UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act
of 1934
(Amendment No. )
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Soliciting Material Pursuant to Rule 14a-12 |
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AUBURN NATIONAL BANCORPORATION, INC. |
(Name of Registrant as Specified in Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) |
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April 10, 2015
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of
Shareholders of Auburn National Bancorporation, Inc., to be held at the AuburnBank Center, 132 North Gay Street, Auburn, Alabama, on May 12, 2015, at 3:00 p.m., Local Time (collectively, with any adjournments or postponements thereof, the
Meeting).
The Notice of Meeting, Proxy Statement, Proxy, and our 2014 Annual Report to Shareholders are enclosed.
We hope you can attend and vote your shares in person. In any case, please complete the enclosed Proxy and return it to us. This action will ensure that your preferences will be expressed on the matters that are being considered. If you attend the
Meeting, you may vote your shares in person even if you have previously returned your Proxy.
Prior to the meeting, a
reception will be held from 2:30 p.m. to 3:00 p.m. in the AuburnBank Center. We hope you can join us!
We thank you for your
support this past year, and we encourage you to review our Annual Report. If you have any questions about the Proxy Statement or the Annual Report, please call or write us.
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Sincerely, |
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/s/ E. L. Spencer, Jr. |
E. L. Spencer, Jr. |
Chairman of the Board and Chief Executive Officer |
AUBURN NATIONAL BANCORPORATION, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 2015
Notice is hereby given that the 2015 Annual
Meeting of Shareholders of Auburn National Bancorporation, Inc. (the Company) will be held at the AuburnBank Center, 132 North Gay Street, Auburn, Alabama, on Tuesday, May 12, 2015, at 3:00 p.m., Local Time (collectively, with any
adjournments or postponements thereof, the Meeting), for the following purposes:
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Election of Directors. To elect 10 directors to the Board of Directors for one-year terms; |
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Advisory Vote on Executive Compensation. To approve, on a non-binding, advisory basis, the compensation of the Companys named executive
officers as disclosed in the proxy statement that accompanies this notice; and |
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Other Business. To transact such other business as may properly come before the Meeting. |
Only shareholders of record at the close of business on March 13, 2015, are entitled to notice of and to vote at the Meeting. All
shareholders, whether or not they expect to attend the Meeting in person, are requested to complete, date, sign and return the enclosed Proxy in the accompanying envelope.
Also enclosed is a copy of the Companys 2014 Annual Report.
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By Order of the Board of Directors, |
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/s/ C. Wayne Alderman |
C. Wayne Alderman |
Secretary |
April 10, 2015
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE TRANSFER AGENT IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON BY WRITTEN BALLOT IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON TUESDAY, MAY 12, 2015
THE PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS
ARE AVAILABLE AT WWW.AUBNPROXY.COM
AND OUR COMPANYS WEBSITE
WWW.AUBURNBANK.COM
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
AUBURN NATIONAL BANCORPORATION, INC.
TO BE HELD MAY 12, 2015
General
This Proxy Statement is being furnished to the shareholders of
Auburn National Bancorporation, Inc. (the Company), a Delaware corporation registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the BHC Act), in connection with the solicitation of
proxies by the Companys Board of Directors from holders of the outstanding shares of the Companys $.01 par value Common Stock (Common Stock) for the 2015 Annual Meeting of Shareholders of the Company (collectively, with any
adjournments or postponements, the Meeting). Unless the context otherwise requires, the term Company includes the Companys subsidiary, AuburnBank (the Bank). The Companys Common Stock is listed on the
Nasdaq Global Market under the symbol AUBN.
The Meeting is being held to consider and vote upon: (i) the
election of 10 directors to the Board of Directors; (ii) the compensation of the Companys named executive officers (as defined below), on a non-binding advisory basis, as disclosed in this Proxy Statement (a say-on-pay
proposal); and (iii) such other matters as may properly come before the Meeting.
The Companys Board of
Directors knows of no business that will be presented for consideration at the Meeting other than the matters described in this Proxy Statement.
This Proxy Statement and the Proxy are first being mailed on or about April 10, 2015, to Company shareholders of record as of the close of business on March 13, 2015 (the Record
Date). The Companys 2014 Annual Report (the Annual Report), including financial statements for the fiscal year ended December 31, 2014, accompanies this Proxy Statement.
Each shareholder is entitled to one vote on each proposal for each share of Common Stock held as of the Record Date. In determining
whether a quorum exists at the Meeting for purposes of all matters to be voted on, all votes for or against, as well as all abstentions (including votes to withhold authority to vote in certain cases), will be counted as
shares present, and a quorum will exist if a majority of the shares outstanding and entitled to vote at the meeting are present. Under Delaware law, the vote required for the election of directors is a plurality of the votes cast by the shares
present, in person or by proxy, at the Meeting, provided a quorum is present. Consequently, with respect to the election of directors, abstentions and broker non-votes will not be counted in determining whether the proposal has received the
requisite number of votes for approval. Although on the ballot, the say-on-pay proposal is only a non-binding, advisory vote. This means that the Board of Directors will not be required to take any action on this matter regardless of the number of
shares voted in favor of or against the proposal. However, the Board of Directors wants to understand the view of the Companys shareholders on the Companys executive compensation program, so your consideration and vote on this matter
will be taken seriously by the Board of Directors. The votes that shareholders cast for the say-on-pay proposal must exceed the number of votes cast against the proposal to pass. Abstentions and broker non-votes will not be counted in determining
whether the proposal has received the requisite number of votes for approval. Unless otherwise required by the Companys Certificate of Incorporation or Amended and Restated Bylaws (Bylaws), or by the Delaware General Corporation
Law or other applicable law, any other proposal that is properly brought before the Meeting will require approval by the affirmative vote of a majority of all votes cast at the Meeting with respect to such proposal. With respect to any such
proposal, abstentions and broker non-votes will not be counted in determining whether such proposal has received the requisite number of votes for approval.
The Companys principal executive offices are located at 100 N. Gay Street, Auburn, Alabama 36830, and its telephone number is (334) 821-9200. The Company maintains an internet website at
www.auburnbank.com.
Record Date, Solicitation and Revocability of Proxies
The Record Date for the Meeting has been set as the close of business on March 13, 2015. Accordingly, only holders of record of
shares of Common Stock on the Record Date will be entitled to vote at the Meeting. At the close of business on such date, there were approximately 3,643,378 shares of Common Stock issued and outstanding, which were held by approximately 434
shareholders of record.
Shares of Common Stock represented by a properly executed Proxy, if such Proxy is received in time
and is not revoked, will be voted at the Meeting in accordance with the instructions indicated in such Proxy. If you properly execute and return your Proxy but do not indicate any voting instructions with respect to one or more matters to be
voted upon at the Meeting, or if your voting instructions are unclear, your shares will be voted in accordance with the recommendation of the Board of Directors as to all such matters. Specifically, your shares will be voted FOR the election of all
director nominees, and FOR the advisory approval of the say-on-pay proposal, as well as in the discretion of the persons named as proxies on all other matters that may properly come before the Meeting.
A shareholder who has given a Proxy may revoke it at any time prior to its exercise at the Meeting by either (i) giving written
notice of revocation to the Companys Secretary, (ii) properly submitting to the Company a duly executed Proxy bearing a later date, or (iii) appearing in person at the Meeting and voting in person by written ballot. All written
notices of revocation or other communications with respect to revocation of Proxies should be addressed as follows: Auburn National Bancorporation, Inc., P.O. Box 3110, Auburn, Alabama 36831-3110, Attention: C. Wayne Alderman, Secretary.
Proxy Solicitation Costs
The cost of soliciting Proxies for the Meeting will be paid by the Company. The Companys officers may also solicit proxies by
telephone or otherwise, but will not receive additional compensation for these activities. In addition to the solicitation of shareholders of record by mail, telephone, facsimile, or personal contact, the Company may also make arrangements with
brokers, dealers, banks, or voting trustees or their nominees who can be identified as record holders of Common Stock to forward this proxy statement and the 2014 Annual Report to beneficial owners of Common Stock. The Company will reimburse them
for the reasonable expenses in connection with these services.
2
PROPOSAL #1 ELECTION OF DIRECTORS
General
Ten persons
have been nominated to serve on the Companys Board of Directors for one-year terms of office expiring at the Companys next scheduled annual meeting of shareholders and until their successors have been elected and qualified. All of the
nominees for director are presently directors of the Company.
Proxies cannot be voted for a greater number of persons than
the number of nominees specified herein. Cumulative voting for directors is not permitted. All shares represented by valid Proxies received and not revoked before they are exercised will be voted in the manner specified therein. If no specification
is made, the Proxies will be voted for the election of the 10 nominees listed below. In the unanticipated event that any nominee is unable to serve, the persons designated as proxy holders will cast votes for the remaining nominees and for such
other replacements as may be nominated by the Companys Board of Directors.
The nominees have been nominated by the
Companys Board of Directors based on the recommendation of the Nominating and Corporate Governance Committee, and the Board unanimously recommends a vote FOR the election of all ten nominees listed below.
Information about Nominees for Director
The following table sets forth the name and age of each nominee for director, a brief description of his or her principal occupation and business experience, certain other directorships and how long he or
she has been a director for the Company or the Bank. In addition, we have also provided a brief discussion of the specific experience, qualifications, attributes or skills that led to the Nominating Committees conclusion that the nominee
should serve as one of our directors. Except for Mr. E. L. Spencer, Jr., Chief Executive Officer and President of the Company and Mr. Dumas, Chief Executive Officer and President of the Bank, none of the nominees is employed by the Company
or the Bank or any entity that is an affiliate of the Company or the Bank.
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Name, Principal Occupation, Business Experience, Age , Directorships and
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Director Since |
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C. Wayne Alderman |
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2004 |
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Dean of Enrollment Services and former Dean, College of Business, Auburn University; former Director of Financial Operations of the Bank; served as Director of
Financial Operations from 2000 to 2007; employed by Auburn University since 1979. Dr. Alderman is 64. |
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Dr. Alderman, a certified public accountant and former Torchmark Professor of Accounting at Auburn University, brings a wealth of strategic planning
expertise and public accounting knowledge to the Board. He also brings valuable insight and banking knowledge as a result of his service as the banks Director of Financial Operations from 2000 to 2007, in addition to serving as a director of
the Bank since 1993. |
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Terry W. Andrus |
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1998 |
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President and Chief Executive Officer of the East Alabama Medical Center since 1984; Former Director of Blue Cross/Blue Shield of Alabama. Mr. Andrus is
63. |
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Mr. Andrus brings executive decision-making, financial expertise, and business-building skills from his service as the Chief Executive Officer of a regional
hospital and has held numerous other positions in professional leadership, including his service as Chairman of the Alabama Hospital Association. He also possesses vast banking knowledge through his service as a director of the Bank since
1991. |
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Name, Principal Occupation, Business Experience, Age , Directorships and
Qualifications |
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Director Since |
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J. Tutt Barrett |
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2010 |
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Mr. Barrett is a senior partner in the law firm of Dean & Barrett, located in Opelika, Alabama, where he has worked since 1992. Mr. Barrett is
63. |
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Mr. Barrett brings a wealth of legal and risk management skills to the Board. He also provides governance skills and experience gained through his service
on the boards of various charitable organizations. In addition, Mr. Barrett has served on one of the Banks local advisory boards since 1991. |
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Robert W. Dumas |
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2001 |
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Vice Chairman of the Company and the Bank since 2013 and Chief Executive Officer and President of the Bank since 2001; President and Chief Lending Officer of the
Bank from 1998 to 2001; employed by the Bank since 1984; Director of East Alabama Medical Center. Mr. Dumas is 61. |
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Mr. Dumas brings valuable insight and knowledge to the Board as a result of his service as the Banks Chief Executive Officer and President of the
Bank. Mr. Dumas currently serves on the Auburn University Board of Trustees, Auburn Research and Technology Board of Directors, Federal Reserve Bank of Atlantas Birmingham Branch Board of Directors, and Alabama Bankers Association Board
of Directors and has held numerous other positions in professional leadership, including his service as President and Chairman of the Alabama Bankers Association and a member of the Auburn University Business Advisory Council. Mr. Dumas brings
valuable knowledge from his 38 years of service in the banking industry, including serving as a director of the Bank since 1997. |
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J.E. Evans |
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1997 |
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Owner of Evans Realty, a property management company specializing in multi-family residential rental property, since 1971; Chairman of the Board of Directors of
J&L Contractors, Inc. since 1976. Mr. Evans is 74. |
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Mr. Evans brings a wealth of executive decision-making and risk assessment skills to the Board as a result of his experience in property management and
construction and his service as a director of the Bank since 1986. |
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William F. Ham, Jr. |
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2004 |
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Mayor of City of Auburn since 1998; owner of Varsity Enterprises, a company providing coin laundry services, since 1977. Mr. Ham is 61. |
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Mr. Ham brings a wealth of business-building skills to the Board as a result of his experience as an entrepreneur and as the Mayor of City of Auburn. He
also brings valuable knowledge through his service as a director of the Bank since 1993. |
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Name, Principal Occupation, Business Experience, Age ,
Directorships and Qualifications |
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Director Since |
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David E. Housel |
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2004 |
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Director of Athletics Emeritus at Auburn University since January 2006; Director of Athletics at Auburn University from 1994 to January 2006; employed by Auburn
University since 1970. Mr. Housel is 68. |
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Mr. Housel brings valuable business, public relations and strategic planning skills to the Board through his previous experience managing a major collegiate
athletic program with numerous employees and supervising multi-million dollar budgets. He also possesses banking knowledge through his service as a director of the Bank since 1997. |
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Anne M. May |
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1990 |
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Partner, Machen, McChesney & Chastain, Certified Public Accountants, since 1983. Ms. May is 64. |
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Ms. May brings valuable risk management skills, public accounting knowledge and a wealth of expertise related to matters of compensation and tax compliance
as a partner and former managing partner for a local accounting firm. She also possesses vast banking knowledge through her service as a director of the Bank since 1982. |
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E. L. Spencer, Jr. |
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1984 |
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Director of the Bank since 1975; Chairman of the Companys and Banks Board of Directors since 1984 and 1980, respectively; Chief Executive Officer and
President of the Company since 1990; formerly Chief Executive Officer and President of the Bank from 1990 to 2000; father of Edward Lee Spencer, III. E. L. Spencer, Jr. is 84. |
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Through his 40 years of service, including 25 years as Chief Executive Officer, Mr. E. L. Spencer, Jr. brings to the Board a deep institutional knowledge
and perspective regarding our strengths, challenges, and opportunities. His diverse experiences and leadership roles in the banking, construction, retail, healthcare and agriculture industries provide the Board an expanded perspective regarding the
relevant risks and opportunities facing financial institutions. |
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Edward Lee Spencer, III |
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2004 |
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Former Vice President, Spencer Lumber Company; employed by Spencer Lumber Company from 1973 to 2006. Son of E. L. Spencer, Jr. Edward Lee Spencer, III is
59. |
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Mr. Edward Lee Spencer, III brings valuable business insights and knowledge as a result of his previous management experience with Spencer Lumber Company, a
supplier of building and construction materials. He also brings valuable banking knowledge through his service as a director of the Bank since 1991. |
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5
CORPORATE GOVERNANCE
Board Leadership Structure
The Board of Directors does not have a policy
with respect to the separation of the offices of Chairman and the Chief Executive Officer. The Board believes this issue is part of the succession planning process and that it is in the best interests of the Company and our shareholders to retain
the flexibility to combine or separate these functions. At this time, the Board believes there are a number of important advantages of combining the positions of Chairman and Chief Executive Officer, including the following:
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Mr. E. L. Spencer, Jr., with 40 years of experience at the Company, including 25 years as Chief Executive Officer, has the knowledge,
expertise, and experience to understand the opportunities and challenges facing the Company, as well as the leadership and management skills to promote and execute our values and strategy, particularly during the current difficult economic
environment; |
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Combining the positions allows Mr. E. L. Spencer, Jr., to lead Board discussions regarding our business and strategy, and provides unified
leadership for the Company; |
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Combining the positions creates a firm link between management and the Board and promotes the development and implementation of corporate strategy; and
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Combining the positions allows timely communication with the Board on critical business matters given the complexity of our business.
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The Board also believes that combining the positions of Chairman and Chief Executive Officer does not
undermine the independence of the Board. The Companys Board is comprised of Mr. E. L. Spencer, Jr. and nine other directors, six of whom satisfy the Nasdaqs listing standards regarding independence. The Company has established an
independent director committee. Anne M. May is currently the chairperson of the committee and therefore is formally identified as the Lead Independent Director. Our corporate governance guidelines provide that the independent directors will meet at
least semi-annually in executive session without management present.
The Company believes the foregoing structure, policies
and practices, when combined with the Companys other governance policies and procedures, provide appropriate oversight, discussion and evaluation of decisions and direction from the Board of Directors.
Boards Role in Risk Oversight
The Board of Directors maintains oversight responsibility of the management of the Companys risks. A fundamental part of risk management is not only understanding the risks the Company faces and
what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The full Board of Directors reviews with management its process for managing enterprise risk.
While the Board of Directors maintains the ultimate oversight responsibility for risk management, certain of the Boards committees
have been assigned responsibility for risk management oversight of specific areas. These responsibilities include:
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the Compensation Committee evaluating, with our senior officers, risks posed by our compensation programs and seeking to limit any unnecessary or
excessive risks these programs may pose to us, in order to avoid programs that might encourage such risks. The Compensation Committees role and its relationship with the Board are more fully described under Committees of the Board
Compensation Committee and Compensation Committee Report; |
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the Audit and Compliance Committee overseeing risks related to our financial statements, our compliance with legal and regulatory requirements, our
financial reporting process and system of internal controls. The Audit and Compliance Committee also evaluates the performance of our independent auditors and our internal auditing department. The Audit Committee periodically meets privately in
separate executive sessions with management, our internal audit department, and the independent auditors. The Audit and Compliance Committees role and its relationship with the Board are more fully described under Committees of the Board
Audit and Compliance Committee; and |
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the Strategic Planning Committee reviewing management and adjusting our risk assessment during the Companys annual strategic planning process.
The Strategic Planning Committees role and its relationship with the Board are more fully described under Committees of the Board Strategic Planning Committee. |
While each of these committees is responsible for evaluating certain risks and overseeing the management of these risks, the entire Board
of Directors is regularly informed through committee reports about such risks. In addition, each of the Companys directors serves on the Banks Board of Directors. We believe that Board committees that report at the Bank level are
critical to the Companys risk management processes. These committees include the Directors Loan Committee, Asset/Liability Committee, Information Technology/Information Security (IT/IS) Steering Committee, Operations and Bank
Secrecy Act (BSA) Committee. These committees each play a role in monitoring the following risks to the Bank and Company: credit, liquidity, interest rate, operational, reputational, compliance, and information technology and security
risks.
Director Nominating Process
The Nominating and Corporate Governance Committee, in consultation with the Chairman of the Board, monitors existing director qualifications and periodically examines the composition of the Companys
Board of Directors and determines whether the Board of Directors would better serve its purposes with the addition of one or more directors. This assessment includes, among other relevant factors, in the context of the perceived needs of the Board
at that time, issues of experience, reputation, judgment, diversity and skills.
If the Nominating and Corporate Governance
Committee determines that adding a new director is advisable or if a vacancy on the Board arises, the Nominating and Corporate Governance Committee initiates the search, working with other directors, management and, if it deems appropriate or
necessary, a search firm retained to assist in the search. The Nominating and Corporate Governance Committee will consider all appropriate candidates proposed by management, directors and shareholders. Information regarding potential candidates is
presented to the Nominating and Corporate Governance Committee, which then evaluates the candidates based on the needs of the Board of Directors at that time and the criteria listed above. Potential candidates are evaluated according to the same
criteria, regardless of whether the candidate was recommended by the Nominating and Corporate Governance Committee, a shareholder, another director, management or another third party. The Nominating and Corporate Governance Committee then meets to
consider the selected candidate(s) and submits the approved candidate(s) to the full Board of Directors for approval and recommendation to the shareholders. Although neither the Board nor the Nominating and Corporate Governance Committee has a
formal policy with regard to the consideration of diversity in identifying director nominees, the director nomination process is designed to ensure that the Board considers members with diverse backgrounds, including race, ethnicity, gender,
education, skills and experience, with a focus on appropriate financial and other expertise relevant to the companys business, and also considers issues of judgment, conflicts of interest, integrity, ethics and commitment to the goal of
maximizing shareholder value. The goal of this process is to assemble a group of directors with deep, varied experience, sound judgment and commitment to the companys success.
Subject to the requirements of the Companys Certificate of Incorporation and Amended and Restated Bylaws, as well as any
requirements of law or regulation, any shareholder entitled to vote for the election of directors may recommend a director nominee. Advance notice of such proposed nomination must be received by the Secretary of the Company not less than 21 days nor
more than 60 days prior to any meeting of the shareholders called for the election of directors. Nominations should be submitted in writing to the Secretary of the Company specifying the nominees name and other required information set forth
in the Companys Bylaws. In 2014, there were no shareholder recommendations received, and no third party search firms were used to identify director candidates.
7
Shareholder Communications
Shareholders who wish to communicate with the Board, or any individual director or group of directors, may do so by sending written communications addressed to: Board of Directors of Auburn National
Bancorporation, Inc., c/o C. Wayne Alderman, Secretary, Auburn National Bancorporation, Inc., 100 N. Gay Street, P.O. Box 3110, Auburn, Alabama, 36831-3110. All information will be compiled by the Secretary of the Company and submitted to the Board
of Directors or each applicable director at the next regular meeting of the Board of Directors.
Meetings of the Board of Directors
The Boards of Directors of the Company and the Bank, as well as the committees of the Companys and Banks
Boards of Directors, generally hold meetings in tandem. The Companys Board of Directors held 12 meetings during 2014. All directors attended at least 75% of all meetings of the Companys Board of Directors and each committee on which they
served. All of the Companys directors are encouraged to attend the Companys annual meetings of shareholders. All of the Companys directors attended the 2014 Annual Meeting of Shareholders.
Committees of the Board of Directors
The Companys Board of Directors has eight standing committees: the Executive Committee, the Proxy Committee, the Property Committee, the Compensation Committee, the Strategic Planning Committee, the
Audit and Compliance Committee, the Nominating and Corporate Governance Committee and the Independent Director Committee.
Executive Committee. The Companys Executive Committee is authorized to act in the absence of the Board of Directors on
certain matters that require Board approval. E. L. Spencer, Jr., Robert W. Dumas and Anne M. May. constitute the current members of this committee. This committee held one meeting during 2014.
Proxy Committee. The Proxy Committee is authorized to act on behalf of Company shareholders when authorized by Proxy. E. L.
Spencer, Jr. and Terry W. Andrus constitute the current members of this committee. This committee held one meeting during 2014.
Property Committee. The Property Committee evaluates potential properties for expansion or branching activities. E. L. Spencer,
Jr., Robert W. Dumas, Anne M. May, J. E. Evans, J. Tutt Barrett and William F. Ham, Jr. constitute the current members of this committee. This committee held two meetings during 2014.
Compensation Committee. The Compensation Committee is authorized to review, recommend and approve the compensation of the Chief
Executive Officer, other executive officers and other key employees of the Company and the Bank; to evaluate the Companys incentive compensation plans, including any equity compensation plans; and to select, interview and make hiring
recommendations to the Board for the Chief Executive Officer position. In addition, the Committee approves changes to any Company personnel policy manuals or handbooks, and annually evaluates director compensation. Anne M. May, J. Tutt Barrett,
David E. Housel and Terry W. Andrus, all of whom are independent directors as defined in the Nasdaq listing standards, constitute the current members of this committee. David E. Housel was elected to the Compensation Committee in March
2015. This committee held ten meetings in 2014.
Strategic Planning Committee. The Strategic Planning Committee
evaluates potential acquisitions and the Companys long range goals and oversees the process and risk assessment used for the officers and directors strategic planning sessions. E. L. Spencer, Jr., Anne M. May, Robert W. Dumas,
Terry W. Andrus, C. Wayne Alderman and David E. Housel constitute the current members of this committee. This committee held two meetings in 2014.
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Audit and Compliance Committee. The Audit and Compliance Committee (Audit
Committee) is composed of Terry W. Andrus, C. Wayne Alderman, David E. Housel, J. Tutt Barrett and William F. Ham, Jr., all of whom are independent directors, as defined in the Nasdaq listing standards, and meet the independence
criteria set forth in SEC Rule 10A-3(b)(1). All members of the Audit Committee meet the financial literacy requirements of the Nasdaq listing standards and SEC regulations. The Audit Committee has the responsibilities set forth in the Audit
Committee Charter, including reviewing the Companys financial statements, evaluating internal accounting controls, reviewing reports of regulatory authorities and determining that all audits and examinations required by law are performed. It
appoints independent auditors, reviews and approves their audit plan and reviews with the independent auditors the results of the audit and managements response thereto. The Audit Committee also reviews the adequacy of the internal audit
budget and personnel, the internal audit plan and schedule, and results of audits performed by the internal audit staff. The Audit Committee is responsible for overseeing the entire audit function and appraising the effectiveness of internal and
external audit efforts. This committee held 15 meetings in 2014. The Board of Directors has determined that C. Wayne Alderman and Terry W. Andrus, members of the Audit Committee, are audit committee financial experts, as defined by SEC
rules.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is composed of
Anne M. May, J. Tutt Barrett and Terry W. Andrus, all of whom are independent directors as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to identify individuals qualified to
become members of the Companys Board of Directors and recommend to the Board the director nominees for the next annual meeting of shareholders. This committee also takes a leadership role in shaping corporate governance policies and practices
of the Company. The responsibilities and duties of the Nominating and Corporate Governance Committee are more fully set out in the Nominating and Corporate Governance Committee Charter. The Nominating and Corporate Governance Committee held one
meeting in 2014.
Independent Directors Committee. The Independent Directors Committee was formed to meet Nasdaq
listing standards, which require that the Companys independent directors meet separately from the other directors in regularly scheduled executive sessions at least twice annually, and at such other times as may be deemed appropriate by the
Companys independent directors. Nasdaq listing standards also require that a majority of the Companys directors be independent directors. The Board has affirmatively determined that the following directors, constituting a
majority of the Companys Board of Directors, are independent directors: William F. Ham, Jr., C. Wayne Alderman, David E. Housel, J. Tutt Barrett, Anne M. May and Terry W. Andrus. The Companys Board of Directors has appointed Anne M. May
to serve as the Boards Lead Independent Director. This committee held two meetings in 2014.
The Board of Directors has
adopted a Code of Conduct and Ethics applicable to the Companys directors, officers and employees, including the Companys principal executive officer, principal financial and principal accounting officer, controller and other senior
financial officers. The Code of Conduct and Ethics, as well as the charters for the Audit Committee, Compensation Committee, and the Nominating and Corporate Governance Committee, can be found by hovering over the heading About Us on the
Companys website, www.auburnbank.com, and then clicking on Investor Relations, and then clicking on Governance Documents. In addition, this information is available in print to any shareholder who requests
it. Written requests for a copy of the Companys Code of Conduct or the Audit Committee, Compensation Committee, or Nominating and Corporate Governance Committee charters may be sent to Auburn National Bancorporation, Inc., 100 N. Gay Street,
Auburn, Alabama 36830, Attention: Marla Kickliter, Senior Vice President of Compliance and Internal Audit. Requests may also be made via telephone by contacting Ms. Kickliter or Laura Carrington, Vice President of Human Resources, at
(334) 821-9200. As additional corporate governance standards are adopted, they will be disclosed on an ongoing basis on the Companys website.
Board Compensation
In 2014, the Chairman received $1,900 and each director
received $950, respectively, for each Board meeting attended. In 2015, the Chairman will receive $2,000 and each director will receive $1,000, respectively, for each Board meeting attended. Generally, the Board of Directors of the Company and the
Bank meet on the same day, and in such cases, a fee is paid for one board meeting only. In addition, members of the Audit Committee and the Compensation Committee of the Company, which also serve as the members of the Audit Committee and the
Compensation Committee of the Bank, respectively, receive an additional fee of $200 for each committee meeting, while each Chairman of these committees receives $400 per meeting. Members of the Banks Loan Committee, Asset/Liability Committee
and IT/IS Steering Committee receive $200 for each committee meeting, while each Chairman of these committees receives $400 per meeting. The Companys and the Banks directors may receive year-end cash bonuses based upon the Companys
financial performance. In 2014, aggregate fees paid to Company and Bank Directors, including cash bonuses, totaled approximately $242,650. The compensation of directors may be changed from time to time by the Board of Directors upon recommendation
of the Compensation Committee, without shareholder approval.
9
The following table provides information concerning the compensation of the Companys
non-employee directors for 2014. Compensation paid to E. L. Spencer, Jr. and Robert W. Dumas for their service as directors is reported in the Summary Compensation Table on page 18.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Fees Earned or Paid in Cash |
|
|
Non-equity Incentive
Plan Compensation (1) |
|
|
Total |
|
C. Wayne Alderman |
|
$ |
24,400 |
|
|
$ |
3,650 |
|
|
$ |
28,050 |
|
Terry W. Andrus |
|
|
17,200 |
|
|
|
3,650 |
|
|
|
20,850 |
|
J. Tutt Barrett |
|
|
17,600 |
|
|
|
3,650 |
|
|
|
21,250 |
|
J.E. Evans |
|
|
24,600 |
|
|
|
3,650 |
|
|
|
28,250 |
|
William F. Ham, Jr. |
|
|
18,050 |
|
|
|
3,650 |
|
|
|
21,700 |
|
David E. Housel |
|
|
16,050 |
|
|
|
3,650 |
|
|
|
19,700 |
|
Anne M. May |
|
|
17,000 |
|
|
|
3,650 |
|
|
|
20,650 |
|
Edward Lee Spencer, III |
|
|
17,600 |
|
|
|
3,650 |
|
|
|
21,250 |
|
(1) |
Amounts represent cash bonuses paid to the Companys directors. |
PROPOSAL #2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
The
purpose of the Companys compensation policies and procedures is to attract and retain experienced, highly qualified executives critical to our long-term success and enhancement of shareholder value. The Board believes our compensation policies
and procedures achieve this objective, and therefore recommend shareholders vote FOR the say-on-pay proposal through approval of the following resolution:
RESOLVED, that the compensation paid to the Companys named executive officers, as disclosed in the Companys Proxy Statement for the 2015 Annual Meeting of Shareholders pursuant to the
compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in the Proxy Statement, is hereby APPROVED.
This say-on-pay proposal gives you as a shareholder the opportunity to endorse or not endorse the compensation we pay to our named
executive officers (identified in Compensation Disclosure and Analysis below) by voting to approve or not approve such compensation as described in this Proxy Statement. This vote is advisory, which means that it is not binding on the
Company, the Board or the Compensation Committee. However, the Board and the Compensation Committee will consider the outcome of the vote when considering future executive compensation arrangements.
In last years Proxy Statement for the 2014 Annual Meeting, a similar advisory vote was requested by the Company. The results of
last years vote were as follows:
|
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|
|
|
|
|
|
|
|
2014 Vote Count
|
|
|
Percent
|
|
|
|
|
|
|
For |
|
|
1,963,571 |
|
|
|
96% |
|
Against |
|
|
41,325 |
|
|
|
2% |
|
Abstain |
|
|
31,573 |
|
|
|
2% |
|
|
|
|
|
|
|
|
|
2,036,469 |
|
|
|
100% |
|
|
|
|
|
|
10
The vote on this resolution is not intended to address any specific element of compensation,
but rather relates to the overall compensation of our named executive officers, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. We encourage you to closely review our Compensation Discussion and
Analysis included herein and the tabular summary compensation disclosure that follows it. Most of our tabular disclosure is backward-looking. When possible, we have discussed our plans for changes to compensation practices for the current year and
beyond.
We have included this proposal in our Proxy Statement pursuant to the requirements of the Dodd-Frank Wall Street
Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934.
The Board recommends you
vote FOR the approval of this Resolution related to the compensation of the Companys named executive officers.
EXECUTIVE OFFICERS
Executive officers generally are appointed annually at
a meeting of the respective Boards of Directors of the Company and the Bank in January to serve for one-year terms and until successors are chosen and qualified. In addition to Mr. E. L. Spencer, Jr. and Mr. Dumas, whose information is
included under Proposal One Election of Directors, our other executive officers are:
|
|
|
Name |
|
Information About Executive Officers |
|
|
Jo Ann Hall |
|
Executive Vice President and Chief Operations Officer since 2005; former Senior Vice President and Chief Operations Officer of the Bank since 1994; various other
positions with the Bank since 1974. Ms. Hall is 65. |
|
|
Terrell E. Bishop |
|
City President, Valley Branch and Senior Vice President and Senior Mortgage Lending Officer of the Bank since 1991. Mr. Bishop is 78. |
|
|
Kris W. Blackmon |
|
Vice President and Chief Investment Officer of the Bank since 2007; various other positions with the Bank since 2001. Mr. Blackmon is 44. |
|
|
James E. Dulaney |
|
Senior Vice President, Bent Creek Branch (Business Development & Commercial/Consumer Lending) since 2010; formerly Senior Vice President (Business
Development/Marketing) of the Bank since 2004; various other positions with the Bank since 1993. Mr. Dulaney is 56. |
|
|
David A. Hedges |
|
Senior Vice President, Controller and Chief Financial Officer of the Company and the Bank since April 2014; formerly Vice President, Controller and Chief
Financial Officer of the Company and the Bank since 2008; various other positions with the Company and Bank since 2006. Mr. Hedges is 36. |
|
|
W. Thomas Johnson |
|
Senior Vice President (Commercial and Consumer Lending) and Senior Lending Officer of the Bank since 2001; formerly Vice President (Commercial and Consumer
Lending) of the Bank since 1999. Mr. Johnson is 67. |
|
|
Marla L. Kickliter |
|
Senior Vice President of Compliance/Internal Audit of the Bank since 2007; formerly Vice President of Compliance/Internal Audit since 2005; various other
positions with the Bank since 2001. Ms. Kickliter is 45. |
|
|
Shannon S. ODonnell |
|
Chief Risk Officer since April 2014 and Senior Vice President of Credit Administration since 2007; formerly Vice President of Credit Administration since 2001.
Ms. ODonnell is 45. |
11
|
|
|
Name |
|
Information About Executive Officers |
|
|
Jerome B. Siegel |
|
Senior Vice President and Chief Technology Officer since 2008, formerly Vice President and Chief Technology Officer since 2002. Mr. Siegel is
51. |
|
|
C. Eddie Smith, Jr. |
|
City President, Opelika Branch and Senior Vice President of the Bank since 2003; Senior Vice President (Commercial and Consumer Lending) of the Bank since 2001;
formerly Vice President (Commercial and Consumer Lending) of the Bank since 1999. Mr. Smith is 58. |
|
|
Robert L Smith, Jr. |
|
Senior Vice President of the Bank and Chief Lending Officer since April 2014; Vice President (Commercial and Consumer Lending) of the Bank since 2001. Mr. Smith
is 46. |
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The following discussion and analysis are focused on the
compensation of the Companys executive officers, with additional detail provided for the Companys named executive officers. The Companys named executive officers are the Companys Chief Executive Officer (Mr. E. L.
Spencer, Jr.), Chief Financial Officer (Mr. Hedges), and the three other most highly compensated executive officers for 2014 (Messrs. Dumas and Bishop and Ms. Hall). Information regarding the compensation of the named executive officers is
provided under Executive Compensation following this section.
Compensation Committee
The Compensation Committee of the Companys Board of Directors oversees the design and administration of the Companys
compensation program. Because officers are compensated only for service at the Bank (and not separately for services to the Company), this compensation program effectively relates to the needs of the Bank. The Compensation Committees members
are appointed by the Board of Directors, and the Compensation Committee is composed entirely of non-employee, independent directors.
The Compensation Committee:
|
|
|
establishes the Banks compensation philosophy; |
|
|
|
evaluates the Chief Executive Officers performance; |
|
|
|
determines benefits and compensation for the Chief Executive Officer; |
|
|
|
reviews the Chief Executive Officers recommendations for and approves benefits and compensation for officers other than the Chief Executive
Officer; |
|
|
|
makes recommendations to the Board on matters relating to organization and succession of senior management; |
|
|
|
oversees the administration of the Companys 401(k) plan, which is a defined contribution plan; and |
|
|
|
makes recommendations to the Board concerning director compensation. |
The Compensation Committees charter reflects these various responsibilities, and the Compensation Committee and the Board annually
review the charter.
12
The authority of the Compensation Committee may not be delegated to persons who are not on
the Compensation Committee. Individuals not on the Compensation Committee, including advisors and executive officers, can make recommendations to the Compensation Committee. The Compensation Committee may consider such recommendations at its
discretion and such recommendations are not binding on the Compensation Committee.
The Compensation Committee held ten
meetings during 2014, the majority of which were executive sessions with no officers or employees present. Our Human Resource Department provides support to the Compensation Committee. All Compensation Committee members are actively engaged in the
review of matters presented, and the members regularly communicate with each other and management before and after meetings about compensation issues.
Compensation Program Review
In 2014, the Compensation Committee completed
an internal review of the Companys officer compensation program. This review was requested in order to update the Compensation Committee on current compensation levels and compensation program design features. Current compensation program
features at banks comparable in asset size, location and performance to the Bank were reviewed and the reasonableness of the Companys officer compensation and benefits program was considered. The Compensation Committee utilized the results of
certain compensation surveys and other resources, including a survey by Balanced Comp LLC that considered the salaries of all Bank employees and officers. The internal report completed in 2014 indicated that the Banks compensation is
comparable to other publicly held banks of comparable asset size, location, and performance within the southeast region of the United States, especially the State of Alabama, and provides competitive qualified benefits.
The Compensation Committee expects to continue to review the objectives and elements of the Companys executive compensation
program, as well as the methods the Compensation Committee utilizes to determine both the types and amounts of compensation to award to the Companys executive officers.
Compensation Philosophy and Objectives
In making decisions with respect to
compensation for its executive officers, the Compensation Committee is guided by a pay-for-performance philosophy. The Compensation Committee believes that a portion of each executives total compensation opportunity should vary with
achievement of the Companys performance goals. In designing the compensation program for the Companys executive officers, the Compensation Committee seeks to achieve the following key objectives:
|
|
|
Motivate Executives. The compensation program should reward employees for strong individual and Company performance and increased compensation
should be earned through an employees increased contribution to the Company. |
|
|
|
Alignment with Stockholders. The compensation program should align the interests of management and shareholders by rewarding service based on
Company and individual performance. |
|
|
|
Attract and Retain Talented Executives. The compensation program should be competitive with compensation paid by other financial institutions of
comparable size and performance in the southeastern United States. This objective is intended to enable the Company to attract and retain key personnel in its highly competitive markets. |
|
|
|
Mitigating Risk. The compensation program should link compensation to performance in a way that does not encourage unnecessary or excessive
risk, and ensure that the structure of the compensation program is consistent with effective controls and strong corporate governance. |
The Compensation Committee monitors the various criteria that make up the program and adjusts them as necessary to continue to meet these objectives.
13
Consideration of Say-On-Pay Vote and Related Matters
The Companys stockholders have the right to vote, on a non-binding basis, on the approval of the compensation of the Companys
named executive officers at specified intervals also determined by stockholder vote. The Companys stockholders most recently voted on this matter at the 2014 Annual Meeting of Stockholders. At the 2013 Annual Meeting of Stockholders the
stockholders also approved a proposal providing that the stockholders would vote on such compensation every year. As a result, the Company has scheduled a vote, on a non-binding, advisory basis, on the approval of the compensation of the
Companys named executive officers at the 2015 Annual Meeting of Stockholders, and intends to schedule this matter again at the 2016 Annual Meeting of Stockholders. The Company intends to provide the stockholders with another vote on the
frequency of the votes on the compensation of the Companys named executive officers before the 2019 annual meeting.
At
the 2014 Annual Meeting of Stockholders, approximately 96% of the shares voted in person or by proxy voted for the approval of the compensation paid to our named executive officers. The Company believes that this stockholder vote strongly endorses
its compensation philosophy and practices. After considering the result of the 2014 advisory vote on executive compensation, the Company did not believe it was necessary to undertake any material changes in the Companys compensation philosophy
and practices. In addition to consideration given to the results of any say-on-pay proposal, the Company considers general developments in executive compensation principles and any appropriate direct or indirect input from shareholders,
in the development and implementation of the Companys executive compensation philosophy and practices.
Components of Compensation
Executive officer compensation is currently composed of base salary and annual cash bonuses. These components are
established based on individual performance as measured by pre-established goals and Company performance relative to pre-established profitability measures. In addition, the Company offers certain basic benefits as described in more detail below.
The Company does not currently have an equity incentive or long-term incentive plan, and, therefore, does not provide equity
incentive or long-term incentive awards to its executive officers. The Companys Long-Term Incentive Plan expired in May 2004, with the last of the stock options outstanding thereunder being exercised in 2006. The Compensation Committee will
continue to review its options regarding the implementation of an equity incentive or long-term incentive plan. Any equity incentive plans or other long-term incentive plans will consider the appropriate use of common stock and predictable expense
recognition, and will be submitted for shareholder approval when necessary and appropriate.
Base Salary
We believe we provide our named executive officers and other officers with the opportunity to earn a competitive annual base salary. We
provide this opportunity to attract and retain appropriate talent for the positions, to recognize that similar base salary rates are provided at other companies that we compete with for talent, and to provide a base salary that is not subject to
Company performance risk. We believe this component of compensation is desirable because it helps assure stability for the executives, thereby promoting the Companys goal of retaining executive leadership. Base salary levels are also important
because we generally tie the amount of incentive compensation and retirement benefits to an executives base compensation.
An important aspect of base salary is the Compensation Committees ability to use annual base salary adjustments to reflect an individuals performance or changed responsibilities, as well as
changes in our markets. In addition, base salary is designed to provide competitive levels of compensation to executives based upon their experience, duties, and scope of responsibility. The Compensation Committee reviews base salaries of our
executive officers on an annual basis in March. Any adjustments to an executives base salary generally become effective retroactive to January 1st of that year.
14
In reviewing and adjusting base salaries for officers, the Compensation Committee considers
individual performance as determined by the achievement of goals established at the beginning of each year. These goals are tied to the Companys performance, such as increases in loan origination fees, increases in certain types of loans,
decreases in past due amounts, etc. The Chief Executive Officer sets these goals with respect to the other executive officers and officers, and the Department Heads set these goals with respect to other employees. The performance goals with respect
to the Chief Executive Officer are approved by the Compensation Committee. In addition, the Compensation Committee considers the relationship of base pay in our markets and the individuals responsibilities and duties.
Changes in base pay for officers are recommended by our Department Heads to the Chief Executive Officer, who then evaluates and
recommends the changes to the Compensation Committee for approval. Changes in base pay for named executive officers other than the Chief Executive Officer are recommended by the Chief Executive Officer (after the evaluation of their job performance)
to the Compensation Committee for approval. Changes in base pay for the Chief Executive Officer are determined by the Compensation Committee after evaluation of his job performance by the Compensation Committee. The Compensation Committees
determinations are then ratified by the full Board of Directors.
Mr. Dumas performance goals were tied to various
measures, including net earnings performance compared to budgeted amounts, satisfactory ratings for the Bank as a result of regulatory examinations, and progress completed toward achievement of goals under the Companys strategic plan. For
2014, the Compensation Committee determined that Mr. Dumas met his performance goals. After reviewing all relevant factors, his 2014 base salary of $275,000 was adjusted to $283,250 effective January 1, 2015. In addition, the Compensation
Committee approved a 2015 base salary of $21,642 for Mr. Spencer. This compares to his 2014 base salary of $21,012. The Compensation Committee considered Mr. Spencers continued focus on strategic issues and less involvement with day
to day operations in making its recommendation.
Cash Bonuses
The Company utilizes cash bonuses as a short-term incentive to promote achievement of AuburnBanks annual Company performance goals. This component of compensation assists in better control of
expenses associated with salary increases by reducing the need for significant annual base salary increases as a reward for past performance, and places more emphasis on annual profitability and the potential rewards associated with future
performance.
Cash bonuses are based on overall financial performance and profitability of the Company. Cash bonuses are
designed to:
|
|
|
support our strategic business objectives; |
|
|
|
promote the attainment of specific financial goals; |
|
|
|
reward achievement of specific performance objectives; and |
Generally speaking, cash bonuses are payable at the discretion of the Board of Directors, based in part on the performance of the Company and the executive during the year compared to their respective
goals. However, in making its recommendation to the Board of Directors regarding payment of the cash incentives, the Compensation Committee may consider other factors. Early each year, generally in March, the Chief Executive Officer and other
executive officers establish certain annual goals for the Company, which may include return on assets (ROA), return on equity (ROE), earnings, and other operational metrics, asset quality and results of regulatory
examinations, among others. The corporate goals are based largely on managements confidential strategic plan and budget for the coming year, which typically includes planned revenue growth, cost containment, and profit improvement. The Board
of Directors reviews and approves the corporate goals. The Compensation Committee reviews quarterly the Companys performance against the corporate goals and, if appropriate, accrues an amount based upon past experience and the excess of the
budgeted performance for distribution as cash bonuses. Any amounts accrued for potential bonuses may or may not be paid depending upon the Compensation Committees judgment.
15
The ultimate amount of cash bonuses, if any, paid to an executive, other than the Chief
Executive Officer, depends on the executives level of participation, including job responsibilities and duties, in the achievement of the corporate goals, as well as the achievement of the individuals goals set as of the beginning of
each year. The performance measures for the Chief Executive Officer are based exclusively on corporate performance measures because he holds an office which has a substantial effect on the achievement of these measures.
The Companys performance objectives are intended to promote a group effort by all officers and employees. Each year, officers must
set personal and departmental goals that are tied to the accomplishment of the Banks overall goals. Department Heads approve those goals at the beginning of each year, and at the end of each year complete an analysis that is given to the Chief
Executive Officer as to the accomplishment of these goals. The Chief Executive Officer then reviews the results and recommends awards to the Compensation Committee if the Company performance goals have been met. The Chief Executive Officers
recommendations are based on the performance evaluations of officers and employees conducted by the Departmental Heads regarding the accomplishment of goals and the level of responsibility of the individuals. The Compensation Committee then
considers and approves awards, if any, and determines the award, if any, to the Chief Executive Officer, and the full Board of Directors ratifies the awards recommended by the Compensation Committee.
The Compensation Committee generally targets annual bonuses to be competitive in our area, for expected levels of performance. Each of
the named executive officers may receive a cash bonus, to the extent the Compensation Committee determines to award an officer a cash bonus. Mr. E.L. Spencer, Jr. may elect not to participate, based on the total amount available for bonuses.
Cash awards are contingent upon employment with the Bank through the end of the fiscal year and are determined and paid prior to March 15th of each year.
During 2014, the performance goals applicable to the Chief Executive Officer were the accomplishments of certain net earnings, ROA, ROE, earnings per share, loan growth, asset quality, and regulatory
examination measures. The performance goals for 2015 may be expanded to include other financial measures as selected by the Compensation Committee.
In 2014, the corporate goals established by the Compensation Committee were considered achieved, so officers were paid a cash bonus in 2015, for their performance related to 2014. In addition, the Company
continued to excel in non-financial performance areas, successfully achieving its policy objectives relating to customers, employees and communities.
Benefits
The Company offers a qualified deferred contribution 401(k) plan
to provide a tax-advantaged savings vehicle to all employees. We make matching contributions to the 401(k) plan to encourage employees to save money for their retirement. The plan and the Companys contributions to it, enhance the range of
benefits we offer to executives and enhance our ability to attract and retain employees. Under the terms of the qualified 401(k) plan, employees must have completed one year of service and worked at least 1,000 hours during that year to participate,
and become 100% vested in our matching contributions after six such years. Employees may make elective deferrals from 2% to 10% of their eligible pay, up to the annually adjusted Internal Revenue Service dollar limit. The 401(k) plan provides for
discretionary matching contributions up to 6% of eligible pay on the participants elective deferrals, in an amount to be determined by the Compensation Committee on an annual basis. Since the plans inception in 1985, we have matched a
minimum amount of 50% of the participants eligible contributions. Matching contributions are usually made in December of each year, and the amount of such contributions is determined based on the Companys performance with respect to the
corporate goals used to determine the availability of cash incentives.
In addition, the Company provides health, life,
disability and other insurance benefits to its executive officers on the same basis as its other full-time employees.
Employment
Agreements
The Company does not have employment agreements with any of its executive officers.
16
Policy Relative to Code Section 162(m)
The Omnibus Budget Reconciliation Act of 1993 disallows the deduction for certain annual compensation in excess of $1 million paid to
certain executive officers of the Company, unless the compensation qualifies as performance-based compensation under Section 162(m) of the Internal Revenue Code. It is our intent to maximize the deductibility of executive
compensation while retaining the discretion necessary to compensate executive officers in a manner commensurate with performance and the competitive market.
At this time, based upon executive compensation levels, the Company does not appear to be at risk of losing deductions under the $1 million deduction limit. As a result, we have not yet established a
formal policy regarding this limit.
Summary
In summary, we believe this mix of base salary and cash incentives motivates our management team to produce strong returns for shareholders. We further believe this program strikes an appropriate balance
between the interests and needs of the Company in operating our business and appropriate employee rewards based on creation of shareholder value. In light of these factors, the Compensation Committee reviewed our compensation programs in 2014 and
determined that they do not subject the Company to unnecessary or excessive risk or motivate staff members to manipulate earnings and therefore are not reasonably likely to have a material adverse effect on our Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the Securities and Exchange Commission.
Terry W. Andrus
J. Tutt Barrett
David E. Housel
Anne M. May
17
EXECUTIVE COMPENSATION
The following executive compensation tables and related information are intended to be read together with the more detailed disclosure
regarding our executive compensation program presented under the caption Compensation Discussion and Analysis above.
Summary
Compensation Table
The following table provides information concerning the compensation of our named executive officers
for 2014, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position |
|
Year |
|
Salary |
|
|
Bonus (1) |
|
|
All
Other Compensation (2) |
|
|
Total |
|
|
|
|
|
|
|
E. L. Spencer, Jr.
Chairman, Chief Executive Officer and President of the Company and Chairman and Director of the Bank |
|
2014 |
|
$ |
21,012 |
|
|
$ |
82,500 |
|
|
|
$ 37,635 |
|
|
|
$ 141,147 |
|
|
2013 |
|
|
20,400 |
|
|
|
90,000 |
|
|
|
32,422 |
|
|
|
142,822 |
|
|
2012 |
|
|
20,000 |
|
|
|
74,000 |
|
|
|
38,320 |
|
|
|
132,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Hedges
Senior Vice President, Controller and Chief Financial Officer |
|
2014 |
|
|
113,858 |
|
|
|
18,485 |
|
|
|
9,989 |
|
|
|
142,332 |
|
|
2013 |
|
|
108,177 |
|
|
|
18,200 |
|
|
|
6,986 |
|
|
|
133,363 |
|
|
2012 |
|
|
103,211 |
|
|
|
17,500 |
|
|
|
6,350 |
|
|
|
127,061 |
|
|
|
|
|
|
|
Robert W. Dumas
President and Chief Executive Officer of the Bank and Vice Chairman and Director of the Bank and the Company |
|
2014 |
|
|
275,000 |
|
|
|
60,000 |
|
|
|
39,065 |
|
|
|
374,065 |
|
|
2013 |
|
|
262,920 |
|
|
|
50,000 |
|
|
|
35,435 |
|
|
|
348,355 |
|
|
2012 |
|
|
250,400 |
|
|
|
40,000 |
|
|
|
35,582 |
|
|
|
325,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jo Ann Hall
Executive Vice President of the Bank |
|
2014 |
|
|
197,205 |
|
|
|
18,485 |
|
|
|
9,536 |
|
|
|
225,226 |
|
|
2013 |
|
|
189,621 |
|
|
|
18,200 |
|
|
|
8,119 |
|
|
|
215,940 |
|
|
2012 |
|
|
183,871 |
|
|
|
17,500 |
|
|
|
8,362 |
|
|
|
209,733 |
|
|
|
|
|
|
|
Terrell E. Bishop
Senior Vice President of the Bank |
|
2014 |
|
|
175,821 |
|
|
|
18,485 |
|
|
|
5,466 |
|
|
|
199,772 |
|
|
2013 |
|
|
170,700 |
|
|
|
18,200 |
|
|
|
5,184 |
|
|
|
194,084 |
|
|
2012 |
|
|
166,089 |
|
|
|
17,500 |
|
|
|
5,156 |
|
|
|
188,745 |
|
(1) |
Represents cash incentive awards paid to the Companys executive officers. |
(2) |
For 2014, includes compensation as described under All Other Compensation below. |
18
All Other Compensation
The following table provides information regarding each component of compensation included in the All Other Compensation column for 2014 of the Summary Compensation Table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Insurance Premiums
|
|
|
Company Contributions to Retirement and 401(k) Plans |
|
|
Total Compensation as Director (1)
|
|
|
Total
|
|
|
|
|
|
|
E. L. Spencer, Jr. |
|
|
$ 37 |
|
|
|
$ 630 |
|
|
|
$ 36,968 |
|
|
|
$ 37,635 |
|
|
|
|
|
|
David A. Hedges |
|
|
6,608 |
|
|
|
3,381 |
|
|
|
|
|
|
|
9,989 |
|
|
|
|
|
|
Robert W. Dumas |
|
|
6,615 |
|
|
|
7,800 |
|
|
|
24,650 |
|
|
|
39,065 |
|
|
|
|
|
|
Jo Ann Hall |
|
|
3,620 |
|
|
|
5,916 |
|
|
|
|
|
|
|
9,536 |
|
|
|
|
|
|
Terrell E. Bishop |
|
|
217 |
|
|
|
5,249 |
|
|
|
|
|
|
|
5,466 |
|
(1) |
Represents fees earned as employee directors of the Bank and Company, including cash bonuses paid for their service as directors. |
2014 Grants of Plan-Based Awards
The Company did not grant any equity or non-equity incentive plan awards in 2014.
2014 Option
Exercises and Stock Vested
There were no stock options exercised or stock awards vested in 2014.
Outstanding Equity Awards at December 31, 2014
There were no unexercised options, unvested stock, and equity incentive plan awards for named executive officers outstanding as of December 31, 2014.
Pension Benefits and Nonqualified Deferred Compensation
The Company does not offer any pension or nonqualified deferred compensation benefits to its named executive officers.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The Company does
not have any severance or change in control agreements with any of its named executive officers.
19
STOCK OWNERSHIP BY CERTAIN PERSONS
The following table sets forth the number and the percentage of shares of the Companys Common Stock that were beneficially owned,
as of the Record Date, by (1) each of our directors and each of our named executive officers, (2) all of our directors and executive officers as a group, and (3) each person known to us to beneficially own more than 5% of any class of
our voting common stock. Other than as set forth below, no persons (as that term is defined by the SEC) are known by the Company to be the beneficial owners of more than 5% of the Common Stock, the Companys only class of voting
securities, as of the Record Date.
|
|
|
|
|
|
|
Name of Beneficial Owner
(1)
|
|
Number of Shares (2) |
|
|
Percent of Class |
All Directors and Named Executive Officers: |
|
|
|
|
|
|
C. Wayne Alderman |
|
|
6,116 |
|
|
* |
Terry W. Andrus |
|
|
2,795 |
|
|
* |
J. Tutt Barrett (3) |
|
|
7,655 |
|
|
* |
Robert W. Dumas (4) (5) |
|
|
37,500 |
|
|
1.03% |
J.E. Evans |
|
|
18,000 |
|
|
* |
William F. Ham, Jr. (6) |
|
|
3,513 |
|
|
* |
David E. Housel |
|
|
4,327 |
|
|
* |
Anne M. May (7) |
|
|
31,349 |
|
|
* |
E. L. Spencer, Jr. (8)(9)(10)(11)(12) |
|
|
735,219 |
|
|
20.18% |
Edward Lee Spencer, III (13) |
|
|
9,576 |
|
|
* |
Terrell E. Bishop |
|
|
42,180 |
|
|
1.16% |
Jo Ann Hall |
|
|
22,140 |
|
|
* |
David A. Hedges |
|
|
200 |
|
|
* |
All Directors and Executive Officers as a Group (21 persons) |
|
|
934,933 |
|
|
25.66% |
|
|
|
Persons known to Company who own more than 5% of outstanding shares of Company Common Stock: |
|
|
|
|
|
|
|
|
|
Emil F. Wright, Jr.
500 Brookwood Drive
Auburn, AL 36830 |
|
|
397,878 |
|
|
10.92% |
(1) |
Unless specified below, each directors and named executive officers business address is c/o AuburnBank, 100 N. Gay Street, Auburn, Alabama 36830.
|
(2) |
Information relating to beneficial ownership of Common Stock by directors is based upon information furnished by each person using beneficial ownership
concepts set forth in rules of the SEC under the Securities Exchange Act of 1934, as amended. Under such rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which
includes the power to vote or direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. The person is also deemed to be a beneficial owner of any
security of which that person has a right to acquire beneficial ownership within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she may disclaim any beneficial ownership. Accordingly, directors and named executive officers may be named as beneficial owners of shares as to which they may disclaim any beneficial interest. Except as indicated in
other notes to this table describing special relationships with other persons and specifying shared voting or investment power, directors and named executive officers possess sole voting and investment power with respect to all shares of Common
Stock set forth opposite their names. |
20
(3) |
Includes 2,052 shares held by Mr. Barretts two daughters, as to which Mr. Barrett may be deemed to have shared voting and investment power.
|
(4) |
Includes 3,562 shares held by Mr. Dumas mother, as to which Mr. Dumas may be deemed to have shared voting and investment power.
|
(5) |
Includes 1,060 shares held by Mr. Dumas that were pledged as collateral for a loan from the Bank. |
(6) |
Includes 300 shares held by Mr. Hams wife, as to which Mr. Ham may be deemed to have shared voting and investment power. |
(7) |
Includes 738 shares held by Ms. Mays daughter, as to which Ms. May may be deemed to have shared voting and investment power. |
(8) |
Includes 18,950 shares held by Mr. E.L. Spencer, Jr.s wife, as to which Mr. E.L. Spencer, Jr. may be deemed to have shared voting and investment power.
|
(9) |
Includes 41,480 shares held by the Edward L. Spencer, Jr. Five-Year Grantor Retained Annuity Trust dated December 23, 2010. Mr. Spencer is the trustee of the
trust and has sole voting and dispositive power with respect to these shares. |
(10) |
Includes 89,775 shares held by the Edward L. Spencer, Jr. Eight-Year Grantor Retained Annuity Trust dated December 23, 2010. Mr. Spencer is the trustee of the
trust and has sole voting and dispositive power with respect to these shares. |
(11) |
Includes 29,419 shares held by the Edward L. Spencer, Jr. Five-Year Grantor Retained Annuity Trust dated January 31, 2012. Mr. Spencer is the trustee of the
trust and has sole voting and dispositive power with respect to these shares. |
(12) |
Includes 3,440 shares held by the Edward L. Spencer, Jr. Foundation. |
(13) |
Includes 3,960 shares held by Spencer LLC, a company in which Mr. Edward Lee Spencer, III is a partner, as to which Mr. Edward Lee Spencer, III may be deemed
to have shared voting and investment power, and as to which Mr. Edward Lee Spencer, III disclaims beneficial ownership of 2,640 shares. |
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Various Company and Bank
directors, officers and their affiliates, including corporations and firms of which they are directors or officers or in which they and/or their families have an ownership interest, are customers of the Company and the Bank. These persons,
corporations and firms have had transactions in the ordinary course of business with the Company and the Bank, including borrowings, all of which, in the opinion of management, were on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with unaffiliated persons and did not involve more than the normal risk of collectability or present other unfavorable features. Such transactions are subject to review and
approval as and to the extent provided in our Audit Committee Charter. The Company and the Bank expect to have such transactions, under similar conditions, with their directors, officers and affiliates in the future.
Regulation O requires loans made to executive officers and directors to be made on substantially the same terms, including interest rates
and collateral, and following credit-underwriting procedures, that are no less stringent than those prevailing at the time for comparable transactions by the Bank with other persons. Such loans also may not involve more than the normal risk of
repayment or present other unfavorable features. Additionally, no event of default may have occurred (that is, such loans are not disclosed as non-accrual, past due, restructured or potential problems). Pursuant to Regulation O, the Board of
Directors must review any loan to a director or his or her related interests that has become criticized in order to determine the impact that such classification has on the directors independence. In addition, the Audit Committee Charter
provides that the Audit Committee will review and approve all related-party transactions. This includes a review of the Companys compliance with applicable banking laws, including, without limitation, those banking laws and regulations
concerning loans to insiders.
21
In 2014 the Bank paid an aggregate of $60,000 to J & L Contractors for building
renovations and entered into a contract with J & L Contractors to build the leasehold improvements in connection with a relocation of a bank branch in 2015. The Bank has made payments of approximately $153,000 during 2015 pursuant to this
contract and $367,000 for other construction work in 2013. See Note 18 to our financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Evans Realty, Inc., the majority owner of
J & L Contractors, is owned by Mr. Evans, a director of the Company and the Bank. In accordance with the Companys Audit Committee Charter, all these contracts are subject to review and approved by the Audit Committee. The Company
expects to engage J & L Contractors in the future for similar work, including a proposed contract for approximately $1,000,000 to build a new branch office in 2015.
Other than the transactions disclosed above, none of the directors of the Company serves as an executive officer of, or owns, or during 2013 or 2014 owned, of record or beneficially, greater than 5%
equity interest in any business or professional entity that has made or received during 2013 or 2014, or proposes to make or receive during 2015, payments to or from the Company or the Bank for property or services in excess of the lesser of
$120,000 or 1% of the Companys average total assets at year end for the last two completed fiscal years.
Compensation Committee
Interlocks and Insider Participation
The Compensation Committee is composed of Mr. Andrus, Mr. Barrett, and
Ms. May, none of whom is an employee of the Company or is or has been an officer of the Company. Except as follows, no member of the Compensation Committee is an executive officer of another entity on which any of the Companys executives
serve on such other entitys compensation committee (or committee performing equivalent functions). Mr. Andrus is the Chief Executive Officer of East Alabama Medical Center (EAMC) and Mr. Dumas serves on the Finance
Committee of the board of directors for EAMC. Other than Mr. Dumas, none of the Companys executive officers served as a director for a company that employs as an executive officer any member of the Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
The Company is subject to Section 16(a) of the
Securities Exchange Act of 1934, as amended, which requires the Companys officers and directors, and persons who own more than 10% of a registered class of the Companys equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and greater-than-10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of Forms 3, 4 and 5 furnished to the Company during and with respect to 2014, or written
representations that no Forms 5 were required, the Company believes that all Section 16(a) filing requirements applicable to the Companys and the Banks officers, directors and greater-than-10% beneficial owners were complied with
during 2014.
AUDIT COMMITTEE REPORT
Management is responsible for the Companys internal controls and the financial reporting process. The Companys independent accountants are responsible for performing an independent audit of
the Companys consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and to issue a report thereon. The Audit Committees responsibility is to monitor and
oversee these processes. In this context, we have met and held discussions with management and the independent accountants. We have reviewed and discussed the Companys audited consolidated financial statements for the fiscal year ended
December 31, 2014, with management and the independent accountants. This review included discussions with the Companys independent accountants of matters required to be discussed by PCAOB Auditing Standard No. 16, Communications
with Audit Committees.
22
The Companys independent accountants also provided to us the written
disclosures and the letter required by Independence Standards Board Standard No. 1, Independent Discussions with Audit Committees, and we discussed with the independent accountants that firms independence.
Based upon our discussions with management and the independent accountants and our review of the representation of management and the
report of the independent accountants to the Audit Committee, we recommended that the Board of Directors include the Companys audited consolidated financial statements in the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2014.
Terry W. Andrus
C. Wayne Alderman
J. Tutt Barrett
William F. Ham, Jr.
David E. Housel
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of our Board of
Directors considers, at least annually, the background, expertise and experience of our independent registered public accountants, the audit team assigned to the Company, and various other relevant matters.
Our Audit Committee determined, after careful consideration, to dismiss KPMG LLP as the Companys independent registered public
accounting firm for the year ending December 31, 2015 effective March 30, 2015. At the same meeting, the Audit Committee, effective March 30, 2015, approved the appointment of Elliott Davis Decosimo LLC (Elliott
Davis) as the Companys independent registered public accounting firm for the year ended December 31, 2015.
Representatives of both KPMG LLP and Elliott Davis, the Companys former and current independent registered public accounting firms,
have been invited and are expected to attend our 2015 annual meeting of the shareholders. Representatives of these firms will be given the opportunity to make a statement if they so desire and will be available to respond to appropriate questions
from shareholders.
Change in Independent Registered Public Accounting Firm
As reported on the Companys Current Report on Form 8-K, dated April 2, 2015, the Audit Committee approved the dismissal of KPMG
LLP as the Companys independent registered public accounting firm, effective March 30, 2015, for the fiscal year ending December 31, 2015 following KPMG LLPs completion of the audit services for the fiscal year ending
December 31, 2014 and the filing of the Companys 2014 Annual Report on Form 10-K.
Effective March 30, 2015,
the Audit Committee approved the appointment of Elliott Davis as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2015.
KPMG LLPs reports on the Companys consolidated financial statements for the years ended December 31, 2014 and 2013 did
not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the Companys two most recent fiscal years ended December 31, 2014 and 2013 and during the subsequent interim period preceding KPMG LLPs dismissal, there were: (i) no
disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the KPMG LLP, would have caused
KPMG LLP to make reference to the subject matter of the disagreements in its reports on the consolidated financial statements of the Company; and (ii) no reportable events, as these terms are used in Item 304(a) of SEC
Regulation S-K.
23
During the Companys two most recent fiscal years and the subsequent interim period
preceding Elliot Daviss engagement, neither the Company nor anyone on its behalf consulted Elliot Davis regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Companys consolidated financial statements, and no written report or oral advice was provided to the Company that Elliott Davis concluded was an important factor considered by the Company in
reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was subject to a disagreement or reportable event (within the meaning of Item 304(a) of SEC Regulation S-K.
The Company provided KPMG LLP with a copy of the above disclosures and requested that KPMG LLP furnish the Company with a
letter addressed to the SEC stating whether or not it agreed with the statements made above. A copy of KPMG LLPs letter dated April 2, 2015 agreeing with the statements made above was attached as Exhibit 16.1 to the Companys Current
Report on Form 8-K filed with the SEC on April 2, 2015.
Independent Public Accountants Fees
The following table presents fees for professional audit services rendered by KPMG LLP for the audit of the Companys annual
financial statements for the years ended December 31, 2014 and 2013, respectively, and fees billed for other services rendered by KPMG LLP during those periods.
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Audit Fees (1) |
|
$ |
210,000 |
|
|
$ |
200,000 |
|
Audit-Related Fees (2) |
|
|
11,500 |
|
|
|
19,000 |
|
Tax Fees |
|
|
|
|
|
|
|
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
221,500 |
|
|
|
219,000 |
|
(1) |
Includes the aggregate fees billed by KPMG LLP for professional services rendered for the audit of the Companys annual financial statements and review of
unaudited financial statements included in the Companys Forms 10-Q filed during fiscal years 2014 and 2013. |
(2) |
Includes the aggregate fees billed by KPMG LLP for professional services rendered for certain agreed upon procedures and other audit and attestation reports related to
compliance matters during fiscal years 2014 and 2013. |
Audit Committee Review
The Companys Audit Committee has reviewed the services rendered and the fees billed by KPMG LLP for the fiscal year ended
December 31, 2014. The Audit Committee has determined that the services rendered and the fees billed last year that were not related to the audit of the Companys financial statements are compatible with the independence of KPMG LLP as the
Companys independent accountants.
Audit Committee Pre-Approval Policy
Under the Audit Committees Charter and its pre-approval policy, the Audit Committee is required to approve in advance the terms of
all audit services provided to the Company as well as all permissible audit related and non-audit services to be provided by the independent public accountants. Unless a service to be provided by the independent public accountants has received
approval under the pre-approval policy, it will require specific approval by the Audit Committee. The pre-approval policy is detailed as to the particular services to be provided, and the Audit Committee is to be informed about each service
provided. The approval of non-audit services may be performed by the Chairman of the Committee and reported to the full Audit Committee at its next meeting, but may not be performed by the Companys management. The term of any pre-approval is
twelve months, unless the Audit Committee specifically provides for a different period.
24
The Audit Committee will approve the annual audit engagement terms and fees prior to the
commencement of any audit work other than that necessary for the independent public accountant to prepare the proposed audit approach, scope and fee estimates. In addition to the annual audit work, the independent public accountants may perform
certain other audit related or non-audit services that are pre-approved by the Audit Committee and are not prohibited by regulatory or other professional requirements. Engagements for the annual audit and recurring tax return preparation engagements
shall be reviewed and approved annually by the Audit Committee based on the agreed upon engagement terms, conditions and fees. The nature and dollar value of services provided under these engagements shall be reviewed by the Audit Committee to
approve changes in terms, conditions and fees resulting from changes in audit scope, Company structure, exchange rates or other items, if any.
In the event audit-related or non-audit services that are pre-approved under the pre-approval policy have an estimated cost in excess of certain dollar thresholds, these services will require specific
approval by the Audit Committee or by the Chairman of the Audit Committee. Any proposed engagement must be approved in advance by the Audit Committee or by the Chairman of the Audit Committee applying the principles set forth in the pre-approval
policy, prior to the commencement of the engagement. In determining the approval of services by the independent public accountants, the Audit Committee evaluates each service to determine whether the performance of such service would:
(a) impair the public accountants independence; (b) create a mutual or conflicting interest between the public accountant and the Company; (c) place the public accountant in the position of auditing his or her own work;
(d) result in the public accountant acting as management or an employee of the Company; or (e) place the public accountant in a position of being an advocate for the Company. In no event are monetary limits the only basis for the
pre-approval of services.
All of the services provided by KPMG LLP during 2014 and described above under the caption
Audit Fees and Audit-Related Fees were pre-approved by the Companys Audit Committee pursuant to SEC Regulation S-X, Rule 2-01(c)(7)(i).
AVAILABILITY OF ANNUAL REPORT
Copies of the Companys 2014 Annual Report to Shareholders have been provided to each shareholder. The Annual Report can be found by hovering over the heading About Us on the
Companys website, www.auburnbank.com, and then clicking on Investor Relations, and then clicking on SEC filings, and then clicking on Annual Reports. Upon the written request of any person
whose Proxy is solicited by this Proxy Statement, the Company will furnish to such person without charge (other than for exhibits) a copy of the Annual Report, including financial statements and schedules thereto, as filed with the SEC. Such
requests should be directed to Marcia Otwell, Shareholder Relations, Auburn National Bancorporation, Inc., P.O. Box 3110, Auburn, Alabama 36831-3110.
SHAREHOLDER PROPOSALS FOR 2016 ANNUAL MEETING
Proposals of shareholders
intended to be presented at the Companys 2016 Annual Meeting of Shareholders must be received by the Company on or before December 12, 2015, in order to be eligible for inclusion in the Companys proxy statement and form of proxy for
that meeting. In addition, regarding any shareholder proposal that is not submitted for inclusion in the proxy statement and form of proxy relating to the 2016 Annual Meeting of Shareholders, but is instead sought to be presented directly to the
shareholders at the 2016 Annual Meeting, management will be able to vote proxies in its discretion if either (i) the Company does not receive notice of the proposal before the close of business on February 25, 2016, or (ii) the
Company receives notice of the proposal before the close of business on February 25, 2016, and advises shareholders in the proxy statement for the 2016 Annual Meeting about the nature of the proposal and how management intends to vote on the
proposal, unless the shareholder notifies the Company by February 25, 2016, that it intends to deliver a proxy statement with respect to such proposal and thereafter takes the necessary steps to do so.
25
OTHER MATTERS
The Company knows of no other matters to be brought before the Meeting. However, if any other proper matter is presented, the persons
named in the enclosed form of Proxy intend to vote the Proxy in accordance with their judgment of what is in the best interest of the Company.
|
By Order of the Board of Directors |
|
/s/ E. L. Spencer, Jr. |
E. L. Spencer, Jr. |
Chairman |
April 10, 2015
26
Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of
mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on
May 12, 2015. Vote by Internet Go to Or scan the QR code with your Follow the steps outlined on the secure website Using a black ink Den. mark your votes with an X as shown in X this example. Please do not write outside the
designated areas. Vote by telephone Call toll free 1-800-652-VOTE (8683) within the USA, Canada on a touch tone telephone Follow the instructions provided by the recorded message IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposal 2. 1. Election of Directors: 01C. Wayne
Alderman 02Terry W. Andrus 03J. Tutt Barrett 04Robert W. Dumas 05J.E. Evans 06William F. Ham, Jr. 07David E. Housel 08Anne M. May 09E.L. Spencer, Jr. 10Edward Lee Spencer, III Mark here to vote
FOR all nominees Mark here to WITHHOLD vote from all nominees 01 02 03 04 05 06 07 08 09 10 For All EXCEPTTo withhold a vote for one or more nominees, mark the box to the left and the corresponding numbered box(es) to the right. For Against
Abstain 2. To approve the compensation of the Companys named executive officers. 3. The Proxies are authorized to vote upon such other business as may properly come before the Meeting, or any adjournments of the meeting, in accordance with the
determination of a majority of the Companys Board of Directors. B Non-Voting Items Change of Address Please print your new address below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. ? C Authorized
Signatures This section must be completed for your vote to be counted. Date and Sign Below When shares are held by joint tenants, both should sign. Executors, administrators, trustees, etc. should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature within the box. / / 1
UPX 0218ND
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH
AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. REVOCABLE PROXYAUBURN NATIONAL BANCORPORATION, INC. 2015 ANNUAL MEETING OF SHAREHOLDERS May 12, 2015 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. KNOW BY ALL MEN BY THESE
PRESENTS, that the undersigned shareholder of Auburn National Bancorporation, Inc., Aubum, Alabama (the Company), hereby revoking any proxy heretofore given, does hereby nominate, constitute, and appoint E.L. Spencer, Jr., and Terry W.
Andrus or either one of them, the true and lawful attomeys and proxies of the undersigned, with full power of substitution, for the undersigned and in the undersigneds name, place, and stead, to vote all of the shares of common stock of the
Company standing in the undersigneds name, on its books on March 13, 2015, and that the undersigned may be entitled to vote at the Annual Meeting of Shareholders to be held at the AubumBank Center, 132 N Gay Street, Aubum, Alabama at 3:00
p.m. local time, on Tuesday, May 12, 2015, and at any adjoumments thereof (the Meeting), with all the powers the undersigned would possess if personally present as follows: The proxy will be voted as directed by the undersigned
shareholder. Unless contrary direction is given, this proxy will be voted FOR the election of the nominees listed in Proposal 1, FOR approval of the compensation of the Companys named executive officers, and in accordance with the
determination of a majority of the Board of Directors as to any other matters. The undersigned shareholder may revoke this proxy at any time before it is voted by delivering to the Secretary of the Company either a written revocation of the proxy or
a duly executed proxy bearing a later date, or by appearing at the Meeting and voting in person. The undersigned shareholder hereby acknowledges receipt of the Notice of Annual Meeting and Proxy Statement. IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 12, 2015 FOR AUBURN NATIONAL BANCORPORATION, INC. THE FOLLOWING MATERIAL IS AVAILABLE AT WWW.AUBNPROXY.COM . *PROXY STATEMENT*ANNUAL REPORT PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE
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