Old Second Bancorp (OSBC)

Midwest regional bank Old Second Bancorp (NASDAQ:OSBC) met Wall Streets revenue expectations in Q4 CY2025, with sales up 29.5% year on year to $95.21 million. Its non-GAAP profit of $0.58 per share was 8.1% above analysts’ consensus estimates.

Company Overview

Dating back to 1871 as one of the Chicago area's longest-standing financial institutions, Old Second Bancorp (NASDAQ:OSBC) is an Illinois-based community bank offering deposit services, commercial and consumer loans, wealth management, and mortgage products through its 53 branch locations.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Old Second Bancorp's competitors include other regional banks operating in the Chicago metropolitan area and surrounding regions, such as First Midwest Bancorp (NASDAQ: FMBI), Wintrust Financial (NASDAQ: WTFC), MB Financial (NASDAQ: MBFI), and larger national banks like JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) that have significant presence in the market.

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Over the last five years, Old Second Bancorp grew its revenue at an incredible 21.1% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Old Second Bancorp’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 8.8% over the last two years was well below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Old Second Bancorp’s year-on-year revenue growth of 29.5% was excellent, and its $95.21 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 82% of the company’s total revenue during the last five years, meaning Old Second Bancorp barely relies on non-interest income to drive its overall growth.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, Old Second Bancorp’s efficiency ratio has swelled by 5 percentage points, going from 65.8% to 54%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

Old Second Bancorp’s efficiency ratio came in at 54% this quarter, beating analysts’ expectations by 36.2 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Old Second Bancorp to maintain its trailing one-year ratio with a projection of 54.7%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Old Second Bancorp’s EPS grew at a remarkable 14.5% compounded annual growth rate over the last five years. However, this performance was lower than its 21.1% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Old Second Bancorp, EPS didn’t budge over the last two years, a regression from its five-year trend. Given the merits in other parts of its business, we’re hopeful it can revert to earnings growth in the coming years.

In Q4, Old Second Bancorp reported adjusted EPS of $0.58, up from $0.44 in the same quarter last year. This print beat analysts’ estimates by 8.1%. Over the next 12 months, Wall Street expects Old Second Bancorp’s full-year EPS of $2.06 to grow 4.9%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Old Second Bancorp’s TBVPS grew at an impressive 7.7% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 14.7% annually over the last two years from $10.73 to $14.12 per share.

Over the next 12 months, Consensus estimates call for Old Second Bancorp’s TBVPS to grow by 13.6% to $16.05, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Old Second Bancorp has averaged a Tier 1 capital ratio of 12.8%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Old Second Bancorp has averaged an ROE of 12.8%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Old Second Bancorp has a decent competitive moat.

It was good to see Old Second Bancorp beat analysts’ EPS expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $21.46 immediately following the results.

Updated: January 21, 2026 at 11:51 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Old Second Bancorp.

There are a lot of things to like about Old Second Bancorp. To kick things off, its revenue growth was exceptional over the last five years. And while its projected EPS for the next year is lacking, its net interest income growth was exceptional over the last five years. On top of that, its admirable net interest margin a wonderful starting point for the overall profitability of the business.

Old Second Bancorp’s P/B ratio based on the next 12 months is 1.1x. Looking at the banking space right now, Old Second Bancorp trades at a compelling valuation. If you trust the business and its direction, this is an ideal time to buy.

Wall Street analysts have a consensus one-year price target of $22.92 on the company (compared to the current share price of $21.46), implying they see 6.8% upside in buying Old Second Bancorp in the short term.