MIFFLINBURG BANCORP, INC. PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 20, 2016

Transcription

1 MIFFLINBURG BANCORP, INC. PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 20, 2016 Introduction This Proxy Statement is being furnished by the Board of Directors of Mifflinburg Bancorp, Inc. (the Company ), a Pennsylvania business corporation, for the solicitation of proxies to be voted at the Annual Meeting of Shareholders of the Company to be held at the Company s bank subsidiary, Mifflinburg Bank and Trust Company (the Bank ), Operations Center Community Room, 250 East Chestnut Street, Mifflinburg, Pennsylvania 17844, on Wednesday, April 20, 2016, at 10:00 a.m., prevailing time, or at any adjournment or postponement of the Annual Meeting. The main office of the Company is located at 250 East Chestnut Street, Mifflinburg, Pennsylvania The telephone number for the Company is (570) All inquiries should be directed to Jeffrey J. Kapsar, President and Chief Executive Officer of the Company. This Proxy Statement and the enclosed form of proxy (the Proxy ) are first being sent to shareholders of the Company on or about March 18, Solicitation Shares represented by proxies, if properly signed and returned, will be voted in accordance with the specifications made thereon by the shareholders. Any properly signed and returned proxy not specifying to the contrary will be voted; for the election of the three nominees for Director named below for three year terms to expire in 2019; for the approval of the Amended and Restated Articles of Incorporation of the Company described below; and for the ratification of the selection of BDO USA, LLC, as the independent auditors for the Company for the year ending December 31, Execution and return of the enclosed proxy will not affect a shareholder s right to attend the Annual Meeting or to cast his or her vote in person. The cost of preparing, assembling, mailing and soliciting proxies will be borne by the Company. In addition to the use of the mails, certain directors, officers and employees of the Company and the Bank may solicit proxies personally, by telephone or otherwise. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward proxy solicitation material to the beneficial owners of stock held of record by these persons and, upon request therefor, the Company will reimburse them for their reasonable forwarding expenses. Right of Revocation A shareholder who returns a proxy may revoke it at any time before it is voted by: (1) delivering written notice of revocation to Secretary of the Company, at 250 East Chestnut Street, Mifflinburg, Pennsylvania 17844; (2) executing and delivering a later-dated proxy to the Secretary of the Company

2 prior to the commencement of voting at the Annual Meeting; or (3) voting in person after giving written notice to the Secretary of the Company. Voting Securities, Record Date and Quorum At the close of business on March 11, 2016, the Company had outstanding 989,400 shares of common stock, $1.00 par value, the only authorized class of stock. A majority of the outstanding shares will constitute a quorum at the annual meeting. Only holders of common stock of record at the close of business on March 18, 2016, will be entitled to notice of and to vote at the Annual Meeting. Cumulative voting rights do not exist with respect to the election of directors. On all matters to come before the Annual Meeting, each share of common stock is entitled to one (1) vote. Principal Owners PRINCIPAL BENEFICIAL OWNERS OF THE COMPANY S STOCK To the knowledge of the Board of Directors, no person owned of record or beneficially as of March 11, 2016 more than five percent of the outstanding shares of the Company s common stock. Beneficial Ownership by Directors and Nominees, and by Directors, Nominees and Executive Officers as a Group The following table sets forth as of March 11, 2016, the amount and percentage of the common stock of the Company beneficially owned by each nominee and director, and by all nominees, directors and executive officers as a group. Name of Individual Amount and Nature of Percent Or Identity of Group Beneficial Ownership (1) (2) of Class (3) Thomas E. Boop 13, Richard J. Drzewiecki 900 John D. Griffith 19, Jeffrey J. Kapsar 1,653 Robert C. Musser 600 Betsy K. Robertson 1,950 John R. Showers 700 All Executive Officers and Directors as a Group (12 persons in total) 55, % (1) (2) (3) The securities beneficially owned by an individual are determined in accordance with the definitions of beneficial ownership set forth in the General Rules and Regulations of the Securities and Exchange Commission. Beneficial ownership may be disclaimed as to certain of the shares reported. Information furnished by the directors and the Company. Less than one percent (1%) unless otherwise indicated. 2

3 PROPOSAL NO. 1 - ELECTION OF DIRECTORS The Company currently has seven directors divided into three classes: three directors with terms to expire in 2016; two directors with terms to expire in 2017; and two directors with terms to expire in Each director holds office for a three-year term. The terms of the classes are staggered, so that the term of a class expires each year. At this Annual Meeting, shareholders will elect three directors with three year terms to expire in Unless otherwise instructed, the proxy voters will vote the proxies received by them for the election of the three nominees for director named below. All of the following three nominees are currently directors of both the Company and the Bank and are recommended for election by the Board of Directors: Richard J. Drzewiecki Jeffrey J. Kapsar John D. Griffith If any nominee should become unavailable for any reason, proxies will be voted in favor of a substitute nominee determined by the Board of Directors. The Board of Directors has no reason to believe any of the named nominees would be unable to serve if elected. There is no cumulative voting for the election of directors. Each share of common stock is entitled to cast one (1) vote for each nominee. For example, if a shareholder owns ten shares of common stock, he or she may cast up to ten votes for each of the nominees for director. The three candidates receiving the highest number of votes will be elected. The Board of Directors recommends a vote FOR the election of all three nominees named above as directors for three year terms to expire in INFORMATION AS TO NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS The following tables contain certain information with respect to the nominees, directors, and executive officers of the Company: Current Directors Whose Terms Will Expire in 2016 and Who Are Nominees for Election to Three Year Terms Expiring in 2019 Principal Occupation for Past Five Years and Position Held with the Director Since Name Age Company and the Bank Company/Bank Richard J. Drzewiecki 56 Owner, Real Estate Appraisal & Marketing 2012 Associates John D. Griffith 71 Principal, Griff, Inc. real estate development 1997 Jeffrey J. Kapsar 49 Vice Chairman of the Board of Directors, 2006 President and Chief Executive Officer of the Company and the Bank Current Directors Whose Terms Will Expire in

4 Principal Occupation for Past Five Years and Position Held with the Director Since Name Age Company and the Bank Company/Bank Thomas E. Boop 66 Chairman of the Board of Directors of the 1979 Company and the Bank; Attorney-at-Law John R. Showers 63 Union County Commissioner 2013 Current Directors Whose Terms Will Expire in 2018 Principal Occupation for Past Five Years and Position Held with the Director Since Name Age Company and the Bank Company/Bank Robert C. Musser 52 Administrative Director, Buffalo Valley 2002 Lutheran Village Betsy K. Robertson 62 Director of Digital and Print Communications, 2014 Susquehanna University Executive Officers of the Company The following table sets forth information about the executive officers of the Company, each of whom is appointed by the Board of Directors and each of whom holds office at the discretion of the Board of Directors: Name Age Office Held Jeffrey J. Kapsar 49 President and Chief Executive Officer of the Company and the Bank Thomas E. Beck, CPA 51 Senior Vice President of Internal Audit and Compliance of the Bank Garry R. Benfer 57 Senior Vice President of Loan Administration of the Bank Thomas L. Eberhart 53 Senior Vice President and Chief Operating Officer of the Bank Thomas C. Graver, Jr., CPA 47 Senior Vice President and Chief Financial Officer of the Company and the Bank Andrea L. Long, PHR 62 Vice President and Director of Human Resources of the Bank Certain Transactions There have been no material transactions, nor any material transactions proposed, between the Company or the Bank and any director or executive officer of the Company and the Bank, or any associate of such persons. The Company and the Bank have had and intend to continue to have banking and financial transactions in the ordinary course of business with directors and executive officers of the Company and the Bank and their associates on comparable terms and with similar interest rates as those prevailing from time to time for other customers of the Company and the Bank. Loans to such persons 4

5 were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of the collectability or present other unfavorable features. PROPOSAL 2 APPROVE AMENDED AND RESTATED ARTICLES OF INCORPORATION The Board of Directors is proposing that the shareholders approve Amended and Restated Articles of Incorporation for the Company in order to accomplish a number of changes to the Company s current Articles of Incorporation. The following is a summary of each of the material proposed changes. This summary is qualified by reference to the full text of the proposed Amended and Restated Articles of Incorporation attached to this Proxy Statement as Annex A. The proposed changes are indicated by underlining (new language) and strike-out. Article 5.A -- Increase Number of Authorized Shares to 5,000,000 Article 5.A of the Company s Articles of Incorporation currently provides for 2,160,000 shares of common stock, of which 989,400 shares are currently issued and outstanding and 90,600 shares are held in treasury. The Board of Directors is proposing to increase the number of authorized shares of common stock from 2,160,000 shares to 5,000,000 shares in order to provide for a sufficient number of shares of common stock to be available for issuance from time to time by the Board of Directors without further action or authorization by the shareholders. The additional shares of common stock would be available for issuance in connection with stock splits, stock dividends, dividend reinvestment plans, employee and non-employee director benefit plans, equity financing, as consideration in acquisition transactions and for other corporate purposes determined by the Board of Directors to be in the best interests of the Company. The Board of Directors has no current plans, arrangements or undertakings for the issuance of additional shares of common stock and the Company currently has no written agreements, understandings or arrangements with respect to which the additional shares would be needed. With 989,400 shares of common stock now outstanding, however, the Company currently has a sufficient number of authorized shares available to split its stock on a 2 for 1 basis only one time and would have only 181,200 shares remaining available thereafter for other purposes. With 5,000,000 authorized shares, the Company would have sufficient shares to split its stock on a 2 for 1 basis twice and continue to have more than 1,000,000 shares remaining available thereafter for other purposes. The authorization of the additional shares will not, by itself, have any effect on the rights of the Company s shareholders. The issuance of additional shares for corporate purposes other than a stock dividend or stock split could have, among other things, a dilutive effect on earnings per share and on the equity percentage and voting power of shareholders at the time of issuance. In addition, the increase in the number of authorized shares could render more difficult under certain circumstances or discourage an attempt to take control of the Company, whether through a tender offer or otherwise by, for example, the issuance of such shares in order to dilute the share ownership of the person attempting to take control. This proposal, however, is not being made in response to any effort of which Board of Directors is aware to accumulate shares or obtain control of the Company. 5

6 Article 10 Removal of Directors Article 10 of the Company s Articles of Incorporation provides that Directors may be removed from office by the shareholders as provided in Section 1726 of the Pennsylvania Business Corporation Law (the PBCL ) as in effect on April 8, The general rule provided by Section 1726 is that directors may be removed from office by the vote of the shareholders without assigning any cause for the removal. An exception to the general rule, however, is provided for corporations, like the Company, that have a classified board of directors pursuant to a provision of the articles of incorporation or bylaws that was adopted by the shareholders. Under the exception, directors on a classified board may be removed from office by the vote of the shareholders only for cause. Section 1726, however, also provides an exception to the exception. Under Section 1726 as in effect on April 8, 1996, shareholders may not remove directors from a classified board by vote of the shareholders without cause unless otherwise provided by the articles of incorporation. In 2006, however, Section 1726 was amended so that shareholders may not remove directors from a classified board by vote of the shareholders without cause unless otherwise provided by a specific and unambiguous statement that directors may be removed without assigning any cause. The Board of Directors proposes to amend Article 10 to remove the date qualification in relation to Section 1726 so that Section 1726, as in effect at the relevant time, would be applicable to the removal of Directors of the Company by the vote of the shareholders. The Board of Directors, however, does not believe that the proposed amendment would result in any change in what otherwise would be the result under Article 10 as currently in effect. Because the Company s Articles of Incorporation do not currently otherwise provide and, following the adoption of the proposed amendment still would not otherwise provide by a specific and unambiguous statement that directors may be removed without assigning any cause, the Board of Directors believes that Directors of the Company may be removed by the vote of the shareholders in either case only for cause. Article 11 Nominations of Directors Article 11(b)(i) of the Company s Articles of Incorporation provides that shareholder nominations for Director must be submitted to the Secretary of the Company no later than the 45 th day immediately preceding the date of the shareholders meeting at which Directors are to be elected. The Board of Directors proposes to amend Article 11(b)(i) to require that shareholder nominations for Director must be submitted to the Secretary of the Company no later than the 90th day immediately preceding the anniversary date of the immediately preceding annual meeting of shareholders. The Board of Directors proposes to require a shareholder to submit a nomination for Director 90 days rather than 45 days prior to the anniversary date of the immediately preceding annual meeting of shareholders in order to provide the Board of Directors with earlier notice of the shareholder s nomination for Director. This would provide the Board of Directors with additional time in which to consider and respond to the shareholder s nomination. In addition, because the Company s Bylaws provide that only 20 days prior notice of shareholder meetings is required, it is possible that a shareholder desiring to nominate a Director may not receive notice of the date of the shareholders meeting until after the 45 day deadline for submitting nominations, the Board of Directors proposes to measure the deadline from the anniversary date of the immediately 6

7 preceding annual meeting rather than the date of the applicable shareholders meeting. This amendment would provide shareholders with certainty in being able to determine the deadline for making nominations. Article 12 Filling of Vacancies in the Board of Directors Article 12 of the Company s Board of Directors provides for filling vacancies on the Board of Directors resulting from the death, disability, resignation or removal of a Director. Article 12 further provides that if the shareholders fill a vacancy, the Director elected by the shareholders will serve until the expiration of the term of the class to which the Director was elected, but if the Directors fill the vacancy by appointment, the appointed Director shall serve only until the next meeting of shareholders. Section 1725(b)(1)(i) of the PBCL, however, provides as a general rule that except as otherwise provided in the bylaws, Directors appointed to fill vacancies are to serve for the balance of the unexpired term. Section 1725(b)(2) of the PBCL similarly provides that Directors appointed to fill vacancies on classified boards are to serve until the expiration of the term of the class to which they are appointed. Consistently with the general rule provided by the PBCL, the Board of Directors is proposing to amend Article 12 to provide that vacancies in the Board of Directors may be filled by the remaining members of the Board of Directors and that each person so appointed shall serve a term of office to expire at the same time as the term of the class to which he or she was appointed is to expire. Article 13 Number of Directors Article 13 of the Company s Articles of Incorporation provides that the number of Directors shall not exceed 9, with the exact number to be fixed and determined by the Board of Directors. There is no statutory limit on the number of Directors set forth in the PBCL. Many Pennsylvania bank holding companies provide for a minimum of 5 and a maximum of 25 directors because that is what the Pennsylvania Banking Code of 1965 provides for Pennsylvania chartered banks. The banking industry continues to experience consolidation. A common feature of consolidation transactions is the addition of members of the target institution s board of directors to the acquiring institution s board of directors. In order to better prepare the Company to compete for opportunities that continuing banking industry consolidation may present, the Board of Directors is proposing to amend Article 13 to provide for a minimum of 5 Directors and a maximum of 25 Directors, with the exact number of Directors to be fixed by the Board of Directors. Consistently with the foregoing, as well as with Section 1725(b) of the PBCL, and subject to the proposed limits on the number of Directors, the Board of Directors also is proposing to amend Article 13 to authorize the Board of Directors to increase the number of Directors by up to 2 between annual meetings of the shareholders. Article 17 Elimination of Directors Liability Section 1713 of the PBCL provides that if a provision of the bylaws or articles of incorporation adopted by the shareholders so provides, a director shall not be personally liable, in the director s capacity as a director, for monetary damages for any action taken unless the director has breached or failed to perform the duties of his or her office under the PBCL and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. 7

8 Article 17 of the Company s Articles of Incorporation implements the elimination of Directors liability provisions of Section 1713 of the PBCL. Article 17, however, eliminates a Director s liability to the Corporation or its shareholders, whereas Section 1713 of the PBCL does not so limit the elimination of a director s liability. The Board of Directors proposes to amend Article 17 to omit that limitation in order that Directors of the Company may be receive the full benefit of the scope of the PBCL s elimination of liability. Similarly, whereas Section 1713 of the PBCL refers to and qualifies a director s breach or failure to perform the duties of his or her office under the PBCL, Article 17 of the Company s Articles of Incorporation does not include that qualification. The Board of Directors proposes to further amend Article 17 to include the statutory qualification and to require that a Director s breach or failure to perform be of the duties of his or her office under Subchapter B of Chapter 17 of the PBCL. Article 18.C Shareholder Proposals Article 18.C provides for shareholder proposals. The second sentence of the second paragraph of Article 18.C provides that shareholder proposals that are to be included in the Company s proxy materials are to comply with Securities and Exchange Commission Rule 14a-8. SEC Rule 14a-8 applies only to companies having a class of stock registered with the SEC under the Securities Exchange Act of The Company does not have a class of stock registered with the SEC and SEC Rule 14a-8, therefore, does not apply to the Company. Absent this language in the Articles of Incorporation, the Company s shareholders would not have a right to include their proposals in the Company s proxy materials unless and until the Company would register its common stock with the SEC, in which case the right would exist by SEC regulation independently of the Articles of Incorporation. The Board of Directors proposes to amend Article 18.C to eliminate the references to SEC Rule 14a-8 and the right of shareholders to include their proposals in the Company s proxy materials. With respect to shareholder proposals that are not to be included in the Company s proxy materials, Article 18.C provides that notice of the proposals are to be submitted to the Company not less than 60 days prior to the anniversary of the date of the prior annual meeting of shareholders. Consistently with the proposal to require shareholder nominations for Director to be submitted not less than 90 days prior to the anniversary of the date of the immediately preceding annual meeting of shareholders, the Board of Directors is proposing to amend Article 18.C to require shareholder proposals to be submitted 90 days rather than 60 days prior to the anniversary date of the immediately preceding annual meeting of shareholders in order to provide the Board of Directors with earlier notice of the shareholder proposal and to provide the Board of Directors with additional time in which to consider and respond to the shareholder proposal. Article 20 Shareholder Action Article 20 of the Company s Articles of Incorporation provides that any merger, consolidation, liquidation or dissolution of the Company, or any action that would result in the sale or other disposition of all or substantially all of its assets, must be approved by the vote of two-thirds of all outstanding shares. The purpose of Article 20 is to assure that such a fundamental transaction involving the Company is supported by shareholders holding a substantial majority of the outstanding shares. The Board of Directors believes, however, that such a high threshold for approval may prove to be unwieldy in connection with friendly transactions supported by the Board of Directors and transactions in which the Company will continue to control the surviving or resulting entity. 8

9 Section 1924 of the PBCL, in contrast, does not require that all such fundamental transactions be approved by the shareholders and, in those cases where shareholder approval is required, Section 1924 requires only that the transaction be approved by a majority of the votes cast. Consequently, the Board of Directors proposes to amend Article 20 to provide that: Shareholder approval of fundamental transactions involving the Company shall not be required when shareholder approval is not required by the PBCL unless, immediately after the effective date of the transaction: (i) the shareholders of the Company are to hold in the aggregate less than a majority of the shares of the surviving or new corporation entitled to be cast generally in the election of directors, or (ii) a majority of the members of the board of directors of the surviving or new corporation and a majority of the members of the board of directors of such corporation s ultimate parent corporation, if any, are not to be former members of the Board of Directors of the Company. When shareholder approval of a fundamental transaction involving the Company shall be required by the PBCL or the Company s Articles of Incorporation, the transaction shall be approved by the affirmative vote of: (i) two-thirds of all outstanding shares, or (ii) a majority of the votes cast by all shareholders entitled to vote thereon, provided that the transaction has received the prior approval of 80% of the Board of Directors. Approval of Proposal 2 Article 21.A of the Company s Articles of Incorporation requires amendments to Articles 11 (Nominations of Directors), 13 (Number of Directors), 17 (Elimination of Directors Liability) and 20 (Shareholder Action) to be approved by the affirmative vote of two-thirds of the shares of the Company entitled to vote generally in the election of Directors. Consequently, because the Board of Directors is proposing that the shareholders approve all of the proposed changes to the Articles of Incorporation in a single vote on the proposed Amended and Restated Articles of Incorporation as a whole, Proposal 2 is subject to approval by the affirmative vote of two-thirds of the shares of the Company entitled to vote generally in the election of directors. All proxies will be voted for the Amended and Restated Articles of Incorporation unless a shareholder specifies otherwise. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION. PROPOSAL NO. 3 - RATIFICATION OF INDEPENDENT AUDITORS Unless instructed to the contrary, it is intended that votes will be cast pursuant to the proxies for the ratification of the selection of BDO USA, LLC as the Company s independent auditors for its fiscal year ending December 31, The Company has been advised by BDO USA, LLC that none of its members has any financial interest in the Company. Ratification of the selection of BDO USA, LLC will require an affirmative vote of a majority of the shares of common stock voted at the Annual Meeting. BDO USA, LLC served as the Company s independent auditors for In the event that the shareholders do not ratify the selection of BDO USA, LLC as the Company s independent public accountants for the 2016 fiscal year, the Board of Directors will reconsider its selection. The Board of Directors, however, will be under no obligation to select new independent auditors for If the Board of Directors does select new independent auditors for 2016, the Company will not seek shareholder ratification of the new selection. 9

10 The Board of Directors recommends that the shareholders vote FOR the ratification of the selection of BDO USA, LLC as the independent auditors for the Company for the year ending December 31, ANNUAL REPORT A copy of the Company s Annual Report for the fiscal year ended December 31, 2016, is enclosed with this Proxy Statement. SHAREHOLDER PROPOSALS AND NOMINATIONS FOR 2017 ANNUAL MEETING Shareholder proposals for the 2017 Annual Meeting must be received no later than February 20, 2017; provided, however, that if the shareholders approve the proposed Amended and Restated Articles of Incorporation pursuant to Proposal No. 2, shareholder proposals for the 2017 Annual Meeting must be received no later than January 20, Shareholder nominations for director for the 2017 Annual Meeting must be received no later than 45 days prior to the date of 2017 Annual Meeting (which has not yet been established); provided, however, that if the shareholders approve the proposed Amended and Restated Articles of Incorporation pursuant to Proposal No. 2, shareholder nominations for director must be received no later than January 20, Such proposals should be addressed to the Secretary. Shareholders wishing to make proposals or nominations should contact the Secretary as to information required to be supplied in such notice. OTHER MATTERS The Board of Directors does not know of any matters to be presented for consideration other than the matters described in the Notice of Annual Meeting of Shareholders, but if any matters are properly presented, it is the intention of the persons named in the accompanying Proxy to vote on such matters in accordance with the directions of the Board of Directors. 10

11 ANNEX A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MIFFLINBURG BANCORP, INC. Article 1. Name. The name of the corporation is Mifflinburg Bancorp, Inc. (hereinafter referred to as the Corporation ). Article 2. Registered Office. The address of the initial registered office of the Corporation in the Commonwealth of Pennsylvania is E. Chestnut Street, Mifflinburg, Pennsylvania Article 3. Nature of Business. To have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the provisions of the Pennsylvania Business Corporation Law of 1988, as amended ( PBCL ). The Corporation was incorporated under the provisions of the Pennsylvania Business Corporation Law of 1933, as amended (Act of May 5, 1933, P.L. 364, as amended). Article 4. Duration. The term of the existence of the Corporation shall be perpetual. Article 5. Capital Stock. A. Authorized Amount. The total number of shares of capital stock which the Corporation has authority to issue is 2,1605,000,000, all of which shall be common stock, par value $1.00 per share (hereinafter the Common Stock ). B. Common Stock. The exclusive voting power shall be vested in the Common Stock, with each holder thereof being entitled to one vote for each share of such Common Stock standing in the holder s name on the books of the Corporation. Holders of Common Stock shall be entitled to such dividends as may be declared by the Board of Directors out of funds lawfully available therefor. Upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Common Stock shall be entitled to receive pro rata the remaining assets of the Corporation. C. Repurchase of Shares. The Corporation may, from time to time, pursuant to authorization by the board of directors of the Corporation and without action by the shareholders, purchase or otherwise acquire shares of any class, bonds, debentures, notes, scrip, warrants, obligations, evidences of indebtedness, or other securities of the Corporation in such manner, upon such terms, and in such amounts as the board of directors shall determine; subject, however, to such limitations or restrictions, if any, as are contained in the express terms of any class of shares of the Corporation outstanding at the time of the purchase or acquisition in question or as are imposed by law or regulation. Article 6. Incorporators. The name and mailing address of each original incorporator of the Corporation was as follows: Shares Name Address Number & Class of Quentin S. Snook R.D. #1, Mifflinburg, PA Share Common Stock

12 Helen P. Strunk 207 Walnut Street, Mifflinburg, PA John C. Watson 602 Walnut Street, Mifflinburg, PA Share Common Stock 1 Share Common Stock Article 7. Cumulative Voting Rights. Cumulative voting rights shall not exist with respect to the election of directors. Article 8. Opposition of Tender (or Other Offer). A. The Board of Directors may, if it deems it advisable, oppose a tender, or other offer for the Corporation s securities, whether the offer is in cash or in securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but it is not legally obligated to, consider any pertinent issues; by way of illustration, but not of limitation, the Board of Directors may, but shall not be legally obligated to, consider any and all of the following: (1) Whether the offer price is acceptable based on the historical and present operating results or financial condition of the Corporation. (2) Whether a more favorable price could be obtained for the Corporation s securities in the future. (3) The impact which an acquisition of the Corporation would have on its employees, depositors and customers of the Corporation and its subsidiaries in the community which they serve. (4) The reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the Corporation and its subsidiaries and the future value of the Corporation s stock. (5) The value of the securities, if any, which the offeror is offering in exchange for the Corporation s securities, based on any analysis of the worth of the Corporation as compared to the corporation or other entity whose securities are being offered. (6) Any antitrust or other legal and regulatory issues that are raised by the offer. B. If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose including, but not limited to, any and all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the offeror; and obtaining a more favorable offer from another individual or entity. Article 9. Classification of Directors. The Board of Directors of the Corporation shall be divided into three classes, the respective terms of office of which shall end in successive years. The number of directors in each class shall be specified in the Bylaws and shall be nearly as equal as possible. Unless they are elected to fill vacancies, the directors in each class shall be elected to hold office until the third successive annual meeting of shareholders after their election and until their successors shall have been elected and qualified. At each annual meeting of shareholders the directors of only one class shall be elected, except directors who may be elected to fill vacancies. Article 10. Removal. Any Director or Directors may be removed as provided in Section 1726 of the PBCL as in effect on April 8,

13 Article 11. Nominations of Directors. Nominations of candidates for election as directors shall be made prior to or at any annual meeting of shareholders (a) by the Board of Directors as follows: (1) by a majority of the Directors presently sitting if the candidate was elected as a Director by the shareholders at a previous meeting of the shareholders and has served continuously since elected. The candidate may vote for his or her own renomination. (2) by two-thirds of the Directors presently sitting if the candidate was not elected as a Director by the shareholders at a previous meeting of the shareholders, or if so elected, has not served continuously since elected; or (b) by any shareholder entitled to vote at such annual meeting. Only persons nominated by shareholders in accordance with the following procedures shall be eligible for election as directors at an annual meeting: (i) Shareholder nominations for directors must be submitted to the Secretary of the Corporation in writing not later than the close of business on the forty-fifth (45 th ninetieth (90 th ) day immediately preceding the anniversary date of the immediately preceding annual meeting of shareholders of the Corporation. (ii) Shareholder nominations so submitted shall contain the following information to the extent known to the nominating shareholder: (a) name and addressed of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the name and address of the nominating shareholder; and (d) the number of shares of capital stock of the Corporation owned by the nominating shareholder. Ballots bearing the names of all the persons who have been nomination for election as directors at an annual meeting in accordance with the procedures set forth in this Article 11 shall be provided for use at the annual meeting. Article 12. Filling of Vacancies in Board of Directors. Any directorship to be filled because of the death, disability, resignation or removal of a director may be filled (a) by the Board of Directors in accordance with the Bylaws of the Corporation; (b) by the shareholders at any annual or special meeting thereof. A director elected by the shareholders to fill a vacancyany vacancy in the Board of Directors may be filled by the remaining Board of Directors and each person so appointed shall serve a term of office which shall expire at the same time as the term of office of the other directors in the class to which he is elected. A director appointed by the Board of Directors shall serve until the next meeting of the shareholders. Article 13. Number of Directors. The Board of Directors shall consist of nonot less than five (5) nor more than nine (9twenty-five (25) shareholders, the exact number to be fixed and determined by a majority of the Board of Directors. In Between annual meetings of the event that there isshareholders, a proposal presented at a meeting of shareholders to majority of the Board of Directors may increase the number of directors, notice thereof shall be circulated to the shareholders to provide sufficient time for shareholders, should they desire to do so, to nominate directors as provided in Article 11 hereof. The Board of Directors may also propose prospective members to serve ondirectors, within the maximum prescribed above, by not more than two (2) Directors, and a majority of the Board of Directors nominated 3

14 as provided in Article 11 to may appoint shareholders to fill any proposed additional seat or seats in the event the proposal to increase the number of directors is approved by the shareholdersvacancies created thereby. Article 14. Preemptive Rights. No holder of shares of any class or of any series of any class shall have any preemptive right to subscribe for, purchase or receive any shares of the Corporation, whether now or hereafter authorized, or any obligations or other securities convertible into or carrying options to purchase any such shares of the Corporation, or any options or rights to purchase any such shares or securities, issued or sold by the Corporation for cash or any other form of consideration. Article 15. Indebtedness. The Corporation shall have the authority to borrow money and the Board of Directors, without the approval of the shareholders and acting within their sole discretion, shall have the authority to issue debt instruments of the Corporation upon such terms and conditions and with such limitations as the Board of Directors deems advisable. The authority of the Board of Directors shall include, but not be limited to, the power to issue convertible debentures. Article 16. Indemnification. Every person who is or was a director, officer, employee, or agent of the Corporation, or of any corporation which he served as such at the request of the Corporation, shall be indemnified by the Corporation to the fullest extent permitted by law against all expenses and liabilities reasonably incurred by or imposed upon him, in connection with any proceeding to which he may be made, or threatened to be made, a party, or in which he may become involved by reason of his being or having been a director, officer, employee or agent of the Corporation, or of such other corporation, whether or not he is a director, officer, employee or agent of the Corporation or such other Corporation at the time the expenses or liabilities are incurred. This indemnification shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Article 17. Elimination of Directors Liability. Directors of the Corporation shall have no liability to the Corporation or its shareholders for monetary damages for any action taken or any failure to take action as a director, provided that this Article 17 shall not eliminate liability of a director for any breach of the director s duty to perform the duties of his office under subchapter B of Chapter 17 of the PBCL if there is a breach or failure to perform which constitutes self dealing, willful misconduct or recklessness. The elimination of liability shall not apply to matters set forth under Section 1713(b) of the PBCL. If the PBCL is amended after the effective date of these Articles of Incorporation to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be likewise eliminated or limited as provided by the PBCL, as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. Article 18. Meetings of Shareholders and Shareholder Proposals. A. Special Meetings. Special meetings of the shareholders may be called at any time by the Board of Directors, the President, or by the shareholders entitled to cast at least thirty percent (30%) of the vote which all shareholders are entitled to cast at the particular meeting. B. Action Without a Meeting. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation, no action required to be taken or which may be taken at any annual or special meeting of shareholders of the Corporation may be taken without a meeting, and the 4

15 power of shareholders to consent in writing, without a meeting, to the taking of any action is specifically denied. C. Shareholder Proposals. At an annual meeting of shareholders, only such new business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the annual meeting by, or at the direction of, (a) the Board of Directors or (b) any shareholder of the Corporation who complies with all the requirements set forth in this Article 1918.C. Proposals, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation as set forth in this Article 19.C. For shareholder proposals to be included in the Corporation s proxy materials, the shareholder must comply with all the timing and informational requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended ( or any successor regulation). With respect to shareholder proposals to be considered at the annual meeting of shareholders but not included in the Corporation s proxy materials, the18.c. The shareholder s notice shall be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than 6090 days prior to the anniversary date of the immediately preceding annual meeting of shareholders of the Corporation. Such shareholder s notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation s books, of the shareholder proposing such business and, to the extent known, any other shareholders known by such shareholder to be supporting such proposal, (c) the class and number of shares of the Corporation stock which are Beneficially Owned by the shareholder on the date of such shareholder notice and, to the extent known, by any other shareholders known by such shareholder to be supporting such proposal on the date of such shareholder notice, and (d) any financial interest of the shareholder in such proposal (other than interests which all shareholders would have). The Board of Directors may reject any shareholder proposal not timely made in accordance with the terms of this Article 1918.C. If the Board of Directors, or a designated committee thereof, determines that the information provided in a shareholder s notice does not satisfy the informational requirements of this Article 1918.C in any material respect, the Secretary of the Corporation shall promptly notify such shareholder of the deficiency in the notice. The shareholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed five days from the date such deficiency notice is given to the shareholder, as the Board of Directors or such committee shall reasonably determine. If the deficiency is not cured within such period, or if the Board of Directors or such committee determines that the additional information provided by the shareholder, together with information previously provided, does not satisfy the requirements of this Article 1918.C in any material respect, then the Board of Directors may reject such shareholder s proposal. The Secretary of the Corporation shall notify a shareholder in writing whether his proposal has been made in accordance with the time and informational requirements of this Article 1918.C. Notwithstanding the procedures set forth in this paragraph, if neither the Board of Directors nor such committee makes a determination as to the validity of any shareholder proposal, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether the shareholder proposal was made in accordance with the terms of this Article 1918.C. If the presiding officer determines that a shareholder proposal was made in accordance with the terms of this Article 1918.C, he shall so declare at the annual meeting and ballots shall be provided for use at the meeting with respect to any such proposal. If the presiding officer determines that a shareholder proposal was not made in accordance with the terms of this Article 1918.C, he shall so declare at the annual meeting and any such proposal shall not be acted upon at the annual meeting. 5

16 This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees of the Board of Directors, but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided. Article 19. Approval of Business Combinations. The Corporation hereby elects to be subject to the provisions of Subchapter F of Chapter 25 of the PBCL and to those sections as they may in the future be amended from time to time. Article 20. Shareholder Action. No merger, consolidation, liquidation or dissolution of the Corporation, nor any action that would result in the sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation, nor any share exchange in which a person or entity acquires the issued or outstanding shares of Common Stock of the Corporation pursuant to a vote of shareholders, shall be valid unless first approved by the affirmative vote of the holders of at least two-thirds (2/3rds) of the outstanding shares of Common Stock.: (a) (b) the holders of at least two-thirds (2/3rds) of the outstanding shares of Common Stock; or a majority of the votes cast by all shareholders entitled to vote thereon, provided that such transaction has received the prior approval of eighty percent (80%) of the entire Board of Directors. Notwithstanding the foregoing, approval by the shareholders pursuant to this Article shall not be required in connection with any transaction for which approval of the transaction by the shareholders is not required by the PBCL; except that shareholder approval pursuant to this Article shall be required in any case if immediately after the effective date of the transaction: (i) the shareholders of the Corporation are to hold in the aggregate less than a majority of the shares of the surviving or new corporation entitled to be cast generally for the election of directors, or (ii) a majority of the members of the Board of Directors of the surviving or new corporation and a majority of the members of the Board of Directors of such corporation s ultimate parent corporation, if any, are not to be former members of the Board of Directors of the Corporation. Article 21. Amendment of Articles and Bylaws. A. Articles. The shareholders reserve the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by law, provided that the affirmative vote of the holders of at least two-thirds (2/3rds) of the shares of the Corporation entitled to vote generally in an election of directors, voting together as a single class, shall be required to amend, adopt, alter, change or repeal any provision inconsistent with the following provisions of the Articles of Incorporation: Article 8. Article 9. Article 11. Article 13. Article 16. Article 17. Article 19. Opposition of Tender (or Other Offer) Classification of Directors Nominations of Directors Number of Directors Indemnification Elimination of Directors Liability Approval of Business Combinations 6