OSBC Stock Forecast & Price Target

Old Second Bancorp's strong outlook is supported by anticipated improvements in profitability metrics, with a projected increase of approximately 152 basis points in Return on Equity (ROE) and 267 basis points in Return on Average Tangible Common Equity (ROATCE) by 2026. The company has demonstrated robust performance in net interest income, achieving a net interest margin (NIM) of 4.68%, bolstered by a strong deposit base and a favorable shift in interest-bearing deposit costs, which stood at 1.41% last quarter. Furthermore, the strategic acquisition of Evergreen Bank is expected to enhance loan growth through the introduction of a new consumer lending vertical, while allowing Old Second to utilize acquired deposits to support higher-yielding loans and maintain a strong balance sheet.

Old Second Bancorp's outlook appears negative due to a higher-than-expected loan loss provision (LLP) reflecting net charge-offs that significantly exceeded consensus estimates, indicating potential weaknesses in credit quality. Additionally, the sluggish repricing of the deposit base amid rising interest rates raises concerns about net interest margins, as accelerated deposit betas or changes in deposit mix could further compress profitability. Furthermore, regulatory risks and challenges associated with acquisitions, including potential dilution of tangible book value and ineffective integration, pose additional concerns for the bank's financial stability.