UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

(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

Filed by the Registrant    x

Filed by a Party other than the Registrant ¨

Check the appropriate box:

SALEM COMMUNICATIONS CORPORATION

(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):

4880 Santa Rosa Road

Camarillo, CA 93012

(805) 987-0400

April 27, 2007

Dear Stockholder:

You are cordially invited to attend the 2007 Annual Meeting of Stockholders (the “Annual Meeting”) of Salem Communications Corporation (“Salem”). The Annual Meeting is scheduled to be held on Wednesday, June 6, 2007, at the Westlake Village Inn, 31943 Agoura Road, Westlake Village, California, at 9:30 a.m. local time. As described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement, the agenda for the Annual Meeting includes:

The board of directors recommends that you vote FOR the election of the slate of director nominees. Please refer to the Proxy Statement for detailed information on the proposal. Directors and executive officers of Salem will be present at the Annual Meeting to respond to questions that our stockholders may have regarding the business to be transacted.

We urge you to vote your proxy as soon as possible. Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting in person, we urge you to sign, date and return the enclosed proxy card promptly in the accompanying postage prepaid envelope. You may, of course, attend the Annual Meeting and vote in person even if you have previously returned your proxy card. The approximate date on which this Proxy Statement and the enclosed proxy card are first being sent to stockholders is April 27, 2007.

On behalf of the board of directors and all of the employees of Salem, we wish to thank you for your support.

Sincerely yours,

STUART W. EPPERSON

Chairman of the Board

EDWARD G. ATSINGER III

President and Chief Executive Officer

If you have any questions concerning the Proxy Statement or the accompanying proxy card, or if you need any help in voting your shares, please telephone Jonathan L. Block of Salem at (805) 987-0400.

PLEASE SIGN, DATE AND RETURN

THE ENCLOSED PROXY CARD TODAY.

4880 Santa Rosa Road

Camarillo, CA 93012

(805) 987-0400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 6, 2007

NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of Stockholders (the “Annual Meeting”) of Salem Communications Corporation (“Salem”) will be held on Wednesday, June 6, 2007, at the Westlake Village Inn, 31943 Agoura Road, Westlake Village, California, at 9:30 a.m. local time, subject to adjournment or postponement by the board of directors, for the following purposes:

Only holders of record of Salem’s Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, on April 13, 2007, the record date, are entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. A list of such stockholders will be available for examination by any stockholder at the time and place of the Annual Meeting.

Holders of a majority of the voting power of the outstanding shares of the Class A common stock and of the Class B common stock must be present in person or by proxy in order for the Annual Meeting to be held. Therefore, we urge you to date, sign and return the accompanying proxy card in the enclosed postage prepaid envelope whether or not you expect to attend the Annual Meeting in person. If you attend the Annual Meeting and wish to vote your shares personally, you may do so by validly revoking your proxy as described below.

Prior to the voting thereof, a proxy may be revoked by the person executing such proxy by: (i) filing with the Secretary of Salem, prior to the commencement of the Annual Meeting, either a duly executed written notice dated subsequent to such proxy revoking the same or a duly executed proxy bearing a later date, or (ii) attending the Annual Meeting and voting in person.

If you plan to attend the Annual Meeting, we would appreciate your response by indicating so at the appropriate box on the enclosed proxy card.

By order of the board of directors,

JONATHAN L. BLOCK

Secretary

Camarillo, California

April 27, 2007

YOUR VOTE IS IMPORTANT.

TO VOTE YOUR SHARES, PLEASE SIGN AND DATE THE ENCLOSED PROXY

CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.

SALEM COMMUNICATIONS CORPORATION

4880 Santa Rosa Road

Camarillo, CA 93012

(805) 987-0400

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 6, 2007

TABLE OF CONTENTS

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INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation by the board of directors (the “board” or the “board of directors”) of Salem Communications Corporation, a Delaware corporation (the “Company”), of proxies for use at the 2007 Annual Meeting of Stockholders of the Company (the “Annual Meeting”) scheduled to be held at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.

INFORMATION REGARDING VOTING AT THE ANNUAL MEETING

General

At the Annual Meeting, the stockholders of the Company are being asked to consider and to vote upon the following proposal:

For information regarding this proposal, see the section of this Proxy Statement entitled “PROPOSAL 1—ELECTION OF DIRECTORS.”

Shares represented by properly executed proxies received by the Company will be voted at the Annual Meeting in the manner specified therein or, if no instructions are marked on the enclosed proxy card, FOR each of the director nominees identified on such proxy card for such directors, as the holder of such shares is entitled to vote. Although management does not know of any matter other than the one proposal described above to be acted upon at the Annual Meeting, unless contrary instructions are given, shares represented by valid proxies will be voted by the persons named on the accompanying proxy card in accordance with their respective best judgment in respect of any other matters that may properly be presented for a vote at the Annual Meeting.

Execution of a proxy will not in any way affect a stockholder’s right to attend the Annual Meeting and vote in person, and any person giving a proxy has the right to revoke it at any time before it is exercised by: (a) filing with the Secretary of Salem, prior to the commencement of the Annual Meeting, either a duly executed written notice dated subsequent to such proxy revoking the same or a duly executed proxy bearing a later date, or (b) attending the Annual Meeting and voting in person.

The mailing address of the principal executive offices of the Company is 4880 Santa Rosa Road, Camarillo, California 93012, and its telephone number is (805) 987-0400.

Record Date, Quorum and Voting

Only stockholders of record on April 13, 2007 (the “Record Date”), will be entitled to notice of and to vote at the Annual Meeting. There were outstanding on the Record Date 18,296,324 shares of Class A common stock, par value $0.01 per share (“Class A common stock”), and 5,553,696 shares of Class B common stock, par value $0.01 per share (“Class B common stock”) (the Class A common stock and the Class B common stock are collectively referred to as the “common stock”). Each share of outstanding Class A common stock is entitled to one vote on each matter to be voted on at the Annual Meeting and each share of outstanding Class B common stock is entitled to ten votes on each matter to be voted on at the Annual Meeting, except that, as provided in the Company’s Amended and Restated Certificate of Incorporation, the holders of Class A common stock shall be entitled to vote as a class, exclusive of the holders of the Class B common stock, to elect two “Independent Directors.” The two Independent Directors shall be elected by a majority of the votes of the shares of Class A common stock present in person or represented by proxy and entitled to vote on the election of the Independent Directors; the remaining six directors will be elected by a majority of the votes of the shares of Class A common

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stock and Class B common stock present in person or represented by proxy and entitled to vote on the election of such directors. For information regarding the election of the Independent Directors, see the section of this Proxy Statement entitled “PROPOSAL 1—ELECTION OF DIRECTORS.”

The presence, in person or by proxy, of the holders of at least a majority of the voting power of the common stock issued and outstanding and entitled to vote is necessary to constitute a quorum at the Annual Meeting. In the event there are not sufficient votes for a quorum at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.

Under Delaware law and the Company’s Amended and Restated Certificate of Incorporation and Bylaws, abstentions and broker non-votes are counted for the purpose of determining the presence or absence of a quorum for the transaction of business. With regard to the election of directors, votes may be cast in favor or withheld; votes that are withheld will be excluded entirely from the vote and will have no effect. Any stockholder proposals that properly come before the Annual Meeting require, in general, the affirmative vote of a majority of the voting power of the shares of Class A common stock and Class B common stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote on the subject matter.

Solicitation

The cost of preparing, assembling and sending the Notice of Annual Meeting of Stockholders, this Proxy Statement and the enclosed proxy card will be paid by the Company. Following the delivery of this Proxy Statement, directors, officers and other employees of the Company may solicit proxies by mail, telephone, facsimile or other electronic means or by personal interview. Such persons will receive no additional compensation for such services. Brokerage houses and other nominees, fiduciaries and custodians nominally holding shares of Class A common stock of record will be requested to forward proxy soliciting material to the beneficial owners of such shares, and will be reimbursed by the Company for their reasonable charges and expenses in connection therewith.

Householding

With regard to the delivery of Annual Reports and Proxy Statements, under certain circumstances the Securities and Exchange Commission (“SEC”) permits a single set of such documents to be sent to any household at which two or more stockholders reside if they appear to be members of the same family. Each stockholder, however, still receives a separate proxy card. This procedure, known as “householding,” reduces the amount of duplicate information received at a household and reduces delivery and printing costs as well. A number of banks, brokers and other firms have instituted householding and have previously sent a notice to that effect to certain of the Company’s stockholders whose shares are registered in the name of such bank, broker or other firm. As a result, unless the stockholders receiving such notice gave contrary instructions, only one Annual Report and/or Proxy Statement, as applicable, will be delivered to an address at which two or more stockholders reside. If any stockholder residing at such an address wishes to receive a separate Annual Report or Proxy Statement in the future, such stockholder should telephone toll-free 1-800-542-1061. In addition, if any stockholder who previously consented to householding desires to receive a separate copy of a Proxy Statement or Annual Report, as applicable, for each stockholder at his or her same address, such stockholder should contact his or her bank, broker or other firm in whose name the shares are registered or contact the Company at the address or telephone number listed on page 1 of this Proxy Statement. Similarly, a stockholder may use any of these methods if such stockholder is receiving multiple copies of a Proxy Statement or Annual Report and would prefer to receive a single copy in the future.

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THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

Board of Directors

The board of directors presently consists of eight members. The following table sets forth certain information as of April 20, 2007 except where otherwise indicated, with respect to the directors of the Company. Each of the directors of the Company serves a one-year term and all directors are subject to re-election at each annual meeting of stockholders.

Set forth below is certain information concerning the principal occupation and business experience of each of the directors during the past five years and other relevant experience.

Stuart W. Epperson

Mr. Epperson has been Chairman of the Board of the Company since its inception. He is also a director of Salem Communications Holding Corporation, a wholly-owned subsidiary of the Company. Mr. Epperson has been engaged in the ownership and operation of radio stations since 1961. Mr. Epperson has been a member of the board of directors of the National Religious Broadcasters for a number of years; he was re-elected to a three-year term on that board in February 2007. Mr. Epperson is married to Nancy A. Epperson who is Mr. Atsinger’s sister.

Edward G. Atsinger III

Mr. Atsinger has been President, Chief Executive Officer, a director of the Company and a director of each of the Company’s subsidiaries since their inception. He has been engaged in the ownership and operation of radio stations since 1969. Mr. Atsinger has been a member of the board of directors of the National Religious Broadcasters for a number of years; he was re-elected to a three-year term on that board in February 2007. Mr. Atsinger has also been a member of the board of directors of Oaks Christian School since 1999. Mr. Atsinger is also a member of Cornerstone Christian Network, which is involved in evangelism and church relations and development. Mr. Atsinger is the brother-in-law of Mr. Epperson.

David Davenport

Mr. Davenport has been a director of the Company since November 2001. Mr. Davenport is a Distinguished Professor of Public Policy at Pepperdine University and has served in that position since August 2003. He is also a research fellow at the Hoover Institution and has served in that position since August 2001. Mr. Davenport was the Chief Executive Officer of Starwire Corporation, a software service company formerly known as Christianity.com, from June 2000 to May 2001. Mr. Davenport served as President of Pepperdine University from 1985 to 2000 and from 1980 through 1985 he served as a Professor of Law, General Counsel, and Executive Vice President of the University. Mr. Davenport currently serves on the governing or advisory boards of Hope Network Ministries, Forest Lawn Memorial Parks Association and Common Sense California. Mr. Davenport also serves on the board of directors of Ameron International Corporation.

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Eric H. Halvorson

Mr. Halvorson has been a director of the Company since 1988. Mr. Halvorson is currently Executive in Residence at Pepperdine University, where he holds a joint teaching appointment to the undergraduate Business Division and the Pepperdine Law School. Mr. Halvorson was President and Chief Executive Officer of The Thomas Kinkade Company from 2003 to 2005. Mr. Halvorson was also a Visiting Professor at Pepperdine University from 2000 to 2003. Mr. Halvorson was Chief Operating Officer of the Company from 1995 to 2000 and Executive Vice President of the Company from 1991 to 2000. From 1991 to 2000, Mr. Halvorson also served as General Counsel to the Company. Mr. Halvorson was the managing partner of the law firm of Godfrey & Kahn, S.C.-Green Bay from 1988 until 1991. From 1985 to 1988, he was Vice President and General Counsel of the Company. From 1976 until 1985, he was an associate and then a partner of Godfrey & Kahn, S.C.-Milwaukee. Mr. Halvorson was a Certified Public Accountant with Arthur Andersen & Co. from 1971 to 1973. Mr. Halvorson is a member of the board of directors of Intuitive Surgical, Inc.

Roland S. Hinz

Mr. Hinz has been a director of the Company since September 1997. Mr. Hinz has been the owner, President and Editor-in-Chief of Hi-Torque Publishing Company, a publisher of magazines covering the motorcycling and biking industries, since 1982. Mr. Hinz is also the managing member of Hi-Favor Broadcasting, LLC, the licensee of radio stations KLTX-AM, Long Beach, California, and KEZY-AM, San Bernardino, California (which were acquired from the Company in August 2000 and December 2001, respectively), and radio station KSDO-AM, San Diego, California. Mr. Hinz also serves on the board of directors of the Association for Community Education, Inc. a not-for-profit corporation operating Spanish Christian radio stations in California. Mr. Hinz also serves on the board of directors of Truth for Life, a non-profit organization that is a customer of the Company.

Paul Pressler

Judge Pressler has been a director of the Company since March 2002, and is also a board member of the Free Market Foundation and KHCB Network, a non-profit corporation which owns Christian radio stations in Texas and Louisiana, and a board member of National Religious Broadcasters. He has been an active leader in the Southern Baptist Convention and has served as its First Vice President. Additionally, he is a member of the Texas Philosophical Society and on the boards of various non-profit organizations. Since 1995, Judge Pressler has been a partner in the law firm of Woodfill & Pressler and its predecessors. A retired justice of the Texas Court of Appeals, Judge Pressler was appointed Justice of the Texas Court of Appeals in 1978, serving until 1992. Judge Pressler also served as District Judge from 1970 to 1978. From 1958 to 1970, he was associated with the law firm of Vinson & Elkins. From 1957 to 1959, he was a member of the Texas Legislature, House of Representatives.

Richard A. Riddle

Mr. Riddle has been a director of the Company since September 1997. Mr. Riddle is an independent businessman specializing in providing financial assistance and consulting to individuals and manufacturing companies. He was President and majority stockholder of I. L. Walker Company from 1988 to 1997 when that company was sold. He also was Chief Operating Officer and a major stockholder of Richter Manufacturing Corp. from 1970 to 1987.

Dennis M. Weinberg

Mr. Weinberg has been director of the Company since November 1, 2005. Mr. Weinberg was one of the founding directors for WellPoint, a health benefits company. From February of 2002 to May 2006, Mr. Weinberg served as President and Chief Executive Officer for ARCUS Enterprises, a WellPoint business development subsidiary. Previously, Mr. Weinberg served for nearly 20 years in a variety of CEO, Group President, and

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Executive Vice President positions with WellPoint and its various affiliates. Prior to WellPoint, Mr. Weinberg held a variety of business consulting positions with the accounting firm of Touche-Ross and Company (currently Deloitte & Touche) in Chicago. Before that, he was general manager for the CTX Products Division of Pet, Inc. at the time, an I.C. Industries Company in St. Louis, Missouri, a designer and manufacturer of commercial computerized processing equipment. Mr. Weinberg is a General Member of the development companies of FRWII, LLC, SkyView Development, LLC and Allyson Aviation, LLC. He is the co-founder of Cornerstone Network Associates, Life Skills for American Families, and is an advisor for the Pacific Justice Institute. Mr. Weinberg also serves on the board of directors of Truth for Life, a non-profit organization that is a customer of the Company.

Director Independence and Executive Sessions

In November 2006, the Company’s board of directors evaluated the independence of each of the Company’s directors pursuant to standards set forth in the listing regulations of the National Association of Securities Dealers, Inc., as approved by the SEC (“NASDAQ Rules”). During this review, the board of directors considered various transactions and relationships among directors (and their affiliates or family members), members of the Company’s senior management, affiliates and subsidiaries of the Company and certain other parties that occurred during the past three fiscal years. This review was conducted to determine whether, under the NASDAQ Rules, any such relationships or transactions would affect the board of directors’ determination as to each director’s independence from management.

Upon conclusion of this review, the board of directors determined that, of the directors nominated for election at the Annual Meeting, a majority of the board (comprised of Messrs. Davenport, Halvorson, Hinz, Pressler, Riddle and Weinberg) is independent of the Company and its senior management as required by the NASDAQ Rules.

The NASDAQ Rules also require that independent members of the board of directors meet periodically in executive sessions during which only independent directors are present. The Company’s independent directors have met separately in such executive sessions and in the future will regularly meet in executive sessions as required by the NASDAQ Rules.

Committees of the Board of Directors

The Company’s board of directors has three committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The following table identifies the independent members of the board of directors and lists the members and chairman of each of these committees:

I = Director is independent

X = Current member of committee

C = Current member and chairman of the committee

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Audit Committee

The Audit Committee currently consists of Messrs. Halvorson (Chairman), Riddle and Weinberg, each of whom is independent under the NASDAQ Rules and applicable SEC rules and regulations. The board of directors has determined that Mr. Halvorson, the Audit Committee Chairperson, qualifies as an “audit committee financial expert,” as defined and required by applicable SEC rules and regulations.

The Audit Committee met four times in 2006 and operates under a written charter adopted by the board of directors. This charter is available on the Company’s Internet website (www.salem.cc) and a copy of the charter may be obtained upon written request from the Secretary of the Company. Any information found on the Company’s website is not a part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

The Audit Committee’s responsibilities are generally to assist the board of directors in fulfilling its legal and fiduciary responsibilities relating to accounting, audit and reporting policies and practices of the Company and its subsidiaries. The Audit Committee also, among other things, oversees the Company’s financial reporting process, retains and engages the Company’s independent registered public accounting firm, approves the fees for the Company’s independent registered public accounting firm, monitors and reviews the quality, activities and functions of the Company’s independent registered public accounting firm, and monitors the adequacy of the Company’s operating and internal controls and procedures as reported by management and the Company’s independent registered public accounting firm. The Audit Committee Report set forth later in this Proxy Statement provides additional details about the duties and activities of this committee.

Compensation Committee

As provided under applicable laws and rules, the Company’s board of directors delegates authority for compensation matters to the Compensation Committee of the board of directors. The Compensation Committee’s membership is determined by the board of directors. The Compensation Committee currently consists of Messrs. Hinz (Chairman), Davenport and Riddle, each of whom is independent under the NASDAQ Rules. The Compensation Committee is authorized to review and approve compensation, including non-cash benefits, and severance arrangements for the Company’s Section 16 officers and employees and to approve salaries, remuneration and other forms of additional compensation and benefits as it deems necessary. The Compensation Committee also administers the Company’s Amended and Restated 1999 Stock Incentive Plan (the “Stock Plan”). The Compensation Discussion & Analysis set forth later in this Proxy Statement provides additional details concerning compensation for the Company’s senior management.

The Compensation Committee held four meetings in 2006. The Compensation Committee meets at least twice annually and at additional times as are necessary or advisable to fulfill all of its duties and responsibilities.

The Compensation Committee operates pursuant to a charter that was approved by the board of directors. The charter sets forth the responsibilities of the Compensation Committee. The Compensation Committee and the Company’s board of directors annually (or more often as needed) review the charter to ensure it conforms to current laws and practices. This charter is available on the Company’s Internet website (www.salem.cc) and a copy of the charter may be obtained from the Secretary of the Company upon written request. Any information found on the Company’s website is not part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee currently consists of Messrs. Pressler (Chairman), Davenport, Halvorson, Hinz, Riddle and Weinberg, each of whom is independent under the NASDAQ Rules. The committee met two times in 2006.

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The board of directors has adopted a written charter for the Nominating and Corporate Governance Committee. This charter is available on the Company’s Internet website (www.salem.cc) and a copy of the charter may be obtained upon written request from the Secretary of the Company. Any information found on the Company’s website is not a part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

The Nominating and Corporate Governance Committee is authorized to: (a) develop and recommend a set of corporate governance standards to the board of directors for adoption and implementation, (b) identify individuals qualified to become members of the board of directors, (c) recommend that director nominees be elected at the Company’s next annual meeting of stockholders, (d) recommend nominees to serve on each standing committee of the board of directors, (e) lead in the annual review of board performance and evaluation of the board’s effectiveness, (f) ensure that succession planning takes place for the position of chief executive officer and other key Company senior management positions, and (g) analyze, review and, where appropriate, approve all related party transactions to which the Company or its subsidiaries or affiliates are a party, all in accordance with applicable rules and regulations.

To qualify as a nominee for service on the board of directors, a candidate must have sufficient time and resources available to successfully carry out the duties required of a Company board member. The committee desires to attract and retain highly qualified directors who will diligently execute their responsibilities and enhance their knowledge of the Company’s core businesses.

The Nominating and Corporate Governance Committee implements the Company’s policy regarding stockholder nominations by considering nominees for director positions that are made by the Company’s stockholders. Any stockholder desiring to make such a nomination must submit in writing the name(s) of the recommended nominee(s) to the Secretary of the Company at least 90 days before the annual meeting of stockholders. The written submission must also contain biographical information about the proposed nominee, a description of the nominee’s qualifications to serve as a member of the board of directors, and evidence of the nominee’s valid consent to serve as a director of the Company if nominated and duly elected.

The Company’s directors provide oversight of the Company’s management and play a key role in shaping the strategic direction of the Company. Consistent with the Company’s Nominating and Corporate Governance Charter, the Nominating and Corporate Governance Committee considers various criteria in board candidates, including, among others, independence, character, judgment and business experience, as well as their appreciation of the Company’s core purpose, core values, and whether they have time available to devote to board activities. The Nominating and Corporate Governance Committee also considers whether a potential nominee would satisfy:

Whenever a vacancy exists on the board due to expansion of the board’s size or the resignation or retirement of an existing director, the Nominating and Corporate Governance Committee identifies and evaluates potential director nominees. The Nominating and Corporate Governance Committee considers recommendations of management, stockholders and others. The Nominating and Corporate Governance Committee has sole authority to retain and terminate any search firm to be used to identify director candidates, including approving its fees and other retention terms.

Director candidates are evaluated using the criteria described above and in light of the then-existing composition of the board, including its overall size, structure, backgrounds and areas of expertise of existing directors and the relative mix of independent and employee directors. The Nominating and Corporate Governance Committee also considers the specific needs of the various board committees. The Nominating and Corporate Governance Committee recommends potential director nominees to the full board, and final approval of a candidate for nomination is determined by the full board. This evaluation process is the same for director nominees who are recommended by our stockholders.

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The Nominating and Corporate Governance Committee did not receive any recommendations from stockholders proposing candidate(s) for election at the 2007 Annual Meeting. None of the directors serving on the Audit Committee, the Compensation Committee, or the Nominating and Corporate Governance Committee are employees of the Company.

Director Attendance at Board Meetings and 2006 Annual Meeting of Stockholders

The full board of directors held four regularly-scheduled meetings and one special meeting in 2006. During 2006, each of the Company’s incumbent directors attended all of the four regularly-scheduled meetings of the full board of directors and all meetings of the committees of the board of directors on which they served. Mr. Davenport was the only board member who did not participate in the special meeting of the board of directors that occurred in 2006. The Company encourages, but does not require, that each director attend the Company’s Annual Meeting. In 2006, each of the Company’s incumbent directors as of May 24, 2006 attended the 2006 annual meeting of stockholders.

Communications Between Stockholders and the Board

The Company has historically handled communications between stockholders and the board of directors on an ad hoc basis. No formal policy or process for such communications has been adopted by the Company as of the date of this Proxy Statement. The Company has, however, taken actions to ensure that the views of its stockholders are communicated to the board or one or more of its individual directors, as applicable. The board considers its responsiveness to such communications as timely and exemplary.

Financial Code of Conduct

The Company has adopted a Financial Code of Conduct that applies to each director of the Company, the Company’s CEO, principal financial officer, principal accounting officer or controller and persons performing similar functions. This Financial Code of Conduct has been adopted by the board as a “code of ethics” that satisfies applicable NASDAQ Rules. The Financial Code of Conduct is available on the Company’s Internet website (www.salem.cc) and a copy of the code may be obtained free of charge upon written request from the Secretary of the Company. Any information found on the Company’s website is not a part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

Executive Officers

Set forth below are the executive officers of the Company, together with the positions held by those persons as of April 20, 2007. The executive officers are elected annually and serve at the pleasure of the Company’s board of directors; however, the Company has entered into Employment Agreements with Messrs. Epperson, Atsinger, Davis and Evans, which agreements are described under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION” below.

Set forth below is certain information concerning the business experience during the past five years and other relevant experience of each of the individuals named above (excluding Messrs. Atsinger and Epperson,

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whose business experience is described in the section of this Proxy Statement entitled “THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS—Board of Directors” above).

Joe D. Davis

Mr. Davis has been the Company’s Executive Vice President and Chief Operating Officer since March 2005. Prior to that time, he was Executive Vice President of Radio from 2003 until March 2005, Executive Vice President, Operations from 2001 to 2003, Senior Vice President of the Company from 2000 to 2001, Vice President, Operations of the Company from 1996 to 2000 and General Manager of WMCA-AM from 1989 to 1996. He served concurrently as General Manager of WWDJ-AM from 1994 to 1996. Previously he was President of Davis Eaton Corporation in Phoenix, Arizona and also served as Vice President and Executive Director of one of the Company’s national ministry clients. He has been involved professionally in various aspects of broadcasting since 1967.

David A. R. Evans

Mr. Evans has been Executive Vice President—Business Development and Chief Financial Officer of the Company since September 2005. Mr. Evans was Executive Vice President and Chief Financial Officer from September 2003 to September 2005. From 2000 to 2003, Mr. Evans served as the Company’s Senior Vice President and Chief Financial Officer. From 1997 to 2000, Mr. Evans served as Senior Vice President and Managing Director-Europe, Middle East, and Africa of Warner Brothers Consumer Products in London, England. He also served at Warner Brothers Consumer Products in Los Angeles, California, as Senior Vice President-Latin America, International Marketing, Business Development from 1996 to 1997 and Vice President-Worldwide Finance, Operations, and Business Development from 1992 to 1996. From 1990 to 1992, he served as Regional Financial Controller-Europe for Warner Brothers based in London, England. Prior to 1990, Mr. Evans was an audit manager with Ernst & Young LLP in Los Angeles, California and worked as a U.K. Chartered Accountant for Ernst & Young in London, England.

Jonathan L. Block

Mr. Block has been General Counsel of the Company since May 2000, Vice President since 1999 and Corporate Secretary since 1997. Since August 2000, Mr. Block has been a director of each subsidiary of the Company other than Salem Communications Holding Corporation. From 1995 to 2000, Mr. Block served as Associate General Counsel of the Company. Since May 2005, Mr. Block has been a director of Alaska National Corporation and its subsidiary Alaska National Insurance Company, a property and casualty insurance company.

Evan D. Masyr

Mr. Masyr has been Vice President—Accounting and Finance since September 2005. From March 2004 to September 2005, Mr. Masyr was Vice President of Accounting and Corporate Controller. Prior to that time, Mr. Masyr was Vice President and Corporate Controller from January 2003 to March 2004. From February 2000 to December 2002, he served as Controller. From 1993 to February 2000, Mr. Masyr worked for PricewaterhouseCoopers LLP (formerly, Coopers & Lybrand LLP). Mr. Masyr has been a Certified Public Accountant since 1995.

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COMPENSATION DISCUSSION & ANALYSIS

General Discussion

The Company’s Executive Compensation Philosophy

The board of directors of the Company believes that a key to the Company’s current and future success is its ability to attract and retain qualified individuals who are committed to the Company’s success and capable of delivering on such commitment. The Company’s compensation and benefits programs are designed to enable the attraction, retention and motivation of the best possible employees to operate and manage the Company at all levels. At the same time, the board of directors of the Company is committed to a compensation policy for the Company’s executive management that is appropriately transparent to the Company’s stockholders and in alignment with stockholders’ best interests.

The Company’s executive compensation programs are based upon a pay-for-performance philosophy that provides incentives to achieve both short-term and long-term objectives and to reward individual and Company performance. In addition to evaluating performance using financial and operational metrics, the CEO, CFO and the Company’s three other most highly compensated executive officers during 2006 (collectively, the “Named Executive Officers”) are evaluated in many areas that are not measured directly by financial or operational results. These areas include: how well each Named Executive Officer helps the Company to achieve its strategic goals; each executive’s ability to develop his or her subordinates; and, each executive’s efforts to enhance the Company’s relationship with key stakeholders.

Role of Committee

The role of the Company’s Compensation Committee (the “Committee”) is to oversee the Company’s compensation and benefit plans and policies, administer its Stock Plan (including reviewing and approving equity grants to elected officers), and review and approve all compensation decisions relating to elected officers, including those for the Company’s Named Executive Officers. In 2006, the actions of the Committee included: enhancing the transparency of compensation policies and actions; improving the alignment of Named Executive Officer compensation structures with the Company’s strategic objectives; reviewing objective benchmarks and metrics by which a Named Executive Officer’s performance can be measured; and, analyzing peer compensation and performance data for comparison with the Company’s Named Executive Officers.

Management’s Role in Determining Compensation

The Company’s Named Executive Officers do not determine or approve any element or component of their own compensation. The Company’s CEO provides a recommendation to the Committee for base salary and annual incentive compensation for the Named Executive Officers reporting to him.

Compensation Committee Interlocks and Insider Participation

No member of the Committee is, or formerly was, an officer or employee of the Company or any of its subsidiaries and none had any relationship with the Company requiring disclosure herein under applicable rules. In addition, to the Company’s knowledge, no executive officer or director of the Company has served as a director or a member of the compensation committee of another entity that requires disclosure herein under applicable rules.

Benchmarking

It is the intent of the board of directors that the Company be in a position to compete for highly qualified employees, including its Named Executive Officers. Accordingly, the process for compensation determination involves the Committee’s consideration of peer compensation levels. While the Committee does not have a formal policy regarding benchmarking, when determining recommended salary, target bonus levels and target

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annual long-term incentive award values for Named Executive Officers, the Committee gives consideration to compensation practices at peer radio broadcast companies, based on available data. The companies that comprised the Company’s radio broadcast peer group in 2006 consisted of: Beasley Broadcast Group, Inc., Cumulus Media Inc., Cox Radio Inc., Emmis Communications Corp., Entercom Communications Corp., Regent Communications Inc., Radio One Inc., and Saga Communications Inc.

Named Executive Officer Compensation

The Company’s Named Executive Officer compensation consists of four elements: base salary; annual cash incentive (bonus) awards; long-term incentive compensation, usually in the form of stock options; and perquisites and benefits. The Committee assesses each of these elements independently from the other elements to ensure that the amount paid to each Named Executive Officer for each compensation element is reasonable and, as a function of overall compensation paid, ensures that compensation for each Named Executive Officer is reasonable in its totality.

Distribution of Compensation

The percentage of the Company’s annual total compensation, consisting of base salary, annual cash incentive (bonus) awards, and long-term incentive compensation is shown in the table below for each Named Executive Officer. This distribution of compensation elements reflects the Committee’s emphasis on aligning compensation with the interests of the Company’s stockholders, and the Committee’s desire to balance short-term and long-term incentives. Other factors the Committee considers in determining the appropriate distribution of compensation for the Company’s executives include executive preference, age, career status, historic practices and internal equity.

For 2006, total compensation for the Company’s Named Executive Officers was distributed as follows:

Employment Agreements

Each of the Company’s Named Executive Officers except Mr. Adair is employed pursuant to employment agreements with three year terms. Each of the agreements provides for a contractual level of base salary. Mr. Epperson’s current agreement was entered into as of July 1, 2004, and will expire on June 30, 2007. Mr. Atsinger’s current agreement was entered into as of July 1, 2004, and will expire on June 30, 2007. Mr. Davis’ current agreement was entered into as of April 1, 2005, and will expire on March 31, 2008. Mr. Evan’s current agreement was entered into as of September 1, 2005, and will expire on August 30, 2008. The Committee is currently in the process of negotiating new agreements with Messrs. Epperson and Atsinger.

Base Salary

When determining recommended base salaries for the Company’s Named Executive Officers, the Committee generally evaluates salaries of the peer companies described in the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—General Discussion—Benchmarking” above.

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Where appropriate, adjustments are made to reflect the Company’s relative position within the peer group. The Committee also considers other factors including: individual contribution and performance; Company performance; market conditions; retention needs; experience; succession planning; historic practices; and internal equity.

Increases in the base salaries of the Company’s Named Executive Officers for 2006 were made pursuant to the terms of the agreements described in the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—Named Executive Officer Compensation—Employment Agreements” above, except for Mr. Adair. Mr. Adair’s base salary is adjusted annually and his annual base salary was increased in early 2006 by 4.9%, which the Committee believed to be appropriate based on an overall assessment of peer companies, his expertise, and the contributions he made to the Company during 2005.

Annual Cash Incentive (Bonus) Awards

All of the Company’s Named Executive Officers are eligible to receive discretionary bonuses. The amount to be paid as a bonus, if any, to any Named Executive Officer is determined after a review of the Company’s performance and the performance of each individual Named Executive Officer. Ordinarily, this determination is made in the first quarter of each year, following completion of the Company’s financial statements for the prior year.

Incentive Compensation Pool

Annual cash incentive (bonus) awards are granted to Named Executive Officers from a target cash incentive (bonus) pool which is established at the beginning of the prior year. Over the course of such year the Committee adjusts the size of the pool to reflect the financial performance of the Company. Although the Company may pay an aggregate amount of annual cash incentive (bonus) award that is less than the full amount set forth in the pool, it generally does not pay and has not paid an aggregate amount that is greater than that which is in the pool.

Performance Measures and Award Payments

The Committee considers many factors when assessing the amount of any Named Executive Officer’s annual cash incentive (bonus) awards. The Committee has significant flexibility in awarding cash bonuses. The Company believes that this flexibility, and the Company’s history of rewarding performance, provide a strong motivating incentive to the Company’s Named Executive Officers to perform in a manner that will help the Company continue to achieve its goals and objectives.

Given the changing nature and complexities of the media industry, the Committee’s decision to increase or decrease cash bonuses from year to year is generally based upon a variety of factors deemed appropriate by the Committee including the financial performance of the Company and the individual areas of responsibility of each Named Executive Officer. The Committee considers: earnings per share; return on invested capital; EBIDTA growth; same station revenue growth; same station SOI growth; non-broadcast EBITDA; relative stock price growth; and audience growth.

Incentive (Bonus) Awards Earned in 2006

Based on the financial performance of the Company, the Committee’s consideration of the factors described in the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—Named Executive Officer Compensation—Performance Measures and Award Payments” above, and Company management’s recommendations, the actual bonuses paid to each Named Executive Officer in 2006 for performance in 2005 were $100,000 for Mr. Epperson, $250,000 for Mr. Atsinger, $100,000 for Mr. Davis, $75,000 for Mr. Evans, and $66,014 for Mr. Adair.

Long-Term Incentive Compensation

The Company believes that equity-based compensation helps ensure that the interests of the Named Executive Officers are aligned with those of the Company’s stockholders. The Company also believes that

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equity-based compensation is a material element of compensation required to recruit and retain key executives and remain competitive with the Company’s peers. Lastly, the Company uses equity-based compensation, in particular stock options with long-term vesting, to incentivize long-term retention of key executives.

Stock Options

The Company’s equity-based compensation program is governed by the Stock Plan adopted by the board of directors and last approved by the Company’s stockholders on May 18, 2005. The Stock Plan calls for stock options to be granted with exercise prices equal to the market price of the Company’s class A common stock on the date of grant. All stock options granted by the Company generally have value only if the market price of the class A common stock has increased by the time the options vest and are exercised. The Company’s option grants generally vest ratably over four years. Because the stock options do not have value unless the stock price increases above the grant date price, the Committee believes that stock options are a useful motivational tool.

In determining the size of stock option grants to Named Executive Officers, the Committee: (a) compares equity-based compensation awards to individuals holding comparable positions in the Company’s peer group; (b) evaluates the Black-Scholes valuation of potential stock option grants; (c) reviews Company performance against annual performance goals; and (d) reviews individual performance against the individual’s annual incentive bonus objectives.

In 2006, Mr. Epperson was awarded 30,000 stock options, Mr. Atsinger was awarded 75,000 stock options, Mr. Davis was awarded 25,000 stock options, Mr. Evans was awarded 20,000 stock options, and Mr. Adair was awarded 5,000 stock options.

Perquisites and Benefits

The Company provides its Named Executive Officers with perquisites and employee benefits. Except as specifically noted elsewhere in this Proxy Statement, the employee benefits programs in which the Company’s Named Executive Officers participate (which provide benefits such as medical coverage, dental coverage, life insurance, disability insurance and annual contributions to a qualified 401(k) retirement plan) are generally the same programs offered to substantially all of the Company’s salaried employees.

Perquisites

The Committee does not view perquisites as a significant element of its overall compensation structure, but it does believe that providing perquisites can be a useful tool in attracting, motivating and retaining executive talent. The Company provided certain perquisites to its Named Executive Officers in 2006 as summarized below:

Use of Vehicles

Each of the Company’s Named Executive Officers except for Mr. Evans is provided with either a car allowance or vehicle provided by the Company. The Committee based its determination to offer these perquisites primarily due to the use of these vehicles for Company purposes and based upon a comparison of comparable perquisites at peer companies.

Supplemental Medical, Travel and Expense Reimbursement for Mr. Atsinger

In addition to the basic group medical plan offered all employees, Mr. Atsinger receives reimbursement for all travel and medical expenses incurred by him for any medical treatment elected by him. This perquisite includes all medical expenses that are not covered under the Company’s medical benefits or plans. The Company may elect to provide this perquisite by obtaining supplemental medical insurance covering Mr. Atsinger at the Company’s cost or reimbursing Mr. Atsinger for any health, dental or vision expenses incurred by him that are

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not covered by the Company’s medical benefits programs. The Company also provides full reimbursement to Mr. Atsinger for any income or employment taxes applicable to this perquisite.

Payment of Filing and Regulatory Fees

The Company pays for the preparation of all regulatory and government filings required to be made by the Named Executive Officers solely as a result of their position as officers or directors of the Company or of the Company’s wholly-owned subsidiary Salem Communications Holding Corporation. The Company also pays for the preparation and filing of all regulatory filings (including without limitation Hart-Scott-Rodino Act filing fees) Mr. Epperson or Mr. Atsinger are required to make as a result of the exercise of options granted to them for the purchase of the Company’s stock. The Committee’s determination to provide this perquisite to Messrs. Epperson and Atsinger was based on the possibility that such filings will need to be made if either Mr. Epperson or Mr. Atsinger elects to exercise any of their vested outstanding stock options.

Mr. Adair’s Country Club Membership

To match a perquisite provided to him by his previous employer, the Company pays dues for a country club membership for Mr. Adair.

Supplemental Life Insurance Coverage for Mr. Evans

To match a perquisite provided to him by his previous employer, and in addition to the basic life insurance provided by the Company to all employees, the Company pays the premiums for term life insurance covering Mr. Evans in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000).

Split-Dollar Life Insurance

Since 2003, the Company has maintained separate split-dollar life insurance policies covering Mr. and Mrs. Epperson and Mr. and Mrs. Atsinger, respectively, in the amount of $20,000,000 each. Pursuant to the terms of these policies, the Company will receive an amount equal to the sum of all premiums paid by the Company (without interest) through such date and the beneficiaries will receive all remaining insurance benefits under these policies.

Other Benefits

401(k) Plan

The Company maintains a 401(k) Plan. Participation in this 401(k) Plan by Named Executive Officers is on the same basis as the Company’s other full-time employees. The terms of the 401(k) Plan indicate that the Company will match employees’ contributions (subject to applicable legal limitations upon such contributions) as follows: (a) for 401(k) Plan contributions less than or equal to 3% of compensation, the Company will match employee contributions at a rate of fifty cents on the dollar, and (b) for 401(k) Plan contributions in excess of 3% and less than 6% of compensation, the Company will match employee contributions at a rate of twenty-five cents on the dollar. Company matching contributions vest ratably in equal installments of one-third each over a three-year period beginning on the employee’s date of hire, such that after three years an employee is 100% vested in Company matching contributions. All Company matches to 401(k) Plan contributions made by the Named Executive Officers are fully vested.

Medical, Dental, Life Insurance and Disability Coverage

The Company provides full reimbursement of all premiums paid by the Named Executive Officers for medical, dental, life and disability coverage benefits provided to the Named Executive Officers and their dependants.

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Deferred Compensation Plans

The Company offers a deferred compensation plan for management-level employees including the Named Executive Officers. Under this plan, participants are permitted to defer a portion of their income for specific time periods. The Company’s obligations under the deferred compensation plan are unsecured.

Severance and Change-in-Control Benefits

Change in Control Agreements

The Company has not entered into change-in-control agreements with any of the Company’s elected corporate officers, including each of the Named Executive Officers.

Severance and Other Termination Agreements

Upon certain types of terminations of employment (other than a termination following a change in control of the Company), severance benefits may be paid to the Named Executive Officers. The severance benefits payable to Messrs. Epperson, Atsinger, Davis and Evans are addressed in their respective employment agreements and each of them would receive the benefits provided to him under their specific agreement. Mr. Adair is not covered under a general severance plan and any severance benefits payable to him would be determined by the Committee in its discretion. The severance and termination payments and benefits that would occur in the event of termination of employment of Messrs. Epperson, Atsinger, Davis or Evans are more fully described in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION—Potential Payments to the Company’s Named Executive Officers Upon Termination or Change in Control” below.

Tax Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of One Million Dollars ($1,000,000) on the amount of compensation that the Company may deduct in any one year with respect to the Company’s CEO and each of the Company’s other four most highly paid executive officers.

The Committee believes that tax deductibility is an important factor, but only one factor, to be considered when evaluating its compensation policies and practices. While the Company’s compensation practices have generally been designed and implemented in a manner which would maintain tax deductibility, the Committee believes that the interests of the Company may be better served by providing compensation that is not fully tax deductible. Based on the Company’s current compensation plans and policies and proposed regulations interpreting the Internal Revenue Code, however, the Committee believes that, for the near future, any loss in tax deductibility for executive compensation will not be material in amount.

Security Ownership Requirements/Guidelines

The Corporate Governance Principles adopted by the Company’s board of directors encourage Company executives and board members to purchase shares of the Company’s stock. The board of directors recognizes, however, that the number of shares of Company stock owned by any executive or director is a personal decision. Accordingly, the Company has determined not to adopt a policy requiring ownership by its Named Executive Officers or directors of a minimum number of shares of Company stock.

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COMPENSATION COMMITTEE REPORT

This Compensation Committee Report shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission (“SEC”), nor shall any information in this report be incorporated by reference by any general statement into any past or future filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that Salem Communications Corporation and its subsidiaries (the “Company”) specifically incorporates this information by reference into such filing, and shall not otherwise be deemed filed under such Acts.

The Compensation Committee has reviewed and discussed the Compensation, Discussion & Analysis which appears above with management, and, based on such review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the above disclosure be included in this Definitive Proxy Statement filed on Schedule 14A under the Securities Exchange Act of 1934, as amended.

The Compensation Committee is currently comprised of Roland S. Hinz, Chairman, David Davenport and Richard A. Riddle.

COMPENSATION COMMITTEE

Roland S. Hinz, Chairman

David Davenport

Richard A. Riddle

April 20, 2007

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EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by the Named Executive Officers for the Company’s fiscal year ended December 31, 2006:

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Grants of Plan-Based Awards in 2006

The Committee granted stock options to each Named Executive Officer on March 15, 2006 under the Stock Plan. The Named Executive Officers were awarded the number of stock options shown in the table below. This table shows all options to purchase the Company’s Class A common stock granted to each of the Named Executive Officers in 2006.

GRANT OF PLAN-BASED AWARDS(1)

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Outstanding Equity Awards at Fiscal Year-End

The following table provides information as of December 31, 2006, in respect of shares of the Company’s Class A common stock that may be issued under the Stock Plan, the Company’s only existing equity compensation plan.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

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