Company: OSBC
Filing Date: 2025-02-26
Form Type: 425
Source: 0000357173-25-000023
Chunk: 3

Company: OLD SECOND BANCORP INC
Filing Date: 2025-02-26
Form: 425
Chunk 3
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 by the combination of two attractive franchises with different core strengths, obviously demonstrated by Old Second on the funding side and Evergreen on the asset side.

We view this transaction as an attractive use of a portion of our excess capital as we are using cash as the form of the consideration for a quarter of the total purchase price, furthering the financial benefits to our shareholders, while also maintaining a well-funded pro forma franchise. Aggregate consideration of approximately $197 million at a price of 1.31x tangible book. We are projecting Evergreen earns at a level near 75 to 80 basis points in 2025 and slightly better in '26 on very modest growth. Note this is below the level Evergreen has earned in the past and yield expansion already seen in the fourth quarter of 2024 supports this level of profitability.

What I can highlight is the expected significant shareholder value created from this deal as referenced earlier. I'm excited to announce this transaction is estimated to be 16% EPS accretive to our shareholders based on conservative assumptions, while also improving all profitability metrics, increasing ROA by approximately 13 basis points and ROTCE by approximately 267 basis points when full implementation of cost saves achieved. You can see we are maintaining very strong capital ratios and liquidity at the pro forma entity.

On Slide 13, I'll quickly point out the complementary nature of the loan portfolios and how this merger will further our management team's focus on creating a balanced and diversified lending book. The added scale and profitability in all rate environments will also further position us to be an employer of choice in Chicago.

On Slide 14, I point out that we do anticipate some modest balance sheet restructuring, including the sale of certain securities and loans. This will lessen the reliance on higher cost funding and free up capital without sacrificing any profitability.

On Slide 15, I'd note that the earn back assumed on an unchanged interest rate environment is three years and the TCE ratio at closing is expected to be approximately 9.6%. This is still very high by our historical standards and it represents optionality for further investment opportunities or capital return.

As on a side, I would point out that if we were to find ourselves in a very different interest rate environment, this transaction would also look different. If say, for example, short interest rates were declined by 200 basis points from today's levels, leading to say a 125 ROA and a 175 ROA at Evergreen. The earn back to Old Second shareholders from today's transaction would be halved