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On Friday, Stephens research firm adjusted its price target for Old Second Bancorp (NASDAQ:OSBC), reducing it to $20.00 from the previous target of $22.00. Despite the price target cut, the firm maintained its Overweight rating for the bank’s stock. According to InvestingPro data, the stock appears undervalued at its current price of $15.60, with analyst targets ranging from $17 to $24. The stock has experienced an 12% decline year-to-date, potentially presenting an opportunity for value investors.
Old Second Bancorp has demonstrated its ability to increase net interest income in the first quarter of 2025. The net interest margin (NIM) expanded by 20 basis points quarter over quarter to 4.88%, surpassing the consensus estimate of 4.61%. This expansion occurred even as the bank experienced elevated payoffs and proactive run-offs, which contributed to lower loan balances. The revenue growth helped Old Second Bancorp’s operating earnings per share for the first quarter exceed consensus estimates by $0.05. InvestingPro analysis shows the bank maintains a GREAT financial health score, with particularly strong metrics in relative value and profit scores. The bank trades at an attractive P/E ratio of 8.45x while maintaining a 10-year streak of consistent dividend payments.
The bank’s tangible common equity (TCE) capital showed a significant year-over-year increase of 130 basis points, reaching 10.3%. Additionally, Old Second Bancorp reported positive deposit flows, which were up 7% on an annualized basis. This positions the bank’s balance sheet favorably in anticipation of its upcoming merger with Evergreen Bank. Management expressed a more bullish outlook on the net interest margin as a result of the merger. The model used by Stephens analysts assumes that the merger will close on June 30, 2025, and suggests that the pro forma balance sheet will be more resilient in a lower interest rate environment.
The bank’s credit losses have been elevated in recent quarters. However, it is noteworthy that criticized loans have declined by approximately 62% since their peak in the first quarter of 2023. Stephens analysts have cited this decrease in criticized loans as a positive development for Old Second Bancorp.
In summary, while the price target for Old Second Bancorp has been lowered to $20.00, Stephens maintains an Overweight rating on the stock, reflecting a continued positive outlook on the bank’s financial performance and strategic initiatives. InvestingPro reveals additional insights through its comprehensive analysis, with multiple analysts revising earnings estimates upward for the upcoming period. For deeper insights into Old Second Bancorp’s valuation and growth prospects, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Old Second Bancorp Inc. reported a strong start to 2025 with first-quarter earnings that exceeded analysts’ expectations. The company achieved an earnings per share of $0.45, surpassing the forecast of $0.44, and recorded revenue of $73.1 million, exceeding the anticipated $70.96 million. The bank also announced a pending merger with Evergreen Bank Group, which could impact its future financial performance. Analysts noted improvements in credit quality and a reduction in nonperforming assets by 27.2% since the end of 2024. Management expressed optimism about maintaining strong credit performance and anticipated that clarity on tariffs could boost loan demand in the future. The firm highlighted a strategic focus on profitability rather than growth for its own sake, with a 4% expense growth target for the year. Despite these positive developments, the company’s stock saw a slight decline, reflecting cautious investor sentiment amid broader market trends. The potential for a stock buyback is on the table following the merger with Evergreen Bank Group.
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