Other Benefit Plans

9 Months Ended

Sep. 30, 2011

Other Benefit Plans [Abstract]

OTHER BENEFIT PLANS

9. OTHER BENEFIT PLANS

Home Savings sponsors a defined benefit health care plan. The plan was curtailed in 2000, but continues to provide postretirement medical benefits for employees who had worked 20 years and attained a minimum age of 60 by September 1, 2000, while in service with Home Savings. The plan is contributory and contains minor cost-sharing features such as deductibles and coinsurance. In addition, postretirement life insurance coverage is provided for employees who were participants prior to December 10, 1976. The life insurance plan is non-contributory. Home Savings’ policy is to pay premiums monthly, with no pre-funding.

The benefit obligation was measured on December 31, 2010. Information about changes in obligations of the benefit plan follows:

	September 30, 2011			December 31, 2010
	(Dollars in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	2,778		$	3,405
Service cost		—			—
Interest cost		41			185
Actuarial (gain)/loss		—			(670	)
Benefits paid		(124	)		(142	)
Benefit obligation at end of the year	$	2,695		$	2,778
Funded status of the plan	$	(2,695	)	$	(2,778	)

The amounts recognized in accumulated other comprehensive income, net of tax consist of the following:

	September 30, 2011		December 31, 2010
	(Dollars in thousands)
Net gains (losses)	$	—	$	1,015
Prior service credit (cost)		—		1
	$	—	$	1,016

Components of net periodic benefit cost are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(Dollars in thousands)
Service cost	$	—		$	—		$	—		$	—
Interest cost		33			46			99			140
Expected return on plan assets		—			—			—			—
Net amortization of prior service cost		(1	)		(1	)		(1	)		(1	)
Recognized net actuarial gain		(19	)		—			(57	)		—
Net periodic benefit cost/(gain)	$	13		$	45		$	41		$	139
Assumptions used in the valuations were as follows
		5.00	%		5.75	%		5.00	%		5.75	%

401(k) Savings Plan:

Home Savings sponsors a defined contribution 401(k) savings plan, which covers substantially all employees. Under the provisions of the plan, Home Savings’ matching contribution is discretionary and may be changed from year to year. For 2011, Home Savings did not match employee contributions. For 2010, Home Savings’ match was 50% of pre-tax contributions, up to a maximum of 6% of the employees’ base pay. Participants become 100% vested in Home Savings contributions upon completion of three years of service. For the three and nine months ended September 30, 2010, the expense related to this plan were approximately $127,000 and $369,000, respectively.

Employee Stock Ownership Plan:

In conjunction with the Conversion, United Community established an Employee Stock Ownership Plan (ESOP) for the benefit of the employees of United Community and Home Savings. All full-time employees who meet certain age and years of service criteria are eligible to participate in the ESOP. The ESOP is a tax-qualified retirement plan designed to invest primarily in the stock of United Community. The ESOP borrowed $26.8 million from United Community to purchase 2,752,615 shares in conjunction with the Conversion. The term of the loan was 15 years and was being repaid primarily with contributions from Home Savings to the ESOP. Additionally, 1,643,817 shares were purchased with the return of capital distribution in 1999. During 2008, 42,890 shares were added to the plan from the stock dividend paid in the fourth quarter of that year.

The loan was collateralized by the common shares held by the ESOP. As the note was repaid, shares were released from collateral based on the proportion of the payment in relation to total payments required to be made on the loan. The shares released from collateral were then allocated to participants on the basis of compensation as described in the plan. Compensation expense is determined by multiplying the per share market price of United Community’s shares at the end of the period by the number of shares to be released. On June 29, 2010, the ESOP paid in full the remaining balance of the loan and Home Savings recognized $1.3 million in additional compensation expense in the second quarter as shares were allocated to plan participants. Proceeds from the ESOP loan prepayment gave United Community the opportunity to infuse approximately $9.0 million of capital into Home Savings, in addition to taking advantage of certain tax benefits available for these types of plans.

There are no shares left to be released for allocation in 2011. During the year ended December 31, 2010, 631,946 shares were released or committed to be released for allocation.

Employee Stock Purchase Plan:

During 2005, United Community established an employee stock purchase plan (ESPP). Under this plan, United Community provides employees of Home Savings the opportunity to purchase United Community Financial Corporation’s common shares through payroll deduction. Participation in the plan is voluntary and payroll deductions are made on an after-tax basis. The maximum amount an employee can have deducted is nine hundred dollars per biweekly pay. Shares are purchased on the open market and administrative fees are paid by United Community. Expense related to this plan is a component of the Shareholder Dividend Reinvestment Plan and the expense recognized is considered immaterial.

Executive Incentive Plan:

On April 28, 2011, the Compensation Committee and the Board of Directors of UCFC approved the 2011 Executive Incentive Plan (the “EIP”). The EIP provides incentive compensation awards to certain named executive officers (the “Named Executive Officers” as defined in the proxy statement filed on March 25, 2011) of UCFC and Home Savings. Executive incentive awards are dependent upon UCFC recognizing net income for the year. The amount of award paid to executives is based upon the actual performance of UCFC for the 12 months ending September 30 compared to the actual performance of a peer group during the same 12 month period. As of September 30, 2011, no expense has been recognized for this plan.

Stay Bonus and Retention Plan:

On April 28, 2011, the Compensation Committee (the “Committee”) and the Boards of Directors of UCFC and Home Savings adopted the Stay Bonus and Retention Plan (the “Retention Plan”) for the purpose of recruiting and retaining qualified officers and employees. The officers and employees recommended for participation by the Committee must be approved by at least a majority of the independent members of the Board. As of the effective date of the Retention Plan, there were twenty-eight participants in the plan. The list of participants may be amended from time to time by the Board and the Committee in their sole and absolute discretion. Each participant must be actively employed by UCFC or Home Savings at the time any award is granted and/or paid.

Each eligible participant will receive a cash award of $1,000 on the first regular pay date occurring in January 2012, subject to all applicable Federal, state and local payroll taxes. If the Board of Home Savings receives official notice that the Bank Order has been terminated, each eligible participant will also be paid a cash award (50% of total award) and granted an equity award (50% of total award). Equity awards will be granted in the form of restricted shares issued under the 2007 Plan and vest one year after the grant date. The total award upon termination of the Bank Order is based upon a specified percentage of each participant’s base salary, which percentage is determined by the Board and may be amended from time to time by the Board and the Committee in their sole and absolute discretion. In the event that a participant’s employment is terminated for cause prior to the date upon which a cash award is actually paid to the participant or the participant’s equity award has vested, the participant forfeits all his or her rights, title or interest in any such cash or equity award, and the participant shall not be entitled to receive all or any part of the cash or equity award.

Subject to any limitations contained in the 2007 Plan, the Board may, at any time and from time to time, amend, modify or suspend the Retention Plan and all rules and guidelines under the Retention Plan; provided, however, that no such amendment, modification, suspension or termination shall impair or adversely alter any cash award or equity award previously granted under the Retention Plan without the consent of the affected participant.

For the three and nine months ended September 30, 2011, the expense recognized for this plan was approximately $215,000. Home Savings expects to recognize an additional $129,000 in expense associated with this plan for the remainder of 2011.