SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240-14a-11(c) or Section 240-14a-12
First Keystone Financial, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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FIRST KEYSTONE LOGO
December 23, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of First Keystone Financial, Inc. The meeting will be held at the Towne House
Restaurant located at 117 Veterans Square, Media, Pennsylvania, on Wednesday,
January 28, 2004 at 2:00 P.M., Eastern Time. The matters to be considered by
stockholders at the Annual Meeting are described in the accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are for any reason unable to attend.
Your continued support of and interest in First Keystone Financial,
Inc. are sincerely appreciated.
Sincerely,
/s/ Donald S. Guthrie
Donald S. Guthrie
Chairman and Chief Executive Officer
FIRST KEYSTONE FINANCIAL, INC.
22 WEST STATE STREET
MEDIA, PENNSYLVANIA 19063
(610) 565-6210
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 28, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of First Keystone Financial, Inc. (the "Company") will be held at the
Towne House Restaurant located at 117 Veterans Square, Media, Pennsylvania, on
Wednesday, January 28, 2004 at 2:00 P.M., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect two (2) directors for four-year terms or until their
successors are elected and qualified;
(2) To ratify the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending September 30, 2004; and
(3) To transact such other business as properly may come before
the meeting or any adjournment thereof. As of the date hereof,
management is not aware of any other such business.
The Board of Directors has fixed December 5, 2003 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carol Walsh
Carol Walsh
Corporate Secretary
Media, Pennsylvania
December 23, 2003
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE IN PERSON AT
THE ANNUAL MEETING.
FIRST KEYSTONE FINANCIAL INC.
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 28, 2004
This Proxy Statement is furnished to holders of common stock, $.01 par
value per share (the "Common Stock"), of First Keystone Financial, Inc. (the
"Company"), the holding company of First Keystone Bank (the "Bank"). Proxies are
being solicited on behalf of the Board of Directors of the Company to be used at
the Annual Meeting of Stockholders ("Annual Meeting") to be held at the Towne
House Restaurant located at 117 Veterans Square, Media, Pennsylvania, on
Wednesday, January 28, 2004 at 2:00 P.M., Eastern Time, for the purposes set
forth in the Notice of Annual Meeting of Stockholders. This Proxy Statement is
first being mailed to stockholders on or about December 23, 2003.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Annual Meeting, stockholders will act upon the matters outlined
in the Notice of Annual Meeting on the cover page of this proxy statement,
including the election of directors and ratification of the Company's
independent auditors. In addition, management will report on the performance of
the Company and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record as of the close of business on the record
date for the meeting, December 5, 2003 (the "Voting Record Date") are entitled
to vote at the Annual Meeting. On the Voting Record Date, there were 1,886,897
shares of Common Stock, issued and outstanding and no other class of equity
securities outstanding. Each issued and outstanding share of Common Stock is
entitled to one vote on each matter to be voted on at the meeting, in person or
by proxy.
HOW DO I SUBMIT MY PROXY?
After you have carefully read this proxy statement, indicate on your
proxy form how you want your shares to be voted. Then sign, date and mail your
proxy form in the enclosed prepaid return envelope as soon as possible. This
will enable your shares to be represented and voted at the Annual Meeting.
IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, COULD MY BROKER AUTOMATICALLY
VOTE MY SHARES FOR ME?
Yes. Your broker may vote in his or her discretion on the election of
directors and ratification of the auditors if you do not furnish instructions.
CAN I ATTEND THE MEETING AND VOTE MY SHARES IN PERSON?
Yes. All stockholders are invited to attend the Annual Meeting.
Stockholders of record can vote in person at the Annual Meeting. If your shares
are held in street name, then you are not the stockholder of record and you must
ask your broker or other nominee how you can vote at the Annual Meeting.
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CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. If you have not voted through your broker or other nominee, there
are three ways you can change your vote or revoke your proxy after you have sent
in your proxy form.
- First, you may send a written notice to the Secretary of First
Keystone Financial, Inc., Ms. Carol Walsh, Secretary, First
Keystone Financial, Inc., 22 West State Street, Media,
Pennsylvania 19063, stating that you would like to revoke your
proxy.
- Second, you may complete and submit a new proxy form. Any
earlier proxies will be revoked automatically.
- Third, you may attend the Annual Meeting and vote in person.
Any earlier proxy will be revoked. However, attending the
Annual Meeting without voting in person will not revoke your
proxy.
If you have instructed a broker or other nominee to vote your shares,
you must follow directions you receive from your broker or other nominee to
change your vote.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock outstanding on the record date will
constitute a quorum. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of votes considered
to be present at the meeting.
WHAT ARE THE BOARD OF DIRECTORS' RECOMMENDATIONS?
The recommendations of the Board of Directors are set forth under the
description of each proposal in this proxy statement. In summary, the Board of
Directors recommends that you vote FOR the nominees for director described
herein and FOR ratification of the appointment of Deloitte & Touche LLP for
fiscal 2004.
The proxy solicited hereby, if properly signed and returned to us and
not revoked prior to its use, will be voted in accordance with your instructions
contained in the proxy. If no contrary instructions are given, each proxy signed
and received will be voted in the manner recommended by the Board of Directors
and, upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Proxies solicited hereby may be exercised only at the annual meeting
and any adjournment of the annual meeting and will not be used for any other
meeting.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Directors are elected by a plurality of the votes cast with a quorum
present. The two persons who receive the greatest number of votes of the holders
of Common Stock represented in person or by proxy at the Annual Meeting will be
elected directors. The affirmative vote of the holders of a majority of the
total votes present in person or by proxy is required for approval of the
proposal to ratify the appointment of the independent auditors. Abstentions are
considered in determining the presence of a quorum, but will not affect the
plurality vote required for the election of directors. Abstentions will have the
effect of a vote against the proposal to ratify the appointment of the
independent auditors. Under rules of the New York Stock Exchange, the proposals
to elect directors and ratify the appointment of the independent auditors are
considered "discretionary" items upon which brokerage firms may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions and for which there will not be "broker non-votes."
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INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Restated Articles of Incorporation of the Company provide that the
Board of Directors of the Company shall be divided into four classes that are as
equal in number as possible, and that members of each class of directors are to
be elected for a term of four years. One class is to be elected annually.
Stockholders of the Company are not permitted to cumulate their votes for the
election of directors. Mr. Donald A. Purdy, whose term expires at the Annual
Meeting, is not standing for re-election and will retire as of the Annual
Meeting. A majority of the members of the Company's Board of Directors are
independent based on an assessment of each member's qualifications by the Board,
taking into consideration the Nasdaq National Market's requirements for
independence. The Board of Directors has determined that Messrs. Calderoni,
Hendrixson, Purdy, O'Donnell and Soss do not have any material relationships
with the Company that would impair their independence.
No directors or executive officers of the Company are related to any
other director or executive officer of the Company by blood, marriage or
adoption except for Donald G. Hosier, Jr. and Robert R. Hosier (who serves as a
Senior Vice President of the Bank) who are brothers and Edmund Jones and Donald
A. Purdy who are brothers-in-law. Each nominee for director currently serves as
director of the Company.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If the person or persons named as nominee should be unable or unwilling
to stand for election at the time of the Annual Meeting, then the proxies will
nominate and vote for one or more replacement nominees recommended by the Board
of Directors. At this time, the Board of Directors knows of no reason why the
nominees listed below may not be able to serve as directors if elected.
The following tables present information concerning the nominees for
director of the Company and each director of the Company whose term continues,
including such person's tenure as a director of the Bank (if applicable).
NOMINEES FOR DIRECTOR FOR FOUR-YEAR TERMS EXPIRING IN 2008
Principal Occupation During Director
Name Age(1) the Past Five Years Since
- ------------------- ------ ----------------------------------------------------- --------
Bruce C. Hendrixson 59 Director, Owner of Garnet Ford and Garnet Volkswagon, 2003
Chester County, Pennsylvania.
Thomas M. Kelly 47 Director; President of the Company since 2002; has 1997
served as Chief Financial Officer of the Company
since 1994; has served as Chief Financial Officer of
the Bank since 1991 and Executive Vice President
since 1995; former Senior Manager at Deloitte &
Touche LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES FOR DIRECTOR.
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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
DIRECTORS WHOSE TERMS EXPIRES IN 2005
Principal Occupation During Director
Name Age(1) the Past Five Years Since
- ---------------------- ------ ---------------------------------------------------- --------
Donald G. Hosier, Jr. 48 Director; President of First Keystone Insurance 2001
Services, LLC, a subsidiary of the Bank, and a
principal with Montgomery Insurance Services, Inc.,
Media, Pennsylvania, an insurance brokerage firm.
Marshall J. Soss 57 Director; President and Chief Executive Officer of 2001
KarMar Realty Group, Inc., Media, Pennsylvania, a
commercial and investment real estate service company.
DIRECTORS WHOSE TERMS EXPIRE IN 2006
Principal Occupation During Director
Name Age(1) the Past Five Years Since
- ---------------------- ------ ---------------------------------------------------- --------
Edward Calderoni 81 Director; Associate-broker of Century 21-Alliance, a 1982
real estate firm located in Aston and Media,
Pennsylvania.
William J. O'Donnell, CPA 36 Director; Information Technology Manager with Wawa,
Inc., Wawa, Pennsylvania since 2000; served as 2002
Information Technology Manager with Vlasic Foods
International, Cherry Hill, New Jersey from 1998 to
2000; former Information Technology Project Leader
with ARCO Chemical Co., Newtown Square, Pennsylvania.
DIRECTORS WHOSE TERMS EXPIRE IN 2007
Principal Occupation During Director
Name Age(1) the Past Five Years Since
- ---------------------- ------ ---------------------------------------------------- --------
Donald S. Guthrie 68 Chairman of the Board and Chief Executive Officer of 1994
the Company; served as President of the Company from
1994 until 2002; President and Chief Executive
Officer of the Bank; previously a member of the law
firm of Jones, Strohm & Guthrie, P.C., Media,
Pennsylvania.
Edmund Jones 85 Director; former Chairman of the Board of the Bank 1947
from 1979 until 1993; member of the law firm of
Jones, Strohm & Guthrie, P.C., Media, Pennsylvania.
- ------------------------
(1) As of September 30, 2003
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EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is information with respect to the principal
occupations during at least the last five years for the seven executive officers
of the Company and/or the Bank who do not serve as directors. There are no
arrangements or understandings between a director of the Company and any other
person pursuant to which such person was elected an executive officer of the
Company.
A. CHARLES AMENTT, JR. Age 48. Mr. Amentt has served as Senior Vice
President of Commercial Lending since July 2002 and prior thereto was Vice
President of Commercial Lending since 1996.
ROSE M. DIMARCO. Age 41. Ms. DiMarco has served as Senior Vice
President of Finance since July 2002 and has been employed in various capacities
at the Bank since 1984.
STEPHEN J. HENDERSON. Age 56. Mr. Henderson has served as Senior Vice
President of Residential Lending since May 1991 and has been employed in various
capacities at the Bank since 1971.
ROBERT R. HOSIER. Age 42. Mr. Hosier has served as Senior Vice
President of Information Technology since July 2002 and has been employed in
various capacities at the Bank since 1987.
ELIZABETH M. MULCAHY. Age 66. Ms. Mulcahy has served as Senior Vice
President of Human Resources, Branch Operations and Security since 1991 and has
been employed in various capacities at the Bank since 1964.
ROBIN G. OTTO. Age 45. Ms. Otto has served as Senior Vice President of
Marketing at the Bank since December 2002; previously marketing consultant with
Palindrome Consulting, Glen Mills, Pennsylvania from August 1996 to December
2002; and prior thereto, Ms. Otto served as an officer of the Bank.
CAROL WALSH. Age 55. Ms. Walsh has served as Corporate Secretary since
August 1991 and has been employed in various capacities at the Bank since 1970.
STOCKHOLDER NOMINATIONS
Article 6.F of the Company's Restated Articles of Incorporation governs
nominations for election to the Board of Directors and requires all such
nominations, other than those made by the Board, to be made at a meeting of
stockholders called for the election of directors, and only by a stockholder who
has complied with the notice provisions set forth in such section. Stockholder
nominations must be made pursuant to timely notice delivered in writing to the
Secretary of the Company. To be timely, a stockholder's notice must be delivered
to, or mailed and received at, the principal executive offices of the Company
not later than 60 days prior to the anniversary date of the immediately
preceding annual meeting. No such notices were submitted to the Company's
Secretary by November 23, 2003 for consideration at this Annual Meeting.
Each written notice of a stockholder nomination shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director and as to the person nominated thereby (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
Company stock that are beneficially owned by such person on the date of such
stockholder notice, and (iv) any other information relating to such person that
is required to be disclosed in solicitations of proxies with respect to nominees
for election as directors, pursuant to the proxy rules under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Company's books, of such stockholder and any other stockholders known by such
stockholder to be supporting such nominees and (ii) the class and number of
shares of Company stock that are beneficially owned by such stockholder on the
date of such stockholder notice and, to the extent known, by any other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder notice. The presiding officer of the meeting may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedures.
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COMMITTEES AND MEETINGS OF THE BOARD OF THE COMPANY AND BANK
The Board of Directors of the Company meets no less than quarterly and
may have additional special meetings upon the request of the President or a
majority of the directors. During the fiscal year ended September 30, 2003, the
Board of Directors of the Company met nine times. No director attended fewer
than 75% of the total number of Board meetings or committee meetings on which he
or she served that were held during fiscal 2003. The Board of Directors of the
Company has established the following committees, among others:
Audit Committee. The Audit Committee consists of Messrs. Calderoni,
Hendrixson and O'Donnell. The Audit Committee reviews the records and affairs of
the Company, engages the Company's external auditors, meets with the Company's
outsourced internal auditor, and reviews their reports. All of the members of
the Audit Committee are independent as such term is currently defined in Rule
4200(a)(15) of the Nasdaq Stock Market's listing standards ("Nasdaq Independence
Rules") and the regulations of the Securities and Exchange Commission ("SEC").
The Audit Committee meets on an as needed basis and met four times in fiscal
2003. On May 12, 2003, the Board of Directors of the Company adopted an Audit
Committee Charter, a copy of which is attached as Appendix A to this proxy
statement.
The Board of Directors has determined that Mr. O'Donnell, a member of
the Audit Committee, meets the requirements recently adopted by the Securities
and Exchange Commission for qualification as an audit committee financial
expert. An audit committee financial expert is defined as a person who has the
following attributes: (i) an understanding of generally accepted accounting
principles and financial statements; (ii) the ability to assess the general
application of such principles in connection with the accounting for estimates,
accruals and reserves; (iii) experience preparing, auditing, analyzing or
evaluating financial statements that present a breadth and level of complexity
or accounting issues that are generally comparable to the breadth and complexity
of issues that can reasonably be expected to be raised by the registrant's
financial statements, or experience actively supervising one or more persons
engaged in such activities; (iv) an understanding of internal controls and
procedures for financial reporting; and (v) an understanding of audit committee
functions.
The identification of a person as an audit committee financial expert
does not impose on such person any duties, obligations or liability that are
greater than those that are imposed on such person as a member of the Audit
Committee and the Board of Directors in the absence of such identification.
Moreover, the identification of a person as an audit committee financial expert
for purposes of the regulations of the Securities and Exchange Commission does
not affect the duties, obligations or liability of any other member of the Audit
Committee or the Board of Directors. Finally, a person who is determined to be
an audit committee financial expert will not be deemed an "expert" for purposes
of Section 11 of the Securities Act of 1933.
Nominating Committee. The Nominating Committee consists of Messrs.
Soss, O'Donnell and Calderoni, who is Chairman of the Committee. The Nominating
Committee, which is responsible for reviewing and nominating candidates to the
Board, met one time during November 2003 in connection with the nominations for
the annual meeting of stockholders in January 2004. All of the members of the
Nominating Committee are independent as such term is defined in the Nasdaq
Independence Rules.
In addition to the committees of the Company described above, the Bank
also has established other committees which include members of the Board of
Directors of the Bank as well as senior management and which meet as required.
These committees include, among others, the Executive Committee, Compensation
Committee, Audit Committee, Asset/Liability Committee, Loan Committee, Community
Investment Committee and Asset Quality Review Committee.
Compensation Committee. The Compensation Committee of the Bank consists
of Messrs. Calderoni, D'Ignazio and O'Donnell. All of the members of the
Compensation Committee are independent as such term is defined in the Nasdaq
Independence Rules. The Compensation Committee reviews overall compensation and
benefits for the Bank's employees and senior officers and recommends
compensation and benefits for the President. The Company does not pay separate
compensation to its employees and officers. The Compensation Committee of the
Bank met one time in fiscal 2003 and its report is included below under
"Executive Compensation."
6
REPORT OF THE AUDIT COMMITTEE OF THE COMPANY
The Audit Committee of the Company is responsible for providing
independent, objective oversight of the Company's accounting function and
internal controls. Management is responsible for the preparation, presentation
and integrity of the Company's financial statements, the Company's accounting
and financial reporting principles and the Company's internal controls and
financial reporting procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The Company's independent
auditors are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and issuing an opinion as to their conformity with generally accepted
accounting principles.
The Audit Committee is composed of directors all of whom are
independent as defined by the Nasdaq Independence Rules. The Audit Committee is
governed by the Audit Committee Charter which specifies, among other things, the
scope of the Committee's responsibilities and how those responsibilities are to
be performed. The responsibilities of the Audit Committee include being the
primary liaison with the external independent auditors and meeting and reviewing
reports prepared by the Company's outsourced internal auditor.
The Audit Committee has reviewed and discussed the audited financial
statements with management. In addition, in compliance with applicable
provisions of the Audit Committee Charter, the Audit Committee has considered
whether the provision of any non-audit services by the independent auditors is
compatible with maintaining the auditor's independence and has discussed with
the Company's independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 "Communication with Audit Committees," as
may be modified or supplemented. The Audit Committee has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and has discussed with the independent accountant, the independent accountant's
independence. Based on the review and discussions referred to above in this
report, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2003 for filing with the
Commission. The Audit Committee also has recommended the reappointment of
Deloitte & Touche LLP as the Company's independent auditors for the fiscal year
ended September 30, 2004.
AUDIT COMMITTEE
Edward Calderoni Bruce C. Hendrixson William J. O'Donnell, CPA
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BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock as of the Voting Record Date, and certain other information with respect
to (i) the only persons or entities, including any "group" as that term is used
in Section 13(d)(3) of the Exchange Act, who or which were known to the Company
to be the beneficial owner of more than 5% of the issued and outstanding shares
of Common Stock, (ii) each director and executive officer of the Company, and
(iii) all directors and executive officers of the Company as a group.
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group December 5, 2003(1) Common Stock
- ---------------------------------------- -------------------- --------------
First Keystone Financial, Inc. 323,440 17.1%
Employee Stock Ownership Plan Trust(2)
22 West State Street
Media, Pennsylvania 19063
Charles J. Moore 129,100(3) 6.8
The Banc Funds Company L.L.C
208 South LaSalle Street
Chicago, Illinois 60604
Dimensional Fund Advisors Inc. 137,700(4) 7.3
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Jeffrey L. Gendell 170,800(5) 9.1
Tontine Financial Partners, L.P.
55 Railroad Avenue, Third Floor
Greenwich, Connecticut 06830
Directors:
Edward Calderoni 33,920(6) 1.8(16)
Donald S. Guthrie 106,453(7) 5.6(16)
Donald G. Hosier, Jr. 4,625(8) *(16)
Edmund Jones 34,730(9) 1.8(16)
Thomas M. Kelly 71,080(10) 3.7(16)
William J. O'Donnell 500 *(16)
Donald A. Purdy 57,360(11) 3.0(16)
Marshall J. Soss 2,717(12) *(16)
Bruce C. Hendrixson -- --
Other Named Executive Officers:
Stephen J. Henderson 37,288(13) 2.0(16)
Elizabeth M. Mulcahy 81,230(14) 4.2(16)
Directors of the Bank who do not serve as
directors of the Company (3 persons) 66,842 3.5(16)
Directors and executive officers of the
Company and the Bank as a group (19
persons) 563,436(15) 27.1(16)
- --------------------
* Represents less than 1% of the outstanding shares of Common Stock.
(Footnotes continued on following page)
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(1) Based upon filings made pursuant to the Exchange Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the Exchange Act, shares of Common Stock are deemed to be
beneficially owned by a person if he or she directly or indirectly has
or shares (i) voting power, which includes the power to vote or to
direct the voting of the shares, or (ii) investment power, which
includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(2) The First Keystone Financial, Inc. Employee Stock Ownership Plan Trust
(the "Trust") was established pursuant to the First Keystone Financial,
Inc. Employee Stock Ownership Plan (the "ESOP") by an agreement between
the Company and Messrs. Calderoni, Jones and Purdy, who act as trustees
of the plan (the "Trustees"). Under the terms of the ESOP, the Trustees
generally will vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees. Unallocated
shares will generally be voted by the Trustees in the same ratio on any
matter as to those shares for which instructions are given, subject in
each case to the fiduciary duties of the Trustees and applicable law.
Any allocated shares which either abstain or are not voted on a
proposal will be disregarded in determining the percentage of stock
voted for and against such proposal by the participants. As of the
Voting Record Date, 222,371 shares held in the Trust had been allocated
to the accounts of participating employees including 69,631 shares
beneficially owned by nine executive officers.
(3) Information obtained from a Schedule 13G, dated February 13, 2003,
filed with the SEC with respect to shares of Common Stock beneficially
owned by The Banc Funds Company, L.L.C. ("Banc Funds"). The Schedule
13G states that Banc Fund IV L.P., Banc Fund V L.P. and Bank Fund VI
L.P. (the "Funds") have sole voting power as to 96,800, 17,300 and
15,000 shares, respectively. The sole stockholder of the general
partner of the Funds is Banc Funds which is controlled by Charles J.
Moore who as such, has voting and dispositive authority over the shares
held thereby.
(4) Information obtained from a Schedule 13G, dated February 3, 2003, filed
with the SEC with respect to shares of Common Stock beneficially owned
by Dimensional Fund Advisors Inc. ("Dimensional"). The Schedule 13G
states that Dimensional has sole voting and dispositive power as to all
of these shares. Dimensional disclaims beneficial ownership of these
shares.
(5) Information obtained from Schedule 13D, filed November 21, 2001 with
the SEC with respect to shares of Common Stock beneficially owned by
Tontine Financial Partners, L.P. ("TFP") which reports shared voting
and dispositive power with respect to all the shares. Tontine
Management, L.L.C. is the general partner to TFP. Mr. Gendell serves as
the managing member of Tontine Management.
(6) Includes options covering 8,950 shares granted pursuant to the 1998
Stock Option Plan ("1998 Option Plan") and the 1995 Stock Option Plan
("1995 Option Plan") (collectively, the "Option Plans") that may be
acquired within 60 days of the Voting Record Date and 22,713 shares
held jointly with spouse.
(7) Includes 15,072 shares held in the Bank's 401(k)/Profit-Sharing Plan
("401(k)Plan"), 15,209 shares allocated to Mr. Guthrie as a participant
in the ESOP and 29,400 shares that may be acquired within 60 days of
the Voting Record Date pursuant to the exercise of options granted
under the Option Plans.
(8) Includes 2,373 shares held by the Montgomery Insurance Services, Inc.
Employee Profit Sharing Plan of which Mr. Hosier is a trustee and
options covering 717 shares granted pursuant to the 1998 Option Plan.
(9) Includes 5,000 shares owned by Mr. Jones' spouse.
(Footnotes continued on following page)
9
- ------------------------
(10) Includes 9,581 shares held in the 401(k) Plan, 13,983 shares allocated
to Mr. Kelly as a participant in the ESOP and 46,120 shares that may be
acquired within 60 days of the Voting Record Date pursuant to the
exercise of options granted under the Option Plans.
(11) Includes 5,530 shares held by Mr. Purdy's spouse over which Mr. Purdy
disclaims beneficial ownership and 15,750 shares that may be acquired
within 60 days of the Voting Record Date pursuant to the exercise of
options granted under the Option Plans.
(12) Includes options covering 717 shares granted pursuant to the 1998
Option Plan.
(13) Includes 9,888 shares allocated to Mr. Henderson as a participant in
the ESOP and 21,400 shares that may be acquired within 60 days of the
Voting Record Date pursuant to the exercise of options granted under
the Option Plans.
(14) Includes 9,818 shares held in the 401(k) Plan, 2,271 shares held by Ms.
Mulcahy's spouse, 9,251 shares allocated to Ms. Mulcahy as a
participant in the ESOP and 39,846 shares that may be acquired within
60 days of the Voting Record Date pursuant to the exercise of options
granted under the Option Plans.
(15) Includes 69,631 shares allocated to executive officers pursuant to the
ESOP and 193,466 shares that may be acquired within 60 days of the
Voting Record Date pursuant to the exercise of options granted under
the Option Plans.
(16) Each beneficial owner's percentage ownership is determined by assuming
that options held by such person (but not those held by any other
person) and that are exercisable within 60 days of the voting record
date have been exercised.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation paid by the Bank for services rendered in all
capacities during the three years ended September 30, 2003 to the Chief
Executive Officer of the Bank and the other three officers of the Bank whose
total annual cash compensation exceeded $100,000 during fiscal 2003. None of
such officers, two of whom also serve as executive officers of the Company
(Messrs. Guthrie and Kelly), receive any compensation from the Company.
Long Term
Annual Compensation Compensation
---------------------------------------- ----------------------
Awards
----------------------
Name and Fiscal Other Annual Stock Number of All Other
Principal Position Year Salary Bonus Compensation(1) Grants Options Compensation
- ------------------------------------------------------------------------------------------------------------------
Donald S. Guthrie 2003 $268,000 $30,000 $23,378 $ -- -- $ 47,237(2)
Chairman of the Board 2002 253,000 25,000 -- -- -- 56,234(2)
and Chief Executive 2001 230,000 25,000 -- -- -- 55,404(2)
Officer
- ------------------------------------------------------------------------------------------------------------------
Thomas M. Kelly 2003 $197,000 $25,000 $32,683 $ -- -- $ 27,722(3)
President and Chief 2002 186,000 15,000 -- -- -- 26,069(3)
Financial Officer 2001 168,000 20,000 -- -- -- 18,013(3)
- ------------------------------------------------------------------------------------------------------------------
Stephen J. Henderson 2003 $110,000 $ 5,000 $ -- $ -- -- $ 16,771(4)
Senior Vice 2002 105,000 6,000 -- -- -- 16,955(4)
President/Lending 2001 100,000 6,000 -- -- -- 14,322(4)
- ------------------------------------------------------------------------------------------------------------------
Elizabeth M. Mulcahy 2003 $104,000 $ 8,000 $ -- $ -- -- $ 21,556(5)
Senior Vice President/ 2002 99,000 6,000 -- -- -- 22,889(5)
Human Resources 2001 94,000 6,000 -- -- -- 23,901(5)
- ------------------------------------------------------------------------------------------------------------------
- -------------------
(1) Includes health and long-term care costs of $15,586 and 11,012 for
Messrs. Guthrie and Kelly, respectively. Does not include certain
amounts attributable to miscellaneous personal benefits received by the
named executive officers other than Messrs. Guthrie and Kelly which in
the opinion of management of the Company, the costs to the Bank of
providing such benefits to such persons during the fiscal year ended
September 30, 2003 did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for each such individual.
(2) Reflects contributions made by the Bank on Mr. Guthrie's behalf to the
401(k) Plan in fiscal years 2003, 2002 and 2001; also reflects in
fiscal years 2003, 2002 and 2001 the allocation of shares of Common
Stock to Mr. Guthrie's account in the ESOP with a fair market value as
of the date of allocation of $27,171, $24,519 and $20,336,
respectively. In addition, such amount includes in each fiscal year
presented the present value of the premiums paid as well as the term
insurance premiums paid in each such period for split life insurance
purchased by the Bank to supplement the retirement benefits to be
received by Mr. Guthrie pursuant to the Bank's retirement plans. See "-
Benefits - Supplemental Retirement Benefits."
(3) Reflects contributions made by the Bank on Mr. Kelly's behalf to the
401(k) Plan in fiscal years 2003, 2002 and 2001; also reflects in
fiscal years 2003, 2002 and 2001 the allocation of shares of Common
Stock to Mr. Kelly's account in the ESOP with a fair market value as of
the date of allocation of $26,972, $24,189 and $20,041, respectively.
(4) Reflects contributions made by the Bank on Mr. Henderson's behalf to
the 401(k) Plan in fiscal years 2003, 2002 and 2001; also reflects in
fiscal years 2003, 2002 and 2001 the allocation of shares of Common
Stock to Mr. Henderson's account in the ESOP with a fair market value
as of the date of allocation of $15,334, $15,568, and $14,902,
respectively.
(Footnotes continued on following page)
11
- -------------------
(5) Reflects contributions made by the Bank on Ms. Mulcahy's behalf to the
401(k) Plan in fiscal years 2003, 2002 and 2001; also reflects in
fiscal years 2003, 2002 and 2001 allocation of shares of Common Stock
to Ms. Mulcahy's account in the ESOP with a fair market value as of the
date of allocation of $14,965, $14,824 and $14,194, respectively. In
addition, such amount includes in fiscal years 2003, 2002 and 2001
value of the premiums paid as well as the term insurance premiums paid
in each such period for split life insurance purchased by the Bank to
supplement the retirement benefits to be received by Ms. Mulcahy
pursuant to the Bank's retirement plans. See "- Benefits - Supplemental
Retirement Benefits."
STOCK OPTIONS
The following table discloses certain information regarding the options
held at September 30, 2003 by the Chief Executive Officer and the other named
executive officers. No options were granted thereto during the fiscal year ended
September 30, 2003.
Number of Options at Value of Options at
Shares September 30, 2003 September 30, 2003
Acquired on Value --------------- ----------------- ---------------- ---------------
Name Exercise Realized Exercisable (1) Unexercisable (1) Exercisable(1)(2) Unexercisable(2)
- -------------------- ----------- -------- --------------- ----------------- ----------------- ----------------
Donald S. Guthrie 13,720 $111,056 29,400 2,350 $ 515,125 $ 33,781
Thomas M. Kelly -- -- 46,120 2,350 832,805 33,781
Stephen J. Henderson 6,000 65,940 21,400 2,350 363,125 33,781
Elizabeth M. Mulcahy 6,274 73,531 39,846 2,350 713,599 33,781
- ------------------
(1) Number of options has been adjusted to reflect effect of two-for-one
stock split effected in fiscal 1998 with respect to options granted
prior to split.
(2) Based on a per share market price of $26.50 at September 30, 2003.
Except with respect to options to purchase 11,750 shares granted to
each of such officers in fiscal 1999 with an exercise price of $12.125,
the exercise price for all options reflected in the table is $7.50.
DIRECTORS' COMPENSATION
BOARD FEES. Directors of the Company received no compensation during
fiscal 2003, except for Messrs. Hendrixson, Hosier, O'Donnell and Soss who are
paid $1,750 per quarter as directors of the Company. During fiscal 2003, members
of the Board of Directors of the Bank received $1,000 per meeting attended.
Full-time officers who serve on the Board do not receive any fees for attending
meetings of the Board or committees thereof. During fiscal 2003, the Chairman of
the Board of the Bank received an annual fee of $5,000. During fiscal 2003,
members of the Board serving on the Bank's Audit Committee, Executive Committee,
Community Investment Committee, Compensation Committee and Loan Committee
received $200 per meeting attended, while members of the Board serving on the
Company's Audit Committee received $200 per meeting attended.
STOCK OPTIONS. Pursuant to the 1995 Option Plan, in July 1995 each
non-employee director of the Company then serving was granted compensatory stock
options to purchase 2,720 shares of Common Stock (except that each non-employee
director who had served as a director of the Bank for more than 30 years was
granted compensatory options to purchase 5,440 shares of Common Stock). In
addition, compensatory options to purchase 340 shares of Common Stock were
granted to each non-employee director (except that each non-employee director
who has served as a director of the Bank for more than 30 years was granted
compensatory options to purchase 680 shares of Common Stock) on each of the next
two succeeding anniversary dates of the initial grant. All of such options
vested at the rate of 20% per year from the date of grant. The number of shares
subject to such option grants discussed above do not reflect the effect of the
two-for-one stock split effected in fiscal 1998. During fiscal 1999, each then
serving non-employee director was granted compensatory options to purchase 2,150
shares at $12.125 per share (the fair market value of the Common Stock
12
on the date of grant) pursuant to the 1998 Option Plan. All of such options
vested over a three year period. During fiscal 2002, Messrs. Hosier and Soss,
appointed as directors in fiscal 2001, were each granted options to purchase
2,150 shares at $14.84 per share, which options vest over a three year period.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company and the Bank (collectively the "Employers") entered into
employment agreements with each of Messrs. Guthrie, Henderson and Kelly
effective May 26, 1999. The Employers agreed to employ Messrs. Guthrie,
Henderson and Kelly for a term of three years in their current respective
positions. The term of each employment agreement is extended each year on its
anniversary date for a successive additional one-year period unless the
Employers or the officer, not less than 30 days prior to the annual anniversary
date, elect not to extend the employment term. The term of each employment
agreement was extended in 2003 for an additional year.
The employment agreements are terminable with or without cause by the
Employers. The officers have no right to compensation or other benefits pursuant
to the employment agreement for any period after voluntary termination or
termination by the Employers for cause, disability, retirement or death,
provided, however, that (i) in the event that the officer terminates his
employment because of failure of the Employers to comply with any material
provision of the employment agreement or (ii) the employment agreement is
terminated by the Employers other than for cause, disability, retirement or
death or by the officer as a result of certain adverse actions which are taken
with respect to the officer's employment following a Change in Control of the
Company, as defined, Messrs. Guthrie, Henderson and Kelly will be entitled to a
cash severance amount equal to three times their base salary. In addition,
Messrs. Guthrie, Henderson and Kelly will be entitled to a continuation of
benefits similar to those they are receiving at the time of such termination for
the remaining term of the agreement or until the officer obtains full-time
employment with another employer, whichever occurs first.
The Employers also entered into two-year severance agreements with
Mesdames Mulcahy and Walsh effective May 26, 1999. Under the terms of such
severance agreements, the Employers have agreed that in the event that such
officer's employment is terminated as a result of certain adverse actions that
are taken with respect to the officer's employment following a Change in Control
of the Company, as defined, such officer will be entitled to a cash severance
amount equal to two times her base salary. The term of each severance agreement
shall be extended each year for a successive additional one-year period unless
the Employers or the officer, not less than 30 days prior to the anniversary
date, elect not to extend the term of the severance agreement. The term of both
severance agreements was extended in 2003 for an additional year.
Each of the employment and severance agreements with the Employers
provides that if the payments and benefits to be provided thereunder, or
otherwise upon termination of employment, are deemed to constitute a "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), then the executive officer would be reimbursed
for any excise tax liability pursuant to Sections 280G and 4999 of the Code and
for any additional income taxes imposed as a result of such reimbursement.
Because the amount of the payments and benefits that could constitute a
parachute payment is dependent upon the timing, price and structure of any
change in control that may occur in the future, it is not possible at this time
to quantify the severance benefits payable to the executive officers under the
employment or severance agreements. Although the above-described employment and
severance agreements could increase the cost of any acquisition of control of
the Company, management of the Company does not believe that the terms thereof
would have a significant anti-takeover effect.
A change in control generally is defined in the employment and
severance agreements to include any change in control of the Company or the Bank
required to be reported under the federal securities laws, as well as (i) the
acquisition by any person of 25% or more of the Company's outstanding voting
securities and (ii) a change in a majority of the directors of the Company
during any two-year period without the approval of at least two-thirds of the
persons who were directors of the Company at the beginning of such period.
Messrs. Guthrie's and Kelly's agreements provide that they will be
entitled to the use of an automobile. In addition, in the event of Messrs.
Guthrie's, Kelly's or Henderson's death during the term of their respective
agreements,
13
their estates will receive payments equal to the amount of
compensation due for the remainder of the term of their agreements at their
respective current salary at the time of their deaths. Mr. Guthrie's employment
agreement also provided for medical insurance coverage for him and his spouse
until he reached age 69 and that in the event of his death, his spouse shall be
covered under the Bank's health insurance plan until age 69. Mr. Kelly's
employment agreement also provides medical insurance coverage under such plan
during the term of his agreement for him and the members of his immediate family
and provides for continued coverage for a period of five years following the
termination of his agreement except if he is terminated for cause.
BENEFITS
Deferred Compensation Arrangements. The Bank provides supplemental
retirement benefits to Messrs. Betts (an advisory director and former director
of the Bank and the Company), Jones and Purdy (directors of the Bank and
Company) and Ms. Faulkner (a director of the Bank) in recognition of their long
service as officers of the Bank. Under the terms of the Bank's amended
arrangements with such persons, each person receives monthly payments, which
payments commenced the first month subsequent to each such person's retirement.
Such payments will continue as long as such persons continue to serve on the
Board of the Bank or the Company or in an advisory capacity. In addition, Mr.
Purdy also chose to defer receipt of approximately one-half of his payments
during part of fiscal 1999 and all of fiscal 2000. In accordance with such
arrangements, such persons received an aggregate of $119,000 during fiscal 2003.
Supplemental Retirement Benefits. In 1994, the Bank purchased a split
dollar variable life insurance policy for the benefit of Mr. Guthrie and Ms.
Mulcahy in order to supplement the retirement benefits to be received by Mr.
Guthrie and Ms. Mulcahy pursuant to the Bank's SEP and the Profit-sharing Plan
and the ESOP. Under the current arrangements with the Bank, upon Mr. Guthrie's
and Ms. Mulcahy's retirement from the Bank, Mr. Guthrie and Ms. Mulcahy will
each receive an aggregate annual supplemental retirement benefit for 15 years,
which is estimated to amount to approximately 70% of Mr. Guthrie's salary and
50% of Ms. Mulcahy's salary. Although the expected benefits are to be paid from
the cash value of the policy, there is no guarantee that the cash value of the
policy will in fact produce such level of benefits. The insurance policies were
issued in each of Mr. Guthrie's and Ms. Mulcahy's name, but the Bank has agreed
to pay all premiums required. However, as a part of such agreements, Mr. Guthrie
and Ms. Mulcahy have assigned to the Bank their interest in their respective
policies to the extent the cash surrender value and death benefit thereof equal
the premiums paid. In addition, Mr. Guthrie and Ms. Mulcahy during 2003 assigned
the policies to the Bank. Upon Mr. Guthrie's or Ms. Mulcahy's death, the Bank
will be reimbursed for the total amount of premiums that it has paid on the
policy. The excess, if any, may in whole or in part be paid to the beneficiaries
of Mr. Guthrie or Ms. Mulcahy, as applicable. During fiscal 2003, the Bank
experienced an increase of $303,000 increase in the cash value of the insurance
policies. In addition, the Bank is implementing salary continuation agreements
with Mr. Guthrie and Ms. Mulcahy. The Bank also is implementing a supplemental
executive retirement plan in which certain other executive officers, including
Mr. Kelly, will participate which will provide similar benefits to those
described above with respect to Mr. Guthrie and Ms. Mulcahy. The Bank incurred
an expense of approximately $141,000 with respect to such benefits for the other
executive officers.
REPORT OF THE COMPENSATION COMMITTEE
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information regarding the
compensation and benefits provided to its Chief Executive Officer and certain
other executive officers of the Bank (since such persons do not receive separate
compensation for service as officers of the Company). The disclosure
requirements for the Chief Executive Officer and such other executive officers
include the use of various tables as well as a report explaining the rationale
and considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the
Compensation Committee of the Board of Directors of the Bank has prepared the
following report for inclusion in this proxy statement.
The Compensation Committee annually reviews the performance of the
Chief Executive Officer and other executive officers and approves changes to
base compensation as well as the level of bonus, if any, to be awarded. With
respect to all positions within the organization with the exception of the Chief
Executive Officer, the Bank uses a formal quantitative system of job evaluation.
In determining whether the base salary of the Chief Executive Officer should be
14
increased, the Board of Directors takes into account individual performance,
performance of the Bank, the size of the Bank and the complexity of its
operations, and information regarding compensation paid to executives performing
similar duties for financial institutions in the Bank's market area.
While the Compensation Committee does not use strict numerical formulas
to determine changes in compensation for the Chief Executive Officer and while
it weighs a variety of different factors in its deliberations, it has emphasized
and will continue to emphasize earnings, profitability, capital position and
income level, and return on tangible equity as factors in setting the
compensation of the Chief Executive Officer. Other non-quantitative factors
considered by the Compensation Committee in fiscal 2003 included general
management oversight of the Bank, the quality of communication with the Board of
Directors, and the productivity of employees. Finally, the Compensation
Committee considers the Bank's standing with customers and the community, as
evidenced by the level of customer/community complaints and compliments. While
each of the quantitative and non-quantitative factors described above was
considered by the Compensation Committee, such factors were not assigned a
specific weight in evaluating the performance of the Chief Executive Officer.
Rather, all factors were considered, and based upon the effectiveness of such
officer in addressing each of the factors, and the range of compensation paid to
officers of peer institutions, the Board of Directors approved the Compensation
Committee's recommendation to increase the base salary of the Chief Executive
Officer to $283,000 for fiscal 2004.
COMPENSATION COMMITTEE OF THE BANK
Edward Calderoni Silvio F. D'Ignazio William J. O'Donnell
15
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock since September 1998 with (i) the yearly cumulative total return on the
stocks included in the Russell 2000 Index; (ii) the yearly cumulative total
return on the stocks included in the Nasdaq Bank Index; and (iii) the yearly
cumulative total return on the stocks indexed in the S&P Bank Index. All of
these cumulative returns are computed assuming the reinvestment of dividends at
the frequency with which dividends were paid during the applicable years. The
graph represents $100 invested in the Company's Common Stock at $13.88 per share
on September 30, 1998.
[LINE GRAPH]
CUMULATIVE TOTAL RETURN
INDEX 9/30/98 9/30/99 9/30/00 9/30/01 9/30/02 9/30/03
- ------------------------------ ------- ------- ------- ------- ------- -------
First Keystone Financial, Inc.
(FKFS) 100.00 94.02 79.39 103.31 112.12 204.25
Russell 2000 Index (RTY) 100.00 117.52 143.40 111.35 99.64 134.13
Nasdaq Bank Index (BANK) 100.00 97.19 102.73 118.94 127.01 149.68
S&P Bank Index (BIX) 100.00 103.51 108.71 109.33 104.73 116.92
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Until November 1996, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 required that all loans or extensions of credit to
executive officers and directors be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and not involve more than the
normal risk of repayment or present other unfavorable features. In addition,
loans made to a director or executive officer in excess of the greater of
$25,000 or 5% of the Bank's capital and surplus (up to a maximum of $500,000)
must be approved in advance by a majority of the disinterested members of the
Board of Directors.
Except as hereinafter indicated, all loans made by the Bank to its
executive officers and directors are made in the ordinary course of business,
are made on substantially the same terms, including interest rates and
collateral, as those
16
prevailing at the time for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present other unfavorable
features.
In accordance with applicable regulations, the Bank extends residential
first mortgage loans to its directors and executive officers secured by their
primary residence pursuant to a benefit program that is widely available to
employees of the Bank and does not give preference to any executive officer or
director over other employees of the Bank. Under the terms of such loans, the
interest rate is 1% below that charged on similar loans to non-employees and
certain fees and charges are waived. Set forth in the following table is certain
information relating to such preferential loans to executive officers and
directors whose loans aggregated in excess of $60,000 which were outstanding at
September 30, 2003.
LARGEST AMOUNT OF INDEBTEDNESS
BETWEEN OCTOBER 1, 2002 AND BALANCE AS OF
NAME YEAR LOAN MADE SEPTEMBER 30, 2003 SEPTEMBER 30, 2003 INTEREST RATE
- -------------------- -------------- ------------------------------ ------------------ -------------
Donald S. Guthrie 2003 $ 68,000 $ 59,119 4.250%
Thomas M. Kelly 2003 322,700 321,505 4.875
Donald G. Hosier Jr. 2002 212,265 202,030 5.100
Robert R. Hosier 2003 224,000 224,000 4.125
William J. O'Donnell 2003 134,221 126,857 5.000
Robin Otto 2003 170,000 165,259 4.375
Carol Walsh 2003 110,000 110,000 4.375
Mr. Edmund Jones, a director of the Company and the Bank, is a member
of the law firm, Jones, Strohm & Guthrie, P.C., which serves as general counsel
to the Bank.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than 10% of the Common Stock to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("Commission"). Officers, directors and more than 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
the Company believes that during the year ended September 30, 2003 and with
respect thereto, all filing requirements applicable to its officers and
directors and more than 10% stockholders have been satisfied.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Deloitte & Touche
LLP, independent certified public accountants, to perform the audit of the
Company's financial statements for the fiscal year ending September 30, 2004,
and further directed that the selection of auditors be submitted for
ratification by the stockholders at the Annual Meeting.
The Company has been advised by Deloitte & Touche LLP that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Deloitte & Touche LLP will have one or
more representatives at the Annual
17
Meeting who will have an opportunity to make a statement, if they so desire, and
who will be available to respond to appropriate questions.
The Audit Committee considered, in determining whether to appoint
Deloitte & Touche LLP as the Company's auditors, whether the provision of
services, other than auditing services, by Deloitte & Touche LLP is compatible
with maintaining the auditor's independence. In addition to performing auditing
services, the Company's auditors performed other audit- and tax-related services
for the Company in fiscal 2003. These other services included tax services and
tax consulting services. The Audit Committee believes that Deloitte & Touche
LLP's performance of these other services is compatible with maintaining the
auditor's independence.
AUDIT FEES
The aggregate amounts of fees billed by Deloitte & Touche LLP for its
audit of the Company's annual financial statements for fiscal 2002 and 2003
(through the date hereof) and for its reviews of unaudited interim financial
statements included in reports filed by the Company under the Exchange Act
during fiscal 2002 and 2003 were $111,000 and $164,200, respectively.
AUDIT RELATED FEES
The aggregate amounts of audit related fees billed by Deloitte & Touche
LLP, primarily consisting of fees for consultation with regard to accounting
pronouncement for fiscal 2002 and 2003 (through the date hereof) were zero and
$11,000, respectively.
TAX FEES
The aggregate amounts fees billed by Deloitte & Touche LLP attributable
to tax related services, consisting of fees for tax consultation and tax
compliance services, during fiscal 2002 and 2003 were $19,963 and $20,176,
respectively.
ALL OTHER FEES
All fees billed by Deloitte & Touche LLP for services rendered to the
Company during fiscal 2002 and 2003 (through the date hereof) were reported
above.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2004.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is anticipated to be held in January 2005, must be received
at the principal executive offices of the Company, 22 West State Street, Media,
Pennsylvania 19063, Attention: Carol Walsh, Corporate Secretary, no later than
August 25, 2004. If such proposal complies with all of the requirements of Rule
14a-8 under the Exchange Act, it will be included in the proxy statement and set
forth on the form of proxy issued for such annual meeting of stockholders. It is
urged that any such proposals be sent by certified mail, return receipt
requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Article 9.D of the Company's
Amended and Restated Articles of Incorporation, which provides that business at
an annual meeting of stockholders must be (a) properly brought before the
meeting by or at the direction of the Board of Directors, or (b) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a
18
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Company. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Company not later than 60 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders of the Company. Proposals to be
presented at this Annual Meeting had to be submitted to the Company by November
23, 2003. No such proposals were received by such date. Proposals to be
submitted for consideration at the Company's next annual meeting of stockholders
must be received by November 29, 2004. Such stockholder's notice is required to
set forth as to each matter the stockholder proposes to bring before an annual
meeting certain information specified in the Company's Amended and Restated
Articles of Incorporation.
ANNUAL REPORTS
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2003 accompanies this Proxy Statement. Such Annual Report is
not part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR FISCAL 2003 REQUIRED TO BE FILED UNDER THE EXCHANGE ACT. SUCH WRITTEN
REQUESTS SHOULD BE DIRECTED TO CAROL WALSH, CORPORATE SECRETARY, FIRST KEYSTONE
FINANCIAL, INC., 22 WEST STATE STREET, MEDIA, PENNSYLVANIA 19063. THE FORM 10-K
IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Company to vote the proxy with respect to the approval
of the minutes of the last meeting of stockholders, the election of any person
as a director if the nominee is unable to serve or for good cause will not
serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the Annual Meeting. As of the date hereof,
management is not aware of any business that may properly come before the Annual
Meeting other than the matters described above in this Proxy Statement. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company has retained Regan & Associates, Inc., a professional proxy
solicitation firm, to assist in the solicitation of proxies. Such firm will be
paid a fee of $5,500. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending the proxy materials to the beneficial owners of the Company's Common
Stock. In addition to solicitations by mail, directors, officers and employees
of the Company may solicit proxies personally or by telephone without additional
compensation.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
19
APPENDIX A
FIRST KEYSTONE FINANCIAL, INC.
AUDIT COMMITTEE
AUDIT COMMITTEE CHARTER
The Audit Committee is a committee of the board of directors. This committee
shall be composed of directors who are "independent" (as defined by applicable
law) and are free of any relationship that, in the opinion of the board of
directors, would interfere with their exercise of independent judgment as a
committee member. The primary function of the Audit Committee is to assist the
board in fulfilling its oversight responsibilities by reviewing the financial
information which will be provided to the shareholders and others, the systems
of internal controls which management and the board of directors have
established, and the audit process. In addition, this committee shall provide
assistance to the corporate directors in fulfilling their responsibility to the
shareholders, potential shareholders, and investment community relating to
corporate accounting, reporting practices of the corporation, and the quality
and integrity of the financial reports of the corporation. In doing so, it is
the responsibility of the Audit Committee to maintain free and open means of
communication between the board of directors, the independent auditors, the
internal auditor, and management. The Committee is responsible for the
selection, evaluation and replacement of auditors, and the auditors are
accountable to the Committee and the board of directors.
In meeting its responsibilities, the Audit Committee is expected to:
[ ] Meet four times per year or more frequently as circumstances
require. The Committee may ask members of management or others
to attend meetings and provide pertinent information as
necessary.
[ ] Review and update the Committee's charter annually.
[ ] Confirm and assure the independence of the independent auditor
and the objectivity of the internal auditor.
[ ] Exercise exclusive authority regarding the appointment,
compensation or termination of the independent auditors
(subject, if applicable, to shareholder approval), who shall
report directly to the Audit Committee.
[ ] Review the performance of the independent auditors.
[ ] Confer with the independent accountants and the internal
auditor concerning the scope of their examinations of the
books and records of the Company and its subsidiaries; review
and approve the independent accountants' annual engagement
letter; direct the special attention of the auditors to
specific matters or areas deemed by the Committee or the
internal auditors to be of special significance; and authorize
the auditors to perform such supplemental reviews or audits as
the Committee may deem desirable.
[ ] Review with the independent auditors, the internal auditor and
management, the adequacy and effectiveness of the accounting
and financial controls of the corporation, and elicit any
recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis
should be given to the adequacy of such internal controls to
expose any payments, transactions, or procedures that might be
deemed illegal or otherwise improper. Further, the Committee
periodically should review company policy statements to
determine their adherence to the code of conduct.
[ ] Review with the independent auditor and the internal auditor
the coordination of audit efforts to assure completeness of
coverage, reduction of redundant efforts, and the effective
use of audit resources.
[ ] Review the financial statements contained in the annual report
to shareholders with management and the independent auditors
to determine that the independent auditors are satisfied with
disclosure and content of the financial statements to be
presented to the shareholders. Any changes in accounting
principles should be reviewed.
[ ] Review filings with the SEC and other published documents
containing the company's financial statements and consider
whether the information contained in these documents is
consistent with the information contained in the financial
statements.
A-1
[ ] Consider and review with management, the internal auditor and
the independent auditor: significant findings during the year,
including the status of previous audit recommendations; any
difficulties encountered in the course of audit work including
any restrictions on the scope of activities or access to
required information; and, any changes required in the planned
scope of the internal audit plan.
[ ] Receive prior to each meeting, a summary of findings from
completed internal audits and progress report on the proposed
internal audit plan, with explanations for any deviations from
the original plan.
[ ] Provide sufficient opportunity for the internal and
independent auditors to meet with the members of the Audit
Committee without members of management present. Among the
items to be discussed in these meetings are the independent
auditors' evaluation of the corporation's financial,
accounting, and auditing personnel, and cooperation that the
independent auditors received during the course of the audit.
[ ] Submit the minutes of all meetings of the Audit Committee to,
or discuss the matters discussed at each committee meeting
with, the board of directors.
[ ] Investigate any matter brought to its attention within the
scope of its duties, with the power to retain outside counsel,
accountants or other advisors for this purpose if, in its
judgment, that it is appropriate.
[ ] Perform such other functions as assigned by law, the Company's
charter or bylaws, or the board of directors.
[ ] Notwithstanding anything to the contrary herein, comply with
the provisions of Statement of Auditing Standards No. 61, as
it may be amended subsequent to the date hereof, or any
successors thereto.
The duties and responsibilities of a member of the Audit Committee are in
addition to those duties set out for a member of the board of directors.
A-2
REVOCABLE PROXY
FIRST KEYSTONE FINANCIAL, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST KEYSTONE
FINANCIAL, INC. ("COMPANY") FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON JANUARY 28, 2004 AND AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of December 5, 2003,
hereby authorizes the Board of Directors of the Company or any successors
thereto as proxies with full powers of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the Towne House Restaurant located at 117 Veterans Square, Media, Pennsylvania,
on January 28, 2004 at 2:00 p.m., Eastern Time, and at any adjournment of said
meeting, and thereat to act with respect to all votes that the undersigned would
be entitled to cast, if then personally present, as set forth herein.
1. ELECTION OF DIRECTORS
Nominees for four-year term: For Withhold For All Except
Bruce C. Hendrixson [ ] [ ] [ ]
Thomas M. Kelly
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
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2. PROPOSAL to ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending September 30, 2004.
For Against Abstain
[ ] [ ] [ ]
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
SHARES OF THE COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR PROPOSAL 2 AND OTHERWISE AT
THE DISCRETION OF THE PROXIES. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS
YOU VOTE FOR THE BOARD OF DIRECTORS' NOMINEES AND PROPOSAL 2.
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of
Stockholders of the Company called for January 28, 2004, a Proxy Statement for
the Annual Meeting and the Company's 2003 Annual Report on Form 10-K prior to
the signing of this Proxy.
Please be sure to sign and date this Proxy in the box below.
Please be sure to sign and date this Date
proxy in the box below.
--------------------------
---------------------- -----------------------------
Shareholder sign above Co-holder (if any) sign above
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
FIRST KEYSTONE FINANCIAL, INC.
Please sign this Proxy exactly as your name(s) appear(s) on this proxy. When
signing in a representative capacity, please give title. When shares are held
jointly, only one holder need sign.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY