DEF 14A of Old Second Bancorp Inc
Filed Apr 18, 2025 · FY20240001558370-25-005000
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS Our board of directors is divided into three classes 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 III directors will expire at this year’s annual meeting. The term of our Class I directors will expire at the 2026 annual meeting and the term of our Class II directors will expire at the 2027 annual meeting. Each proposed Class III director nominee currently serves as a Class III director. Following a review and nomination from our Corporate Governance and Nominating Committee, our board has proposed that the following Class III directors be elected as Class III directors at our 2025 annual meeting of stockholders for a term that will expire at our 2028 annual meeting and until their respective successors are duly elected and qualified.
Class III Director Nominees
Class III Director Nominees
Class III Director Nominees
| Name | Age | Served as Director Since | | Edward Bonifas | 65 | 2000 | | Gary Collins | 66 | 2016 | | Keith Kotche | 68 | 2021 | | Jill York | 61 | 2020 |
Class III Director Nominees
Each Class III director nominee will be elected if the number of shares voted “FOR” the nominee constitutes a majority of the shares having voting power present in person or represented by proxy at the annual meeting. Accordingly, broker non-votes will not have any effect on the outcome of voting, but abstentions will have the effect of a vote “AGAINST” the applicable nominee. There is no cumulative voting with respect to the election of directors. The board of directors recommends that you vote “FOR” each of the above Class III director nominees. Set forth below is information concerning our other directors, whose term of office will continue after the annual meeting, including their age and year first elected or appointed as a director.
Continuing Directors
Continuing Directors
Continuing Directors
| Name | Age | Served as Director Since | | Class I (term expires 2026) | | | | John Ladowicz | 72 | 2008 | | Billy J. Lyons, Jr. | 64 | 2020 | | Patti Temple Rocks | 65 | 2015 | | John Williams, Jr. | 71 | 2021 | | Class II (term expires 2027) | | | | James Eccher | 59 | 2006 | | Barry Finn | 65 | 2004 | | Dennis Klaeser | 67 | 2021 | | Hugh McLean | 66 | 2018 |
Continuing Directors
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. 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.
Director Experience
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, Nominating and Corporate Governance Committee, and as Chair of the Risk and Insurance 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 on our Executive Committee and 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. Collins serves on the Capital Committee, as Vice Chair of the Executive Committee, and on the Information Technology Steering Committee, Loan Committee and Risk and Insurance Committee. Mr. Eccher: Mr. Eccher is our Chairman, President and Chief Executive Officer of the Company. Mr. Eccher was appointed as Chairman in May 2022. Mr. Eccher has also served as our President and Chief Executive Officer of the Bank since 2003. Mr. Eccher has previously 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. Eccher serves as Chair of the Capital Committee, as Chair of the Executive Committee, as Chair of the Loan Committee and on the Risk and Insurance Committee. 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 as Chair, as well as our Audit Committee, Compensation Committee, Executive Committee, Capital Committee, Information Technology Steering Committee, and the Loan 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. Klaeser: Mr. Klaeser served as a Strategic Advisor to TCF Financial Corporation (formerly, NASDAQ: TCF) from October 2020 until June 2021. Before that, he served as Chief Financial Officer of TCF Financial Corporation (formerly Chemical Financial Corporation) and TCF National Bank from August 2016 until April 2020. Prior to his time at TCF Financial Corporation (formerly Chemical Financial Corporation), Mr. Klaeser served as Chief Financial Officer and an Executive Managing Director of Talmer Bancorp, Inc. from May 2010 until Talmer Bancorp’s merger with Chemical Financial Corporation in August 2016. Mr. Klaeser also served as Chief Financial Officer and a director of First Place Bank following its acquisition by Talmer Bancorp, Inc. from January 2013 until it was merged into Talmer Bank and Trust in February 2014. Mr. Klaeser was a senior Midwest bank analyst with Raymond James from April 2009 to May 2010. From 2003 until 2009, Mr. Klaeser was Chief Financial Officer of PrivateBancorp, Inc. From 2000 through 2002, Mr. Klaeser was Managing Director and Head of the Financial Institutions Group for Anderson Corporate Finance, a division of Arthur Andersen, where he was responsible for advising financial institutions on complex merger and acquisition transactions, restructuring, and divestures. Mr. Klaeser also spent seven years as an investment banker and was head of the Financial Institutions Group at EVEREN Securities, which was acquired by First Union Securities. We consider Mr. Klaeser to be a qualified candidate for service on the board, the Audit Committee, Capital Committee, as Vice Chair of the Compensation Committee, and on the Risk and Insurance Committee due to his extensive executive-level experience in the financial services industry, including his service as a Chief Financial Officer for a public company. Mr. Kotche: Mr. Kotche is a former partner at the law firm Levato & Kotche, a position he held from 1984 until his retirement in 2023. Before our acquisition of West Suburban Bancorp, Inc. (formerly, NASDAQ: WNRP), he served as a director of West Suburban Bancorp, Inc. and West Suburban Bank since 2010. He previously served on the board of STC Bancshares Corp. and STC Capital Bank. We consider Mr. Kotche to be a qualified candidate for service on the board, the Compensation Committee, the Loan Committee and the Risk and Insurance Committee due to his experience in law and business, 20 years of bank board experience, and his extensive knowledge of the market areas we serve, including the markets we entered through our acquisition of West Suburban. 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 Compensation Committee, Nominating and Corporate Governance Committee, the Loan Committee, and the Risk and Insurance Committee 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. Lyons: Mr. Lyons served for over 30 years with the Office of the Comptroller of the Currency, most recently as a National Bank Examiner, before his retirement in December 2019. We consider Mr. Lyons to be a qualified candidate for service on the board and the Audit Committee, the Nominating and Corporate Governance Committee, the Loan Committee and as Vice Chair of the Risk and Insurance Committee due to his extensive bank regulatory and bank supervision experience with the bank’s primary federal regulator.
Director Experience
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 2001 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, Capital Committee, Compensation Committee as Chair, Information Technology Steering Committee, and the Loan Committee due to his previous experience in the financial industry. Ms. Temple Rocks: Ms. Temple Rocks is currently the head of Temple Rocks IMC, a marketing consulting firm. Previously, her four-decade career included C-suite leadership roles for global marketing agencies including ICF Next, Golin and Leo Burnett. She was also the Chief Communications Officer for The Dow Chemical Company. We consider Ms. Temple Rocks to be a qualified candidate for service on the board, as Chair of the Information Technology Steering Committee, and on the Risk and Insurance Committee due to her business experience and familiarity with the greater Chicago market. Mr. Williams: Mr. Williams is Vice President of Bracing Systems, Inc., a construction supply and equipment supplier of masonry and concrete specialties, a position he has held since 1976. Before our acquisition of West Suburban Bancorp, Inc. (formerly, NASDAQ: WNRP), he served as director of West Suburban Bancorp, Inc. and West Suburban Bank since 1986. We consider Mr. Williams to be a qualified candidate for service on the board and the Risk and Insurance Committee due to his experience in business, as well as his extensive knowledge of the market areas we serve, including the markets we entered through our acquisition of West Suburban. Ms. York: Ms. York most recently served as President, Head of Equipment Finance and Leasing Solutions for Fifth Third Bank, until April 2020. Before that, she held various executive level positions with MB Financial Inc. (formerly, NASDAQ: MBFI), including serving as its Chief Financial Officer, and most recently serving as its Vice President and as Executive Vice President, Specialty Banking and Mergers and Acquisitions, of its subsidiary bank, until it was sold to Fifth Third Bank in March 2019. We consider Ms. York to be a qualified candidate for service on the board, as Chair of the Audit Committee, and on the Compensation Committee, Capital Committee, the Information Technology Steering Committee, and the Risk and Insurance Committee due to her extensive executive-level experience in the banking industry, including her service as a Chief Financial Officer for a public company.
Insider Trading Policy and Procedures
| ● | Permitted Transactions: Certain transactions are exempt, including stock option exercises (but not market sales), restricted stock vesting (but not sales), and periodic investments through the Company’s 401(k) plan. |
Introduction
| ● | Elements of Compensation. The key components of our compensation program are base salary, annual cash incentive payments and long-term equity awards, with an emphasis on tying executive compensation to performance. |
Introduction
| ● | Severance and Change in Control Arrangements. We provide certain severance benefits in the event of Mr. Eccher’s involuntary termination and “double-trigger” change in control benefits to each of our named executive officers. |
Objectives of Our Compensation Program
| ● | tie equity compensation to long-term value creation for our stockholders; |
Objectives of Our Compensation Program
| ● | maintain a corporate environment that encourages stability and a long-term focus for both us and our management; |
Objectives of Our Compensation Program
| o | attracts and retains key personnel critical to our long-term success; and |
Objectives of Our Compensation Program
| What We Don’t Do | | | No Tax Gross-Ups | We do not provide our executive officers excise tax gross-ups on benefits or under any change in control provisions or agreements. | | No Excessive Perquisites | We do not offer excessive perquisites and those perquisites we do offer are limited and primarily serve to enhance our executives’ business development activities. | | No Hedging or Pledging | We prohibit hedging of the pledging of our securities in a margin account or as collateral for a loan. | | No Repricing of Options | Our Equity Incentive Plan prohibits repricing of underwater options without prior stockholder approval. |
Elements of Compensation
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, 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 2024. 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 2024, 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 2024, which was originally approved by our stockholders at our 2019 annual meeting of stockholders, and amended and restated for the first time by our stockholders at our 2021 annual meeting of stockholders to increase the number of authorized shares of common stock under the 2019 Equity Incentive Plan to a total of 1,800,000 shares (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 2024 Compensation—Long-Term Equity Compensation,” in 2024, the Compensation Committee granted our named executive officers service-based restricted stock units that are subject to three-year cliff vesting. In addition, in 2024 the Compensation Committee awarded performance-based restricted stock units to each of the named executive officers subject to specified performance conditions to be measured over the three-year period ending December 31, 2026.
Severance and Change in Control Arrangements
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 with named executive officers. 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
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 2024, the Compensation Committee convened in February, May, August and December. Mr. McLean, as Chair 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 2025 to approve salaries, incentive plans and performance metrics for 2025, as well as approving officer incentives earned during 2024. 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. The Compensation Committee retained AON/McLagan in 2024 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, AON/McLagan also provided the Compensation Committee an updated market analysis of our executive compensation program. 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 25 financial institutions was jointly presented by AON/McLagan 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 2024 include:
Analysis of 2024 Compensation
| ● | all of the components of executive compensation, including annual cash incentives, equity awards, retirement and death benefits, as well as other benefits and perquisites; and |
Analysis of 2024 Compensation
| (1) Represents each officer’s target incentive payment expressed as a percentage of their base salary. As discussed below, under the Incentive Plan, the Committee has set threshold and maximum performance levels for certain objectives. |
Analysis of 2024 Compensation
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 if 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 had a portion of their annual incentive tied to this performance objective in 2024. 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. See page 50 for the reconciliation of this non-GAAP measure to GAAP Net Income. In addition, the Compensation Committee determined to use 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 median ROAA 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:
Analysis of 2024 Compensation
| | | Percent of | | | | Assigned | | Adjusted Net Income | Notes | Weight (%) | | $66.9 million | 75% of 2024 budgeted net income | 40(1) | | $75.8 million | 85% of 2024 budgeted net income | 60 | | $84.8 million | 95% of 2024 budgeted net income | 80 | | $89.2 million | 2024 budgeted net income | 100(2) | | ROAA | > 50% of peer group median ROAA | 75 | | ROAA | > 60% of peer group median ROAA | 110 | | ROAA | > 75% of peer group median ROAA | 120 | | ROAA | > 90% of peer group median ROAA | 130(3) |
Analysis of 2024 Compensation
| Nonperforming Assets | Percent of | | Percent of | | to Loans + OREO | Assigned Weight | Net Chargeoffs to Average Loans | Assigned Weight | | (%) | (%) | (%) | (%) | | 2.10 | 50(1) | 25% to 49% of peer group percentile | 50(1) | | 1.95 | 75 | 50% of peer group percentile | 75 | | 1.80 | 100(2) | 75% of peer group percentile | 100(2) | | ≤ 1.35 | 115 | > 75% of peer group percentile | 115(3) | | ≤ 1.00 | 120(3) | | |
Analysis of 2024 Compensation
At December 31, 2024, our nonperforming assets to total loans plus OREO ratio was 1.30%, which resulted in 115.71% earnings from this performance metric. In addition, our net chargeoffs to average loans ratio was 0.36% while the peer group median net chargeoffs to average loans ratio for 2024 was 0.13%. This resulted in no earnings from this performance metric because we did not meet the threshold level. 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 and Mr. Adams each had a portion of their annual incentive tied to our Adjusted Efficiency Ratio, as noted in the following table. For 2024, our Adjusted Efficiency Ratio was calculated as noninterest expense, excluding OREO expenses, amortization of core deposits, acquisition related costs, and net gains on branch sales, divided by the sum of net interest income, on a fully tax equivalent basis, and total noninterest income, less net losses on security sales, net losses on mortgage servicing rights, death benefits realized on BOLI, and including a tax equivalent adjustment on the increase in the cash surrender value of BOLI.
Analysis of 2024 Compensation
For 2024, our Adjusted Efficiency Ratio at year-end was 53.18% and, therefore, Mr. Eccher and Mr. Adams each earned 90.68% of their applicable assigned weight for this performance metric. Department and Individual Performance The Compensation Committee also set performance metrics for Mr. Eccher, Mr. Adams, Mr. Collins, Mr. Pilmer and Mr. Gartelmann related to their respective departments and/or individual performance to promote the leadership and development of our various lines of business. For 2024, Mr. Eccher was evaluated on the executive team’s performance as well as improvements related to employee survey results, and earned 5% of base salary on a target of 5%. Mr. Adams was evaluated on finance, information technology, loan and deposit operations and accounting department strategies and efficiencies, and earned 5% of base salary on a target 5%. Mr. Collins was evaluated on residential lending performance and overall asset quality, and earned 10% of base salary on a target of 10% for this performance metric. Mr. Pilmer was evaluated on the growth of our commercial lending performance, commercial deposits and commercial fee income, and earned 12.0% of base salary on a target 10% for this performance metric. Mr. Gartelmann was evaluated on the performance of our Wealth Management department, including growth of wealth management income and assets under management, and earned 26.78% of base salary on a target 25% for this performance metric. Total 2024 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 2024 are noted in the table below, along with the percentage of the total target incentive each officer achieved.
Analysis of 2024 Compensation
Long-Term Equity Compensation. 2024 TRSU Awards. In 2024, 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.
Analysis of 2024 Compensation
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. 2024 PRSU Awards. In 2024, the Compensation Committee also approved an award of performance-based restricted stock units, or PRSUs, to our named executive officers, as shown in the following table.
Analysis of 2024 Compensation
The number of PRSUs that ultimately vest and convert to shares may range from 0% to 175% of the underlying PRSUs originally awarded, depending on our performance relative to these performance metrics. Results of 2022 PRSU Awards. The final performance period for our 2022 PRSUs ended on December 31, 2024. While each performance metric was measured annually, the awards were also subject to a service requirement through the date we issued our 2024 audited financial statements. The PRSUs had a payout range from 0% of target for below threshold performance, 25% of target for threshold performance, 100% of target for target performance and 175% of target for maximum performance. The performance metrics, weight and relative goals are disclosed in the below table, along with the percent of target achieved, as measured over the three-year period.
Analysis of 2024 Compensation
| | | Threshold | | Target | | Maximum | | Percent of | | Performance Metric | Weight (%) | Performance Goal (Percentile) | Payout Rate (%) | Performance Goal (Percentile) | Payout Rate (%) | Performance Goal (Percentile) | Payout Rate (%) | Target Achieved (%) | | Relative Return on Average Tangible Common Equity | 67 | 25th | 25 | 50th | 100 | 75th | 175 | 175 | | Growth in Relative Book Value per Share | 33 | 25th | 25 | 50th | 100 | 75th | 175 | 175 |
Regulatory Considerations
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, updated 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 $1,000,000 in that year. The Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our executive officers, and may determine it is appropriate to provide compensation that may exceed deductibility limits in order to recognize performance, meet market demands, retain key executives, and take into account other appropriate considerations.
Summary Compensation Table
Summary Compensation Table The following table sets forth information concerning the compensation of our named executive officers:
Summary Compensation Table
| | | | | | | Change in | | | | | | | | | | Pension Value | | | | | | | | | Non-Equity | and Nonqualified | | | | | | | | | Incentive | Deferred | All | | | | | | | Stock | Plan | Compensation | Other | | | Name and | | Salary | Bonus | Awards | Compensation | Earnings | Compensation | Total | | Principal Position(1) | Year | ($) (2) | ($) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | ($) | | James Eccher | 2024 | 835,000 | - | 1,043,772(7) | 740,546 | - | 74,101 | 2,693,419 | | Chairman, President and Chief | 2023 | 810,873 | - | 862,809 | 567,800 | - | 52,909 | 2,294,391 | | Executive Officer | 2022 | 668,327 | - | 501,517 | 486,619 | - | 45,620 | 1,702,083 | | Bradley S. Adams | 2024 | 487,500 | - | 450,016(7) | 327,037 | - | 50,459 | 1,315,012 | | Executive Vice President, Chief Operating Officer | 2023 | 424,591 | - | 308,279 | 279,000 | - | 34,548 | 1,046,418 | | and Chief Financial Officer | 2022 | 378,066 | - | 256,338 | 216,747 | - | 30,362 | 881,513 | | Gary Collins | 2024 | 347,006 | - | 228,084(7) | 164,358 | - | 64,575 | 804,023 | | Vice Chairman | 2023 | 391,487 | - | 284,157 | 135,934 | - | 59,923 | 871,501 | | | 2022 | 371,718 | - | 252,037 | 180,905 | - | 44,101 | 848,761 | | Donald Pilmer | 2024 | 377,575 | - | 217,506(7) | 213,407 | - | 45,376 | 853,864 | | Executive Vice President, | 2023 | 356,940 | - | 181,122 | 166,737 | - | 41,248 | 746,047 | | Commercial Lending | 2022 | 324,405 | - | 120,018 | 148,999 | - | 35,932 | 629,354 | | Richard Gartelmann | 2024 | 292,735 | - | 96,812(7) | 136,971 | - | 38,608 | 565,126 | | Executive Vice President, | 2023 | 272,903 | - | 89,079 | 115,342 | - | 37,372 | 514,696 | | Wealth Management | 2022 | 251,415 | - | 59,035 | 73,081 | - | 31,833 | 415,364 |
Summary Compensation Table
| (1) Reflects current principal positions. |
Summary Compensation Table
| (2) Actual base paid reflects normal salary increases effective in March annually |
Summary Compensation Table
| (3) The amounts represent the grant date fair value for equity awards in accordance with ASC 718 — “Compensation — Stock Compensation.” A discussion of the assumptions used in calculating the values may be found in Note 1 to our audited financial statements included in our 2024 Annual Report on Form 10-K. |
Summary Compensation Table
| (4) See “Compensation Discussion and Analysis —Analysis of 2024 Compensation—Annual Cash Incentive Payments” above for a description of how the Compensation Committee determined the incentive payments awarded in 2024. |
Summary Compensation Table
| (5) There were no above-market or preferential earnings on our nonqualified deferred compensation plan. |
Summary Compensation Table
| (6) The 2024 amounts set forth in this column include the following: |
Summary Compensation Table
| | Mr. Eccher | Mr. Adams | Mr. Collins | Mr. Pilmer | Mr. Gartelmann | | | ($) | ($) | ($) | ($) | ($) | | 401(k) match | 13,800 | 13,800 | 13,800 | 13,800 | 13,800 | | Life insurance | 788 | 787 | 505 | 705 | 539 | | Car allowance | 10,800 | 6,000 | 7,800 | 9,600 | 9,600 | | Country club/Social club dues | 18,261 | 13,200 | 25,962 | 14,460 | 10,964 | | TRSU dividend equivalents | 30,452 | 15,952 | 15,788 | 6,091 | 2,985 | | Cell phone reimbursement | - | 720 | 720 | 720 | 720 | | Total | 74,101 | 50,459 | 64,575 | 45,376 | 38,608 |
Summary Compensation Table
| (7) Represents the following awards and grant date fair values: |
Summary Compensation Table
| | PRSUs(a) | TRSUs | | Name | ($) | ($) | | Mr. Eccher | 521,886 | 521,886 | | Mr. Adams | 225,008 | 225,008 | | Mr. Collins | 114,042 | 114,042 | | Mr. Pilmer | 108,753 | 108,753 | | Mr. Gartelmann | 48,406 | 48,406 |
Summary Compensation Table
| (a) The PRSUs were determined to have a value at the grant date based on management’s assessment that it was probable that the PRSUs would vest in each performance period at 1.0x the number of units granted. However, if the highest level of performance conditions with respect to the PRSUs granted in 2024 are satisfied, then the value of the PRSUs, determined as of the grant date, would be as follows: Mr. Eccher – $913,300; Mr. Adams – $393,764; Mr. Collins – $199,574, Mr. Pilmer – $190,318 and Mr. Gartelmann – $84,710. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table shows plan-based awards granted to our named executive officers in 2024.
Grants of Plan-Based Awards
| | | | | | | | | All Other | | | | | Estimated Possible Payouts Under | | | Estimated Possible Payouts Under | | | Stock Awards: | Grant Date | | | | Non-Equity Incentive Plan Awards(1) | | | Equity Incentive Plan Awards(2) | | | Number of | Fair Value | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Thres-hold (#) | Target (#) | Maximum (#) | Share of Stock or Units (#)(3) | of Stock Awards ($)(4) | | James Eccher | 2/20/2024 | 279,516 | 688,040 | 851,450 | | | | 38,544 | 521,886 | | | | | | | 9,636 | 38,544 | 67,452 | | 521,886 | | Bradley S. Adams | 2/20/2024 | 103,950 | 272,250 | 336,600 | | | | 16,618 | 225,008 | | | | | | | 4,155 | 16,618 | 29,082 | | 225,008 | | Gary Collins | 3/20/2024 | 51,000 | 150,000 | 182,250 | | | | 8,246 | 114,042 | | | | | | | 2,062 | 8,246 | 14,431 | | 114,042 | | Donald Pilmer | 2/20/2024 | 76,119 | 209,327 | 251,193 | | | | 8,032 | 108,753 | | | | | | | 2,008 | 8,032 | 14,056 | | 108,753 | | Richard Gartelmann | 2/20/2024 | 17,758 | 118,385 | 131,703 | | | | 3,575 | 48,406 | | | | | | | 894 | 3,575 | 6,256 | | 48,406 |
Grants of Plan-Based Awards
| (1) Amounts reported represent the potential payouts pursuant to our Incentive Plan subject to the evaluation criteria set by the Compensation Committee, with all payments subject to achievement of Company and/or individual and departmental goals as discussed in “Compensation Discussion and Analysis —Analysis of 2024 Compensation—Annual Cash Incentive Payments.” Actual amounts earned by each named executive officer are included in the column entitled “Non-Equity Incentive Plan Compensation” of the “Summary Compensation Table” above. |
Grants of Plan-Based Awards
| (2) Represents the award of PRSUs with a three-year performance period (2024-2026). The vesting is subject to the achievement of pre-established targets and the officer’s continued service through the vesting date. See “Compensation Discussion and Analysis – Analysis of 2024 Compensation – Long-Term Equity Compensation – 2024 PRSU Awards.” Any PRSUs that vest will be converted to shares of our common stock on a one-for-one basis. PRSUs that do not vest will be forfeited. |
Grants of Plan-Based Awards
| (3) Represents the award of TRSUs that will cliff vest on the third anniversary of the grant date. |
Grants of Plan-Based Awards
| (4) This amount represents the grant date fair value for equity awards in accordance with ASC 718 – “Compensation – Stock Compensation”. The grant date fair value of the PRSUs was estimated at the target performance level. |
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning the outstanding equity awards at December 31, 2024, held by the individuals named in the Summary Compensation Table:
Outstanding Equity Awards at Fiscal Year-End
| | Stock Awards | | | | | | | | Equity Incentive | Equity Incentive Plan | | | Number of | Market value of | Plan Awards: | Awards: Market value | | | shares or units of | of shares or | Number of shares | of PRSU shares or | | | stock that have | units of stock that | or units of stock | units of stock that | | | not vested | have not vested | that have not vested | have not vested | | Name | (#) (TRSUs) | ($) (TRSUs)(1) | (#) (PRSUs) (7) | ($)(1) (7) (8) | | James Eccher | 80,840(2) | 1,437,335 | 93,785 | 1,667,497 | | Bradley Adams | 34,385(3) | 611,365 | 41,003 | 729,033 | | Gary Collins | 25,165(4) | 447,434 | 31,672 | 563,128 | | Donald Pilmer | 21,548(5) | 383,123 | 13,288 | 236,261 | | Richard Gartelmann | 10,223(6) | 181,765 | 6,160 | 109,525 |
Outstanding Equity Awards at Fiscal Year-End
| (1) Based upon the closing price of our common stock on December 31, 2024 (the last trading day of the year) of $17.78 per share. |
Outstanding Equity Awards at Fiscal Year-End
| (2) Represents the following unvested TRSUs granted to Mr. Eccher: |
Outstanding Equity Awards at Fiscal Year-End
| ● | 17,258 TRSUs that vest on February 15, 2025 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 25,038 TRSUs that vest on February 21, 2026 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 38,544 TRSUs that vest on February 20, 2027 |
Outstanding Equity Awards at Fiscal Year-End
| (3) Represents the following unvested TRSUs granted to Mr. Adams: |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,821 TRSUs that vest on February 15, 2025 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,946 TRSUs that vest on February 21, 2026 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 16,618 TRSUs that vest on February 20, 2027 |
Outstanding Equity Awards at Fiscal Year-End
| (4) Represents the following unvested TRSUs granted to Mr. Collins: |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,673 TRSUs that vest on February 15, 2025 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,246 TRSUs that vest on February 21, 2026 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,246 TRSUs that vest on February 20, 2027 |
Outstanding Equity Awards at Fiscal Year-End
| (5) Represents the following unvested TRSUs granted to Mr. Pilmer: |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,260 that vest on February 15, 2025 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 5,256 that vest on February 21, 2026 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 8,032 that vest on February 20, 2027 |
Outstanding Equity Awards at Fiscal Year-End
| (6) Represents the following unvested TRSUs granted to Mr. Gartelmann: |
Outstanding Equity Awards at Fiscal Year-End
| ● | 4,063 that vest on February 15, 2025 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 2,585 that vest on February 21, 2026 |
Outstanding Equity Awards at Fiscal Year-End
| ● | 3,575 that vest on February 20, 2027 |
Outstanding Equity Awards at Fiscal Year-End
| (7) Represents the unvested PRSUs as of December 31, 2024 and includes the 2022 PRSUs earned upon satisfaction of the performance at 175%. The 2022 PRSUs were vested and paid on March 4, 2025. See the table on page 32 which represents the number of shares actually earned on these vested PRSUs. |
Outstanding Equity Awards at Fiscal Year-End
| (8) Represents PRSUs that are subject to the achievement of pre-established performance targets and the officer’s continued service through the vesting date. Any PRSUs that vest will be converted to shares of our common stock on a one-for-one basis. PRSUs that do not vest will be forfeited. The number of unearned PRSUs reported assumes the units are earned and vested at 1.0x the number of units granted (representing satisfaction of corporate performance goals at the target performance level). |
Stock Vested
Stock Vested The following table provides information concerning stock awards that vested in 2024 for our named executive officers. No stock options were exercised by our named executive officers in 2024.
Stock Vested
| | Stock Awards | | | | Number of | Value | | | shares acquired | realized on | | | on vesting | vesting(1) | | Name | (#) | ($) | | James Eccher | 51,190 | 689,836 | | Bradley S. Adams | 26,815 | 361,359 | | Gary Collins | 26,540 | 357,653 | | Donald Pilmer | 10,108 | 137,974 | | Richard Gartelmann | 4,954 | 67,622 |
Stock Vested
| (1) The dollar values reported in this column were calculated using the per share closing price of our common stock on the vesting date of the awards. |
Nonqualified Deferred Compensation
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. The current plan, approved in 2020, effective January 1, 2021, does not allow for company matching contributions. Discretionary employer profit sharing contributions are also no longer allowed under the plan approved in 2020. 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.
Nonqualified Deferred Compensation
| | Executive | Registrant | Aggregate | Aggregate | Aggregate | | | contributions | contributions | gains (losses) | withdrawals/ | balance at | | | in last FY | in last FY | in last FY | distributions | last FYE | | Name | ($)(1) | ($) | ($)(2) | ($) | ($)(3) | | James Eccher | - | - | 117,065 | - | 604,855 | | Bradley S. Adams | - | - | 4,919 | - | 23,283 | | Gary Collins | 45,227 | - | 68,515 | - | 401,048 | | Don Pilmer | 38,717 | - | 25,080 | - | 144,795 | | Richard Gartelmann | - | - | 4,033 | - | 21,706 |
Nonqualified Deferred Compensation
| (1) The amounts shown in this column are included within amounts reported as compensation in the Summary Compensation Table. |
Nonqualified Deferred Compensation
| (2) There were no above-market or preferential earnings or appreciation in 2024 or previous years. Amounts included in this column are not included in the Summary Compensation Table. |
Nonqualified Deferred Compensation
| (3) The aggregate balance at last fiscal year-end shown in this column includes contributions in prior years which were reported as “Salary” and “All Other Compensation” in the Summary Compensation Table for the applicable year. |
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 respective employment agreement for Mr. Eccher and Mr. Collins provides for certain payments and benefits if we terminate such executive’s employment without cause or if such executive terminates his employment for good reason. Mr. Eccher and Mr. Collins are also eligible for certain severance benefits upon a change in control. In addition, each of Mr. Adams, Mr. Pilmer and Mr. Gartelmann 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. On March 16, 2021, we entered into an amended Compensation and Benefits Assurance Agreement with Mr. Gartelmann, which superseded and replaced his prior agreement dated June 17, 2014. The amended agreement, among other things, removed the provision related to certain tax gross-up payments to Mr. Gartelmann, in the event any severance or other payments from the Company would constitute an excess parachute payment.
Pay Ratio
Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chairman, President, and Chief Executive Officer, James Eccher. For 2024, our last completed fiscal year:
Pay Ratio
| ● | the median of the annual total compensation of all employees of our company (other than Mr. Eccher) was $64,326; and |
Pay Ratio
| ● | the annual compensation of our Chief Executive Officer from the Summary Compensation Table was $2,693,418, calculated consistent with the Summary Compensation Table executive compensation disclose requirements, plus the value of employer-paid health insurance contributions of $22,900, totaling $2,716,318 in total annual compensation. |
Pay Ratio
Based on this information, for 2024 the ratio of the annual total compensation of Mr. Eccher, our Chief Executive Officer and President, to the median of the annual total compensation of all employees was 42 to 1. To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our Chief Executive Officer, we took the following steps:
Pay Ratio
| 1. | We determined that as of December 31, 2024, our employee population consisted of 877 individuals with all of these individuals located in the United States. This population included our full-time, part-time, seasonal and temporary employees. However, it did not include independent contractors who were employed by and had their compensation determined by unaffiliated third parties. |
Pay Ratio
| 2. | To identify the “median employee” from our employee population, we compared the wages of our employees as reflected in our payroll records and reported to the Internal Revenue Service on Form W-2 for 2024. In making this determination, we annualized the compensation of full-time and part-time permanent employees who were employed on December 31, 2024, but did not work for us the entire year. No full-time equivalent adjustments were made for part time employees. |
Pay Ratio
| 3. | We identified our median employee using this compensation measure, which was consistently applied to all of our employees included in the calculation. |
Pay Ratio
| 4. | Since all of our employees are located in the United States, as is our Chief Executive Officer, we did not make any cost-of-living adjustments in identifying our “median employee.” |
Pay Ratio
| 5. | Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2024 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $64,326. The difference between such employee’s wages and the employee’s total compensation represents the estimated value of such employee’s life insurance, health care benefits, and company 401(k) contribution (estimated for the employee and such employee’s eligible dependents at $9,069.) |
Pay Ratio
| 6. | With respect to the annual total compensation of our Chief Executive Officer, we used the amount reported in the “Total” column of our Summary Compensation Table included in this Proxy Statement, adjusted as follows. To maintain consistency between the annual total compensation of our Chief Executive Officer and the median employee, we added the estimated value of our Chief Executive Officer’s health care benefits (estimated for our Chief Executive Officer and his eligible dependents at $22,900 to the amount reported in the Summary Compensation Table. This resulted in annual total compensation for purposes of determining the ratio in the amount of $2,716,318, which exceeds the amount reported for him in the Summary Compensation Table by $22,900. |
Pay versus Performance
Pay versus Performance The information below describes the relationship between compensation actually paid to our Principal Executive Officer (“PEO”) and other Named Executive Officers (“NEOs”), and certain measures of financial performance, for the three years ended December 31, 2024, in accordance with Item 402(v) of Regulation S-K. Compensation actually paid, as determined under SEC requirements, does not necessarily reflect the actual amount of compensation earned by or paid to our NEOs during a covered year. For further information concerning our pay-for-performance philosophy and how we align executive compensation with our performance, refer to the Compensation Discussion and Analysis.
Pay versus Performance
| | | | | | Value of Initial Fixed | | | | | | | | | | Investment Based on: | | | | | | Summary | | Average Summary | Average | | Peer Group | | | | | Compensation | Compensation | Compensation on | Compensation | Total | Total | | | | | on Table Total | Actually | Table Total for | Actually Paid to | Shareholder | Shareholder | | Adjusted | | | for PEO (1) | Paid to PEO (2) | Non-PEO NEOs (3) | Non-PEO NEOs (4) | Return (5) | Return (5) | Net Income | Net Income (6) | | Year | ($) | ($) | ($) | ($) | (%) | (%) | ($) | ($) | | 2024 | 2,693,418 | 3,117,679 | 884,506 | 1,158,337 | 85.86 | 47.85 | 85,264,000 | 86,408,000 | | 2023 | 2,294,391 | 2,184,116 | 794,666 | 720,869 | 19.90 | (3.35) | 91,729,000 | 96,997,000 | | 2022 | 1,702,083 | 2,006,937 | 693,748 | 802,770 | 22.84 | (2.48) | 67,405,000 | 71,814,000 | | 2021 | 1,717,080 | 2,057,620 | 701,022 | 861,926 | (4.93) | 24.06 | 20,044,000 | 39,800,000 | | 2020 | 1,330,313 | 981,528 | 562,218 | 397,204 | (24.70) | (10.32) | 27,825,000 | 30,800,000 |
Pay versus Performance
| (1) PEO for 2020, 2021, 2022, 2023, and 2024 was James Eccher. |
Pay versus Performance
| (2) This column represents the “compensation actually paid” to our PEO for each year, determined by starting with the amount set forth in the Summary Compensation Table (“SCT”) in the column entitled “Total Compensation” for the applicable year and adjusting that amount as follows: |
Pay versus Performance
| | PEO | | | | | | | 2024 | 2023 | 2022 | 2021 | 2020 | | | ($) | ($) | ($) | ($) | ($) | | Summary Compensation Table Total Compensation | 2,693,418 | 2,294,391 | 1,702,083 | 1,717,080 | 1,330,313 | | Less Grant Date Fair Value of RSU Awards in Covered Fiscal Year | (1,043,772) | (862,809) | (501,517) | (463,986) | (288,110) | | Add Change in Fair Value of Outstanding and Unvested RSU Awards Granted in Prior Years and Covered Fiscal Year | 1,468,033 | 752,535 | 806,371 | 804,526 | (60,675) | | Compensation Actually Paid | 3,117,679 | 2,184,116 | 2,006,937 | 2,057,620 | 981,528 |
Pay versus Performance
| (3) Non-PEO NEOs for 2020, 2021, 2022, 2023, and 2024 were Bradley Adams, Gary Collins, Donald Pilmer, and Richard Gartelmann. |
Pay versus Performance
| (4) This column represents the average “compensation actually paid” to our non-PEO NEOs for each year, determined by starting with the amount set forth in the SCT in the column entitled “Total Compensation” for the applicable year (and taking the average of those amounts for the non-PEO NEOs) and adjusting that amount as follows: |
Pay versus Performance
| | Non-PEO NEOs | | | | | | | 2024 | 2023 | 2022 | 2021 | 2020 | | | ($) | ($) | ($) | ($) | ($) | | Summary Compensation Table Total Compensation | 884,506 | 794,666 | 693,748 | 701,022 | 562,218 | | Less Grant Date Fair Value of RSU Awards in Covered Fiscal Year | (248,231) | (215,659) | (171,857) | (163,566) | (108,958) | | Add Change in Fair Value of Outstanding and Unvested RSU Awards Granted in Prior Years and Covered Fiscal Year | 522,061 | 141,863 | 280,879 | 324,470 | (56,057) | | Compensation Actually Paid | 1,158,337 | 720,869 | 802,770 | 861,926 | 397,204 |
Pay versus Performance
| (5) The Peer Group TSR disclosed in this table utilizes the KBW NASDAQ Bank Index (“KBW Bank Index”), which we also use in the stock performance chart required by Item 201(e) of Regulation S-K included in our Annual Report Form 10-K for the year ended December 31, 2024. The two columns assume $100 was invested for the period starting December 31, 2020 and through the end of the listed year in each of the Company and in the KBW Bank Index, respectively. All dollar values assume reinvestment of pre-tax dividends paid by companies, where applicable, included in the KBW Bank Index. Historical stock performance is not necessarily indicative of future stock performance. |
Pay versus Performance
| (6) Adjusted Net Income is a non-GAAP measure we use to compare periods by excluding material transactions that are not considered core to our business or may not reflect the effects of operations. We determined Adjusted Net Income to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and Non-PEO NEOs in 2024. The Adjusted Net Income used for compensation differs from that disclosed in the Form 10-K. See our reconciliation to GAAP Net Income on page 50. |
Relationship Between Compensation Actually Paid and Our TSR and Peer Group TSR
Relationship Between Compensation Actually Paid and Our TSR and Peer Group TSR The graph below shows the relationship between the compensation actually paid to our PEO and the average compensation actually paid to our non-PEO NEOs and our TSR and the Peer Group TSR.
Relationship Between Compensation Actually Paid and Our Net Income
Relationship Between Compensation Actually Paid and Our Net Income The graph below shows the relationship between the compensation actually paid to our PEO and the average compensation actually paid to our non-PEO NEOs and our net income.
Relationship Between Compensation Actually Paid and Our Adjusted Net Income
Relationship Between Compensation Actually Paid and Our Adjusted Net Income The graph below shows the relationship between the compensation actually paid to our PEO and the average compensation actually paid to our non-PEO NEOs and our Adjusted Net Income.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION We do not pay our “inside” employee-directors any additional compensation for their service as directors. For their service in 2024, we paid our non-employee directors the following cash fees:
DIRECTOR COMPENSATION
| ● | a director service fee of $49,000 ($12,250 payable quarterly). |
DIRECTOR COMPENSATION
| ● | a lead director fee of $25,000 ($6,250 payable quarterly to Mr. Finn); |
DIRECTOR COMPENSATION
| ● | an Audit Committee Chair fee of $12,000 ($3,000 payable quarterly to Ms. York); |
DIRECTOR COMPENSATION
| ● | a Compensation Committee Chair, Information Technology Steering Committee Chair, and Risk and Insurance Committee Chair fee of $8,000 each ($2,000 payable quarterly to Mr. McLean, Ms. Temple Rocks, and Mr. Bonifas, respectively); and |
DIRECTOR COMPENSATION
| ● | committee member fees of $6,000 ($1,500 quarterly) for the Audit and Loan Committees, committee member fees of $4,000 ($1,000 quarterly) for the Compensation, Risk and Insurance, and Information Technology Steering Committees, and $1,500 ($375 quarterly) for the Nominating and Governance Committee. |
DIRECTOR COMPENSATION
Director fees are paid a quarter in arrears, and are paid based on service for the prior quarter. We also grant our non-employee directors annual equity awards in the form of restricted stock units. These awards cliff vest on the third anniversary of the grant date. The grant date of the 2024 equity awards was February 20, 2024, and these awards will vest on February 20, 2027. The following table sets forth the compensation paid to each of our non-employee directors in 2024:
DIRECTOR COMPENSATION
| | Fees deferred or | Stock | | | | paid in cash(1) | Awards(2) | Total | | Name | ($) | ($) | ($) | | Edward Bonifas | 66,000 | 58,005(3) | 124,005 | | Barry Finn | 100,000 | 58,005(3) | 158,005 | | William Kane (4) | 11,750 | - | 11,750 | | Dennis Klaeser | 62,500 | 58,005(3) | 120,505 | | Keith Kotche | 62,500 | 58,005(3) | 120,505 | | John Ladowicz | 70,000 | 58,005(3) | 128,005 | | Billy J. Lyons, Jr. | 66,000 | 58,005(3) | 124,005 | | Hugh McLean | 76,500 | 58,005(3) | 134,505 | | Patti Temple Rocks | 64,500 | 58,005(3) | 122,505 | | John Williams, Jr. | 52,500 | 58,005(3) | 110,505 | | Jill York | 78,500 | 58,005(3) | 136,505 |
DIRECTOR COMPENSATION
| (1) We maintain the Old Second Bancorp, Inc. Amended and Restated Voluntary Deferred Compensation Plan for Directors (the “Director Deferred Compensation Plan”) under which directors are permitted to defer receipt of their directors’ fees. The directors who participate in the plan are permitted to make hypothetical investments in publicly-traded funds that are held in an insurance company separate account, with respect to the contributions credited to their plan accounts. We may, but are not required to, contribute the deferred fees into a trust, which may hold our stock. The plan is a nonqualified deferred compensation plan and the directors have no interest in the trust. The deferred fees and any earnings thereon are our unsecured obligations. Any shares held in the trust are treated as treasury shares and may not be voted on any matter presented to stockholders. We do not pay any above-market interest on the compensation or fees deferred by the directors. |
DIRECTOR COMPENSATION
| (2) The amounts represent the grant date fair value for equity awards in accordance with ASC 718 — “Compensation-Stock Compensation.” A discussion of the assumptions used in calculating the values may be found in Note 1 of our audited financial statements included in our 2023 Annual Report on Form 10-K. |
DIRECTOR COMPENSATION
| (3) Total unvested restricted stock units held by such director at December 31, 2024 was 10,441, which includes awards granted in 2022 through 2024. |
DIRECTOR COMPENSATION
| (4) In accordance with our Director Retirement Policy, which requires that any person serving as a director submit his or her resignation as a director upon attaining the age of 73 during his or her tenure, Mr. Kane retired on October 30, 2023. As noted, directors are paid a quarter in arrears. The entire amounts represents payments made to Mr. Kane in January 2024 for services performed as a member of the board in 2023. |
Interests of Directors and Executive Officers
Interests of Directors and Executive Officers Our directors and executive officers do not have substantial interests, directly or indirectly, in the matters set forth in this proposal except to the extent of their ownership of shares of our common stock or any other of our securities.
Overhang
| Outstanding Equity Awards | # of Shares | | A. TRSUs | 610,955 | | B. PRSUs (1) | 182,989 | | C. Stock Options | - | | D. Total (A + B + C) | 793,944 | | Shares Available for Grant | # of Shares | | E. 2019 Equity Incentive Plan (which includes the shares added in 2021) | 556,238 | | F. Restated Equity Incentive Plan (if approved) | 800,000 | | G. Total (E + F) | 1,356,238 | | H. Total Grant Outstanding + Shares Available for Grant (D + G) | 2,150,182 | | I. Common Shares Outstanding as of Record Date (3/21/2025) | 45,047,151 | | J. Basic Overhang (H / I) | 4.8% | | K. Diluted Overhang (H / H + I) | 4.6% |