OLD SECOND BANCORP INC - Interim / Quarterly Report 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 000-10537

(Exact name of Registrant as specified in its charter)


Delaware		36-3143493
(State or other jurisdiction		(I.R.S. Employer Identification Number)
of incorporation or organization)

37 South River Street , Aurora , Illinois 60507

(Address of principal executive offices) (Zip Code)

( 630 ) 892-0202

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	OSBC	The Nasdaq Stock Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15-(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes ☐ No ☒

As of May 5, 2026, the Registrant has 51,432,372 shares of common stock outstanding at $1.00 par value per share.

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OLD SECOND BANCORP, INC.

Form 10-Q Quarterly Report

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Cautionary Note Regarding Forward-Looking Statements


	PART I
		Page Number
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61
Item 4.	Controls and Procedures	62
	PART II

Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosure s	64
Item 5.	Other Information	64
Item 6.	Exhibits	65

	Signatures	66

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and other publicly available documents of Old Second Bancorp, Inc. (“Old Second” or the “Company”) contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including, but not limited to, management’s expectations regarding future plans, strategies and financial performance, including regulatory developments, industry and economic trends and estimates and assumptions underlying accounting policies. Forward-looking statements are based on our current beliefs, expectations, assumptions, and on information currently available and may be identified by the use of words such as “expects,” “intends,” “believes,” “may,” “will,” “would,” “could,” “should,” “plan,” “anticipate,” “estimate,” “forecasts,” “possible,” “implies,” “likely” or the negative thereof as well as other similar words and expressions of the future. Forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict as to timing, extent, likelihood and degree of occurrence, which could cause our actual results to differ materially from those anticipated in or by such statements. Potential risks and uncertainties include, but are not limited to, the following:

● our ability to execute our growth strategy;

● negative economic conditions that adversely affect the economy, real estate values, the job market and other factors nationally and in our market area, in each case that may affect our liquidity and the performance of our loan portfolio;

● risks with respect to our ability to successfully expand and integrate businesses and operations that we acquire, as well as our ability to identify and complete future mergers or acquisitions;

● the financial success and viability of the borrowers of our commercial loans;

● changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities;

● competitive pressures from other financial service businesses and from nontraditional financial technology (“FinTech”) companies;

● any negative perception of our reputation or financial strength;

● our ability to raise additional capital on acceptable terms when needed;

● our ability to raise cost-effective funding to support business plans when needed;

● our ability to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations;

● adverse effects on our information technology systems resulting from system failures, human error or cyberattacks;

● risks associated with data privacy laws and regulations;

● risks associated with the development and use of artificial intelligence (“AI”);

● adverse effects of cyberattacks or failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors and those vendors performing a service on our behalf;

● the impact of any claims or legal actions, including any effect on our reputation;

● losses incurred in connection with repurchases and indemnification payments related to mortgages;

● the soundness of other financial institutions and other counter-party risk;

● changes in accounting standards, rules and interpretations and the related impact on our financial statements;

● our ability to receive dividends from our subsidiaries;

● a decrease in our regulatory capital ratios or negative changes in our capital position;

● adverse federal or state tax assessments, or changes in tax laws or policies;

● risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others;

● legislative or regulatory changes, particularly changes in regulation of financial services companies;

● increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the current regulatory environment;

● risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence, information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations;

● changes in political and economic conditions, including potential disruptions resulting from U.S. federal government funding lapses, shutdowns, or related fiscal policy uncertainty;

● the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine , the war in Iran, and the conflict between China and Taiwan, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation;

● changes in trade policy and any related tariffs; and

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● each of the factors and risks under the heading “Risk Factors” in our 2025 Annual Report on Form 10-K and in subsequent filings we make with the SEC.

Because our ability to predict results or the actual effect of future plans or strategies is inherently uncertain, there can be no assurances that future actual results will correspond to any forward-looking statements, and you should not rely on any forward-looking statements. Additionally, all statements in this Form 10-Q, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events, except as required by applicable law.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)


	(unaudited)
	March 31,		December 31,
	2026		2025
Assets
Cash and due from banks	$	48,100	$	51,665
Interest earning deposits with financial institutions		67,627		72,360
Cash and cash equivalents		115,727		124,025
Securities available-for-sale, at fair value		1,115,443		1,090,523
Federal Home Loan Bank Chicago (“FHLBC”) and Federal Reserve Bank Chicago (“FRBC”) stock		31,350		32,025
Loans held-for-sale		4,344		3,645
Loans		5,185,237		5,252,131
Less: allowance for credit losses on loans		72,126		72,301
Net loans		5,113,111		5,179,830
Premises and equipment, net		85,634		86,645
Other real estate owned, net		632		1,427
Mortgage servicing rights, at fair value		9,579		9,459
Goodwill		129,196		129,196
Core deposit intangible ("CDI")		22,516		23,692
Bank-owned life insurance (“BOLI”)		131,563		130,481
Deferred tax assets, net		31,321		31,276
Other assets		58,805		60,451
Total assets	$	6,849,221	$	6,902,675

Liabilities
Deposits:
Noninterest bearing demand	$	1,755,548	$	1,739,117
Interest bearing:
Savings, NOW, and money market		2,795,038		2,745,540
Time		1,014,413		1,111,412
Total deposits		5,564,999		5,596,069
Securities sold under repurchase agreements		23,130		23,769
Other short-term borrowings		200,000		215,000
Junior subordinated debentures		25,774		25,774
Subordinated debentures		59,574		59,552
Notes payable and other borrowings		14,837		14,825
Other liabilities		67,610		70,918
Total liabilities		5,955,924		6,005,907

Stockholders’ Equity
Common stock		53,015		53,015
Additional paid-in capital		338,418		341,451
Retained earnings		559,129		537,231
Accumulated other comprehensive loss, net		( 31,095 )		( 28,738 )
Treasury stock		( 26,170 )		( 6,191 )
Total stockholders’ equity		893,297		896,768
Total liabilities and stockholders’ equity	$	6,849,221	$	6,902,675


	March 31, 2026		December 31, 2025
	Common		Common
	Stock		Stock
Par value	$	1.00	$	1.00
Shares authorized		120,000,000		120,000,000
Shares issued		53,015,496		53,015,496
Shares outstanding		51,665,659		52,669,224
Treasury shares		1,349,837		346,272

See accompanying notes to consolidated financial statements .

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Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)


	(unaudited)
	Three Months Ended March 31,
	2026		2025
Interest and dividend income
Loans, including fees	$	87,138	$	61,595
Loans held-for-sale		43		22
Securities:
Taxable		8,949		9,227
Tax exempt		1,155		1,260
Dividends from FHLBC and FRBC stock		512		473
Interest bearing deposits with financial institutions		549		988
Total interest and dividend income		98,346		73,565
Interest expense
Savings, NOW, and money market deposits		7,147		4,913
Time deposits		7,217		4,829
Securities sold under repurchase agreements		50		68
Other short-term borrowings		1,791		17
Junior subordinated debentures		296		288
Subordinated debentures		546		546
Notes payable and other borrowings		155		-
Total interest expense		17,202		10,661
Net interest and dividend income		81,144		62,904
Provision for credit losses		9,500		2,400
Net interest and dividend income after provision for credit losses		71,644		60,504
Noninterest income
Wealth management		3,383		3,089
Service charges on deposits		3,126		2,976
Secondary mortgage fees		121		73
Mortgage servicing rights mark to market loss		( 152 )		( 570 )
Mortgage servicing income		497		480
Net gain on sales of mortgage loans		555		464
Change in cash surrender value of BOLI		1,082		498
Card related income		2,354		2,241
Other income		1,664		950
Total noninterest income		12,630		10,201
Noninterest expense
Salaries and employee benefits		29,673		26,993
Occupancy, furniture and equipment		5,371		4,548
Computer and data processing		3,375		2,348
FDIC insurance		759		628
Net teller & bill paying		716		658
General bank insurance		353		330
Amortization of core deposit intangible		1,176		1,037
Advertising and marketing expense		551		229
Card related expense		1,519		1,380
Professional fees		1,299		1,095
Consumer credit expense		1,522		25
Other real estate expense, net		( 186 )		1,873
Other expense		4,082		3,361
Total noninterest expense		50,210		44,505
Income before income taxes		34,064		26,200
Provision for income taxes		8,479		6,370
Net income	$	25,585	$	19,830

Basic earnings per share	$	0.49	$	0.44
Diluted earnings per share		0.48		0.43
Dividends declared per share		0.07		0.06

See accompanying notes to consolidated financial statements.

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Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)


	(unaudited)
	Three Months Ended March 31,
	2026		2025
Net Income	$	25,585	$	19,830

Unrealized holding (losses) gains on available-for-sale securities arising during the period		( 3,287 )		8,931
Related tax benefit (expense)		920		( 2,501 )
Holding (losses) gains, after tax, on available-for-sale securities		( 2,367 )		6,430

Less: Reclassification adjustment for the net gains realized during the period
Net realized gains (losses)		-		-
Related tax (expense) benefit		-		-
Net realized gains (losses) after tax		-		-
Other comprehensive (loss) income on available-for-sale securities		( 2,367 )		6,430

Changes in fair value of derivatives used for cash flow hedges		12		( 85 )
Related tax (expense) benefit		( 2 )		24
Other comprehensive income (loss) on cash flow hedges		10		( 61 )

Total other comprehensive (loss) income		( 2,357 )		6,369
Total comprehensive income	$	23,228	$	26,199



	Accumulated		Accumulated		Total
	Unrealized Gain		Unrealized Gain		Accumulated Other
	(Loss) on Securities		(Loss) on Derivative		Comprehensive
(unaudited)	Available-for -Sale		Instruments		Income/(Loss)
For the Three Months Ended
Balance, January 1, 2025	$	( 49,412 )	$	1,664	$	( 47,748 )
Other comprehensive income (loss), net of tax		6,430		( 61 )		6,369
Balance, March 31, 2025	$	( 42,982 )	$	1,603	$	( 41,379 )

Balance, January 1, 2026	$	( 31,010 )	$	2,272	$	( 28,738 )
Other comprehensive (loss) income, net of tax		( 2,367 )		10		( 2,357 )
Balance, March 31, 2026	$	( 33,377 )	$	2,282	$	( 31,095 )

See accompanying notes to consolidated financial statements.

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Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)


	(unaudited)
	Three Months Ended March 31,
	2026		2025
Cash flows from operating activities
Net income	$	25,585	$	19,830
Adjustments to reconcile net income to net cash provided by operating activities:
Net premium / discount amortization on securities		475		457
Provision for credit losses		9,500		2,400
Originations of loans held-for-sale		( 22,950 )		( 14,371 )
Proceeds from sales of loans held-for-sale		22,525		12,115
Net gains on sales of mortgage loans		( 555 )		( 464 )
Mortgage servicing rights mark to market loss		152		570
Net accretion of purchase accounting adjustments and other discounts on loans		( 175 )		( 179 )
Net change in cash surrender value of BOLI		( 1,082 )		( 498 )
Net (gains) losses on sale of other real estate owned		( 98 )		236
Provision for other real estate owned valuation losses		-		454
Depreciation of fixed assets and amortization of leasehold improvements		1,698		1,408
Change in operating lease right-of-use asset		( 512 )		261
Amortization of core deposit intangibles		1,176		1,037
Change in current income taxes		7,114		5,797
Deferred tax expense		871		2,935
Change in accrued interest receivable and other assets		2,187		1,171
Accretion of purchase accounting adjustment on time deposits		( 25 )		( 274 )
Change in accrued interest payable and other liabilities		( 10,991 )		( 15,989 )
Change in operating lease payable		602		( 441 )
Stock based compensation		1,442		1,383
Net cash provided by operating activities		36,939		17,838
Cash flows from investing activities
Proceeds from maturities and calls, including pay down of securities available-for-sale		78,204		106,329
Purchases of securities available-for-sale		( 106,886 )		( 82,875 )
Net redemptions of FHLBC/FRBC stock		675		-
Net change in loans		56,762		36,815
Proceeds from sales of other real estate owned, net of participations		1,525		18,049
Proceeds from disposition of premises and equipment		76		-
Net purchases of premises and equipment		( 769 )		( 1,609 )
Cash received from acquisition, net		-		28
Net cash provided by investing activities		29,587		76,737
Cash flows from financing activities
Net change in deposits		( 31,045 )		84,334
Net change in securities sold under repurchase agreements		( 639 )		2,007
Net change in other short-term borrowings		( 15,000 )		( 20,000 )
Dividends paid on common stock		( 3,686 )		( 2,694 )
Purchase of treasury stock		( 24,454 )		( 1,430 )
Net cash (used in) provided by financing activities		( 74,824 )		62,217
Net change in cash and cash equivalents		( 8,298 )		156,792
Cash and cash equivalents at beginning of period		124,025		99,329
Cash and cash equivalents at end of period	$	115,727	$	256,121

See accompanying notes to consolidated financial statements .

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Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in

Stockholders’ Equity

(In thousands, except share data)


								Accumulated
	Number of			Additional				Other				Total
(unaudited)	Common Shares	Common		Paid-In		Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Stock		Capital		Earnings		(Loss) Income		Stock		Equity
For the Three Months Ended

Balance, January 1, 2025	44,873,467	$	44,908	$	205,284	$	469,165	$	( 47,748 )	$	( 575 )	$	671,034
Net income							19,830						19,830
Other comprehensive income, net of tax									6,369				6,369
Dividends declared on common stock, ($ 0.06 per share)							( 2,695 )						( 2,695 )
Vesting of restricted stock	252,615		186		( 1,385 )						1,199		-
Stock based compensation					1,383								1,383
Purchase of treasury stock from taxes withheld on stock awards	( 78,931 )										( 1,430 )		( 1,430 )
Balance, March 31, 2025	45,047,151	$	45,094	$	205,282	$	486,300	$	( 41,379 )	$	( 806 )	$	694,491

Balance, January 1, 2026	52,669,224	$	53,015	$	341,451	$	537,231	$	( 28,738 )	$	( 6,191 )	$	896,768
Net income							25,585						25,585
Other comprehensive loss, net of tax									( 2,357 )				( 2,357 )
Dividends declared on common stock, ($ 0.07 per share)							( 3,687 )						( 3,687 )
Vesting of restricted stock	239,652				( 4,475 )						4,475		-
Stock based compensation					1,442								1,442
Purchase of treasury stock from taxes withheld on stock awards	( 67,358 )										( 1,368 )		( 1,368 )
Purchase of treasury stock from stock repurchase program	( 1,175,859 )										( 23,086 )		( 23,086 )
Balance, March 31, 2026	51,665,659	$	53,015	$	338,418	$	559,129	$	( 31,095 )	$	( 26,170 )	$	893,297

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Old Second Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data, unaudited)

Note 1 – Basis of Presentation and Changes in Significant Accounting Policies

The accounting policies followed in the preparation of the interim consolidated financial statements are consistent with those used in the preparation of the annual financial information. The interim consolidated financial statements reflect all normal and recurring adjustments that are necessary, in the opinion of management, for a fair statement of results for the interim period presented. Results for the period ended March 31, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. These interim consolidated financial statements and accompanying notes are unaudited and should be read in conjunction with the audited financial statements and notes included in Old Second Bancorp, Inc.’s (the “Company”) annual report on Form 10-K for the year ended December 31, 2025. Unless otherwise indicated, dollar amounts in the tables contained in the notes to the consolidated financial statements are in thousands. Certain items in prior periods have been reclassified to conform to the current presentation.

The Company’s consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the consolidated financial statements. Future changes in information may affect these estimates, assumptions, and judgments, which, in turn, may affect amounts reported in the consolidated financial statements.

Recent Accounting Pronouncements

The following is a summary of recent accounting pronouncements that have impacted or could potentially affect the Company :

ASU 2023-06 – On October 9, 2023, the FASB issued ASU 2023-06 “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The amendments in the ASU modify the disclosure or presentation requirements of a variety of topics in the codification. Certain of the amendments represent clarifications to, or technical corrections of, the current requirements. Each amendment in the ASU will only become effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. The amendments in this ASU are not expected to have a material impact on the financial statements of the Company.

ASU 2024-03 – On November 4, 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Specifically, they will be required to: (1) Disclose the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. (2) Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements. (3) Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. (4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and is not expected to have a material impact on the financial statements of the Company.

ASU 2025-01 – On January 6, 2025, the FASB issued ASU 2025-01 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date.” ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, which dates were clarified in ASU 2025-01, and is not expected to have a material impact on the financial statements of the Company.

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ASU 2025-03 – On May 12, 2025, the FASB issued ASU 2025-03 “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity.” This ASU revises current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity that meets the definition of a business. The amendments require an entity to consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued (or made available for issuance). If an entity adopts ASU No. 2025-03 in an interim reporting period, it should adopt it as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period. An entity should apply ASU 2025-03 on a prospective basis to all business combinations that have an acquisition date that occurs on or after the date of initial application of ASU 2025-03. ASU 2025-03 is not expected to have a material impact on the financial statements of the Company.

ASU 2025-08 – On November 12, 2025, the FASB issued ASU 2025-08 “'Financial Instruments—Credit Losses (Topic 326): Purchased Loans.” This ASU expands the population of acquired financial assets accounted for using the gross-up approach. Acquired loans (excluding credit cards) are deemed purchased seasoned loans and accounted for using the gross-up approach upon acquisition if criteria established by the new guidance are met. This change aims to enhance comparability, consistency, and better reflect the economics of acquiring financial assets. ASU 2025-08 is effective for interim and annual periods in fiscal years beginning after December 15, 2026, and is applied prospectively. Early adoption is permitted.

Old Second has elected not to early adopt ASU 2025-08 at this time. When adopted, the standard will be adopted prospectively; thus, the accounting for previously completed business combinations will not be impacted. However, adopting this accounting standard is anticipated to have a material impact on the accounting for purchased loans on any business combination completed after adoption.

ASU 2025-11 – On December 8, 2025, the FASB issued ASU 2025-11 “Interim Reporting (Topic 270): Narrow-Scope Improvements”: This ASU does not change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements. The amendments in this ASU: i) clarify that the guidance in Topic 270 applies to all entities that provide interim financial statements and notes in accordance with GAAP; ii) create a comprehensive list in FASB ASC Topic 270 of interim disclosures that are required in interim financial statements and notes in accordance with GAAP; iii) incorporate a disclosure principle, which is modeled after previous SEC guidance, that requires entities to disclose events and changes that occur after the end of the most recent fiscal year that have a material impact on the entity; and iv) improve guidance about information included in and the format of interim financial statements. The amendments in this ASU are effective for public business entities for interim periods within annual periods beginning after December 15, 2027. ASU 2025-11 is not expected to have a material impact on the financial statements of the Company.

ASU 2025-12 – On December 17, 2025, the FASB issued ASU 2025-12 “Codification Improvements”: The amendments in this ASU update the FASB ASC for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. The amendments in the ASU, which addresses 33 issues, affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. The amendments in this ASU are effective for all entities for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted in both interim and annual periods in which financial statements have not yet been issued or made available for issuance. ASU 2025-12 is not expected to have a material impact on the financial statements of the Company.

Changes in Significant Accounting Policies

Significant accounting policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. These policies, along with the disclosures presented in the other financial statement notes and, in this discussion, provide information on how significant assets and liabilities are valued in the consolidated financial statements and how those values are determined. During the first quarter of 2026, the Company had no changes to significant accounting policies or estimates.

Subsequent Events

Redemption of Debt

On April 15, 2026, we redeemed $ 30.0 million of the total $ 60.0 million subordinated debt held, which was the same date this debt changed from a 3.50 % fixed rate to Three-Month Term Secured Overnight Financing Rate (“SOFR”) plus 273 basis points, payable quarterly in arrears.

Dividends

On April 21, 2026 , our Board of Directors declared a cash dividend of $ 0.07 per share of common stock payable on May 11, 2026 , to stockholders of record as of May 1, 2026 ; dividends of $ 3.6 million will be paid to stockholders on May 11, 2026.

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Note 2 – Acquisition

Completed Acquisitions

Bancorp Financial

On July 1, 2025, the Company completed its acquisition of Bancorp Financial and its wholly-owned subsidiary, Evergreen Bank Group, based in Oakbrook, Illinois, with operations throughout our existing market footprint as well as a loan production office in Reno, Nevada. This acquisition brought increased scale and new markets to the Company, and provided new product offerings and line of business opportunities. At closing, the Company acquired $ 1.43 billion of assets, $ 1.20 billion of loans, $ 119.1 million of securities, and $ 1.23 billion of deposits, net of fair value adjustments. Under the terms of the merger agreement, each outstanding share of Bancorp Financial common stock was exchanged for 2.5814 shares of the Company’s common stock, plus $ 15.93 of cash. This resulted in merger consideration of $ 189.4 million, based on the closing price of the Company’s common stock on the date of acquisition, which consisted of 7.9 million shares of the Company’s common stock and $ 48.9 million of cash. Goodwill of $ 36.0 million associated with the acquisition was recorded by the Company, which was the result of expected synergies, operational efficiencies and other factors.

The acquisition of Bancorp Financial has been accounted for as a business combination. The Company recorded the estimate of fair value based on initial valuations available at July 1, 2025. The determination of estimated fair value required management to make assumptions related to discount rates, expected future cash flows, market conditions and other future events that are often subjective in nature and may require adjustments, which can be subject to adjustment for additional information received during the measurement period which cannot extend beyond July 1, 2026. None of the $ 36.0 million of goodwill recorded is expected to be deductible for income tax purposes.

As permitted by ASC No. 805-10-25, Business Combinations, the above estimated amounts may be adjusted up to one year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. While the Bank believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence may be provided which will be utilized to finalize all valuations and record final adjustments during the one year subsequent measurement period. These adjustments may include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, (ii) immaterial changes in loan valuations, and (iii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets, including acquired loans, will be recognized in the period the adjustment is identified.

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The following table provides the purchase price allocation as of the July 1, 2025 acquisition of Bancorp Financial for the assets acquired and liabilities assumed at their estimated fair values as of the purchase date, as recorded by the Company:


Bancorp Financial Transaction Summary
As of Date of Transaction

	July 1, 2025
Assets
Cash and due from banks	$	59,385
Securities available-for-sale and held-to-maturity, at fair value		119,117
FHLBC stock		1,958
Loans, net of purchase accounting adjustments		1,195,739
Premises and equipment		2,513
Core deposit intangible		6,206
Bank-owned life insurance ("BOLI")		13,916
Deferred tax assets		13,642
Other assets		14,764
Total assets	$	1,427,240

Liabilities
Noninterest bearing demand	$	73,744
Interest bearing deposits		1,158,778
Total deposits		1,232,522
Short-term borrowings		15,500
Long-term debt		14,800
Deferred tax liabilities		-
Other liabilities		10,978
Total liabilities		1,273,800

Cash consideration paid		48,884
Stock issued for acquisition		140,520
Total consideration		189,404
Total liabilities assumed and cash consideration received for transaction	$	1,463,204
Goodwill	$	35,964

Expenses related to the Bancorp Financial acquisition totaled $ 349,000 and $ 278,000 for the quarters ended March 31, 2026 and 2025, respectively. The expenses related to the acquisition are reported within noninterest expense based on the line items impacted, which are primarily salaries and employee benefits, occupancy, furniture and equipment, computer and data processing, legal fees, and other expense in the Consolidated Statements of Income.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered purchased credit deteriorated (“PCD”) loans. For PCD loans, the initial estimate of expected credit losses was recognized in the allowance for credit losses (“ACL”) on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans purchased as part of the Bancorp Financial acquisition which were individually evaluated and determined to be PCD loans at acquisition.


	As of
Bancorp Financial Acquired PCD Loans	July 1, 2025
Par value of acquired loans	$	89,870
Allowance for credit losses		( 17,540 )
Non-credit premium		722
Purchase price of PCD loans at acquisition	$	73,052

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Note 3 – Securities

Our investment portfolio serves the liquidity needs and income objectives of the Company. While the portfolio serves as an important component of the overall liquidity management at the Bank, portions of the portfolio also serve as income producing assets. The size and composition of the portfolio reflects liquidity needs, loan demand and interest income objectives. Portfolio size and composition will be adjusted from time to time. While a significant portion of the portfolio consists of readily marketable securities to address liquidity, other parts of the portfolio may reflect funds invested pending future loan demand or to maximize interest income without undue interest rate risk.

Investments are comprised of debt securities and non-marketable equity investments. Securities available-for-sale are carried at fair value. Unrealized gains and losses, net of tax, on securities available-for-sale are reported as a separate component of equity. This balance sheet component changes as interest rates and market conditions change. Unrealized gains and losses are not included in the calculation of regulatory capital.

Federal Home Loan Bank of Chicago (“FHLBC”) and Federal Reserve Bank of Chicago (“FRBC”) stock are considered non-marketable equity investments. FHLBC stock was recorded at $ 10.6 million as of March 31, 2026, and $ 11.3 million as of December 31, 2025. FRBC stock was recorded at $ 20.7 million at March 31, 2026 and December 31, 2025. Our FHLBC stock is necessary to maintain access to FHLBC advances.

The following tables summarize the amortized cost and fair value of the securities portfolio at March 31, 2026, and December 31, 2025, and the corresponding amounts of gross unrealized gains and losses:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
March 31, 2026	Cost 1		Gains		Losses		Value
Securities available-for-sale
U.S. Treasury	$	164,232	$	754	$	-	$	164,986
U.S. government agencies		68,949		-		( 324 )		68,625
U.S. government agencies mortgage-backed		92,318		21		( 7,129 )		85,210
States and political subdivisions		211,216		269		( 8,141 )		203,344
Collateralized mortgage obligations		394,111		705		( 31,485 )		363,331
Asset-backed securities		45,318		469		( 1,282 )		44,505
Collateralized loan obligations		184,941		24		( 254 )		184,711
Equity securities		714		17		-		731
Total securities available-for-sale	$	1,161,799	$	2,259	$	( 48,615 )	$	1,115,443


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2025	Cost 1		Gains		Losses		Value
Securities available-for-sale
U.S. Treasury	$	164,296	$	1,564	$	-	$	165,860
U.S. government agencies		29,421		-		( 245 )		29,176
U.S. government agencies mortgage-backed		95,899		-		( 7,119 )		88,780
States and political subdivisions		213,366		450		( 7,441 )		206,375
Collateralized mortgage obligations		388,774		1,102		( 30,571 )		359,305
Asset-backed securities		46,600		423		( 1,207 )		45,816
Collateralized loan obligations		194,552		151		( 239 )		194,464
Equity securities		684		63		-		747
Total securities available-for-sale	$	1,133,592	$	3,753	$	( 46,822 )	$	1,090,523

1 Excludes accrued interest receivable of $ 6.4 million at March 31, 2026, and $ 6.9 million at December 31, 2025, that is recorded in other assets on the Consolidated Balance Sheets.

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The fair value, amortized cost and weighted average yield of debt securities at March 31, 2026, by contractual maturity, are listed in the table below. Securities not due at a single maturity date are shown separately.


			Weighted
	Amortized		Average		Fair
Securities available-for-sale	Cost		Yield		Value
Due in one year or less	$	102,882	4.00	%	$	103,058
Due after one year through five years		122,963	3.91			122,569
Due after five years through ten years		142,578	3.52			138,495
Due after ten years		75,974	3.14			72,833
		444,397	3.67			436,955
Mortgage-backed and collateralized mortgage obligations		486,429	2.81			448,541
Asset-backed securities		45,318	3.64			44,505
Collateralized loan obligations		184,941	5.21			184,711
Equity securities		714	-			731
Total securities available-for-sale	$	1,161,799	3.55	%	$	1,115,443

At March 31, 2026, the Company had no securities issued from any one originator, other than the U.S. Government and its agencies, which individually amounted to over 10 % of the Company’s stockholders’ equity.

Securities with unrealized losses with no corresponding allowance for credit losses at March 31, 2026, and December 31, 2025, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands except for number of securities):


	Less than 12 months					12 months or more
March 31, 2026	in an unrealized loss position					in an unrealized loss position					Total
	Number of	Unrealized		Fair		Number of	Unrealized		Fair		Number of	Unrealized		Fair
Securities available-for-sale	Securities	Losses		Value		Securities	Losses		Value		Securities	Losses		Value
U.S. government agencies	1	$	171	$	39,516	7	$	153	$	29,109	8	$	324	$	68,625
U.S. government agencies mortgage-backed	-		-		-	126		7,129		74,618	126		7,129		74,618
States and political subdivisions	19		180		52,366	19		7,961		74,514	38		8,141		126,880
Collateralized mortgage obligations	9		85		31,813	127		31,400		276,485	136		31,485		308,298
Asset-backed securities	5		168		11,090	9		1,114		22,924	14		1,282		34,014
Collateralized loan obligations	15		219		113,078	2		35		9,976	17		254		123,054
Total securities available-for-sale	49	$	823	$	247,863	290	$	47,792	$	487,626	339	$	48,615	$	735,489


	Less than 12 months					12 months or more
December 31, 2025	in an unrealized loss position					in an unrealized loss position					Total
	Number of	Unrealized			Fair	Number of	Unrealized			Fair	Number of	Unrealized			Fair
Securities available-for-sale	Securities	Losses			Value	Securities	Losses			Value	Securities	Losses			Value
U.S. government agencies	-	$	-	$	-	7	$	245	$	29,176	7	$	245	$	29,176
U.S. government agencies mortgage-backed	1		36		10,572	126		7,083		78,208	127		7,119		88,780
States and political subdivisions	1		4		5,046	29		7,437		104,483	30		7,441		109,529
Collateralized mortgage obligations	5		19		6,287	130		30,552		288,228	135		30,571		294,515
Asset-backed securities	7		139		14,927	7		1,068		20,164	14		1,207		35,091
Collateralized loan obligations	12		239		87,299	-		-		-	12		239		87,299
Total securities available-for-sale	26	$	437	$	124,131	299	$	46,385	$	520,259	325	$	46,822	$	644,390

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Each quarter, we perform an analysis to determine if any of the unrealized losses on securities available-for-sale are comprised of credit losses as compared to unrealized losses due to market interest rate adjustments. Our assessment includes a review of the unrealized loss for each security issuance held; the financial condition and near-term prospects of the issuer, including external credit ratings and recent downgrades; and our ability and intent to hold the security for a period of time sufficient for a recovery in value. We also consider the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies. The portfolio continues to consist of a mix of fixed and floating-rate, high quality securities, largely rated AA (or better), displaying an overall effective duration of approximately 3.0 years.

There were no securities sold for the three months ended March 31, 2026 or 2025, respectively.

As of March 31, 2026, securities valued at $ 652.7 million were pledged for borrowings and for other purposes, a decrease from $ 679.5 million of securities pledged at year end 2025.

Note 4 – Loans and Allowance for Credit Losses on Loans

Major classifications of loans were as follows:


	March 31, 2026		December 31, 2025
Commercial	$	845,278	$	842,130
Leases		539,116		548,256
Commercial real estate – investor		1,169,318		1,212,384
Commercial real estate – owner occupied		702,986		706,567
Construction		143,563		173,630
Residential real estate – investor		69,763		70,225
Residential real estate – owner occupied		239,711		230,432
Multifamily		357,131		339,131
HELOC		235,637		235,293
Powersport		674,116		696,959
Other 1		208,618		197,124
Total loans		5,185,237		5,252,131
Allowance for credit losses on loans		( 72,126 )		( 72,301 )
Net loans 2	$	5,113,111	$	5,179,830

1 The “Other” classification includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts in this table and in subsequent tables within Note 4 – Loans and Allowance for Credit Losses on Loans.

2 Excludes accrued interest receivable of $ 23.2 million and $ 23.5 million at March 31, 2026, and December 31, 2025, respectively, that is recorded in other assets on the Consolidated Balance Sheets.

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It is the policy of the Company to review each prospective credit prior to making a loan in order to determine if an adequate level of security or collateral has been obtained. The type of collateral, when required, will vary from liquid assets to real estate. The Company seeks to ensure access to collateral, in the event of borrower default, through adherence to lending laws, the Company’s lending standards and credit monitoring procedures. Although the Bank makes loans primarily within its market area, there are no significant concentrations of loans where the customers’ ability to honor loan terms is dependent upon a single economic sector. The real estate related categories listed above represent 56.3 % and 56.5 % of the portfolio at March 31, 2026, and December 31, 2025, respectively, and include a mix of owner occupied and non-owner occupied commercial real estate, residential, construction and multifamily loans.

The following tables represent the activity in the allowance for credit losses for loans, or the ACL, for the three months ended March 31, 2026 and 2025:



			Provision for
	Beginning		(Release of)						Ending
Allowance for credit losses	Balance		Credit Losses 1		Charge-offs		Recoveries		Balance
Three months ended March 31, 2026
Commercial	$	11,183	$	2,754	$	1,328	$	30	$	12,639
Leases		2,370		154		312		115		2,327
Commercial real estate – investor		21,672		3,120		3,933		14		20,873
Commercial real estate – owner occupied		4,583		344		-		5		4,932
Construction		1,527		( 325 )		-		-		1,202
Residential real estate – investor		759		( 7 )		-		2		754
Residential real estate – owner occupied		1,879		67		-		7		1,953
Multifamily		1,493		115		-		-		1,608
HELOC		3,628		( 17 )		2		8		3,617
Powersport		17,449		3,362		4,661		767		16,917
Other		5,758		34		557		69		5,304
Total	$	72,301	$	9,601	$	10,793	$	1,017	$	72,126

1 Amount does not include the provision for unfunded commitment liability.


			Provision for
	Beginning		(Release of)						Ending
Allowance for credit losses	Balance		Credit Losses 1		Charge-offs		Recoveries		Balance
Three months ended March 31, 2025
Commercial	$	7,813	$	3,448	$	3,446	$	32	$	7,847
Leases		2,136		148		107		14		2,191
Commercial real estate – investor		14,528		1,094		-		14		15,636
Commercial real estate – owner occupied		10,036		( 2,730 )		47		8		7,267
Construction		3,581		( 91 )		821		-		2,669
Residential real estate – investor		553		7		-		2		562
Residential real estate – owner occupied		1,509		301		-		30		1,840
Multifamily		1,876		( 23 )		-		-		1,853
HELOC		1,578		88		-		12		1,678
Powersport		-		-		-		-		-
Other		9		43		108		64		8
Total	$	43,619	$	2,285	$	4,529	$	176	$	41,551

1 Amount does not include the provision for unfunded commitment liability.

At March 31, 2026, our allowance for credit losses (“ACL”) on loans totaled $ 72.1 million, and our ACL on unfunded commitments, included in other liabilities, totaled $ 2.0 million. During the first three months of 2026, we recorded net provision for credit losses on loans and unfunded commitments of $ 9.5 million. The provision was mostly driven by increased commercial and commercial real estate charge offs, and a downgrade of one commercial relationship. Charge offs for the period ending March 31, 2026 were largely comprised of a $ 3.9 million charge off in commercial real estate-investor on a downtown Chicago office building that now cashflows after the restructuring; a commercial charge off of $ 1.3 million in the warehouse and distribution business; and higher than normal powersport net charge offs totaling $ 3.9 million due to continued softness in the consumer lending as seen in the broader economy. The ACL on loans excludes an allowance for unfunded commitments of $ 2.0 million as of March 31, 2026, $ 2.1 million as of December 31, 2025, and $ 2.0 million as of March 31, 2025, which is recorded within other liabilities on the Consolidated Balance Sheets.

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Generally, the Bank considers a loan to be collateral dependent when, based on current information and events, it is probable that foreclosure could be initiated. Additionally, the Bank will review all loans meeting the criteria for individual analysis, to determine if repayment or satisfaction of the loan is expected through the sale of collateral. This will generally be the case for credits with high loan-to-value ratios. Exceptions to this policy would include loans with guarantors or sponsors that have the means and willingness to support the obligation. Non-accruing loans with an outstanding balance of $ 500,000 or more are assessed on an individual loan level basis. When a financial asset is deemed collateral-dependent, the level of credit loss is measured by the difference between amortized cost of the financial asset and the fair value of collateral adjusted for estimated cost to sell. The Company had $ 64.7 million and $ 40.9 million of collateral dependent loans secured by real estate or business assets as of March 31, 2026, and December 31, 2025, respectively.

The following tables present the collateral dependent loans and the related ACL allocated by classification of loans as of March 31, 2026, and December 31, 2025:


			Accounts								ACL
March 31, 2026	Real Estate		Receivable		Equipment		Equity Interests		Total		Allocation
Commercial	$	-	$	12,507	$	3,402	$	16,500	$	32,409	$	5,348
Leases		-		-		-		-		-		-
Commercial real estate – investor		11,210		-		-		-		11,210		5,547
Commercial real estate – owner occupied		17,939		-		-		-		17,939		315
Construction		1,469		-		-		-		1,469		-
Residential real estate – investor		152		-		-		-		152		-
Residential real estate – owner occupied		721		-		-		-		721		-
Multifamily		783		-		-		-		783		-
HELOC		-		-		-		-		-		-
Powersport		-		-		-				-		-
Other		-		-		-		-		-		-
Total	$	32,274	$	12,507	$	3,402	$	16,500	$	64,683	$	11,210

			Accounts								ACL
December 31, 2025	Real Estate		Receivable		Equipment		Equity Interests		Total		Allocation
Commercial	$	-	$	5,960	$	2,055	$	-	$	8,015	$	762
Leases		-		-		-		-		-		-
Commercial real estate – investor		11,345		-		-		-		11,345		5,682
Commercial real estate – owner occupied		19,809		-		-		-		19,809		-
Construction		-		-		-		-		-		-
Residential real estate – investor		26		-		-		-		26		-
Residential real estate – owner occupied		844		-		-		-		844		-
Multifamily		782		-		-		-		782		-
HELOC		53		-		-		-		53		-
Powersport		-		-		-				-		-
Other		-		-		-		-		-		-
Total	$	32,859	$	5,960	$	2,055	$	-	$	40,874	$	6,444

An aged analysis of past due loans by classification of loans was as follows:


													90 days or
					90 Days or								Greater Past
	30-59 Days		60-89 Days		Greater Past		Total Past						Due and
March 31, 2026	Past Due		Past Due		Due		Due		Current		Total Loans		Accruing
Commercial	$	6,512		-		4,053		10,565		834,713	$	845,278	$	581
Leases		1,976		391		1,910		4,277		534,839		539,116		348
Commercial real estate – investor		29,415		1,750		5,182		36,347		1,132,971		1,169,318		5,182
Commercial real estate – owner occupied		1,222		784		20,122		22,128		680,858		702,986		3,578
Construction		-		-		2,086		2,086		141,477		143,563		-
Residential real estate – investor		198		356		152		706		69,057		69,763		-
Residential real estate – owner occupied		2,359		194		617		3,170		236,541		239,711		90
Multifamily		311		-		1,072		1,383		355,748		357,131		-
HELOC		1,610		851		589		3,050		232,587		235,637		60
Powersport		11,497		3,484		2,363		17,344		656,772		674,116		2,190
Other		659		135		1,112		1,906		206,712		208,618		839
Total	$	55,759	$	7,945	$	39,258	$	102,962	$	5,082,275	$	5,185,237	$	12,868

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													90 days or
					90 Days or								Greater Past
	30-59 Days		60-89 Days		Greater Past		Total Past						Due and
December 31, 2025	Past Due		Past Due		Due		Due		Current		Total Loans		Accruing
Commercial	$	565		-		4,746		5,311		836,819	$	842,130	$	1,241
Leases		2,116		595		1,677		4,388		543,868		548,256		471
Commercial real estate – investor		10,604		89		-		10,693		1,201,691		1,212,384		-
Commercial real estate – owner occupied		7,176		819		11,389		19,384		687,183		706,567		250
Construction		1,546		1,349		635		3,530		170,100		173,630		-
Residential real estate – investor		120		699		152		971		69,254		70,225		-
Residential real estate – owner occupied		7,983		562		757		9,302		221,130		230,432		141
Multifamily		404		313		1,070		1,787		337,344		339,131		-
HELOC		5,219		441		451		6,111		229,182		235,293		-
Powersport		13,796		4,860		2,778		21,434		675,525		696,959		2,710
Other		1,873		702		217		2,792		194,332		197,124		66
Total	$	51,402	$	10,429	$	23,872	$	85,703	$	5,166,428	$	5,252,131	$	4,879

The table presents all nonaccrual loans as of March 31, 2026, and December 31, 2025:


Nonaccrual loan detail	March 31, 2026		With no ACL		December 31, 2025		With no ACL
Commercial	$	21,946	$	14,446	$	8,520	$	5,520
Leases		2,604		2,604		2,428		2,428
Commercial real estate – investor		11,241		31		11,377		32
Commercial real estate – owner occupied		18,690		4,799		19,493		19,493
Construction		2,086		2,086		737		737
Residential real estate – investor		669		669		681		681
Residential real estate – owner occupied		1,826		1,826		1,711		1,711
Multifamily		1,489		1,489		1,494		1,494
HELOC		1,543		1,543		1,222		1,222
Powersport		204		204		68		68
Other		338		338		221		221
Total	$	62,636	$	30,035	$	47,952	$	33,607

The Company recognized $ 4,000 of interest on nonaccrual loans during the three months ended March 31, 2026, and $ 39,000 of interest on nonaccrual loans during the three months ended March 31, 2025, respectively.

Table of Contents

Credit Quality Indicators

The Company categorizes loans into credit risk categories based on current financial information, overall debt service coverage, comparison to industry averages, historical payment experience, and current economic trends. This analysis includes loans with outstanding balances or commitments greater than $ 50,000 and excludes homogeneous loans such as home equity lines of credit residential mortgages, powersports, and other loan categories. Loans with a classified risk rating are reviewed quarterly regardless of size or loan type. The Company uses the following definitions for classified risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The substandard credit quality indicator includes both potential problem loans that are currently performing and nonperforming loans.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Credits that are not covered by the definitions above are pass credits, which are not considered to be adversely rated.

For residential owner-occupied, HELOC, powersport, and the other loan portfolios, the Company evaluates credit quality based on the

aging status of the loan and by payment activity. Nonperforming loans are those that are either 90 days or more past due and accruing or

are on nonaccrual, and all other loans not meeting this criteria are considered performing.

Credit quality indicators by loan classification and contractual loan origination date at March 31, 2026, were as follows:


	2026		2025		2024		2023		2022		Prior		Revolving Loans		Revolving Loans Converted To Term Loans		Total
Commercial
Pass	$	54,297	$	250,771	$	144,913	$	90,559	$	20,994	$	16,475	$	202,190	$	-	$	780,199
Special Mention		-		-		3,240		-		173		-		11,026		-		14,439
Substandard		-		206		12,869		2,166		3,402		189		27,308		-		46,140
Doubtful		-		-		4,500		-		-		-		-		-		4,500
Total commercial		54,297		250,977		165,522		92,725		24,569		16,664		240,524		-		845,278

Leases
Pass		46,629		231,261	$	155,167		71,663		22,207		8,915		-		-		535,842
Special Mention		-		-		-		347		233		90		-		-		670
Substandard		-		-		420		850		1,334		-		-		-		2,604
Total leases		46,629		231,261		155,587		72,860		23,774		9,005		-		-		539,116

Commercial real estate – investor
Pass		27,246		278,723		185,373		117,511		252,926		267,194		6,636		-		1,135,609
Special Mention		-		448		7,176		-		1,148		9,978		-		-		18,750
Substandard		-		-		9,553		1,676		1,677		1,964		89		-		14,959
Total commercial real estate – investor		27,246		279,171		202,102		119,187		255,751		279,136		6,725		-		1,169,318

Commercial real estate – owner occupied
Pass		27,254		201,845		80,958		59,790		78,693		177,985		9,490		-		636,015
Special Mention		-		-		-		1,418		3,203		1,756		-		-		6,377
Substandard		-		2,109		5,511		21,130		6,833		24,262		-		749		60,594
Total commercial real estate – owner occupied		27,254		203,954		86,469		82,338		88,729		204,003		9,490		749		702,986

Table of Contents

Credit quality indicators by loan classification and contractual loan origination date at March 31, 2026, continued: —	2026		2025		2024		2023		2022		Prior		Revolving Loans		Revolving Loans Converted To Term Loans		Total
Construction
Pass		1,005		65,952		35,787		1,859		24,846		1,131		-		-		130,580
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		102		1,936		875		9,731		339		-		-		12,983
Total construction		1,005		66,054		37,723		2,734		34,577		1,470		-		-		143,563

Residential real estate – investor
Pass		2,114		11,900		5,407		3,022		15,005		26,702		4,601		-		68,751
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		1,012		-		-		1,012
Total residential real estate – investor		2,114		11,900		5,407		3,022		15,005		27,714		4,601		-		69,763

Residential real estate – owner occupied
Pass		11,329		43,354		10,676		24,848		35,061		111,349		1,208		-		237,825
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		147		337		1,402		-		-		1,886
Total residential real estate – owner occupied		11,329		43,354		10,676		24,995		35,398		112,751		1,208		-		239,711

Multifamily
Pass		5,747		57,219		19,792		79,042		96,040		96,527		1,275		-		355,642
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		124		889		476		-		-		1,489
Total multifamily		5,747		57,219		19,792		79,166		96,929		97,003		1,275		-		357,131

HELOC
Pass		1,068		2,810		2,117		1,658		1,541		4,605		220,006		-		233,805
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		248		1,584		-		1,832
Total HELOC		1,068		2,810		2,117		1,658		1,541		4,853		221,590		-		235,637

Powersport
Pass		73,258		288,187		154,278		96,362		46,199		15,628		-		-		673,912
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		20		105		45		9		25		-		-		204
Total Powersport		73,258		288,207		154,383		96,407		46,208		15,653		-		-		674,116

Other
Pass		27,171		75,836		26,477		17,500		46,381		7,872		7,012		-		208,249
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		141		198		30		-		-		369
Total other		27,171		75,836		26,477		17,641		46,579		7,902		7,012		-		208,618

Total loans
Pass		277,118		1,507,858		820,945		563,814		639,893		734,383		452,418		-		4,996,429
Special Mention		-		448		10,416		1,765		4,757		11,824		11,026		-		40,236
Substandard		-		2,437		30,394		27,154		24,410		29,947		28,981		749		144,072
Doubtful		-		-		4,500		-		-		-		-		-		4,500
Total loans	$	277,118	$	1,510,743	$	866,255	$	592,733	$	669,060	$	776,154	$	492,425	$	749	$	5,185,237

Table of Contents

Credit quality indicators by loan classification and loan origination date at December 31, 2025, were as follows:


	2025		2024		2023		2022		2021		Prior		Revolving Loans		Revolving Loans Converted To Term Loans		Total
Commercial
Pass	$	275,155	$	161,529	$	94,487	$	22,843	$	8,699	$	9,730	$	214,846	$	125	$	787,414
Special Mention		-		-		-		212		-		-		2,917		-		3,129
Substandard		231		926		19,241		3,611		291		-		27,287		-		51,587
Total commercial		275,386		162,455		113,728		26,666		8,990		9,730		245,050		125		842,130

Leases
Pass		247,515		172,825	$	84,533		27,993		10,164		2,038		-		-		545,068
Special Mention		-		-		374		263		123		-		-		-		760
Substandard		-		214		469		1,745		-		-		-		-		2,428
Total leases		247,515		173,039		85,376		30,001		10,287		2,038		-		-		548,256

Commercial real estate – investor
Pass		296,219		217,761		120,630		255,701		199,993		99,144		6,371		-		1,195,819
Special Mention		82		-		-		-		41		2,197		-		-		2,320
Substandard		-		9,703		1,677		1,690		-		1,175		-		-		14,245
Total commercial real estate – investor		296,301		227,464		122,307		257,391		200,034		102,516		6,371		-		1,212,384

Commercial real estate – owner occupied
Pass		193,988		76,480		67,749		76,670		106,107		103,545		10,309		-		634,848
Special Mention		-		-		161		3,542		2,153		1,782		-		-		7,638
Substandard		58		-		20,929		8,996		20,252		13,846		-		-		64,081
Total commercial real estate – owner occupied		194,046		76,480		88,839		89,208		128,512		119,173		10,309		-		706,567

Construction
Pass		53,522		48,906		31,121		27,500		332		828		-		-		162,209
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		102		-		1,454		9,526		-		339		-		-		11,421
Total construction		53,624		48,906		32,575		37,026		332		1,167		-		-		173,630

Residential real estate – investor
Pass		13,993		5,729		3,677		15,256		15,288		10,743		4,397		-		69,083
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		461		681		-		-		1,142
Total residential real estate – investor		13,993		5,729		3,677		15,256		15,749		11,424		4,397		-		70,225

Residential real estate – owner occupied
Pass		42,941		11,580		25,594		35,826		30,264		81,123		1,207		-		228,535
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		151		202		142		1,402		-		-		1,897
Total residential real estate – owner occupied		42,941		11,580		25,745		36,028		30,406		82,525		1,207		-		230,432

Multifamily
Pass		56,753		20,133		50,464		96,747		70,496		40,926		2,118		-		337,637
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		124		892		313		165		-		-		1,494
Total multifamily		56,753		20,133		50,588		97,639		70,809		41,091		2,118		-		339,131

HELOC
Pass		2,888		2,192		1,700		1,646		278		4,480		220,643		-		233,827
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		240		1,226		-		1,466
Total HELOC		2,888		2,192		1,700		1,646		278		4,720		221,869		-		235,293

Powersport
Pass		323,072		180,099		114,212		57,740		17,237		4,531		-		-		696,891
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		22		44		-		-		2		-		-		68
Total Powersport		323,072		180,121		114,256		57,740		17,237		4,533		-		-		696,959

Other
Pass		81,405		31,889		19,599		48,615		1,729		7,282		6,335		-		196,854
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		163		74		27		6		-		-		270
Total other		81,405		31,889		19,762		48,689		1,756		7,288		6,335		-		197,124

Total loans
Pass		1,587,451		929,123		613,766		666,537		460,587		364,370		466,226		125		5,088,185
Special Mention		82		-		535		4,017		2,317		3,979		2,917		-		13,847
Substandard		391		10,865		44,252		26,736		21,486		17,856		28,513		-		150,099
Total loans	$	1,587,924	$	939,988	$	658,553	$	697,290	$	484,390	$	386,205	$	497,656	$	125	$	5,252,131

Table of Contents

The following vintage tables present the amortized cost basis of non-risk rated loans by class and year of origination, based on the Company’s credit quality indicator for such loans as of March 31, 2026 and December 31, 2025. For these loan classes, the Company monitors credit quality based on performing and nonperforming status rather than internal risk ratings.


March 31, 2026	2026		2025		2024		2023		2022		Prior		Revolving Loans		Revolving Loans Converted To Term Loans		Total
Residential real estate – owner occupied
Performing	$	11,329		43,354		10,676		24,848		35,061		111,319		1,208	$	-	$	237,795
Nonperforming		-		-		-		147		337		1,432		-		-		1,916
Total Residential real estate – owner occupied		11,329		43,354		10,676		24,995		35,398		112,751		1,208		-		239,711

HELOC
Performing		1,068		2,810		2,057		1,658		1,541		4,767		220,133		-		234,034
Nonperforming		-		-		60		-		-		86		1,457		-		1,603
Total HELOC		1,068		2,810		2,117		1,658		1,541		4,853		221,590		-		235,637

Powersport
Performing		73,258		287,490		153,788		95,830		45,936		15,420		-		-		671,722
Nonperforming		-		717		595		577		272		233		-		-		2,394
Total Powersport		73,258		288,207		154,383		96,407		46,208		15,653		-		-		674,116

Other
Performing		27,171		75,836		26,465		17,499		46,346		7,872		6,252		-		207,441
Nonperforming		-		-		12		142		233		30		760		-		1,177
Total Other		27,171		75,836		26,477		17,641		46,579		7,902		7,012		-		208,618

Total non-risk rated loans
Performing		112,826		409,490		192,986		139,835		128,884		139,378		227,593		-		1,350,992
Nonperforming		-		717		667		866		842		1,781		2,217		-		7,090
Total non-risk rated loans	$	112,826		410,207		193,653		140,701		129,726		141,159		229,810		-		1,358,082


December 31, 2025	2025		2024		2023		2022		2021		Prior		Revolving Loans		Revolving Loans Converted To Term Loans		Total
Residential real estate – owner occupied
Performing	$	42,941	$	11,580	$	25,594	$	35,826	$	30,264	$	81,168	$	1,207	$	-	$	228,580
Nonperforming		-		-		151		202		142		1,357		-		-		1,852
Total Residential real estate – owner occupied		42,941		11,580		25,745		36,028		30,406		82,525		1,207		-		230,432

HELOC
Performing		2,888		2,192		1,700		1,646		278		4,499		220,868		-		234,071
Nonperforming		-		-		-						221		1,001		-		1,222
Total HELOC		2,888		2,192		1,700		1,646		278		4,720		221,869		-		235,293

Powersport
Performing		322,369		179,391		113,725		57,266		17,026		4,404		-		-		694,181
Nonperforming		703		730		531		474		211		129		-		-		2,778
Total Powersport		323,072		180,121		114,256		57,740		17,237		4,533		-		-		696,959

Other
Performing		81,405		31,889		19,596		48,615		1,730		7,267		6,335		-		196,837
Nonperforming		-		-		166		74		26		21				-		287
Total Other		81,405		31,889		19,762		48,689		1,756		7,288		6,335		-		197,124

Total non-risk rated loans
Performing		449,603		225,052		160,615		143,353		49,298		97,338		228,410		-		1,353,669
Nonperforming		703		730		848		750		379		1,728		1,001		-		6,139
Total non-risk rated loans	$	450,306		225,782		161,463		144,103		49,677		99,066		229,411		-		1,359,808

Table of Contents

The gross charge-offs activity by loan type and year of origination for the three months ended March 31, 2026 and 2025, were as follows:


Three months ended March 31, 2026	2026		2025		2024		2023		2022		Prior		Total
Commercial	$	-		-		34		1,290		-		4	$	1,328
Leases		-		-		-		-		310		2		312
Commercial real estate – investor		-		-		-		-		-		3,933		3,933
Commercial real estate – owner occupied		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Residential real estate – investor		-		-		-		-		-		-		-
Residential real estate – owner occupied		-		-		-		-		-		-		-
Multifamily		-		-		-		-		-		-		-
HELOC		-		-		-		2		-		-		2
Powersport		5		1,646		1,230		880		616		284		4,661
Other		-		-		-		50		426		81		557
Total	$	5	$	1,646	$	1,264	$	2,222	$	1,352	$	4,304	$	10,793


Three months ended March 31, 2025	2025		2024		2023		2022		2021		Prior		Total
Commercial	$	-		-		2,050		-		1,391		5	$	3,446
Leases		-		-		85		22		-		-		107
Commercial real estate – investor		-		-		-		-		-		-		-
Commercial real estate – owner occupied		-		-		-		-		-		47		47
Construction		-		-		-		821		-		-		821
Residential real estate – investor		-		-		-		-		-		-		-
Residential real estate – owner occupied		-		-		-		-		-		-		-
Multifamily		-		-		-		-		-		-		-
HELOC		-		-		-		-		-		-		-
Powersport		-		-		-		-		-		-		-
Other		-		-		5		-		-		103		108
Total	$	-	$	-	$	2,140	$	843	$	1,391	$	155	$	4,529

The Company had $ 1.6 million and $ 379,000 in residential real estate loans in the process of foreclosure as of March 31, 2026, and December 31, 2025, respectively.

Table of Contents

There were 15 loans modified during the three-month period ending March 31, 2026, totaling $ 26.8 million in aggregate, which were experiencing financial difficulty. Of the 15 loans modified in the first three months of 2026, three loans had also been modified in prior periods. There were 13 loans modified during the three-month period ending March 31, 2025, totaling $ 46.7 million in aggregate, which were experiencing financial difficulty.

The following tables present the amortized costs basis of loans at March 31, 2026, and March 31, 2025, that were both experiencing financial difficulty and modified during the three months ended March 31, 2026, and March 31, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.


Three months ended March 31, 2026	Term Modification		Combination - Term, Interest Rate and Payment Modification		Combination - Term and Interest Rate Modification		Combination - Term and Payment Modification 1		Total Loans Modified		% of Total Loan Classification Modified to Total Loan Classification
Commercial	$	4,055	$	-	$	3,500	$	-	$	7,555	0.9	%
Commercial real estate – investor		-		-		-		89		89	0.0
Commercial real estate – owner occupied		18,873		-		-		-		18,873	2.7
Construction		-		-		-		-		-	-
HELOC		153		-		-		-		153	0.1
Powersport		-		80		-		-		80	0.0
Total	$	23,081	$	80	$	3,500	$	89	$	26,750	0.5	%

1 Payment modifications are either contractual delays in payment or a modification of the payment amount.


Three months ended March 31, 2025	Term Modification		Combination - Term, Interest Rate and Payment Modification		Combination - Term and Interest Rate Modification		Combination - Term and Payment Modification 1		Total Loans Modified		% of Total Loan Classification Modified to Total Loan Classification
Commercial	$	312	$	-	$	-	$	6,547	$	6,859	0.9	%
Commercial real estate – investor		-		-		12,331		-		12,331	1.1
Commercial real estate – owner occupied		13,102		-		-		1,167		14,269	2.1
Construction		13,212		-		-		-		13,212	6.4
HELOC		-		-		-		-		-	-
Powersport		-		-		-		-		-	-
Total	$	26,626	$	-	$	12,331	$	7,714	$	46,671	1.2	%

1 Payment modifications are either contractual delays in payment or a modification of the payment amount.

The Company closely monitors the performance of loan modifications to borrowers experiencing financial difficulty. The following tables present the performance of loans that have been modified in the last twelve months as of March 31, 2026, and March 31, 2025.


March 31, 2026	30-59 days past due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Modifications
Commercial	$	3,500	$	-	$	3,000	$	6,500	$	10,525	$	17,025
Commercial real estate – investor		11,210		-		89		11,299		31		11,330
Commercial real estate – owner occupied		-		56		15,217		15,273		22,369		37,642
Construction		-		-		-		-		-		-
Multifamily		-		-		-		-		-		-
HELOC		-		-		-		-		238		238
Powersport		16		-		20		36		110		146
Other		-		-		-		-		23		23
Total	$	14,726	$	56	$	18,326	$	33,108	$	33,296	$	66,404


March 31, 2025	30-59 days past due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Modifications
Commercial	$	-	$	-	$	-	$	-	$	9,950	$	9,950
Commercial real estate – investor		-		-		-		-		12,331		12,331
Commercial real estate – owner occupied		-		-		-		-		17,592		17,592
Construction		-		-		-		-		13,212		13,212
Multifamily		-		-		-		-		1,191		1,191
HELOC		-		-		-		-		-		-
Powersport		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	54,276	$	54,276

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The following tables summarize the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2026 and March 31, 2025. The financial impact of these modifications was immaterial.


Three months ended March 31, 2026	Weighted-Average Term Extension (In Months)		Weighted-Average Interest Rate Change			Weighted-Average Delay of Payment (In Months)
Commercial		4.08		1.00	%		-
Commercial real estate – investor		12.00		-			-
Commercial real estate – owner occupied		6.00		-			-
Construction		-		-			-
HELOC		24.00		-			-
Powersport		( 0.95 )		( 1.64 )			-
Total		5.56		0.94	%		-


Three months ended March 31, 2025	Weighted-Average Term Extension (In Months)		Weighted-Average Interest Rate Change			Weighted-Average Delay of Payment (In Months)
Commercial		3.00		-	%		2.00
Leases		-		-			-
Commercial real estate – investor		9.00		( 1.00 )			-
Commercial real estate – owner occupied		3.44		-			2.00
Construction		9.00		-			-
HELOC		-		-			-
Powersport		-		-			-
Total		6.42		( 1.00 )	%		2.00

Note 5 – Other Real Estate Owned

Details related to the activity in the other real estate owned (“OREO”) portfolio, net of valuation reserve, for the periods presented are itemized in the following table:


	Three Months Ended
	March 31,
Other real estate owned	2026		2025
Balance at beginning of period	$	1,427	$	21,617
Property additions, net of participation sold		632		-
Less:
Carrying value of property disposals, net of participation sold		1,427		18,285
Period valuation adjustments		-		454
Balance at end of period	$	632	$	2,878

Activity in the valuation allowance was as follows:


	Three Months Ended
	March 31,
	2026		2025
Balance at beginning of period	$	632	$	1,862
Provision for valuation reserves		-		454
Reductions taken on sales		( 632 )		( 1,463 )
Balance at end of period	$	-	$	853

Expenses related to OREO, net of lease revenue, include:


	Three Months Ended
	March 31,
	2026		2025
(Gain) loss on sales, net	$	( 98 )	$	236
Provision for valuation reserves		-		454
Operating (income) expense (1)		( 86 )		1,913
Less:
Lease revenue		2		730
Net OREO expense	$	( 186 )	$	1,873

1 Operating income for the three months ended March 31, 2026 includes $ 235,000 net gain on transfer as the fair value less cost to sell on one property transfer exceeded the book value of the loan .

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Note 6 – Deposits

Major classifications of deposits were as follows:


	March 31, 2026		December 31, 2025
Noninterest bearing demand	$	1,755,548	$	1,739,117
Savings		1,117,316		1,121,888
NOW accounts		701,712		693,573
Money market accounts		976,010		930,079
Certificates of deposit of less than $100,000		440,553		489,879
Certificates of deposit of $100,000 through $250,000		376,868		412,655
Certificates of deposit of more than $250,000		196,992		208,878
Total deposits	$	5,564,999	$	5,596,069

Note 7 – Borrowings

The following table is a summary of borrowings as of March 31, 2026, and December 31, 2025. Junior subordinated debentures are discussed in more detail in Note 8:


	March 31, 2026		December 31, 2025
Securities sold under repurchase agreements	$	23,130	$	23,769
Other short-term borrowings		200,000		215,000
Junior subordinated debentures 1		25,774		25,774
Subordinated debentures		59,574		59,552
Notes payable and other borrowings 2		14,837		14,825
Total borrowings	$	323,315	$	338,920

1 See Note 8: Junior Subordinated Debentures.

2 Long-term FHLBC advance, net of purchase accounting adjustment.

The Company enters into deposit sweep transactions where the transaction amounts are secured by pledged securities. These transactions consistently mature overnight from the transaction date and are governed by sweep repurchase agreements. All sweep repurchase agreements are treated as financings secured by U.S. government agencies and collateralized mortgage-backed securities, and had a carrying amount of $ 23.1 million at March 31, 2026, and $ 23.8 million at December 31, 2025. The average amount and weighted average rate for the quarter ended March 31, 2026 was $ 24.8 million and 0.82 % with the maximum month-end amount recorded at $ 27.6 million at February 28, 2026. The average amount and weighted average rate for the quarter ended December 31, 2025 was $ 23.5 million and 0.76 % with the maximum month-end amount recorded at $ 23.8 million at December 31, 2025. The fair value of the pledged collateral was $ 73.7 million at March 31, 2026, and $ 74.0 million at December 31, 2025. At March 31, 2026, there were no customers with secured balances exceeding 10 % of stockholders’ equity.

The Company’s borrowings at the FHLBC require the Bank to be a member and invest in the stock of the FHLBC. 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. The outstanding balance of our short-term FHLBC advances was $ 200.0 million as of March 31, 2026, and $ 215.0 million as of December 31, 2025. The outstanding balance of our long-term FHLBC advances, net of purchase accounting adjustments, was $ 14.8 million as of March 31, 2026, and $ 14.8 million as of December 31, 2025. FHLBC stock held at March 31, 2026, was valued at $ 10.6 million, and any potential FHLBC advances were collateralized by loans and securities with a principal balance of $ 1.50 billion, which carried a FHLBC-calculated combined collateral value of $ 973.7 million. The Company had excess collateral of $ 757.4 million available to secure borrowings at March 31, 2026.

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In the second quarter of 2021, 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”). The Company used the net proceeds from the offering for general corporate purposes. The Notes bear interest at a fixed annual rate of 3.50 %, from and including the date of issuance to but excluding April 15, 2026, payable semi-annually in arrears. From and including April 15, 2026, to, but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an interest rate per annum equal to three-month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears. As of March 31, 2026, and December 31, 2025, we had $ 59.6 million of subordinated debentures outstanding, net of deferred issuance cost. On April 15, 2026, the Company redeemed $ 30.0 million aggregate principal amount of the Notes. See Note 1 – Subsequent Events for additional information.

The Company also has an undrawn line of credit of $ 30.0 million with a correspondent bank to be used for short-term funding needs; advances under this line can be outstanding up to 360 days from the date of issuance.

Note 8 – Junior Subordinated Debentures

The Company issued $ 25.0 million of cumulative trust preferred securities through a private placement completed by an unconsolidated subsidiary, Old Second Capital Trust II, in April 2007. These trust preferred securities mature in 30 years , but subject to regulatory approval, can be called in whole or in part on a quarterly basis commencing June 15, 2017. The quarterly cash distributions on the securities were fixed at 6.77 % through June 15, 2017, and now have a floating rate of 150 basis points over three-month SOFR . Upon conversion to a floating rate, a cash flow hedge was initiated which resulted in the total interest rate paid on the debt of 4.66 % for the quarter ended March 31, 2026, and 4.53 % for the quarter ended March 31, 2025. The Company issued a $ 25.8 million subordinated debenture to Old Second Capital Trust II in return for the aggregate net proceeds of this trust preferred offering. The interest rate and payment frequency on the debenture are equivalent to the cash distribution basis on the trust preferred securities.

The junior subordinated debentures issued by the Company are disclosed on the Consolidated Balance Sheets, and the related interest expense for each issuance is included in the Consolidated Statements of Income. As of March 31, 2026, and December 31, 2025, the remaining unamortized debt issuance costs related to the junior subordinated debentures were less than $ 1,000 and are included as a reduction to the balance of the junior subordinated debentures on the Consolidated Balance Sheets. The remaining deferred issuance costs on the junior subordinated debentures related to the issuance of Old Second Capital Trust II will be amortized to interest expense over the remainder of the 30 -year term of the notes and are included in the Consolidated Statements of Income.

Note 9 – Equity Compensation Plans

Stock-based awards are outstanding under the Company’s 2019 Equity Incentive Plan, as amended and restated (the “2019 Plan”). The 2019 Plan was originally approved at the May 2019 annual stockholders’ meeting and authorized 600,000 shares, and at the May 2021 annual stockholders’ meeting, the Company obtained stockholder approval to increase the number of shares of common stock authorized for issuance under the 2019 Plan by 1,200,000 shares, from 600,000 shares to 1,800,000 shares. At the May 2025 annual stockholders’ meeting, the Company obtained stockholder approval to increase the number of shares of common stock authorized for issuance under the 2019 Plan by an additional 800,000 shares, from 1,800,000 shares to 2,600,000 shares. Following the approval of the 2019 Plan, no further awards will be granted under any other prior plan.

The 2019 Plan authorizes the granting of qualified stock options, non-qualified stock options, restricted stock, restricted stock units, and stock appreciation rights (“SARs”); to date only restricted stock units have been awarded. Awards may be granted to selected directors, officers, employees or eligible service providers under the 2019 Plan at the discretion of the Compensation Committee of the Company’s Board of Directors. As of March 31, 2026, 1,084,444 shares remained available for issuance under the 2019 Plan.

Generally, restricted stock units granted under the 2019 Plan vest three years from the grant date, but the Compensation Committee of the Company’s Board of Directors has discretionary authority to change the terms of particular awards including the vesting schedule.

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Under the 2019 Plan, unless otherwise provided in an award agreement, upon the occurrence of a change in control, all equity awards then held by the participant will become fully exercisable immediately if, and all stock awards and cash incentive awards will become fully earned and vested immediately if, (i) the 2019 Plan is not an obligation of the successor entity following a change in control or (ii) the 2019 Plan is an obligation of the successor entity following a change in control and the participant incurs a termination of service without cause or for good reason following the change in control. Notwithstanding the immediately preceding sentence, if the vesting of an award is conditioned upon the achievement of performance measures, then such vesting will generally be subject to the following: if, at the time of the change in control, the performance measures are less than 50 % attained (pro rata based upon the time of the period through the change in control), the award will become vested and exercisable on a fractional basis with the numerator being equal to the percentage of attainment and the denominator being 50 %; and if, at the time of the change in control, the performance measures are at least 50 % attained (pro rata based upon the time of the period through the change in control), the award will become fully earned and vested immediately upon the change in control.

Awards of restricted stock under the 2019 Plan generally entitle holders to voting and dividend rights upon grant and are subject to forfeiture until certain restrictions have lapsed including employment for a specific period. Awards of restricted stock units under the 2019 Plan are also subject to forfeiture until certain restrictions have lapsed including employment for a specific period, but do not entitle holders to voting rights until the restricted period ends and shares are transferred in connection with the units.

There were 293,073 and 267,805 restricted stock units issued under the 2019 Plan during the three months ended March 31, 2026, and March 31, 2025, respectively. Compensation expense is recognized over the vesting period of the restricted stock units based on the market value of the award on the issue date. Total compensation cost, including related dividend equivalent expense, that has been recorded for the 2019 Plan was $ 1.5 million for the three months ended March 31, 2026, and $ 1.4 million for the three months ended March 31, 2025. The tax benefit recorded was $ 385,000 and $ 350,000 for the three months ended March 31, 2026 and March 31, 2025, respectively.

A summary of changes in the Company’s unvested restricted awards for the three months ended March 31, 2026, is as follows:


	March 31, 2026
		Weighted
	Restricted	Average
	Stock Shares	Grant Date
	and Units	Fair Value
Unvested at January 1	812,179	$	16.31
Granted	293,073		20.67
Vested	( 239,652 )		17.61
Unvested at March 31	865,600	$	17.43

Total unrecognized compensation cost of restricted awards was $ 9.2 million as of March 31, 2026, which is expected to be recognized over a weighted-average period of 2.25 years.

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Note 10 – Earnings Per Share

The earnings per share, both basic and diluted, are as follows:


	Three Months Ended March 31,
	2026		2025
Basic earnings per share:
Weighted-average common shares outstanding		52,450,306		44,967,726
Net income	$	25,585	$	19,830
Basic earnings per share	$	0.49	$	0.44

Diluted earnings per share:
Weighted-average common shares outstanding		52,450,306		44,967,726
Dilutive effect of unvested restricted awards 1		852,766		753,379
Diluted average common shares outstanding		53,303,072		45,721,105

Net Income	$	25,585	$	19,830
Diluted earnings per share	$	0.48	$	0.43


1 Includes the common stock equivalents for restricted share rights that are dilutive.

Note 11 – Regulatory & Capital Matters

The Bank is subject to the risk-based capital regulatory guidelines, which include the methodology for calculating the risk-weighted Bank assets, developed by the Office of the Comptroller of the Currency (the “OCC”) and the other bank regulatory agencies. In connection with the current risk-based capital regulatory guidelines, the Bank’s Board of Directors has established an internal guideline requiring the Bank to maintain a Tier 1 leverage capital ratio at or above eight percent (8%) and a total risk-based capital ratio at or above twelve percent (12%). At March 31, 2026, the Bank exceeded those thresholds.

At March 31, 2026, the Bank’s Tier 1 capital leverage ratio was 12.09 %, an increase of 60 basis points from December 31, 2025, and is above the 8.00 % Board of Directors’ guideline. The Bank’s total capital ratio was 14.88 %, an increase of 66 basis points from December 31, 2025, and also above the Board of Directors’ guideline of 12.00 %.

Bank holding companies are generally required to maintain minimum levels of capital in accordance with capital guidelines implemented by the Board of Governors of the Federal Reserve System. The general bank and holding company capital adequacy guidelines are shown in the accompanying table, as are the capital ratios of the Company and the Bank, as of March 31, 2026, and December 31, 2025.

The Basel III Rules are applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as to bank and savings and loan holding companies, other than “small bank holding companies,” which are generally holding companies with consolidated assets of less than $3.0 billion. A detailed discussion of the Basel III Rules is included in Part I, Item 1 of the Company’s Form 10-K for the year ended December 31, 2025, under the heading “Supervision and Regulation.”

At March 31, 2026, and December 31, 2025, Old Second Bancorp, Inc. and its bank subsidiary exceeded the regulatory minimums and Old Second National Bank met the regulatory definition of “well capitalized” based on the most recent regulatory definition.

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Capital levels and industry defined regulatory minimum required levels are as follows:



					Minimum Capital				Well Capitalized
					Adequacy with Capital				Under Prompt Corrective
	Actual				Conservation Buffer, if applicable 1				Action Provisions 2
	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2026
Common equity tier 1 capital to risk weighted assets
Consolidated	$	775,165	13.13	%	$	413,264	7.00	%		N/A	N/A
Old Second National Bank		814,473	13.80			413,138	7.00		$	383,629	6.50	%
Total capital to risk weighted assets
Consolidated		923,600	15.64			620,064	10.50			N/A	N/A
Old Second National Bank		877,909	14.88			619,492	10.50			589,993	10.00
Tier 1 capital to risk weighted assets
Consolidated		800,165	13.55			501,949	8.50			N/A	N/A
Old Second National Bank		814,473	13.80			501,668	8.50			472,158	8.00
Tier 1 capital to average assets
Consolidated		800,165	11.88			269,416	4.00			N/A	N/A
Old Second National Bank		814,473	12.09			269,470	4.00			336,837	5.00

December 31, 2025
Common equity tier 1 capital to risk weighted assets
Consolidated	$	774,990	12.99	%	$	417,624	7.00	%		N/A	N/A
Old Second National Bank		785,569	13.17			417,539	7.00		$	387,714	6.50	%
Total capital to risk weighted assets
Consolidated		922,259	15.46			626,373	10.50			N/A	N/A
Old Second National Bank		847,838	14.22			626,041	10.50			596,229	10.00
Tier 1 capital to risk weighted assets
Consolidated		799,990	13.41			507,078	8.50			N/A	N/A
Old Second National Bank		785,569	13.17			507,011	8.50			477,187	8.00
Tier 1 capital to average assets
Consolidated		799,990	11.70			273,501	4.00			N/A	N/A
Old Second National Bank		785,569	11.49			273,479	4.00			341,849	5.00

1 Amounts are shown inclusive of a capital conservation buffer of 2.50%.

2 The prompt corrective action provisions are only applicable at the Bank level. The Bank exceeded the general minimum regulatory requirements to be considered “well capitalized.”

Dividend Restrictions

In addition to the above requirements, banking regulations and capital guidelines generally limit the amount of dividends that may be paid by a bank without prior regulatory approval. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s profits, combined with the retained profit of the previous two years , subject to the capital requirements described above. As of March 31, 2026, the Bank had capacity to pay dividends of $ 85.3 million to the Company without prior regulatory approval. Pursuant to the Basel III rules, the Bank must keep a capital conservation buffer of 2.50 % above the regulatory minimum capital requirements, which must consist entirely of Common Equity Tier 1 capital in order to avoid additional limitations on capital distributions and certain other payments.

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Note 12 – Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy established by the Company also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own view about the assumptions that market participants would use in pricing an asset or liability.

There were no transfers between levels during the three-month period ended March 31, 2026 and March 31, 2025 .

The Company has certain assets and liabilities measured at fair value. The majority of those assets and liabilities are measured using Level 2 measurement methods. The following is a description of the techniques used to measure all assets and liabilities using Level 2 techniques at fair value as of March 31, 2026, and December 31, 2025:

● Government-sponsored agency debt securities are primarily priced using available market information through processes such as benchmark spreads, market valuations of like securities, like securities groupings and matrix pricing.

● Other government-sponsored agency securities, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”), and some of the actively traded real estate mortgage investment conduits and collateralized mortgage obligations are priced using available market information including benchmark yields, prepayment speeds, spreads, volatility of similar securities and trade date.

● State and political subdivisions are largely grouped by characteristics (e.g., geographical data and source of revenue in trade dissemination systems). Because some securities are not traded daily and due to other grouping limitations, active market quotes are often obtained using benchmarking for like securities. For securities where quoted prices or market prices are not available, fair value is calculated using discounted cash flows or other market indicators (level 3).

● Asset-backed collateralized loan obligations (“CLO”), and asset-backed securities (“ABS”) were priced using data from a pricing matrix supported by our bond accounting service provider and are therefore considered Level 2 valuations. For securities where quoted prices or market prices are not available, fair value is calculated using discounted cash flows or other market indicators (level 3).

● Residential mortgage loans available for sale in the secondary market are carried at fair market value. The fair value of loans held-for-sale is determined using quoted secondary market prices for similar loans.

● Mortgage banking derivatives, e.g., residential mortgage loans with locked interest rates to be sold in the secondary market and forward commitments for the future delivery of mortgage loans to third party investors, as well as forward commitments for future delivery of MBS, are considered derivatives. Fair values are estimated based on observable changes in mortgage interest rates including prices for MBS from the date of the commitment and do not typically involve significant judgments by management.

● The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income to derive the resultant value. The Company is able to compare the valuation model inputs, such as the discount rate, prepayment speeds, weighted average delinquency and foreclosure/bankruptcy rates to widely available published industry data for reasonableness.

● Interest rate swap positions, both assets and liabilities, are based on valuation pricing models using an income approach reflecting readily observable market parameters such as interest rate yield curves.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis :

The tables below present the balance of assets and liabilities at March 31, 2026 and December 31, 2025, respectively, measured by the Company at fair value on a recurring basis:


	March 31, 2026
	Level 1		Level 2		Level 3		Total
Assets:
Securities available-for-sale
U.S. Treasury	$	164,986	$	-	$	-	$	164,986
U.S. government agencies		-		68,625		-		68,625
U.S. government agencies mortgage-backed		-		85,210		-		85,210
States and political subdivisions		-		196,420		6,924		203,344
Collateralized mortgage obligations		-		363,331				363,331
Asset-backed securities		-		39,435		5,070		44,505
Collateralized loan obligations		-		184,711		-		184,711
Equity securities		-		731		-		731
Loans held-for-sale		-		4,344		-		4,344
Mortgage servicing rights		-		-		9,579		9,579
Interest rate derivatives 1		-		4,000		-		4,000
Mortgage banking derivatives		-		117		-		117
Total	$	164,986	$	946,924	$	21,573	$	1,133,483

Liabilities:
Interest rate swap agreements, including risk participation agreements	$	-	$	821	$	-	$	821
Total	$	-	$	821	$	-	$	821

1 Interest rate derivatives include interest rate swaps, a rate cap and risk participation agreements.


	December 31, 2025
	Level 1		Level 2		Level 3		Total
Assets:
Securities available-for-sale
U.S. Treasury	$	165,860	$	-	$	-	$	165,860
U.S. government agencies		-		29,176		-		29,176
U.S. government agencies mortgage-backed		-		88,780		-		88,780
States and political subdivisions		-		199,428		6,947		206,375
Collateralized mortgage obligations		-		359,305		-		359,305
Asset-backed securities		-		40,966		4,850		45,816
Collateralized loan obligations		-		194,464		-		194,464
Equity securities		-		747		-		747
Loans held-for-sale		-		3,645		-		3,645
Mortgage servicing rights		-		-		9,459		9,459
Interest rate derivatives 1		-		4,321		-		4,321
Mortgage banking derivatives		-		31		-		31
Total	$	165,860	$	920,863	$	21,256	$	1,107,979

Liabilities:
Interest rate swap agreements, including risk participation agreements	$	-	$	1,157	$	-	$	1,157
Total	$	-	$	1,157	$	-	$	1,157

1 Interest rate derivatives include interest rate swaps, a rate cap and risk participation agreements.

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The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are as follows:


		Three Months Ended March 31, 2026
	Securities available-for-sale
			States and		Mortgage
	Asset-backed		Political		Servicing
	Securities		Subdivisions		Rights
Beginning balance January 1, 2026	$	4,850	$	6,947	$	9,459
Transfers out of Level 3		-		-		-
Total gains or losses
Included in earnings		-		-		2
Included in other comprehensive income		7		( 23 )		-
Purchases, issuances, sales, and settlements
Purchases		474		-		-
Issuances		-		-		272
Settlements		( 261 )		-		( 154 )
Ending balance March 31, 2026	$	5,070	$	6,924	$	9,579


		Three Months Ended March 31, 2025
		Securities available-for-sale
			States and		Mortgage
	Asset-backed		Political		Servicing
	Securities		Subdivisions		Rights
Beginning balance January 1, 2025	$	3,254	$	11,896	$	10,374
Transfers out of Level 3		-		-		-
Total gains or losses
Included in earnings		-		-		( 488 )
Included in other comprehensive income		( 36 )		( 466 )		-
Purchases, issuances, sales, and settlements
Purchases		461		-		-
Issuances		-		-		134
Settlements		( 96 )		( 42 )		( 82 )
Ending balance March 31, 2025	$	3,583	$	11,388	$	9,938

The following table and commentary present quantitative and qualitative information about Level 3 fair value measurements as of March 31, 2026:


						Weighted
Measured at fair value				Significant Unobservable		Average
on a recurring basis:	Fair Value		Valuation Methodology	Inputs	Range of Input	of Inputs

States and political subdivisions	$	6,924	Discounted Cash Flow	Discount Rate	3.7 - 3.7 %	3.7	%
				Liquidity Premium	0.5 - 0.5 %	0.5	%

Asset-backed securities	$	5,070	Discounted Cash Flow	Discount Rate	5.3 - 5.3 %	5.3	%

Mortgage servicing rights	$	9,579	Discounted Cash Flow	Discount Rate	9.0 - 9.0 %	9.0	%
				Prepayment Speed	2.5 - 30.7 %	7.7	%

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The following table and commentary present quantitative and qualitative information about Level 3 fair value measurements as December 31, 2025:


						Weighted
Measured at fair value				Significant Unobservable		Average
on a recurring basis:	Fair Value		Valuation Methodology	Inputs	Range of Input	of Inputs

States and political subdivisions	$	6,947	Discounted Cash Flow	Discount Rate	3.5 - 3.6 %	3.5	%
				Liquidity Premium	0.5 - 0.5 %	0.5	%

Asset-backed securities	$	4,850	Discounted Cash Flow	Discount Rate	4.9 - 4.9 %	4.9	%

Mortgage servicing rights	$	9,459	Discounted Cash Flow	Discount Rate	9.0 - 9.0 %	9.0	%
				Prepayment Speed	0.0 - 33.2 %	8.2	%

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis:

The Company may be required, from time to time, to measure certain other assets at fair value on a nonrecurring basis in accordance with GAAP. These assets consist of individually evaluated loans and OREO. The following is a description of the techniques used to measure these assets using Level 3 techniques at fair value as of March 31, 2026, and December 31, 2025:

● The fair value of individually evaluated loans with specific allocations of the allowance for credit losses is essentially based on recent real estate appraisals or the fair value of the collateralized asset. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are made in the appraisal process by the appraisers to reflect differences between the available comparable sales and income data. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

● Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (“OREO”) are measured at fair value, less costs to sell. Fair values are based on third party appraisals of the property, resulting in a Level 3 classification, or an executed pending sales contract. In cases where the carrying amount exceeds the fair value, less costs to sell, a valuation loss is recognized.

For assets measured at fair value on a nonrecurring basis at March 31, 2026 and December 31, 2025, respectively, the following tables provide the level of valuation assumptions used to determine each valuation and the carrying value of the related assets:


	March 31, 2026
	Level 1		Level 2		Level 3		Total
Individually evaluated loans 1	$	-	$	-	$	53,473	$	53,473
Other real estate owned, net 2		-		-		632		632
Total	$	-	$	-	$	54,105	$	54,105

1 Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans, which had a carrying amount of $ 64.7 million and a valuation allowance of $ 11.2 million, resulting in an increase of specific allocations within the allowance for credit losses on loans of $ 4.8 million for the three months ended March 31, 2026.

2 OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $ 632,000 at March 31, 2026, which is the outstanding balance of $ 632,000 . There was no valuation allowance at March 31, 2026.

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	December 31, 2025
	Level 1		Level 2		Level 3		Total
Individually evaluated loans 1	$	-	$	-	$	34,430	$	34,430
Other real estate owned, net 2		-		-		1,427		1,427
Total	$	-	$	-	$	35,857	$	35,857

1 Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of

collateral for collateral-dependent loans and to a lesser extent the discounted cash flow, which had a carrying amount of $ 40.9 million and a valuation allowance of $ 6.4 million, resulting in a decrease of specific allocations within the allowance for credit losses on loans of $ 747,000 for the year December 31, 2025.

2 OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $ 1.4 million at December 31, 2025, which is made up of the outstanding balance of $ 2.1 million, net of a valuation allowance of $ 632,000 .

The Company has estimated the fair values of these assets based primarily on Level 3 inputs. OREO and individually evaluated loans are generally valued using the fair value of collateral provided by third party appraisals. These valuations include assumptions related to cash flow projections, discount rates, and recent comparable sales. The numerical ranges of unobservable inputs for these valuation assumptions are not meaningful.

Note 13 – Fair Values of Financial Instruments

The carrying amount and estimated fair values of financial instruments were as follows:


	March 31, 2026
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	48,100	$	48,100	$	48,100	$	-	$	-
Interest earning deposits with financial institutions		67,627		67,627		67,627		-		-
Securities available-for-sale		1,115,443		1,115,443		164,986		938,463		11,994
FHLBC and FRBC stock		31,350		31,350		-		31,350		-
Loans held-for-sale		4,344		4,344		-		4,344		-
Net loans		5,113,111		5,072,088		-		-		5,072,088
Mortgage servicing rights		9,579		9,579		-		-		9,579
Interest rate swap and rate cap agreements		3,975		3,975		-		3,975		-
Interest rate lock commitments and forward contracts		117		117		-		117		-
Interest receivable on securities and loans		29,562		29,562		-		29,562		-

Financial liabilities:
Noninterest bearing deposits	$	1,755,548	$	1,755,548	$	1,755,548	$	-	$	-
Interest bearing deposits		3,809,451		3,801,984		-		3,801,984		-
Securities sold under repurchase agreements		23,130		23,130		-		23,130		-
Other short-term borrowings		200,000		200,000		-		200,000		-
Junior subordinated debentures		25,774		21,907		-		21,907		-
Subordinated debentures		59,574		57,774		-		57,774		-
Note payable and other borrowings		14,837		14,982		-		14,982		-
Interest rate swap and rate cap agreements		808		808		-		808		-
Interest payable on deposits and borrowings		5,184		5,184		-		5,184		-

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	December 31, 2025
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	51,665	$	51,665	$	51,665	$	-	$	-
Interest earning deposits with financial institutions		72,360		72,360		72,360		-		-
Securities available-for-sale		1,090,523		1,090,523		165,860		912,866		11,797
FHLBC and FRBC stock		32,025		32,025		-		32,025		-
Loans held-for-sale		3,645		3,645		-		3,645		-
Net loans		5,179,830		5,032,472		-		-		5,032,472
Mortgage servicing rights		9,459		9,459		-		-		9,459
Interest rate swap and rate cap agreements		4,298		4,298		-		4,298		-
Interest rate lock commitments and forward contracts		31		31		-		31		-
Interest receivable on securities and loans		30,344		30,344		-		30,344		-

Financial liabilities:
Noninterest bearing deposits	$	1,739,117	$	1,739,117	$	1,739,117	$	-	$	-
Interest bearing deposits		3,856,952		3,850,530		-		3,850,530		-
Securities sold under repurchase agreements		23,769		23,769		-		23,769		-
Other short-term borrowings		215,000		215,000		-		215,000		-
Junior subordinated debentures		25,774		21,522		-		21,522		-
Subordinated debentures		59,552		57,973		-		57,973		-
Note payable and other borrowings		14,825		15,049		-		15,049		-
Interest rate swap and rate cap agreements		1,143		1,143		-		1,143		-
Interest payable on deposits and borrowings		5,451		5,451		-		5,451		-

Note 14 – Derivatives, Hedging Activities and Financial Instruments with Off-Balance Sheet Risk

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loan portfolio.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. The aggregate fair value of the swaps is recorded in other assets or other liabilities with changes in fair value recorded in other comprehensive income, net of tax. The amount included in other comprehensive income would be reclassified to current earnings should all or a portion of the hedge no longer be considered effective. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest income or interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income or expense as interest payments are received on the variable rate loan pools or paid on the Company’s fixed-rate borrowings.

There are no interest rate swaps as of March 31, 2026 and December 31, 2025, designated as cash flow hedges of certain variable rate commercial and commercial real estate loan pools. All of the interest rate swap cash flow hedges on loans held in the first quarter of 2025 matured during the third quarter of 2025.

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An interest rate swap with a notional amount of $ 25.8 million as of March 31, 2026 and December 31, 2025, is designated as a cash flow hedge of junior subordinated debentures and was executed to pay fixed and receive variable rate cash flows. The hedge was determined to be effective during all periods presented and the Company expects the hedge to remain effective during the remaining terms of the swap.

During the next twelve months, the Company estimates that an additional $ 285,000 will be reclassified as an increase to interest expense.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps and rate cap agreements with commercial banking customers to facilitate their respective risk management strategies. The notional amounts of interest rate swaps with its loan customers as of March 31, 2026 and December 31, 2025 were $ 123.3 million and $ 125.8 million, respectively. Those interest rate swaps and rate cap agreements are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

At March 31, 2026, the Company had $ 290,000 of cash collateral pledged with one correspondent financial institution and held $ 3.7 million of cash pledged from one correspondent financial institution to support the interest rate swap activity during 2026. At December 31, 2025, the Company had $ 660,000 of cash collateral pledged with one correspondent financial institution and held $ 3.5 million of cash pledged from one correspondent financial institution to support the interest rate swap activity during 2025. No investment securities were required to be pledged to any correspondent financial institution during the first three months of 2026 or during 2025. The Company offsets derivative assets and liabilities that are subject to a master netting arrangement.

The Company also grants mortgage loan interest rate lock commitments to borrowers, subject to normal loan underwriting standards. The interest rate risk associated with these loan interest rate lock commitments is managed with contracts for future deliveries of loans as well as selling forward mortgage-backed securities contracts. Loan interest rate lock commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The notional amount of these commitments at March 31, 2026 and December 31, 2025 was $ 29.2 million and $ 14.8 million, respectively. Commitments to originate residential mortgage loans held-for-sale and forward commitments to sell residential mortgage loans or forward MBS contracts are considered derivative instruments and changes in the fair value are recorded to mortgage banking revenue. Fair values are estimated based on observable changes in mortgage interest rates including mortgage-backed securities prices from the date of the commitment.

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The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025:

Fair Value of Derivative Instruments


			March 31, 2026
	No. of Trans.	Notional Amount $	Balance Sheet Location	Fair Value $	Balance Sheet Location	Fair Value $
Derivatives designated as hedging instruments
Interest rate swap agreements	1	25,774	Other Assets	3,167	Other Liabilities	-
Total derivatives designated as hedging instruments				3,167		-

Derivatives not designated as hedging instruments
Interest rate swaps with commercial loan customers	11	123,253	Other Assets	808	Other Liabilities	808
Interest rate lock commitments and forward contracts	66	29,220	Other Assets	117	Other Liabilities	-
Other contracts	5	62,945	Other Assets	25	Other Liabilities	13
Total derivatives not designated as hedging instruments				950		821



			December 31, 2025
	No. of Trans.	Notional Amount $	Balance Sheet Location	Fair Value $	Balance Sheet Location	Fair Value $
Derivatives designated as hedging instruments
Interest rate swap agreements	1	25,774	Other Assets	3,155	Other Liabilities	-
Total derivatives designated as hedging instruments				3,155		-

Derivatives not designated as hedging instruments
Interest rate swaps with commercial loan customers and rate cap	12	125,808	Other Assets	1,143	Other Liabilities	1,143
Interest rate lock commitments and forward contracts	40	14,790	Other Assets	31	Other Liabilities	-
Other contracts	5	63,080	Other Assets	23	Other Liabilities	14
Total derivatives not designated as hedging instruments				1,197		1,157

Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting

The fair value and cash flow hedge accounting related to derivatives covered under ASC Subtopic 815-20 impacted Accumulated Other Comprehensive Income (“AOCI”) and the Income Statement. The gain recognized in AOCI on derivatives designated as hedging instruments totaled $ 2.3 million as of March 31, 2026 and $ 1.6 million as of March 31, 2025. The amount of the gain reclassified from AOCI to net interest income on the Income Statement was $ 71,000 for the three months ended March 31, 2026, and the amount of the loss reclassified from AOCI was $ 579,000 for the three months ended March 31, 2025.

Credit-risk-related Contingent Features

For derivative transactions involving counterparties who are lending customers of the Company, the derivative credit exposure is managed through the normal credit review and monitoring process, which may include collateralization, financial covenants and/or financial guarantees of affiliated parties. Agreements with such customers require that losses associated with derivative transactions receive payment priority from any funds recovered should a customer default and ultimate disposition of collateral or guarantees occur.

Credit exposure to broker/dealer counterparties is managed through agreements with each derivative counterparty that require collateralization of fair value gains owed by such counterparties. Some small degree of credit exposure exists due to timing differences between when a gain may occur and the subsequent point in time that collateral is delivered to secure that gain. This is monitored by the Company and procedures are in place to minimize this exposure. Such agreements also require the Company to collateralize counterparties in circumstances wherein the fair value of the derivatives results in loss to the Company.

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Other provisions of such agreements include the definition of certain events that may lead to the declaration of default and/or the early termination of the derivative transaction(s):

● If the Company either defaults or is capable of being declared in default on any of its indebtedness (exclusive of deposit obligations), then the Company could also be declared in default on its derivative obligations.

● If a merger occurs that materially changes the Company's creditworthiness in an adverse manner.

● If certain specified adverse regulatory actions occur, such as the issuance of a Cease and Desist Order, or citations for actions considered Unsafe and Unsound or that may lead to the termination of deposit insurance coverage by the FDIC.

The Bank also issues letters of credit, which are conditional commitments that guarantee the performance of a customer to a third party. The credit risk involved and collateral obtained in issuing letters of credit are essentially the same as that involved in extending loan commitments to our customers. In addition to customer-related commitments, the Company is responsible for letters of credit commitments that relate to properties held in OREO. The following table represents the Company’s contractual commitments due to letters of credit as of March 31, 2026 and December 31, 2025.

The following table is a summary of letter of credit commitments:


	March 31, 2026						December 31, 2025
	Fixed		Variable		Total		Fixed		Variable		Total
Letters of credit:
Borrower:
Financial standby	$	55	$	29,114	$	29,169	$	118	$	26,769	$	26,887
Performance standby		565		6,353		6,918		512		8,666		9,178
		620		35,467		36,087		630		35,435		36,065
Non-borrower:
Performance standby		-		-		-		-		-		-
Total letters of credit	$	620	$	35,467	$	36,087	$	630	$	35,435	$	36,065

Unused loan commitments	$	174,456	$	579,377	$	753,833	$	174,479	$	592,658	$	767,137

As of March 31, 2026, the Company evaluated current market conditions, including any impacts related to market interest rate changes and unused line of credit utilization trends during the first quarter of 2026, and based on that analysis under the CECL methodology, the Company determined credit losses related to unfunded commitments totaled $ 2.0 million. The resultant decrease in the ACL for unfunded commitments of $ 101,000 for the first three months of 2026 from $ 2.1 million as of December 31, 2025 was primarily driven by adjustments to historical benchmark assumptions, such as the funding rates and the period used to forecast those rates within the ACL calculation. The Company will continue to assess the credit risk at least quarterly, and adjust the allowance for unfunded commitments, which is carried within other liabilities on our Consolidated Balance Sheets, as needed, with the appropriate offsetting entry to the provision for credit losses on our Consolidated Statements of Income.

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Note 15 – Segment Information

Various identifiable operating segments provide a variety of revenue streams including loans, deposits, and wealth management services. The Company’s Chief Operating Decision Maker (CODM) is the Chief Financial Officer.

Through our wholly-owned subsidiary, the Bank, we offer a wide variety of community banking services primarily throughout the Chicagoland area, including commercial and consumer lending and deposit services, and a wide array of wealth management services. The accounting policies for the services discussed here are the same as those described in Note 1: Summary of Significant Accounting Policies. We earn interest income on portfolio loans, fee income on loan originations and commitments, fees charged on certain deposit accounts, as well as fees related to wealth management services.

Although information is available on each of the individual revenue streams, the CODM manages, allocates resources, and evaluates performance on a company-wide basis. The CODM uses consolidated net income to evaluate the financial performance of the Company’s business along with budget to actual results in assessing the Company’s performance and in determining the allocation of resources whether it be to reinvest in the Company or deploy capital in order to maximize shareholder value. The CODM uses consolidated net income and return on average assets to benchmark the Company against competitors as well as against prior periods.

On a regular basis the CODM is provided consolidated income and expense, assets, liabilities, and equity, in the same manner that is presented publicly on the Consolidated Statements of Income and Consolidated Balance Sheets, to assess performance and allocate resources throughout the Company. Further, additional internal financial information is provided to the CODM in order to assess credit quality in each of our lending segments. Accordingly, the Company has determined that it has only one reportable segment, Community Banking.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation s

Overview

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.

In this report, unless the context suggests otherwise, references to the “Company,” “we,” “us,” and “our” mean the combined business of Old Second Bancorp, Inc. and its subsidiary bank, Old Second National Bank (the “Bank”).

We have made, and will continue to make, various forward-looking statements with respect to financial and business matters. Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, see the “ Cautionary Note Regarding Forward-Looking Statements ” on page 3 of this report.

Business Overview

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.

On July 1, 2025, we completed our previously announced acquisition of Bancorp Financial, Inc. (“Bancorp Financial”), pursuant to the agreement and plan of merger dated February 24, 2025. At the effective time of the acquisition, Bancorp Financial merged with and into the Company, with the Company continuing as the surviving corporation. Immediately following the merger, Evergreen Bank Group (“Evergreen”), an Illinois-chartered banking corporation and wholly-owned subsidiary of Bancorp Financial, merged with and into Old Second National Bank, with the Bank continuing as the surviving bank. Under the terms of the merger agreement, each share of Bancorp Financial common stock outstanding immediately prior to the effective time was converted into the right to receive 2.5814 shares of Old Second common stock and $15.93 in cash, without interest, with cash paid in lieu of any fractional shares.

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.

Our results of operations depend generally on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearing liabilities. Our results of operations are also affected by noninterest income, such as service charges, wealth management fees, loan fees, gains from the sale of newly originated loans, gains or losses on investments and certain other noninterest related items. Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, professional fees, data processing expenses and provision for credit losses.

We are significantly impacted by prevailing economic conditions, including federal monetary and fiscal policies, and federal regulations of financial institutions. Deposit balances are influenced by numerous factors such as competing investments, the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include the demand for housing and the interest rate pricing competition from other lending institutions.

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As of March 31, 2026, all of our capital ratios were in excess of all regulatory requirements. While we believe that we have sufficient capital to withstand an extended economic recession, our reported and regulatory capital ratios could be adversely impacted by credit losses.

Financial Overview

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.

See the discussion entitled “Non-GAAP Financial Measures” on page 45, as well as the table below, which provides a reconciliation of this non-GAAP measure to the most comparable GAAP equivalents:


Net Income and Earnings Per Share - GAAP and Adjusted	Three Months Ended
	March 31,			December 31,			March 31,
	2026			2025			2025

Income before income taxes (GAAP)	$	34,064		$	39,270		$	26,200
Pre-tax income adjustments:
Securities gains, net		-			(8)			-
MSR losses		152			428			570
Acquisition related costs, net of (gains) losses on branch sales		349			2,296			454
Adjusted net income before taxes		34,565			41,986			27,224
Taxes on adjusted net income		8,604			11,208			6,619
Adjusted net income (non-GAAP)	$	25,961		$	30,778		$	20,605

Basic earnings per share (GAAP)	$	0.49		$	0.55		$	0.44
Diluted earnings per share (GAAP)		0.48			0.54			0.43
Adjusted basic earnings per share (non-GAAP)		0.49			0.59			0.46
Adjusted diluted earnings per share (non-GAAP)		0.49			0.58			0.45

Total average assets		6,859,164			6,960,177			5,673,092

Return on average assets (GAAP)		1.51	%		1.64	%		1.42	%
Adjusted return on average assets (non-GAAP)		1.53			1.75			1.47

The following provides an overview of some of the factors impacting our financial performance for the three-month period ended March 31, 2026, compared to the like period ended March 31, 2025:

● Net interest and dividend income was $81.1 million for the first quarter of 2026, compared to $62.9 million for the first quarter of 2025. The increase in net interest and dividend income in the first quarter of 2026 was primarily driven by the acquisition of Bancorp Financial.

● We recorded a net provision for credit losses on loans and leases of $9.5 million in the first quarter of 2026, driven by quarterly net charge-offs of $9.8 million. Partially offsetting this expense, we recorded a reversal of $101,000 in our allowance for unfunded commitments in the first quarter of 2026 based on an adjustment of historical benchmark assumptions, such as funding rates and the period used to forecast those rates, within the ACL calculation. We recorded a net provision for credit losses of $2.4 million in the first quarter of 2025.

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● Noninterest income was $12.6 million for the first quarter of 2026, compared to $10.2 million for the first quarter of 2025, which is an increase of $2.4 million, or 23.8%. Contributing to the higher noninterest income was a $714,000 increase in other income as a result of powersport and other consumer fee income. Also contributing to the growth in noninterest income during the quarter, compared to the prior year like quarter, were increases in wealth management, residential mortgage banking revenue due to a decrease in MSR mark to market losses, and an increase in the cash surrender value of BOLI as a result of an increase in the market value of our insurance policies due primarily to more favorable market interest rates.

● Noninterest expense was $50.2 million for the first quarter of 2026, compared to $44.5 million for the first quarter of 2025, an increase of $5.7 million, or 12.8%. The increase in noninterest expense in the first quarter of 2026, compared to the prior year like quarter, was primarily due to the Bancorp Financial acquisition and the corresponding growth in employees and operations, which resulted in higher salaries and employee benefits, and increases in occupancy, furniture and equipment, computer and data processing, consumer credit expense, and other expense.

● We had a provision for income tax expense of $8.5 million for the first quarter of 2026, compared to a provision for income tax expense of $6.4 million for the first quarter of 2025. The effective tax rate for these two periods was 24.9% and 24.3%, respectively.

● As of March 31, 2026, total loans decreased by $66.9 million compared to the year ended December 31, 2025, and increased $1.25 billion compared to March 31, 2025. The increase from the prior year like period is primarily driven by the $1.20 billion of loans acquired in our acquisition of Bancorp Financial.

● Nonaccrual loans totaled $62.6 million as of March 31, 2026, which is an increase of $14.7 million compared to December 31, 2025, and an increase of $29.2 million compared to March 31, 2025. The increase in nonaccrual loans as of March 31, 2026, compared to December 31, 2025, was primarily due to inflows of $19.7 million on 37 loans, consisting primarily of ten commercial loans totaling $17.3 million. The inflows are partially offset by $3.1 million of paid off nonaccrual loans, and $1.7 million of reduction of principal from payments and partial charge offs. The increase in nonaccrual loans year over year is partially due to the growth in the loan portfolio due to the Bancorp Financial acquisition, as well as two larger credits which were moved to nonperforming status with partial charge-offs taken in the first quarter of 2026. Nonperforming loans as a percent of total loans was 1.5% as of March 31, 2026, compared to 1.0% as of December 31, 2025, and 0.9% as of March 31, 2025. Classified assets decreased to $150.1 million as of March 31, 2026, reflecting a decrease of $2.8 million, or 1.8%, from December 31, 2025, and an increase of $61.7 million, or 69.7%, from March 31, 2025.

Critical Accounting Estimates

Our consolidated financial statements are prepared based on the application of accounting policies in accordance with generally accepted accounting principles (“GAAP”) and follow general practices within the banking industry. These policies require reliance on estimates and assumptions which may prove inaccurate or are subject to variations. These estimates, assumptions, and judgments are based on information available as of the date of the consolidated financial statements. Future changes in information may affect these estimates, assumptions, and judgments, which, in turn, may affect amounts reported in the consolidated financial statements. Changes in underlying factors, assumptions, or estimates could have a material impact on our future financial condition and results of operations.

Of the significant accounting policies used in the preparation of our consolidated financial statements, we have identified certain items as critical accounting policies based on the associated estimates, assumptions, judgments and complexity. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates ” in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies or the estimates made pursuant to those policies during the most recent quarter from those disclosed in our 2025 Annual Report Form 10-K.

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Non-GAAP Financial Measures

This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the presentation of net interest income and net interest margin on a tax equivalent (“TE”) basis, adjusted net income, adjusted basic and diluted earnings per share, and our adjusted efficiency ratio. Management believes that the presentation of these non-GAAP financial measures (a) provides important supplemental information that contributes to a proper understanding of our operating performance, (b) enables a more complete understanding of factors and trends affecting our business, and (c) allows investors to evaluate our performance in a manner similar to management, the financial services industry, bank stock analysts, and bank regulators. Management uses non-GAAP measures as follows: in the preparation of our operating budgets, monthly financial performance reporting, and in our presentation of our performance to investors. However, we acknowledge that these non-GAAP financial measures have a number of limitations. Limitations associated with non-GAAP financial measures include the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently. These measures should not be considered an alternative to our GAAP results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is presented below or alongside the first instance where each non-GAAP financial measure is used.

Results of Operations

Overview

Three months ended March 31, 2026 and 2025

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.

Net Interest Income

Net interest income, which is our primary source of earnings, is the difference between income earned on interest-earning assets, such as loans and investment securities, accretion income on purchased loans, dividend income earned on certain equity investments, and expense incurred on interest-bearing liabilities, such as deposits and borrowings. Net interest income depends upon the relative mix of interest-earning assets and interest-bearing liabilities, the ratio of interest-earning assets to total assets and of interest-bearing liabilities to total funding sources, and movements in market interest rates. Our net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions, credit risk, the amount of nonearning assets including nonperforming loans and OREO, the amounts of and rates at which assets and liabilities reprice, variances in prepayment of loans and securities, early withdrawal of deposits, exercise of call options on borrowings or securities, a general rise or decline in interest rates, changes in the slope of the yield-curve, and balance sheet growth or contraction.

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Three months ended March 31, 2026 and 2025

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.

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.

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.

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.

Three months ended March 31, 2026 and December 31, 2025

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.

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.

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.

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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.


Analysis of Average Balances,
Tax Equivalent Income / Expense and Rates
(unaudited)

	Quarters Ended
	March 31, 2026						December 31, 2025						March 31, 2025
	Average			Income /		Rate	Average			Income /		Rate	Average			Income /		Rate
	Balance			Expense		%	Balance			Expense		%	Balance			Expense		%
Assets
Interest earning deposits with financial institutions	$	67,571		$	549	3.30	$	66,430		$	598	3.57	$	97,645		$	988	4.10
Securities:
Taxable		969,194			8,949	3.74		979,060			9,136	3.70		1,026,233			9,227	3.65
Non-taxable (TE) 1		146,299			1,462	4.05		150,573			1,543	4.07		155,024			1,595	4.17
Total securities(TE) 1		1,115,493			10,411	3.79		1,129,633			10,679	3.75		1,181,257			10,822	3.72
Dividends from FHLBC and FRBC		31,540			512	6.58		30,085			390	5.14		19,441			473	9.87
Loans and loans held-for-sale 1,2		5,207,744			87,194	6.79		5,278,643			90,969	6.84		3,959,073			61,626	6.31
Total interest earning assets		6,422,348			98,666	6.23		6,504,791			102,636	6.26		5,257,416			73,909	5.70
Cash and due from banks		48,252			-	-		52,040			-	-		52,550			-	-
Allowance for credit losses on loans		(71,869)			-	-		(73,718)			-	-		(43,543)			-	-
Other noninterest bearing assets		460,433			-	-		477,064			-	-		406,669			-	-
Total assets	$	6,859,164					$	6,960,177					$	5,673,092

Liabilities and Stockholders' Equity
NOW accounts	$	697,692		$	823	0.48	$	682,729		$	816	0.47	$	628,336		$	629	0.41
Money market accounts		946,075			4,148	1.78		958,672			4,561	1.89		801,178			3,393	1.72
Savings accounts		1,118,979			2,176	0.79		1,123,208			2,529	0.89		940,894			891	0.38
Time deposits		1,062,623			7,217	2.75		1,179,966			8,665	2.91		725,314			4,829	2.70
Interest bearing deposits		3,825,369			14,364	1.52		3,944,575			16,571	1.67		3,095,722			9,742	1.28
Securities sold under repurchase agreements		24,795			50	0.82		23,464			45	0.76		34,529			68	0.80
Other short-term borrowings		189,056			1,791	3.84		159,565			1,644	4.09		1,444			17	4.77
Junior subordinated debentures		25,774			296	4.66		25,774			288	4.43		25,773			288	4.53
Subordinated debt		59,564			546	3.72		59,542			546	3.64		59,478			546	3.72
Notes payable and other borrowings		14,831			155	4.24		14,819			158	4.23		-			-	-
Total interest bearing liabilities		4,139,389			17,202	1.69		4,227,739			19,252	1.81		3,216,946			10,661	1.34
Noninterest bearing deposits		1,738,504			-	-		1,781,374			-	-		1,703,382			-	-
Other liabilities		73,284			-	-		67,078			-	-		69,186			-	-
Stockholders' equity		907,987			-	-		883,986			-	-		683,578			-	-
Total liabilities and stockholders' equity	$	6,859,164					$	6,960,177					$	5,673,092
Net interest income (GAAP)				$	81,144					$	83,051					$	62,904
Net interest margin (GAAP)						5.12						5.07						4.85

Net interest income (TE) 1				$	81,464					$	83,384					$	63,248
Net interest margin (TE) 1						5.14						5.09						4.88
Interest bearing liabilities to earning assets		64.45	%					64.99	%					61.19	%

1 Represents 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.

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.

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Reconciliation of Tax-Equivalent (TE) Non-GAAP Financial Measures

Net interest and dividend income (TE) and net interest income (TE) to average interest earning assets are non-GAAP measures that have been adjusted on a TE basis using a marginal rate of 21% for 2026 and 2025 to compare returns more appropriately on tax-exempt loans and securities to other earning assets. The table below provides a reconciliation of each non-GAAP (TE) measure to the GAAP equivalent for the periods indicated:


	Three Months Ended
	March 31,			December 31,			March 31,
Net Interest Margin	2026			2025			2025


Interest income (GAAP)	$	98,346		$	102,303		$	73,565
Taxable-equivalent adjustment:
Loans		13			9			9
Securities		307			324			335
Interest and dividend income (TE)		98,666			102,636			73,909
Interest expense (GAAP)		17,202			19,252			10,661
Net interest income (TE)	$	81,464		$	83,384		$	63,248
Net interest income (GAAP)	$	81,144		$	83,051		$	62,904
Average interest earning assets	$	6,422,348		$	6,504,791		$	5,257,416
Net interest margin (GAAP)		5.12	%		5.07	%		4.85	%
Net interest margin (TE)		5.14	%		5.09	%		4.88	%

Noninterest Income

Three months ended March 31, 2026 and 2025

The following table details the major components of noninterest income for the periods presented:


							March 31, 2026
Noninterest Income	Three Months Ended						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Wealth management	$	3,383	$	3,537	$	3,089	(4.4)	9.5
Service charges on deposits		3,126		3,125		2,976	0.0	5.0
Residential mortgage banking revenue
Secondary mortgage fees		121		123		73	(1.6)	65.8
MSRs mark to market loss		(152)		(428)		(570)	64.5	(73.3)
Mortgage servicing income		497		444		480	11.9	3.5
Net gain on sales of mortgage loans		555		657		464	(15.5)	19.6
Total residential mortgage banking revenue		1,021		796		447	28.3	128.4
Securities gains, net		-		8		-	N/M	N/M
Change in cash surrender value of BOLI		1,082		834		498	29.7	117.3
Card related income		2,354		2,548		2,241	(7.6)	5.0
Other income		1,664		1,306		950	27.4	75.2
Total noninterest income	$	12,630	$	12,154	$	10,201	3.9	23.8

N/M – Not meaningful.

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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.

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.

Noninterest Expense

Three months ended March 31, 2026 and 2025

The following table details the major components of noninterest expense for the periods presented:


										March 31, 2026
Noninterest Expense	Three Months Ended									Percent Change From
	March 31,			December 31,			March 31,			December 31,	March 31,
	2026			2025			2025			2025	2025
Salaries	$	21,933		$	22,426		$	18,804		(2.2)	16.6
Officers' incentive		1,652			3,035			2,799		(45.6)	(41.0)
Benefits and other		6,088			5,535			5,390		10.0	12.9
Total salaries and employee benefits		29,673			30,996			26,993		(4.3)	9.9
Occupancy, furniture and equipment expense		5,371			5,092			4,548		5.5	18.1
Computer and data processing		3,375			4,798			2,348		(29.7)	43.7
FDIC insurance		759			720			628		5.4	20.9
Net teller & bill paying		716			701			658		2.1	8.8
General bank insurance		353			354			330		(0.3)	7.0
Amortization of core deposit intangible asset		1,176			1,235			1,037		(4.8)	13.4
Advertising and marketing expense		551			437			229		26.1	140.6
Card related expense		1,519			1,652			1,380		(8.1)	10.1
Professional fees		1,299			1,265			1,095		2.7	18.6
Consumer credit expense		1,522			1,451			25		4.9	5,988.0
Other real estate owned expense, net		(186)			81			1,873		(329.6)	(109.9)
Other expense		4,082			4,153			3,361		(1.7)	21.5
Total noninterest expense	$	50,210		$	52,935		$	44,505		(5.1)	12.8
Efficiency ratio (GAAP) 1		52.40	%		53.98	%		56.46	%
Adjusted efficiency ratio (non-GAAP) 2		51.70	%		51.28	%		55.48	%

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

2 The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits, OREO expenses, acquisition expense, net of gains or losses on branch sales, as applicable, divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains or losses on securities, death benefit realized on BOLI, as applicable, mark to market gains or losses on MSRs, and includes a tax equivalent adjustment on the change in cash surrender value of BOLI. See the discussion entitled “Non-GAAP Financial Measures” above and the table on page 50 that provides a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent.

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Noninterest expense for the first quarter of 2026 decreased $2.7 million, or 5.1%, compared to the fourth quarter of 2025, and increased $5.7 million, or 12.8%, compared to the first quarter of 2025. The decrease in the first quarter of 2026, compared to the fourth quarter of 2025, was driven by a $1.3 million decrease in salaries and employee benefits with decreases reflected primarily in salaries, officer incentive accruals, and insurance premiums. Other decreases include a $1.4 million decrease in computer and data processing expenses due to the timing of costs incurred related to the core system conversion as a result of our acquisition of Bancorp Financial and a $267,000 decrease in net OREO expenses due to a $235,000 gain recorded on the transfer of one property to OREO during the first quarter of 2026.

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.

Efficiency Ratio

The efficiency ratio presented above and reconciled below measures how much it costs an institution to generate one dollar of revenue. We utilize this measure in evaluating employee performance incentives as well as in comparison against peer performance, to set and assess operational standards. The following table provides a reconciliation of the non-GAAP efficiency ratio to the most comparable GAAP equivalent.

Reconciliation of Adjusted Efficiency Ratio Non-GAAP Financial Measures


	GAAP									Non-GAAP
		Three Months Ended									Three Months Ended
	March 31,			December 31,			March 31,			March 31,			December 31,			March 31,
	2026			2025			2025			2026			2025			2025
Efficiency Ratio / Adjusted Efficiency Ratio

Noninterest expense	$	50,210		$	52,935		$	44,505		$	50,210		$	52,935		$	44,505
Less amortization of core deposit		1,176			1,235			1,037			1,176			1,235			1,037
Less other real estate expense, net		(186)			81			1,873			(186)			81			1,873
Less acquisition related costs, net of losses on branch sales		N/A			N/A			N/A			349			2,296			454
Noninterest expense less adjustments	$	49,220		$	51,619		$	41,595		$	48,871		$	49,323		$	41,141

Net interest income	$	81,144		$	83,051		$	62,904		$	81,144		$	83,051		$	62,904
Taxable-equivalent adjustment:
Loans		N/A			N/A			N/A			13			9			9
Securities		N/A			N/A			N/A			307			324			335
Net interest income including adjustments		81,144			83,051			62,904			81,464			83,384			63,248
Noninterest income		12,630			12,154			10,201			12,630			12,154			10,201
Less securities gains		-			8			-			-			8			-
Less MSRs mark to market losses		(152)			(428)			(570)			(152)			(428)			(570)
Change in cash surrender value of BOLI		N/A			N/A			N/A			288			222			132
Noninterest income including adjustments		12,782			12,574			10,771			13,070			12,796			10,903

Net interest income including adjustments plus noninterest income including adjustments	$	93,926		$	95,625		$	73,675		$	94,534		$	96,180		$	74,151
Efficiency ratio / Adjusted efficiency ratio		52.40	%		53.98	%		56.46	%		51.70	%		51.28	%		55.48	%

N/A - not applicable

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Income Taxes

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.

Income tax expense reflected all relevant statutory tax rates and GAAP accounting. There were no significant changes in our ability to utilize our deferred tax assets during the quarter ended March 31, 2026. We had no valuation reserve on the deferred tax assets as of March 31, 2026.

Financial Condition

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.


							March 31, 2026
Securities	As of						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Securities available-for-sale, at fair value
U.S. Treasuries	$	164,986	$	165,860	$	160,191	(0.5)	3.0
U.S. government agencies		68,625		29,176		38,047	135.2	80.4
U.S. government agencies mortgage-backed		85,210		88,780		98,929	(4.0)	(13.9)
States and political subdivisions		203,344		206,375		209,117	(1.5)	(2.8)
Collateralized mortgage obligations		363,331		359,305		390,891	1.1	(7.1)
Asset-backed securities		44,505		45,816		49,701	(2.9)	(10.5)
Collateralized loan obligations		184,711		194,464		199,845	(5.0)	(7.6)
Equity securities		731		747		-	(2.1)	N/M
Total securities	$	1,115,443	$	1,090,523	$	1,146,721	2.3	(2.7)

N/M – Not meaningful.

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.

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							March 31, 2026
Loans	As of						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Commercial	$	845,278	$	842,130	$	732,874	0.4	15.3
Leases		539,116		548,256		505,455	(1.7)	6.7
Commercial real estate – investor		1,169,318		1,212,384		1,105,440	(3.6)	5.8
Commercial real estate – owner occupied		702,986		706,567		669,964	(0.5)	4.9
Construction		143,563		173,630		205,839	(17.3)	(30.3)
Residential real estate – investor		69,763		70,225		50,103	(0.7)	39.2
Residential real estate – owner occupied		239,711		230,432		210,239	4.0	14.0
Multifamily		357,131		339,131		341,253	5.3	4.7
HELOC		235,637		235,293		104,575	0.1	125.3
Powersport		674,116		696,959		-	(3.3)	N/M
Other 1		208,618		197,124		14,490	5.8	N/M
Total loans	$	5,185,237	$	5,252,131	$	3,940,232	(1.3)	31.6

N/M – Not meaningful.

1 The “Other” classification includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts.

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.

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.


			Weighted
	March 31,		Average
	2026		FICO
Tier 1	$	351,101	776
Tier 2		131,894	710
Tier 3		80,937	683
Tier 4		40,382	657
Tier 5		69,802	606
Total Powersport	$	674,116	727

The following table sets forth the total of powersport by collateral type:


	March 31,		% of
	2026		Total
New	$	517,948	76.8	%
Used		156,168	23.2
Total Powersport	$	674,116	100.0	%

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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.

Asset Quality

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.


							March 31, 2026
Nonperforming Loans	As of						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Commercial	$	22,527	$	9,761	$	12,475	130.8	80.6
Leases		2,952		2,899		848	1.8	248.1
Commercial real estate – investor		16,423		11,377		1,968	44.4	734.5
Commercial real estate – owner occupied		22,268		19,743		11,297	12.8	97.1
Construction		2,086		737		4,989	183.0	(58.2)
Residential real estate – investor		669		681		769	(1.8)	(13.0)
Residential real estate – owner occupied		1,916		1,852		1,563	3.5	22.6
Multifamily		1,489		1,494		332	(0.3)	348.5
HELOC		1,603		1,222		545	31.2	194.1
Powersport		2,394		2,778		-	(13.8)	N/M
Other 1		1,177		287		5	310.1	N/M
Total nonperforming loans	$	75,504	$	52,831	$	34,791	42.9	117.0

N/M – Not meaningful.

1 The “Other” classification includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts.

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The components of our nonperforming assets are shown in the following table:


										March 31, 2026
Nonperforming Assets	As of									Percent Change From
	March 31,			December 31,			March 31,			December 31,	March 31,
	2026			2025			2025			2025	2025
Nonaccrual loans	$	62,636		$	47,952		$	33,394		30.6	87.6
Loans past due 90 days or more and still accruing interest		12,868			4,879			1,397		163.7	821.1
Total nonperforming loans		75,504			52,831			34,791		42.9	117.0
Other real estate owned		632			1,427			2,878		(55.7)	(78.0)
Repossessed assets 1		858			1,363			484		(37.1)	77.3
Total nonperforming assets	$	76,994		$	55,621		$	38,153		38.4	101.8


30-89 days past due loans and still accruing interest	$	50,036		$	52,169		$	21,951
Nonaccrual loans to total loans		1.2	%		0.9	%		0.8	%
Nonperforming loans to total loans		1.5	%		1.0	%		0.9	%
Nonperforming assets to total loans plus OREO and repossessed assets		1.5	%		1.1	%		1.0	%

Allowance for credit losses	$	72,126		$	72,301		$	41,551
Allowance for credit losses to total loans		1.4	%		1.4	%		1.1	%
Allowance for credit losses to nonaccrual loans		115.2	%		150.8	%		124.4	%

1 Repossessed assets are reported within other assets.

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:


Loan Charge–offs, Net of Recoveries	Three Months Ended
	March 31,		% of	December 31,		% of	March 31,		% of
	2026		Total 1	2025		Total 1	2025		Total 1
Commercial	$	1,298	13.3	$	(44)	(0.7)	$	3,414	78.4
Leases		197	2.0		15	0.2		93	2.1
Commercial real estate – investor		3,919	40.1		(14)	(0.2)		(14)	(0.3)
Commercial real estate – owner occupied		(5)	(0.1)		1,125	18.8		39	0.9
Construction		-	-		-	-		821	18.9
Residential real estate – investor		(2)	-		(1)	-		(2)	-
Residential real estate – owner occupied		(7)	(0.1)		(11)	(0.2)		(30)	(0.7)
Multifamily		-	-		-	-		-	-
HELOC		(6)	(0.1)		(49)	(0.8)		(12)	(0.3)
Powersport		3,894	39.9		4,466	74.7		-	-
Other 2		488	5.0		494	8.2		44	1.0
Net charge–offs (recoveries)	$	9,776	100.0	$	5,981	100.0	$	4,353	100.0

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

2 The “Other” classification includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts.

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.

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Classified loans include nonaccrual loans, accruing substandard, and doubtful loans. Classified assets include classified loans, OREO, and repossessed assets. Loans classified as substandard are inadequately protected by either the current net worth and ability to meet payment obligations of the obligor, or by the collateral pledged to secure the loan, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and carry the distinct possibility that we will sustain some loss if the deficiencies remain uncorrected. Loans classified as doubtful have all the weaknesses inherent as those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The following table shows classified assets by classification for the following periods:


							March 31, 2026
Classified Assets	As of						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Commercial	$	50,640	$	51,587	$	20,807	(1.8)	143.4
Leases		2,604		2,428		848	7.2	207.1
Commercial real estate – investor		14,959		14,245		14,299	5.0	4.6
Commercial real estate – owner occupied		60,594		64,081		26,818	(5.4)	125.9
Construction		12,983		11,421		18,201	13.7	(28.7)
Residential real estate – investor		1,012		1,142		1,283	(11.4)	(21.1)
Residential real estate – owner occupied		1,886		1,897		1,759	(0.6)	7.2
Multifamily		1,489		1,494		332	(0.3)	348.5
HELOC		1,832		1,466		686	25.0	167.1
Powersport		204		68		-	200.0	N/M
Other		369		270		10	36.7	N/M
Total classified loans		148,572		150,099		85,043	(1.0)	74.7
Other real estate owned		632		1,427		2,878	(55.7)	(78.0)
Repossessed assets 1		858		1,363		484	(37.1)	77.3
Total classified assets	$	150,062	$	152,889	$	88,405	(1.8)	69.7

N/M - Not meaningful

1 Repossessed assets are reported within other assets.

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.

Allowance for Credit Losses on Loans

The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses (“ACL”) at a level consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date.

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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.

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.

Below is a reconciliation of the activity in the allowance for credit losses on loans for the periods indicated:


		Three Months Ended
	March 31,			December 31,			March 31,
	2026			2025			2025
Allowance at beginning of period	$	72,301		$	75,037		$	43,619
Charge–offs:
Commercial		1,328			28			3,446
Leases		312			15			107
Commercial real estate – investor		3,933			-			-
Commercial real estate – owner occupied		-			1,126			47
Construction		-			-			821
Residential real estate – investor		-			-			-
Residential real estate – owner occupied		-			-			-
Multifamily		-			-			-
HELOC		2			-			-
Powersport		4,661			5,136			-
Other 1		557			551			108
Total charge–offs		10,793			6,856			4,529
Recoveries:
Commercial		30			72			32
Leases		115			-			14
Commercial real estate – investor		14			14			14
Commercial real estate – owner occupied		5			1			8
Construction		-			-			-
Residential real estate – investor		2			1			2
Residential real estate – owner occupied		7			11			30
Multifamily		-			-			-
HELOC		8			49			12
Powersport		767			670			-
Other 1		69			57			64
Total recoveries		1,017			875			176
Net charge-offs		9,776			5,981			4,353
Provision for credit losses on loans 2		9,601			3,245			2,285
Allowance at end of period	$	72,126		$	72,301		$	41,551

Average total loans (exclusive of loans held–for–sale)	$	5,205,721		$	5,275,389		$	3,957,730
Net charge–offs to average loans		0.76	%		0.45	%		0.45	%

1 The “Other” classification includes consumer loans, such as collector cars, manufactured homes, and solar loans, as well as overdrafts.

2 Amount does not include the provision for unfunded commitment liability.

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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.

In management’s judgment, an adequate ACL has been established to encompass the current lifetime expected credit losses at March 31, 2026, as well as general changes in lending policy, procedures and staffing, and other external factors. However, there can be no assurance that actual losses will not exceed the estimated amounts in the future, based on unforeseen economic events, changes in business climates and the condition of collateral at the time of default and repossession. Continued volatility in the economic environment stemming from the impacts of and response to inflation, tariffs, potential recession, and the war in Ukraine and the war in Iran, and the associated effects on our customers, or other factors, such as changes in business climates and the condition of collateral at the time of default or repossession, may revise our current expectations of future credit losses in future reporting periods.

Other Real Estate Owned

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.


							March 31, 2026
OREO	Three Months Ended						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Balance at beginning of period	$	1,427	$	6,416	$	21,617	(77.8)	(93.4)
Property additions, net of transfer adjustments		632		-		-	N/M	N/M
Less:
Proceeds from property disposals, net of participation purchase and of gains/losses		1,427		4,989		18,285	(71.4)	(92.2)
Period valuation adjustments		-		-		454	-	(100.0)
Balance at end of period	$	632	$	1,427	$	2,878	(55.7)	(78.0)

N/M – Not meaningful.

In management’s judgment, the property valuation allowance as established presents OREO at current estimates of fair value less estimated costs to sell; however, there can be no assurance that additional losses will not be incurred on disposals or upon updates to valuations in the future. These valuations are reversed when the property is sold.



OREO Properties by Type
	March 31, 2026			December 31, 2025			March 31, 2025
		Amount	% of Total		Amount	% of Total		Amount	% of Total
Single family residence	$	632	100	$	-	-	$	-	-
Commercial property		-	-		1,427	100		2,695	94
Vacant land		-	-		-	-		183	6
Total other real estate owned	$	632	100	$	1,427	100	$	2,878	100

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Deposits and Borrowings


							March 31, 2026
Deposits	As of						Percent Change From
	March 31,		December 31,		March 31,		December 31,	March 31,
	2026		2025		2025		2025	2025
Noninterest bearing demand	$	1,755,548	$	1,739,117	$	1,713,711	0.9	2.4
Savings		1,117,316		1,121,888		952,602	(0.4)	17.3
NOW accounts		701,712		693,573		652,444	1.2	7.6
Money market accounts		976,010		930,079		829,533	4.9	17.7
Certificates of deposit of less than $100,000		440,553		489,879		334,694	(10.1)	31.6
Certificates of deposit of $100,000 through $250,000		376,868		412,655		252,276	(8.7)	49.4
Certificates of deposit of more than $250,000		196,992		208,878		117,531	(5.7)	67.6
Total deposits	$	5,564,999	$	5,596,069	$	4,852,791	(0.6)	14.7

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.

The following table presents estimated insured and uninsured deposits at March 31, 2026, and December 31, 2025, by deposit type, as well as the weighted average rates for each year to date ending period.


	March 31, 2026								December 31, 2025
	Total Deposits		Insured Deposits		Uninsured Deposits		Average Rate Paid		Total Deposits		Insured Deposits		Uninsured Deposits		Average Rate Paid
Noninterest bearing demand	$	1,755,548	$	1,165,286	$	590,262	-	%	$	1,739,117	$	1,141,542	$	597,575	-	%
Savings		1,117,316		1,022,199		95,117	0.79			1,121,888		1,025,941		95,947	0.73
NOW accounts		701,712		508,484		193,228	0.48			693,573		495,397		198,176	0.45
Money market accounts		976,010		558,441		417,569	1.78			930,079		548,289		381,790	1.90
Time deposits		1,014,413		849,896		164,517	2.75			1,111,412		937,045		174,367	2.92
Total	$	5,564,999	$	4,104,306	$	1,460,693	1.05	%	$	5,596,069	$	4,148,214	$	1,447,855	1.06	%

Collateralized public funds	$	220,165	$	15,602	$	204,563			$	219,939	$	15,832	$	204,107

Deposits balances were stable during the first quarter of 2026, reflecting a nominal decrease of 0.6% for the three months ended March 31, 2026, compared to December 31, 2025. Changes in the rate paid on time deposits reflect a gradual repricing of accounts opened during a higher interest rate environment. The aggregate rate paid on deposits and the overall product mix were largely unchanged during the quarter.

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.

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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.

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.

Capital

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.

The following table shows the regulatory capital ratios and the current well capitalized regulatory requirements for the Company and the Bank as of the dates indicated :


	Minimum Capital		Well Capitalized
	Adequacy with		Under Prompt
	Capital Conservation		Corrective Action		March 31,		December 31,		March 31,
	Buffer, if applicable 1		Provisions 2		2026		2025		2025
The Company
Common equity tier 1 capital ratio	7.00	%	N/A		13.13	%	12.99	%	13.47	%
Total risk-based capital ratio	10.50		N/A		15.64		15.46		16.24
Tier 1 risk-based capital ratio	8.50		N/A		13.55		13.41		14.01
Tier 1 leverage ratio	4.00		N/A		11.88		11.70		11.58

The Bank
Common equity tier 1 capital ratio	7.00	%	6.50	%	13.80	%	13.17	%	13.64	%
Total risk-based capital ratio	10.50		10.00		14.88		14.22		14.58
Tier 1 risk-based capital ratio	8.50		8.00		13.80		13.17		13.64
Tier 1 leverage ratio	4.00		5.00		12.09		11.49		11.27

1 Amounts are shown inclusive of a capital conservation buffer of 2.50%.

2 The prompt corrective action provisions are only applicable at the Bank level.

N/A - Not applicable

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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.

Liquidity

Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customers’ credit needs, and to meet maturing obligations and existing commitments. 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.

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.

Net cash inflows from investing activities were $29.6 million in the three months ended March 31, 2026, compared to net cash inflows of $76.7 million in the same period in 2025. In the first three months of 2026, securities transactions accounted for net outflows of $28.7 million, and the principal change on loans accounted for net inflows of $56.8 million. In the first three months of 2025, securities transactions accounted for net inflows of $23.5 million, and principal on loans funded, net of paydowns, accounted for net inflows of $36.8 million.

Net cash outflows from financing activities in the three months ended March 31, 2026, were $74.8 million, compared with net cash inflows of $62.2 million in the three months ended March 31, 2025. Net deposit outflows in the first three months of 2026 were $31.0 million compared to net deposit inflows of $84.3 million in the first three months of 2025. Other short-term borrowings had $15.0 million of net cash outflows in the first three months of 2026, compared to net cash outflows of $20.0 million for other short-term borrowings in the first three months of 2025. Changes in securities sold under repurchase agreements accounted for outflows of $639,000 and inflows of $2.0 million for the three months ended March 31, 2026 and 2025, respectively. Dividends paid on our common stock totaled $3.7 million for the three months ended March 31, 2026, and $2.7 million for the three months ended March 31, 2025. The purchase of treasury stock in the first three months of 2026 due to shares acquired with equity award vestings as well as share repurchases resulted in outflows of $24.5 million, compared to cash outflows of $1.4 million in the first three months of 2025 related to shares acquired from equity award vestings.

Cash and cash equivalents for the three months ended March 31, 2026 totaled $115.7 million, as compared to $124.0 million as of December 31, 2025, and $256.1 million as of March 31, 2025. The decrease in cash and cash equivalents for the three months ended March 31, 2026, as compared to the prior year end, was primarily attributable to the increase in treasury stock due to share repurchases, the increase in securities available-for-sale based on strategic purchases, and the decrease in customer deposits. In addition to cash and cash equivalents on hand or held as deposits with other financial institutions, we rely on funding sources from customer deposits, cash flows from securities available-for-sale and loans, and a line of credit with the FHLBC to meet potential liquidity needs. These sources of liquidity are immediately available to satisfy any funding requirements due to depositor or borrower demands through the ordinary course of our business. Additional sources of funding available include a $30.0 million undrawn line of credit held by the Company with a third party financial institution, as well as unpledged securities available-for-sale.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are subject to interest rate risk from changes in interest rates on assets (loans and securities), liabilities (customer deposits and borrowed funds), and off-balance sheet derivative instruments (interest rate swaps). Fluctuations in interest rates may have a material impact on the fair market values of our financial instruments, cash flows, and net interest income. Like most financial institutions, we are exposed to changes in both short-term and long-term interest rates. We believe that a financial institution’s ability to effectively manage its interest rate risk profile and strategically position its balance sheet through interest rate cycles is critical to sustaining financial performance.

The Federal Reserve Board (“FRB”) held the federal funds target rate at a range of 3.50% to 3.75% during the first quarter of 2026, consistent with market expectations. Economic conditions remained relatively stable, and the forward curve currently does not reflect expectations for interest rate cuts in 2026.

We manage interest rate risk within guidelines established by our asset-liability policy, which are designed to limit the level of interest rate exposure. In practice, we seek to manage interest rate risk so that potential exposure does not pose a material risk to future earnings. We are exposed to various market risks in the normal course of business, including credit risk, liquidity risk, and interest rate risk. Other forms of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of our operations. In addition, because we do not maintain a trading portfolio, we are not exposed to significant market risk from trading activities. Our interest rate risk exposures at March 31, 2026, and December 31, 2025, are summarized in the table below.

Our net income may be influenced by a number of external factors. These factors include overall economic conditions and actions taken by regulatory authorities. Net income may also be affected by the amounts of and rates at which assets and liabilities reprice, differences between assumed and actual prepayment speeds on loans and securities, and early withdrawal of deposits. Additional factors include the exercise of call options on borrowings or securities, competitive pressures, changes in the level or slope of the yield curve, and changes in historical relationships between interest rate indices, such as SOFR and Prime. Balance sheet growth or contraction may also impact net income.

Our Asset‑Liability Committee (“ALCO”) manages interest rate risk across a range of interest rate environments by structuring our on- and off‑balance sheet positions, including the use of interest rate swap derivatives, as discussed in Note 19 to the consolidated financial statements in our Annual Report on Form 10‑K for the year ended December 31, 2025. The ALCO reviews asset‑liability modeling and interest rate risk analyses and reports its findings to the Board of Directors no less than quarterly, including assessments of interest rate risk exposure and the potential impact on earnings and equity. As of the reporting date, the balance sheet exhibited a moderately asset‑sensitive profile, as variable‑rate assets generally reprice more quickly than our longer‑duration, lower‑beta deposit base. Following liquidity events in the banking industry during 2023, the ALCO evaluated our liquidity profile and concluded that the Bank maintains a strong liquidity position. As a prudent measure, internal reporting was enhanced to further segment deposits by insured, uninsured, and collateralized categories, and to more closely track funding sources and uses.

We also maintain a Risk Committee that is chaired by our Chief Risk Officer. The committee reports no less than quarterly to senior management and the Board of Directors on compliance with established risk tolerance limits and on changes in key risk factors arising from portfolio activity and market conditions. Our enterprise risk management framework is governed by this committee, with input from line‑of‑business leaders, senior management, and the Board.

We utilize simulation analysis to quantify the potential impact of various interest rate scenarios on net interest income. The simulation model incorporates expected cash flows, repricing characteristics, and embedded options of our assets and liabilities. Earnings at risk are calculated by comparing net interest income under a stable interest rate scenario to net interest income under alternative rate scenarios. As of March 31, 2026, our net interest income profile remained positioned to benefit from rising interest rates, both in dollar terms and as a percentage change. Compared to December 31, 2025, the profile reflects slightly increased sensitivity to rising rates, primarily due to growth in cash balances resulting from earnings and principal repayments, including amortization, maturities, calls, and prepayments.

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The following table summarizes the effect on annual income before income taxes based upon an immediate increase or decrease in interest rates of 0.5%, 1.0%, and 2.0%, with no change in the slope of the yield curve:


	Analysis of Net Interest Income Sensitivity
	Immediate Changes in Rates
(Dollars in thousands)		(2.0)	%		(1.0)	%		(0.5)	%		0.5	%		1.0	%		2.0	%
March 31, 2026
Dollar change	$	(35,998)		$	(17,947)		$	(8,366)		$	8,937		$	17,987		$	32,400
Percent change		(10.4)	%		(5.2)	%		(2.4)	%		2.6	%		5.2	%		9.4	%

December 31, 2025
Dollar change	$	(35,505)		$	(18,190)		$	(9,026)		$	8,817		$	17,732		$	31,490
Percent change		(10.6)	%		(5.4)	%		(2.7)	%		2.6	%		5.3	%		9.4	%

The amounts and assumptions used in the simulation model are not intended to be indicative of actual future results. Actual results may differ materially from simulated outcomes due to differences in the timing, frequency, and magnitude of interest rate changes, changes in balance sheet composition, evolving market conditions, and management actions taken in response to those conditions. In addition, the simulated results do not reflect the impact of any potential management actions that could be implemented to mitigate interest rate risk.

Effects of Inflation

In management’s opinion, changes in interest rates affect our financial condition to a greater extent than changes in inflation, however we monitor both. The annual U.S. inflation rate increased to 3.3% in March 2026, compared to 2.7% in the prior quarter; while core CPI increased modestly to 2.6%. Recent inflation trends have been influenced by volatility in energy prices and broader geopolitical developments. Elevated inflation could place upward pressure on operating expenses and may impact the financial condition of certain borrowers. Inflation at currently observed levels has had a minimal impact on our financial results.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended, as of March 31, 2026. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2026, the Company’s internal controls were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified.

There were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries, from time to time, are involved in collection suits in the ordinary course of business against its debtors and are defendants in legal actions arising from normal business activities. Management, after consultation with legal counsel, believes that the ultimate liabilities, if any, resulting from these actions will not have a material adverse effect on the financial position of the Bank or on the consolidated financial position of the Company.

Item 1A. Risk Factors

Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as well as cautionary statements contained in this Quarterly Report, on Form 10-Q, including those under the caption “Cautionary Note Regarding Forward-Looking Statements.”

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Stock Repurchases

In January 2026, our board of directors authorized the repurchase of up to 1,908,042 shares of our common stock (the “Repurchase Program”). The Company received notice of non-objection in January 2026 from the Federal Reserve Bank of Chicago for the Repurchase Program. Under the Repurchase Program, repurchases may be made through December 31, 2026 will not exceed an aggregate value of $43.9 million. We may make repurchases under the Repurchase Program from time to time through open market purchases, trading plans established in accordance with SEC rules, privately negotiated transactions, or by other means.

The actual means and timing of any repurchases, quantity of purchased shares and prices will be, subject to certain limitations, at the discretion of management and will depend on a number of factors, including, without limitation, market prices of our common stock, general market and economic conditions, and applicable legal and regulatory requirements. Repurchases under the Repurchase Program may be initiated, discontinued, suspended or restarted at any time provided that repurchases under the Repurchase Program, after December 31, 2026, would require Federal Reserve non-objection or approval. We are not obligated to repurchase any shares under the Repurchase Program.

During the first quarter of 2026, the Company repurchased 1,175,859 shares at $19.63 per share for a total reduction to capital of $23.1 million, as these shares are held in treasury stock.

The following table presents our stock repurchases for the quarter ended March 31, 2026:


				Total Number of	Maximum Number
	Total			Shares Purchased	of Shares that May
	Number of		Average	as Part of Publicly	Yet Be
	Shares		Price Paid	Announced Plans	Purchased Under
	Purchased (a)		per Share (b)	or Programs (c) 1	the Plans or Programs (d)
January 1, 2026 - January 31, 2026	-	$	-	-	1,908,042
February 1, 2026 - February 28, 2026	205,458		19.78	205,458	1,702,584
March 1, 2026 - March 31, 2026	970,401		19.60	970,401	732,183
Total	1,175,859	$	19.63	1,175,859	732,183

1 We announced our Repurchase Program, which will expire on December 31, 2026, unless further extended as described above, in our Current Report on Form 8-K filed on January 29, 2026, and 732,183 shares remained available for repurchase under the Repurchase Program as of March 31, 2026.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Trading Plans

During the three months ended March 31, 2026, neither the Company, nor any director or “officer” of the Company, adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

Exhibits:



31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) .

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) .

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets at March 31, 2026, and December 31, 2025; (ii) Consolidated Statements of Income for the three months ended March 31, 2026 and 2025; (iii) Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2026 and 2025; (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025; (v) Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2026 and 2025; and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.

104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).

Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish supplementally a copy of any omitted schedules or similar attachment to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

—	OLD SECOND BANCORP, INC.


	BY:	/s/ James L. Eccher
		James L. Eccher
		Chairman, President and Chief Executive Officer
		(principal executive officer)


	BY:	/s/ Bradley S. Adams
		Bradley S. Adams
		Executive Vice President, Chief Operating Officer and Chief Financial Officer
		(principal financial and accounting officer)


DATE: May 7, 2026

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OLD SECOND BANCORP INC Interim / Quarterly Report 2026

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OLD SECOND BANCORP INC Interim / Quarterly Report 2026