reset quarterly to a rate equal to three-month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears. The Notes have a stated maturity of April 15, 2031, and are redeemable, in whole or in part, on April 15, 2026, or any interest payment date thereafter, and at any time upon the occurrence of certain events. On April 15, 2026, we redeemed $30.0 million aggregate principal amount of the Notes. As of June 30, 2026, we had $29.8 million of subordinated debentures outstanding, net of deferred issuance costs. See Note 7. Borrowings for additional information.

Previous wording

As of March 31, 2026, total stockholders’ equity was $893.3 million, which was a decrease of $3.5 million from $896.8 million as of December 31, 2025. This decrease was primarily attributable to a $20.0 million increase in treasury stock. During the first three months of 2026, we repurchased 1,175,859 shares for $23.1 million under our stock repurchase program and withheld 67,357 shares with a value of $1.4 million to satisfy tax withholding obligations related to restricted stock unit vestings. The increase in treasury stock was partially offset by the issuance of 152,021 shares related to restricted stock unit vestings, with a value of $2.7 million, and 87,631 shares related to performance-based restricted stock unit vestings, with a value of $1.7 million. Total stockholders’ equity also decreased due to $3.7 million of dividends paid to common stockholders and an increase of $2.4 million in unrealized net losses on available-for-sale securities and swaps, recorded within accumulated other comprehensive loss, driven by changes in market interest rates during the quarter. These decreases were partially offset by net income of $25.6 million for the period. Total stockholders’ equity as of March 31, 2026, increased $198.8 million compared to March 31, 2025, primarily due to the Bancorp Financial acquisition and net income year over year.

Current wording

As of June 30, 2026, total stockholders’ equity was $902.8 million, an increase of $6.0 million from $896.8 million as of December 31, 2025. This increase was primarily attributable to net income of $53.8 million earned during the first six months of 2026, partially offset by $7.3 million of dividends paid to our common stockholders. The increase in total stockholders’ equity was further offset by a $35.5 million increase in treasury stock. During the first six months of 2026, we repurchased 1,908,042 shares for $38.8 million under our stock repurchase program and withheld 69,621 shares with a value of $1.4 million to satisfy tax withholding obligations related to restricted stock unit vestings. These transactions were partially offset by the issuance of 159,771 shares related to restricted stock unit vestings, with a value of $2.9 million, and 87,631 shares related to performance-based restricted stock unit vestings, with a value of $1.8 million. Total stockholders’ equity also decreased as a result of a $3.1 million increase in unrealized net losses on available-for-sale securities and swaps, recorded within accumulated other comprehensive loss, driven by changes in market interest rates during the period. Total stockholders’ equity at June 30, 2026 increased $184.2 million compared to June 30, 2025, primarily due to the Bancorp Financial acquisition and the accumulation of earnings since June 30, 2025.

Previous wording

As of March 31, 2026, the Bank exceeded the minimum capital ratios to be deemed “well capitalized” and met the capital conservation buffer requirements. In addition to the above regulatory ratios, our GAAP common equity to total assets ratio, which is used as a performance measure for capital analysis and peer comparisons, increased from 12.99% at December 31, 2025, to 13.04% at March 31, 2026. Our GAAP tangible common equity to tangible assets ratio was 11.07% at March 31, 2026, compared to 11.02% as of December 31, 2025. The decrease in tangible common equity from December 31, 2025, to March 31, 2026, was primarily due to a $20.0 million increase in treasury stock and a $2.4 million increase in unrealized losses recorded in accumulated other comprehensive loss.

Current wording

As of June 30, 2026, the Bank exceeded the minimum capital ratios to be deemed “well capitalized” and met the capital conservation buffer requirements. In addition to the above regulatory ratios, our GAAP common equity to total assets ratio, which is used as a performance measure for capital analysis and peer comparisons, increased from 12.99% at December 31, 2025, to 13.14% at June 30, 2026. Our GAAP tangible common equity to tangible assets ratio was 11.19% at June 30, 2026, compared to 11.02% as of December 31, 2025.

Previous wording

Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customers’ credit needs, and to meet maturing obligations and existing commitments. Our liquidity principally depends on our cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and our ability to borrow funds. Through the first quarter of 2026, we experienced a decrease in both loans and deposits. We managed the change in our funding through a decrease in average borrowings from the FHLBC through March 31, 2026, compared to the prior year end. We seek to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management. We monitor our borrowing capacity at the FHLBC as part of our liquidity management process as supervised by our Asset and Liability Committee (“ALCO”) and reviewed by our Board of Directors. In addition, our senior management team monitors cash balances daily to ensure we have adequate liquidity to meet our operational and financing needs. As of March 31, 2026, our cash on hand liquidity totaled $115.7 million, a decrease of $8.3 million over cash balances held as of December 31, 2025.

Current wording

Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customers’ credit needs, and to meet maturing obligations and existing commitments. Our liquidity principally depends on our cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and our ability to borrow funds. Through the second quarter of 2026, we experienced an increase in loans, but a decrease in deposits. We managed the change in our funding through an increase in average borrowings from the FHLBC through June 30, 2026, compared to the prior year end. We seek to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management. We monitor our borrowing capacity at the FHLBC as part of our liquidity management process as supervised by our Asset and Liability Committee (“ALCO”) and reviewed by our Board of Directors. In addition, our senior management team monitors cash balances daily to ensure we have adequate liquidity to meet our operational and financing needs. As of June 30, 2026, our cash on hand liquidity totaled $143.3 million, an increase of $19.3 million over cash balances held as of December 31, 2025.

Previous wording

Net cash inflows from operating activities were $36.9 million during the first three months of 2026, compared with net cash inflows of $17.8 million in the same period of 2025. Funds used to originate loans held-for-sale, net of proceeds from sales of loans held-for-sale, resulted in outflows for both the first three months of 2026 as well as the like period of 2025. Interest paid, net of interest received, combined with changes in other assets and liabilities were a source of outflows for the three months ended March 31, 2026 and 2025. The management of investing and financing activities, as well as market conditions, determines the level and the stability of net interest cash flows. Management’s policy is to mitigate the impact of changes in market interest rates to the extent possible, as part of the balance sheet management process.

Current wording

Net cash inflows from operating activities were $65.5 million during the first six months of 2026, compared with net cash inflows of $42.1 million in the same period of 2025. Funds used to originate loans held-for-sale, net of proceeds from sales of loans held-for-sale, resulted in inflows for the first six months of 2026, but were a source of outflows in the like period of 2025. Interest paid, net of interest received, combined with changes in other assets and liabilities were a source of outflows for the six months ended June 30, 2026 and 2025. The management of investing and financing activities, as well as market conditions, determines the level and the stability of net interest cash flows. Management’s policy is to mitigate the impact of changes in market interest rates to the extent possible, as part of the balance sheet management process.