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 [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
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)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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 23, 2008, at 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 ratify the selection of Beard Miller Company LLP, Certified Public
Accountants, as the independent auditors of the Corporation for the fiscal year
ending December 31, 2008; and
3. 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 3,
2008, 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, 2007 is being mailed with this notice.
You are urged to mark, sign, date and promptly return your proxy in the
enclosed envelope so that your shares may be voted in accordance with your
wishes and in order that the presence of a quorum may be assured. The prompt
return of your signed proxy, regardless of the number of shares you hold, will
aid the Corporation in reducing the expense of additional proxy solicitation.
The giving of such proxy does not affect your right to vote in person if you
attend the meeting.
By Order of the Board of Directors,
/s/ David L. Cox
David L. Cox
Chairman, President and Chief Executive Officer
March 24, 2008
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 23, 2008
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, of proxies to be voted at the Annual Meeting of
Shareholders of the Corporation to be held at the main office of the Farmers
National Bank of Emlenton (the "Bank"), 612 Main Street, Emlenton, Pennsylvania
16373, on Wednesday, April 23, 2008, 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 (724) 867-2311.
All inquiries should be directed to David L. Cox, 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 24, 2008.
Solicitation
The proxy solicited hereby, if properly 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
and, upon the transaction of such other business as may properly come before the
annual 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. 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 there for, the Corporation will reimburse them for their reasonable
forwarding expenses.
Right of Revocation
A shareholder who returns a proxy may revoke it at any time before it is
voted by: (1) delivering written notice of revocation to Raymond M. Lawton,
Secretary, Emclaire Financial Corp., 612 Main Street, Post Office Box D,
Emlenton, Pennsylvania 16373, telephone: (724) 867-2311; (2) executing a
later-dated proxy and giving written notice thereof to the Secretary of the
Corporation or (3) voting in person after giving written notice to the Secretary
of the Corporation.
1
Voting Securities and Quorum
At the close of business on March 3, 2008, the voting record date, the
Corporation had outstanding 1,267,835 shares of common stock, $1.25 par value
per share. A majority of the outstanding shares in person or by proxy will
constitute a quorum at the annual meeting.
Only our 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. On
all matters to come before the annual meeting, each share of common stock is
entitled to one (1) vote.
Directors are elected by a plurality of the votes cast with a quorum
present. The persons receiving the greatest number of votes of the holders of
common stock represented in person or by proxy at the annual meeting will be
elected director. The affirmative vote of a majority of the total votes present
in person or by proxy is required for approval of the proposal 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 proposal to ratify the
appointment of Beard Miller Company LLP as our independent registered public
accounting firm for 2008. Abstentions will have the effect of a vote against
this proposal. There are no proposals to be considered at the annual meeting
which are considered "non-discretionary" and, as a result, there will be no
"broker non-votes".
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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 named in the Summary Compensation Table, and (iv) all
directors and executive officers of the Corporation and the Bank 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.
Percent of
Outstanding
Shares Beneficially Common Stock
Name and Address Owned (1) Beneficially Owned
--------------------------------------- ------------------- ------------------
Mary E. Dascombe 90,574 (2) 7.14%
Raleigh, NC 27609
Barbara C. McElhattan 66,297 (3) 5.23%
Emlenton, PA 16373
Directors:
George W. Freeman 78,940 (4) 6.23%
Ronald L. Ashbaugh 10,500 (5) *
Brian C. McCarrier 1,294 (5) *
Robert L. Hunter 12,494 (6) *
John B. Mason 6,668 (7) *
James M. Crooks 9,744 (8) *
J. Michael King 6,098 *
Mark A. Freemer 1,400 *
David L. Cox 11,580 (9) *
William C. Marsh 12,555 (10) *
Executive Management
Raymond M. Lawton 700 *
All directors and executive officers 151,973 11.99%
as a group (11 persons)
(Footnotes on following page)
3
-----------------
(1) 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, an individual is considered to beneficially own shares
of common stock if he or she directly or indirectly has or shares (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, an
individual has sole voting power and sole investment power with respect to
the indicated shares.
(2) Of the 90,574 shares beneficially owned by Mrs. Dascombe, 2,677 shares are
owned jointly with her spouse, and 23,511 shares are owned individually by
her spouse.
(3) Of the 66,297 shares beneficially owned by Mrs. McElhattan, 27,972 shares
are owned jointly with her spouse and 4,746 shares are owned individually
by her spouse.
(4) Of the 78,940 shares beneficially owned by Mr. Freeman, 200 shares are
owned jointly with his spouse, 1,000 shares are owned jointly with his
spouse in a family limited partnership and 37,805 shares are owned
individually by his spouse.
(5) All shares owned jointly with spouse.
(6) Of the 12,494 shares beneficially owned by Mr. Hunter, 5,041 shares are
owned individually by his spouse.
(7) Of the 6,668 shares beneficially owned by Mr. Mason, 653 shares are held as
custodian for his daughter.
(8) Of the 9,744 shares beneficially owned by Mr. Crooks, 3,237 shares are
owned jointly with his spouse, 939 are held as custodian for his children
and 134 are held individually by his spouse.
(9) Of the 11,580 shares beneficially owned by Mr. Cox, 1,500 shares are held
jointly with his spouse.
(10) Of the 12,555 shares beneficially owned by Mr. Marsh, 650 shares are owned
individually by his wife.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The common stock is registered pursuant to Section 12(g) 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.
Other than as set forth below, 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, 2007.
John B. Mason, a director, did not timely file one Form 4 with respect to one
transaction during December 2007. A Form 5 was subsequently filed with the SEC.
4
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 shall then expire shall be
elected to hold office for a term of three years, so that the office of one
class shall 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 Messrs. King, Freemer, Crooks, Hunter, Freeman,
McCarrier and Ashbaugh 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.
No director or executive officer of the Corporation is related to any other
director or executive officer of the Corporation by blood, marriage or adoption,
and each of the nominees currently serve as a director of the Corporation.
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. The Board of
Directors recommends that its nominees be elected as directors. Ages are
reflected as of December 31, 2007.
Nominees for Director for Three-Year Term Expiring in 2011
Principal Occupation Director Since
Name Age For Past Five Years Bank/Corporation
---------------- ----- ------------------------------------- ----------------
James M. Crooks 55 Owner, Crooks Clothing Company, Inc., 2004/2004
Retail Sales
Robert L. Hunter 66 Truck Dealer; President of: Hunter 1974/1989
Truck Sales & Service, Inc.; Hunter
Leasing, Inc.; Hunter Keystone
Peterbilt, LLP; Hunter Erie Truck
Sales LLP; Hunter Jersey Peterbilt,
LLC
John B. Mason 59 President, H. B. Beels & Son, Inc. 1985/1989
5
Members of the Board Continuing in Office
Directors Whose Terms Expire in 2010
Principal Occupation Director Since
Name Age For Past Five Years Bank/Corporation
------------------ --- --------------------------------------- ----------------
J. Michael King 60 Senior Attorney, Lynn, King & 1988/1989
Schreffler, P.C., Attorneys at Law
Prior to 2005 - President, Lynn, King &
Schreffler, P.C., Attorneys at Law
Prior to 2003 - Senior Partner of Lynn,
King & Schreffler, Attorneys at Law
David L. Cox 57 Since July 1, 2007, Chairman of the 1991/1991
Bank and Chairman, President and Chief
Executive Officer of the Corporation.
Prior to July 1, 2007, Chairman,
President and Chief Executive Officer
of the Bank and Corporation since 1997.
Mark A. Freemer 48 Partner, Clyde, Ferraro & Co., LLP, 2004/2004
Certified Public Accountants
Directors Whose Terms Expire in 2009
Principal Occupation Director Since
Name Age For Past Five Years Bank/Corporation
------------------ --- --------------------------------------- ----------------
Ronald L. Ashbaugh 72 Retired, former President of the Bank 1971/1989
and the Corporation.
George W. Freeman 77 Owner of Freeman's Tree Farm. 1964/1989
William C. Marsh 41 Since July 1, 2007, President and Chief 2006/2006
Executive Officer of the Bank; and
Treasurer and Chief Financial Officer
of the Corporation; from June 2006
through June 2007, Executive Vice
President and Chief Financial Officer
of the Corporation and the Bank; from
February 2006 through June 2006,
Executive Vice President and Chief
Financial Officer of Allegheny Valley
Bancorp, Inc. and Allegheny Valley Bank
of Pittsburgh; from March 2005 through
February 2006, Chief Financial Officer
of InterTECH Security, LLC; from
October 2003 through February 2005,
Senior Vice President and Chief
Financial Officer of NSD Bancorp, Inc.
and North Side Bank; and from August
2001 through October 2003, Senior Vice
President and Chief Financial Officer
of the Corporation and the Bank. Mr.
Marsh is a certified public accountant.
Brian C. McCarrier 44 President, Interstate Pipe and Supply 1997/1997
Company
6
Director's Attendance at Annual Meetings
All directors are expected to attend the Corporation's annual meeting of
shareholders. Nine of the ten directors of the Corporation at the time attended
the Corporation's 2007 annual meeting of shareholders.
Committees and Meetings of the Corporation and the Bank
During 2007, the Board of Directors of the Corporation held five regular
meetings and three special meetings and the Board of Directors of the Bank held
13 regular meetings. Each of the directors attended at least seventy-two percent
(72%) of the combined total number of meetings of the Corporation's and Bank'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 and a human
resources committee. The human resources committee functions as the
Corporation's compensation committee. The Corporation does not have a standing
nominating committee and, instead, director nominations are considered by the
entire Board. The Corporation's director nomination process is described below.
The following table sets forth the membership of such committees as of the
date of this proxy statement.
Directors Audit Executive Human Resources
----------------------------------- ----- --------- ---------------
J. Michael King.................... * *
David L. Cox....................... *
Mark A. Freemer.................... ** * *
James M. Crooks.................... *
Robert L. Hunter .................. * * **
John B. Mason...................... *
Ronald L. Ashbaugh................. * *
George W. Freeman.................. * *
William C. Marsh................... *
Brian C. McCarrier................. *
----------------------
* Member
** Chairman
Audit Committee. The audit committee of the Board is composed of five
members and operates under a written charter adopted by the Board of Directors.
During 2007, the audit committee consisted of Messrs. Freemer (Chairman),
Ashbaugh, Hunter, McCarrier and Crooks. The Board of Directors has identified
Mark A. Freemer as an audit committee financial expert. The audit committee met
five times in 2007. 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:
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o To monitor the preparation of quarterly and annual financial reports;
o To review the adequacy of internal control systems and financial
reporting procedures with management and independent auditors; and
o 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,
the President and Chief Executive Officer of the Bank, to approve the
compensation structure for senior management, to review the Bank's salary
administration program, and to review and administer the Corporation's bonus
plans, including the management incentive program.
The human resources committee, composed entirely of independent directors,
administers the Corporation's executive compensation program. The members of the
human resources committee, Messrs. Hunter (Chairman), Freeman, Freemer, King and
Mason, meet all of the independence requirements under the listing requirements
of the Nasdaq Stock Market. None of the members is a current or former officer
or employee of the Corporation or any of its subsidiaries.
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 five meetings of the full human resources
committee in 2007.
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.
Nomination Process. The goal of the Board of Directors has been, and
continues to be, to identify nominees for service on the Board of Directors who
will bring a variety of perspectives and skills from their professional and
business experience. Depending upon the current needs of the Board of Directors
and the Corporation, certain factors may be weighed more or less heavily. The
Board of Directors identifies nominees by first evaluating, on an informal
basis, the current members of the Board of Directors willing to continue in
service. Current members of the Board of Directors with skills and experience
that are relevant to the Corporation's business and/or unique situation who are
willing to continue in service are considered for re-nomination, balancing the
value of continuity of service by existing members of the Board of Directors
with that of obtaining a new perspective or skill set. If any member of the
Board of Directors does not wish to continue in service or if the Board of
Directors decides not to re-nominate a member for re-election, the Board of
Directors will then determine if there is a need to replace that director or
reduce the number of directors serving on the Board of Directors, in accordance
with the Corporation's bylaws. If the Board of Directors determines a need to
replace a non-continuing director, it identifies the desired skills and
experience in light of the criteria set forth above. Current members of the
Board of Directors are polled for suggestions as to individuals meeting those
criteria, and research may also be performed to identify qualified individuals.
To date, the Board of Directors has not formally engaged third parties to assist
in identifying or evaluating potential nominees, although the Board of Directors
reserves the right to do so in the future.
8
Section 10.1 of the Corporation's bylaws contains provisions addressing the
process by which a shareholder may nominate an individual to stand for election
to the Board of Directors at the Corporation's Annual Meeting. Historically, the
Corporation has not had a formal policy concerning shareholder recommendations
for nominees. Given the size of the Corporation, the Board of Directors does not
feel that such a formal policy is warranted at this time. The absence of such a
policy, however, does not mean that a reasonable shareholder recommendation will
not be considered, in light of the particular needs of the Corporation and the
policies and procedures set forth above. The Board of Directors will reconsider
this matter at such time as it believes that the Corporation's circumstances,
including its operations and prospects, warrant the adoption of such a policy.
Executive Officer Who is Not a Director
Set forth below is information with respect to the principal occupations
during at least the last five years for the current executive officer of the
Corporation and the Bank who does not serve as a director. All executive
officers of the Corporation and the Bank 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 officer and the Corporation and any person
pursuant to which such person has been selected an officer. Age is reflected as
of December 31, 2007.
Raymond M. Lawton, age 53. Mr. Lawton is Senior Vice President, Chief
Lending Officer and Secretary of the Corporation. Mr. Lawton has been Senior
Vice President and Secretary since 2003 and Chief Lending Officer since 2002 and
Chief Credit Officer since 1999.
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 2007 to our principal executive
officer as well as our two other highest compensated executive officers.
9
Change in
Pension
Value and
Nonqualified
Deferred All
Option Compensation Other
Name and Principal Position Year Salary Bonus(1) Awards(2) Earnings(3) Compensation Total
---------------------------- ---- -------- -------- --------- ------------ ------------ ----------
David L. Cox, Chairman, 2007 $168,000 $50,400 $ 7,489 $44,011 $19,120(4) $289,020
President and Chief 2006 $160,000 $ -- $ -- $42,702 $17,597 $220,299
Executive Officer
William C. Marsh, Treasurer 2007 $142,000 $42,600 $ 5,617 $21,280 $18,080(4) $229,577
and Chief Financial Officer 2006 $75,202 $ -- $ -- $23,611 $8,925 $107,738
Raymond M. Lawton, Senior 2007 $105,000 $26,250 $ 3,744 $26,758 $4,200 $165,952
Vice President and Chief 2006 $100,000 $ -- $ -- $26,153 $3,680 $129,833
Lending Officer
---------------------
(1) Bonuses were paid in 2008 for 2007 performance pursuant to the
Corporation's Management Incentive Program.
(2) Reflects the dollar amount recognized for financial statement
reporting purposes for 2007 in accordance with FAS 123(R) of awards
pursuant to the 2007 Stock Incentive Plan and Trust adopted in 2007.
(3) Reflects the increase in the actuarial present value of the named
executive officer's accumulated benefits under the Corporation's
defined benefit pension plan and supplemental executive retirement
plan at the relevant measurement date used for financial reporting
purposes for 2007 compared to 2006 and for 2006 compared to 2005.
(4) Includes director's fees from the Corporation and the Bank totaling
$12,000 and matching amounts under the Corporation's 401(k) plan.
Pension Plan
The Bank maintains a defined benefit pension plan for all eligible
employees. An employee becomes vested in the plan after five 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 .4% of average monthly compensation in excess
of six hundred seventy five ($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 continues through December 31, 2012, as a minimum benefit. In
2007, the Bank contributed $360,000 to the pension plan.
401(k) Plan
The Bank provides a match of an employee's contribution to the 401(k) plan
up to 4% of the participant's salary.
10
Supplemental Retirement Agreements
In October 2002, following Board of Director approval, the Bank entered
into supplemental retirement agreements with Messrs. Cox and Lawton and in June
2006 with Mr. Marsh ("Supplemental Agreements"). 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 Corporation in regards to their vested Supplemental Agreement
benefits. The Supplemental Agreements provide for retirement benefits upon
reaching age 65, and participants are fully vested five years after the
inception of the Supplemental Agreements. Upon attaining the age of 65, Messrs.
Cox, Marsh and Lawton would be entitled to $520,000, $1.1 million and $720,000,
respectively, over a 20 year period under their Supplemental Agreements. The
Corporation accrued $18,360, $9,240 and $16,800 in expense for the Supplemental
Agreements for Messrs. Cox, Marsh and Lawton, respectively, for the year ended
December 31, 2007.
Each of the Supplemental Agreements provides that in the event of a change
of control of the Corporation (as defined in the agreements), the officer (i) if
he has not yet qualified for retirement benefits, shall have the right to demand
his withdrawal benefits (which is an amount equal to the present value of the
normal retirement benefit, using a 7% discount rate and monthly compounding of
interest) in a single lump sum payment, or (ii) if he has qualified for
retirement benefits or has begun receiving a retirement benefit under the
Supplemental Agreement, shall have the right to demand his benefits in a single
lump sum payment in an amount equal to the normal retirement benefit. In the
event of a change in control on December 31, 2007, Messrs. Cox, Marsh, and
Lawton could have been entitled to lump sum payments of $163,655, $113,882 and
$171,399, respectively. Such payments could be limited if they are deemed
"parachute payments" under Section 280G of the Internal Revenue Code, as
amended.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth, with respect to the executive officers named in
the Summary Compensation Table, information with respect to the number of
options held as of December 31, 2007. All options 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. No restricted stock awards were
granted under the 2007 Stock Incentive Plan in 2007.
Option Awards
----------------------------------------------------
Number of
Securities Underlying
Unexercised Options
-----------------------------
Option
Exercise Expiration
Name Exercisable Unexercisable(1) Price Date
---- ----------- ---------------- -------- ----------
David L. Cox............... -- 20,000 $26.00 06/23/2017
William C. Marsh........... -- 15,000 $26.00 06/23/2017
Raymond M. Lawton.......... -- 10,000 $26.00 06/23/2017
---------------------
(1) Options become fully vested and exercisable on June 23, 2010.
11
Employment and Change of Control Agreements
Effective July 1, 2007, the Corporation and the Bank entered into
employment agreements with Messrs. Cox and Marsh. These agreements replace prior
change in control agreements with such individuals. The agreements have an
initial term ending on June 30, 2010, provided that such terms shall be
automatically renewed for successive one-year periods each July 1 unless notice
to the contrary is provided at least 30 days prior to the renewal. The
agreements also provide that if the individual is terminated by the Corporation
or the Bank for other than cause, disability, retirement or the individual's
death or the individual terminates employment for good reason (as defined in the
agreements) after a change in control of the Corporation, the individual will be
entitled to the payment of a cash severance amount equal to three times the
individual's average annual compensation and the maintenance of insurance and
other benefits, provided that such payments will be limited if they are deemed
"parachute payments" under Section 280G of the Internal Revenue Code, as
amended.
In addition, effective July 1, 2007, the Corporation and the Bank entered
into a change in control agreement with Raymond M. Lawton, Senior Vice President
of the Corporation and the Bank. The agreement with Mr. Lawton replaces his
prior change in control agreement with the Bank. The agreement has an initial
term ending on June 30, 2009, provided that such term shall be automatically
renewed for successive one-year periods each July 1 unless notice to the
contrary is provided at least 30 days prior to the renewal. The agreement also
provides that if the individual is terminated by the Corporation or the Bank (or
any successor) within 24 months subsequent to a change in control of the
Corporation for other than cause, disability, retirement or the individual's
death or the individual terminates employment for good reason (as defined in the
agreement) after a change in control of the Corporation, the individual will be
entitled to the payment of a cash severance amount equal to two times the
individual's average annual compensation and the maintenance of insurance and
other benefits, provided that such payments will be limited if they are deemed
"parachute payments" under Section 280G of the Internal Revenue Code, as
amended.
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 the Bank's other customers, and do not
involve more than the normal risk of collectibility nor present other
unfavorable features. All of such loans are approved by the board of directors.
The following table presents a summary of the only loan in excess of $120,000
extended by the Bank to any of the Corporation's directors, nominees for
director, executive officers or immediate family members of such individuals.
Highest Amount Paid
Principal During Year
Name and Year Balance Balance ------------------ Interest
Position Type Made During 12/31/07 Principle Interest Rate
--------------------------------------------------------------------------------
David L. Cox
Chairman,
President
and Chief
Executive Residential
Officer Mortgage 2003 $145,761 $138,854 $7,503 $8,041 5.63%
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Director Compensation
During 2007, directors received $1,000 per month for their services as a
director of the Bank regardless of attendance at board meetings. The Chairman of
the Audit Committee received an additional $100 per month for his services as
Audit Committee Chairman. No additional compensation is paid for service as a
director of the Corporation. In addition, outside directors received $225 for
each Bank committee meeting that they attended during 2007. During 2007, total
fees paid to all non-employee directors amounted to $133,567.
The following table sets forth information concerning compensation paid or
accrued by the Corporation and the Bank to each non-officer member of the Board
of Directors during the year ended December 31, 2007.
Fees
Earned
or Paid
Name in Cash Option Awards(1) Total
-------------------- --------- ----------------- ---------
Ronald L. Ashbaugh $17,625 $ 749 $18,374
James M. Crooks 13,800 749 14,549
George W. Freeman 17,400 749 18,149
Mark A. Freemer 15,725 749 16,474
Robert L. Hunter 13,800 749 14,549
J. Michael King 16,500 749 17,249
John B. Mason 18,075 749 18,824
Brian C. McCarrier 14,650 749 15,399
(1) Reflects the dollar amount recognized for financial statement reporting
purposes for 2007 in accordance with FAS 123(R) of awards pursuant to the
2007 Stock Incentive Plan and Trust.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of the Board of Directors appointed Beard Miller
Company LLP as the independent registered public accounting firm to audit the
Corporation's financial statements for the year ending December 31, 2008. The
audit committee considered the compatibility of the non-audit services provided
to the Corporation by Beard Miller Company LLP in 2007 described below on the
independence of Beard Miller Company LLP from the Corporation in evaluating
whether to appoint Beard Miller Company LLP to perform the audit of the
Corporation's financial statements for the year ending December 31, 2008.
The following table sets forth the aggregate fees paid by us to Beard
Miller Company LLP for professional services rendered by Beard Miller Company
LLP in connection with the audit of the Corporation's consolidated financial
statements for 2007 and 2006, as well as the fees paid by us to Beard Miller
Company LLP for audit-related services, tax services and all other services
rendered by Beard Miller Company LLP to us during 2007 and 2006.
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2007 2006
--------- ---------
Audit fees(1) $51,100 $51,783
Audit-related fees (2) 6,000 5,800
--------- ---------
Total $57,200 $57,583
========= =========
-----------------------------
(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 2007 and 2006
and the reviews of the financial statements included in the Corporation's
Quarterly Reports on Forms 10-Q for fiscal years 2007 and 2006.
(2) In both years, the audit-related services included audits of the
Corporation's benefit plans and student loans. 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.
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.
Since May 6, 2003, the effective date of SEC rules stating that an auditor
is not independent of an audit client if the services it provides to the client
are not appropriately approved, each new engagement of Beard Miller Company LLP
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.
REPORT OF THE AUDIT COMMITTEE
In discharging its oversight responsibility, the audit committee has met
and held discussions with management and Beard Miller Company 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
nonaudit 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 Beard
Miller Company LLP that bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committee. 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.
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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, 2007, for filing with the SEC.
Respectfully submitted by the members of the audit committee of the Board of
Directors:
Mark A. Freemer, Chairman
Ronald L. Ashbaugh
James M. Crooks
Robert L. Hunter
Brian C. McCarrier
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Unless instructed to the contrary, it is intended that votes will be cast
pursuant to the proxies for the ratification of the selection of Beard Miller
Company LLP, Certified Public Accountants, of Wexford, Pennsylvania, as the
Corporation's independent public accountants for its fiscal year ending December
31, 2008. The Corporation has been advised by Beard Miller Company LLP that none
of its members have any financial interest in the Corporation. Ratification of
Beard Miller Company LLP will require an affirmative vote of a majority of the
shares of common stock cast at the Annual Meeting.
In addition to performing customary audit services related to the audit of
the Corporation's financial statements, Beard Miller Company 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.
Representatives of Beard Miller Company LLP will be present at the annual
meeting, will be available to respond to your questions and will be able to make
such statements as they desire.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of Beard Miller Company LLP as the auditors for
the Corporation for the year ending December 31, 2008.
It is understood that even if the selection of Beard Miller Company LLP is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a new independent auditing 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.
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal year ended
December 31, 2007, is being mailed with this Proxy Statement. Such Annual Report
is not to be treated as part of the proxy solicitation material or having been
incorporated herein by reference.
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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 2008 Annual Meeting of Shareholders 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 Tuesday, November 25,
2008.
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 received 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, David L. Cox, or to the attention of the Chairman of the
Audit Committee, Mark A. Freemer, in care of the Corporation at the Corporation
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 may be obtained, without charge from William C. Marsh, Executive Vice
President and Chief Financial Officer, 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.
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