OSBC
Old Second Bancorp, Inc.
$21.08
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 12.8% below fair value
You pay
$21.08
Bear
$16.92
Fair
$24.17
Bull
$31.43
Bear
$16.92
-19.7%
ROTCE 8.1% → 0.98x TBV
Fair
$24.17
+14.7%
ROTCE 10.8% → 1.62x TBV
Bull
$31.43
+49.1%
ROTCE 12.4% → 2.01x TBV
Key Value Driver
ROTCE (10.8%) vs. cost of equity (8.2%)
Implied Market Multiple
1.46x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $23.67 from 6 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $24.17 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Dividend-based valuation: $14.32 (41% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly