UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

OLD SECOND BANCORP, INC.
37 South River Street, Aurora, Illinois 6050660507

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 201615, 2018

TO THE STOCKHOLDERS:

            The annual meeting of stockholders of Old Second Bancorp, Inc., will be held on Tuesday, May 17, 2016,15, 2018, at 9:00 a.m., central time, at North Island Center, 8 East Galena Boulevard,Blvd., 60506, Aurora, Illinois, for the following purposes:

1.

to elect three members of the board of directors;four director nominees named in the accompanying proxy statement;



2.

to approve, in a non-binding, advisory vote, the compensation of our named executive officers, as described in the proposal on Old Second's executive compensation disclosed in the proxy statement, which is referred to as the "say-on-pay" proposal;officers;



3.

to ratify an amendment to the Old Second Bancorp, Inc. 2014 Equity Incentive Plan to increase the maximum number of shares of common stock of the Company that may be delivered under the Plan;



4.

to ratify an amendment to the Company's Amended and Restated Rights Agreement and Tax Benefits Preservation Plan to extend its expiration date;



5.

to ratify the appointment of Plante & Moran, PLLC as our independent registered public accounting firm for the year endedending December 31, 2016;2018; and



6.4.

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

            The board of directors is not aware of any other business to come before the meeting. Stockholders of record at the close of business on March 25, 201630, 2018 are the stockholders entitled to vote at the meeting and any and all adjournments or postponements of the meeting. In the event there are an insufficient number of votes for a quorum at the time of the annual meeting, the meeting may be adjourned or postponed in order to permit further solicitation of proxies.

            Important Notice Regarding Availability of Proxy Materials for the Annual Meeting:    Our 2018 proxy statement, proxy card and 2017 Annual Report to Shareholders are available free of charge online at www.oldsecond.com under "2018 Annual Meeting Materials."

		By order of the board of directors
		James L. Eccher Chief Executive Officer and President

Aurora, Illinois
, 2016April 13, 2018

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

OLD SECOND BANCORP, INC.
37 South River Street, Aurora, Illinois 6050660507

PROXY STATEMENT

            This proxy statement is furnished in connection with the solicitation by the board of directors of Old Second Bancorp, Inc., a Delaware corporation, of proxies to be voted at the annual meeting of stockholders. This meeting is to be held at North Island Center, 8 East Galena Boulevard,Blvd., Aurora, Illinois, on May 17, 201615, 2018 at 9:00 a.m., central time, or at any postponements or adjournments of the meeting. Old Second conducts full service community banking and trust business through its wholly-ownedwholly owned subsidiary, Old Second National Bank.

            A copy of our annual report for the year ended December 31, 2015,2017, which includes audited financial statements, is enclosed. This proxy statement was first mailed to stockholders on or about April 15, 2016.13, 2018. As used in this proxy statement, the terms "Old Second," "the Company," "we," "our" and "us" all refer to Old Second Bancorp, Inc., and its subsidiaries. Additionally, the term "Bank""the Bank" refers to Old Second National Bank.

Why am I receiving this proxy statement and proxy form?

You are receiving a proxy statement and proxy form from us because on March 25, 2016,30, 2018, the record date for the annual meeting, you owned shares of our common stock. This proxy statement describes the matters that will be presented for consideration by the stockholders at the annual meeting. It also gives you information concerning these matters to assist you in making an informed decision.

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

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

What matters will be voted on at the meeting?

You are being asked to vote on: (i) on three matters:

•

the election of threethe four director nominees to our board of directors; (ii) named in this proxy statement;

•

a non-binding, advisory proposal to approve the compensation of our named executive officers, which is referred to as the "say-on-pay" proposal; (iii) the ratification of an amendment to the Old Second Bancorp, Inc. 2014 Equity Incentive Plan to increase the maximum number of shares of common stock of the Company that may be delivered under the Plan; (iv) the ratification of an amendment to the Company's Amended and Restated Rights Agreement and Tax Benefits Preservation Plan to extend its expiration date; (v) 

•

the ratification of Plante & Moran, PLLC as our independent registered public accounting firm for the year endedending December 31, 2016; and (vi) any other business that may properly be brought before the meeting.

2018.

How do I vote?

A form of proxy is enclosed for use at the meeting. If the proxy is executed and returned, it may nevertheless be revoked at any time insofar as it has not been exercised. Stockholders attending the meeting may, on request, vote their own shares even though they have previously sent in a proxy. Unless revoked or instructions to the contrary are contained in the proxies, the shares represented by validly executed proxies will be voted at the meeting and will be voted "FOR" the election of the nominees for director named in this proxy statement, "FOR" the say-on-pay proposal, "FOR" the amendment to the 2014 Equity Incentive Plan, "FOR" the amendment to Company's Amended and Restated Rights

Agreement and Tax Benefits Preservation Plan and "FOR" the ratification of our independent registered public accounting firm.firm, and in accordance with the proxy holder's judgement on any other business that is properly brought before the meeting.

If you want to vote in person, please come to the meeting. We will distribute written ballots to anyone who wants to vote at the meeting. Please note, however, that if your shares are held in the name of a broker or other fiduciary (or what is usually referred to as "street name"), you will need to arrange to obtain a proxy from the record holder in order to vote in person at the meeting. Even if you plan to attend the annual meeting, we

ask that you complete, sign and return your proxy card in advance of the annual meeting in case your plans change.

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

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

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

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

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

The election of directors and the say-on-pay proposals are considered non-routine matters. Therefore, we encourage you to provide directions to your broker as to how you want your shares voted on all matters to be brought before the 20162018 annual meeting upon receipt of our proxy materials. You should do this by carefully following the instructions your broker gives you concerning its procedures. This ensures that your shares will be voted at the meeting.

What if I change my mind after I return my proxy card?

If you hold your shares in your own name, you may revoke your proxy and change your vote at any time before the polls close at the meeting. You may do this by:

•

signing another proxy card with a later date and returning that proxy card to us;us, or

•

sending notice to us that you are revoking your proxy, or

•

voting in person at the meeting.

If you hold your shares in the name of your broker or other fiduciary and desire to revoke your proxy, you will need to contact that party to revoke your proxy.

How many votes do we needshares must be represented for us to hold the annual meeting?

A majority of the shares that were outstanding and entitled to vote as of the record date must be present in person or by proxy at the meeting in order to hold the meeting and conduct business. On March 25, 2016,30, 2018, the record date, there were 29,483,42929,747,078 shares of common stock outstanding. A majority of these shares must be present in person or by proxy at the meeting.

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

•

is present in person at the meeting;meeting, or

•

has properly submitted a signed proxy form or other proxy.

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

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

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

Except with respect to the election of directors, youYou may vote "for,"FOR," "against""AGAINST" or "abstain""ABSTAIN" on each proposal properly brought before the meeting. Inmeeting, including the election of directors you may vote "for" or "withhold authority to vote for" each nominee.directors.

How many votes may I cast?

Generally, youYou are entitled to cast one vote for each share of stock you owned on the record date with respect to each of the proposals. Stockholders do not have cumulative voting rights. The proxy card included with this proxy statement indicates the number of shares owned by an account attributable to you.

What is the quorum for the annual meeting?

A majority of our outstanding shares of common stock as of the record date must be present at the meeting, either in person or by proxy, to hold the meeting and conduct business. This is called a quorum. In determining whether we have a quorum at the annual meeting for purposes of all matters to be voted on, all votes "FOR" or "AGAINST" and all votes to "ABSTAIN" will be counted. Shares will be counted for quorum purposes if they are represented at the meeting for any purpose other than solely to object to holding the meeting or transacting business at the meeting. If you hold your shares in street name, your brokerage firm may vote your shares under certain circumstances. Brokerage firms have authority under stock exchange rules to vote their customers' unvoted shares on certain "routine" matters. We expect that brokers will be allowed to exercise discretionary authority for beneficial owners who have not provided voting instructions ONLY with respect to Proposal 3 — the ratification of Plante & Moran, PLLC as our independent registered public accounting firm for the year ending December 31, 2018 but not with respect to any of the other proposals to be voted on at the annual meeting. If you hold your shares in street name, please provide voting instructions to your bank, broker or other nominee so that your shares may be voted on all other proposals.

When a brokerage firm votes its customers' unvoted shares on routine matters, these shares are counted for purposes of establishing a quorum to conduct business at the meeting. If a brokerage firm indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular matter, then those shares will be treated as "broker non-votes." Shares represented by broker non-votes will be counted in determining whether there is a quorum.

How many votes are needed for each proposal?

A majority of votesAssuming a quorum is present, and entitled to vote at the meeting will approve each matter that arises at the annual meeting.

The directors are elected by a majority of the shares having voting power present in person or represented by proxy must approve each proposal brought before the annual meeting (meaning that the number of votes present and entitledcast "FOR" each proposal must exceed the number of votes cast "AGAINST" or "ABSTAIN" with respect to vote atthat proposal). This includes the meeting. Forproposal regarding the election of directors in accordance with the policy of majority voting in uncontested director elections set forth in our bylaws.

Broker non-votes will not affect the outcome of voting on a "withhold authority" voteparticular proposal or the election of directors, but abstentions will have the same effect asof a vote against the election of a particularapplicable proposal or director.

Please note that, because the say-on-pay vote is advisory, it will not be binding upon the board of directors or the Compensation Committee.

Abstentions and broker non-votes, if any, will not be counted as entitled to vote, but will count for purposes of determining whether or not a quorum is present. So long as a quorum is present, abstentions and broker non-votes will have no effect on the election of directors. Abstentions will have the effect of a vote against the say-on-pay proposal and the ratification of the appointment of our independent registered public accounting firm, while broker non-votes will not affect these votes.

How are votes counted?

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

Where do I find the voting results of the meeting?

If available, we will announce voting results at the meeting. The voting results will also be disclosed in a Form 8-K filed with the Securities and Exchange Commission within four business days of the voting

Important Notice Regarding the Availability of Proxy Material for the Stockholder Meeting to be held on May 17, 2016.

Full copies of the proxy statement, the proxy card and other materials for the annual meeting are available on the internet at www.oldsecond.com under "2016 Annual Meeting Materials." Stockholders will receive a full set of these materials through the mail from us or from your broker.meeting.

PROPOSAL 11:

ELECTION OF DIRECTORS

            Old Second's board of directors is divided into three classes approximately equal in number, which are electedserving 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 terms of our Class II directors will expire at this year's annual meeting. The terms of our Class III directors will expire at the 2019 annual meeting and the terms of our Class I directors will expire at the 2020 annual meeting.

            Each proposed Class II director nominee, other than Hugh McLean, currently serves as a Class II director. Hugh McLean, who currently serves on the Bank's board of directors, is a new Class II director nominee for our 2018 annual meeting. His nomination was recommended by our common stockholders. Atboard of directors.

            Following a review and nomination from our Corporate Governance and Nominating Committee, our board has proposed that the following Class II directors be elected as Class II directors at our 2018 annual meeting to be held on May 17, 2016, you, as the holder of shareholders for a term that will expire at our common stock,2021 annual meeting and until their respective successors are duly elected and qualified.

Class II Director Nominees

            Each Class II director nominee will be entitled to elect three directors for terms expiring in three years, as described herein. Allelected if the number of shares voted "FOR" the nominee constitutes a majority of the nominees are incumbent directors who have served at least one term as a director of Old Second.

            We have no knowledge that any of the nominees will refuseshares having voting power present in person or be unable to serve as directors, but if any of the nominees becomes unavailable for election, the holders of proxies reserve the right to substitute another person of their choice as a nominee when votingrepresented by proxy at the meeting. The Nominating and Corporate Governance Committee of the board of directors of Old Second has nominated three persons set forth below for election as directors at this annual meeting, all of whom are incumbent directors.

            Set forth below is information concerning the nominees for election and for the other directors whose term of officeAccordingly, broker non-votes will continue after the meeting, including their age, year first elected or appointed as a director and business experience during the previous five years. The three nominees for director, if elected at the annual meeting, will serve for terms expiring in 2019. None of the directors servenot have any effect on the boardsoutcome of any other publicly traded companies besides Old Second.

            Unless authority tovoting, but abstentions will have the effect of a vote for"AGAINST" the nominees is withheld, the shares represented by the enclosed proxy card, if executed and returned, will be voted "FOR" the election of the nominees proposed by the board of directors.

Board Recommendation:applicable nominee.

            The board of directors recommends you vote your shares "FOR" each of the nominees forabove Class II director nominees.

            Set forth below is information concerning our other directors whose term of office will continue after the annual meeting, including their age, year first elected or appointed as a director.

DIRECTORS

NOMINEES

CONTINUING DIRECTORSContinuing 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. Except in connection with the restructuring of the Company's board of directors, there

            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 QualificationsExperience

            We have established minimum criteria that we believeBiographical information regarding each director should possess to be an effective member of our board. Those criteria are discussed in more detail on page 10 of this proxy statement. Thedirector 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 on is as follows: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 AuditRisk Committee, 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 community.communities we serve. Mr. Bonifas also serves as Chairman of our ITInformation Technology Steering committee where he uses his business expertise for cybersecurity oversight.

            Mr. Cheatham:Collins:    Mr. Collins has served as the Vice Chairman of the Company 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. CheathamCollins to be qualified for service on the board due to his experience in the financial services industryfocused within mortgage banking and the familiarity with Old Second's operations he has acquired as Chief Financial Officer of Old Second.real estate opportunities among residential, multi-family, and commercial lending.

            Mr. Eccher:    Mr. Eccher has served as the Chief Executive Officer and President of the Company since 2015 and has served 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 the familiarity with Old Second's operations that he has acquired as the former Chief Operating Officer of Old Second and as the current Chief Executive Officer and President of Old Second and Old Second National Bank.

            Mr. Finn:    Mr. Finn has served as the President and Chief Executive Officer of Rush-Copley Medical Center since 2002. 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 and the Nominating and Corporate Governance Committee as Lead Director, 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 community.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 and the Compensation Committee and the Risk Committee as Chairman, and 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 community.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 Old Second. We consider Mr. Ladowicz to be a qualified candidate for service on the board, the Audit Committee, 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. Tapscott: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. TapscottMcLean to be a qualified candidate for service on the board 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 the Company's 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 and the Audit Committee as Chairman (including as the audit committee financial expert) and the Risk Committee and the Nominating and Corporate Governance Committee due to his skills and experience in the financial services industry and his familiarity with Old Second's operations.

            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 and 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:    We consider Ms. Temple Rocks to be qualified for service onis the board due to her previsous business experience and familiarity with the greater Chicago market as the managing directorManaging Director of the Chicago office of Golin.

            Mr. Skoglund:Golin, a global communications agency. We consider Mr. Skoglund to be qualified for service on the board due to his skills and experience in the financial services industry and the intimate familiarity with Old Second's operations he has acquired as the former Chief Executive Officer of Old Second.

            Mr. Suits:    Mr. Suits was originally appointed to our board as a Class B Director by the U.S. Department of the Treasury ("Treasury") pursuant to the terms of our Fixed Rate Cumulative Perpetual Preferred Stock (the "Series B Preferred Stock"). Mr. Suits' appointment was approved by the unanimous written consent of the board on November 20, 2012. Following our repayment of the outstanding dividends on the Series B Preferred Stock, Mr. Suits was appointed as a common stock director shortly after our 2014 annual meeting. We consider Mr. SuitsMs. Temple Rocks to be a qualified candidate for service on the board and the AuditCompensation Committee and the Information Technology Steering Committee due to his skillsher business experience and familiarity with the greater Chicago market through her managing directorship with 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 44, joined Old Second and Old Second National 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. Gottschalk, age 56, joined Old Second and Old Second National Bank in 2001. He currently serves as Executive Vice President and Chief Operating Officer at Old Second National Bank, a position he has held 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 financial services industryATM/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 his familiarity withFBOP Corporation (Oak Park, IL). He has served on many customer advisory boards in the operations field.

Mr. Pilmer, age 53, joined Old Second's operations.Second and Old Second National Bank in 1989. He currently serves as Executive Vice President (a position he has held since 2016) and as Chief Lending Officer (a position he has held since 2008). Mr. Pilmer manages the Commercial Banking unit and has more than 25 years of experience in the Commercial Banking industry.

CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

General

            Currently, the board of directors is made up of ten directors, who are elected by the holders of our common stock every three years to serve staggered terms. In accordance with our corporate governance procedures, the board does not involve itself in the day-to-day operations of Old Second, which is monitored by our executive officers and management. Our directors fulfill their duties and responsibilities by attending regular meetings of the board and through committee membership, which is discussed below. The board has determined that all of the directors and nominees are "independent" as defined by the Nasdaq Stock Market, with the exception of Messrs. Skoglund, Cheatham and Eccher, each of whom is an executive officer or was an executive officer during the past three calendar years.

Director Attendance

            The board of directors held 11eleven regular meetings and one special meetingsmeeting during 2015.2017. All of the directors attended at least 75% of these meetings and the meetings of the committees on which they served. We typically schedule a board meeting in conjunction with our annual meeting and expect that our directors will attend our annual meeting. Last year, all of our then-serving directors attended our annual meeting.meeting except for one.

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 Securities and Exchange Commission, can be found on our website at www.oldsecond.com. The Company will post on its 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.

Director Independence

            The board of directors has standing Audit, Nominating and Corporate Governance, and Compensation Committees, each of which is made up solely of directors who are deemed to be "independent" under the rules of Nasdaq. Nasdaq'sNASDAQ. NASDAQ's independence rules include certain instances that will preclude a director from being deemed independent and the board reviews those requirements each year to determine a director's status as an independent director. The board has determined that all of the directors and nominees are "independent" as defined by the NASDAQ Stock Market, with the exception of Messrs. Skoglund, Eccher and Collins, each of whom is an executive officer of the Company or was an executive officer of the Company during the past three calendar years ended December 31, 2017.

            During its review of director independence, the board considered Mr. Finn's roles as President and Chief Executive Officer at Rush-Copley Medical Center and Mr. Skoglund's position as the Vice Chairman of Rush-Copley's board of directors. Our board determined that this does not preclude a finding that Mr. Finn is independent under Nasdaq'sNASDAQ's rules because Mr. Skoglund does not serve on Rush-Copley's compensation committee and has recused himself from any discussions or votes that involve Mr. Finn's salary. The board also reviewed certain transactions between Alarm Detection Systems, Inc., and the Company. Mr. Bonifas is a Vice President of Alarm Detections Systems, Inc. The board determined that Mr. Bonifas qualified as an independent director because the amounts paid by the Company to Alarm Detection Systems in 2017, which totaled approximately $257,540, by the Company$211,528, were less than 5% of Alarm Detection System's gross revenues for 20152017 and because Mr. Bonifas had no interest in the transaction with the Company, except an indirect andde minimis interest as a shareholderstockholder of Alarm Detection Systems.

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

Committees of the Board of Directors

            Our board committees are currently composed as follows (M — member; C — chair):

Audit Committee

            The Audit Committee assists the board in carrying out its oversight responsibilities for our financial reporting process, audit process and internal controls. The Audit Committee is solely responsible for the pre-approval of all required audit and non-audit services to be provided by our independent registered public accounting firm and exercises its authority to do so in accordance with a policy that it has adopted. Additionally,The committee's duties, responsibilities and functions are further described in its charter, which is available on our website at www.oldsecond.com, in the Audit Committee reviews and approves all related party transactions between Old Second and related parties in accordance with Nasdaq's rules and regulations."Governance Documents" section under "Investor Relations." You can request a copy of the committee's charter by sending a written request to the Corporate Secretary at 37 South River Street, Aurora, Illinois 60507, or by requesting via e-mail to corporatesecretary@oldsecond.com.

            The members of our Audit Committee during 20152017 were Messrs.Mr. Suits (who serves as Chairman), Mr. Finn, (who served as Chairman until October, when he became Chairman of the Nominating and Corporate Governance CommitteeMr. Tapscott and Mr. Suits became Chairman of the Audit Committee), Bonifas, Ladowicz, and Suits, each of whom we have determinedis deemed to be an independent director under Nasdaq's rules. We expect that these members will continue to serve on the committee in 2016. Mr. Finn served as chairman of the Audit Committee from 2008 until 2015.SEC Rule 10A-3 and NASDAQ's listing requirements. The Audit Committee met sixseven times in 2015.2017.

            The board has designated Mr. Finn, who is currently President and Chief Executive Officer of Rush-Copley Medical Center and previously served as its Chief Operating Officer and Chief Financial Officer, and Mr. Suits as the "audit committee financial experts,expert," as such term is defined by the regulations of the SEC. The board's determination was based upon Mr. Finn'sSuits' level of knowledge and experience regarding financial matters and his experience overseeing and managing the audit of an organization, which he has gained both from his formal education and from his professional experience as the Chief Financial Officer of a regional hospital organization, and upon Mr. Suits' experience as an independent financial consultant and as the founding partner of Sikich Gardner & Co., LLP, a public accounting and consulting firm. The board believes that each of the other members of the Audit Committee possesses knowledge and experience sufficient to understand the complexities of the financial statements of Old Second. Mr. Finn and Mr. Suits are both considered to be "independent" directors as defined by Nasdaq. Mr. Finn, or another member of the Audit Committee, met on a quarterly basis during 20152017 with our independent registered public accounting firm.

            To review our annual Audit Committee report, please see "Proposal 3 — Ratification of Our Independent Registered Public Accounts — Audit Committee Report."

Compensation Committee

            The Compensation Committee reviews the performance of Old Second's executive officers and establishes their compensation levels. The committee also has the authority, among other things, to:

•

review and approve performance goals and objectives relevant to the chief executive Officer and other executive officers and evaluate, at least annually, the performance of the chief executive officer and other executive officers in light of those goals and objectives;



•

review and approve employment agreements, severance arrangements, and change-in-control agreements or provisions for our executive officers;



•

adopt, approve or ratify awards under equity incentive compensation plans;



•

review with the chief executive officer our management succession plans; and



•

evaluate the risks posed by the design and implementation of our compensation plans and evaluate the implementation of appropriate risk management and controls to avoid or mitigate any excessive risk to the Company.

            The committee's duties, responsibilities and functions are further described more fully in its charter, which is available on our website at www.oldsecond.com.www.oldsecond.com, in the "Governance Documents" section under "Investor Relations." You can request a copy of the committee's charter by sending a written request to the Corporate Secretary at 37 South River Street, Aurora, Illinois 60506,60507, or by sending anrequesting via e-mail requesting same to corporatesecretary@oldsecond.com.

            The members of our Compensation Committee during 2017 were Mr. Ladowicz (who serves as Chairman), Mr. Kane, Mr. Bonifas and Ms. Temple Rocks, each of whom is deemed to be an independent director under NASDAQ's listing requirements. The Compensation Committee met three times in 2017.

            The Compensation Committee reviewshas the performance of Old Second's executive officers and establishes their compensation levels. The committee's duties, responsibilities and functions are further described inauthority under its charter which is available on our website at www.oldsecond.com. You can request a copyto select, or receive advice from, advisors (including compensation consultants). In 2017, the committee continued its engagement of ChaseCompGroup LLC as an independent advisor to assist the committee's charter by sending a written request to the Corporate Secretary at 37 South River Street, Aurora, Illinois 60506, or by sending an e-mail requesting same to corporatesecretary@oldsecond.com.committee in determining and evaluating executive compensation. The Compensation Committee met two times during 2015.

            Compensation Committee Interlocks and Insider Participation.    The membersassessed the independence of the Compensation CommitteeChaseCompGroup LLC taking into consideration all factors specified in 2015 were Messrs. Bonifas, Kane, Ladowicz and Palmer (who served as Chairman until his retirement in October at which point Mr. Ladowicz became the Chairman of the Compensation Committee), each of whom is an "independent" director as defined by Nasdaq, an "outside" director pursuant to Section 162(m) of the Internal Revenue Code and a "non-employee" director under Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"). We expect that the current members will continue to serveNASDAQ listing standards. Based on this assessment, the committee in 2016.determined the engagement of ChaseCompGroup LLC did not raise any conflict of interest.

Nominating and Corporate Governance Committee

            The Nominating and Corporate Governance Committee reviews the qualifications of, and recommends to the board for nomination, candidates to stand for election at each annual meeting or to fill vacancies on the board as they may occur during the year. The committee also reviews on a periodicat least an annual basis whether each director is "independent" under the rules of Nasdaq.NASDAQ listing requirements. Additionally, the Nominating and Corporate Governance Committee is responsible for reviewing our policies, procedures and structure as they relate to corporate governance. The committee's duties, responsibilities and functions are further described in its charter, which is available on our website at www.oldsecond.com.www.oldsecond.com, in the "Governance Documents" section under "Investor Relations." You can request a copy of the committee's charter by sending a written request to the Corporate Secretary at 37 South River Street,

Aurora, Illinois 60506,60507, or by sending anrequesting via e-mail requesting same to corporatesecretary@oldsecond.com. The Nominating and Corporate Governance Committee met one time in 2015.

            The members of the Nominating and Corporate Governance Committee in 20152017 were Messrs.Mr. Finn (who serves as Chairman), Mr. Kane, Mr. Bonifas, LadowiczMr. Suits and Palmer (who served as Chairman until his retirement in October),Mr. Ladowicz, each of whom is deemed to be an independent director under Nasdaq's rules. It is anticipated that theNASDAQ's listing requirements. The Nominating and Corporate Governance Committee will consist of Messrs. Finn, Kane, Bonifas and Ladowicz throughout 2016. Mr. Finn is expected to serve as Chairman of the committeemet two times in 2016.2017.

Director Nominations and Qualifications

            In making its nominations for persons to be elected to the board of directors and included in our proxy statement, the Nominating and Corporate Governance Committee evaluates incumbent directors, board nominees and persons nominated by stockholders, if any. The committee reviews each candidate in light of the criteria that we believe each director should possess. Included in the criteria are whether each nominee: (i) meets the minimum requirements for service on the board of directors contained in our bylaws; (ii) is under the age of 70 at the time of his or her election, as required byin accordance with our certificate of incorporation;bylaws; (iii) possesses the highest personal and professional ethics, integrity and values; (iv) has, in the committee's opinion, a sufficient educational and professional background and relevant past and current employment affiliations, board affiliations and experience for service on the board; (v) has demonstrated effective leadership and sound judgment in his or her professional life; (vi) has a strong sense of service to the communities thatin which we serve; (vii) has exemplary management and communication skills; (viii) is free of conflicts of interest that would prevent him or her from serving on the board; (ix) will ensure that other existing and future commitments do not materially interfere with his or her service as a director; (x) will review and agree to meet the standards and duties set forth in the Company's Code of Business Conduct and Ethics; (xi) is willing to devote sufficient time to carrying out his or hertheir duties and responsibilities effectively; and (xii) is committed to serving on the board for an extended period of time. While we do not have a separate diversity policy, the committee does consider the diversity of its directors and nominees in terms of knowledge, experience, skills, expertise and other demographics which may contribute to the board. The committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members and to determine whether they are "independent" in accordance with NasdaqNASDAQ requirements (to ensure that at least a majority of the directors will, at all times, be independent).

            The committee, when considering potential board members, will look at all of the foregoing criteria and arrive at the candidate that best meets the items set forth.criteria. The various qualifications and criteria are normally considered by the committee in connection with its evaluation of who the committee will recommend as the Company's nominees. Generally, each incumbent director standing for re-election should have and will have, at a minimum, attended at least 75% of board meetings during the past year and attended a majority75% of committee meetings of which he or she is a member. The committee retains the ability to make exceptions to this attendance requirement as individual circumstances warrant.

            All of the nominees for election as directors forat the 20162018 annual meeting were nominatedrecommended for nomination by the committee. The committee did not receive any formal nominations for directors from our common stockholders.

Common Stock Ownership and Retention Guidelines for Directors

            In order to align the interests of board members and stockholders, we require each director is required to develop a significant equity stake in the organization they oversee.company. The Compensation Committee is responsible for monitoring compliance with these stock ownership and retention guidelines.

            Non-employee directors are expected to acquire and hold during their service as board members, shares of our common stock equal in value to at least three times the annual cash retainer for non-employee directors. Non-employee directors have three years from their initial election to the board to meet the target stock ownership guidelines. Once they obtain the requisite number of shares, they are expected to continuously own sufficient shares to meet the guidelines. The stock ownership goal will be determined by using the value of their retainers as of January 1 of each year and the average closing stock price for our common stock over the prior twelve months.

            Shares that count toward meeting the stock ownership guidelines include: (i) shares owned, which include shares obtained upon exercise of options or shares purchased in the open market; (ii) shared ownership, which includes shares owned or held in trust by immediate family; and (iii) restricted stock units. Unexercised stock options do not count toward meeting the stock ownership guidelines. Until such

time as the director reaches his or her target stock ownership, the director will be required to hold 50% of the shares of common stock received upon lapse of the restrictions, and upon exercise of stock options. In the rare instance in which these guidelines would place a severe hardship on a director, the Compensation Committee may decide to allow an alternative stock ownership guideline that reflects the intentions of these overall guidelines and the directors'director's own personal circumstances.

Board Leadership Structure

            The roles of Chairman of the Board and Chief Executive Officer are separate positions within our Company. Mr. Skoglund, our former Chief Executive Officer, serves as our Chairman, and Mr. Eccher serves as our Chief Executive Officer and President. We currently separate the roles of Chairman and Chief Executive Officer in recognition of the differences between the two roles.

            Our board of directors has also created the position of a "lead" independent director, who assists the board of directors in assuring effective corporate governance, and serves as chairman when the board of directors meets in independent director sessions. In 2015, Gerald Palmer served as our lead independent director until his resignation on October 13, 2015 in connection with his reaching the mandatory retirement age. Subsequently,2017, our board of directors designated Mr. Finn to serve as the Company's lead independent director. The Nominating and Corporate Governance Committee reviews this appointment annually and the full board has the opportunity to ratify the committee's selection.

            Our board of directors believes this structure is appropriate for our Company because it allows the Chief Executive Officer to focus on our strategic direction and our day-to-day leadership and performance, and we are also able to leverage the experience and perspective of the Chairman through his guidance to the Chief Executive Officer and his management team as well as to the board of directors. In addition, the lead independent director, who is an independent member of our Board, provides independent leadership within our Board that strengthens its effectiveness and oversight of our business.

Board's Role in Risk Oversight

            Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including general economic risks, credit risks, regulatory risks, audit risks, reputational risks and others, such as the impact of competition. Management is responsible for the day-to-day management of risks the Company faces, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

            While the full board of directors is charged with ultimate oversight responsibility for risk management, various committees of the board and members of management also have responsibilities with respect to our risk oversight. In particular, the AuditRisk Committee plays a large role in monitoring and assessing our financial, legal and organizational risks, and receives regular reports from the management

team's senior risk officer regarding comprehensive organizational risk as well as particular areas of concern. The board's Compensation Committee monitors and assesses the various risks associated with compensation policies, and oversees incentives that encourage a level of risk-taking consistent with our overall strategy. Mr. Bonifas, the Chairman of the ITInformation Technology Steering Committee, will serveserves as our cybersecurity expert. Additionally, our senior credit officer and loan review staff are directly responsible for overseeing our credit risk.

            We believe that establishing the right "tone at the top" and providing for full and open communication between management and the board of directors are essential for effective risk management and oversight. Our executive management meets regularly with our other senior officers to discuss strategy and risks facing the Company. Senior officers attend many of the board meetings, or, if not in attendance, are available to address any questions or concerns raised by the board on risk management-relatedmanagement-

related and any other matters. Additionally, each of our board-level committees provides regular reports to the full board and apprises the board of our comprehensive risk profile and any areas of concern.

Certain Relationships and Related Party Transactions

Statement of Policy Regarding Transactions with Related Persons

            Transactions by us with related parties are subject to regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by us with our affiliates) and the Federal Reserve's Regulation O (which governs certain loans by us to our executive officers, directors and principal shareholders). We have also adopted policies to comply with these regulatory requirements and restrictions, including policies governing the approval of related party transactions. Our Audit Committee reviews and approves all related person transactions between Old Second and related parties in accordance with NASDAQ's rules and regulations. For purposes of this review, related person transactions are those transactions required to be disclosed under applicable SEC regulations.

Alarm Detection Systems, Inc.

            Alarm Detection Systems, Inc. provides certain security services and equipment to the Company. Edward Bonifas is the Executive Vice President of Alarm Detection Systems, Inc. During 2017, we paid Alarm Detection Systems, Inc. approximately $211,528.

Banking Relationships

            Certain of our executive officers and directors have, from time to time, engaged in banking transactions with Old Second National Bank and are expected to continue such relationships in the future. All loans or other extensions of credit made by Old Second National Bank to such individuals were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties and did not involve more than the normal risk of collectability or present other unfavorable features.

Compensation Committee Interlocks and Insider Participation

            For the year ended December 31, 2017, our Compensation Committee consisted of Mr. Ladowicz, Mr. Kane, Mr. Bonifas and Ms. Temple Rocks. No member of our Compensation Committee in 2017 was, during the last fiscal year, an officer or employee of the Company or formerly an officer of the Company. In addition, none has had any relationship with the Company of the type that is required to be disclosed under "Certain Relationships and Related Party Transactions," except Mr. Bonifas as described above. During 2017, none of our executive officers served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of another entity that had one or more executive officers serving as a member of the board of directors or Compensation Committee of the Company.

Stockholder Communications with the Board; Nomination and Proposal Procedures

            Stockholder Communications with Directors.    Stockholders of Old SecondOur stockholders may contact any member of the board of directors, or the board as a whole, through the Corporate Secretary either in person, in writing by mail or by e-mail atto corporatesecretary@oldsecond.com. Any such communication should indicate whether the sender is an Old Second stockholder. The address for submitting communications to the board by mail is 37 South River Street, Aurora, Illinois 60506.60507. Any communication will be forwarded promptly to the board as a group or to the attention of a specified director per your request, except for communications that are primarily commercial in nature or related to an improper or irrelevant topic.

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

            In accordance with our Certificate of Incorporation, a stockholder may otherwise nominate a director for election to the board at an annual meeting of stockholders by giving timely notice in writing to our Corporate Secretary, at the address provided above. To be timely, stockholder nominations must be made in writing, delivered or mailed by first class United States mail, postage prepaid, to our Corporate Secretary not fewer than 60 days nor more than 90 days prior to the anniversary date of the prior year's annual meeting. Each written nomination must set forth (i) the name, age, business address and residential address of the nominee; (ii) the principal occupation or employment of such person; (iii) the class and number of shares of the Company's stock which are beneficially owned by such person on the date of such stockholder notice; and (iv) any other information relating to such person that would be required to be disclosed on Schedule 13D pursuant to Regulation 13D under the Exchange Act and pursuant to Regulation 14A under the Exchange Act. The nominating stockholder must also provide certain information regarding his, her or itself including (a) the name and address, as they appear on the Company's books, of such stockholder and the name and principal business or residential address of any other beneficial stockholders known by such stockholder to support the nominees; and (b) the class and number of shares of Old Second's stock which are beneficially owned by the stockholder on the date of the stockholder notice.

            In the event that a stockholder nominates an individual to serve as a director in accordance with our bylaws and the applicable federal and state laws, the Committee shall evaluate the individual to determine whether the individual satisfies the qualification criteria and determine whether the individual will be nominated by the Committee to serve on the board.

            Other Stockholder Proposals.    To be considered for inclusion in our proxy statement and form of proxy relating to our 20172019 annual meeting of stockholders, the proposing stockholder must file a written notice of the proposal with our Corporate Secretary, at the above address, by December 6, 2016,14, 2018, and must otherwise comply with the rules and regulations set forth by the Securities and Exchange Commission.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

            The following table sets forth certain information with respect to the beneficial ownership of our common stock at December 31, 2015,as of March 30, 2018, by each persondirector or nominee for director, by each named executive officer, by all of our directors, director nominees and executive officers as a group, and each stockholder known by us to be the beneficial owner of more than 5% of theour outstanding common stock,stock.

            Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Old Second Bancorp, Inc., 37 South River Street, Aurora, Illinois 60507. Except as indicated by each director or nominee, by each executive officerthe footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the Summary Compensation Table (which can be found later in this proxy statement),tables below have sole voting and byinvestment power with respect to all directors and executive officersshares of Old Secondour common stock that they beneficially own, subject to applicable community property laws. We have based our calculation of the percentage of beneficial ownership on 29,747,078 shares of common stock outstanding as a group.of March 30, 2018. Beneficial ownership has been determined for this purpose in accordance with Rule 13d-3 under the Securities Exchange Act, of 1934, as amended (the "Exchange Act"), under which a person is deemed to be the beneficial owner of securities if he or she has or shares voting power or investment power with respect to such securities or has the right to acquire beneficial ownership of securities within 60 days of December 31, 2015.March 30, 2018.

SECTIONSECURITY 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

            Section 16(a) of the Exchange Act requires that our directors, executive officers and ten percent stockholders file reports of ownership and changes in ownership with the Securities and Exchange Commission. Such persons are also required to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the Section 16(a) reports furnished to us with respect to 20152017 and written representations from our executive officers and directors, we believe that all Section 16(a) filing requirements applicable to each covered person were satisfied during 2015 resulting in no2017, except for a late filings.Form 4 filed by Patti Temple Rocks on February 21, 2017 that reported four dividend reinvestment transactions that occurred between May 2016 and February 2017.

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

            This Compensation Discussion and Analysis ("CD&A") describesis intended to assist our shareholders in understanding our compensation programs, the philosophy underlying our compensation strategy and policies for 2015 and 2016 as applicablethe fundamental elements of the compensation paid to our "named executive officers" whose 2017 compensation information is provided in the tables following this discussion. Our named executive officers as of December 31, 2017, are noted in the Summary Compensation Table set forth below. This section explainsfollowing table, along with their titles:

Introduction

            Our CD&A is organized as follows:

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Overview and Executive Summary.  Background context and highlights are provided to put the overall disclosure in perspective.



•

Objectives of Our Compensation Program.  The objectives of our executive compensation program are based on our business model and the competitive pressures we face in attracting and retaining executive talent. We structure our executive compensation program to reflect our compensation philosophy and related operating principles.



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Elements of Compensation.  The key components of our compensation program are base salary, annual bonuses and long-term equity awards, with an emphasis on tying executive compensation to performance.



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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.



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Compensation Process.  Our executive compensation programs areprogram is regularly reviewed by the Compensation Committee to ensure that we meet our compensation objectives and to ensure that our compensation program does not pose material risks to the Company.



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Analysis of 20152017 Compensation.  Decisions on 20152017 compensation are analyzed and explained in the context of our compensation objectives and performance.



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Regulatory Considerations.  We consider guidance established by the Federal Deposit Insurance Corporation (the "FDIC") and other bank regulatory agencies, in addition to various other regulatory requirements, in making decisions about executive compensation.

Overview and Executive Summary

            Business Overview.    The Company, through its banking subsidiary, provides 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 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 our fiscal year ending December 31, 2015,2017, we continued our emphasis on sustaining profitability and growth as primary objectives. Specific accomplishments in 20152017 that directly impacted those objectives include:

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Reduction in classified assets by 39.2%;to $31.7 million in 2017 from $37.0 million in 2016;



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Net income of $15.4$23.1 million highlighted by lower credit costs,for 2017 compared to $17.0 million for 2016;



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Commercial loan loss reserve releases and lower insurance costs;growth of 9.7% in 2017 compared to 2016; and



•

Balance sheet growthEfficiency ratio of $16.1 million.61.40% at year-end 2017, improving from 66.78% at year-end 2016.

            Overview of Our Executive Compensation Programs.    It is important to note that theThe Company and the Bank share an executive management team, the members of which are compensated by the Bank rather than the Company. The compensation packages of the named executive officers are determined and approved by our Compensation Committee based upon their performance and roles for both the Company and the Bank.

            The Company and the Bank 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 the business goals of the Company and the Bank 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 the organization's short-term incentive plans, focused on the following goals and accountabilities: our and the Bank's net income growth; specific profit center performance;the Bank's loan growth; asset-credit quality risk;risk reduction and a reduction in classified assets; and cost savings initiatives.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.    We received approximately 94%77% of votes cast in support of our executive compensation program during the 20152017 annual stockholders meeting. We, our board and the Compensation Committee pay careful attention to communications received from stockholders regarding executive compensation, including the non-binding advisory vote. We considered the positive result of the 20152017 advisory vote on executive compensation but not for specific 20152017 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 2015.2017.

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:

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Paypay for performance;



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tie equity compensation to long-term value creation for our stockholders;



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align the financial interests of our named executive officers with those of our stockholders;



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maintain a corporate environment that encourages stability and a long-term focus for both us and our management;

•

maintain a program that:



o

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



o

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



o

does not encourage undue risk-taking; and



•

ensure that management:



o

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



o

conforms its business conduct to the highest ethical standards;



o

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



o

continues to avoid any conflict between its responsibilities to us and each individual's personal interests.

Elements of Compensation

            Our named executive officers' compensation program consists of four main components: (i) base salary, (ii) annual cash bonus,incentive, (iii) equity awards, and (iv) 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 take into account qualitative and quantitative factors, as are 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, incentive equity 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 2015.2017.

            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 order to provide such stability, the Compensation Committee uses salaries to make up the largest portion of the named executives' compensation. 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 Bonus.Incentives.    In 2015,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.

            For 2017, the Compensation Committee adoptedcontinued a non-equity officer incentive compensation plan (the "Bonus"Incentive Plan") for our named executive officers. The BonusUnder the Incentive Plan, established a structure under which Messrs. Eccher, Cheatham, Gottschalk and Pilmer are eligible for cash bonus

payments if our performance during aas soon as practicable at the beginning of each fiscal year, meets or exceeds certainthe committee, in consultation with our Chief Executive Officer, selects key performance goals; provided that, the Compensation Committee ultimately has discretionobjectives, which will be used to determine the amountactual 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 bonuses awarded.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 bonusincentive 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 long-term soundness.

            The Bonus Plan is designed to provide an incentive to achieve corporate financial goals while considering the mitigation of any risks which may affect our overall financial performance. Generally speaking, targets are set so that improvement in a performance metric is necessary in order to receive any or all of the bonus payout with respect to that metric.

            In setting the performance metrics, Mr. Eccher provides recommendations with respect to members of management other than himself to the Compensation Committee. The Compensation Committee then, outside the presence of Mr. Eccher, considers factors applicable to Mr. Eccher's annual bonus.

            Equity Awards.    Our board and theThe Compensation Committee believe inbelieves that senior management equity ownership of our common stock as an effective means to aligneffectively aligns the interests of senior management with those of theour 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. Our current long-termequity incentive plan, (the "Incentive Plan"), which was approved by our stockholders at thein 2014 annual meeting, is intended to promote equity ownership in the Company by the directors and selected officers and employees, focus the management team on increasing value to stockholders, increase their proprietary interest in the success of the Company and encourage them to remain in the employ of the Company or its subsidiaries for a long period of time. The(the "Equity Incentive PlanPlan"), authorizes the issuance of up to 375,000975,000 shares of our common stock, including the granting of qualified stock options, non-qualified stock options, restricted stock, restricted stock units and stock appreciation rights. In February 2016, the Board approved an amendment to increase the number of shares authorized for issuance under the Incentive Plan by 600,000 shares, pending shareholder approval. As a result, following shareholder approval, 975,000 shares will be authorized for issuance under our Incentive Plan.

            We also maintain our prior 2008 Equity Incentive Plan (the "2008 Plan"), which was approved by stockholders at the 2008 annual meeting. After the adoption of the Incentive Plan, no additional awards may be granted under the 2008 Plan. Any shares that become available for reuse under the 2008 Plan, whether due to forfeiture or otherwise, may be delivered under the Incentive Plan. The 2008 Plan authorized the issuance of up to 575,000 shares of our common stock, including 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 whetherachievement as measured by those goals, the respective goals were obtained, the person'sexecutive'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 the prior awards of stock options and restricted stock and takes into account the overall wealth accumulation of a given executive officer through such awards.

            Pursuant to a formal equity compensation policy, all equity grants are finalized in the beginning of each calendar year. This allows for a more complete review of the full prior year when making equity awards as well as coordinating the granting of equity awards to a time when there is less likelihood of there being existing material, non-public information, as the grants will normally be made after the public release of our financial information for the prior year.

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 2015,2017, we provided a matching contribution on elective deferrals to eligible participants in an amount equal to 2%3% of each participant's salary. There is also a profit-sharing portion of the 401(k) plan which provides for an annual discretionary contribution to the retirement account of each employee based in part on our profitability in a given year and on each participant's annual compensation. The contribution amount granted each year is on a discretionary basis and there is no set formula used by the Compensation Committee. For 2015,2017, the Compensation Committee elected not to make a discretionary profit sharing contribution. In February 2016, the Board approved increasing the matching contribution on elective deferrals to eligible participants to an amount equal to 3% of each participants' salary.

            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 3%, provided at least a 6% deferral was met, 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 inwith 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 with respect to the deferrals and our contributions credited to their accounts under the Executive Deferred Compensation Plan.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, Cheatham, Collins 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 and equity 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 Mr.Messrs. Eccher, Adams, Collins and Pilmer with an automobile allowance to enable himthem 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.    In connection withUnder his appointment as President and Chief Executive Officer of the Company,employment agreement, we provide Mr. Eccher entered into an employment agreement effective as of January 1, 2015 which provides forwith certain "double trigger" severance benefits in the event of anhis involuntary termination following a change in control, as well as salary continuation following certain other involuntary terminations. The Company hasWe have also entered into Compensation and Benefits Assurance Agreements with each of the remainingour other named executive officers which also provide for"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."

            Retirement and Release Agreement with Mr. Cheatham.    On March 15, 2017, in connection with his retirement, we entered into a retirement and release agreement with Mr. Cheatham that provides for certain payments and other benefits. For a detailed description of the retirement agreement, see the discussion below under "Potential Payments Upon Termination or Change in Control."

            Acceleration of Equity Awards.    All employees, including theour 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 (i) the equity plan and the respective awards are not assumed by the surviving entity or (ii) the plan and the respective awards are assumed by the surviving entity but the individual is terminated without cause or resigns for good reason. There are no unvested awards under our 2008 Plan. Additionally, under the terms of the Employment Agreement and Assurance Agreements noted above and Employment Agreements discussed above,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.    Under Section 280G of the Internal Revenue Code (the "Code"), an executive may be subject toWe do not provide excise taxestax gross-ups on certain benefits received in relation to aunder any change in control provisions or other agreements. All of the Company. Mr. Eccher'sour named executive officers currently have employment agreement providesagreements or Compensation and Benefits Assurance Agreements that provide that in the event hethe officer would be subject to excise tax for any amounts payable under thesuch agreement, the amounts to be paid shallwill be reduced to such lesser extent that would result in no portion of such amounts being subject to excise taxes. The remaining named executive officers are entitled to a gross up payment in an amount to cover the full cost of any excise tax and their state and federal income and payroll taxes per the terms of their respective Assurance Agreements in the event any portion of their severance benefits, or other payments from the Company, would constitute an excess parachute payment for which excise tax is due.

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 the rules established by Treasury, 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 most of the compensation plans, policies and programs maintained for our employees.

            During 2015,2017, the Compensation Committee convened in February and October.February. Mr. Palmer servedLadowicz, as Chairman of the Compensation Committee, through his retirement from the board of directors in October 2015, at which time he was succeeded by Mr. Ladowicz. Mr. Palmer and Mr. Ladowicz also met, as needed, with internal staff members to compile compensation information for this proxy statement. The Compensation Committee also met in February 20162018 to approve salaries, incentive plans and performance metrics for 2016.2018 as well as approving officer incentives earned during 2017.

            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 local marketplace on an annual basis, the Compensation Committee retained ChaseCompGroup LLC in 20152017 to provide an updated analysis of our executive compensation program. The Compensation Committee expects to retain ChaseCompGroup LLC again in 2016. Additionally, the Compensation Committee has retained Willis Towers Watson in connection with matters related to equity compensation, including the amendment of our Incentive Plan discussed below.

            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 Senior Risk Officer, in completing the risk review with respect to employee compensation plans. A risk review was performed in February 2016.June 2017. 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 for a group of publicly traded companies selected based on their business focus, scope and location of operations, size and other considerations. The Company's peer group of 16 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 include:

Analysis of 20152017 Compensation

            This section describes the decisions made by the Compensation Committee with respect to the compensation for theour named executive officers for 2015 and 2016.2017.

            The following is a brief summary of the Compensation Committee's compensation decisions for 2015 and 2016:

•

for 2015, conservative merit increases in base salary were granted to our named executive officers (other than Mr. Eccher) in keeping with the conservative compensation guidelines established for the organization;



•

for 2015, Messrs. Cheatham, Gottschalk and Pilmer received a merit increase in base salary of 2.5%;



•

$460,409 cash bonus payments were earned or awarded to our named executive officers with respect to 2015 performance; and



•

benefits and perquisites remained substantially similar in 2015 compared to prior years and we expect that will continue through 2016.

            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 2015,2017, determined by the Compensation Committee at the beginning of 2015,2017, are set forth in the Summary Compensation Table below. In determining thesebase salary levels, we generally considered the following:

•

the compensation philosophy and guiding principles described above;



•

the general economic factors in the financial industry beyond our control and the financial performance of the Company compared to our peers;



•

the experience and industry knowledge of our named executive officers and the quality and effectiveness of their leadership;



•

all of the components of executive compensation, including base salary, bonus, stock options,annual cash incentives, equity awards, retirement and death benefits, as well as other benefits and perquisites; and



•

internal pay equity among our executives.

            The following table details the base salary of our named executive officers for the periods presented. In early 2016,2018, the Compensation Committee determined the base salaries for theour named executive directorsofficers for 2016. The base salaries for 2015 and 2016 are as follows:

2018. In determining the base salaries for 2016,2018, we considered the same general factors discussed above including the continuing general slowdown inof the economy and growth ofin our earnings, return on average assets and overall assets.

            For 2017 and 2018, the Compensation Committee increased Mr. Eccher's base salary by 9.1% and 5.0%, respectively, based on overall company and his individual performance. Mr. Pilmer also received merit increases in base salary of 8.9% and 3.0% in 2017 and 2018, respectively, due primarily to commercial loan growth.

            Annual Cash Bonus.Incentive Payments.    Based onAs discussed above, under our namedIncentive 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'officers upon the achievement of the goals for earning a cash bonus established byselected performance objectives. In addition, under the Incentive Plan, the Compensation Committee we awarded cash bonusesalso determines each executive officer's target incentive opportunity, expressed as a percentage of base salary.

            For 2017, the Compensation Committee set forth below:the target potential incentive payment, expressed as a percentage of base salary, as follows:

            In 2015, pursuant to our Bonus Plan, Mr. Eccher was eligible for a maximum annual bonus equal to 62.5% of his salary, or $250,000.            Mr. Cheatham was not eligible for a maximum annual bonus equal to 43.75%an incentive payment under the Incentive Plan in 2017 because of his salary, or $117,163, and Mr. Gottschalk was eligible for a maximum annual bonus equal to 47.5% of his salary, or $117,164, and Mr. Pilmer was eligible for a maximum annual bonus equal to 47.5% of his salary, or $111,209. These maximum annual bonus percentages reflect a maximum measure includedretirement in March 2017.

            For 2017, the Compensation Committee selected five performance objectives, as identified in the bonus allocation factors.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 components designatedperformance objectives chosen by the Compensation Committee and the target percentage of salary that the named executive officers were eligible to earnassigned weight for 2015each objective for 2017 performance were as follows:

            The Company consideredAs noted above, the followingCompensation Committee chose four corporate performance metrics in determination of the annual incentive bonus:objectives for 2017:

•

Company income growth;



•

Loan growth;



•

Asset/credit quality; and



•

Efficiency ratio.

            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.

            The Compensation Committee also evaluated the department and/or personal performance of Mr. Adams, Mr. Gottschalk and Mr. Pilmer in determining awards under the incentive plan.

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

Company Income Growth.Growth

            Each named executive officer participating in the incentive plan had a portion of their annual incentive tied to this performance objective in 2017. The Compensation Committee believes that our growth, as measured by reference to theour net income, of the Company and our bank subsidiary, is an appropriate performance measure

because it focuses on our financial performance, which in turn reflects stockholder value. Each named executive officer has a portion of his bonus tied to this metric.

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

⁽¹⁾

Represents the threshold level of performance necessary to earn any portion of this objective, which will result in 40% of the assigned weight being earned.



⁽²⁾

Represents the target level of performance for this objective, which will result in 100% of the assigned weight being earned.



⁽³⁾

Represents the maximum level of performance for this objective, which will result in 125% of the assigned weight being earned.




Our 20152017 net income was $13.5$23.1 million and, therefore, Messrs.each named executive officer participating in the incentive plan earned 97.7% of the assigned weight for this performance objective.

Loan Growth

            Both Mr. Eccher and CheathamMr. Collins had a loan growth performance objective that was measured based on total loan growth of 10% (target) in 2017 over 2016. The Compensation Committee did not set a threshold or maximum performance level for this objective. Accordingly, growth below the target level would result in no payment for this objective and growth above the target level would not result in payment above the target level. We did not achieve this objective and, therefore, Mr. Eccher and Mr. Collins earned 111.0%0% of the assigned weight for this performance objective.

            Mr. Pilmer had a commercial loan growth performance objective that was measured based on 2017 budgeted growth over 2016 results in our commercial loan portfolio, as detailed in the following table.

2017 Budgeted Commercial Loan Growth		As a % of Budget		Percent of Assigned Weight
10.80%		80%		50%(1)
12.15%		90%		75%
13.50%		100%		100%(2)
14.85%		110%		125%(3)

⁽¹⁾

Represents the threshold level of performance necessary to earn any portion of this component. Our 2015 net incomeobjective, which will result in 50% of the assigned weight being earned.



⁽²⁾

Represents the target level of performance for this objective, which will result in 100% of the assigned weight being earned.



⁽³⁾

Represents the maximum level of performance for this objective, which will result in 125% of the assigned weight being earned.

            We did not achieve this objective at our bank subsidiary was $19.5 million,the threshold performance level and, therefore, Messrs. Gottschalk andMr. Pilmer earned 104.0%0% of the assigned weight for this performance objective.

            Mr. Gottschalk had a consumer loan growth performance objective that was measured based on 2017 budgeted growth over 2016 results in our retail loan portfolio, as detailed in the following table:

2017 Budgeted Retail Loan Growth		As a % of Budget		Percent of Assigned Weight
11.65%		85%		75%(1)
13.70%		100%		100%(2)
15.76%		115%		115%
17.13%		125%		125%(2)

⁽¹⁾

Represents the threshold level of performance necessary to earn any portion of this component

objective, which will result in 75% of the assigned weight being earned.



•⁽²⁾

Represents the target level of performance for this objective, which will result in 100% of the assigned weight being earned.



Department Performance.  With respect⁽³⁾

Represents the maximum level of performance for this objective, which will result in 125% of the assigned weight being earned.




            We did not achieve this objective at the threshold performance level and, therefore, Mr. Gottschalk 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 Messrs. Gottschalk and Pilmer, theour classified assets ratio. The Compensation Committee believes that using the performance of their respective departments is an appropriate incentive to promote the leadership and development of our various lines of business. For 2015, Mr. Gottschalk was evaluated on the performance of our Retail Department, including the growth of core checking accounts, consumer loans, small business accounts and retail fee income with specific goals as follows:

The Compensation Committee determined that Mr. Gottschalk was entitled to 60.0% of the bonus amount attributable to this metric based on the overall performance of our Retail Department in 2015.

For 2015, Mr. Pilmer was evaluated on the performance of our Commercial Department, including total commercial loan growth, the income growth of our Commercial Department, treasury department income, merchant income, and commercial deposits with specific goals as follows:

The Compensation Committee determined that Mr. Pilmer was entitled to approximately 26.6% of the bonus amount attributable to this metric based on the overall performance of our Commercial Department in 2015.

•

Asset/Credit Quality.  With respect to Messrs. Eccher and Pilmer, because classified assets were a difficult issue for the company to navigate the last several years, the Compensation Committee believes incentivizing them tocontinued focus by these executives on our asset/credit quality will further ensure that we are working toward sustainable growth and profitability. As such,

Classified Assets Ratio		Percent of Assigned Weight
14.0%		50%(1)
12.5%		75%
11.5%		100%(2)
10.5%		125%(3)

⁽¹⁾

Represents the Compensation Committee determined that a bonus componentthreshold level of performance necessary to earn any portion of this objective, which will result in 50% of the assigned weight being earned.



⁽²⁾

Represents the target level of performance for them would appropriately be tied to our classified asset ratio. If the ratio remained at 30% or lower, each of Messrs. Eccher and Pilmer would be entitled to 100% of their bonus with respect to this metric. If the ratio exceeded 30%, then no bonus would be earned with respect to our asset/credit quality. Our classified asset ratio was 20.31% at December 31, 2015, thus entitling Messrs. Eccher and Pilmer toobjective, which will result in 100% of the bonus associated withassigned weight being earned.



⁽³⁾

Represents the maximum level of performance for this component.objective, which will result in 125% of the assigned weight being earned.

            At December 31, 2017, our classified assets ratio was 11.69% and, therefore, Mr. Eccher, Mr. Collins and Mr. Pilmer each earned 95.25% of the assigned weight for this performance objective.





•

Efficiency Ratio.Ratio

            The Compensation Committee believes that expense control and efficiency of operations is a goal we mustshould 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, the Compensation Committee deemedMr. Eccher, Mr. Adams, Mr. Collins and Mr. Gottschalk each had a bonus component in 2015portion of their annual incentive tied to cost savings as measured by overallour efficiency ratio was merited. Ifas noted below:

Efficiency Ratio		Percent of Assigned Weight
£ to 66%		50%(1)
£ to 64.5%		75%
£ to 63%		100%(2)
£ to 62%		125%(3)

⁽¹⁾

Represents the Bank'sthreshold level of performance necessary to earn any portion of this objective, which will result in 50% of the assigned weight being earned.



⁽²⁾

Represents the target level of performance for this objective, which will result in 100% of the assigned weight being earned.



⁽³⁾

Represents the maximum level of performance for this objective, which will result in 125% of the assigned weight being earned.




            For 2017, our overall efficiency ratio at year-end was 61.40% and, therefore, Mr. Eccher, Mr. Adams, Mr. Collins and Mr. Gottschalk earned 125% of their applicable assigned weight for this performance objective.

Department and Individual Performance

            With respect to Mr. Adams, Mr. Gottschalk and Mr. Pilmer, the endCompensation Committee also set performance metrics related to their respective departments and/or individual performance to promote the leadership and development of 2015our various lines of business. For 2017, Mr. Adams was less than orevaluated on Finance and Accounting Department strategies and efficiencies, and earned the target award of 5%. Mr. Gottschalk was evaluated on the performance of our Retail Department, including retail deposit growth and retail service charge growth. As neither of these performance metrics experienced growth in 2017, Mr. Gottschalk earned 0% of the applicable assigned weight for this performance objective. Finally, Mr. Pilmer was evaluated on commercial treasury department income growth, commercial merchant income growth, and commercial deposit growth. As these performance measures were not achieved, no payout was made for this component.

Total 2017 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 70%,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 would earn 100%officers' actual cash incentive awards for 2017 are noted in the table below, along with the percentage of the bonus with respect to this component. The overall efficiency ratio at year end was 72.73% so the named executive officers earned 93% of that component.

            Long-Term Stock Incentives.    The Compensation Committee typically acts to award equity grants at the beginning of each year, specifically in the monthsmonth of January and February. In February 2015,2017, the

Compensation Committee approved equity grants for our named executive officers comprised solely of an aggregate of 121,500 restricted stock units subject to three-year cliff vesting, with accelerated vesting in certain circumstances as described in the Potential"Potential Payments upon Termination or Change in ControlControl" section of the CD&A.

            In February 2016 the Compensation Committee approved equity grants for our named executive officers comprised of 53,000 shares of restricted stock units subject to three-year cliff vesting.

            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 20152017 are reported in the Summary Compensation Table below. The benefits offered in 20152017 to the named executive officers are expected to continue for 2016.2018.

Regulatory Considerations

            As a publicly-traded financial institution, we and the Bank 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 Company and 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 Code Section 162(m) that may limit the tax deductibility of certain compensation unless it is considered performance-based; 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. In 2018, new tax regulations will generally eliminate the performance-based compensation exclusion under Section 162(m) of the Code.

Compensation-Related Governance Policies

Insider Trading Policy

            The Company has an insider trading policy that prohibits open market transactions in Company stock during the period beginning five business days prior to the end of the fiscal quarter and terminating two full business days after the public announcement of the Company's current financial results for the most recently ended fiscal quarter or year.

Common Stock Ownership Guidelines

            As described in more detail above, in order to align the interests of board members and stockholders, each director is required to develop a significant equity stake in the organization they oversee. The Compensation Committee is responsible for monitoring compliance with these stock ownership and retention guidelines.

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 proxy statement and in Old Second's Annual Report on Form 10-K for the year ended December 31, 2015.2017.

Submitted by:

Mr. John Ladowicz, Chairman
Mr. Edward Bonifas
Mr. William Kane
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 Chief Executive Officer, Chief Financial Officer and our other twonamed executive officers:

Grants of Plan-Based Awards

Outstanding Equity Awards at Fiscal Year-End

            The following table sets forth information concerning the outstanding equity awards at December 31, 20152017, held by the individuals named in the Summary Compensation Table:

Stock Vested

            The following table provides information concerning stock options exercised and stock awards that vested in 2017 for our named executive officers:

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 Director Deferred Compensation Plan are credited earnings based on our stock price. 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. The information reflected for Messrs. Eccher, Collins and Cheatham in the table above combines their accounts under both the executive plan and the director plan.

Potential Payments Upon Termination or Change in ControlEmployment 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 effective January 1, 2015 (the "Employment Agreement"). Eachto serve as Chief Executive Officer and President of Messrs. Cheatham, Gottschalk and Pilmer previously entered into Compensation and Benefits Assurance Agreements with us (each, an "Assurance Agreement"). The Employment Agreementthe Company and the Assurance Agreements provide for payments and benefits to a terminating executive following a change in control.

            The table below sets forth the estimated amount of compensation payable to each of our named executive officers upon a change in control or the termination of such officer's employment in the event of (1) the officer's disability or death, (2) termination by the Company without cause or by the officer for good reason, in each case other than in connection with a change in control, and (3) termination by the Company without cause or by the officer for good reason, in each case in connection with a change in control. The amounts shown assume the change in control or termination was effective as of December 31, 2015, and that the price of Company stock as of termination was the closing price of $7.84 on

December 31, 2015 (the last trading day of the year). The actual amounts to be paid can be determined only following the change in control or the named executive officer's termination.