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AURORA AND OAK BROOK, IL - Old Second Bancorp, Inc. (NASDAQ:OSBC), currently valued at $813 million and showing GREAT financial health according to InvestingPro metrics, and Bancorp Financial, Inc. have entered into a definitive agreement for Old Second to acquire Bancorp Financial in a deal valued at approximately $197 million. The transaction, approved by both companies’ boards, will involve a mix of cash and stock with Bancorp Financial stockholders receiving 2.5814 shares of Old Second common stock and $15.93 in cash per share.
The acquisition is expected to create the second-largest community bank under $10 billion in assets in the Chicago market, with pro forma assets of about $7.1 billion, deposits of $6.0 billion, and loans of $5.2 billion. Trading at a P/E ratio of 9.64 and maintaining consistent dividend payments for 10 consecutive years, Old Second presents an attractive valuation profile according to InvestingPro analysis. This strategic move will expand Old Second’s presence in the greater Chicago area and add new consumer lending capabilities, particularly in the powersport lending sector, where Evergreen Bank Group, a subsidiary of Bancorp Financial, is a recognized leader.
James Eccher, CEO of Old Second Bancorp, highlighted the expected benefits of the merger, including less volatility and a stronger earnings profile in all rate environments. The combined entity aims to diversify revenue streams, enhance management depth, and improve competitiveness in the Chicago market while maintaining a strong capital position.
The merger is anticipated to be financially advantageous for Old Second stockholders, projecting about 16% EPS accretion in the first full year post-merger, including expected cost savings. With analyst price targets ranging from $19 to $24 and a consensus "Buy" recommendation, InvestingPro data suggests strong growth potential. Subscribers can access detailed financial analysis and 12+ additional ProTips for comprehensive investment insights. Pro forma returns are also expected to increase, with a rise in return on assets of over 13 basis points and a return on tangible common equity increase of over 267 basis points, fully phased-in.
Completion of the merger is subject to customary closing conditions, including regulatory approvals and approval by Bancorp Financial stockholders, and is expected to close in the third quarter of 2025. Piper Sandler & Co. and Nelson Mullins Riley & Scarborough LLP are advising Old Second, while Keefe, Bruyette & Woods, A Stifel Company, and Vedder Price P.C. are advising Bancorp Financial.
This merger announcement is based on a press release statement and contains forward-looking statements subject to risks, uncertainties, and assumptions. The actual results could differ materially from those anticipated due to various factors, including regulatory approvals, integration challenges, and market conditions.
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 anticipated $0.48. Despite this, the company’s revenue surpassed expectations, reaching $73.19 million against a forecast of $70.56 million. Analysts at Raymond (NSE:RYMD) James reiterated their Strong Buy rating for Old Second Bancorp, highlighting the company’s expanding Net Interest Margin (NIM) as a positive trend. The bank’s strategic initiatives, including the completion of its credit clean-up, are expected to position it well for future growth, especially in the Chicago area.
Furthermore, Old Second Bancorp’s net income for the quarter was $19.1 million, translating to $0.42 per diluted share, with a return on assets of 1.34%. The bank also reported a net interest income increase to $61.6 million, up by $1 million from the previous quarter. Analysts from Raymond James remain optimistic about the bank’s future, expecting continued market share growth and superior profitability metrics. The bank’s focus on expanding its commercial banking capabilities and strategic acquisitions, such as the purchase of five branches from First Merchants (NASDAQ:FRME), underscores its commitment to growth.
Old Second Bancorp’s strategic focus includes potential asset purchases and expanding lending verticals, particularly in healthcare and sponsored finance. CEO Jim Eckers expressed confidence in the bank’s balance sheet and future opportunities, while CFO Brad Adams noted the bank’s flexibility and strategic positioning. Looking ahead, the bank anticipates mid-single-digit loan growth and slight downward trends in profit margins for 2025.
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