March 12, 2008

Dear Stockholder:

You are cordially invited to attend the 2008 annual meeting of stockholders of Old Second Bancorp, Inc. to be held on Tuesday, April 15, 2008 at 11:00 a.m., local time. The meeting will be held at the Copley Theatre, North Island Center, 8 East Galena Boulevard, Aurora, Illinois.

The formal items of business to be considered at the meeting include the election of five directors with terms expiring in 2011, the approval of a new stock incentive plan, and the ratification of our independent auditors. In addition, we will report on our performance in 2007 and address questions or comments from stockholders.

We encourage you to attend the meeting in person.  Whether or not you plan to attend, however, please read the enclosed proxy statement and then complete, sign and date the enclosed proxy and return it in the accompanying postpaid return envelope as promptly as possible.  This will save us additional expense in soliciting proxies and will ensure that your shares are represented at the meeting.

A copy of our annual report to stockholders for the year 2007 is also enclosed.  Thank you for your continued support and we look forward to seeing you at the meeting.

If you plan to attend the meeting in person, please respond to Robin Hodgson, Vice President/Corporate Secretary via email at rhodgson@02bancorp.com, by telephone at 630.906.5480, or indicate your preference on the back of the proxy sheet.

Directions:  The Copley Theater is located approximately 2 blocks east of Old Second National Bank on Galena Boulevard, Aurora, Illinois 60506 (please see detailed map found in the proxy statement.)

OLD SECOND BANCORP, INC.
37 South River Street, Aurora, Illinois 60506

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD APRIL 15, 2008

TO THE STOCKHOLDERS:

The annual meeting of stockholders of Old Second Bancorp, Inc., will be held on Tuesday, April 15, 2008 at 11:00 a.m., local time, at the Copley Theatre, North Island Center, 8 East Galena Boulevard, Aurora, Illinois, for the following purposes:

1.                                       to elect five members of the board of directors;

2.                                       to approve the adoption of the Old Second Bancorp, Inc. 2008 Equity Incentive Plan;

3.                                       to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ended December 31, 2008; and

4.                                       to transact such other business as may properly be brought before the meeting or any postponements or adjournments of the meeting.

The board of directors is not aware of any other business to come before the meeting. Stockholders of record at the close of business on March 3, 2008, are the stockholders entitled to vote at the meeting and any and all adjournments or postponements of the meeting. In the event there are an insufficient number of votes for a quorum at the time of the annual meeting, the meeting may be adjourned or postponed in order to permit further solicitation of proxies.

IMPORTANT:  THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.

OLD SECOND BANCORP, INC.

PROXY STATEMENT

This proxy statement is furnished in connection with the solicitation by the board of directors of Old Second Bancorp, Inc., a Delaware corporation, of proxies to be voted at the annual meeting of stockholders. This meeting is to be held at the Copley Theatre, North Island Center, located at 8 East Galena Boulevard, Aurora, Illinois on April 15, 2008 at 11:00 a.m., local time, or at any postponements or adjournments of the meeting. Old Second conducts full service community banking and trust business through its wholly-owned subsidiaries, Old Second National Bank, Old Second Financial, Inc., Old Second Affordable Housing Fund, L.L.C. and Old Second Management, LLC, and its majority-owned subsidiary, Old Second Realty, LLC.

A copy of our annual report for the year ended December 31, 2007, which includes audited financial statements, is enclosed. This proxy statement was first mailed to stockholders on or about March 12, 2008.

Why am I receiving this proxy statement and proxy form?

You are receiving a proxy statement and proxy form from us because on March 3, 2008, the record date for the annual meeting, you owned shares of our common stock. This proxy statement describes the matters that will be presented for consideration by the stockholders at the annual meeting. It also gives you information concerning these matters to assist you in making an informed decision.

When you sign the enclosed proxy form, you appoint the proxy holder as your representative at the meeting. The proxy holder will vote your shares as you have instructed in the proxy form, ensuring that your shares will be voted whether or not you attend the meeting. Even if you plan to attend the meeting, you should complete, sign and return your proxy form in advance of the meeting just in case your plans change.

If you have signed and returned the proxy form and an issue comes up for a vote at the meeting that is not identified on the form, the proxy holder will vote your shares, pursuant to your proxy, in accordance with his or her best judgment.

What matters will be voted on at the meeting?

You are being asked to vote on the election of five nominees to our board of directors, the approval of the Old Second Bancorp, Inc. 2008 Equity Incentive Plan and the ratification of Grant Thornton LLP as our independent registered public accounting firm for the year ended December 31, 2008 and any other business that may properly be brought before the meeting.

How do I vote?

A form of proxy is enclosed for use at the meeting. If the proxy is executed and returned, it may nevertheless be revoked at any time insofar as it has not been exercised. Stockholders attending the meeting may, on request, vote their own shares even though they have previously sent in a proxy. Unless revoked or instructions to the contrary are contained in the proxies, the shares represented by validly executed proxies will be voted at the meeting and will be voted “for” the election of the nominees for director named in this proxy statement, “for” the approval of the new equity incentive plan and for the ratification of our independent registered public accounting firm.

What does it mean if I receive more than one proxy form?

It means that you have multiple holdings reflected in our stock transfer records and/or in accounts with stockbrokers. Please sign and return ALL proxy forms to ensure that all your shares are voted.

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If I hold shares in the name of a broker, who votes my shares?

If you received this proxy statement from your broker, your broker should have given you instructions for directing how your broker should vote your shares. It will then be your broker’s responsibility to vote your shares for you in the manner you direct.

Under the rules of various national and regional securities exchanges, brokers generally may vote on routine matters, such as the election of directors and ratifying the appointment of an independent registered public accounting firm, but may not vote on non-routine matters, such as an amendment to the certificate of incorporation or the adoption or amendment of a stock incentive plan, unless they have received voting instructions from the person for whom they are holding shares. If there is a non-routine matter presented to stockholders at a meeting and your broker does not receive instructions from you on how to vote on that matter, your broker will return the proxy card to us, indicating that he or she does not have the authority to vote on that matter. This is generally referred to as a “broker non-vote” and may affect the outcome of the voting on those matters.

The election of directors and the ratification of the appointment of our independent registered public accounting firm should be within your broker’s discretion to vote in the absence of instructions from you. The approval of the new equity incentive plan, however, is a non-routine matter for which your broker will not have discretionary authority to cast a vote—whether “for,” “against,” or “abstain.”  Accordingly, we encourage you to provide directions to your broker as to how you want your shares voted on all matters to be brought before the 2008 annual meeting. You should do this by carefully following the instructions your broker gives you concerning its procedures. This ensures that your shares will be voted at the meeting.

How many votes do we need to hold the annual meeting?

A majority of the shares that were outstanding and entitled to vote as of the record date must be present in person or by proxy at the meeting in order to hold the meeting and conduct business. On March 3, 2008, the record date, there were 13,740,186 shares outstanding. A majority of these shares must be present in person or by proxy at the meeting.

Shares are counted as present at the meeting if the stockholder either:

·      is present in person at the meeting; or

·      has properly submitted a signed proxy form or other proxy.

What happens if any nominee is unable to stand for re-election?

The board may, by resolution, provide for a lesser number of directors or designate a substitute nominee. In the latter case, shares represented by proxies may be voted for a substitute nominee. Proxies cannot be voted for more than five nominees. The board has no reason to believe any nominee will be unable to stand for re-election.

What options do I have in voting on each of the proposals?

You may vote “for” or “withhold authority to vote for” each nominee for director. You may vote “for,” “against” or “abstain” on the approval of Old Second Bancorp, Inc. 2008 Equity Incentive Plan, and you may vote “for,” “against,” or “abstain,” on the ratification of our independent registered public accounting firm and on any other proposal that may properly be brought before the meeting.

How many votes are needed for each proposal?

The directors are elected by a plurality and the five individuals receiving the highest number of votes cast “for” their election will be elected as directors of Old Second. A “withhold authority” vote will have the same effect as a vote against the election of a particular director. A majority of votes cast at the meeting will approve the adoption of the equity incentive plan and ratify the appointment of our independent registered public accounting firm.

Abstentions and broker non-votes, if any, will not be counted as entitled to vote, but will count for purposes of determining whether or not a quorum

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 is present on the matter. So long as a quorum is present, abstentions and broker non-votes will have no effect on the outcome of the election of directors, the approval of the equity incentive plan or the ratification of the appointment of our independent registered public accounting firm.

How are votes counted?

Voting results will be tabulated and certified by the election judges.

Where do I find the voting results of the meeting?

We will announce voting results at the meeting. The voting results will also be disclosed in our Form 10-Q for the quarter ending June 30, 2008.

PROPOSAL 1:

ELECTION OF DIRECTORS

Old Second’s board of directors is divided into three classes, approximately equal in number. At the annual meeting to be held on April 15, 2008, you will be entitled to elect five directors for terms expiring in three years, as described herein. We have no knowledge that any of the nominees will refuse or be unable to serve as directors, but if any of the nominees becomes unavailable for election, the holders of proxies reserve the right to substitute another person of their choice as a nominee when voting at the meeting.

The Nominating and Corporate Governance Committee of the board of directors of Old Second has nominated five persons for election at this annual meeting, ALL of whom are incumbent directors. Set forth below is information concerning the nominees for election and for the other directors whose term of office will continue after the meeting, including their age, year first elected or appointed as a director and business experience during the previous five years. The five nominees for director, if elected at the annual meeting, will serve for terms expiring in 2011.

Unless authority to vote for the nominees is withheld, the shares represented by the enclosed proxy card, if executed and returned, will be voted “for” the election of the nominees proposed by the board of directors.

The board of directors recommends you vote your shares “FOR” each of the nominees for director.

NOMINEES

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Upon attaining age 70, an elected director assumes the status of a senior director for a period of three years. Senior directors have the right to attend all board meetings and all meetings of the

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committees to which they are appointed and to participate in all discussions during such meetings. However, a senior director does not have the right to vote on any matter. Mr. Walter Alexander, who has served on the board since 1976, became a senior director in January, 2005. His three-year term as a senior director will expire at the 2008 annual meeting and thereafter will no longer serve on the board.

All directors will hold office for the terms indicated, or until their earlier death, resignation, removal or disqualification, and until their respective successors are duly elected and qualified. Pursuant to the Agreement and Plan of Merger, dated November 5, 2007, between Old Second, Old Second Acquisition, Inc. and HeritageBanc, Inc., which is discussed below under “Material Events of the Past Year,” Mr. John Ladowicz, the former Chairman and Chief Executive Officer of HeritageBanc and its banking subsidiary, Heritage Bank, was appointed to our board of directors. Mr. Ladowicz was appointed to the class of directors whose term expires at this year’s annual meeting. The Agreement and Plan of Merger provided that our board is obligated to re-nominate Mr. Ladowicz for a board position at this year’s annual meeting. Except for the arrangement with respect to Mr. Ladowicz, there are no arrangements or understandings between any of the nominees, directors or executive officers and any other person pursuant to which any of our nominees, directors or executive officers have been selected for their respective positions. No nominee, member of the board of directors or executive officer is related to any other nominee, member of the board of directors or executive officer.

MATERIAL EVENTS OF THE PAST YEAR

On November 5, 2007, Old Second, Old Second Acquisition, Inc. and HeritageBanc, Inc., entered into an Agreement and Plan of Merger pursuant to which we acquired all of the outstanding capital stock of HeritageBanc through the merger of Old Second Acquisition with and into HeritageBanc. In connection with our acquisition of HeritageBanc, Heritage Bank, HeritageBanc’s banking subsidiary, merged with and into Old Second National Bank. The merger was consummated on February 8, 2008.

Under the terms of the merger agreement, we paid an aggregate purchase price of approximately $86.0 million, comprised of two components: $43.0 million in cash and approximately 1,563,636 shares of our common stock. Our acquisition of Heritage Bank added a bank with a similar relationship-focused banking strategy and approximately $350 million in assets and five branches, creating an organization with 35 banking offices and more than $3 billion in assets. The transaction provides us with a platform to expand into the high-growth markets of the south Chicago suburbs and to fill in our footprint in Will and southern Cook counties in the Chicago metropolitan area. The transaction will afford Heritage Bank’s loyal customers the wealth management services and expanded mortgage, treasury and retail services that currently are offered by Old Second National Bank.

CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

General

Currently, the board of directors is made up of fifteen directors, who are elected every three years to serve staggered terms. The board previously had consisted of fourteen directors, but, as discussed above, Mr. John Ladowicz was appointed to the board upon consummation of our acquisition of HeritageBanc on February 8, 2008. However, one of our current directors, Mr. Jesse Maberry, notified the board in October, 2007, that he intended to retire from the board at the end of his current term, which will expire at the 2008 annual meeting, and accordingly will not stand for re-election at this year’s annual meeting. As a result, if all of the nominees are elected at this year’s meeting, there will be fourteen directors immediately after the meeting.

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Generally, the board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the board does not involve itself in the day-to-day operations of Old Second, which is monitored by our executive officers and management. Our directors fulfill their duties and responsibilities by attending regular meetings of the board and through committee membership, which is discussed below. The board has determined that all of the directors and nominees are “independent” as defined by the Nasdaq Stock Market, with the exception of Messrs. Skoglund, Cheatham and Eccher, each of whom are executive officers, and Mr. Ladowicz, who was an executive officer of HeritageBanc prior to the merger transaction and also served as an employee of Old Second for a time following the merger.

The board of directors held twelve regular meetings during 2007. All of the directors attended at least 75% of these meetings and of the meetings of the committees on which they served. We typically schedule a board meeting in conjunction with our annual meeting and expect that our directors will attend our annual meeting. Last year, all directors attended our annual meeting.

The board of directors believes that it is important to encourage the highest level of corporate ethics and responsibility. Among other things, the board has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees, as well as a procedure for allowing employees to anonymously report any problems they may detect with respect to our financial reporting. The Code of Conduct, as well as other information pertaining to our committees, corporate governance and reporting with the Securities and Exchange Commission, can be found on our website at www.oldsecond.com.

The board of directors has standing Audit, Nominating and Corporate Governance and Compensation Committees, each of which is made up solely of directors who are deemed to be “independent” under the rules of Nasdaq. Nasdaq’s independence rules include certain instances that will preclude a director from being deemed independent. These instances include the existence of any of the following relationships in the current fiscal year or at any time during the preceding three years:

·                  employment with the company or any of its subsidiaries;

·                  service by any family member of a director as an executive officer of the company or any of its subsidiaries;

·                  acceptance by a director or a family member of payments from the company or any of its subsidiaries in excess of $100,000 during a fiscal year, other than the following: (i) fees for board or board committee service, (ii) payments arising from investments in the company’s securities, (iii) compensation paid to a family member who is a non-executive employee of the company or a subsidiary, (iv) benefits under a tax-qualified retirement plan or other non-discretionary compensation, (v) loans made to the director or family member in compliance with Regulation O, (vi) loans from Old Second National Bank, provided that the loans were made in the ordinary course of business, were made on substantially the same terms including interest rates and collateral as comparable transactions with the general public, did not involve more than the normal degree of risk or other unfavorable factors and were not otherwise subject to the disclosure requirement of Item 404 of SEC Regulation S-K or (vii) payments from Old Second National Bank in connection with the deposit of funds or Old Second National Bank acting in any agency capacity, provided the payments were made in the ordinary course of business, made in substantially the same terms as comparable transactions with the general public, and not otherwise subject to the disclosure requirements of Item 404 of SEC Regulation S-K;

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·                  involvement as a partner, executive officer or controlling stockholder of any entity or involvement by any family member in such entity, where the company made payments to, or received payments from, the entity in excess of the greater of (i) $200,000 or (ii) 5% of the recipient’s gross revenues for that year, other than payments arising solely from investments in the company’s securities or payments under non-discretionary charitable contribution programs;

·                  employment, or employment by any family member, as an executive of another entity where any of the company’s executives serve on the other entity’s compensation committee; or

·                  employment with, or employment or involvement by a family member, at the company’s outside audit firm.

In addition to the foregoing, directors serving on the Audit Committee must (i) be independent under the terms of the Securities Exchange Act and (ii) not have participated in the preparation of the company’s financial statements at any time in the preceding three years. The Securities Exchange Act further states that an independent director must not accept, either directly or indirectly, any consulting, advisory or other compensatory fee from the company, other than compensation for board or committee service or fixed amounts under a retirement plan for prior service that is not contingent on continued service; or be an affiliated person of the company or any subsidiary.

In the above regard, Mr. Barry Finn is the President and Chief Executive Officer of Rush-Copley Medical Center and Mr. William Skoglund, our Chairman and Chief Executive Officer, serves as the Vice Chairman of Rush-Copley’s board of directors. Our board has determined that this fact does not preclude a finding that Mr. Finn is independent under Nasdaq’s rules.

Actions taken by each committee of the board are reported to the full board, usually at its next meeting. The principal responsibilities of each of the committees are described below.

Audit Committee

The Audit Committee assists the board in carrying out its oversight responsibilities for our financial reporting process, audit process and internal controls. The Audit Committee is solely responsible for the pre-approval of all audit and non-audit services to be provided by our independent registered public accounting firm and exercises its authority to do so in accordance with a policy that it has adopted. Additionally, the Audit Committee reviews and approves all related party transactions between Old Second and related parties in accordance with Nasdaq’s rules and regulations. Copies of the Audit Committee’s charter and its pre-approval policy for audit and non-audit services were attached as exhibits to our 2004 proxy statement and also can be found on our website at www.oldsecond.com. Both documents were ratified by our full board in October 2007 for the 2008 calendar year.

The members of our Audit Committee during 2007 were Messrs. Finn, Maberry (who served as Chairman), McKee, Schmitz, each of whom is deemed to be an independent director under Nasdaq’s rules. Mr. Alexander, a senior director, also attended Audit Committee meetings in 2007. The Audit Committee met seven times in 2007. The board has designated Mr. Finn, who currently is President and Chief Executive Officer of Rush-Copley Medical Center and previously served as Chief Operating Officer and Chief Financial Officer of Rush-Copley, as the “audit committee financial expert,” as such term is defined by the regulations of the SEC. The board’s determination was based upon Mr. Finn’s level of knowledge and experience regarding financial matters and his experience overseeing and managing the audit of an organization, which he has gained both from his formal education and from his professional experience as the Chief Financial Officer of a regional hospital organization. The board

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 believes that each of the other members of the Audit Committee possesses knowledge and experience sufficient to understand the complexities of the financial statements of Old Second. Mr. Maberry, or Mr. Finn, met individually on a quarterly basis during 2007 with our independent registered public accounting firm.

Due to the retirement of Mr. Maberry, which will be effective at this year’s annual meeting, it is anticipated that Mr. Finn will be appointed as chairman of the Audit Committee in 2008. In addition, due to the expiration of Mr. Alexander’s term as a senior director, he will no longer attend Audit Committee meetings. Accordingly, it is anticipated that the Audit Committee will consist of Messrs. Finn, McKee and Schmitz throughout 2008. It is also possible that another independent director will be appointed to serve on the committee in 2008.

The committee’s duties, responsibilities and functions are further described in its charter, which is available on our website at www.oldsecond.com. You can request an additional copy of the committee’s charter by sending a written request to the Corporate Secretary at 37 South River Street, Aurora, Illinois 60506, or by sending an e-mail requesting same to rhodgson@oldsecond.com.

Compensation Committee

The Compensation Committee reviews the performance of Old Second’s executive officers and sets their compensation levels. The committee’s duties, responsibilities and functions are further described in its charter, which is available on our website at www.oldsecond.com. You can request a copy of the committee’s charter by sending a written request to the Corporate Secretary at 37 South River Street, Aurora, Illinois 60506, or by sending an e-mail requesting same to rhodgson@oldsecond.com. The Compensation Committee met two times during 2007.

The members of the Compensation Committee in 2007 were Messrs. Alexander, Fagel, Kane, McKee, Meyer and Palmer (who served as Chairman), each of whom is an “independent” director as defined by Nasdaq, an “outside” director pursuant to Section 162(m) of the Internal Revenue Code and a “non-employee” director under Section 16 of the Securities Exchange Act of 1934. It is anticipated that the composition of the Compensation Committee will be the same throughout 2008 as it was in 2007.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee reviews the qualifications of, and recommends to the board for nomination, candidates to fill vacancies on the board as they may occur during the year. The committee also reviews on a periodic basis whether each director is “independent” under the rules of Nasdaq. Additionally, the Nominating and Corporate Governance Committee is responsible for reviewing our policies, procedures and structure as they relate to corporate governance. The committee’s duties, responsibilities and functions are further described in its charter, which is available on our website at www.oldsecond.com. You can request a copy of the committee’s charter by sending a written request to the Corporate Secretary at 37 South River Street, Aurora, Illinois 60506, or by sending an e-mail requesting same to rhodgson@oldsecond.com. The Nominating and Corporate Governance Committee met two times in 2007.

The members of the Nominating and Corporate Governance Committee in 2007 were Messrs. Lindgren, Maberry, McKee (who served as Chairman), Meyer and Palmer, each of whom is deemed to be an independent director under Nasdaq’s rules. As previously discussed, Mr. Maberry will be retiring from the board upon the expiration of his term at this year’s annual meeting. Accordingly, it is anticipated that the Nominating and Corporate Governance Committee will consist of Messrs. Lindgren, McKee, Meyer and Palmer throughout 2008. It is also possible that another independent director will be

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 appointed to serve on the committee in 2008. Mr. McKee will continue to serve as Chairman of the committee.

Independent Director Sessions. Consistent with Nasdaq’s listing requirements, the independent directors regularly have the opportunity to meet in executive session without management or any non-independent directors in attendance. In 2004, the board of directors created the position of a “lead” independent director and Mr. McKee was appointed to serve in that position, and has been reappointed to that position each year since. The Nominating and Corporate Governance Committee reviews this appointment annually and the full board has the opportunity to ratify the committee’s selection. The lead independent director assists the board in assuring effective corporate governance and serves as chairman of the independent director sessions. In 2007, the independent directors met twice in executive session.

Director Nominations and Qualifications. In making its nominations for persons to be elected to the board of directors and included in our proxy statement, the Nominating and Corporate Governance Committee evaluates incumbent directors, board nominees and persons nominated by stockholders, if any. Generally, the committee believes that, at a minimum, directors should possess certain qualities, including the highest personal and professional ethics and integrity, a sufficient educational and professional background, demonstrated leadership skills, sound judgment, a strong sense of service to the communities which we serve and an ability to meet the standards and duties set forth in our Code of Business Conduct and Ethics. The committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members and to ensure the nominees’ “independence” so that at least a majority of the directors on the board will be deemed “independent” in accordance with Nasdaq requirements. Furthermore, all nominees must be under the age of 70, which is the mandatory retirement age for directors, although they may continue to serve as senior directors for a period of three years. Generally, each incumbent director standing for re-election should have, at a minimum, attended at least 75% of board meetings during the past year and attended a majority of committee meetings of which he or she is a member. The committee retains the ability to make exceptions to this attendance requirement as individual circumstances warrant. Currently, there are no fees paid to any third party to identify or assist in identifying or evaluating nominees.

All of the nominees for election as directors for the 2008 annual meeting were nominated by the committee. The committee did not receive any stockholder nominations for directors.

Stockholder Communications with the Board; Nomination and Proposal Procedures

Stockholder Communications with Directors. Stockholders of Old Second may contact any member of the board of directors, or the board as a whole, through the Corporate Secretary either in person, in writing, via phone at 630-906-5480, or by e-mail at rhodgson@oldsecond.com. Any communication will be forwarded promptly to the board as a group or to the attention of a specified director  per your request. Your letter should indicate that you are an Old Second stockholder. The address for submitting communications to the board by mail is 37 South River Street, Aurora, Illinois 60506.

Nominations of Directors. In order for a stockholder nominee to be considered by the Nominating and Corporate Governance Committee to be its nominee and included in our proxy statement, the nominating stockholder must file a written notice of the proposed director nomination with our Corporate Secretary, at the above address, at least 120 days prior to the date on which the previous year’s proxy statement was mailed to stockholders. Nominations must include the full name and address of the proposed nominee and a brief description of the proposed nominee’s business experience for at least the previous five years and, as to the stockholder giving the notice, his or her name and address, and the class and number of shares of our capital stock owned by that stockholder. All submissions must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a

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director if elected. The committee may request additional information in order to make a determination as to whether to nominate the person for director.

In accordance with our bylaws, a stockholder may otherwise nominate a director for election to the board at an annual meeting of stockholders by giving timely notice in writing to our Corporate Secretary, at the address provided above. To be timely, stockholder nominations must be made in writing, delivered or mailed by first class United States mail, postage prepaid, to our Corporate Secretary not fewer than 14 days nor more than 60 days prior to any meeting of stockholders called for the election of directors. However, if notice of the meeting is given to stockholders less than 21 days prior to the date of the meeting, written nominations must be delivered or mailed to our Corporate Secretary not later than the close of business on the seventh day following the day on which notice of the meeting was mailed to stockholders. Each written nomination must set forth the name, age, business address and, if known, residence address of each nominee; the principal occupation or employment of each such nominee for the past five years; and the number of shares of stock of Old Second beneficially owned by each such nominee and by the nominating stockholder.

Other Stockholder Proposals. To be considered for inclusion in our proxy statement and form of proxy relating to our 2009 annual meeting of stockholders, the proposing stockholder must file a written notice of the proposal with our Corporate Secretary, at the above address, by November 1, 2008, and must otherwise comply with the rules and regulations set forth by the Securities and Exchange Commission.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our common stock at December 31, 2007, by each person known by us to be the beneficial owner of more than five percent of the outstanding common stock, by each director or nominee, by each executive officer named in the Summary Compensation Table (which can be found later in this proxy statement), and by all directors and executive officers of Old Second as a group. Beneficial ownership has been determined for this purpose in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under which a person is deemed to be the beneficial owner of securities if he or she has or shares voting power or investment power with respect to such securities or has the right to acquire beneficial ownership of securities within 60 days of December 31, 2007. Unless otherwise noted, the address of each five percent stockholder is 37 South River Street, Aurora, Illinois 60506.

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*                 Less than one percent

(1)          Includes ownership of shares of our common stock by spouse (even though any beneficial interest is disclaimed) and in our profit sharing plan and trust and our salary savings plan.

(2)          In addition, as of December 31, 2007, Old Second National Bank held in its trust department, in various fiduciary capacities (other than as trustee of our profit sharing plan and trust), 1,101,028 shares of our common stock. Old Second had full investment power with respect to 338,073 shares and shared investment power with respect to 153,715 shares.

(3)          Includes 81,332 shares issuable pursuant to options held by Mr. Cheatham. Also includes 2,773 shares held in our profit sharing plan and trust and 6,950 shares held in our 401(k) plan.

(4)          Includes 64,066 shares issuable pursuant to options held by Mr. Eccher. Also includes 518 shares held in our profit sharing plan and trust and 3,012 shares held in our 401(k) plan.

(5)          Mr. Ladowicz was not a director of Old Second on December 31, 2007, and was not the beneficial owner of shares of our common stock at such time. However, Mr. Ladowicz became a director of Old Second upon consummation of our acquisition of HeritageBanc and, on February 13, 2008, became entitled to receive shares of our common stock in exchange for his shares of HeritageBanc common stock in connection with our acquisition of HeritageBanc. On February 13, 2008, Mr. Ladowicz reported that he was the beneficial owner of 321,220 shares of our common stock. This number includes 260,870 shares held in our 401(k) plan.

(6)          Mr. Schmitz has voting control of 386,596 shares held in the J. C. Schmitz Revocable Trust.

(7)          Includes 207,200 shares issuable pursuant to options held by Mr. Skoglund. The total also includes 43,905 shares held in our profit sharing plan and trust and 13,259 shares held in our 401(k) plan.

(8)          Includes 2,100 shares held in direct ownership by Mr. Sloan , which comprises 707 shares held in Mr. Sloan’s name alone and 3,247 shares in restricted stock held in his name, and 4,898 shares held indirectly in our profit sharing plan. In addition, Mr. Sloan had options totaling 14,000 shares that are exercisable.

(9)   Each director, with the exception of Mr. Cheatham, Mr. Eccher, Mr. Skoglund and Ms. Krasner, holds a total of 6,000 shares of options from grants of 1,500 shares in 2004, 1,500 shares in 2005, 1,500 shares in 2006 and 1,500 shares in 2007. Ms. Krasner joined the board in 2006 and holds options to purchase 3,000 shares of our common stock. Mr. Ladowicz was appointed to the board on February 8, 2008 and currently has no options. All options issued prior to December 31, 2005 are currently exercisable and options granted since that time vest in three equal installments on the first three anniversaries of the grant date and the exercisable portion is included in these totals.

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SECURITY 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and 10% stockholders file reports of ownership and changes in ownership with the Securities and Exchange Commission.  Such persons are also required to furnish us with copies of all Section 16(a) forms they file.  No person failed to comply with the filing requirements of Section 16(a) during 2007 and there are no late filings to report.

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This Compensation Discussion and Analysis describes Old Second’s compensation philosophy and policies for 2007 as applicable to the executive officers named in the Summary Compensation Table on page 24.  This section explains the structure and rationale associated with each material element of each executive’s compensation, and it provides important context for the more detailed disclosure tables and specific compensation amounts provided following the section.  It is important to note that Old Second and Old Second National Bank share an executive management team, the members of which are compensated by the bank rather than the holding company.  The compensation packages of the named executive officers are determined and approved by our Compensation Committee based upon their performances and roles for both Old Second and Old Second National Bank.

The following discussion and analysis contains statements regarding future individual and company performance targets and goals.  These targets and goals are disclosed in the limited context of Old Second’s compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance.  Old Second specifically cautions investors not to apply these statements to other contexts.

The Compensation Committee has overall responsibility for evaluating the compensation plans, policies and programs relating to the executive officers of Old Second.  The Compensation Committee relies upon the input of management, particularly Mr. Skoglund, when carrying out its responsibilities in establishing executive compensation.  Management provides the committee with evaluations as to employee performance, guidance on establishing performance targets and objectives and recommends salary levels and option awards.  The committee also consults with management on matters that are relative to executive compensation and benefit plans where board or stockholder action is expected, including the adoption of new plans or the amendment of existing plans.  No executive officer participates in any recommendation or decision regarding his or her own compensation.

The committee’s charter gives it the authority to hire outside consultants to further its objectives and responsibilities.  For several years, the committee has utilized the services of Watson Wyatt for its expertise and resources regarding current market activities and to assist the committee in benchmarking and comparing Old Second’s compensation and benefit programs with an objective peer group.  The committee also receives a number of surveys from other independent sources regarding the compensation levels and programs at other financial institutions.

During the calendar year of 2007, the Compensation Committee convened in January and again in December. Mr. Palmer, Chairman of the committee, met as needed basis with internal staff members to assimilate proxy compensation information for this proxy statement.  The Compensation Committee also met in January 2008 to approve salaries for 2008 and final bonus awards for 2007.

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Compensation Philosophy and Objectives

The overall objective of Old Second’s compensation programs is to align senior executive officer compensation with the success of meeting goals by creating strong incentives to manage the business successfully from financial and operating perspectives.  Our philosophy is intended to align the interests of management with those of our stockholders.  The executive compensation program is structured to accomplish the following objectives:

·                  encourage a consistent and competitive return to stockholders;

·                  maintain a corporate environment which encourages stability and a long-term focus for both Old Second and our management;

·                  clearly motivates personnel to perform and succeed according to our current goals;

·                  retains key personnel critical to our long-term success; and

·                  emphasizes formula-based components, such as incentive plans, in order to better focus management efforts in its execution of corporate goals; and

·                  ensure that management:

·                  fulfills its oversight responsibility to its constituents that includes stockholders, customers, employees, the community and government regulatory agencies;

·                  conforms its business conduct to the highest ethical standards;

·                  remains free from any influences that could impair or appear to impair the objectivity and impartiality of its judgments or treatment of our constituents; and

·                  continues to avoid any conflict between its responsibilities to Old Second and each individual’s personal interests.

Compensation Components

General.   There are four major components that make up our executive officer compensation program:  base salary, bonus, equity awards and additional benefits.  The committee’s decisions regarding each of these components for the named executive officers are based in part on the committee’s subjective judgment and take into account qualitative and quantitative factors, as are described in the discussion below.  In reviewing an executive officer’s compensation, the committee considers and evaluates all components of the officer’s total compensation package.  This involves reviewing base salary, bonus, incentive stock awards, perquisites, participation in our non-qualified executive plans, participation in our 401(k) plan, and any other payments, awards or benefits that an officer earns.  Additionally, the committee takes into consideration any amounts an executive officer is entitled to upon retirement, termination or a change-in-control event.  In this regard, in establishing compensation for 2007 and 2008, the committee utilized tally sheets summarizing these aggregated amounts.

Base Compensation-Salary.  The committee believes that base compensation should offer security to each executive to maintain a stable management team and environment.  Because of the need to provide stability, salaries make up the largest portion of the executives’ compensation.  In establishing a senior executive officer’s initial base salary the committee considers, among other things, the executive’s level of responsibility, prior experience, breadth of knowledge, the competitive salary practices at peer companies, internal performance objectives, education, internal pay equity, potential bonus and equity awards, level of benefits and perquisites and the tax deductibility of base salary.

When considering annual adjustments to the named executive officers’ base salaries, the committee concentrates primarily on corporate performance compared to our peer group, although

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individual performance is also taken into consideration.  When measuring individual performance, the committee receives an annual performance review for each executive officer as well as a recommendation from management as to what level of adjustment is appropriate for that officer.  This performance review takes into account the officer’s effort and success in achieving his or her individual goals, managing and developing other employees and how the officer has generally contributed to Old Second’s financial performance.  Mr. Skoglund presents the annual review for each officer except for his own, which is presented by Mr. Palmer, the committee’s chairman.

When evaluating corporate performance, the committee focuses on profitability growth, particularly return on average equity as well as return on average assets.  The committee will evaluate this in light of overall market conditions, and compares Old Second’s performance on those measures with those of its peer group (Midwestern banks with total assets between $1.0 and $5.0 billion).  Other factors of corporate performance that may affect an executive’s compensation include the change in value of Old Second’s common stock over the year, Old Second’s realization of economies of scale through cost-saving measures, the increase or decrease in Old Second’s market share in the communities in which it serves, as well as the turnover level of employees.

As with all of its decisions regarding compensation levels, when reviewing salaries the committee considers the levels of all aspects and components of the officer’s compensation, including the individual’s potential bonus and equity awards as well as the level of benefits and perquisites offered.  All of these factors are considered on a subjective basis in the aggregate, and none of the factors is accorded a specific weight.

Cash Incentive Awards-Bonus. The bonus plan is designed to provide incentive to attain corporate and individually delineated goals.  All vice presidents and above as well as assistant vice presidents in profit centers are generally eligible for a bonus.  Each officer is assigned thresholds by the committee for company performance, individual performance, earnings per share compared to peer institutions (Midwestern banks with total assets between $1.0 and $5.0 billion) and, depending upon the officer’s position and duties, performance goals of a subsidiary.  The committee establishes the target amount that each officer may earn upon meeting the separate target goals.  For instance, the committee may provide that an officer can earn 10% of his or her salary as a bonus if Old Second attains the corporate performance thresholds, 5% of the officer’s salary if the officer attains his or her individual goals and an additional 5% of the officer’s salary if the Old Second attains its earnings per share goals compared to its peer group.  In that case, if all performance targets were attained, the officer would earn a bonus equal to 20% of his or her base salary.  The bonuses are discretionary, and the potential payout amount can be increased or decreased by the committee if there are extraordinary circumstances that year.

Corporate Performance Component.  For 2007, in setting the thresholds for corporate performance, the committee focused upon the net income of either Old Second as a whole (for those officers at the holding company level) or of a particular subsidiary (for those officers whose responsibilities are primarily at a subsidiary level).  Generally, the corporate performance threshold is established so that an officer will realize a higher portion of his or her possible bonus as net income increases.  For 2007, the thresholds were as follows:

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Therefore, if an officer is eligible to receive a bonus equal to 10% of his or her salary based upon corporate performance, and our net income increases 10% from the prior year, the officer would receive a bonus amount equal to 7.5% of salary (75% of 10%).

For 2008, the committee decided to use a comparison of return on equity to Old Second’s peer group, consisting of all publicly reporting bank holding companies in the Midwest with total assets between $1.0 and $5.0 billion.  This change was made primarily because of the difficult economic environment faced by financial institutions and the desire by the committee to focus the payment of a bonus on Old Second’s relative performance in such an environment.  The thresholds for 2008 are as follows:

Therefore, if an officer is eligible to receive a bonus equal to 5% of his or her salary based upon our return on equity compared to peers, and if our return on equity is equal to 40% of our peer group, the officer would receive a bonus amount equal to 2.5% of salary (50% of 5%).

Earnings Per Share Component.  Our earnings per share compared to a peer group also make up a portion of an officer’s eligible bonus under the plan.  Generally, the committee measures our diluted earnings per share growth for the year against the results of a peer group as set forth above.  For 2007 and 2008, the thresholds were as follows:

The total award is calculated consistent with the method described above.

Individual Goals Component.  Individual goals are assigned to each officer and generally reflect corporate measures that are affected by that officer’s performance.  The measures used by the committee

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include return on equity, our efficiency ratio, total net charge-offs, net interest margin and total loan growth and the goals vary from officer to officer.  The committee also establishes goals relating to strategic plans, leadership, etc. that are subjective in nature.  Generally, the thresholds are set so that improvement in the particular category is necessary in order to receive the full eligible bonus.

Long-Term Incentive Awards-Equity Awards.  The Board and the committee believe in management ownership of our common stock as an effective means to align the interests of management with those of the stockholders.  Our current long-term incentive plan (the “Incentive Plan”) is intended to promote equity ownership in Old Second by the directors and selected officers and employees, focus the management team on increasing value to stockholders, increase their proprietary interest in the success of Old Second and encourage them to remain in the employ of Old Second or its subsidiaries for a long period of time.

Generally, Old Second grants options to most of the named executive officers and to other senior management, while awarding restricted stock to other officers and employees.  All awards are at the discretion of the committee and are generally subjective in nature.  In determining the number of options to be granted to executive officers, the committee considers individual and corporate performance and whether respective goals were obtained, the person’s position and ability to affect profits and stockholder value, as well as the level of awards granted to individuals with similar positions at our peer organizations.  Because of the nature of equity awards, the committee also evaluates the prior awards of stock options and restricted stock and takes into account the overall wealth accumulation of a given executive officer through such awards.

The Incentive Plan authorizes the issuance of up to 1,333,332 shares of Old Second’s common stock, including the granting of qualified stock options (“Incentive Stock Options”), nonqualified stock options, restricted stock and stock appreciation rights.  As of January 1, 2007, 236,257 shares remained eligible for award or issuance under the Incentive Plan.  As of January 1, 2008, 116,531 shares remained eligible for award or issuance.  As described in this proxy statement, the committee has approved a new equity incentive plan, pending stockholder approval, in part because the shares available under the existing plan are being exhausted.  Options granted in 2007 vest in equal installments on the first three anniversaries of the grant date.

The committee typically grants equity awards in December of each year.  This is because all annual salary reviews are conducted in the month of December across the entire company and such awards are a part of the review process.  Options are issued at the closing market value of the common stock at the time of issuance, which has been the day of the board meeting held in December so that all directors are afforded the opportunity to vote upon the Compensation Committee’s recommendations.  Upon approval of the option grants, the actual administration of grants is coordinated through our Human Resources Department.  We do not have a formal written policy guiding the timing of equity grants and the grant date of stock option grants is not coordinated with the release of material non-public information and we do not plan to time, or will time, our release of material non-public information for the purpose of affecting the value of executive compensation.

In 2005, the committee began granting restricted stock instead of options to other officers.  Typically, all restricted stock is subject to a three-year cliff-vesting period and is subject to forfeiture until that time has passed.   The rationale behind the use of restricted stock as opposed to options is that a less complicated accounting treatment is needed and restricted stock is intended to be a retention tool for key employees so they can take ownership in Old Second.  The Compensation Committee generally determines each restricted stock award in December of each year and the shares are issued effective the first business day of January of the following year.  The number of shares awarded to different levels of officers are relatively uniform throughout each level of officer and the value awarded is generally based

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upon a percentage of that officer’s or employee’s base salary.  The restricted stock awards, like stock option awards, are intended to align the officer’s and certain other employee’s interests with those of the stockholders and to provide an incentive to remain at Old Second.

All Other Compensatio-Additional Benefits.  We provide general and customary benefit programs to executive officers and other employees.  Benefits offered to executives are intended to serve a different purpose than base salary, bonus and equity awards.  While the benefits offered are competitive with the market place and help attract and retain executives, the benefits also provide financial security for employees for retirement as well as in the event of illness, disability, or death.  Benefits offered to executive officers are generally those offered to other employees with some variation to promote tax efficiency and replacement of benefit opportunities lost to regulatory limits, although there are some additional perquisites that may only be offered to executive officers.  Because of the nature of the benefits offered, the committee normally does not adjust the level of benefits offered on a year to year basis.

The following table summarizes the benefits and perquisites we do and do not provide as well as identifies those employees that may be eligible to receive them:

Old Second Bancorp, Inc. Employees 401(k) Savings Plan and Trust.  Old Second sponsors a qualified, tax-exempt 401(k) savings plan and trust qualifying under Section 401(k) of the Internal Revenue Code.  Virtually all employees are eligible to participate after meeting certain age and service requirements.  Eligible employees are permitted to contribute up to a dollar limit set by law.  Pursuant to the plan, we match up to 100% of a participant’s deferral into the 401(k) plan limited to 6% of each participant’s salary.

There is also a profit sharing portion of the 401(k) plan which provides for an annual discretionary contribution to the retirement account of each employee based in part on our profitability in a given year and on each participant’s annual compensation. This discretionary contribution is generally between 3% and 7% of an employee’s salary.  The contribution amount granted each year is on a discretionary basis and there is no set formula used by the committee.  The percentage of salary contributed is equal for all eligible employees.

Old Second has generally increased the amount of the company match and the profit sharing contribution in the past few years because Old Second terminated its defined benefit plan as of the end of

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2005 and the 401(k) plan is now the primary retirement vehicle provided by Old Second for the officers and employees.  Participants can choose between several different investment options under the 401(k) plan, including shares of Old Second’s common stock.

Old Second Bancorp, Inc. Amended and Restated Voluntary Deferred Compensation Plan for Executives.  Old Second sponsors an executive deferred compensation plan, which provides a means for certain executives to voluntarily defer all or a portion of their salary and/or bonus without regard to the statutory limitations applicable to tax-qualified plans.  The plan provides for participant deferrals, company matching contributions and discretionary employer profit sharing contributions.   A company matching contribution is credited to the plan on behalf of a participant when the participant elects to defer the maximum amount permitted under the tax-qualified 401(k) plan (including catch-up contributions, if applicable) and keeps that level of deferral for the entire plan year.  The company matching contribution will be an amount equal to 6% of the participant’s combined base salary and bonuses, less any matching contribution paid to the 401(k) plan on the participant’s behalf.  The determination of whether a profit sharing contribution will be made and in what amount is entirely at the committee’s discretion and there is no set formula.  Generally, this percentage of salary for the profit sharing component will equal the percentage for our 401(k) plan.  The amount for the profit sharing component paid pursuant to the 401(k) plan will be deducted from the amount to be paid pursuant to the deferred compensation plan.  Participants may invest the deferrals and company contributions credited to their accounts under the plan in a mutual fund-like investment pool managed by an independent third party.  Participants may elect to receive their plan balance in a lump sum or in up to 10 annual installments following retirement.  Participants are not permitted to make a withdrawal from the plan during their employment, except in the event of hardship as approved by the plan’s administrator.  The plan is administered through an independent service provider.

Before the end of 2008, the plan will be amended to bring it into full documentary compliance with the requirements of Section 409A of the Internal Revenue Code.

Other Perquisites.  It is our belief that perquisites for executive officers should be very limited in scope and value.  Due to this philosophy, Old Second has generally provided nominal benefits to executives that are not available to full-time employees and we plan to continue this approach in the future.  We do provide country club memberships to certain executives and managers in the ordinary course of business to give them the opportunity to bring in and recruit new business opportunities.  Those individuals are eligible to use the club membership for their own personal use.  Additionally, we provide each of Mr. Skoglund, Mr. Eccher, and Mr. Sloan with an automobile allowance to enable them to visit our banking locations on a regular basis as well as to call on our customers.  We have disclosed the value of all perquisites to named executive officers in the Summary Compensation Table even if they fall below the disclosure thresholds under the SEC rules.

Compensation Decisions

This section describes the decisions made by the committee with respect to the compensation for the named executive officers for 2007 and 2008.

Executive Summary.    We have continued to apply the compensation principles described above in determining the compensation of the executive officers named in the Summary Compensation Table on page 24.  Our compensation decisions for 2007 compensation factored in Old Second’s growth during 2006 and the increases in earnings, return on assets and to overall assets.  Additionally, the committee’s decisions made in 2007 and the first quarter of 2008 were made in the context of slow earnings growth in 2007, reduced return on assets in 2007, a general slowdown in our asset growth as well as the negotiation, announcement and consummation of the merger transaction with Heritage in 2007.  Despite the growth

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slowdown in our performance in 2007, the committee determined that Old Second showed solid performance in 2007 when compared to our peers.

The following is a brief summary of the compensation decisions the committee effected for 2007 and 2008:

·                  we increased base salaries for the named executive officers on average by approximately 3% for 2007 and 7% for 2008;

·                  bonus payments to named executive officers for 2007 increased from 2006;

·                  equity awards to named executive officers in 2007 remained consistent with awards granted in past years and increased slightly for 2008; and

·      benefits and perquisites remained substantially similar in 2007 compared to prior years and we expect that will continue through 2008.

Base Salary.   We annually review the base salaries of the named executive officers to determine whether or not they will be adjusted, as described above.  The salaries for 2007, determined by the committee at the end of 2006, are set forth in the Summary Compensation Table on page 24.  In determining these salary levels, we considered the following:

·                  the compensation philosophy and guiding principles described above;

·                  the general growth in 2006 and slowdown of our earnings, return on average assets, and overall assets from our historically high levels over the previous several years;

·                  the general economic factors in the financial industry beyond our control and the favorable financial performance of Old Second compared to our peers;

·                  the base salary paid to the officers in comparable positions at companies in the peer groups, using the 50^th-75^th percentile as our point of reference;

·                  the experience and industry knowledge of the named executive officers and the quality and effectiveness of their leadership at Old Second;

·                  all of the components of executive compensation, including base salary, bonus, stock options, retirement and death benefits, as well as benefits and perquisites; and

·                  internal pay equity among Old Second executives.

No specific weighting was applied to these factors, although our performance in 2006 was a key factor in setting salaries, as personal performance is rewarded more heavily in cash incentives and long-term incentive awards.  The total increase in base salaries for the named executive officers for 2007 represented an overall increase of approximately 3% over 2006.

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At the end of 2007 and in early 2008, the committee determined the base salaries for the executive officers for 2008.  The base salaries for 2006, 2007, and 2008 are as follows:

In determining these base salaries for 2008, we considered the same general factors discussed above including the continuing general slowdown in the growth of our earnings, return on average assets and overall assets from our historically high levels over the past several years.  As in the past, the committee took into account the general economic factors in the financial industry that are beyond the executive officers’ control and the committee believed that Old Second’s performance in 2007 compared favorably with other financial institutions, including those of its peer group.  Additionally, the committee considered the recent reorganization of all of Old Second’s bank charters under Old Second National Bank as well as the recently completed merger transaction with Heritage Bank and concluded that salaries should be increased as a result.  As a result of these factors, the total increase in base salaries for 2008 represents an approximate increase of 7% over 2007 salaries.

Bonus.  As described above, there were different components that made up the non-discretionary portion of the executive officer’s bonus.  Those components, and the percentage of salary that the named executive officer could have earned for 2007 performance, were as follows:

(1)                                  Mr. Eccher is the President of Old Second National Bank and this component is based off of that subsidiary bank’s performance.

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Total bonuses earned in 2007 were higher than bonuses earned in 2006 and earlier years.  The amounts paid in 2008 based upon 2007 performance are reported in the Summary Compensation Table under the “Bonus” and the “Non-equity incentive compensation” columns on page 24.

For the formula-based bonus amounts earned through the performance thresholds discussed above, we did not meet the Old Second performance threshold and no bonus was paid for that component.  The earnings per share threshold was obtained and each executive was paid 125% of their eligible amount as a result.  Additionally, the executives met most of their individual goals.  Therefore, the formula-based bonuses paid for 2007 reflected the amounts attributable to the earnings per share and individual goals.  These formula-based bonus payments are listed under the “Non-equity incentive plan compensation” column in the Summary Compensation Table on page 24.

For 2007, Mr. Skoglund’s individual goals related to our return on equity, our efficiency ratio and our net-charge offs.  We achieved our net charge-off and return on equity thresholds, but did not meet our efficiency ratio threshold for 2007 and, therefore, he received only a portion of his bonus based upon the individual component.  Mr. Cheatham’s individual goals related to our net interest margin, our efficiency ratio as well as the implementation of an asset/liability strategy for the ALCO Committee of the board.  We did not meet the net interest margin or efficiency ratio thresholds, but Mr. Cheatham did successful implement the asset/liability strategy, so he earned a portion of the bonus attributable to the individual component.  Mr. Eccher’s individual goals included low net charge-offs on loans for the Old Second National Bank as well as the implementation of several strategic plans.  We achieved the goal for net charge-offs and Mr. Eccher completed the strategies and received the full bonus attributable to his individual component.  Finally, Mr. Sloan’s individual goals consisted of low net-charge offs for the holding company, low non-performing assets, growth in loans and deposits, as well as implementing various functions in credit department.  We were successful in meeting all of the thresholds for Mr. Sloan, with the exception of growth in loans and deposits, so Mr. Sloan did not receive the full bonus attributable to his individual component.

Pursuant to the bonus plan, the committee is authorized to grant discretionary bonuses to executive officers if there are extraordinary circumstances that the committee believes warrant a bonus payment.  For 2007, the committee decided to award an additional bonus amount to the executive officers to reward them for our performance in 2007 compared to our peers, particularly our growth in earnings per share and our return on equity.  Additionally, the committee also decided to reward the officers’ individual efforts in the merger transaction with Heritage, the successful completion of the transaction and their work toward consolidating the two companies.  Because of the time and effort that was expended in 2007, the successful completion of the merger transaction and the fact that the transaction was not built into the bonus plan already (because the committee set the thresholds in 2007 prior to us being aware of a possible transaction with Heritage) the committee determined to award each of the named executive officers an award equal to 20% of the total amount available to the officer under the bonus plan.  Therefore, since Mr. Skoglund was eligible to receive a bonus equal to 45% of his salary under the bonus plan, the committee awarded an amount equal to 20% of that 45%, or 9% of his base salary.  These bonus payments are listed under the “Bonus” column in the Summary Compensation Table on page 24.  Because we did not achieve the corporate level goal that would warrant a formula payout pursuant to the thresholds discussed above, even with this discretionary bonus payment, no executive officer achieved his total eligible bonus payment for 2007.

In early 2008, the committee established the company performance, individual goals and earnings per share goals for 2008 bonuses and the company performance and earnings per share are set forth above.  For individual goals, Mr. Skoglund’s relate to maintaining an efficiency ratio at 62% or lower, successfully integrating Heritage into Old Second, implementing a high level succession plan and maintaining low levels of net charge-off to total loans.  Mr. Cheatham’s individual goals relate to

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maintaining an efficiency ratio at 62% or lower and successfully integrating Heritage into Old Second.  Mr. Eccher’s individual goals relate to maintaining an efficiency ratio at 62% or lower, successfully integrating Heritage into Old Second and maintaining low levels of net charge-off to total loans.  Mr. Sloan’s individual goals relate to maintaining low levels of net charge-off to total loans and non-performing assets, review and implement revised policies relating to loan policies and business continuity plans, overseeing loan growth of at least 6% to 12% and the continued successful integration of the requirements of Sarbanes-Oxley, the audit processes and risk management.

The percentage of salary that the named executive officers are eligible to earn for 2008 for each component are as follows:

Equity Awards.  In December 2007 we granted stock options to purchase 40,000 shares of common stock to Mr. Skoglund, 15,000 shares to Mr. Cheatham and 20,000 shares to Mr. Eccher.  In approving these option grants, we considered our compensation philosophy, the position and level of responsibility of each officer, our belief that equity awards should be a significant part of the total mix of executive compensation, the number of options currently held by each officer and the level of options granted to them in prior years.

Additionally, the committee granted Mr. Sloan 1,747 shares of restricted stock on December 19, 2006 for the ensuing year of 2007 and 1,946 shares of restricted stock on January 2, 2008 for the year of 2008. In the foregoing instances, the level of restricted stock granted was approximately 30% of Mr. Sloan’s base salary, which is a comparable amount to those of other officers.  Each of the awards will vest on the third anniversary from the date of the respective grant.  The committee granted Mr. Sloan shares of restricted stock instead of options because Old Second is limiting the number of option grants on a year over year basis due to accounting reasons.

All Other Compensation.  While the committee reviews and monitors the level of other compensation offered to the named executive officers, the committee typically does not adjust the level of benefits offered on an annual basis.  The committee does consider the benefits and perquisites offered to the named executive officers in its evaluation of the total compensation received by each.  The committee did provide a profit sharing contribution equal to 4% of salary to each employee, including the named executive officers.  The committee contributed an amount on the low end of its goal of 3% to 7% because of the overall performance in 2006 and 2007.  As with the 401(k) plan, the amount of profit sharing under the deferred compensation plan equaled 4% of the participant’s total salary.  The benefits offered in 2007 to the named executive officers are expected to continue for 2008 and the perquisites received by the named executive officers in 2007 are reported in the Summary Compensation Table on page 24.

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COMPENSATION COMMITTEE REPORT

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management.  Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in Old Second’s Annual Report on Form 10-K for the year ended December 31, 2007.

Submitted by:

Mr. Gerald Palmer, Chairman

Mr. Marvin Fagel

Mr. William Kane

Mr. D. Chet McKee

Mr. William Meyer

Members of the Compensation Committee

Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that incorporate future filings, including this Proxy Statement, in whole or in part, the foregoing Compensation Committee Report shall not be incorporated by reference into any such filings.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the compensation of our Chief Executive Officer, Chief Financial Officer and our other most highly compensated officers who are considered executive officers and who served in such capacities during 2007:

(1)           The amounts represent the discretionary bonus payment made to the named executive officers as described on page 21.  Additional amounts were paid for 2007 pursuant to the formulas established under the bonus plan and those amounts are set forth as “non-equity incentive plan compensation” in this table.  No such discretionary bonus payment was made for 2006, and the total bonus amount paid in 2006 is set forth as “non-equity incentive plan compensation”.

(2)           The amounts represent Old Second’s expense in 2007 for restricted stock awarded.  A discussion of the assumptions used in calculating these values may be found in Note N to our 2007 audited financial statements included in our annual report to stockholders.

(3)           The amounts for 2007 represent Old Second’s expense in 2007 for options awarded in 2007 and 2006.  The amounts for 2006 represent Old Second’s expense in 2006 for options awarded in 2006.  All other options were expensed prior to 2006.  The 2006 options were granted on December 19, 2006, and, therefore, only a small amount was required to be expensed in 2006 for such options.  A discussion of the assumptions used in calculating the values for 2007 may be found in Note N to our 2007 audited financial statements included in our annual report to stockholders.

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(3)           The amounts set forth in column (i) include the following:

(a)           Represents amounts paid in 2008 relating to service in 2007.

(b)                                 Mr. Skoglund no longer receives director fees for service on the subsidiary boards nor do Messrs. Sloan and Eccher as the subsidiary banks were merged into Old Second National Bank as of June 30, 2007.

Grants of Plan Based Awards

(1)   Represents possible payments pursuant to our bonus plan for 2008 performance.  The plan is described in the section entitled —“Bonus” in the Compensation Discussion and Analysis section.  Amounts paid pursuant to the bonus plan for 2007 performance are shown on the Summary Compensation Table.

(2)   Mr. Sloan was awarded 1,946 shares of restricted stock on January 2, 2008 with a fair market value of $54,001, which shares are not reflected in this table.

(3)   Represents options to purchase shares of our common stock that were granted on December 18, 2007.  The options will vest in three equal installments on the first three anniversaries of the grant date.

(4)   A discussion of the assumptions used in calculating these values may be found in Note N to our 2007 audited financial statements included in our annual report to stockholders.

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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning the exercisable and unexercisable stock options at December 31, 2007 held by the individuals named in the Summary Compensation Table: