SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of 1934 (Amendment No. _______)
Filed by the registrant
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Filed by a party other than the registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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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 § 240.14a-11(c) or § 240.14a-12
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Emclaire
Financial Corp
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of filing fee (Check the appropriate
box):
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on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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of securities to which transaction applies:
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or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
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aggregate value of transaction:
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paid previously with preliminary materials.
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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
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paid:
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EMCLAIRE FINANCIAL CORP
612 MAIN STREET
EMLENTON, PENNSYLVANIA 16373
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF EMCLAIRE FINANCIAL
CORP:
Notice is hereby given
that the Annual Meeting of Shareholders of Emclaire Financial Corp (the “Corporation”) will be held at 9:00 a.m., local
time, on Wednesday, April 25, 2018, at the main office of the Farmers National Bank of Emlenton, 612 Main Street, Emlenton, Pennsylvania
16373, for the following purposes:
1. To
elect three (3) directors to serve for three-year terms and until their successors are duly elected and qualified;
2. To
amend the Corporation’s Articles of Incorporation to eliminate the current supermajority voting provision for a merger or
similar transaction in certain circumstances;
3. To
ratify the selection of Crowe Horwath LLP, Certified Public Accountants, as the Corporation’s independent registered public
accounting firm for the fiscal year ending December 31, 2018; and
4. To
transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
Only those shareholders
of record at the close of business on March 1, 2018 will be entitled to notice of and to vote at the Annual Meeting.
A copy of the Corporation’s
Annual Report for the fiscal year ended December 31, 2017 is being mailed with this notice.
To assure that your
shares of common stock will be voted at the meeting, please indicate your voting instructions: (i) over the Internet at www.voteproxy.com,
(ii) by telephone at 1-800-776-9437, or (iii) by completing and signing the enclosed proxy card and returning it promptly in the
enclosed, postage prepaid, addressed envelope. No additional postage is required if mailed in the United States. The giving of
a proxy will not affect your right to vote in person if you attend the meeting.
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By Order of the Board of Directors,
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William C. Marsh
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Chairman, President and Chief Executive Officer
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March 23, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 2018
The proxy materials
for the Annual Meeting of Shareholders of Emclaire Financial Corp, including the Proxy Statement and the Corporation’s Annual
Report for the fiscal year ended December 31, 2017, are available in the Financial Information section on our website at www.emclairefinancial.com.
PROXY STATEMENT FOR THE ANNUAL MEETING
OF
SHAREHOLDERS TO BE HELD APRIL 25, 2018
GENERAL
Introduction, Date, Place and Time of
Meeting
This Proxy Statement
is being furnished for the solicitation by the Board of Directors of Emclaire Financial Corp (the “Corporation”), a
Pennsylvania business corporation and the bank holding company for the Farmers National Bank of Emlenton (the “Bank”),
of proxies to be voted at the Annual Meeting of Shareholders of the Corporation to be held at the main office of the Bank, 612
Main Street, Emlenton, Pennsylvania 16373, on Wednesday, April 25, 2018, at 9:00 a.m. local time, or at any adjournment or postponement
of the annual meeting.
The main office of
the Corporation is located at 612 Main Street, Emlenton, Pennsylvania 16373. The telephone number for the Corporation is (844)
767-2311. All inquiries should be directed to William C. Marsh, Chairman, President and Chief Executive Officer. This Proxy Statement
and the enclosed form of proxy are first being sent to shareholders of the Corporation on March 23, 2018. This Proxy Statement
and the Annual Report for the fiscal year ended December 31, 2017 are available in the Financial Information section on our website
at www.emclairefinancial.com and www.sec.gov.
How to Vote
Shareholders may vote
(i) via the Internet at www.voteproxy.com by following the instructions contained on that website, (ii) by telephone at 1-800-776-9437,
(iii) by completing and signing the enclosed proxy card and returning it promptly in the enclosed, postage prepaid, addressed envelope,
or (iv) appearing at the annual meeting and voting in person. Proxies properly executed and delivered by shareholders (via the
Internet, telephone or by mail as described above) and timely received by us will be voted at the annual meeting in accordance
with the instructions contained therein. If you authorize a proxy to vote your shares over the Internet or by telephone,
you should not return a proxy by mail (unless you are revoking your previous proxy).
Solicitation of Proxies
The proxy solicited
hereby, if properly voted via the Internet or telephone or signed and returned to us and not revoked prior to its use, will be
voted in accordance with your instructions contained in the proxy. If no contrary instructions are given, each proxy signed and
received will be voted in the manner recommended by the Board of Directors as follows: (i) FOR the nominees for director described
herein; (ii) FOR the amendment of the Corporation’s Amended and Restated Articles of Incorporation (the “Articles”)
to eliminate the current supermajority voting provision for a merger or similar transaction in certain circumstances; (iii) FOR
the ratification of Crowe Horwath LLP, as the Corporation’s independent registered public accounting firm for the year ending
December 31, 2018; and (iv) upon the transaction of such other business as may properly come before the meeting, in accordance
with the best judgment of the persons appointed as proxies. Proxies solicited hereby may be exercised only at the annual meeting
and any adjournment of the annual meeting and will not be used for any other meeting. Execution and return of the enclosed proxy
will not affect a shareholder’s right to attend the annual meeting and vote in person.
The cost of preparing,
assembling, mailing and soliciting proxies will be borne by the Corporation. The Corporation has retained Laurel Hill Advisory
Group, LLC, Jericho, New York, a professional proxy solicitation firm, to assist in the solicitation of proxies. Such firm will
receive a fee of $6,000 plus reimbursement for out-of-pocket expenses. In addition to solicitations by mail, directors, officers
and employees of the Corporation may solicit proxies personally or by telephone without additional compensation. In addition to
the use of the mail, certain directors, officers and employees of the Corporation intend to solicit proxies personally, by telephone
and by facsimile. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward proxy
solicitation material to the beneficial owners of stock held of record by these persons, and, upon request, the Corporation will
reimburse them for their reasonable forwarding expenses.
Quorum
The presence of shareholders,
in person or by proxy, entitled to cast at least a majority of the votes which all shareholders are entitled to cast shall constitute
a quorum at the annual meeting. Abstentions, broker non-votes, which are discussed below, and votes withheld from director nominees
count as “shares present” at the meeting for purposes of determining a quorum.
Voting
At the close of business
on March 1, 2018, the voting record date, the Corporation had outstanding 2,271,139 shares of common stock, $1.25 par value per
share. Only shareholders of record, at the close of business on the voting record date, will be entitled to notice of and to vote
at the annual meeting. Each issued and outstanding share of common stock owned on the record date will be entitled to one vote
on each matter to be voted on at the annual meeting, in person or by proxy.
Directors are elected
by a plurality of the votes cast with a quorum present. The three nominees for director receiving the most votes of the common
stock represented in person or by proxy at the annual meeting will be elected as directors. The affirmative vote of 80% of the
outstanding shares of common stock is required to amend our Articles to eliminate the current supermajority voting provision for
a merger or similar transaction in certain circumstances. The affirmative vote of a majority of the total votes present in person
or by proxy is required to ratify the appointment of the independent registered public accounting firm.
With regard to the
election of directors, you may vote in favor of or withhold authority to vote for one or more nominees for director. Votes that
are withheld in connection with the election of one or more nominees for director will not be counted as votes cast for such individuals
and accordingly will have no effect. An abstention may be specified on the proposals to amend our Articles or to ratify the appointment
of Crowe Horwath LLP as our independent registered public accounting firm for 2018. Abstentions will have the same effect as a
vote against these proposals.
Under rules applicable
to broker-dealers, the proposal for the election of directors and to amend our Articles are considered to be non-routine matters.
Brokerage firms may not vote on non-routine matters in their discretion on behalf of their clients if such clients have not furnished
voting instructions. A “broker non-vote” occurs when a broker’s customer does not provide the broker with voting
instructions on non-routine matters for shares owned by the customer but held in the name of the broker. For such non-routine matters,
the broker cannot vote on the proposal and reports the number of such shares as “non-votes.” Because the election of
directors and the proposal to amend our Articles are not considered routine matters, there potentially can be “broker non-votes”
at the annual meeting. Any “broker non-votes” submitted by brokers or nominees in connection with the annual meeting
will have no effect on the vote for the election of directors. However, a broker non-vote on the proposal to amend our Articles
will have the same effect as a vote against the proposal.
Accordingly, because
of the required vote, abstentions, broker-non-votes and unvoted shares on the proposal to amend our Articles of Incorporation will
have the same effect as a vote against the proposal. Please vote your proxy by mail, via the Internet or by telephone as soon as
practicable so your vote can be counted.
Revocation of Proxies and Changing
a Vote
A shareholder who votes
via the Internet (as described above) or telephone (as described above) or returns a proxy via mail may revoke it at any time before
it is voted by: (i) delivering written notice of revocation to Matthew J. Lucco, Secretary, Emclaire Financial Corp, 612 Main Street,
Post Office Box D, Emlenton, Pennsylvania 16373, telephone: (844) 767-2311; or (ii) voting in person at the annual meeting after
giving written notice to the Secretary of the Corporation. Executing and returning a later-dated proxy and giving written notice
thereof to the Secretary of the Corporation or voting again via the Internet or telephone will revoke the earlier voted proxy.
Only the latest dated proxy, ballot or Internet or telephone proxy submitted by a shareholder prior to the annual meeting will
be counted.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 2018
The proxy materials
for the Annual Meeting of Shareholders of Emclaire Financial Corp, including the Proxy Statement and the Corporation’s Annual
Report for the fiscal year ended December 31, 2017, are available in the Financial Information section on our website at www.emclairefinancial.com
or www.sec.gov.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION’S
COMMON STOCK
Persons and groups
owning in excess of 5% of the common stock are required to file certain reports regarding such ownership pursuant to the Securities
Exchange Act of 1934, as amended (the “1934 Act”). The following table sets forth, as of the voting record date, certain
information as to the common stock beneficially owned by (i) persons or groups who own more than 5% of the common stock, (ii) the
directors of the Corporation, (iii) certain executive officers of the Corporation included in the Summary Compensation Table (which
we refer to as “named executive officers”), and (iv) all directors and executive officers of the Corporation as a group.
Other than as noted below, management knows of no person or group that owns more than 5% of the outstanding shares of common stock
at the voting record date.
Name and Address
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Amount and Nature of
Beneficial Ownership(1)
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Percent of Outstanding
Common Stock Beneficially
Owned
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The Banc Funds Company, L.L.C.
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117,207
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(2)
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5.16
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%
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20 North Wacker Drive, Suite 3300
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Chicago, IL 60606
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Directors:
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Robert L. Hunter
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89,792
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(3)
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3.95
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%
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Robert W. Freeman
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43,661
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(4)
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1.92
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%
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William C. Marsh
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40,646
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1.79
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%
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John B. Mason
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39,042
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1.72
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%
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Nicholas D. Varischetti
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34,143
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1.50
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%
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James M. Crooks
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27,832
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(5)
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1.23
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%
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Milissa S. Bauer
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25,375
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(6)
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1.12
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%
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David L. Cox
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18,830
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(7)
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*
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Mark A. Freemer
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17,100
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*
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Deanna K. McCarrier
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16,544
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*
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Named Executive Officers:
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Matthew J. Lucco
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6,627
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*
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Jennifer A. Roxbury
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1,805
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*
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All directors and executive officers as a group (13 persons)
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362,922
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15.98
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%
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*
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Represents less than 1% of the outstanding common stock.
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(1)
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Based upon information provided by the respective beneficial owners and filings with the Securities
and Exchange Commission (“SEC”) made pursuant to the 1934 Act. For purposes of this table, pursuant to rules promulgated
under the 1934 Act, a person or entity is considered to beneficially own shares of common stock if they directly or indirectly
have or share (1) voting power, which includes the power to vote or to direct the voting of the shares, or (2) investment
power, which includes the power to dispose or direct the disposition of the shares. Unless otherwise indicated, a person or entity
has sole voting power and sole investment power with respect to the indicated shares.
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(2)
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According to a Schedule 13G filed jointly by Banc Fund VI L.P. ("BF VI"), an Illinois
Limited Partnership, Banc Fund VII L.P. ("BF VII"), an Illinois Limited Partnership, Banc Fund VIII L.P. ("BF VIII"),
and Illinois Limited Partnership, Banc Fund IX L.P. ("BF IX"), an Illinois limited partnership. The general partner of
BF VI is MidBanc VI L.P. ("MidBanc VI"), whose principal business is to be a general partner of BF VI. The general partner
of BF VII is MidBanc VII L.P. ("MidBanc VII"), whose principal business is to be a general partner of BF VII. The general
partner of BF VIII is MidBanc VIII L.P. ("MidBanc VIII"), whose principal business is to be a general partner of BF VIII.
The general partner of BF IX is MidBanc IX L.P. ("MidBanc IX"), whose principal business is to be a general partner of
BF IX. MidBanc VI, MidBanc VII, MidBanc VIII, and MidBanc IX are Illinois limited partnerships. The general partner of MidBanc
VI, MidBanc VII, MidBanc VIII, and MidBanc IX is The Banc Funds Company, LLC, whose principal business is to be a general partner
of MidBanc VI, MidBanc VII, MidBanc VIII, and MidBanc IX. The Banc Funds Company, LLC (“The Banc Funds”) is an Illinois
corporation whose principal shareholder is Charles J. Moore. Mr. Moore has been the manager of BF VI, BF VII, BF VIII, and BF IX,
since their respective inceptions. As manager, Mr. Moore has voting and dispositive power over the securities held by each of those
entities. As the controlling member of The Banc Funds, Mr. Moore controls The Banc Funds, and therefore each of the partnership
entities directly and indirectly controlled by The Banc Funds.
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(3)
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Of the 89,792 shares beneficially owned by Mr. Hunter, 6,766 shares are owned individually by his
spouse.
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(4)
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Of the 43,661 shares beneficially owned by Mr. Freeman, 1,085 shares are owned individually by
his spouse.
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(5)
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Of the 27,832 shares beneficially owned by Mr. Crooks, 3,273 shares are owned jointly with his
spouse and 635 shares are owned individually by his spouse.
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(6)
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Of the 25,375 shares beneficially owned by Ms. Bauer, 5,399 shares are owned jointly with her spouse
and 9,178 shares are owned individually by her spouse.
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(7)
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Of the 18,830 shares beneficially owned by Mr. Cox, 500 shares are owned individually by his spouse
and 17,330 are owned jointly with his spouse.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
The Corporation’s
common stock is registered pursuant to Section 12(b) of the 1934 Act. The officers and directors of the Corporation and beneficial
owners of greater than 10% of the common stock are required to file reports on Forms 3, 4, and 5 with the SEC disclosing changes
in beneficial ownership of the common stock. Based on the Corporation’s review of such ownership reports, to the Corporation’s
knowledge, no executive officer, director, or 10% beneficial owner of the Corporation failed to file such ownership reports on
a timely basis for the fiscal year ended December 31, 2017, except that Milissa S. Bauer, a director, filed late one Form 4 with
respect to the sale of 20 shares of common stock in December 2017.
INFORMATION WITH RESPECT TO NOMINEES
FOR DIRECTOR,
CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS
Election of Directors
The Corporation has
a classified Board of Directors with staggered three-year terms of office. In a classified board, the directors are generally divided
into separate classes of equal number. The terms of the separate classes expire in successive years. Thus, at each annual meeting
of shareholders, successors to the class of directors whose term then expires are to be elected to hold office for a term of three
years, so that the office of one class will expire each year.
A majority of the members
of our Board of Directors are independent based on an assessment of each member’s qualifications by the Board, taking into
consideration the NASDAQ Stock Market’s requirements for independence. The Board of Directors has concluded that Directors
Bauer, Cox, Crooks, Freeman, Freemer, Hunter, Mason, McCarrier and Varischetti do not have any material relationships with the
Corporation that would impair their independence. There are no arrangements or understandings between the Corporation and any person
pursuant to which such person has been elected a director. Shareholders of the Corporation are not permitted to cumulate their
votes for the election of directors.
Unless otherwise directed,
each proxy executed and returned by a shareholder will be voted for the election of the nominees for director listed below. If
the person named as nominee should be unable or unwilling to stand for election at the time of the annual meeting, the proxies
will nominate and vote for one or more replacement nominees recommended by the Board of Directors. At this time, the Board of Directors
knows of no reason why the nominees listed below may not be able to serve as a director if elected. Any vacancy occurring on the
Board of Directors of the Corporation for any reason may be filled by a majority of the directors then in office until the expiration
of the term of office of the class of directors to which he or she was appointed. Ages are reflected as of December 31, 2017.
Nominees for Director for Three-Year
Terms Expiring in 2021
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Principal Occupation
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Director Since
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Name
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Age
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for Past Five Years
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Bank/Corporation
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Milissa S. Bauer
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55
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Executive Vice President and Chief Financial Officer of Kriebel Companies and President of Kriebel Wells Purchase Co., LLC. As a business executive in the Corporation's market area as well as extensive involvement with various business and civic organizations in the communities that the Corporation operates, Ms. Bauer is well qualified to serve as a director.
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2015/2015
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Deanna K. McCarrier
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54
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Owner, McCarrier, CPAs. Ms. McCarrier is a certified public accountant. As a business owner in the Corporation's market area as well as involvement with various business and civic organizations in the communities that the Corporation operates, Ms. McCarrier is well qualified to serve as a director.
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2016/2016
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Nicholas D. Varischetti
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34
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Attorney with Burns White and Partner in Varischetti Holdings, LP. Based on Mr. Varischetti's legal background, business ownership within the Corporation's market area and involvement with various business and civic organizations, he is well qualified to serve as a director.
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2015/2015
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The Board of Directors
recommends that you vote “FOR” for each of the nominees for director.
Members of the Board of Directors Continuing
in Office
Directors Whose Terms Expire in 2019
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Principal Occupation
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Director Since
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Name
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Age
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for Past Five Years
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Bank/Corporation
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David L. Cox
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67
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Retired, former Chairman, President and Chief Executive Officer of the Bank and the Corporation. Mr. Cox's prior service as Chairman, President and Chief Executive Officer as well as his subsequent years of service as a director provide the Board with valuable knowledge and experience.
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1991/1991
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Mark A. Freemer
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58
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Chief Financial Officer for Varischetti Holdings, LP. Formerly a Partner with Clyde, Ferraro & Co., LLP, Certified Public Accountants. Mr. Freemer is a certified public accountant. As a business executive in the Corporation's market area as well as his many years of service as a director of the Corporation and his public accounting experience, Mr. Freemer is well qualified to serve as a director.
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2004/2004
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William C. Marsh
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51
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Chairman, President and Chief Executive Officer of the Bank and the Corporation. Mr. Marsh is a certified public accountant. Mr. Marsh's positions as Chairman, President and Chief Executive Officer, his extensive involvement with and background in the banking industry and involvement in business and civic organizations in the communities that the Corporation operates, as well as his prior accounting background provide the Board valuable insight regarding the business and operations of the Corporation.
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2006/2006
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Directors Whose Terms Expire in 2020
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Principal Occupation
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Director Since
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Name
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Age
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for Past Five Years
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Bank/Corporation
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James M. Crooks
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65
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Owner, F.L. Crooks Clothing Company, Inc. As a business owner in the Corporation's market area as well as his many years of service as a director of the Corporation, Mr. Crooks is well qualified to serve as a director.
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2004/2004
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Robert W. Freeman
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60
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Partner, Beaconfield Consulting Group, LLC. Formerly, Vice President of Information Technology for Phillip Pet Food & Supplies from 2011 to 2013. Based on Mr. Freeman's past employment experiences and financial and technological background, he is well qualified to serve as a director.
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2015/2015
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Robert L. Hunter
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76
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Retired Chairman of: Hunter Truck Sales & Service, Inc.; Hunter Leasing, Inc.; Hunter Keystone Peterbilt, LLP; Hunter Erie Truck Sales LLP; Hunter Jersey Peterbilt, LLC; Hunter Services Inc. As a business owner in the Corporation's market area as well as his many years of service as a director of the Corporation, Mr. Hunter is well qualified to serve as a director.
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1974/1989
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John B. Mason
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69
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President, H. B. Beels & Son, Inc. As a former business owner in the Corporation's market area as well as his many years of service as a director of the Corporation, Mr. Mason is well qualified to serve as a director.
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1985/1989
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Board Leadership Structure and Risk
Oversight
Board
Leadership Structure.
Since the Corporation was founded in 1989, the Corporation has employed a traditional board
leadership model, with our Chief Executive Officer also serving as Chairman of our Board of Directors. We believe this
traditional leadership structure benefits the Corporation. A combined Chairman and Chief Executive Officer role helps provide
strong, unified leadership for our management team and Board of Directors. William C. Marsh has served as our Chairman and
Chief Executive Officer since January 1, 2009. Prior to becoming Chairman and Chief Executive Officer, Mr. Marsh served as
Executive Vice President and Chief Financial Officer of the Corporation beginning in 2006. Our Board of Directors is
currently comprised of ten directors of which nine, or a majority, are independent directors. The board has three standing
committees with separate chairs—the audit, executive and human resources committees. The audit committee and human
resources committee are led by independent directors and our executive committee is comprised of a majority of independent
directors. We do not have a lead independent director position. The Board has reviewed our Corporation’s current Board
leadership structure in light of the composition of the Board, the Corporation’s size, the nature of the
Corporation’s business, the regulatory framework under which the Corporation operates, the
Corporation’s shareholder base, the Corporation’s peer group and other relevant factors, and has determined that
a combined Chairman and Chief Executive Officer position, is currently the most appropriate Board leadership structure for
our Corporation. The Board noted the following factors in reaching its determination:
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The Board acts efficiently and effectively under its current structure, where the Chief Executive
Officer also acts as Chairman.
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·
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A combined Chairman and Chief Executive Officer is in the best position to be aware of major issues
facing the Corporation on a day-to-day and long-term basis, and is in the best position to identify key risks and developments
facing the Corporation to be brought to the Board’s attention.
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·
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A combined Chairman and Chief Executive Officer position eliminates the potential for confusion
and duplication of efforts, including among employees.
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A combined Chairman and Chief Executive Officer position eliminates the potential for confusion
as to who leads the Corporation, providing the Corporation with a single public “face” in dealing with shareholders,
employees, regulators, analysts and other constituencies.
|
Risk Oversight.
The Board’s role in the Corporation’s risk oversight process includes receiving regular reports from members of senior
management on areas of material risk to the Corporation, including operational, financial, legal and regulatory, and strategic
and reputational risks. The full Board (or the appropriate committee in the case of risks that are under the purview of a particular
committee) receives these reports from the appropriate “risk owner” within the organization to enable it to understand
our risk identification, risk management and risk mitigation strategies. When a committee receives the report, the Chairman of
the relevant committee reports on the discussion to the full Board during the next Board meeting. This enables the Board and its
committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.
Directors Attendance at Annual Meetings
Although we do not
have a formal policy regarding attendance by members of the Board of Directors at annual meetings of shareholders, all directors
are expected to attend the Corporation’s annual meeting of shareholders. Seven of the ten directors of the Corporation at
the time attended the Corporation’s 2017 annual meeting of shareholders.
Committees and Meetings of the Corporation
and the Bank
During 2017, the Board
of Directors of the Corporation held seven regular meetings and five special meetings, and the Board of Directors of the Bank held
13 regular meetings and two special meetings. Each of the directors attended at least seventy-five percent (75%) of the combined
total number of meetings of the Corporation’s Board of Directors and of the committees on which they serve.
Membership on Certain
Board Committees.
The Board of Directors of the Corporation has established an audit committee, executive committee, human
resources committee and a nominating and corporate governance committee. The human resources committee functions as the Corporation’s
compensation committee.
The following table
sets forth the membership of such committees as of the date of this proxy statement.
|
|
|
|
|
|
|
|
Nominating
|
|
|
|
|
|
|
Human
|
|
and Corporate
|
Directors
|
|
Audit
|
|
Executive
|
|
Resources
|
|
Governance
|
Milissa S. Bauer
|
|
*
|
|
|
|
|
|
|
David L. Cox
|
|
|
|
*
|
|
|
|
*
|
James M. Crooks
|
|
*
|
|
|
|
|
|
|
Robert W. Freeman
|
|
|
|
*
|
|
|
|
|
Mark A. Freemer
|
|
**
|
|
*
|
|
*
|
|
*
|
Robert L. Hunter
|
|
*
|
|
*
|
|
**
|
|
**
|
William C. Marsh
|
|
|
|
**
|
|
|
|
|
John B. Mason
|
|
|
|
*
|
|
*
|
|
*
|
Deanna C. McCarrier
|
|
*
|
|
|
|
*
|
|
|
Nicholas D. Varischetti
|
|
*
|
|
|
|
*
|
|
|
Audit Committee.
The audit committee of the Board is composed of six members and operates under a written charter adopted by the Board of
Directors. During 2017, the audit committee consisted of Directors Freemer (Chairman), Bauer, Crooks, Hunter, McCarrier and Varischetti.
The Board of Directors has identified Mark A. Freemer as an audit committee financial expert. The audit committee met four times
in 2017. The Board of Directors has determined that each committee member is “independent,” as defined by Corporation
policy, SEC rules and the NASDAQ listing standards.
The audit committee
charter adopted by the Board sets out the responsibilities, authority and specific duties of the audit committee. The full text
of the audit committee charter is available on our website at www.emclairefinancial.com. Pursuant to the charter, the audit committee
has the following responsibilities:
|
·
|
To monitor the preparation of quarterly and annual financial reports;
|
|
·
|
To review the adequacy of internal control systems and financial reporting procedures with management
and independent auditors; and
|
|
·
|
To review the general scope of the annual audit and the fees charged by the independent auditors.
|
Human Resources
Committee
.
The human resources committee of the Board functions as the compensation committee and has the responsibility
to evaluate the performance of and determine the compensation for the Chairman of the Board, President and Chief Executive Officer
of the Corporation, to approve the compensation structure for senior management and the members of the Board of Directors, to review
the Corporation’s salary administration program, and to review and administer the Corporation’s bonus plans, including
the management incentive program.
The human resources
committee, which is currently composed entirely of independent directors, administers the Corporation’s executive compensation
program. In 2017, the members of the human resources committee consisted of Directors Hunter (Chairman), Freemer, Mason, McCarrier
and Varischetti. All of the members meet all of the independence requirements under the listing requirements of the NASDAQ Stock
Market.
The human resources
committee is committed to high standards of corporate governance. The human resources committee’s charter reflects the foregoing
responsibilities and commitment, and the human resources committee and the Board will periodically review and revise the charter,
as appropriate. The full text of the human resources committee charter is available on our website at www.emclairefinancial.com.
The human resources committee’s membership is determined by the Board. There were three meetings of the full human resources
committee in 2017.
The human resources
committee has exercised exclusive authority over the compensation paid to the Corporation’s Chairman of the Board, President
and Chief Executive Officer and reviews and approves salary increases and bonuses for the Corporation’s other executive officers
as prepared and submitted to the human resources committee by the Chairman of the Board, President and Chief Executive Officer.
Although the human resources committee does not delegate any of its authority for determining executive compensation, the human
resources committee has the authority under its charter to engage the services of outside advisors, experts and others to assist
the human resources committee.
Nominating and
Corporate Governance Committee.
The Corporation has established a nominating and corporate governance committee to identify
and recommend to the full Board of Directors the selection of qualified individuals to serve as Board members, recommend to the
full Board director nominees for each annual meeting of shareholders, review existing corporate governance documents, establish
corporate governance principles applicable to the Corporation and to govern the conduct of the Board and its members, and review
nominations for director submitted by shareholders. During 2017, the members of this committee were Messrs. Hunter (Chairman),
Cox, Freemer and Mason. Each of these persons is independent within the meaning of the rules of the NASDAQ Stock Market. The nominating
and corporate governance committee operates pursuant to a written charter, which can be viewed on our website at
www.emclairefinancial.com
.
The nominating and corporate governance committee met one time in connection with the nominations for the election of directors
at the annual meeting.
The nominating and
corporate governance committee considers candidates for director suggested by its members and other directors, as well as management
and shareholders. The nominating and corporate governance committee also may solicit prospective nominees. The committee will also
consider whether to nominate any person nominated pursuant to the provision of our bylaws relating to shareholder nominations.
The nominating and corporate governance committee has the authority and ability to retain a search firm to identify or evaluate
potential nominees if it so desires.
The charter of the
nominating and corporate governance committee sets forth certain criteria the committee may consider when recommending individuals
for nomination as director including: (a) ensuring that the Board of Directors, as a whole, is diverse and consists of individuals
with various and relevant career experience, relevant technical skills, industry knowledge and experience, financial expertise
(including expertise that could qualify a director as a “financial expert,” as that term is defined by the rules of
the SEC), local or community ties and (b) minimum individual qualifications, including strength of character, mature judgment,
familiarity with our business and industry, independence of thought and an ability to work collegially. The committee also may
consider the extent to which the candidate would fill a present need on the Board of Directors.
Once the nominating
and corporate governance committee has identified a prospective nominee, the committee makes an initial determination as to whether
to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the committee
with the recommendation of the prospective candidate, as well as the committee’s own knowledge of the prospective candidate,
which may be supplemented by inquiries to the person making the recommendation or others.
Section 10.1 of our
bylaws governs shareholder nominations for election to the Board of Directors and requires all nominations for election to the
Board of Directors by a shareholder to be made pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a shareholders’ notice must be received by the Corporation not later than 60 days prior to the annual meeting called
for the election of directors. Each written notice of a shareholder nomination must set forth certain information specified in
the bylaws. Any nomination of any person not made in compliance with the procedures set forth in the bylaws shall be disregarded
by the presiding officer of the meeting and any votes for such nominee shall be disregarded.
Executive Officers Who are Not Directors
Set forth below is
information with respect to the principal occupations during at least the last five years for the current executive officers of
the Corporation who do not serve as directors. All executive officers of the Corporation are elected annually by the Board of Directors
and serve at the discretion of the Board. There are no arrangements or understandings between the executive officers and the Corporation
and any person pursuant to which such persons have been selected officers. Ages are reflected as of December 31, 2017.
Jennifer A. Roxbury,
age 48.
Ms. Roxbury is Assistant Secretary of the Corporation and Senior Vice President and Chief Operating Officer of the
Bank. Ms. Roxbury was appointed Assistant Secretary in 2016 and has served in her role at the Bank since October 2011.
Matthew J. Lucco,
age 38.
Mr. Lucco is Secretary of the Corporation and Senior Vice President and Chief Risk and Strategy Officer of the Bank,
positons he has held since July 2017. Previously, Mr. Lucco served as Treasurer of the Corporation from August 2010 until July
2017 and as Senior Vice President and Chief Financial Officer of the Bank from August 2010 until July 2017 and as Chief Credit
Officer of the Bank from January 2016 until July 2017.
Amanda L. Engles,
Age 39
. Ms. Engles is Treasurer of the Corporation and Senior Vice President and Chief Financial Officer of the Bank, positions
she has held since July 2017. Ms. Engles previously served as Principal Accounting Officer and Secretary of the Corporation as
well as Vice President and Controller of the Bank since October 2007. She previously served as Treasurer of the Corporation from
October 2007 through August 2010.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table
sets forth a summary of certain information concerning the compensation awarded to or paid by the Corporation or its subsidiaries
for services rendered in all capacities during the past two years to our principal executive officer as well as our two other highest
compensated executive officers in 2017 (who we refer to as “named executive officers”).
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Other
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
(1)
|
|
|
Awards
(2)
|
|
|
Compensation
(3)
|
|
|
Total
|
|
William C. Marsh, Chairman,
|
|
2017
|
|
$
|
345,697
|
|
|
$
|
131,711
|
|
|
$
|
125,480
|
|
|
$
|
44,714
|
|
|
$
|
647,602
|
|
President and Chief Executive Officer
|
|
2016
|
|
$
|
319,853
|
|
|
$
|
98,275
|
|
|
$
|
93,590
|
|
|
$
|
43,997
|
|
|
$
|
555,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer A. Roxbury, Senior Vice President
|
|
2017
|
|
$
|
163,200
|
|
|
$
|
41,453
|
|
|
$
|
47,055
|
|
|
$
|
10,145
|
|
|
$
|
261,853
|
|
and Chief Operating Officer
|
|
2016
|
|
$
|
151,410
|
|
|
$
|
31,014
|
|
|
$
|
13,370
|
|
|
$
|
8,586
|
|
|
$
|
204,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Lucco, Senior Vice President,
|
|
2017
|
|
$
|
163,200
|
|
|
$
|
41,453
|
|
|
$
|
23,528
|
|
|
$
|
10,533
|
|
|
$
|
238,713
|
|
Secretary and Chief Risk & Strategy Officer
|
|
2016
|
|
$
|
151,455
|
|
|
$
|
31,023
|
|
|
$
|
20,055
|
|
|
$
|
10,344
|
|
|
$
|
212,877
|
|
|
(1)
|
Bonus amounts presented for 2017 were paid in 2018 for 2017 performance pursuant to the Corporation’s
Incentive Compensation Plan.
|
|
(2)
|
Reflects the grant date fair value, computed in accordance with FASB ASC Topic 718, for stock awards
granted in 2017 and 2016 pursuant to the 2007 Stock Incentive Plan and Trust adopted in 2007 and the 2014 Stock Incentive Plan
adopted in 2014. For a description of the assumptions used for purposes of determining grant date fair value, see Note 14 to the
Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
|
|
(3)
|
Includes (i) director’s fees from the Corporation and the Bank totaling $27,000 for 2017
and 2016 for Mr. Marsh and (ii) matching amounts and discretionary profit sharing contributions made under the Corporation’s
401(k) plan for all the named executive officers.
|
Outside Compensation Consultants
Periodically, the Corporation
retains a compensation consulting firm to review its compensation structure. During 2016 and 2017, the Corporation retained L.R.
Webber Associates, Inc. (“L.R. Webber”) to assist the human resources committee in setting compensation levels. The
human resources committee considered L.R. Webber to be independent and concluded that the consultant had no conflicts of interest
with respect to its engagement. The consultant reviewed the Corporation’s compensation practices and compared them with compensation
practices of institutions similar in size and performance to the Corporation. The human resources committee considered L.R. Webber’s
review of compensation levels in establishing the compensation amounts of the Corporation’s President and Chief Executive
Officer and Board of Directors.
Pension Plan
The Bank maintains
a defined benefit pension plan for all eligible employees. An employee becomes vested in the plan after three years. Upon retirement
at age 65, a terminated participant is entitled to receive a monthly benefit. Prior to a 2002 amendment to the plan, the benefit
formula was 1.1% of average monthly compensation plus 0.4% of average monthly compensation in excess of $675 multiplied by years
of service. In 2002, the plan was amended to change the benefit structure to a cash balance formula under which the benefit payable
is the actuarial equivalent of the hypothetical account balance at normal retirement age. However, the benefits already accrued
by the employees prior to the amendment were not reduced. In addition, the prior benefit formula continued through December 31,
2012, as a minimum benefit. The Bank amended the defined benefit pension plan to freeze the benefits under the plan effective as
of April 30, 2013, with no additional benefits to accrue after such date.
401(k) Plan
The Corporation maintains
a defined contribution 401(k) plan. Employees are eligible to participate by providing tax-deferred contributions up to 20% of
qualified compensation. Employee contributions are vested at all times. The Corporation provides a matching contribution of up
to 4% of the participant’s salary. The Corporation may also make, at the sole discretion of its Board of Directors, a profit
sharing contribution.
Supplemental Retirement Agreements
In November 2015, the
Bank entered into amended and restated supplemental retirement agreements (“Supplemental Agreements”) with Messrs.
Marsh and Lucco and Ms. Roxbury, which amended prior supplemental agreements originally entered into with Mr. Marsh in October
2002 and with Mr. Lucco and Ms. Roxbury in August 2012. The Supplemental Agreements are non-qualified defined benefit plans and
are unfunded. The Supplemental Agreements have no assets, and the benefits payable under the Supplemental Agreements are not secured.
The Supplemental Agreement participants are general creditors of the Bank in regards to their vested Supplemental Agreement benefits.
The Supplemental Agreements provide for retirement benefits upon reaching age 65, and the participants become vested in their benefits
up until their normal retirement age. Upon attaining normal retirement age, Messrs. Marsh and Lucco and Ms. Roxbury would be entitled
to $1.6 million, $1.0 million and $900,000, respectively, over a 20-year period under their Supplemental Agreements.
Each of the Supplemental
Agreements provides that in the event of a change in control of the Corporation or the Bank (as defined in the agreements), the
executive will receive his supplemental retirement benefits in a lump sum payment if the change in control occurs before the executive’s
employment is terminated and before the executive reaches normal retirement age. If a change in control had occurred on December
31, 2017, Messrs. Marsh and Lucco and Ms. Roxbury would have been entitled to lump sum payments of $532,482, $185,712 and $261,264,
respectively. Such payments could be limited if they are deemed “parachute payments” under Section 280G of the Internal
Revenue Code, as amended.
The Supplemental Agreements
prohibit the executives from competing against the Bank or soliciting customers or employees of the Bank for a period of three
years following a termination of employment if such termination occurs prior to a change in control. If the executives are still
employed at the time of a change in control, the Supplemental Agreements with Mr. Lucco and Ms. Roxbury impose non-compete and
non-solicitation provisions for a period of six months following the change in control. The employment agreement with Mr. Marsh
described below imposes non-compete and non-solicitation provisions for a period of 12 months following a change in control. The
Bank has entered into similar Supplemental Agreements with other officers.
Employment and Change in Control Agreements
In November 2015, the
Corporation and the Bank entered into an amended and restated employment agreement with William C. Marsh to serve as Chairman,
President and Chief Executive Officer, which amended prior employment agreements originally entered into with Mr. Marsh in July
2007. The current term of the agreement expires on December 31, 2018 and will renew for successive one-year periods each January
1 unless notice to the contrary is provided at least 30 days prior to the renewal. The agreement also provides that if the executive
is terminated by the Corporation or the Bank for other than cause, disability, retirement or the executive’s death or the
executive terminates employment for good reason (as defined in the agreement) after a change in control of the Corporation or the
Bank, then Mr. Marsh will be entitled to the payment of a lump sum cash severance amount equal to three times his average annual
compensation (as defined in the agreement) during the five calendar years preceding the year of termination, the continuation of
his insurance benefits for up to 36 months and a lump sum cash payment equal to the projected cost of providing certain other benefits
for 36 months, provided that such payments will be limited if they are deemed “parachute payments” under Section 280G
of the Internal Revenue Code as amended. The employment agreement imposes non-compete and non-solicitation provisions on Mr. Marsh
for a period of 18 months if his employment is terminated prior to a change in control and for a period of 12 months if his employment
is terminated concurrently with or following a change in control.
In November 2015, the
Corporation and the Bank entered into amended and restated change in control agreements with Matthew J. Lucco and with Jennifer
A. Roxbury. The agreements amended the change in control agreements originally entered into with Mr. Lucco in August 2010 and with
Ms. Roxbury in October 2011. The change in control agreements currently expire on December 31, 2018, and the term will renew for
successive one-year periods each January 1 unless notice to the contrary is provided at least 30 days prior to the renewal. If
a change in control occurs during the term of the agreements at a time when there is less than one year remaining in the term,
then the remaining term of the agreements will be automatically extended until the one-year anniversary of the completion of the
change in control.
The change in control
agreements for Mr. Lucco and Ms. Roxbury provide that if the executive is terminated by the Corporation or the Bank (or any successor)
within 24 months subsequent to a change in control of the Corporation or the Bank for other than cause, disability, retirement
or the executive’s death or the executive terminates employment for good reason (as defined in the agreement) after a change
in control of the Corporation or the Bank, then the executive will be entitled to the payment of a lump sum cash severance amount
equal to two times the executive’s highest annual compensation (as defined in the agreement) during the year of termination
or either of the two preceding calendar years, the continuation of the executive’s insurance benefits for up to 24 months
and a lump sum cash payment equal to the projected cost of providing certain other benefits for 24 months, provided that such payments
will be limited if they are deemed “parachute payments” under Section 280G of the Internal Revenue Code as amended.
The Bank has entered into similar change in control agreements with other officers.
Outstanding Equity Awards at Fiscal
Year-End
The following tables
set forth, with respect to the executive officers named in the Summary Compensation Table, information with respect to the number
of awards held as of December 31, 2017. All awards were granted pursuant to the Corporation’s 2007 Stock Incentive Plan and
Trust adopted in 2007 and approved by shareholders at the 2007 annual meeting or the 2014 Stock Incentive Plan adopted in 2014
and approved by shareholders at the 2014 annual meeting.
|
|
Stock Awards
|
|
|
Number of Shares
of Stock
|
|
|
Market Value of
Shares of Stock
|
|
|
Vesting
|
Name
|
|
Not Vested
|
|
|
Not Vested (1)
|
|
|
Date
|
William C. Marsh
|
|
|
3,000
|
|
|
$
|
91,050
|
|
|
12/11/2018
|
William C. Marsh
|
|
|
3,500
|
|
|
$
|
106,225
|
|
|
12/07/2019
|
William C. Marsh
|
|
|
4,000
|
|
|
$
|
121,400
|
|
|
12/08/2020
|
Matthew J. Lucco
|
|
|
750
|
|
|
$
|
22,763
|
|
|
12/11/2018
|
Matthew J. Lucco
|
|
|
1,000
|
|
|
$
|
30,350
|
|
|
12/07/2019
|
Matthew J. Lucco
|
|
|
750
|
|
|
$
|
22,763
|
|
|
12/08/2020
|
Jennifer A. Roxbury
|
|
|
350
|
|
|
$
|
10,623
|
|
|
12/11/2018
|
Jennifer A. Roxbury
|
|
|
500
|
|
|
$
|
15,175
|
|
|
12/07/2019
|
Jennifer A. Roxbury
|
|
|
1,500
|
|
|
$
|
45,525
|
|
|
12/08/2020
|
(1) Based upon the fair market value of
a share of common stock of the Corporation as of December 31, 2017.
Certain Transactions
Other than as set forth
below, there have been no material transactions, proposed or consummated, between the Corporation and the Bank with any director
or executive officer of the Corporation or the Bank, or any associate of the foregoing persons.
The Bank, like many
financial institutions, has followed a written policy of granting various types of loans to officers, directors, and employees
and under such policy grants a discount of 100 basis points on loans extended to all employees, including executive officers. With
the exception of such policy, all loans to executive officers and directors of the Corporation and the Bank have been made in the
ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those
prevailing at the time for comparable transactions with persons not related to the Bank, and do not involve more than the normal
risk of collectibility nor present other unfavorable features. All such loans are approved by the Board of Directors.
The following table
presents a summary of loans in excess of $120,000 with preferential pricing (100 basis point discount) extended by the Bank to
any of the Corporation’s executive officers or immediate family members of such individuals. In addition, the Corporation
had two directors and one executive officer whose loans totaled more than $120,000 at December 31, 2017, however in these instances
the loans made with preferential pricing did not exceed $120,000.
|
|
|
|
Year
|
|
Highest
Principal
Balance
During
|
|
|
Balance
|
|
|
Amount Paid During
Year
|
|
|
Interest
|
|
Name and Position
|
|
Type
|
|
Made
|
|
Year
|
|
|
12/31/17
|
|
|
Principal
|
|
|
Interest
|
|
|
Rate
|
|
David L. Cox, Director
|
|
Residential Mortgage
|
|
2010
|
|
$
|
153,240
|
|
|
$
|
145,107
|
|
|
$
|
8,133
|
|
|
$
|
6,309
|
|
|
|
4.00
|
%
|
Director Compensation
During 2017, directors
received $1,500 per month for their services as a director of the Bank and $750 for attendance at board meetings. The Chairmen
of the audit and human resources committees received an additional $200 per month for their services as Committee Chairmen. No
additional compensation is paid for service as a director of the Corporation. In addition, non-employee directors received $400
for each Bank committee meeting that they attended during 2017.
The following table
sets forth information concerning compensation paid or accrued by the Corporation and the Bank to each member of the Board of Directors
with the exception of named executive officers reported within the Summary Compensation Table during the year ended December 31,
2017.
|
|
Fees Earned
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
Name
|
|
or Paid in Cash
|
|
|
Awards (1)
|
|
|
Compensation (2)
|
|
|
Total
|
|
Milissa S. Bauer
|
|
$
|
36,150
|
|
|
$
|
15,685
|
|
|
$
|
-
|
|
|
$
|
51,835
|
|
David L. Cox
|
|
|
36,200
|
|
|
|
15,685
|
|
|
|
26,000
|
|
|
|
77,885
|
|
James M. Crooks
|
|
|
36,950
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
52,635
|
|
Robert W. Freeman
|
|
|
29,750
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
45,435
|
|
Mark A. Freemer
|
|
|
34,600
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
50,285
|
|
Robert L. Hunter
|
|
|
33,350
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
49,035
|
|
John B. Mason
|
|
|
35,400
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
51,085
|
|
Deanna K. McCarrier
|
|
|
32,150
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
47,835
|
|
Nicholas D. Varischetti
|
|
|
30,950
|
|
|
|
15,685
|
|
|
|
-
|
|
|
|
46,635
|
|
|
(1)
|
Reflects the grant date fair value, computed in accordance with FASB
ASC Topic 718, for stock awards granted in 2017 pursuant to the 2014 Stock Incentive Plan adopted in 2014. For a description of
the assumptions used for purposes of determining grant date fair value, see Note 14 to the Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2017. Directors Bauer, Cox, Crooks, Freeman, Freemer, Hunter, Mason
and Varischetti also have a total of 1,500 stock awards of which 500 vest on December 11, 2018, December 7, 2019 and December 8,
2020, respectively. Director McCarrier has 1,000 stock awards of which 500 vest on December 7, 2019 and December 8, 2020.
|
|
(2)
|
Reflects amounts distributed under the Corporation’s Supplemental Retirement Agreements.
|
REPORT OF THE AUDIT COMMITTEE
In discharging its
oversight responsibility, the audit committee has met and held discussions with management and Crowe Horwath LLP, the independent
auditors for the Corporation. Management represented to the audit committee that all consolidated financial statements were prepared
in accordance with accounting principles generally accepted in the United States of America, and the audit committee has reviewed
and discussed the consolidated financial statements with management and the independent auditors.
In addition, the audit
committee has discussed with the independent auditors the auditors’ independence from management and the Corporation, and
has received and discussed with the independent auditors the matters in the written disclosures required by the Independence Standards
Board and as required under the Sarbanes-Oxley Act of 2002, including considering the permissibility of non-audit services with
the auditors’ independence.
The audit committee
also obtained from the independent auditors a formal written statement describing all relationships between the Corporation and
Crowe Horwath LLP that bear on the auditors’ independence consistent with the applicable requirements of the Public Company
Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence.
The audit committee discussed with the independent auditors any relationships that may impact the firm’s objectivity and
independence and satisfied itself as to the auditors’ independence.
Based on these discussions
and reviews, the audit committee recommended that the Board of Directors approve the inclusion of the Corporation’s audited
consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017, for filing with the SEC.
Respectfully submitted by the members of
the audit committee of the Board of Directors:
Mark A. Freemer, Chairman
Milissa S. Bauer
James M. Crooks
Robert L. Hunter
Deanna K. McCarrier
Nicholas D. Varischetti
PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION
TO
ELIMINATE THE CURRENT SUPERMAJORITY VOTING
PROVISION FOR A MERGER
OR SIMILAR TRANSACTION IN CERTAIN CIRCUMSTANCES
Summary.
The
current Amended and Restated Articles of Incorporation of the Corporation (the “Articles”) require an 80% vote of the
outstanding shares of common stock in order to approve a merger or similar transaction, without any exceptions, when the Corporation
is not the surviving entity. The Board of Directors believes that this is a very high and difficult threshold to achieve, which
could impede the Corporation from completing a merger or sale of the Corporation in the future, even if such a transaction was
favored by the Board of Directors and a majority of shareholders and could deny shareholders a premium on their shares. The Board
of Directors has proposed an amendment to the Articles which eliminates the supermajority vote requirement if the proposed merger
or similar transaction is first approved by a majority of the Board of Directors. The amendment also reduces the threshold for
approval of a merger or sale transaction to two-thirds of the outstanding shares of common stock from the current 80% vote requirement
and eliminates the supermajority vote requirement if the transaction is first approved by a majority of the Board of Directors,
which the Board believes will discourage hostile takeovers and encourage an acquirer to negotiate with the Corporation.
Proposal.
The
Board of Directors proposes that shareholders approve an amendment to our Articles to revise the provision that currently requires
approval of the holders of at least 80% of the outstanding shares of common stock for a merger or similar transaction. Currently,
Article 8 of the Articles provides as follows:
Article
8. No merger, consolidation, liquidation or dissolution of this Corporation nor any action that would result in the sale or other
disposition of all or substantially all of the assets of this Corporation shall be valid unless first approved by the holders of
at least eighty percent (80%) of the outstanding shares of Common Stock of this Corporation. This Article 8 may not be amended
unless first approved by the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of Common
Stock of this Corporation.
This provision was
included in the original Articles of Incorporation when the Corporation was formed in 1989 and was retained when the Articles were
amended and restated in 1996. This provision could impede the ability of the Board of Directors to enter in a potential acquisition
or a merger or sale of the Corporation in the future if it desired to do so, even if the Board of Directors and majority of shareholders
were in favor of the transaction. A merger or sale transaction could be beneficial to shareholders, provide a premium to the market
value of the common stock and not be approved because of the 80% vote requirement. Obtaining the vote of 80% of the outstanding
shares of common stock is a very high and difficult threshold to achieve for any proposal to be considered by shareholders of a
public company. Many shareholders, particularly holders of a relatively small position of a stock, do not bother to return a proxy
or to vote even if they are in favor of a proposal. A potential acquisition by the Corporation could enhance franchise value, be
accretive to earnings per share and position the Corporation for additional growth and sustained profitability. The provision might
also discourage a potential acquirer from pursuing a friendly merger with the Corporation out of concern that the required 80%
shareholder approval might not be obtained. Due to a lack of clarity in Article 8 as currently drafted, an argument could be made
that the supermajority vote requirement may be required even where the Corporation is acquiring another company and is the surviving
company in the merger. The Board of Directors believes that such an interpretation was not the intent of Article 8 when it was
originally implemented and believes that it is in the best interests of the Corporation and its shareholders to amend and clarify
the Articles on this point.
The Board of Directors
has approved, subject to shareholder approval, the amendment and restatement of Article 8 of the Articles as follows:
Article 8. No merger, consolidation,
liquidation or dissolution of this Corporation nor any action that would result in the sale or other disposition of all or substantially
all of the assets of this Corporation shall be valid unless first approved by the holders of at least two-thirds of the shares
of Common Stock of this Corporation which are issued and outstanding and entitled to vote generally in an election of directors,
as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof. This two-thirds
vote requirement referenced in the preceding sentence shall not apply if (i) the merger or other transaction is first approved
by a majority of the Board of Directors of the Corporation then in office, or (ii) the Corporation is the surviving entity of the
merger, consolidation or other transaction, and in either such event, the action will require only such affirmative vote as may
be required by applicable law. This Article 8 may not be amended unless first approved by the affirmative vote of the holders of
at least two-thirds of the shares of Common Stock of this Corporation which are issued and outstanding and entitled to vote generally
in an election of directors, as well as such additional vote of the Preferred Stock as may be required by the provisions of any
series thereof.
The amendment reduces
the 80% vote requirement to two-thirds of the outstanding shares of common stock and eliminates the supermajority vote requirement
if the transaction is first approved by a majority of the Board of Directors. In addition, the amendment makes clear that the supermajority
vote is not applicable if the Corporation is the surviving entity of a merger or similar transaction. If the amendment is approved
by shareholders, in the event a merger or similar transaction is first approved by the Board of Directors, then a vote of a majority
of the votes cast by shareholders will be sufficient shareholder approval in accordance with Pennsylvania law. In addition, if
the amendment is approved by shareholders, then under applicable Pennsylvania law, with certain exceptions, it will be clear that
no approval of the Corporation’s shareholders will be required for a merger when the Corporation will be the surviving entity.
The amendment provides
for a two-thirds supermajority vote of shareholders if the transaction is not first approved by the Board of Directors. The Board
of Directors believes that a two-thirds vote requirement in such circumstances provides protection against unfair, potentially
abusive takeover attempts by encouraging an acquirer to negotiate directly with the Board, ensuring that the Board can negotiate
fair and adequate offers that are in the best interests of the Corporation and its shareholders and protect against abusive or
coercive takeover tactics. The Board believes that this provision as revised is usual and customary and is in accordance with sound
corporate governance standards.
The Board of Directors
has carefully considered the advantages and disadvantages of the amendment and the applicability of a supermajority voting provision
in certain circumstances and has approved the amendment and restatement of Article 8 and recommends that shareholders vote to approve
the amendment.
Vote Required for Approval and Board
Recommendation
Under current Article
8, the affirmative vote of 80% of the outstanding common stock is required for approval of this proposal. Because of the required
vote, abstentions and unvoted shares, including broker non-votes, will have the same effect as a vote against the proposal.
Please
vote your proxy by mail, via the Internet or by telephone as soon as practicable so your vote can be counted.
If this proposal is
approved by the requisite vote of shareholders, the Corporation intends to promptly file Articles of Amendment with the Commonwealth
of Pennsylvania to amend the Corporation’s Articles. If the proposal is not approved, current Article 8 of the Articles will
remain in effect.
The Board of Directors
recommends that you vote for approval of the amendment to our Amended and Restated Articles of Incorporation
.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee
of the Board of Directors of the Corporation has appointed Crowe Horwath LLP, Certified Public Accountants, to perform the audit
of the Corporation's consolidated financial statements for the year ending December 31, 2018, and has further directed that
the selection of Crowe Horwath as the Corporation’s independent registered public accounting firm be submitted for ratification
by the shareholders at the annual meeting. The Corporation has been advised by Crowe Horwath that neither the firm nor any of its
associates has any relationship with the Corporation other than the usual relationship that exists between independent public accountants
and clients. Crowe Horwath will have a representative at the annual meeting who will have an opportunity to make a statement, if
he or she so desires, and who will be available to respond to appropriate questions.
Vote Required; Effect
Unless instructed to
the contrary, it is intended that proxies will be voted for the ratification of the selection of Crowe Horwath, as the Corporation’s
independent registered public accounting firm for the fiscal year ending December 31, 2018. Ratification of Crowe Horwath as the
Corporation’s independent registered public accounting firm will require the affirmative vote of a majority of the shares
of common stock present in person or by proxy at the annual meeting.
Recommendation of the Board of Directors
The Board of Directors
recommends that shareholders vote FOR the ratification of the appointment by the audit committee of the Board of Directors of Crowe
Horwath LLP as the Corporation's independent registered public accounting firm for the year ending December 31, 2018.
It is understood that
even if the selection of Crowe Horwath is ratified, the Board of Directors, in its discretion, may direct the appointment of a
new independent registered public accounting firm at any time during the year if the Board of Directors determines that such a
change would be in the best interest of the Corporation and its shareholders.
RELATIONSHIP WITH INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
General
The audit committee
of the Board of Directors has appointed Crowe Horwath LLP as the independent registered public accounting firm to audit the Corporation’s
financial statements for the year ending December 31, 2018. In evaluating whether to appoint Crowe Horwath to perform the audit
of the Corporation’s financial statements for the year ending December 31, 2018, the audit committee considered the compatibility
of the non-audit services provided to the Corporation by Crowe Horwath in 2017 described below on the independence of Crowe Horwath
from the Corporation.
In addition to performing
customary audit services related to the audit of the Corporation’s financial statements, Crowe Horwath LLP will assist the
Corporation with the preparation of its federal and state tax returns and will perform required retirement plan audits, charging
the Corporation for such services at its customary hourly billing rates.
The audit committee
selects the Corporation’s independent registered public accounting firm and separately pre-approves all audit services to
be provided by it to the Corporation. The audit committee also reviews and separately pre-approves all audit-related, tax and all
other services rendered by our independent registered public accounting firm in accordance with the audit committee’s charter
and policy on pre-approval of audit-related, tax and other services. In its review of these services and related fees and terms,
the audit committee considers, among other things, the possible effect of the performance of such services on the independence
of our independent registered public accounting firm.
During 2017, each new
engagement of the independent registered public accounting firm was approved in advance by the audit committee, and none of those
engagements made use of the
de minimus
exception to pre-approval contained in the SEC’s rules.
Auditor Fees
The following table
sets forth the aggregate fees paid by us to Crowe Horwath in 2017 and 2016 for professional services rendered in connection with
the audit of the Corporation’s consolidated financial statements, as well as the fees paid by us for audit-related services,
tax services and all other services rendered by Crowe Horwath in 2017 and 2016.
|
|
|
|
|
2017
|
|
|
2016
|
|
Audit fees
|
(1)
|
|
|
|
|
$
|
139,000
|
|
|
$
|
129,000
|
|
Audit-related fees
|
(2)
|
|
|
|
|
|
25,000
|
|
|
|
24,500
|
|
Tax fees
|
|
|
|
|
|
|
33,183
|
|
|
|
24,020
|
|
Total
|
|
|
|
|
|
$
|
197,183
|
|
|
$
|
177,520
|
|
|
(1)
|
The audit fees include only fees that are customary under generally accepted auditing standards
and are the aggregate fees the Corporation incurred for professional services rendered for the audit of the Corporation’s
annual financial statements for fiscal years 2017 and 2016 and the reviews of the financial statements included in the Corporation’s
Quarterly Reports on Forms 10-Q for fiscal years 2017 and 2016.
|
|
(2)
|
The audit-related fees include audits of the Corporation’s benefit plans for both years.
These audit-related services are assurance and related services that are reasonably related to the performance of the audit or
review of the Corporation’s financial statements.
|
ANNUAL REPORT
A copy of the Corporation’s
Annual Report for its fiscal year ended December 31, 2017, is being mailed with this Proxy Statement and is available over the
Internet at www.emclairefinancial.com.
Such Annual Report is not to be treated as part of the proxy solicitation material or
having been incorporated herein by reference.
SHAREHOLDER PROPOSALS
Any shareholder who,
in accordance with and subject to the provisions of the proxy rules of the SEC, wishes to submit a proposal for inclusion in the
Corporation’s proxy statement for its 2019 Annual Meeting of Shareholders to be held in April 2019 must deliver such proposal
in writing to the Secretary of Emclaire Financial Corp at the principal executive offices of the Corporation at 612 Main Street,
Post Office Box D, Emlenton, Pennsylvania 16373, no later than November 23, 2018.
Under the Corporation’s
current bylaws, business proposal nominations for directors other than those to be included in the Corporation’s proxy materials
following the procedures described in Rule 14a-8 under the 1934 Act, may be made by shareholders entitled to vote at the meeting
if notice is timely given and if the notice contains the information required by the bylaws. Nominations must be received no less
than sixty (60) days prior to the annual meeting.
In the event the Corporation
receives notice of a shareholder proposal to take action at next year’s annual meeting of shareholders that is not submitted
for inclusion in the Corporation’s proxy material, or is submitted for inclusion but is properly excluded from the proxy
material, the persons named in the proxy sent by the Corporation to its shareholders intend to exercise their discretion to vote
on the shareholder proposal in accordance with their best judgment.
SHAREHOLDER COMMUNICATION WITH THE
BOARD
The Corporation does
not have a formal procedure for shareholder communication with its Board of Directors. In general, officers are easily accessible
by telephone or mail. Any matter intended for the Board, or for any individual member or members of the Board, should be directed
to the President with a request to forward the same to the intended recipient. In the alternative, shareholders can send correspondence
to the Board to the attention of the Board Chairman, William C. Marsh, or to the attention of the Chairman of the Audit Committee,
Mark A. Freemer, in care of the Corporation at the Corporation’s address. All such communications will be forwarded unopened.
OTHER MATTERS
The Board of Directors
does not know of any matters to be presented for consideration other than the matters described in the Notice of Meeting, but if
any matters are properly presented, it is the intention of the persons named in the accompanying proxy to vote on such matters
in accordance with their judgment.
ADDITIONAL INFORMATION
Upon written request,
a copy of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 may be obtained, without charge
from Matthew J. Lucco, Secretary, Emclaire Financial Corp, 612 Main Street, Post Office Box D, Emlenton, Pennsylvania 16373. In
addition, the Corporation files reports with the SEC. Free copies can be obtained from the SEC website at www.sec.gov or on the
Corporation’s website at www.emclairefinancial.com.
If you have any questions
about any of the proposals for consideration at the Annual Meeting or how to vote at the Annual Meeting, in person or by proxy,
please call our proxy solicitor, Laurel Hill Advisory Group, LLC, 2 Robbins Lane, Suite 201, Jericho, New York 11753.
Banks and Brokers Call (516) 933-3100
All Others Call Toll-Free (888) 742-1305
ANNUAL MEETING OF
SHAREHOLDERS OF EMCLAIRE FINANCIAL CORP APRIL 25, 2018 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can
quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste.
Enroll today via www.astfinancial.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The proxy materials
for the 2018 Annual Meeting of Shareholders, including the Proxy Statement and 2017 Annual Report, are available in the Financial
Information section on our website at www.emclairefinancial.com Please sign, date and mail your proxy card in the envelope provided
as soon as possible. Please detach along perforated line and mail in the envelope provided. 20330300000000001000 2 042518 THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE LISTED NOMINEES AND "FOR" PROPOSAL 2 AND
PROPOSAL 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE x 1. Election of three Directors for three-year terms to expire in 2021. 2. To amend the Corporation’s Articles of
Incorporation to eliminate the current supermajority voting provision for a merger or similar transaction in certain circumstances.
FOR AGAINST ABSTAIN FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) NOMINEES: O Milissa
S. Bauer O Deanna K. McCarrier O Nicholas D. Varischetti 3. To ratify the selection of Crowe Horwath LLP, Certified Public Accountants,
as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2018. 4. To transact
such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to
each nominee you wish to withhold, as shown here: THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR, FOR
THE AMENDMENT OF THE ARTICLES OF INCORPORATION, FOR RATIFICATION OF CROWE HORWATH LLP, CERTIFIED PUBLIC ACCOUNTANTS, AS THE CORPORATION’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018 AND OTHERWISE AT THE DISCRETION OF THE PROXIES, INCLUDING OTHER MATTERS
THAT PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM THE CORPORATION PRIOR TO THE EXECUTION OF THIS
PROXY OF A NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, A PROXY STATEMENT DATED MARCH 23, 2018 AND AN ANNUAL REPORT TO SHAREHOLDERS.
To change the address on your account, please check the box at right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account may not be submitted via this method. MARK “X”
HERE IF YOU PLAN TO ATTEND THE MEETING. Signature of Shareholder Date: Signature of Shareholder Date: NOTE: Please sign exactly
as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized
person.
0 EMCLAIRE FINANCIAL
CORP PROXY ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 25, 2018 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints the Board of Directors of Emclaire Financial Corp (the "Corporation"),
or its designee, proxy of the undersigned, with full power of substitution, to vote all of the shares of the Corporation that
the undersigned may be entitled to vote at the Annual Meeting of Shareholders of the Corporation to be held on Wednesday, April
25, 2018, at The Farmers National Bank of Emlenton, 612 Main Street, Emlenton, PA 16373, at 9:00 a.m., local time, and at any
adjournment or postponement thereof as follows: (CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.) 1.1 14475
ANNUAL MEETING OF
SHAREHOLDERS OF EMCLAIRE FINANCIAL CORP APRIL 25, 2018 PROXY VOTING INSTRUCTIONS INTERNET - Access “WWW.VOTEPROXY.COM”
and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access
the web page. TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries
from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until
11:59 PM EST the day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless.
With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs,
clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY
MATERIAL: The proxy materials for the 2018 Annual Meeting of Shareholders, including the Proxy Statement and 2017 Annual Report,
are available in the Financial Information section on our website at www.emclairefinancial.com Please detach along perforated
line and mail in the envelope provided IF you are not voting via the Internet or telephone. 20330300000000001000 2 042518 THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE LISTED NOMINEES AND "FOR" PROPOSAL 2 AND
PROPOSAL 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE x FOR AGAINST ABSTAIN 1. Election of three Directors for three-year terms to expire in 2021. 2. To amend the Corporation’s
Articles of Incorporation to eliminate the current supermajority voting provision for a merger or similar FOR ALL NOMINEES WITHHOLD
AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) NOMINEES: O Milissa S. Bauer O Deanna K. McCarrier O Nicholas
D. Varischetti transaction in certain circumstances. 3. To ratify the selection of Crowe Horwath LLP, Certified Public Accountants,
as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2018. 4. To transact
such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to
each nominee you wish to withhold, as shown here: THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR, FOR
THE AMENDMENT OF THE ARTICLES OF INCORPORATION, FOR RATIFICATION OF CROWE HORWATH LLP, CERTIFIED PUBLIC ACCOUNTANTS, AS THE CORPORATION’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018 AND OTHERWISE AT THE DISCRETION OF THE PROXIES, INCLUDING OTHER MATTERS
THAT PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM THE CORPORATION PRIOR TO THE EXECUTION OF THIS
PROXY OF A NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, A PROXY STATEMENT DATED MARCH 23, 2018 AND AN ANNUAL REPORT TO SHAREHOLDERS.
To change the address on your account, please check the box at right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account may not be submitted via this method. MARK “X”
HERE IF YOU PLAN TO ATTEND THE MEETING. Signature of Shareholder Date: Signature of Shareholder Date: NOTE: Please sign exactly
as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized
person.
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