Old Second Bancorp came into this Q3 2026 report with a reputation as a high margin community bank and a stock that has lagged the fair value estimates many investors track. The fresh numbers show basic earnings per share of about US$0.58 and a robust net interest margin of 5.27%, yet the share price slipped 0.6% today to US$24.71.
For a lender, that kind of profitability and a cost to income ratio close to 52% tell a different story from the muted one day move. The gap between headline reaction and underlying earnings power is where your attention should go next.
Love Old Second Bancorp's healthy net interest margin but uneasy about owning a lender whose share price shrugs off earnings strength? Compare it instead with a curated bench of banks and financials in the list of solid balance sheet and fundamentals stocks (26 results)
Q3 2026 Earnings Summary
- Total Revenue (Q3 2026 vs. Q3 2025): US$90.37m vs. US$75.80m (up about 19%)
- Net Income excl. Extra Items (Q3 2026 vs. Q3 2025): US$28.94m vs. US$9.87m (up about 193%)
- Basic EPS (Q3 2026 vs. Q3 2025): US$0.58 vs. US$0.19 (up about 207%)
- Net Interest Margin (Q3 2026 vs. Q3 2025): 5.27% vs. 5.05% (reflecting a slightly higher spread on earning assets)
Ask Charlie what Old Second’s buybacks signal about management’s confidence.
Old Second’s Margin Story Meets The Numbers
For Old Second Bancorp, the bullish story leans heavily on a funding edge turning into durable earnings power.
"Continued focus on a tax equivalent net interest margin above 5%, supported by total deposit costs of 1.00% and an asset sensitive balance sheet, positions Old Second Bancorp to keep translating a low funding base into relatively strong net interest income and earnings power."
Q3 delivered a 5.27% tax equivalent net interest margin and net interest income of US$84.0m, with only a slight uptick in deposit costs to 1.02%. Pre provision earnings were solid and the efficiency ratio near 52% showed that margin strength is still flowing through to profitability.
Credit Cleanup Risk For Old Second Bancorp
The bear side worries that higher yield lending eventually bites through credit costs.
"The main thing that has to go right is that Old Second Bancorp continues to balance its higher yielding specialty lending and powersports portfolio with credit discipline so that elevated net charge-offs and commercial real estate exposures do not erode that earnings power."
Q3 charge offs were US$12.7m, with US$9.2m tied to one C&I warehouse and distribution borrower and about US$3.1m from powersports. Classified, criticized and nonperforming balances all fell, and management now views the large C&I issue as largely addressed. The allowance ratio eased to 1.23%, which supports the cleanup narrative but leaves less buffer if losses flare back up.
One Narrative disagrees with today's price. → See where this Narrative says Old Second Bancorp should trade.
Hunt For Quiet Earnings Power
Old Second Bancorp showed that solid fundamentals can coincide with a muted share price reaction. The real opportunity is assessing stocks that could be undervalued before the market recognizes their earnings power.
- Company 1 - 49% below our estimate - wins fixed price mega projects and Indo Pacific defense work that create long construction backlogs.
- Company 2 - 28% below our estimate - equips utilities and aerospace contractors with diagnostic gear as power networks and aircraft fleets are modernized.
- Company 3 - 41% below our estimate - supplies high complexity circuit hardware for AI data centers and defense programs needing rapid capacity additions.
That is three of the list. See every one of the 30 undervalued companies on it →
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