On Thursday, Old Second Bancorp (NASDAQ:OSBC) reported its third-quarter earnings for 2024, with an operating earnings per share (EPS) of $0.52, surpassing the consensus estimate of $0.47 and the Piper Sandler estimate of $0.48.
The reported EPS was $0.50, which included a negative $1.0 million mortgage servicing rights fair value adjustment, $0.5 million in likely non-recurring gains, and $0.5 million of costs related to branch acquisitions.
The outperformance against consensus was attributed to a combination of stronger net interest income (contributing an additional $0.01 to EPS) and core fee income (also adding $0.01 to EPS), as well as a lower loan loss provision (adding $0.02 to EPS) and tax rate (contributing another $0.02 to EPS). These gains were slightly offset by increased operating expenses, which reduced EPS by $0.01.
Despite pre-provision net revenue (PPNR) being 2% below expectations and non-performing assets (NPAs) showing a slight increase, Piper Sandler views this as a strong quarter for Old Second Bancorp. The firm highlighted positive aspects such as robust revenue, net recoveries, and a decrease in classified loan levels.
Additionally, Old Second Bancorp continued to exhibit high profitability, with a return on assets (ROA) of 1.6% and return on tangible common equity (ROTCE) of 17.1% for the third quarter. This performance has led to significant growth in tangible book value (TBV) and tangible common equity (TCE).
Piper Sandler anticipates that Old Second Bancorp's shares will moderately outperform on Friday, based on the initial assessment that suggests slight long-term sustainable (LSD) upside to estimates.
In other recent news, Old Second Bancorp has been active in financial developments. The company announced a quarterly cash dividend of $0.06 per share, reflecting its commitment to shareholder value.
The bank also reported Q2 2024 financial results, showing a net income of $21.9 million or $0.48 per diluted share, and loan growth in commercial, lease, and construction portfolios totaling $7.2 million, despite a decrease in average and total deposits.
The company's third-quarter 2024 financial results are soon to be released, with an earnings call scheduled to discuss the quarterly performance. DA Davidson, an analyst firm, recently downgraded Old Second Bancorp from "Buy" to "Neutral," adjusting its price target to $17 from $19, due to the bank's less favorable asset-sensitive balance sheet position and increased net interest margin pressure.
Despite these challenges, Old Second Bancorp remains optimistic about future loan growth and investment opportunities, maintaining a focus on managing liquidity, building capital, and optimizing the balance sheet. The company is also considering mergers and acquisitions activity, as long as the pricing is disciplined. These are recent developments for Old Second Bancorp.
InvestingPro Insights
Old Second Bancorp's strong third-quarter performance is further supported by recent InvestingPro data and tips. The company's P/E ratio of 8.4 suggests that it may be undervalued compared to its peers, which aligns with the positive earnings surprise reported. Additionally, the company's high return over the last decade, as noted in one of the InvestingPro Tips, reinforces its consistent performance and may explain the robust ROA and ROTCE figures mentioned in the article.
InvestingPro data shows that Old Second Bancorp has maintained dividend payments for 9 consecutive years, indicating financial stability and a commitment to shareholder returns. This is particularly noteworthy given the company's impressive operating income margin of 45.08% for the last twelve months as of Q2 2024, which supports its ability to sustain dividend payments.
While the article highlights the company's strong performance, it's worth noting that InvestingPro Tips also point out that 2 analysts have revised their earnings downwards for the upcoming period. This could suggest some caution for future expectations, despite the current positive results.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Old Second Bancorp, providing a deeper insight into the company's financial health and market position.
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