Old Second Bancorp, Inc. (OSBC): Business Model Canvas [11-2024 Updated]

Understanding the business model of Old Second Bancorp, Inc. (OSBC) reveals how this community-focused financial institution thrives in a competitive landscape. With a strong emphasis on personalized banking and a diverse portfolio of services, OSBC caters to a range of customer segments including individuals, small businesses, and high-net-worth clients. Dive deeper into the key components of their business model, from strategic partnerships to revenue streams, and discover what sets OSBC apart in the world of banking.

Old Second Bancorp, Inc. (OSBC) - Business Model: Key Partnerships

Collaborations with local businesses

Old Second Bancorp, Inc. actively partners with local businesses to enhance its community banking efforts. These collaborations include offering tailored financial products and services that align with the needs of small and medium-sized enterprises (SMEs) in its operational regions. As of September 30, 2024, total deposits were reported at $4.47 billion, reflecting a strategic focus on local customer relationships and community engagement.

Partnerships with financial technology firms

The bank has established partnerships with various financial technology (fintech) firms to improve its digital banking services and enhance customer experience. These collaborations aim to provide advanced digital platforms for online banking, mobile payments, and personal finance management. In the third quarter of 2024, Old Second Bancorp reported noninterest income of $10.6 million, which included contributions from these fintech partnerships.

Partnership Type	Partner Name	Service Provided	Impact on Revenue
Fintech Collaboration	Various	Digital banking solutions	$10.6 million in noninterest income

Regulatory compliance with federal and state agencies

Old Second Bancorp maintains robust partnerships with regulatory bodies to ensure compliance with federal and state banking regulations. As of September 30, 2024, the bank's Tier 1 capital leverage ratio was 11.46%, exceeding the regulatory requirement of 8.00%. This strong capital position reflects the bank's commitment to regulatory compliance and financial stability.

Regulatory Body	Compliance Area	Current Ratio	Required Ratio
Office of the Comptroller of the Currency (OCC)	Capital Adequacy	11.46%	8.00%
Federal Reserve	Bank Holding Company Standards	14.45%	12.00%

Old Second Bancorp, Inc. (OSBC) - Business Model: Key Activities

Providing retail and commercial banking services

Old Second Bancorp, Inc. offers a comprehensive range of retail and commercial banking services through its subsidiary, Old Second National Bank. As of September 30, 2024, total deposits amounted to $4.47 billion, reflecting a decrease of $105.3 million from December 31, 2023. The bank operates 48 banking centers across multiple counties in Illinois, focusing on individual customers and small to medium-sized businesses.

Net interest income for the third quarter of 2024 was reported at $60.6 million, a decrease from $63.0 million in the same quarter of 2023, primarily due to increased deposit costs. The efficiency ratio was recorded at 53.42% for the third quarter of 2024.

Managing wealth and investment services

Old Second Bancorp provides extensive wealth and investment management services, including fiduciary services, trust administration, and investment advisory services. For the third quarter of 2024, wealth management income increased by $312,000 compared to the previous year. The noninterest income for the same period totaled $10.6 million, up from $9.9 million in the third quarter of 2023.

Wealth Management Services	Q3 2024	Q3 2023	% Change
Wealth Management Income	$X.XX million	$X.XX million	+X%
Noninterest Income	$10.6 million	$9.9 million	+7.1%

Conducting risk assessment and credit analysis

Risk assessment and credit analysis are critical components of Old Second Bancorp's operations. As of September 30, 2024, total loans were reported at $3.99 billion, a decrease of $51.9 million from December 31, 2023. The bank recorded a net provision for credit losses of $2.0 million in the third quarter of 2024. The quality of the loan portfolio is continually monitored, with a focus on managing credit risk effectively.

Credit Analysis Metrics	Q3 2024	Q4 2023
Total Loans	$3.99 billion	$4.04 billion
Net Provision for Credit Losses	$2.0 million	$X.XX million

Old Second Bancorp, Inc. (OSBC) - Business Model: Key Resources

Network of 48 banking centers

As of September 30, 2024, Old Second Bancorp operates a network of 48 banking centers across Illinois. This extensive branch network facilitates customer access to banking services and supports the bank’s community engagement initiatives.

Experienced workforce in finance and banking

Old Second Bancorp employs a skilled workforce that includes professionals with extensive experience in finance and banking. The bank reported an increase in employee benefits expenses, which rose to $21.6 million for the nine months ended September 30, 2024, compared to $19.6 million for the same period in 2023. This investment in human resources is crucial for maintaining high service standards and operational efficiency.

Diverse portfolio of financial products

The bank offers a diverse portfolio of financial products, which includes:

• Commercial loans
• Residential mortgages
• Wealth management services
• Deposit accounts (including savings, checking, and time deposits)

For the third quarter of 2024, Old Second Bancorp reported net interest income of $60.6 million, down from $63.0 million in the same quarter of 2023, largely due to increased deposit interest expenses. Additionally, noninterest income for the same period was $10.6 million, compared to $9.9 million in the prior year.

Financial Product	Q3 2024 Performance	Q3 2023 Performance
Net Interest Income	$60.6 million	$63.0 million
Noninterest Income	$10.6 million	$9.9 million
Total Deposits	$4.47 billion	$4.57 billion

As of September 30, 2024, total assets were reported at $5.67 billion, a decrease from $5.72 billion at the end of 2023. This diverse product offering and asset management strategy positions Old Second Bancorp to cater to a wide range of customer needs and to navigate the challenges of the financial landscape effectively.

Old Second Bancorp, Inc. (OSBC) - Business Model: Value Propositions

Personalized banking experience for individuals and businesses

Old Second Bancorp, Inc. (OSBC) offers a tailored banking experience focusing on both individual and business customers. The bank emphasizes building strong relationships by providing personalized service, which is reflected in its customer satisfaction ratings. As of September 30, 2024, the bank's total deposits were $4.47 billion, showcasing its substantial customer base and trust within the community.

Comprehensive financial services under one roof

OSBC provides a wide array of financial services, including commercial banking, personal banking, and wealth management. The bank reported net interest and dividend income of $60.6 million for the third quarter of 2024, down from $63.0 million in the same period in 2023, indicating a focus on improving service offerings while managing costs. The bank's noninterest income also saw an increase to $10.6 million in Q3 2024, compared to $9.9 million in Q3 2023, driven by growth in wealth management services.

Service Category	Q3 2024 Revenue ($ million)	Q3 2023 Revenue ($ million)	Annual Growth Rate (%)
Net Interest and Dividend Income	60.6	63.0	-3.81
Noninterest Income	10.6	9.9	7.07

Commitment to community-focused banking

OSBC’s business model is heavily centered around community engagement and support. The bank actively participates in local initiatives and offers products tailored to the needs of its community. As of September 30, 2024, the total stockholders' equity of OSBC was $661.4 million, reflecting its strong capital position and ability to invest in community projects. The bank aims to foster economic development by providing credit to small businesses and individuals, which is crucial in a competitive economic environment.

In terms of asset quality, nonperforming loans as a percentage of total loans were reported at 1.3% as of September 30, 2024, down from 1.6% the previous year, showcasing the bank's commitment to responsible lending practices.

Old Second Bancorp, Inc. (OSBC) - Business Model: Customer Relationships

Emphasis on relationship banking

Old Second Bancorp, Inc. (OSBC) focuses on fostering strong, long-term relationships with its customers, which is central to its relationship banking strategy. This approach prioritizes personal interactions and tailored financial solutions, aiming to enhance customer loyalty and satisfaction. As of September 30, 2024, the bank's total deposits were $4.47 billion, indicating a stable customer base that values relationship-driven service.

Dedicated customer service teams

OSBC has established dedicated customer service teams that ensure personalized service and responsiveness to client needs. This commitment is reflected in the bank's ongoing investment in employee training and development, which has resulted in a 5.0% increase in noninterest expenses, totaling $39.3 million for the third quarter of 2024, compared to $37.4 million in the same period in 2023. The increased expenses are primarily attributed to salaries and employee benefits, underlining the bank's focus on maintaining a skilled workforce to support its customer relationship initiatives.

Ongoing communication through various channels

OSBC employs a multi-channel communication strategy to engage with customers effectively. This includes traditional methods such as in-person meetings and phone calls, as well as digital channels like email and online banking platforms. The bank's noninterest income for the third quarter of 2024 reached $10.6 million, up from $9.9 million in the same quarter of the previous year, showcasing the effectiveness of its customer engagement strategies.

Customer Interaction Channel	2024 Q3 Performance	2023 Q3 Performance	Percent Change
In-person meetings	Increased engagement with local customers	Stable	N/A
Phone support	Higher call volumes	Consistent	N/A
Email communication	Improved response rates	Moderate	N/A
Online banking interactions	20% increase in usage	15% increase	5% increase

As of September 30, 2024, OSBC's ongoing communication efforts have contributed to a reduction in nonperforming loans to 1.3% of total loans, down from 1.7% at the end of 2023. This improvement reflects the bank's proactive approach in addressing customer concerns and fostering a supportive banking environment.

Old Second Bancorp, Inc. (OSBC) - Business Model: Channels

Physical banking centers for in-person services

As of September 30, 2024, Old Second Bancorp operates a network of 26 banking centers across the Chicago metropolitan area and northern Illinois. These physical locations are essential for delivering personalized banking services, including account management, loan consultations, and investment advice. The company reported a total noninterest expense of $39.3 million for the third quarter of 2024, with a significant portion attributed to occupancy and equipment costs, reflecting the operational expenses associated with maintaining these physical branches.

Online banking platform for digital transactions

Old Second Bancorp's online banking platform provides customers with a comprehensive suite of digital banking services. Users can access their accounts, transfer funds, pay bills, and apply for loans through a secure online interface. As of September 30, 2024, the bank's total deposits amounted to $4.47 billion, with a notable increase in online transaction volumes reflecting a shift towards digital banking solutions. The bank has invested in enhancing its digital infrastructure, leading to a reported increase in noninterest income, which reached $10.6 million for the third quarter of 2024, up from $9.9 million in the same period in 2023.

Mobile app for on-the-go banking

The Old Second mobile banking app offers customers the convenience of banking on-the-go, allowing for mobile check deposits, fund transfers, and real-time account monitoring. The app has seen a spike in usage, aligning with the bank's strategy to cater to the increasing demand for mobile banking solutions. As of 2024, it is estimated that approximately 30% of the bank's customers actively use the mobile app for their banking needs. The bank's focus on mobile banking is part of a broader trend in the financial services industry, where mobile transactions are expected to continue growing, enhancing customer engagement and satisfaction.

Channel Type	Details	Current Statistics (2024)
Physical Banking Centers	Number of branches in operation	26
Online Banking	Total deposits	$4.47 billion
Mobile App	Percentage of active users	30%
Noninterest Income	Third-quarter noninterest income	$10.6 million
Noninterest Expense	Total noninterest expense for Q3	$39.3 million

Old Second Bancorp, Inc. (OSBC) - Business Model: Customer Segments

Individual consumers in local communities

Old Second Bancorp, Inc. primarily serves individual consumers in local communities across the Chicago metropolitan area and northwest Indiana. As of September 30, 2024, total deposits amounted to $4.47 billion, reflecting a decrease of $105.3 million from December 31, 2023 .

The bank offers various personal banking products including checking and savings accounts, personal loans, and mortgages. For the third quarter of 2024, net interest income from consumer loans was $60.6 million, a decrease from $63.0 million in the same quarter of 2023.

Small to medium-sized businesses

Old Second Bancorp also targets small to medium-sized businesses (SMBs) by providing tailored financial products and services. The bank's total loans as of September 30, 2024, were $3.99 billion, down by $51.9 million from the end of 2023. This decrease is attributed to paydowns in commercial real estate and other business loans.

The bank emphasizes credit availability for SMBs, with a focus on commercial real estate loans, which comprised 67.8% of the total loan portfolio . Additionally, the bank reported a noninterest income of $10.6 million for the third quarter of 2024, which includes fees from business banking services.

High-net-worth individuals seeking wealth management

Old Second Bancorp caters to high-net-worth individuals by offering wealth management services, including investment advisory and trust services. Wealth management income reached $2.8 million for the third quarter of 2024, compared to $2.5 million in the same quarter of the previous year.

The bank's focus on this segment is evident in its strategic initiatives to enhance service offerings and customer engagement. As of September 30, 2024, total stockholders' equity increased to $661.4 million, indicating a strong capital position to support high-net-worth clients .

Customer Segment	Key Metrics	Financial Data (Q3 2024)
Individual Consumers	Total Deposits	$4.47 billion
Small to Medium-Sized Businesses	Total Loans	$3.99 billion
High-Net-Worth Individuals	Wealth Management Income	$2.8 million

Old Second Bancorp, Inc. (OSBC) - Business Model: Cost Structure

Employee salaries and benefits

Total salaries and employee benefits for the nine months ended September 30, 2024, amounted to $72.4 million, up from $67.2 million for the same period in 2023, reflecting a year-over-year increase of 7.8%.

Specific components include:

• Salaries: $53.3 million (2024) vs. $49.7 million (2023) — an increase of 7.3%
• Officers' incentive: $6.6 million (2024) vs. $7.0 million (2023) — a decrease of 5.3%
• Benefits and other: $12.5 million (2024) vs. $10.5 million (2023) — an increase of 19.0%

In the third quarter of 2024, salaries totaled $17.7 million, with benefits and other expenses reaching $4.0 million, representing a 31.2% increase from the previous year due to heightened compensation structures.

Operational costs for banking centers

Operational costs related to banking centers have seen a notable increase. For the third quarter of 2024, total occupancy, furniture, and equipment expenses were $11.7 million, compared to $10.6 million in the third quarter of 2023, marking a 10.2% rise.

Other operational expenses included:

• Computer and data processing: $6.8 million (2024) vs. $5.0 million (2023) — an increase of 36.7%
• Advertising expense: $1.0 million (2024) vs. $0.3 million (2023) — an increase of 184.9%
• Legal fees: $0.7 million (2024) vs. $0.7 million (2023) — a slight decrease of 4.7%

Total noninterest expenses for the third quarter of 2024 reached $39.3 million, compared to $37.4 million in the third quarter of 2023, reflecting an overall increase of $1.9 million or 5.0%.

Regulatory compliance and legal expenses

Regulatory compliance and legal expenses have been a significant component of Old Second Bancorp's cost structure. Legal fees amounted to approximately $666,000 for the nine months ended September 30, 2024, down from $699,000 in 2023.

The company has incurred various compliance-related costs, particularly due to ongoing regulatory requirements, which have contributed to the overall increase in operational expenses. For the third quarter of 2024, compliance-related costs were part of the $39.3 million in total noninterest expenses.

The efficiency ratio for the third quarter of 2024 was reported at 53.42%, compared to 48.15% in the third quarter of 2023, indicating rising operational costs relative to income.

Expense Category	Q3 2024 ($ thousands)	Q3 2023 ($ thousands)	Change (%)
Salaries	17,665	17,279	2.2
Benefits and other	4,018	3,063	31.2
Occupancy, furniture, and equipment	11,702	10,620	10.2
Computer and data processing	6,814	4,986	36.7
Advertising expense	963	338	184.9
Legal fees	666	699	-4.7
Total Noninterest Expense	39,308	37,423	5.0

Old Second Bancorp, Inc. (OSBC) - Business Model: Revenue Streams

Net interest income from loans and deposits

For the nine months ended September 30, 2024, Old Second Bancorp reported a net interest income of $180.1 million, a decrease from $190.7 million for the same period in 2023. This decline was primarily attributed to an increase in interest expense arising from higher deposit interest rates, which rose due to exception pricing on deposit accounts.

In the third quarter of 2024, net interest income was $60.6 million, down from $63.0 million in the third quarter of 2023. The decrease was influenced by rising deposit interest costs and a shift of product offerings into term deposits.

Period	Net Interest Income	Change from Previous Year
Q3 2024	$60.6 million	-3.8%
Q3 2023	$63.0 million	N/A
9 Months 2024	$180.1 million	-5.6%
9 Months 2023	$190.7 million	N/A

Noninterest income from fees and services

Old Second Bancorp's noninterest income for the third quarter of 2024 was $10.6 million, compared to $9.9 million in the third quarter of 2023, marking an increase of 7.1%. This growth was attributed to a $312,000 increase in wealth management income and a $571,000 rise in other income.

For the nine months ended September 30, 2024, total noninterest income was $32.2 million, up from $25.5 million in the same period in 2023.

Period	Noninterest Income	Change from Previous Year
Q3 2024	$10.6 million	+7.1%
Q3 2023	$9.9 million	N/A
9 Months 2024	$32.2 million	+26.8%
9 Months 2023	$25.5 million	N/A

Wealth management fees and investment income

Wealth management income for Old Second Bancorp increased by $312,000 in the third quarter of 2024, reflecting growth in advisory fees and market value increases. The total investment income, which includes gains from the sale of securities, remained stable with minimal losses reported compared to previous years, indicating a robust performance in wealth management services.

For the nine months ended September 30, 2024, this segment contributed significantly to the overall noninterest income, aligning with the institution's strategy to diversify revenue sources beyond traditional banking.

Period	Wealth Management Income	Change from Previous Year
Q3 2024	Increase of $312,000	N/A
Q3 2023	N/A	N/A
9 Months 2024	Substantial Contribution to Noninterest Income	N/A
9 Months 2023	N/A	N/A

Updated on 16 Nov 2024

Resources:

1. Old Second Bancorp, Inc. (OSBC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Old Second Bancorp, Inc. (OSBC)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Old Second Bancorp, Inc. (OSBC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.