LADYSMITH FEDERAL SAVINGS AND LOAN ASSOCIATION

BOARD OF DIRECTORS CORPORATE GOVERNANCE GUIDELINES

1.         Every Director owes a duty of loyalty to the Association and is expected to act in the best interest of the members as a whole.

2.         The Board will always have an independent outside Director to serve as the Chairman of the Board. The Chairman presides at all meetings of the Board of Directors. The Chairman has ultimate approval over Board Meeting schedules and agendas.  If the Chairman is unable to attend a meeting of the Board his/her duties will be performed by the Vice Chairman.

3.         The Audit, Compensation, and Nominating committees will consist entirely of outside Directors.

4.         Directors are required to be members of the Association.  (Requires a minimum of $50 in savings.)

5.         Directors must retire at the annual meeting after which they turn age 70½.

6.         Attendance at board meetings is mandatory.  Directors missing more than 25% without being excused will submit a personal plan to the Chairman to resolve the situation.

7.         Directors should direct and Managers should manage.  Directors should

not attempt to micro-manage issues or problems that are the responsibility of Management. The Director/Management relationship must be open, honest, and constructive.

8.         Directors should be prepared for meetings and Management will be as prudent as possible on delivering materials in advance of meetings, particularly for items that need to be acted upon.

9.         Directors are expected to assist the Association in developing new business, but must be careful not to create undo pressure on bank officers to accommodate any individual or business.

10.              Directors must keep all non-public information about customers and the Association confidential at all times.  Individuals consciously violating this standard will be asked to resign from the Board.

11.        Directors must be open to, and encourage employees and/or members to raise ethical issues and report possible ethical violations by Management.

12.       Directors should avoid conflicts of interest at all costs, per 12 CFR Chapter V Part 563.200.  Directors must not advance their own personal or business interests, or those of others with whom they have a personal or business relationship, at the expense of the association.  When a Director finds themselves in a potential conflict of interest, their responsibility is to formally inform the Board of the conflict, and disqualify themselves from discussing or voting on that item. Even the appearance of, or opportunity for, a conflict of interest must be avoided.

13.       If a Director is involved in situations that are detrimental to the Association’s reputation, they should voluntarily resign from the Board.  These situations include personal bankruptcy, public indictments, or unethical practices.

14.       Directors will conduct a self-assessment evaluation of their performance as a board member on an annual basis.

15.               Directors must not take advantage of corporate opportunities belonging to the association, per 12 CFR Chapter V Part 563.201.  A corporate opportunity belongs to the association if: the opportunity is within the corporate powers of the association and the opportunity is of present or potential practical advantage to the association.

16.              A director’s position with Ladysmith Federal Savings and Loan may provide that person with access to “material non-public information”. “Material non-public information” includes information that is not available to the public at large which would be important to an investor in making a decision to buy, sell, or retain a security. It should be noted that either positive or negative information may be “material”. A director in possession of “material non-public information” shall not pass that information on to others, and shall not purchase or sell a security or recommend a security transaction of the director’s own account, the account of a family member, the account of Ladysmith Federal Savings and Loan, or any other person or entity. After the information has been publicly disclosed through appropriate channels a director should allow at least three business days to elapse before trading in the security.

17.               Ladysmith Federal Savings and Loan maintains the highest standards in preparing the accounting and financial information disclosed to our members and to the public. All accounting records shall be compiled accurately, with the appropriate accounting entries properly classified when entered into the books. No payments on behalf of Ladysmith Federal Savings and Loan shall be approved or any transaction made with the intention or understanding that part or all of such payment will be used for any purpose other than that described by the documents supporting it. No fund, asset, or liability of Ladysmith Federal Savings and Loan shall, under any circumstances or for any purpose, be concealed or used for an unlawful or improper purpose.

18.              Ladysmith Federal Savings and Loan’s name, logo or corporate letterhead may not be used for any purpose other than in the normal course of official Association business.

19.              No director shall corruptly solicit, demand or accept for the benefit of any person anything of value from anyone in return for any business, service or confidential information of Ladysmith Federal Savings and Loan, intending to be influenced or rewarded, either before or after a transaction is discussed or consummated. Any person who improperly offers or promises something of value under these circumstances is guilty of the same offense.

20.             Directors may not, on behalf of Ladysmith Federal Savings and Loan or in connection with any transaction or business of Ladysmith Federal Savings and Loan, directly or indirectly give, offer, or promise anything of value to any individual, business entity, organization, governmental unit, public official, political party or any other person for the purpose of influencing the actions of the recipient. This standard of conduct is not intended to prohibit normal business practices so long as they are of nominal and reasonable value under the circumstances and promote the Association’s legitimate business interests.

21.        Special counsel may be hired to investigate any suspected unethical behavior by a Director. This special counsel should not be the Association’s regular counsel.

            The Board of Directors has approved these corporate governance guidelines.

Ladysmith Federal Savings & Loan Association

Director Duties & Responsibilities

Directors represent the account holders of the Association and make decisions in the interest of all account holders.  Directors are elected at the annual meeting for a three-year period.

Qualifications:

Strong management experience with knowledge and skills in accounting and finance, business judgment, general management practices, crisis response and management,  leadership, and strategic planning.

Personal characteristics matching the Association’s values, such as integrity, accountability, financial literacy, and high performance standards.

Willingness to advance their opinions, but once a decision is made by a majority of the board, a willingness to support the majority decision assuming questions of ethics or propriety are not involved.

Has an account relationship or willing to establish an account relationship.

Has a willingness to commit the time required to fully discharge their responsibilities to the Association, including the time to prepare for board and committee meetings by reviewing the material supplied before each meeting.

Community involvement and the willingness to act as a public and community relations  resource to management by keeping the organization attuned to the external environment in which it operates.

Directors should be selected so that the Board of Directors is a diverse body, with diversity reflecting age, gender, race, and professional experience.

No person shall be eligible to become or remain a director, or hold any position of trust in the association, if such person:

1. Is a close relative of a full-time employee of the association; or,
2. Has been employed by the Association or an entity controlled by the Association at any time in the three (3) years preceding such person’s election or appointment as director;

Duties & Responsibilities:

1. Directors oversee the conduct of the Association’s business and assure compliance with the regulations of the Office of Thrift Supervision.
2. Directors hire a President/CEO to manage the Association, who in turn hires a staff to operate and carry out specific duties.
3. Directors must be honest and fair in their decisions.  They share responsibility for Board decisions even if they are not present.
4. Establish sound policies and goals as guides for the President/CEO and see that they are followed. They should not try to manage the Association and definitely do not become involved with employee complaints or criticisms.
5. It is the obligation of the directors to hold monthly board meetings and committee meetings as necessary and have the responsibility to attend these meetings. Board members that are absent frequently may be asked to resign.
6. Adhere to a code of ethics.
7. Ensure that the Association meets the credit needs of the community.
8. Review operating results, compliance performance, and performance of new and existing activities.
9. Willing to perform a self-evaluation of Board performance.