SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
FIRST KEYSTONE FINANCIAL, INC.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[FIRST KEYSTONE LOGO]
December 27, 2005
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 25, 2006 at 2:00 p.m., Eastern Time. The matters to be considered by
stockholders at the Annual Meeting are described in the accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend
the meeting in person. We urge you to mark, sign and date your proxy card
today and return it in the envelope provided, even if you plan to attend the
Annual Meeting. This will not prevent you from voting in person, but will
ensure that your vote is counted if you are for any reason unable to attend.
Your continued support of and interest in First Keystone Financial, Inc.
are sincerely appreciated.
Sincerely,
/s/ Donald S. Guthrie
Donald S. Guthrie
Chairman
FIRST KEYSTONE FINANCIAL, INC.
22 West State Street
Media, Pennsylvania 19063
(610) 565-6210
______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on January 25, 2006
______________
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 25, 2006 at 2:00 p.m., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect two (2) directors for four-year terms or until their
successors are elected and qualified;
(2) To ratify the appointment by the Audit Committee of the Board of
Directors of Deloitte & Touche LLP as the Company's independent
registered public accounting firm for the fiscal year ending
September 30, 2006; and
(3) To transact such other business as properly may come before the
meeting or any adjournment thereof. As of the date hereof,
management is not aware of any other such business.
The Board of Directors has fixed December 5, 2005 as the voting record
date for the determination of stockholders entitled to notice of and to vote
at the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carol Walsh
Carol Walsh
Corporate Secretary
Media, Pennsylvania
December 27, 2005
______________________________________________________________________________
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN
TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY
VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF
YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU
WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE
IN PERSON AT THE ANNUAL MEETING.
______________________________________________________________________________
FIRST KEYSTONE FINANCIAL INC.
_____________________
PROXY STATEMENT
_____________________
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on January 25, 2006
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 25, 2006 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 27, 2005.
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 5, 2005 (the "Voting Record Date") are entitled to
vote at the Annual Meeting. On the Voting Record Date, there were 2,023,874
shares of Common Stock issued and outstanding and no other class of equity
securities outstanding. Each issued and outstanding share of Common Stock
is entitled to one vote on each matter to be voted on at the meeting, in
person or by proxy.
How do I submit my proxy?
After you have carefully read this proxy statement, indicate on your
proxy form how you want your shares to be voted. Then sign, date and mail
your proxy form in the enclosed prepaid return envelope as soon as possible.
This will enable your shares to be represented and voted at the Annual Meeting.
If my shares are held in street name by my broker, could my broker
automatically vote my shares for me?
Yes. Your broker may vote in his or her discretion on the election of
directors and ratification of the auditors if you do not furnish instructions.
Can I attend the meeting and vote my shares in person?
Yes. All stockholders are invited to attend the Annual Meeting.
Stockholders of record can vote in person at the Annual Meeting. If your
shares are held in street name, then you are not the stockholder of record and
you must ask your broker or other nominee how you can vote at the Annual
Meeting.
Can I change my vote after I return my proxy card?
Yes. If you have not voted through your broker or other nominee, there
are three ways you can change your vote or revoke your proxy after you have
sent in your proxy form.
1
* 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.
* Second, you may complete and submit a new proxy form. Any earlier
proxies will be revoked automatically.
* Third, you may attend the Annual Meeting and vote in person. Any
earlier proxy will be revoked. However, attending the Annual Meeting
without voting in person will not revoke your proxy.
If you have instructed a broker or other nominee to vote your shares, you
must follow directions you receive from your broker or other nominee to change
your vote.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock outstanding on the record date will
constitute a quorum. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of votes considered
to be present at the meeting.
What are the Board of Directors' recommendations?
The recommendations of the Board of Directors are set forth under the
description of each proposal in this proxy statement. In summary, the Board of
Directors recommends that you vote FOR the nominees for director described
herein and FOR ratification of the appointment of Deloitte & Touche LLP as the
Company's independent registered public accounting firm for fiscal 2006.
The proxy solicited hereby, if properly signed and returned to us and not
revoked prior to its use, will be voted in accordance with your instructions
contained in the proxy. If no contrary instructions are given, each proxy
signed and received will be voted in the manner recommended by the Board of
Directors and, upon the transaction of such other business as may properly
come before the meeting, in accordance with the best judgment of the persons
appointed as proxies. Proxies solicited hereby may be exercised only at the
annual meeting and any adjournment of the annual meeting and will not be used
for any other meeting.
What vote is required to approve each item?
Directors are elected by a plurality of the votes cast with a quorum
present. The two persons who receive the greatest number of votes of the
holders of Common Stock represented in person or by proxy at the Annual
Meeting will be elected directors. The affirmative vote of the holders of a
majority of the total votes present in person or by proxy is required for
approval of the proposal to ratify the appointment of the independent
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 auditors. Under
rules of the New York Stock Exchange, the proposals to elect directors and
ratify the appointment of the independent auditors are considered
"discretionary" items upon which brokerage firms may vote in their discretion
on behalf of their clients if such clients have not furnished voting
instructions and for which there will not be "broker non-votes."
2
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
Election of Directors
The Restated Articles of Incorporation of the Company provide that the
Board of Directors of the Company shall be divided into four classes that are
as equal in number as possible, and that members of each class of directors
are to be elected for a term of four years. One class is to be elected
annually. Stockholders of the Company are not permitted to cumulate their
votes for the election of directors. A majority of the members of the Company's
Board of Directors are independent based on an assessment of each member's
qualifications by the Board, taking into consideration the Nasdaq National
Market's requirements for independence. The Board of Directors has determined
that Messrs. Calderoni, Hendrixson, Naessens, O'Donnell and Soss do not have
any material relationships with the Company that would impair their
independence.
The Nominating Committee has recommended the re-election of Messrs.
Calderoni and O'Donnell 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.
Unless otherwise directed, each proxy executed and returnedby a
stockholder will be voted for the election of the nominees for director
listed below. If the person or persons named as nominee should be unable or
unwilling to stand for election at the time of the Annual Meeting, then the
proxies will nominate and vote for one or more replacement nominees recommended
by the Board of Directors. At this time, the Board of Directors knows
of no reason why the nominees listed below may not be able to serve as
directors if elected.
The following tables present information concerning the nominees for
director of the Company and each director of the Company whose term continues,
including such person's tenure as a director of the Bank (if applicable).
Ages are reflected as of September 30, 2005.
The Board of Directors recommends that you vote FOR the election of the above
nominees for director.
Members of the Board of Directors Continuing in Office
Nominees for Director for Four-Year Terms Expiring in 2010
Principal Occupation During Director
Name Age the Past Five Years Since
_________________________ ______ ______________________________ ________
Edward Calderoni 83 Director; Associate-broker of 1982
Century 21-Alliance, a real
estate firm located in Aston
and Media, Pennsylvania.
William J. O'Donnell, CPA 38 Director; Corporate Solutions 2002
Manager/IT Group with Wawa,
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.
3
Directors Whose Terms Expire in 2007
Principal Occupation During Director
Name Age the Past Five Years Since
_________________________ ______ ______________________________ ________
Donald S. Guthrie 70 Chairman of the Board; served 1994
as President of the Company
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 87 Director; former Chairman of 1947
the Board of the Bank from
1979 until 1993; member of the
law firm of Jones, Strohm &
Guthrie, P.C., Media,
Pennsylvania.
Jerry A. Naessens 69 Director; retired former Chief 2004
Financial Officer of Thistle
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.
Directors Whose Terms Expire in 2008
Principal Occupation During Director
Name Age the Past Five Years Since
_________________________ ______ ______________________________ ________
Bruce C. Hendrixson 61 Director, Owner of Garnet Ford 2003
and Garnet Volkswagen, Chester
County, Pennsylvania.
Thomas M. Kelly 49 Director; President and Chief 1997
Executive Officer of the
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.
4
Directors Whose Terms Expire in 2009
Principal Occupation During Director
Name Age the Past Five Years Since
_________________________ ______ ______________________________ ________
Donald G. Hosier, Jr. 50 Director; President of First 2001
Keystone Insurance Services,
LLC, a subsidiary of the Bank,
and a principal with
Montgomery Insurance Services,
Inc., Media, Pennsylvania, an
insurance brokerage firm.
Marshall J. Soss 59 Director; President and Chief 2001
Executive Officer of KarMar
Realty Group, Inc., Chadds
Ford, Pennsylvania, a
commercial and investment real
estate service company.
Executive Officers Who Are Not Directors
Set forth below is information with respect to the principal occupations
during at least the last five years for the six executive officers of the
Company and/or the Bank who do not serve as directors. There are no
arrangements or understandings between a director of the Company and any other
person pursuant to which such person was elected an executive officer of the
Company.
Rose M. DiMarco. Age 43. 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 39. 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 44. 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 68. 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 47. 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 57. Ms. Walsh has served as 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, 2005,
the Board of Directors of the Company met seven 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 2005. The Board of Directors
of the Company has established the following committees, among others:
5
Audit Committee. The Audit Committee consists of Messrs. Calderoni,
Hendrixson, Naessens and O'Donnell. The Audit Committee reviews the records
and affairs of the Company, engages the Company's external auditors, meets with
the Company's outsourced internal auditor, and reviews their reports. All of
the members of the Audit Committee are independent as such term is currently
defined in the Nasdaq Stock Market's listing standards ("Nasdaq Independence
Rules") and the regulations of the Securities and Exchange Commission. The
Audit Committee meets on a quarterly and on an as needed basis and met five
times in fiscal 2005. On September 29, 2004, the Board of Directors of
the Company adopted an amended and restated Audit Committee Charter, a 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 Securities and
Exchange Commission for qualification as an audit committee financial expert.
An audit committee financial expert is defined as a person who has the
following attributes: (i) an understanding of generally accepted accounting
principles and financial statements; (ii) the ability to assess the general
application of such principles in connection with the accounting for estimates,
accruals and reserves; (iii) experience preparing, auditing, analyzing or
evaluating financial statements that present a breadth and level of complexity
or accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised by the
registrant's financial statements, or experience actively supervising one or
more persons engaged in such activities; (iv) an understanding of internal
controls and procedures for financial reporting; and (v) an understanding of
audit committee functions.
The identification of a person as an audit committee financial expert does
not impose on such person any duties, obligations or liability that are greater
than those that are imposed on such person as a member of the Audit Committee
and the Board of Directors in the absence of such identification. Moreover,
the identification of a person as an audit committee financial expert for
purposes of the regulations of the Securities and Exchange Commission does not
affect the duties, obligations or liability of any other member of the Audit
Committee or the Board of Directors. Finally, a person who is determined to
be an audit committee financial expert will not be deemed an "expert" for
purposes of Section 11 of the Securities Act of 1933.
Nominating Committee. The Nominating Committee consists of Messrs.
Hendrixson, Soss and Naessens, who is Chairman of the Committee. The
Nominating Committee, which is responsible for reviewing and nominating
candidates to the Board, met once during fiscal 2005. 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.
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
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 Securities and
Exchange Commission), 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.
6
In addition to the committees of the Company described above, the Bank
also has established other committees which include members of the Board of
Directors of the Bank as well as senior management and which meet as required.
These committees include, among others, the Executive Committee, Compensation
Committee, Audit Committee, Asset/Liability Committee, Loan Committee,
Community Investment Committee and Asset Quality Review Committee.
Compensation Committee. The Compensation Committee of the Bank consists
of Messrs. Calderoni, 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 2005 and its report is included below under "Executive
Compensation."
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
2005, all of our directors attended our Annual Meeting of Stockholders held in
January 2005.
Report of the Audit Committee of the Company
The Audit Committee of the Company is responsible for providing
independent, objective oversight of the Company's accounting function and
internal controls. Management is responsible for the preparation,
presentation and integrity of the Company's financial statements, the Company's
accounting and financial reporting principles and the Company's internal
controls and financial reporting procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The Company's
independent auditors are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with generally
accepted auditing standards and issuing an opinion as to their conformity
with generally accepted accounting principles.
The Audit Committee is composed of directors all of whom are independent
as defined by the Nasdaq Independence Rules. The Audit Committee is governed
by the Audit Committee Charter which specifies, among other things, the scope
of the Committee's responsibilities and how those responsibilities are to be
performed. The responsibilities of the Audit Committee include being the
primary liaison with the external independent auditors and meeting and
reviewing reports prepared by the Company's outsourced internal auditor.
The Audit Committee has reviewed and discussed the audited financial
statements with management. In addition, in compliance with applicable
provisions of the Audit Committee Charter, the Audit Committee has considered
whether the provision of any non-audit services by the independent auditors
is compatible with maintaining the auditor's independence and has discussed
with the Company's independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 "Communication with Audit
Committees," as may be modified or supplemented. The Audit Committee has
received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1, as may
be modified or supplemented, and has discussed with the independent
accountant, the independent accountant's independence. Based on the review
and discussions referred to above in this report, the Audit Committee
recommended to the Board of Directors that the audited financial statements
be included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2005 for filing with the Commission. The Audit Committee
also has recommended the reappointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ended September 30, 2006.
Audit Committee
Edward Calderoni Bruce C. Hendrixson
William J. O'Donnell, CPA Jerry A. Naessens
7
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock as of the Voting Record Date, and certain other information with respect
to (i) the only persons or entities, including any "group" as that term is
used in Section 13(d)(3) of the Exchange Act, who or which were known to the
Company to be the beneficial owner of more than 5% of the issued and
outstanding shares of Common Stock, (ii) each director and executive officer
of the Company, and (iii) all directors and executive officers of the Company
as a group.
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group December 5, 2005(1) Common Stock
________________________________________ _____________________ ______________
First Keystone Financial, Inc. 387,182 19.1%
Employee Stock Ownership Plan Trust(2)
22 West State Street
Media, Pennsylvania 19063
Dimensional Fund Advisors Inc. 123,200(3) 6.1
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Jeffrey L. Gendell 170,800(4) 8.4
Tontine Financial Partners, L.P.
55 Railroad Avenue, Third Floor
Greenwich, Connecticut 06830
Lawrence Garshofsky & Company, LLC 132,350(5) 6.5
9665 Wilshire Boulevard
Suite 200
Beverly Hills, California 90212
Directors:
Edward Calderoni 34,795(6)(7) 1.7(12)
Donald S. Guthrie 99,427 4.9
Bruce C. Hendrixson 554 *
Donald G. Hosier, Jr. 6,162(8) *(12)
Edmund Jones 32,280(9) 1.6
Thomas M. Kelly 57,479(6) 2.8(12)
Jerry A. Naessens 7,500 *
William J. O'Donnell 520(10) *
Marshall J. Soss 4,150(6) *(12)
Other Named Executive Officers:
Rose M. DiMarco 16,868(6) *(12)
Robert R. Dwyer 2,138(6) *(12)
Elizabeth M. Mulcahy 66,270(6)(11) 3.3(12)
Robin G. Otto 8,013(6) *(12)
Directors of the Bank who do not serve
as directors of the Company
(2 persons) 64,586 3.2(12)
Directors and executive officers of the
Company and the Bank as a group
(17 persons) 448,069(6)(12) 21.6(12)
____________________
* Represents less than 1% of the outstanding shares of Common Stock.
(Footnotes on following page)
8
___________________
(1) Based upon filings made pursuant to the Exchange Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the Exchange Act, shares of Common Stock are deemed to be
beneficially owned by a person if he or she directly or indirectly has
or shares (i) voting power, which includes the power to vote or to
direct the voting of the shares, or (ii) investment power, which includes
the power to dispose or to direct the disposition of the shares. Unless
otherwise indicated, the named beneficial owner has sole voting and
dispositive power with respect to the shares.
(2) The First Keystone Financial, Inc. Employee Stock Ownership Plan Trust
(the "Trust") was established pursuant to the First Keystone Financial,
Inc. Employee Stock Ownership Plan (the "ESOP") by an agreement between
the Company and Messrs. Calderoni, 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, 262,983 shares held in the Trust had been allocated
to the accounts of participating employees including 51,588 shares
beneficially owned by six executive officers.
(3) Information obtained from a Schedule 13G/A, dated February 9, 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, filed September 2, 2005, with
the SEC with respect to shares of Common Stock beneficially owned by
Lawrence Garshofsky & Company, LLC ("Garshofsky"). The Schedule 13D/A
states that Garshofsky has sole voting and dispositive power over 10,000
shares and shared voting and dispositive power with respect to the
remaining shares beneficially owned. Subsequent to the record date,
Garshofsky filed on December 16, 2005 an amendment to the Schedule 13D
reflecting an increase in the shares beneficially owned thereby to
160,850.
(6) 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 5, 2005, 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
_____________ ________ _____________________ ____________
Edward Calderoni -- -- 3,150 --
Donald G. Hosier, Jr. -- -- 2,150 --
Thomas M. Kelly 9,952 17,617 11,750 --
Rose M. DiMarco 3,663 7,224 3,800 381
Robert R. Dwyer 45 -- 82 --
Elizabeth M. Mulcahy 11,414 11,407 11,750 --
Robin G. Otto 3,909 1,423 1,400 881
Marshall J. Soss -- -- 716 --
Directors and executive officers of the
Company and the Bank as a group 46,262 51,588 47,018 2,025
(7) Includes 23,478 shares held jointly with Mr. Calderoni's spouse.
(Footnotes continued on following page)
9
___________________
(8) Includes 2,460 shares held by the Montgomery Insurance Services, Inc.
Employee Profit Sharing Plan of which Mr. Hosier is a trustee.
(9) Includes 5,000 shares owned by Mr. Jones' spouse.
(10) The 500 shares are held by Mr. O'Donnell's spouse.
(11) Includes 2,182 shares held by Ms. Mulcahy's spouse.
(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.
10
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of certain information
concerning the compensation paid by the Bank for services rendered in all
capacities during the three years ended September 30, 2005, 2004 and 2003 to
the two persons who served as Chief Executive Officer of the Company and the
Bank during fiscal 2005 and the three other officers of the Bank whose total
salary and bonus exceeded $100,000 during fiscal 2005. 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.
Long Term
Compensation
Annual Compensation Awards
_____________________________________ __________________________
Name and Fiscal Other Annual Stock Number of All Other
Principal Position Year Salary Bonus Compensation(1) Grants(2) Options(3) Compensation(4)
________________________ __________ ________ _________ _______________ ___________ _____________ _________________
Donald S. Guthrie 2005 $170,976 $ -- $21,760 $ -- -- $203,488
Chairman of the Board(5) 2004 282,885 30,000 24,273 -- -- 40,932
2003 268,000 30,000 23,378 -- -- 47,237
Thomas M. Kelly(5) 2005 $212,130 $ -- $35,185 $ -- -- $ 35,270
President and Chief 2004 203,450 25,000 35,584 -- -- 38,179
Executive Officer 2003 197,000 20,000 32,683 -- -- 27,722
Elizabeth M. Mulcahy 2005 $108,459 $ -- $ -- $ -- -- $ 22,049
Senior Vice President/ 2004 109,492 6,000 -- -- -- 23,128
Human Resources 2003 104,000 6,000 -- -- -- 21,556
Rose M. DiMarco 2005 $105,658 $ -- $ -- $ 7,525 -- $ 20,833
Senior Vice President/ 2004 95,019 10,249 -- -- -- 17,861
Chief Financial Officer 2003 80,000 6,000 -- -- -- --
Robert R. Dwyer(6) 2005 $117,954 $ -- $ -- $ -- -- $ 412
Senior Vice President/ 2004 48,442 5,000 -- -- 408 --
Director of Lending
Robin G. Otto 2005 $107,939 $ -- $ -- $18,469 -- $ 20,756
Senior Vice President/ 2004 103,969 8,000 -- -- -- 1,331
Retail Delivery 2003 80,646 7,000 -- -- 3,000 --
____________________
(1) Includes health and long-term care costs of $15,785, $15,752 and $15,586
for Mr. Guthrie in fiscal years 2005, 2004 and 2003, respectively.
Includes health care costs of $15,305, $13,359 and $11,012 for Mr. Kelly
in fiscal years 2005, 2004 and 2003, respectively. Does not include
certain amounts attributable to miscellaneous personal benefits received by
the named executive officers other than Messrs. Guthrie and Kelly which in
the opinion of management of the Company, the 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, 2005,
Mesdames DiMarco and Otto had 381 shares and 881 shares, respectively, of
unearned restricted stock, which had fair market values of $8,382 and
$19,382, 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)
11
___________________
(4) In fiscal 2005, represents $35,503, $35,270, $20,612, $19,324 and $19,277
contributed by the Bank to the ESOP accounts of Messrs. Guthrie and Kelly
and Mesdames Mulcahy, DiMarco and Otto, also reflects in fiscal 2005,
$2,466, $0, $1,437, $412, $1,509 and $1,479 contributed by the Bank to the
401(k) Plan accounts of Messrs. Guthrie, Kelly and Dwyer and Mesdames
Mulcahy, DiMarco and Otto, respectively. Also includes in fiscal 2005
payment of $165,519 to Mr. Guthrie in satisfaction of his accrued but
unused vacation leave in connection with entering into a Transition,
Consulting, Noncompetition and Retirement Agreement. See "-Consulting,
Employment and Severance Agreements."
(5) During fiscal 2005, Mr. Guthrie served as Chief Executive Officer
through April 30, 2005 at which time Mr. Kelly became the Chief
Executive Officer. Effective May 1, 2005, Mr. Guthrie was appointed
Chairman of the Board of the Company and the Bank.
(6) 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, 2005 by the Chief Executive Officer and the other
executive officers named in the Summary Compensation Table. No options were
granted thereto during the fiscal year ended September 30, 2005.
Number of Options at Value of Options at
Shares September 30, 2005 September 30, 2005
Acquired on Value ________________________________ _____________________________________
Name Exercise Realized Exercisable(1) Unexercisable Exercisable(1)(2) Unexerciseable
_____________________ _____________ __________ _______________ _______________ ___________________ ________________
Donald S. Guthrie 31,750 $380,428 -- -- $ -- $ --
Thomas M. Kelly 14,000 210,700 11,750 -- 116,031 --
Elizabeth M. Mulcahy 15,000 225,750 11,750 -- 116,031 --
Rose M. DiMarco 1,000 3,570 3,800 1,200 30,905 7,020
Robert R. Dwyer -- -- 82 2,139 9 4,115
Robin G. Otto 400 668 800 1,800 4,680 10,530
__________________
(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 $22.00 at September 30, 2005. The
exercise prices for the options reflected in the table range from $12.125
to $21.89.
Directors' Compensation
Board Fees. Directors of the Company received no compensation during
fiscal 2005 except for Messrs. Hendrixson, Hosier and Soss who are paid
$2,000 per quarter as directors of the Company. During fiscal 2005, members
ofthe 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. During fiscal 2005,
Mr. Purdy, as the Chairman of the Board of the Bank until May 1, 2005,
received a fee of approximately $2,700. In addition, as described below under
"Consulting, Employment and Severance Agreements," Mr. Guthrie is being paid
$15,000 per year for service as Chairman of the Board of the Chairman of the
Company and the Bank, which service commenced on May 1, 2005. During fiscal
2005, members of the Board serving on the Bank's Audit Committee, Executive
Committee, Community Investment Committee, Compensation Committee and Loan
Committee received $250 per meeting attended, while members of the Board
serving on the Company's Audit Committee received $350 per meeting attended.
12
Other. In February 2004, the Bank entered into a one-year consulting
agreement with Mr. Jones. The term of the agreement may be extended for a
one year term beginning on March 1st of each year thereafter. Under the terms
of the agreement, Mr. Jones receives $24,000 per year. The consulting
agreement was extended in February 2005 for a one year term expiring March 1,
2006. In addition, as described below under "- Consulting, Employment and
Severance Agreements," the Company, the Bank and Mr. Guthrie entered into a
Transition, Consulting, Noncompetition and Retirement Agreement in March 2005.
Consulting, Employment and Severance Agreements
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 "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 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 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 Agreement or by Mr. Guthrie for "good
reason" as defined in the Agreement. In the event Mr. Guthrie's consulting
services are terminated for cause or Mr. Guthrie terminates his services
without good reason, the 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 $115,600
with respect to the Retirement Benefits during fiscal 2005. 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 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.
13
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
and to elect him as a director of the Bank during the Consulting Period.
In addition, prior to the Effective Date, the Company and/or the Bank
paid in a lump sum to Mr. Guthrie $165,519 in satisfaction of his accrued
and/or carried over but unused vacation leave as well as in recognition of
the years of service Mr. Guthrie had provided to the Company and the Bank.
In connection with entering into the Agreement, 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.
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 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.
14
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.
Benefits
Deferred Compensation Arrangements. 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 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 2005.
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. Mr. Guthrie was a participant in the
SERP until May 2005 at which time he terminated his participation in the SERP
in connection with the entering into the Transition, Consulting, Noncompetition
and Retirement Agreement. See "-Consulting, Employment and Severance
Agreements." 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 2005,
the Compensation Committee maintained the 5.0% crediting rating. 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, 2005, the Bank expensed approximately $146,900 with regard to
the SERP for the benefit of the participants (not including Mr. Guthrie.
Report of the Compensation Committee
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information regarding the
compensation and benefits provided to its Chief Executive Officer and certain
other executive officers of the Bank (since such persons do not receive
15
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 2005 included
general management oversight of the Bank, the quality of communication with
the Board of Directors, and the productivity of employees. Finally, the
Compensation Committee considers the Bank's standing with customers and
the community, as evidenced by the level of customer/community complaints and
compliments. While each of the quantitative and non-quantitative factors
described above was considered by the Compensation Committee, such factors
were not assigned a specific weight in evaluating the performance of the
Chief Executive Officer. Rather, all factors were considered, and based upon
the effectiveness of such officer in addressing each of the factors, and the
range of compensation paid to officers of peer institutions, the Board of
Directors approved the Compensation Committee's recommendation to promote Mr.
Kelly to Chief Executive Officer of the Bank and the Company effective May 1,
2005 and in connection therewith to increase the base salary of the Chief
Executive Officer to $220,000 for fiscal 2005. With respect to the other
executive officers, they were awarded modest increases in their base salaries
for fiscal 2005, ranging from 1.4% to 6.9%. In addition, no bonuses were
awarded to the Chief Executive Officer or the other executive officers for
fiscal 2005.
Compensation Committee of the Bank
Edward Calderoni Jerry A. Naessens William J. O'Donnell
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,
the Company believes that during the year ended September 30, 2005 and with
respect thereto, all filing requirements applicable to its officers and
directors and more than 10% stockholders have been satisfied, with the
exception of one report covering one transaction by Mr. Jones which was filed
late.
16
Performance Graph
The following graph compares the cumulative total return on the Common
Stock since September 30, 1999 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 $11.02 per share on September 30, 2000.
[Performance Graph]
Index 9/30/00 9/30/01 9/30/02 9/30/03 9/30/04 9/30/05
______________________________________ _________ _________ _________ _________ _________ _________
First Keystone Financial, Inc. (FKFS) $100.00 $130.13 $153.81 $257.26 $222.69 $224.41
Russell 2000 Index (RTY) 100.00 77.66 69.48 93.54 109.89 128.09
Nasdaq Bank Index (BANK) 100.00 115.78 123.63 145.70 167.27 170.15
S&P Bank Index (BIX) 100.00 100.56 96.34 107.55 125.71 118.91
17
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Until November 1996, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 required that all loans or extensions of credit to
executive officers and directors be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and not involve more than the
normal risk of repayment or present other unfavorable features. In addition,
loans made to a director or executive officer in excess of the greater
of $25,000 or 5% of the Bank's capital and surplus (up to a maximum of
$500,000) must be approved in advance by a majority of the disinterested
members of the Board of Directors.
Except as hereinafter indicated, all loans made by the Bank to its
executive officers and directors are made in the ordinary course of business,
are made on substantially the same terms, including interest rates and
collateral, as those 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, 2005.
Largest Amount of
Indebtedness between
Year Loan October 1, 2004 and Balance as of
Name Made September 30, 2005 September 30, 2005 Interest Rate
_______________________ ___________ ________________________ ____________________ _______________
Thomas M. Kelly 2003 $316,576 $311,401 4.875%
Donald G. Hosier Jr. 2004 328,138 311,030 3.750
Robert R. Hosier 2003 213,917 202,475 4.125
William J. O'Donnell 2002 119,002 110,755 5.000
Robin Otto 2003 156,846 148,057 4.375
Carol Walsh 2003 105,144 99,620 4.375
Bruce C. Hendrixson 2004 333,700 328,797 5.500
Mr. Edmund Jones, a director of the Company and the Bank, is a member of
the law firm, Jones, Strohm & Guthrie, P.C., which serves as general counsel
to the Bank.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
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, 2006,
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 accountants 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.
The Audit Committee considered, in determining whether to appoint Deloitte
& Touche LLP as the Company's auditors, whether the provision of services,
other than auditing services, by Deloitte &
18
Touche LLP is compatible with maintaining the auditor's independence. In
addition to performing auditing services, the Company's auditors performed
other audit- and tax-related services for the Company in fiscal 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 auditor's independence.
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 2005 and 2004, 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 2005 and fiscal 2004.
Year Ended September 30,
____________________________
2005 2004
_____________ ____________
Audit fees (1)................... $241,904 $219,870
Audit-related fees (2)........... 3,000 12,000
Tax fees (3)..................... 26,070 21,500
All other fees................... 4,580 --
_______ _______
Total............................ $275,554 $253,370
======= =======
______________
(1) Audit fees consist of fees incurred in connection with the audit of our
annual financial statements and the review of the interim financial
statements included in our quarterly reports filed with the SEC.
(2) Primarily consist of fees for consultation with regard to accounting
pronouncements for 2005 and 2004.
(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 auditors 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 auditors 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
auditors. 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 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, 2006.
19
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 2007, 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 29, 2006. 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 27, 2005.
No such proposals were received by such date. Proposals to be submitted for
consideration at the Company's next annual meeting of stockholders must be
received by November 26, 2006. 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. No such
notices were submitted to the Company's Secretary by November 27, 2005 for
consideration at this Annual Meeting.
Each written notice of a stockholder nomination shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director and as to the person nominated thereby (i) the
name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number
of shares of Company stock that are beneficially owned by such person on the
date of such stockholder notice, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies with
respect to nominees for election as directors, pursuant to the proxy rules
under the Securities Exchange Act of 1934, as amended (the "Exchange Act");
and (b) as to the stockholder giving the notice (i) the name and address, as
they appear on the Company's books, of such stockholder and any other
stockholders known by such stockholder to be supporting such nominees and
(ii) the class and number of shares of Company stock that are beneficially
owned by such stockholder on the date of such stockholder notice and, to the
extent known, by any other stockholders known by such stockholder to be
supporting such nominees on the date of such stockholder notice. The
presiding officer of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedures.
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
20
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, 2005 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 2005 required to be filed under the Exchange Act. Such written
requests should be directed to Carol Walsh, Corporate Secretary, First Keystone
Financial, Inc., 22 West State Street, Media, Pennsylvania 19063. The Form
10-K is not part of the proxy solicitation materials.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Company to vote the proxy with respect to the
approval of the minutes of the last meeting of stockholders, the election of
any person as a director if the nominee is unable to serve or for good cause
will not serve, matters incident to the conduct of the meeting, and upon such
other matters as may properly come before the Annual Meeting. As of the date
hereof, management is not aware of any business that may properly come before
the Annual Meeting other than the matters described above in this Proxy
Statement. However, if any other matters should properly come before the
meeting, it is intended that the proxies solicited hereby will be voted with
respect to those other matters in accordance with the judgment of the persons
voting the proxies.
The cost of the solicitation of proxies will be borne by the Company. The
Company has retained Regan & Associates, Inc., a professional proxy
solicitation firm, to assist in the solicitation of proxies. Such firm will
be paid a fee of $6,000. 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.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
21
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
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 25, 2006 AND AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of December 5, 2005,
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 25, 2006 at 2:00 p.m., EasternTime, 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.
I. ELECTION OF DIRECTORS
Nominees for four year term:
Edward Calderoni
William J. O'Donnell, CPA
With- For All
For hold Except
[ ] [ ] [ ]
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.
______________________________________________________________________________
2. PROPOSAL to ratify the appointment of For Against Abstain Deloitte & Touche
LLP as the Company's independent registered public accounting firm for the
fiscal year ending September 30, 2006.
For Against Abstain
[ ] [ ] [ ]
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
SHARES OF THE COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD OF
DIRECTORS'NOMINEES TO THE BOARD OF DIRECTORS, FOR PROPOSAL 2 AND OTHERWISE AT
THE DISCRETION OF THE PROXIES. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS
YOU VOTE FOR THE BOARD OF DIRECTORS' NOMINEES AND PROPOSAL 2.
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting
of Stockholders of the Company called for January 25, 2006, a Proxy Statement
for the Annual Meeting and the Company's 2005 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.
- -------------------------------------------------------------------
- ------Stockholders 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.
_______________________________________
_______________________________________
_______________________________________