Old Second Bancorp (OSBC) is set to redeem $30 million of its 3.50% subordinated notes due 2031 on April 15, 2026, following non objection from the Federal Reserve Bank of Chicago.
See our latest analysis for Old Second Bancorp.
The news of the subordinated note redemption comes as Old Second Bancorp’s share price sits at $20.05, with a 90 day share price return of 2.14% and a 1 year total shareholder return of 16.72%. This indicates that momentum has been gradually building over a multi year period.
If this balance sheet move has you thinking more broadly about banks and financials, it could be a good moment to widen your search with our 18 top founder-led companies.
With Old Second Bancorp trading at $20.05, and with an implied discount to both analyst targets and some intrinsic value estimates, the key question is whether this represents genuine undervaluation or a price that already reflects future growth.
Most Popular Narrative: 15.9% Undervalued
With Old Second Bancorp last closing at $20.05 versus a narrative fair value of $23.83, the gap hinges on how you view its earnings and margin potential.
The recent Evergreen Bank acquisition is performing ahead of expectations, providing higher than expected profitability and a more favorable asset mix, which is expected to drive incremental revenue growth, strengthen net interest margin, and enhance ROA as integration is completed. The company is successfully leveraging technology upgrades and digital banking capabilities to improve expense management, as evidenced by strong and improving efficiency ratios, which is likely to drive operating leverage and higher net margins over time.
Curious what kind of revenue runway and margin profile need to line up for that fair value to make sense? The most followed narrative leans on specific growth, profitability, and valuation hurdles that are anything but conservative.
Result: Fair Value of $23.83 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this upside story can quickly be challenged if Illinois focused credit risk flares up or if digital only competitors start eroding Old Second’s profitability assumptions.
Find out about the key risks to this Old Second Bancorp narrative.
Another View: Earnings Multiple Sends A Different Signal
While the most followed narrative frames Old Second Bancorp as 15.9% undervalued on fair value assumptions, the current P/E of 13.1x sits above both the US Banks industry at 11.4x and peers at 12.3x. It is, however, in line with the fair ratio of 13.1x. That mix of a premium versus peers and alignment with the fair ratio raises a simple question for you as an investor: is the market already pricing in a good chunk of the earnings story?
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With a mix of optimism and caution running through this story, it is worth looking at the numbers yourself and deciding quickly where you stand. This is especially important given there are both risks and rewards already on investors’ minds, so it can help to weigh 3 key rewards and 2 important warning signs before you make your own call.
Looking for more investment ideas?
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- Target potential mispricings by scanning our 49 high quality undervalued stocks that pair solid fundamentals with prices that may not fully reflect their underlying strength.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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