Old Second Bancorp Inc (OSBC) Stock Analysis and Metrics

Old Second Bancorp

NASDAQ: OSBC

$24.01 ▲ +0.50 (+2.15%)

At close: Jul 24, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap1.26 Bn

P/E14.66

P/S56.25

Div. Yield0.01

Total Debt (Qtr)23.13 Mn

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About

Old Second Bancorp, Inc. is a bank holding company that provides full service community banking and trust operations through its subsidiary Old Second National Bank. The bank is headquartered in Aurora Illinois and operates 55 banking centers located in Cook DeKalb DuPage Kane Kendall LaSalle and Will counties in Illinois. In addition to the bank the company owns several subsidiaries including Old Second Affordable Housing Fund LLC which offers down payment assistance Station I LLC Station II LLC and Station III LLC which hold foreclosed property and River Street Advisors LLC which provides investment advisory services. The institution emphasizes relationship banking and seeks to meet the financial needs of individuals businesses and local governments within its footprint.

The company generates revenue primarily from interest income on its loan portfolio which includes commercial real estate residential mortgage consumer and specialty loans such as powersport and equipment financing. Interest income represents the largest portion of revenue driven by the yield on loans and the size of the earning asset base. Additional revenue comes from service charges on deposit accounts wealth management fees and other noninterest income such as trust administration and investment advisory fees. Fee based revenue includes wealth management asset under administration charges deposit service charges and loan related fees such as origination and late fees. The diversified mix of lending and fee based services supports stable earnings across changing interest rate environments.

The company operates through the following segments.

• Community banking: This segment encompasses all traditional banking activities including deposit taking commercial lending consumer lending wealth management trust services and related financial solutions delivered through the bank's branch network digital channels and subsidiary entities. It provides a full suite of deposit products such as checking savings money market and time deposits and offers lending options ranging from residential mortgages and home equity lines to commercial real estate construction equipment and specialty loans like powersport and manufacturer financing.

Old Second Bancorp competes in a highly competitive financial services market that includes large national banks regional banks credit unions and financial technology firms primarily in the Chicago metropolitan area. The company differentiates itself through its deep community relationships its long standing presence in the region its strong community reinvestment act rating and its ability to offer a broad range of products while maintaining personalized service. Following recent acquisitions the bank has increased its scale and diversified its loan base which enhances its competitive position. These factors help the bank attract and retain retail commercial and municipal customers despite intense competition.

The bank serves a diverse customer base that includes individual consumers small and mid sized businesses large corporations governmental entities and nonprofit organizations. Its retail customers reside in communities such as Aurora Batavia Bolingbrook Joliet Naperville and numerous other cities across the western and southern portions of the Chicago metro area. Commercial borrowers span industries such as manufacturing health care real estate and technology while municipal clients rely on the bank for public financing and treasury services. In addition the bank provides wealth management and trust services to individual investors employee benefit plans and charitable foundations further broadening its client relationships.

Investment Thesis

▲ Bull case

The bank’s net interest margin remains exceptionally strong at 5.14% in Q1 FY26 reflecting a 5 basis point increase quarter over linked quarter and a 26 basis point rise year over year. This stability demonstrates the balance sheet’s ability to generate attractive spreads even as the Fed cuts rates and deposit costs decline. Management highlighted that the margin is supported by a disciplined approach to pricing and a favorable mix of earning assets. The sustained NIM provides a solid foundation for continued earnings power and supports the outlook for mid‑teens return on tangible common equity.
Capital levels are robust with Common Equity Tier 1 at 13.13% and tangible equity ratio at 11.07% as of March 31 2026. The bank generated excess capital that allowed it to repurchase 1.2 million shares at an average price of $19.63 during Q1 FY26 adding roughly $0.01 to EPS. Management noted they are more than halfway through the existing buyback authorization and intend to refile another authorization once the current one is exhausted. This aggressive capital return combined with strong internal capital generation signals confidence in the franchise’s intrinsic value and provides a buffer against potential stress.
Asset quality metrics aside from a few specific credits show encouraging trends. Classified assets declined by $2.8 million during the quarter while nonperforming loans rose to $22.7 million largely due to two isolated credits. The allowance for credit losses on loans remained stable at 1.39% of total loans indicating that reserves are adequate to cover anticipated losses. Management expressed confidence that the elevated charge‑off level in the powersports book is partially a pull‑forward of seasonal losses and expects loss content to trend lower in coming quarters. The overall credit profile therefore appears to be improving beyond the headline charge‑off numbers.
The powersports portfolio despite higher net charge‑offs generated an 8.3% net contribution margin after charge‑offs the highest level in recent quarters. This high contribution margin reflects effective pricing on non‑endorsed products and a favorable product mix that includes higher yielding loans. Management tightened underwriting modestly but emphasized that the focus remains on maximizing net contribution margin rather than simply minimizing charge‑offs. The combination of strong margins and manageable loss trends suggests the powersports business remains a profitable engine for the bank.
Loan pipelines are building across commercial real estate commercial and industrial lending leasing and sponsored credit categories. Management anticipates low to mid single digit loan growth for the balance of FY26 but describes the growth as broad based with no single sector driving expectations. The pipeline strength indicates that demand is present and the bank is positioned to capture growth when market conditions improve. This broad‑based pipeline reduces reliance on any one segment and supports sustainable revenue expansion.

The bank’s net interest margin remains exceptionally strong at 5.14% in Q1 FY26 reflecting a 5 basis point increase quarter over linked quarter and a 26 basis point rise year over year. This stability demonstrates the balance sheet’s ability to generate attractive spreads even as the Fed cuts rates and deposit costs decline. Management highlighted that the margin is supported by a disciplined approach to pricing and a favorable mix of earning assets. The sustained NIM provides a solid foundation for continued earnings power and supports the outlook for mid‑teens return on tangible common equity.
Capital levels are robust with Common Equity Tier 1 at 13.13% and tangible equity ratio at 11.07% as of March 31 2026. The bank generated excess capital that allowed it to repurchase 1.2 million shares at an average price of $19.63 during Q1 FY26 adding roughly $0.01 to EPS. Management noted they are more than halfway through the existing buyback authorization and intend to refile another authorization once the current one is exhausted. This aggressive capital return combined with strong internal capital generation signals confidence in the franchise’s intrinsic value and provides a buffer against potential stress.
Asset quality metrics aside from a few specific credits show encouraging trends. Classified assets declined by $2.8 million during the quarter while nonperforming loans rose to $22.7 million largely due to two isolated credits. The allowance for credit losses on loans remained stable at 1.39% of total loans indicating that reserves are adequate to cover anticipated losses. Management expressed confidence that the elevated charge‑off level in the powersports book is partially a pull‑forward of seasonal losses and expects loss content to trend lower in coming quarters. The overall credit profile therefore appears to be improving beyond the headline charge‑off numbers.
The powersports portfolio despite higher net charge‑offs generated an 8.3% net contribution margin after charge‑offs the highest level in recent quarters. This high contribution margin reflects effective pricing on non‑endorsed products and a favorable product mix that includes higher yielding loans. Management tightened underwriting modestly but emphasized that the focus remains on maximizing net contribution margin rather than simply minimizing charge‑offs. The combination of strong margins and manageable loss trends suggests the powersports business remains a profitable engine for the bank.
Loan pipelines are building across commercial real estate commercial and industrial lending leasing and sponsored credit categories. Management anticipates low to mid single digit loan growth for the balance of FY26 but describes the growth as broad based with no single sector driving expectations. The pipeline strength indicates that demand is present and the bank is positioned to capture growth when market conditions improve. This broad‑based pipeline reduces reliance on any one segment and supports sustainable revenue expansion.

▼ Bear case

The quarter recorded $9.8 million of net loan charge‑offs driven largely by a $3.9 million commercial real estate office charge‑off and a $3.9 million powersports charge‑off. The office charge‑off stemmed from a property whose valuation fell approximately 50% below prior estimates highlighting ongoing pressure in the CRE office sector. Management acknowledged that the C&I credit related to warehousing and distribution also deteriorated due to supply chain disruption and tariff issues. These isolated but sizable losses suggest that certain segments of the portfolio remain vulnerable to macro‑economic headwinds.
The powersports business while generating a high contribution margin experienced a net charge‑off rate of just over 2% in Q1 FY26 which is above the bank’s historical norm. Management attributed part of the elevation to seasonality and product mix but noted that the segment remains sensitive to consumer lending softness and broader economic cycles. Any further deterioration in consumer confidence or disposable income could push charge‑offs higher and erode the profitability of this line. The reliance on a volatile consumer segment introduces earnings variability that may not be fully captured by current guidance.
Commercial real estate office valuations are coming in at steep discounts to prior levels and rents are declining broadly across the market. Although the bank’s office exposure is relatively small at about 3.5% of the loan book with an average loan‑to‑value of 68% the sector‑wide stress could lead to additional credit downgrades or valuation adjustments. Management indicated they are monitoring one additional non‑classified office credit and that further losses could emerge if market conditions worsen. The CRE office sector therefore represents a latent risk that could resurface despite current limited exposure.
Macro‑economic uncertainties including global tariff volatility and the war in Iran are explicitly factored into the bank’s loss‑rate assumptions but remain unquantified risks. These factors could suppress borrower willingness to invest in capital projects dampening loan demand especially in the commercial and industrial segment. The bank’s lending teams noted reluctance among borrowers to embark on capital expenditures due to pricing challenges and geopolitical uncertainty. Should these headwinds intensify they could curb loan growth and increase the probability of credit deterioration across multiple portfolios.
Loan growth guidance for the remainder of FY26 is low to mid single digit reflecting a cautious outlook that may limit upside to earnings. Management acknowledged that the first quarter was soft in both commercial and powersports lending and that pipelines are building but not yet translating into robust volume. If the expected modest growth fails to materialize the bank could rely more heavily on cost control and capital returns to sustain EPS growth. Dependence on expense discipline and buybacks rather than organic loan expansion makes the earnings trajectory more vulnerable to any misstep in expense management or capital markets.

The quarter recorded $9.8 million of net loan charge‑offs driven largely by a $3.9 million commercial real estate office charge‑off and a $3.9 million powersports charge‑off. The office charge‑off stemmed from a property whose valuation fell approximately 50% below prior estimates highlighting ongoing pressure in the CRE office sector. Management acknowledged that the C&I credit related to warehousing and distribution also deteriorated due to supply chain disruption and tariff issues. These isolated but sizable losses suggest that certain segments of the portfolio remain vulnerable to macro‑economic headwinds.
The powersports business while generating a high contribution margin experienced a net charge‑off rate of just over 2% in Q1 FY26 which is above the bank’s historical norm. Management attributed part of the elevation to seasonality and product mix but noted that the segment remains sensitive to consumer lending softness and broader economic cycles. Any further deterioration in consumer confidence or disposable income could push charge‑offs higher and erode the profitability of this line. The reliance on a volatile consumer segment introduces earnings variability that may not be fully captured by current guidance.
Commercial real estate office valuations are coming in at steep discounts to prior levels and rents are declining broadly across the market. Although the bank’s office exposure is relatively small at about 3.5% of the loan book with an average loan‑to‑value of 68% the sector‑wide stress could lead to additional credit downgrades or valuation adjustments. Management indicated they are monitoring one additional non‑classified office credit and that further losses could emerge if market conditions worsen. The CRE office sector therefore represents a latent risk that could resurface despite current limited exposure.
Macro‑economic uncertainties including global tariff volatility and the war in Iran are explicitly factored into the bank’s loss‑rate assumptions but remain unquantified risks. These factors could suppress borrower willingness to invest in capital projects dampening loan demand especially in the commercial and industrial segment. The bank’s lending teams noted reluctance among borrowers to embark on capital expenditures due to pricing challenges and geopolitical uncertainty. Should these headwinds intensify they could curb loan growth and increase the probability of credit deterioration across multiple portfolios.
Loan growth guidance for the remainder of FY26 is low to mid single digit reflecting a cautious outlook that may limit upside to earnings. Management acknowledged that the first quarter was soft in both commercial and powersports lending and that pipelines are building but not yet translating into robust volume. If the expected modest growth fails to materialize the bank could rely more heavily on cost control and capital returns to sustain EPS growth. Dependence on expense discipline and buybacks rather than organic loan expansion makes the earnings trajectory more vulnerable to any misstep in expense management or capital markets.

Peer Comparison

Companies in the Banks - Regional

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	KB	KB Financial Group Inc.	42,090.38 Bn	0.00 Bn	0.01 Mn	56.66 Bn
2	SHG	Shinhan Financial Group Co Ltd	33,919.15 Bn	0.00 Bn	0.00 Mn	40.46 Bn
3	BCH	Bank Of Chile	4,123.52 Bn	368.17 Bn	1.57 Mn	0.00 Bn
4	LYG	Lloyds Banking Group plc	360.83 Bn	0.00 Bn	0.00 Mn	42.37 Bn
5	FCAP	First Capital Inc	204.17 Bn	0.00 Bn	0.03 Mn	-
6	LARK	Landmark Bancorp Inc	187.97 Bn	0.00 Bn	0.00 Mn	0.00 Bn
7	NWG	NatWest Group plc	144.82 Bn	0.00 Bn	0.00 Mn	94.66 Bn
8	PNC	Pnc Financial Services Group, Inc.	101.80 Bn	0.00 Bn	0.00 Mn	21.42 Bn

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Investment Thesis

Product and Service Breakdown of Revenue (2025)

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