United Community Financial Corp. DEF 14A
SCHEDULE
14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
United Community Financial Corp.
(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):
þ No fee required
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
|
1) |
|
Title of each class of securities to which transaction applies: |
|
|
2) |
|
Aggregate number of securities to which transaction applies: |
|
|
3) |
|
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined) |
|
|
4) |
|
Proposed maximum aggregate value of transaction: |
|
|
5) |
|
Total fee paid: |
o Fee paid previously with preliminary materials
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the date of its filing.
|
1) |
|
Amount Previously Paid: |
|
|
2) |
|
Form, Schedule or Registration Statement No.: |
|
|
3) |
|
Filing Party: |
|
|
4) |
|
Date Filed: |
TABLE OF CONTENTS
UNITED COMMUNITY FINANCIAL CORP.
275 Federal Plaza West
Youngstown, Ohio 44503-1203
(330) 742-0500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 2006 Annual Meeting of Shareholders of United Community Financial Corp. (UCFC) will be
held at Mr. Anthonys, 7440 South Avenue, Boardman, Ohio, on April 27, 2006, at 10:00 a.m., Eastern
Time (Annual Meeting), for the following purposes, all of which are more completely set forth in
the accompanying proxy statement:
|
1. |
|
To reelect three directors of UCFC for terms expiring in
2009; |
|
|
2. |
|
To ratify the selection of Crowe Chizek and Company LLC as
the auditors of UCFC for the current fiscal year; and |
|
|
3. |
|
To transact such other business as may properly come before
the Annual Meeting. |
Only shareholders of record at the close of business on March 10, 2006, will be entitled to
vote at the Annual Meeting. Whether or not you expect to attend the Annual Meeting, we urge you to
consider the accompanying proxy statement carefully and to SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF
A QUORUM AT THE ANNUAL MEETING MAY BE ASSURED. Submitting a proxy does not affect your right to
vote in person in the event you attend the Annual Meeting.
By Order of the Board of Directors
|
|
|
Youngstown, Ohio
|
|
Douglas M. McKay |
March 29, 2006
|
|
President and Chairman of the Board |
United Community Financial Corp.
275 Federal Plaza West
Youngstown, Ohio 44503-1203
(330) 742-0500
PROXY STATEMENT
PROXIES
The enclosed proxy is being solicited by the Board of Directors of United Community Financial
Corp., an Ohio corporation (UCFC), for use at the 2006 Annual Meeting of Shareholders of UCFC to be
held at Mr. Anthonys, 7440 South Avenue, Boardman, Ohio, on April 27, 2006, at 10:00 a.m., Eastern
Time, and at any adjournments thereof (Annual Meeting). Only shareholders of record as of the
close of business on March 10, 2006 (Voting Record Date) are entitled to vote at the Annual
Meeting. As of the Voting Record Date, there were 31,092,963 votes entitled to be cast at the
Annual Meeting.
Each properly executed proxy received prior to the Annual Meeting and not revoked will be
voted as specified thereon or, in the absence of specific instructions to the contrary, will be
voted:
FOR the re-election of Richard M. Barrett, Thomas J. Cavalier and Douglas M.
McKay as directors of UCFC for terms expiring in 2009.
FOR the ratification of the selection of Crowe Chizek and Company LLC (Crowe
Chizek) as the auditors of UCFC for the current fiscal year.
Proxies may be revoked by (a) delivering a written notice expressly revoking the proxy to the
Secretary of UCFC at the above address prior to the Annual Meeting, (b) delivering a later dated
proxy to UCFC at the above address prior to the Annual Meeting, or (c) attending the Annual Meeting
and voting in person. Proxies may be solicited by the directors, officers and other employees of
UCFC and The Home Savings and Loan Company of Youngstown, Ohio, a wholly-owned subsidiary of UCFC
(Home Savings), in person or by telephone, telecopy, telegraph or mail, only for use at the Annual
Meeting. The cost of soliciting proxies will be borne by UCFC.
In some cases, UCFC has multiple shareholders of record at a single address. UCFC sends a
single annual report and proxy statement to that address unless it receives instructions to the
contrary. However, each shareholder of record will continue to receive a separate proxy card. This
practice, known as householding, is designed to reduce printing and postage costs. If you wish
to receive a separate copy of this years annual report or proxy statement, you may request it by
writing to UCFC at the above address. If you wish to discontinue householding entirely, you may
contact Registrar and Transfer Company by telephone at 1-800-368-5948, by e-mail at info@rtco.com,
or by written instructions sent to Registrar and Transfer Company, 10 Commerce Drive, Cranford, New
Jersey 07016-3572. If you receive multiple copies of the annual report and proxy statement, you
may request householding by contacting Registrar and Transfer at the telephone number or address
above. If your shares are held in street name through a bank, broker or other holder of record,
you may request householding by contacting that bank, broker or other holder of record.
This proxy statement is first being mailed to the shareholders of UCFC on or about March 29,
2006.
ELECTION OF DIRECTORS
The Board of Directors has nominated and proposes the re-election of the following directors
for terms expiring in 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Director of |
Name |
|
Age |
|
Positions held |
|
UCFC since |
Richard M. Barrett |
|
66 |
|
Director |
|
1998 |
Thomas J. Cavalier |
|
53 |
|
Director |
|
2000 |
Douglas M. McKay |
|
58 |
|
Director, Chairman of the Board and President |
|
1998 |
|
|
|
|
|
|
|
Richard M. Barrett. Prior to his retirement in 1995, Mr. Barrett was the President of Barrett
Cadillac, Inc., an automobile dealership located in Youngstown, Ohio. Mr. Barrett has been a
director of Home Savings since 1976.
Thomas J. Cavalier. Mr. Cavalier is the Chairman of the Board, Chief Executive Officer and
President of Butler Wick Corp., a subsidiary of UCFC (Butler Wick), positions which he has held
since 1985. Mr. Cavalier joined Butler Wick in 1975.
Douglas M. McKay. Mr. McKay joined Home Savings in 1971. Mr. McKay became Chairman of the
Board and President of UCFC in 1998. Since 1995, Mr. McKay has served as Chief Executive Officer
and Chairman of the Board of Home Savings and, from 1996 until March 2000, also served as President
of Home Savings.
In accordance with UCFCs Code of Regulations (Regulations), nominees for election as
directors may be proposed only by the directors or by a shareholder entitled to vote for directors
in a written nomination received by the Secretary of UCFC by the sixtieth day before the first
anniversary of the most recent annual meeting of shareholders held for the election of directors.
If the annual meeting for the election of directors in any year is not held on or before the
thirty-first day following such anniversary, then the written notice shall be received by the
Secretary within a reasonable time prior to the date of the annual meeting. Each written
nomination must state the name, age, and business or residence address of the nominee, the
principal occupation or employment of the nominee, the number of common shares of UCFC owned either
beneficially or of record by each nominee and the length of time the UCFC shares have been so
owned. No nominations were received from any shareholders of UCFC for the Annual Meeting.
Under Ohio law and the Regulations, the three nominees receiving the greatest number of votes
will be elected as directors. Each shareholder will be entitled to cast one vote for each share
owned. Shares as to which the authority to vote is withheld are not counted toward the election of
directors or toward the election of the individual nominees specified in the enclosed proxy. If
the enclosed proxy is signed and dated by the shareholder but no vote is specified, the shares
represented by the proxy will be voted FOR the re-election of the three nominees. No
shareholder may cumulate votes in the election of directors.
If any nominee is unable to stand for election, any proxies granting authority to vote for
such nominee will be voted for such substitute as the Board of Directors recommends.
2
UCFC encourages all directors to attend the Annual Meeting. All of UCFCs directors attended
the 2005 Annual Meeting of Shareholders.
CONTINUING DIRECTORS
The following directors will continue to serve after the Annual Meeting for the terms
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director of |
|
Term |
Name |
|
Age |
|
Positions held |
|
UCFC since |
|
expiring in |
Eugenia C. Atkinson |
|
63 |
|
Director |
|
2005 |
|
2007 |
David G. Lodge |
|
66 |
|
Director |
|
2005 |
|
2007 |
Clarence R. Smith, Jr. |
|
77 |
|
Director |
|
2005 |
|
2007 |
Richard J. Schiraldi |
|
51 |
|
Director |
|
2002 |
|
2008 |
Herbert F. Schuler, Sr. |
|
65 |
|
Director |
|
1998 |
|
2008 |
David C. Sweet |
|
66 |
|
Director |
|
2004 |
|
2008 |
Eugenia C. Atkinson. Mrs. Atkinson became a director of Home Savings in 1999. She currently
serves as the Executive Director of Youngstown Metropolitan Housing Authority, a position she has
held since 2000.
David G. Lodge. Mr. Lodge is the President, Chief Operating Officer and a director of Home
Savings, positions he has held since 2000. Prior to joining Home Savings, Mr. Lodge was the
President, Chief Operating Officer and a director of Metropolitan Bank and Trust and its holding
company, Metropolitan Financial Corp. located in Highland Hills, Ohio.
Clarence R. Smith, Jr. Mr. Smith has been a director of Home Savings since 1976. Mr. Smith
also serves as Chairman of S-P Company located in Columbiana, Ohio, a position he has held since
1971. S-P Company is the holding company for Compco Industries and Diamond Steel Construction
Company.
Richard J. Schiraldi. Mr. Schiraldi has been a partner at Cohen & Company, Certified Public
Accountants, Youngstown, Ohio, since 1990. Mr. Schiraldi served as Director of Tax Operations at
Cohen from 1983 until 2003. Mr. Schiraldi also serves as a director of Home Savings.
Herbert F. Schuler, Sr. Mr. Schuler is the Chairman and a director of General Extrusions,
Inc., an aluminum parts manufacturer and the Chairman and a director of Genex Tool & Die, Inc. Mr.
Schuler has been employed by each company since the 1960s. He also serves as a director of Home
Savings.
David C. Sweet. Dr. Sweet is the President of Youngstown State University, a position he has
held since July 2000. Dr. Sweet also serves as a director of Home Savings.
3
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Board of Directors of UCFC met six times for regularly scheduled meetings during 2005.
Each director attended at least 75% of the aggregate of the meetings of the Board of Directors and
the committees on which he or she serves. The Board of Directors has determined that Messrs.
Barrett, Schiraldi, Schuler, Smith and Sweet and Mrs. Atkinson are each considered independent as
set forth in (a) section 10A(m)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(m)(3)),
(b) Securities and Exchange Commission (SEC) Rule 10A-3(b) (17CFR 240.10A-3(b)), and (c) Rule
4200(a) of the National Association of Securities Dealers, Inc. (NASD).
The Board of Directors of UCFC has an Audit Committee, a Compensation Committee and a
Nominating and Governance Committee.
The Audit Committee of UCFC is responsible for reviewing and reporting to the full Board of
Directors on the independent audit of UCFC and related matters to ensure effective compliance with
regulatory and internal policies and procedures. The members of the Audit Committee are Richard M.
Barrett, Richard J. Schiraldi, Herbert F. Schuler, Sr. and David C. Sweet, all of whom are
considered independent under the listing standards of Nasdaq. The Board of Directors has
determined that Richard J. Schiraldi qualifies as a financial expert. The Audit Committee met
seven times during 2005.
The Compensation Committee of UCFC is primarily responsible for establishing Mr. McKays
compensation, assisting the Home Savings Compensation Committee in reviewing the compensation of
other executive officers and evaluating, reviewing and administering UCFCs stock benefit plans.
The members of the Compensation Committee are Eugenia C. Atkinson, Richard M. Barrett, Richard J.
Schiraldi, Herbert F. Schuler, Sr., Clarence R. Smith, Jr. and David C. Sweet. The Compensation
Committee met once during 2005.
The Nominating and Governance Committee of UCFC is responsible for receiving and evaluating
recommendations for potential Board members from directors and shareholders and recommending to the
Board of Directors a slate of director nominees to be elected by shareholders. The Nominating and
Governance Committee has adopted a charter, which is attached as Exhibit A, to set forth its
responsibilities. In selecting nominees, the Nominating and Governance Committee considers the
skills and experience desired in a director, such as community involvement, business development
expertise or financial expertise. Any nominee for election to the Board of Directors should
possess the highest personal values, judgment and integrity and have an understanding of the
regulatory and policy environment in which UCFC operates. The Nominating and Governance Committee
evaluates nominations properly submitted by shareholders on the same basis that it considers
nominations submitted by directors. The members of the Nominating and Governance Committee, all of
whom are independent, are Eugenia C. Atkinson, Richard M. Barrett, Richard J. Schiraldi, Herbert F.
Schuler, Sr., Clarence R. Smith, Jr. and David C. Sweet. The Nominating and Governance Committee
met once during 2005.
Each director of UCFC who is also a director of Home Savings receives a $10,000 retainer from
Home Savings, and each UCFC director who is not a Home Savings director receives a $10,000 retainer
from UCFC. Each director also receives a fee of $400 per UCFC board meeting attended, and each
non-employee director receives a fee of $400 per committee meeting attended if he/she is a
committee member, or $600 per committee meeting attended if he/she is the committee chairperson.
4
EXECUTIVE OFFICERS
The following information is supplied for certain executive officers of UCFC and Home Savings
who do not serve on UCFCs Board of Directors:
|
|
|
|
|
Name |
|
Age |
|
Position held |
Patrick W. Bevack |
|
59 |
|
Executive Vice President and CFO of Home Savings |
Patrick A. Kelly |
|
47 |
|
Treasurer and CFO of UCFC |
Patrick W. Bevack. Mr. Bevack was appointed Executive Vice President and Chief Financial
Officer of Home Savings in June 2003. Mr. Bevack joined Home Savings in June 2000 and served as
Senior Vice President of Mortgage Banking until June 2003. Prior to joining Home Savings, he was
Executive Vice President and Assistant Secretary of Metropolitan Bank and Trust.
Patrick A. Kelly. Mr. Kelly was appointed Treasurer of Home Savings in April 1992 and named
Senior Vice President of Home Savings in November 1995. Mr. Kelly was appointed Treasurer of UCFC
in 1998 and Chief Financial Officer of UCFC in June 2003. Mr. Kelly has been employed by Home
Savings since 1983 and has been a director of Home Savings since 1996.
5
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
The following table presents certain information regarding the compensation earned by Mr.
McKay and the four highest compensated executive officers of UCFC and its subsidiaries (Named
Executive Officers) who received cash and cash equivalent compensation in excess of $100,000 from
UCFC or one of its subsidiaries for services rendered during 2005:
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
Fiscal Year Ended |
|
Annual Compensation |
|
Restricted Stock |
|
Underlying |
|
All Other |
Name and Principal Position |
|
December 31, |
|
Salary ($)(1) |
|
Bonus ($) |
|
Award(s)($) |
|
Options/SARs (#) |
|
Compensation |
Douglas M. McKay |
|
|
2005 |
|
|
$ |
349,477 |
|
|
$ |
262,255 |
|
|
|
|
|
|
|
|
|
|
$ |
57,188 |
(2) |
Chairman and |
|
|
2004 |
|
|
|
339,488 |
|
|
|
205,000 |
|
|
|
|
|
|
|
136,752 |
|
|
|
59,846 |
|
President, UCFC |
|
|
2003 |
|
|
|
329,600 |
|
|
|
247,200 |
|
|
|
|
|
|
|
136,752 |
|
|
|
61,931 |
|
|
David G. Lodge |
|
|
2005 |
|
|
|
240,811 |
|
|
|
180,710 |
|
|
|
|
|
|
|
|
|
|
|
55,588 |
(3) |
President and COO, |
|
|
2004 |
|
|
|
233,928 |
|
|
|
140,357 |
|
|
|
|
|
|
|
80,096 |
|
|
|
55,446 |
|
Home Savings |
|
|
2003 |
|
|
|
227,115 |
|
|
|
170,336 |
|
|
|
|
|
|
|
80,096 |
|
|
|
56,731 |
|
|
Thomas J. Cavalier |
|
|
2005 |
|
|
|
211,000 |
|
|
|
169,825 |
|
|
|
|
|
|
|
|
|
|
|
457,834 |
(4) |
Chairman and CEO, |
|
|
2004 |
|
|
|
211,000 |
|
|
|
120,852 |
|
|
|
|
|
|
|
6,553 |
|
|
|
389,989 |
|
Butler Wick |
|
|
2003 |
|
|
|
211,000 |
|
|
|
120,852 |
|
|
|
|
|
|
|
6,315 |
|
|
|
136,639 |
|
|
Patrick W. Bevack |
|
|
2005 |
|
|
|
187,244 |
|
|
|
131,144 |
|
|
|
|
|
|
|
|
|
|
|
41,588 |
(5) |
Executive VP and |
|
|
2004 |
|
|
|
181,892 |
|
|
|
100,041 |
|
|
|
|
|
|
|
52,444 |
|
|
|
40,646 |
|
CFO, Home Savings |
|
|
2003 |
|
|
|
176,594 |
|
|
|
97,126 |
|
|
|
|
|
|
|
52,444 |
|
|
|
40,905 |
|
|
Patrick A. Kelly |
|
|
2005 |
|
|
|
173,709 |
|
|
|
112,974 |
|
|
|
|
|
|
|
|
|
|
|
56,388 |
(6) |
Treasurer and CFO, |
|
|
2004 |
|
|
|
168,743 |
|
|
|
84,372 |
|
|
|
|
|
|
|
57,777 |
|
|
|
55,446 |
|
UCFC |
|
|
2003 |
|
|
|
163,828 |
|
|
|
90,105 |
|
|
|
|
|
|
|
57,777 |
|
|
|
56,731 |
|
|
|
|
(1) |
|
Does not include amounts attributable to other miscellaneous benefits received by
executive officers. The cost to UCFC of providing such benefits to each named executive
officer was less than 10% of his cash compensation. |
|
(2) |
|
Consists of directors fees of $15,600, a matching contribution of $6,300 to Mr. McKays
account in the Home Savings 401(k) Plan (the 401(k) Plan) and the $35,288 value at December
31, 2005 of 2,988 shares allocated to Mr. McKays ESOP account. |
|
(3) |
|
Consists of directors fees of $14,000, a 401(k) Plan matching contribution of $6,300 and the
$35,288 value at December 31, 2005 of 2,988 shares allocated to Mr. Lodges ESOP account. |
|
(4) |
|
Consists of directors fees of $12,400, commissions of $102,791, profit sharing of $8,035, a
401(k) Plan matching contribution of $3,150 and a distribution from the Butler Wick Retention
Plan of $331,458. |
6
|
|
|
(5) |
|
Consists of a 401(k) Plan matching contribution of $6,300 and the $35,288 value at December
31, 2005 of 2,988 shares allocated to Mr. Bevacks ESOP account. |
|
(6) |
|
Consists of directors fees of $14,800, a 401(k) Plan matching contribution of $6,300 and the
$35,288 value at December 31, 2005 of 2,988 shares allocated to Mr. Kellys ESOP account. |
Stock Options
The following table sets forth information regarding the number and value of unexercised
options held by the Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregated Option/SAR Exercises in Last Fiscal Year and 12/31/2005 Option/SAR Values |
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
Value of Unexercised |
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised |
|
In The Money |
|
|
Shares |
|
|
|
|
|
Options/SARs at |
|
Options/SARs at |
|
|
Acquired on |
|
Value |
|
12/31/2005(#) |
|
12/31/2005 (1) |
Name |
|
Exercise(#) |
|
Realized($) |
|
Exercisable/Unexercisable |
|
Exercisable/Unexercisable |
Douglas M. McKay |
|
|
-0- |
|
|
|
N/A |
|
|
|
439,627/-0- |
|
|
$ |
1,138,325/0 |
|
David G. Lodge |
|
|
-0- |
|
|
|
N/A |
|
|
|
226,775/-0- |
|
|
|
521,104/0 |
|
Thomas J. Cavalier |
|
|
-0- |
|
|
|
N/A |
|
|
|
30,187/-0- |
|
|
|
101,370/0 |
|
Patrick W. Bevack |
|
|
-0- |
|
|
|
N/A |
|
|
|
137,304/-0- |
|
|
|
291,896/0 |
|
Patrick A. Kelly |
|
|
-0- |
|
|
|
N/A |
|
|
|
227,293/-0- |
|
|
|
686,445/0 |
|
|
|
|
(1) |
|
The amount represents the difference between the aggregate option exercise price and the
fair market value of the underlying shares on December 31, 2005 of $11.81 per share. |
Employment Agreements
Home Savings has employment agreements with each of Douglas M. McKay, David G. Lodge, Patrick
W. Bevack and Patrick A. Kelly, and Butler Wick has an employment agreement with Thomas J. Cavalier
(collectively, Employment Agreements). Each of the Employment Agreements has a term ending on
December 31, 2008 and is terminable by Home Savings or Butler Wick, as applicable (the Employers),
at any time. In the event of termination by the Employer for cause, as defined in the Employment
Agreements, the employee has no right to receive any compensation or other benefits for any period
after such termination. In the event of termination by the Employer other than for cause or in
connection with a change of control, as defined in the Employment Agreements, the employee is
entitled to a continuation of salary payments for a period of time equal to the remaining term of
the Employment Agreement, a continuation of benefits substantially equal to those being provided at
the date of termination of his employment until the earliest to occur of the end of the term of the
Employment Agreement or the date on which the employee becomes employed full-time by another
employer, and a cash bonus equal to the cash bonus, if any, paid to the employee in the
twelve-month period prior to the termination of his employment.
In the event of termination in connection with a change in control, the employee is entitled
to payment of an amount equal to three times the employees annual compensation immediately
preceding the termination of his employment. In addition, the employee is entitled to continued
coverage under benefit plans until the earliest of the end of the term of his Employment Agreement
or the date on which he is included in another employers benefit plans as a full-time employee.
The maximum which the employee may receive, however, is limited to an amount which will not result
in the imposition of a penalty tax pursuant to Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (Code).
7
Control, as defined in the Employment Agreements, generally refers to the acquisition by any
person or entity of the ownership or power to vote 20% or more of the voting stock of the employer
or UCFC, the control of the election of a majority of the directors of the employer or UCFC, or the
exercise of a controlling influence over the management or policies of the employer or UCFC.
The aggregate payments that would have been made to Messrs. McKay, Lodge, Cavalier, Bevack and
Kelly pursuant to the Employment Agreements, assuming their termination at December 31, 2005,
following a change of control, would have been approximately $1,044,936, $720,025, $630,890,
$559,860 and $519,390, respectively.
Compensation Committee Report
The business of UCFC consists principally of holding the stock of its subsidiaries, Home
Savings and Butler Wick. The functions of the executive officers of UCFC pertain primarily to the
operations of Home Savings and Butler Wick, and the executive officers receive their compensation
from the appropriate subsidiary. The Compensation Committee of UCFC makes a recommendation to the
Board of Directors of Home Savings, which makes the final decision. The Compensation Committee of
Home Savings is responsible for reviewing the compensation of the other Named Executive Officers
except Thomas Cavalier, whose compensation is established by the Compensation Committee of Butler
Wick. The following report is a joint report of the UCFC and Home Savings Compensation Committees.
Both of the Compensation Committees are comprised solely of non-employee, independent directors.
Compensation Policies and Process. The executive compensation programs of UCFC and its
subsidiaries are designed to attract and retain key executives by providing comparable compensation
opportunities to those offered by peer group companies. The programs consist of three main
components: (1) base salary; (2) cash bonuses, which are generally based on the appropriate
companys performance; and (3) stock awards and stock options to provide long-term incentives for
performance and to align executive officer and stockholder interests. The Committee strives to
achieve a balance of cash and stock-based compensation at levels appropriate to align the
short-term and long-term interests of UCFCs executives with those of its shareholders. The
bonuses and stock-based compensation are intended to reward executive officers for corporate
performance and to motivate the officers to reach specific strategic business objectives. The
criteria utilized for the cash bonus program are earnings per share, credit quality, capital levels
and interest rate risk.
Determination of CEOs Compensation. The compensation of Douglas M. McKay, the President and
Chief Executive Officer of UCFC and the Chief Executive Officer of Home Savings, is reviewed
annually by the Compensation Committee of UCFC. The Compensation Committee utilizes industry
survey data and assesses Mr. McKays contribution to UCFC, the skills and experiences required for
his position and his potential contributions to the future of UCFC. Mr. McKay does not participate
in discussions or decisions relative to his compensation. The Compensation Committees of UCFC and
Home Savings approved a base salary for Mr. McKay of $367,157 for the year 2006, an increase of 5%
over his base salary for 2005, and a performance incentive award for 2005 of $262,255, which is 75%
of his base salary. Comparative salary data gathered from various industry compensation surveys
indicates that Mr. McKays compensation level as compared to that of peer companies does not exceed
the market average.
8
Submitted by the Compensation Committees of UCFC and Home Savings
|
|
|
Eugenia Atkinson, Chair
|
|
Clarence R. Smith, Jr. |
Richard M. Barrett
|
|
David C. Sweet |
Richard J. Schiraldi
|
|
|
Herbert F. Schuler, Sr.
|
|
|
Compensation Committee Interlocks and Insider Participation
During 2005, Mrs. Atkinson and Messrs. Barrett, Schiraldi, Schuler, Smith and Dr. Sweet served
on the UCFC Compensation Committee. None of these members is a current or former executive officer
or employee of UCFC, Home Savings or Butler Wick or had a reportable business relationship with
UCFC, Home Savings or Butler Wick.
9
Performance Graph
The following graph compares the cumulative total return on UCFCs common shares since
December 31, 2000, with the total return of an index of companies whose shares are traded on The
Nasdaq Stock Market and an index of publicly traded thrift institutions and thrift holding
companies. The graph assumes that $100 was invested in UCFC shares on December 31, 2000.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending |
|
Index |
|
12/31/00 |
|
|
12/31/01 |
|
|
12/31/02 |
|
|
12/31/03 |
|
|
12/31/04 |
|
|
12/31/05 |
|
|
United Community Financial Corp. |
|
|
100.00 |
|
|
|
108.22 |
|
|
|
134.80 |
|
|
|
183.44 |
|
|
|
184.68 |
|
|
|
200.66 |
|
NASDAQ Composite |
|
|
100.00 |
|
|
|
79.18 |
|
|
|
54.44 |
|
|
|
82.09 |
|
|
|
89.59 |
|
|
|
91.54 |
|
SNL Thrift Index |
|
|
100.00 |
|
|
|
106.88 |
|
|
|
127.50 |
|
|
|
180.50 |
|
|
|
201.12 |
|
|
|
208.21 |
|
Certain Transactions
Home Savings makes loans to executive officers and directors of UCFC and its subsidiaries in
the ordinary course of business and on the same terms and conditions, including interest rates and
collateral, as those of comparable loans to other persons. All outstanding loans to executive
officers and directors were made pursuant to such policy, do not involve more than the normal risk
of collectibility or present other unfavorable features and are current in their payments.
10
OWNERSHIP OF UCFC SHARES
The following table sets forth certain information regarding the only person known to UCFC to
own beneficially more than five percent of the outstanding common shares of UCFC as of the Voting
Record Date:
|
|
|
|
|
|
|
|
|
|
|
Amount and nature of |
|
Percent of |
Name and address |
|
beneficial ownership |
|
shares outstanding |
United Community Financial Corp. |
|
|
|
|
|
|
|
|
Employee Stock Ownership Plan |
|
|
3,966,810 |
(1) |
|
|
12.8 |
% |
2321 Kochs Lane |
|
|
|
|
|
|
|
|
Quincy, IL 62301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors, Inc. |
|
|
2,341,847 |
(2) |
|
|
7.5 |
% |
1299 Ocean Avenue |
|
|
|
|
|
|
|
|
11th Floor |
|
|
|
|
|
|
|
|
Santa Monica, CA 90401 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
First Bankers Trust Services, Inc., as the Trustee for the United Community Financial
Corp. Employee Stock Ownership Plan (the ESOP), has sole investment power over the ESOP
shares. The Trustee may be deemed to have voting power over the 2,121,357 unallocated shares,
although the plan provides that unallocated shares shall be voted by the Trustee in the same
proportion as participants direct the voting of allocated ESOP shares. |
|
(2) |
|
Based on Schedule 13G, dated February 1, 2006, in which Dimensional Fund Advisors, Inc.
reports sole voting power and sole dispositive power over all of the shares reported. |
11
The following table sets forth certain information regarding the number of common shares
of UCFC beneficially owned by each director and Named Executive Officer and by the directors and
executive officers of UCFC as a group as of the Voting Record Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and nature of |
|
|
|
|
beneficial ownership |
|
|
|
|
Sole voting or |
|
Shared voting or |
|
Percent of |
Name and address (1) |
|
investment power |
|
investment power |
|
shares outstanding |
Eugenia C. Atkinson |
|
|
20,552 |
|
|
|
0 |
|
|
|
* |
|
Richard M. Barrett |
|
|
52,499 |
|
|
|
18,975 |
|
|
|
* |
|
Patrick W. Bevack |
|
|
175,910 |
(2) |
|
|
0 |
|
|
|
* |
|
Thomas J. Cavalier |
|
|
75,887 |
(2) |
|
|
0 |
|
|
|
* |
|
Patrick A. Kelly |
|
|
443,547 |
(2) |
|
|
22,529 |
|
|
|
1.5 |
% |
David G. Lodge |
|
|
298,385 |
(2) |
|
|
1,350 |
|
|
|
* |
|
Douglas M. McKay |
|
|
547,191 |
(2) |
|
|
0 |
|
|
|
1.7 |
|
Richard J. Schiraldi |
|
|
7,437 |
|
|
|
0 |
|
|
|
* |
|
Herbert F. Schuler, Sr. |
|
|
55,971 |
|
|
|
54,860 |
|
|
|
* |
|
Clarence R. Smith |
|
|
41,770 |
|
|
|
7,036 |
|
|
|
* |
|
David C. Sweet |
|
|
591 |
|
|
|
0 |
|
|
|
* |
|
All directors and executive
officers as a group (11 persons) |
|
|
1,719,740 |
(2) |
|
|
104,750 |
|
|
|
5.7 |
|
|
|
|
* |
|
Less than one percent of the total outstanding. |
|
(1) |
|
Each of the persons listed in this table may be contacted at the address of UCFC. |
|
(2) |
|
Includes the following number of shares that may be acquired upon the exercise of options
awarded under the United Community Financial Corp. Long-Term Incentive Plan: Mr. Bevack
137,304; Mr. Cavalier 30,187; Mr. Kelly 227,293; Mr. Lodge 226,775; Mr. McKay 439,627;
and directors and executive officers as a group 1,061,186. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires UCFCs executive officers and
directors, and persons who own more than ten percent of UCFCs common shares, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
and to provide UCFC with a copy of such form. Based on UCFCs review of the copies of such forms
it has received, UCFC believes that its executive officers and directors complied with all filing
requirements applicable to them with respect to transactions during the fiscal year ended December
31, 2005, except Mr. Lodge who filed a late Form 4 reporting the sale of shares held in his 401(k)
and Mr. Sweet who filed a late Form 4 reporting the purchase of shares.
12
AUDIT COMMITTEE REPORT
The Audit Committee is responsible for overseeing UCFCs accounting functions and controls, as
well as hiring an accounting firm to audit UCFCs financial statements. The Audit Committee has
adopted a charter to set forth its responsibilities (the Charter).
As required by the Charter, the Audit Committee received and reviewed the report of Crowe
Chizek regarding the results of their audit, as well as the written disclosures and the letter from
Crowe Chizek required by Independence Standards Board Standard No. 1. The Audit Committee reviewed
the audited financial statements with the management of UCFC. A representative of Crowe Chizek
also discussed with the Audit Committee the independence of Crowe Chizek from UCFC, as well as the
matters required to be discussed by Statement of Auditing Standards 61, as may be amended from time
to time. Discussions between the Audit Committee and the representative of Crowe Chizek included
the following:
|
|
|
Crowe Chizeks responsibilities in accordance with generally accepted auditing
standards |
|
|
|
|
The initial selection of, and whether there were any changes in, significant
accounting policies or their application |
|
|
|
|
Managements judgments and accounting estimates |
|
|
|
|
Whether there were any significant audit adjustments |
|
|
|
|
Whether there were any disagreements with management |
|
|
|
|
Whether there was any consultation with other accountants |
|
|
|
|
Whether there were any major issues discussed with management prior to Crowe
Chizeks retention |
|
|
|
|
Whether Crowe Chizek encountered any difficulties in performing the audit |
|
|
|
|
Crowe Chizeks judgments about the quality of UCFCs accounting principles |
|
|
|
|
Crowe Chizeks responsibilities for information prepared by management that is
included in documents containing audited financial statements |
Based on its review of the financial statements and its discussions with management and the
representative of Crowe Chizek, the Audit Committee did not become aware of any material
misstatements or omissions in the financial statements. Accordingly, the Audit Committee
recommended to the Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K for the year ended December 31, 2005, to be filed with the SEC.
Richard J. Schiraldi Richard M. Barrett Herbert F. Schuler, Sr. David C. Sweet Chair
SELECTION OF AUDITORS
The Board of Directors has selected Crowe Chizek as the auditors for the current fiscal year.
Management expects that a representative from Crowe Chizek will be present at the Annual Meeting.
The affirmative vote of the holders of a majority of the shares of UCFC represented in person
or by proxy at the Annual Meeting is necessary to ratify the selection of Crowe Chizek as the
auditors of UCFC for the current fiscal year. Shares that are represented in person or by proxy at
the Annual Meeting but not voted (non-votes) will have the same effect as a vote against the
approval of such ratification, as will abstentions. If, however, a shareholder has signed and
dated a proxy but has not voted on the ratification of the selection of Crowe Chizek by checking an
appropriate block on the
13
proxy, such persons shares will be voted FOR the ratification of the selection of Crowe
Chizek and will not be considered non-votes.
AUDIT FEES
The aggregate fees billed by Crowe Chizek to UCFC for the years ended December 31, 2005 and
2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Audit Fees |
|
$ |
357,640 |
|
|
$ |
359,350 |
|
Audit-Related Fees |
|
|
31,550 |
(1) |
|
|
26,705 |
(1) |
Tax Fees |
|
|
50,500 |
(2) |
|
|
71,750 |
(2) |
All Other Fees |
|
|
3,250 |
(3) |
|
|
49,278 |
(3) |
|
|
|
(1) |
|
Includes fees for services related to attestation on internal controls, the audit of the
401(k) and ESOP and an evaluation of managements assertions relative to U.S. Department of
Education reporting requirements for the student loan portfolio. |
|
(2) |
|
Includes fees for services related to the preparation of various federal, state and local
income tax returns and various consulting services. |
|
(3) |
|
Includes fees for software and education relating to managements review and reporting on
internal controls for compliance with Section 404 of the Sarbanes-Oxley Act. |
14
PROPOSALS OF SHAREHOLDERS, COMMUNICATIONS WITH THE BOARD OF DIRECTORS AND OTHER MATTERS
Any proposals of qualified shareholders intended to be included in the proxy statement for the
2007 Annual Meeting of Shareholders of UCFC should be sent to UCFC by certified mail and must be
received by UCFC not later than November 30, 2006. In addition, if a shareholder intends to
present a proposal at the 2007 Annual Meeting without including the proposal in the proxy materials
related to that meeting, and if the proposal is not received by February 13, 2007, then the proxies
designated by the Board of Directors of UCFC for the 2007 Annual Meeting of Shareholders of UCFC
may vote in their discretion on any such proposal any shares for which they have been appointed
proxies without mention of such matter in the proxy statement or on the proxy card for such
meeting.
Shareholders may send written communications to the Board of Directors or any of the directors
c/o Secretary, United Community Financial Corp., 275 Federal Plaza West, Youngstown, Ohio
44503-1203. All communications will be compiled by the Secretary of UCFC and submitted to the
Board of Directors or the individual directors.
Management knows of no other business which may be brought before the Annual Meeting. It is
the intention of the persons named in the enclosed Proxy to vote the Proxy in accordance with their
best judgment on any other matters which may be brought before the Annual Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON, WE URGE YOU TO COMPLETE, SIGN AND RETURN THE PROXY IN THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
|
|
|
|
|
|
|
By Order of the Board of Directors
|
|
|
|
|
|
|
|
Youngstown, Ohio
|
|
Douglas M. McKay
|
|
|
March 29, 2006
|
|
President and Chairman of the Board
|
|
|
15
EXHIBIT A
UNITED COMMUNITY FINANCIAL CORP.
CHARTER OF THE NOMINATING AND GOVERNANCE COMMITTEE
Adopted February 15, 2006
PURPOSE
The purpose of the Nominating and Governance Committee (the Committee) of the Board of
Directors (the Board) of United Community Financial Corp. (the Company) shall be to identify
and screen individuals to become members of the Board; receive and evaluate recommendations for
potential Board members from shareholders; recommend to the Board the slate of director nominees to
be elected by shareholders; recommend directors to be elected by the Board to fill any vacancies;
evaluate the Boards performance; develop and recommend to the Board corporate governance
guidelines; provide oversight with respect to corporate governance and ethical conduct and handle
other matters as the Board deems appropriate.
MEMBERS
The Committee shall consist of at least three members, all of whom must qualify as independent
directors (Independent Directors). A Committee member shall not be considered independent if he
or she fails to satisfy the standards of independence set forth in (a) section 10A(m)(3) of the
Securities Exchange Act of 1934 (15 U.S.C. 78f(m)(3)), (b) Securities and Exchange Commission (SEC)
Rule 10A-3(b) (17 CFR 240.10A-3(b)), and (c) Rule 4200(a) of the National Association of Securities
Dealers, Inc. (NASD), whether because he or she accepts consulting, advisory, or other compensatory
fees from the Company or any subsidiary, or because he or she is an affiliated person of the
Company or a subsidiary, or for other reasons under those laws. No member of the Committee may
accept any consulting, advising, or other compensatory fee from the Company except for service on
the board of directors or a committee or committees of the board.
The members of the Committee shall be appointed by the Board. The members shall serve until
their resignation, retirement, or removal by the Board or until their successors shall be appointed
and qualified. No member of the Committee shall be removed except by majority vote of the
Independent Directors of the Board then in office. Notwithstanding anything contained herein to
the contrary, it shall be the responsibility of each Independent Director to disclose immediately
to the Committee any relationship that, either in fact or in appearance, may affect such Directors
qualification as an Independent Director or that might impact the independent judgment of the
Director in their services as a member of the Committee.
RESPONSIBILITIES
To fulfill its purposes, the Committee shall:
|
1. |
|
Identify and evaluate prospective candidates for the Board, including those
individuals properly nominated by shareholders. In selecting nominees, the Committee
may consider whether a current Board member wishes to be re-elected and, if a new
nominee is needed, the skills and experience desired in a new director, such as
community involvement, marketing or sales experience, financial expertise, business
experience, technological |
1
|
|
|
knowledge or business development expertise. The Committee shall look for candidates
who, both individually and as a group: |
|
a. |
|
meet the Companys strategic needs and will be most effective in
meeting the long term interests of the Company and its shareholders; |
|
|
b. |
|
possess the highest personal values, judgment and integrity; |
|
|
c. |
|
have an understanding of the regulatory and policy environment in
which the Company operates; and |
|
|
d. |
|
have diverse experience in the key business, financial and other
challenges that face the Company. |
|
2. |
|
Recommend to the Board a slate of potential nominees to be proposed at the
Companys annual meeting of shareholders, including the nomination of incumbent
directors for re-election, as appropriate. |
|
|
3. |
|
Consider and recommend to the Board the appropriate size of the Board and
retirement and other tenure policies for directors. |
|
|
4. |
|
Review the structure and composition of the Boards other committees and make
recommendations to the Board with respect to such matters. |
|
|
5. |
|
Review directorships in other public companies held by or offered to directors
of the Company. |
|
|
6. |
|
Recommend to the Board corporate governance guidelines for the Company and from
time to time review and assess the guidelines and recommend changes for approval by the
Board. |
|
|
7. |
|
Consider and advise the Board on other matters relating to the affairs or
governance of the Board. |
|
|
8. |
|
Recommend to the Board the adoption of a code of ethics and business conduct,
and from time to time review and assess the code and recommend changes for approval by
the Board. |
|
|
9. |
|
Oversee a periodic evaluation of the performance of the Board, including
individual members of the Board, and discuss the evaluation with the full Board. |
|
|
10. |
|
Evaluate annually the performance of the Committee and the adequacy of the
Committees charter. |
|
|
11. |
|
Review senior management membership on outside boards. |
2
OUTSIDE ADVISORS
The Committee shall have the authority to retain such outside counsel, experts, and other
advisors, including search firms to identify director candidates, as it determines appropriate to
assist it in the full performance of its functions.
MEETINGS
The Committee shall meet as often as it deems necessary or appropriate and at such times and
places as it may determine. A majority of the Committee shall constitute a quorum. Meetings of
the Committee may be held through any communications equipment if all persons participating can
hear each other, and participation in a meeting pursuant to this provision shall constitute
presence at such meeting. Minutes shall be kept and provided to the Board. The Committee shall
make reports to the Board on its activities at such times as the Committee deems appropriate.
3
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNITED COMMUNITY FINANCIAL CORP.
UNITED COMMUNITY FINANCIAL CORP. 2006 ANNUAL MEETING Of SHAREHOLDERS
April 27, 2006
The undersigned shareholder of United Community Financial Corp. (UCFC) hereby constitutes
and appoints David G. Lodge and Patrick A. Kelly, or either of them, as the Proxy or
Proxies of the undersigned with full power of substitution and resubstitution, to vote at the
Annual Meeting of Shareholders of UCFC to be held at Mr. Anthonys, 7440 South Avenue, Boardman,
Ohio , on April 27, 2006, at 10:00 a.m. Eastern Time (the Annual Meeting), all of the shares of
UCFC which the undersigned is entitled to vote at the Annual Meeting, or at any adjournment
thereof, on each of the following proposals, all of which are described in the accompanying Proxy
Statement:
1. |
|
The reelection of three directors for terms expiring in 2009: |
|
|
|
|
|
|
|
|
|
o |
|
FOR all nominees listed below (except as marked to the contrary below): |
|
o |
|
WITHHOLD authority to vote for
all nominees listed below: |
|
|
Richard M. Barrett
Thomas J. Cavalier
Douglas M. McKay
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominees name
in the space provided below).
2. |
|
The ratification of the selection of Crowe Chizek and Company LLC, certified public
accountants, as the auditors of UCFC for the current fiscal year. |
|
|
|
|
|
|
|
|
|
|
|
o
|
|
FOR
|
|
o
|
|
AGAINST
|
|
o
|
|
ABSTAIN |
3. |
|
In their discretion, upon such other business as may properly come before the Annual Meeting
or any adjournments thereof. |
|
|
|
The Board of Directors recommends a vote FOR the nominees and the proposals listed above. |
IMPORTANT: Please sign and date this Proxy on the reverse side.
4
This Proxy, when properly executed, will be voted in the manner directed herein by the
undersigned shareholder. Unless otherwise specified, the shares will
be voted FOR proposals 1 and 2.
All Proxies previously given by the undersigned are hereby revoked. Receipt of the Notice of
the 2006 Annual Meeting of Shareholders of UCFC and of the accompanying Proxy Statement is hereby
acknowledged.
|
|
|
o
|
|
In order to accommodate all shareholders, please check if you plan on attending the Annual Meeting. |
Please sign exactly as your name appears on your Stock Certificate(s). Executors,
Administrators, Trustees, Guardians, Attorneys and Agents should give their full titles.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature |
|
|
|
Signature |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print or Type Name |
|
|
|
Print or Type Name |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated:
|
|
|
|
|
|
Dated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED
FOR MAILING IN THE USA.
5