Old Second Bancorp Greenlights $43.9M Buyback, Fueling Valuation Debate After Strong Quarter
In a move signaling confidence in its financial health and future prospects, Old Second Bancorp (NASDAQ: OSBC) has announced a new share repurchase program authorizing the buyback of up to $43.9 million of its common stock. The authorization, approved by the board following a non-objection from the Federal Reserve, comes on the heels of the company's solid fourth-quarter earnings report.
The announcement adds another layer to the investment narrative for the Illinois-based bank, which has delivered a total shareholder return of 86% over the past five years, including a 9.7% gain in the last 90 days. This pattern suggests a story of gradual, sustained momentum rather than volatile swings.
"The buyback is a clear signal from management that they believe the stock is undervalued," said Michael Thorne, a financial analyst at Crestview Advisors. "Combined with their strong capital position and consistent performance, it's a textbook method to return excess capital to shareholders and support per-share metrics."
Currently trading around $19.84, Old Second's stock sits below most analyst price targets, which cluster in the $23 to $24.50 range. A widely followed discounted cash flow (DCF) analysis suggests a fair value estimate of approximately $22.92, implying a potential upside. However, a separate, more aggressive DCF model points to a far higher intrinsic value near $45.83, highlighting the significant divergence in valuation methodologies and the assumptions about long-term growth and profitability.
"This isn't just a numbers game," countered Lisa Reynolds, a portfolio manager known for her skeptical stance on regional banks. "Sure, the math looks pretty on a spreadsheet. But this is a bank heavily exposed to the Illinois economy. One regional downturn, or a squeeze from digital competitors, and those beautiful growth projections evaporate. The market isn't stupid—that concentration risk is likely already baked into the discount."
David Chen, a long-term shareholder, offered a more measured perspective. "I've held OSBC for years because of its steady execution. The buyback is a logical next step. It doesn't guarantee short-term pops, but it aligns management's interests with ours and demonstrates prudent capital allocation. For me, it reinforces the long-term story."
The key question for investors now is whether the approved buyback and recent operational strength have adequately de-risked the stock, or if the geographic concentration and competitive threats justify its current valuation. The coming quarters will show if the repurchase program is executed aggressively and if the bank can maintain its margin and loan growth trajectory in a potentially shifting economic landscape.
This analysis is based on historical data, analyst forecasts, and publicly available information. It is intended for informational purposes only and does not constitute specific financial advice or a recommendation to buy or sell any security. Investors should conduct their own research and consider their individual circumstances before making any investment decisions.