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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]
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Preliminary Proxy Statement
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[ ]
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Confidential, for Use of the Commission
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Only (as permitted by Rule
14a-6(e)(2))
[X]
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Definitive Proxy Statement
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[ ]
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Definitive Additional Materials
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[ ]
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Soliciting Material Pursuant to Rule
14a-12
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AUBURN NATIONAL BANCORPORATION, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[ ]
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Fee computed on table below per Exchange Act Rules
14a-6(i)(1)
and
0-11.
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(1)
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Title of each class of securities to which transaction
applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule
0-11
(set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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[ ]
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Fee paid previously with preliminary materials.
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[ ]
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its
filing.
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(1)
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Amount previously paid:
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(2)
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Form, Schedule or Registration Statement
No.:
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April 12, 2019
TO OUR SHAREHOLDERS:
You are
cordially invited to attend the Annual Meeting of Shareholders of Auburn National Bancorporation, Inc., to be held at the AuburnBank Center, 132 North Gay Street, Auburn, Alabama, on May 14, 2019, at 3:00 p.m., Local Time (collectively, with
any adjournments or postponements thereof, the Meeting).
The Notice of Meeting, Proxy Statement, Proxy, and our 2018 Annual
Report to Shareholders are enclosed. We hope you can attend and vote your shares in person. In any case, please complete the enclosed Proxy and return it to us. This action will ensure that your preferences will be expressed on the matters that are
being considered. If you attend the Meeting, you may vote your shares in person even if you have previously returned your Proxy.
Prior to
the meeting, a reception will be held from 2:30 p.m. to 3:00 p.m. in the AuburnBank Center. We hope you can join us!
We thank you for
your support this past year, and we encourage you to review our Annual Report. If you have any questions about the Proxy Statement or the Annual Report, please call or write us.
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Sincerely,
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/s/ Robert W. Dumas
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Robert W. Dumas
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Chairman of the Board,
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President and CEO
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AUBURN NATIONAL BANCORPORATION, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 2019
Notice is hereby given that the 2019 Annual Meeting of Shareholders of Auburn National Bancorporation, Inc. (the Company) will be
held at the AuburnBank Center, 132 North Gay Street, Auburn, Alabama, on Tuesday, May 14, 2019, at 3:00 p.m., Local Time (collectively, with any adjournments or postponements thereof, the Meeting), for the following purposes:
1.
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Election of Directors.
To elect 10 directors to the Board of Directors for
one-year
terms;
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2.
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Advisory Vote on Executive Compensation
. To approve, on a
non-binding,
advisory basis, the compensation of the Companys named executive officers as disclosed in the proxy statement that accompanies this notice;
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3.
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Frequency of Advisory Vote on Executive Compensation.
To recommend, on a
non-binding,
advisory basis, the frequency (every one, two or three years) of shareholder votes to approve, on a
non-binding,
advisory basis, the compensation of the
Companys named executive officers; and
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4.
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Other Business.
To transact such other business as may properly come before the Meeting.
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Only shareholders of record at the close of business on March 15, 2019, are entitled to notice of and to vote at
the Meeting. All shareholders, whether or not they expect to attend the Meeting in person, are requested to complete, date, sign and return the enclosed Proxy in the accompanying envelope.
Also enclosed is a copy of the Companys 2018 Annual Report.
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By Order of the Board of Directors,
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/s/ C. Wayne Alderman
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C. Wayne Alderman
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Secretary
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April 12, 2019
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE TRANSFER AGENT IN THE ENVELOPE
PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON BY WRITTEN BALLOT IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON TUESDAY, MAY 14, 2019
THE PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS
ARE AVAILABLE AT WWW.AUBNPROXY.COM
AND OUR COMPANYS WEBSITE WWW.AUBURNBANK.COM
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
AUBURN NATIONAL
BANCORPORATION, INC.
TO BE HELD MAY 14, 2019
General
This Proxy Statement is being
furnished to the shareholders of Auburn National Bancorporation, Inc. (the Company), a Delaware corporation registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the BHC Act), in
connection with the solicitation of proxies by the Companys Board of Directors from holders of the outstanding shares of the Companys $.01 par value Common Stock (Common Stock) for the 2019 Annual Meeting of Shareholders of
the Company (collectively, with any adjournments or postponements, the Meeting). Unless the context otherwise requires, the term Company includes the Companys subsidiary, AuburnBank (the Bank). The
Companys Common Stock is listed on the Nasdaq Global Market under the symbol AUBN.
The Meeting is being held to
consider and vote upon: (i) the election of 10 directors to the Board of Directors; (ii) on a
non-binding,
advisory basis, the compensation of the Companys named executive officers
(defined below) as disclosed in this Proxy Statement (a
say-on-pay
proposal); (iii) on a
non-binding,
advisory basis,
the frequency (every one, two, or three years) of
say-on-pay
proposals (the
say-on-frequency
proposal); and (iv) such other matters as may properly come before the Meeting.
The Companys Board of Directors knows of no business that will be presented for consideration at the Meeting other than the matters
described in this Proxy Statement.
This Proxy Statement and the Proxy are first being mailed on or about April 12, 2019, to Company
shareholders of record as of the close of business on March 15, 2019 (the Record Date). The Companys 2018 Annual Report (the Annual Report), including financial statements for the fiscal year ended
December 31, 2018, accompanies this Proxy Statement.
Each shareholder is entitled to one vote on each proposal for each share of
Common Stock held as of the Record Date. In determining whether a quorum exists at the Meeting for purposes of all matters to be voted on, all votes for or against, as well as all abstentions (including votes to withhold
authority to vote in certain cases), will be counted as shares present, and a quorum will exist if a majority of the shares outstanding and entitled to vote at the meeting are present. Under Delaware law, the vote required for the election of
directors is a plurality of the votes cast by the shares present, in person or by proxy, at the Meeting, provided a quorum is present. Consequently, with respect to the election of directors, abstentions and broker
non-votes
will not be counted in determining whether the proposal has received the requisite number of votes for approval. The
say-on-pay
proposal and the
say-on-frequency
proposal included on the ballot are only
non-binding,
advisory votes. This means that the Board of Directors will not be required to take any action on these matters regardless of the number of shares voted in favor of or against either proposal. However,
the Board of Directors wants to understand the view of the Companys shareholders on the Companys executive compensation program, so your consideration and vote on these matters will be taken seriously by the Board of Directors. For both
the
say-on-pay
proposal and the
say-on-frequency
proposal, the votes that shareholders
cast for the proposals must exceed the number of votes cast against the proposals to pass. Abstentions and broker
non-votes
will not be counted in determining whether the proposals received the requisite
number of votes for approval. Unless otherwise required by the Companys Certificate of Incorporation or Amended and Restated Bylaws (Bylaws), or by the Delaware General Corporation Law or other applicable law, any other proposal
that is properly brought before the Meeting will require approval by the affirmative vote of a majority of all votes cast at the Meeting with respect to such proposal. With respect to any such proposal, abstentions and broker
non-votes
will not be counted in determining whether such proposal has received the requisite number of votes for approval.
The Companys principal executive offices are located at 100 N. Gay Street, Auburn, Alabama 36830, and its telephone number is (334)
821-9200.
The Company maintains an internet website at
www.auburnbank.com
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Record Date, Solicitation and Revocability of Proxies
The Record Date for the Meeting has been set as the close of business on March 15, 2019. Accordingly, only holders of record of shares of
Common Stock on the Record Date will be entitled to vote at the Meeting. At the close of business on such date, there were approximately 3,581,485 shares of Common Stock issued and outstanding, which were held by approximately 384 shareholders of
record.
Shares of Common Stock represented by a properly executed Proxy, if such Proxy is received in time and is not revoked, will be
voted at the Meeting in accordance with the instructions indicated in such Proxy.
If you properly execute and return your Proxy but do not indicate any voting instructions with respect to one or more matters to be voted upon at the Meeting, or if
your voting instructions are unclear, your shares will be voted in accordance with the recommendation of the Board of Directors as to all such matters. Specifically, your shares will be voted FOR the election of all director nominees, FOR the
advisory approval of the
say-on-pay
proposal, FOR the advisory recommendation of the
say-on-frequency
proposal, as well as in the discretion of the persons named as proxies on all other matters that may properly come before the Meeting.
A shareholder who has given a Proxy may revoke it at any time prior to its exercise at the Meeting by either (i) giving written notice of
revocation to the Companys Secretary, (ii) properly submitting to the Company a duly executed Proxy bearing a later date, or (iii) appearing in person at the Meeting and voting in person by written ballot. All written notices of
revocation or other communications with respect to revocation of Proxies should be addressed as follows: Auburn National Bancorporation, Inc., P.O. Box 3110, Auburn, Alabama 36831-3110, Attention: C. Wayne Alderman, Secretary.
Proxy Solicitation Costs
The cost of
soliciting Proxies for the Meeting will be paid by the Company. The Companys officers may also solicit proxies by telephone or otherwise, but will not receive additional compensation for these activities. In addition to the solicitation of
shareholders of record by mail, telephone, facsimile, or personal contact, the Company may also make arrangements with brokers, dealers, banks, or voting trustees or their nominees who can be identified as record holders of Common Stock to forward
this proxy statement and the 2018 Annual Report to beneficial owners of Common Stock. The Company will reimburse them for the reasonable expenses in connection with these services.
2
PROPOSAL #1 ELECTION OF DIRECTORS
General
Ten persons have been nominated
to serve on the Companys Board of Directors for
one-year
terms of office expiring at the Companys next scheduled annual meeting of shareholders and until their successors have been elected and
qualified. All of the nominees for director are presently directors of the Company.
Proxies cannot be voted for a
greater number of persons than the number of nominees specified herein. Cumulative voting for directors is not permitted. All shares represented by valid Proxies received and not revoked before they are exercised will be voted in the manner
specified therein. If no specification is made, the Proxies will be voted for the election of the ten nominees listed below. In the unanticipated event that any nominee is unable to serve, the persons designated as proxy holders will cast votes for
the remaining nominees and for such other replacements as may be nominated by the Companys Board of Directors.
The nominees have been nominated
by the Companys Board of Directors based on the recommendation of the Nominating and Corporate Governance Committee, and the Board unanimously recommends a vote FOR the election of all ten nominees listed below.
Information about Nominees for Director
The following table sets forth the name and age of each nominee for director, a brief description of his or her principal occupation and
business experience, certain other directorships and how long he or she has been a director for the Company or the Bank. In addition, we have also provided a brief discussion of the specific experience, qualifications, attributes or skills that led
to the Nominating Committees conclusion that the nominee should serve as one of our directors. Except for Robert W. Dumas, President and CEO of the Company and the Bank, none of the nominees is employed by the Company or the Bank or any entity
that is an affiliate of the Company or the Bank.
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Name, Principal Occupation, Business Experience, Age, Directorships and
Qualifications
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Director
Since
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C. Wayne Alderman
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2004
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Dean and Professor Emeritus, former Dean of Enrollment Services and former Dean, College of Business, Auburn University;
former Director of Financial Operations of the Bank from 2000 to 2007; employed by Auburn University since 1979. Dr. Alderman is 68.
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Dr. Alderman, a certified public accountant and former Torchmark Professor of Accounting at Auburn University, brings
strategic planning expertise, public accounting and risk and general management knowledge to the Board. He also brings valuable insight and banking knowledge as a result of his service as the Banks Director of Financial Operations from 2000 to
2007, in addition to serving as a director of the Bank since 1993.
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Terry W. Andrus
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1998
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Retired President and Chief Executive Officer of the East Alabama Medical Center from 1984 to 2018; Director of 340B
Health, Former Director of Blue Cross/Blue Shield of Alabama. Mr. Andrus is 67.
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Mr. Andrus brings executive decision-making, financial expertise, and business-building skills from his past service
as the Chief Executive Officer of a regional hospital. Mr. Andrus also has served as Chairman of the Alabama Hospital Association. He possesses banking knowledge through his service as a director of the Bank since 1991.
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3
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Name, Principal Occupation, Business Experience, Age, Directorships and
Qualifications
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Director
Since
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J. Tutt Barrett
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2010
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Mr. Barrett is a senior partner in the law firm of Dean & Barrett, located in Opelika, Alabama, where he has
worked since 1992. Mr. Barrett is 67.
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Mr. Barrett brings a wealth of legal and risk management skills to the Board. He also provides governance skills and
experience gained through his service on the boards of various charitable organizations. In addition, Mr. Barrett has served on one of the Banks local advisory boards since 1991.
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Robert W. Dumas
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2001
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Chairman of the Board of the Company and the Bank since January 2019; Chief Executive Officer and President of the Company
since 2017 and Bank since 2001; Vice Chairman of the Company and the Bank from 2013 until his election as Chairman; President and Chief Lending Officer of the Bank from 1998 to 2001; employed by the Bank since 1984; and Director of East Alabama
Medical Center. Mr. Dumas is 65.
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Mr. Dumas brings valuable insight and knowledge to the Board as a result of his service as President and CEO of the
Company and the Bank. Mr. Dumas currently serves on the Auburn University Board of Trustees, Auburn Research and Technology Board of Directors, Federal Reserve Bank of Atlanta Board of Directors, and Alabama Bankers Association Board of
Directors and has held numerous other positions in professional leadership, including his service as President and Chairman of the Alabama Bankers Association and a member of the Auburn University Business Advisory Council. Mr. Dumas brings
valuable knowledge from his 40 years of service in the banking industry, including serving as a director of the Bank since 1997.
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William F. Ham, Jr.
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2004
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Former Mayor of City of Auburn from 1998 to 2018; owner of Varsity Enterprises, a company providing coin laundry services,
since 1977. Mr. Ham is 65.
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Mr. Ham brings a wealth of business-building skills to the Board as a result of his experience as an entrepreneur and
as the Mayor of City of Auburn. He also brings valuable knowledge through his service as a director of the Bank since 1993.
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David E. Housel
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2004
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Director of Athletics Emeritus at Auburn University since January 2006; Director of Athletics at Auburn University from
1994 to January 2006; employed by Auburn University since 1970. Mr. Housel is 72.
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Mr. Housel brings valuable business, public relations, and strategic planning skills to the Board through his previous
experience managing a major collegiate athletic program with numerous employees and supervising multi-million dollar budgets. He also possesses banking knowledge through his service as a director of the Bank since 1997.
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4
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Name, Principal Occupation, Business Experience, Age, Directorships and
Qualifications
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Director
Since
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Anne M. May
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1990
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Retired Partner, Machen & McChesney, LLP, from 1983 to 2018. Ms. May is 68.
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Ms. May has valuable risk management skills, public accounting knowledge and expertise in compensation and tax
compliance as a partner and former managing partner for a local accounting firm. She also possesses extensive banking knowledge through her service as a director of the Bank since 1982.
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Amy B. Murphy
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2016
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Director of Graduate and Online Programs in the School of Accountancy at Auburn University where she has worked since 1994.
Ms. Murphy is 60.
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Ms. Murphy, a certified public accountant and instructor in the School of Accountancy at Auburn University, brings
valuable financial, accounting and risk management expertise to the Board. She also possesses valuable strategic planning skills and management knowledge through her role as Director of Graduate and Online Programs. Ms. Murphy was appointed to
the Board of the Company and the Bank in February 2016.
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Edward Lee Spencer, III
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2004
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Director of the Company; former Vice President, Spencer Lumber Company; employed by Spencer Lumber Company from 1973 to
2006. Son of E. L. Spencer, Jr. Edward Lee Spencer, III is 63.
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Mr. Edward Lee Spencer, III brings valuable business insights and knowledge as a result of his previous management
experience with Spencer Lumber Company, a supplier of building and construction materials. He also brings valuable banking knowledge through his service as a director of the Bank since 1991.
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Patricia Wade, M.D.
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2016
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Physician with Pinnacle Cardiovascular Associates, formerly Auburn Cardiovascular, P.C., in Auburn, Alabama since 2011. She
has practiced medicine in the Auburn-Opelika, Alabama area since 1993. Dr. Wade is 63.
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As a physician, Dr. Wade brings a unique perspective to the Board of Directors regarding the needs of the local
medical community. As a private-practice professional, she offers insight into the small business community. Dr. Wade was appointed to the Board of the Company and the Bank in February 2016.
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5
CORPORATE GOVERNANCE
Board Leadership Structure
The Board of
Directors does not have a policy with respect to the separation of the offices of Chairman and the Chief Executive Officer. The Board believes this issue is part of the succession planning process and that it is in the best interests of the Company
and our shareholders to retain the flexibility to combine or separate these functions. At this time, the Board believes there are a number of important advantages of combining the positions of Chairman and Chief Executive Officer, including the
following:
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Mr. Dumas with 35 years of experience at the Bank, including 17 years as President and Chief Executive
Officer and 6 years as Vice Chairman, has the knowledge, expertise, and experience to understand the opportunities and challenges facing the Company, as well as the leadership and management skills to promote and execute our values and strategy,
particularly during the current economic environment;
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Combining the positions allows Mr. Dumas to lead Board discussions regarding our business and strategy,
and provides unified leadership for the Company;
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Combining the positions creates a firm link between management and the Board and promotes the development
and implementation of corporate strategy; and
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Combining the positions allows timely communication with the Board on critical business matters given the
complexity of our business.
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The Board also believes that combining the positions of Chairman and Chief Executive
Officer would not undermine the independence of the Board. The Companys Board is comprised of Mr. Dumas and nine other directors. Eight directors satisfy the Nasdaqs listing standards regarding independence. The Company has
established an independent director committee. Anne M. May is currently the chairperson of the committee and therefore is formally identified as the Lead Independent Director. Our corporate governance guidelines provide that the independent
directors will meet at least semi-annually in executive session without management present.
The Company believes the foregoing structure,
policies and practices, when combined with the Companys other governance policies and procedures, provide appropriate oversight, discussion and evaluation of decisions and direction from the Board of Directors.
Boards Role in Risk Oversight
The
Board of Directors maintains oversight responsibility of the management of the Companys risks. A fundamental part of risk management is not only understanding the risks to the Company, and the actions needed to manage those risks, but also
determining acceptable levels of risk for the Company. The full Board of Directors reviews with management its process for managing enterprise risk.
6
While the Board of Directors maintains the ultimate oversight responsibility for risk management,
certain of the Boards committees have been assigned responsibility for risk management oversight of specific areas. These responsibilities include:
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the Compensation Committee evaluating, with our senior officers, risks posed by our compensation programs
and seeking to limit any unnecessary or excessive risks these programs may pose to us, in order to avoid programs that might encourage such risks. The Compensation Committees role and its relationship with the Board are more fully described
under Committees of the Board Compensation Committee;
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the Audit and Compliance Committee overseeing risks related to our financial statements, our
compliance with legal and regulatory requirements, our financial reporting process and system of internal controls. The Audit and Compliance Committee also evaluates the performance of our independent auditors and our internal auditing department.
The Audit Committee periodically meets privately in separate executive sessions with management, our internal audit department, and the independent auditors. The Audit and Compliance Committees role and its relationship with the Board are more
fully described under Committees of the Board Audit and Compliance Committee; and
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the Strategic Planning Committee reviewing management and adjusting our risk assessment during the
Companys annual strategic planning process. The Strategic Planning Committees role and its relationship with the Board are more fully described under Committees of the Board Strategic Planning Committee.
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While each of these committees is responsible for evaluating certain risks and overseeing the management of these
risks, the entire Board of Directors is informed through committee reports about such risks. In addition, each of the Companys directors serves on the Banks Board of Directors. We believe that Board committees that report at the Bank
level are critical to the Companys risk management processes. These committees include the Directors Loan Committee, Asset/Liability Committee, Information Technology/Information Security (IT/IS) Steering Committee,
Operations and Bank Secrecy Act (BSA) Committee. These committees each play a role in monitoring the following risks to the Bank and Company: credit, liquidity, interest rate, operational, reputational, compliance, and information
technology and security risks.
7
Director Nominating Process
The Nominating and Corporate Governance Committee, in consultation with the Chairman of the Board, monitors existing director qualifications
and periodically examines the composition of the Companys Board of Directors and determines whether the Board of Directors would better serve its purposes with the addition of one or more directors. This assessment includes, among other
relevant factors, in the context of the perceived needs of the Board at that time, issues of experience, reputation, judgment, diversity and skills.
If the Nominating and Corporate Governance Committee determines that adding a new director is advisable or if a vacancy on the Board arises,
the Nominating and Corporate Governance Committee initiates the search, working with other directors, management and, if it deems appropriate or necessary, a search firm retained to assist in the search. The Nominating and Corporate Governance
Committee will consider all appropriate candidates proposed by management, directors and shareholders. Information regarding potential candidates is presented to the Nominating and Corporate Governance Committee, which then evaluates the candidates
based on the needs of the Board of Directors at that time and the criteria listed above. Potential candidates are evaluated according to the same criteria, regardless of whether the candidate was recommended by the Nominating and Corporate
Governance Committee, a shareholder, another director, management or another third party. The Nominating and Corporate Governance Committee then meets to consider the selected candidate(s) and submits the approved candidate(s) to the full Board of
Directors for approval and recommendation to the shareholders. Although neither the Board nor the Nominating and Corporate Governance Committee has a formal policy with regard to the consideration of diversity in identifying director nominees, the
director nomination process is designed to ensure that the Board considers members with diverse backgrounds, including race, ethnicity, gender, education, skills and experience, with a focus on appropriate financial and other expertise relevant to
the companys business, and also considers issues of judgment, conflicts of interest, integrity, ethics and commitment to the goal of maximizing shareholder value. The goal of this process is to assemble a group of directors with deep, varied
experience, sound judgment and commitment to the companys success.
Subject to the requirements of the Companys Certificate of
Incorporation and Amended and Restated Bylaws, as well as any requirements of law or regulation, any shareholder entitled to vote for the election of directors may recommend a director nominee. Advance notice of such proposed nomination must be
received by the Secretary of the Company not less than 21 days nor more than 60 days prior to any meeting of the shareholders called for the election of directors. Nominations should be submitted in writing to the Secretary of the Company specifying
the nominees name and other required information set forth in the Companys Bylaws. In 2018, there were no shareholder recommendations received, and no third party search firms were used to identify director candidates.
Shareholder Communications
Shareholders
who wish to communicate with the Board, or any individual director or group of directors, may do so by sending written communications addressed to: Board of Directors of Auburn National Bancorporation, Inc., c/o C. Wayne Alderman, Secretary, Auburn
National Bancorporation, Inc., 100 N. Gay Street, P.O. Box 3110, Auburn, Alabama, 36831-3110. All information will be compiled by the Secretary of the Company and submitted to the Board of Directors or each applicable director at the next regular
meeting of the Board of Directors.
8
Meetings of the Board of Directors
The Boards of Directors of the Company and the Bank, as well as the committees of the Companys and Banks Boards of Directors,
generally hold meetings in tandem. The Companys Board of Directors held 12 meetings during 2018. All directors attended at least 75% of the aggregate of all meetings of the Companys Board of Directors and each committee on which they
served. All of the Companys directors are encouraged to attend the Companys annual meetings of shareholders. All of the Companys directors attended the 2018 Annual Meeting of Shareholders.
Committees of the Board of Directors
In
accordance with the Companys Corporate Governance Guidelines or Bylaws, the Companys Board has established the committees described below. As of April 12, 2019, the members of each committee are identified below:
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Director Name
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Audit &
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Compensation
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Nominating &
Corporate
Governance
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Independent
Directors
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Executive
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Planning
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Property
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Alderman
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✓
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✓
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✓
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Andrus
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✓(C)
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✓
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✓(C)
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✓
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Barrett
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✓
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Dumas
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✓(C)
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✓(C)
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Ham, Jr.
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✓
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|
|
|
|
Housel
|
|
✓
|
|
✓
|
|
|
|
✓
|
|
|
|
✓
|
|
|
|
|
|
|
|
|
|
|
May
|
|
|
|
✓(C)
|
|
✓
|
|
✓(C)
|
|
✓
|
|
✓
|
|
✓
|
|
|
|
|
|
|
|
|
Murphy
|
|
✓
|
|
|
|
|
|
✓
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spencer, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
✓
|
|
|
|
|
|
|
|
|
Wade, M.D.
|
|
|
|
✓
|
|
|
|
✓
|
|
|
|
|
|
|
(C) Chairman
Audit and Compliance Committee.
The Audit and Compliance Committee (Audit Committee) has the
responsibilities set forth in the Audit Committee Charter, including reviewing the Companys financial statements, evaluating internal accounting controls, reviewing reports of regulatory authorities and determining that all audits and
examinations required by law are performed. It appoints independent auditors, reviews and approves their audit plan and reviews with the independent auditors the results of the audit and managements response thereto. The Audit Committee also
reviews the adequacy of the internal audit budget and personnel, the internal audit plan and schedule, and results of audits performed by the internal audit staff. The Audit Committee is responsible for overseeing the entire audit function and
appraising the effectiveness of internal and external audit efforts. All members of the Audit Committee are independent directors, as defined in the Nasdaq listing standards, and meet the independence criteria set forth in SEC Rule
10A-3(b)(1)
and the financial literacy requirements of the Nasdaq listing standards and SEC regulations. This committee held thirteen meetings in 2018. The Board of Directors has determined that C. Wayne Alderman
and Terry W. Andrus, members of the Audit Committee, are audit committee financial experts, as defined by SEC rules.
9
Compensation Committee.
Pursuant to the Compensation Committee
Charter, the Compensation Committee is authorized to review, recommend and approve the compensation of the Chief Executive Officer, other executive officers and other key employees of the Company and the Bank; to evaluate the Companys
incentive compensation plans, including any equity compensation plans; and to select, interview and make hiring recommendations to the Board for the Chief Executive Officer position. In addition, the Committee approves changes to any Company
personnel policy manuals or handbooks, and annually evaluates director compensation. Although it has not done so, the Compensation Committee may delegate authority to subcommittees consisting of one or more members, as it deems appropriate. Although
it has not done so during 2018, the Compensation Committee may engage its own legal counsel and compensation consultants, funded by the Company. All members of the Compensation Committee are independent directors as defined in the Nasdaq
listing standards. This committee held two meetings in 2018.
Nominating and Corporate Governance
Committee.
The purpose of the Nominating and Corporate Governance Committee is to identify individuals qualified to become members of the Companys Board of Directors and recommend to the Board the director nominees
for the next annual meeting of shareholders. This committee also takes a leadership role in shaping corporate governance policies and practices of the Company. The responsibilities and duties of the Nominating and Corporate Governance Committee are
more fully set out in the Nominating and Corporate Governance Committee Charter. All members of the Nominating and Corporate Governance Committee are independent directors as defined in the Nasdaq listing standards. The Nominating and
Corporate Governance Committee held one meeting in 2018.
Independent Directors Committee.
The Independent
Directors Committee was formed to meet Nasdaq listing standards, which require that the Companys independent directors meet separately from the other directors in regularly scheduled executive sessions at least twice annually, and at such
other times as may be deemed appropriate by the Companys independent directors. Nasdaq listing standards also require that a majority of the Companys directors be independent directors. The Board has affirmatively determined
that all members of the Independent Directors Committee are independent directors. The Companys Board of Directors has appointed Anne M. May to serve as the Boards Lead Independent Director. This committee held two meetings in 2018.
Executive Committee.
The Companys Executive Committee is authorized to act in the absence of the Board of
Directors on certain matters that require Board approval. This committee held one meeting during 2018.
Strategic Planning
Committee.
The Strategic Planning Committee evaluates potential acquisitions and the Companys long range goals and oversees the process and risk assessment used for the officers and directors strategic
planning sessions. This committee held two meeting in 2018.
Property Committee.
The Property Committee
evaluates potential properties for expansion or branching activities. This committee held two meetings during 2018.
The Board of
Directors has adopted a Code of Conduct and Ethics applicable to the Companys directors, officers and employees, including the Companys principal executive officer, principal financial officer, principal accounting officer and other
senior financial officers. The Code of Conduct and Ethics, as well as the charters for the Audit Committee, Compensation Committee, and the Nominating and Corporate Governance Committee, can be found by hovering over the heading About Us
on the Companys website,
www.auburnbank.com
, and then clicking on Investor Relations, and then clicking on Governance Documents. In addition, this information is available in print to any shareholder who
requests it. Written requests for a copy of the Companys Code of Conduct or the Audit Committee, Compensation Committee, or Nominating and Corporate Governance Committee charters may be sent to Auburn National Bancorporation, Inc., 100 N. Gay
Street, Auburn, Alabama 36830, Attention: Marla Kickliter, Senior Vice President of Compliance and Internal Audit. Requests may also be made via telephone by contacting Ms. Kickliter or Laura Carrington, Vice President of Human Resources, at
(334)
821-9200.
As additional corporate governance standards are adopted, they will be disclosed on an ongoing basis on the Companys website.
10
Board Compensation
In 2018, the Chairman received $2,000 and each director received $1,000, respectively, for each Board meeting attended, which will be the same
for 2019. Generally, the Board of Directors of the Company and the Bank meet on the same day, and in such cases, a fee is paid for one board meeting only. In addition, members of the Audit Committee and the Compensation Committee of the Company,
which also serve as the members of the Audit Committee and the Compensation Committee of the Bank, respectively, receive an additional fee of $250 for each committee meeting, while each Chairman of these committees receives $500 per meeting. Members
of the Banks Loan Committee, Asset/Liability Committee and IT/IS Steering Committee receive $250 for each committee meeting, while each Chairman of these committees receives $500 per meeting. The Companys and the Banks directors
may receive
year-end
cash bonuses based upon the Companys financial performance. In 2018, aggregate fees paid to Company and Bank Directors, including cash bonuses, totaled approximately $255,750. The
compensation of directors may be changed from time to time by the Board of Directors upon recommendation of the Compensation Committee, without shareholder approval.
The following table provides information concerning the compensation of the Companys
non-employee
directors for 2018. Compensation paid to Robert W. Dumas for his service as director is reported in the Summary Compensation Table on page 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid in
Cash
|
|
Non-equity
Incentive Plan
Compensation(1)
|
|
Total
|
C. Wayne Alderman
|
|
$
|
34,750
|
|
|
$
|
3,650
|
|
|
$
|
38,400
|
|
Terry W. Andrus
|
|
|
16,750
|
|
|
|
3,650
|
|
|
|
20,400
|
|
J. Tutt Barrett
|
|
|
26,250
|
|
|
|
3,650
|
|
|
|
29,900
|
|
William F. Ham, Jr.
|
|
|
21,750
|
|
|
|
3,650
|
|
|
|
25,400
|
|
David E. Housel
|
|
|
16,000
|
|
|
|
3,650
|
|
|
|
19,650
|
|
Anne M. May
|
|
|
17,250
|
|
|
|
3,650
|
|
|
|
20,900
|
|
Amy B. Murphy
|
|
|
13,000
|
|
|
|
3,650
|
|
|
|
16,650
|
|
Edward Lee Spencer, III
|
|
|
21,000
|
|
|
|
3,650
|
|
|
|
24,650
|
|
Patricia Wade, M.D.
|
|
|
10,500
|
|
|
|
3,650
|
|
|
|
14,150
|
|
(1)
|
Amounts represent cash bonuses paid to the Companys directors.
|
PROPOSAL #2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
The purpose of the Companys compensation policies and procedures is to attract and retain experienced, highly qualified executives to
promote our long-term success and shareholder value. The Board believes our compensation policies and procedures achieve this objective, and therefore recommend shareholders vote FOR the
say-on-pay
proposal through approval of the following resolution:
RESOLVED, that the
compensation paid to the Companys named executive officers, as disclosed in the Companys Proxy Statement for the 2019 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the compensation tables and any related material disclosed in the Proxy Statement, is hereby APPROVED.
This
say-on-pay
proposal gives you as a shareholder the opportunity to endorse or not endorse the compensation we pay to our named executive officers (identified below) by voting
to approve or not approve such compensation as described in this Proxy Statement. This vote is advisory, which means that it is not binding on the Company, the Board or the Compensation Committee. However, the Board and the Compensation Committee
will consider the outcome of the vote when considering future executive compensation arrangements.
11
We have included this proposal in our Proxy Statement pursuant to the requirements of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and Section 14A of the Securities Exchange Act of 1934.
In last years Proxy Statement for the 2018 Annual Meeting, a similar advisory vote was requested by the Company. The results of last
years vote were as follows:
|
|
|
|
|
|
|
|
|
|
|
2018
Vote Count
|
|
|
Percent
|
|
|
|
|
|
|
For
|
|
|
2,035,773
|
|
|
|
99%
|
|
Against
|
|
|
9,980
|
|
|
|
*
|
|
Abstain
|
|
|
15,769
|
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
2,061,522
|
|
|
|
100%
|
|
|
|
|
|
|
The vote on this resolution is not intended to address any specific element of compensation, but rather relates to the overall compensation of
our named executive officers, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. We encourage you to closely review the information we have provided under the caption Executive
Compensation below.
The Board recommends you vote FOR the approval of this Resolution related to the compensation of the
Companys named executive officers.
PROPOSAL #3 FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act provides that shareholders must be given the opportunity to vote, on a
non-binding,
advisory basis,
for their preference as to how frequently the Company should seek future advisory votes on the compensation of the named executive officers as disclosed in accordance with the compensation disclosure rules of the Securities and Exchange Commission.
By voting with respect to this
say-on-frequency
proposal, shareholders may indicate whether they would prefer that we conduct future
say-on-pay
votes once every one, two, or three years. Shareholders also may, if they wish, abstain from casting a vote on this proposal.
Our Board has determined that an annual
say-on-pay
advisory vote will allow
our shareholders to provide timely, direct input on the Companys executive compensation philosophy, policies and practices as disclosed in the proxy statement each year.
The Company recognizes that the shareholders may have different views as to the best approach for the Company, and therefore we look forward to hearing from
our shareholders as to their preferences on the frequency of a
say-on-pay
vote.
This vote is advisory and not binding on the Company or our Board in any way. The Board and the Compensation Committee will take into account the outcome of
the vote, however, when considering the frequency of future
say-on-pay
votes. The Board may decide that it is in the best interests of our shareholders and the Company
to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by our shareholders.
Shareholders may cast a vote on the preferred voting frequency by selecting the option of one year, two years, or three years (or abstain) when voting in
response to the resolution set forth below.
RESOLVED, that the shareholders determine, on an advisory basis, whether the preferred frequency of
an advisory vote on the executive compensation of the Companys named executive officers as set forth in the Companys proxy statement should be every year, every two years, or every three years.
12
The proxy card provides shareholders with the opportunity to choose among four options (holding
the vote every one, two or three years, or abstaining) and, therefore, shareholders will not be voting to approve or disapprove the recommendation of the Board.
We have included this proposal in our Proxy Statement pursuant to the requirements of the Dodd-Frank Act and Section 14A of the
Securities Exchange Act of 1934.
The Board recommends you vote FOR the option of once every year as the preferred frequency of future
advisory votes to approve the compensation of the Companys named executive officers.
EXECUTIVE OFFICERS
Executive officers of the Company and the Bank generally are appointed annually at a meeting of the respective Boards of Directors of the
Company and the Bank in January to serve for
one-year
terms and until successors are chosen and qualified. In addition to Mr. Dumas, whose information is included under Proposal One Election
of Directors, our other executive officers are:
|
|
|
Name
|
|
Information About Executive
Officers
|
|
|
Terrell E. Bishop
|
|
City President, Valley Branch since 2011 and Senior Vice President of the Bank since 1991. Mr. Bishop is
82.
|
|
|
Kris W. Blackmon
|
|
Vice President and Chief Investment Officer of the Bank since 2007; various other positions with the Bank since 2001.
Mr. Blackmon is 48.
|
|
|
James E. Dulaney
|
|
Senior Vice President, Bent Creek Branch (Business Development & Commercial/Consumer Lending) since 2010; formerly
Senior Vice President (Business Development/Marketing) of the Bank since 2004; various other positions with the Bank since 1993. Mr. Dulaney is 60.
|
|
|
David A. Hedges
|
|
Executive Vice President and Chief Financial Officer of the Company and the Bank since December 2015; formerly Senior Vice
President, Controller and Chief Financial Officer of the Company and the Bank since 2014; various other positions with the Company and Bank since 2006. Mr. Hedges is 40.
|
|
|
W. Thomas Johnson
|
|
Senior Vice President (Commercial and Consumer Lending) and Senior Lending Officer of the Bank since 2001; formerly Vice
President (Commercial and Consumer Lending) of the Bank since 1999. Mr. Johnson is 71.
|
|
|
Marla L. Kickliter
|
|
Senior Vice President of Compliance/Internal Audit of the Bank since 2007; formerly Vice President of Compliance/Internal
Audit since 2005; various other positions with the Bank since 2001. Ms. Kickliter is 49.
|
13
|
|
|
Name
|
|
Information About Executive
Officers
|
|
|
Shannon S. ODonnell
|
|
Chief Risk Officer since April 2014 and Senior Vice President of Credit Administration since 2007; formerly Vice President
of Credit Administration since 2001. Ms. ODonnell is 49.
|
|
|
Jerome B. Siegel
|
|
Senior Vice President and Chief Technology Officer since 2008, formerly Vice President and Chief Technology Officer since
2002. Mr. Siegel is 55.
|
|
|
C. Eddie Smith, Jr.
|
|
City President, Opelika Branch and Senior Vice President of the Bank since 2003; Senior Vice President (Commercial and
Consumer Lending) of the Bank since 2001; formerly Vice President (Commercial and Consumer Lending) of the Bank since 1999. Mr. Smith is 62.
|
|
|
Robert L. Smith, Jr.
|
|
Senior Vice President of the Bank and Chief Lending Officer since April 2014; Vice President (Commercial and Consumer
Lending) of the Bank since 2001; Mr. Smith is 50.
|
|
|
W. James Walker, IV
|
|
Senior Vice President and Chief Accounting Officer of the Company and the Bank since December 2015; formerly an audit
partner with a regional public accounting firm since 2006. Mr. Walker is 50.
|
|
|
J. Michael King
|
|
Senior Vice President (Mortgage Lending Division) of the Bank; formerly with Alabama Housing Finance Authority since 1988.
Mr. King is 62.
|
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table provides information concerning the compensation of our named executive officers for 2018 and 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus (1)
|
|
All Other
Compensation (2)
|
|
Total
|
|
|
|
|
|
|
Robert W. Dumas
President and Chief Executive Officer of the Company and Chairman and Director of the Bank and the Company
|
|
2018
2017
|
|
|
$309,920
299,963
|
|
|
|
$71,887
71,887
|
|
|
|
$41,696
41,416
|
|
|
|
$423,503
413,266
|
|
|
|
|
|
|
|
David A. Hedges (3)
Executive Vice President and Chief Financial Officer of the Bank and the Company
|
|
2018
2017
|
|
|
204,970
199,206
|
|
|
|
21,000
21,000
|
|
|
|
13,612
12,898
|
|
|
|
239,582
233,104
|
|
|
|
|
|
|
|
J. Michael King (3) (4) (5)
|
|
2018
|
|
|
225,000
|
|
|
|
100,000
|
|
|
|
7,177
|
|
|
|
332,177
|
|
Senior Vice President of the Bank
|
|
2017
|
|
|
75,000
|
|
|
|
|
|
|
|
2,876
|
|
|
|
77,876
|
|
(1)
|
Represents cash incentive awards paid to the Companys executive officers.
|
(2)
|
For 2018, includes compensation as described under All Other Compensation below.
|
(3)
|
Considered the two most highly compensated executive officers other than the principal executive officer.
|
14
(4)
|
Mr. King and the Bank are parties to an agreement, dated July 24, 2017, providing Mr. King
with a cash retention bonus of $200,000 payable in two equal $100,000 installments. The first installment was paid to Mr. King on the first anniversary of the date of his hire, September 1, 2018. The second installment will be payable to
Mr. King on the second anniversary of his hire, September 1, 2019.
|
(5)
|
For 2017, Mr. Kings compensation reflects less than a full years employment. Mr. King
was hired on September 1, 2017.
|
All Other Compensation
The following table provides information regarding each component of compensation included in the All Other Compensation column for 2018 of
the Summary Compensation Table above.
|
|
|
|
|
|
|
|
|
Name
|
|
Insurance
Premiums
|
|
Company
Contributions
to Retirement and
401(k) Plans
|
|
Total
Compensation
as Director (1)
|
|
Total
|
|
|
|
|
|
Robert W. Dumas
|
|
$7,323
|
|
$6,973
|
|
$27,400
|
|
$41,696
|
|
|
|
|
|
David A. Hedges
|
|
7,463
|
|
6,149
|
|
|
|
13,612
|
|
|
|
|
|
J. Michael King
|
|
7,177
|
|
|
|
|
|
7,177
|
(1) Represents fees earned as an employee director of the Bank and Company, including cash bonuses paid for service as a director.
2018 Grants of Plan-Based Awards
The
Company did not grant any equity or
non-equity
incentive plan awards in 2018.
2018 Option Exercises and Stock
Vested
There were no stock options exercised or stock awards vested in 2018.
Outstanding Equity Awards at December 31, 2018
There were no unexercised options, unvested stock, and equity incentive plan awards for named executive officers outstanding as of
December 31, 2018.
Pension Benefits and Nonqualified Deferred Compensation
The Company does not offer any pension or nonqualified deferred compensation benefits to its named executive officers.
15
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The Company does not have any severance or change in control agreements with any of its named executive officers.
STOCK OWNERSHIP BY CERTAIN PERSONS
The following table sets forth the number and the percentage of shares of the Companys Common Stock that were beneficially owned, as of
the Record Date, by (1) each of our directors and each of our named executive officers, (2) all of our directors and executive officers as a group, and (3) each person known to us to beneficially own more than 5% of any class of our
voting common stock. Other than as set forth below, no persons (as that term is defined by the SEC) are known by the Company to be the beneficial owners of more than 5% of the Common Stock, the Companys only class of voting
securities, as of the Record Date.
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner (1)
|
|
Number of Shares (2)
|
|
Percent of Class
|
All Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
C. Wayne Alderman
|
|
|
5,116
|
|
|
|
*
|
|
|
|
|
Terry W. Andrus (3)
|
|
|
3,395
|
|
|
|
*
|
|
|
|
|
J. Tutt Barrett (4)
|
|
|
6,949
|
|
|
|
*
|
|
|
|
|
Robert W. Dumas
|
|
|
39,119
|
|
|
|
1.09%
|
|
|
|
|
William F. Ham, Jr. (5) (6)
|
|
|
3,995
|
|
|
|
*
|
|
|
|
|
David E. Housel
|
|
|
5,103
|
|
|
|
*
|
|
|
|
|
Anne M. May
|
|
|
33,311
|
|
|
|
*
|
|
|
|
|
Amy B. Murphy
|
|
|
100
|
|
|
|
*
|
|
|
|
|
Edward Lee Spencer, III (7)
|
|
|
9,576
|
|
|
|
*
|
|
|
|
|
Terrell E. Bishop
|
|
|
42,205
|
|
|
|
1.18%
|
|
|
|
|
David A. Hedges
|
|
|
200
|
|
|
|
*
|
|
|
|
|
All Directors and Executive Officers as a Group (20 persons)
|
|
|
162,365
|
|
|
|
4.53%
|
|
|
|
|
Persons known to Company who own more than 5% of
outstanding shares of Company Common
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
E. L. Spencer, Jr. (8) (9) (10)
P. O. Box 3288
Auburn, AL 36831
|
|
|
744,316
|
|
|
|
20.78%
|
|
|
|
|
Emil F. Wright, Jr. (11) (12) (13) (14)
500 Brookwood Drive
Auburn, AL 36830
|
|
|
394,884
|
|
|
|
11.03%
|
|
(1)
|
Unless specified below, each directors and named executive officers business address is c/o
AuburnBank, 100 N. Gay Street, Auburn, Alabama 36830.
|
(2)
|
Information relating to beneficial ownership of Common Stock by directors is based upon information furnished
by each person using beneficial ownership concepts set forth in rules of the SEC under the Securities Exchange Act of 1934, as amended. Under such rules, a person is deemed to be a beneficial owner of a security if that
person has or shares voting power, which includes the power to vote or direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. The person
is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial ownership. Accordingly, directors and named executive officers may be named as beneficial owners of shares as to which they may disclaim
any beneficial interest. Except as indicated in other notes to this table describing special relationships with other persons and specifying shared voting or investment power, directors and named executive officers possess sole voting and investment
power with respect to all shares of Common Stock set forth opposite their names.
|
16
(3)
|
Includes 3,292 shares held by Mr. Andrus that were pledged as collateral for a loan from the Bank.
|
(4)
|
Includes 2,233 shares held by Mr. Barrett that were pledged as collateral for a loan from the Bank.
|
(5)
|
Includes 300 shares held by Mr. Hams wife, as to which Mr. Ham may be deemed to have shared
voting and investment power.
|
(6)
|
Includes 2,532 shares held by Mr. Ham that were pledged as collateral for a loan from the Bank.
|
(7)
|
Includes 3,960 shares held by Spencer LLC, a company in which Mr. Edward Lee Spencer, III is a partner,
as to which Mr. Edward Lee Spencer, III may be deemed to have shared voting and investment power, and as to which Mr. Edward Lee Spencer, III disclaims beneficial ownership of 2,640 shares.
|
(8)
|
Includes 18,950 shares held by Mr. E.L. Spencer, Jr.s wife, as to which Mr. E.L. Spencer, Jr.
may be deemed to have shared voting and investment power.
|
(9)
|
Includes 5,703 shares held by the Edward L. Spencer, Jr. Foundation.
|
(10)
|
Includes 47,882 shares held by the E.L. Spencer, Jr. 2008 Revocable Trust.
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(11)
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Includes 58,978 shares held by Dr. Wrights wife, as to which Dr. Wright may be deemed to have
shared voting and investment power.
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(12)
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Includes 59,500 shares held by Ferrocene, LP whose general partners are Dr. Wright and his wife, and
limited partners include Dr. and Mrs. Wrights two children and their two grandchildren.
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(13)
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Includes 1,000 shares held by Comitas Foundation, Inc.
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(14)
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Information regarding the shares beneficially owned by Dr. Wright was acquired from
Dr. Wrights Form 4, filed October 19, 2017.
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CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Various Company and Bank directors, officers, and their affiliates, including corporations and firms of which they are directors or officers
or in which they and/or their families have an ownership interest, are customers of the Company and the Bank. These persons, corporations, and firms have had transactions in the ordinary course of business with the Company and the Bank, including
borrowings, all of which, in the opinion of management, were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated persons and did not involve more
than the normal risk of collectability or present other unfavorable features. Such transactions are subject to review and approval as and to the extent provided in our Audit Committee Charter. The Company and the Bank expect to have such
transactions, under similar conditions, with their directors, officers, and affiliates in the future.
Regulation O requires loans made to
executive officers and directors to be made on substantially the same terms, including interest rates and collateral, and following credit-underwriting procedures, that are no less stringent than those prevailing at the time for comparable
transactions by the Bank with other persons. Such loans also may not involve more than the normal risk of repayment or present other unfavorable features. Additionally, no event of default may have occurred (that is, such loans are not disclosed as
non-accrual,
past due, restructured, or potential problems). Pursuant to Regulation O, the Board of Directors must review any loan to a director or his or her related interests that has become criticized in order to
determine the impact that such classification has on the directors independence. In addition, the Audit Committee Charter provides that the Audit Committee will review and approve all related-party transactions. This includes a review of the
Companys compliance with applicable banking laws, including, without limitation, those banking laws and regulations concerning loans to insiders.
17
None of the directors or executive officers of the Company, owners of 5% or more of the
Companys outstanding stock, or their immediate family members, had direct or indirect interest in any transaction involving the Company during 2018 or 2017, served as an executive officer of, or owns, or during 2018 or 2017 owned, of record or
beneficially, greater than 10% equity interest in any business or professional entity that has made or received during 2018 or 2017, or proposes to make or receive during 2019, payments to or from the Company or the Bank for property or services in
excess of the lesser of $120,000 or 1% of the Companys average total assets at year end for the last two completed fiscal years.
18
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
The
Company is subject to Section 16(a) of the Securities Exchange Act of 1934, as amended, which requires the Companys officers and directors, and persons who own more than 10% of a registered class of the Companys equity securities,
to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, Directors and
greater-than-10%
shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of Forms 3, 4 and 5 furnished to the
Company during and with respect to 2018, or written representations that no Forms 5 were required, the Company believes that all Section 16(a) filing requirements applicable to the Companys and the Banks officers, directors and
greater-than-10%
beneficial owners were complied with during 2018.
AUDIT COMMITTEE REPORT
Management is responsible for the Companys internal controls and the financial reporting process. The Companys independent
accountants are responsible for performing an independent audit of the Companys consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and to issue a report
thereon. The Audit Committees responsibility is to monitor and oversee these processes. In this context, we have met and held discussions with management and the independent accountants. We have reviewed and discussed the Companys
audited consolidated financial statements for the fiscal year ended December 31, 2018, with management and the independent accountants. This review included discussions with the Companys independent accountants of matters required to be
discussed by PCAOBs AS 1301,
Communications with Audit Committees
.
The Companys independent accountants also provided
to us the written disclosures and the letter required by Ethics and Independence Rule 3526,
Communication with Audit Committees Concerning Independence
, and we discussed with the independent accountants that firms independence.
Based upon our discussions with management and the independent accountants and our review of the representation of management and the report
of the independent accountants to the Audit Committee, we recommended to the Board of Directors that the audited consolidated financial statements be included in the Companys Annual Report on Form
10-K
for the fiscal year ended December 31, 2018.
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Terry W. Andrus
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C. Wayne Alderman
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J. Tutt Barrett
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William F. Ham, Jr.
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David E. Housel
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Amy B. Murphy
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19
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of the Company has approved the appointment of Elliott Davis LLC (Elliott Davis) to serve as the
Companys independent registered public accounting firm for the Company for the year ending December 31, 2018. The Audit Committee considered the background, expertise and experience of the audit team assigned to the Company and various
other relevant matters, including the proposed fees for audit services. A representative of Elliott Davis will be present at the Meeting and will be given the opportunity to make a statement on behalf of the firm, and will also be available to
respond to appropriate questions from shareholders.
Independent Public Accountants Fees
The fees billed by the Companys independent registered public accounting firm relating to the 2018 and 2017 fiscal years were as
follows:
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2018
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2017
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Audit Fees (1)
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$176,500
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$174,600
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Audit-Related Fees (2)
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15,250
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Tax Fees
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All Other Fees
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Total
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191,750
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174,600
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(1)
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Includes the aggregate fees billed by Elliott Davis for professional services rendered for the audit of the
Companys annual financial statements, audit of the Companys internal control over financial reporting, and review of unaudited financial statements included in the Companys Forms
10-Q
filed
during fiscal years 2018 and 2017.
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(2)
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Includes the aggregate fees billed by Elliott Davis for professional services rendered for certain agreed
upon procedures and other audit and attestation reports related to compliance matters during fiscal years 2018 and 2017.
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Audit
Committee Review
The Companys Audit Committee has reviewed the services rendered and the fees billed by Elliott Davis for the
fiscal year ended December 31, 2018. The Audit Committee has determined that the services rendered and the fees billed last year that were not related to the audit of the Companys financial statements are compatible with the independence
of Elliott Davis as the Companys independent accountants.
Audit Committee
Pre-Approval
Policy
Under the Audit Committees Charter and its
pre-approval
policy, the Audit Committee is required
to approve in advance the terms of all audit services provided to the Company as well as all permissible audit related and
non-audit
services to be provided by the independent public accountants. Unless a
service to be provided by the independent public accountants has received approval under the
pre-approval
policy, it will require specific approval by the Audit Committee. The
pre-approval
policy is detailed as to the particular services to be provided, and the Audit Committee is to be informed about each service provided. The approval of
non-audit
services may be performed by the Chairman of the Committee and reported to the full Audit Committee at its next meeting, but may not be performed by the Companys management. The term of any
pre-approval
is twelve months, unless the Audit Committee specifically provides for a different period.
20
The Audit Committee will approve the annual audit engagement terms and fees prior to the
commencement of any audit work other than that necessary for the independent public accountant to prepare the proposed audit approach, scope and fee estimates. In addition to the annual audit work, the independent public accountants may perform
certain other audit related or
non-audit
services that are
pre-approved
by the Audit Committee and are not prohibited by regulatory or other professional requirements.
Engagements for the annual audit and recurring tax return preparation engagements shall be reviewed and approved annually by the Audit Committee based on the agreed upon engagement terms, conditions and fees. The nature and dollar value of services
provided under these engagements shall be reviewed by the Audit Committee to approve changes in terms, conditions and fees resulting from changes in audit scope, Company structure, exchange rates or other items, if any.
In the event audit-related or
non-audit
services that are
pre-approved
under the
pre-approval
policy have an estimated cost in excess of certain dollar thresholds, these services will require specific approval by the Audit
Committee or by the Chairman of the Audit Committee. Any proposed engagement must be approved in advance by the Audit Committee or by the Chairman of the Audit Committee applying the principles set forth in the
pre-approval
policy, prior to the commencement of the engagement.
In determining the approval of services by the independent public accountants, the Audit Committee evaluates each service to determine
whether the performance of such service would: (a) impair the public accountants independence; (b) create a mutual or conflicting interest between the public accountant and the Company; (c) place the public accountant in the
position of auditing his or her own work; (d) result in the public accountant acting as management or an employee of the Company; or (e) place the public accountant in a position of being an advocate for the Company. In no event are
monetary limits the only basis for the
pre-approval
of services.
All of the services provided by
Elliott Davis during 2018 and described above under the caption Audit Fees and Audit-Related Fees were
pre-approved
by the Companys Audit Committee pursuant to SEC Regulation
S-X,
Rule
2-01(c)(7)(i).
AVAILABILITY OF ANNUAL REPORT
Copies of the Companys 2018 Annual Report to Shareholders have been provided to each shareholder. The Annual Report can also be
found by clicking the heading About Us on the Companys website,
www.auburnbank.com
and then clicking on Investor Relations. Upon the written request of any person whose Proxy is solicited by this Proxy Statement,
the Company will furnish to such person without charge (other than for exhibits) a copy of the Annual Report, including financial statements and schedules thereto, as filed with the SEC. Such requests should be directed to Marcia Otwell, Shareholder
Relations, Auburn National Bancorporation, Inc., P.O. Box 3110, Auburn, Alabama, 36831-3110.
21
SHAREHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
Proposals of shareholders intended to be presented at the Companys 2020 Annual Meeting of Shareholders must be received by the Company
on or before December 6, 2019, in order to be eligible for inclusion in the Companys proxy statement and form of proxy for that meeting. In addition, regarding any shareholder proposal that is not submitted for inclusion in the proxy
statement and form of proxy relating to the 2020 Annual Meeting of Shareholders, but is instead sought to be presented directly to the shareholders at the 2020 Annual Meeting, management will be able to vote proxies in its discretion if either
(i) the Company does not receive notice of the proposal before the close of business on February 19, 2020, or (ii) the Company receives notice of the proposal before the close of business on February 19, 2020, and advises shareholders
in the proxy statement for the 2020 Annual Meeting about the nature of the proposal and how management intends to vote on the proposal, unless the shareholder notifies the Company by February 19, 2020, that it intends to deliver a proxy
statement with respect to such proposal and thereafter takes the necessary steps to do so.
OTHER MATTERS
The Company knows of no other matters to be brought before the Meeting. However, if any other proper matter is presented, the persons named in
the enclosed form of Proxy intend to vote the Proxy in accordance with their judgment of what is in the best interest of the Company.
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By Order of the Board of Directors
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/s/ Robert W. Dumas
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Robert W. Dumas
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Chairman of the Board,
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President and Chief Executive Officer
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April 12, 2019
22
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Using a
black ink
pen, mark your votes with an
X
as shown in this
example.
Please do not write outside the designated areas.
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Your vote matters heres how to vote!
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You may vote online or by phone instead of mailing this card.
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Votes submitted electronically must be received by 1:00 a.m., Central Time, on May 14, 2019.
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Online
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Go to
www.investorvote.com/AUBN
or scan the QR code login details are located in the shaded bar below.
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Phone
Call toll free
1-800-652-VOTE
(8683) within the USA, US territories and Canada
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Save paper, time and money!
Sign up for
electronic delivery at www.investorvote.com/AUBN
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Annual Meeting Proxy Card
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q
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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A
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Proposals The Board of Directors recommends a vote
FOR
all the nominees listed,
FOR
Proposal 2, and for a shareholder vote
EVERY ONE YEAR
in Proposal 3.
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1. Election of Directors:
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01 - C. Wayne Alderman
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02 - Terry W. Andrus
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03 - J. Tutt Barrett
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04 - Robert W. Dumas
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05 - William F. Ham, Jr.
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06 - David E. Housel
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07 - Anne M. May
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08 - Amy B. Murphy
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09 Edward Lee Spencer, III
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10 Patricia Wade, M.D.
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☐
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Mark here to vote
FOR
all nominees
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☐
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Mark here to
WITHHOLD
vote from all nominees
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01
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02
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03
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04
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05
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06
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07
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08
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09
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10
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☐
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For All
EXCEPT
- To withhold a vote for one or more
nominees, mark the box to the left and the corresponding numbered box(es) to the right.
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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For
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Against
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Abstain
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Every
1 Year
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Every
2 Years
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Every
3 Years
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Abstain
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2. To approve the compensation of the Companys named executive
officers.
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☐
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☐
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☐
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3. To recommend the frequency of the shareholder votes to approve the
compensation of the Companys named executive officers.
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☐
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☐
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☐
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☐
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4. The Proxies are authorized to vote upon such other business as may properly
come before the Meeting, or any adjournments of the meeting, in accordance with the determination of a majority of the Companys Board of Directors.
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B
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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When shares are held by joint tenants, both should sign. Executors, administrators, trustees, etc. should give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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/
/
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1 U P X
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031A3B
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Small steps make an impact.
Help the environment by consenting to receive electronic
delivery, sign up at www.investorvote.com/AUBN
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q
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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REVOCABLE PROXY AUBURN NATIONAL BANCORPORATION, INC.
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2019 ANNUAL MEETING OF SHAREHOLDERS May 14, 2019
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
KNOW BY ALL
MEN BY THESE PRESENTS, that the undersigned shareholder of Auburn National Bancorporation, Inc., Auburn, Alabama (the Company), hereby revoking any proxy heretofore given, does hereby nominate, constitute, and appoint Robert W. Dumas,
and Terry W. Andrus or either one of them, the true and lawful attorneys and proxies of the undersigned, with full power of substitution, for the undersigned and in the undersigneds name, place, and stead, to vote all of the shares of common
stock of the Company standing in the undersigneds name, on its books on March 15, 2019, and that the undersigned may be entitled to vote at the Annual Meeting of Shareholders to be held at the AuburnBank Center, 132 N Gay Street, Auburn,
Alabama at 3:00 p.m. local time, on Tuesday, May 14, 2019, and at any adjournments thereof (the Meeting), with all the powers the undersigned would possess if personally present as follows:
The proxy will be voted as directed by the undersigned shareholder.
Unless contrary direction is given, this proxy will be voted FOR the election of
the nominees listed in Proposal 1, FOR approval of the compensation of the Companys named executive officers, for a shareholder vote EVERY ONE YEAR to approve the compensation of the Companys named executive officers, and in accordance
with the determination of a majority of the Board of Directors as to any other matters.
The undersigned shareholder may revoke this proxy at any time before it is voted by delivering to the Secretary of the Company either a written revocation of
the proxy or a duly executed proxy bearing a later date, or by appearing at the Meeting and voting in person. The undersigned shareholder hereby acknowledges receipt of the Notice of Annual Meeting and Proxy Statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 14, 2019 FOR AUBURN NATIONAL
BANCORPORATION, INC. THE FOLLOWING MATERIAL IS AVAILABLE AT WWW.AUBNPROXY.COM. *PROXY STATEMENT *ANNUAL REPORT
PLEASE COMPLETE, DATE, SIGN,
AND MAIL THIS PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE
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Change of Address
Please print new address below.
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Meeting Attendance
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Mark box to the right if
you plan to
attend the
Annual Meeting.
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☐
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