SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-
11(c) or Rule 14a-12
</TABLE>
SOUTHERN FINANCIAL BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
.....................................................................
(2) Aggregate number of securities to which transaction applies:
.....................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
.....................................................................
(4) Proposed maximum aggregate value of transaction:
.....................................................................
(5) Total fee paid:
.....................................................................
[ ] Fee paid previously with preliminary materials.
.....................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
.....................................................................
(2) Form, Schedule or Registration Statement no.:
.....................................................................
(3) Filing Party:
.....................................................................
(4) Date Filed:
.....................................................................
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of Southern Financial Bancorp, Inc. (the "Company"), which will be held on April
23, 1998 at 2:00 p.m., at the Fauquier Springs Country Club, Springs Road,
Warrenton, Virginia 20186.
At the Meeting, two directors of the Company will be elected for a term
of three years. Whether or not you plan to attend in person, it is important
that your shares be represented at the Meeting. Please complete, sign, date and
return promptly the enclosed form of proxy. If you later decide to attend the
Meeting and vote in person, or if you wish to revoke your proxy for any reason
prior to the vote at the Meeting, you may do so and your proxy will have no
further effect.
The Board of Directors and management of the Company appreciate your
continued support and look forward to seeing you at the Annual Meeting.
Sincerely yours,
GEORGIA S. DERRICO
Chairman and
Chief Executive Officer
Warrenton, Virginia
March 20, 1998
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
37 E. Main Street
Warrenton, Virginia 20186
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of shares
of Common Stock, par value $0.01 per share (the "Common Stock") of Southern
Financial Bancorp, Inc. (the "Company") will be held at the Fauquier Springs
Country Club, Springs Road, Warrenton, Virginia, on April 23, 1998 at 2:00 p.m.,
for the following purposes:
1. To elect two directors to serve on the Company's Board of
Directors for a term of three years, or until their successors
are elected and qualify;
2. To ratify the designation by the Board of Directors of KPMG Peat
Marwick LLP as auditors for the fiscal year ended December 31,
1997 and the fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on February 28,
1998 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
Mary F. Henward,
Secretary
Warrenton, Virginia
March 20, 1998
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THIS MEETING. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED REGARDLESS OF THE NUMBER THAT YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
-2-
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS
April 23, 1998
GENERAL INFORMATION
This Proxy Statement is furnished to holders of common stock, $.01 par
value per share ("Common Stock"), of Southern Financial Bancorp, Inc. (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors (the "Board") of the Company to be used at the Annual Meeting of
Shareholders to be held on April 23, 1998 at 2:00 p.m. at the Fauquier Springs
Country Club, Springs Road, Warrenton, Virginia (the "Annual Meeting") and any
adjournment thereof.
The principal executive offices of the Company are located at 37 E.
Main Street, Warrenton, Virginia 20186, telephone (540) 349-3900. The
approximate date on which this Proxy Statement, the accompanying proxy card and
Annual Report to Shareholders (which is not part of the Company's soliciting
materials) are being mailed to the Company's shareholders is March 20, 1998. The
cost of soliciting proxies will be borne by the Company.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained thereon. If no contrary instructions are given, each
proxy received will be voted "for" the proposals described herein. Any
shareholder giving a proxy has the power to revoke it at any time before it is
exercised by (i) filing written notice thereof with Lynette D. Ridgley, Vice
President, Southern Financial Bancorp, Inc., 37 E. Main Street, Warrenton,
Virginia 20186; (ii) submitting a duly executed proxy bearing a later date; or
(iii) appearing at the Annual Meeting or at any adjournment thereof and giving
the Secretary notice of his or her intention to vote in person. Proxies
solicited hereby may be exercised only at the Annual Meeting and any adjournment
thereof and will not be used for any other meeting.
Only shareholders of record at the close of business on February 28,
1998 (the "Record Date") will be entitled to vote at the Annual Meeting. On the
Record Date, there were 1,592,781 shares of Common Stock issued and outstanding
and 274 record holders. Each share of Common Stock is entitled to one vote at
the Annual Meeting. The Company had 15,634 shares of preferred stock issued and
outstanding at the Record Date. Holders of preferred stock are not entitled to
notice of, or to vote at, the Annual Meeting.
As of the Record Date, directors and executive officers of the Company
and their affiliates, persons and entities as a group, owned beneficially a
total of 443,044 shares of Common Stock, or approximately 25.30% of the shares
of Common Stock outstanding on such date. Directors and executive officers of
the Company have indicated an intention to vote their shares of Common Stock FOR
the election of the nominees set forth on the enclosed proxy.
<PAGE>
A shareholder may abstain or (only with respect to the election of
directors) withhold his or her vote (collectively, "abstentions") with respect
to each item submitted for shareholder approval. Abstentions will be counted for
purposes of determining the existence of a quorum. Abstentions will be counted
as not voting in favor of the relevant item. Since the election of directors is
determined by a plurality vote, abstentions will not affect such election.
A broker who holds shares in street name has the authority to vote on
certain items when it has not received instructions from the beneficial owner.
Except for certain items for which brokers are prohibited from exercising their
discretion, a broker is entitled to vote on matters put to shareholders without
instructions from the beneficial owner. Where brokers do not have or do not
exercise such discretion, the inability or failure to vote is referred to as a
broker non-vote. Under the circumstances where the broker is not permitted to or
does not exercise its discretion, assuming proper disclosure to the Company of
such inability to vote, broker non-votes will be counted for purposes of
determining the existence of a quorum, but also will be counted as not voting in
favor of the particular matter.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the Board shall be
divided into three classes as nearly equal in number as possible. The members of
each class are to be elected for a term of three years and until their
successors are elected and qualify. One class of directors is elected annually.
Two directors are to be elected at the Annual Meeting to serve for a term of
three years.
The Board acts as a nominating committee for selecting the nominees for
election as directors. The nominating committee delivers written nominations to
the secretary of the Company at least twenty days prior to the date of the
Annual Meeting. The Board has no reason to believe that any of the nominees will
be unavailable to serve as a director if elected. Five other directors have been
elected to terms that end either in 1999 or 2000, as indicated below.
The Company's Bylaws provide, however, that shareholders entitled to
vote for the election of directors may name nominees for election to the Board.
Under the Company's Bylaws, notice of a proposed nomination meeting certain
specified requirements must be received by the Company not less than 60 nor more
than 90 days prior to any meeting of shareholders called for the election of
directors, provided in each case that, if fewer than 70 days' notice of the
meeting is given to shareholders, such written notice shall be received not
later than the close of the tenth day following the day on which notice of the
meeting was mailed to shareholders.
The Company's Bylaws require that the shareholder's notice set forth as
to each nominee (i) the name, age, business address and residence address of
such nominee, (ii) the principal occupation or employment of such nominee, (iii)
the class and number of shares of the Company that are beneficially owned by
such nominee, and (iv) any other information relating to such nominee that is
required under federal securities laws to be disclosed in solicitations of
proxies for the election of directors, or is otherwise required (including,
without limitation, such nominee's written consent to being named in a proxy
statement as nominee and to serving as a director if elected). The Company's
Bylaws further require that the shareholder's notice set forth as to the
shareholder giving the notice (i) the name and address of such shareholder and
(ii) the class and amount of such shareholder's beneficial ownership of the
Company's capital stock. If the information supplied by the shareholder is
deficient in any material aspect or if the foregoing procedure is not followed,
the chairman of the annual meeting may determine that such shareholder's
nomination should not be brought before the annual meeting and that such nominee
shall not be eligible for election as a director of the Company.
-2-
<PAGE>
Unless authority is withheld in the proxy, each proxy executed and
returned by a shareholder will be voted for the election of the nominees listed
below. Proxies distributed in conjunction herewith may not be voted for persons
other than the nominees named thereon. If any person named as nominee should be
unable or unwilling to stand for election at the time of the Annual Meeting, the
proxy holders will nominate and vote for a replacement nominee or nominees
recommended by the Board. At this time, the Board knows no reason why any of the
nominees listed below may not be able to serve as a director if elected. The
proxy also confers discretionary authority upon the persons named therein, or
their substitutes, with respect to any other matter that may properly come
before the meeting.
In the election of directors, those receiving the greatest number of
votes will be elected even if they do not receive a majority. Abstentions and
broker non-votes will not be considered a vote for, or a vote against, a
director.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES BE ELECTED AS DIRECTORS.
NOMINEES FOR ELECTION FOR TERM EXPIRING IN 2001
<TABLE>
<CAPTION>
Year First
Name; Age; Principal Occupation for Past Five Years; Elected as
and Directorships in Public Corporations Director
---------------------------------------- --------
<S> <C> <C>
Georgia S. Derrico 53, Chairman of the Board and Chief Executive Officer 1986
of the Company since 1986; having served as Senior Vice
President, Chief Administrative and Credit Officer,
Multinational Division, District Head of Chemical Bank
prior thereto.
John L. Marcellus, Jr. 75, Retired President and Chairman of the Board, 1986
Oneida, Ltd., a silverware manufacturing company. Other
directorship: Kuhlman Corporation.
</TABLE>
INCUMBENT DIRECTORS SERVING FOR TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
Year First
Name; Age; Principal Occupation for Past Five Years; Elected as
and Directorships in Public Corporations Director
---------------------------------------- --------
<S> <C> <C>
Virginia Jenkins 50, Owner, V. Jenkins Interiors and Antiques. 1988
Michael P. Rucker 57, Executive with Caterpillar, Inc., a manufacturing 1991
company; Chairman of the Board, George H. Rucker Realty
Corp., a real estate development company.
</TABLE>
-3-
<PAGE>
INCUMBENT DIRECTORS SERVING FOR TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
Year First
Name; Age; Principal Occupation for Past Five Years; Elected as
and Directorships in Public Corporations Director
---------------------------------------- --------
<S> <C> <C>
Neil J. Call 64, Executive Vice President, MacKenzie Partners, Inc., 1986
a New York financial consulting company, since 1990;
having served as Executive Vice President, D.F. King &
Co., Inc. from 1986 to 1990; and Executive Vice
President, Finance, Gulf and Western Industries prior
thereto.
David de Give 55, Senior Vice President of the Company since 1992; 1986
having been a cattle breeder and private investor from
1989 to 1992; having served as President, Newmarket
Capital Corp., a mortgage company, from 1986 to 1989;
and Vice President in charge of U.S. Funding, Chemical
Bank, prior thereto.
R. Roderick Porter 52, President, FX Concepts, Ltd., an international 1986
money management firm, since January 1994; having
served as Managing Director, West Capital, Inc., a real
estate advising firm, from 1992 to 1994; Chairman,
Newmarket Capital Corp., a mortgage company; and
Principal of Morgan Stanley prior thereto.
</TABLE>
In 1997, each director attended at least 75% of the aggregate of (i)
the total number of meetings of the Board and (ii) the total number of meetings
of all committees of the Board on which the director then served. Seven meetings
of the Board were held during 1997.
Committees of the Board
The Asset/Liability Management Committee has authority for policy
formulation and administration of the Company's asset/liability management
policies. The Asset/Liability Management Committee, which consists of Ms.
Derrico and Messrs. Porter (Chairman) and de Give, reports monthly to the Board
on the interest sensitivity of the Company, including an analysis of the
duration of the Company's assets, liabilities and contingent liabilities as well
as the mortgage pipeline and a calculation of the duration of the Company's
equity. The Asset/Liability Management Committee met seven times during 1997.
The Asset/Liability Management Committee frequently discusses policy issues by
teleconference (see "Compensation of Directors").
The Credit Committee has authority and responsibility to oversee the
prudent operation of the Company's lending function, including the ongoing
qualitative review of the loan portfolio. The Credit Committee, which consists
of Ms. Derrico and Messrs. Call (Chairman) and Rucker, is responsible for
reviewing all loans and approving loans above a certain minimum amount, and for
insuring the development and maintenance of sound credit policies and
procedures. The Credit Committee met in person three times during 1997. The
Credit Committee frequently discusses credit issues by teleconference (see
"Compensation of Directors").
-4-
<PAGE>
The Audit Committee assists the Board in fulfilling its fiduciary
responsibilities relating to corporate accounting and reporting practices of the
Company. The Audit Committee consists of Messrs. Call (Chairman) and Marcellus
and Ms. Jenkins and met one time during 1997.
The Compensation Committee reviews the performance of, and establishes
the compensation for, the executive officers of the Company. The Company's
executive compensation programs are designed to retain and reward executives
based upon (i) their individual performance and ability to lead the Company to
achieving its goals and (ii) the Company's performance. The Compensation
Committee consists of Messrs. Call and Marcellus (Chairman) and Ms. Jenkins and
met two times during 1997.
Certain Relationships and Related Transactions
Georgia S. Derrico, Chairman of the Board and Chief Executive Officer
and a director of the Company, and R. Roderick Porter, a director of the
Company, are married to each other.
It is currently the Company's policy not to make loans to members of
its executive management. However, the following residential mortgage loan from
the Company to William H. Lagos, the Company's Senior Vice President and
Controller, currently is outstanding:
<TABLE>
<CAPTION>
Name and Type Year Original Loan Highest Balance Balance as of Interest Rate at
of Loan Made Balance During 1997 December 31, 1997 December 31, 1997
------- ---- ------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
One Year
Adjustable 1987 $138,000 $116,987 $113,757 5.25%
</TABLE>
STOCK OWNERSHIP
The following table lists those persons (including any "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) who, to the knowledge of the Company, were the
beneficial owner of more than 5% of the outstanding voting shares of the
Company, as of January 31, 1998.
<TABLE>
<CAPTION>
Name and Address of Number of Percent
Title of Class Beneficial Owners Shares(1) of Class
- -------------- ----------------- --------- --------
<S> <C> <C> <C>
Common Stock Georgia S. Derrico(2) 179,786(3) 10.74%
R. Roderick Porter
2954 Burrland Lane
The Plains, Virginia 20171
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of Percent
Title of Class Beneficial Owners Shares(1) of Class
- -------------- ----------------- --------- --------
<S> <C> <C>
Max C. Chapman 127,118 7.98%
Nomura Holding America
2 World Financial Center
Building B
New York, New York 10281-1198
The Torray Companies 123,101(4) 7.73%
Robert E. Torray
6610 Rockledge Drive, Suite 450
Bethesda, Maryland 20817
Value Partners, Ltd. 117,289(5) 7.36%
Fisher Ewing Partners
Richard W. Fisher
Timothy G. Ewing
2200 Ross Avenue, Suite 4600
West Dallas, Texas 75201
Hovde Capital, L.L.C. *(6) *
Financial Institution Partners II, L.P.
1629 Colonial Parkway
Inverness, Illinois 60067
Salem Investment Counselors, Inc. 98,848(7) 6.21%
P. O. Box 25427
Winston-Salem, North Carolina 27114-5427
David G. Booth(8) 95,635(9) 5.89%
Jane Marvel Garnett
24 Monroe Place #9A
Brooklyn, New York 11201
</TABLE>
____________________________
(1) Except as otherwise indicated, includes shares held directly, as well as
shares held in retirement accounts or by certain family members or
corporations over which the named individuals may be deemed to have
voting or investment power.
(2) Georgia S. Derrico and R. Roderick Porter are married to each other.
(3) Includes (a) 78,689 shares owned individually by Ms. Derrico over which
she has sole voting and investment power and 76,856 shares that Ms.
Derrico may acquire pursuant to the exercise of stock options; and (b)
20,202 shares of Common Stock and 4,039 shares of convertible preferred
stock owned individually by Mr. Porter over which he has sole investment
power. Ms. Derrico and Mr. Porter disclaim beneficial ownership of each
other's shares.
(4) The Torray Fund, as managed by The Torray Corporation, beneficially owns
86,236 shares. The Torray Corporation may be deemed to have sole voting
and investment power over all such shares. Robert E. Torray, President
of The Torray Corporation, may be deemed to have shared voting and
investment power over these shares. Robert E.
-6-
<PAGE>
Torray & Co., Inc. beneficially owns, on behalf of its clients, 36,865
shares. Mr. Torray may be deemed to have sole voting and investment
power over 28,130 of such shares.
(5) Value Partners, Ltd., as managed by Fisher Capital Management,
beneficially owns 117,289 shares. Fisher Ewing Partners may be deemed to
have sole voting and investment power over all such shares.
(6) Hovde Capital, L.L.C. is the General Partner of Financial Institution
Partners II, L.P. As of January 31, 1998, neither Hovde Capital, L.L.C.
nor Financial Institution Partners II, L.P. beneficially owned any
shares of Common Stock. On February 11, 1998, Financial Institution
Partners II, L.P. purchased 100,000 shares of Common Stock, or 6.28% of
the outstanding voting shares of the Company. Hovde Capital, L.L.C. and
Financial Institution Partners II, L.P. may be deemed to have shared
voting and investment powers over all such shares.
(7) Salem Investment Counselors, Inc. beneficially owns 98,848 shares and
may be deemed to have sole voting and investment power over all such
shares.
(8) David G. Booth and Jane Marvel Garnett are married to each other.
(9) Includes 1,028 shares owned by Mr. Booth and 94,607 shares owned by Ms.
Garnett. The Company makes no representation as to whether Mr. Booth and
Ms. Garnett share voting or investment power with respect to their
shares.
The following table sets forth as of January 31, 1998 the beneficial
ownership of Common Stock by all directors and nominees, each of the named
executive officers, and directors and executive officers of the Company as a
group. Unless otherwise indicated, each person listed below has sole voting and
investment power over all shares beneficially owned by such person.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
with Sole Voting with Shared
and Investment Voting and Total Number Percent of
Name of Beneficial Owner Power(6) Investment Power of Shares Class
- ------------------------ -------- ---------------- --------- -----
<S> <C> <C> <C> <C>
R. Roderick Porter 24,241 155,545 179,786(2) 10.74
Neil J. Call 40,340 -0- 40,340(3) 2.52
David de Give 68,541 2,297 70,838 4.35
Georgia S. Derrico 155,545 24,241 179,786(2) 10.74
John L. Marcellus 15,008 640 15,648(4) * (1)
Virginia Jenkins 2,263 -0- 2,263 * (1)
Michael P. Rucker 12,618 64,365 76,983(5) 4.82
William H. Lagos 33,290 534 33,824 2.11
-7-
<PAGE>
Number of Shares Number of Shares
with Sole Voting with Shared
and Investment Voting and Total Number Percent of
Name of Beneficial Owner Power(6) Investment Power of Shares Class
- ------------------------ -------- ---------------- --------- -----
Linda Sandridge 12,821 -0- 12,821 * (1)
Laura L. Vergot 10,463 78 10,541 * (1)
Directors and Officers as a
Group (10 persons) 375,130 247,700 443,044 25.30
</TABLE>
_______________________________
(1) Ms. Jenkins, Mr. Marcellus, Ms. Sandridge and Ms. Vergot own less than
1% of the outstanding shares of Common Stock.
(2) Includes (a) 78,689 shares owned individually by Ms. Derrico over which
she has sole voting and investment power and 76,856 shares that Ms.
Derrico may acquire pursuant to the exercise of stock options; and (b)
20,202 shares of Common Stock and 4,039 shares of convertible preferred
stock owned individually by Mr. Porter over which he has sole investment
power. Ms. Derrico and Mr. Porter disclaim beneficial ownership of each
other's shares.
(3) Includes 33,331 shares of Common Stock and 7,009 shares of convertible
preferred stock.
(4) Includes 13,427 shares of Common Stock and 2,221 shares of convertible
preferred stock.
(5) Includes 11,627 shares of Common Stock and 991 shares of convertible
preferred stock owned by Michael Rucker, 5,973 shares of Common Stock
and 2,402 shares of convertible preferred stock owned by Derek Rucker,
8,378 shares of Common Stock owned by Lucy Jones, 5,025 shares of Common
Stock owned by Susan Jones Cooper, 4,832 shares of Common Stock owned by
David Dodrill and 37,755 shares of Common Stock owned by Rucker Realty
and persons associated with Rucker Realty. The Company makes no
representation as to whether any of these persons, individually or in
any combination, share voting or investment power with any other or with
Rucker Realty with respect to their shares.
(6) The amounts in this column include shares of Common Stock with respect
to which certain persons have the right to acquire beneficial ownership
within sixty days after December 31, 1997, pursuant to the Company's
1986 Stock Option and Incentive Plan, as amended in 1987, and as
superseded by the Company's 1993 Stock Option and Incentive Plan: Mr. de
Give: 37,403 shares; Ms. Derrico: 76,856 shares; Mr. Lagos: 11,802
shares; Ms. Sandridge: 9,717 shares; Ms. Vergot: 7,298 shares; and the
directors and officers as a group: 143,076 shares.
-8-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation
The following table presents information relating to total compensation
of the Chief Executive Officer and the other named executive officers of the
Company for the years ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compen-
------------------- sation
------
Securities
Underlying
Name and Other Annual Options All Other
Principal Position Year Salary Bonus Compensation(1) (#) Compensation(2)
- ------------------ ---- ------ ----- --------------- --- ---------------
<S> <C> <C> <C> <C> <C> <C>
Georgia S. Derrico 1997 $175,000 $175,000 -- 10,000 $4,500
Chairman of the Board 1996 175,000 132,500 -- 22,003 4,500
and Chief Executive 1995 175,000 100,000 -- 14,667 4,500
Officer
David de Give 1997 $84,240 $12,000 -- 3,000 $2,887
Senior Vice President 1996 84,240 25,000 -- 13,203 3,240
1995 78,000 25,000 -- 8,800 3,108
William H. Lagos 1997 $87,125 $10,000 -- 8,000 $2,913
Senior Vice President 1996(3) 51,875 12,500 -- 8,802 500
and Controller 1995 105,000 25,000 -- 8,800 3,917
Linda Sandridge 1997 $51,120 $16,000 -- 3,000 $ 900
Senior Vice President 1996 46,960 10,000 -- 1,652 900
1995 44,935 8,000 -- 1,613 900
Laura L. Vergot 1997 $50,144 $16,000 -- 3,000 $1,984
Senior Vice President 1996 44,615 10,000 -- 1,652 1,640
1995 41,520 7,000 -- 1,613 1,457
</TABLE>
_________________________
(1) None of the named executive officers received Other Annual Compensation
in excess of the lesser of $50,000 or 10% of combined salary and bonus
for the years indicated.
(2) The amounts set forth in this column constitute contributions to the
Company's 401(k) Plan.
(3) Mr. Lagos did not work for the Company from June 1, 1996 through
November 30, 1996.
-9-
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth for the year ended December 31, 1997,
the grants of stock options to the named executive officers:
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants(1) Option Term
------------------------------------------------------------- -----------
Percent of
Number of Total Options
Securities Granted to
Underlying Employees in Exercise of
Options Fiscal Year Base Price Expiration
Name Granted (#) (%)(2) ($/Share) Date 5% ($) 10% ($)
- ---- ----------- ------ --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Georgia S. Derrico 10,000 31.75 16.00 7/31/07 260,623 414,999
David de Give 3,000 9.52 16.00 7/31/07 78,187 124,500
William H. Lagos 3,000 25.40 13.75 1/30/07 67,192 106,992
5,000 16.00 7/31/07 130,312 207,499
Linda Sandridge 3,000 9.52 16.00 7/31/07 78,187 124,500
Laura L. Vergot 3,000 9.52 16.00 7/31/07 78,187 124,500
</TABLE>
________________________
(1) Stock options were awarded at the fair market value of the shares of
Common Stock at the date of award and are exercisable after January 30,
1998 and July 31, 1998.
(2) Options to purchase 27,000 shares of Common Stock were granted to
executive officers during the year ended December 31, 1997.
-10-
<PAGE>
Option Exercises in Last Fiscal Year
Set forth in the table below is information concerning each exercise of
stock option during the fiscal year ended December 31, 1997 by each of the named
executive officers and the year end value of unexercised options.
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at December 31, 1997 (#)(1) at December 31, 1997 ($)(2)
--------------------------- ----------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Georgia S. Derrico 12,907 103,256 76,856 10,000 857,690 60,000
David de Give -- -- 37,403 3,000 398,830 18,000
William H. Lagos -- -- 8,802 8,000 73,585 54,750
Linda Sandridge -- -- 9,717 3,000 115,091 18,000
Laura L. Vergot -- -- 7,298 3,000 82,911 18,000
</TABLE>
__________________________
(1) Each of these Options relates to Common Stock.
(2) These values are based on $22.00, the closing price of Common Stock on
December 31, 1997.
Employment Agreements
The Company entered into an employment agreement with Ms. Derrico in
1996 for a term of three years with automatic one-year extensions. If, during
the term of the agreement, there is a change in control of the Company and
within 12 months thereafter Ms. Derrico's employment is terminated for good
reason (as provided in the agreement) or on account of disability (as provided
in the agreement), Ms. Derrico shall be entitled to receive severance pay equal
to three times the sum of her annual base salary at its highest rate during the
preceding 12 months and her highest annual bonus during the three preceding
calendar years. The term "change in control" as used in Ms. Derrico's agreement
shall refer generally to (i) the acquisition of 25% or more of the voting
securities of the Company by any "person" (within the definition of Section
13(d) of the Exchange Act), (ii) the acquisition of 10% or more of the voting
securities of the Company by any such person if the Board has made a
determination that such acquisition constitutes or will constitute control of
the Company, (iii) the approval by the Company's shareholders of an agreement to
merge or consolidate with another corporation if the directors who constitute
the Board six months prior to such approval cease to constitute a majority
during the period therefrom and ending two years after such approval, and (iv)
the sale by the Company of 80% or more of its assets to any such person.
-11-
<PAGE>
The Company entered into an employment agreement with Mr. Lagos in 1997
for a term of 18 months with automatic one-year extensions. If, during the term
of the agreement, Mr. Lagos' employment is terminated in connection with or
subsequent to a change of control of the Company by (i) the Company other than
for cause or as a result of Mr. Lagos' death, disability or retirement, or (ii)
Mr. Lagos for good reason (as provided in the agreement), Mr. Lagos shall be
entitled to receive severance pay equal to 150% of the total cash compensation
paid to him during the previous 12 months. The term "change in control" as used
in his agreement shall refer generally to (i) the acquisition of 40% or more of
the voting securities of the Company by any "person" or "group" (within the
definition of Section 13(d) and 14(d) of the Exchange Act), (ii) a change in the
composition of the Board to less than a majority of incumbent directors (as
defined in the agreement), or (iii) the approval by the Company's shareholders
of either a business combination with any other person or group, other than a
merger or consolidation that would result in the Common Stock outstanding
immediately prior thereto representing at least 50% of the Common Stock of the
surviving entity outstanding immediately thereafter, or a plan of liquidation or
sale or disposition of all or substantially all of the Company's assets.
Compensation of Directors
Each member of the Board who was not an employee of the Company or any
of its subsidiaries is paid (i) $500 for attendance at each Board meeting and
(ii) $150 for attendance at each meeting of a committee of the Board of which he
or she is a member. Directors are not compensated for meetings conducted by
teleconference. In addition, each director is paid an annual fee of $3,000.
Employee members of the Board are not paid separately for their service on the
Board or its committees.
DESIGNATION OF AUDITORS
The Board has designated KPMG Peat Marwick LLP, Certified Public
Accountants, as the Company's independent auditors for the fiscal year ended
December 31, 1997 and the fiscal year ending December 31, 1998, subject to
shareholder ratification. A representative of KPMG Peat Marwick LLP is expected
to be present at the Annual Meeting, will have the opportunity to make a
statement if he or she desires to do so, and is expected to be available to
respond to appropriate questions.
The principal function of KPMG Peat Marwick LLP is to audit the
consolidated financial statements of the Company and its subsidiaries and, in
connection with that audit, to review certain related filings with the
Securities and Exchange Commission and to conduct limited reviews of the
financial statements included in each of the Company's quarterly reports.
The Company's financial statements have previously been audited by
Arthur Anderson LLP, Certified Public Accountants, for the fiscal year ended
June 30, 1995, the six month period ended December 31, 1995, and the year ended
December 31, 1996. On June 26, 1997, Arthur Anderson LLP was terminated as
independent auditors for the Company. Arthur Anderson LLP's reports on the
Company's financial statements for the last two years of Arthur Anderson LLP's
engagement did not contain an adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope, or accounting
principles. For the Company's last two fiscal years and any interim periods
preceding Arthur Anderson LLP's termination, there was no disagreement with
Arthur Anderson LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Arthur Anderson LLP, would
have caused it to make a reference to the subject matter of the disagreement in
connection with its report.
-12-
<PAGE>
The Company engaged the services of KPMG Peat Marwick LLP as its
independent accountants as of June 26, 1997. During the two most recent fiscal
years and the interim period prior to June 26, 1997, the Company did not consult
with KPMG Peat Marwick LLP on items which (i) were or should have been subject
to SAS 50 or (ii) concern the subject matter of a disagreement or reportable
event with the former auditor as described in Item 304(a)(2) of Regulation S-K
under the Exchange Act.
FINANCIAL STATEMENTS
A copy of the Company's Annual Report on Form 10-K for the period ended
December 31, 1997, to be filed with the Securities and Exchange Commission, will
be provided on written request without charge to any shareholder whose proxy is
being solicited by the Board. The written request should be directed to:
Lynette D. Ridgley
Shareholder Relations
Southern Financial Bancorp, Inc.
37 E. Main Street
Warrenton, Virginia 20186
PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder desiring to make a proposal to be acted upon at the
1999 annual meeting of shareholders must present such proposal to the Company at
its principal office at 37 E. Main Street, Warrenton, Virginia, not later than
November 20, 1998, in order for the proposal to be considered for inclusion in
the Company's proxy statement. The Company anticipates holding the 1999 annual
meeting on April 22, 1999.
OTHER MATTERS
The Board is not aware of any matters to be presented for action at the
meeting other than as set forth herein. However, if any other matters properly
come before the meeting, or any adjournment thereof, the person or persons
voting the proxies will vote them in accordance with their best judgment.
By Order of the Board of Directors
Mary F. Henward, Secretary
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<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
37 E. Main Street
Warrenton, Virginia 22186
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
Proxy is Solicited by the Board of Directors
The undersigned hereby appoints Mary F. Henward, Georgia S. Derrico,
and William H. Lagos as proxies (and if the undersigned is a proxy, as
substitute), each with the power to appoint his or her substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all of
the shares of Common Stock of Southern Financial Bancorp, Inc. (the
"Corporation") held of record by the undersigned on February 28, 1998 at the
Annual Meeting of Shareholders to be held on April 23, 1998, or any adjournment
thereof.
The Board of Directors recommends a vote FOR each of the following
Proposals:
1. Election of two directors for a three-year term.
<TABLE>
<CAPTION>
<S> <C>
_ _
|_| FOR all nominees |_| WITHHOLD AUTHORITY to
listed below vote for all nominees
(except as marked to the contrary)
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in list below.)
Georgia S. Derrico, John L. Marcellus, Jr.
2. To ratify the designation of KPMG Peat Marwick LLP as independent
certified public accountants for the fiscal year ended December 31,
1997 and the fiscal year ending December 31, 1998.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR each of Proposals 1 and 2.
Please sign exactly as the name appears on the label. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, guardian, or agent, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
<TABLE>
<CAPTION>
<S> <C>
Date: _______________, 1998 ___________________________________
Signature
Printed Name:
____________________________ ___________________________________
Signature, if held jointly
Number of Shares:
_
____________________ I plan to attend the meeting in person |_| Yes
_
|_| No
</TABLE>
Please mail this form in the enclosed envelope.
