OSBC heads into earnings with shorts rebuilding and insiders cashing out

Old Second Bancorp reports third-quarter results tomorrow, October 22, with a pair of signals pulling in opposite directions: short interest has climbed sharply over the past month even as options traders lean more bullish than they have been in weeks.

The short-interest build is the more striking of the two. Shares short have risen 37% over the past 30 days, reaching 5.2% of the free float, a level that puts OSBC into territory where positioning is worth watching ahead of a print. The weekly change is modest, less than 0.1%, suggesting the bulk of the build happened earlier in October and has since stabilised. Borrowing costs remain cheap at 0.51%, and availability is exceptionally loose at nearly 1,400% of short interest, meaning there is no squeeze pressure in the lending market and no shortage of supply for anyone still looking to add to the short side. Options traders, meanwhile, have moved the other way. The put/call ratio has dropped to 0.09, more than a standard deviation below its 20-day average of 0.13, and well off the 0.21 level seen in late September. That shift points to call demand outpacing put protection into the earnings date. The two positioning signals are not contradictory so much as they describe different audiences: the short book rebuilt in early October, and the options market has since tilted toward the upside.

The Street is broadly constructive. Raymond James upgraded OSBC to Strong Buy and raised its target to $30 on October 6, making it the most recent and most positive move from a named firm. Piper Sandler, which has been consistently Overweight on the name, last lifted its target to $30 in July. DA Davidson stays at Neutral with a $25 target, essentially in line with where the stock trades now at $25.10. The mean analyst target of $28.33 implies roughly 13% upside from current levels, a reasonable premium for a name that has rallied more than 26% year-to-date. Valuation remains undemanding: the price-to-earnings multiple is just above 10x and the price-to-book sits at 1.23x, both broadly consistent with a profitable community bank that the Street views as having room to run. The bull case centres on loan growth restarting and the EBG powersport lending acquisition adding a new revenue stream inside the Chicagoland footprint. Bears point to three consecutive quarters of deposit decline and the risk that operating expenses remain elevated longer than management has guided.

FDIC call report data, published by the Federal Deposit Insurance Corporation, provides some real-economy context ahead of the print. Net loans and leases were up 31% on Q2 of last year as of the June 2026 quarter, the most recent period available. Total deposits, by contrast, have fallen for three consecutive quarters. This dataset has not been tested long enough against OSBC's reported figures to carry a measured lead status, so the numbers are colour rather than a directional signal for tomorrow's release. They do, however, confirm the structural tension at the heart of the bear case: loan growth has been strong, but the funding base has been shrinking.

Insider activity is worth flagging separately. Over the past 90 days, insiders have sold a net 170,000 shares worth approximately $4.3 million, all via open-market transactions without declared 10b5-1 plans. Director Hugh McLean sold 50,000 shares across two transactions in early September at prices around $25.63 to $25.73. Vice Chairman Gary Collins sold a combined 21,000 shares in September. The September 30 cluster of small acquisitions by the CFO, CEO and two EVPs appears to be a routine employee-plan purchase rather than discretionary buying, given the tiny share counts and the absence of price data. The net picture is one of senior insiders reducing exposure at prices close to where the stock trades today.

The closing angle is straightforward: with earnings due tomorrow, the question is whether the loan growth trajectory visible in the FDIC data translates into a revenue beat, and whether management can offer any reassurance on the three-quarter deposit slide that has defined the bear case through 2026.