-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D9otaqbK9dYmsTna7k6L2BZBEpoPcuR8qHLtvhmgO3aUx7Yny6A8MCEKlm+A4Mee OziRhqsfNmJSSDFRuNFDmg== 0001157523-07-004954.txt : 20070510 0001157523-07-004954.hdr.sgml : 20070510 20070510111908 ACCESSION NUMBER: 0001157523-07-004954 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070510 DATE AS OF CHANGE: 20070510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCLAIRE FINANCIAL CORP CENTRAL INDEX KEY: 0000858800 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 251606091 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18464 FILM NUMBER: 07835619 BUSINESS ADDRESS: STREET 1: 612 MAIN ST CITY: EMLENTON STATE: PA ZIP: 16373 BUSINESS PHONE: 7248672311 MAIL ADDRESS: STREET 1: POST OFFICE BOX D STREET 2: 612 MAIN STREET CITY: EMLENTON STATE: PA ZIP: 16373 10-Q 1 a5399916.txt EMCLAIRE FINANCIAL CORP. 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2007 ------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 000-18464 --------- EMCLAIRE FINANCIAL CORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 25-1606091 - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or (IRS Employer organization) Identification No.) 612 Main Street, Emlenton, Pennsylvania 16373 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (724) 867-2311 - -------------------------------------------------------------------------------- (Registrant's telephone number) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |X| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| The number of shares outstanding of the Registrant's common stock was 1,267,835 at May 10, 2007. ================================================================================ EMCLAIRE FINANCIAL CORP. INDEX TO QUARTERLY REPORT ON FORM 10-Q PART I - FINANCIAL INFORMATION ------------------------------
Item 1. Interim Financial Statements (Unaudited) Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006......................................................................1 Consolidated Statements of Income for the three months ended March 31, 2007 and 2006......................................................................2 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006......................................................................3 Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2007 and 2006.................................................4 Notes to Consolidated Financial Statements................................................................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................................9 Item 3. Quantitative and Qualitative Disclosures about Market Risk...............................................15 Item 4. Controls and Procedures..................................................................................16 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings........................................................................................16 Item 1A. Risk Factors.............................................................................................16 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..............................................16 Item 3. Defaults upon Senior Securities..........................................................................16 Item 4. Submission of Matters to a Vote of Security Holders......................................................17 Item 5. Other Information........................................................................................17 Item 6. Exhibits.................................................................................................17 Signatures .........................................................................................................18
PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Interim Financial Statements - ------------------------------------- Emclaire Financial Corp. and Subsidiary Consolidated Balance Sheets As of March 31, 2007 (Unaudited) and December 31, 2006 (Dollar amounts in thousands, except per share data)
March 31, December 31, 2007 2006 ------------- ------------ Assets ------ Cash and due from banks $ 5,737 $ 7,540 Interest-earning deposits with banks 5,338 9,177 ------------- ------------ Cash and cash equivalents 11,075 16,717 Securities available for sale, at fair value 57,044 51,774 Loans receivable, net of allowance for loan losses of $2,078 and $2,035 212,933 213,344 Federal bank stocks, at cost 2,209 2,217 Bank-owned life insurance 4,841 4,794 Accrued interest receivable 1,476 1,374 Premises and equipment, net 7,891 7,958 Goodwill 1,422 1,422 Deferred tax asset 552 533 Prepaid expenses and other assets 612 427 ------------- ------------ Total Assets $ 300,055 $ 300,560 ============= ============ Liabilities and Stockholders' Equity ------------------------------------ Liabilities: Deposits: Noninterest-bearing $ 43,966 $ 44,045 Interest-bearing 199,505 200,447 ------------- ------------ Total deposits 243,471 244,492 Long-term borrowed funds 30,000 30,000 Accrued interest payable 754 825 Accrued expenses and other liabilities 1,761 1,326 ------------- ------------ Total Liabilities 275,986 276,643 ------------- ------------ Stockholders' Equity: Preferred stock, $1.00 par value, 3,000,000 shares authorized; none issued - - Common stock, $1.25 par value, 12,000,000 shares authorized; 1,395,852 shares issued; 1,267,835 shares outstanding 1,745 1,745 Additional paid-in capital 10,871 10,871 Treasury stock, at cost; 128,017 shares (2,653) (2,653) Retained earnings 14,553 14,370 Accumulated other comprehensive loss (447) (416) ------------- ------------ Total Stockholders' Equity 24,069 23,917 ------------- ------------ Total Liabilities and Stockholders' Equity $ 300,055 $ 300,560 ============= ============
See accompanying notes to consolidated financial statements. 1 Emclaire Financial Corp. and Subsidiary Consolidated Statements of Income For the three months ended March 31, 2007 and 2006 (Unaudited) (Dollar amounts in thousands, except per share data)
For the three months ended March 31, --------------------------- 2007 2006 ------------ ------------- Interest and dividend income: Loans receivable, including fees $ 3,604 $ 3,152 Securities: Taxable 364 383 Exempt from federal income tax 173 173 Federal bank stocks 50 18 Deposits with banks 121 18 ------------ ------------- Total interest and dividend income 4,312 3,744 ------------ ------------- Interest expense: Deposits 1,667 1,314 Borrowed funds 336 168 ------------ ------------- Total interest expense 2,003 1,482 ------------ ------------- Net interest income 2,309 2,262 Provision for loan losses 45 31 ------------ ------------- Net interest income after provision for loan losses 2,264 2,231 ------------ ------------- Noninterest income: Fees and service charges 326 357 Commissions on financial services 162 101 Gains on securities 58 116 Earnings on bank-owned life insurance (BOLI) 53 50 Other 131 104 ------------ ------------- Total noninterest income 730 728 ------------ ------------- Noninterest expense: Compensation and employee benefits 1,306 1,307 Premises and equipment 400 381 Intangible amortization expense - 3 Other 604 524 ------------ ------------- Total noninterest expense 2,310 2,215 ------------ ------------- Income before provision for income taxes 684 744 Provision for income taxes 133 159 ------------ ------------- Net income $ 551 $ 585 ============ ============= Basic earnings per share $ 0.43 $ 0.46 Average common shares outstanding 1,267,835 1,267,835
See accompanying notes to consolidated financial statements. 2 Emclaire Financial Corp. and Subsidiary Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2007 and 2006 (Unaudited) (Dollar amounts in thousands)
For the three months ended March 31, ------------------------------- 2007 2006 -------------- -------------- Cash flows from operating activities Net income $ 551 $ 585 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of premises and equipment 170 182 Provision for loan losses 45 31 Amortization of premiums and accretion of discounts, net (2) 11 Amortization of intangible assets and mortgage servicing rights 4 5 Realized gain on sale of available for sale securities, net (58) (116) Earnings on bank owned life insurance, net (47) (44) (Increase) decrease in accrued interest receivable (102) 61 Increase in prepaid expenses and other assets (191) (46) Increase (decrease) in accrued interest payable (71) 21 Increase in accrued expenses and other liabilities 435 127 -------------- -------------- Net cash provided by operating activities 734 817 -------------- -------------- Cash flows from investing activities Loan originations and principal collections, net 52 522 Proceeds from the sale of loans 312 - Available for sale securities: Sales 265 202 Maturities, repayments and calls 126 1,153 Purchases (5,647) (107) Held to maturity securities: Maturities, repayments and calls - 1 Redemption of federal bank stocks 8 195 Purchases of premises and equipment (103) (610) -------------- -------------- Net cash (used in) provided by investing activities (4,987) 1,356 -------------- -------------- Cash flows from financing activities Net increase (decrease) in deposits (1,021) 1,870 Net decrease in overnight borrowed funds - (4,500) Dividends paid on common stock (368) (342) -------------- -------------- Net cash used in financing activities (1,389) (2,972) -------------- -------------- Net decrease in cash and cash equivalents (5,642) (799) Cash and cash equivalents at beginning of period 16,717 10,367 -------------- -------------- Cash and cash equivalents at end of period $ 11,075 $ 9,568 ============== ============== Supplemental information: Interest paid $ 2,074 $ 1,461 Income taxes paid - 10
See accompanying notes to consolidated financial statements. 3 Emclaire Financial Corp. and Subsidiary Consolidated Statements of Changes in Stockholders' Equity For the three months ended March 31, 2007 and 2006 (Unaudited) (Dollar amounts in thousands, except per share data)
For the three months ended March 31, -------------------------- 2007 2006 ---------- ---------- Balance at beginning of period $ 23,917 $ 23,615 Net income 551 585 Other comprehensive income (loss): Change in net unrealized gains (losses) on available for sale securities, net of taxes 7 (103) Less reclassification adjustment for gains included in net income, net of taxes (38) (76) ---------- ---------- Other comprehensive loss (31) (179) ---------- ---------- Total comprehensive income 520 406 Dividends declared (368) (342) ---------- ---------- Balance at end of period $ 24,069 $ 23,679 ========== ========== Common cash dividend per share $ 0.29 $ 0.27 ========== ==========
See accompanying notes to consolidated financial statements. 4 Emclaire Financial Corp. and Subsidiary Notes to Consolidated Financial Statements (Unaudited) 1. Nature of Operations and Basis of Presentation. Emclaire Financial Corp. (the "Corporation") is a Pennsylvania company organized as the holding company of Farmers National Bank of Emlenton (the "Bank"). The Corporation provides a variety of financial services to individuals and businesses through its offices in western Pennsylvania. Its primary deposit products are checking, savings and certificate of deposit accounts and its primary lending products are residential and commercial mortgages, commercial business and consumer loans. The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiary, the Bank. All intercompany transactions and balances have been eliminated in preparing the consolidated financial statements. The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Corporation's consolidated financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission's Form 10-Q and therefore do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2006, as contained in the Corporation's 2006 Annual Report to Stockholders. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses. The results of operations for interim quarterly or year to date periods are not necessarily indicative of the results that may be expected for the entire year or any other period. Certain amounts previously reported may have been reclassified to conform to the current year's financial statement presentation. 2. Basic Earnings per Common Share. The Corporation maintains a simple capital structure with no common stock equivalents. Basic earnings per common share is calculated using net income divided by the weighted average number of common shares outstanding during the period. 5 3. Securities. The Corporation's securities as of the respective dates are summarized as follows:
- ------------------------------------------------------------------------------------------------------------------------ (Dollar amounts in thousands) Amortized Unrealized Unrealized Fair cost gains losses value - ------------------------------------------------------------------------------------------------------------------------ Available for sale: - ------------------- March 31, 2007: U.S. Government agencies and related entities $31,355 $ - $ (428) $30,927 Mortgage-backed securities 2,304 - (92) 2,212 Municipal securities 14,689 540 - 15,229 Corporate securities 5,222 - - 5,222 Equity securities 3,606 97 (249) 3,454 --------- ---------- ---------- -------- $57,176 $ 637 $ (769) $57,044 ========= ========== ========== ======== December 31, 2006: U.S. Government agencies and related entities $31,354 $ - $ (606) $30,748 Mortgage-backed securities 2,434 - (95) 2,339 Municipal securities 14,688 574 - 15,262 Corporate securities - - - - Equity securities 3,382 176 (132) 3,425 --------- ---------- ---------- -------- $51,858 $ 750 $ (833) $51,774 ========= ========== ========== ========
4. Loans Receivable. The Corporation's loans receivable as of the respective dates are summarized as follows:
- ------------------------------------------------------------------------------------------------------------------------ (Dollar amounts in thousands) March 31, December 31, 2007 2006 - ------------------------------------------------------------------------------------------------------------------------ Mortgage loans on real estate: Residential first mortgages $ 64,589 $ 64,662 Home equity loans and lines of credit 46,225 47,330 Commercial real estate 62,888 61,128 ------------ ------------- 173,702 173,120 Other loans: Commercial business 33,756 34,588 Consumer 7,553 7,671 ------------ ------------- 41,309 42,259 ------------ ------------- Total loans, gross 215,011 215,379 Less allowance for loan losses 2,078 2,035 ------------ ------------- Total loans, net $ 212,933 $ 213,344 ============ ============= - ------------------------------------------------------------------------------------------------------------------------
6 5. Deposits. The Corporation's deposits as of the respective dates are summarized as follows:
- ------------------------------------------------------------------------------------------------------------------------ (Dollar amounts in thousands) March 31, 2007 December 31, 2006 - ------------------------------------------------------------------------------------------------------------------------ Type of accounts Amount % Amount % - -------------------------------------------------------------------------------------------------- --------------------- Noninterest-bearing deposits $ 43,966 18.1% $ 44,045 18.0% Interest-bearing demand deposits 72,905 29.9% 70,951 29.0% Time deposits 126,600 52.0% 129,496 53.0% ----------- ------- ---------- -------- $ 243,471 100.0% $ 244,492 100.0% =========== ======= ========== ======== - ------------------------------------------------------------------------------------------------------------------------
6. Guarantees. The Corporation does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Of these letters of credit at March 31, 2007, $75,000 will expire within the next twelve months, $233,000 will automatically renew within the next twelve months and $415,000 will automatically renew within thirteen to fifty-five months. The Corporation, generally, holds collateral and/or personal guarantees supporting these commitments. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The current amount of the liability as of March 31, 2007 for guarantees under standby letters of credit issued is not material. 7. Employee Benefit Plans. The Corporation maintains a defined contribution 401(k) Plan. Employees are eligible to participate by providing tax-deferred contributions up to 20% of qualified compensation. Employee contributions are vested at all times. The Corporation provides a matching contribution of up to 4% of the participant's salary. Matching contributions for the three months ended March 31, 2007 and 2006 amounted to $33,000 and $21,000, respectively. The Corporation provides pension benefits for eligible employees through a defined benefit pension plan. Substantially all employees participate in the retirement plan on a non-contributing basis and are fully vested after five years of service. The Corporation uses December 31 as the measurement date for its plans. 7 7. Employee Benefit Plans (continued). The components of the periodic pension cost are as follows:
- ------------------------------------------------------------------------------------------------------------------------ (Dollar amounts in thousands) For the three months ended March 31, -------------------------------- 2007 2006 - ------------------------------------------------------------------------------------------------------- ---------------- Service cost $ 57 $ 52 Interest cost 65 58 Expected return on plan assets (77) (66) Transition asset (2) (2) Prior service costs (8) (8) Recognized net actuarial (gain) loss 7 9 --------------- ---------------- Net periodic pension cost $ 42 $ 43 =============== ================ - ------------------------------------------------------------------------------------------------------------------------
The expected rate of return on plan assets was 8.50% for the periods ended March 31, 2007 and 2006. The Corporation previously disclosed in its financial statements for the year ended December 31, 2006 that it expected to contribute $250,000 to its pension plan in 2007. As of March 31, 2007, there have been no contributions. The Corporation presently anticipates contributing $250,000 to fund its pension plan in 2007. 8. Effect of Recently Issued Accounting Standards. In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements in accordance with SFAS 109, Accounting for Income Taxes. Specifically, the pronouncement prescribes a recognition threshold and a measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The interpretation is effective for fiscal years beginning after December 15, 2006. The Corporation adopted FASB Interpretation No. 48 as of January 1, 2007. The adoption had no effect on the Corporation's financial statements. The Corporation is subject to U.S. federal income tax as well as income tax of the state of Pennsylvania. The Corporation is no longer subject to examination by taxing authorities for years before 2002. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months. The Corporation recognizes interest and/or penalties related to income tax matters in income tax expense. The Corporation did not have any amounts accrued for interest and penalties at January 1, 2007. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. The Corporation is currently evaluating the potential impact, if any, of the adoption of SFAS 157 on its consolidated financial statements. 8 8. Effect of Recently Issued Accounting Standards (continued). In September 2006, FASB's EITF issued EITF Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements (EITF 06-4). EITF 06-4 requires the recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The consensus highlights that the employer (who is also the policyholder) has a liability for the benefit it is providing to its employee. As such, if the policyholder has agreed to maintain the insurance policy in force for the employee's benefit during his or her retirement, then the liability recognized during the employee's active service period should be based on the future cost of insurance to be incurred during the employee's retirement. Alternatively, if the policy holder has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS 106 or Accounting Principles Board (APB) Opinion No. 12, as appropriate. For transition, an entity can choose to apply the guidance using either of the following approaches: (a) a change in accounting principle through retrospective application to all periods presented or (b) a change in accounting principle through a cumulative-effect adjustment to the balance in retained earnings at the beginning of the year of adoption. The disclosures are required in fiscal years beginning after December 15, 2007, with early adoption permitted. The Corporation is currently evaluating the impact that the implementation of EITF 06-4 may have on its consolidated financial statements. In September 2006, FASB's EITF issued EITF Issue No. 06-5 Accounting for Purchases of Life Insurance - Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance (EITF 06-5), The scope of EITF 06-5 consists of six separate issues relating to accounting for life insurance policies purchased by entities protecting against the loss of key persons. The six issues are clarifications of previously issued guidance on FASB Technical Bulletin No. 85-4. EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The Corporation is currently evaluating the impact that the implementation of EITF 06-5 may have on its consolidated financial statements. In October 2006, the FASB issued FSP No. 123(R)-5, Amendment of FASB Staff Position FAS 123(R)-1 (FSP 123(R)-5). FSP 123(R)-5 amends FSP 123(R)-1 for equity instruments that were originally issued as employee compensation and then modified, with such modification made solely to reflect an equity restructuring that occurs when the holders are no longer employees. FSP 123(R)-5 is effective for the Corporation January 1, 2007. The adoption of FSP 123(R)-5 did not have a significant effect on the Corporation's consolidated financial statements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for the Corporation January 1, 2008. The Corporation is evaluating the impact that the adoption of SFAS 159 will have on its consolidated financial statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations ------------- This section discusses the consolidated financial condition and results of operations of Emclaire Financial Corp. (the "Corporation") and its wholly owned subsidiary bank, the Farmers National Bank of Emlenton (the "Bank"), for the three months ended March 31, 2007 and should be read in conjunction with the Corporation's December 31, 2006 Annual Report of Form 10-K filed with the Securities and Exchange Commission and with the accompanying consolidated financial statements and notes presented on pages 1 through 9 of this Form 10-Q. The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words "believes," "anticipates," "contemplates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, the ability to control costs and expenses and general economic conditions. The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements. 9 CHANGES IN FINANCIAL CONDITION Total assets decreased $505,000 to $300.1 million at March 31, 2007 from $300.6 million at December 31, 2006. This decrease resulted from a decrease in cash and cash equivalents of $5.6 million or 33.8% to $11.1 million at March 31, 2007 from $16.7 million at December 31, 2006, as these funds were utilized in funding security purchases. Partially offsetting this decrease was an increase in securities available for sale of $5.3 million or 10.2% to $57.0 million at March 31, 2007 from $51.8 million at December 31, 2006 due to security purchases of $5.6 million. Total liabilities decreased $657,000 to $276.0 million at March 31, 2007 from $276.6 million at December 31, 2006, while total stockholders' equity increased $152,000 to $24.1 million at March 31, 2007 from $23.9 million at December 31, 2006. The decrease in total liabilities was primarily due to a decrease in customer deposits of $1.0 million partially offset by an increase in accrued expenses and other liabilities of $435,000. RESULTS OF OPERATIONS Comparison of Results for the Three Month Periods Ended March 31, 2007 and 2006 General. Net income decreased $34,000 or 5.8% to $551,000 for the three months ended March 31, 2007 from $585,000 for the same period in 2006. This decrease was a result of increases in noninterest expense and the provision for loan losses of $95,000 and $14,000, respectively, offset by increases in net interest income and noninterest income of $47,000 and $2,000, respectively, and a decrease in the provision for income tax of $26,000. Net interest income. Net interest income on a tax equivalent basis increased $45,000 or 1.9% to $2.4 million for the three months ended March 31, 2007. This net increase can be attributed to an increase in tax equivalent interest income of $566,000, partially offset by a $521,000 increase in interest expense. Interest income. Interest income on a tax equivalent basis increased $566,000 or 14.7% to $4.4 million for the three months ended March 31, 2007, compared to $3.9 million for the same period in the prior year. This increase can be attributed to increases in interest earned on loans, federal bank stocks, and interest-earning deposits with banks of $450,000, $32,000 and $103,000, respectively, offset by a decrease in interest earned on securities of $19,000. Tax equivalent interest earned on loans receivable increased $450,000 or 14.1% to $3.6 million for the three months ended March 31, 2007, compared to $3.2 million for the same period in 2006. During that time, average loans increased $21.7 million or 11.2%, accounting for $364,000 in additional loan interest income. Additionally, the yield on loans increased 18 basis points to 6.85% for the three months ended March 31, 2007, versus 6.67% for the same period in 2006, contributing $86,000 in additional interest income. Tax equivalent interest earned on securities decreased $19,000 or 3.0% to $615,000 for the three months ended March 31, 2007, compared to $634,000 for the same period in 2006. The average volume of securities decreased $3.7 million or 6.7%, primarily as a result of the utilization of these funds for loan growth. This resulted in a $44,000 decline in interest income. Partially offsetting the decline was an increase in the average yield on securities of 19 basis points to 4.80% for the three months ended March 31, 2007, versus 4.61% for the same period in 2006, as a result of certain lower yielding securities maturing. This favorable yield variance contributed an additional $25,000 to interest income. Interest earned on interest-earning deposit accounts increased $103,000 to $121,000 for the three months ended March 31, 2007 from $18,000 for the same period in 2006. The average volume of these assets increased $7.6 million primarily as a result of the investment of funds from maturing securities contributing $97,000 in additional interest income. Additionally, the average yield on interest-earning deposit accounts increased 109 basis points to 5.23% for the three months ended March 31, 2007, compared to 4.14% for the same period in the prior year, contributing $6,000 in additional interest income. The increase in the average yield reflects the recent increases in short-term interest rates. Interest earned on federal bank stocks increased $32,000 to $50,000 for the three month period ended March 31, 2007 from $18,000 for the same period in the prior year as a result of a higher volume and a higher yield. The higher yield resulted from the recognition during the first quarter of a fourth quarter 2006 special dividend on FHLB capital stock. 10 Interest expense. Interest expense increased $521,000 or 35.2% to $2.0 million for the three months ended March 31, 2007, compared to $1.5 million for the same period in the prior year. This increase in interest expense can be attributed to increases in interest incurred on deposits and borrowed funds of $353,000 and $168,000, respectively. Interest expense incurred on deposits increased $353,000 or 26.9% to $1.7 million for the three months ended March 31, 2007, compared to $1.3 million for the same period in the prior year. This increase was principally rate driven as the cost of interest-bearing deposits increased 60 basis points to 3.54% for the three months ended March 31, 2007, compared to 2.94% for the same period in 2006 contributing $269,000 in additional expense. The average volume of deposits increased $11.6 million or 6.1% to $199.7 million for the three months ended March 31, 2007, compared to $188.2 million for the same period in 2006 contributing $84,000 in additional expense. Interest expense incurred on borrowed funds increased $168,000 or 100.0% to $336,000 for the three months ended March 31, 2007, compared to $168,000 for the same period in the prior year. This increase in interest expense can be attributed to the increase in the average balance of borrowed funds of $14.1 million to $30.0 million for the three months ended March 31, 2007, compared to $15.9 million for the same period in the prior year. This volume increase was the result of $15.0 million of FHLB term borrowings placed in the second and third quarters of 2006 contributing $157,000 in additional expense. Such borrowings were primarily used to fund loan growth. 11 Average Balance Sheet and Yield/Rate Analysis. The following table sets forth, for the periods indicated, information concerning the total dollar amounts of interest income from interest-earning assets and the resulting average yields, the total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs, net interest income, interest rate spread and the net interest margin earned on average interest-earning assets. For purposes of this table, average loan balances include non-accrual loans and exclude the allowance for loan losses and interest income includes accretion of net deferred loan fees. Interest and yields on tax-exempt loans and securities (tax-exempt for federal income tax purposes) are shown on a fully tax equivalent basis. The information is based on average daily balances during the periods presented.
- ------------------------------------------------------------------------------------------------------------------------ (Dollar amounts in thousands) Three months ended March 31, ----------------------------------------------------- 2007 2006 -------------------------- -------------------------- Yield Yield Average / Average / Balance Interest Rate Balance Interest Rate - ------------------------------------------------------------------------------------------------------------------------ Interest-earning assets: - ------------------------ Loans, taxable $208,776 $3,532 6.86% $186,737 $3,077 6.68% Loans, tax exempt 6,495 104 6.49% 6,858 109 6.45% --------- ------- --------- ------- Total loans receivable 215,271 3,636 6.85% 193,595 3,186 6.67% --------- ------- --------- ------- Securities, taxable 36,758 364 4.02% 40,332 383 3.85% Securities, tax exempt 15,224 251 6.68% 15,384 251 6.61% --------- ------- --------- ------- Total securities 51,982 615 4.80% 55,716 634 4.61% --------- ------- --------- ------- Interest-earning deposits with banks 9,375 121 5.23% 1,763 18 4.14% Federal bank stocks 2,209 50 9.18% 1,635 18 4.46% --------- ------- --------- ------- Total interest-earning cash equivalents 11,584 171 5.99% 3,398 36 4.30% --------- ------- --------- ------- Total interest-earning assets 278,837 4,422 6.43% 252,709 3,856 6.19% Cash and due from banks 6,163 7,110 Other noninterest-earning assets 14,535 12,821 --------- --------- Total Assets $299,535 $272,640 ========= ========= Interest-bearing liabilities: - ----------------------------- Interest-bearing demand deposits $ 72,176 233 1.31% $ 73,404 146 0.81% Time deposits 127,533 1,434 4.56% 114,755 1,168 4.13% --------- ------- --------- ------- Total interest-bearing deposits 199,709 1,667 3.39% 188,159 1,314 2.83% --------- ------- --------- ------- Borrowed funds, short-term - - 0.00% 941 9 3.88% Borrowed funds, long-term 30,000 336 4.54% 15,000 159 4.30% --------- ------- --------- ------- Total borrowed funds 30,000 336 4.54% 15,941 168 4.27% --------- ------- --------- ------- Total interest-bearing liabilities 229,709 2,003 3.54% 204,100 1,482 2.94% --------- ------- --------- ------- Noninterest-bearing demand deposits 43,368 - - 42,316 - - --------- ------- --------- ------- Funding and cost of funds 273,077 2,003 2.97% 246,416 1,482 2.44% Other noninterest-bearing liabilities 2,572 2,613 --------- --------- Total Liabilities 275,649 249,029 Stockholders' Equity 23,886 23,611 --------- --------- Total Liabilities and Stockholders' Equity $299,535 $272,640 ========= ------- ========= ------- Net interest income $2,419 $2,374 ======= ======= Interest rate spread (difference between weighted average rate on interest-earning assets and interest-bearing liabilities) 2.89% 3.24% Net interest margin (net interest income as a percentage of average interest-earning assets) 3.52% 3.81% - ------------------------------------------------------------------------------------------------------------------------
12 Analysis of Changes in Net Interest Income. The following table analyzes the changes in interest income and interest expense in terms of: (1) changes in volume of interest-earning assets and interest-bearing liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in the Corporation's interest income and interest expense are attributable to changes in rate (change in rate multiplied by prior year volume), changes in volume (changes in volume multiplied by prior year rate) and changes attributable to the combined impact of volume/rate (change in rate multiplied by change in volume). The changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances. Changes in interest income on loans and securities reflect the changes in interest income on a fully tax equivalent basis.
- ------------------------------------------------------------------------------------------------------------------------ Three months ended March 31, 2007 versus 2006 Increase (Decrease) due to -------------------------------------- (Dollar amounts in thousands) Volume Rate Total - ------------------------------------------------------------------------------------------------------------------------ Interest income: Loans $ 364 $ 86 $ 450 Securities (44) 25 (19) Interest-earning deposits with banks 97 6 103 Federal bank stocks 8 24 32 ------------- ----------- ------------ Total interest-earning assets 425 141 566 ------------- ----------- ------------ Interest expense: Deposits 84 269 353 Borrowed funds 157 11 168 ------------- ----------- ------------ Total interest-bearing liabilities 241 280 521 ------------- ----------- ------------ Net interest income $ 184 $ (139) $ 45 ============= =========== ============ - ------------------------------------------------------------------------------------------------------------------------
Provision for loan losses. The Corporation records provisions for loan losses to maintain a level of total allowance for loan losses that management believes, to the best of its knowledge, covers all known and inherent losses that are both probable and reasonably estimable at each reporting date. Management considers historical loss experience, the present and prospective financial condition of borrowers, current conditions (particularly as they relate to markets where the Corporation originates loans), the status of non-performing assets, the estimated underlying value of the collateral and other factors related to the collectibility of the loan portfolio. Information pertaining to the allowance for loan losses and non-performing assets for the quarters ended March 31, 2007 and 2006 is as follows:
- ------------------------------------------------------------------------------------------------------------------ For the three months ended: March 31, ----------------------------- (Dollar amounts in thousands) 2007 2006 - ------------------------------------------------------------------------------------------------------------------ Balance at the beginning of the period $ 2,035 $ 1,869 Provision for loan losses 45 31 Charge-offs (15) (15) Recoveries 13 6 -------------- -------------- Balance at the end of the period $ 2,078 $ 1,891 ============== ============== Non-performing loans $ 1,980 $ 1,256 Non-performing assets 1,980 1,352 Non-performing loans to total loans 0.92% 0.65% Non-performing assets to total assets 0.66% 0.50% Allowance for loan losses to total loans 0.97% 0.98% Allowance for loan losses to non-performing loans 104.95% 150.56% - ------------------------------------------------------------------------------------------------------------------
13 The provision for loan losses increased $14,000 or 45.2% to $45,000 for the three month period ended March 31, 2007 from $31,000 for the same period in the prior year. Management's evaluation of the loan portfolio, including the changing composition of the portfolio as well as economic trends, regulatory considerations and other factors contributed to the recognition of $45,000 in the provision for loan losses during the three months ended March 31, 2007. Noninterest income. Noninterest income increased $2,000 to $730,000 during the three months ended March 31, 2007, compared to $728,000 during the same period in the prior year. This decrease can be attributed to decreases in customer fees and service charges and gains on the sale of securities of $31,000 and $58,000, respectively. Offsetting this decrease in noninterest income were increases in commissions earned on financial services, earnings on bank-owned life insurance and other noninterest income of $61,000, $3,000 and $27,000, respectively. Noninterest expense. Noninterest expense increased $95,000 or 4.3% to $2.3 million during the three months ended March 31, 2007, compared to $2.2 million during the same period in the prior year. This increase in noninterest expense can be attributed to increases in premises and equipment and other noninterest expenses of $19,000 and $80,000, respectively. Premises and equipment increased $19,000 or 5.0% to $400,000 for the three months ended March 31, 2007, compared to $381,000 for the same period in the prior year. This increase can be attributed primarily to the operation of one additional branch facility opened in November 2006. Other noninterest expense increased $80,000 or 15.4% to $604,000 during the three months ended March 31, 2007, compared to $524,000 for the same period in the prior year. This increase can be attributed primarily to increases in professional fees relating to operations and compliance consulting needed as a result of the 2006 reorganization. Provision for income taxes. The provision for income taxes decreased $26,000 or 16.4% to $133,000 for the three months ended March 31, 2007, compared to $159,000 for the same period in the prior year due primarily to the decrease in the effective tax rate to 19.4% in 2007 from 21.4% in 2006 in addition to lower pre-tax earnings. The difference between the statutory rate of 34% and the Corporation's effective tax rate is due to tax-exempt income earned on loans, securities and bank-owned life insurance. LIQUIDITY The Corporation's primary sources of funds generally have been deposits obtained through the offices of the Bank, borrowings from the FHLB and amortization and prepayments of outstanding loans and maturing securities. During the three months ended March 31, 2007, the Corporation used its sources of funds primarily to fund loan originations and security purchases. As of such date, the Corporation had outstanding loan commitments, including undisbursed loans and amounts available under credit lines, totaling $23.9 million, and standby letters of credit totaling $723,000. At March 31, 2007, time deposits amounted to $126.6 million or 52.0% of the Corporation's total consolidated deposits, including approximately $60.7 million of which are scheduled to mature within the next year. Management of the Corporation believes that it has adequate resources to fund all of its commitments, that all of its commitments will be funded as required by related maturity dates and that, based upon past experience and current pricing policies, it can adjust the rates of time deposits to retain a substantial portion of maturing liabilities. Aside from liquidity available from customer deposits or through sales and maturities of securities, the Corporation has alternative sources of funds such as a term borrowing capacity from the FHLB and, to a limited and rare extent, the sale of loans. At March 31, 2007, the Corporation's borrowing capacity with the FHLB, net of funds borrowed, was $107.0 million. 14 Management is not aware of any conditions, including any regulatory recommendations or requirements, which would adversely impact its liquidity or its ability to meet funding needs in the ordinary course of business. CRITICAL ACCOUNTING POLICIES Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views the determination of the allowance for loan losses as a critical accounting policy. The allowance for loan losses provides for an estimate of probable losses in the loan portfolio. In determining the appropriate level of the allowance for loan loss, the loan portfolio is separated into risk-rated and homogeneous pools. Migration analysis/historical loss rates, adjusted for relevant trends, have been applied to these pools. Qualitative adjustments are then applied to the portfolio to allow for quality of lending policies and procedures, national and local economic and business conditions, changes in the nature and volume of the portfolio, experience, ability and depth of lending management, changes in the trends, volumes and severity of past due, non-accrual and classified loans and loss and recovery trends, quality of the Corporation's loan review system, concentrations of credit, and external factors. The methodology used to determine the adequacy of the Corporation's allowance for loan losses is comprehensive and meets regulatory and accounting industry standards for assessing the allowance, however, it is still an estimate. Loan losses are charged against the allowance while recoveries of amounts previously charged-off are credited to the allowance. Loan loss provisions are charged against current earnings based on management's periodic evaluation and review of the factors indicated above. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- Market risk for the Corporation consists primarily of interest rate risk exposure and liquidity risk. Since virtually all of the interest-earning assets and interest-bearing liabilities are at the Bank, virtually all of the interest rate risk and liquidity risk lies at the Bank level. The Bank is not subject to currency exchange risk or commodity price risk, and has no trading portfolio, and therefore, is not subject to any trading risk. In addition, the Bank does not participate in hedging transactions such as interest rate swaps and caps. Changes in interest rates will impact both income and expense recorded and also the market value of long-term interest-earning assets. Interest rate risk and liquidity risk management is performed at the Bank level. Although the Bank has a diversified loan portfolio, loans outstanding to individuals and businesses depend upon the local economic conditions in the immediate trade area. One of the primary functions of the Corporation's asset/liability management committee is to monitor the level to which the balance sheet is subject to interest rate risk. The goal of the asset/liability committee is to manage the relationship between interest rate sensitive assets and liabilities, thereby minimizing the fluctuations in the net interest margin, which achieves consistent growth of net interest income during periods of changing interest rates. Interest rate sensitivity is the result of differences in the amounts and repricing dates of the Bank's rate sensitive assets and rate sensitive liabilities. These differences, or interest rate repricing "gap", provide an indication of the extent that the Corporation's net interest income is affected by future changes in interest rates. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities and is considered negative when the amount of interest rate-sensitive liabilities exceeds the amount of interest rate-sensitive assets. Generally, during a period of rising interest rates, a negative gap would adversely affect net interest income while a positive gap would result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would result in an increase in net interest income and a positive gap would adversely affect net interest income. The closer to zero that gap is maintained, generally, the lesser the impact of market interest rate changes on net interest income. 15 Based on certain assumptions provided by a federal regulatory agency, which management believes most accurately represents the sensitivity of the Corporation's assets and liabilities to interest rate changes, at March 31, 2007, the Corporation's interest-earning assets maturing or repricing within one year totaled $83.0 million while the Corporation's interest-bearing liabilities maturing or repricing within one-year totaled $90.8 million, providing an excess of interest-bearing liabilities over interest-earning assets of $7.8 million or a negative 2.6% of total assets. At March 31, 2007, the percentage of the Corporation's assets to liabilities maturing or repricing within one year was 91.4%. For more information, see "Market Risk Management" in Exhibit 13 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 2006. Item 4. Controls and Procedures - ------------------------------- The Corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Corporation's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Corporation's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). There has been no change made in the Corporation's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting. As of the quarter ended March 31, 2007, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's management, including the Corporation's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on the foregoing, the Corporation's Chief Executive Officer and Chief Financial Officer concluded that the Corporation's disclosure controls and procedures were effective. There have been no significant changes in the Corporation's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Corporation completed its evaluation. PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings - -------------------------- The Corporation is involved in various legal proceedings occurring in the ordinary course of business. It is the opinion of management, after consultation with legal counsel, that these matters will not materially effect the Corporation's consolidated financial position or results of operations. Item 1A. Risk Factors - ---------------------- There have been no material changes in the Corporation's risk factors from those previously disclosed in the 2006 Form 10-K. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - -------------------------------------------------------------------- None. Item 3. Defaults Upon Senior Securities - ---------------------------------------- None. 16 Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ None. Item 5. Other Information - -------------------------- (a) Not applicable. (b) Not applicable. Item 6. Exhibits - ----------------- Exhibit 31.1 Rule 13a-14(a) Certification of Chief Executive Officer Exhibit 31.2 Rule 13a-14(a) Certification of Chief Financial Officer Exhibit 32.1 CEO Certification Pursuant to 18 U.S.C. Section 1350 Exhibit 32.2 CFO Certification Pursuant to 18 U.S.C. Section 1350 17 Signatures - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EMCLAIRE FINANCIAL CORP. AND SUBSIDIARY Date: May 10, 2007 By: /s/ David L. Cox ----------------------------------------------------- David L. Cox Chairman of the Board, President and Chief Executive Officer Date: May 10, 2007 By: /s/ William C. Marsh ----------------------------------------------------- William C. Marsh Executive Vice President, Chief Financial Officer and Treasurer 18 EX-31.1 2 a5399916ex31_1.txt EXHIBIT 31.1 Exhibit 31.1 Certification of the Chief Executive Officer (Pursuant to Rule 13a-14(a)) I, David L. Cox, Chairman of the Board, President and Chief Executive Officer, certify that: 1. I have reviewed this Form 10-Q of Emclaire Financial Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 10, 2007 By: /s/ David L. Cox -------------------------------------------- David L. Cox Chairman of the Board, President and Chief Executive Officer 19 EX-31.2 3 a5399916ex31_2.txt EXHIBIT 31.2 Exhibit 31.2 Certification of the Chief Financial Officer (Pursuant to Rule 13a-14(a)) I, William C. Marsh, Executive Vice President, Chief Financial Officer and Treasurer certify that: 1. I have reviewed this Form 10-Q of Emclaire Financial Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 10, 2007 By: /s/ William C. Marsh ----------------------------------------------------- William C. Marsh Executive Vice President, Chief Financial Officer and Treasurer 20 EX-32.1 4 a5399916ex32_1.txt EXHIBIT 32.1 Exhibit 32.1 CEO CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of Emclaire Financial Corp. (the Corporation) on Form 10-Q for the period ending March 31, 2007 as filed with the Securities and Exchange Commission on the date here (the Report), I, David L. Cox, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and result of operations of the Corporation. /s/ David L. Cox - ----------------- David L. Cox Chairman of the Board, President and Chief Executive Officer May 10, 2007 EX-32.2 5 a5399916ex32_2.txt EXHIBIT 32.2 Exhibit 32.2 CFO CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report of Emclaire Financial Corp. (the Corporation) on Form 10-Q for the period ending March 31, 2007 as filed with the Securities and Exchange Commission on the date here (the Report), I, William C. Marsh, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and result of operations of the Corporation. /s/ William C. Marsh - --------------------- William C. Marsh Executive Vice President Chief Financial Officer and Treasurer May 10, 2007 -----END PRIVACY-ENHANCED MESSAGE-----