Analysts Lift Old Second Bancorp Target to $23 on Strong Earnings

DA Davidson analysts raised their price target for Old Second Bancorp to $23 from $22. The update came after the bank reported better-than-expected results for the fourth quarter of 2025. Old Second Bancorp, which trades under the ticker OSBC on Nasdaq, saw its shares react positively in early trading.

Background

Old Second Bancorp runs a network of banks mainly in Illinois. The company has grown through buying other banks, including a recent merger with Bancorp Financial that wrapped up earlier this year. This deal helped boost its size and reach. In the fourth quarter of 2025, the bank posted net income of $28.8 million. That worked out to $0.54 per diluted share. When analysts strip out one-time items like costs from the merger and a small loss on mortgage rights, the adjusted net income hits $30.8 million, or $0.58 per share.

These numbers beat what Wall Street expected. Forecasts called for $0.50 per share, so Old Second came in 16% above that mark. Revenue reached $95.2 million, just over the predicted $94.88 million. The bank's return on assets stood at 1.64%, and return on average tangible common equity was 16.15%. These measures show how well the bank turns profits from its assets and shareholder money.

The strong showing ties back to a healthy net interest margin. This key measure, which shows the gap between what the bank earns on loans and pays on deposits, held at 5.09%. That was up four basis points from the prior quarter and 41 basis points from a year earlier. Basis points are hundredths of a percent, so these small shifts add up. The total cost of deposits fell to 1.15%, down from higher levels before.

Old Second finished integrating Evergreen Bank from earlier efforts. That work cut some expenses and upgraded systems. Total non-interest expenses dropped by $10.2 million from the previous quarter, thanks to lower merger costs. The adjusted efficiency ratio, which tracks expenses against revenue, improved to 51.28%.

On the loan side, the loan-to-deposit ratio climbed to 93.9% by year-end. That means loans make up most of deposits, a sign of active lending. Total loans dipped slightly by $12.4 million, but average loans grew by $60 million, or 1.2%. Deposits fell by about $200 million as the bank cut back on certain wholesale types. Still, the loan pipeline at year-end was the strongest in almost two years, pointing to more business ahead.

Credit quality had some bumps. Net charge-offs totaled $6 million, mostly from power sports loans and owner-occupied commercial real estate. Management expects losses in power sports to stay high but hopes for better margins there.

Key Details

The earnings call brought out clear numbers on performance. Net interest income stayed around $83 million, flat from the prior quarter but up 34.9% from a year ago. This growth came largely from the Bancorp Financial acquisition, which added $27 million in interest and dividend income.

Provisions for credit losses were $3 million in the quarter, up from a benefit in prior periods. Non-interest income dipped a bit quarter-over-quarter but rose year-over-year, helped by wealth management fees and service charges.

Leadership Comments

Chairman and CEO Jim Eccher spoke on the results during the earnings call. He pointed to the solid return figures and the completion of merger work.

"Integration fully done. Integration at the end of last year as well. That's a lot of work, and to close the year like that, this is especially gratifying."

— Jim Eccher, Chairman and CEO

Eccher noted the quarter had little complexity beyond ongoing trends. CFO Jeff Adams added details on outlook. He expects loan growth in the mid-single digits for 2026. That means 4% to 6% roughly. Expense growth should stay modest at around 3%. Employee benefits costs may rise in double digits due to health insurance trends, but branch closings and other steps aim to offset that.

The net interest margin should hold steady near 5% into 2027. Management sees room for share buybacks and possible deals if opportunities fit.

Tangible book value per share rose to $14.12. The tax-equivalent efficiency ratio was 53.98% before adjustments.

What This Means

The price target hike from DA Davidson signals confidence in Old Second's path. At $23, it suggests about 8% upside from recent levels around $21.26. Investors liked the earnings beat, with shares up 1.82% in premarket after the release.

For the bank, mid-single digit loan growth would build on the strong pipeline. A stable margin near 5% supports profits in a rate environment that has eased from peaks. Modest expense control keeps efficiency in check.

Challenges remain. Charge-offs in certain sectors like power sports could pressure credit quality. Deposit shifts mean careful management to fund loans without raising costs too much. The loan-to-deposit ratio near 94% leaves less room if deposits keep shrinking.

Broader banking faces interest rate uncertainty and economic slowdown risks. Old Second's focus on commercial real estate participations sees some runoff, but origination activity is picking up.

Shareholders benefit from high returns on equity at over 16%. Talk of buybacks could boost share price further. The merger integration success sets a base for organic growth.

Old Second serves communities in the Midwest. Its performance reflects steady demand for loans amid business needs. As 2026 starts, the bank positions for balanced expansion. Analysts' higher target matches this view, betting on continued execution.

The full-year 2025 picture shows progress. Trailing twelve-month EPS reached $1.64 on $311.3 million revenue. From Q4 2024's $0.43 EPS and $69.7 million revenue, growth is clear.

This target raise fits a pattern. Old Second has topped earnings estimates before, building trust. DA Davidson's move shows the bank's resilience post-merger.