-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CFExsNRrA+OBlM3t6MuJsNKHDiZiDLvirvNUt8OkY/TB8P59ftE/ceAEVH1sFNfa mqNNwYv2tJ/7xq4GpyNCuA== 0000865058-99-000002.txt : 19990413 0000865058-99-000002.hdr.sgml : 19990413 ACCESSION NUMBER: 0000865058-99-000002 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990513 FILED AS OF DATE: 19990412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SECURITY GROUP INC CENTRAL INDEX KEY: 0000865058 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 631020300 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-18649 FILM NUMBER: 99591784 BUSINESS ADDRESS: STREET 1: 661 E DAVIS ST CITY: ELBA STATE: AL ZIP: 36323 BUSINESS PHONE: 2058972273 DEF 14A 1 DEF PROXY STATEMENT THE NATIONAL SECURITY GROUP, INC. 661 EAST DAVIS STREET ELBA, ALABAMA 36323 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 13,1999 Notice is hereby given of the Annual Meeting of Stockholders of The National Security Group, Inc., a Delaware corporation (the "Company"), to be held at the principal executive offices of the Company in Elba, Alabama, on Thursday, May 13, 1999 at 10:00 a.m. (Central Time) for the following purposes: 1. To elect three (3) members to the Board of Directors to serve for three year terms and until their successors are duly elected and qualified; 2. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. Only Stockholders of record at the close of business on April 13, 1999 shall be entitled to notice of and to vote at the Annual Meeting. Stockholders are cordially invited to attend the Annual Meeting in person. BY ORDER OF THE BOARD OF DIRECTORS /s/ Bette Ham ------------------------- Bette Ham Secretary Elba, Alabama April 13,1999 THE NATIONAL SECURITY GROUP, INC. 661 East Davis Street Elba, Alabama 36323 PROXY STATEMENT This document, which constitutes a Proxy Statement for The National Security Group, Inc., (the "Company") is being furnished to the holders of the common stock of the Company in connection with the solicitation of proxies by the Board of Directors of the Company for use at the Annual Meeting of Stockholders of the Company to be held at 10:00 a.m. (Central Time) on May 13, 1999 at the principal executive offices of the Company (the "Annual Meeting"). At the Annual Meeting, the Company's stockholders will vote to elect three directors to serve for three year terms and until their successors are duly elected and qualified. All costs in connection with the solicitation of the enclosed proxy will be paid by the Company. The date of this Proxy Statement is April 13, 1999. GENERAL This Proxy Statement is being mailed to holders of the Company Common Stock on or about April 13, 1999, in connection with the solicitation by the Board of Directors of the Company of proxies to be used at the Annual Meeting to be held at the Company's principal executive offices, 661 East Davis Street, Elba, Alabama 36323, on Thursday, May 13, 1999, at 10:00 a.m. (Central Time). At the Annual Meeting, the stockholders of the Company will elect three directors to serve for three year terms. If the enclosed proxy is properly signed and returned, your shares will be voted on all matters that properly come before the Annual Meeting for a vote. If instructions are specified in your signed proxy with respect to matters being voted upon, your shares will be voted in accordance with your instructions. If no instructions are so specified, your shares will be voted "FOR" the election of the persons nominated as directors in the proxy statement. So far as is now known, there is no business to be acted upon at the Annual Meeting other than as set forth above, and it is not anticipated that other matters will be brought before the Annual Meeting. If, however, other appropriate matters are duly brought before the Annual Meeting, the persons appointed as proxy agents will have discretion to vote or act thereon according to their own judgement. A proxy may be revoked if written notice of such revocation is received by Mrs. Bette Ham, Secretary, The National Security Group, Inc., 661 East Davis Street, Elba, Alabama 36323, at any time before the taking of the vote at the Annual Meeting. Whether or not you attend the Annual Meeting, your vote is important. Accordingly, you are asked to sign and return the accompanying proxy, regardless of the number of shares you own. Shares can be voted at the Annual Meeting only if the holder is present or represented by proxy. The Board of Directors has fixed the close of business on April 13, 1999, as the record date for the determination of stockholders who are entitled to notice of, and to vote at the Annual Meeting and any adjournments thereof. On the record date, the Company had outstanding 2,051,311 shares of Company Stock, the holders of which are entitled to one vote per share. No shares of any other class of Company stock are issued or outstanding. 1 A proxy may be revoked at any time prior to its exercise (i) by filing with the Secretary of the Company either an instrument revoking the proxy or a duly executed proxy bearing a later date or (ii) by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting by itself will not revoke a proxy. Shares of Common Stock represented by a properly executed and returned proxy will be treated as present at the Annual Meeting for purposes of determining a quorum without regard to whether the proxy is marked as casting a vote for or against or abstaining with respect to a particular matter. In addition, shares of Common Stock represented by "broker non-votes" (i.e., shares of Common Stock held in record name by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote, (ii) the broker or nominee does not have discretionary voting power or (iii) the record holder has indicated that it does not have authority to vote such shares on the matter) generally will be treated as present for the purposes of determining a quorum. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock of the Company present in person or represented by proxy at the Annual Meeting and entitled to vote thereon is required for the election of the nominees to the Board of Directors. With respect to this matter, an abstention will have the same effect as a negative vote, but because shares held by brokers will not be considered entitled to vote on matters as to which brokers would hold authority, a broker nonvote will have no effect on the vote. ELECTION OF DIRECTORS The Bylaws of the Company provide that the Board of Directors shall be divided into three classes as nearly equal in number as possible. The term of each director is three years and the terms are staggered to provide for the election of one class of directors each year. Three directors will be elected at the Annual Meeting. Winfield Baird, Fred D. Clark, Jr., and M.L. Murdock (the "Nominees") have been nominated by the Board of Directors for election to serve for a term of three years. All of the nominees are currently serving as directors of the Company. The persons named in the enclosed proxy intend to vote "FOR" the election of the Nominees unless the proxy is marked to indicate that such authorization is expressly withheld. Should any of the Nominees be unable to accept nomination or election (which the Board of Directors does not expect) or should any other vacancy have occurred in the Board, it is the intention of the persons named in the enclosed proxy to vote for the election of the person or persons whom the Board of Directors recom mends. The following tables set forth the names and certain information concerning the Nominees and each other director who will continue to serve (the "Continuing Directors") as a director of the Company after the Annual Meeting: NOMINEES Positions Held Age at Director Name with the Company Dec.31,1998 Since* Winfield Baird Director 66 1964 Fred D. Clark, Jr. Director 38 1996 M.L. Murdock Sr. Vice President & Director 56 1976 THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE ABOVE NOMINEES AS DIRECTORS. 2 Continuing Directors Age at Director End of Name Dec.31,1998 Since* Present Term Lewis Avinger 76 1984 2001 Carolyn Brunson 71 1978 2001 J. R. Brunson 70 1962 2000 D. M. English 80 1947 2000 Craig S. Pittman 42 1992 2001 James B. Saxon 64 1982 2001 Walter P. Wilkerson 51 1984 2000 *In 1990 National Security Insurance Company was reorganized as a holding company system pursuant to a plan of exchange whereby The National Security Group, Inc., (the "Company"),became the holding company for National Security Insurance Company (the"Life Company"), and its prior subsidiaries, National Security Fire & Casualty Company (the "Casualty Company"), and NATSCO, Inc., ("NATSCO"). References to tenure with the Company (in the above table and in the following biographical section) include the individual's tenure with the Life Company prior to the reorganization. BIOGRAPHICAL INFORMATION The business experience of each of the Nominees and Continuing Directors is set forth below. Nominees WINFIELD BAIRD is currently the President and a director of Investment Counselors of Alabama, Inc., of Birmingham, Alabama. He previously was a partner in J. C. Bradford & Co. FRED D. CLARK, JR., is currently President of The Clark Company, LLC in Montgomery, Alabama. He was formerly Executive Director of the Alabama Farmers Federation, President of Alabama Rural Electric Association of Cooperatives, Montgomery, Alabama, State Director for U.S. Senator Richard Shelby, Legislative Representative for National Rural Electric Cooperative Association, and Legislative Assistant to U.S. Senator Howell Heflin. M.L. MURDOCK, C.P.A., has served as Senior Vice President, Chief Financial Officer and Treasurer of the Company since 1982. Prior to that time he served as Vice President and Controller of the Company. He initially joined the Company in 1970. Mr. Murdock is also a director of the Life Company, Omega One Insurance Company, Inc., NASCO, and NATSCO, Inc. 3 Continuing Directors LEWIS AVINGER is a retired Savings and Loan executive from Montgomery, Alabama. CAROLYN BRUNSON presently serves as the Managing Partner of Brunson Properties (formerly the W.L. Brunson Estate), a family partnership engaged in investments. J. R. BRUNSON has served as President and Chief Executive Officer of the Company since 1978. He previously held the position of Senior Vice President. He joined the Company in 1953. Mr. Brunson is also a director of the Life Company, the Casualty Company, Omega One Insurance Company, Inc., NATSCO, Inc., and NASCO, and serves on the Board of Trustees of the University of South Alabama. D. M. ENGLISH is a retired urban renewal administrator. He became a director of the Company upon its founding in 1947 and currently serves as its Chairman of the Board. He has held that position since 1987. Mr. English is also a director of the Casualty Company, Omega One Insurance Company, Inc., and NASCO. CRAIG S. PITTMAN is an attorney and Managing Partner of the firm of Pittman, Pittman, Carwie, and Fuquay, Mobile, Alabama. JAMES B. SAXON is a retired executive of Anderson Products, Square D Company, Leeds, Alabama. WALTER P. WILKERSON is a certified public accountant and partner in the firm Barr, Brunson, Wilkerson & Bowden in Enterprise, Alabama. BOARD COMMITTEES AND MEETINGS During the last full fiscal year the Board of Directors of the Company held four regularly scheduled and special meetings. All directors attended at least 75% of the meetings of the Board of Directors and the committees on which they served during fiscal year 1998. Compensation Committee. The Compensation Committee, whose members have been appointed annually by the Board of Directors, is currently composed of Craig S. Pittman, Fred D. Clark,Jr. and James B. Saxon . The Committee is responsible for recommending officers, the salaries of officers, directors fees and officer bonuses to the Board of Directors for full consideration. The Compensation Committee met once in fiscal year 1998. Audit Committee. The Audit Committee is comprised of Lewis Avinger, Fred D. Clark, Jr., James B. Saxon and Walter P. Wilkerson. The principal functions of the Audit Committee include making recommendations to the Board of Directors concerning the selection of independent auditors, approval of proposed independent audit fees, review of internal, independent, and regulatory audit results, review of proposed corrective actions and results thereof with senior management, review and approval of internal audit functions and controls and obtaining assurances of regulatory compliance from independent auditors. The Audit Committee met twice in fiscal year 1998. 4 Nominating Committee. The Nominating Committee is comprised of Fred D. Clark, Jr., Carolyn E. Brunson and Craig S. Pittman. This committee is responsible for the nomination of directors. No procedure has been established by the committee for considering nominations by the stockholders. The Nominating Committee met once in fiscal year 1998. DIRECTORS' REMUNERATION Remuneration of directors is usually adjusted annually. Directors are currently paid an annual fee of $3,300 ($4,622 for the Chairman), plus $635 per meeting attended and mileage reimbursement of $.31 per mile. In addition, directors receive $250 per year for each Board committee on which he or she serves, the total not to exceed $500. The Company has established an "Unfunded Plan of Deferred Compensation" which allows Directors to defer fees otherwise payable to them for attending Board meetings or serving on committees. Participating directors may, at their option, elect to have the deferred fees credited to either a cash account, which accrues interest quarterly at a prime interest rate, or to a stock account, under which such deferred amounts are treated as if they had been invested in shares of the Company's common stock. Stock accounts may only be distributed in their equivalent value in cash. All accounts under the plan are unfunded and do not represent claims against specific assets of the Company. STOCK OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS The following table sets forth information as of March 1, 1998, as to the number of shares of Company Common Stock beneficially owned' by (a) each of the Company's directors, (b) the nominees for director and (c) the directors and executive officers of the Company as a group. SHARES OF COMMON STOCK BENEFICIALLY PERCENT OF NAMES OWNED (1) COMMON STOCK Lewis Avinger 1,000 .05% Carolyn E. Brunson 319,926 (2) 15.59% James B. Saxon 19,260 .93% Winfield Baird 98,258 4.79% M.L. Murdock 1,200 .06% J. R. Brunson 110,255 5.37% D. M. English 98,022 4.78% Walter P. Wilkerson 5,695 .27% 5 Craig Pittman 20,282 .97% Fred Clark, Jr. 1,000 .05% Directors and Officers (as a group, 13 persons including persons named 694,664 33.86% above) Other closely held stock (as a group, numbering 34 including immediate family members of some directors, emeritus directors, affiliated entities, and employee retirement plan) 717,118 34.96% (1)For purposes of this table, an individual is considered to "beneficially own" any shares of the Company if he or she directly or indirectly has or shares (I) voting power, which includes power to vote or direct voting of the shares; or (ii) investment power, which includes the power to dispose or direct the disposition of the shares. All amounts include stock held in a spouse's name. (2)Includes stock held in Brunson Properties, a partnership (W.L. Brunson Estate), Carolyn E. Brunson and William L. Brunson, Jr., Managing Partners. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The family relationships, not more remote than first cousin, which exist among the directors and nominees are as follows: Mrs. Carolyn Brunson is the widow of the deceased brother of J.R. Brunson, and mother of William L. Brunson, Jr., Assistant Vice President and Assistant Secretary of the Company and President of the Life Company. Mr. J.R. Brunson, Mr. D. M. English and Mr. James B. Saxon are first cousins . Mr. J. R. Brunson is the father of Jack E. Brunson, President of the Casualty Company. Mr. Craig S. Pittman is the nephew of Mr. J. R. Brunson. Mr. Pittman is a partner of Pittman, Pittman , Carwie and Fuquay, Attorneys at Law, which firm provided legal services to a subsidiary of the Company during 1998. See also the discussion under the heading "Compensation Committee Interlocks and Insider Participation." INDEPENDENT ACCOUNTANTS The firm of Dudley, Hopton-Jones, Sims & Freeman, certified public accountants, is the independent accountant for the Company and its subsidiaries and has performed the audit function for the year ending December 31, 1998. The independent accountant is appointed by the Board of Directors after receiving the recommendation of the Audit Committee. Such appointment is customarily made in July of each year. Consequently, the independent accountant for the fiscal year ending December 31, 1999 has not yet been appointed. No plans have been made for a representative of Dudley, Hopton-Jones, Sims & Freeman to be present at the Annual Meeting. 6 EXECUTIVE COMPENSATION The following table sets forth the remuneration paid by the Company and its subsidiaries during the fiscal year ended December 31, 1998, to each of its executive officers whose annual compensation exceeds $100,000. SUMMARY COMPENSATION TABLE - ------------------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) (g) (h) (i) Name Other Restricted All and Principal Base Annual Stock Options LTIP Other Position Year Salary Bonus Comp. Award(s) SARs Payouts Comp.* - -------------------------------------------------------------------------------- J.R. Brunson President & CEO 1998 $161,720 $11,756 0 0 0 0 $13,511 1997 $158,543 $0 0 0 0 0 $16,187 1996 $152,645 $0 0 0 0 0 $15,419 M.L. Murdock Sr. Vice President 1998 $107,071 $7,766 0 0 0 0 $10,052 1997 $104,740 $0 0 0 0 0 $11,930 1996 $100,547 $0 0 0 0 0 $11,537 *"All Oher Compensation" includes the following for J. R. Brunson for the years 1998, 1997, and 1996, respectively: Contributions to the 401 (K) Retirement Plan of $4,987, $7,929, and $7,500; Dollar value of benefit for term life insurance of $2,184, $1,970, and $1,779; and Deferred Directors Fees of $6,340, $6,290, and $6,140. For Mr. Murdock, the totals for the years 1998, 1997, and 1996 are 401(K) contributions of $3,272, $5,237, $5,027, life insurance benefit of $440, $403 and $370, and Deferred Directors Fees of $6,340, $6,290 and $6,140. REPORT OF COMPENSATION COMMITTEE The Compensation Committee of the Board of Directors is currently composed of Craig S. Pittman, Fred D. Clark, Jr., and James B. Saxon, all of whom are outside directors of the Company. The Committee is responsible for recommending officers, the salaries of officers, directors' fees, and officer bonuses to the Board of Directors for full consideration. The committee members receive director fees as described in this Proxy Statement and do not receive any other compensation from the Company. The Compensation Committee has provided the following report: The Committee considers the primary responsibility of the company's executive officers as being to ensure the long-term health and growth of the Company. The Company's compensation policy is relatively simple, utilizing annual base salaries and bonuses based upon Company performance. The system provides for moderate base salaries, but offers opportunities for executives and supervisors to earn incentive compensation based on Company results. The Company does not utilize stock options, rights, or other forms of long - term incentives in its compensation scheme. Section 162(m) of the Internal Revenue Code limits the Company's tax deduction for compensation paid to certain executive officers that does not qualify as "performance-based" to $1 million per executive officer. Compensation has been and will continue to be tax deductible as no executive officer will earn in excess of $ 1 million. 7 Executive salary levels within the Company reflect a number of factors including the size and location of the Company, and the length of service of the executives. Bonuses are discretionary with the Board, and require as a precondition that Company results for a given year reach a threshold level of return on shareholders' equity. The threshold is determined by the Executive Committee and takes into considera tion a number of factors including current financial markets and historic patterns of Company operations. The base salary of the Company's President and Chief Executive Officer, Mr. J. R. Brunson, results from a base amount set many years ago and has been adjusted for annual raises. Mr. Brunson has served as President since 1978 and has been employed by the Company since 1953. The 1998 base salary reflects a 2% increase over the 1997 base amount. Bonuses awarded in a given year are based on the previous years results. Cash bonuses of approximately 7% were awarded in 1998 to the Company's President, Sr. Vice-President M.L. Murdock, and other executive officers and supervisors, based on the operating results of 1997. It is anticipated that there will be no bonuses awarded in 1999 due to performance thresholds not being met in 1998 . Mr. Brunson and Mr. Murdock were the only executive officers of the Company whose annual compensation exceeded $100,000 in 1998. Contributions to executive officers under the Company's 401(K) Retirement Plan are made on the same basis as are contributions to all other participants in the Plan. The Committee does not anticipate any significant changes in the Company's executive compensation during 1999. Bonuses will continue to be performance- based. There are no plans to integrate options, rights or other forms of long-term incentives. The Committee believes that the Company's salary and incentive compensation programs are competitive and appropriate for National Security. Craig S. Pittman Fred Clark, Jr. James B. Saxon COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Board of Directors is currently comprised of Craig S. Pittman, Fred D. Clark, Jr. , and James B. Saxon, all of whom are outside directors. The Committee members receive director fees as described in this Proxy Statement and do not receive any other compensation from the Company. During 1998 Mr. Pittman received director compensation of $5,205.00 which was deferred; Mr. Clark received director compensation in the amount of $6,340.00, and Mr. Saxon's director compensation was in the amount of $6,840.00. EMPLOYEE BENEFITS 401 (K) Plan The Company contributes an amount equal to twice the employees' salary deferral amounts, not exceeding 5% of total compensation of all eligible employees, to a Retirement Savings Plan established under sec.401(K) of the Internal Revenue Service Code of 1986 (the "Company 401 (K) Plan"). All full time employees who have completed 1,000 hours of service on either January 1 or July 1 are eligible to participate. The Company contributions are annually allocated among the participants' plan accounts based on compensation received during the year for which contribution is made. Amounts allocated vest as scheduled in the Company 401 (K) Plan. Benefits are generally payable only upon termination, retirement, disability or death. 8 COMPANY PERFORMANCE The following graph shows a five year comparison of cumulative returns for the Company, the NASDAQ STOCK MARKET INDEX (U.S.) and the NASDAQ Insurance Stocks Index. The cumulative total return is based on change in the year - end stock price plus reinvested dividends for each of the periods shown. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN NASDAQ NASDAQ Measurement period STOCK MARKET INSURANCE (Fiscal year Covered) NATIONAL SECURITY (U.S.) INDEX STOCK INDEX 1993 100.00 100.00 100.00 1994 100.80 97.75 94.13 1995 81.74 138.26 133.71 1996 87.70 170.01 152.42 1997 127.13 208.58 223.58 1998 102.31 293.21 198.78 STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth those persons who beneficially owned, as of March 1, 1998, five percent or more of the Company Common Stock. Unless otherwise noted, each beneficial owner has sole voting and investment powers. Amount and Nature of Beneficial Percentage Ownership of of Name and Address Company Common Stock Class Brunson Properties, a partnership 302,547 15.59% (W.L. Brunson Estate) Elba, Alabama 36323 SunTrust Bank as Trustee, 193,798 9.45% National Security Retirement Savings Plan, Chattanooga, Tennessee 37402 J.R. Brunson 110,255 5.37% 1192 Pine Circle Elba, Alabama 36323 9 DIRECTOR AND OFFICER SECURITIES REPORTS The Federal Securities laws require the Company's directors and executive officers to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of the Company's common stock. To the best of the Company's knowledge, all persons subject to these reporting requirements filed the required reports on a timely basis. STOCKHOLDERS' PROPOSALS In order for a proposal by a stockholder of the Company to be eligible to be included in the proxy statement and proxy form for the Annual Stockholders' Meeting to be held in 2000, the proposal must be received by the Company at its headquarters, 661 E. Davis Street, Elba, Alabama 36323, on or before January 13, 2000. The Board of Directors will review any stockholder proposals that are filed to determine whether such proposals meet applicable criteria for inclusion in the 2000 Proxy Statement for consideration at the 2000 Annual Meeting. TRANSFER AGENT AND REGISTRAR The Company is the Transfer Agent and Registrar for the Company Common Stock. ANNUAL REPORTS AND FINANCIAL STATEMENT A copy of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998 accompanies this Proxy Statement. Additional copies of the Company's Annual Report to Stockholders, and/or a copy of the Company's annual report on Form 10-K filed with the Securities and Exchange Commission may be obtained by written request to the Chief Financial Officer of the Company at the address indicated above. OTHER MATTERS The Board of Directors of the Company does not know any other matters to be brought before the meeting. If any other matters, not now known, property come before the Meeting or any adjournments thereof, the persons named in the enclosed proxy, or their substitutes, will vote the proxy in accordance with their judgement in such matters. Date: April 13, 1999 THE NATIONAL SECURITY GROUP, INC. J. R. Brunson President 10 THE NATIONAL SECURITY GROUP, INC PROXY MAY 13, 1999 ANNUAL MEETING OF SHAREHOLDERS PROXY The undersigned hereby appoints J.R. Brunson, and Bette Ham, or either of them, as Proxies, each with power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated hereon, and in their discretion with respect to any other business properly brought before the meeting, all the shares of stock of The National Security Group, Inc., which the undersigned is entitled to vote at the annual meeting of shareholders to be held on May 13, 1999 or any adjournment thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, the Proxy will be voted "FOR" the election of all nominees for the directors and the proposals on the reverse side hereof. Signature --------------------------- Date --------------------------- Signature --------------------------- Date --------------------------- Please sign, date and return this proxy in the enclosed postage paid envelope. (Please sign exactly as your name appears above. If shares are held jointly, each shareholder should sign. If signing as attorney, executor, administrator, trustee, or guardian, please give full title) 1. The election as directors of the THREE nominees listed below to serve for 3-year terms expiring in 2002. -- For all nominees listed below (except as marked to the contrary below) -- Withhold authority to vote for all nominees listed below INSTRUCTION: To withhold authority to vote for any individual nominee, strike through the nominee's name on the list below: WINFIELD BAIRD FRED D. CLARK, JR. M.L. MURDOCK 2. In their discretion on such other business as may properly be brought before the meeting or any adjournment thereof. -----END PRIVACY-ENHANCED MESSAGE-----