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On Thursday, Keefe, Bruyette & Woods, a financial services research firm, raised its price target for Old Second Bancorp shares, traded under (NASDAQ:OSBC), from $22.00 to $24.00. The firm continues to endorse an Outperform rating for the bank’s stock.
The adjustment in the price target reflects Keefe analysts’ positive outlook on Old Second Bancorp’s strategic initiatives, particularly following its acquisition of Bancorp Financial. The analysts praised Old Second Bancorp for its systematic and shareholder-friendly approach to using excess capital to enhance returns and mitigate interest rate sensitivity. InvestingPro data reveals the company maintains a GREAT financial health score, with particularly strong marks in profitability and relative value metrics.
The acquisition is viewed as the most recent step in Old Second Bancorp’s strategy to build a more robust and resilient earnings stream. The analysts are optimistic about the bank’s future financial performance, expecting a return on average assets (ROAA) of 1.5% and a return on tangible common equity (ROTCE) of over 15%.
The research firm’s revised estimates for 2026 suggest that Old Second Bancorp is trading at less than nine times the expected earnings, which is seen as favorable for a bank with strong profitability metrics. The analysts also noted the absence of a significant accretable yield contribution in their earnings per share (EPS) estimates, which is believed to support the stock’s multiple and enhance earnings visibility.
In summary, Keefe analysts underscored their continued preference for Old Second Bancorp stock, highlighting its insulated earnings stream, reduced asset sensitivity, and robust profitability outlook. Adding to the investment case, InvestingPro data shows the company has maintained dividend payments for 10 consecutive years, demonstrating consistent shareholder returns. For deeper insights into Old Second Bancorp’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Old Second Bancorp reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $0.44, which fell short of the forecasted $0.48. However, the company’s revenue surpassed expectations, reaching $73.19 million compared to the anticipated $70.56 million. The bank has entered into a definitive agreement to acquire Bancorp Financial in a deal valued at approximately $197 million, aiming to create the second-largest community bank under $10 billion in assets in the Chicago market. This acquisition is expected to bring about significant benefits, including a projected 16% EPS accretion in the first full year post-merger.
Analysts have shown varying levels of confidence in Old Second Bancorp’s prospects. Stephens analyst Terry McEvoy raised the price target for the company to $22, maintaining an Overweight rating, following the acquisition announcement. Meanwhile, Raymond (NSE:RYMD) James reiterated a Strong Buy rating with a $22 price target, highlighting positive trends in the company’s Net Interest Margin and the near completion of its credit clean-up.
The strategic acquisition of Bancorp Financial is anticipated to enhance Old Second Bancorp’s financial profile by expanding its consumer lending capabilities, particularly in powersport lending. Despite the EPS miss, the company demonstrated robust revenue growth, and its strategic initiatives are aligned with long-term growth goals, according to Raymond James. The merger is expected to close in the third quarter of 2025, pending regulatory and stockholder approvals.
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