Exhibit 10(20)
 

 
2014 River Valley Financial Bank Incentive Plan
 
General Considerations
 
This plan is designed to meet the organization’s strategic initiatives and
interests of its stakeholders (including, shareholders, communities, and
regulators). As such this plan is subject to the direct oversight,
administration, and authority of the Compensation Committee of the Board of
Directors of River Valley Financial Bank and subject to authoritative concerns
of the institution’s primary regulators.
 
 
Plan Parameters
 
This plan covers the calendar year 2014 for the individuals (or positions)
specifically named in the policy.  The payout of monies under this plan will be
paid-out by January 31, 2015 at the rate of 75% of funds earned. The balance of
earnings (25%) will be escrowed in an interest earning account with the Trust
Department of this organization for payout one year from the date of original
disbursement. This “deferral” of funds is in consideration to “clawback”
provisions described subsequently in this policy. All funds are considered
earned at the conclusion of the calendar year. So terminations of employment
during the current calendar year are treated as forfeitures, but any termination
of employment subsequent to year-end will not impact the payout of current or
deferred funds.
 
 
Clawback Provision
 
This plan specifically reserves the right to “recapture” funds disbursed under
this plan for material misstatements of facts, whether individually or
collectively derived, and as deemed inappropriate by the authorities having
governance over this policy. Assuming certain timing parameters and after an
investigation of facts, no less than any monies  deferred under this plan will
be subject to recapture, and depending on the serious of the misstatement, the
organization specifically reserves all rights and remedies to collect previously
disbursed funds. A determination of misappropriated value will be at the Board
of Directors sole discretion for any and all participants of the plan.
 
 
Other Provisions
 
The Board of Directors of River Valley Financial Bank specifically reserves the
right to discontinue, alter, and/or modify the provisions of this plan at its
sole discretion. It has discretionary abilities to supplement or modify awards
under this plan as it deems appropriate.
 
 
Specific Plan Design Features
 
This plan has features unique to the individuals covered by this plan. Because
of varying responsibilities, there are different criteria, as well as,
differences in the value of potential rewards. As an attachment to this plan,
there is a summary sheet illustrating the employees covered by this plan and the
amounts that could be earned under this incentive plan. As well, individual
worksheets will also be attached illustrating the performance factors, the value
of those factors, and potential value of rewards earned under each of the
factors.
 
 
 
 

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Performance Criteria – Goals and Objectives
 
 
·
Bank Performance – For most plan participants a percentage of the annual
incentive will be based overall Bank performances. For the top tier of this plan
75% of the incentive payout is based on overall Bank Performance.

 
 
·
Department/Individual Performance – For all participants a portion of this plan
will be dependent on departmental and/or individual criteria.  An increasing
proportion of the incentive program is subjective to those parameters as those
individuals have less control in the success of the overall bank performance.

 
 
·
Wealth management officers have a defined monetary goal based upon dollar values
of production over and above expectations.

 
 
Performance Standards – Performance Expectations
 
For each performance factor (Overall Bank, Department, and Individual), an
appropriate standard of performance must be established with these three
essential performance points:
 
 
·
Threshold Performance: That level of performance for each factor below which no
award will be given. The budgeted, or expected, level of performance based upon
historical data, and management’s best judgment as to expected performance
during the coming period.

 
 
·
Targeted Performance: The budgeted, or expected, level of performance based upon
historical data, and management’s best judgment as to expected performance
during the coming performance period.

 
 
·
Maximum Expected Performance: That level of performance which based upon
historical performance and management’s judgment would be exceptional or
significantly beyond the expected.

 
Performance standards are typically determined by using the Bank’s performance
history, peer data and management’s judgment of what reasonable levels could be
attained based on previous experience. One the targeted performance is
established; the threshold and maximum payout are typically (but, not absolutes)
as follows. The threshold is typically 80% to 90% of target while the maximum
can be in a range from typically 110% to 140% of target (with the primary
exception being profitability with a variance of 5% either side of the target).
 
Weighting for each performance criteria (overall bank and department/individual)
will be discussed during goal setting sessions and reflect the individual’s
abilities to impact results in a particular factor, as well as representing
areas of specific focus for the executive. Properly assigned factor weights to
the performance criteria assure that the annual incentive plan augments the
annual strategic business plan of the Bank.
 
 
 
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Plan Design Features for CEO & EVP (Tier I)
 
CEO and EVP – Payouts:  Target – 15% Maximum – 30%
 
CEO and EVP Factor Weights – 50% on Total Shareholder Return, the greater of:
25% on Profitability or 25% on Loan Portfolio Growth (having an average risk
weighting of 3.8), and 25% on Asset Quality Targets
 

 
 Individual Weighting (25% Assigned to Asset Quality Targets) -
50% on Non-Performing Number
   
50% on Charge-offs

 
Total Shareholder Return – is defined as price appreciation of the stock value
for the period ended December 31, 2014, plus the annualized dividend rate paid
to common stock shareholders for the year. Due to fact that the Corporation’s
stock is thinly traded and that there can be significant price swings in any one
day of trading, for calculation purposes the 30 day average price as of December
31, 2014 will be used.
 
Loan Portfolio Growth is defined as the net growth of the aggregated loan
portfolio as December 31, 2014 measured against the ending loan portfolio
balance as of December 31, 2013.
 
Non-Performing Assets – is defined as 90 day or longer delinquency and assets
held as Other Real Estate Owned (OREO).  Any loan that is restructured when it
is in a non performing status at the time of restructuring will continue to be
non performing until the loan has performed for six consecutive months according
to the terms of the restructured loan.
 
Goals
 
Total Return – Threshold – 8%, Target – 12%, Maximum – 16%
 
Profitability – Threshold - $4.400 million, Target - $4.625 million, Maximum -
$4.850 million
 
Loan Portfolio Growth – Threshold – 4%, Target – 5%, Maximum –7%
 
Asset Quality Targets:
 
Non-Performing Assets (as a percentage of total assets) – Threshold – 3.6%,
 
Target - 3.0%, Maximum - 2.4%
 
Charge-offs (as percentage of loan portfolio) – Threshold - < .50, Target - <
.40,
 
Maximum - < .30
 
 
 
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Senior Officers (Tier II)
 
We will have payouts of 10% for Target and 20% for Maximums. Factors will be
weighted at 50% for overall Bank objectives as defined as Total Return and
Profitability as illustrated above. The balance of potential earnings will be
based on individual goals that will carry 50% value, but will have individual
factors (up to five criteria) that may have unique factor weights.
 
 
Vice Presidents (Tier III)
 
We will have payouts of 7.50% for Target and 15% for maximums. Factors will be
weighted at 50% for overall Bank objectives as defined as Total Return and
Profitability as illustrated above. The balance of potential earnings will be
based on individual goals that will carry 50% value, but will have individual
factors (up to four criteria) that may have unique factor weights. Those
individual factors may also have subjective criteria that are defined by
meeting, exceeding, far exceeds expectations.
 
 
Internal Audit, Compliance, and Ex. Administrative Assistant (Tier IV)
 
We will have payouts of 5% for Target and 10% for maximums. Factors will be
weighted at 50% for overall Bank objectives as defined as Total Return and
Profitability as illustrated above. The balance of potential earnings will be
based on individual goals that will carry 50% value, but will have individual
factors (up to four criteria) that may have unique factor weights. Those
individual factors may also have subjective criteria that are defined by
meeting, exceeding, far exceeds expectations.
 
 
Loan Officers (Tier V)
 
We will have payouts of 7.50% for Target and 15% for maximums. Factors will be
weighted at 25% for overall Bank objectives as defined as Total Return (6.3% of
goal) and Loan Portfolio Growth (18.8%). The balance of potential earnings will
be based on individual goals that will carry 75% value, but will have individual
factors (up to four criteria) that may have unique factor weights tailored to
desired performance goals.
 
 
Wealth Management Officers (Tier VI)
 
Officers will be afforded specific monetary rewards for achieving collective
targeted minimums and maximums tied to reportable income to general ledger
accounts attributed to wealth management operations. The wealth management
officers will be eligible for an individual reward of $2,000 if the targeted
amount (recorded in 2014) exceeds $300,000. Individual rewards are prorated to a
maximum of $7,500 based upon aggregated income of $400,000.
 
 
Other Considerations:
 
These calculations are based solely of the financials of River Valley Financial
Bank. Any acquisition of assets, other than through “normal” ongoing operations,
will facilitate a need to modify calculations appropriately. Modifications to
this plan will be subject to Board approval.
 
Participants to this plan will need to be identified no later than January 31,
2014. Hires subsequent to this date will not qualify for participation in the
2014 plan.
 
 
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