We have just entered into the last quarter of the year. This week, the potential superstock of the week is  Old Second Bancorp Inc (OSBC). ...

Weekly Superstock Scan 2 Oct 2017 - 6 Oct 2017: Old Second Bancorp Inc (OSBC)

/
0 Comments
We have just entered into the last quarter of the year. This week, the potential superstock of the week is Old Second Bancorp Inc (OSBC).
 



OSBC provides a wide range of financial services through its 26 banking locations located in Kane, Kendall, DeKalb, DuPage, LaSalle, Will and Cook counties in Illinois. These banking centers offer access to a full range of traditional retail and commercial banking services including treasury management operations as well as fiduciary and wealth management services. 


The Bank’s loan portfolios are comprised primarily of loans in the areas of commercial real estate, residential real estate, construction, general commercial and consumer lending. 

Technical



Since the start of the year, OSBC is trading in a tight range from $9.65 to $12.75. In the second half of the year, OSBC is trading in an even tighter range from $10.75 to $12.75. Last week, price broke above the range to close at $13.45 with slightly more than two times its average trading volume.

The surge in price began on 8 September with a series of green daily charts. However, there was no news or announcement made by the company during this period other than insider buying and selling. Hence I am not sure of the reason for the surge in price.

Fundamental



Including the current quarter, OSBC reported 8 consecutive quarters of year on year EPS growth. 

Acquisition of Chicago Talmer

OSBC acquired the Chicago branch of Talmer Bank and Trust, the banking subsidiary of Talmer Bancorp, Inc. in October last year. The acquisition includes approximately $82 million of deposits and approximately $238 million of loans

The acquisition of the Talmer Chicago office and integration helped drive solid loan growth and continues to be a catalyst for solid organic loan growth this year.

Other than increasing top and bottom line, the integration of Talmer brought additional benefits for OSBC. Veteran bankers Gary Collins and Hugh McLean will join the OSBC board. The downtown presence has also helped OSBC in its recruiting efforts and allowed OSBC to hire a couple of new Chicago-based lenders.

Reduction in Nonperforming Loan

OSBC has done a great job reducing is non-performing loan, especially in the area of commercial real estate. 


The value of 'Other Real Estate Owned' has also dropped drastically over the years from $66 million in 2013 to $11.7 million in the recent quarter.

Matrices
o Small float of  25.9 million shares. However, its average trading volume is even smaller at 83 thousand shares. Float approximately 312 times its average daily trading volume.
- OSBC is trading at 21.7 times its trailing twelve months EPS. 


Risk Factors/ Things I do not like

  • Not a Superstock Sector - My reason for listing OSBC as a potential superstock is 80% technical and 20% fundamental. The banking sector is not a superstock sector as it is unlikely to have a catalyst so strong to sustain a strong surge in price. OSBC resembles one of the earlier potential superstock that I blogged about earlier this year - ESXB, which I traded and exited with a small loss.
  • High Valuation - With a trailing P/E ratio of 21.7, the upside may be limited. Even though OSBC's EPS is still growing strongly, the growth rate may not be high enough to justify a higher P/E ratio.
  • Insider Selling - Since OSBC start to surge in price in mid-September, John Ladowicz (independent director) and William B. Skoglund (Chairman and Ex-CEO) started to sell off significant amount of OSBC shares. This signal a lack in confidence in the stock by insiders.


You may also like

No comments:

Powered by Blogger.

Disclaimer

All information in The Trader Diaries (TTD) does not constitute to investment advice or recommendation to buy, sell or hold. Readers are advised to consult their financial advisors prior to making any investment or pursuing any investment strategy. TTD will not be liable for any losses resulted from information published or shared from the blog.