Over the past six months, Old Second Bancorp has been a great trade, beating the S&P 500 by 5.9%. Its stock price has climbed to $24.54, representing a healthy 24.3% increase. This performance may have investors wondering how to approach the situation.
Is now still a good time to buy OSBC? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does Old Second Bancorp Spark Debate?
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.
Two Things to Like:
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
While banks generate revenue from multiple sources, investors view net interest income as a cornerstone — its predictable, recurring characteristics stand in sharp contrast to the volatility of one-time fees.
Old Second Bancorp’s net interest income has grown at a 29.2% annualized rate over the last five years, much better than the broader banking industry and faster than its total revenue. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.
One Reason to Be Careful:
Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Old Second Bancorp’s net interest income to rise by 2.5%, a deceleration versus its 16.4% annualized growth for the past two years. This projection is below its 16.4% annualized growth rate for the past two years.
Final Judgment
Old Second Bancorp’s positive characteristics outweigh the negatives, and with its shares beating the market recently, the stock trades at 1.3× forward P/B (or $24.54 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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