Company: OSBC
Filing Date: 2025-05-06
Form Type: S-4/A
Source: 0001104659-25-045103
Chunk: 186

Company: OLD SECOND BANCORP INC
Filing Date: 2025-05-06
Form: S-4/A
Chunk 186
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 and reasonable and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. ASC 326 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the reserve for credit losses.

The Company adopted ASC 326 using the static pool method, pooled by vintage approach. The Company recorded a net reduction of retained earnings of $1,150,772 upon adoption, including a corresponding increase in deferred tax assets of $374,679. The transition adjustment includes an increase in credit related reserves of $1,585,451 and a reduction to the liability for unfunded commitments of $60,000.

The ACL is established based upon the Company’s current estimate of expected lifetime credit losses on loans measured at amortized cost. The ACL on loans is increased by charges to provision for credit losses and reduced by charge-offs, net of recoveries. Management evaluates the appropriateness of the ACL on the loans quarterly. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change from period to period. The ACL represents the Company’s estimated risk of loss within the loan portfolio as of the reporting date. To appropriately measure expected credit losses, management disaggregates the loan portfolio into pools of similar risk characteristics or segments. These segments are established based on a variety of factors including, but not limited to, underwriting standards, collateral, and associated risks of certain portfolios. These risk categories and the relevant risk characteristics are as follows:

Commercial and industrial — Commercial and industrial loans are loans for commercial, corporate and business purposes, including issuing letters of credit and Small Business Administration (SBA) Paycheck Protection Program (PPP) loans. The Company’s commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment, machinery and other business assets. Commercial business loans generally have terms of five years or less and interest rates that float in accordance

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TABLE OF CONTENTS

#### Bancorp Financial, Inc. and Subsidiary

### Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)

with a designated published index. Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business or the SBA.

Commercial real estate — Commercial real estate loans are primarily secured by apartment buildings, office and industrial buildings, warehouses, and various special purpose