Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ]Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
Security Federal Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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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 statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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June 20, 2003
Dear Fellow Shareholder:
It is with great pleasure that I invite you to attend the Company's
Annual Meeting of Shareholders, to be held on July 17, 2003 at the
Stevenson-McClelland Parish House Facilities at St. Thaddeus Episcopal Church,
125 Pendleton Street, Southwest, Aiken, South Carolina at 2:00 p.m., Eastern
time. This meeting will include management's report to you on the Company's
financial and operating performance during the fiscal year ended March 31,
2003, as well as an update on the progress we've made in achieving our longer
term corporate goals.
A critical aspect of the annual meeting is the shareholder vote on
corporate business items. I urge you to exercise your voting rights as a
shareholder and participate. All the materials you need to vote via the mail
are enclosed in this package. Please look them over carefully. Then MARK,
DATE, SIGN AND PROMPTLY RETURN YOUR PROXY in the envelope provided so that
your shares can be voted at the meeting in accordance with your instructions.
Your Board of Directors and management are committed to the continued
success of the Company and to the enhancement of your investment. As your
Chairman, I want to express my appreciation for your confidence and support.
Sincerely,
/s/ T. Clifton Weeks
T. Clifton Weeks
Chairman
SECURITY FEDERAL CORPORATION
1705 Whiskey Road South
Aiken, South Carolina 29803
(803) 641-3000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on July 17, 2003
Notice is hereby given that the Annual Meeting of Shareholders
("Meeting") of Security Federal Corporation ("Company") will be held at the
Stevenson-McClelland Parish House Facilities at St. Thaddeus Episcopal Church,
125 Pendleton Street, Southwest, Aiken, South Carolina, on July 17, 2003, at
2:00 p.m., Eastern time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company; and
2. Such other matters as may properly come before the Meeting or
any adjournments or postponements thereof.
NOTE: The Board of Directors is not aware of any other business to
come before the Meeting.
Any action may be taken on the foregoing proposal at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Shareholders of record as of the close of business on
June 12, 2003 are the shareholders entitled to receive notice of and to vote
at the Meeting, and any adjournments or postponements thereof.
A complete list of shareholders entitled to vote at the Meeting is
available for examination by any shareholder, for any purpose germane to the
Meeting, between 9:00 a.m. and 5:00 p.m., Eastern time, Monday through Friday,
at the main office of the Company located at 1705 Whiskey Road South, Aiken,
South Carolina, from the date of this proxy statement through the Meeting.
You are requested to fill in and sign the enclosed form of Proxy, which
is solicited on behalf of the Board of Directors, and to mail it promptly in
the enclosed envelope. The Proxy will not be used if you attend the Meeting
and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert E. Johnson
Robert E. Johnson
Secretary
Aiken, South Carolina
June 20, 2003
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
SECURITY FEDERAL CORPORATION
1705 Whiskey Road South
Aiken, South Carolina 29803
(803) 641-3000
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ANNUAL MEETING OF SHAREHOLDERS
July 17, 2003
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This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Security Federal Corporation
("Company"), to be used at the Annual Meeting of Shareholders of the Company
("Meeting"), which will be held at the Stevenson-McClelland Parish House
Facilities at St. Thaddeus Episcopal Church, 125 Pendleton Street, Southwest,
Aiken, South Carolina, on July 17, 2003, at 2:00 p.m., Eastern time, and all
adjournments or postponements of the Meeting. The accompanying Notice of
Annual Meeting of Shareholders and this Proxy Statement are first being mailed
to shareholders on or about June 20, 2003. Certain of the information
provided herein relates to Security Federal Bank ("Bank"), a wholly owned
subsidiary and the predecessor of the Company.
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VOTING AND PROXY PROCEDURE
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Shareholders Entitled to Vote. Shareholders of record as of the close of
business on June 12, 2003 ("Record Date") will be entitled to one vote for
each share of common stock of the Company ("Common Stock") then held. As of
the close of business on the Record Date, there were 2,529,824 shares of
Common Stock issued and outstanding.
If you are a beneficial owner of Common Stock held by a broker, bank or
other nominee (i.e., in "street name"), you will need proof of ownership to be
admitted to the meeting. A recent brokerage statement or letter from a bank
or broker are examples of proof of ownership. If you want to vote your shares
of Common Stock held in street name in person at the meeting, you will have to
get a written proxy in your name from the broker, bank or other nominee who
holds your shares.
Quorum Requirement. A majority of the shares of Common Stock, present in
person or represented by proxy and entitled to vote, shall constitute a quorum
for purposes of the Meeting. Abstentions and broker non-votes will be counted
as shares present and entitled to vote for purposes of the existence of a
quorum.
Voting. Directors shall be elected by a plurality of the votes present
in person or represented by proxy at the Meeting and entitled to vote on the
election of directors. Shareholders are not entitled to cumulate their votes
in the election of directors. Votes that are withheld and broker non-votes
will have no effect on the election of directors.
Proxies; Proxy Revocation Procedures. All shares of Common Stock
represented at the Meeting by properly executed and dated proxies received
prior to or at the Meeting, and not revoked, will be voted at the Meeting in
accordance with the instructions thereon. If no instructions are indicated,
properly executed and dated proxies will be voted FOR the election of the
director nominees named in this Proxy Statement. The Company does not know of
any matters, other than as described in the Notice of Annual Meeting, that are
to come before the Meeting. If any other matters are properly presented at
the Meeting for action, the persons named in the enclosed form of proxy and
acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment.
Participants in the Security Federal Corporation ESOP. If a shareholder
is a participant in the Security Federal Corporation Employee Stock Ownership
Plan ("ESOP"), the proxy card represents a voting instruction to the trustees
of the ESOP as to the number of shares of Common Stock in the participant's
plan account. Each participant in the ESOP may direct the trustees as to the
manner in which shares of Common Stock allocated to the participant's plan
account are to be voted. Unallocated shares of Common Stock held by the ESOP
and allocated shares for which
no voting instructions are received will be voted by the trustees in the same
proportion as shares for which the trustees have received voting instructions.
If your Common Stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow in
order to have your shares voted. Your broker or bank may allow you to deliver
your voting instruction via the telephone or the Internet. Please see the
instruction form that accompanies this proxy statement. If you wish to change
your voting instructions after you have returned your voting instruction form
to your broker or bank, you must contact your broker or bank.
A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary
of the Company at or before the Meeting a written notice of revocation bearing
a later date than the proxy; (ii) duly executing a subsequent proxy relating
to the same shares and delivering it to the Secretary of the Company at or
before the Meeting; or (iii) attending the Meeting and voting in person
(although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy should be
delivered to Robert E. Johnson, Secretary, Security Federal Corporation, 1705
Whiskey Road South, Aiken, South Carolina 29803.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Persons and groups who beneficially own in excess of 5% of the Common
Stock are required to file certain reports with the Securities and Exchange
Commission ("SEC"), and provide a copy to the Company, regarding such
ownership pursuant to the Securities Exchange Act of 1934, as amended
("Exchange Act"). Based upon such reports, the following table sets forth, as
of the close of business on the Record Date, certain information as to those
persons who were beneficial owners of more than 5% of the outstanding shares
of Common Stock. Management knows of no persons other than those set forth
below who owned more than 5% of the outstanding shares of Common Stock as of
the close of business on the Record Date. The table also sets forth, as of
the close of business on the Record Date, information as to the shares of
Common Stock beneficially owned by each director, the "named executive
officers" of the Company, and all executive officers and directors of the
Company as a group.
Shares Beneficially Percent
Beneficial Owners Owned (1) of Class
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Beneficial Owners of More Than 5%
T. Clifton Weeks (2) 310,830 11.93%
P.O. Box 941
Aiken, SC 29802
Mr. and Mrs. Robert E. Scott, Sr. (3) 216,066 8.55
4 Inverness West
Aiken, SC 29803
Thomas W. Weeks (4) 197,316 7.80
P.O. Box 365
Barnwell, SC 29812
Timothy W. Simmons (5) 162,813 6.44
P.O. Box 277
Aiken, SC 29802
2
Shares Beneficially Percent
Beneficial Owners Owned (1) of Class
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Directors
Gasper L. Toole, III (6) 100,600 3.98
Thomas L. Moore (7) 6,084 *
Harry O. Weeks, Jr. (8) 78,498 3.10
Robert E. Alexander (9) 3,600 *
William Clyburn (10) 2,214 *
Thomas C. Clark (11) 5,041 *
J. Chris Verenes(12) 2,625 *
All directors and executive officers
as a group (12 persons) (13) 710,759 28.10
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* Less than one percent of shares outstanding.
(1) Includes shares held directly, as well as indirectly by spouses, minor
children and corporations owned by such individuals, shares held in
retirement accounts of such individuals' family members over which
shares the respective individuals may be deemed to have sole voting or
investment power.
(2) T. Clifton Weeks, the Chairman of the Board of the Company and Director
of the Bank, is the father-in-law of Timothy W. Simmons. Includes 5,952
shares held directly and 295,878 held indirectly through a partnership
over which Mr. Weeks has sole voting and dispositive power.
(3) Mr. and Mrs. Scott have shared voting and dispositive power with respect
to the shares held jointly.
(4) Thomas W. Weeks is the brother of Harry O. Weeks, Jr., a Director of the
Company. The amount disclosed includes 45,600 shares held by his wife.
(5) Includes 82,506 shares held directly, 68,646 shares held by his wife,
and 11,661 shares allocated to Mr. Simmons' account under the Company's
ESOP. In addition to serving as a Director, Mr. Simmons is the
President and Chief Executive Officer of the Company, and Chairman of
the Board and Chief Executive Officer of the Bank.
(6) Includes 25,600 shares held by his wife.
(7) Includes 2,280 shares held by his wife.
(8) Includes 3,540 shares held by his wife and 6,600 shares held in trust
for his daughter, Allison Weeks.
(9) Includes 3,000 shares held by his son.
(10) Includes 2,064 shares held jointly with his wife.
(11) Includes 375 shares held by his wife, 1,650 shares held by his minor
children and 1,471 shares allocated to his ESOP account. In addition to
serving as a Director, Mr. Clark is the President and a Director of the
Bank.
(12) Includes 300 shares held jointly with his wife.
(13) Includes 14,179 shares allocated to individual accounts of executive
officers pursuant to the ESOP.
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PROPOSAL 1 - ELECTION OF DIRECTORS
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The Company's Board of Directors consists of nine directors. Each member
of the Company's Board of Directors is also a director of the Bank.
Approximately one-third of the directors are elected annually. Directors of
the Company are elected to serve for a three-year period or until their
respective successors shall have been elected and shall qualify. Three
directors will be elected at the meeting to serve for a term of three years or
until their respective successors have been elected and qualified. The
nominees for election this year are Timothy W. Simmons, T. Clifton Weeks and
Thomas C. Clark, each of whom is a current member of the Board of Directors of
the Company and of the Bank.
The following table sets forth information as of the close of business on
the Record Date regarding each director nominee and each director whose term
of office will continue after the Meeting. The Board of Directors intends to
vote the proxies solicited on its behalf (other than proxies in which the vote
is withheld as to one or more nominees)
3
for the three candidates nominated by the Board of Directors and standing for
election at the Meeting. If any nominee is unable to serve, the shares
represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time the Board of
Directors knows of no reason why any nominee might be unavailable to serve.
Except as disclosed herein, there are no arrangements or understandings
between any nominee and any other person pursuant to which such nominee was
selected.
The Board of Directors recommends a vote "FOR" the election of Messrs.
Simmons, Weeks and Clark.
Positions Held in the Director Term to
Name Age Company and the Bank Since (1) Expire
- ------------------ ---- -------------------- ---------- -------
NOMINEES
Timothy W. Simmons 57 President, Chief Executive 1983 2006 (2)
Officer and Director of the
Company, and Chairman of the
Board and Chief Executive
Officer of the Bank
T. Clifton Weeks 76 Chairman of the Board of the 1958 2006 (2)
Company and Director of the Bank
Thomas C. Clark 46 Director of the Company and 2002 2006 (2)
President and Director of the
Bank
CONTINUING DIRECTORS
Gasper L. Toole, III 77 Director and Vice President of 1958 2004
the Company and the Bank
Thomas L. Moore 53 Director of the Company and 1990 2004
the Bank
J. Chris Verenes 47 Director of the Company and 2002 2004
the Bank
Harry O. Weeks Jr. 63 Director of the Company and 1978 2005
the Bank
Robert E. Alexander 63 Director of the Company and 1988 2005
the Bank
William Clyburn 62 Director of the Company and 1993 2005
the Bank
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(1) Includes service on the Board of Directors of the Bank.
(2) Assuming re-election at the Meeting.
The principal occupation of each of the directors during the last five
years is as follows:
Timothy W. Simmons has been President of the Company since 1987 and Chief
Executive Officer since June 1994. Mr. Simmons was elected President and
Chief Operating Officer of the Bank in January 1987 and served in these
capacities from March 1987 to December 2001. In May 1988, Mr. Simmons became
Chief Executive Officer of the Bank and in January 2002, he was elected
Chairman of the Bank's Board of Directors.
T. Clifton Weeks has been Chairman of the Board of the Company since July
1987 and was Chief Executive Officer of the Company from July 1987 until June
1994. Mr. Weeks served as Chairman of the Board of the Bank from January 1987
until January 2002 and was Chief Executive Officer of the Bank from 1987 until
May 1988. Prior thereto, he served as President and Managing Officer of the
Bank beginning in 1958.
4
Thomas C. Clark was elected President of the Bank effective January 1,
2002. Prior to this, he was Senior Vice President - Retail Banking since
January 1, 1994. He held the position of Vice President - Consumer/Commercial
Loans from July 1992 to January 1994.
Gasper L. Toole, III is of counsel to the law firm of Toole & Toole, a
position he has held since March 1991. Prior to that time, he was a partner in
the firm. He has also served as Vice President of the Company since July 1987
and of the Bank since August 1958.
Thomas L. Moore is a member of the South Carolina Senate, a position he
has held since 1981. He is also President of Boiler Efficiency, Inc., a
mechanical contracting company located in Clearwater, South Carolina, a
position he has held since 1978.
J. Chris Verenes has held a variety of management positions with
Washington Group International, an engineering and construction company that
manages and operates major government sites throughout the United States for
the Department of Energy. He is currently the Director of Planning and
Administration, and has previously held positions as Chief of Staff and
Director of Strategic Programs for the business unit. Prior to his position
with Washington Group International, Mr. Verenes served as Controller for
Riegel Textile Corporation, as Director of Control Data and Business and
Technology Center, and as Executive Director of the South Carolina Democratic
Party.
Harry O. Weeks Jr. is an Insurance Broker and Business Development
Officer with Hutson-Etherredge Companies, a position he has held since May
1995. Prior to that, Mr. Weeks was President and Chief Executive Officer of
Lyon, Croft, Weeks & Hunter Insurance Agency from May 1965 to May 1995.
Robert E. Alexander is the Chancellor Emeritus of the University of South
Carolina - Aiken. He served as Chancellor from 1983 to June 2000. He
continues to assist the University in special development activities through
teaching undergraduate seminars. Dr. Alexander is Chair of the Board of
Governors of Aiken Regional Medical Centers, a wholly-owned subsidiary of
Universal Health Services. He serves as Vice Chair of the Board of Directors
of ACTS (Area Churches Together Serving), an interdenominational organization
that provides emergency and long-term assistance to people in distress. He
serves as Treasurer and member of the Board of Managers of the Bishop Gravatt
Episcopal Retreat Center. Other board of director memberships include The
Aiken Preparatory School and The Lambda Chi Alpha National Fraternity,
Indianapolis, Indiana. In addition, Dr. Alexander regularly serves as a
consultant for architectural firms on a national and a regional basis in the
fields of higher education and health care facilities.
William Clyburn is employed as an Advisor for Community Alliances with
Westinghouse Savannah River Company, a United States Department of Energy
contractor located in Aiken, South Carolina, a position he has held since
September 1994. He previously served as an Administrative Law Judge with the
South Carolina Workers Compensation Commission from July 1986 to June 1994.
Mr. Clyburn serves in the South Carolina House of Representatives.
Executive Officers Who Are Not Directors of the Company or the Bank
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The following information as to the principal occupations during the past
five years is supplied with respect to the Company's executive officers who do
not serve on the Company's or the Bank's Board of Directors. There are no
arrangements or undertakings between the persons named and any other person
pursuant to which such officers were selected.
Frank M. Thomas, age 56, was named Senior Vice President - Commercial
Loans and Business Development in January 2002. He previously served as
Senior Vice President - Mortgage Lending from March 1999 to January 2002.
From September 1994 to March 1999, Mr. Thomas served as Vice President -
Commercial Loans and Business Development as well as Banking Center
Coordinator from January 1996 to April 1998.
5
Roy G. Lindburg, age 42, has been Treasurer and Chief Financial Officer
of the Company and the Bank since January 1995.
Floyd Blackmon, age 62, was named Senior Vice President - Chief Operating
Officer of the Bank in January 2002. He previously served as Senior Vice
President - Operations from March 1999 until January 2002 and prior to that as
Vice President of that department from January 1998. Prior to joining the
Bank, Mr. Blackmon was Senior Vice President of Operations for ComSouth
Bankshares, Inc., Columbia, South Carolina from March 1989 to July 1997.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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Meetings and Committees of the Company. During the fiscal year ended
March 31, 2003, the Board of Directors of the Company held 12 meetings. No
director attended fewer than 75% of the meetings held by the Board of
Directors and all committees on which he served. The Company's Board of
Directors has standing Executive, Audit, Compensation and Proxy Committees.
The Executive Committee, comprised of Director T. Clifton Weeks as
Chairman and Directors Toole, Alexander, Simmons and Clark, meets on an as
needed basis to handle matters arising between Board meetings. This Committee
met once during fiscal 2003.
The Audit Committee, comprised of Director Harry O. Weeks Jr. as Chairman
and Directors Moore, Clyburn and Verenes, assists the Board in fulfilling its
oversight responsibilities. Previously, the Committee met on an as needed
basis, but in April 2003, it adopted a revised Charter to reflect the new
responsibilities imposed by the Sarbanes-Oxley Act of 2002. Under the revised
Charter, the Committee will meet at least four times annually, and is
responsible for reviewing the Company's annual audited financial statements
and any financial statements submitted to the public, appointment of the
independent auditors and monitoring the independence and performance of the
Company's independent auditors and internal auditing department. A copy of
the revised Charter is attached to this proxy statement as Appendix A. Each
member of the Audit Committee is "independent," as defined, in the case of the
Company, under The Nasdaq Stock Market Rules. This Committee met once during
fiscal 2003.
The Compensation Committee, which also serves as the Stock Option
Committee, is comprised of Director T. Clifton Weeks as Chairman and Directors
Toole and Alexander. This Committee meets on an as needed basis and makes
recommendations to the Board regarding annual contributions to certain benefit
plans and salaries for officers and employees. This Committee also determines
certain minor administrative matters related to certain employee plans. This
Committee met four times during fiscal 2003.
The Proxy Committee, which is composed of the entire Board of Directors,
is responsible for voting the proxies of the Company's shareholders. The
Committee met once during fiscal 2003.
The Company's Board of Directors does not have a standing nominating
committee; rather, the entire Board of Directors is responsible for this
function. The full Board of Directors met once in this capacity during the
fiscal year ended March 31, 2003.
Meetings and Committees of the Bank. The Bank, as principal subsidiary
of the Company, has certain standing committees of its Board of Directors.
Meetings of the Bank's Board of Directors are generally held on a monthly
basis. The Board of Directors held a total of 12 meetings during the fiscal
year ended March 31, 2003. During fiscal 2003, no director attended fewer
than 75% of the total number of meetings held by the Board of Directors and
all committees of the Board of Directors on which he served. The Bank's Board
of Directors has standing Executive, Audit, Compensation and Loan Committees.
The Executive Committee of the Board of Directors of the Bank is composed
of Director Simmons as Chairman and Directors T. Clifton Weeks, Toole,
Alexander and Clark. To the extent authorized by the Board of Directors and
by the Bank's Bylaws, this Committee exercises all of the authority of the
Board of Directors between Board meetings
6
and formulates recommendations for presentation to the full Board. All
actions of this Committee are reviewed and ratified by the entire Board. The
Executive Committee met 31 times during fiscal 2003.
The Loan Committee of the Board of Directors of the Bank is composed of
T. Clifton Weeks as Chairman and Directors Toole, Alexander, Simmons and
Clark. The Loan Committee is responsible for and oversees the Bank's loan
activities. All actions of this Committee are reviewed and ratified by the
entire Board. This Committee met 27 times during fiscal 2003.
The Audit Committee of the Bank reviews audit reports, reevaluates audit
performance and handles relations with the Bank's independent auditors to
ensure effective compliance with regulatory and internal policies and
procedures. Members of this Committee are Director Harry O. Weeks Jr. as
Chairman and Directors Moore, Clyburn and Verenes. The Audit Committee met 13
times during fiscal 2003.
The Compensation Committee of the Bank makes recommendations to the Board
regarding the amount of the Bank's annual contribution to certain benefit
plans and salaries for the Bank's officers and employees. This Committee also
determines certain minor administrative matters related to certain employee
plans. Members of this Committee are Directors T. Clifton Weeks as Chairman
and Directors Toole and Alexander. This Committee met twice during fiscal
2003.
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DIRECTORS COMPENSATION
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The Company does not compensate the members of its Board of Directors for
service on the Board or committees. The Directors of the Bank receive fees of
$1,000 per month. Members of the Executive Committee receive $1,000 per month
for membership on this Committee, with the exception of Messrs. Simmons and
Clark, who do not receive a fee for service on this Committee. Members of the
Audit Committee receive $400 per meeting attended. No fee is paid for service
on the Bank's Compensation or Loan Committees.
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EXECUTIVE COMPENSATION
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Summary Compensation Table. The Company has not paid any compensation to
its executive officers since its formation. The following table sets forth
for the last three fiscal years the compensation paid by the Bank to, or
accrued for the benefit of, the Chief Executive Officer of the Company and the
Bank, and one executive officer who received salary and bonus in excess of
$100,000 during the fiscal year ended March 31, 2003. No other executive
officer's total annual salary and bonus for the last completed fiscal year
exceeded $100,000.
Annual Compensation
--------------------
All Other
Name and Position Year Salary (1) Compensation (2)
- --------------------------- ---- -------------------- ----------------
Timothy W. Simmons 2003 $144,840 $22,350
President, Chief Executive 2002 127,883 16,626
Officer and Director of the 2001 117,500 14,980
Company, and Chairman of the
Board and Chief Executive
Officer of the Bank
Thomas C. Clark 2003 113,240 14,285
President of the Bank and 2002 86,830 11,751
Director of the 2001 76,600 10,310
Company and the Bank
(Footnotes appear on following page.)
7
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(1) Includes board fees for Mr. Simmons of $10,740, $10,080 and $8,500 for
fiscal 2003, 2002 and 2001, respectively, and for Mr. Clark of $10,740
and $2,580 for fiscal 2003 and 2002, respectively. Mr. Clark was
appointed to the Board of Directors on January 2, 2002.
(2) All other compensation during fiscal 2003 represents for Mr. Simmons,
deferred compensation pursuant to the Company's 401(k) Plan of $10,755
and employer contributions to the 401(k) Plan of $7,814 and to the ESOP
of $3,781, and for Mr. Clark, deferred compensation pursuant to the
Company's 401(k) Plan of $6,153 and employer contributions to the
401(k) Plan of $5,604 and to the ESOP of $2,528.
Option Grant Table. There were no options granted to Mr. Simmons or Mr.
Clark in fiscal 2003.
Option Exercise/Value Table. The following table sets forth information
with respect to the number and value of stock options held at March 31, 2003
by Mr. Simmons and Mr. Clark.
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End at Fiscal Year End (1)
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- -------- ----------- -------------- ----------- -------------
<s> <c> <c> <c> <c> <c> <c>
Timothy W. Simmons
Nonqualified - $ -- -- 3,000 $ -- $ 10,770
Incentive Stock
Options -- -- 6,000 -- 11,580 -
Thomas C. Clark
Incentive Stock Options 1,920 31,296 1,920 11,760 28,666 107,537
- -----------------
(1) Represents the difference between the price of the Common Stock at March 31, 2003 and the exercise
price of the option. Options are in-the-money if the market value of the shares covered by the
options is greater than the option exercise price.
Salary Continuation Agreement. The Company and the Bank have entered
into salary continuation agreements (each, an "Agreement") with Messrs.
Simmons and Clark (individually, the "Executive"). The Agreements are each
for a term of one year. However, upon the expiration of each one-year term,
the Agreements may be extended for an additional term upon approval by the
Board of Directors following a formal performance evaluation of the Executive
by the disinterested members of the Board of Directors. The Agreement with
Mr. Simmons provides for payment of 120% of current compensation in monthly
installments until the earlier of: (i) his reaching age 72, or (ii) 36 months
after his resignation or termination, where he is terminated or resigns at any
time following a "Change in Duties or Salary" in connection with a "Change in
Control" of the Company. The Agreement with Mr. Clark provides for payment of
120% of current compensation in monthly installments until the earlier of:
(i) his reaching age 65, or (ii) 12 months after his resignation or
termination, where he is terminated or resigns at any time following a "Change
in Duties or Salary" in connection with a "Change in Control" of the Company.
For purposes of the Agreements, the term "Change in Control" means a
change in control of the Company where an entity, corporation or group of
persons acting in concert (other than the members of the Board of Directors of
the Company as of January 1, 1993) acquire a majority of the voting stock of
the Company entitling them to elect a majority of the Board of Directors of
the Company. A "Change in Duties or Salary" shall include any of the
following: (a) a change in duties and responsibilities of the Executive from
those in effect at the time of a Change in Control, which change results in
the assignment of duties and responsibilities inferior to those duties and
responsibilities of the Executive at the time the Change in Control occurs;
(b) a reduction in rate of annual salary from such rate in effect at the time
of a Change in Control; or (c) a change in the place of assignment of employee
from Aiken, South Carolina, to any location that is located further than 25
miles from Aiken, South Carolina. Assuming a Change of Control occurred on
March 31, 2003, the aggregate amount due and payable to Mr. Simmons and Mr.
Clark would have been approximately $540,000 and $132,000, respectively.
8
- -----------------------------------------------------------------------------
AUDIT COMMITTEE MATTERS
- -----------------------------------------------------------------------------
Audit Committee Charter. The Audit Committee operates pursuant to a
Charter approved by the Company's Board of Directors. The Audit Committee
reports to the Board of Directors and is responsible for overseeing and
monitoring financial accounting and reporting, the system of internal controls
established by management and the audit process of the Company. The Audit
Committee Charter sets out the responsibilities, authority and specific duties
of the Audit Committee. The Charter specifies, among other things, the
structure and membership requirements of the Audit Committee, as well as the
relationship of the Audit Committee to the independent accountants, the
internal audit department and management of the Company.
Report of the Audit Committee. The Audit Committee reports as follows
with respect to the Company's audited financial statements for the year ended
March 31, 2003:
* The Audit Committee has completed its review and discussion of the
Company's 2003 audited financial statements with management;
* The Audit Committee has discussed with the independent auditors
(Elliott Davis & Company, LLC) the matters required to be discussed
by Statement on Auditing Standards ("SAS") No. 61, Communication
with Audit Committees, as amended by SAS No. 90, Audit Committee
Communications, including matters related to the conduct of the
audit of the Company's financial statements;
* The Audit Committee has received written disclosures, as required
by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee, indicating all relationships, if
any, between the independent auditor and its related entities and
the Company and its related entities which, in the auditors'
professional judgment, reasonably may be thought to bear on the
auditors' independence, and the letter from the independent
auditors confirming that, in its professional judgment, it is
independent from the Company and its related entities, and has
discussed with the auditors the auditors' independence from the
Company; and
* The Audit Committee has, based on its review and discussions with
management of the Company's 2003 audited financial statements and
discussions with the independent auditors, recommended to the
Board of Directors that the Company's audited financial statements
for the year ended March 31, 2003 be included in the Company's
Annual Report on Form 10-K.
Audit Committee: Harry O. Weeks Jr., Chairman
Thomas L. Moore
William Clyburn
J. Chris Verenes
- -----------------------------------------------------------------------------
COMPENSATION COMMITTEE MATTERS
- -----------------------------------------------------------------------------
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of the Compensation
Committee and Performance Graph shall not be incorporated by reference into
any such filings.
Report of the Compensation Committee. Under rules established by the
SEC, the Company is required to provide certain data and information in regard
to the compensation and benefits provided to the Company's Chief Executive
Officer and other executive officers. The disclosure requirements for the
Chief Executive Officer and other executive officers include the use of tables
and a report explaining the rationale and considerations that led to the
fundamental executive compensation decisions affecting those individuals. The
Compensation Committee of the Board
9
of Directors of the Company is responsible for establishing and monitoring
compensation policies of the Company and for reviewing and ratifying the
actions of the Compensation Committee of the Board of Directors of the Bank.
Performance is evaluated and salaries are set by the Compensation Committee of
the Bank.
General. The Bank's Compensation Committee's duties are to recommend and
administer policies that govern executive compensation. The Committee
evaluates individual executive performance, compensation policies and
salaries. The Committee is responsible for evaluating the performance of the
Chief Executive Officer of the Bank while the Chief Executive Officer of the
Bank evaluates the performance of other senior officers of the Bank and makes
recommendations to the Committee regarding compensation levels.
Compensation Policies. The executive compensation policies of the Bank
are designed to establish an appropriate relationship between executive pay
and the Company's and Bank's annual performance, to reflect the attainment of
short- and long-term financial performance goals and to enhance the ability of
the Company and the Bank to attract and retain qualified executive officers.
The principles underlying the executive compensation policies include the
following:
* To attract and retain key executives who are vital to the long-term
success of the Company and the Bank and are of the highest caliber;
* To provide levels of compensation competitive with those offered
throughout the financial industry and consistent with the Company's
and the Bank's level of performance;
* To motivate executives to enhance long-term stockholder value by
building their equity interest in the Company; and
* To integrate the compensation program with the Company's and the
Bank's annual and long-term strategic planning and performance
measurement processes.
The Committee considers a variety of subjective and objective factors in
determining the compensation package for individual executives, including: (1)
the performance of the Company and the Bank as a whole with emphasis on annual
performance factors and long-term objectives; (2) the responsibilities
assigned to each executive; and (3) the performance of each executive of
assigned responsibilities as measured by the progress of the Company and the
Bank during the year.
Base Salary. The Bank's current compensation plan involves a combination
of salary, employer contributions to 401(k) and ESOP Plans, and deferred
compensation. The salary levels of executive officers are designed to be
competitive within the banking and financial services industries. In setting
competitive salary levels, the Compensation Committee continually evaluates
current salary levels by surveying similar institutions in the Southeast and
the United States. The Compensation Committee's peer group analysis focuses
on asset size, nature of ownership, type of operation and other common
factors. Specifically, the Compensation Committee annually reviews the South
Carolina Banker's Association Compensation and Benefits Survey, the Bank
Administration Institute Cash Compensation Survey, and the America's Community
Banker's Survey of Salaries which covers over 500 financial institutions
nationwide.
Long Term Incentive Compensation. The Company, with shareholder
approval, adopted the 1987 Stock Option Plan, the 1999 Stock Option Plan and
the 2002 Stock Option Plan. Under the plans, non-employee directors,
executive officers and other employees may receive grants and awards. The
Company believes that stock ownership by the Company's and the Bank's
executives is a significant factor in aligning the interests of the executives
with those of stockholders. Stock options and awards under such plans were
allocated based upon regulatory practices and policies, and the practices of
other publicly traded financial institutions as verified by external surveys
and were based upon the executive officers' level of responsibility and
contributions to the Company and the Bank.
Compensation of the Chief Executive Officer. During the fiscal year
ended March 31, 2003, Mr. Simmons' salary was $144,840, including board fees
of $10,740. In addition, he was credited with $22,350 in other compensation
10
(comprised of ESOP contribution of $3,781, employer 401(k) contribution of
$7,814 and deferred compensation pursuant to the Company's 401(k) plan of
$10,755) as set forth in the preceding Summary Compensation Table. This
resulted in total compensation of $167,190, which represents a 15.7% increase
from the previous year. The Committee believes that Mr. Simmons' compensation
is appropriate based on the Company's overall compensation policy, on the
basis of the Committee's consideration of peer group data, and the superior
financial performance of the Company during the fiscal year.
Compensation Committee of the Board of Directors: T. Clifton Weeks, Chairman
Gasper L. Toole, III
Robert E. Alexander
Performance Graph. The following graph compares the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return on the S&P 500 (U.S. Stock) Index and a peer group of the SNL All
Thrift Index. Total return assumes the reinvestment of all dividends and that
the value of Common Stock and each index was $100 on March 31, 1998.
[GRAPH APPEARS HERE]
Period Ending
---------------------------------------------------------
Index 3/31/98 3/31/99 3/31/00 3/31/01 3/31/02 3/31/03
- ------------------- ------- ------- ------- ------- ------- -------
Security Federal
Corporation $100.00 $205.72 $274.74 $275.52 $299.22 $277.80
S&P 500 100.00 118.43 139.68 109.41 109.67 82.39
SNL Thrift Index 100.00 82.60 65.48 108.69 125.77 140.19
- -----------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -----------------------------------------------------------------------------
Section 16(a) of the Exchange Act requires certain officers of the
Company and its directors, and persons who beneficially own more than 10% of
any registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the SEC and the Company. Based solely
on a review of the reports and written representations provided to the Company
by these persons, the Company believes that all filing requirements applicable
11
to its reporting officers, directors and greater than 10% beneficial owners
were properly and timely complied with during the fiscal year ended March 31,
2003, except for the filing of Form 4, Statement of Changes of Beneficial
Ownership of Securities, to report securities sold by Mr. Lindburg, which was
subsequently filed.
- -----------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- -----------------------------------------------------------------------------
Applicable law and regulations require that all loans or extensions of
credit to executive officers and directors must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons (unless the loan or
extension of credit is made under a benefit program generally available to all
employees and does not give preference to any insider over any other employee)
and does not involve more than the normal risk of repayment or present other
unfavorable features. The Bank has adopted a policy to this effect. At March
31, 2003, loans to all employees, officers and directors of the Bank totalled
$2.9 million, or 9.75% of the Company's total shareholders' equity.
Director T. Clifton Weeks and the wife of Director Simmons, who are
father and daughter, are co-owners of the Franclif Company, which rents office
space to the Bank for its Laurens Street branch. Franclif Company received
$28,838 in rent, none of which represents property taxes from the Bank, during
fiscal 2003. This lease was made in the ordinary course of business on
substantially the same terms as those of comparable transactions prevailing at
the time and does not present any unfavorable features.
- -----------------------------------------------------------------------------
SHAREHOLDER PROPOSALS AND NOMINATIONS
- -----------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy solicitation
materials for the next year's Annual Meeting of Shareholders, any shareholder
proposal to take action at such meeting must be received at the Company's main
office at 1705 Whiskey Road South, Aiken, South Carolina, no later than
February 21, 2004. Any such proposals shall be subject to the requirements of
the proxy solicitation rules adopted under the Exchange Act.
The Company's Articles of Incorporation provide that in order for a
shareholder to make nominations for the election of directors or proposals for
business to be brought before a meeting of shareholders, a shareholder must
deliver written notice of such nominations and/or proposals to the Secretary
not less than 30 nor more than 90 days prior to the date of the meeting;
provided that if less than 45 days' notice of the meeting is given to
shareholders, such notice must be delivered not later than the close of the
15th day following the day on which notice of the meeting was mailed to
shareholders. As specified in the Articles of Incorporation, the written
notice with respect to nominations for election of directors must set forth
certain information regarding each nominee for election as a director,
including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director, if elected, and certain information
regarding the shareholder giving such notice. The notice with respect to
business proposals to be brought before the Meeting must state the
shareholder's name, address and number of shares of Common Stock held, and
briefly discuss the business to be brought before the Meeting, the reasons for
conducting such business at the Meeting and any interest of the shareholder in
the proposal.
- -----------------------------------------------------------------------------
AUDITORS
- -----------------------------------------------------------------------------
Audit Fees
The aggregate fees billed to the Company by Elliott Davis & Company, LLC
for professional services rendered for the audit of the Company's financial
statements for fiscal 2003 and the reviews of the financial statements
included in the Company's Forms 10-Q for that year, including travel expenses,
were $27,000.
12
Financial Information Systems Design and Implementation Fees
Elliott Davis & Company, LLC performed no financial information system
design or implementation work for the Company during the fiscal year ended
March 31, 2003.
All Other Fees
Other than audit fees, the aggregate fees billed to the Company by
Elliott Davis & Company, LLC for fiscal 2003, none of which were financial
information systems design and implementation fees, were $12,755. The Audit
Committee of the Board of Directors determined that the services performed by
Elliott Davis & Company, LLC other than audit services are not incompatible
with Elliott Davis & Company, LLC maintaining its independence.
Representatives of Elliot, Davis & Company, LLC are expected to be
present at the Meeting to respond to appropriate questions from shareholders
and will have the opportunity to make a statement should they desire to do so.
- -----------------------------------------------------------------------------
OTHER MATTERS
- -----------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
- -----------------------------------------------------------------------------
MISCELLANEOUS
- -----------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of Common Stock. In addition to
solicitation by mail, directors, officers and regular employees of the Company
and the Bank may solicit proxies personally or by telephone, without
additional compensation.
The Company's Annual Report to Shareholders, including consolidated
financial statements, accompanies this Proxy Statement. Any shareholder who
has not received a copy of such Annual Report may obtain a copy by writing to
the Company. Such Annual Report is not to be treated as part of the proxy
solicitation materials, or as having been incorporated herein by reference.
- -----------------------------------------------------------------------------
FORM 10-K
- -----------------------------------------------------------------------------
A copy of the Annual Report on Form 10-K as filed with the SEC will be
furnished without charge to shareholders as of the close of business on the
Record Date upon written request to Robert E. Johnson, Secretary, Security
Federal Corporation, P.O. Box 810, Aiken, South Carolina 29802.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert E. Johnson
Robert E. Johnson
Secretary
Aiken, South Carolina
June 20, 2003
13
Appendix A
----------
Charter of the Audit Committee of the Board of Directors
of Security Federal Corporation
I. Purpose
The Audit Committee is appointed by the Board of Directors of Security
Federal Corporation ("Company") to assist the Board in fulfilling its
oversight responsibilities. The Audit Committee's primary duties and
responsibilities are to:
1. Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, accounting,
and legal compliance.
2. Monitor the independence and performance of the Company's
independent auditors and internal auditing department.
3. Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. Composition
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment. All members
of the Committee shall have a basic understanding of finance and accounting
and be able to read and understand fundamental financial statements. Member
independence, experience and financial expertise will be in conformance with
rules established by the Securities and Exchange Commission. The members of
the Committee shall be elected by the Board at the annual organizational
meeting of the Board and shall serve until their successors shall be duly
elected and qualified. If an Audit Committee Chair is not designated by the
Board, the members of the Committee may designate a Chair by majority vote of
the Committee membership.
III. Meetings
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting. As part of its job to
foster open communication, the Committee should meet at least annually with
management, the senior internal audit executive and the independent auditors
in separate executive sessions to discuss any matters that the Committee or
each of these groups believe should be discussed privately. In addition, the
Committee or at least its Chair should meet with the independent auditors and
management quarterly to review the Company's financials consistent with IV.4
below.
IV. Responsibilities and Duties
To fulfill its responsibilities and duties, the Audit Committee shall:
Review Procedures
-----------------
1. Review and reassess the adequacy of this Charter, at least
annually, as needed. The Committee shall submit the Charter to
the Board of Directors for approval.
A-1
2. Review the Company's annual audited financial statements and any
financial statements submitted to the public, including any
certification, report, opinion, or review rendered by the
independent auditors.
3. Review the regular internal reports prepared by the internal
auditing department and management's response thereto.
4. Review with financial management and the independent auditors the
financial statements, including disclosures made in Management's
Discussion and Analysis of Financial Condition and Results of
Operations, in the Company's reports on Forms 10-Q and 10-K and
annual report to shareholders prior to its filing or prior to the
release of earnings. The Committee shall recommend to the Board
whether or not the audited financial statements should be included
in the Company's 10-K.
5. Review disclosures made by the Company's chief executive officer
and chief financial officer regarding compliance with their
certification obligations as required under the Sarbanes-Oxley Act
of 2002 and the rules promulgated thereunder, including the
Company's disclosure controls and procedures and internal controls
for financial reporting and evaluations thereof.
Independent Auditors
--------------------
6. Have the sole authority to appoint or replace the independent
auditors.
7. Approve all audit engagement fees and terms and all non-audit
engagements with the independent auditors. The Committee may
delegate authority to pre-approve non-audit services to one or
more members of the Committee. If this authority is delegated,
all approved non-audit services will be presented to the Committee
at its next scheduled meeting.
8. Ensure the independent auditors' ultimate accountability to the
Audit Committee and the Board of Directors, as representatives of
the stockholders, receiving reports directly from the auditors.
9. Be directly responsible for the oversight of the work of the
independent auditors, reviewing their performance regularly.
10. Ensure receipt from the independent auditors of a formal written
statement delineating all relationships between the auditors and
the Company, consistent with Independence Standards Board
Standard 1. On an annual basis, the Committee should review and
discuss with the auditors any such relationships to determine the
auditors' independence and objectivity. The Committee should
take, or recommend to the Board that it take, appropriate action
to oversee the independence of the auditors.
11. Discuss with the independent auditors all matters required to be
communicated to audit committees in accordance with Statement of
Auditing Standards No. 61.
12. Periodically consult with the independent auditors out of the
presence of management about internal controls and the
completeness and accuracy of the Company's financial statements.
13. Ensure that the lead audit partner of the independent auditors and
the concurring audit partner are rotated at least every five
years, and that all other audit partners are rotated at least
every seven years.
14. Discuss with management any second opinions sought from an
accounting firm other than the Company's independent accountants,
including the substance and reasons for seeking any such opinion.
A-2
Financial Reporting Processes
-----------------------------
15. In consultation with management, the independent auditors and the
internal auditors, review the integrity of the Company's financial
reporting processes and controls, both internal and external.
16. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied
in its financial reporting.
17. Consider and approve, if appropriate, major changes to the
Company's auditing and accounting principles and practices as
suggested by the independent auditors, management, or the internal
auditing department.
Process Improvements
--------------------
18. Discuss significant financial risk exposures and the steps
management has taken to monitor, control, and report such
exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together
with management's responses.
19. Review significant reports prepared by the internal audit
department together with management's response and follow-up to
these reports.
20. Review at least annually the exceptions noted in the reports to
the Audit Committee by the internal auditors and the independent
accountants, and the progress made in responding to the
exceptions.
21. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent auditors and the
internal auditors regarding any significant judgments made in
management's preparation of the financial statements and the view
of each as to appropriateness of such judgments.
22. Establish procedures that allow employees of the Company or any of
its subsidiaries to submit confidential and anonymous concerns
regarding questionable accounting or auditing matters.
23. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters.
24. Following completion of the annual audit, review separately, as
needed, with each of management, the independent auditors and the
internal auditing department any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information.
25. Review (and in the case of the independent auditors, settle) any
disagreement among management and the independent auditors or the
internal auditing department in connection with the preparation of
the financial statements.
26. Review with the independent auditors, the internal auditing
department and management the adequacy and effectiveness of the
accounting and financial controls of the Company and elicit any
recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed controls
or procedures are desirable.
27. Review with the independent auditors, the internal auditing
department and management the extent to which changes or
improvements in financial or accounting practices, as approved by
the Audit Committee, have been implemented.
A-3
Compliance
----------
28. Review findings from completed internal audits and progress
reports on the proposed internal audit plan, together with
explanations for any deviations from the original plan.
29. Review the internal audit function of the Company, including the
budget, plan, changes in plan, activities, independence,
competence, staffing adequacy, authority and organization of the
internal auditing department, the reporting relationships among
the internal audit department, financial management and the Audit
Committee, the internal audit reporting obligations, the proposed
internal audit plans for the coming year, and the coordination of
such plans with the independent accountants.
30. Review the appointment, performance and replacement of the senior
internal audit executive.
31. Review the Company's policies and procedures for regular review of
the expense accounts of senior management.
32. Obtain reports from management, the Company's senior internal
auditing executive and the independent accountants as to whether
the Company and its subsidiaries are in conformity with
applicable legal requirements.
33. Review reports and disclosures of insider and affiliated party
transactions.
34. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and
regulations.
35. Discuss with management and the independent accountants (and legal
counsel, if necessary) any correspondence with regulators or
governmental agencies and any employee complaints or published
reports which raise material issues regarding the Company's
financial statements or accounting policies.
36. Review with legal counsel legal compliance matters including
corporate securities trading policies.
37. Review with legal counsel legal or regulatory matters that may
have a material impact on the Company's financial statements or
its compliance and reporting policies.
38. Review, with management and legal counsel, the Company's system
for assessing whether the financial statements, reports and other
financial information required to be disseminated to the public
and filed with governmental organizations satisfy the requirements
of the Securities and Exchange Commission and the National
Association of Securities Dealers.
Reporting
---------
39. Prepare an audit committee report for inclusion in the Company's
annual proxy statement, consulting with the Company's legal
counsel, if necessary.
Miscellaneous
-------------
40. Determine the appropriate funding for payment of compensation to
(i) the independent auditors and (ii) any advisers employed by the
Committee.
41. At its discretion, request that management, the independent
accountants or the internal auditors undertake special projects or
investigations which the Audit Committee deems necessary to
fulfill its responsibilities.
A-4
42. Perform any other activities consistent with this Charter, the
Company's Bylaws, and governing law, as the Committee or the Board
deems necessary or appropriate.
43. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the foregoing activities.
V. Limitations of Audit Committee's Roles
While the Committee has the responsibilities and powers set forth in this
Audit Committee Charter, it is not the duty of the Committee to prepare
financial statements, plan or conduct audits or to determine that the
Company's financial statements and disclosures are complete and accurate and
are in accordance with generally accepted accounting principles and applicable
rules and regulations. These are the responsibilities of management and the
independent auditors.
* * * * *
A-5
REVOCABLE PROXY
SECURITY FEDERAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
July 17, 2003
The undersigned hereby appoints the official Proxy Committee of the Board
of Directors of Security Federal Corporation ("Company") with full powers of
substitution to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock which the undersigned is entitled to vote at the Annual
Meeting of Shareholders ("Meeting"), to be held at the Stevenson-McClelland
Parish House Facilities at St. Thaddeus Episcopal Church, 125 Pendleton
Street, Southwest, Aiken, South Carolina, on July 17, 2003, at 2:00 p.m.,
Eastern time, and at any and all adjournments or postponements thereof, as
follows:
VOTE
FOR WITHHELD
1. The election as directors of the nominees listed
below (except as marked to the contrary below). [ ] [ ]
Timothy W. Simmons
T. Clifton Weeks
Thomas C. Clark
INSTRUCTION: To withhold your vote for any
individual nominee, write that nominee's name
on the line below.
----------------------------------------------
The Board of Directors recommends a vote "FOR" the election of the nominees
listed above.
- -----------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ABOVE. IF
ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- -----------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment or postponement thereof and after notification to the
Secretary of the Company at the Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of Notice of Annual Meeting of Shareholders, a proxy
statement for the Annual Meeting of Shareholders and an Annual Report to
Shareholders.
Dated: , 2003
- --------------------------------- --------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- --------------------------------- --------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on the mailing label. When signing
as attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, only one signature is required, but
each holder should sign, if possible.
- -----------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- -----------------------------------------------------------------------------