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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR THE USE OF THE
[X] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Additional Materials RULE 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Section 240.14a-12
OAK HILL FINANCIAL, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
[_] Fee paid previously with preliminary materials.
[_] 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:
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OAK HILL FINANCIAL, INC.
14621 S.R. 93
JACKSON, OH 45640
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 24, 2006
To the Shareholders of Oak Hill Financial, Inc.:
You are cordially invited to attend the Annual Meeting of Shareholders of
Oak Hill Financial, Inc. (the "Corporation") to be held at the Ohio State
University Extension South District Office, 17 Standpipe Road, Jackson, Ohio
45640, on April 18, 2006 at 1:00 p.m., local time, for the following purposes of
considering and acting upon the following:
(1) To elect the following six directors for terms expiring in 2008 (Class
II), as successors to incumbent directors whose terms expire in 2006:
Candice R. DeClark-Peace, Barry M. Dorsey, Ed.D., Donald R. Seigneur,
William S. Siders, H. Grant Stephenson, and Donald P. Wood.
(2) To ratify the appointment of Grant Thornton LLP to serve as
independent registered public accounting firm for the Corporation for
the year 2006.
(3) To consider and act upon such matters as may properly come before the
Annual Meeting or any adjournment thereof.
Holders of record of the Corporation at the close of business on February
24, 2006 are entitled to notice of and to vote at the Annual Meeting and at any
adjournment thereof. Each shareholder is entitled to one vote for each common
share held regarding each matter properly brought before the meeting. On
February 24, 2006, there were 5,560,345 common shares outstanding.
By Order of the Board of Directors,
/s/ Ron J. Copher
Ron J. Copher
Secretary
EVERY SHAREHOLDER'S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE
ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED
PROXY SO THAT YOUR SHARES WILL BE REPRESENTED. A STAMPED, ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
1
OAK HILL FINANCIAL, INC.
14621 S.R. 93
Jackson, OH 45640
PROXY STATEMENT
On behalf of the Board of Directors of Oak Hill Financial, Inc. (the
"Corporation"), a proxy is solicited from you to be used at the Corporation's
Annual Meeting of Shareholders ("Annual Meeting") to be held April 18, 2006 at
1:00 p.m., local time, and any adjournment thereof, at the Ohio State University
Extension South District Office, 17 Standpipe Road, Jackson, Ohio 45640. This
Proxy Statement is being mailed on or about March 24, 2006.
Proxies in the form enclosed herewith are being solicited on behalf of the
Corporation's Board of Directors. Proxies which are properly executed and
returned will be voted at the Annual Meeting as directed; proxies properly
executed and returned which indicate no direction will be voted FOR the nominees
for director named herein, FOR the ratification of the appointment of the firm
of Grant Thornton LLP to serve as independent registered public accounting firm
for the Corporation for the year 2006, and, at the discretion of the persons
acting under the proxy, to transact such other business as may properly come
before the meeting or any adjournment thereof. Proxies indicating an abstention
from voting on any matter will be tabulated as a vote withheld on such matter
and will be included in computing the number of shares present for purposes of
determining the presence of a quorum for the Annual Meeting. If a broker
indicates on the form of proxy that it does not have discretionary authority as
to certain common shares to vote on a particular matter, those common shares
will be considered as present but not entitled to vote with respect to that
matter. Any shareholder giving the enclosed proxy has the power to revoke the
same prior to its exercise by filing with the Secretary of the Corporation a
written revocation or duly executed proxy bearing a later date, or by giving
notice of revocation in open meeting.
VOTING SECURITIES
As of February 24, 2006, the record date fixed for the determination of
shareholders entitled to vote at the Annual Meeting, there were 5,560,345 shares
of the Corporation's common stock outstanding. Each such share is entitled to
one vote on each matter properly coming before the Annual Meeting.
OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS
As of February 17, 2006, persons known by the Corporation to own
beneficially more than 5% of the outstanding common shares of the Corporation
are set forth below.
Number of Shares of
Common Stock Percentage
Name(1) Beneficially Owned(2) of Class(3)
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Evan E. Davis 608,487 10.95%
D. Bruce Knox 342,486(4)(5) 6.11%
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(1) The address of Evan E. Davis, Director Emeritus of the Corporation, and D.
Bruce Knox, a Director of the Corporation, is c/o Oak Hill Financial, Inc.,
14621 S.R. 93, Jackson, OH 45640.
(2) Beneficial ownership is determined in accordance with the Rules of the
Securities and Exchange Commission ("SEC") which generally attributes
beneficial ownership of securities to persons who possess sole or shared
voting power and/or investment power with respect to those securities.
(3) "Percentage of class" is calculated by dividing the number of shares
beneficially owned by the number of outstanding shares of the Corporation
on February 17, 2006 plus the number of shares the person has the right to
acquire within 60 days of February 17, 2006.
2
4) Includes 45,558 shares which could be acquired by Mr. Knox under stock
options exercisable within 60 days of February 17, 2006. Includes 242,262
shares held by a Trust as to which Mr. Knox is a Trustee and a partial
beneficiary.
(5) Includes shares acquired pursuant to the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which investment power is exercised.
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
As of February 17, 2006, the directors of the Corporation, the executive
officers of the Corporation named in the Summary Compensation Table, and all
executive officers and directors of the Corporation as a group beneficially
owned common shares of the Corporation as set forth below.
Amount and Nature of
Beneficial Ownership Percentage
Name and Title of Common Stock(1) of Class(2)
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John D. Kidd, Chairman and Director 270,988(3)(5) 4.87%
R. E. Coffman, Jr., President, Chief
Executive Officer and Director 188,173(3)(5)(6) 3.37%
Ron J. Copher, Chief Financial Officer
Treasurer and Secretary 41,561(3)(5) *
Scott J. Hinsch, Jr., Vice President 14,689(3)(5) *
D. Bruce Knox, Chief Information Officer
and Director 342,486(3)(4)(5) 6.11%
Miles R. Armentrout, Chief Commercial Banking Officer 3,614(3)(5) *
Candice R. DeClark-Peace, Director 6,138(3)(7) *
Barry M. Dorsey, Ed.D., Director 28,600(3) *
Donald R. Seigneur, Director 26,250(3) *
William S. Siders, Director 87,161(3) 1.57%
H. Grant Stephenson, Director 24,511(3)(7) *
Neil S. Strawser, Director 71,448(3) 1.29%
Donald P. Wood, Director 7,778(3)(7) *
All directors and executive officers
as a group (14 persons) 1,151,523(8) 19.91%
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(1) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he exercises sole or shared voting or
investment power or as to which he has the right to acquire the beneficial
ownership within 60 days of February 17, 2006, Unless otherwise indicated,
voting power and investment power are exercised solely by the person named
above or shared with members of his household.
(2) "Percentage of class" is calculated by dividing the number of shares
beneficially owned by the number of outstanding shares of the Corporation
on February 17, 2006 plus the number of shares the person has the right to
acquire within 60 days of February 17, 2006.
3
(3) Includes 11,600 shares which could be acquired by Mr. Kidd, 28,000 shares
which could be acquired by Mr. Coffman, 27,750 shares which could be
acquired by Mr. Copher, 10,600 shares which could be acquired by Mr.
Hinsch, 45,558 shares which could be acquired by Mr. Knox, 3,000 shares
which could be acquired by each of Ms. DeClark-Peace and Messrs. Armentrout
and Strawser, 2,000 shares which could be acquired by Mr. Wood, 18,750
shares which could be acquired by Mr. Dorsey, 15,000 shares which could be
acquired by Mr. Seigneur, 5,000 shares which could be acquired by Mr.
Siders, and 20,000 shares which could be acquired by Mr. Stephenson under
stock options exercisable within 60 days of February 17, 2006.
(4) Also includes 242,262 shares held by a Trust as to which Mr. Knox is a
Trustee and partial beneficiary.
(5) Includes shares acquired pursuant to the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which investment power is exercised.
(6) Includes shares held in Trust for the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which Mr. Coffman, as an Administrator, exercises
shared voting power.
(7) Includes the right to acquire 438 shares by Ms. DeClark-Peace, 711 shares
by Mr. Stephenson, and 878 shares by Mr. Wood upon termination of director
service under the Corporation's Non-employee Director Deferred Compensation
Plan.
(8) Includes 226,508 shares which may be purchased under stock options
exercisable within 60 days of February 17, 2006.
ELECTION OF DIRECTORS
The Corporation's Board of Directors (the "Board") has nominated six
persons for a two-year term (Class II). The terms of the remaining directors in
Class I will continue as indicated below. The accompanying proxy will be voted
for the election of those six persons named under Class II in the following
table unless otherwise directed. In the event that any of the nominees for
director shall become unavailable (which management does not expect), the
proxies may be voted for a substitute nominee at the discretion of those named
as proxies. The election of each nominee requires the favorable vote of a
plurality of all votes cast by the holders of the Corporation's common stock.
Director candidates are recommended by the Corporation's Governance and
Compensation Committee (the "Committee") to the Board for nomination for
election to the Board. The Committee's charter directs the Committee to
investigate and assess potential candidates and to maintain an active file of
suitable candidates for directors. The Committee is empowered by the Charter to
engage a third party search firm to assist, but the Committee believes that the
existing directors and executive management of the Corporation have significant
business contacts from which qualified candidates will be identified. The
Committee did not hire any director search firm in 2006 and, accordingly, paid
no fees to any such a firm. Upon identifying a candidate for serious
consideration, one or more members of the Committee would initially interview
such candidate. If a candidate merited further consideration, the candidate
would subsequently interview with all other Committee members (individually or
as a group), and would interview with the Corporation's Chief Executive Officer
and other executive officers. The Committee would seek input from all persons
who interviewed the candidate and then determine whether or not to nominate the
candidate.
The Committee also considers the recommendations of shareholders regarding
potential director candidates. In order for shareholder recommendations
regarding possible director candidates to be considered by the Committee, such
recommendations must be provided to the Governance and Compensation Committee
c/o Oak Hill Financial, Inc., 14621 S.R. 93, Jackson, OH 45640, in writing at
least 120 days prior to the date of the next scheduled annual meeting.
In order to be considered, the recommendation must include the following:
(i) the name, age, business address and residence of such person;
(ii) the principal occupation or employment of such person;
(iii) the class and number of shares of the Corporation which are
beneficially owned by such person; and
(iv) any other information relating to such person that is required
to be disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, or successor provision.
The shareholder submitting the recommendation must also give his name,
address, and the number of shares beneficially owned. Such notice shall also be
accompanied by the written consent of each proposed nominee to serve as a
director of the Corporation, if elected. The Corporation may require any
proposed nominee to furnish other information to determine the qualifications of
such proposed nominee to serve as a director of the Corporation. The Committee
will evaluate
4
the possible nominee using the criteria outlined below and will consider such
person in comparison to all other candidates. The Committee is not obligated to
nominate any such individual for election.
The Committee's Guidelines for Directors set forth the following guidelines
for directors: exercise independent, practical and mature business judgment for
the overall benefit of the Corporation and the Corporation's shareholders;
possess familiarity with the business issues affecting the success of the
Corporation and its affiliates; a willingness, in a manner consistent with
applicable legal requirements with the highest professional and ethical
standards, promote the Corporation and its subsidiaries; demonstrate high
ethical and moral standards; possess a reputation for integrity; possess
communication skills necessary to function as part of a team on behalf of the
Corporation and the Corporation's shareholders, both as a listener and as a
leader; have no conflicts of interest or the appearance of conflicts of
interest; possess a willingness to invest significant time and energy in
monitoring management's conduct of the business of the Corporation and its
affiliates and in monitoring management's compliance with the Corporation's
operating and administrative policies; have the ability to hold management
accountable for compliance with the legal and regulatory requirements applicable
to the Corporation and its affiliates, including the requirements applicable to
financial institutions; have a significant history of professional and
educational achievement; be a resident of the service area of the Corporation or
its affiliates; have experience reviewing financial statements; be of an age
such that, when first nominated the director will be able to serve two two-year
terms as a director before reaching the retirement age of 70 which the
Corporation requires for its directors; have demonstrated a willingness to
attend at least eighty percent of regularly scheduled meetings of the
Corporation's Board and of the committees of the Board on which the director
serves; and shall acquire shares of the Corporation worth $100,000 within the
first five years of becoming a director as prescribed in the Guidelines for
Stock Ownership in the Corporation.
Neither the Board nor the Committee has adopted a formal policy regarding
director attendance at the Annual Meeting. The Board normally holds its annual
organizational meeting directly following the Annual Meeting, which usually
results in all directors being able to attend the Annual Meeting. In 2005, all
current directors attended the Annual Meeting.
The Board of Directors recommends that the shareholders vote FOR the
election of each nominee for Class II director.
5
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Position with Corporation and/or
Principal Occupation
Name and Age or Employment for the Last Five Years Director Since
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CLASS II DIRECTORS
(Terms expire in 2008)
CANDICE R. DeCLARK-PEACE, 53, Partner in the public 2002
accounting firm of Clark, Schaefer, Hackett & Company,
Dayton, Ohio, since 1978. She served as a Director of Towne
from May 2002 through November 2002.
BARRY M. DORSEY, Ed.D., 63, Executive Director of the New 1995
College of Virginia Planning Commission in Martinsville,
Virginia. He served as President of the University of Rio
Grande and Rio Grande Community College from July 1991 to
January 2006. Mr. Dorsey served as Associate Director from
July 1980 to July 1990 and as Deputy Director from July 1990
to June 1991 of the State Council for Higher Education for
Virginia.
DONALD R. SEIGNEUR, 54, Partner in the public accounting 1995
firm of Whited, Seigneur, Sams & Rahe, CPAs, Chillicothe,
Ohio, since 1979.
WILLIAM S. SIDERS, 58, President of Siders Investments 2001
since 2000. Mr Siders is also a retired Chairman and a
Director of Shriners Hospital for Children Cincinnati
Burns Hospital in Cincinnati, Ohio. He served a Director of
Towne from October 1999 through November 2002. He served as
Chief Executive Officer and a Director of Blue Ash from 1982
until its acquisition in October 1999. He served in several
positions with Hunter Savings Association from 1970 through
1982.
H. GRANT STEPHENSON, 56, Partner in the law firm of Porter, 1995
Wright, Morris & Arthur LLP, Columbus, Ohio, since 1986.
DONALD P. WOOD, 61, Chairman and Chief Executive Officer of 2002
Don Wood, Inc., Don Wood Ford Lincoln, Mercury, Inc., Don
Wood Automotive, LLC, and other related automobile
dealerships in Athens and Hocking counties, Ohio, since
1985. He has also served in several positions with Banc One
National Bank and Florida National Bank from 1969 to 1985.
CLASS I DIRECTORS
(Terms expire in 2007)
R. E. COFFMAN, JR., 54, Chief Executive Officer of the 2002
Corporation since January 2004 and President of the
Corporation since December 2002. Mr. Coffman has also served
as the Chief Executive Officer of Oak Hill Banks ("Oak
Hill") since January 2005. In addition, Mr. Coffman served
as the Corporation's Chief Administrative Officer from
December 2002 through December 2003. He served as Vice
President of the Corporation from June 1999 through November
2002. He served as President, Chief Executive Officer and
Director of Towne Bank ("Towne") from October 1999 through
November 2002. Mr. Coffman served as Executive Vice
President of Oak Hill from July 1998 to September 1999. From
June 1997 to June 1998, he served as Senior Vice President
of Oak Hill, and from September 1996 to May 1997, he served
as Area President for Oak Hill.
6
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Position with Corporation and/or
Principal Occupation
Name and Age or Employment for the Last Five Years Director Since
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JOHN D. KIDD, 66, Chairman of the Corporation since December 1981
2002 and Chairman of Oak Hill since January 2005. Mr. Kidd
served as Chief Executive Officer from 1981 through December
2003. He served as President of the Corporation from June
1995 through November 2002 and Executive Vice President from
1981 to June 1995. He served as President of Oak Hill from
October 1991 to September 1997 and as Chairman of Oak Hill
from 1997 through November 2002. Mr. Kidd joined Oak Hill in
1970 as Director, Chief Executive Officer and Executive Vice
President. Mr. Kidd served as Director of Towne from October
1999 through November 2002.
D. BRUCE KNOX, 45, has served as Executive Vice President of 1997
the Corporation since January 2005 and Chief Information
Officer since January 2000. He has also served as Chief
Information Officer and Executive Vice President of Oak Hill
since January 2005. Prior, he served as Executive Vice
President of Oak Hill from July 1998 to December 1999. He
also served as Senior Vice President of Oak Hill from
October 1997 to June 1998. He served as President and
Director of Unity Savings Bank ("Unity") from January 1996
until the merger into Oak Hill in October 1997. He served as
Executive Vice President of Unity and its successor, Oak
Hill, from January 1989 to December 1995. He also served as
a Director of Oak Hill from October 1997 to November 2001.
NEIL S. STRAWSER, 63, Co-founder and owner of Parrott & 2002
Strawser Properties, Inc., a land development and building
firm in Cincinnati, Ohio, since 1980. Mr. Strawser has
served as Director of Strawser Funeral Home, Inc. since
1974. He served as a Director of The Blue Ash Building and
Loan ("Blue Ash") and its successor, Towne, from 1976
through November 2002.
7
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During 2005, the Board of Directors held four regularly scheduled meetings
and one additional meeting. All of the incumbent directors and each nominee
standing for re-election attended more than 75% of the regularly scheduled
meetings and committee meetings for committees on which he or she served during
the last fiscal year. In addition, the Board of Directors also regularly holds
executive sessions of only those members of the Board of Directors who meet the
current independence standards. Those members are Ms. Candice R. DeClark-Peace
and Messrs. Barry M. Dorsey, Donald R. Seigneur, William S. Siders, H. Grant
Stephenson, Donald P. Wood and Neil S. Strawser.
Each non-employee director received $1,000 per meeting attended as a
director of the Corporation. Directors who are also employees received no
additional compensation for service on the Board of Directors.
The Board of Directors has the following standing committees: Governance
and Compensation Committee and Audit Committee.
The Governance and Compensation Committee (the "Committee") makes
recommendations to the Board of Directors of the Corporation (the "Board") with
respect to the compensation of the executive officers of the Corporation and
with respect to the awards of stock-based compensation, develops and recommends
to the Board a set of corporate principles applicable to the Corporation,
reviews and recommends to the Board the appropriate structure and composition of
the Board and of the Boards of each of the subsidiaries, and formulates,
administers and oversees the Board's Code of Ethics. The Committee has the
duties of a nominating committee to identify and evaluate individuals qualified
to serve on the Board, recommends director nominees for each of the boards of
the Corporation's subsidiaries to the Board and assumes responsibility for
planning for the succession of directors. In so doing, the Committee recommends
to the Board the size of the Board, as well as its membership mix and the
process for the selection of independent directors, and makes similar
recommendations for each of the boards of the Corporation's subsidiaries. In
addition, the Committee assumes the overall responsibility for periodic
assessment of the Corporation's governance program and assumes responsibility
for the annual development and implementation of a plan for the evaluation of
the Board and of each of the boards of the Corporation's subsidiaries. The
Committee is also responsible for the Chief Executive Officer's performance
evaluation and for management succession planning. The Committee assesses the
appropriateness of shareholder proposals for inclusion in the proxy materials.
The Board has adopted a written charter for the Committee. Although the charter
is not on the Corporation's website, it was attached to the 2004 Annual Meeting
Proxy. The members of the Committee are Mr. Neil S. Strawser, who serves as
Chairman, and Messrs. Barry M. Dorsey and H. Grant Stephenson, each of which
meet the independence standards of Rule 4200(a)(15) of the National Association
of Securities Dealers (the "NASD") listing standards. John D. Kidd, Chairman of
the Corporation, attends all committee meetings as an ex-officio member. The
Committee held four meetings during the last fiscal year, and all current
members attended. Committee members received $2,000 for attending each committee
meeting with the exception of the chairman of the committee who received $2,625
for attending each meeting. The report of the Committee with respect to the year
2005 begins on page 14 herein.
The Audit Committee oversees the Corporation's financial reporting process
on behalf of the Board. Functions of the Audit Committee include the engagement
of the independent registered public accounting firm, reviewing with the
independent registered public accounting firm the plans and results of the audit
engagement of the Corporation, reviewing the scope and results of the procedures
for internal auditing, reviewing the independence of the independent registered
public accounting firm, conducting an appropriate review and approve all related
party transactions for potential conflicts of interest, and similar functions.
In its oversight role, the Audit Committee assures that management fulfills its
responsibilities in preparing the financial statements. The Audit Committee
reviews and discusses with the internal audit department, management and the
Board such matters as accounting policies, internal controls and procedures for
preparation of financial statements. The Board has adopted a revised written
charter for the Audit Committee, which was attached to the 2005 Proxy Statement.
The members of the Audit Committee are Mr. Donald R. Seigneur, who serves as
Chairman, Ms. DeClark-Peace and Messrs. William S. Siders and Donald P. Wood.
All members of the Audit Committee meet the independence standards of Rule
4200(a)(15) and the audit committee qualifications of Rule 4350(d)(2) of the
NASD listing standards. The Board has determined that Ms. DeClark-Peace and
Messrs. Seigneur, Siders and Wood each are audit committee financial experts for
the Corporation and are independent as described in the preceding sentence. The
Audit Committee held eight meetings during the last fiscal year, including three
meetings with management and the independent registered public accounting firm
to discuss the Corporation's quarterly financial statements prior to the filing
of its Quarterly Report on Forms 10-Q with the SEC. Each director serving on
such committee received $1,000 per meeting attended in connection with the
Quarterly Reports on Form 10-Q and $2,500 per meeting attended otherwise with
the exception of the chairman of the committee who received $1,200 per meeting
attended in connection with the Quarterly Reports on Form 10- Q and $3,100 per
meeting attended otherwise. The report of the Audit Committee with respect to
the year 2005 begins on page 18 herein.
8
Shareholders may communicate directly to the Board in writing by sending a
letter to the Board at: Oak Hill Financial, Inc., ATTN: Board of Directors,
14621 S.R. 93, Jackson, OH 45640. All communications directed to the Board will
be received and processed by the Corporation's Director of Internal Audit and
will be transmitted to the Chairman of the Audit Committee without any editing
or screening by the Director of Internal Audit.
EXECUTIVE OFFICERS
The officers of the Corporation are appointed annually by the Board and
serve at the pleasure of the Board. In addition to John D. Kidd, Chairman of the
Board, R. E. Coffman, Jr., President and Chief Executive Officer, and D. Bruce
Knox, Chief Information Officer, the following persons are officers of the
Corporation:
MILES R. ARMENTROUT, 49, has served as Executive Vice President and Chief
Commercial Banking Officer of the Corporation since April 2005. He has served as
Executive Vice President of Oak Hill since January 2005. In addition, Mr.
Armentrout also served as Regional President of Oak Hill from December 2002 to
December 2004. He served as Senior Vice President and Senior Lender of Towne
from December 2001 to November 2002 and Vice President and Area Commercial
Lender from June 2001 to November 2001. Prior to coming to Oak Hill, he served
in various banking positions from April 1977 to May 2001.
RON J. COPHER, 48, has served as Executive Vice President of the Corporation
since January 2005, Chief Financial Officer since July 1999, Treasurer since
February 2001, and Secretary since June 2004. In addition, Mr. Copher has served
as Chief Financial Officer and Executive Vice President of Oak Hill since
January 2005. Mr. Copher has also served as Secretary of Oak Hill since June
2004. Prior, he served as Executive Vice President of Oak Hill from July 1999 to
February 2000. From January 1985 to June 1999, he served in a variety of
positions in the financial services practice of Grant Thornton LLP. He most
recently served as Partner and Practice Leader of the Financial Services
Industry Group of Southern California.
SCOTT J. HINSCH, JR., 54, has served as Vice President of the Corporation since
January 2002. Mr. Hinsch has served as President of Oak Hill Financial Insurance
since January 2005. He has served as President of Oak Hill since January 2002
and Chief Executive Officer from January 2002 through December 2004. He served
as Chief Operating Officer of Oak Hill from January 2001 to December 2001. From
April 1999 to December 2000, he served as Executive Vice President and Branch
Administrator of Oak Hill. Prior to coming to Oak Hill, he served as Regional
President for the former Star Bank and as President of the former Commercial &
Savings Bank, Gallipolis, Ohio.
DAVID G. RATZ, 48, has served as Chief Administrative Officer of the Corporation
since January 2005 and Executive Vice President since January 2002. He served as
Chief Operating Officer of the Corporation from January 2002 to December 2004.
In addition, Mr. Ratz has served as Executive Vice President and Chief
Administrative Officer of Oak Hill since January 2005. He served as Chief
Administrative Officer of the Corporation from January 2000 to December 2001. He
served as Vice President of the Corporation from October 1995 to December 1999.
He served as Vice President of Oak Hill from October 1995 to February 1996, as
Senior Vice President from February 1996 to June 1998, and as Executive Vice
President from July 1998 to February 2000. From December 1986 to September 1995,
he served as a marketing and human relations consultant to community banking
organizations as Vice President of Young & Associates, Kent, Ohio.
9
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation paid
during the last three completed fiscal years by the Corporation and its
subsidiaries to the Chief Executive Officer and the four other highest-paid
executive officers of the Corporation whose total salary and bonus annually
exceed $100,000 for services in all capacities for the Corporation:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------------------- ------------------------
Restricted Shares
Other Annual Stock Underlying All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2) Awards(3) Options(4) Compensation(5)
- -----------------------------------------------------------------------------------------------------------------------------
John D. Kidd 2005 $215,000 -- $25,137 -- -- $ 6,450
Chairman and Director 2004 $215,000 -- $ 5,197 -- 3,000 $ 9,191
2003 $214,375 $49,900 $ 8,114 -- 1,600 $15,535
R. E. Coffman, Jr. 2005 $204,250 $15,000 $ 6,507 -- -- $ 5,869
President, Chief Executive 2004 $183,125 -- $ 5,757 $26,044 10,000 $ 9,171
Officer and Director 2003 $167,750 $38,400 $ 6,969 $25,282 1,600 $13,115
Scott J. Hinsch, Jr. 2005 $177,374 $12,500 $ 3,579 -- -- $ 6,185
Vice President 2004 $172,000 $20,400 $ 4,097 -- 4,000 $ 9,654
2003 $164,458 $51,100 $ 6,431 $25,282 1,600 $13,115
Miles R. Armentrout 2005 $143,500 $25,400 -- -- -- $ 5,067
Chief Commercial Banking 2004 $113,043 $40,000 -- -- 3,000 $ 7,326
Officer 2003 $103,909 $40,300 -- -- 1,500 $ 8,905
Ron J. Copher 2005 $147,375 $10,000 -- -- -- $ 4,646
Chief Financial Officer, 2004 $142,000 -- -- $26,044 3,000 $ 8,176
Secretary and Treasurer 2003 $134,250 $28,800 -- -- 1,500 $13,853
- ---------------------------------------------------------------------------------------------------------------------------
(1) Bonus was accrued in the current year and paid in January of the following
year.
(2) Includes amounts imputed for personal use of a company vehicle and for
certain estate planning expenses for Messrs. Kidd and Coffman.
(3) Messrs. Coffman and Hinsch both received an award of 830 shares of
restricted stock on December 16, 2003 valued at $30.46 per share, based
upon the fair market value of the Corporation's common stock as of the
preceding business day. Each award is subject to a three year graduated
vesting schedule and becomes fully vested on the third anniversary of the
date of the award. In addition, Mr. Coffman received an award of 700 shares
of restricted stock on December 21, 2004, valued at $37.205 per share,
based upon the average of the closing bid and ask of the Corporation's
common stock as of the preceding business day. The award is subject to a
three year graduated vesting schedule and becomes fully vested on the third
anniversary date of the award. At December 31, 2005, Mr. Coffman's 1,297
unvested shares of restricted stock had an aggregate value of $43,086, and
Mr. Hinsch's 830 shares of restricted stock had an aggregate value of
$27,573 based on the $33.22 fair market value of the Corporations' common
stock on that date. In addition, Mr. Copher received an award of 700 shares
of restricted stock on December 21, 2004, valued at $37.205 per share,
based upon the average of the closing bid and ask of the Corporation's
common stock as of the preceding business day. The award is subject to a
three year graduated vesting schedule and becomes fully vested on the third
anniversary date of the award. At December 31, 2005, Mr. Copher's 467
unvested shares of restricted stock had an aggregate value of $15,514 based
on the $33.22 fair market value of the Corporation's common stock on that
date. Messrs. Coffman, Hinsch and Copher may exercise full voting rights
with respect to their restricted share awards during the restricted period.
In addition, dividends and distributions are payable on all restricted
share awards during the restricted period, and such shares are held in
escrow by the Corporation until the shares vest.
10
(4) All shares are subject to options granted under the Oak Hill Financial,
Inc. 2004 Stock Incentive Plan.
(5) Includes 401(k) matching and profit sharing contributions to the Oak Hill
Financial, Inc. 401(k) & Profit Sharing Plan for the fiscal years shown.
Also includes $1,805 paid on behalf of Mr. Copher in connection with the
Corporation's executive health program in 2003.
- --------------------------------------------------------------------------------
The following table shows aggregate option exercises in the last fiscal
year and year-end values.
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End Fiscal Year End(1)
-----------------------------------------------------------
Acquired Value
Name on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
John D. Kidd
Chairman and Director 11,250 $100,580 11,600 -- $116,206 --
R. E. Coffman, Jr.
President, Chief Executive
Officer and Director 9,375 $151,736 28,000 -- $281,979 --
Scott J. Hinsch, Jr.
Vice President -- -- 10,600 -- $ 96,766 --
Miles R. Armentrout 1,500 $ 7,185 3,000 -- $ -- --
Chief Commercial Banking
Officer
Ron J. Copher
Chief Financial Officer,
Secretary and Treasurer 1,000 $ 15,540 27,750 -- $378,827 --
(1) Represents total gain which would have been realized if all in-the-money
options held at fiscal year-end had been exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and per share fair market value
at year-end. The fair market value as determined by the closing price of
the Corporation's common stock on December 31, 2005 was $33.22. An option
is in-the-money if the fair market value of the underlying shares exceeds
the exercise price of the option.
Employment Contracts and Change in Control Agreements
On December 20, 2005, Oak Hill Financial, Inc. (the "Corporation") entered
into an Employment Agreement with Ralph E. Coffman, Jr. (the "Employment
Agreement"). The terms of the Employment Agreement terminate the Change in
Control Agreement, effective as of January 31, 2004, between the Corporation and
Mr. Coffman. The Employment Agreement is for a term of two years, commencing on
January 1, 2006 and ending on December 31, 2007. The term of the Employment
Agreement will be extended for one day each day until the Board of Directors of
the Corporation elects not to extend the term of the Employment Agreement by
giving written notice to Mr. Coffman. Mr. Coffman will continue to serve as the
Corporation's President and Chief Executive Officer and as the Chief Executive
Officer of Oak Hill Banks, a wholly-owned subsidiary of the Corporation. Mr.
Coffman will receive an annual base salary of $230,000, which will be reviewed
at least annually in accordance with the procedures adopted for such purpose by
the Board of Directors of the Corporation. In addition, Mr. Coffman will be
eligible to receive bonuses and awards under the Corporation's stock incentive
plan. Mr. Coffman is subject to non-competition and non-solicitation obligations
during the term of his employment.
In the event of termination of Mr. Coffman's employment (i) as a
consequence of death or permanent disability, (ii) by the Corporation without
cause, as defined in the agreement, or (iii) after a change in control, as
defined in the agreement, the Corporation shall pay to Mr. Coffman, his
beneficiary or his estate, the salary that would have been paid to Mr. Coffman
for the remaining term of the Employment Agreement, a pro rata portion of the
bonus applicable to the fiscal year in which such
11
termination occurs, the value of any stock option or related rights granted to
Mr. Coffman, but not exercisable, as of the date of such termination, and the
value of restricted stock awards or related rights which have been granted to
Mr. Coffman subject to certain conditions in the Employment Agreement.
In the event of termination of Mr. Coffman's employment by the Corporation
for cause, Mr. Coffman will not be entitled to further compensation or other
benefits under the Employment Agreement, except as to that portion of any unpaid
salary and other benefits accrued and earned up to and including the effective
date of such termination. In the event of termination of Mr. Coffman's
employment by the Corporation for cause or as a result of a change in control,
Mr. Coffman will be subject to non-competition and non-solicitation obligations
for a period of at least two years following such termination (the "Restricted
Period"). The Restricted Period shall continue for so long as payments are made
by the Corporation to Mr. Coffman and for a period of six months thereafter.
In the event of termination of Mr. Coffman's employment by Mr. Coffman, the
Corporation may, in its sole discretion, elect to make salary payments, but the
Corporation does not have an obligation to pay any compensation or benefits of
any kind other than the salary that has accrued but not paid up to and including
the date of termination, and any bonus accrued but not paid for fiscal years
that have been completed as of the date of termination. In the event that the
Corporation makes a payment, in the nature of compensation to Mr. Coffman that
is subject to an excise tax, the Corporation shall pay Mr. Coffman an amount
such that after Mr. Coffman pays all taxes and excise tax imposed on the
gross-up payment, the participant retains an amount of the gross-up payment
equal to the excise tax imposed on the payment or distribution made by the
Corporation. In the event that Mr. Coffman terminates his employment with the
Corporation and the Corporation continues to pay Mr. Coffman his salary, in at
least monthly installments and net of all tax and other withholding obligations
of the Corporation, at the level of salary paid to Mr. Coffman immediately prior
to the effective date of the termination, Mr. Coffman will be subject to
non-competition and non-solicitation obligations during the Restricted Period
and the Restricted Period will continue for two (2) years from the last day of
the last month for which a salary payment is made. In the event that Mr. Coffman
terminates his employment with the Corporation and the Corporation does not
continue to pay Mr. Coffman his salary, the non-competition and non-solicitation
obligations of Mr. Coffman shall cease after the Restricted Period.
On December 20, 2005, the Board of Directors of the Corporation approved
and adopted the Oak Hill Financial, Inc. Key Executive Change of Control Plan
(the "Plan"). The purpose of the Plan is to provide severance and other benefits
to designated key executives of the Corporation and its subsidiaries in the
event that any of their employments terminate for specified reasons within one
year following a "change of control" of the Corporation, as defined in the Plan.
The key executives participating in the Plan are appointed by the Corporation's
Chief Executive Officer annually and confirmed by an annual election of the
Governance and Compensation Committee of the Corporation's Board of Directors.
The initial key executives participating in the Plan are Messrs. Ratz, Copher,
Hinsch, Knox and Armentrout.
A participant in the Plan will be entitled to severance and other benefits
under the Plan if the participant's employment with the Corporation and all of
its subsidiaries terminates for any reason other than "cause," death or
disability within one year following a change of control. "Cause" means the
willful and continued failure of the executive to perform his or her duties or
the willful engaging by the executive in illegal conduct or gross misconduct
materially injurious to the Corporation. In addition, a participant in the Plan
will be entitled to severance and other benefits under the Plan if the
participant resigns for "good reason" within one year following the change of
control. "Good reason" means (i) a material diminution in the participant's
position, authority, duties or responsibilities, (ii) a material reduction in
the participant's annual salary and incentive compensation or material adverse
change in employee benefits, (iii) requiring the participant to be based at an
office or location more than 125 miles from the location where the participant
was based immediately before the change in control, or (iv) failure of the
Corporation to require any successor Corporation to comply with the Plan.
If the participant's employment so terminates, the Corporation will pay the
participant in twelve equal monthly payments consisting of, an amount equal to
the participant's annual salary, any unpaid salary, earned unused vacation pay,
the value of any stock option or related rights which as of the date of
termination have been granted to participant, but are not exercisable by
participant and the value of any restricted stock awards or related rights which
have been granted to participant, but in which participant does not have a
non-forfeitable or fully vested interest as of the date of termination. Such
payment amounts may also be grossed-up if they would be subject to any excise
tax on excess parachute payments under certain circumstances.
In order for the key executives to participate in the Plan, they must enter
into an agreement with the Corporation under which they agree to:
12
o reasonably assist the Corporation with any transition issues that
arise from the participant's employment;
o not use or disclose any proprietary or confidential information;
o not make any public statements related to the Corporation, its
management, customers or employees without the prior written consent
of the Corporation;
o not make any public statements related to the Corporation, its
management, customers or employees without the prior written consent
of the Corporation; and
o provide the Corporation with a release of claims against the
Corporation for matters related to the participant's employment with
the Corporation.
Equity Compensation Plan Information
The following table presents information as of December 31, 2005, with
respect to the shares of the Corporation's common stock that may be issued under
the Corporation's existing equity compensation plan.
Number of Securities
Remaining Available
Number of Securities to Be Weighted-Average for Future Issuance
Issued Upon Exercise of Exercise Price of Under Equity
Plan Category Outstanding Options Outstanding Options Compensation Plans
- --------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by shareholders(1) 484,233 $23.14 1,074,273
Equity compensation plans not
approved by shareholders -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total 484,233 $23.14 1,074,273
- --------------------------------------------------------------------------------------------------------------------
(1) Consists of the 2004 Stock Incentive Plan.
- --------------------------------------------------------------------------------------------------------------------
13
The following REPORT OF THE GOVERNANCE AND COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS REGARDING COMPENSATION, PERFORMANCE GRAPH, and REPORT OF THE AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS, should not be deemed filed or incorporated
by reference into any other document, including the Corporation's filings under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent specifically incorporated into any such filing by reference.
REPORT OF THE GOVERNANCE AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS REGARDING COMPENSATION
Composition and Philosophy of the Committee
The Corporation's Governance and Compensation Committee (the "Committee")
is composed entirely of non-employee directors of the Corporation: H. Grant
Stephenson, Barry M. Dorsey and Neil S. Strawser, who is Chairman. Under its
charter, the Committee has responsibility for the development, evaluation and
nomination of members of the Board of Directors, review of significant
governance policies, administration of the executive compensation program, and
evaluation and compensation of the Corporation's Chief Executive Officer.
As part of its administration of the executive compensation program, the
Committee has the authority and responsibility to determine and administer the
Corporation's officer compensation policies, to review the salaries of executive
officers, to approve bonus awards to executive officers, to approve the grant of
award to executive officers and other key employees under the Corporation's 2004
Stock Incentive Plan and to approve other executive compensation. In general,
the philosophy of the Committee is to attract and retain qualified executives,
reward current and past individual performance, provide short-term and long-term
incentives for superior future performance, and relate total compensation to
individual performance and performance of the Corporation. The preferred
compensation policy of the Committee is to set base pay at the middle of the
comparable market ranges, establish performance-based annual cash bonus
opportunities, and grant significant option positions to key employees to
provide greater long-term incentives.
Executive Compensation Program
The Corporation's executive compensation program is designed to enable the
Corporation to attract, motivate and retain top quality executive officers by
providing a fully competitive and comprehensive compensation package. It
provides for competitive base salaries that reflect individual performance as
well as variable incentive awards in cash for the achievement of financial
performance goals established by Committee and approved by the Board of
Directors. The Committee is responsible for the establishment of the base
salaries of the Corporation's executive officers, as well as the administration
of the annual bonus compensation programs. In addition, long-term stock-based
incentive awards may be granted to strengthen the mutuality of interest between
the executive officers and the Corporation's shareholders and to motivate and
reward the achievement of important long-term performance objectives of the
Corporation. The Committee is responsible for the award level and administration
of the stock option program for executive officers, as well as for
recommendations regarding other executive benefits and plans, both of which also
are subject to approval by the Board of Directors. In completing its
assignments, the Committee takes into account the views of the management of the
Corporation.
The Committee reviewed the executive compensation program being utilized
and compared it with similar programs of banking corporations that shared one or
more common traits with the Corporation (such as market capitalization, asset
size and geographic location). As an overall evaluation tool in determining
levels of compensation for the Corporation's Chief Executive Officer and other
executive officers, the Committee reviewed the compensation policies of other
banking companies, as well as published surveys of salaries in the financial
industry, which are provided by management. Based on a recommendation from
management, the Committee has defined or established a specific comparison group
of bank holding companies for determination of compensation: banking
organizations in Ohio and contiguous states with a similar market
capitalization.. These companies may not be included in the SNL $1B-$5B Bank
Index (an index included in the Corporation's Performance Graph on page 15). The
Committee believes that while the executive compensation program of the
Corporation is typical of these peer companies, the overall level of executive
compensation by the Corporation is in the lower half of the range of the
compensation levels of these peer companies.
Components of Executive Officer Compensation
For 2005, the executive compensation program for the executive officers of
the Corporation, including the Named Executive Officers in this Proxy Statement
(Messrs. Kidd, Coffman, Hinsch, Armentrout and Copher (the "Named
14
Executive Officers")), consisted of four primary components: (i) a base salary;
(ii) incentive compensation; (iii) executive benefits, such as insurance and
retirement benefits; and (iv) benefits which are generally available to all
employees. These components are discussed in detail below.
Base Salary. The Corporation employs a salary review program in which the
review is conducted in January with salary increases for the twelve month period
beginning February 1 of each calendar. The salaries and performance reviews are
determined primarily by examining the individual executive officer's level of
responsibility for his position, comparing that position to similar positions
within the Corporation, and comparing the officer's salary with salaries
detailed in the salary surveys for executives with similar experience and
responsibilities outside of the Corporation. The performance of the
Corporation's executive officers is reviewed during the Committee's final
meeting in December of each calendar year.
Significant weight is given to the views of the management of the
Corporation regarding whether a executive officer has succeeded in the annual
performance goals established by the Chief Executive Officer with each executive
officer. The nature of these goals differs, depending upon each officer's job
responsibilities. Goals are both qualitative in nature-such as the development
and retention of key personnel, the quality of products and services, and
management effectiveness-and quantitative in nature, such as sales and revenue
goals and cost containment.
Each executive officer's base salary is then established by the Committee
with management's input, taking into account the items listed above as well as
the Corporation's overall performance during the preceding year. The Committee
does not place a specific value on any of the above-listed factors. The base
salary is subject to approval by the Board of Directors.
Incentive Compensation. In 2005, potential incentive compensation included
the award of cash bonuses, and awards of stock options and restricted stock
under the Corporation's 2004 Stock Incentive Plan. The awards to executive
officers under the Corporation's 2004 Stock Incentive Plan in 2005 were
determined by the Committee with input from management. The Committee has not
established particular target percentages of total compensation that should be
incentive compensation. In light of the financial performance of the
Corporation, no incentive compensation, other than the cash bonuses described
below, were paid in 2005.
Cash Incentive Compensation. The Committee's policy for cash incentive
compensation is to reward the achievement of financial objectives at the
beginning of each year. Each year, the Committee establishes a bonus plan for
executive officers for performance based upon a targeted increase of net
operating income of the Corporation in consultation with management. The
Committee also considers other factors related to the individual performance of
the each executive officer. All incentive bonus awards under the plan are to be
paid in cash. There were no bonuses paid or accrued in 2005 based upon the
Corporation's 2005 financial performance, which failed to meet the targeted
increase in net operating income. However, the Corporation accomplished a number
of significant financial and administrative milestones during 2005 in the
opinion of the Committee that merited recognition, such as, for example, an
improvement to asset quality and implementation of enhanced internal controls.
Accordingly, the Committee approved cash bonuses for the executive officers as
follows: Mr. Kidd - none; Mr. Coffman - $15,000; Mr. Hinsch - $12,500; Mr.
Armentrout - $25,400; and Mr. Copher - $10,000.
Awards under Corporation's 2004 Stock Incentive Plan. The purpose of the
Corporation's 2004 Stock Incentive Plan is to provide long-term incentives to
key employees and to motivate key employees to improve the performance of the
Corporation and thereby increase the Corporation's common stock price. No awards
were made for performance during 2005.
Determination of the Chief Executive Officer's Compensation
The compensation package entered into with Mr. Coffman is detailed in this
Proxy Statement under the tables and descriptive paragraphs of the section
entitled Executive Compensation.
Mr. Coffman's base salary for 2006 was determined by the Committee through
an assessment of several areas, including the financial results of the
Corporation as compared with peer companies and his overall performance as a
leader of the Corporation, as well as the performance of the bonus plan. In
determining compensation, the financial results as compared with peer companies
were given the most weight by the Committee; overall performance as a leader was
given significant, but lesser, weight. In addition to these factors, the
Committee also reviewed information to determine if there were any overall
trends in the financial services industry regarding compensation of chief
executive officers that would suggest further adjustments to the amounts to be
paid to Mr. Coffman. Based on information provided by management, the Committee
believes Mr. Coffman's compensation is below the median compensation typical of
peer companies.
15
Based on these factors, the Committee established Mr. Coffman's annual base
salary for 2006 at $230,000, an approximate 11.1% increase from his previous
base salary. Other personal benefits available to Mr. Coffman are described in
the descriptive paragraphs of the section entitled Executive Compensation and
are, in the opinion of the Committee, reasonable and not excessive.
Deductibility of Executive Compensation
The Committee has reviewed the qualifying compensation regulations
issued by the Treasury Department under Code Section 162(m) which provide that
no deduction is allowed for applicable employee remuneration paid by a publicly
held corporation to a covered employee if the remuneration paid to the employee
exceeds $1.0 million for the applicable taxable year, unless certain conditions
are met. Currently, remuneration is not expected to exceed the $1.0 million base
for any employee. Therefore, compensation should not be affected by the
qualifying compensation regulations.
Miscellaneous Developments
In addition to the actions described above, the Committee took a number of
other more routine actions , the most significant of which are summarized below.
The Committee adopted a program for the deferral of directors fees for directors
electing to participate in the program. As a result of the Committee's review,
the Corporation's Director Emeritus Policy was amended to include affiliates of
the Corporation. The Committee completed its annual review of the Committee's
charter and policies, and it reviewed compliance with policies covering director
independence and meeting attendance. The Committee undertook a review of
compliance with Regulation L which prohibits certain interlocks between the
Board of Directors and the boards of other financial institutions. The Committee
adopted the Key Executive Change of Control Plan, a plan providing a basic
benefit of one years salary in the event of termination following a change of
control of the Corporation to certain executives, and a employment contract for
Mr. Coffman which provides a basic benefit of two years salary in the event of
termination by the Corporation.
The foregoing report has been respectfully submitted by the members of the
Committee:
Neil S. Strawser, Chairman
Barry M. Dorsey
H. Grant Stephenson
16
PERFORMANCE GRAPH
Comparison of Cumulative Total Return
Among the Corporation, the Nasdaq Composite Index and
The SNL $1B-$5B Bank Asset-Size Index
The following Performance Graph compares the performance of the Corporation
with that of the NASDAQ Composite Index and the SNL $1B-$5B Bank Asset-Size
Index, each of which is a published industry index. The comparison of the
cumulative total return to shareholders for each of the periods assumes that
$100 was invested on December 31, 2000 in the common stock of the Corporation
and in the NASDAQ Composite Index and the SNL $1B-$5B Bank Asset-Size Index and
that all dividends were reinvested.
Oak Hill Financial, Inc.
[GRAPH OMITTED]
Period Ending
-------------------------------------------------------------
Index 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
- -------------------------------------------------------------------------------------------
Oak Hill Financial, Inc. 100.00 111.58 154.82 222.51 291.82 255.53
NASDAQ - Total US 100.00 79.18 54.44 82.09 89.59 91.54
SNL $1B-$5B Bank Index 100.00 121.50 140.26 190.73 235.40 231.38
17
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
In accordance with its written charter, the Audit Committee (the
"Committee") of the Board of Directors assists the Board of Directors in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing, and financial reporting practices of the Corporation.
During the current year, the Committee met eight times including meeting with
management and the independent registered public accounting firm to discuss the
Corporation's quarterly financial statements prior to the filing of its
Quarterly Report on Form 10-Q with the Securities and Exchange Commission.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent registered public accounting firm a
formal written statement describing all relationships between the independent
registered public accounting firm and the Corporation that might bear on the
independent registered public accounting firm's independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and discussed with the registered independent public
accounting firm any relationships that may impact its objectivity and
independence. The Corporation has been advised by Grant Thornton LLP that
neither that firm nor any of its associates has any relationship with the
Corporation or its subsidiaries other than the usual relationship that exists
between an independent registered public accounting firm and clients. The
Committee satisfied itself as to the independent registered public accounting
firm's independence. The Committee has discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards ("SAS")
No. 61.
The Committee also discussed with management, the internal auditor and the
independent registered public accounting firm the quality and adequacy of the
Corporation's internal controls and the internal audit functions' organization,
responsibilities, budget, and staffing. The Committee reviewed with both the
independent registered public accounting firm and the internal auditor their
plans, audit scope, and identification of audit risks
The Committee discussed and reviewed with the internal auditor and
independent registered public accounting firm all communications required by
generally accepted auditing standards, including a discussion of the quality,
not just the acceptability of the accounting principles, the reasonableness of
significant adjustments, clarity of disclosures in the financial statements, and
other matters described in SAS No. 100, as amended, "Communication with Audit
Committees." With and without management present, the Committee discussed and
reviewed the results of the internal audit examinations and the results of the
independent registered public accounting firm's examination of the financial
statements.
The Committee reviewed the audited financial statements of the Corporation
as of and for the fiscal year ended December 31, 2005, and management's
assertion on the design and effectiveness of the Corporations's internal control
over financial reporting as of December 31, 2005 with management and the
independent registered public accounting firm. Management has the responsibility
for the preparation of the Corporation's financial statements, and the
independent registered public accounting firm has the responsibility for the
examination of those statements and assertion.
Based on the above-mentioned review and discussions with management and the
independent registered public accounting firm, the Committee recommended to the
Board that the Corporation's audited financial statements be included in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2005 for
filing with the Securities and Exchange Commission. The Committee also
recommended the reappointment, subject to shareholder approval, of the
Corporation's independent registered public accounting firm, Grant Thornton LLP.
The foregoing report has been respectfully submitted by the members of the
Committee, being:
Donald R. Seigneur, Chairman
Candice R. DeClark-Peace
William S. Siders
Donald P. Wood
18
PRINCIPAL INDEPENDENT REGISTERD PUBLIC ACCOUNTING FIRM FEES
The following table presents fees for professional audit services
rendered by Grant Thornton LLP for the audit of the Corporation's financial
statements for the years ended December 31, 2005 and 2004, and fees billed for
other services rendered by Grant Thornton LLP during those periods.
2005 2004
- --------------------------------------------------------------------------------
Audit fees $215,000 $193,150
Audit related fees 27,217 67,461
Tax fees 67,005 36,070
All other fees -- --
- --------------------------------------------------------------------------------
Total $309,222 $296,681
- --------------------------------------------------------------------------------
Audit Fees
Grant Thornton LLP fees billed to the Corporation for professional services
rendered for the audit of the Corporation's consolidated financial statements
included in the annual Form 10-K and review of financial statements included in
the quarterly Forms 10-Q and for services that are normally provided by the
independent registered public accounting firm in connection with statutory and
regulatory filings and engagements.
Audited Related Fees
Aggregate fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the
Corporation's financial statements. These services include employee benefit plan
audits, due diligence related to mergers and acquisitions, attestations by Grant
Thornton LLP that are not required by statute or regulation and consulting on
financial and reporting standards.
Tax Fees
Aggregate fees billed for professional services rendered by Grant Thornton
LLP for tax compliance, consulting and return preparation.
All Other Fees
Fees billed for other permissible work performed by Grant Thornton LLP that
does not meet the above category descriptions.
In determining whether to appoint Grant Thornton LLP as the Corporation's
independent registered public accounting firm, the Audit Committee considered
whether the provision of services, other than audit services, is compatible with
maintaining the principal independent registered public accounting firm's
independence.
19
AUDIT COMMITTEE GUIDELINES
FOR PRE-APPROVAL OF INDEPENDENT REGISTERD PUBLIC ACCOUTING FIRM SERVICES
The Audit Committee (the "Committee") has adopted the following guidelines
regarding the engagement of the Corporation's independent registered public
accounting firm:
Audit Services
The annual audit services and related fees are subject to specific
pre-approval of the Committee. The annual audit services include the annual
financial statement audit, required quarterly reviews, subsidiary audits, equity
investment audits, audit of management's assessment on internal control over
financial reporting, and other procedures required to be performed by the
independent registered public accounting firm to be able to form an opinion on
the Corporation's consolidated financial statements.
In addition, the Committee may grant general or specific pre-approval to
other audit services. Other audit services may include statutory audits or
financial audits of the Corporation and services associated with the SEC
registration statements, periodic reports and other documents filed with the SEC
or other documents issued in connection with securities offerings.
Audit-related Services
The Committee may grant general or specific pre-approval to audit-related
services that the Committee has determined are consistent with the SEC's rules
on auditor independence. Audit-related services include assurance and other
services that are reasonably related to the performance of the audit or review
of the Corporation's financial statements.
Tax Services
The Committee may grant general or specific pre-approval for tax
compliance, consulting and return preparation services provided by the
independent registered public accounting firm to the Corporation, its directors
and employees that the Committee has determined are consistent with the SEC's
rules on auditor independence.
All Other Services
The Committee may grant general or specific pre-approval for all other
permissible non-audit services that the Committee has determined are consistent
with the SEC's rules on auditor independence.
In determining whether to pre-approve any services of the independent
registered public accounting firm, the Committee considers the overall
relationship of fees for audit and non-audit services.
Corporation management must annually submit to the Committee for approval a
list of non-audit services that it recommends the Committee engage the
independent registered public accounting firm to provide. Corporation management
and the independent registered public accounting firm must each confirm to the
Committee that each non-audit service on the list is permissible under all
applicable legal requirements.
Pre-approved, budgeted amounts for all services to be provided by the
independent registered public accounting firm are established by the Committee.
To ensure prompt handling of unexpected matters, the Committee delegates to the
Chairman the authority to amend or modify the list of approved permissible
services and fees. The Chairman will report action taken to the Committee at the
next Committee meeting.
The independent registered public accounting firm must ensure that all
audit and non-audit services provided have been approved by the Committee. The
Corporation's Senior Risk Management Officer is responsible for tracking all
independent registered public accounting firm services and fees against the
budgeted amounts and will report at least quarterly to the Committee all
services actually provided by the independent registered public accounting firm
and related fees pursuant to this pre-approval process.
20
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUTING FIRM
The Audit Committee has appointed Grant Thornton LLP as the independent
registered public accounting firm for the Corporation and its subsidiaries for
the fiscal year ending December 31, 2006. Although not required, the Audit
Committee is submitting its selection to the shareholders of the Corporation for
ratification. Grant Thornton LLP has served as independent registered public
accounting firm for the Corporation and its subsidiaries during the past year.
The Audit Committee believes that the reappointment of Grant Thornton LLP for
the fiscal year ending December 31, 2006 is appropriate because of the firm's
reputation, qualifications, and experience. The Audit Committee will reconsider
the appointment of Grant Thornton LLP if its election is not ratified by the
shareholders.
Management expects that representatives of Grant Thornton LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes entitled to be cast by the
holders of the Corporation's common stock present in person or represented by
proxy at the Annual Meeting is required for ratification.
The Board of Directors recommends a vote FOR this proposal. Unless a
contrary choice is specified, proxies solicited by the Board of Directors will
be voted for the proposal.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Compensation Committee Interlocks and Insider Participation
Currently, Messrs. Barry M Dorsey, H. Grant Stephenson and Neil S.
Strawser, who are not employees of the Corporation, are members of the
Governance and Compensation Committee.
Transactions with Directors and Officers
Some of the officers and directors of the Corporation and the companies
with which they are associated are customers of Oak Hill. The loans to such
officers and directors (a) were made in the ordinary course of business, (b)
were made on substantially the same terms, including interest rates and nature
of collateral, as those prevailing at the time for comparable transactions with
other persons, and (c) did not involve more than the normal risk of
collectibility or present other unfavorable features.
Oak Hill has had, and expects to have in the future, banking transactions
in the ordinary course of business with directors, officers, principal
shareholders, and their associates on the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others.
Miscellaneous
H. Grant Stephenson, a director of the Corporation, is a Partner in the law
firm of Porter Wright Morris & Arthur LLP, which provides legal services to the
Corporation.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's officers and directors, and greater than 10% shareholders, to
file reports of ownership and changes in ownership of the Corporation's
securities with the SEC. Copies of the reports are required by SEC regulation to
be furnished to the Corporation.
Based solely on the Corporation's review of the copies of such reports, the
Corporation believes that all its officers, directors, and greater than 10%
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 2005.
21
SHAREHOLDER PROPOSALS
If an eligible shareholder wishes to present a proposal for action at the
next Annual Meeting of the Corporation to be held in 2007, it shall be presented
to management by certified mail, written receipt requested, not later than
November 28, 2006, for inclusion in the Corporation's Proxy Statement and form
of proxy relating to that meeting. Any such proposal must comply with Rule 14a-8
promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"). Proposals should be sent to Oak Hill Financial, Inc.,
Attention: David G. Ratz, Chief Administrative Officer, 14621 State Route 93,
Jackson, Ohio 45640. Any shareholder proposal submitted outside the processes of
Rule 14a-8 under the 1934 Act for presentation to the Corporation's 2007 Annual
Meeting of shareholders will be considered untimely for purposes of Rule 14a-4
and 14a-5 if notice thereof is received by the Corporation after February 8,
2007.
ANNUAL REPORT
The Corporation's Annual Report for the year ended December 31, 2005 is
being mailed to each shareholder with this Proxy Statement.
The Corporation files annually with the SEC an Annual Report on Form 10-K.
This report includes financial statements and schedules thereto. A SHAREHOLDER
OF THE CORPORATION MAY OBTAIN A COPY OF THE ANNUAL REPORT ON FORM 10-K,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2005 WITHOUT CHARGE BY SUBMITTING A WRITTEN REQUEST THEREFORE TO
THE FOLLOWING ADDRESS:
Oak Hill Financial, Inc.
Attention: David G. Ratz
14621 State Route 93
Jackson, Ohio 45640
OTHER MATTERS
Management and the Board of Directors of the Corporation know of no
business to be brought before the Annual Meeting other than as set forth in this
Proxy Statement. However, if any matters other than those referred to in this
Proxy Statement should properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy on such
matters in accordance with their best judgment.
EXPENSES
The expense of proxy solicitation will be borne by the Corporation. Proxies
will be solicited by mail and may be solicited, for no additional compensation,
by some of the officers, directors and employees of the Corporation or its
subsidiaries, by telephone, telegraph or in person. Brokerage houses and other
custodians, nominees and fiduciaries may be requested to forward soliciting
material to the beneficial owners of shares of the Corporation and will be
reimbursed for their related expenses.
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[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE OAK HILL FINANCIAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 12, 2005
The undersigned hereby appoints Ron J. Copher and David G. Ratz with full
power of substitution, to act as attorneys and proxies for the undersigned to
vote all shares of common stock of the Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders (the "Meeting"), to be
held on April 18, 2006 at the Ohio State University Extension South District
Office, 17 Standpipe Road, Jackson, Ohio at 1:00 p.m., local time, and at any
adjournments thereof, as follows:
With- For All
For hold Except
1. The election as directors of all nominees listed [_] [_] [_]
below:
Candice R. DeClark-Peace, Barry M. Dorsey, Ed.D.,
Donald R. Seigneur, William S. Siders, H. Grant Stephenson,
Donald P. Wood
INSTRUCTION:To withhold authority to vote for any individual nominee, mark "For
All Except"and write that nominee's name in the space provided below.
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For Against Abstain
2. The ratification of the appointment of Grant [_] [_] [_]
Thornton LLP as independent registered public
accounting firm of the Corporation for the fiscal
year ending December 31, 2006.
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment thereof.
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS. THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present to vote at the Meeting or at any
adjournment thereof, and after notification to the Secretary of the Corporation
at the Meeting of the shareholder's decision to terminate this Proxy, then the
power of such attorneys and proxies shall be deemed terminated and of no further
force and effect.
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Please be sure to sign and date | Date |
this Proxy in the box below. | |
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| |
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- -----------Stockholder sign above----------Co-holder (if any) sign above-------
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Detach above card, date, sign and mail in postage-prepaid envelope provided.
OAK HILL FINANCIAL, INC.
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The above signed acknowledges receipt from the Corporation, prior to the
execution of this Proxy, of Notice of the Annual Meeting, a Proxy Statement
dated March 24, 2006, and the Corporation's Annual Report to Shareholders for
the fiscal year ended December 31, 2005.
Please sign exactly as your name appears on this card. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE &MAIL YOUR PROXY CARD TODAY
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