SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement | |
| x | Definitive Proxy Statement | |
| ¨ | Definitive Additional Materials | |
| ¨ | Soliciting Material Pursuant to Rule 14a-12 | |
| ¨ | Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
Monarch Community Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than The Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. | |||
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
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| (2) | Aggregate number of securities to which transaction applies:
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| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
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| (4) | Proposed maximum aggregate value of transaction:
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| (5) | Total fee paid:
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| ¨ | Fee paid previously with preliminary materials. | |||
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid:
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| (2) | Form, Schedule or Registration Statement No.:
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| (3) | Filing Party:
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| (4) | Date Filed:
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MONARCH COMMUNITY BANCORP, INC.
375 North Willowbrook Road
Coldwater, MI 49036
(517) 278-4566
April 18, 2014
Dear Shareholder:
I am pleased to invite you to attend the Monarch Community Bancorp, Inc.’s 2014 annual meeting of shareholders on May 20, 2014. We will hold the meeting at 7:00 p.m. at Monarch Community Bank, 375 North Willowbrook Road, Coldwater, Michigan.
On the page following this letter, you will find the Notice of Meeting which lists the matters to be considered at the meeting. Following the Notice of Meeting is the proxy statement which describes these matters and provides you with additional information about our Company. Also enclosed you will find your proxy card, which allows you to vote on these matters, and the Company’s 2013 Annual Report.
Your vote is important. One-third of the common stock must be represented, either in person or by proxy, to constitute a quorum for the conduct of business.Please complete and mail in your proxy card promptly, even if you plan to attend the meeting. You can attend the meeting and vote in person, even if you have sent in a proxy card.
The Board of Directors recommends that shareholders voteFOR each of the proposals stated in the proxy statement.
The rest of the Board and I look forward to seeing you at the meeting. Whether or not you can attend, we greatly appreciate your cooperation in returning the proxy card.
| Sincerely, |
| /s/ Richard J. DeVries |
| President and Chief Executive Officer |
MONARCH COMMUNITY BANCORP, INC.
375 North Willowbrook Road
Coldwater, MI 49036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
| TIME | 7:00 p.m., local time, on May 20, 2014 | |||
| PLACE | Monarch Community Bank 375 North Willowbrook Road Coldwater, Michigan | |||
| ITEMS OF BUSINESS | (1) | To elect three members of the Board of Directors for three-year terms. | ||
| (2) | Advisory vote on Executive Compensation. | |||
| (3) | Advisory vote on Say on Frequency of Executive Compensation Vote | |||
| (4) | To ratify the selection of Plante & Moran, PLLC as independent auditors of the Company for the 2014 fiscal year. | |||
| (5) | To transact such other business as may properly come before the Meeting. | |||
| ANNUAL REPORT | Our 2013 Annual Report, which is not a part of the proxy soliciting material, is enclosed. | |||
| RECORD DATE | You can vote if you are a shareholder of record on March 21, 2014. | |||
| QUORUM | One-third of the shares of common stock entitled to vote must be represented at the meeting. If there are insufficient shares, the meeting may be adjourned. | |||
| April 18, 2014 | /s/ Andrew J. Van Doren | |||
| Secretary |
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Voting Procedures for Shares in the Company’s 401(k) Plan or ESOP | 2 | |||
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| ITEM 2. ADVISORY VOTE ON EXECUTIVE COMPENSATION | 11 | |||
ITEM 3. ADVISORY VOTE ON SAY ON FREQUENCY OF VOTE ON EXECUTIVE COMPENSATION | 11 | |||
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SECURITY OWNERSHIP OF SHAREHOLDERS HOLDING 5% OR MORE AS OF 12/31/13 | 15 | |||
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MONARCH COMMUNITY BANCORP, INC.
375 North Willowbrook Road
Coldwater, MI 49036
We are sending you this Proxy Statement and the enclosed proxy card because the Board of Directors of Monarch Community Bancorp, Inc. (the “Company” “we” or “us”) is soliciting your proxy to vote at the 2013 Annual Meeting of Shareholders (the “Annual Meeting”). This Proxy Statement summarizes the information you need to know to vote at the Annual Meeting.
You are invited to attend our Annual Meeting on May 20, 2014 beginning at 7:00 p.m., local time. The Annual Meeting will be held at Monarch Community Bank, 375 North Willowbrook Road, Coldwater, Michigan.
This Proxy Statement and the enclosed form of proxy are being mailed starting on or about April 18, 2014.
Holders of record of common stock of the Company at the close of business on March 21, 2014 are entitled to receive this notice. Generally, each share of common stock of the Company is equal to one vote. However, the Company’s Articles of Incorporation limit the number of shares that may be voted by any holder owning beneficially more than 10% of the outstanding shares of the common stock of the Company (the “Limit”). A beneficial holder of shares in excess of the Limit may not vote any shares exceeding the Limit. [A shareholder may exceed the Limit if affiliates of the shareholder as well as persons acting in concert hold sufficient shares together with such shareholder so as to exceed the Limit. Pursuant to the Articles of Incorporation, the Board of Directors will (i) make all determinations necessary to implement these rules and (ii) demand that anyone reasonably believed to beneficially own shares in excess of the Limit supply information to the Company to enable the enforcement of these rules.
There is no cumulative voting at the Annual Meeting.
As of the record date, there were 8,660,147 common shares issued and outstanding.
Unless you hold your shares in the Company’s Savings and Profit Sharing Plan (the “401(k) Plan”) or the Employee Stock Ownership Plan and Trust (the “ESOP”), you can vote on matters to come before the meeting in one of two ways:
| • | you can come to the Annual Meeting and cast your vote there; or |
| • | you can vote by signing and returning the enclosed proxy card. If you do so, the individuals named as proxies on the card will vote your shares in the manner you indicate. |
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You may also choose to vote for all of the nominees for Director and each proposal by simply signing, dating and returning the enclosed proxy card without further direction. All signed and returned proxies that contain no direction as to vote will be votedFOR each of the nominees for Director andFOR each of the proposals.
The Board of Directors has selected itself as the persons to act as proxies on the proxy card.
If you plan to attend the Annual Meeting and vote in person, you should request a ballot when you arrive.HOWEVER, IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER, BANK OR OTHER NOMINEE, THE INSPECTOR OF ELECTION WILL REQUIRE YOU TO PRESENT A POWER OF ATTORNEY OR PROXY IN YOUR NAME FROM SUCH BROKER, BANK OR OTHER NOMINEE FOR YOU TO VOTE SUCH SHARES AT THE ANNUAL MEETING. Please contact your broker, bank or nominee.
Voting Procedures for Shares in the Company’s 401(k) Plan or ESOP
If you participate in the Company’s 401(k) Plan or ESOP, please return your proxy in the envelope on a timely basis to ensure that your proxy is voted. If you own or are entitled to give voting instructions for shares in the 401(k) Plan or ESOP and do not vote your shares or give voting instructions, generally, the Plan Administrator or Trustee will vote your shares in the same proportion as the shares for all plan participants for which voting instructions have been received. Holders of shares in the 401(k) Plan or ESOP will not be permitted to vote such shares at the Annual Meeting, but their attendance is encouraged and welcome.
The presence, in person or by proxy, of the holders of one-third of the votes entitled to be cast by the shareholders at the Annual Meeting is necessary to constitute a quorum. Abstentions and broker “non votes” are counted as present and entitled to vote for purposes of determining a quorum. A broker “non vote” occurs when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because such broker, bank or nominee does not have discretionary authority to vote and has not received instructions from the beneficial owner.
Once a quorum is achieved, a plurality of votes cast is all that is necessary for the election of directors. Abstentions and broker “non votes” are not counted in determining the vote. As to the say on pay proposal, the say on frequency proposal, the ratification of Plante & Moran, PLLC and all other matters that may come before the meeting, the affirmative vote of a majority of votes cast is necessary for the approval of such matters. Abstentions and broker “non votes” are again not counted for purposes of approving the matter.
If you give a proxy, you may revoke it at any time before it is exercised. You may revoke your proxy in any one of three ways:
| • | you may send in another proxy with a later date; |
| • | you may notify the Company’s Secretary in writing at Monarch Community Bancorp, Inc., 375 North Willowbrook Road, Coldwater, Michigan 49036; or |
| • | unless you hold shares in the 401(k) Plan or ESOP, you may revoke by voting in person at the Annual Meeting. |
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If you choose to revoke your proxy by attending the Annual Meeting, you must vote in accordance with the rules for voting at the Annual Meeting. Attending the Annual Meeting alone will not constitute revocation of a proxy.
We will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by telephone, mail or telegram. We do not intend to engage a proxy solicitation firm to assist us in the distribution and solicitation of proxies. The Company will also request persons, firms and corporations holding shares in their names for other beneficial owners to send proxy materials to such beneficial owners. The Company will reimburse these persons for their expenses.
The Board of Directors knows of no business which will be presented for consideration at the Annual Meeting other than as stated in the Notice of Annual Meeting of Shareholders. If, however, other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the proxies to vote the shares on such matters in their discretion.
Role and Composition of the Board of Directors
Our Company’s Board of Directors is the ultimate decision making body of the Company, except for matters which law or our Articles of Incorporation require the vote of shareholders. The Board of Directors selects the management of the Company which is responsible for the Company’s day to day operations. The Board acts as an advisor to management and also monitors its performance. Our Board of Directors has determined that each of Messrs. Adamson, Dally, Dobbins, Gordon, Loomis, Mitchell, Ross, are independent.
Members of the Board of Directors serve also as Directors of Monarch Community Bank (the “Bank”). The Bank is the Company’s wholly owned subsidiary. You will find a discussion of its activities in your Annual Report.
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During 2013, the Board of Directors met as the Company’s Board of Directors 15 times. In addition, the Board of Directors has authorized five Committees to manage distinct matters of the Company. These Committees are the Executive Committee, the Audit and Risk Committee, the Asset and Liability Committee, the Nominating Committee and the Compensation Committee. Membership on each of the Committees is set forth in the table below. All of our Directors attended 75 percent or more of the meetings of the Board and the Board Committees on which they served in 2013.
Name | Board | Executive | Audit/Risk | Asset/ Liability | Nom. | Comp. | ||||||||||||||||||
Harold A. Adamson | X | X | X | |||||||||||||||||||||
Craig W. Dally | X | X | ||||||||||||||||||||||
Richard J. DeVries | X | X | X | |||||||||||||||||||||
Richard L. Dobbins | X | X | X | X | ||||||||||||||||||||
James W. Gordon | X | X | X | X | ||||||||||||||||||||
Karl F. Loomis | X | X | X | X | X | |||||||||||||||||||
Martin L. Mitchell | X | X | X | X | ||||||||||||||||||||
Stephen M. Ross | X | X | X | X | ||||||||||||||||||||
Gordon L. Welch | X | X | ||||||||||||||||||||||
Meetings in 2013 | 15 | 0 | 12 | 4 | 1 | 3 | ||||||||||||||||||
Board Leadership Structure and Oversight of Risk
The Chairman of the Board and Chief Executive Officer positions historically have been separate, with the Chairman being an outside director. The Company believes this structure permits the Board to better hold management accountable and decreases the possibility that a person holding the combined offices could exercise undue influence on the Board.
The Board administers its risk oversight function as follows:
| • | By the adoption of Board Policies to address various risks. |
| • | By the entire Board regularly reviewing and discussing reports on Interest Rate Risk, Liquidity, Capital, and Classified Assets, as well as delinquency reports. |
| • | By directing Management to perform annual risk assessments. |
| • | Through the Audit Committee, which directly engages annual third party reviews of Information Technology, Bank Secrecy Act compliance, Regulatory Compliance, and Commercial Loans. All reports generated, together with Management responses, are reviewed by the Audit Committee, which then requires regular reports from Management on its progress in addressing all issues raised in such reports. |
| • | The internal audit function is performed by an external firm, Rehmann Robson. The Audit Committee reviews Internal Audit reports at its monthly meetings. The Committee holds Management accountable to address all exceptions noted in Internal Audit and Examination reports. The Chief Risk Management Officer is responsible for tracking exception follow up. |
The Executive Committee generally acts in lieu of the full Board of Directors between board meetings. This committee is responsible for formulating and implementing policy decisions, subject to review by the entire Board of Directors.
The Audit and Risk Committee is responsible the annual appointment of the public accounting firm to be our outside auditors. The Committee is responsible for the following tasks:
| • | maintaining a liaison with the outside auditors; |
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| • | reviewing the adequacy of internal controls; |
| • | reviewing all Board Policies annually; |
| • | reviewing with management and outside auditors financial disclosures of the Company; and |
| • | reviewing any material changes in accounting principles or practices used in preparing statements. |
Audit Committee Financial Expert
While the Board of Directors endorses the effectiveness of our Audit Committee, its membership does not include a director who qualifies for designation as an “audit committee financial expert” – a concept under federal regulation that contemplates such designation only when an audit committee member satisfies all five qualification requirements, such as experience (or “experience actively supervising” others engaged in), preparing, auditing, analyzing or evaluating financial statements presenting a level of accounting complexity comparable to what is encountered in connection with our Company’s financial statements.
The Board of Directors Asset and Liability Committee (“ALCO”) meets regularly four times a year, after the end of each quarter. The Board ALCO now oversees such matters as the Company’s investment policy, asset/liability management, liability management, capital management, and interest rate risk management.
Our Board of Directors has a Nominating Committee, which in 2013 consisted of three directors. Messrs. Dally, Mitchell, and Welch are the current members of this committee. The Nominating Committee identifies individuals to become board members and selects, or recommends for the board’s selection, director nominees to be presented for shareholder approval at the annual meeting of shareholders or to fill any vacancies. During the fiscal year ended December 31, 2013, the Nominating Committee held one meeting.
Our Board of Directors has adopted a written charter for the Nominating Committee, a copy of which is available to shareholders on our website, athttp://www.monarchcb.com, via the “Investor Relations” tab. Each of the members of our Nominating Committee is independent.
The Nominating Committee’s policy is to consider director candidates recommended by shareholders. Such recommendations must be made pursuant to timely notice in writing to
Andrew J. Van Doren, Secretary
Monarch Community Bancorp, Inc.
375 North Willowbrook Road
Coldwater, MI 49036
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The Nominating Committee has established certain qualifications in order to be eligible for service on the Board:
| • | No person shall be eligible for election or appointment to the Board of Directors if such person (i) has, within the previous 10 years, been the subject of supervisory action by a financial regulatory agency that resulted in a cease and desist order or an agreement or other written statement subject to public disclosure under 12 U.S.C. 1818 (u), or any successor provision, (ii) has been convicted of a crime involving dishonesty or breach of trust which is punishable by imprisonment for a term exceeding one year under state or federal law, or (iii) is currently charged in any information, indictment, or other complaint with the commission of or participation in such a crime. No person is eligible for election to the Board of Directors if the person is the nominee or representative of a person or group that includes a person who is ineligible for election to the Board. |
| • | No person shall be eligible for election or appointment to the Board of Directors if such person shall have attained the age of 75 years at the time of such election or appointment. |
Historically, the Nominating Committee used a subjective process for identifying and evaluating nominees for director, based on the information available to, and the subjective judgments of, the members of the Nominating Committee and our then current needs; and nominees have been existing directors or business associates of our directors or officers. In 2005, objective standards for evaluating director nominees were adopted, as follows:
A. Nominees for Directors of the Company shall possess such qualifications as the Company’s Bylaws may require.
B. Nominees shall own, directly or indirectly, at least 1,000 shares of common stock of the Company. Shares owned jointly with other persons shall be counted toward such minimum. The Board of Directors may waive this requirement for nominees recommended by shareholders owning at least 500,000 shares.
C. Nominees shall be at least 30 years of age as of the date of election to the Board.
D. Nominees shall be citizens of the United States of America.
E. Nominees shall possess a Bachelor’s Degree from an accredited college or university, or shall possess employment experience judged by the Committee to be the equivalent of such a degree.
F. Nominees shall possess a minimum of 10 years experience in a least one of the following:
| • | Management position(s) with a for-profit or non-profit entity; |
| • | Ownership of a business; or |
| • | Employment in a learned profession such as accounting or law. |
G. Nominees shall exhibit a basic understanding of financial statements and the banking industry.
H. Nominees shall not be or have been under any type of disciplinary order, sanction, or penalty from a national or state banking, securities, or licensed profession regulatory body.
I. Nominees shall not have been convicted of a crime, other than non-substance abuse related traffic offenses.
J. Nominees shall certify in writing that he or she possess the above qualifications.
K. Nominees shall furnish such references as the Committee may request.
L. Nominees shall answer such questions and attend such interviews as the Committee shall request.
Nominees recommended by a shareholder also will be evaluated in accordance with the above standards. The Nominating Committee considers diversity in identifying nominees for director, but has not adopted a formal written diversity policy. The complete Nominating Committee Policies and Procedures are available on our website,www.monarchcb.com, via the “Investor Relations” tab.
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Nominations of persons for election to the Board of Directors may be made only by or at the direction of the Board of Directors or by any shareholder entitled to vote for the election of directors who complies with the notice procedures set forth in the Company’s bylaws. Pursuant to our bylaws, nominations by shareholders must be delivered in writing to the Secretary of Monarch Community Bancorp, Inc. at least 90 days but no more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder must be delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which notice of the date of annual meeting was mailed or public announcement of the date of such meeting is first made.
The Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the Chief Executive Officer (Mr. DeVries) and other Executive Officer compensation, including annual performance objectives. The Committee has a charter, which is available on our website,www.monarchcb.com, via the “Investor Relations” tab. This Committee also approves the senior officers’ compensation and other incentive compensation programs recommended by the Chief Executive Officer, subject to final approval of the Company’s budget by the Board of Directors. The Committee utilizes industry prepared surveys of annual compensation but does not engage consultants in connection with its review of executive compensation. The Committee’s functions include:
| • | awarding shares or options under the Company’s stock option plan (the Committee has delegated to the Chief Executive Officer authority to award options to Company employees); and |
| • | recommending to the Board of Directors changes in director compensation, as well as the award of shares or options to directors. |
The Company has adopted a Code of Conduct that applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Conduct contains written standards that we believe are reasonably designed to deter wrongdoing and to promote:
| • | Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| • | Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications we make; |
| • | Compliance with applicable governmental laws, rules and regulations; |
| • | The prompt internal reporting of violations of the code to an appropriate person or persons named in the code; and |
| • | Accountability for adherence to the code. |
This Code of Conduct is attached to our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 as Exhibit 14. We have also posted it on our Web site athttp://www.monarchcb.com under the “Investor Relations” tab. We will provide to any person without charge, upon request, a copy of our Code of Conduct. Requests for a copy of our Code of Conduct should be made to our Secretary at 375 North Willowbrook Road, Coldwater, Michigan 49036. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or any waiver from, a provision of our Code of Conduct that applies to our principal executive officer, principal financial officer, principal accounting
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officer or controller or persons performing similar functions and that relates to any element of the code definition enumerated in Securities and Exchange Commission, Regulation S-K, Item 406(b) by posting such information on our Web site athttp://www.monarchcb.com, via the “Investor Relations” tab. within four business days following the date of the amendment or waiver.
Shareholder Communications with the Board
Our Board of Directors has a process for shareholders to send communications to the Board of Directors, its Nominating Committee, its Compensation Committee or its Audit Committee, including complaints regarding accounting, internal accounting controls, or auditing matters. Communications can be sent to the Board of Directors; its Nominating Committee, its Compensation Committee or its Audit Committee or specific directors either by regular mail to the attention of the Board of Directors, its Nominating Committee, its Compensation Committee, its Audit Committee or specific directors, at our principal executive offices at 375 North Willowbrook Road, Coldwater, Michigan 49036. All of these communications will be reviewed by our Secretary (1) to filter out communications that our Secretary deems are not appropriate for our directors, such as spam and communications offering to buy or sell products or services, and (2) to sort and relay the remainder to the appropriate directors. We encourage all of our directors to attend the annual meeting of shareholders, if possible. All of our then-current directors attended the 2013 annual meeting of shareholders.
| ITEM 1. | ELECTION OF DIRECTORS |
Currently, the Board of Directors has nine members divided into three classes of three directors per class. One director whose term expires in 2015 resigned from the Board during 2013 and has not been replaced. Each class of directors has three-year terms. One class of directors is up for election each year. This results in a staggered Board which ensures continuity from year to year.
Three directors will be elected at the Annual Meeting to serve for three-year terms expiring at our Annual Meeting in the year 2017.
The persons named in the enclosed proxy card intend to vote the proxy for the election of each of the three nominees unless you indicate on the proxy card that your vote should be withheld from any or all of such nominees. Each nominee elected as director will continue in office until his or her successor has been elected, or until his death, resignation or retirement.
The Board of Directors has proposed the following nominees for election as Directors with terms expiring in 2017 at the Annual Meeting: Harold Adamson, James W. Gordon, and Karl F. Loomis.
The Board of Directors recommends a vote FOR the election of these nominees as Directors.
We expect each nominee to be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees. The principal occupation and certain other information about the nominees and other directors whose terms of office continue after the Annual Meeting, including the specific factors that led the Board to conclude that such person should serve as a Director, is set forth below. Such terms may include years of services for the Bank prior to the formation of the Company.
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CONTINUING DIRECTORS WHOSE TERMS WILL EXPIRE IN 2015
Name and Age as of the Annual Meeting | Position, Principal Occupation, Business Experience and Directorship | |||
| Martin L. Mitchell | 63 | Director since April 2004. Previously served as Director of MSB Financial, Inc. and Marshall Savings Bank, F.S.B. from 1987 to 2004. In 2004, Dr. Mitchell became President and Chief Executive Officer of Starr Commonwealth, a non-profit organization serving youth and their | ||
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| families with campuses in Albion, Battle Creek and Detroit, Michigan and Columbus and Van Wert, Ohio. Previously he was Executive Vice President and Chief Operations Officer 2002-2004, Vice President and COO 1999-2002, and Vice President of Program from 1981-1999. Dr. Mitchell has served on the Board of Directors of Olivet College, Olivet Michigan since 1995. Dr. Mitchell’s experience as a director of MSB Financial, together with his extensive management background with Starr Commonwealth, qualifies him to serve as Director. | ||||
| Stephen M. Ross | 70 | Director since 1994. Appointed Chairman in 2004. From 1980 until August, 2003, Mr. Ross was Senior Vice President of the Hillsdale Division of Eagle-Picher, Inc., an automotive supplier. Mr. Ross retired as Vice President of Sales and Marketing for Southern Michigan Tool and Machine, an automotive parts supplier in Hillsdale, Michigan. Mr. Ross’ long-time experience as a Bank director, his managerial experience, as well as his accounting background, qualifies him to serve as Director. | ||
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2016
Name and Age as of the Annual Meeting | Position, Principal Occupation, Business Experience and Directorship | |||
| Craig W. Dally | 67 | Director since 1992. Vice President, Treasurer and General Manager of Dally Tire Co., a retail and commercial tire reseller with over $1 million in sales located in Coldwater, Michigan. Mr. Dally has served in this capacity for over 21 years. Mr. Dally’s experience on the Board since 1992 and his small business managerial experience qualify him to serve as a Director. | ||
| Richard L. Dobbins | 69 | Director since 2004. Previously served as a Director of MSB Financial, Inc. and Marshall Savings Bank, F.S.B. from 1974 to 2004. Mr. Dobbins is an attorney in private practice since 1973, and is President of North Concord Farms, Inc., North Parma Farms, Inc., and Dobbins Farms, Inc. From 1990 to 2002, he was a director of Caster Concepts, Inc., a manufacturer of industrial wheels and casters in Albion, Michigan. Mr. Dobbins’ 30 years of experience as a Bank director, together with his legal and business experience, qualify him to serve as a Director. | ||
| Richard J. DeVries | 58 | Director since 2010. President and Chief Executive Officer, Monarch Community Bank and Monarch Community Bancorp, Inc. Formerly President, Chief Executive Officer and Director of Pavilion Bancorp and The Bank of Lenawee, Adrian, Michigan (2003-2008). President and CEO, Bank One/Citizens Bank, Ypsilanti, Michigan (1993-2000). Senior Vice President, Commercial and Retail Banking, Bank One—East Lansing, Michigan (1990-1993). Vice President, Venture Capital Lending, Norwest Bank, Minneapolis, Minnesota and New York, New York; Vice | ||
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| President, Media Lending; Vice President, Corporate Training; Vice President, Large Corporate Lending; Assistant Vice President, Commercial Banking—California and Arizona (1983-1990). Assistant Vice President, Interfirst Bank, Dallas Texas and New York, New York; Banking Officer, Midwest Fortune 1000 Lending, Ohio, Indiana, Kentucky; Commercial Lending Trainee (1981-1983). From 2000-2003, Mr. DeVries served as volunteer President of the Oakland, California Mission of the Church of Jesus Christ of Latter-Day Saints. He holds a BBA in Marketing/Economics and an MBA, Finance, from Central Michigan University. Mr. DeVries’ education and long and varied career in banking, including serving as a bank and bank holding company director, qualifies him to serve as Director. |
| ITEM 2. | ADVISORY VOTE ON EXECUTIVE COMPENSATION |
Section 14A of the Exchange Act provides Company’s stockholders the opportunity to vote to approve, on an advisory,non-binding basis, the compensation of the Company’s named executive officers as disclosed in this Proxy Statement. Pursuant to Section 14A of the Exchange Act, the Company is presenting the following “say-on-pay” proposal, which gives stockholders the opportunity to approve the Company’s compensation for its named executive officers as disclosed pursuant to Item 402(m) through (q) of Regulation S–K by voting for or against the resolution set forth below:
“Resolved, that the shareholders approve the executive compensation of the Company, as described in the “Executive Compensation” Section and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.”
Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The Board of Directors unanimously recommends a vote “FOR” approval of the executive compensation of the Company, as described in the “Executive Compensation” section, and the tabular disclosure regarding named Executive Officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.
| ITEM 3. | ADVISORY VOTE ON SAY ON FREQUENCY OF VOTE ON EXECUTIVE COMPENSATION |
We are seeking an advisory vote on the frequency with which say-on-pay votes, similar to Item 2 in this Proxy Statement, should be held in the future. This advisory vote is commonly referred to as “say on frequency.”
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We recommend that our stockholders select a frequency of three years, or a triennial vote. We believe our executive compensation program is designed to support long-term value creation, and a triennial vote will provide stockholders with an appropriate timeframe for judging our executive compensation program in relation to our long-term performance. As part of our effort to ensure management’s interests are aligned with our stockholder’s interests to support long-term value creation, we grant awards with multi-year service periods to encourage our named executive officers to focus on long-term performance. A triennial vote allows our executive compensation programs to be evaluated over similar time-frames and in relation to our long-term performance. In addition, a triennial vote will provide us with the time to thoughtfully respond to stockholders’ sentiments and implement any necessary changes. We periodically and deliberately consider modifications to our executive compensation program so that we are able to motivate our employees while maintaining consistency and credibility in our executive compensation program. We believe that a triennial vote is an appropriate frequency to provide our Compensation Committee and Board with sufficient time to thoughtfully consider stockholder input and to implement any appropriate changes to our executive compensation program.
Because this proposal is advisory, it will not be binding on the Company. However, the Board values our stockholders’ opinions and the Board will consider the outcome of the vote when determining the frequency of future advisory votes on executive compensation. To be effective, the proposal needs to be approved by the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS SELECT “THREE YEARS” ON THE PROPOSAL RECOMMENDING THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION.
| ITEM 4. | RATIFICATION OF AUDITORS |
The Audit Committee of the Board of Directors has appointed Plante & Moran, PLLC to serve as our independent auditors for 2014 and is seeking the ratification of the appointment of Plante & Moran, PLLC by our shareholders.
In the event our shareholders fail to ratify the selection of Plante & Moran, PLLC, the Audit Committee will consider it as a direction to select other auditors for the subsequent year. Representatives of Plante & Moran, PLLC will be present at the Annual Meeting to answer questions. They will also have the opportunity to make a statement if they desire to do so.
Audit fees and expenses billed to the Company by Plante & Moran, PLLC for the audit of the Company’s financial statements for the fiscal years ended December 31, 2013 and December 31, 2012, and for review of the Company’s financial statements included in the Company’s quarterly reports on Form 10-Q, are as follows:
| 2013 | 2012 | |||||
| $ | 89,000 | $ | 105,700 | |||
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Audit related fees and expenses billed to the Company by Plante & Moran, PLLC for fiscal years 2013 and 2012 for services related to the performance of the audit or review of the Company’s financial statements that were not included under the heading “Audit Fees,” are as follows:
| 2013 | 2012 | |||||
| $ | 0 | $ | 0 | |||
Tax fees and expenses billed to the Company for fiscal years 2013 and 2012 for services related to tax compliance, tax advice and tax planning, consisting primarily of preparing the Company’s federal and state income tax returns for the previous fiscal periods and inclusive of expenses are as follows:
| 2013 | 2012 | |||||
| $ | 11.000 | $ | 13,000 | |||
Fees and expenses billed to the Company by Plante & Moran, PLLC for all other services provided during fiscal years 2013 and 2012 are as follows:
| 2013 | 2012 | |||||
| $ | 20,000 | $ | 18,250 | |||
In accordance with Section 10A(i) of the Exchange Act, before Plante & Moran, PLLC is engaged by us to render audit or non-audit services, the engagement is approved by our Audit Committee. None of the audit-related, tax and other services described in the table above were approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X. None of the time devoted by Plante & Moran, PLLC on its engagement to audit the Company’s financial statements for the year ended December 31, 2013 is attributable to work performed by persons other than Plante & Moran, PLLC employees.
The affirmative vote of a majority of votes cast on this proposal, without regard to abstentions or broker “non votes,” is required for the ratification of the appointment of Plante & Moran, PLLC.
The Board of Directors recommends a vote FOR the ratification of the appointment of Plante & Moran, PLLC as our independent auditors for the year 2014.
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SECURITY OWNERSHIP OF DIRECTORS, MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS AND ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP AS OF 12/31/13
Name | Amount and Nature of Beneficial Ownership(1) | Ownership As a Percent of Class | ||||||
Harold A. Adamson, Director | 15,768 | (2) | * | |||||
Vicki L. Bassage, Executive Officer | 11,908 | (3) | * | |||||
Rebecca S. Crabill, Executive Officer | 13,871 | (4) | * | |||||
Craig W. Dally, Director | 18,785 | (5) | * | |||||
Richard J. DeVries, President, CEO & Director | 18,640 | (2) | * | |||||
Richard L. Dobbins, Director | 113,534 | (6) | * | |||||
James W. Gordon, Director | 52,278 | (2) | * | |||||
Karl F. Loomis, Director | 129,606 | (2) | * | |||||
Martin L. Mitchell, Director | 105,435 | (6) | * | |||||
Charles J. Mulka, Executive Officer | 860 | (3) | * | |||||
Stephen M. Ross, Director, Chairman | 15,724 | (2) | * | |||||
Andrew J. Van Doren, Executive Officer | 6,032 | (4) | * | |||||
All directors and executive officers as a group (12 persons)(7) | 502,441 | (8) | 5.79 | % | ||||
| (1) | Except as otherwise noted in these footnotes, the nature of beneficial ownership for shares reported in this table is sole voting and investment power. |
| (2) | Includes 1,000 shares issuable upon the exercise of options exercisable within 60 days. |
| (3) | Includes shares held in the ESOP. |
| (4) | Includes shares held in 401(k) and ESOP. |
| (5) | Includes 20 shares owned by Dally Tire Company where Mr. Dally is Vice President, Treasurer and General Manager, and 1,000 shares issuable upon the exercise of options exercisable within 60 days. |
| (6) | Includes 2,984 shares issuable upon the exercise of options exercisable within 60 days. |
| (7) | Includes shares held directly, as well as shares held jointly, shares held in retirement accounts, held in a fiduciary capacity, held by certain of the group members’ families, or held by trusts of which the group member is a trustee or substantial beneficiary, with respect to which shares the group member may be deemed to have sole or shared voting and/or investment powers. |
| (8) | Includes a total of 11,967 shares issuable upon the exercise of options exercisable within 60 days. |
| * | Less than 1% ownership as a percent of class. |
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SECURITY OWNERSHIP OF SHAREHOLDERS HOLDING 5% OR MORE AS OF 12/31/13
| NAME AND ADDRESS OF BENEFICIAL OWNER | NUMBER OF SHARES | PERCENT OF CLASS | ||||||
Joel S. Lawson IV 2040 Grubbs Mill Road Berwyn, PA 19312 | 865,000 | 9.99 | ||||||
Banc Fund VIII LP 20 North Wacker Drive, Suite 300 Chicago, IL 60606 | 850,000 | 9.82 | ||||||
BSOF Master Fund LP 345 Park Avenue, 28th Floor New York, NY 10154 | 566,567 | 6.54 | ||||||
Transactions with Certain Related Persons
We have followed a written policy of granting consumer loans and loans secured by the borrower’s personal residence to our officers, directors and employees. Loans to all officers and directors must be reported to the Board of Directors. Loans exceeding $500,000 (when aggregated) must be approved by a majority of the disinterested directors. All loans to our employees, executive officers and directors were made in the ordinary course of business and on the same terms and conditions as those of comparable transactions prevailing at the time for comparable loans to persons not related to the lender, in accordance with our underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. All loans to directors and executive officers were performing in accordance with their terms at December 31, 2013.
The Company has a written policy requiring annual disclosure by directors and executive officers of the identity of immediate family members and related interests and all transactions between the Company and related persons or interests, which must be on the same terms as transactions with unrelated parties. The Company Secretary maintains records of the disclosures. Other than loans granted by the Company’s subsidiary, Monarch Community Bank under the policies discussed above, there were no transactions with related persons in 2013.
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The salaries and other cash compensation; fringe benefits including insurance plans and the 401(k) Plan are provided to the executive officers by the Bank. Stock-based compensation, including the Employee Stock Ownership Plan, the 2003 Recognition and Retention Plan, and the 2003 Stock Option Plan, is awarded by the Company. This section describes the current compensation policy as endorsed by the Company’s Board of Directors and the Compensation Committee. The executive compensation program of the Bank has been designed to:
| 1. | Provide a pay-for-performance policy that differentiates compensation amounts based upon corporate and individual performance. |
| 2. | Provide compensation opportunities comparable to those offered by other Michigan-based financial institutions and Eastern US banks of similar asset size, thus allowing the Bank to compete for and retain talented executives who are essential to the long-term success of the Company and the Bank. |
| 3. | Align the interest of the executive officers with the long-term interest of the Company’s shareholders through the ownership of Company Common Stock. |
The executive compensation program is comprised of salary, opportunities for annual cash bonuses, participation in the ESOP, participation in the Incentive Stock Option Plan and participation in the Retention and Recognition Plan (RRP). An executive officer’s salary is based on a number of factors, including, (1) the Bank’s performance as compared to internally established goals for the most recently ended fiscal year and to the performance of other Michigan-based financial institutions, (2) the individual officer’s level of responsibility with the Bank and (3) comparisons to salaries paid to officers holding similar positions in other Michigan–based financial institutions.
The award of an annual cash bonus is made in the discretion of the Board of Directors and is pursuant to a formal plan or formula. There was no 2013 bonus plan, nor is there a bonus plan for 2014. Future bonus plans will be as established in the Company’s annual budget and business plan. The Company currently does not plan to recover or reduce payments if the relevant terms of the Company’s performance are restated or otherwise adjusted in a manner that would reduce the size of a payment, except to extent required because of the Company’s participation in the U.S. Treasury’s Capital Purchase Plan.
The Bank, as plan sponsor of the ESOP, made an ESOP contribution which was allocated among all participating employees of the Bank, including the executive officers based on their annual salaries. The Compensation Committee uses the award of stock options and/or available Recognition and Retention Plan stock to officers to align the officers’ interests with those of the shareholders; significant vesting periods are also used to retain employees. The amount of stock granted is determined by reviewing the practices of other financial institutions based on information provided by an outside reliable research consultant to the Board of Directors.
The current salary of the Chief Executive Officer was set by the Board of Directors after negotiations between Mr. DeVries and the Compensation Committee prior to his appointment in July 2010. Any future increases will occur after a performance appraisal.
16
The annual salaries of the other executive officers generally are based on their annual performance appraisals and the recommendations of the Chief Executive Officer, within the constraints of the budget adopted by the Board of Directors. The budget for 2014 does not include general salary increases.
In 1993, Section 162 (m) of the Internal Revenue Code was amended to place limits on the deductibility of compensation in excess of $1 million paid to executive officers of publicly held companies. The Board of Directors of the Company does not believe, however, that the amendment has had or will have any impact on the compensation policies followed by the Board.
The following table shows, for the year ended December 31, 2013, the cash compensation paid, as well as certain other compensation paid or accrued, to the Chief Executive Officer, the Chief Financial Officer, and the other executive officers who received over $100,000 in total compensation during such years.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation1 ($) | Total ($) | ||||||||||||||||||||||||
Richard J. DeVries | 2013 | 231528 | 2 | 0 | 0 | 0 | — | 4,848 | 3 | 236,376 | ||||||||||||||||||||||
President & CEO | 2012 | 229,800 | 2 | 0 | 0 | 0 | — | 5,843 | 3 | 235,643 | ||||||||||||||||||||||
| 2011 | 233,028 | 2 | 0 | 0 | 0 | — | 1,735 | 3 | 234,763 | |||||||||||||||||||||||
Rebecca S. Crabill, | 2013 | 135,738 | 0 | 0 | 0 | — | 856 | 136,584 | ||||||||||||||||||||||||
1st EVP & CFO | 2012 | 135,728 | 0 | 0 | 0 | — | 2,036 | 137,115 | ||||||||||||||||||||||||
| 2011 | 128,869 | 0 | 0 | 0 | — | 930 | 129,799 | |||||||||||||||||||||||||
Andrew J. Van Doren | 2013 | 105,758 | 0 | 0 | 0 | — | 708 | 106,536 | ||||||||||||||||||||||||
EVP, Secretary & General Counsel | 2012 | 105,758 | 0 | 0 | 0 | — | 1,788 | 107,546 | ||||||||||||||||||||||||
| 2011 | 105,920 | 0 | 0 | 0 | — | 1,019 | 106,939 | |||||||||||||||||||||||||
Vicki L. Bassage | 2013 | 105,728 | 0 | 0 | 0 | — | 705 | 106,433 | ||||||||||||||||||||||||
EVP, Monarch Community Bank | 2012 | 105,758 | 0 | 0 | 0 | — | 1,787 | 107,545 | ||||||||||||||||||||||||
| 2011 | 105,728 | 0 | 0 | 0 | — | 979 | 106,707 | |||||||||||||||||||||||||
Charles C. Mulka | 2013 | 155,728 | 0 | 0 | 0 | — | 774 | 116,502 | ||||||||||||||||||||||||
EVP, Monarch Community Bank | 2012 | 115,728 | 0 | 0 | 0 | — | 1,911 | 117,639 | ||||||||||||||||||||||||
| 2011 | 108,566 | 0 | 0 | 0 | — | 771 | 109,337 | |||||||||||||||||||||||||
| 1. | Includes ESOP allocation and life insurance premiums. |
| 2. | Includes annual Director Fee meeting fees for Board of Director meetings attended. |
| 3. | Includes personal use of Company-owned vehicle. |
Backgrounds of our Executive Officers
In addition to the information about our President and Chief Executive Officer, Richard J. DeVries, which is set forth on page 12, following is information about the Company’s other executive officers.
Rebecca S. Crabill,Age 43, 1st Executive Vice President, and Chief Financial Officer for Monarch Community Bancorp, Inc and Monarch Community Bank. Employed by Monarch Community Bank since 1996. She previously held the position of Controller, and began her employment with the Bank as a Teller. Ms. Crabill holds a Bachelor Degree in Accounting from Sienna Heights University.
17
Andrew J. Van Doren, Age 65, Executive Vice President, Secretary, and General Counsel for Monarch Community Bancorp, Inc. since the Company was formed in 2002. He has been employed by Monarch Community Bank since 2001 as Executive Vice President, Secretary, General Counsel, and Chief Risk Management Officer. Prior to coming to the Bank, Mr. Van Doren was President of Biringer, Hutchinson, Van Doren, Lillis, and Bappert, P.C., a law firm in Coldwater, Michigan, which he joined in 1983. Mr. Van Doren holds a B.A. from Western Michigan University and aJuris Doctordegree from Northwestern University School of Law. He is a 2008 graduate, with honors, of the American Banker Association’s National School of Banking, and is a Certified Regulatory Compliance Manager.
Vicki L. Bassage,Age 51, Assistant Secretary, Monarch Community Bancorp, Inc.; Executive Vice President and Chief Talent and Marketing Officer for Monarch Community Bank. Ms. Bassage has been employed by Monarch Community Bank since 1985. She previously held various positions with the Bank, beginning as a Teller.
Charles C. Mulka,Age 58, Executive Vice President and Chief Lending Officer, Monarch Community Bank. Mr. Mulka has been employed by Monarch Community Bank since 2010. He previously was employed by Bank of America and Fifth Third Bank as a commercial loan officer. He began his banking career with Michigan National Bank, working in variety of capacities. Mr. Mulka holds BA and MSBA degrees from Madonna University.
There currently is no Employment Agreement with Mr. DeVries.
Management Continuity Agreements
On December 16, 2004, the Company entered into management continuity agreements with Andrew J. Van Doren, Senior Vice President and General Counsel and Vicki L. Bassage, Monarch Community Bank Senior Vice President, and on February 21, 2008 with Rebecca S. Crabill, Executive Vice President and Chief Financial Officer; (each an “Executive”). The agreements are valid for a period of one year and renew automatically for successive one-year periods, unless the Board of Directors of the Company indicates by resolution adopted at least three months prior to the end of the relevant one-year term that the agreements shall not be renewed.
Pursuant to the agreements if, during a change in control period, Executive is terminated other than for cause, death, disability or retirement, or if Executive terminates his employment for good reason, then the Executive is entitled to receive his annual base salary for a period of twelve months following the date of termination and ongoing health insurance coverage for Executive and his family under the Bank’s health care plan for a period of twelve months. If Executive’s employment is terminated by reason of death, disability or retirement during the change in control period, then the agreement terminates and the Company must pay Executive his annual base salary through the date of termination and any benefits that have accrued prior to that date. If Executive’s employment is terminated for cause, then the agreement terminates without any further obligations to Executive.
18
A “change in control” is defined to include the following: (A) any third person becoming the beneficial owner of shares of the Company with respect to which 25% or more of the total number votes for the election of the Board may be cast; (B) a change in control of the Company’s subsidiary bank within the meaning of the Home Owners Loan Act of 1933; (C) as a result of or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who are directors of the Company before such transaction or event ceased to constitute a majority of the Board of the Company or any successor to the Company; or (D) the Company transfers substantially all of its assets to another corporation or entity which is not an affiliate of the Company. The “change in control period” is defined as the period commencing on the date of the change in control and ending twelve months later.
“Cause” is defined as termination due to Executive’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, failure to perform stated duties or to follow one or more specific written directives of the Board, reasonable in nature and scope, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order, or material breach of any provision of the agreement. “Good reason” generally includes: (A) if Executive would be required to move his personal residence or perform his principal executive functions more than 25 miles from the Executive’s primary office; (B) if the Company should fail to maintain Executive’s base salary or fail to maintain employee benefit plans or arrangements generally comparable to those currently in place; or (C) if Executive is assigned substantial duties and responsibilities other than those normally associated with his current position.
In the event of disputes under the agreement, the parties have agreed to binding arbitration in accordance with the rules of the American Arbitration Association and have waived their right to a trial by jury.
Assuming termination occurred on December 31, 2013, the estimated total post-employment payments due under these agreements (assuming current salary and health insurance costs) are as follows:
| • | Mr. Van Doren: $116,074 |
| • | Ms. Crabill: $146,022 |
| • | Ms. Bassage: $107,545 |
2003 Recognition and Retention Plan
The Recognition Plan acquired 92,575 shares of Common Stock. At December 31, 2012, 92,275 shares had been granted to current or former directors and executive officers, and 85,549 of such shares had vested. Under the Recognition Plan, shares are awarded as restricted stock which vests in equal annual installments over the five-year period from the date of grant. The dividends on unvested shares are paid to the grantee. Currently grants are made by the Compensation Committee on the recommendation of the Chief Executive Officer, based the grantee’s performance.
If the grantee’s employment terminates, all unvested shares are forfeited unless due to a change in control of the Company, death or disability; upon the occurrence of any such event, all unvested shares become vested.
Unvested shares are not transferable. In the event of any change in the outstanding shares of the Company’s Common Stock because of any recapitalization, stock split, reverse stock split, stock dividend, reorganization, consolidation, combination or exchange of shares, merger, or any other change in the corporate structure of the Company or in the shares of Common Stock, the number and class of shares awarded shall be appropriately adjusted by the Compensation Committee.
19
A total of 231,438 shares of Common Stock were reserved under the 2003 Stock Option Plan for awards to directors and employees. As of December 31, 2013 adjusted for the 5-for-1 Reverse Split of May 28, 2013, 34,322 of such shares are available for future grant. The option price is the market price on the date of the award. Currently awards are made by the Compensation Committee on the recommendation of the Chief Executive Officer.
In the event of any change in the outstanding shares of the Company’s Common Stock because of any recapitalization, stock split, reverse stock split, stock dividend, reorganization, consolidation, combination or exchange of shares, merger, or any other change in the corporate structure of the Company or in the shares of Common Stock, the number and class of shares awarded and the exercise price shall be appropriately adjusted by the Compensation Committee.
If an option-holder’s employment is terminated for cause, all options are forfeited. In the event of voluntary termination or termination other than for cause (except termination after a change in control of the Company), unvested options are forfeited; vested options must be exercised within three months of termination (one year in the event of termination because of disability) or are forfeited.
In the event of termination following a change in control of the Company, all unexercised options, including unvested options, become exercisable.
Options are not transferable, except that in the event of death the person to whom the options are transferred by will or the laws of descent may exercise the options that were vested at death within one year of the death of the Optionee. However, the Company has the discretion to pay the amount by which the Market Value per share of Common stock on the date of exercise of the Options exceeds the Exercise Price per Option Share, multiplied by the number of Option Shares exercised.
The Bank has a 401(k) Plan in which substantially all employees may participate. Until December 31, 2009, the 401(k) Plan provided for matching contributions equal to 25% on the first 6% of the participant’s 401(k) deferrals for the year. Employer contributions become 20% vested for each year of employment, with full vesting after five years. Effective January 1, 2010, the Plan no longer provides for matching contributions.
Employee Stock Ownership Plan and Trust
The Bank has established an ESOP for employees of the Bank. Full-time employees who have been credited with at least 1,000 hours of service during a 12-month period and who have attained age 21 are eligible to participate in our employee stock ownership plan.
The ESOP borrowed funds from the Company to purchase 185,150 shares of Common Stock in the Bank’s conversion from mutual to stock form. The original loan to the ESOP was to be repaid principally from the Bank’s contributions to the ESOP over a period of ten years, and the collateral for the loan is the Common Stock purchased by the ESOP. Effective January 1, 2007, the loan was amended to provide for payback over an additional five years. The amendment thus reduced the annual compensation costs attributable to the ESOP.
20
Effective January 1, 2007, the vesting schedule was changed from five year “cliff” vesting (which required five full years of employment before a participant became vested) to a vesting schedule under which participants become 20% vested for each year of employment, with full vesting after five years. The ESOP is subject to the requirements of the Employee Retirement Income Security Act of 1974, and the regulations of the Internal Revenue Service and the Department of Labor thereunder.
There were no grants of equity plan awards to Executive Officers during 2013.
Outstanding Equity Awards at Fiscal Year End
There were no outstanding Equity Awards at December 31, 2013.
Nonqualified Deferred Compensation
There are no nonqualified deferred compensation plans for officers or employees.
The members of the Boards of Directors of Monarch Community Bancorp, Inc. and Monarch Community Bank are identical. Each director earns an annual retainer fee of $7,200, two-thirds of which is paid in equal monthly installments; one-third is being deferred. In addition, each director earns $300 for each board and committee meeting attended, with the payment of $100 of the fee for each meeting being deferred. The Chairman of the Board earns an additional $11,000 per year, of which $7,400 is paid in equal monthly installments, with $3,600 being deferred.
Name1 (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($) (c) | Option Awards ($) (d) | Non-Equity Incentive Plan Compensation ($) (e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (f) | All Other Compensation ($) (g) | Total ($) (h) | |||||||||||||||||||||
Harold A. Adamson | 16,300 | 0 | None | None | — | None | 16,300 | |||||||||||||||||||||
Craig W. Dally | 13,800 | 0 | None | None | — | None | 13,800 | |||||||||||||||||||||
Richard L. Dobbins | 18,000 | 0 | None | None | — | None | 18,000 | |||||||||||||||||||||
James W. Gordon | 18,600 | 0 | None | None | — | None | 18,600 | |||||||||||||||||||||
Karl F. Loomis | 18,300 | 0 | None | None | — | None | 18,300 | |||||||||||||||||||||
Martin L. Mitchell | 17,100 | 0 | None | None | — | None | 17,100 | |||||||||||||||||||||
Stephen M. Ross | 26,600 | 0 | None | None | — | None | 26,600 | |||||||||||||||||||||
Gordon L. Welch (resigned 10/1/13) | 10,500 | 0 | None | None | — | None | 10,500 | |||||||||||||||||||||
| 1. | The Director Compensation for Richard J. DeVries, President and CEO, is included in the Executive Summary Compensation Table on Page 20 |
21
The Audit Committee is comprised of five directors (Messrs. Adamson, Dobbins, Gordon, Loomis and Mitchell). Each of the directors is independent, under the definition contained in Rule 5605(a)(2) of the Nasdaq’s listing standards. The Board of Directors has adopted a written charter for the Audit Committee, which is available on our website atwww.monarchcb.com.
In connection with the audited financial statements contained in the Company’s 2013 Annual Report on Form 10-K for the fiscal year ended December 31, 2012, the Audit Committee reviewed and discussed the audited financial statements with management and Plante & Moran, PLLC. The Audit Committee discussed with Plante & Moran, PLLC the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA Professional Standards, Vol. 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also received the written disclosures and the letter from Plante & Moran, PLLC required by applicable requirements of the Public Company Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
Based on the review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
THE AUDIT COMMITTEE
| Harold A. Adamson | Richard L. Dobbins | James W. Gordon | Karl F. Loomis | Martin L. Mitchell |
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than 10% of any registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than 10% shareholders are required by regulation to furnish the Company with copies of all Section 16(a) reports they file.
Based on its review of the copies of the reports it has received and written representations provided to the Company from the individuals required to file the reports, the Company believes that all Directors and Executives of the Company filed all reports required on a timely basis pursuant to Section 16 of the Securities Exchange Act of 1934.
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SHAREHOLDER PROPOSALS FOR THE YEAR 2014 PROXY STATEMENT
Under SEC Rule 14a-8, in order to be eligible for inclusion in next year’s proxy materials for the annual meeting of shareholders, any shareholder proposal to take action at such meeting must be received at our executive office located at 375 North Willowbrook Road, Coldwater, Michigan 49036, on or before December 19, 2014. If you would like to present a proposal at next year’s annual meeting or if you would like to nominate one or more directors without inclusion in the proxy statement, you must provide written notice to the Corporate Secretary at the address below. The Secretary must receive this notice not earlier than January 20, 2015, and not later than February 19, 2015. In the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from May 20, 2015, the shareholder proposal must be delivered not earlier than the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or the tenth day following the day on which notice of the date of the annual meeting was mailed or public announcement of the date of such meeting is first made.
All shareholder proposals for inclusion in Monarch Community Bancorp, Inc.’s proxy materials may be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934 and, as with any shareholder proposal, regardless of whether included in our proxy materials, Monarch Community Bancorp’s articles of incorporation and bylaws and Maryland law.
Whether or not you plan to attend the Meeting, please vote by marking, signing, dating and promptly returning the enclosed proxy in the enclosed envelope.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 20, 2014:
The Proxy Statement and Annual Report to Security Holders are available atwww.cfpproxy.com/7474.
| By Order of the Board of Directors, |
| /s/ Andrew J. Van Doren |
| Corporate Secretary |
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REVOCABLE PROXY
MONARCH COMMUNITY BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS MAY 20, 2014 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the members of the Board of Directors of Monarch Community Bancorp, Inc., and its survivor, with full power of substitution, and authorizes them to represent and vote, as designated below and in accordance with their judgment upon any other matters properly presented at the annual meeting, all the shares of Monarch Community Bancorp, Inc. common stock held of record by the undersigned at the close of business on March 21, 2014, at the annual meeting of shareholders, to be held Tuesday, May 20, 2014, and at any and all adjournments or postponements thereof. The Board of Directors recommends a vote “FOR” each of the listed proposals.
Should a director nominee be unable to serve as a director, an event the Monarch Community Bancorp, Inc. does not currently anticipate, the persons named in this proxy reserve the right, in their discretion to vote for a substitute nominee designated by the Board of Directors. | ||||
| Mark here if you plan to attend the meeting. | ¨ | |||
| Mark here for address change. | ¨ | |||
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IMPORTANT ANNUAL MEETING INFORMATION IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 20, 2014.
THE PROXY STATEMENT AND THE ANNUAL REPORT ARE AVAILABLE AT: http://www.cfpproxy.com/7774 | Comments:
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FOLD HERE – PLEASE DO NOT DETACH – PLEASE ACT PROMPTLY PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE |
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| PLEASE MARK VOTES AS IN THIS EXAMPLE |
I. |
The election ofHarold A. Adamson, James W. Gordon, Karl F. Loomis as directors of Monarch Community Bancorp, Inc. each for a term of three years. | For
¨ | With- hold
¨ | For All Except
¨ | ||||||||||||
INSTRUCTION: To vote for all the nominees mark the box “FOR” with an “X”. To withhold your vote for all the nominees mark the box “WITHHOLD” with an “X”. To withhold your vote for an individual nominee mark the box “FOR ALL EXCEPT” and write the name of the nominee on the following line for whom you with to withhold your vote. | ||||||||||||||||
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II. |
To approve the following (non-binding) proposal: |
For |
Against |
Abstain | ||||||||||||
“Resolved, that the shareholders approve the executive compensation of the Company, as described in the “Executive Compensation” section and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.” | ¨ | ¨ | ¨ | |||||||||||||
Please be sure to date and sign this proxy card in the box below. |
Date | |||
Sign above. | Co-holder (if any) sign above. | |||
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. | ||||
| III. | To approve the following (non-binding) proposal: | For | Against | Abstain | ||||||||||
| “Resolved, that the shareholders select three years as the frequency of advisory Votes on Executive Compensation.” | ¨ | ¨ | ¨ | |||||||||||
IV. |
The ratification of appointment of Plante & Moran, PLLC as the independent auditors for the Corporation for the fiscal year ending December 31, 2014. |
For
¨ |
Against
¨ |
Abstain
¨ | ||||||||||
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, this proxy will be voted FOR each of the proposals set forth herein. If any other business is presented at such meeting, this proxy will be voted by those named in this proxy in their best judgment. At the present time, the Board of Directors knows of no other business to be presented at the meeting.
The above signed acknowledges receipt from Monarch Community Bancorp, Inc. prior to the execution of this Proxy, of Notice of Annual Meeting scheduled to be held on May 20, 2014, a Proxy Statement dated on or about April 18, 2014 and Monarch Community Bancorp, Inc.’s Annual Report to Shareholders for the fiscal year ended December 31, 2013.
This proxy may be revoked at any time before it is voted on by delivering to the Secretary of Monarch Community Bancorp, Inc., on or before the taking of the vote at the annual meeting, a written notice of revocation bearing a later date than the proxy or a later dated proxy relating to the same shares of Monarch Community Bancorp, Inc. common stock, or by attending the annual meeting and voting in person. Attendance at the annual meeting will not in itself constitute the revocation of a proxy. If this proxy is properly revoked as described above, then the power of such attorneys and proxies shall be deemed terminated and of no further force and effect. | ||||||||||||||
