UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):July 15, 2009
UNITED COMMUNITY FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
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| OHIO | | 0-024399 | | 34-1856319 |
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(State or other jurisdiction of
incorporation) | | (Commission File No.) | | (IRS Employer I.D. No.) |
275 Federal Plaza West, Youngstown, Ohio 44503-1203
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:(330) 742-0500
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Section 5 — Corporate Governance and Management
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| Item 5.02. | | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
(e) On July 15, 2009, the Compensation Committee and the Board of Directors of United Community Financial Corporation (“UCFC”) approved the Executive Incentive Plan (“EIP”). Messrs. McKay, Bevack and Reske, in addition to other executive officers, will participate in the EIP. The EIP provides incentive compensation awards based upon UCFC’s actual performance for the calendar year compared to the actual performance of an established peer group for the same calendar year, looking at six performance measures.Seethe “Weightings” table below.
The Compensation Committee and the Board of Directors used the following criteria to establish the 2009 peer group: (a) assets between $1.75 and $5.0 billion; and (b) publicly traded banks and thrifts headquartered in Ohio, Indiana, Michigan and Western Pennsylvania. Old Second Bancorp, Inc., Aurora, Illinois, was also included in the peer group based upon management’s recommendation. The 2009 peer group is as follows:
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| S&T Bancorp, Inc. | | 1st Source Corporation |
| First Merchants Corporation | | Chemical Financial Corporation |
| First Financial Bancorp. | | Integra Bank Corporation |
| First Place Financial Corp. | | Independent Bank Corporation |
| Old Second Bancorp, Inc. | | MainSource Financial Group, Inc. |
| First Financial Corporation | | Lakeland Financial Corporation |
| Mercantile Bank Corporation | | Macatawa Bank Corporation |
| Citizens First Bancorp, Inc. | | ESB Financial Corporation |
| First Defiance Financial Corp. | | Peoples Bancorp Inc. |
| Parkvale Financial Corporation | | |
In order for any awards to be made under the EIP for a calendar year’s performance, UCFC must report positive net income for that calendar year, calculated in accordance with GAAP, but adjusted to exclude the effect of extraordinary items. If this threshold is met, incentive awards will be calculated based upon UCFC’s performance against its peers in the six weighted performance measures.Seethe “Weightings” table below. For 2009, the target and maximum incentive awards, respectively, measured as a percentage of base salary are as follows: Mr. McKay—50%, 100%; Mr. Bevack—45%, 90%; and Mr. Reske—40%, 80%. Once the award under the EIP is calculated, it is paid 60% in cash and 40% in restricted stock or stock options. The restricted stock or stock option awards will be awarded under the Amended and Restated United Community 2007 Long-Term Incentive Plan and vest equally over three years, beginning on the first anniversary of the award. Awards under the EIP cannot be made until all peer companies have reported full calendar year earnings.
The calculation of the incentive awards under the EIP is as follows. First, it must be determined where UCFC’s actual performance falls in comparison to the peer group for each of the six performance measures. The comparison is based upon percentiles which correspond to a threshold level for that performance measure.Seethe “Threshold Levels” table below. Then, the threshold level achieved is used to determine the bonus percentage for that performance measure based upon the
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executive officer’s position.Seethe “Bonus Percentages” table below. This bonus percentage is multiplied by the performance measure’s assigned weighting and by the executive’s base salary to determine what amount, if any, is awarded for UCFC’s actual performance for that performance measure. The amount earned for each performance measure is added together to determine the total incentive award under the EIP.
Bonus Percentages As Percent of Base Compensation
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| Threshold | | CEO | | Pres/COO | | CFO | | |
| Level | | Group 1 | | Group 2 | | Group 3 | | Actual Performance versus Peers |
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| | 1 | | | | 0.0 | % | | | 0.0 | % | | | 0.0 | % | | Below 25th Percentile |
| | 2 | | | | 10.0 | % | | | 9.0 | % | | | 8.0 | % | | Above 25th percentile |
| | 3 | | | | 20.0 | % | | | 18.0 | % | | | 16.0 | % | | Above 30th percentile |
| | 4 | | | | 30.0 | % | | | 27.0 | % | | | 24.0 | % | | Above 35th Percentile |
| | 5 | | | | 40.0 | % | | | 36.0 | % | | | 32.0 | % | | Above 40th Percentile |
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| | 6 | | | | 50.0 | % | | | 45.0 | % | | | 40.0 | % | | At or Above Median |
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| | 7 | | | | 60.0 | % | | | 54.0 | % | | | 48.0 | % | | Above 55th Percentile |
| | 8 | | | | 70.0 | % | | | 63.0 | % | | | 56.0 | % | | Above 60th Percentile |
| | 9 | | | | 80.0 | % | | | 72.0 | % | | | 64.0 | % | | Above 65th Percentile |
| | 10 | | | | 90.0 | % | | | 81.0 | % | | | 72.0 | % | | Above 70th Percentile |
| | 11 | | | | 100.0 | % | | | 90.0 | % | | | 80.0 | % | | At or Above 75th Percentile |
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Weightings for Performance Measures
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| | | Weight |
Profitability | | | 40.0 | % |
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| ROAE | | | 5.0 | % |
| ROAA | | | 25.0 | % |
| Budget Net Income | | | 10.0 | % |
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Growth | | | 10.0 | % |
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| Core Deposit Growth | | | 10.0 | % |
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Asset Quality | | | 50.0 | % |
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| Texas Ratio | | | 40.0 | % |
| NCOs/Average Loans | | | 10.0 | % |
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Total Weighting | | | 100.0 | % |
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| Definitions: | | “Core” ROAE and ROAA”: GAAP performance excluding extraordinary items Core Deposit Growth: Total Deposits less CDs>$100,000, brokered deposits and public deposits Texas Ratio: Nonperforming Assets divided by sum of Tangible Common Equity plus Loan Loss Reserve |
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Threshold Levels
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| | | Overall Profitability | | Growth Rate | | Asset Quality |
| | | | | | | | | | | | | NCOs/ |
| | | Core | | Core | | Net Income | | Core Deposit | | Texas | | Average |
| Level | | ROAE | | ROAA | | Budget | | Growth | | Ratio | | Loans |
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1 | | <25th Pct | | <25th Pct | | 70% of Budget | | <25th Pct | | <25th Pct | | <25th Pct |
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| 2 | | 25th | | 25th | | 75% | | 25th | | 25th | | 25th |
| 3 | | 30th | | 30th | | 80% | | 30th | | 30th | | 30th |
| 4 | | 35th | | 35th | | 85% | | 35th | | 35th | | 35th |
| 5 | | 40th | | 40th | | 95% | | 40th | | 40th | | 40th |
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6 | | Median | | Median | | 100% | | Median | | Median | | Median |
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| 7 | | 55th | | 55th | | 105% | | 55th | | 55th | | 55th |
| 8 | | 60th | | 60th | | 115% | | 60th | | 60th | | 60th |
| 9 | | 65th | | 65th | | 120% | | 65th | | 65th | | 65th |
| 10 | | 70th | | 70th | | 125% | | 70th | | 70th | | 70th |
11 | | >75th Pct | | >75th Pct | | 130% | | >75th Pct | | >75th Pct | | >75th Pct |
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Definition: Pct: Percentile Rank within defined Peer Group
For example, if UCFC’s Core ROAE for 2009 falls into the 40th percentile when compared to its peers, Mr. McKay’s incentive award for that performance measure would be as follows:
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| Incentive Plan | | Bonus Percentage (based) | | | | |
| Weighting | | on Threshold Level achieved | | Base Salary | | |
| 5.0% | X | 40% | X | $ | 382,000 | | | = $7,640 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | UNITED COMMUNITY FINANCIAL CORP.
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| | By: | /s/ James R. Reske | |
| | | James R. Reske, Chief Financial Officer | |
Date: July 21, 2009
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