UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.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 Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials:
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[_] 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
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[FIRST KEYSTONE LOGO]
December [29], 2006
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 [31], 2007 at 2:00 p.m., Eastern Time. The matters to be considered by
stockholders at the Annual Meeting are described in the accompanying materials.
The Board of Directors unanimously recommends a vote "FOR" each of
First Keystone Financial Inc.'s nominees for election as directors, Donald S.
Guthrie (Chairman of the Board), Edmund Jones (Director) and Jerry A. Naessens
(Director), in proposal one and "FOR" the ratification of Deloitte & Touche LLP
as our independent registered public accounting firm, in proposal two, to be
considered at the Annual Meeting.
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 white 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,
Donald S. Guthrie
Chairman
FIRST KEYSTONE FINANCIAL, INC.
22 West State Street
Media, Pennsylvania 19063
(610) 565-6210
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on January [31], 2007
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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 [31], 2007 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 three (3) directors for four-year terms or until
their successors are elected and qualified;
(2) To ratify the appointment of Deloitte & Touche LLP as the
Company's independent registered public accounting firm for
the fiscal year ending September 30, 2007; and
(3) To transact such other business as properly may come before
the Annual Meeting including, among other things, a motion to
adjourn the Annual Meeting for the purpose of soliciting
additional proxies, 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 4, 2006 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
Carol Walsh
Corporate Secretary
Media, Pennsylvania
December [29], 2006
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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 white
proxy card 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.
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TABLE OF CONTENTS
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Page
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About the Annual Meeting of Stockholders............................................ 1
Information with Respect to Nominees for Director, Continuing Directors and
Executive Officers................................................................ 3
Election of Directors (Proposal One).......................................... 3
Members of the Board of Directors Continuing in Office........................ 5
Executive Officers Who Are Not Also Directors................................. 6
Committees and Meetings of the Board of the Company and Bank.................. 6
Compensation Committee Interlocks and Insider Participation................... 7
Directors' Attendance at Annual Meetings...................................... 8
Director Nominations.......................................................... 8
Directors' Compensation....................................................... 8
Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management.... 10
Section 16(a) Beneficial Ownership Reporting Compliance............................. 12
Executive Compensation.............................................................. 13
Summary Compensation Table.................................................... 13
Stock Options................................................................. 14
Employment and Severance Agreements........................................... 14
Benefit Plans................................................................. 15
Report of the Compensation Committee of the Bank.................................... 16
Performance Graph................................................................... 17
Indebtedness of Management and Related Party Transactions........................... 18
Ratification of Appointment of Independent Registered Public Accounting Firm
(Proposal Two).................................................................... 18
Audit Fees.................................................................... 19
Report of the Audit Committee of the Company........................................ 20
Stockholder Proposals, Nominations and Communications with the Board of Directors... 21
Annual Reports...................................................................... 22
Participants in the Solicitation.................................................... 22
Other Matters....................................................................... 23
Appendix A - Transactions in First Keystone's Securities in the Last Two Years...... A-1
FIRST KEYSTONE FINANCIAL, INC.
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PROXY STATEMENT
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ABOUT THE ANNUAL MEETING OF STOCKHOLDERS
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General. 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 [31], 2007 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 [29],
2006.
Potential Proxy Contest Pending. You may receive proxy solicitation
materials from Lawrence Garshofsky and Company, LLC, ("Garshofsky") on behalf of
their own nominees to the Company's Board of Directors. These nominees have NOT
been endorsed by your Board. We urge stockholders not to return any potential
proxy from Garshofsky. Your Board of Directors urges you to vote "FOR" our
nominees for director, Donald S. Guthrie, Edmund Jones and Jerry A. Naessens. We
are not responsible for the accuracy of any information by or relating to
Garshofsky contained in any proxy materials filed or disseminated by Garshofsky
or any other statement it makes.
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 registered public accounting firm. 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 4, 2006 (the "Voting Record Date") are entitled
to vote at the Annual Meeting. On the Voting Record Date, there were 2,027,928
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
white proxy card how you want your shares to be voted. Then sign, date and mail
your white proxy card in the enclosed prepaid return envelope as soon as
possible. This will enable your shares to be represented and voted at the Annual
Meeting.
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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 independent registered public accounting firm
if you do not furnish instructions. If, however, there is a proxy contest, your
broker will not be able to vote your shares without receiving instructions from
you. Shares that are not voted by brokers are called "broker non-votes."
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.
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 white proxy card.
o First, you may send a written notice to the Secretary of First
Keystone Financial, Inc., Ms. Carol Walsh, Corporate
Secretary, First Keystone Financial, Inc., 22 West State
Street, Media, Pennsylvania 19063, stating that you would like
to revoke your proxy.
o Second, you may complete and submit a new white proxy card.
Any earlier proxies will be revoked automatically.
o Third, you may attend the Annual Meeting and vote in person.
Any earlier dated proxy card submitted 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 Company's nominees for director
described herein and FOR ratification of the appointment of Deloitte & Touche
LLP as the Company's independent registered public accounting firm for fiscal
2007.
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,
including voting "FOR" the Company's nominees for director and, upon the
transaction of
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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 three 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. Stockholders may not vote their shares cumulatively
for the election of directors. Cumulative voting is a type of voting that allows
a stockholder to cast as many votes for directors as the stockholder has shares
of stock, multiplied by the number of directors to be elected. 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 registered public accounting firm. 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
registered public accounting firm. If there is a proxy contest, broker non-votes
are not considered to be present or votes cast under the Pennsylvania Business
Corporation Law and will have no effect on the proposals to elect directors and
ratify the appointment of the independent registered public accounting firm.
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INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
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Election of Directors (Proposal One)
The Amended and 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. 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. Hendrixson, Jones, Naessens, O'Donnell and Soss do not
have any material relationships with the Company that would impair their
independence.
The Company's Board currently consists of eight members. The terms of
three Directors expire at the Annual Meeting. In addition, in connection with
the recently completed private placement of shares of Common Stock, the Company
agreed to appoint, subject to the receipt of the non-objection of the Office of
Thrift Supervision, Ned Vidinli of Financial Stocks, Inc., to its Board of
Directors as well as that of its wholly owned subsidiary, First Keystone Bank.
Mr. Vidinli has extensive knowledge of the capital markets and community
banking. Financial Stock Capital Partners IV L.P., an affiliate of Financial
Stocks, Inc., purchased approximately 222,000 shares of common stock in the
offering. The Company's request to the OTS is currently pending. If the OTS does
not object to Mr. Vidinli's appointment, he will be appointed to the class of
directors whose term ends in 2010.
The Nominating Committee has recommended the re-election of Messrs.
Guthrie, Jones and Naessens as directors. 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. Each nominee for director currently serves as director of the Company.
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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.
As discussed under "Stockholder Proposals, Nominations and
Communications with the Board of Directors," stockholders can submit nominations
for election as directors of the Company's Board of Directors. As of the date of
this proxy statement, the Company had received three nominations for election as
directors from Lawrence Garshofsky and Company, LLC, Lawrence Partners, L.P. and
Lawrence Offshore Partners, LLC in connection with the Annual Meeting.
Therefore, you may receive proxy soliciting materials from persons other than
the Company on behalf of their nominees. These nominations have NOT been
endorsed by the Company's Board of Directors. The Board of Directors unanimously
recommends a vote for the election of the Company's nominees FOR election as
directors.
Please mark your vote on the enclosed white proxy card and
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return it in the enclosed postage prepaid envelope
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). Ages
are reflected as of September 30, 2006.
Nominees for Director for Four-Year Terms Expiring in 2011
Principal Occupation During Director
Name (Age) the Past Five Years Since
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Donald S. Guthrie (71) Chairman of the Board; served as President of the Company 1994
from 1994 until 2002 and served as Chief Executive Officer
from 2002 until 2005; served as President and Chief Executive
Officer of the Bank from 1993 until 2005; previously a member
of the law firm of Jones, Strohm & Guthrie, P.C., Media,
Pennsylvania.
Edmund Jones (88) Director; former Chairman of the Board of the Bank from 1979 1947
until 1993; member of the law firm of Jones, Strohm &
Guthrie, P.C., Media, Pennsylvania.
Jerry A. Naessens (70) Director; retired former Chief Financial Officer of Thistle 2004
Group Holdings Co., Philadelphia, Pennsylvania from 1996 to
2002 and President of Roxborough-Manayunk Bank, Philadelphia,
Pennsylvania from 2001 to 2002 and Chief Financial Officer of
Roxborough-Manayunk Bank from 1991 to 2001.
The Board of Directors recommends that you vote FOR the election of
First Keystone's nominees for director.
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Members of the Board of Directors Continuing in Office
Directors Whose Terms Expire in 2008
Principal Occupation During Director
Name (Age) the Past Five Years Since
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Bruce C. Hendrixson (62) Director; Owner of Garnet Ford and Garnet Volkswagen, Chester 2003
County, Pennsylvania.
Thomas M. Kelly (50) Director; President and Chief Executive Officer of the 1997
Company since 2005; President and Chief Operating Officer of
the Company from 2004 to 2005 and President since 2002;
previously served as Chief Financial Officer of the Company
from 1994 to 2004; President and Chief Executive Officer of
the Bank since 2005; previously served as Executive Vice
President and Chief Operating Officer of the Bank from 2004
to 2005 and previously Chief Financial Officer of the Bank
from 1991 to 2004 and Executive Vice President from 1995 to
2005; former Senior Manager at Deloitte & Touche LLP.
Directors Whose Terms Expire in 2009
Principal Occupation During Director
Name (Age) the Past Five Years Since
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Donald G. Hosier, Jr. (51) Director; President of First Keystone Insurance Services, 2001
LLC, a subsidiary of the Bank, and a
principal with Montgomery Insurance
Services, Inc., Media, Pennsylvania, an
insurance brokerage firm.
Marshall J. Soss (60) Director; President and Chief Executive Officer of KarMar 2001
Realty Group, Inc., Chadds Ford, Pennsylvania, a commercial
and investment real estate service company.
Director Whose Term Expires in 2010
Principal Occupation During Director
Name (Age) the Past Five Years Since
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William J. O'Donnell, CPA (39) Director; Corporate Solutions Manager/IT Group with Wawa, 2002
Inc., Wawa, Pennsylvania since 2003; served in various
positions at Wawa from 2000 to 2003; served as 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.
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Executive Officers Who Are Not Also Directors
Set forth below is information with respect to the principal
occupations during at least the last five years for the six executive officers
of the Company and/or the Bank who do not also 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. Ages are reflected as of September 30, 2006.
Rose M. DiMarco. Age 44. Ms. DiMarco has served as Senior Vice
President and Chief Financial Officer of the Company and the Bank since January
2004 and previously as Senior Vice President of Finance since July 2002 and has
been employed in various capacities at the Bank since 1984.
Robert R. Dwyer. Age 40. Mr. Dwyer has served as Senior Vice President
and Director of Lending at the Bank since May 2004; previously Vice President of
Lending with First Penn Bank, Feasterville, Pennsylvania from April 2003 to May
2004; Vice President and Business Advisor, PNC Bank, Abington, Pennsylvania from
January 2002 to April 2003; and prior thereto, Assistant Vice President of
Lending at Commerce Bank, Philadelphia, Pennsylvania.
Robert R. Hosier. Age 45. 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 1983.
Elizabeth M. Mulcahy. Age 69. 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 48. Ms. Otto has served as Senior Vice President of
Retail Delivery of the Bank since May 2005; from December 2002 until May 2005,
she served as Senior Vice President of Marketing and Business Development;
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 58. Ms. Walsh has served as Senior Vice President and
Corporate Secretary since August 1991 and has been employed in various
capacities at the Bank since 1970.
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, 2006, 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
served that were held during fiscal 2006. The Board of Directors of the Company
has established the following committees, among others:
Audit Committee. The Audit Committee consists of Messrs. Hendrixson,
Naessens and O'Donnell. The Audit Committee reviews the records and affairs of
the Company, engages the Company's independent registered public accounting
firm, 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 the Nasdaq Stock Market's listing standards ("Nasdaq
Independence Rules") and the regulations of the Securities and Exchange
Commission (the "SEC"). The Audit Committee meets on a quarterly and on an as
needed basis and met five times in fiscal 2006. On September 29, 2004, the Board
of Directors of the Company adopted an amended and restated Audit Committee
Charter, a
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copy of which was attached as Appendix A to the proxy statement dated December
30, 2004 used in connection with the Annual Meeting of Stockholders held in
January 2005 ("2004 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 SEC 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 SEC 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.
Hendrixson, Soss and O'Donnell. The Nominating Committee, which is responsible
for reviewing and nominating candidates to the Board, met once during fiscal
2006. All of the members of the Nominating Committee are independent as such
term is defined in the Nasdaq Independence Rules. On September 29, 2004, the
Board of Directors adopted a Nominating Committee Charter, a copy of which was
attached as Appendix B to the 2004 Proxy Statement.
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. Naessens 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 officers. The Compensation Committee of the Bank met twice in fiscal 2006
and its report is included below under "Executive Compensation."
Compensation Committee Interlocks and Insider Participation
Messrs. Naessens and O'Donnell serve as members of the Compensation
Committee. None of the members of the Compensation Committee was a current or
former officer or employee of the Company or the Bank. Nor did any member engage
in certain transactions with the Company or the Bank required to be disclosed by
regulations of the SEC. Additionally, there were no compensation committee
"interlocks" during 2006, which generally means that no executive officer of the
Company or the Bank
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served as a director or member of the compensation committee of another entity,
one of whose executive officers served as a director or member of the
Compensation Committee of the Company or the Bank.
Directors' Attendance at Annual Meetings
Although we do not have a formal policy regarding attendance by members
of the Board of Directors at Annual Meetings of Stockholders, we expect that our
directors will attend, absent a valid reason for not doing so. In fiscal 2006,
seven of our directors attended our Annual Meeting of Stockholders held in
January 2006.
Director Nominations
The Nominating Committee considers candidates for director suggested by
its members and other directors, as well as management and stockholders. The
Nominating Committee also may solicit prospective nominees identified by it. A
stockholder who desires to recommend a prospective nominee for the Board should
notify the Company's Secretary or any member of the Nominating Committee in
writing with whatever supporting material the stockholder considers appropriate.
The Nominating Committee also considers whether to nominate any person nominated
pursuant to the provision of the Company's Amended and Restated Articles of
Incorporation relating to stockholder nominations, which is described under
"Stockholder Proposals, Nominations and Communications with the Board of
Directors." The Nominating Committee has the authority and ability to retain a
search firm to identify or evaluate potential nominees if it so desires.
The charter of the Nominating Committee sets forth certain criteria the
Committee may consider when recommending individuals for nomination as director
including: (a) ensuring that the Board of Directors, as a whole, is diverse and
consists of individuals with various and relevant career experience, relevant
technical skills, industry knowledge and experience, financial expertise
(including expertise that could qualify a director as an "audit committee
financial expert," as that term is defined by the rules of the SEC, local or
community ties and (b) minimum individual qualifications, including strength of
character, mature judgment, familiarity with our business and industry,
independence of thought and an ability to work collegially. The Committee also
may consider the extent to which the candidate would fill a present need on the
Board of Directors.
Directors' Compensation
Board Fees and Other Compensation. Directors of the Company received no
compensation during fiscal 2006 except for Messrs. Hendrixson, Hosier and Soss
who are paid $2,000 per quarter as directors of the Company. During fiscal 2006,
members of the Board of Directors of the Bank received $1,100 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. In addition, as described
below under "-Consulting Agreements," Mr. Guthrie is being paid $15,000 per year
for service as Chairman of the Board of the Company and the Bank, which service
commenced on May 1, 2005. Pursuant to a Confidentiality Agreement and Exclusive
Tenant and Buyer Agency Agreement with the Bank, Mr. Soss receives a retainer of
$1,500 per month for real estate and advisory services. During fiscal 2006,
members of the Board serving on the Bank's Executive Committee, Community
Investment Committee, Compensation Committee and Loan Committee received $250
per meeting attended, while members of the Board serving on the Bank's and the
Company's Audit Committee received $350 per meeting attended.
Supplemental Retirement Benefits. The Bank provides supplemental
retirement benefits to Mr. Jones (a director of the Bank and Company) and Mr.
Purdy (a director of the Bank) in recognition of their
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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 Directors of the Bank or the Company or in an advisory capacity. In
accordance with such arrangements, such persons received an aggregate of
$94,000 during fiscal 2006.
Consulting Agreements. In February 2004, the Bank entered into a
one-year consulting agreement with Mr. Jones. The term of the agreement was
extended for a one year term beginning on March 1, 2005. The agreement
terminated in February 2006 in accordance with its terms. During fiscal 2006,
Mr. Jones received $10,000 for his services as a consultant pursuant to the
terms of the agreement.
On March 23, 2005, the Company announced the retirement of Mr. Guthrie,
who at the time served as the Chairman and Chief Executive Officer of the
Company and President and Chief Executive Officer of the Bank. In connection
with the retirement of Mr. Guthrie as chief executive officer, the Company and
the Bank entered into a Transition, Consulting, Noncompetition and Retirement
Agreement (the "Retirement Agreement") with Mr. Guthrie, with such Agreement
becoming effective as of May 1, 2005 (the "Effective Date"). Under the
Agreement, Mr. Guthrie relinquished his rights under the employment agreements
previously entered into with the Company and the Bank and his rights under the
Bank's Supplemental Executive Retirement Plan (See "-Supplemental Retirement
Benefits").
Under the terms of the Retirement Agreement, Mr. Guthrie agreed to
provide services to the Company and the Bank for a five-year period ending on
April 30, 2010 (the "Consulting Period"). In return for providing advice and
counsel regarding the Company's and the Bank's operations, customer
relationships, growth and expansion opportunities and other matters during the
Consulting Period, the Company and/or the Bank agreed to pay Mr. Guthrie an
amount equal to $12,500 per month. During the Consulting Period, the Company and
the Bank are also providing Mr. Guthrie with the continued use of the automobile
that was provided for his use immediately prior to the Effective Date. In
addition, the Company and/or the Bank will reimburse or otherwise provide for or
pay all reasonable expenses incurred by Mr. Guthrie during the Consulting Period
with respect to such automobile. The Company and the Bank are also providing Mr.
Guthrie and his spouse during the Consulting Period medical, dental and
long-term care insurance at no cost to Mr. Guthrie.
Mr. Guthrie's services under the Retirement Agreement terminate
automatically upon his death during the Consulting Period and may be terminated
upon the determination that Mr. Guthrie is disabled. Mr. Guthrie's services may
also be terminated during the Consulting Period by the Company or the Bank for
"cause" as such term is defined in the Retirement Agreement or by Mr. Guthrie
for "good reason" as defined in the Retirement Agreement. In the event Mr.
Guthrie's consulting services are terminated for cause or Mr. Guthrie terminates
his services without good reason, the Retirement Agreement shall terminate
without further obligation. In the event Mr. Guthrie's termination is for death,
good reason or disability during the Consulting Period, the Company or the Bank
shall pay Mr. Guthrie a lump sum equal to the sum of an amount equal to the
present value of the fees that would have been paid through the Consulting
Period and the present value of the Retirement Benefits (as hereinafter
defined).
If Mr. Guthrie satisfies his obligations during the Consulting Period,
including the Non-Compete Requirements, the Company and the Bank will pay Mr.
Guthrie subsequent to the Consulting Period an annual supplemental retirement
benefit of $135,175 per year, payable in equal monthly installments, for 10
years (the "Retirement Benefits"). The Bank expensed approximately $148,678 with
respect to the Retirement Benefits during fiscal 2006. In the event Mr. Guthrie
dies following the end of the Consulting Period but before all the Retirement
Benefits have been paid, the Company and/or the Bank shall pay Mr. Guthrie's
estate or beneficiary, as applicable, in a lump sum the present value of the
remaining unpaid Retirement Benefits. In addition, during the 10 year period
subsequent to the Consulting Period, the
9
Company and/or the Bank shall provide medical insurance which supplements the
Medicare coverage for the benefit of Mr. Guthrie and his spouse at no cost to
Mr. Guthrie.
In addition to the foregoing, during the Consulting Period, Mr. Guthrie
will continue to serve as Chairman of the Board of the Company and the Bank
provided he continues to be a director in good standing. In addition to his
compensation as a consultant and any fees paid to directors of the Company and
the Bank, Mr. Guthrie will receive an annual fee of $15,000 for serving as
Chairman of the Board of the Company and the Bank during the Consulting Period.
The Board of Directors of the Company agreed to nominate Mr. Guthrie for an
additional four year term, subject to compliance with its fiduciary duties, when
Mr. Guthrie's term as a director of the Company expires in 2007 (which
nomination has been made) and to elect him as a director of the Bank during the
Consulting Period.
- --------------------------------------------------------------------------------
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.
Name of Beneficial Amount and Nature
Owner or Number of of Beneficial Percent of
Persons in Group Ownership (1) Common Stock
- --------------------------------------------- ------------- -----------------
First Keystone Financial, Inc.
Employee Stock Ownership Plan Trust(2) ..... 386,802 19.1%
22 West State Street
Media, Pennsylvania 19063
Dimensional Fund Advisors Inc. ............... 124,000 6.1
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Jeffrey L. Gendell
Tontine Financial Partners, L.P. ........... 170,800 8.4
55 Railroad Avenue, Third Floor
Greenwich, Connecticut 06830
Lawrence Garshofsky and Company, LLC ......... 155,850 7.9
9665 Wilshire Boulevard, Suite 200
Beverly Hills, California 90212
Directors:
Donald S. Guthrie .......................... 99,427 4.9
Bruce C. Hendrixson ........................ 554 *
Donald G. Hosier, Jr ....................... 6,193 * (12)
Edmund Jones ............................... 32,280 1.6
Thomas M. Kelly ............................ 58,583 2.9
Jerry A. Naessens .......................... 7,500 *
William J. O'Donnell ....................... 520 *
Marshall J. Soss ........................... 4,150 * (12)
(Footnotes on following page)
10
Name of Beneficial Amount and Nature
Owner or Number of of Beneficial Percent of
Persons in Group Ownership (1) Common Stock
- --------------------------------------------- ------------- -----------------
Other Named Executive Officers:
Rose M. DiMarco ............................ 18,269 * (12)
Robert R. Dwyer ............................ 2,710 * (12)
Elizabeth M. Mulcahy ....................... 67,250 3.3
Robin G. Otto .............................. 9,673 * (12)
Directors of the Bank who do not serve as
directors of the Company (2 persons) ....... 64,586 3.2
Directors and executive officers of the
Company and the Bank as a group (16 persons) 421,655 20.4(12)
- -----------------
* Represents less than 1% of the outstanding shares of Common Stock.
(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. O'Donnell, Naessens and Hendrixson, 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, 252,753 shares held in the Trust had been
allocated to the accounts of participating employees including 54,773
shares beneficially owned by six executive officers.
(3) Information obtained from a Schedule 13G/A, dated December 31, 2005,
filed with the SEC with respect to shares of Common Stock beneficially
owned by Dimensional Fund Advisors Inc. ("Dimensional"). The Schedule
13G/A states that Dimensional has sole voting and dispositive power as
to all of these shares. Dimensional disclaims beneficial ownership of
these shares.
(4) Information obtained from a Schedule 13D/A, 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.
(5) Information obtained from a Schedule 13D/A, filed November 29, 2006,
with the SEC with respect to shares of Common Stock beneficially owned
by Lawrence Garshofsky and Company, LLC ("LLC") Lawrence Garshofsky
("Garshofsky"), Lawrence Partners, L.P., and Lawrence Offshore
Partners, LLC. The Schedule 13D/A states that Garshofsky has sole
voting and dispositive power over 10,000 shares and LLC has shared
voting and dispositive power with respect to the remaining shares
beneficially owned.
(Footnotes continued on following page)
11
- -------------------
(6) Includes 2,486 shares held by the Montgomery Insurance Services, Inc.
Employee Profit Sharing Plan of which Mr. Hosier is a trustee and 456
shares held in Mr. Hosier's individual retirement account.
(7) Includes 5,000 shares owned by Mr. Jones's spouse.
(8) Includes shares (a) over which an officer has voting power under the
Bank's 401(k)/Profit Sharing Plan ("401(k) Plan") and the ESOP (b)
options to purchase shares of Common Stock granted pursuant to the 1998
Stock Option Plan ("1998 Option Plan") and the 1995 Stock Option Plan
("1995 Option Plan") (collectively, the "Option Plans") which are
exercisable within 60 days of December 4, 2006, and (c) restricted
stock awards granted pursuant to the 1995 Recognition and Retention
Plan and Trust Agreement ("Recognition Plan") as follows:
Currently Restricted
401(k) Plan ESOP Exercisable Options Stock Awards
------------- ------------ ------------------- ----------------
Donald G. Hosier, Jr.................... 2,486.471 -- 2,150 --
Thomas M. Kelly......................... 10,038.870 18,633.707 11,750 --
Rose M. DiMarco......................... 3,991.487 7,696.343 4,400 305
Robert R. Dwyer......................... 172.417 -- 527 --
Elizabeth M. Mulcahy.................... 11,796.606 12,004.781 11,750 --
Robin G. Otto........................... 4,267.412 1,724.823 2,000 705
Marshall J. Soss........................ -- -- 716 --
Directors and executive officers of the
Company and the Bank as a group...... 51,265.672 54,773.496 43,603 1,621
(9) Includes 500 shares held by Mr. O'Donnell's spouse and 20 shares held
in Mr. O'Donnell's individual retirement account.
(10) Includes 2,182 shares held by Ms. Mulcahy's spouse and 13,958 shares
held in Ms. Mulcahy's individual retirement account.
(11) Includes 400 shares held for the benefit of Ms. Otto's children
registered in the name of their grandmother, as custodian.
(12) 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.
- --------------------------------------------------------------------------------
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%
stockholders 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
during the year ended September 30, 2006, all filing requirements applicable to
its officers and directors and more than 10% stockholders have been satisfied
with the exception of one late filing by Ms. Robin Otto with respect to one
transaction in fiscal 1995.
12
- --------------------------------------------------------------------------------
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, 2006, 2005 and 2004 to the
President and Chief Executive Officer of the Company and the Bank during fiscal
2006 and the four other officers of the Bank whose total salary and bonus
exceeded $100,000 during fiscal 2006. None of such officers, two of whom also
serve as executive officers of the Company (Mr. Kelly and Ms. DiMarco), receive
any compensation from the Company.
Annual Compensation
------------------------------------
Long Term
Compensation
Other Awards
Annual ----------------------- All Other
Name and Fiscal Compen- Stock Number of Compen-
Principal Position Year Salary Bonus sation(1) Grants(2) Options(3) sation(4)
- -------------------------- ------ ---------- ---------- ---------- ---------- ---------- ----------
Thomas M. Kelly 2006 $ 220,159 $ -- $ 35,025 $ -- -- $ 13,831
President and Chief 2005 212,130 -- 38,185 -- -- 35,270
Executive Officer 2004 203,450 25,000 35,584 -- -- 38,179
Elizabeth M. Mulcahy 2006 $ 109,000 $ -- $ -- $ -- -- $ 9,139
Senior Vice President/ 2005 108,977 -- -- -- -- 22,049
Human Resources 2004 109,492 6,000 -- -- -- 23,128
Rose M. DiMarco 2006 $ 106,000 $ -- $ -- $ -- -- $ 8,136
Senior Vice President/ 2005 105,908 -- -- 7,525 -- 20,833
Chief Financial Officer 2004 95,019 10,249 -- -- -- 17,861
Robert R. Dwyer(5) 2006 $ 118,000 $ -- $ -- $ -- -- $ 767
Senior Vice President/ 2005 117,954 -- -- -- 2,221 412
Director of Lending 2004 48,442 5,000 -- -- -- --
Robin G. Otto 2006 $ 108,000 $ -- $ -- $ -- -- $ 6,844
Senior Vice President/ 2005 107,939 -- -- 18,470 -- 20,756
Retail Delivery 2004 103,969 8,000 -- -- -- 1,331
- --------------------
(1) Includes health care costs of $17,309, $15,305 and $13,359 for Mr.
Kelly in fiscal years 2006, 2005 and 2004, respectively. Does not
include certain amounts attributable to miscellaneous personal benefits
received by the named executive officers other than Mr. Kelly which in
the opinion of management of the Company, the cost to the Bank of
providing such benefits to such persons during the fiscal year 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 the value of shares of restricted stock on the date of grant
awarded pursuant to the Recognition Plan. Such restricted stock vests
over five years, 20% per year from the date of the grant. Dividends
paid on the restricted common stock are paid to the recipient as soon
as practicable after the shares vest by the trust. As of September 30,
2006, Mesdames DiMarco and Otto had 305 shares and 705 shares,
respectively, of unearned restricted stock, which had fair market
values of $6,012 and $13,896, respectively.
(3) Consists of stock options granted pursuant to the 1998 Option Plan. The
options vest at the rate of 20% per year from the date of grant.
(Footnotes continued on following page)
13
- --------------------
(4) In fiscal 2006, represents $13,831, $0, $7,776, $6,751 and $5,394
contributed by the Bank to the ESOP accounts of Messrs. Kelly and Dwyer
and Mesdames Mulcahy, DiMarco and Otto; also reflects in fiscal 2006,
$0, $767, $1,363, $1,385 and $1,450 contributed by the Bank to the
401(k) Plan accounts of Messrs. Kelly and Dwyer and Mesdames Mulcahy,
DiMarco and Otto, respectively.
(5) Mr. Dwyer joined the Bank in May 2004. Accordingly, the compensation
reflected for fiscal 2004 only reflects the compensation earned during
the portion of the year he was employed by the Bank.
Stock Options
The following table discloses certain information regarding the options
held at September 30, 2006 by the Chief Executive Officer and the other
executive officers named in the Summary Compensation Table. No options were
granted to any of such officers during the fiscal year ended September 30, 2006.
Number of Options at Value of Options at
Shares September 30, 2006 September 30, 2006
Acquired on Value -------------------------------- ------------------------------------
Name Exercise Realized Exercisable(1) Unexercisable Exercisable(1)(2) Unexercisable
- ---------------------- ------------ ---------- ------------- ----------------- ----------------- -----------------
Thomas M. Kelly -- -- 11,750 -- $89,124 $ --
Elizabeth M. Mulcahy -- -- 11,750 -- 89,124 --
Rose M. DiMarco -- -- 4,400 600 24,339 2,136
Robert R. Dwyer -- -- 527 1,694 -- --
Robin G. Otto -- -- 2,000 600 7,120 2,136
- ------------------
(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 the split.
(2) Based on a per share market price of $19.71 at September 30, 2006. The
exercise prices for the options reflected in the table range from
$12.125 to $21.89.
Employment and Severance Agreements
In connection with entering into the Retirement Agreement with Mr.
Guthrie, as described above under "-Directors' Compensation," the Company and
the Bank (collectively, the "Employers") elected Mr. Kelly as President and
Chief Executive Officer and entered into amendments of the employment agreements
entered into with Mr. Kelly in December 2004 in order to reflect such change in
title. The terms of such amended and restated employment agreements were
substantially identical to the agreements they superseded. The Employers agreed
to employ Mr. Kelly for a term of three years. The term of his employment
agreement is extended each year on its anniversary date for a successive
additional one-year period unless the Employers or Mr. Kelly, not less than 30
days prior to the annual anniversary date, elect not to extend the employment
term. However, as a result of the entering into of the supervisory agreement in
February 2006 with the Office of Thrift Supervision, the term of Mr. Kelly's
agreements were not allowed to extend for an additional year.
The employment agreements are terminable with or without cause by the
Employers. Mr. Kelly has 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 Mr. Kelly terminates his
employment because of failure of the Employers to comply with any material
provision of the employment agreements or (ii) the employment
14
agreements are terminated by the Employers other than for cause, disability,
retirement or death, Mr. Kelly will be entitled to a cash severance amount equal
to two times his base salary. In addition, Mr. Kelly will be entitled to a
continuation of benefits similar to those he is receiving at the time of such
termination for the remaining term of the agreements or until he obtains
full-time employment with another employer, whichever occurs first. If Mr.
Kelly's employment is terminated by the Employers subsequent to a Change in
Control of the Company (as defined in the agreements) or by Mr. Kelly subsequent
to a Change in Control of the Company as a result of certain adverse actions,
Mr. Kelly will be entitled to a cash severance amount equal to three times his
base salary as well as continuation of benefits under the same terms as
described above.
Mr. Kelly's agreements provide that he will be entitled to the use of
an automobile. In addition, in the event of Mr. Kelly's death during the term of
his agreements, his estate will receive payments equal to the amount of
compensation due for the remainder of the term of his agreements at his current
salary at the time of his death. 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.
The Employers also entered into two-year amended and restated severance
agreements with Mesdames Elizabeth M. Mulcahy and Carol Walsh, effective
December 1, 2004. The severance agreements are substantially identical to the
agreements they superceded. 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. As is the case with Mr. Kelly's
agreements, the terms of Mesdames Mulcahy's and Walsh's agreements were not
permitted to extend.
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 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 officers under the employment or severance agreements.
A "Change in Control" generally is defined in the employment and
severance agreements to include, among other things, (i) the acquisition by any
person of 20% or more of the Company's outstanding voting securities, (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 and (iii) approval by the
stockholders of the Company of a transaction which results in the
reorganization, merger or consolidation of the Company other than one in which
at least 51% of the equity ownership interests of the resulting entity are
beneficially owned by persons who immediately prior to such transaction
beneficially owned at least 51% of equity interests of the Company.
15
Benefit Plans
Supplemental Retirement Benefits. During fiscal 2004, the Bank
implemented a defined contribution supplemental executive retirement plan (the
"SERP") covering certain executive officers of the Bank. Currently, Mr. Kelly
and Mesdames Mulcahy and Walsh (as well as one former executive officer) are
participants in the SERP. Under the terms of the SERP, the Bank may choose to
make contributions to some or all of the participants in the SERP. The amount
and frequency of contributions is solely within the discretion of the Bank and
the committee administering the SERP. To the extent the Bank makes contributions
to the SERP on the participants' behalf, the amounts so credited will earn
interest at a rate determined by the Compensation Committee annually. For the
initial year of the SERP, the interest rate was established at 5.0%. Such rate
will remain in effect until such time that the Compensation Committee (which
administers the SERP) chooses to change it. For fiscal 2006, the Compensation
Committee did not take any action with respect to the crediting rating. Thus it
remains at 5.0%. No contribution was made to the SERP for fiscal 2006. Upon
retirement of a participant, he or she will receive his or her account balance
paid out in equal annual payments for a period not to exceed 15 years provided
that a participant can make a prior election to receive his or her distribution
in a lump sum. The SERP also provides for benefits in the event of the death of
the participant or the termination of the employment of the participant
subsequent to a change in control of the Company. For the fiscal year ended
September 30, 2006, the amount deemed expensed with regard to the SERP for the
benefit of the participants, who are current officers of the Bank, was
approximately $58,000.
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE OF THE BANK
- --------------------------------------------------------------------------------
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
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 2006 included general
management oversight of the Bank, the quality of communication with the Board of
Directors, and the productivity of employees. The Compensation Committee also
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
16
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. However, although such matters were considered,
no salary adjustments were made or bonuses awarded to the Chief Executive
Officer or any of the other executive officers for fiscal 2006 due to the terms
of the supervisory agreement entered into with the Office of Thrift Supervision
("OTS") in February 2006. Under the terms of the supervisory agreement, no
salary adjustments are permitted with respect to the compensation paid senior
officers without the prior approval of the OTS. No salary adjustments for fiscal
2007 had been made as of the date of this report.
Compensation Committee of the Bank
Jerry A. Naessens
William J. O'Donnell
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares the cumulative total return on the Common
Stock since September 30, 2001 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 $13.25 per share
on September 30, 2001.
[GRAPH OMITTED]
Index 9/30/01 9/30/02 9/30/03 9/30/04 9/30/05 9/30/06
- ------------------------------------- ------- ------- ------- ------- ------- -------
First Keystone Financial, Inc. (FKFS) $100.00 $118.20 $197.70 $171.13 $172.45 $157.25
Russell 2000 Index (RTY) 100.00 89.48 120.45 141.51 164.94 179.22
Nasdaq Bank Index (BANK) 100.00 106.78 125.84 144.47 146.95 158.97
S&P Bank Index (BIX) 100.00 95.80 106.95 125.00 118.24 138.09
17
- --------------------------------------------------------------------------------
INDEBTEDNESS OF MANAGEMENT AND RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
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 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, 2006.
Largest Amount of
Indebtedness between Balance as of
October 1, 2005 and September 30,
Name Year Loan Made September 30, 2006 2006 Interest Rate
- ----------------------- -------------- -------------------- -------------- -------------
Thomas M. Kelly 2003 $311,401 $305,968 4.875%
Donald G. Hosier Jr. 2004 311,030 293,269 3.750
Robert R. Hosier 2003 202,474 190,551 4.125
William J. O'Donnell 2002 110,754 101,748 5.000
Robin Otto 2003 148,057 138,876 4.375
Carol Walsh 2003 99,620 93,850 4.375
Bruce C. Hendrixson 2004 328,796 324,024 5.500
- --------------------------------------------------------------------------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (Proposal Two)
- --------------------------------------------------------------------------------
The Audit Committee of the Company has appointed Deloitte & Touche LLP,
independent registered public accounting firm, to perform the audit of the
Company's financial statements for the fiscal year ending September 30, 2007,
and further directed that the selection of Deloitte & Touche LLP 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
registered public accounting firms and clients. Deloitte & Touche LLP will have
one or more representatives at the Annual Meeting who will have an opportunity
to make a statement, if they so desire, and who will be available to respond to
appropriate questions.
18
The Audit Committee considered, in determining whether to appoint
Deloitte & Touche LLP as the Company's independent registered public accounting
firm, whether the provision of services, other than auditing services, by
Deloitte & Touche LLP is compatible with maintaining their independence. In
addition to performing auditing services, the Company's independent registered
public accounting firm performed other audit- and tax-related services for the
Company in fiscal 2006 and 2005. 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
independent registered public accounting firm's independence.
Audit Fees
The following table sets forth the aggregate fees paid by us to
Deloitte & Touche LLP for professional services rendered by Deloitte & Touche
LLP in connection with the audit of the Company's consolidated financial
statements for 2006 and 2005, as well as the fees paid by us to Deloitte &
Touche LLP for audit-related services, tax services and all other services
rendered by Deloitte & Touche LLP to us during fiscal 2006 and fiscal 2005.
Year Ended September 30,
------------------------
2006 2005
-------- --------
Audit fees (1) ....... $342,556 $241,904
Audit-related fees (2) -- 3,000
Tax fees (3) ......... -- 26,070
All other fees ....... -- 4,580
-------- --------
Total ............ $342,556 $275,554
======== ========
-------------
(1) Audit fees consist of fees incurred in connection with the
audit of our annual financial statements, the review of the
interim financial statements included in our quarterly reports
filed with the SEC and fees related to the comfort letter
issued for the private placement memorandum.
(2) Primarily consist of fees for consultation with regard to
accounting pronouncements for 2006 and 2005.
(3) Tax fees consist of fees incurred in connection with tax
planning, tax compliance and tax consulting services.
The Audit Committee selects the Company's independent registered public
accounting firm and pre-approves all audit services to be provided by it to the
Company. The Audit Committee also reviews and pre-approves all audit-related,
tax and all other services rendered by our independent registered public
accounting firm in accordance with the Audit Committee's charter and policy on
pre-approval of audit-related, tax and other services. In its review of these
services and related fees and terms, the Audit Committee considers, among other
things, the possible effect of the performance of such services on the
independence of our independent registered public accounting firm. Pursuant to
its policy, the Audit Committee pre-approves certain audit-related services and
certain tax services which are specifically described by the Audit Committee on
an annual basis and separately approves other individual engagements as
necessary. The pre-approval requirements do not apply to certain services if:
(i) the aggregate amount of such services provided to the Company constitutes
not more than five percent of the total amount of revenues paid by the Company
to its independent auditor during the year in which the services are provided;
(ii) such services were not recognized by the Company at the time of the
engagement to be other services; and (iii) such services are promptly brought to
the attention of the committee and approved by the committee or by one or more
members of the committee to whom authority to grant such approvals has been
delegated by the committee prior to the completion of the
19
audit. The committee may delegate to one or more designated members of the
committee the authority to grant required pre-approvals. The decisions of any
member to whom authority is delegated to pre-approve an activity shall be
presented to the full committee at its next scheduled meeting.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of Deloitte & Touche LLP as independent registered public
accounting firm for the fiscal year ending September 30, 2007.
- --------------------------------------------------------------------------------
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
registered public accounting firm is 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 registered public accounting firm
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 registered
public accounting firm is compatible with maintaining their independence and has
discussed with the Company's independent registered public accounting firm 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 registered public accounting firm required by Independence Standards
Board Standard No. 1, as may be modified or supplemented, and has discussed with
the independent registered public accounting firm, their 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, 2006 for filing with the Commission. The Audit Committee also has
recommended the reappointment of Deloitte & Touche LLP as the Company's
independent registered public accounting firm for the fiscal year ending
September 30, 2007.
Members of the Audit Committee
William J. O'Donnell, CPA
Bruce C. Hendrixson
Jerry A. Naessens
20
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS, NOMINATIONS AND COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
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 2008, 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 [21], 2007. 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 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 26, 2006. 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 December [1],
2007. 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.
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. As discussed
below, one notice was submitted to the Company's Secretary by November 26, 2006,
for consideration at this Annual Meeting.
By letter dated November 21, 2006, received November 22, 2006, Lawrence
Garshofsky and Company, LLC, Beverly Hills, California, ("Garshofsky"), a
stockholder of the Company, submitted pursuant to the Amended and Restated
Articles of Incorporation of the Company, nominations of candidates for election
as directors at the Annual Meeting. Garshofsky nominated Lawrence Garshofsky,
the managing member of Garshofsky, as well as two other individuals. The Company
is currently reviewing Garshofsky's submission for compliance with the
nomination provisions of the Company's Articles of Incorporation and will notify
Garshofsky promptly if any deficiency exists with respect thereto. If the
nominations are deemed to be in compliance with the Articles, ballots will be
provided at the Annual Meeting with respect to such nominees.
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
21
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.
Stockholder Communications. The Board of Directors has adopted a
process by which stockholders may communicate directly with members of the
Board. Stockholders who wish to communicate with the Board may do so by sending
written communications addressed to the Board of Directors, c/o Ms. Carol Walsh,
First Keystone Financial, Inc., 22 West State Street, Media, Pennsylvania,
19063.
- --------------------------------------------------------------------------------
ANNUAL REPORTS
- --------------------------------------------------------------------------------
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2006 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 2006 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.
- --------------------------------------------------------------------------------
PARTICIPANTS IN THE SOLICITATION
- --------------------------------------------------------------------------------
General. Under the proxy solicitation rules of the Exchange Act, the
Company's executive officers (including for this purpose) Senior Vice President
and Corporate Secretary, Carol Walsh and each of the Company's directors may be
deemed to be a "participant" in our solicitation of proxies. Information about
principal occupations of directors is set forth under the section "Information
with Respect to Nominees for Director, Continuing Directors and Executive
Officers - Election of Directors" (Proposal One). Information about the present
ownership of the voting stock by each participant, including the right to
acquire shares of the voting stock is set forth under the section "Beneficial
Ownership of Common Stock by Certain Beneficial Owners and Management."
Information about Mr. Kelly's employment agreements and Mesdames Mulcahy's and
Walsh's severance agreements, is set forth under the section "Executive
Compensation - Employment and Severance Agreements." Information about
transactions between the Company and directors and executive officers is set
forth under the section "Indebtedness of Management and Related Party
Transactions." For the purpose of this proxy statement, the business address of
each participant is 22 West State Street, Media, Pennsylvania, 19063. Appendix A
sets forth certain additional information about each participant's purchases and
sales of Common Stock since December 4, 2004.
22
Other information. Except as disclosed elsewhere in this proxy
statement, to the knowledge of the Company, no participant (1) owns of record
any securities of the Company that are not also beneficially owned by them; (2)
is, or was within the past year, a party to any contract, arrangement or
understanding with any person with respect to the securities of the Company,
including, but not limited to, joint ventures, loan or option arrangement, puts
or calls, or the giving or withholding of proxies; (3) has any substantial
interest, direct or indirect, by security holdings or otherwise, in any matter
to be acted upon at the Annual Meeting; or (4) borrowed any funds to purchase
any securities set forth under this section "Participants in the Solicitation."
Except as disclosed elsewhere in this proxy statement, to the knowledge of the
Company, no participant has any arrangement or understanding with any person (1)
with respect to future transactions to which the Company or any of its
affiliates will or may be a party.
- --------------------------------------------------------------------------------
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.
Solicitation of 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 $6,000. If a proxy solicitation is conducted by
Garshofsky, the fee due Regan & Associates, Inc. will increase to $20,000. 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.
Although no precise estimate can be made at this time, the Company expects to
incur additional costs as a result of the potential proxy contest. These costs
would include legal fees, printing costs and the additional fees paid to Regan &
Associates, Inc. The actual amount will depend on any developments that occur in
the event of an election contest.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED WHITE PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID
-----
ENVELOPE.
23
Appendix A
- ----------------------------------------------------------------------------------------------------------------------
TRANSACTIONS IN FIRST KEYSTONE'S SECURITIES IN THE LAST TWO YEARS
- ----------------------------------------------------------------------------------------------------------------------
The following table sets forth the only purchases and sales of Common
Stock by each participant since December 4, 2004.
Number of Form of
Shares Transaction Beneficial
Name Purchased (Sold) Date Type Ownership
- ---------------------------- -------------------- --------------- --------------------- ---------------------------
Rose Mary DiMarco 1,000 6/3/2005 Option Exercise Direct
Rose Mary DiMarco 1,093 (1) Purchase Indirect by 401(k) Plan
Rose Mary DiMarco 1,040 12/11/2006 Purchase Direct
Robert R. Dwyer 184 (1) Purchase Indirect by 401(k) Plan
Robert R. Dwyer 2,600 12/11/2006 Purchase Direct
Donald S. Guthrie 9,750 5/3/2005 Option Exercise Direct
Donald S. Guthrie 22,000 2/4/2005 Option Exercise Direct
Donald S. Guthrie 6,510 12/11/2006 Purchase Direct
Robert R. Hosier 3,064 (1) Purchase Indirect by 401(k) Plan
Edmund Jones 3,900 12/11/2006 Purchase Direct
Edmund Jones 6,500 12/11/2006 Purchase Indirect by Spouse
Thomas M. Kelly (1,800) 8/29/2005 Sale Direct
Thomas M. Kelly (1,200) 8/26/2005 Sale Direct
Thomas M. Kelly (2,300) 6/15/2005 Sale Direct
Thomas M. Kelly 9,344 3/14/2005 Option Exercise Direct
Thomas M. Kelly 303 (1) Purchase Indirect by 401(k) Plan
Thomas M. Kelly 1,040 12/11/2006 Purchase Direct
Elizabeth M. Mulcahy (10,000) 3/14/2005 Sale Direct
Elizabeth M. Mulcahy 10,012 3/14/2005 Option Exercise Direct
Elizabeth M. Mulcahy 1,312 (1) Purchase Indirect by 401(k) Plan
Elizabeth M. Mulcahy 1,560 12/11/2006 Purchase Direct
Jerry A. Naessens 1,500 5/12/2005 Purchase Direct
Jerry A. Naessens 5,200 12/11/2006 Purchase Direct
William J. O'Donnell 20 5/26/2005 Purchase Direct
William J. O'Donnell 1,040 12/11/2006 Purchase Indirect by Spouse
Robin G. Otto 400 6/3/2005 Option Exercise Direct
Robin G. Otto 959 (1) Purchase Indirect by 401(k) Plan
Donald A. Purdy (2,000) 8/29/2005 Sale Direct
Donald A. Purdy 2,222 6/1/2005 Option Exercise Direct
Donald A. Purdy 7,614 3/10/2005 Option Exercise Direct
Marshall J. Soss 1,434 5/3/2005 Option Exercise Direct
Joan G. Taylor 2,150 12/22/2004 Option Exercise Direct
Carol L. Walsh 942 3/8/2005 Option Exercise Direct
Carol L. Walsh 768 (1) Purchase Indirect by 401(k) Plan
- ---------------------
(1) Reflects aggregate purchases in the Company's 401(k) Plan pursuant to
regular quarterly deferred elections during the past two years.
A-1
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE FIRST KEYSTONE FINANCIAL, INC.
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 24, 2007 AND AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of December 4, 2006,
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 24, 2007 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.
For With- For All
Hold Except
1. ELECTION OF DIRECTORS [_] [_] [_]
Nominees for four year term:
Donald S. Guthrie
Edmund Jones
Jerry A. Naessens
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:
- --------------------------------------------------------------------------------
For Against Abstain
2. PROPOSAL to ratify the appointment of Deloitte [_] [_] [_]
& Touche LLP as the Company's independent
registered public accounting firm for the
fiscal year ending September 30, 2007.
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. 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 24, 2007, a Proxy Statement
for the Annual Meeting and the Company's 2006 Annual Report on Form 10-K prior
to the signing of this Proxy.
------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
- --------------------------------------------------------------------------------
| |
| |
- -----------Stockholder 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
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
- -----------------------------
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