Old Second Bundle
How is Old Second Bancorp positioning itself in Chicagoland banking?
After doubling via late-2021 acquisition, Old Second Bancorp has scaled into a full-service community bank across Chicagoland with retail, commercial, and wealth offerings while keeping local relationship depth.
Old Second monetizes deposits, manages CRE exposure, and grows fee income through cross-sell and wealth management to stabilize earnings in a higher-for-longer rate environment.
How does Old Second Company work? It combines core deposit funding, middle-market lending, CRE financing, and fee-based wealth services to generate diversified revenue while focusing on local client relationships and credit risk controls. See Old Second Porter's Five Forces Analysis for competitive context.
What Are the Key Operations Driving Old Second’s Success?
Old Second Company converts low-cost community deposits into loans across C&I, CRE, residential mortgage and consumer credit, leveraging branch and commercial-banker relationships plus digital channels to serve small and mid-sized businesses, developers, and retail clients.
Deposit-to-Loan Franchise
Core operations collect granular retail and business deposits and recycle them into higher-yielding loans in C&I, CRE, mortgages and consumer products, supporting net interest margin.
Client Segments
Primary clients include small and mid-sized businesses (treasury, lending, merchant services), real estate developers (construction, multifamily, industrial) and retail banking customers.
Distribution Model
Neighborhood branches across the Chicago metro and commercial bankers covering suburban and industrial corridors provide local sourcing, supported by digital account opening and mobile banking.
Product Ecosystem
A full community bank product set—checking, savings, money market, CDs, mortgages, HELOCs, treasury and wealth/trust—enables multi-product bundling and higher customer retention.
Operational mechanics emphasize localized underwriting with centralized risk oversight, funding stability from core deposits, and selective partnerships to extend capabilities without large build costs.
Value Drivers and Differentiation
Competitive advantages include fast local decisioning, long-tenured relationship teams, and sticky deposit relationships that lower funding cost and improve cross-sell economics.
- Localized credit focus on borrower cash flow, collateral coverage and market-specific CRE discipline
- Funding mix: granular core deposits supplemented by time deposits and secured wholesale sources as needed
- Digital tools: online banking, mobile app, remote deposit capture and treasury portals for business clients
- Selective channel partners (mortgage brokers, card networks, fintech rails) to broaden product reach
Relevant metrics: as of 2024–2025 regional community banks of similar scale typically maintain core deposit ratios above 75%, CRE concentration limits by policy, and cross-sell ratios yielding significantly lower customer attrition; see Competitors Landscape of Old Second for comparative positioning and local market data.
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How Does Old Second Make Money?
Revenue for Old Second Company is driven primarily by net interest income from loans and securities, supplemented by diverse noninterest fees and transactional revenue; the bank’s balance-sheet-centric model focuses on lending spreads and deposit funding advantages to monetize relationships.
Net interest income
Net interest income typically accounts for the bulk of revenue, driven by yields on commercial and CRE loans and offset by funding costs from core deposits.
Noninterest income mix
Service charges, interchange, wealth/trust fees and mortgage gain-on-sale compose roughly 10–15% of revenue for peers in 2023–2024; Old Second’s mix aligns with this profile.
Deposit pricing
Tiered interest-rate pricing and emphasis on noninterest-bearing or low-beta balances reduce funding cost and support spread maintenance.
Loan pricing strategy
Relationship-based pricing for C&I and CRE, with variable-rate structures helping reprice revenue as benchmark rates change.
Treasury and business fees
Business treasury bundles—ACH, wires, lockbox, remote deposit—drive fee revenue and deepen share-of-wallet for commercial clients.
Mortgage monetization
Conforming mortgage originations are sold opportunistically; gain-on-sale and servicing fees provide a hedge against interest-rate risk.
Balance-sheet positioning emphasizes CRE and C&I as primary loan categories, with securities for liquidity and interest-rate management; recent trends show NIM pressure but offsetting noninterest growth.
2024–2025 trend dynamics
Higher-for-longer rates compressed industry NIM from 2023 peaks, while variable-rate commercial repricing and fee growth helped stabilize revenue.
- Industry peers recorded net interest income as ~85–90% of revenue in 2023–2024 for balance-sheet-focused community banks
- Noninterest income contributed ~10–15%, with treasury and interchange accelerating in 2024
- Deposit beta rose in 2024, pressuring funding cost; disciplined loan spreads and fee diversification were defensive levers
- Mortgage gain-on-sale remained a tactical tool to manage duration and capital efficiency
For context on market focus and customer segments that support these monetization strategies, see Target Market of Old Second
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Which Strategic Decisions Have Shaped Old Second’s Business Model?
Key milestones, strategic moves, and competitive edge for Old Second Company center on the 2021 scale step-up, balance-sheet rebalancing after 2022 market dislocations, expanded fee-bearing product lines, and tightened risk controls that together underpin durable local-market advantage.
Scale step-up: 2021 combination
The late-2021 acquisition of West Suburban Bancorp materially increased assets and deposits, boosting customer density across western Chicago suburbs and improving operating leverage and revenue breadth.
Balance-sheet optimization
Following 2022 AOCI pressure from low-yield securities, management has shifted toward higher-yield loans, disciplined deposit pricing, and selective wholesale funding to protect long‑term net interest margin.
Product breadth and fee growth
Expanded treasury management, commercial card programs, and wealth/trust services have increased fee income and client stickiness, reducing sensitivity to rate-cycle swings in core NII.
Risk management posture
CRE underwriting tightened in 2023–2024 with focus on office exposure, elevated DSCR standards, and proactive borrower engagement, helping preserve asset quality versus peers with larger legacy office books.
The bank’s competitive edge is local decisioning speed, a dense suburban branch footprint, and relationship-led commercial coverage—advantages that lower acquisition costs and drive higher cross-sell; the 2021 scale lift also enabled meaningful efficiency and tech investment.
Key metrics and implications (2024–mid‑2025 context)
Recent disclosures and market context indicate asset base and deposit density increased materially post-combination, with management targeting a higher loan-to-securities mix and fee-income growth to offset margin pressure.
- Acquisition impact: late-2021 deal added scale across western Chicago suburbs and improved operating leverage.
- Balance-sheet action: shift toward higher-yield commercial and consumer loans to reduce AOCI sensitivity.
- Product strategy: treasury, cards, and wealth drove fee diversification and client retention.
- Risk controls: tighter CRE (office) underwriting and higher DSCR requirements supported credit performance.
For more on strategic rationale and growth implications see Growth Strategy of Old Second which reviews the combination and subsequent integration in context of Old Second Bank services and Old Second mortgage lending trends.
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How Is Old Second Positioning Itself for Continued Success?
Old Second Company holds a top-20 deposit position in the Chicago MSA with a sub-1% share, competing as a community-oriented bank that keeps agility while serving key suburbs and small/mid-sized businesses. Customer loyalty is driven by operating-account primacy and multi-product household relationships, supporting fee and deposit resilience amid competitive pressures.
Industry Position
Old Second National Bank is a regional community bank anchored in the Chicago MSA with a sub-1% local deposit share but top-20 positioning, giving meaningful influence in targeted suburbs and commercial corridors.
Customer Franchise
Operating-account primacy among small and mid-sized businesses and multi-product households drives cross-sell: treasury, card interchange, and deposit sweep relationships underpin loyalty and recurring fee income.
Key Risks
Material risks include CRE exposure—notably office and retail in urban cores—funding pressure as depositors chase higher yields, legacy securities duration risk, and potential capital rule changes from Basel III endgame proposals.
Competitive Threats
Competition from digital banks offering higher deposit rates, fintechs in payments/treasury, and large banks with superior technology budgets could erode share unless Old Second scales digital and fee capabilities.
Strategic priorities emphasize core deposit growth, selective loan mix shifts, and revenue diversification to protect margin and book value.
Outlook & Actions
Near-term actions focus on C&I and non-office CRE with strong collateral and DSCR, scaling treasury and card interchange, and selectively originating saleable residential mortgages to manage rate/duration risk.
- Grow core operating deposits via business banking and branch relationships to reduce wholesale funding reliance
- Maintain credit discipline; prioritize loans with strong DSCR and collateral quality
- Invest incrementally in digital channels to defend deposit share and capture payment/treasury fees
- Preserve capital and liquidity buffers to meet evolving Basel III endgame standards
For additional strategic context and marketing positioning, see Marketing Strategy of Old Second.
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