Old Second: 3 Key Takeaways for Long-Term Investors

Here are three key takeaways for long-term investors considering Old Second (OSBC):

1. Credit quality and capital allocation are crucial drivers of the bank's earnings power. In Q3 2026, Old Second reported a net income of $28.9 million. The company absorbed $12.7 million in net loan charge-offs, primarily from one commercial customer. However, underlying credit health improved as criticized loans fell by 38%. Classified loans have not been this low since before the COVID-19 pandemic.

2. The bank has been actively managing its share count and boosting dividends. During Q3 2026, Old Second repurchased 1.5 million shares and raised its dividend by 14%. Leadership plans to continue buying back stock while preserving capital for strategic M&A. The CEO stated that they aim to take out 5% of shares annually while still having the flexibility for desired M&A activities.

3. Interest rate trends and loan repricing are shaping the bank's outlook. High deposit competition may create near-term margin pressure, but upcoming asset repricing presents a natural counterbalance. Over the next four quarters, a significant portion of the bank's loans and investments are expected to reprice to current interest rates.

45% of the loan book and 25% of the securities portfolio are scheduled to reprice within the next 3-4 quarters. Furthermore, troubled loan balances are declining rapidly, and management is satisfied with the credit trajectory. A stabilization in core deposit trends and a slowdown in high-cost deposit attrition could enable Old Second to maintain exceptional margin performance in the year ahead.