<PAGE> 1
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:
/X/ Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive proxy statement |_| Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-12
Security Financial Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
Security Financial Bancorp, Inc.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total Fee paid:
N/A
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/ / 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:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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<PAGE> 2
___________, 2000
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
Thursday, October 19, 2000 at 5:00 p.m., local time. This will be the first
annual meeting since Security Federal Bank & Trust converted from the mutual to
stock form of organization on January 5, 2000.
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.
The Board of Directors of the Company has determined that matters to be
considered at the Annual Meeting are in the best interests of the Company and
its shareholders. FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES FOR
DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, "FOR" THE APPROVAL OF THE
SECURITY FINANCIAL BANCORP, INC. 2000 STOCK-BASED INCENTIVE PLAN AND "FOR" THE
RATIFICATION OF CROWE, CHIZEK & COMPANY LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 2001.
It is important that your shares are represented 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 WHITE proxy card. If you attend the meeting, you may vote in
person even if you have previously mailed a proxy card.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING, PLEASE CONTACT OUR
PROXY SOLICITOR, GEORGESON SHAREHOLDER COMMUNICATIONS, INC.,
AT (___) ___-____.
We look forward to seeing you at the meeting.
Sincerely,
John P. Hyland
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE> 3
SECURITY FINANCIAL BANCORP, INC.
9321 WICKER AVENUE
ST. JOHN, INDIANA 46373
(219) 365-4344
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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On Thursday, October 19, 2000, 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 5:00 p.m., local time, for the
following purposes:
1. To elect three directors to serve for a term of three years;
2. To consider and vote upon a proposal to approve the Security Financial
Bancorp, Inc. 2000 Stock-Based Incentive Plan;
3. To ratify the appointment of Crowe, Chizek and Company LLP as
independent auditors for the Company for the fiscal year ending
June 30, 2001; and
4. To transact any 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 stockholders of record at the close of business on ___________, 2000
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 WHITE 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
Lawrence R. Parducci
CORPORATE SECRETARY
St. John, Indiana
___________, 2000
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.
<PAGE> 4
PROXY STATEMENT
OF
SECURITY FINANCIAL BANCORP, INC.
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ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 2000
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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 stockholders of
the Company. The annual meeting will be held at Security Financial's main office
located at 9321 Wicker Avenue, St. John, Indiana on Thursday, October 19, 2000
at 5:00 p.m., local time. This proxy statement and the enclosed WHITE proxy card
are being first mailed to stockholders on or about ___________, 2000.
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VOTING AND PROXY PROCEDURE
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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 ___________, 2000. As of the close of business on ___________, 2000,
a total of 1,938,460 shares of Security Financial common stock were outstanding.
Each share of common stock has one vote. As provided in the Company's
Certificate of Incorporation, 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.
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 approval of the Security Financial Bancorp,
Inc. 2000 Stock-Based Incentive Plan and the ratification of the appointment of
Crowe, Chizek and Company LLP as independent auditors, you may vote in favor of
the proposal, vote against the proposal or abstain from voting. The adoption of
the plan and 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 these matters, abstentions and broker non-votes will
have no effect on the voting.
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<PAGE> 5
VOTING BY PROXY
This proxy statement is being sent to you by the Board of Directors of
Security Financial 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 WHITE 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, FOR APPROVAL OF THE SECURITY FINANCIAL BANCORP, INC. 2000 STOCK-BASED
INCENTIVE PLAN 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 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 HAVE ANY QUESTIONS ABOUT VOTING, PLEASE CONTACT OUR PROXY
SOLICITOR, GEORGESON SHAREHOLDER COMMUNICATIONS, INC., AT (___) ___-____.
PARTICIPANTS IN THE SECURITY FEDERAL BANK & TRUST ESOP AND THE 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) Plan, you will
receive with this proxy statement along with a voting 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. As of ___________, 2000, no shares
have been allocated to participants' accounts under the ESOP. However, for the
sole purpose of voting on the matters presented at the annual meeting, each
participant will be deemed to have one share allocated to his or her account.
The ESOP trustee, subject to the exercise of its fiduciary duties, will vote all
unallocated shares of common stock held by the ESOP and allocated shares for
which no voting instructions are received in the same proportion as shares for
which it has received timely voting instructions. Under the terms of the 401(k)
Plan, a participant is entitled to direct the trustee as to the shares in the
Security Financial Bancorp, Inc. Stock Fund 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 same proportion
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<PAGE> 6
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 October 12, 2000.
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STOCK OWNERSHIP
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The following table provides information as of ___________, 2000 with
respect to persons known to Security Financial to be the beneficial owners of
more than 5% of the Company's outstanding common stock. A person may be
considered to beneficially own any shares of common stock over which he or she
has, directly or indirectly, sole or shared voting or investing power.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF COMMON STOCK
NAME AND ADDRESS SHARES OWNED OUTSTANDING
------------------ --------------- -------------
<S> <C> <C>
Paul J. Duggan 186,400(1) 9.62%
53 West Jackson Boulevard
Suite 400
Chicago, Illinois 60604
John Wm. Palmer 178,000(2) 9.18%
Richard J. Lashley
PL Capital, LLC
2015 Spring Road, Suite 290
Oak Brook, Illinois 60523
Security Federal Bank & Trust 155,076(3) 8.00%
Employee Stock Ownership Plan
9321 Wicker Avenue
St. John, Indiana 46373
David M. W. Harvey 100,000(4) 5.20%
P.O. Box 3178
Gardnerville, Nevada 89410
-----------------------------
(1) 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 186,400, 90,600, 43,500, 27,200, 19,900 and 87,800 of
these shares, respectively. Based on information in a Schedule 13D,
Amendment No. 1, filed jointly on May 26, 2000 with the Securities and
Exchange Commission.
(2) Financial Edge Fund. L.P., Financial Edge - Strategic Fund, L.P., PL
Capital, LLC, John Wm. Palmer, Richard J. Lashley and Beth R. Lashley are
deemed to be beneficial owners of 176,900, 176,900, 176,900, 177,000,
177,900 and 1,000 of these shares, respectively. Based on information in a
Schedule 13D, Amendment No. 1, filed jointly on May 22, 2000 with the
Securities and Exchange Commission.
(3) Under the terms of the ESOP, the ESOP trustee will vote shares allocated to
participants' accounts in the manner directed by the participants. Subject
to their fiduciary responsibility, the trustee will vote unallocated shares
and allocated shares for which no timely voting instructions are received
in the same proportion as shares for which they have received voting
instructions from participants. As of ___________, 2000, no shares had been
allocated under the ESOP. Therefore, each ESOP participant is deemed to
have one share of Security Financial common stock in the ESOP allocated to
his or her account for the sole purpose of providing voting instructions to
the trustee.
</TABLE>
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<PAGE> 7
(4) 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 100,000, 100,000 and 100,000 of these shares, respectively. Based
on information in a Schedule 13D filed jointly on February 18, 2000 with
the Securities and Exchange Commission.
The following table provides information about the shares of Company
common stock that may be considered to be beneficially owned by each nominee for
director nominated by the Board of Directors and by all directors and executive
officers of the Company as a group as of ___________, 2000. A person may be
considered to beneficially own any shares of common stock over which he or she
has, directly or indirectly, sole or shared voting or investment 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.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF COMMON STOCK
NAME SHARES OWNED OUTSTANDING(1)
--------------------------- ----------------- ----------------------
<S> <C> <C>
Mary Beth Bonaventura 5,100 *
Howard O. Cyrus 1,000 *
Dr. Peter Ferrini 28,100 1.45
John P. Hyland 3,310 *
Tula Kavadias 500 *
Robert L. Lauer 2,680(2) *
Lawrence R. Parducci 4,000 *
Philip T. Rueth 10,000(3) *
Robert A. Vellutini 10,000 *
All directors and executive 80,100 4.13%
officers as a group (16 persons)
* Less than 1% of shares outstanding.
(1)Based on 1,938,460 shares of Company common stock outstanding and entitled to
vote as of ___________, 2000.
(2)Includes 1,400 shares owned by Mr. Lauer's spouse's trust.
(3)Includes 5,000 shares owned by Mr. Rueth's spouse's trust.
</TABLE>
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INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
--------------------------------------------------------------------------------
The Board of Directors' three nominees for election as director were
unanimously nominated by the Nominating Committee of the Board of Directors. No
Board of Directors' nominee was nominated according to an agreement or
understanding between the nominee and Security Financial. Mr. Hyland does have
employment agreements with Security Financial and Security Federal. See
"EXECUTIVE COMPENSATION--EMPLOYMENT AGREEMENTS."
After obtaining shareholder approval, Security Financial and Security
Federal will consider granting to directors, officers and employees of Security
Federal and Security Financial stock options and awards in
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<PAGE> 8
the form of shares of common stock under the Security Financial Bancorp, Inc.
2000 Stock-Based Incentive Plan.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
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The Company's Board of Directors consists of nine members. Eight directors
are independent and one is a member of management. The Board is divided into
three classes with three-year staggered terms, with 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 John P. Hyland, Tula Kavadias and Philip T. Rueth,
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, 2000. The indicated period of
service as a director includes the period of service as a director of Security
Federal. The business address for each of the Board of Directors' nominees and
the directors continuing in office is c/o Security Financial Bancorp, Inc., 9321
Wicker Avenue, St. John, Indiana 46373.
BOARD NOMINEES
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 49. 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 43. Director since 1997.
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 54.
Director since 1997.
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<PAGE> 9
DIRECTORS CONTINUING IN OFFICE
The following directors have terms ending in 2001:
MARY BETH BONAVENTURA is a Senior Judge of the Lake Superior Court,
Juvenile Division. Ms. Bonaventura was elected as Chief Judge of the Lake
Superior Courts for the 1997-1998 term. Age 46. Director since 1992.
LAWRENCE R. PARDUCCI is a pharmacist, consultant and pharmacy insurance
solicitor for Fagen Pharmacy, a 20-store pharmacy chain. Age 69. Director since
1988.
ROBERT A. VELLUTINI is a Vice President of Investments for A.G. Edwards &
Sons, Inc., a financial services and brokerage firm. Mr. Vellutini is the first
cousin of Dr. Ferrini. Age 55. Director since 1999.
The following directors have terms ending in 2002:
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 62. 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 76. Director since 1977.
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 45. Director since 1998.
In addition, John Palmer has notified Security Financial of his intent to
nominate John Palmer, Naperville, Illinois and Richard Lashley, Warren, New
Jersey for election to the Board of Directors, and Vincent Cainkar has notified
Security Financial of his intention to nominate Vincent Cainkar, Burbank,
Illinois for election to the Board of Directors.
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, 2000, the Board of Directors of the Company held
seven meetings and the Board of Directors of Security Federal held 12 regular
meetings and six special meetings. No director attended fewer than 75% of the
total meetings of the Boards of Directors and committees on which he or she
served.
The Audit Committee, consisting of Ms. Bonaventura, Mr. Hyland, Ms.
Kavadias, Mr. Rueth and Mr. Vellutini, receives and reviews all reports prepared
by the Company's independent auditors. This committee met one time during the
year ended June 30, 2000.
The Compensation Committee of the Company, consisting of Ms. Bonaventura,
Mr. Hyland, Mr. Lauer and Mr. Parducci, and the Compensation Committee of the
Bank, consisting of Ms. Bonaventura, Ms. Kavadias, Mr. Parducci and Mr. Rueth,
are responsible for all matters regarding the Company's and the
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<PAGE> 10
Bank's employee compensation and benefit programs. These committees met four
times during the year ended June 30, 2000.
The Nominating Committee, consisting of the full Board of Directors,
selects annually the nominees for election as directors. This committee met on
August 3, 2000 to select management's nominees for election as directors at this
annual meeting. The Company's Bylaws provide for shareholder nominations of
directors. These provisions require such nominations to be made pursuant to
timely notice in writing to the Secretary of the Company. The shareholder's
notice of nomination must contain all information relating to the nominee which
is required to be disclosed by the Company's Bylaws. See "STOCKHOLDER
PROPOSALS."
DIRECTORS' COMPENSATION
MEETING FEES. Security Federal pays a fee to each of its non-management
directors for attendance at each board meeting and each meeting of a committee
of which they are members. The following table sets forth the meeting fees in
effect for the fiscal year ended June 30, 2000:
<TABLE>
<CAPTION>
FEES
------
<S> <C>
Regular Board Meetings
Chairman...................... $2,000
Vice-Chairman................. $1,600
Director...................... $1,000
Special Board Meetings........... $500
Committee Meetings............... $250
</TABLE>
Security Financial pays 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.
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<PAGE> 11
------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following information is furnished for John P. Hyland. No other
executive officer of Security Financial or Security Federal received salary and
bonus of $100,000 or more during the year ended June 30, 2000.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION (1)(2)
-------------------
ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(3)
-------------- ---- ------- -------- ------------
<S> <C> <C> <C> <C>
John P. Hyland 2000 $176,346 $18,365 $15,250
President and Chief 1999 134,778 -- --
Executive Officer
(1)Compensation information for 1998 has been omitted because Security Financial
was not a public company nor a subsidiary of a public company at that time.
(2)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.
(3)Represents director fees.
</TABLE>
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENTS. Effective January 5, 2000, Security Federal and
Security Financial entered into three-year employment agreements with Mr.
Hyland. Under the employment agreements, the current salary level for Mr. Hyland
is $176,346. On the anniversary of the commencement date of the employment
agreements, the term of the employment agreements may be extended for an
additional year at the discretion of the Board of Directors. The agreements are
terminable by the employers at any time or by Mr. Hyland 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 Mr. Hyland'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, Mr. Hyland
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
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<PAGE> 12
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.
Payments to Mr. Hyland under Security Federal's employment agreement will
be guaranteed by Security Financial if payments or benefits are not paid by
Security Federal. Payment under Security Financial' employment agreement would
be made by Security Financial. The employment agreements also provide that
Security Federal and Security Financial will indemnify Mr. Hyland to the fullest
extent legally allowable.
The employment agreements restrict Mr. Hyland from competing against
Security Financial or Security Federal for a period of one year from the date of
termination of the agreement if Mr. Hyland is terminated without cause, except
if such termination occurs after a change in control.
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.
------------------------------------------------------------------------------
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% stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on the Company's review of copies of the reports it has
received and written representations provided to it from the individuals
required to file the reports, the Company believes that each of its executive
officers and directors has complied with applicable reporting requirements for
transactions in Security Financial common stock during the year ended June 30,
2000, except that the following transactions by the following individuals were
not reported on a timely basis on Form 4 due to administrative error: one report
containing two purchase transactions by Dr. Ferrini. These transactions were
subsequently reported on a Form 4.
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TRANSACTIONS WITH MANAGEMENT
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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, 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. As of June 30, 2000, no
directors or executive officers had aggregate indebtedness to Security Financial
or Security Federal based on preferential terms is excess of $60,000.
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PROPOSAL 2 -- APPROVAL OF THE SECURITY FINANCIAL BANCORP, INC.
2000 STOCK-BASED INCENTIVE PLAN
--------------------------------------------------------------------------------
The Board of Directors of the Company is presenting for stockholder
approval the Security Financial Bancorp, Inc. 2000 Stock-Based Incentive Plan,
in the form attached to this proxy statement as Appendix A. The purpose of the
plan is to attract and retain qualified personnel in key positions, provide
officers, employees and non-employee directors of the Company and Security
Federal, with a proprietary interest in the Company as an incentive to
contribute to the success of the Company, promote the attention of management to
other stockholder's concerns, and reward employees for outstanding performance.
The following is a summary of the material terms of the plan which is qualified
in its entirety by the complete text of the plan.
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GENERAL
The plan authorizes both the grant of options to purchase common stock of
the Company and the award of restricted shares of common stock. Subject to
certain adjustments to prevent dilution of awards to participants, the number of
shares of common stock reserved for awards under the plan is 271,384 shares,
consisting of 193,846 shares reserved for options and 77,538 shares reserved for
restricted stock awards. All employees and non-employee directors of the Company
and its affiliates are eligible to receive awards under the plan. The plan will
be administered by a committee (the "Committee") consisting of members of the
Board of Directors who are not employees of the Company or its affiliates.
Authorized but unissued shares or shares previously issued and reacquired by the
Company may be used to satisfy awards under the plan. If authorized but unissued
shares are used to satisfy restricted stock awards and the exercise of options
granted under the plan, the number of outstanding shares will increase and will
have a dilutive effect on the holdings of existing stockholders. Security
Financial may establish a trust under which the trustee will purchase, with
contributions from the Company or Security Federal, previously issued shares to
fund the Company's obligation for restricted stock awards. As of the date of
this proxy statement, no awards have been granted under the plan.
TYPES OF AWARDS
GENERAL. The plan authorizes the grant of awards in the form of: (1)
options intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code (options which provide certain tax benefits to the
recipients upon compliance with applicable requirements, but which do not result
in tax deductions to the Company); (2) options that do not so qualify (options
which do not provide the same income tax benefits to recipients, but which may
provide tax deductions to the Company), referred to as "non-statutory stock
options"; and (3) grants of restricted shares of common stock. Each type of
award may be subject to certain vesting or service requirements or other
conditions imposed by the Committee.
OPTIONS. Subject to the terms of the plan, the Committee has the authority
to determine the amount of options granted to any individual and the date or
dates on which each option will become exercisable and any other conditions
applicable to an option. The exercise price of all options will be determined by
the Committee but will be at least 100% of the fair market value of the
underlying common stock at the time of grant. The exercise price of any option
may be paid in cash, common stock, or any other form permitted by the Committee
at its discretion. See "ALTERNATE OPTION PAYMENTS" below. The term of options
will be determined by the Committee, but in no event will an option be
exercisable more than ten years from the date of grant (or five years from date
of grant for a 10% owner with respect to incentive stock options).
All options granted under the plan to officers and employees may, at the
discretion of the Committee, qualify as incentive stock options to the extent
permitted under Section 422 of the Internal Revenue Code. Under certain
circumstances, incentive stock options may be converted into non-statutory stock
options. In order to qualify as incentive stock options under Section 422 of the
Internal Revenue Code, the option must generally be granted only to an employee,
must not be transferable (other than by will or the laws of descent and
distribution), the exercise price must not be less than 100% of the fair market
value of the common stock on the date of grant, the term of the option may not
exceed ten years from the date of grant, and no more than $100,000 of options
may become exercisable for the first time in any calendar year. Notwithstanding
the foregoing requirements, incentive stock options granted to any person who is
the beneficial owner of more than 10% of the outstanding voting stock of the
Company may be exercised only for a period of five years from the date of grant
and the exercise price must be at least equal to 110% of the fair market value
of the
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<PAGE> 15
underlying common stock on the date of grant. Each non-employee director of the
Company or its affiliates, as well as employees, will be eligible to receive
non-statutory stock options.
Unless the Committee determines otherwise, upon termination of an option
holder's services for any reason other than death, disability, retirement,
change in control or termination for cause, all then exercisable options will
remain exercisable for three months following termination, or if sooner, the
expiration of the term of the option. If an option holder dies or becomes
disabled all unexercisable options will become exercisable and remain
exercisable for one year, or if sooner, the expiration of the term of the
option. In the event of termination for cause, all exercisable and unexercisable
options held by the option holder will be canceled. If an option holder retires,
all unvested options will be canceled and all vested options will remain
exercisable for one year following retirement. However, the Committee may permit
all unvested stock options to continue to vest provided the option holder
remains employed by Security Financial or Security Federal as a consultant or
advisor or continues to serve Security Financial or Security Federal as a
director, advisory director or director emeritus. In the event an option holder
is terminated in connection with a change in control of Security Financial or
Security Federal, the option holder may exercise only those options that are
immediately exercisable as of the option holder's date of termination of service
for a period of one (1) year following his or her termination date. Incentive
stock options exercised more than three months after an option holder has
terminated service in connection with a change in control or retirement will be
treated as non-statutory stock options for tax purposes.
Under generally accepted accounting principles, compensation expense is
generally not recognized with respect to the award of stock options.
RESTRICTED STOCK AWARDS. Subject to the terms of the plan and applicable
regulation, the Committee has the authority to determine the amounts of
restricted stock awards granted to any individual and the dates on which
restricted stock awards granted will vest or any other conditions which must be
satisfied before vesting. Stock award recipients may also receive amounts equal
to accumulated cash and stock dividends or other distributions (if any) with
respect to shares awarded in the form of restricted stock. In addition, before
vesting, recipients of restricted stock awards may also direct the voting of
shares of common stock granted to them.
Unless the Committee determines otherwise, upon termination of the
services of a holder of a stock award for any reason other than death,
disability or retirement, all the holder's rights in unvested restricted stock
awards will be canceled. If the holder of the stock award dies or becomes
disabled, all unvested restricted stock awards held by such individual will
become fully vested. If the holder of a stock award retires, all unvested
restricted stock awards held by such individual will be canceled. However, the
Committee may permit all unvested stock awards to continue to vest provided the
holder of a stock award remains employed by Security Financial or Security
Federal as a consultant or advisor or continues to serve Security Financial or
Security Federal as a director, advisory director or director emeritus.
FEDERAL INCOME TAX TREATMENT
OPTIONS. An option holder will generally not be deemed to have recognized
taxable income upon grant or exercise of any incentive stock option, provided
that shares transferred in connection with the exercise are not disposed of by
the optionee for at least one year after the date the shares are transferred in
connection with the exercise of the option and two years after the date of grant
of the option. If these holding periods are satisfied, upon disposal of the
shares, the aggregate difference between the per share option
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<PAGE> 16
exercise price and the fair market value of the common stock is recognized as
income taxable at capital gains rates. No compensation deduction may be taken by
the Company as a result of the grant or exercise of incentive stock options,
assuming these holding periods are met.
In the case of the exercise of a non-statutory stock option, an option
holder will be deemed to have received ordinary income upon exercise of the
option in an amount equal to the aggregate amount by which the fair market value
of the common stock exceeds the exercise price of the option. If shares received
through the exercise of an incentive stock option are disposed of before the
satisfaction of the holding periods (a "disqualifying disposition"), the
exercise of the option will essentially be treated as the exercise of a
non-statutory stock option, except that the option holder will recognize the
ordinary income for the year in which the disqualifying disposition occurs. The
amount of any ordinary income recognized by an optionee upon the exercise of a
non-statutory stock option or due to a disqualifying disposition will be a
deductible expense of the Company for federal income tax purposes.
RESTRICTED STOCK AWARDS. A participant who has been awarded restricted
stock under the plan and does not make an election under Section 83(b) of the
Internal Revenue Code will not recognize taxable income at the time of the
award. At the time any transfer or forfeiture restrictions applicable to the
restricted stock award lapse, the recipient will recognize ordinary income and
the Company will be entitled to a corresponding deduction equal to the excess of
the fair market value of such stock at such time over the amount paid, if any,
therefor. Any dividend paid to the recipient on the restricted stock at or
before such time will be ordinary compensation income to the recipient and
deductible as such by the Company.
A recipient of a restricted stock award who makes an election under
Section 83(b) of the Code will recognize ordinary income at the time of the
award and the Company will be entitled to a corresponding deduction equal to the
fair market value of such stock at such time over the amount paid, if any,
therefor. Any dividends subsequently paid to the recipient on the restricted
stock will be dividend income to the recipient and not deductible by the
Company. If the recipient makes a Section 83(b) election, there are no federal
income tax consequences either to the recipient or the Company at the time any
transfer or forfeiture restrictions applicable to the restricted stock award
lapse.
ALTERNATE OPTION PAYMENTS
Subject to the terms of the plan, the Committee has discretion to
determine the form of payment for the exercise of an option. The Committee may
indicate acceptable forms in the award agreement covering such options or may
reserve its decision to the time of exercise. An option will not be considered
exercised until payment in full is accepted by the Committee. Any shares of
common stock tendered in payment of the exercise price of an option will be
valued at the fair market value of the common stock on the date before the date
of exercise.
AMENDMENTS
Subject to certain restrictions contained in the plan, the Board of
Directors or the Committee may amend the plan in any respect, at any time,
provided that no amendment may affect the rights of the holder of an award
without his or her permission and such amendment must comply with applicable law
and regulation.
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<PAGE> 17
ADJUSTMENTS
If there is any change in the outstanding shares of common stock of the
Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, or if an
extraordinary capital distribution is made, including the payment of an
extraordinary dividend, the Committee may make such adjustments to previously
granted awards, to prevent dilution, diminution or enlargement of the rights of
the holder; provided, however, that in the case of an extraordinary dividend,
the Committee may be required to obtain approval of the Office of Thrift
Supervision before any such adjustment. All awards under the plan will be
binding upon any successors or assigns of the Company.
NONTRANSFERABILITY
Unless the Committee determines otherwise, awards under the plan will not
be transferable by the recipient other than by will or the laws of intestate
succession or according to a domestic relations order. With the consent of the
Committee, a recipient may permit transferability or assignment for valid estate
planning purposes of a non-statutory stock option as permitted under the
Internal Revenue Code or federal securities laws and a participant may designate
a person or his or her estate as beneficiary of any award to which the recipient
would then be entitled, if the participant dies.
STOCKHOLDER APPROVAL, EFFECTIVE DATE OF PLAN AND REGULATORY COMPLIANCE
The plan provides that it shall become effective on January 6, 2001,
subject to prior approval of the plan by the Company's stockholders. The
effective date has been delayed until January 6, 2001 to ensure compliance with
federal regulations that would otherwise limit the terms of awards under the
plan and, specifically, the circumstances in which the vesting of outstanding
awards may be accelerated. Accordingly, assuming stockholder approval, the plan
may not be implemented and no awards may be made before January 6, 2001.
Implementation of the plan is subject to the regulations of the Office of Thrift
Supervision. The Office of Thrift Supervision has not endorsed or approved the
plan.
NEW PLAN BENEFITS
As of the date of this proxy statement, no decisions have been made
regarding the granting of any options or stock awards under the plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
SECURITY FINANCIAL BANCORP, INC. 2000 STOCK-BASED INCENTIVE PLAN.
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PROPOSAL 3 -- RATIFICATION OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
The Board of Directors has appointed Crowe, Chizek and Company LLP to be
its independent auditors for the 2001 fiscal year, subject to the ratification
by stockholders. A representative of Crowe, Chizek and Company LLP is expected
to be present at the annual meeting to respond to appropriate questions from
stockholders and will have the opportunity to make a statement should he or she
desire to do so.
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<PAGE> 18
If the ratification of the appointment of the independent auditors is not
approved by a majority of the votes cast by stockholders at the annual meeting,
the Board of Directors may consider other independent auditors. THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS.
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STOCKHOLDER PROPOSALS AND NOMINATIONS
------------------------------------------------------------------------------
Proposals that stockholders seek to have included in the proxy statement
for the Company's next annual meeting must be received by the Company no later
than May 22, 2001. If next years annual meeting is held on a date more than 30
calendar days from October 19, 2001, a stockholder proposal must be received by
a reasonable time before the proxy solicitation for such annual meeting is made.
Any stockholder proposals will be subject to the requirements of the proxy rules
adopted by the Securities and Exchange Commission.
The Company's Bylaws provides that in order for a stockholder to make
nominations for the election of directors or proposals for business to be
brought before the annual meeting, a stockholder must deliver notice of such
nominations and/or proposals to the Secretary not less than 90 days before the
date of the annual meeting; provided that if less than 100 days' notice or prior
public disclosure of the date of the annual meeting is given to stockholders,
such notice must be delivered not later than the close of the tenth day
following the day on which notice of the date of the annual meeting was mailed
to stockholders or prior public disclosure of the meeting date was made. A copy
of the Bylaws may be obtained from the Company.
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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. The Company has retained Georgeson Shareholder Communication, Inc.
to assist in soliciting proxies for a fee of $4,000, plus reimbursable expenses.
The Company's Annual Report to Stockholders has been mailed to
stockholders as of the close of business on ___________, 2000. Any stockholder
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.
A COPY OF THE COMPANY'S FORM 10-KSB, WITHOUT EXHIBITS, FOR THE FISCAL YEAR
ENDED JUNE 30, 2000, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL
BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE CLOSE OF BUSINESS ON
___________, 2000 UPON WRITTEN REQUEST TO LAWRENCE R. PARDUCCI, CORPORATE
SECRETARY, SECURITY FINANCIAL BANCORP, INC., 9321 WICKER AVENUE, ST. JOHN,
INDIANA 46373.
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<PAGE> 19
Whether or not you plan to attend the annual meeting, please vote by
marking, signing, dating and promptly returning the enclosed WHITE proxy card in
the enclosed WHITE envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Lawrence R. Parducci
CORPORATE SECRETARY
St. John, Indiana
___________, 2000
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<PAGE> 20
REVOCABLE PROXY
SECURITY FINANCIAL BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 2000
5:00 P.M., LOCAL TIME
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of Security
Financial Bancorp, Inc. (the "Company") 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
stockholders, to be held on October 19, 2000, at 5:00 p.m., local time, at
Security Financial'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).
John P. Hyland, Tula Kavadias and Philip T. Rueth
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.
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2. The approval of the Security Financial Bancorp, Inc. 2000 Stock-Based
Incentive Plan.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
3. 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, 2001.
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
<PAGE> 21
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 PROPOSALS
LISTED. 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:________________________________
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SIGNATURE OF STOCKHOLDER
--------------------------------------
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 Stockholders and of a
Proxy Statement dated ___________, 2000 and of the Annual Report to
Stockholders.
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.
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PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS WHITE PROXY IN THE
ENCLOSED POSTAGE-PAID WHITE ENVELOPE.
