0000854395-01-500013.txt : 20011009
0000854395-01-500013.hdr.sgml : 20011009
ACCESSION NUMBER: 0000854395-01-500013
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20010928
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
CENTRAL INDEX KEY: 0000854395
STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
IRS NUMBER: 611168311
STATE OF INCORPORATION: KY
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-18832
FILM NUMBER: 1747242
BUSINESS ADDRESS:
STREET 1: 2323 RING ROAD
CITY: ELIZABETHTOWN
STATE: KY
ZIP: 42701
BUSINESS PHONE: 2707652131
MAIL ADDRESS:
STREET 1: 2323 RING ROAD
CITY: ELIZABETHTOWN
STATE: KY
ZIP: 42701
DEF 14A
1
ffsb2001proxy.txt
FIRST FEDERAL FINANCIAL CORPORATION ANNUAL PROXY
September 28, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders of
First Federal Financial Corporation of Kentucky (the "Corporation") to be held
at the Corporation's home office, 2323 Ring Road, Elizabethtown, Kentucky on
Wednesday November 14, 2001 at 5:00 p.m.
The attached Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted at the meeting. During the meeting, we will report on
the operations of the Corporation. Directors and officers of the Corporation as
well as a representative from the Corporation's independent accounting firm,
Crowe, Chizek and Company LLP, will be present to respond to appropriate
questions of shareholders.
Detailed information concerning activities and operating performance during the
fiscal year ended June 30, 2001 is contained in our Annual Report, which is also
enclosed.
Please sign, date and promptly return the enclosed proxy card to the
Corporation. If you attend the meeting, you may vote in person even if you have
previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
B. KEITH JOHNSON
President & Chief Executive Officer
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
2323 Ring Road
Elizabethtown, Kentucky 42702-5006
(270) 765-2131
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on November 14, 2001
The Annual Meeting of Shareholders of First Federal Financial Corporation
of Kentucky (the "Corporation") will be held at the Corporation's home office,
2323 Ring Road, Elizabethtown, Kentucky, on Wednesday, November 14, 2001 at 5:00
p.m.
A Proxy Card and a Proxy Statement for the meeting are enclosed.
The meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Corporation;
2. Such other matters as may properly come before the meeting or
any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the meeting.
Any action may be taken on any one of the foregoing proposals at the
meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the meeting may be adjourned. Shareholders of
record at the close of business on September 15, 2001 are the shareholders
entitled to vote at the meeting and any adjournments thereof.
You are requested to complete and sign the enclosed proxy card, which is
solicited by the Board of Directors, and to mail it promptly in the enclosed
envelope. The proxy card will not be used if you attend and vote at the meeting
in person.
BY ORDER OF THE BOARD OF DIRECTORS
REBECCA S. BOWLING
Corporate Secretary
Elizabethtown, Kentucky
September 28, 2001
IMPORTANT: THE PROMPT RETURN OF PROXY CARDS WILL SAVE THE CORPORATION THE
EXPENSE OF FURTHER REQUESTS FOR PROXY CARDS IN ORDER TO INSURE A QUORUM. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
2323 Ring Road
Elizabethtown, Kentucky 42702-5006
(270) 765-2131
ANNUAL MEETING OF SHAREHOLDERS
November 14, 2001
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxy cards by the Board of Directors of First Federal Financial Corporation of
Kentucky (the "Corporation") for use at the 2001 Annual Meeting of Shareholders
of the Corporation (the "Meeting") to be held at the Corporation's home office,
2323 Ring Road, Elizabethtown, Kentucky, on Wednesday, November 14, 2001 at 5:00
p.m. The accompanying Notice of Annual Meeting of Stockholders and this Proxy
Statement, together with the enclosed proxy card, are being first mailed to
stockholders of the Corporation on or about September 28, 2001.
REVOCABILITY OF PROXY CARDS
Shareholders who execute proxy cards retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxy cards will be
voted at the Meeting and all adjournments thereof. Proxy cards may be revoked by
written notice to the Corporate Secretary of the Corporation or by the filing of
a later-dated proxy card prior to a vote being taken on a particular proposal at
the Meeting. A written notice of revocation of a proxy card should be sent to
the Corporate Secretary, First Federal Financial Corporation of Kentucky, 2323
Ring Road, P.O. Box 5006, Elizabethtown, Kentucky 42702-5006, and will be
effective if received by the Corporate Secretary prior to the Meeting. A
previously submitted proxy card will also be revoked if a shareholder attends
the Meeting and votes in person. Proxy cards solicited by the Board of Directors
of the Corporation will be voted in accordance with the directions given
therein. Where no instructions are indicated, the shares represented by a signed
proxy card will be voted for the nominees for director set forth below.
The accompanying proxy card confers discretionary authority on the persons
named as proxies to vote in their discretion in matters incident to the conduct
of the Meeting. If one or more persons other than the nominees named below are
nominated as directors, then the named proxies or their substitutes will have
the power, in their discretion, to vote cumulatively for some number less than
all nominees named below or for such of the other nominees as they may choose.
If any of the nominees named below becomes unwilling or unable to accept
nomination or election, then the proxies will have the right to vote for any
substitute nominee in place of the nominee who has become unwilling or unable to
accept nomination or election.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record as of the close of business on September 15, 2001
are entitled to one vote for each share then held, except in the election of
directors, when cumulative voting applies. As of September 15, 2001 the
Corporation had 3,758,491 shares of common stock ("Common Stock") issued and
outstanding.
Persons and groups owning more than 5% of the Common Stock are required to
file certain reports regarding their ownership pursuant to the Securities
Exchange Act of 1934. Based on such reports, the following table sets forth, as
of September 15, 2001, certain information as to those persons who were
beneficial owners of more than 5% of the outstanding shares of Common Stock as
of that date. The table also sets forth the beneficial ownership of all
executive officers and directors of the Corporation as a group.
3
Amount & Nature Percent of Shares
of Beneficial of Capital Stock
Ownership Outstanding
First Federal Financial Corporation
of Kentucky Employee Stock
Ownership Plan
2323 Ring Road
P.O. Box 5006
Elizabethtown, Kentucky 42702-5006 207,045 (1) 5.51%
All Executive Officers and
Directors as a Group (27 Persons) 658,694 (2) 17.53%
--------------------------------
(1) As of the date of this proxy statement, all shares have been allocated. The
voting of allocated shares is directed by the employees.
(2) Includes certain shares owned by spouses, or as custodian or trustee, over
which all executive officers and directors as a group effectively exercise
sole voting and investment power. Also includes 46,900 shares of Common
Stock which may be purchased pursuant to stock options exercisable within
60 days from the record date, and 118,594 shares held by the Bank's ESOP
which have been allocated to all executive officer participants as a group.
Each employee participant votes shares allocated to his or her account.
CUMULATIVE VOTING
Pursuant to the Articles of Incorporation and Bylaws of the Corporation,
every shareholder voting for the election of directors is entitled to cast a
number of votes calculated by multiplying the number of shares the shareholder
is entitled to vote times the number directors to be elected. Each shareholder
will be entitled to cast his votes for one director or distribute his votes
among any number of candidates as he or she chooses. The Board of Directors
intends to vote the shares represented by completed proxy cards solicited by it
equally among the four candidates standing for election as directors nominated
by the Board of Directors. However, the Board reserves the right, in its sole
discretion, to distribute the votes among some or all of the nominees of the
Board of Directors in another manner so as to elect as directors the maximum
number of nominees possible.
PROPOSAL I - ELECTION OF DIRECTORS
The Corporation's Board of Directors is currently comprised of ten
directors, divided into three classes with staggered terms. We currently have
two classes of directors with three directors in the class and one class of
directors with four directors.
At the meeting, the Corporation will elect three directors. The Board has
nominated each of Robert M. Brown, J. Alton Rider, and Gail L. Schomp for
election to a three-year term ending at the 2004 annual meeting. If any nominee
is unable to serve, the shares represented by all valid proxy cards will be
voted for election of such substitute director as the Board of Directors may
recommend. At this time, the Board knows of no reason why any nominee might be
unable to serve.
One current director, Burlyn Pike, is retiring from the Board of Directors
at the 2001 annual meeting. Mr. Pike is a member of the law firm Pike & Schmidt
Law Office, P.S.C. in Shepherdsville, Kentucky. Mr. Pike also served as the
President and Chief Executive Officer of Bullitt Federal Savings Bank prior to
its merger with First Federal Savings Bank in January 1995. He was named a
director of the Corporation in January 1995. The Board of Directors wishes to
thank Mr. Pike for his years of service to the Corporation.
The three persons receiving the most votes at the meeting will be elected
as directors. Votes, which are not cast at the meeting, either because of
abstentions or broker non-votes, are not considered in determining the number of
votes cast for the election of a nominee.
The following table sets forth for each nominee and for each director
continuing in office such person's name, age, the year he or she first became a
director and the number of shares and percentage of the Common Stock
beneficially owned.
4
NOMINEES
SHARES OF
COMMON
STOCK
YEAR FIRST BENEFICIALLY
AGE ELECTED OWNED
AT OR TERM AT PERCENT
SEPT. 15, APPOINTED TO SEPTEMBER 15, OF
NAME 2001 DIRECTOR (1) EXPIRE 2001 (2) CLASS
---- ---- ------------ ------ --------- -----
Robert M. Brown 61 1991 2004 16,047 *
Gail L. Schomp 48 - 2004 161,780 4.30%
J. Alton Rider 64 1987 2004 80,608 2.15%
DIRECTORS CONTINUING IN OFFICE
Wreno M. Hall 81 1979 2002 82,960 2.21%
Walter D. Huddleston 74 1966 2002 74,030 1.97%
B. Keith Johnson 40 1997 2003 36,660 *
Diane E. Logsdon 58 2000 2003 207 *
J. Stephen Mouser 52 1998 2002 5,770 *
John L. Newcomb, Jr. 47 2000 2003 11,051 *
Michael L. Thomas 46 1998 2002 1,392 *
RETIRING DIRECTOR
Burlyn Pike 80 1995 2001 9,058 *
NON-DIRECTOR EXECUTIVE OFFICERS
Number of
Unexercised
Options
Number of Shares of at Fiscal Percent
Common Stock Beneficially Year-End of
Name Age Owned(2)(3) (Exercisable) Class
---- --- ----------- ------------- -----
Charles Chaney 50 29,597 3,000 *
Anne Moran 49 61 - *
William Ray Brown 52 26,172 - *
William Duffy 55 9,210 5,000 *
Gary Bowers 49 16,353 3,000 *
Alan Howell 43 22,460 - *
Lloyd Henderson 61 26,888 - *
Dwight Brown 52 1,155 1,000 *
Richard Muse 45 11,766 - *
Susan Simmons 36 13,128 500 *
Rosemary Wiseman 55 9,634 500 *
Becky Wells 47 2,487 2,000 *
Tanya Deneen 33 1,047 500 *
Larry Hawkins 45 400 400 *
Gary Chapman 48 1,131 1,000 *
Rebecca Bowling 49 7,642 - *
--------------------------------
o Represents less than 1%
5
(1) Each director first elected in 1990 or earlier was first elected as a
director of the Bank and became a director of the Corporation on the date
of its incorporation in June 1990.
(2) Includes certain shares owned by spouses, or as custodian or trustee over
which shares the director or executive officer effectively exercises sole
voting and investment power, unless otherwise indicated.
(3) Includes 118,594 shares under the ESOP, which have been allocated to all
executive officer participants as a group. Each employee participant votes
shares allocated to his or her account.
Listed below is information about the directors and certain executive
officers of the Corporation. Unless otherwise noted all directors and executive
officers have held these positions for at least five years.
Robert M. Brown, owner of Brown Funeral Home, has served on the Board of
Directors for ten years. He is a charter member of the Elizabethtown A.M. Rotary
Club. Mr. Brown is also active in the National, Kentucky and South Central
Funeral Directors Association. In addition, he is an active member of the
Chamber of Commerce and has served as a major division chairman of Elizabethtown
Community College's Partners in Progress fund raising campaign.
Wreno M. Hall has served on the Board of Directors for 22 years. He is a
retired surgeon who spent 39 years practicing in Elizabethtown.
Walter D. Huddleston is Chairman of the Board and a former two-term member
of the United States Senate. He began his professional career in broadcasting at
WIEL in Elizabethtown. Today he owns and operates Walter D. Huddleston
Consulting, a legislative consulting firm located in Elizabethtown and
Washington D.C. and is a former President of the Elizabethtown Chamber of
Commerce and Rotary Club. Senator Huddleston has received the U.S. Central
Intelligence Agency Medal of Honor and the Outstanding Young Man of
Elizabethtown and Kentucky. He has served on the Board of Directors since 1966.
B. Keith Johnson was named President and Chief Executive Officer of the
Corporation and the Bank on September 4, 1997. Mr. Johnson joined the Bank as
Comptroller in 1993 and was appointed Executive Vice President in 1995. Before
joining the Corporation he was a principal in the accounting firm of Whelan,
Johnson, Doerr, Pike & Pawley P.S.C., where he was extensively involved in the
firm's financial institution practice. He has been a licensed CPA since 1984.
Locally, Mr. Johnson serves on the Executive Committee of the Elizabethtown
Industrial Foundation, Ft. Knox AUSA CORE Committee, and the United Way Advisory
Board. He is also involved in various capacities with several other
community/charitable organizations.
Diane E. Logsdon is currently the Vice President for Planning and
Development for Hardin Memorial Hospital. Mrs. Logsdon serves on numerous
community and charity Boards and is the Immediate Past Chair of the Board of the
Elizabethtown Chamber of Commerce. She is also a member of the Elizabethtown
Comprehensive Plan Steering Committee and the Kentucky Healthcare Strategy
forum. She is a past recipient of the Athena Award, Business and Professional
Woman's "Woman of Achievement," Leadership Elizabethtown Alumna of the Year, and
the L Award for Leadership.
Stephen Mouser is President of Mouser Custom Cabinetry, LLC, a family-owned
cabinet manufacturer in Elizabethtown. He is a member of the Better Business
Bureau, the Elizabethtown-Hardin County Chamber of Commerce, and the Home
Builders Association. He is a former President of the Rineyville Optimist Club
and former Board Member of Lincoln Trail Home Builders' Association.
John L. Newcomb, Jr. is President and Financial Manager of Newcomb Oil
Company, a family business that among other things, owns and operates the Five
Star Food Marts. He serves as Treasurer of the Kentucky Petroleum Marketers
Association and is a member of the National Chevron Marketers Council and the
Ashland Petroleum Marketer Council. A lifelong resident of Nelson County, Mr.
Newcomb was elected as a director of the Bank in 1999.
J. Alton Rider has been the owner and operator of Rider's Men & Women
Clothing Store in Elizabethtown since 1969. He is past President of the Hardin
County A.M. Rotary Club, former Hardin County School Board member, past Hardin
County Representative of the Kentucky Retail Association, a current member of
the National Retail Federation, and is a member of the Elizabethtown-Hardin
County Chamber of Commerce. He is also currently serving as a member of the
Kentucky Retail Federation.
6
Gail L. Schomp has spent her life in the transportation industry. She was
employed by her family's business, Langley Trucking Company until 1983. Today
she is the owner and operator of Carty and Carty, Inc., a mail hauling business
that specializes in freight hauling, and Lexington Truck Sales, a new and used
truck dealership for Volvo, Isuzu and GMC. Mrs. Schomp also serves on the
Executive Committee of Kentucky Motor Transportation Association.
Michael Thomas, DVM, has been a partner in the Elizabethtown Animal
Hospital for 17 years. Dr. Thomas is an active member of the American Veterinary
Medical Association and the Kentucky Veterinary Medical Association.
CERTAIN NON-DIRECTOR EXECUTIVE OFFICERS
Charles Chaney currently serves as a Senior Vice President and Chief
Operating Officer. Mr. Chaney joined the Bank in 1976 as Banking Center Manager
of the Munfordville Banking Center.
Anne Moran is a Senior Vice President and Chief Retail Officer. Ms. Moran
joined the Bank in 1999.
Wm. Ray Brown currently serves as a Senior Vice President of the
Corporation. Mr. Brown has served in many capacities since joining the Bank in
1972.
William Duffy is a Senior Vice President and Trust Officer. Mr. Duffy
joined the Bank in 1993 to manage the Bank's trust operations.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board
and through its committees. During the fiscal year ended June 30, 2001, the
Board of Directors held eight meetings.
The full Board of Directors of the Corporation acts as a nominating
committee for the annual selection of nominees for election as directors. The
Board of Directors met once during the 2001 fiscal year in its capacity as
nominating committee. While the Board of Directors will consider nominees
recommended by shareholders, it has not actively solicited recommendations from
the Corporation's shareholders for nominees. Nominations by shareholders must be
submitted to the Corporate Secretary in writing in accordance with procedures
set forth in the Corporation's Articles of Incorporation. Such notices generally
must be submitted not less than 30 days nor more than 60 days before the date of
the annual meeting and must include certain information including (i) the name,
age, address, principal occupation and Common Stock ownership of the person to
be nominated; (ii) a description of all arrangements or understandings between
the shareholder and the nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination is to be made by the
shareholder; (iii) such other information regarding the nominee as would be
required to be included in proxy materials filed under the applicable rules of
the SEC had the nominee been nominated by the Board of Directors; and (iv) the
written consent of the nominee to serve as a director of the Corporation if so
elected. The notice must also include information about the shareholder
submitting the nomination including name and address as they appear on the
Corporation's books and the number of shares of Common Stock owned by the
shareholder. Copies of the Articles of Incorporation may be obtained without
charge upon written request to Corporate Secretary, First Federal Financial
Corporation of Kentucky, 2323 Ring Road, Elizabethtown, Kentucky 42702-5006.
The Board's Risk Management Committee selects the Corporation's independent
auditors and reviews major financial, accounting and internal auditing policies.
This committee meets with the independent auditors before scheduling the
external audits to discuss the scope of work and audit findings and reviews the
finished reports. The committee also reviews Office of Thrift Supervision
examiner's reports and monitors policies pertaining to conflicts of interest as
they affect directors, officers, and employees. The Risk Management Committee,
composed of Directors Brown, Mouser, and Rider, met four times during the 2001
fiscal year.
The Board's Executive Compensation Committee determines issues involving
executive compensation. The compensation committee is composed of Directors
Huddleston, Hall, Mouser, Newcomb, and Pike. The compensation committee met
twice in 2001.
7
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation
During fiscal 1994, the Corporation established a Compensation Committee,
comprised entirely of independent, non-employee directors, with responsibility
for reviewing all aspects of the Corporation and Bank's executive compensation
program. The Compensation Committee's primary objective in structuring executive
compensation is to provide a means of attracting and retaining executives with
the experience and capability of providing outstanding leadership to the
Corporation and the Bank.
The Corporation's and the Bank's executive compensation program, described
in greater detail below, consists of a competitive base salary, an incentive
bonus based on the attainment of annual corporate performance objectives, and
stock-based compensation awards.
In establishing base salary levels and recommending corporate performance
objectives, the Committee reviews relevant financial results for the
Corporation, including growth in earnings, the rate of return on assets, and
various other measures of productivity and efficiency. The Compensation
Committee also believes that stock-based compensation, in the form of ESOP
awards and grants of stock options, can provide a longer-term incentive by
giving executives, employees, and the Corporation's shareholders a common
interest in increasing long-term shareholder value.
SALARIES
The Compensation Committee has established a policy of providing base pay
for executives that approximates the median base pay provided to executives of
other thrifts and financial institutions of similar size. Base pay increases for
executives and all other employees are based on an evaluation of individual
performance.
BONUS INCENTIVE COMPENSATION
Corporate performance objectives are established each year by the Board of
Directors, which can include specific targets for growth, return on assets, and
return on equity. When these objectives are met, all employees, including
executive officers, earn an incentive bonus equal to a percentage of base pay.
Based upon the actual financial results for the fiscal year ended June 30, 2001
all employees of the Bank earned an average incentive bonus equal to 3.95% of
base pay.
EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation awards shares of the Common Stock under the ESOP to
eligible employees, including executives, based on a percentage of base pay
determined by the Board of Directors. Under the ESOP, executive officers were
awarded an aggregate of 1,124 shares of Common Stock during fiscal 2001.
STOCK OPTION AND INCENTIVE PLAN
The Corporation adopted its 1998 Stock Option and Incentive Plan as a means
of increasing the incentive and encouraging the continued employment of key
employees by facilitating their purchases of an equity interest in the
Corporation. The 1998 Plan, authorized grants of stock options and stock
appreciation rights to eligible employees. Awards under the 1998 Plan are
subject to vesting and forfeiture as determined by the Stock Option Committee,
which administers the Plan. The stock options granted under the 1998 Plan could
have various vesting schedules depending on the date of the option. During
fiscal year 2001, 12,000 shares were granted to executive officers under the
1998 Plan. The Board of Directors believes that stock options and other forms of
stock-based incentive compensation help to attract, retain and motivate
executive officers to improve long-term shareholder value.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In establishing Mr. Johnson's salary for fiscal year 2001, the Executive
Compensation Committee took into account the Corporation's success in meeting
its non-financial and financial performance goals during 2001. Mr. Johnson
earned a base salary of $165,000 for 2001. Mr. Johnson also received a
performance incentive bonus of $3,966 or 2.4% of his salary. Mr. Johnson was
also awarded 158 shares of stock under the ESOP during fiscal 2001.
EXECUTIVE COMPENSATION COMMITTEE
Walter D. Huddleston, Chairperson
Wreno M. Hall
Burlyn Pike
Stephen Mouser
John L. Newcomb, Jr.
8
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Corporation and the Bank.
ANNUAL COMPENSATION
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
------------------ ---- ------ ----- ------------ ------------
(1) (2) (3)
B. Keith Johnson 2001 $165,000 $ 6,372 $2,160 $31,715
President and Chief 2000 157,500 10,313 2,160 28,488
Executive Officer 1999 133,000 9,410 2,160 26,915
----------------------
(1) Includes a performance incentive bonus and a Christmas bonus.
(2) Represents compensation related to Mr. Johnson's use of an automobile
provided by the Bank.
(3) Includes the following for the 1999, 2000 and 2001 fiscal years,
respectively: director's fees of $15,250, $16,750 and $19,500; matching
contributions under the Bank's 401(K) plan of $7,980, $9,450 and $9,768;
and amounts credited to Mr. Johnson's account under the Bank's ESOP of
$2,047, $2,288 and $2,447.
OPTIONS EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information concerning the value of options
held by the Chief Executive Officer at the end of fiscal year 2001.
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
at Fiscal at Fiscal
Shares Acquired Value Year-End Year-End
Name on Exercise Realized (Exercisable) (Exercisable)(1)
---- -------------- -------- ------------- ---------------
B. Keith Johnson -0- -0- 30,000 $18,750
------------------
(1) Difference between fair market value of underlying Common Stock at June 30,
2001 and the exercise price of such options.
DIRECTORS' COMPENSATION
Members of the Board of Directors of the Corporation receive a monthly fee
of $350. Members of the Bank's Board of Directors receive a monthly fee of
$1,150. No fees are paid for attendance at committee meetings.
9
RETIREMENT PLAN
The Bank is a participating employer in a multiple employer pension plan
sponsored by the Financial Institution Retirement Fund. All full time employees
of the Bank are eligible to participate after one year of service and attaining
age 21. Service credit for purposes of benefit accrued, eligibility and vesting
is retroactive to the date of employment.
A qualifying employee becomes fully vested in the plan upon completion of
five years' service or when the normal retirement age of 65 is attained. The
plan is intended to comply with the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code"), as a "tax qualified" defined
benefits plan, and with the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
The plan provides for monthly payments to each participating employee at
normal retirement age. The annual allowance payable under the plan is equal to
1.5% of the highest average earnings received in any five consecutive full
calendar years during the last ten years of employment before the participant's
normal retirement date multiplied by the years of credited service. A
participant who has attained the age of 45 and completed ten years of service
may take an early retirement and elect to receive a reduced monthly benefit
beginning immediately. Mr. Johnson has 7 years of credited service under the
plan.
The following table indicates the annual retirement benefit payable under
the plan based on various specified levels of plan compensation and various
specified years of credited service as calculated under the plan assuming
retirement at age 65 on December 31, 2001. The IRS maximum annual benefit under
the plan is limited to $133,080 per year.
High-5 Average YEARS OF BENEFIT SERVICE
Compensation 15 20 25 30 35
--------------------------------------------------------------------------
10,000 2,300 3,000 3,800 4,500 5,300
20,000 4,500 6,000 7,500 9,000 10,500
30,000 6,800 9,000 11,300 13,500 15,800
60,000 13,500 18,000 22,500 27,000 31,500
90,000 20,300 27,000 33,800 40,500 47,300
120,000 27,000 36,000 45,000 54,000 63,000
150,000 38,800 45,000 56,300 67,500 78,800
TRANSACTIONS WITH THE CORPORATION AND THE BANK
All loans to directors and executive officers are approved by the Executive
Loan Committee and promptly reported to the Board of Directors. They are made in
the ordinary course of business on substantially the same terms as those of
comparable transactions prevailing at the time and do not involve more than the
normal risk of collectability or contain other unfavorable terms.
10
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below shows the cumulative total return on the Common Stock of
the Corporation between June 30, 1996 through June 30, 2001 compared with the
cumulative total return of the NASDAQ Stock Market Index for U.S. Companies and
the S&P Savings and Loans Index over the same period. Cumulative total return on
the stock or the index equals the total increase in value since June 30, 1996,
assuming reinvestment of all dividends paid into the stock or the index,
respectively. The graph was prepared assuming that $100 was invested on June 30,
1996 in the Common Stock of the Corporation or in the indexes.
[GRAPHIC OMITTED]
---------------------------------------------------------------------------
6/96 6/97 6/98 6/99 6/00 6/01
First Federal Financial ---- ---- ---- ---- ---- ----
Corporation of Kentucky 100 90 143 117 101 92
NASDAQ Stock Market - US 100 122 160 230 340 185
S & P Savings & Loan Companies 100 174 223 190 181 329
11
RISK MANAGEMENT COMMITTEE REPORT
The Risk Management Committee has furnished the following report:
It is the responsibility of management to prepare the financial statements
and the responsibility of Crowe, Chizek and Company LLP, the Corporation's
independent auditors, to audit the financial statements in accordance with
generally accepted auditing procedures. The functions and responsibilities of
the Risk Management Committee are described in the charter Risk Management
Committee charter attached as an appendix to this proxy statement.
In connection with its review of First Federal Financial Corporation's
financial statements for 2001, the Risk Management Committee:
o has reviewed and discussed the audited financial statements with
management;
o has discussed with the independent auditors the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380); and
o has received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), and has discussed with the independent accountant the
independent accountant's independence.
The Risk Management Committee also discussed with management and the
independent auditors the quality and adequacy of the Corporation's internal
controls and the internal audit function's organization, responsibilities,
budget and staffing. The Committee reviewed with the independent auditors their
audit plans, audit scope and identification of audit risks.
Based on the review and discussions referred to above, the Risk Management
Committee recommended to the Board of Directors that the audited financial
statements be included in First Federal Financial Corporation's Annual Report on
Form 10-K for the year ended June 30, 2001.
RISK MANAGEMENT COMMITTEE
Robert M.Brown
Stephen Mouser
J. Alton Rider
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Crowe, Chizek and Company LLP are expected to be present
at the annual meeting and will be available to respond to appropriate questions
and will have the opportunity to make a statement if they desire to do so.
Crowe, Chizek and Company LLP has served as the Corporation's independent public
accountants and auditors since the 1999 fiscal year.
AUDIT FEES
The aggregate fees incurred for professional services rendered for the
audit of our annual financial statements for the year ended June 30, 2001, and
the reviews of the financial statements included in the Corporation's Forms 10-Q
for the year were $47,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees incurred for professional services rendered in
connection with the design and/or implementation of our financial information
systems by Crowe, Chizek and Company LLP for the year ended June 30, 2001, were
$0.
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ALL OTHER FEES
The aggregate fees incurred for services rendered by Crowe, Chizek and
Company LLP, other than the services covered under the captions "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", above, for the
year ended June 30, 2001, were $34,000.
The Audit Committee of the Board of Directors has considered whether the
provision of the services covered under the captions "Financial Information
Systems Design and Implementation Fees" and "All Other Fees", above, is
compatible with maintaining the principal accountant's independence.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to regulations promulgated under the Securities Exchange Act of
1934, the Corporation's officers, directors and persons who own more than ten
percent of the outstanding Common Stock are required to file reports detailing
their ownership and changes of ownership in Common Stock, and to furnish the
Corporation with copies of all such reports. Based solely on its review of the
copies of such reports received during the past fiscal year or with respect to
the last fiscal year, the Corporation believes that during the fiscal year ended
June 30, 2001, all of its officers and directors and all stockholders who own
more than ten percent of the Corporation's outstanding Common Stock have
complied with the reporting requirements.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that shares represented by completed proxy cards in the accompanying
form will be voted in respect thereof in accordance with the judgment of the
person or persons voting such shares.
MISCELLANEOUS
The cost of solicitation of proxy cards will be borne by the Corporation.
In addition to solicitations by mail, directors, officers, and regular employees
of the Corporation may solicit proxy cards personally or by telegraph or
telephone without additional compensation.
The Corporation's Annual Report to Shareholders, including financial
statements, is being mailed to all shareholders of record as of the close of
business on September 15, 2001. Any shareholder who has not received a copy of
the Annual Report may obtain a copy by writing to the Corporate Secretary of the
Corporation. The Annual Report is not to be treated as a part of the proxy
solicitation material or as having been incorporated herein by reference.
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SHAREHOLDER PROPOSALS
Shareholders proposals to be presented at the 2002 Annual Meeting must be
received by the Corporate Secretary of the Corporation no later than May 31,
2002 to be included in the proxy statement for the 2002 Annual Meeting. Any such
proposals and any nominations of candidates for election of directors must
comply with the Corporation's Articles of Incorporation and the requirements of
the proxy rules adopted under the Securities Exchange Act of 1934. The
Corporation expects to exercise discretionary voting authority granted under any
proxy form which is properly executed and returned to the Corporation on any
matter that may properly come before the 2002 Annual Meeting unless written
notice of the matter is delivered to the Corporation at its corporate offices,
addressed to the Corporate Secretary of the Corporation, not later than October
13, 2002.
BY ORDER OF THE BOARD OF DIRECTORS
Rebecca S. Bowling
Corporate Secretary
Elizabethtown, Kentucky
September 28, 2001
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APPENDIX
FIRST FEDERAL FINANCIAL CORPORATION
RISK MANAGEMENT COMMITTEE CHARTER
I. PURPOSE
The Risk Management Committee shall serve as a committee of First Federal
Financial Corporation's Board of Directors. The Committee has a major
responsibility to provide assistance to the directors in fulfilling their
responsibility to the shareholders and investment community related to corporate
accounting, reporting practices, and the quality and integrity of financial
reports. Key components of fulfilling this charge include:
>> Overseeing that management has established and maintained processes to
assure that an adequate system of internal controls is functioning within
the Bank.
>> Assuring compliance by the Bank with all applicable laws, regulations, and
Bank policy.
>> Handling relations with important resources such as: regulatory agencies,
external auditing firm, the Internal Audit Department, and the loan review
function.
>> Concurring in the appointment or removal of the Internal Auditor,
Compliance Officer, and External Auditors.
>> Communicating with the Bank's attorneys, accounting department, loan
administration, and others as it deems necessary.
>> Providing direction to and oversight of the Internal Audit function.
I. ORGANIZATION/COMPOSITION
In accordance with FDICIA, which applies to financial institutions over $500
million in assets, the Risk Management Committee shall be composed of at least
three directors who are independent of the management of the bank and are free
of any relationship that, in the opinion of the Board of Directors, would
interfere with their exercise of independent judgement as a committee member.
The following relevant information was considered in making this determination:
>> The member has not been an officer or employee of the bank or its
affiliates within the preceding five years;
>> The member has not accepted compensation from the bank or its affiliates
other than compensation for Board service or receipt of benefits under a
tax-qualified retirement plan;
>> The member has not served or does not serve as a consultant, advisor,
promoter, underwriter, legal counsel, or trustee of the bank or its
affiliates;
>> The member is not an immediate family relative or an officer or other
employee of the institution or its affiliates;
>> The member does not hold or control, nor has held or controlled, a direct
or indirect financial interest in the bank or its affiliates within the
preceding year, of 10 percent or more of any outstanding class of voting
securities of the institution.
The New York Stock Exchange (NYSE) and National Association of Securities Dealer
(NASD) require the following composition/expertise of Risk Management committee
members:
>> Consist of at least three directors, all of who have no relationship to the
holding company or the bank that may interfere with the member exercising
independence.
>> Each member should be financially literate as defined by the Board of
Directors or become financially literate within a reasonable time after
their appointment.
>> One member must have accounting or related financial management expertise.
>> A director who is an employee (including non-employee executive officers)
of the holding company or any of its affiliates may not serve on the risk
management committee until three years following the termination of that
employment.
>> A director (a) who is a partner, controlling shareholder, or executive
officer of an organization that has a business relationship with the
company or (b) who has a direct material business relationship with the
company may serve on the committee only if the holding company's Board of
Directors determines that the relationship does not interfere with the
Director's exercise of independent judgement.
>> A Director who is an immediate family member of an individual who is an
executive officer of the holding company or any of its affiliates cannot
serve on the Risk Management Committee until three years following the
termination of the relationship.
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NASD permits one Director who is not independent, and is not a current employee
or immediate family member of an employee, be appointed to the Risk Management
Committee, if the Board, under exceptional and limited circumstances, determines
that membership on the Committee by the individual is required by the best
interest of the Corporation and it's shareholders. These reasons, as well as the
nature of the relationship, are required to be disclosed in the next annual
proxy statement.
II. MEETINGS
To fulfill its primary responsibilities, the Risk Management Committee shall
meet as often as deemed necessary. The Committee may ask management or others to
attend meetings and provide pertinent information as necessary. The Committee
members will have sole discretion in determining the meeting attendees and
agenda. The meetings shall provide an open avenue of communication between the
independent auditor, Internal Audit Staff, and the Board of Directors. Meetings
with the independent auditor and the Vice President of Internal Audit/Compliance
without management's presence should occur routinely to ensure open
communication.
III. DUTIES AND RESPONSIBILITIES
In carrying out their responsibilities, the Risk Management Committee believes
its agenda and procedures should remain flexible in order that it can best react
to changing conditions and environment and to assure to the Directors and
Shareholders that the accounting and reporting practices of the Bank are in
accordance with all requirements and are of the highest quality. The agenda on
an annual basis will include:
A. GENERAL
|X| Maintain minutes or other records of meetings and activities.
|X| Adopt a formal written charter that is approved by the full Board of
Directors that specifies scope of responsibility, process, membership, etc.
|X| Review, update and approve the Risk Management Committee Charter annually.
|X| Report periodically to the Board of Directors on significant results of
Risk Management Committee meetings.
|X| Submit written affirmation to NYSE regarding Risk Management Committee
membership, independence, financial literacy, financial management
expertise and a Risk Management Committee Charter.
|X| Conduct or authorize investigations into any matters within the Risk
Management Committee's scope of responsibilities. The Risk Management
Committee shall be empowered to retain independent counsel, accountants, or
others to assist it in the conduct of investigation.
|X| Review with the independent auditor and the Vice President of Internal
Audit/Compliance the coordination of audit efforts to assure completeness
of coverage, reduction efforts, and the effective use of audit resources.
B. EXTERNAL/INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS AND REPORTS
1. SEC Requirements
|X| Discuss interim financial statements reviewed by an independent public
accountant before filing its Form 10-Q with the commission.
|X| Provide appropriate reconciliations and descriptions of any adjustments to
the quarterly information previously reported in a Form 10-Q for any
quarter.
|X| Discuss with independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61,89, and 90.
|X| Receive from the auditors a disclosure report regarding the auditor's
independence required by Independence Standards Board No. 1, modified as
necessary, and discuss with auditors.
|X| Review and discuss audited financial statements with management. |X|
Prepare a report for the annual proxy statement stating whether:
>> Based on review and discussion with management and independent auditors,
the Risk Management Committee recommended to the Board of Directors that
the audited financial statement be included in the holding company's Annual
Report on Form 10-K.
>> The Board of Directors has adopted a written charter for the Risk
Management Committee, and if so, include a copy of the charter as an
appendix to the holding company's proxy statements at least once every
three years.
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>> The Risk Management Committee members are "independent", as defined in the
applicable listing, or if not listed, which definition of "independent" was
used.
>> Disclose information regarding any Director on the Risk Management
Committee who is not "independent".
2. NYSE Requirements
|X| Recommend to the Board of Directors the appointment and compensation of the
outside auditors for the ensuring year. Includes evaluating and, if
necessary, replacing, the outside auditor.
|X| Remind the outside auditor that the auditors are ultimately accountable to
the Board of Directors and Risk Management Committee of the holding
company.
|X| Ensure the outside auditor submits on a periodic basis a formal written
statement explaining all relationships between the holding company and the
auditor.
|X| Discuss with the auditor any relationship that may impact the objectivity
and independence of the outside auditor.
|X| Recommend that the Board of Directors take appropriate action in response
to the outside auditors' report to satisfy itself of the outside auditors'
independence.
3. NASD Requirements
|X| Recommend to the Board the certified public accountants to be retained as
outside auditors.
|X| Monitor the outside auditors' performance along with their independence.
|X| Review the scope of the external audit.
|X| Review the final report with the independent auditors.
|X| Be available to the independent auditors during the year for consultation
purposes.
|X| Review with the independent auditors the corporate accounting practices and
policies.
|X| Recommend to whom the independent auditors' report should be submitted
within the holding company and/ or bank.
|X| Ensure the existence of integrity with financial reporting process.
4. FDICA Requirements
|X| Review the basis for report on audited financial statements and the report
on internal controls.
|X| Review the scope of services provided, significant accounting policies, and
significant accounting estimates.
|X| Review the assessment of internal control adequacy, including reportable
conditions and material weaknesses.
|X| Review with management compliance with laws and regulations.
|X| Review with management the selection and termination of the independent
accountant and any disagreements between management and the independent
accountant.
C. INTERNAL AUDIT
1. NASD Requirements
|X| Ensure the existence of adequate internal controls.
|X| Direct and oversee all activities of the internal review function,
including but not limited to management's responses to the internal review
function.
|X| Hire, determine adequate compensation for, and terminate the staff in the
Internal Audit Department. |X| Determine the budget for the Auditing
Department because this area should report directly to the Risk Management
Committee. The Risk Management Committee may deem appropriate for the
Auditing Department to report to senior management on particular matters to
remain consistent with preserving the independence of the office.
|X| Review with internal and independent auditors overall accounting and
financial controls.
|X| Review and approve the annual internal audit plan.
2. FFIEC Interagency Guidance on the Internal Audit Function and its
Outsourcing
The federal regulatory agencies prepared a joint policy statement which contains
guidance on the responsibilities of directors and senior management for ensuring
that banking organization's systems of internal control, including the internal
audit function, are adequate for the nature and scope of the organization's
lines of business. The guidance outlined the following responsibilities:
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|X| The Board of Directors and senior management have primary responsibility
for the system of internal control.
|X| Ensure internal controls are tested and assessed by individuals without
business-line responsibilities, such as internal audit.
|X| Ensure that the internal audit function meets the demands of the
institution's activities.
|X| Evaluate the following aspects of the internal audit function: structure,
management, staffing, and audit quality; scope; and communication.
|X| Review and approve the internal audit risk assessments, scope, and plan.
|X| Monitor internal audit's adherence to the audit plan.
|X| Consider requests for expansion of internal audit work when issues arise or
changes occur in controls or risk.
|X| Assess whether reported control weaknesses are being resolved by
management.
|X| Meet with internal audit staff without management being present.
|X| Ensure internal audit staff reports directly to the Risk Management
Committee.
|X| Considerations for Internal Audit Outsourcing Arrangement:
>> The engagement letter with the outsourcing firm should address the
following: audit scope and frequency; manner of reporting; protocol for
changing the engagement terms; state that internal audit reports are
property of the institution; allow access to workpapers; specify locations
of reports and workpapers; permit examiners access to reports and
workpapers; address cost of damages from errors, omissions, and negligence,
and state that internal audit will not perform management functions. The
Board and senior management should ensure that the outsourced internal
audit function is competently managed.
>> All internal audit work is to be well documented and all findings promptly
reported to the Vice President of Internal Audit/Compliance.
>> The outsourcing firm should conduct internal audit with qualified staff.
>> The internal audit coordinator should assess the outsourcing firm's
competence and experience and should be notified of staffing changes.
>> The institution should have a contingency plan to mitigate risk from
discontinuity of audit coverage.
|X| Independence of External Auditor - applies to arrangements where the
internal audit firm is also the external audit firm:
>> The internal and external audit firm has communicated to the Board and
senior management that they, Board and management, are responsible for
establishing and maintaining internal control, and for directing the
internal audit function, including: designating an internal audit
coordinator; determining internal audit scope, risk and frequency;
evaluating internal audit results; and evaluating adequacy of internal
audit procedures.
>> The Board of Directors has determined that the internal/external audit firm
does not act in a capacity equivalent to a member of management. AICPA rule
101-13 outlines outsourcing activities that would compromise the CPA's
independence.
>> Performing ongoing monitoring and control activities;
>> Reporting on behalf of management;
>> Preparing source documents on transactions;
>> Having custody of assets;
>> Approving the overall internal audit work plan;
>> Being represented as a member of management in correspondence or
publications;
>> Contributing in a decision-making capacity on committees or elements of
strategic planning;
>> Contributing in a decision-making capacity to the design and implementation
of significant new products; services, internal controls, or software.
>> If the external audit firm renders an internal control attest report under
Section 36 of FDICIA - the audit firm is not the primary support for
management's assertion of the effectiveness of internal control.
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