OSBC Stock Forecast & Price Target

Old Second Bancorp's outlook is bolstered by projected profitability enhancements following its acquisition of Evergreen Bank, anticipated to improve return on equity (ROE) and return on average tangible common equity (ROATCE) by approximately 152 basis points and 267 basis points, respectively, by 2026. Additionally, the strong performance of Old Second’s net interest income, which achieved a net interest margin (NIM) of 4.68%, indicates effective deposit management and a favorable interest rate environment contributing to revenue growth. The strategic expansion into a nationwide consumer lending platform through the acquisition is expected to drive loan growth and enhance the firm's overall return profile, despite carrying some associated risks of higher losses through the economic cycle.

Old Second Bancorp faces significant headwinds due to a higher-than-expected loan loss provision (LLP), which was primarily driven by net charge-offs significantly surpassing consensus estimates. The bank's deposit pricing strategy is concerning, as a lag in repricing its deposit base relative to rising interest rates may constrict net interest margins, compounded by potential shifts in its deposit mix. Additionally, the risk of loan credit quality deterioration poses a substantial threat, as it could necessitate increased provisions for loan losses, further undermining financial stability and stock performance outlook.