UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-K/A

Amendment No. 1

☒     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

OR

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

Commission file number   0‑10537

37 South River Street, Aurora, Illinois 60507

(Address of principal executive offices, including zip code)

(630) 892‑0202

(Registrant’s telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes☐              No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ☐              No ☒

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☒        No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes☒        No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b‑2).  Yes☐        No☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, on June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $374.5 million.  The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, was 29,706,390 at April 24, 2020.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10‑K/A (“Amendment No. 1”) amends our Annual Report on Form 10‑K for the fiscal year ended December 31, 2019 (“Original Filing”), filed with the U.S. Securities and Exchange Commission (“SEC”) on March 6, 2020 (“Original Filing Date”). The sole purpose of this Amendment No. 1 is to include certain information required by Items 10 through 14 of Part III of Form 10‑K. This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10‑K, which permits the information in the above-referenced items to be incorporated in the Form 10‑K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. We are filing this Amendment No. 1 to include Part III information in our Form 10‑K because we will not file a definitive proxy statement containing such information within 120 days after the end of the fiscal year covered by the Original Filing. The reference on the cover of the Original Filing to the incorporation by reference to portions of our definitive proxy statement into Part III of the Original Filing is hereby deleted.

In accordance with Rule 12b‑15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), Part III, Items 10 through 14 and Part IV, Item 15 of the Original Filing are hereby amended and restated in their entirety. This Amendment No. 1 does not amend, modify, or otherwise update any other information in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing. In addition, this Amendment No. 1 does not reflect events that may have occurred subsequent to the Original Filing Date.

Pursuant to Rule 12b‑15 under the Exchange Act, this Amendment No. 1 also contains new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are attached hereto. Because no financial statements are included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4, and 5 of the certifications have been omitted.

Unless otherwise indicated, references to the “Company” refer to Old Second Bancorp, Inc. and references to “we,” “us,” and “our” mean the combined business of the Company, Old Second National Bank (the “Bank”) and its wholly-owned subsidiaries.

OLD SECOND BANCORP, INC.

Form 10‑K/A

INDEX

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Our board of directors is divided into three classes approximately equal in number, serving staggered three‑year terms.  As a result, the terms of only approximately one‑third of our board members expire at each annual meeting.  The current term of our Class I directors will expire at this year’s annual meeting.  The term of our Class II directors will expire at the 2021 annual meeting and the term of our Class III directors will expire at the 2022 annual meeting.

Set forth below is information concerning our directors, including their age and year first elected or appointed as a director.

All directors 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.

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 member of the board of directors or executive officer is related to any other member of the board of directors or executive officer.

Director Experience

Biographical information regarding each of our director nominees and continuing directors is set forth below, including the particular experience, qualifications, attributes or skills that led the board to conclude that each member is qualified to serve on the board and any committee he or she serves.

Mr. Bonifas:    Mr. Bonifas is the Executive Vice President of Alarm Detection Systems, Inc., a producer and installer of alarm systems, closed circuit video systems and card access control systems, a position he has held since 2000.  We consider Mr. Bonifas to be qualified for service on the board, the Risk Committee, the Nominating and Corporate Governance Committee and the Compensation Committee due to his skills and expertise acquired as a leader of a successful business and his prominence in the communities we serve. Mr. Bonifas also serves as Chairman of our Information Technology Steering committee where he uses his business expertise for cybersecurity oversight.

Mr. Collins:    Mr. Collins has served as our Vice Chairman  since October 2016.  Before that, he was Vice Chairman of Talmer Bancorp, Inc., a publicly traded bank holding company, from 2011 until 2016.  He also served as a director of Talmer Bancorp, Inc. from 2010 until 2016. Mr. Collins served as Chairman and Co‑Chief Executive Officer of Lake Shore Wisconsin Corporation, a bank holding company, from 2010 until 2011, and as a founding Managing Director and Vice Chairman of The Private Bank — Chicago from 1991 until 2009.  We consider Mr. Collins to be qualified for service on the board due to his experience focused within mortgage banking and real estate opportunities among residential, multi‑family, and commercial lending.

Mr. Eccher:    Mr. Eccher has served as  Chief Executive Officer and President of the Company since 2015 and  as President and Chief Executive Officer of the Bank since 2003. He also serves as Chief Operating Officer of the Company, a position he has held since 2007, and served as Senior Vice President and Branch Director of the Bank from 1999 until 2003.  Before that, he served as President and Chief Executive Officer of the Bank of Sugar Grove from 1996 until 1999.  We consider Mr. Eccher to be qualified for service on the board due to his experience in the financial services industry and his familiarity with  our operations.

Mr. Finn:    Mr. Finn served as the President and Chief Executive Officer of Rush‑Copley Medical Center  from 2002 until his retirement in 2019.  Before that, Mr. Finn served as the Chief Operating Officer and Chief Financial Officer of Rush‑Copley Medical Center from 1996 until 2002. We consider Mr. Finn to be a qualified candidate for service on the board, including as our Lead Director, and the Nominating and Corporate Governance Committee, the Information Technology Steering Committee and the Audit Committee due to his business and financial expertise acquired as an executive at a successful local medical center, as well as his prominence in the communities we serve.

Mr. Kane:    Mr. Kane is a Partner of Label Printers, Inc., a printing company, a position he has held since 1977. We consider Mr. Kane to be a qualified candidate for service on the board, the Compensation Committee, the Risk Committee (as Chairman) and the Nominating and Corporate Governance Committee due to his experience as a partner at a successful local business, his general experience in business and his prominence in the communities we serve.

Mr. Ladowicz:    Mr. Ladowicz is the former Chairman and Chief Executive Officer of HeritageBanc, Inc. and Heritage Bank, where he served from 1996 until 2008, when it was acquired by the Company.  We consider Mr. Ladowicz to be a qualified candidate for service on the board, the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee (as Chairman) due to his previous experience as a chief executive officer in the financial services industry, as well as his extensive knowledge of the market areas we entered through the acquisition of HeritageBanc, Inc. in 2008.

Mr. McLean:    Mr. McLean has been a Partner with Rock Island Capital since November 2016.  Before that, Mr. McLean served as Regional President and Managing Director of Talmer Bank from 2010 until October 2016.  From 2009 until 2010, he was President and Director of Lake Shore Wisconsin Corporation. Mr. McLean was Vice Chairman of The PrivateBank, a publicly traded commercial bank headquartered in Chicago, from 1996 until 2008, and was a Managing Director of The PrivateBank from 1996 until 2001.  He also held senior commercial banking positions with Firstar Bank and American National Bank prior to joining the PrivateBank in 1996.  We consider Mr. McLean to be a qualified candidate for service on the board, the Audit Committee and the Information Technology Steering Committee due to his previous experience in the financial industry.

Mr. Skoglund:    Mr. Skoglund serves as the Chairman of the Company and the Bank. From 1998 until 2014, Mr. Skoglund served as the Chief Executive Officer of the Company.  He also served as Chief Executive Officer of the Bank from 1996 until 2014.  We consider Mr. Skoglund to be qualified for service on the board due to his skills and experience in the financial services industry and his familiarity with our operations as our former Chief Executive Officer.

Mr. Suits:    Mr. Suits was a founding Partner of Sikich LLC, a financial services firm, from 1982 until his retirement in 2004.  We consider Mr. Suits to be a qualified candidate for service on the board,  the Audit Committee (as Chairman ),  the Risk Committee and the Nominating and Corporate Governance Committee due to his skills and experience in the financial services industry.

Mr. Tapscott:    Mr. Tapscott was a Partner of McGladrey LLP, an audit, tax and consulting firm, from 1991 until his retirement in 2015.  Before that, he was a Partner with Wilkes Besterfield and Co., Ltd., from 1972 until 1991. We consider Mr. Tapscott to be a qualified candidate for service on the board,  the Risk Committee and the Audit Committee due to his previous experience in accounting and financial matters as a partner of McGladrey LLP and Wilkes Besterfield and Co., Ltd.

Ms. Temple Rocks: Ms. Temple Rocks is Senior Partner, head of Client Impact, for ICF Next, a global communications agency, a position she has held since 2019, where she is responsible for client leadership in both the Chicago and Minneapolis office for the agency. Before that, she was the Managing Director of the Chicago office of Golin, a global communications agency from 2011 until 2018.  We consider Ms. Temple Rocks to be a qualified candidate for service on the board, the Compensation Committee and the Information Technology Steering Committee due to her business experience and familiarity with the greater Chicago market through her positions with ICF Next and Golin.

Biographical Information for Executive Officers

Because each of Mr. Eccher and Mr. Collins also serves on our board of directors, we have provided biographical information for them above. Biographical information for each of Mr. Adams, Mr. Gottschalk and Mr. Pilmer is provided below:

Mr. Adams, age 46, joined the Company and the Bank in May 2017 to serve as an Executive Vice President and our Chief Financial Officer.  From November 2016 until joining us, he served as Executive Vice President and Director of Corporate Development and Strategy for TCF National Bank, where he oversaw corporate development and strategy. Before that, he served as Executive Managing Director, Corporate Development, of Talmer Bancorp, Inc. from 2011 and 2016. While at Talmer, Mr. Adams was responsible for management of internal financial reporting, budgeting, mortgage bank accounting, investor relations, strategic planning and corporate development activities.  Prior to joining Talmer, Mr. Adams also held positions as Managing Director of W2 Freedom, LLC, a private investment fund manager focused on investing in community banks, and as Director of Investor Relations for Fifth Third Bancorp.

Mr. Pilmer, age 55, joined the Company and the Bank in 1989.  He currently serves as Executive Vice President (a position he has held since 2012) and as Chief Lending Officer (a position he has held since 2016). Mr. Pilmer manages the Commercial Banking unit and has more than 25 years of experience in the Commercial Banking industry.

Mr. Gottschalk, age 58, joined the Company and the Bank in 2001.  He currently serves as Executive Vice President, Digital Banking Services at the Bank, a position he has held since January 2019.  Before that, Mr. Gottschalk was Executive Vice President and Chief Operating Officer of the Bank since 2012. From 2007 until 2012, he served as Executive Vice President of Operations of the Bank. Mr. Gottschalk has more than 35 years of banking experience, including managing Operations, Information Technology, Retail Banking and extensive experience in the ATM/Debit arena.  Before joining the Old Second team, Mr. Gottschalk held senior management positions for Old Kent Bank (Elmhurst, IL), Fifth Third Bank (Elmhurst, IL), Pinnacle Bank (Berwyn, IL) and FBOP Corporation (Oak Park, IL).  He has served on many customer advisory boards in the operations field.

CODE OF BUSINESS CONDUCT AND ETHICS

The board of directors believes that it is important to encourage the highest level of corporate ethics and responsibility.  Among other things, the board 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 Business Conduct and Ethics, as well as other

information pertaining to our committees, corporate governance and reporting with the SEC, can be found on our website at www.oldsecond.com.  We will post on our website any amendments to, or waiver from, the Code of Business Conduct and Ethics as it applies to any director or officer to the extent required to be disclosed by applicable NASDAQ or SEC requirements.

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 members of our Audit Committee during 2019 were Mr. Suits (who serves as Chairman), Mr. Finn, Mr. Tapscott, Mr. Ladowicz and Mr. McLean, each of whom is deemed to be an independent director under SEC Rule 10A‑3 and NASDAQ’s listing requirements.  The board has designated each of Mr. Suits, Mr. Finn and Mr. Tapscott as  an “audit committee financial expert,” as such term is defined by the regulations of the SEC.

Item 11.  Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) is intended to assist our stockholders in understanding our compensation programs, the philosophy underlying our compensation strategy and the fundamental elements of the compensation paid to our “named executive officers” whose 2019 compensation information is provided in the tables following this discussion.  Our named executive officers as of December 31, 2019, are noted in the following table, along with their current titles:

Introduction

Our CD&A is organized as follows:

Overview and Executive Summary

Business Overview. We provide lending, deposit, and trust services for businesses and individuals.  We offer competitive commercial and personal banking products and are committed to providing superior customer service.  We place a high priority on community service and are actively involved with many civic and community projects in the communities where we conduct our business.  We operate in an intensely competitive and uncertain business environment.  From a business perspective, not only do we compete with numerous companies in our markets for customers, but we also compete with many different types and sizes of organizations for senior leadership capable of executing our business strategies.  Among other challenges, our business model requires experienced leaders with banking and operational expertise who are capable of taking on high levels of personal responsibility in an ever‑evolving banking industry and economy.

Financial and Operational Performance.  During 2019, we continued our emphasis on sustaining profitability and growth.  Specific accomplishments in 2019 that directly impacted those objectives include:

Overview of Performance Metrics. In 2019, our Compensation Committee selected, among others, corporate performance metrics for our annual incentive plan based on our

Overview of Our Executive Compensation Programs.  The Company and the Bank share an executive management team.  The compensation packages of our named executive officers are determined and approved by our Compensation Committee based on their performance and roles for both the Company and the Bank.

We are committed to paying for performance.  This commitment is reflected by the significant portion of our named executive officers’ compensation that is provided through performance‑based programs. Our executive compensation programs evolve and are adjusted over time to support our business goals and to promote both near- and long‑term profitable growth.  Total compensation for each named executive officer varies with performance in achieving financial and nonfinancial objectives.

Accordingly, our executive compensation, particularly metrics for our short‑term incentive plans, focused on the following goals and accountabilities: our net income growth; loan growth; asset‑credit quality risk reduction and a reduction in classified assets; cost savings initiatives; and specific profit center performance.  These metrics were prudently designed to contain and minimize risk while at the same time emphasizing growth and profitability.

Say‑on‑Pay.  At our 2019 annual meeting, approximately 97.4% of the votes cast on the say-on-pay proposal were in favor of approving  the compensation of our named executive officers.  Our board and the Compensation Committee pay careful attention to communications received from stockholders regarding executive compensation, including the results of the say-on-pay vote.  The Compensation Committee believes that these voting results reflect strong confidence in our board to exercise good judgement in structuring thoughtful executive compensation programs that benefit our stockholders.  We considered the result of the 2019 advisory vote on executive compensation but not for specific 2019 compensation decisions.  Based on this consideration and the other factors described in this CD&A, the Compensation Committee did not alter the policies or structure for named executives’ compensation for 2019.

Objectives of Our Compensation Program

The goal of our compensation program is to align the interests of management with those of our stockholders while minimizing undue risk‑taking.  The Compensation Committee has designed our executive compensation program in a manner that does not provide our executives with incentives to engage in business activities or other behavior that would threaten our value or the investments of our stockholders.

The executive compensation program is intended to accomplish the following objectives:

oclearly motivates personnel to perform and succeed according to our current goals;

oattracts and retains key personnel critical to our long‑term success; and

odoes not encourage undue risk‑taking; and

ofulfills its oversight responsibility to its constituents which include stockholders, customers, employees, the community and government regulatory agencies;

oconforms its business conduct to the highest ethical standards;

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

ocontinues to avoid any conflict between its responsibilities to us and each individual’s personal interests.

Below we summarize certain governance practices we have implemented to drive performance and those we have not implemented because we do not believe they would serve our stockholders’ long-term interests.

Elements of Compensation

Our named executive officers’ compensation program consists of four main components: (a) base salary, (b) annual cash incentives, (c) equity awards, and (d) additional benefits.

The Compensation Committee’s decisions regarding each of the components for the named executive officers are based in part on the Compensation Committee’s subjective judgment and consider qualitative and quantitative factors, as discussed below.  In reviewing an executive officer’s compensation, the Compensation Committee considers and evaluates all components of the officer’s total compensation package.  This involves reviewing base salary, bonus/cash incentives, equity incentive 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 Compensation Committee takes into consideration any amounts an executive officer is entitled to upon retirement, termination or a change‑in‑control event.

The following overview explains the structure and rationale of the elements of compensation used for 2019.

Base Salary.  The Compensation Committee believes that base compensation should offer security to each executive sufficient to maintain a stable management team and environment.  In establishing an executive officer’s initial base salary the Compensation 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.

The Compensation Committee reviews salaries of the named executive officers on an annual basis.  As with all of its decisions regarding compensation levels, when reviewing salaries the Compensation 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.

Annual Cash Incentives.  The Compensation Committee believes that annual cash incentive compensation is an integral component of our total compensation program that links executive decision‑making and performance with our annual strategic objectives.  We use this component to focus management on the achievement of corporate financial goals while considering the mitigation of any risks which may affect our overall financial performance.

In February  2019, the Compensation Committee established performance metrics under the Old Second Bancorp, Inc. Executive Annual Incentive Plan, which we refer to as our “Incentive Plan.” Under the Incentive Plan, as soon as practicable at the beginning of each fiscal year, the Compensation Committee, in consultation with our Chief Executive Officer, selects key performance objectives, which will be used to determine the actual incentive cash payment to be awarded to our executive officers upon the achievement of the selected performance objectives.  Generally speaking, performance targets are set so that improvement in a performance objective is necessary in order to receive any or all of the incentive award with respect to that objective.  In addition, under the Incentive Plan, in order to be eligible for a cash incentive payment with respect to a particular year, the executive must also meet the expectations of his position during such year.

Maximum incentive opportunities are capped under the Incentive Plan to avoid encouraging excessive risk‑taking and to avoid any focus on maximizing short‑term results at the expense of our long‑term soundness.

Equity Awards.  The Compensation Committee believes that senior management equity ownership effectively aligns the interests of senior management with those of our stockholders.  Accordingly, we have implemented equity‑based incentives to both encourage our management’s long‑term service and give management a more direct interest in our future success.  The equity incentive plan in effect in 2019, which was approved by our stockholders on May 21, 2019 (the “Equity Incentive Plan”), authorizes the granting of qualified stock options, non‑qualified stock options, restricted stock, restricted stock units and stock appreciation rights.

All awards are at the discretion of the Compensation Committee and are generally subjective in nature.  In determining the number of equity awards to be granted to executive officers, the Compensation Committee considers individual and corporate performance goals and achievement as measured by those goals, the executive’s position and his or her 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 Compensation Committee also evaluates prior awards of stock options and restricted stock and considers the overall wealth accumulation of a given executive officer through such awards.

As discussed below in “Analysis of 2019 Compensation—Long-Term Equity Compensation,” in 2019, the Compensation Committee granted our named executive officers service-based restricted stock units that are subject to three-year cliff vesting.  In addition, with respect to Mr. Eccher, Mr. Adams and Mr. Collins, in 2018, the Compensation Committee awarded performance-based restricted stock units subject to specified performance conditions to be measured over the three year period ending December 31, 2020.

Additional Benefits

Retirement Benefits.  We sponsor a tax‑qualified 401(k) savings plan and trust intended to be qualified 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. Participants can choose between several different investment options under the 401(k) plan, including shares of our common stock.

During 2019, we provided a matching contribution on elective deferrals to eligible participants in an amount equal to 100% of the first 3% of each participant’s contributions, and 50% of the next 2% of the participant’s contributions.  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.  The contribution amount granted each year is on a discretionary basis and there is no set formula used by the Compensation Committee. For 2019, the Compensation Committee elected not to make a discretionary profit sharing contribution.

Deferred Compensation.  We sponsor an executive deferred compensation plan (the “Executive Deferred Compensation Plan”), which provides a means for certain executives to voluntarily defer all or a portion of their salary and/or bonus, if any, without regard to the statutory limitations applicable to tax‑qualified plans, such as our 401(k) plan.  The Executive Deferred Compensation 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 401(k) plan (including catch‑up contributions, if applicable) and keeps that level of deferral for the entire plan year. The company matching contribution is an amount up 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 is made and in what amount is entirely at the Compensation Committee’s discretion and there is no set formula.  Participants are permitted to make hypothetical investments with respect to their account balances.  The participants may select such hypothetical investments from an array of publicly‑traded mutual funds that are held in an insurance company separate account.  Participants may elect to receive their Executive Deferred Compensation Plan balance in a lump sum or in installments.  Participants may make a withdrawal from the plan during their employment in the event of hardship as approved by the plan’s administrator.  The plan is administered through an independent service provider. Messrs. Eccher, Collins, Adams, and Gottschalk currently have account balances under the Executive Deferred Compensation Plan.

Perquisites and Other 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, cash incentive and equity incentive awards.  While the benefits offered are competitive with the marketplace 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.  The benefits we offer 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 Compensation Committee normally does not adjust the level of benefits offered on a year‑to‑year basis.  We will continue to offer benefits, the amount of which shall be determined from time‑to‑time in the sole discretion of the Compensation Committee.

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:

It is our belief that perquisites for executive officers should be very limited in scope and value.  Due to this philosophy, we have generally provided very 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.  These individuals are eligible to use the club membership for their own personal use.  Additionally, we provide Messrs. Eccher, Adams, Collins and Pilmer 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.  We will continue to offer perquisites, the amount of which shall be determined from time‑to‑time in the sole discretion of the Compensation Committee.

Severance and Change in Control Arrangements

Employment Agreements and Compensation and Benefits Assurance Agreements.  Under his employment agreement, we provide Mr. Eccher with certain “double trigger” severance benefits in the event of his involuntary termination following a change in control, as well as salary continuation following certain other involuntary terminations.  We have also entered into Compensation and Benefits Assurance Agreements with each of our other named executive officers which also provide “double trigger” severance benefits in the event of a qualifying termination following a change in control.  We believe these agreements help us recruit and retain executives with the experience, skills, knowledge and background needed to achieve our business goals and strategy.  For a detailed description of the severance and change in control benefits applicable to our named executive officers, see the discussion below under “Potential Payments Upon Termination or Change in Control.”

Acceleration of Equity Awards.  All employees, including our named executive officers, who receive equity awards under our Equity Incentive Plan will immediately vest in any unvested equity awards held by such employees upon the occurrence of a change in control if (a) the equity plan and the respective awards are not assumed by the surviving entity or (b) the plan and the respective awards are assumed by the surviving entity but the individual is terminated without cause or resigns for good reason.  Additionally, under the terms of the Employment Agreement and Assurance Agreements noted above and described in greater detail below, all equity awards held by a named executive officer will become vested and exercisable upon a qualifying termination following a change in control.

No Tax Gross‑Ups.  We do not provide excise tax gross‑ups on benefits under any change in control provisions or other agreements.  All of our named executive officers currently have employment agreements or Compensation and Benefits Assurance Agreements that provide that in the event the officer would be subject to excise tax for any amounts payable under such agreement, the amounts to be paid will be reduced to such lesser extent that would result in no portion of such amounts being subject to excise taxes.

Compensation Process

The Compensation Committee has overall responsibility for evaluating the compensation plans, policies and programs relating to our executive officers.  Further, as required by guidance issued by the Federal Reserve and other financial institution regulatory agencies, and the SEC’s guidance regarding risk associated with compensation arrangements (each as described more fully below), the Compensation Committee is also responsible for a more expansive risk review with respect to the compensation plans, policies and programs maintained for our employees.

During 2019, the Compensation Committee convened in February, May and December. Mr. Ladowicz, as Chairman of the Compensation Committee, also met, as needed, with internal staff members to compile compensation information for this proxy statement.  The Compensation Committee also met in February 2020 to approve salaries, incentive plans and performance metrics for 2020, as well as approving officer incentives earned during 2019.

Role of Compensation Consultant.  The Compensation Committee’s charter gives it the authority to delegate its responsibility to members or subcommittees of the Compensation Committee.  Also, the charter gives the Compensation Committee the authority to hire outside consultants to further its objectives and responsibilities.  In prior years, the Compensation Committee has retained ChaseCompGroup LLC to provide services in connection with a review and

analysis of compensation paid to our named executive officers and board of directors.  In keeping with the Compensation Committee’s philosophy of comparing our compensation with that of the competitive marketplace on an annual basis, the Compensation Committee retained ChaseCompGroup LLC in 2019 to provide an updated market analysis of our executive compensation program.  In 2019, the Compensation Committee also engaged McLagan Partners, Inc. for select executive compensation analysis, including executive compensation review, incentive plan review, and peer group review.

Role of Executive Officers.  The Compensation Committee relies upon the input of management, when carrying out its responsibilities in establishing executive compensation.  The Compensation Committee relies on Mr. Eccher’s input in establishing compensation for our named executive officers other than himself.  Management provides the Compensation Committee with evaluations as to employee performance, guidance on establishing performance targets and objectives and recommends salary levels and equity awards.  The Compensation Committee also consults with management on matters that are relevant 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.  Finally, the Compensation Committee consults with our management, specifically the Bank’s Chief Risk Officer, in completing the risk review with respect to employee compensation plans.  No executive officer participates in any recommendation, discussion or decision regarding his or her own compensation.

Peer Group.  Market pay practices are one of many factors we consider in setting executive pay levels and designing compensation programs. Information on pay levels and practices is gathered from a group of publicly traded companies selected based on their business focus, scope and location of operations, size and other considerations.  Our peer group of 22 financial institutions was jointly presented by ChaseCompGroup LLC and management and approved by the Compensation Committee.  The group is periodically reviewed, with changes made to reflect merger and acquisition activity, financial situation and development, and other considerations.  The institutions included in the peer group for 2019 include:

Analysis of 2019 Compensation

This section describes the decisions made by the Compensation Committee with respect to the compensation for our named executive officers for 2019.

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 2019, determined by the Compensation Committee at the beginning of 2019, are set forth in the Summary Compensation Table below. In determining base salary levels, we generally considered the following:

The following table details the base salary of our named executive officers for the periods presented.

For 2019, the Compensation Committee modestly increased the base salary of Mr. Eccher, Mr. Adams, Mr. Collins and Mr. Pilmer based on our overall corporate performance, including the successful completion of our merger with ABC Bank, and each officer’s own individual performance. In addition, Mr. Pilmer’s increase also related to growth in commercial loans and commercial treasury management. Mr. Gottschalk’s base salary declined in 2019 compared to 2018 commensurate with a change in his responsibilities.

Annual Cash Incentive Payments.  As discussed above, under our Incentive Plan, the Compensation Committee, in consultation with our Chief Executive Officer, selects key performance objectives, which will be used to determine the actual incentive cash payment to be awarded to our executive officers upon the achievement of the selected performance objectives.  In addition, under the Incentive Plan, the Compensation Committee also determines each executive officer’s target incentive opportunity, expressed as a percentage of base salary.

For 2019, the Compensation Committee set the target potential incentive payment, expressed as a percentage of base salary, as follows:

For 2019, the Compensation Committee selected five performance objectives, as identified in the following table (and described in more detail below), and assigned a weight for each performance objective, stated as a percentage of the total target incentive payment.

The performance objectives chosen by the Compensation Committee and the assigned weight for each objective for 2019 performance were as follows:

The Compensation Committee established threshold, target and maximum performance levels and weights for each selected corporate goal.  Threshold represents the minimum level of performance at which, if achieved, a payment is earned on each corporate goal.  If performance is below the threshold level for any particular corporate goal, no payment will be earned; however, payment will be earned for other corporate objectives that are achieved at least at a threshold level of performance.  Maximum represents the maximum level of performance at which, if achieved, a maximum payment is earned on each corporate goal. If performance exceeds the maximum level for any corporate goal, no further incentive above the maximum incentive for such corporate goal is earned.  Actual performance between threshold, target and maximum performance levels will be interpolated to determine the amount of payment based on relative achievement of the corporate objectives.

How we defined each of these corporate objects is set forth below.

Adjusted Net Income Growth

Each named executive officer participating in the incentive plan had a portion of their annual incentive tied to this performance objective in 2019.  The Compensation Committee believes that our growth, as measured by our adjusted net income, is an appropriate performance measure because it focuses on our financial performance, which in turn affects stockholder value.  The Compensation Committee defined adjusted net income in 2019 as net income, excluding after-tax losses on mortgage servicing rights, after-tax net security gains, and BOLI death benefits. In addition, the Compensation Committee defined a return on average assets (“ROAA”) metric for our performance, defined as net income divided by average assets, as compared to our peer group. The ROAA metric superseded the adjusted net income performance metric if we performed as well as, or better than, the ROAA median of our peer group.

The Compensation Committee applied the following scale to determine how much of the total assigned weight for this performance objective each named executive officer could receive based on our net income:

Our adjusted net income in 2019 was $37.2 million, and our reported net income was $39.5 million. However, our  ROAA was in excess of our peer group median, but less than 50% above our peer group median.  Accordingly, each named executive officer earned 110.0% of the assigned weight for this performance objective.

Loan Growth

Mr. Pilmer had a commercial loan growth performance objective of 6.6% over 2018 total commercial loans. The Compensation Committee set a threshold of 75% of budget to achieve a 50% performance measurement, and a maximum of 110% of budget to achieve 110% performance measurement. Accordingly, growth below the threshold level would result in no payment for this objective and growth above the maximum level would result in payment at the maximum level.

The commercial loan growth performance objective that was measured based on 2019 budgeted organic growth, excluding acquired loans, over 2018 results, as detailed in the following table.

Actual commercial loan growth was 2.71%, which was below the threshold performance level and, therefore, Mr. Pilmer earned 0% of the assigned weight for this performance objective.

Asset/Credit Quality

Mr. Eccher, Mr. Collins and Mr. Pilmer each had a performance objective related to asset quality, measured with 50% of the metric related to our adjusted classified assets ratio and 50% related to the maintenance of a satisfactory asset quality rating with bank regulators.  Management monitors a ratio of classified assets as a percent of the sum of Bank Tier 1 capital and the allowance for loan and lease losses, which is referred to as the “classified assets ratio.”  The adjusted classified assets ratio is our classified assets ratio, excluding purchased credit impaired loans, nonperforming acquired loans and acquired other real estate owned.  The Compensation Committee believes that a continued focus by these executives on our asset/credit quality will ensure that we are working toward sustainable growth and profitability.

At December 31, 2019, our adjusted classified assets ratio was 11.11%, and, therefore, no incentive was paid out for this component of the metric.  However, we did attain a satisfactory rating by the regulators for asset quality. Therefore Mr. Eccher, Mr. Collins and Mr. Pilmer each earned 50% of the assigned weight for this performance objective.

Adjusted Efficiency Ratio

The Compensation Committee believes that expense control and efficiency of operations is a goal we should continually strive for in order to provide for the best financial return for our stockholders.  Further, the Compensation Committee believes that our named executive officers are best situated to impact our efforts in this regard.  As such, Mr. Eccher, Mr. Adams, Mr. Collins and Mr. Gottschalk each had a portion of their annual incentive tied to our adjusted efficiency ratio, as noted in the following table.  For 2019, our adjusted efficiency ratio was calculated as noninterest expense, excluding OREO expenses and amortization of core deposits, divided by the sum of net interest income, on a fully tax equivalent basis, and total noninterest income, less net gains and losses on securities and net losses on mortgage servicing rights, and including a tax equivalent adjustment on the increase in the cash surrender value of BOLI.

For 2019, our adjusted efficiency ratio at year‑end was 59.00% and, therefore, Mr. Eccher, Mr. Adams, Mr. Collins and Mr. Gottschalk earned 87.45% of their applicable assigned weight for this performance objective.

Department and Individual Performance

The Compensation Committee also set performance metrics for Mr. Adams, Mr. Pilmer and Mr. Gottschalk, related to their respective departments and/or individual performance to promote the leadership and development of our various lines of business.  For 2019, Mr. Adams was evaluated on Finance and Accounting Department strategies and efficiencies, and earned 0% of a possible 5% as one large project was not completed. Mr. Pilmer was evaluated on commercial treasury department income growth, commercial merchant income growth, and commercial deposit growth, and earned 4.7% of a possible 5% for these goals. Mr. Gottschalk was evaluated on the performance of our Digital Banking Department, including growth and new debit card contract implementation, and earned 13% of a possible 15% for this metric.

Total 2019 Annual Cash Incentive Plan Awards

As outlined above, the Compensation Committee reviewed our performance and the performance of each department and executive officer, as applicable.  Based on this review, the Compensation Committee approved awards at an amount equal to an interpolated amount between the total potential threshold incentive and the total maximum incentive for each performance objective (if the threshold performance level was obtained for such objective).  Our named executive

officers’ actual cash incentive awards for 2019 are noted in the table below, along with the percentage of the total target incentive each officer achieved.

Long‑Term Equity Compensation.  In 2019, the Compensation Committee approved equity grants for our named executive officers comprised of time-vesting restricted stock units, or TRSUs, as shown in the following table.

The TRSUs are subject to three-year cliff vesting, with accelerated vesting in certain circumstances as described in the “Potential Payments upon Termination or Change in Control” section below.

The Compensation Committee determined not to grant any performance-based equity awards, or PRSUs, in 2019, given the grants of PRSUs to Mr. Eccher, Mr. Adams and Mr. Collins, in 2018.  The 2018 PRSUs have a three year performance period that ends on December 31, 2020.  The performance metrics selected by the Compensation Committee for the 2018 PRSUs were (a) cumulative adjusted earnings per share  (b) return on tangible common equity, (c) efficiency ratio, and (d) relative stockholder return measured relative to the KBW NASDAQ Regional Banking Index.

Perquisites and Other Benefits.  While the Compensation Committee reviews and monitors the level of other compensation offered to the named executive officers, the Compensation Committee typically does not adjust the level of benefits offered on an annual basis.  The Compensation Committee does consider the benefits and perquisites offered to the named executive officers in its evaluation of the total compensation received by each.  The perquisites received by the named executive officers in 2019 are reported in the Summary Compensation Table below.  The benefits offered in 2019 to the named executive officers are expected to continue for 2020.

Regulatory Considerations

As a publicly‑traded financial institution, we must contend with several often overlapping layers of regulations when considering and implementing compensation‑related decisions.  These regulations do not set specific parameters within which compensation decisions must be made, but do require the Compensation Committee to be mindful of the risks that often go hand‑in‑hand with compensation programs designed to incentivize the achievement of better than average performance.  While the regulatory focus on risk assessment has been heightened over the last several years, the incorporation of general concepts of risk assessment into compensation decisions is not a recent development.

The Compensation Committee continues to believe in and practice a sensible approach to balancing risk‑taking and rewarding reasonable, but not necessarily easily attainable, goals and this has always been a component of its overall assessment of the compensation plans, programs and arrangements it has put in place for our named executive officers.  The Compensation Committee believes we have adequate policies and procedures in place to balance and control any risk‑taking that may be incentivized by the employee compensation plans.  The Compensation Committee further believes that such policies and procedures will work to limit the risk that any employee would manipulate reporting earnings in an effort to enhance his or her compensation.

In making decisions about executive compensation, in addition to the above, we also consider the impact of other regulatory provisions, including: the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), such as Code Section 162(m) that may limit the tax deductibility of certain compensation; Code Section 409A regarding nonqualified deferred compensation; and Code Section 280G regarding excise taxes and deduction limitations on golden parachute payments made in connection with a change in control.  In making decisions about executive compensation, we also consider how various elements of compensation will impact our financial results.  For example, we consider the impact of FASB ASC Topic 718, which requires us to recognize the compensation cost of grants of equity awards based upon the grant date fair value of those awards.

Code Section 162(m) generally prohibits a federal income tax deduction to public companies for compensation over $1,000,000 paid to a “covered employee.”  A “covered employee” includes (a) the Chief Executive Officer, (b) the

Chief Financial Officer, (c) the three other most highly compensated executive officers, and (d) any individual who was a covered employee for any taxable year beginning after December 31, 2016.  Before 2018, we were permitted to receive a federal income tax deduction for qualifying “performance-based” compensation as defined under Code Section 162(m) without regard to this $1,000,000 limitation. However, recent U.S. tax legislation eliminated the performance-based exception. These new rules became effective starting in 2018 for us. To the extent that in 2018 or any later year, the aggregate amount of any covered employee’s salary, bonus, and amount realized from vesting of restricted stock units or other equity awards, and certain other compensation amounts that are recognized as income for federal income tax purposes by the covered employee exceeds $1,000,000 in any year, we will not be entitled to a U.S. federal income tax deduction for the amount over $1,000,000 in that year. The Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our executive officers, and may determine it is appropriate to provide compensation that may exceed deductibility limits in order to recognize performance, meet market demands, retain key executives, and take into account other appropriate considerations.

Compensation‑Related Governance Policies

Common Stock Ownership and Retention Guidelines for Our Chief Executive Officer

In order to align the interests of our chief executive officer with our stockholders, we have adopted a policy that requires our chief executive officer to develop a significant equity stake in the company.  The Compensation Committee is responsible for monitoring compliance with these stock ownership and retention guidelines.

Under the policy our chief executive officer must acquire and hold shares of our common stock equal in value to at least three times his or her annual base salary.  The officer will have five years from the date he or she first becomes subject to these guidelines to achieve these target ownership levels. If the officer acquires share of common stock under our equity-based incentive plans he or she must hold at least 50% of all net after-tax acquired shares until these stock ownership guidelines are satisfied. The following share types are included under these guidelines: shares directly owned, family-owned shares, retirement plan shares and unvested time-based restricted stock. Stock options that are unexercised, regardless of their vesting status and in-the-money value, are not counted toward satisfaction of these guidelines. Unvested performance-based restricted stock is also not counted toward stock ownership.  Currently, our chief executive officer is in compliance with these guidelines.

Prohibitions on Hedging and Pledging

We consider it improper and inappropriate for our directors, officers and employees to engage in short-term or speculative transactions in our securities or in other transactions in our securities that may lead to inadvertent violations of the insider trading laws. Accordingly, under our Insider Trading Policy, we prohibit:

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the foregoing CD&A with management.  Based on the Compensation Committee’s review and discussion with management, the Compensation Committee has recommended to our board of directors that the CD&A be included in this Amendment No. 1 to Old Second’s Annual Report on Form 10‑K for the year ended December 31, 2019.

Submitted by:

Mr. John Ladowicz, Chairman

Mr. Edward Bonifas

Mr. William Kane

Mr. Hugh McLean

Ms. Patti Temple Rocks

Members of the Compensation Committee

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers:

Grants of Plan‑Based Awards

The following table shows plan-based awards granted to our named executive officers in 2019.

Outstanding Equity Awards at Fiscal Year‑End

The following table sets forth information concerning the outstanding equity awards at December 31, 2019, held by the individuals named in the Summary Compensation Table:

Stock Vested

The following table provides information concerning stock awards that vested in 2019 for our named executive officers.  No stock options were exercised by our named executive officers in 2019.

Nonqualified Deferred Compensation

We sponsor the Executive Deferred Compensation Plan, which is described in the CD&A above, and the Director Deferred Compensation Plan, which is described below following the Directors Compensation Table.  The plans provide a means by which certain executives and directors may voluntarily defer all or a portion of their compensation.  The plans are funded by participant deferrals and, in the case of the Executive Deferred Compensation Plan, company matching contributions and discretionary employer profit sharing contributions.  With respect to their deferrals and our contributions, participants are permitted to make hypothetical investment elections in publicly‑traded mutual funds, which are held in an insurance company separate account.  Earnings are credited to the participant accounts under the plan based on the performance of their hypothetical investment elections.  The deferrals to the Executive Deferred Compensation Plan are credited for earnings based on stock prices of their holdings.  Participants may elect to receive their plan balance in a lump sum or in installments.  Participants are permitted, in the discretion of the administrator, to make a withdrawal from the plan during their employment in the event of hardship.

Employment Agreement and Offer Letters

Mr. Eccher’s Employment Agreement.

On September 16, 2014, but effective January 1, 2015, we entered into an employment agreement with Mr. Eccher to serve as Chief Executive Officer and President of the Company and the Bank.  The employment agreement had an initial term of one year, and will be automatically renewed for successive one‑year terms, unless either party gives at least 90 days prior written notice of non‑renewal; provided, that, the term will be extended for a two-year period immediately following a change in control that occurs during the term.  Under the employment agreement, Mr. Eccher initially received an annual base salary of $400,000.  The base salary will be reviewed annually and may be increased, but not decreased, at the discretion of the Compensation Committee. His current base salary is $572,828.

In addition to his base salary, Mr. Eccher is eligible to receive performance‑based annual incentive bonuses, in accordance with the Company’s annual incentive plan, a monthly car allowance of $900, reimbursement for costs associated with maintaining a country club membership, and also to receive employee benefits on as favorable a basis as other similarly situated senior executives of the Company.

We may terminate Mr. Eccher’s employment with or without cause, and Mr. Eccher may terminate his employment with or without good reason. Mr. Eccher is also eligible for certain severance benefits upon a change in control.  Further detail on our severance obligations to Mr. Eccher, including the definitions of “cause”, “good reason” and “change in control,” are set forth below under the heading “Potential Payments Upon Termination or Change in Control.”

Mr. Eccher’s employment agreement also contains provisions related to non‑competition that generally preclude Mr. Eccher, for a period of 12 months following his termination without cause by the Company or for good reason by him, if he is terminated outside of the 24 month period following a change in control, from, among other things, engaging or investing in, managing, owning, operating, financing, controlling, participating in the ownership, management, operation or control of, being employed by, associated with, or in any manner connected with, serving as a director, officer or consultant to, any person or business entity that owns, operates or is in the process of forming a bank, savings bank, savings and loan association, credit union or similar financial institution, with an office within 25 miles from any banking or other office of the Company and its affiliates.  In addition, during the term and 12 months following his termination for any reason, he cannot (a) induce or attempt to induce any employee of the Company or any of its affiliates to leave their employment, (b) interfere with the relationship between the Company or its affiliates and any employee of the Company or its affiliates; or (c) induce or attempt to induce any customer, supplier, licensee, or other business relation of the Company or its affiliates with whom he had an ongoing business relationship to cease doing business with the Company or its affiliates or interfere with, induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its affiliates with whom he had an ongoing business relationship to cease doing business with the Company or its affiliates.

Mr. Adams’ Offer Letter.

On April 3, 2017, we entered into an offer letter with Mr. Adams, as amended on April 15, 2017 and April 19, 2017, to serve as Executive Vice President and Chief Financial Officer of the Company and the Bank effective May 2, 2017.  Under the offer letter, Mr. Adams has an annual base salary of $300,000, which will be reviewed annually for merit increases by the board of directors.  His current base salary is $331,800.  In addition to his base salary, Mr. Adams is eligible to receive a performance‑based annual incentive bonus of 50% of his base salary in accordance with the Company’s officer incentive plan, a monthly car allowance of $500, costs associated with maintaining a country club membership of up to $600 per month, and other benefits, including normal employee insurance benefits and 401(k) and profit sharing plans.

As provided in the offer letter, we also entered into a Compensation and Benefits Assurance Agreement with Mr. Adams that provides him with certain severance benefits if he is terminated following a change in control.  Further detail regarding our severance obligations to Mr. Adams, including the definition of “change in control,” are set forth below under the heading “Potential Payments Upon Termination or Change in Control.”

Mr. Collins’ Offer Letter.

On August 1, 2016, we entered into a revised offer letter with Mr. Collins (which superseded and replaced his April 1, 2016 offer letter), to serve as Vice Chairman of the Company and the Bank effective October 2016.  Under the offer letter, Mr. Collins has an annual base salary of $300,000, which will be reviewed annually for merit increases by the board of directors.  His current base salary is $326,229.  In addition to his base salary, beginning in 2017, Mr. Collins was eligible to receive a performance‑based annual incentive bonus of 40% of his base salary in accordance with the Company’s officer incentive plan. He is also eligible to participate in the Bank’s Deferred Compensation Plan and in other benefits plans, including normal employee insurance benefits and 401(k) and profit sharing plans.  As provided in the offer letter, we also entered into a Compensation and Benefits Assurance Agreement with Mr. Collins that provides him with certain severance benefits if he is terminated following a change in control.  Further detail regarding our severance obligations to Mr. Collins, including the definition of “change in control,” are set forth below under the heading “Potential Payments Upon Termination or Change in Control.”

Potential Payments Upon Termination or Change in Control

The board of directors believes that the interests of stockholders will be best served if the interests of executive management are aligned with the stockholders, and that providing change in control benefits should eliminate, or at least reduce, the reluctance of executive management to pursue potential change in control transactions that may be in the best interests of stockholders.

The employment agreement for Mr. Eccher provides for certain payments and benefits if we terminate Mr. Eccher’s employment without cause or if Mr. Eccher terminate his employment for good reason. Mr. Eccher is also eligible for certain severance benefits upon a change in control.

In addition, each of Mr. Adams, Mr. Collins, Mr. Gottschalk and Mr. Pilmer have entered into substantially similar Compensation and Benefits Assurance Agreements with us that provide for payments and benefits if the executive is terminated following a change in control.

Employment Agreement with Mr. Eccher.

The employment agreement provides for severance benefits in the event Mr. Eccher is terminated by the Company without cause or by the executive for good reason (each a “Termination”).  For a Termination during the employment period that does not occur in connection with a “change in control” of the Company (as defined below), Mr. Eccher is entitled to receive 24 months of base salary continuation.

For purposes of his employment agreement, “cause” is generally defined to mean the occurrence of any one or more of the following events:

For purposes of his employment agreement, “good reason” is generally defined to mean the occurrence of any one or more of the following events, unless he agrees in writing that such event will not constitute “good reason”:

For a Termination that occurs within 24 months after a change in control of the Company, which we refer to herein as the “Covered Period,” Mr. Eccher is entitled to receive an amount equal to three times the sum of his current base salary plus an amount equal to his average bonus paid for the three calendar years preceding the year of Termination