Old Second Bancorp, Inc. (OSBC) Bundle
Understanding Old Second Bancorp, Inc. (OSBC) Revenue Streams
Understanding Old Second Bancorp, Inc.’s Revenue Streams
The primary revenue sources for Old Second Bancorp, Inc. include net interest income and noninterest income. The breakdown of these revenue sources is as follows:
| Revenue Source | Q3 2024 ($ millions) | Q3 2023 ($ millions) | Change (%) |
|---|---|---|---|
| Net Interest Income | 60.6 | 63.0 | -3.8 |
| Noninterest Income | 10.6 | 9.9 | 7.1 |
| Total Revenue | 71.2 | 72.9 | -2.3 |
Year-over-year revenue growth rate shows a decline in net interest income driven by increased deposit interest expense. For the nine months ended September 30, 2024, net interest and dividend income totaled $180.1 million, down from $190.7 million in the same period of 2023, reflecting a decrease of 5.6%.
The contribution of different business segments to overall revenue is significant, with net interest income being the largest contributor. In Q3 2024, net interest income accounted for approximately 85% of total revenue, while noninterest income contributed about 15%.
Significant changes in revenue streams include:
- Reduction in net interest income due to higher deposit costs.
- Increase in noninterest income, attributed to higher wealth management fees and other income sources.
- Overall decline in total revenue compared to the previous year.
For a detailed view of revenue trends over the past year, the following table summarizes the revenue performance:
| Period | Net Interest Income ($ millions) | Noninterest Income ($ millions) | Total Revenue ($ millions) |
|---|---|---|---|
| Q3 2024 | 60.6 | 10.6 | 71.2 |
| Q3 2023 | 63.0 | 9.9 | 72.9 |
| 9M 2024 | 180.1 | 32.2 | 212.3 |
| 9M 2023 | 190.7 | 25.5 | 216.2 |
The analysis indicates a clear trend of declining net interest income influenced by rising deposit costs, while noninterest income has shown resilience and growth during the same period. This presents a mixed outlook for revenue streams moving forward.
A Deep Dive into Old Second Bancorp, Inc. (OSBC) Profitability
A Deep Dive into Old Second Bancorp, Inc.'s Profitability
Gross Profit Margin: As of September 30, 2024, the gross profit margin is not explicitly stated in the financial reports. However, net interest income for the third quarter of 2024 was $60.6 million, compared to $63.0 million for the same period in 2023, indicating a decrease of 3.97%.
Operating Profit Margin: Income before income taxes for the third quarter of 2024 was $29.9 million, down from $32.5 million in the third quarter of 2023. This results in an operating profit margin of 48.63% for Q3 2024, compared to 51.53% in Q3 2023.
Net Profit Margin: The net income for the third quarter of 2024 was $23.0 million, or $0.50 per diluted share, compared to $24.3 million, or $0.54 per diluted share, for the same quarter in 2023. This gives a net profit margin of 38.51% for Q3 2024 versus 38.54% for Q3 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Interest Income | $60.6 million | $63.0 million | -3.97% |
| Income Before Income Taxes | $29.9 million | $32.5 million | -8.00% |
| Net Income | $23.0 million | $24.3 million | -5.36% |
Trends in Profitability Over Time: For the nine months ended September 30, 2024, net income was $66.2 million, or $1.45 per diluted share, compared to $73.5 million, or $1.62 per diluted share for the same period in 2023, reflecting a decrease of 10.62% in net income year-over-year.
Comparison of Profitability Ratios with Industry Averages: The efficiency ratio for the third quarter of 2024 was 53.42%, compared to 48.15% in Q3 2023. The industry average efficiency ratio is approximately 55%, indicating that the company is performing slightly better than average despite the increase in expenses.
Analysis of Operational Efficiency: Noninterest expenses for the third quarter of 2024 were $39.3 million, an increase from $37.4 million in Q3 2023, representing a 5.05% increase. This increase was primarily driven by higher salary and employee benefits expenses.
| Period | Net Income | Noninterest Expenses | Efficiency Ratio |
|---|---|---|---|
| Q3 2024 | $23.0 million | $39.3 million | 53.42% |
| Q3 2023 | $24.3 million | $37.4 million | 48.15% |
| 9M 2024 | $66.2 million | $115.4 million | 53.00% |
| 9M 2023 | $73.5 million | $108.2 million | 49.00% |
Debt vs. Equity: How Old Second Bancorp, Inc. (OSBC) Finances Its Growth
Debt vs. Equity: How Old Second Bancorp, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, total liabilities stood at approximately $5.01 billion, which reflects a decrease from $5.07 billion at December 31, 2023. The company reported short-term borrowings of $335.0 million, down from $405.0 million at the end of 2023. Long-term debt, primarily consisting of subordinated debentures, was $59.4 million as of the same date.
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, was calculated at 7.57, significantly higher than the industry average of approximately 1.25. This high ratio indicates a greater reliance on debt financing relative to equity.
Recent Debt Issuances
In the second quarter of 2021, the company issued $60.0 million in Fixed-to-Floating Rate Subordinated Notes due April 15, 2031, with an initial fixed interest rate of 3.50%. Additionally, the company redeemed $45.0 million in senior notes on June 30, 2023, which had an effective cost of 12.85%.
Credit Ratings
The company's credit rating remains stable, with recent evaluations reflecting a solid financial position. However, specific rating details are not disclosed in the latest reports. The overall capital ratios indicate a well-capitalized status, with a Tier 1 leverage ratio of 11.46% as of September 30, 2024.
Equity Funding
As of September 30, 2024, total stockholders’ equity was approximately $661.4 million, up from $577.3 million at the end of 2023. This increase was primarily due to net income of $66.2 million for the first nine months of 2024. The company maintains a balanced approach towards financing, leveraging equity growth alongside debt management strategies.
| Indicator | September 30, 2024 | December 31, 2023 | Industry Average |
|---|---|---|---|
| Total Liabilities | $5.01 billion | $5.07 billion | N/A |
| Short-term Borrowings | $335.0 million | $405.0 million | N/A |
| Long-term Debt | $59.4 million | N/A | N/A |
| Debt-to-Equity Ratio | 7.57 | N/A | 1.25 |
| Total Stockholders’ Equity | $661.4 million | $577.3 million | N/A |
| Net Income (9M 2024) | $66.2 million | $73.5 million (9M 2023) | N/A |
Assessing Old Second Bancorp, Inc. (OSBC) Liquidity
Assessing Old Second Bancorp, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.04, indicating that the company has sufficient current assets to cover its current liabilities.
Quick Ratio: The quick ratio stood at 0.93, suggesting that even when excluding inventory, the company is close to covering its short-term obligations.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was calculated as follows:
| Metric | Amount (in thousands) |
|---|---|
| Current Assets | $1,563,000 |
| Current Liabilities | $1,507,000 |
| Working Capital | $56,000 |
The working capital has shown a slight decrease from $62,000 as of December 31, 2023, primarily due to a decrease in total loans.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, reveal the following:
| Cash Flow Category | Cash Flow (in thousands) |
|---|---|
| Net Cash from Operating Activities | $107,537 |
| Net Cash from Investing Activities | $63,400 |
| Net Cash from Financing Activities | ($155,300) |
The net cash provided by operating activities increased from $87,321 in the same period of 2023, indicating improved operational efficiency.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company maintained cash and cash equivalents of $115.8 million, an increase from $100.1 million as of December 31, 2023. This increase was mainly due to a decrease in loan and securities portfolios.
The total deposits were reported at $4.47 billion, a decrease of $105.3 million from December 31, 2023. However, the company managed to maintain liquidity through various sources, including:
- Securities sold under repurchase agreements totaling $53.9 million.
- Short-term FHLBC borrowings of $335.0 million.
- Availability of a $30.0 million undrawn line of credit.
The company’s overall liquidity remains strong, supported by a diversified funding strategy and effective cash management practices.
Is Old Second Bancorp, Inc. (OSBC) Overvalued or Undervalued?
Valuation Analysis
To evaluate the financial health of the company, we will analyze key valuation metrics including the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 11.50, calculated from the latest earnings per share of $1.45 for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.20, based on a book value of $13.00 per share and the current stock price of $15.60.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 8.75, with an enterprise value of $480 million and EBITDA of $54.8 million.
Stock Price Trends
Over the past 12 months, the stock price has shown a fluctuating trend:
- 12 months ago: $14.50
- 6 months ago: $16.20
- Current price: $15.60
Dividend Yield and Payout Ratios
The company offers a dividend yield of 1.92%, with a dividend payout ratio of 30% based on the current dividend of $0.15 per share.
Analyst Consensus on Stock Valuation
Analysts currently have a consensus rating of Hold on the stock, with 60% recommending to hold, 30% are advising to buy, and 10% suggest to sell.
| Metric | Value |
|---|---|
| P/E Ratio | 11.50 |
| P/B Ratio | 1.20 |
| EV/EBITDA Ratio | 8.75 |
| Current Stock Price | $15.60 |
| 12-Month Stock Price Change | $14.50 to $15.60 |
| Dividend Yield | 1.92% |
| Dividend Payout Ratio | 30% |
| Analyst Consensus | Hold |
Key Risks Facing Old Second Bancorp, Inc. (OSBC)
Key Risks Facing Old Second Bancorp, Inc.
Old Second Bancorp, Inc. faces a variety of internal and external risks that can significantly impact its financial health. Below are the key risk factors identified as of 2024:
Industry Competition
The banking industry is highly competitive, with numerous institutions vying for market share. As of September 30, 2024, total loans were reported at $3.99 billion, reflecting a decrease of $51.9 million from December 31, 2023. The competitive landscape can pressure net interest margins and affect loan growth.
Regulatory Changes
Old Second Bancorp is subject to various regulatory requirements, including capital ratios. As of September 30, 2024, the Tier 1 capital leverage ratio was 11.46%, and the total capital ratio was 14.45%, both exceeding regulatory minimums. Nevertheless, changes in regulations can impose additional compliance costs and operational constraints.
Market Conditions
Interest rate fluctuations pose a significant risk. In the third quarter of 2024, net interest and dividend income decreased to $60.6 million from $63.0 million in the same quarter of the previous year, primarily driven by increased deposit interest expenses. Such conditions can directly affect profitability and liquidity.
Operational Risks
Operational risks include potential failures in internal processes, systems, or external events. The bank recorded a net provision for credit losses of $2.0 million in the third quarter of 2024, influenced by credit downgrades. The need for robust risk management systems is critical to mitigate these risks.
Financial Risks
Liquidity is a key concern, especially with total deposits reported at $4.47 billion as of September 30, 2024, down $105.3 million from December 31, 2023. The bank's reliance on short-term funding sources, such as repurchase agreements totaling $53.9 million, increases vulnerability to market volatility.
Strategic Risks
Strategic decisions, including acquisitions and market expansion, carry inherent risks. The anticipated acquisition of five branches is set to close in late 2024, which could impact operational efficiency and financial stability.
Mitigation Strategies
The bank has implemented several strategies to mitigate these risks, including:
- Maintaining a strong capital position with Tier 1 capital ratios exceeding regulatory requirements.
- Active management of liquidity and interest rate risk through a diversified funding strategy.
- Continuous monitoring of credit quality and proactive measures to manage the loan portfolio.
| Risk Factor | Description | Current Metrics |
|---|---|---|
| Industry Competition | High competition affecting loan growth | Total Loans: $3.99 billion (decrease of $51.9 million) |
| Regulatory Changes | Compliance with capital ratios | Tier 1 Leverage Ratio: 11.46%, Total Capital Ratio: 14.45% |
| Market Conditions | Interest rate fluctuations impacting net income | Net Interest Income: $60.6 million (decrease from $63.0 million) |
| Operational Risks | Failures in internal processes | Net Provision for Credit Losses: $2.0 million |
| Financial Risks | Liquidity concerns due to deposit decline | Total Deposits: $4.47 billion (decrease of $105.3 million) |
| Strategic Risks | Risks associated with acquisitions | Pending Acquisition of Five Branches |
Future Growth Prospects for Old Second Bancorp, Inc. (OSBC)
Growth Opportunities
Future growth prospects for the financial institution are shaped by several key drivers, including market expansions, product innovations, and strategic acquisitions.
Key Growth Drivers
- Market Expansions: The company is focusing on expanding its footprint by acquiring additional branches. The acquisition of five new branches is expected to close in late 2024, which will enhance the bank's presence in the local markets.
- Product Innovations: New banking products are being developed to meet the evolving needs of customers, particularly in digital banking services. This includes enhancements in mobile banking and online customer services.
- Strategic Acquisitions: The bank has engaged in strategic acquisitions, contributing to its asset base and customer reach. The integration of the First Merchants acquisition is expected to boost the bank's operational capacity and market share.
Future Revenue Growth Projections
Future revenue growth is projected to be influenced by the following financial metrics:
| Metric | 2024 Estimate | 2025 Projection | 2026 Projection |
|---|---|---|---|
| Net Interest Income | $240 million | $260 million | $280 million |
| Noninterest Income | $45 million | $50 million | $55 million |
| Total Revenue | $285 million | $310 million | $335 million |
Earnings Estimates
The earnings estimates for the upcoming years are as follows:
| Year | Net Income (in millions) | Earnings per Share (EPS) |
|---|---|---|
| 2024 | $66.2 | $1.45 |
| 2025 | $72.0 | $1.55 |
| 2026 | $78.0 | $1.65 |
Strategic Initiatives and Partnerships
Strategic initiatives that may drive future growth include:
- Partnerships with Fintechs: Collaborations with technology firms are being pursued to enhance service delivery and operational efficiency.
- Community Engagement Programs: Initiatives aimed at strengthening community ties and increasing brand loyalty are being rolled out.
- Focus on Sustainability: Environmental sustainability programs are being integrated into business practices to attract eco-conscious consumers.
Competitive Advantages
The company possesses several competitive advantages that position it well for growth:
- Strong Capital Position: As of September 30, 2024, total stockholders’ equity was $661.4 million, an increase of $84.1 million from December 31, 2023.
- Regulatory Capital Ratios: The bank's Tier 1 capital leverage ratio was 11.46%, exceeding the regulatory requirement of 8%.
- Robust Liquidity Metrics: Cash on hand liquidity totaled $115.8 million as of September 30, 2024, reflecting a strong liquidity position to meet operational needs.
The company's focus on enhancing its operational capabilities and expanding its market reach will be critical as it navigates the competitive landscape in the financial services sector.
Old Second Bancorp, Inc. (OSBC) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Old Second Bancorp, Inc. (OSBC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Old Second Bancorp, Inc. (OSBC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Old Second Bancorp, Inc. (OSBC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.