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On Wednesday, Stephens analyst Terry McEvoy increased the price target for Old Second Bancorp (NASDAQ:OSBC) to $22 from the previous target of $21, while keeping an Overweight rating on the stock. According to InvestingPro data, analysts maintain a strong buy consensus with price targets ranging from $20 to $24, suggesting potential upside from the current price of $18.14. The adjustment follows Old Second Bancorp’s announcement of its acquisition of Bancorp Financial, which operates Evergreen Bank. The deal, valued at approximately $197 million, introduces a new nationwide consumer lending platform specializing in Powersports and enhances Old Second’s presence in the Chicago area.
The strategic acquisition is expected to bolster Old Second Bancorp’s financial profile by allowing it to deploy recently acquired deposits into higher-yielding loans, thereby enhancing the company’s return profile. With an "GREAT" financial health score from InvestingPro, the company has demonstrated strong performance with a 14% return on equity and maintained dividend payments for 10 consecutive years. McEvoy noted that upon closing the deal, the company’s tangible common equity (TCE) and Common Equity Tier 1 (CET1) capital ratios are projected to be around 9.6% and 11.7%, respectively. Based on an estimated operating return on tangible common equity (ROTCE) of approximately 14% for 2025, the analyst anticipates Old Second will rapidly accrete capital, which may set the stage for another potential acquisition announcement next year.
The company is also expected to address the higher-cost deposits inherited from Evergreen Bank, which were around 4% last quarter. The introduction of the new consumer lending vertical is likely to accelerate loan growth; however, it also carries the potential for higher anticipated losses through the cycle. Despite these considerations, McEvoy has maintained the Overweight (Vol.) rating, expressing confidence in the company’s valuation and growth prospects.
The analyst’s updated 2026 earnings per share (EPS) estimate positions Old Second Bancorp at 8.8 times earnings, reinforcing the rationale behind the maintained Overweight rating and revised price target. The acquisition and subsequent financial strategies are set to play a significant role in Old Second Bancorp’s performance and investor outlook.
In other recent news, Old Second Bancorp has reported its fourth-quarter 2024 earnings, revealing an EPS of $0.44, which fell short of the projected $0.48. However, the company exceeded revenue expectations, achieving $73.19 million compared to the anticipated $70.56 million. In a significant development, Old Second Bancorp announced a definitive agreement to acquire Bancorp Financial in a transaction valued at approximately $197 million. This merger is expected to create one of the largest community banks in the Chicago market with assets of about $7.1 billion.
Raymond (NSE:RYMD) James has maintained its Strong Buy rating for Old Second Bancorp, citing the company’s favorable net interest margin trends and nearing the completion of its credit clean-up. Analysts at Raymond James remain optimistic about the bank’s strategic growth initiatives, particularly its expansion within the Chicago Metropolitan Statistical Area. The merger with Bancorp Financial is anticipated to be financially beneficial for Old Second stockholders, with projected EPS accretion of about 16% in the first full year post-merger. Completion of the merger is expected in the third quarter of 2025, pending regulatory and stockholder approvals.
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