UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission File Number 0 -10537

OLD SECOND BANCORP, INC.

(Exact name of Registrant as specified in its charter)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ýNo o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes ýNo o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: As of May 1, 2003, the Registrant had outstanding 7,420,505 shares of common stock, $1.00 par value per share.

OLD SECOND BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

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PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

See accompanying notes to consolidated financial statements.

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Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)

See accompanying notes to consolidated financial statements.

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Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2003 and 2002

(In thousands)

See accompanying notes to consolidated financial statements.

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Old Second Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

The accounting policies followed in the preparation of interim financial statements are consistent with those used in the preparation of annual financial information. The interim financial statements reflect all normal and recurring adjustments, which are necessary, in the opinion of management, for a fair statement of results for the interim period presented.  Results for the period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.  These interim financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s 2002 Form 10-K.  Unless otherwise indicated, amounts in the tables contained in these Notes are in thousands.

On May 21, 2002, the Board of Directors of the Company declared a 4-for-3 stock split effected in the form of a stock dividend payable on June 24, 2002 to shareholders of record on June 14, 2002.  All historical share data and per share amounts have been restated to reflect this stock split.

In June 2001, the FASB issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001.  Under the new rules, goodwill (and intangible assets deemed to have indefinite lives) will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements.  Other intangible assets will continue to be amortized over their useful lives.  In accordance with the new rules on accounting for goodwill and other intangible assets, the Company is no longer amortizing goodwill.

Amortization  expense for the three months ended March 31, 2003 was $89,000.  The estimated amortization expense for the next five years will be $355,000 per year.

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Note 2 – Securities

Securities available for sale are summarized as follows:

Note 3 – Loans

Major classifications of loans were as follows:

Note 4 – Allowance for Loan Losses

Changes in the allowance for loan losses as of  March 31, are summarized as follows:

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Note 5 – Notes Payable

As of March 31, 2003 Company had a $20 million line of credit available with a loan issued by Marshall & Isley under which there was no outstanding balance as of March 31, 2003 and December 31, 2002.  The note bears interest at the rate of 1% over the previous month average (Federal Reserve targeted rate) federal funds rate or 0.90% over the adjusted interbank rate.  In May 2003, this line of credit was extended to $30 million and a Revolving Business Note dated May 5, 2003 secures the note and is guaranteed by the Company.  This borrowing is for general corporate purposes, including funding loans held for sale at the Old Second Mortgage Company subsidiary.

Note 6 – Earnings Per Share

Earnings per share were as follows (share data not in thousands):

Note 7 – Comprehensive Income

Comprehensive income was as follows:

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Item 2.   Managements’ Discussion and Analysis of Financial Condition and Results for Operations

Overview

Old Second Bancorp is a financial services company with its main headquarters located in Aurora, Illinois.  The Company has offices located in Kane, Kendall, DeKalb, DuPage, Lake and LaSalle counties in Illinois.  The Company provides financial services through its three subsidiary banks at its twenty-two banking locations.  Old Second Mortgage, which also conducts business as “Maple Park Mortgage”, provides mortgage-banking services at its four offices.  Insurance products are provided by Old Second Financial, Inc.  The Old Second National Bank of Aurora, the Company’s lead subsidiary bank, also engages in trust operations.

Results of Operations

Net income for the first quarter of 2003 was $5.21 million, or 70 cents diluted earnings per share, compared to $4.98 million, or 66 cents diluted earnings per share in the first quarter of 2002.  This was a 4.58% increase in earnings, or 6.06% on a per share basis.  The return on equity decreased to 15.57% in the first three months of 2003, from 16.20% for the same period of 2002.

Net Interest Income

The increase in net income for the three-month period was primarily the result of an increase in net interest income.  Net interest income was $14.6 million and $13.8 million during the three months ended March 31, 2003 and 2002, an increase of 6.20%.  Given the Company’s mix of interest bearing liabilities and interest earning assets, the net interest margin could be expected to decline in a falling interest rate environment and conversely, to increase in a rising rate environment.  This was reflected in the decline in the net interest margin from 4.58% for the first quarter of 2002 to 4.11% for the fourth quarter of 2002 and to 3.99% in the first quarter of 2003.  Net interest margin was 4.28% for the entire year of 2002.

Provision for Loan Losses and the Application of Critical Accounting Policies

The provision for loan losses amounted to $855,000 and $830,000 for the first quarters of 2003 and 2002, respectively.  Provisions for loan losses are made to provide for probable and estimable losses on loans inherent in the portfolio.  The provision reflects a number of factors, including the size of the loan portfolio, the amount of past due accruing loans (90 days or more), the amount of non-accrual loans and management’s overall view on current credit quality.  Net charge-offs were $572,000 and $394,000 in the first quarters of 2003 and 2002, respectively.

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The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements. Future changes in information may affect these estimates, assumptions, and judgments, which, in turn, may affect amounts reported in the financial statements.

All significant accounting policies are presented in Note 1 to the consolidated financial statements for the year ended December 31, 2002. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Management has determined that its accounting policies with respect to the allowance for loan losses is the accounting area requiring subjective or complex judgments that is most important to the Company’s financial position and results of operations, and therefore, is its only critical accounting policy. The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the consolidated statement of condition. The methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in the Provision for Losses for Loans in the Company’s Form 10-K for the year ended December 31, 2002.

Noninterest Income

Noninterest income was $7.4 million during the first quarter of 2003 and $5.6 million in the first quarter of 2002, an increase of $1.8 million, or 32.72%.  An increase in loan originations in the first quarter of 2003 resulted in an increase in the gain on sale of loans of $1.4 million, or 78.89% and an increase in secondary mortgage fees of $205,000 or 83.00%.  An unprecedented volume of mortgage originations continued during the first quarter of 2003.  While mortgage rates remain near historically low levels, the Company does not anticipate that the level of income from residential mortgage activity will continue throughout the year.  Service charges on deposits increased $356,000, or 28.21% for the three-month period.  This increase was due primarily to the one time recognition of income in the amount of $192,000 of charges previously set aside pursuant to our check bounce protection program. Trust income declined by $62,000 to $1.3 million for the first quarter of 2003.

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Noninterest Expense

Noninterest expense was $13.2 million during the first three months of 2003, an increase of $2.2 million, or 20.08%, from $11.0 million in the first three months of 2002.  Salaries and benefits, which is the largest component of noninterest expense, increased $1.9 million, or 27.69%, over the same quarter of 2002.  The full-time equivalent number of employees was 522 as of March 31, 2003, compared to 473 one year earlier.  In addition to increased staffing and merit increases, commissions and incentives tied to earnings performance also increased.  Employee benefit expenses increased as well, primarily as a result of higher employee healthcare insurance, retirement benefits and payroll taxes associated with the salary increases.  Net occupancy expenses increased $173,000, or 25.59% and furniture and equipment expenses increased $92,000 or 9.47% over the first quarter of the prior year.  As the Company has expanded into and developed new markets, related facility and employee expenses have increased accordingly.

A primary cause of the increase in noninterest expense was an increase in expenses of Old Second Mortgage. Mortgage business continued to increase as a result of decreased interest rates and expanded utilization of the Company’s branch network. Salaries and benefits, which account for a major portion of noninterest expense, increased $621,000 at Old Second Mortgage compared to the first quarter of 2002 as a result of the expanded business.

Other expense, which consists primarily of postage, processing fees, professional fees and marketing, increased from $2.5 million in the first quarter of 2002 to $2.6 million in the first quarter of 2003 due to the increased loan activity at Old Second Mortgage.

Income Taxes

The Company’s provision for Federal and State of Illinois income taxes was $2.8 million and $2.6 million for the first quarter of 2003 and 2002 respectively. The first quarter average effective income tax rate for 2003 and 2002 was 35.1% and 34.2% respectively.

Financial Condition

Assets

Total assets were $1.62 billion at March 31, 2003, an increase of $15.5 million from $1.61 billion at December 31, 2002.

Loans

Total loans were $1.12 billion as of March 31, 2003, an increase of $53.9 million or 5.08% for the three-month period, from $1.06 billion as of December 31, 2002. The largest increases in loan classifications were in residential real estate loans, which increased $21.1 million, or 8.03%. These changes reflected the continuing loan demand in the markets in which the Company operates.  The loan portfolio generally reflects the profile of the communities in which the Company operates. Because the Company is located in growing areas, real estate lending (including commercial, residential, and construction) is a significant portion of the portfolio. These categories comprised 74.8% of the portfolio as of December 31, 2002 and 76.4% of the portfolio as of March 31, 2003.

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Nonperforming loans of $4.7 million as of March 31, 2003, were down from $5.4 million as of December 31, 2002. Nonperforming loans include loans in nonaccrual status, renegotiated loans, and loans past due ninety days or more and still accruing.  Nonaccrual loans decreased from $4.8 million as of December 31, 2002 to $4.5 million as of March 31, 2003.  The allowance for loan losses as a percentage of nonperforming loans was 348.97% at March 31,2003 as compared to 289.66% as of December 31, 2002.  Asset quality has remained strong, although net charge-offs increased from $394,000 in the first quarter of 2002 to $572,000 in the first quarter of 2003.

The Company’s provision for loan losses during the first three months of 2003 was increased to $855,000 from $830,000 during the first three months of the previous year.  One measure of the adequacy of the allowance for loan losses is the ratio of the allowance to total loans. The allowance for loan losses as a percentage of total loans was 1.46% as of March 31, 2003, compared to 1.49% as of December 31, 2002.  In management’s judgment, an adequate allowance for estimated losses has been established; however, there can be no assurance that such loss will not exceed the estimated amounts in the future.

Along with other financial institutions, management shares a concern for the outlook of the economy during the remainder of 2003.  A slowdown in economic activity beginning in 2001 severely impacted several major industries as well as the economy as a whole.  Even though there are numerous indications of emerging strength, it is not certain that this strength is sustainable.  In addition, consumer confidence may be negatively impacted by the recent substantial decline in equity prices.  These events could still adversely affect cash flows for both commercial and individual borrowers, as a result of which, the Company could experience increases in problem assets, delinquencies and losses on loans.

Securities

Securities totaled $386.2 million as of March 31, 2003, a decrease of $3.0 million from $389.2 million as of December 31, 2002.  The net unrealized gains, net of deferred taxes, in the portfolio decreased from  $5.4 million as of December 31, 2002 to $5.0 million as of March 31, 2003.

Deposits and Borrowings

Total deposits were $1.40 billion as of March 31, 2003, an increase of $5.4 million from $1.39 billion as of December 31, 2002.  Demand deposits decreased $18.8 million during the first three months from $196.9 million to $178.1 million or 9.55%.  At the same time, savings deposits, which include money market accounts, increased $18.2 million or 2.7% from $667.9 million to $686.1 million.  Time deposits increased $6.1 million from $525.9 million to $532.0 million or 1.15% during the same period.  Given the lower interest rate environment in which retail time deposits were maturing, pricing and sales strategies targeted growth in transactional deposit accounts and customer reinvestment of maturing time deposit balances in longer-term maturities.  Successful selling efforts in these areas resulted in an increase in new account relationships and core funding sources.

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Securities sold under repurchase agreements, which are typically of short-term duration, decreased from $60.8 million as of December 31, 2002, to $53.8 million as of March 31, 2003. Other short-term borrowings increased from $7.9 million to $18.2 million due to the increase in federal funds purchased of $14.5 million.  The Company is currently maintaining liquid assets and delivering consistent growth in core funding to provide funding for loan growth.

Capital

The Company and its three subsidiary banks are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines provide for five classifications, the highest of which is well capitalized. The Company and its subsidiary banks were categorized as well capitalized as of March 31, 2003. The accompanying table shows the capital ratios of the Company and Old Second National Bank, the Company’s lead subsidiary bank, as of March 31, 2003.

Capital levels and minimum required levels:

During the first quarter of 2001, the Company’s board of directors authorized the repurchase of up to 1,200,000 shares of common stock on the open market or through privately negotiated transactions.  The purchase of 5,000 shares during the first quarter of 2003, together with 795,749 shares purchased in 2001 and 2002, brought the total to 800,749 shares repurchased as of March 31, 2003.

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Item 3.      Quantitative and Qualitative Disclosure About Market Risk

Liquidity and Market Risk

Liquidity is the Company’s ability to fund its operations, to meet depositor withdrawals, to provide for customer’s credit needs, and to meet maturing obligations and its existing commitments, to withstand fluctuations in deposit levels, to meet maturing obligations and existing commitments.  The liquidity of the Company principally depends on cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and its ability to borrow funds in the money or capital markets.

Net cash inflow from operating activities was $26.4 million in the first three months of 2003 compared to $29.1 million in the first three months of 2002. The decrease in inflows was directly related to the decrease in loans held for sale by Old Second Mortgage Company.  Interest received net of interest paid was the principal source of operating cash inflows in both periods reported.  Management of investing and financing activities, and market conditions, determine the level and the stability of net interest cash flows.  Management’s policy is to mitigate the impact of changes in market interest rates to the extent possible, so that balance sheet growth is the principle determinant of growth in net interest cash flows.

Net cash outflows from investing activities were $54.4 million in the three months ended March 31, 2003, compared to $4.6 million a year earlier. In the first three months of 2003, securities transactions aggregated a net inflow of $1.3 million, and net principal disbursed on loans accounted for net outflows of $54.3 million. In the first three months of 2002, securities transactions aggregated a net inflow of $17.5 million, and net principal disbursed on loans accounted for net outflows of $21.1 million.  Cash outflows for property and equipment was $1.5 million in 2003 compared to $1.0 million for the same three months of 2002.

Cash inflows from financing activities included an increase in deposits of $5.4 million and an increase in fed funds purchased and repurchase agreements of $7.5 million in the first three months of 2003 offset by $4.2 million for reduction of other short-term borrowings.  This compares with a net cash outflow of $2.4 million associated with an increase in deposits of $56.9 million, an increase of fed funds purchased and other repurchase agreements of $5.4 million, offset by a reduction to other short term borrowings of $25.7 million, and a payoff of the notes payable of  $33.4 million in the first three months of 2002.

Interest Rate Risk

The impact of movements in general market interest rates on a financial institution’s financial condition, including capital adequacy, earnings, and liquidity, is known as interest rate risk. Interest rate risk is the Company’s primary market risk. As a financial institution, accepting and managing this risk is an inherent aspect of the Company’s business. However, safe and sound management of interest rate risk requires that it be maintained at prudent levels.

The Company analyzes interest rate risk by examining the extent to which assets and liabilities are interest rate sensitive. The interest sensitivity gap is defined as the difference between the amount of interest earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest sensitive assets exceeds the amount of interest

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sensitive liabilities. A gap is considered negative when the amount of interest sensitive liabilities exceeds the amount of interest sensitive assets. During a period of rising interest rates, a negative gap would tend to result in a decrease in net interest income while a positive gap would tend to positively affect net interest income. The Company’s policy is to manage the balance sheet such that fluctuations in the net interest margin are minimized regardless of the level of interest rates.

The accompanying table does not necessarily indicate the future impact of general interest rate movements on the Company’s net interest income because the repricing of certain assets and liabilities is discretionary and is subject to competitive and other pressures. As a result, assets and liabilities indicated as repricing within the same period may in fact reprice at different times and at different rate levels. Assets and liabilities are reported in the earliest time frame in which maturity or repricing may occur. Although securities available for sale are reported in the earliest time frame in which maturity or repricing may occur, these securities may be sold in response to changes in interest rates or liquidity needs.

Expected Maturity of Interest-Earning Assets and Interest-Bearing Liabilities

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Item 4.   Controls and Procedures

Based upon an evaluation within the 90 days prior to the filing date of this report, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.  There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions.  Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following:

•                                         The strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of the Company’s assets.

•                                         The economic impact of past and future terrorist attacks, acts of war or threats thereof, and the response of the United States to any such threats and attacks.

•                                         The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters.

•                                         The effects of changes in interest rates (including the effects of changes in the rate of prepayments of the Company’s assets) and the policies of the Board of Governors of the Federal Reserve System.

•                                         The ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector.

•                                         The inability of the Company to obtain new customers and to retain existing customers.

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•                                         The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet.

•                                         Technological changes implemented by the Company and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers.

•                                         The ability of the Company to develop and maintain secure and reliable electronic systems.

•                                         The ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner.

•                                         Consumer spending and saving habits which may change in a manner that affects the Company’s business adversely.

•                                         Business combinations and the integration of acquired businesses that may be more difficult or expensive than expected.

•                                         The costs, effects and outcomes of existing or future litigation.

•                                         Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board.

•                                         The ability of the Company to manage the risks associated with the foregoing as well as anticipated.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results is included in the Company’s Form 10-K for the year ended December 31, 2002 and in its other filings with the Securities and Exchange Commission.

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PART II - OTHER INFORMATION

Item 1.             Legal Proceedings

The Company and its subsidiaries have, from time to time, collection suits in the ordinary course of business against its debtors and are defendants in legal actions arising from normal business activities. Management, after consultation with legal counsel, believes that the ultimate liabilities, if any, resulting from these actions will not have a material adverse effect on the consolidated financial position of the Company and its subsidiaries.

Item 2.   Changes in Securities and Use of Proceeds

None.

Item 3.             Defaults Upon Senior Securities

None.

Item 4.             Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of the Company was held on April 15, 2003.  At the meeting, stockholders voted to elect three nominees to the board of directors and to ratify the appointment of Ernst & Young LLP as the Company’s independent auditors for 2003.  At the meeting, the stockholders elected D. Chet McKee, Gerald Palmer, and James Carl Schmitz as directors to serve until their terms expire in 2006.  Walter Alexander, Edward Bonifas, William Meyer and William B. Skoglund will continue as directors with their terms expiring in 2004.  Marvin Fagel, William Kane, Kenneth Lindgren, and Jesse Marberry will also continue as directors with their terms expiring in 2005.  The stockholders also ratified the selection of Ernst & Young LLP to serve as the Company’s independent auditors.  The matters approved by stockholders at the meeting and the number of votes cast for, against or withheld (as well as the number of abstentions) as to each matter are set forth below:

1.                   The election of directors for a three-year term expiring in 2006.

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2.                   The ratification of Ernst & Young LLP, as the auditors for the year ending December 31, 2003.

Item 5.             Other Information

None.

Item 6.   Exhibits and Reports on Form 8-K

Exhibits:

Exhibit 99.1 Certificate of Chief Executive Officer

Exhibit 99.2 Certificate of Chief Financial Officer

Reports on Form 8-K:

A report on Form 8-K was filed on January 17, 2003, under Item 5, which reported the Company’s fourth quarter financial information in the form of a press release.

A report on Form 8-K was filed on April 11, 2003, under Item 12, which reported the Company’s first quarter financial information in the form of a press release.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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I, William B. Skoglund, Chief Executive Officer of the Company, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of Old Second Bancorp, Inc.;

2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.                                       The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)                                      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)                                     evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)                                      presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.                                       The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)                                      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)                                     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.                                       The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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I, J. Douglas Cheatham, Chief Financial Officer of the Company, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of Old Second Bancorp, Inc.;

2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.                                       The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)                                      designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)                                     evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)                                      presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.                                       The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)                                      all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)                                     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.                                       The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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