Old Second Bancorp, Inc. (OSBC) - Description of business

Company Description

Old Second Bancorp, Inc. is a bank holding company. The Company conducts a full service community banking and trust business through its wholly owned subsidiaries. The Company's subsidiaries include Old Second National Bank (the Bank); Old Second Capital Trust I, Old Second Capital Trust II, Old Second Affordable Housing Fund, L.L.C., and Station I, LLC. The Bank's full service banking businesses includes the customary consumer and commercial products and services that banks provide including demand, negotiable order of withdrawal (NOW), money market, savings, time deposit, individual retirement and Keogh deposit accounts; commercial, industrial, consumer and real estate lending, including installment loans, student loans, agricultural loans, lines of credit and overdraft checking; safe deposit operations; trust services; wealth management services, and a range of additional services to meet the needs of individual customers, such as the acquisition of United States Treasury notes and bonds, the sale of traveler's checks, money orders, cashier's checks and foreign currency, direct deposit, discount brokerage, debit cards, credit cards, and other special services. The Bank also offers a full complement of electronic banking services, such as Internet banking and corporate cash management including remote deposit capture.

Commercial and consumer loans are made to corporations, partnerships and individuals, primarily on a secured basis. Commercial lending focuses on business, capital, construction, inventory and real estate lending. Installment lending includes direct and indirect loans to consumers and commercial customers. Additionally, the Bank provides a range of trust, investment, agency, and custodial services for individual, corporate, and not-for-profit clients. These services include the administration of estates and personal trusts, as well as the management of investment accounts for individuals, employee benefit plans, and charitable foundations. The Bank also originates residential mortgages, offering a range of products including conventional, government, and jumbo loans. Secondary marketing of those mortgages is handled at the Bank.

Lending Activities

The Bank provides a broad range of commercial and retail lending services to corporations, partnerships, individuals and government agencies. The Bank markets its services to qualified borrowers. 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. As of December 31, 2009, residential mortgages made up approximately 31% of its loan portfolio, commercial real estate loans comprised approximately 45%, construction lending comprised approximately 13%, general commercial loans comprised approximately 10%, and consumer and other lending comprised less than 1%. The Bank provides a wide range of business loans, including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and other purposes. At December 31, 2009 approximately $427.1 million, or 46.2%, of the total commercial real estate loan portfolio of $925.0 million was to owner occupied borrowers. The Bank originates loans to finance the construction of residential and commercial properties located in its market area. Residential first mortgage loans, second mortgages, and home equity line of credit mortgages are included in this category. First mortgage loans may include fixed rate loans that are generally sold to investors. The Bank is a direct seller to Federal National Mortgage Association (FNMA), Chase Manhattan Bank, Bank of America, and to other investors. The Bank also provides many types of consumer loans including motor vehicle, home improvement, home equity, signature loans and small personal credit lines.

Investment Activities

As of December 31, 2009, the Bank's securities available for sale comprised United States treasury, United States government agencies, United States government agency mortgage-backed, States and political subdivisions, collateralized mortgage obligations, collateralized debt obligations and equity securities. The Company's holdings of United States government agency and United States government agency mortgage-backed securities are comprised of government-sponsored enterprises, such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Sources of Funds

Types of deposits offered by the Bank comprise demand, NOW, money market, savings, time deposit, individual retirement and Keogh deposit accounts. The Bank's primary market area is Aurora, Illinois, its surrounding communities, as well as southwestern Cook county.