SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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Security Financial Bancorp, Inc.
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[SECURITY FINANCIAL BANCORP, INC. LETTERHEAD]
November 18, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Security Financial Bancorp, Inc. The meeting will be held at Security
Financial's main office located at 9321 Wicker Avenue, St. John, Indiana on
Wednesday, December 18, 2002 at 9:00 a.m., Central time.
The notice of annual meeting and proxy statement appearing on the following
pages describe the formal business to be transacted at the meeting. During the
meeting, we will also report on the operations of the Company. Directors and
officers of the Company, as well as a representative of Crowe, Chizek and
Company LLP, the Company's independent auditors, will be present to respond to
appropriate questions of stockholders.
It is important that your shares are represented and voted at this meeting,
whether or not you attend the meeting in person and regardless of the number of
shares you own. To make sure your shares are represented, we urge you to
complete and mail the enclosed proxy card. If you attend the meeting, you may
vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ John P. Hyland
John P. Hyland
President and Chief Executive Officer
SECURITY FINANCIAL BANCORP, INC.
9321 WICKER AVENUE
ST. JOHN, INDIANA 46373
(219) 365-4344
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
On Wednesday, December 18, 2002, Security Financial Bancorp, Inc. will hold
its annual meeting of stockholders at Security Financial's main office located
at 9321 Wicker Avenue, St. John, Indiana at 9:00 a.m., Central time.
At the meeting, stockholders will consider and act on the following:
1. The election of four directors to serve for a term of three years;
2. The ratification of the appointment of Crowe, Chizek and Company LLP
as independent auditors for the Company for the fiscal year ending
June 30, 2003; and
3. Such other business that may properly come before the meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Only shareholders of record at the close of business on November 8, 2002
are entitled to receive notice of the meeting and to vote at the meeting and any
adjournment or postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and 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/ Philip T. Rueth
Philip T. Rueth
Corporate Secretary
St. John, Indiana
November 18, 2002
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
SECURITY FINANCIAL BANCORP, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Security Financial Bancorp, Inc. ("Security
Financial" or the "Company") to be used at the annual meeting of shareholders of
the Company. The annual meeting will be held at Security Financial's main office
located at 9321 Wicker Avenue, St. John, Indiana on Wednesday, December 18, 2002
at 9:00 a.m., Central time. This proxy statement and the enclosed proxy card are
being first mailed to shareholders on or about November 18, 2002.
VOTING AND PROXY PROCEDURE
WHO CAN VOTE AT THE MEETING
You are entitled to vote your Security Financial common stock only if the
records of the Company show that you held your shares as of the close of
business on November 8, 2002. As of the close of business on November 8, 2002, a
total of 1,864,191 shares of Security Financial common stock were outstanding.
Each share of common stock has one vote. The Company's Certificate of
Incorporation provides that record holders of the Company's common stock who
beneficially own, either directly or indirectly, in excess of 10% of the
Company's outstanding shares are not entitled to any vote in respect of the
shares held in excess of the 10% limit.
ATTENDING THE MEETING
If you are a beneficial owner of Security Financial 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 Security Financial 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.
VOTE REQUIRED
The annual meeting will be held if a majority of the outstanding shares of
common stock entitled to vote is represented at the meeting. If you return valid
proxy instructions or attend the meeting in person, your shares will be counted
for purposes of determining whether there is a quorum, even if you abstain from
voting. Broker non-votes also will be counted for purposes for determining the
existence of a quorum. A broker non-vote occurs when a broker, bank or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received voting instructions from the
beneficial owner.
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees, or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
must be elected by a plurality of the votes cast at the annual meeting. This
means that the nominees receiving the greatest number of votes will be elected.
Votes that are withheld and broker non-votes will have no effect on the outcome
of the election. In voting on the ratification of the appointment of Crowe,
Chizek and Company LLP as independent auditors, you may vote in favor of the
ratification, vote against the ratification or abstain from voting. The
ratification of Crowe, Chizek and Company LLP as independent auditors will be
decided by the affirmative vote of a majority of the votes
cast at the annual meeting. On this matter, abstentions and broker non-votes
will have no effect on the voting.
VOTING BY PROXY
The Board of Directors of Security Financial is sending you this proxy
statement for the purpose of requesting that you allow your shares of Security
Financial common stock to be represented at the annual meeting by the persons
named in the enclosed proxy card. All shares of Security Financial common stock
represented at the annual meeting by properly executed and dated proxies will be
voted according to the instructions indicated on the proxy card. If you sign,
date and return a proxy card without giving voting instructions, your shares
will be voted as recommended by the Company's Board of Directors. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR AND "FOR"
RATIFICATION OF CROWE, CHIZEK AND COMPANY LLP AS INDEPENDENT AUDITORS.
If any matters not described in this proxy statement are properly presented
at the annual meeting, the persons named in the proxy card will use their own
best judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the annual meeting in order to solicit additional proxies.
If the annual meeting is postponed or adjourned, your Security Financial common
stock may be voted by the persons named in the proxy card on the new annual
meeting date as well, unless you have revoked your proxy. The Company does not
know of any other matters to be presented at the annual meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Secretary of the
Company in writing before your Company common stock has been voted at the annual
meeting, deliver a later dated proxy, or attend the meeting and vote your shares
in person. Attendance at the annual meeting will not in itself constitute
revocation of your proxy.
If your Security Financial 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, bank or other nominee
may allow you to deliver your voting instructions via the telephone or the
Internet. Please see the instruction form provided by your broker, bank or other
nominee 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.
PARTICIPANTS IN THE SECURITY FEDERAL BANK & Trust ESOP and 401(k) Plan
If you participate in the Security Federal Bank & Trust ("Security
Federal") Employee Stock Ownership Plan (the "ESOP") or if you hold shares of
Security Financial common stock through Security Federal's 401(k) Profit Sharing
Plan, you will receive a vote instruction form for each plan that reflects all
shares you may vote under the plans. Under the terms of the ESOP, all shares
held by the ESOP are voted by the ESOP trustee, but each participant in the ESOP
may direct the trustee how to vote the shares of Company common stock allocated
to his or her account. Unallocated shares of common stock held by the ESOP and
allocated shares for which no timely voting instructions are received will be
voted by the ESOP trustee in the same proportion as shares for which the trustee
has received timely voting instructions. Under the terms of the 401(k) Plan, a
participant may direct the trustee of the Security Financial Bancorp, Inc. Stock
Fund how to vote shares credited to his or her account. The trustee will vote
all shares for which no directions are given or for which timely instructions
were not received in the
2
same proportion as shares for which the trustee received timely voting
instructions. The deadline for returning your voting instructions to each of the
plan's trustees is December 11, 2002.
STOCK OWNERSHIP
The following table sets forth certain information with respect to
beneficial ownership of the Company's common stock, as of November 8, 2002, for:
o each person known to the Company to beneficially own more than 5%
of its common stock;
o each of the Company's directors;
o each of the Company's executive officers named in the executive
compensation table; and
o all of the Company's directors and executive officers as a group.
A person may be considered to beneficially own any shares of stock over
which he or she has, directly or indirectly, sole or shared voting or investing
power. Unless otherwise indicated, each of the named individuals has sole voting
power and sole investment power with respect to the number of shares shown.
NUMBER OF NUMBER OF SHARES
SHARES THAT MAY BE
OWNED ACQUIRED WITHIN PERCENT OF
NAME (AND ADDRESS OF PERSONS (EXCLUDING 60 DAYS BY COMMON STOCK
OWNING MORE THAN 5%) OPTIONS) EXERCISING OPTIONS OUTSTANDING(1)
- ---------------------------------- ----------------- ------------------------ -------------------
DIRECTORS, EXECUTIVE OFFICERS AND
OTHER A FFILIATED PERSON S:
Vincent Cainkar 5,500(2) 1,163 *
Howard O. Cyrus, Sr. 3,500(3) 1,163 *
Sheila Donoghue 2,100(4) 1,163 *
Dr. Peter Ferrini 40,450(5) 1,163 2.2%
Patrick J. Hunt 2,500(6) 1,200 *
John P. Hyland 25,848(7) 9,693 1.9%
Jay D. Johnson 6,100(8) 1,163 *
Tula Kavadias 4,700(9) 1,163 *
Richard J. Lashley 167,900(10) 1,163 9.1%
20 East Jefferson Avenue
Suite 22
Naperville, Illinois 60540
Robert L. Lauer 6,968(11) 1,163 *
3
NUMBER OF NUMBER OF SHARES
SHARES THAT MAY BE
OWNED ACQUIRED WITHIN PERCENT OF
NAME (AND ADDRESS OF PERSONS (EXCLUDING 60 DAYS BY COMMON STOCK
OWNING MORE THAN 5%) OPTIONS) EXERCISING OPTIONS OUTSTANDING(1)
- ---------------------------------- ----------------- ------------------------ -------------------
John Wm. Palmer 168,000(10) 1,163 9.1%
20 East Jefferson Avenue
Suite 22
Naperville, Illinois 60540
Philip T. Rueth 13,500(12) 1,163 *
Security Federal Bank & Trust 152,797(13) 8.2%
Employee Stock Ownership Plan
9321 Wicker Avenue
St. John, Indiana 46373
All directors and executive 277,666(14) 32,013 16.3%
officers as a group (20 persons)
Non-Affiliated Persons:
Paul J. Duggan 186,000(15) 10.0%
53 West Jackson Boulevard
Suite 400
Chicago, Illinois 60604
David M.W. Harvey 115,000(16) 6.2%
P.O. Box 3178
Gardnerville, Nevada 89410
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* Less than 1% of shares outstanding.
(1) Based on 1,864,191 shares of Company common stock outstanding and entitled
to vote as of November 8, 2002.
(2) Includes 1,000 unvested shares awarded under the Company's 2001
Stock-Based Incentive Plan for Mr. Cainkar as to which he has voting power
but not investment power. Also Mr. Cainkar is deemed to be the beneficial
owner of 4,400 shares held by Burbank Partners.
(3) Includes 2,000 unvested shares awarded under the Company's 2001
Stock-Based Incentive Plan for Mr. Cyrus as to which he has voting power
but not investment power.
(4) Includes 1,0 00 unvested shares awarded under the Company's 2001 Stock-B
ased Incentive Plan for Ms. Donoghue as to which she has voting power but
not investment power.
(5) Includes 2,600 unvested shares awarded under the Company's 2001
Stock-Based Incentive Plan for Mr. Ferrini as to which he has voting power
but not investment power.
(6) Includes 2,000 unvested shares awarded under the Company's 2001
Stock-Based Incentive Plan for Mr. Hunt as to which he has voting power but
not investment power.
(7) Includes 15,507 unvested shares awarded under the Company's 2001
Stock-Based Incentive Plan for Mr. Hyland as to which he has voting power
but not investment power. Also includes 1,896 shares allocated to Mr.
Hyland under the ESOP, for which Mr. Hyland has voting power but not
investment power.
(8) Includes 1,000 unvested shares awarded under the Company's 2001 Stock-Based
Incentive Plan for Mr. Johnson as to which he has voting power but not
investment power. Also Mr. Johnson is deemed to be the beneficial owner of
5,000 shares held by Aqua Fund, L.P.
(9) Includes 2,000 unvested shares awarded under the Company's 2001 Stock-Based
Incentive Plan for Ms. Kavadias as to which she has voting power but not
investment power.
(10) Financial Edge Fund. L.P., Financial Edge - Strategic Fund, L.P., PL
Capital, LLC, John Wm. Palmer and Richard J. Lashley are deemed to be
beneficial owners of 166,900, 166,900, 166,900, 168,000 and 167,900 of
these shares, respectively. Based on information in a Schedule 13D,
Amendment No. 6, filed jointly on
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October 5, 2001 with the Securities and Exchange Commission. Includes
unvested shares awarded under the Company's 2001 Stock-Based Incentive Plan
for Messrs. Lashley and Palmer as to which the holder has voting power but
not investment power, as follows: 800 shares and 800 shares, respectively.
Also includes shares as to which Messrs. Palmer and Lashley share voting
and investment power held by Financial Edge Fund. L.P. and Financial Edge
- Strategic Fund, L.P. as follows: 156,900 shares and 10,000, shares,
respectively.
(11) Includes 1,600 unvested shares awarded under the Company's 2001 Stock-Based
Incentive Plan for Mr. Lauer as to which he has voting power but not
investment power. Also includes 1,400 shares owned by Mr. Lauer's
spouse's trust.
(12) Includes 2,000 unvested shares awarded under the Company's 2001
Stock-Based Incentive Plan for Mr. Rueth as to which he has voting power
but not investment power. Includes 5,000 shares owned by Mr. Rueth's
spouse's trust and 1,000 shares owned by Mr. Rueth's family trust.
(13) As of November 8,2002, 20,676 shares had been allocated under the ESOP to
participants' accounts. See "Voting and Proxy Procedures - Participants in
Security Federal Bank & Trust ESOP and 401(k) Plan" for a discussion of the
ESOP's voting procedures.
(14) Includes shares held by directors of Security Federal who are not also
directors of Security Financial. For purposes of avoiding double-counting,
excludes 166,900 shares beneficially owned by both Messrs. Palmer and
Lashley through Financial Edge Fund, L.P. and Financial Edge-Strategic
Fund, L.P.
(15) Paul J. Duggan, Jackson Boulevard Capital Management, Ltd., Jackson
Boulevard Equities, L.P., Jackson Boulevard Investments, L.P., Jackson
Offshore Fund, Ltd. and Jackson Boulevard Partners are deemed to be
beneficial owners of 186,000, 105,200, 58,500, 26,800, 19,900 and 80,300
of these shares, respectively. Based on information in a Schedule 13D,
Amendment No. 3, filed jointly on September 12, 2001 with the Securities
and Exchange Commission.
(16) Everest Partners Limited Partnership (d.b.a. Everest Partners, L.P.),
Everest Managers, L.L.C. and David M. W. Harvey are deemed to be
beneficial owners of 115,000, 115,000 and 115,000 of these shares,
respectively. Based on information in a Schedule 13D, Amendment No. 1,
filed jointly on November 27, 2000 with the Securities and Exchange
Commission.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eleven members. Ten
directors are independent and one is a member of management. The Board is
divided into three classes with three-year staggered terms, with approximately
one-third of the directors elected each year. The Board of Directors' nominees
for election this year, to serve for a three-year term, or until their
respective successors have been elected and qualified, are Howard O. Cyrus, Sr.,
Dr. Peter Ferrini, Richard J. Lashley and Robert L. Lauer, all of whom are
currently directors of Security Financial and Security Federal.
The Board of Directors intends that the proxies solicited by it will be
voted for the election of the nominees named above. If any nominee is unable to
serve, the persons named in the proxy card would vote your shares to approve the
election of any substitute proposed by the Board of Directors. Alternatively,
the Board of Directors may adopt a resolution to reduce the size of the Board.
At this time, the Board of Directors knows of no reason why any nominee might be
unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL OF THE
NOMINEES NOMINATED BY THE BOARD OF DIRECTORS NAMED IN THIS PROXY STATEMENT.
Information regarding the Board of Directors' nominees and the directors
continuing in office is provided below. Unless otherwise stated, each individual
has held his or her current occupation for the last five years. The age
indicated for each individual is as of June 30, 2002. The indicated period of
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service as a director includes the period of service as a director of Security
Federal, except for Messrs. Cainkar and Johnson and Ms. Donoghue, who have
served as directors of Security Federal since September 2002. Directors of
Security Federal are elected each year at Security Federal's annual meeting.
BOARD NOMINEES
HOWARD O. CYRUS, SR. is the owner of and real estate broker for Cyrus
Realtors, Inc., a corporation specializing in the sales, leasing, appraisals and
management of commercial/industrial properties. Age 64. Director since 1996.
DR. PETER FERRINI is a retired oral surgeon. Dr. Ferrini is the uncle of
Mr. Lauer and is the first cousin of Mr. Vellutini. Age 78. Director since 1977.
RICHARD J. LASHLEY is an investment manager, primarily as Managing Member
of PL Capital, LLC. Mr. Lashley is also a director of Franklin Bank, N.A.,
Southfield, Michigan and was formerly a director of Haven Bancorp, Inc.,
Westbury, New York. Mr. Lashley is a Certified Public Accountant. Age 43.
Director since 2000.
ROBERT L. LAUER is a Vice President of Investments and Assistant Branch
Manager for A.G. Edwards & Sons, Inc. a financial services and brokerage firm.
Mr. Lauer is the nephew of Dr. Ferrini. Age 47. Director since 1998.
DIRECTORS CONTINUING IN OFFICE
THE FOLLOWING DIRECTORS HAVE TERMS ENDING IN 2003:
JOHN P. HYLAND has served as President and Chief Executive Officer of
Security Financial and Security Federal since September 1999 and October 1998,
respectively. Prior to joining Security Federal, Mr. Hyland served as Director,
President and Chief Executive Officer of Southwest Financial Bank and Trust,
Orland Park, Illinois, and as Director and Vice President for Southwest
Financial Corporation, the holding company for Southwest Financial Bank and
Trust. Age 51. Director since 1999.
TULA KAVADIAS is an attorney admitted to the Bar of the State of Indiana.
Ms. Kavadias is the sole proprietor of the law firm of Tula Kavadias &
Associates. Age 45. Director since 1997.
JOHN WM. PALMER is an investment manager, primarily as Managing Member of
PL Capital, LLC. Mr. Palmer is also a director of Franklin Bank, N.A.,
Southfield, Michigan. Mr. Palmer is a Certified Public Accountant. Age 41.
Director since 2000.
PHILIP T. RUETH is a certified public accountant for Steiber, Rueth & Co.,
a certified public accounting firm. Mr. Rueth is also a registered
representative for Terra Securities Corporation, a broker dealer. Age 56.
Director since 1997.
6
THE FOLLOWING DIRECTORS HAVE TERMS ENDING IN 2004:
VINCENT CAINKAR is a licensed attorney and a licensed real estate broker.
He is in private legal practice and is an independent investor and founder of
several real estate entities that have developed Chicago area commercial and
residential projects. Age 53. Director since 2001.
SHEILA DONOGHUE has served as the President of Kerry Capital Corp., an
investment management company, since July 2000 and has worked as an independent
contractor for Marlin Capital corporation, the general partner of a hedge fund
specializing in the equities of companies in the financial services industry
since 1996. Ms. Donoghue is a chartered financial analyst. Age 39. Director
since 2001.
JAY D. JOHNSON is the President of Lakeshore Capital, Inc., an investment
advisor and has served as Managing Partner of Hyatt Johnson Capital, LLC since
June 2002. Age 42. Director since 2001.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company and Security Federal is conducted through
meetings and activities of their Boards of Directors and their committees.
During the year ended June 30, 2002, the Board of Directors of the Company held
16 meetings and the Board of Directors of Security Federal held 12 meetings. No
director, other than Tula Kavadias, attended fewer than 75% of the total
meetings of the Boards of Directors and committees on which he or she served.
The Audit Committee of the Company, consisting of Sheila Donoghue, Tula
Kavadias, Robert L. Lauer, John Wm. Palmer and Philip T. Rueth receives and
reviews all reports prepared by the Company's independent auditors. This
committee met 4 times during the year ended June 30, 2002.
The Compensation Committee of the Company, consisting of Vincent Cainkar,
Howard O. Cyrus, Sr., Richard J. Lashley, Robert L. Lauer and John Wm. Palmer,
and the Compensation Committee of the Bank, consisting of Mary Beth Bonaventura,
Tula Kavadias, Lawrence R. Parducci and Philip T. Rueth are responsible for all
matters regarding the Company's and the Bank's employee compensation and benefit
programs. Security Financial's committee met once and Security Federal's
committee met twice during the year ended June 30, 2002.
The Nominating Committee, consisting of Dr. Peter Ferrini, John P. Hyland,
Robert L. Lauer, Jay D. Johnson, Tula Kavadias and John Wm. Palmer, selects
annually the nominees for election as directors. This committee met once to
select nominees for election as directors at this annual meeting. The Company's
Bylaws provide for shareholder nominations of directors. See "Shareholder
Proposals and Nominations."
7
DIRECTORS' COMPENSATION
MEETING FEES. Security Federal pays a fee to each of its directors for
attendance at each board meeting and to each of its non-management directors for
each meeting of a committee of which they are members. The following table sets
forth the Security Federal meeting fees in effect for the fiscal year ended June
30, 2002:
FEES
----------
Regular Board Meetings:
Chairman. . . . . . . . . $2,000
Vice-Chairman . . . . . . $1,600
Director. . . . . . . . . $1,000
Committee Meetings . . . . . $250
Security Financial pays each of its directors an annual retainer of $2,500
for service on its Board of Directors.
DIRECTOR'S RETIREMENT PLAN. Security Federal maintains a retirement program
for incumbent nonemployee directors to provide a retirement income supplement
for directors. Current directors who attain the normal retirement age of 65 have
the option upon retirement to receive a benefit of approximately $1,000 for each
year of service payable either a) in a lump sum payment, or b) in a payment with
50% of such sum being paid upon retirement and the balance being paid in two
equal annual installments for the two years immediately following retirement. If
a director dies while still serving on the Board of Directors, the director's
estate will receive an amount equal to $1,000 for each year of service payable
in a lump sum.
INCENTIVE PLAN. During the year ended June 30, 2002 and pursuant to the
Company's 2000 Stock-Based Incentive Plan, Messrs. Cainkar and Johnson and Ms.
Donoghue each received non-statutory stock options to acquire 5,815 shares of
Security Financial common stock at an exercise price of $19.78, the fair market
value of the common stock on November 27, 2001, the date the options were
granted. In addition, Messrs. Cainkar and Johnson and Ms. Donoghue each were
granted 1,000 shares of restricted stock. Both the stock options and the
restricted stock vest equally over a five-year period.
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for Mr. Hyland and Mr. Hunt. No
other executive officers of Security Financial or Security Federal received
salary and bonus of $100,000 or more during the year ended June 30, 2002.
LONG-TERM COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
------------------------- --------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS AWARDS OPTIONS COMPENSATION
POSITIONS YEAR ($)(2) ($) ($)(3) (#) ($)(4)
- ---------------------------- ---------- ------------- ---------- ------------- ------------ --------------
John P. Hyland 2002 $201,500 $22,192 $ -- -- $24,401
President and Chief 2001 199,192 7,192 327,202 48,461 15,375
Executive Officer 2000 191,596 18,365 -- -- --
Patrick J. Hunt 2002 $ 97,722 $ 3,577 $ -- -- $ --
Executive Vice President and 2001 22,177(5) -- 42,200 6,000 --
Chief Financial Officer
- ----------------------------------------
(1) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than $50,000 or 10% of the total annual salary and
bonus reported.
(2) Includes director fees for Mr. Hyland.
(3) Rep resents the total value of 19,384 and 2,500 shares of restricted stock
awarded to Mr. Hyland and Mr. Hunt, respectively, on June 26, 2001. The
restricted stock vests in equal annual installments over a five-year period
beginning on June 26, 2002. At June 30, 2002, the market value of the
unvested restricted stock award was $307,81 4 and $39 ,700 for Mr. Hyland
and Mr. Hunt, respectively. Dividends, if any, will be paid on the
restricted stock.
(4) For 2002, consists of the market value of stock allocated under the
employee stock ownership program of $19,751 for Mr. Hyland and employer
contributions to the supplemental executive retirement plan of $4,650 for
Mr. Hyland.
(5) Mr. Hunt has been employed with Security Financial since March 2001.
FISCAL YEAR-END OPTION VALUES
The following table provides certain information with respect to the number
of shares of Company common stock represented by outstanding options held by Mr.
Hyland and Mr. Hunt as of June 30, 2002. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of the existing stock options and the fiscal year-end stock price.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)(1)
------------------------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ---------------- ----------------- ---------------- ---------------
John P. Hyland . . . . . . 9,693 38,768 $ 28,788 $ 115,141
Patrick J. Hunt . . . . . 1,200 4,800 $ 3,564 $ 14,256
- ----------------------------------------
(1) Value of unexercised in-the-money stock options equals the market value of
shares covered by in-the- money options on June 30, 2002, less the option
exercise Options are in-the-money if the price. market value o f shares
covered b y the op tions is greater than the exercise p rice.
9
EMPLOYMENT AGREEMENTS
Effective January 5, 2000, Security Federal and Security Financial entered
into three-year employment agreements with Mr. Hyland. Effective March 29, 2001,
Security Federal entered into a two-year employment agreement with Mr. Hunt. The
term of Mr. Hyland's agreement with Security Financial extends on a daily basis
until either the Company or Mr. Hyland elects not to extend the term. The terms
of the Security Federal employment agreements are renewable on an annual basis,
and most recently were renewed effective July 1, 2002 for a new three-year term
for Mr. Hyland and March 29, 2002 for a new two-year term for Mr. Hunt. Under
the employment agreements, the current salary levels for Mr. Hyland and Mr. Hunt
are $187,000 and $96,720, respectively. Mr. Hyland's and Mr. Hunt's base
salaries are renewed on an annual basis. In addition to base salary, the
employment agreements provide for, among other things, participation in stock
and employee benefit plans and fringe benefits applicable to executive
personnel. The agreements are terminable by the employers at any time or by the
executive if he is assigned duties inconsistent with his initial position,
duties, responsibilities and status, or upon the occurrence of certain events
specified by applicable regulations. If the executive's employment is terminated
without cause or upon his voluntary termination following the occurrence of an
event described in the preceding sentence, Security Federal or Security
Financial would be required to honor the terms of the agreement through the
expiration of the current term, including payment of current cash compensation
and continuation of employee benefits.
The employment agreements also provide for a severance payment and other
benefits in the event of involuntary termination of employment in connection
with any change in control of Security Federal or Security Financial. A
severance payment also will be provided on a similar basis in connection with a
voluntary termination of employment where, after a change in control, the
executive is assigned duties inconsistent with his position, duties,
responsibilities and status immediately before such change in control.
Even though both Security Federal and Security Financial employment
agreements provide for a severance payment if a change in control occurs, Mr.
Hyland would only be entitled to receive a severance payment under one
agreement. Mr. Hyland would also be entitled to receive an additional tax
indemnification payment if payments under the employment agreements or any other
payments triggered liability under the Internal Revenue Code as an excise tax
constituting "excess parachute payments." Under applicable law, the excise tax
is triggered by change in control-related payments which equal or exceed three
times Mr. Hyland's average annual compensation over the five years preceding the
change in control. The excise tax equals 20% of the amount of the payment in
excess of one times Mr. Hyland's average compensation over the preceding
five-year period. No severance payment to Mr. Hunt may exceed three times his
average annual compensation over the five years preceding the change in control.
Payments to the executive under Security Federal's employment agreements
will be guaranteed by Security Financial if payments or benefits are not paid by
Security Federal. Payment under Security Financial's employment agreement with
Mr. Hyland would be made by Security Financial. The employment agreements also
provide that Security Federal and Security Financial will indemnify the
executive to the fullest extent legally allowable.
The employment agreements restrict the executive from competing against
Security Financial or Security Federal for a period of one year from the date of
termination of the agreement if the executive is terminated without cause,
except if such termination occurs after a change in control.
10
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Security Federal has implemented a plan to provide for supplemental
benefits with respect to the tax-qualified retirement plan benefits otherwise
limited by certain provisions of the Internal Revenue Code. Specifically, the
supplemental executive retirement plan will provide benefits to eligible
individuals (designated by the Board of Directors of Security Federal or its
affiliates) that cannot be provided under the tax-qualified plans as a result of
the limitations imposed by the Internal Revenue Code, but that would have been
provided under these plans but for such limitations. The supplemental executive
retirement plan also provides eligible individuals with a supplemental benefit
upon a change in control before the complete scheduled repayment of the employee
stock ownership plan loan. This benefit is intended to provide the eligible
individual with the employee stock ownership benefit that would have otherwise
been provided during the loan repayment period, but for the change in control.
An individual's benefits under the supplemental executive retirement plan will
generally become payable at the same time benefits become payable under the
tax-qualified plans.
RETIREMENT PLAN
Security Federal is a participant in the Financial Institutions Retirement
Fund, a multi-employer, non-contributory defined benefit retirement plan. The
following table indicates the annual retirement benefits that would be payable
under the retirement plan upon retirement at age 65 to a participant electing to
receive his retirement benefit in the standard form of benefit, assuming various
specified levels of plan compensation and various specified years of credited
service. Under the Internal Revenue Code, maximum annual benefits under the
retirement plan are limited to $160,000 per year for the 2002 calendar year.
YEARS OF SERVICE
FINAL AVERAGE ---------------------------------------------
SALARY 15 20 25 30 35
------------- ------- ------- ------- -------- --------
$100,000 $22,500 $30,000 $37,500 $ 45,000 $ 52,500
125,000 28,125 37,500 46,875 56,250 65,625
150,000 33,750 45,000 56,250 67,500 78,750
175,000 39,375 52,500 62,625 78,750 91,875
200,000 45,000 60,000 75,000 90,000 105,000
225,000 50,625 67,500 84,375 101,250 118,125
250,000 56,250 75,000 93,750 112,500 131,250
The retirement plan provides for monthly payments to, or on behalf of, each
covered employee. All full-time employees are eligible to participate in the
retirement plan after completion of one year of service to Security Federal and
the attainment of age 21. To obtain one year of service, an employee must
complete at least 1,000 hours of service in 12 consecutive months. Benefits are
based upon years of service and salary excluding bonuses, fees, etc. Employees
become vested following five years of service. As of June 30, 2002, Mr. Hyland
and Mr. Hunt had 3 years and 6 years, respectively, of credited service under
the retirement plan.
11
The normal retirement age is 65 and the early retirement age is before age
65, but after age 45. Normal retirement benefits are equal to 1.5% multiplied by
the years of service to Security Federal and by the employee's average base
salary for the five highest consecutive years preceding retirement. If an
employee elects early retirement, but defers the receipt of benefits until age
65, the formula for computation of early retirement benefits is the same as if
the employee had retired at the normal retirement age. However, if the employee
elects early retirement benefits payable under the retirement plan, the benefits
are equal to the benefits payable assuming retirement at age 65 reduced by
applying an early retirement factor based on age and vesting service when
payments begin. Payment may also be deferred to any time up to age 70, in which
case the retirement allowance payable at age 65 will be increased by 0.8% for
each month of deferment after age 65. Under the retirement plan, Security
Federal makes annual contributions computed on an actuarial basis to fund the
benefits.
Upon retirement, the regular form of benefit under the retirement plan is
an annuity payable in equal monthly installments for the life of the employee.
Optional annuity or lump sum benefit forms may also be elected by the employee.
Benefits under the retirement plan are not integrated with social security.
REPORT OF THE COMPENSATION COMMITTEE
Under rules established by the Securities and Exchange Commission, 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 of the Company for the fiscal year ended June 30, 2002.
Because the Company conducts no activities other than managing the activities of
Security Federal, the following discussion addresses compensation information
relating to the Chief Executive Officer and executive officers of Security
Financial for fiscal 2002 and sets forth the joint report of the Compensation
Committee of the Company and Security Federal (collectively the "Compensation
Committee"). 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 fundamental compensation decisions
affecting those individuals. In fulfillment of this requirement, the
Compensation Committee, at the direction of the Board of Directors, has prepared
the following report for inclusion in this proxy statement.
GENERAL POLICY. The Compensation Committee has the responsibility to
recommend to the Board of Directors the amount and composition of compensation
paid to the executive officers. The Board of Directors has the responsibility to
review the report of the Compensation Committee and act on its recommendations.
It is the policy of the Compensation Committee to review executive compensation
not less than annually and more often if it deems appropriate.
The Committee believes that compensation policy should reflect the
executives' management skills, comparable peer group salaries for other thrift
executives, Company performance and shareholder returns. To this end, the
following goals underlie the Committee's policies:
1) To attract and retain key executives who possess the management
skills and experience vital to the long-term success of the
Company and Security Federal.
2) To provide compensation that is competitive and consistent with
executive compensation levels found in the financial and banking
industries.
12
3) To motivate executives to enhance long-term shareholder value by
providing management with stock-based compensation.
4) To make the compensation program an integral part of the
Company's long-term planning and management process.
The Compensation Committee's goal is to obtain up-to-date peer group salary
and performance information which is used to make compensation recommendations
to the Board of Directors. The process which the Compensation Committee utilized
for fiscal 2002 included reviewing the results of various compensation surveys,
as well as assessing the performance of the Chief Executive Officer and other
executive officers of Security Financial.
In preparing its analysis with respect to comparative compensation data,
the Compensation Committee considers characteristics of peer institutions such
as asset size, off-balance sheet assets, earnings, type of business operations,
corporate structure and geographic location. With respect to analyzing
comparative data for individual executive officers at peer institutions, the
Compensation Committee considers the scope and similarity of officer positions,
experience and the complexity of individual officer responsibilities.
In making its compensation determinations, the Compensation Committee also
considers the performance of executive officers. The Chief Executive Officer
evaluates the performance of all other executive officers and reports to the
Compensation Committee. The Compensation Committee evaluates the performance of
the Chief Executive Officer. The Compensation Committee then reports to the
Board of Directors regarding the performance of the Chief Executive Officer and
other executive officers. The Compensation Committee also recommends to the
Board of Directors the compensation of each of the executive officers, including
the Chief Executive Officer. Upon review of the Compensation Committee's
recommendations, the Board of Directors sets all executive compensation. The
Chief Executive Officer, a member of the Board of Directors, abstains from
voting on matters related to his compensation.
COMPENSATION COMMITTEE CONSIDERATIONS FOR FISCAL 2002. Compensation for
executive officers is generally composed of salary, bonus, participation in
various employee benefit plans, such as the employee stock ownership plan, the
401(k) plan, and the pension plan sponsored by Security Federal, certain fringe
benefits provided to employees and directors fees, if applicable. The benefits
provided under the employee stock ownership plan, 401(k) plan and pension plan
are determined based on the executive's compensation and/or years of service
with Security Federal.
This year, as in the past, Security Federal consulted various compensation
surveys, particularly that of the Indiana Bankers Association and America's
Community Bankers. After considering information in such reports and the
compensation, performance, experience and qualifications of the executive
officers and their contributions to the performance of Security Federal, the
Compensation Committee recommended and the Board of Directors approved
compensation levels for all executive officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer's
compensation was determined by the factors discussed above, including
compensation surveys and the overall qualitative performance of the Chief
Executive Officer in managing the Company and Security Federal during fiscal
2002. The compensation of the Chief Executive Officer was not determined for
13
fiscal 2002 using any specific formula nor did his compensation relate
specifically to corporate performance. The Board of Directors approved the
recommendations made by the Compensation Committee regarding the Chief Executive
Officer's compensation.
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF SECURITY FINANCIAL BANCORP, INC.
Vincent Cainkar
Howard O. Cyrus, Sr.
Richard J. Lashley
Robert L. Lauer
John Wm. Palmer
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF SECURITY FEDERAL BANK & Trust
Mary Beth Bonaventura
Tula Kavadias
Lawrence R. Parducci
Philip T. Rueth
14
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Security Financial common stock with the cumulative total return on the Nasdaq
National Market Index (U.S. Companies) and with the SNL Thrift Index. Total
return assumes the reinvestment of all dividends. The base amount for Security
Financial common stock is $9.25 per share, which was the closing price on the
initial day of trading on January 5, 2000.
[PERFORMANCE GRAPH]
COMPARISON OF CUMULATIVE TOTAL RETURN*
1/5/00 6/30/00 12/31/00 6/30/01 12/31/01 06/30/02
------ ------- -------- ------- -------- --------
Security Financial Bancorp, Inc. . . $100.00 $152.70 $181.08 $187.78 $218.38 $214.59
The Nasdaq National Market Index . . $100.00 $102.54 $ 63.19 $ 55.58 $ 50.13 $ 37.87
SNL Thrift Index . . . . . . . . . . $100.00 $109.21 $170.25 $189.06 $181.97 $224.07
- --------------------------
* Assumes $100 invested in Security Financial common stock at the closing price
per share and each index on January 5, 2000 (the date on which Security
Financial common stock was first traded publicly) and that all dividends were
reinvested. Source: SNL Securities.
15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who 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 Securities and Exchange Commission.
Executive officers, directors and greater than 10% shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the copies of the reports it has received and
written representations provided to the Company from the individuals required to
file the reports, the Company believes that during the year ended June 30, 2002,
each of its executive officers and directors has complied with applicable
reporting requirements for transactions in Company common stock.
TRANSACTIONS WITH MANAGEMENT
LOANS AND EXTENSIONS OF CREDIT
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally 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
other employees and does not give preference to any insider over any other
employee and must not involve more than the normal risk of repayment or present
other unfavorable features. Security Federal currently does make new loans and
extensions of credit to Security Federal's executive officers, directors and
employees at different rates or terms than those offered to the general public;
however, Security Federal does not give preference to any director or officer
over any other employee, and such loans do 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 an amount that, when aggregated with the amount
of all other loans to the person and his or her related interests, are in excess
of the greater of $500,000 or 5% of Security Federal's capital and surplus, up
to a maximum of $3.0 million, must be approved in advance by a majority of the
disinterested members of the Board of Directors.
PROPOSAL 2 -- RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Crowe, Chizek and Company LLP to be
its independent auditors for the 2003 fiscal year, subject to the ratification
by shareholders. A representative of Crowe, Chizek and Company LLP is expected
to be present at the annual meeting to respond to appropriate questions from
shareholders and will have the opportunity to make a statement should he or she
desire to do so.
If the ratification of the appointment of the independent auditors is not
approved by a majority of the votes cast by shareholders at the annual meeting,
the Board of Directors may consider other independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
16
AUDIT FEES
The following table sets for the fees billed to the Company during the
fiscal year ending June 30, 2002 by Crowe, Chizek and Company LLP:
Audit Fees . . . . . . . . . . . . . $58,500
Financial information and systems
design and implementation fees . . -
All other fees*. . . . . . . . . . . $14,250
------------------------
* Includes fees for tax-related services and the 401(k) Plan audit.
The Audit Committee believes that the provision of non-audit services by
Crowe, Chizek and Company LLP are compatible with maintaining Crowe, Chizek and
Company LLP's independence.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is responsible for exercising
independent, objective oversight of Security Financial's independent auditors,
accounting functions and internal controls. The Audit Committee is comprised of
five directors, each of whom is independent under The Nasdaq Stock Market,
Inc.'s listing standards and as defined under the newly issued proposed rules
for listed companies by the Nasdaq Stock Market as required under the
Sarbanes-Oxley Act of 2002. The Audit Committee acts under a written charter
adopted by the Board of Directors, a copy of which was attached to last year's
proxy statement.
The Audit Committee reviewed and discussed the annual financial statements
with management and the independent accountants. As part of this process,
management represented to the Audit Committee that the financial statements were
prepared in accordance with generally accepted accounting principles. The Audit
Committee also received and reviewed written disclosures and a letter from the
accountants concerning their independence as required under applicable standards
for auditors of public companies. The Audit Committee discussed with the
accountants the contents of such materials, the accountant's independence and
the additional matters required under Statement on Auditing Standards No. 61.
Based on such review and discussion, the Audit Committee recommended that the
Board of Directors include the audited consolidated financial statements in
Security Financial's Annual Report on Form 10-K for the year ended June 30, 2002
for filing with the Securities and Exchange Commission.
Members of the Audit Committee:
Sheila Donoghue
Tula Kavadias
Robert L. Lauer
John Wm. Palmer
Philip T. Rueth
17
SHAREHOLDER PROPOSALS AND NOMINATIONS
Proposals that shareholders seek to have included in the proxy statement
for the Company's next annual meeting must be received by the Company no later
than August 20, 2003. If next years annual meeting is held on a date more than
30 calendar days from December 18, 2003, a shareholder proposal must be received
by a reasonable time before the proxy solicitation for such annual meeting is
made. Any shareholder proposals will be subject to the requirements of the proxy
rules adopted by the Securities and Exchange Commission.
The Company's Bylaws provide that in order for a stockholder to make
proposals for business to be brought before the annual meeting, the business
must relate to a proper subject matter for stockholder action and the
stockholder must give timely notice thereof in writing to the Secretary of the
Company. To be timely, a stockholder's notice must be delivered or mailed to and
received at the principal executive offices of the Company not less than ninety
(90) days prior to the date of the annual meeting; provided, however, that in
the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made.
The Company Bylaws provide that in order for a stockholder to make
nominations for the election of directors, the stockholder must give timely
notice in writing to the Secretary of the Company. To be timely, a stockholder's
notice shall be delivered or mailed to and received at the principal executive
offices of the Company not less than ninety (90) days prior to the date of the
meeting; provided, however, that in the event that less than one hundred (100)
days' notice or prior disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
The requirements for the content of both a stockholder's notice of proposal
for business and a stockholder's notice of nominations can be found in the
Company's Bylaws, a copy of which may be obtained from the Company.
MISCELLANEOUS
The Company will pay the cost of this proxy solicitation. 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 Security Financial common stock. In addition to soliciting
proxies by mail, directors, officers and regular employees of the Company may
solicit proxies personally or by telephone without receiving additional
compensation. Georgeson Shareholder Communications, Inc., a proxy solicitation
firm, will be paid a fee of $4,500, plus out-of-pocket expenses to assist the
Company in soliciting proxies.
The Company's Annual Report to Shareholders has been mailed to all persons
who were shareholders as of the close of business on November 8, 2002. Any
shareholder who has not received a copy of the Annual Report may obtain a copy
by writing to the Secretary of the Company. The Annual Report is not to be
treated as part of the proxy solicitation material or as having been
incorporated in this proxy statement by reference.
18
A COPY OF THE COMPANY'S FORM 10-K WITHOUT EXHIBITS, FOR THE FISCAL YEAR
ENDED JUNE 30, 2002, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL
BE FURNISHED WITHOUT CHARGE TO ALL PERSONS WHO WERE SHAREHOLDERS AS OF THE CLOSE
OF BUSINESS ON NOVEMBER 8, 2002 UPON WRITTEN REQUEST TO PHILIP T. RUETH,
CORPORATE SECRETARY, SECURITY FINANCIAL BANCORP, INC., 9321 WICKER AVENUE, ST.
JOHN, INDIANA 46373.
If you and others who share your address own your shares in street name,
your broker or other holder of record may be sending only one annual report and
proxy statement to your address. This practice, known as "householding," is
designed to reduce the Company's printing and postage costs. However, if a
shareholder residing at such an address wishes to receive a separate annual
report or proxy statement in the future, he or she should contact the broker or
other holder of record. If you own your shares in street name and are receiving
multiple copies of our annual report and proxy statement, you can request
householding by contacting your broker or other holder of record.
Whether or not you plan to attend the annual meeting on December 18, 2002,
please vote by marking, signing, dating and promptly returning the enclosed
proxy card in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Philip T. Rueth
Philip T. Rueth
CORPORATE SECRETARY
St. John, Indiana
November 18, 2002
19
SECURITY FINANCIAL BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
December 18, 2002
9:00 a.m., Central Time
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John P. Hyland, Robert L. Lauer and John
Wm. Palmer each with full power of substitution, to act as proxy for the
undersigned, and to vote all shares of common stock of the Company which the
undersigned is entitled to vote only at the annual meeting of shareholders, to
be held on December 18, 2002, at 9:00 a.m., Central time, at the Company's main
office located at 9321 Wicker Avenue, St. John, Indiana and at any and all
adjournments thereof, with all of the powers the undersigned would possess if
personally present at such meeting as follows:
1. The election as Directors of all nominees listed (unless the "FOR ALL
EXCEPT" box is marked and the instructions below are complied with).
Howard O. Cyrus, Sr., Dr. Peter Ferrini, Richard J. Lashley and
Robert L. Lauer
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
/ / / / / /
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of the appointment of Crowe, Chizek and Company LLP
as independent auditors of Security Financial Bancorp, Inc. for the
fiscal year ending June 30, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 and 2.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" EACH OF THE NOMINEES
FOR DIRECTOR LISTED ON THIS PROXY AND "FOR" RATIFICATION OF CROWE, CHIZEK AND
COMPANY LLP AS INDEPENDENT AUDITORS. IF ANY OTHER BUSINESS IS PRESENTED AT THE
ANNUAL MEETING, INCLUDING WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY WILL
BE VOTED BY THE PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE BOARD OF DIRECTORS TO
VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEES
ARE UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE
CONDUCT OF THE MEETING.
Dated:
---------------------------------
---------------------------------------
SIGNATURE OF SHAREHOLDER
---------------------------------------
SIGNATURE OF CO-HOLDER (IF ANY)
The above signed acknowledges receipt from the Company prior to the
execution of this proxy of a notice of annual meeting of shareholders and of a
proxy statement and of the annual report to shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
-----------------------------
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Security Federal Bank & Trust Letterhead
Dear ESOP Participant:
On behalf of the Board of Directors of Security Financial Bancorp, Inc.
(the "Company"), I am forwarding to you a Notice and Proxy Statement for the
Company's Annual Meeting of Stockholders. We will hold the Annual Meeting of
Stockholders on December 18, 2002, at the time and location stated in the
notice. I have also included with these materials the Company's Annual Report to
Stockholders, as well as a GREEN vote authorization form. The vote authorization
form allows you to convey your voting instructions, as a participant in the
Security Federal Bank & Trust Employee Stock Ownership Plan (the "ESOP"), to
First Bankers Trust Company, N.A. (the "ESOP Trustee") on the proposals
presented to stockholders at the Annual Meeting.
As of November 8, 2002, the record date for the Annual Meeting, the ESOP
Trustee held ___________ shares of Company common stock on behalf of the ESOP,
of which ____________ had been allocated to participants' accounts. The ESOP
Trustee will vote the allocated shares as directed by ESOP participants;
provided the trustee timely receives instructions from the participants. Subject
to its fiduciary duties under the Employee Retirement Income Security Act of
1974, as amended, the ESOP Trustee will vote the unallocated shares and the
allocated shares for which it does not timely receive instructions in a manner
calculated to most accurately reflect the instructions it receives from
participants regarding the allocated shares.
In order to direct the voting of the shares of Company common stock
allocated to your ESOP account, please complete and sign the enclosed GREEN vote
authorization form and return it in the provided postage-paid envelope by
December 11, 2002. Your vote will not be revealed, directly or indirectly, to
any officer, employee or director of the Company or Security Federal Bank &
Trust. The ESOP Trustee will tabulate the votes received from participants and
vote the shares of Company common stock held in the ESOP Trust in accordance
with the terms of the ESOP.
Please note that as an employee of Security Federal Bank & Trust you may
participate in several benefit plans for which you may receive a separate vote
authorization form. PLEASE VOTE ALL OF THE VOTE AUTHORIZATION FORMS YOU RECEIVE.
Sincerely,
John P. Hyland
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Name:
---------------------
Shares:
-------------------
VOTE AUTHORIZATION FORM
-----------------------
I understand that First Bankers Trust Company, the ESOP Trustee, is the
holder of record and custodian of all shares attributed to me of Security
Financial Bancorp, Inc. (the "Company") common stock under the Security Federal
Bank & Trust Employee Stock Ownership Plan. I understand that my voting
instructions are solicited on behalf of the Company's Board of Directors for the
Annual Meeting of Stockholders to be held on December 18, 2002 and at any and
all adjournments thereof.
Accordingly, you are to vote my shares as follows:
1. The election as Directors of all nominees listed (unless the "FOR ALL
EXCEPT" box is marked and the instructions below are complied with).
Howard O. Cyrus, Sr., Dr. Peter Ferrini, Richard J. Lashley and
Robert L. Lauer
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
/ / / / / /
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of the appointment of Crowe, Chizek and Company LLP
as independent auditors of Security Financial Bancorp, Inc. for the
fiscal year ending June 30, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 and 2.
The ESOP Trustee is hereby authorized to vote any shares attributed to me
in its trust capacity as indicated above.
- ------------ -------------------------------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE NO
LATER THAN DECEMBER 11, 2002.
Security Federal Bank & Trust Letterhead
Dear 401(k) Plan Participant:
On behalf of the Board of Directors of Security Financial Bancorp, Inc.
(the "Company"), I am forwarding to you a Notice and Proxy Statement for the
Company's Annual Meeting of Stockholders. We will hold the Annual Meeting of
Stockholders on December 18, 2002, at the time and location stated in the
notice. I have also included with these materials the Company Annual Report to
Stockholders, as well as a YELLOW vote authorization form. The vote
authorization form allows you to convey your voting instructions, as a Security
Federal Bank & Trust 401(k) Plan participant investing in the Security Financial
Bancorp, Inc. Stock Fund (the "Employer Stock Fund"), to First Bankers Trust
Company, N.A. (the "Employer Stock Fund Trustee") on the proposals presented to
stockholders at the Annual Meeting.
As of November 8, 2002, the record date for the Annual Meeting, the
Employer Stock Fund Trust held _______ shares of Company common stock. The
Employer Stock Fund Trustee will vote these shares as directed by participants;
provided the trustee receives the instructions from participants by December 11,
2002.
In order to direct the voting of shares of Company common stock credited to
your 401(k) Plan account, please complete and sign the enclosed YELLOW vote
authorization form and return it in the enclosed postage-paid envelope by
December 11, 2002. The Employer Stock Fund Trustee will tabulate the votes
received and vote the shares of Company common stock held in the Employer Stock
Fund Trust in accordance with the terms of the plan.
Please note that as an employee of Security Federal Bank & Trust you may
participate in several benefit plans for which you may receive a separate vote
authorization form. PLEASE VOTE ALL OF THE VOTE AUTHORIZATION FORMS YOU RECEIVE.
Sincerely,
John P. Hyland
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Name:
---------------------
Shares:
-------------------
VOTE AUTHORIZATION FORM
-----------------------
I understand that First Bankers Trust Company, N.A., the Employer Stock
Fund Trustee, is the holder of record and custodian of all shares attributed to
me of Security Financial Bancorp, Inc. (the "Company") common stock held in the
Security Financial Bancorp, Inc. Stock Fund under the Security Federal Bank &
Trust 401(k) Plan. I understand that my voting instructions are solicited on
behalf of the Company's Board of Directors for the Annual Meeting of
Stockholders to be held on December 18, 2002 and at any and all adjournment
thereof.
Accordingly, you are to vote my shares as follows:
1. The election as Directors of all nominees listed (unless the "FOR ALL
EXCEPT" box is marked and the instructions below are complied with).
Howard O. Cyrus, Sr., Dr. Peter Ferrini, Richard J. Lashley and
Robert L. Lauer
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
/ / / / / /
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of the appointment of Crowe, Chizek and Company LLP
as independent auditors of Security Financial Bancorp, Inc. for the
fiscal year ending June 30, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 and 2.
The Employer Stock Fund Trustee is hereby authorized to vote any shares
attributed to me in its trust capacity as indicated above.
- ----------------------------- -------------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID
ENVELOPE NO LATER THAN DECEMBER 11, 2002.
[Security Financial Bancorp, Inc. Letterhead]
Dear Stock Award Recipient:
On behalf of the Board of Directors of Security Financial Bancorp, Inc.
(the "Company"), I am forwarding to you a Notice and Proxy Statement for the
Company's Annual Meeting of Stockholders. We will hold the Annual Meeting of
Stockholders on December 18, 2002, at the time and location stated in the
notice. I have also included with these materials the Company's Annual Report to
Stockholders, as well as a BLUE vote authorization form. The vote authorization
form allows you to convey your voting instructions, as a recipient of a stock
award under the Security Financial Bancorp, Inc. Stock-Based Incentive Plan (the
"Incentive Plan"), to First Bankers Trust Company, N.A. (the "Incentive Plan
Trustee") on the proposals presented to stockholders at the Annual Meeting.
As of the record date for the Annual Meeting, November 8, 2002, the
Incentive Plan Trust held ________________shares of Company common stock. The
Incentive Plan Trustee will vote these shares as directed by the stock award
recipients; provided the trustee receives the instructions from the stock award
recipients by December 11, 2002.
In order to direct the voting of Company common stock subject to your stock
award, please complete and sign the enclosed BLUE vote authorization form and
return it in the postage-paid envelope provided by December 11, 2002. The
Incentive Plan Trustee will tabulate the votes received from stock award
recipients and vote the shares of Company common stock held in the Incentive
Plan Trust in accordance with the terms of the plan.
Please note that if you are an employee of Security Federal Bank & Trust
you may participate in several benefit plans for which you may receive a vote
authorization form. PLEASE VOTE ALL VOTE AUTHORIZATION FORMS YOU RECEIVE.
Sincerely,
John P. Hyland
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Name:
---------------------
Shares:
-------------------
VOTE AUTHORIZATION FORM
-----------------------
I understand that First Bankers Trust Company, N.A., the Incentive Plan
Trustee, is the holder of record and custodian of all shares attributed to me of
Security Financial Bancorp, Inc. (the "Company") common stock held in the
Security Financial Bancorp, Inc. Stock-Based Incentive Plan Trust. I understand
that my voting instructions are solicited on behalf of the Company's Board of
Directors for the Annual Meeting of Stockholders to be held on December 18, 2002
and at any and all adjournments thereof.
Accordingly, you are to vote my shares as follows:
1. The election as Directors of all nominees listed (unless the "FOR ALL
EXCEPT" box is marked and the instructions below are complied with).
Howard O. Cyrus, Sr., Dr. Peter Ferrini, Richard J. Lashley and
Robert L. Lauer
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
/ / / / / /
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
2. The ratification of the appointment of Crowe, Chizek and Company LLP
as independent auditors of Security Financial Bancorp, Inc. for the
fiscal year ending June 30, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 and 2.
The Incentive Plan Trustee is hereby authorized to vote any shares
attributed to me in its trust capacity as indicated above.
- ----------------------------- -------------------------------------------
Date Signature
PLEASE DATE, SIGN AND RETURN THIS FORM IN THE ENCLOSED POSTAGE-PAID
ENVELOPE NO LATER THAN DECEMBER 11, 2002.