Old Second Bancorp Inc. Strategy and Business Model

Executive Overview

Old Second is a northern Illinois bank holding company headquartered in Aurora, Illinois. Through Old Second National Bank, it provides commercial lending, business banking, treasury management, consumer deposits and loans, mortgage products, and wealth management. The company operates in the competitive middle ground between very large national banks and smaller local institutions: it is large enough to offer a broad banking product set, but still positions itself around local relationships, market knowledge, and credit decision-making close to the customer. Its strategic focus is concentrated rather than national, with the core footprint centered on the Chicago metropolitan area, especially the western suburbs and adjacent communities. That concentration gives Old Second density in its chosen markets, but it also ties performance to local economic conditions, deposit competition, and commercial real estate trends in the region. The bank traces its roots to 1871, while the holding company structure dates to 1981. In recent years, Old Second has also used selective acquisitions, most notably West Suburban Bancorp, to deepen its presence in attractive Chicagoland markets rather than pursue broad geographic sprawl. For FY2024, reported revenue was #N/A.

Old Second at a Glance

Logo
Common name	Old Second
Full legal name	Old Second Bancorp, Inc.
Headquarters	Aurora, Illinois, United States
Ownership	Public company; Nasdaq-listed; no controlling shareholder disclosed in the company’s 2024 proxy statement
Ticker	OSBC
Exchange	NASDAQ
Market Cap	$1.16B
Revenue (FY2024)	#N/A
Founding / major historical milestones	Roots date to 1871; holding company formed in 1981; expanded over time across northern Illinois; announced acquisition of West Suburban Bancorp in 2021 and completed the transaction in early 2022
Industry or industries	Banking; financial services; commercial banking; retail banking; wealth management
Key products or services	Commercial loans, commercial real estate lending, business deposits, treasury management, consumer banking, mortgage lending, wealth management
Geographic footprint	Northern Illinois, centered on Aurora, the Chicago metropolitan area, and the western suburbs
Business segments as officially reported	One reportable segment: banking
Company website	https://www.oldsecond.com/

1. What Is the Strategy of Old Second?

Old Second does not package its strategy into a single public slogan, but a clear pattern emerges from its 2023 Form 10-K and early-2024 earnings materials: grow relationship banking in selected northern Illinois markets, defend and deepen the deposit base, maintain credit discipline, and use selective acquisitions to add market density where the economics are attractive.

1a. What is the winning aspiration of Old Second?

Old Second’s winning aspiration appears to be to become the primary relationship bank for businesses and households in its chosen Illinois markets while producing consistent profitability, strong asset quality, and capital generation. The company has not recently framed its public strategy around a single national market-share target or a transformative scale ambition. Instead, winning appears to mean profitable growth with discipline: more commercial relationships, more core deposits, better fee-income mix, and strong returns without compromising underwriting standards.
1b. Where does Old Second play?

Old Second plays in northern Illinois banking, with a footprint concentrated in Aurora, the Chicago metropolitan area, and the western suburbs. Its core product and customer focus is on commercial banking, commercial real estate, business deposits and treasury services, consumer banking, mortgage, and wealth management. It is not trying to be a national digital bank or a broad multi-state super-regional. The field is narrower: local and regional banking relationships in markets where branch presence, banker networks, and local credit judgment can matter.
1c. How does Old Second plan to win?

Old Second’s likely recipe for winning is a relationship-banking model that combines local presence with a fuller product set than many smaller community banks can offer. That means competing on responsiveness, banker accessibility, treasury and deposit capabilities for business customers, and disciplined credit execution. Against national banks, the pitch is usually local decision-making and higher-touch service. Against smaller banks, the pitch is broader capabilities, more scale, and a stronger operating platform. Selective acquisitions also support this model by adding density rather than scattering the franchise across too many geographies.
1d. What capabilities must Old Second have in place?

To make that strategy work, Old Second needs strong commercial and real-estate underwriting, portfolio monitoring, deposit-gathering capability, treasury-management sales, and relationship-manager productivity. It also needs sound interest-rate and liquidity management, because funding cost and balance-sheet structure are central to bank earnings. In addition, the company needs integration capability for acquisitions, scalable operations, and enough digital banking functionality to remain credible with both businesses and consumers.
1e. What management systems does Old Second require?

As a regulated bank, Old Second requires management systems that reinforce discipline rather than just growth. These include formal credit approval and review processes, allowance-for-credit-loss methodologies, liquidity and interest-rate-risk governance, regulatory compliance controls, internal audit, and capital planning. Operationally, it also needs lender and branch productivity metrics, deposit-cost monitoring, customer profitability analysis, and incentive structures that balance production with risk quality. For a bank of this type, execution depends as much on risk systems and asset-liability management as on frontline sales effort.

2. What Are the Current Strategic Initiatives of Old Second?

Based on Old Second’s 2023 annual disclosures and early-2024 public commentary, the most visible strategic initiatives are practical rather than flashy. They are centered on funding, credit, market density, and relationship growth.

Protecting and deepening the deposit franchise. In the higher-rate environment that followed the Federal Reserve’s rate increases, deposit pricing and customer retention became more strategic. Old Second has emphasized core deposits, especially operating and relationship accounts, because low-cost and stable funding is one of the main ways a regional bank protects margin.
Growing commercial banking relationships in northern Illinois. The company continues to emphasize commercial and industrial lending, commercial real estate lending, and related treasury-management relationships in its core markets. For a bank like Old Second, a business relationship is more valuable than a stand-alone loan because it can bring deposits, payments activity, and fee income.
Getting more value from expanded Chicagoland density. The West Suburban combination broadened Old Second’s footprint in attractive western-suburb markets. The strategic task after a deal like that is not only cost integration but also customer retention, cross-sell, and better market coverage.
Maintaining conservative credit discipline. With the broader banking sector facing pressure around office exposure, commercial real estate concentrations, and higher funding costs, Old Second’s public posture has remained credit-conscious. That means active portfolio monitoring, reserve management, and disciplined underwriting rather than growth at any price.
Diversifying earnings with fee income. Wealth management and other noninterest revenue streams matter because they make earnings less dependent on pure spread income. For a smaller regional bank, this does not replace net interest income, but it improves resilience.
Preserving capital flexibility. Old Second appears to be balancing organic growth, shareholder returns, and optionality for future acquisitions or branch opportunities. In a consolidating banking industry, maintaining that flexibility is itself a strategic choice.

3. What Is the Business Model of Old Second?

What customers actually buy

Business customers buy credit, transaction banking, and liquidity management. That includes lines of credit, term loans, commercial real estate financing, treasury-management services, and deposit accounts. Consumer customers buy checking and savings products, certificates of deposit, residential and consumer loans, digital banking access, and, for some customers, wealth-management services.

Recurring versus one-time economics

Most of Old Second’s economics are recurring or repeat-driven. Net interest income is generated from ongoing loan balances funded by deposits and other liabilities. Service charges, account fees, card-related fees, and wealth-management fees also tend to recur as long as the customer relationship remains in place. More episodic revenue sources can include mortgage origination-related income or gains tied to specific transactions, but those are not the core of the model.

How pricing power works

Old Second’s pricing power is real but limited by market competition and interest rates. On the asset side, loan pricing depends on borrower risk, relationship depth, collateral, and prevailing rates. On the funding side, deposit pricing is constrained by competition from other banks, money-market products, and digital alternatives. In practice, the best pricing power comes from relationship breadth: a customer using loans, deposits, treasury services, and wealth products is less likely to shop purely on headline rate.

Why the business mix matters

The mix between commercial loans, consumer banking, securities, and fee businesses matters a great deal. Commercial banking usually drives higher relationship value and better cross-sell opportunities, but it can also bring concentration risk. Consumer deposits are strategically valuable because they can be a steadier and lower-cost funding source. Wealth management and other fee lines provide diversification when spread income is under pressure.

What drives margins and cash generation

For banks, gross margin is not the most useful lens. The more relevant drivers are net interest margin, provision expense, noninterest income, and the efficiency ratio. Old Second’s profitability depends on earning-asset yields, deposit costs, credit losses, expense control, and the size and mix of noninterest-bearing deposits. Traditional free-cash-flow analysis is less central for banks than for industrial companies; retained earnings, regulatory capital generation, dividend capacity, and balance-sheet strength are the more important measures of financial flexibility.

Revenue model

Old Second’s revenue model is mainly spread-based. It earns interest income on loans and securities and pays interest on deposits and borrowings, with the difference producing net interest income. That is supplemented by fee income from wealth management, service charges, and other banking activities. It is therefore a recurring relationship model rather than a transaction-only model.

4. What Products and Services Does Old Second Sell?

Old Second offers a conventional but strategically important range of banking products. The key point is not product novelty; it is how these products fit together around long-term customer relationships.

Commercial and industrial lending. Loans to small and mid-sized businesses for working capital, equipment, expansion, and general corporate purposes. This is a core growth area because it can anchor broader business relationships.
Commercial real estate and construction lending. Financing for income-producing properties, owner-occupied properties, and related development activity. This is often a major earning-asset category for regional banks, but it requires close risk management.
Business deposits and treasury management. Operating accounts, cash management, online banking, payments, and related treasury services. Strategically, these products are crucial because they improve deposit quality and relationship stickiness.
Consumer banking. Checking, savings, money market accounts, certificates of deposit, and related personal banking services. These products may not always generate the highest margins directly, but they support funding stability.
Residential mortgage and consumer lending. Mortgage and other household credit products help Old Second deepen retail relationships, even if the revenue contribution is smaller and more cyclical than core commercial banking.
Wealth management and trust services. Advisory and fiduciary services provide fee income diversification and can be especially valuable for affluent households, business owners, and multi-product customers.

Economically, the most important offerings are the ones tied to the balance sheet: commercial loans, commercial real estate loans, and deposits. Strategically, treasury management and wealth management matter because they increase retention and raise customer lifetime value.

5. What Are the Key Competitors or Peers of Old Second?

Old Second’s closest competition comes from other banks serving northern Illinois and the broader Chicago market. Some are direct community and regional-bank peers; others are much larger national players competing for the same business and household relationships.

Wintrust Financial — A larger Chicago-area banking company with a strong community-bank orientation, extensive local presence, and meaningful specialty capabilities. It is one of the most relevant direct comparables.
Byline Bancorp — A Chicago-focused commercial bank serving small and mid-sized businesses, commercial real estate clients, and retail customers. It overlaps with Old Second in market and customer type.
Old National Bancorp — A larger Midwest regional bank with a stronger Chicago presence following its merger with First Midwest. It competes for commercial, treasury, and consumer relationships.
First Busey Corporation — An Illinois-based bank with commercial, consumer, and wealth capabilities. It is a reasonable peer in business mix and regional orientation.
Associated Banc-Corp — A Midwest regional bank that competes for business banking and middle-market relationships in and around the Chicago area.
Huntington Bancshares — A super-regional bank with substantial business banking resources and a growing Midwest commercial footprint.
JPMorgan Chase — A national-scale competitor with enormous brand, branch, treasury, and digital capabilities. It is especially formidable in consumer deposits and middle-market banking.
Bank of America — Another national bank competing for affluent households, commercial clients, and treasury-management relationships in Chicago.

Old Second also faces substitutes beyond traditional banks, including credit unions, brokered cash products, and digital banking platforms that compete for deposits. For many customers, especially businesses, however, the real competitive decision still hinges on relationship quality, response time, local knowledge, and treasury capabilities.

6. What Is the Marketing Strategy of Old Second?

Old Second’s marketing strategy appears to be relationship-led rather than mass-market-led. For a bank of its size and footprint, brand matters, but it is not likely the primary differentiator in the way it would be for a national retail bank. The bank’s commercial engine depends more on banker relationships, local reputation, and cross-sell than on broad-based consumer advertising.

Local brand visibility. Branch presence, market familiarity, and community recognition support trust, especially in consumer banking and small-business banking.
Relationship marketing to businesses. Commercial growth is likely driven mainly through relationship managers, treasury officers, and referrals rather than through scaled digital lead generation.
Cross-sell inside the franchise. Once Old Second wins a deposit or credit relationship, marketing efforts can shift toward treasury management, wealth management, mortgage, and additional household accounts.
Digital convenience as a support requirement. Digital banking is important, but for Old Second it appears more like a necessary capability than the center of the brand proposition.

Overall, marketing looks like a supporting capability that reinforces sales and retention. The company’s competitive edge is more likely to come from service model, banker quality, underwriting, and local density than from heavy advertising spend.

7. What Are the Key Customer Segments of Old Second?

Old Second serves several customer groups, but the earnings profile appears more commercially oriented than that of a pure retail bank.

Small and mid-sized businesses. This is a core segment because these clients often need a combination of loans, deposits, and treasury services, which makes them high-value relationship customers.
Commercial real estate borrowers and property operators. This is an important segment for many regional banks and appears strategically meaningful for Old Second as well, though it also increases the importance of sector-specific credit discipline.
Retail households. Consumers provide checking, savings, certificates of deposit, mortgage demand, and other household banking relationships. Even when consumer banking is not the main earnings engine, it is vital to funding stability.
Affluent households and business owners. These customers are especially relevant for wealth-management and trust relationships and can be highly valuable when combined with commercial banking ties.
Existing multi-product customers. A practical segment for Old Second is not defined only by industry but by relationship depth. Customers using multiple products are usually more profitable and more stable.

The franchise is reasonably diversified across commercial and consumer customers, but economically it appears more dependent on business banking and related deposits than on pure retail activity alone.

8. What Is the Sales Model of Old Second?

Old Second primarily sells directly through its own bankers, branches, and digital channels. It is not a partner-led or distributor-led model. The main sales channels differ by customer type.

Commercial relationship managers. Business clients are typically won and expanded through lender-led and treasury-led coverage. This channel supports higher-value, more customized sales.
Branch-based consumer sales. Branch staff remain important for account opening, service, local visibility, and household relationship deepening in the bank’s core markets.
Digital and online banking. Digital account access, payments, and self-service tools are increasingly necessary to acquire and retain customers, even if Old Second is not trying to be a digital-only bank.
Referral-based cross-sell. Commercial, consumer, mortgage, and wealth teams can feed one another. That matters because the economics of a banking relationship improve materially when several products are bundled.

This channel structure has strategic consequences. It tends to create higher customer intimacy and better retention, but growth is constrained by banker productivity, hiring, and branch-market density. That makes talent quality and local execution especially important.

9. In What Geographies Does Old Second Operate?

Old Second operates overwhelmingly in northern Illinois. Its physical and commercial footprint is centered on Aurora, the Fox Valley, the Chicago metropolitan area, and the western suburbs. The company’s branch network, customer relationships, and commercial banking efforts are concentrated in those markets rather than spread across many states.

That geographic focus is strategically significant. It creates local density, better market knowledge, and the possibility of stronger brand recognition in selected communities. It also means performance is more exposed to the economic health of the Chicagoland region, local deposit competition, and regional commercial real estate conditions than a more geographically diversified bank would be.

Old Second is therefore better understood as a focused regional banking franchise than as a broadly national financial institution.

10. Who Are the Owners of Old Second?

Old Second is a publicly traded bank holding company listed on Nasdaq under the ticker OSBC. As of the company’s 2024 proxy statement, it did not disclose a controlling shareholder. Ownership appears to be broadly distributed among institutional investors, other public-market shareholders, and insiders, which is typical for a small-cap regional bank.

11. How Is Old Second Organized?

Legally, Old Second Bancorp, Inc. is the holding company, and Old Second National Bank is the principal operating subsidiary. Officially, the company reports one reportable segment: banking.

Practically, however, the business is managed through several operating domains. These include commercial banking, consumer and branch banking, mortgage and other consumer lending, treasury management, wealth management, and the core support functions that every regulated bank requires: finance, risk, credit administration, compliance, operations, technology, and audit.

This distinction matters. The official reporting structure is simple, but the day-to-day operating model is multi-disciplinary and requires coordination across lenders, branch teams, treasury specialists, credit officers, and centralized control functions.

12. How Does Old Second Operate?

Old Second operates like a traditional regional bank, but its day-to-day value creation depends on a few specific activities being executed well.

Gathering deposits and funding. The bank collects deposits from consumers and businesses through branches, relationship managers, and digital channels. Funding quality is crucial because it directly affects net interest margin.
Originating and servicing loans. Commercial and consumer teams source, underwrite, book, and monitor loans. Credit quality and pricing discipline are central to this process.
Running transaction banking. The bank processes payments, supports cash management, and provides everyday banking services. These activities are operationally heavy but strategically important because they help retain customers.
Managing the balance sheet. Old Second has to manage interest-rate sensitivity, liquidity, securities holdings, capital, and the relationship between asset yields and funding costs. This is especially important in volatile rate environments.
Controlling risk and meeting regulatory requirements. Compliance, internal controls, anti-money-laundering procedures, credit review, and exam readiness are not back-office details; they are core operating requirements for a bank.

The main operating bottlenecks for a bank like Old Second are usually not manufacturing constraints but balance-sheet constraints: deposit cost pressure, credit deterioration, regulatory burden, and the need to keep technology and service quality competitive without losing operating leverage.

13. What Are the Growth Opportunities for Old Second?

Old Second’s most plausible growth opportunities are tied to share gains and relationship depth within its existing footprint rather than geographic leapfrogging.

Winning more middle-market and small-business relationships in Chicagoland. This is the clearest path because commercial clients can bring loans, deposits, treasury services, and wealth opportunities.
Deepening treasury management and operating-account penetration. In a higher-rate environment, strong treasury capabilities can improve both growth and funding quality.
Cross-selling inside the expanded western-suburbs footprint. After the West Suburban deal, there is an opportunity to get more revenue per customer and more density per market.
Growing fee income. Wealth management and other noninterest businesses can modestly improve diversification and reduce earnings volatility tied to net interest margin.
Selective M&A or branch transactions. Industry consolidation continues to create openings for well-capitalized regional banks that want density, talent, or deposits in adjacent markets.
Operational and digital improvements. Better onboarding, faster loan workflows, and stronger digital service can improve both retention and efficiency.

The main constraints are equally clear: intense deposit competition, interest-rate volatility, commercial real estate stress, regulatory capital requirements, and the challenge of recruiting and retaining strong commercial bankers in competitive markets.

14. What Is the History of Old Second?

Old Second’s roots go back to 1871, giving the franchise a long history in Illinois banking. The current holding company, Old Second Bancorp, Inc., was formed in 1981. Over time, the company expanded beyond its original Aurora base through a combination of organic branch growth and selective acquisitions in northern Illinois.

A major recent milestone was the acquisition of West Suburban Bancorp, announced in 2021 and completed in early 2022. That transaction materially expanded Old Second’s presence in DuPage County and the western suburbs of Chicago, strengthening the company’s market density in one of its most important regions.

Viewed over the long arc of its history, Old Second has generally followed a focused regional-banking path: preserve local identity, expand selectively in adjacent Illinois markets, and avoid trying to become a broad national consolidator.

15. What Are the Key Assets of Old Second?

For a bank like Old Second, the most important assets are financial and relational rather than industrial.

The loan portfolio. Commercial, commercial real estate, residential, and other loans are the main earning assets and the primary engine of interest income.
The deposit franchise. Core business and consumer deposits are strategically valuable because they provide funding, customer stickiness, and potential pricing advantage versus wholesale funding.
The branch and office network in northern Illinois. Physical presence still matters in regional banking because it supports trust, visibility, and local market access.
The national bank charter and regulatory infrastructure. Banking licenses, compliance systems, and regulatory standing are real barriers to entry.
Customer relationships and banker talent. In practice, a regional bank’s customer base and relationship teams are among its most valuable assets, especially in commercial banking and wealth management.
Data and operating systems. Core banking, digital access, and customer information systems are essential operating assets even if they are less visible than loans and branches.

Asset intensity in banking shows up differently than in manufacturing. Returns depend less on plant utilization and more on asset mix, funding structure, credit performance, and the quality of the deposit base.

16. What Is the Finance Strategy of Old Second?

Old Second’s finance strategy is bank-specific and appears relatively conservative. The company must balance growth, liquidity, capital, and shareholder returns within a regulated framework.

First, the funding strategy matters as much as the asset strategy. Old Second needs to defend deposit quality and manage the cost of funds carefully, especially in a competitive rate environment. Second, capital preservation remains central. A bank cannot simply maximize growth without regard to regulatory capital, credit reserves, and liquidity buffers.

Third, earnings quality matters more than simple revenue growth. Management attention is likely focused on net interest margin, provision expense, noninterest income, and the efficiency ratio rather than on volume growth alone. Fourth, Old Second appears to use a balanced capital-allocation approach: support organic loan and deposit growth, maintain dividends, and keep flexibility for buybacks or acquisitions when the economics make sense.

In short, the finance strategy appears designed to support steady compounding rather than aggressive leverage. That is consistent with the company’s broader positioning as a disciplined regional bank rather than a high-risk balance-sheet story.

17. What Major Acquisitions Has Old Second Made?

Acquisitions have mattered to Old Second, but the company does not appear to follow a serial national roll-up model. Its M&A behavior has been more selective and market-density oriented.

The clearest recent example is West Suburban Bancorp, parent of West Suburban Bank. Old Second announced the transaction in 2021 and completed it in early 2022. Strategically, the deal expanded Old Second’s presence in DuPage County and Chicago’s western suburbs, added deposits and customer relationships, and increased scale in markets where the company already wanted to compete more aggressively.

That deal illustrates how M&A fits Old Second’s strategy: not as a quest for national footprint, but as a way to add density, talent, and local market share in adjacent Illinois markets. Publicly observable behavior suggests that Old Second is more likely to pursue tuck-in or adjacency transactions than transformative multi-state combinations.

18. How Companies Like Old Second Leverage Independent Consultants through Umbrex

Umbrex has built a global community of more than 8,000 independent management consultants based in more than 50 countries. These consultants are alumni of McKinsey, Bain, BCG, and other top firms. Companies like Old Second use Umbrex when they want that level of training and functional depth without hiring a full consulting team and its associated overhead. For a regional bank, that can be especially useful for focused strategy, growth, operations, finance, technology, risk, and integration projects.

Deposit franchise strategy. Segment the deposit base, identify at-risk balances, redesign pricing and retention tactics, and create market-by-market growth plans for core deposits.
Treasury management growth program. Build a sharper go-to-market model for business deposits, payments, and cash-management services tied to Old Second’s commercial banking strategy.
Commercial banker productivity review. Analyze relationship-manager coverage, call patterns, wallet-share opportunities, and portfolio allocation to improve growth per banker.
Commercial real estate portfolio analytics. Support stress testing, concentration analysis, and segment-level strategy work around office, multifamily, industrial, and other exposure categories.
Branch network and omnichannel optimization. Evaluate branch roles, local market density, staffing models, and digital-service migration opportunities across northern Illinois.
M&A target screening and integration support. Help identify attractive community-bank or branch opportunities, support diligence, and run post-merger integration planning.
Wealth management growth strategy. Design referral models, client segmentation, pricing, and advisor productivity programs to deepen fee-income diversification.
Customer profitability and pricing analytics. Build relationship-level profitability views across loans, deposits, treasury services, and service costs to improve pricing discipline.
Loan-operations and credit-workflow redesign. Streamline origination, underwriting, closing, and servicing processes to reduce turnaround time and improve operating leverage.
AI and automation roadmap for banking operations. Assess practical use cases in servicing, document handling, call-center support, compliance workflows, and internal productivity while staying aligned with banking risk controls.

Old Second Bancorp Strategy and Business Model