##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    Number: 0-024399
 UNITED COMMUNITY FINANCIAL
    CORP.
 (Exact name of registrant as
    specified in its charter)
  Ohio(State or other jurisdiction
    of
    incorporation or organization)

34-1856319(I.R.S. Employer
    Identification Number)275 West Federal Street,
    Youngstown, Ohio(Address of principal
    executive offices)

44503(Zip Code)   Registrants
    telephone number:
 (330)
    742-0500
  Securities registered pursuant to Section 12(b) of the
    Act:
  Common shares, no par value per share(Title of Class)

Nasdaq(Name of each exchange on
    which registered)   Securities registered pursuant to Section 12(g) of the
    Act:
  None (Title
    of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K þ
  Rule 12b-2
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K 




---



##### 





TABLE OF
    CONTENTS
   
 ItemNumber



PagePART I1.


Description of Business


1General


1Discussion of Forward-Looking
    Statements


2Lending Activities


2Investment Activities


11Sources of Funds


12Competition


15Employees


15Regulation


151A.


Risk Factors


161B.


Unresolved Staff Comments


192.


Properties


193.


Legal Proceedings


194.


Submission of Matters to a Vote of Security
    Holders


19PART II5.


Market for Registrants Common Equity and
    Related Shareholder Matters


206.


Selected Financial Data


227.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


247A.


Quantitative and Qualitative Disclosures About
    Market Risk


378.


Financial Statements and Supplemental Data


409.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


839A.


Controls and Procedures


839B.


Other Information


83PART III10.


Directors and Executive Officers and Corporate
    Governance


8311.


Executive Compensation


8312.


Security Ownership of Certain Beneficial Owners
    and Management and Related Shareholder Matters


8313.


Certain Relationships and Related Transactions
    and Director Independence


8414.


Principal Accountant Fees and Services


84PART IV15.


Exhibits, Financial Statement Schedules and
    Reports on
    Form 8-K


85Signatures


86Exhibit Index


87EX-4EX-10.4EX-10.5EX-10.6EX-10.7EX-10.8EX-10.9EX-10.10EX-10.11EX-10.12EX-21EX-23EX-31.1EX-31.2EX-32




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##### Table of Contents



PART I  Item 1.
    Description
    of Business GENERAL    http://www.ucfconline.com Form 10-K, Form 10-Q, Form 8-K,
             1




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##### Table of Contents



DISCUSSION
    OF FORWARD-LOOKING STATEMENTS  Form 10-K,
   LENDING
    ACTIVITIES  General.
 2




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##### Table of Contents



Loan Portfolio Composition.
  At December 31,2008


2007


2006


2005


2004Percent of





Percent of





Percent of





Percent of





Percent ofAmount


total loans


Amount


total loans


Amount


total loans


Amount


total loans


Amount


total loans(Dollars in thousands)Real estate loans:Permanent loans:One- to four-family residential

$
909,567



40.65
%

$
871,019



38.41
%

$
854,829



37.65
%

$
749,362



35.44
%

$
690,413



37.68
%Multifamily residential


187,711



8.39



179,535



7.92



163,541



7.20



154,702



7.32



153,011



8.35Non-residential


375,463



16.78



359,070



15.84



348,528



15.35



314,124



14.86



289,755



15.81Land


23,517



1.05



22,818



1.01



26,684



1.18



14,979



0.71



14,701



0.80Total permanent


1,496,258



66.87



1,432,442



63.18



1,393,582



61.38



1,233,167



58.33



1,147,880



62.64Construction loans:One- to four-family residential


255,355



11.41



357,153



15.75



388,926



17.13



389,558



18.43



301,193



16.43Multifamily and non-residential


35,797



1.60



25,191



1.11



25,215



1.11



66,788



3.16



47,230



2.58Total construction


291,152



13.01



382,344



16.86



414,141



18.24



456,346



21.59



348,423



19.01Total real estate loans


1,787,410



79.88



1,814,786



80.04



1,807,723



79.62



1,689,513



79.92



1,496,303



81.65Consumer loans:Home equity


253,348



11.32



234,362



10.33



220,679



9.72



196,986



9.32



133,441



7.28Auto


24,138



1.08



31,206



1.38



36,605



1.61



42,975



2.03



58,148



3.17Marine


11,781



0.53



14,196



0.63



19,218



0.85



23,434



1.11



31,622



1.73RV


54,003



2.41



63,587



2.80



59,642



2.63



48,108



2.27



27,330



1.49Other(1)


5,564



0.25



6,096



0.27



9,463



0.42



12,012



0.57



17,105



0.94Total consumer


348,834



15.59



349,447



15.41



345,607



15.23



323,515



15.30



267,646



14.61Commercial loans


101,489



4.53



103,208



4.55



116,952



5.15



100,977



4.78



68,523



3.74Total loans


2,237,733



100.00
%


2,267,441



100.00
%


2,270,282



100.00
%


2,114,005



100.00
%


1,832,472



100.00
%Less net items


34,280







30,453







16,723







16,572







16,496Total loans, net

$
2,203,453






$
2,236,988






$
2,253,559






$
2,097,433






$
1,815,976     (1)
    
    Consists primarily of overdraft protection loans and loans to
    individuals secured by demand accounts, deposits and other
    consumer assets.  Loan Maturity. due-on-sale
  Principal Repayments ContractuallyDue in the Years Ended December 31,2009


2010-2013


2014 and thereafter


Total(Dollars in thousands)Construction loans:One- to four-family residential

$
216,298


$
17,700


$
21,357


$
255,355Multifamily and non-residential


9,405



7,273



19,119



35,797Commercial loans


69,034



12,411



20,044



101,489Total

$
294,737


$
37,384


$
60,520


$
392,641  3




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##### Table of Contents



Due after December 31, 2009(Dollars in thousands)Fixed rate

$
37,554Adjustable rate


60,350$
97,904   Loans Secured by One- to Four-Family Real
    Estate.
  30-year
          Loans Secured by Multifamily Residences.
   4




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##### Table of Contents



Loans Secured by Nonresidential Real
    Estate.
      Loans Secured by Vacant Land.
  Construction Loans.
       5




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##### Table of Contents



Consumer Loans.
        Commercial Loans.
        Reduction in loan concentrations.
 6




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##### Table of Contents



Loan Solicitation and Processing.
          Loan Originations, Purchases and Sales.
    tm
   7




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##### Table of Contents



Loans to One Borrower Limits.
    Delinquent Loans, Nonperforming Assets and Classified
    Assets.
  At December 31,2008


2007Percent of








PercentNet








of NetNumber


Amount


Loans


Number


Amount


Loans(Dollars in thousands)Loans delinquent for:30-59 days


528


$
46,365



2.10
%


341


$
41,478



1.85
%60-89 days


181



17,455



0.79



120



17,331



0.7890 days or over


606



99,715



4.53



425



92,671



4.14Total delinquent loans


1,315


$
163,535



7.42
%


886


$
151,480



6.77
%     deed-in-lieu
     8




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##### Table of Contents



At December 31,2008


2007


2006


2005


2004(Dollars in thousands)Nonperforming loans:Nonaccrual loansReal estate loans:One- to four-family residential

$
21,622


$
12,708


$
8,977


$
6,795


$
6,511Multifamily and nonresidential


23,969



27,201



16,569



6,368



2,880Construction (net of loans in process) and land


42,560



48,043



20,858



4,732



1,350Total real estate loans


88,151



87,952



46,404



17,895



10,741Consumer


5,549



4,809



3,245



2,495



5,152Commercial


4,553



4,738



2,997



3,889



4,960Total nonaccrual loans


98,253



97,499



52,646



24,279



20,853Restructured loans


1,797



2,342



1,385



825



1,329Past due 90 days and still accruing


6,631



1,215



796



563



377Total nonperforming loans


106,681



101,056



54,827



25,667



22,559Real estate acquired through foreclosure and other repossessed
    assets


29,258



10,510



3,242



2,514



1,682Total nonperforming assets

$
135,939


$
111,566


$
58,069


$
28,181


$
24,241Nonperforming loans as a percent of loans, net


4.84
%


4.52
%


2.43
%


1.22
%


1.24
%Nonperforming assets as a percent of total assets


5.19



4.03



2.15



1.11



1.06Allowance for loan losses as a percent of nonperforming loans


33.71



31.67



30.92



61.26



70.38Allowance for loan losses as a percent of loans, net


1.61



1.41



0.75



0.74



0.87          9




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##### Table of Contents



Allowance for Loan Losses.
    Year Ended December 31,2008


2007


2006


2005


2004(Dollars in thousands)Balance at beginning of period

$
32,006


$
16,955


$
15,723


$
15,877


$
15,111Provision for loan losses


25,329



28,750



4,347



3,028



9,370Charge-offs:Permanent real estate


(6,827
)


(962
)


(737
)


(961
)


(902
)Construction real estate


(9,151
)


(5,924
)


(320
)


(35
)


(114
)Consumer


(3,978
)


(3,605
)


(2,334
)


(2,848
)


(6,177
)Commercial


(2,132
)


(3,729
)


(47
)


(241
)


(1,867
)Total charge-offs


(22,088
)


(14,220
)


(3,438
)


(4,085
)


(9,060
)Recoveries:Permanent real estate


29



10



34



51



325Construction real estate


10







1



2



Consumer


575



509



283



848



72Commercial


101



2



5



2



59Total recoveries


715



521



323



903



456Net charge-offs


(21,373
)


(13,699
)


(3,115
)


(3,182
)


(8,604
)Balance at end of year

$
35,962


$
32,006


$
16,955


$
15,723


$
15,877Ratio of net charge-offs to average net loans


(0.96
)%


(0.60
)%


(0.14
)%


(0.16
)%


(0.50
)%  10




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##### Table of Contents



At December 31,2008


2007





2006


2005


2004Percent of





Percent of





Percent of





Percent of





Percent ofLoans in Each





loans in Each





Loans in Each





Loans in Each





Loans in EachCategory





Category





Category





Category





CategoryAmount


to Total Loans


Amount


to Total Loans


Amount


to Total Loans


Amount


to Total Loans


Amount


to Total Loans(Dollars in thousands)Permanent real estate loans

$
12,785



66.87
%

$
10,285



63.18
%

$
5,459



61.39
%

$
7,152



58.33
%

$
7,956



62.64
%Construction real estate loans


11,342



13.01



12,499



16.86



3,321



18.24



2,531



21.59



2,603



19.01Consumer loans


4,870



15.59



5,485



15.41



5,147



15.22



3,378



15.30



3,615



14.61Commercial loans


6,965



4.53



3,737



4.55



3,028



5.15



2,662



4.78



1,703



3.74Total

$
35,962



100.00
%

$
32,006



100.00
%

$
16,955



100.00
%

$
15,723



100.00
%

$
15,877



100.00
%  INVESTMENT
    ACTIVITIES  General.
  Home Savings Investment Activities.
   11




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##### Table of Contents



United Community Investment Activities.
    At December 31, 2008After One Year


Five YearsNo Stated





through


throughMaturity


One Year or Less


Five Years


Ten YearsAmortized


Average


Amortized


Average


Amortized


Average


Amortized


AverageCost


Yield


Cost


Yield


Cost


Yield


Cost


Yield(Dollars in thousands)Securities:U.S Government agencies and corporations

$





%

$





%

$
10,957



3.37
%

$
15,348



4.19
%Mortgage-related securities










6



7.25



3



10.36



9,000



4.30Other securities(a)


1,251



2.04























Total securities

$
1,251



2.04
%

$
6



7.25
%

$
10,960



3.37
%

$
24,348



4.23
%   At December 31, 2008After Ten Years


TotalAmortized


Average


Amortized


Average


FairCost


Yield


Cost


Yield


Value(Dollars in thousands)Securities:U.S. Government agencies and corporations

$





%

$
26,305



3.85
%

$
27,170Mortgage-related securities


174,222



5.09



183,231



5.05



187,651Other securities(a)










1,251



2.04



910Total securities

$
174,222



5.09
%

$
210,787



4.88
%

$
215,731     (a)
    
    Yield on equity securities only SOURCES
    OF FUNDS  General.
  Deposits.
   12




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##### Table of Contents



At December 31, 2008


For the Year Ended December 31, 2008Percent


Weighted





Percent


Weightedof Total


Average





of Average


AverageAmount


Deposits


Rate


Average Balance


Deposits


Rate(Dollars in thousands)Noninterest bearing demand

$
106,255



5.63
%



%

$
110,000



5.83
%



%Checking and money market accounts


372,777



19.77



1.60



426,790



22.63



2.22Savings accounts


181,643



9.63



0.50



180,010



9.54



0.45Certificates of deposit


1,225,256



64.97



3.92



1,169,403



62.00



4.27Total deposits

$
1,885,931



100.00
%


2.91
%

$
1,886,203



100.00
%


3.19
%   For the Year Ended December 31, 2007


For the Year Ended December 31, 2006Percent


Weighted





Percent


Weightedof Average


Average





of Average


AverageAverage Balance


Deposits


Rate


Average Balance


Deposits


Rate(Dollars in thousands)Noninterest bearing demand

$
103,268



5.70
%



%

$
96,067



5.47
%



%Checking and money market accounts


397,290



21.93



3.50



330,856



18.83



3.04Savings accounts


185,949



10.26



0.41



218,590



12.44



0.41Certificates of deposit


1,125,117



62.11



4.74



1,111,602



63.26



4.29Total deposits

$
1,811,624



100.00
%


3.75
%

$
1,757,115



100.00
%


3.34
%     Over


OverUp to


1 Year to


2 Years toRate

One Year


2 Years


3 Years


Thereafter


Total(Dollars in thousands)2.00% or less

$
4,610


$
628


$
66


$
91


$
5,3952.01% to 4.00%


441,550



112,932



4,887



168,473



727,8424.01% to 6.00%


147,939



257,807



42,460



43,813



492,019Total certificates of deposit

$
594,099


$
371,367


$
47,413


$
212,377


$
1,225,256Percent of total certificates of deposit    13




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##### Table of Contents



Maturity

Amount(Dollars in thousands)Three months or less

$
17,960Over 3 months to 6 months


30,503Over 6 months to 12 months


41,096Over 12 months


119,085Total

$
208,644     Year Ended December 31,2008


2007(Dollars in thousands)Beginning balance

$
1,875,206


$
1,822,935Net (decrease) increase in deposits


(50,698
)


(11,353
)Net deposits before interest credited


1,824,508



1,811,582Interest credited


61,423



63,624Ending balance

$
1,885,931


$
1,875,206Net increase

$
10,725


$
52,271Percent increase


0.57
%


2.87
%   Borrowings.
       14




---



##### Table of Contents



COMPETITION   EMPLOYEES     REGULATION    truth-in-lending
 15




---



##### Table of Contents



1 3
   Item 1A.  Risk
    Factors   16




---



##### Table of Contents



Corporate Risk Management and
    Control Policy
  Cease
    and desist orders restrict dividends and certain business
    activities.
      Changes
    in interest rates could adversely affect our financial condition
    and results of operations.
        Our
    ability to pay cash dividends is limited.
   17




---



##### Table of Contents



Increasing
    credit risks could continue to adversely affect our results of
    operations.
      Economic
    Conditions.
    We
    operate in an extremely competitive market, and our business
    will suffer if we are unable to compete
    effectively.
    Legislative
    or regulatory changes or actions could adversely impact the
    financial services industry.
  10-K
  The
    preparation of financial statements requires management to make
    estimates about matters that are inherently
    uncertain.
   18




---



##### Table of Contents



We
    face risks with respect to future expansion.
      Material
    breaches in security of our systems may have a significant
    effect on our business.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   19




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities  ®
  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2008High

$
6.70


$
8.50


$
5.84


$5.11Low


4.16



3.62



2.82


0.75Dividends declared and paid


0.0924



0.0462






2.8% stock
    dividend2007High

$
12.15


$
10.78


$
9.93


$7.44Low


10.10



9.71



6.27


5.16Dividends declared and paid


0.0924



0.0924



0.0924


0.0924      20




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##### Table of Contents



Performance
    Graph
    United
    Community Financial Corp
    Total Return Performance
  
  Period EndingIndex

12/31/03

12/31/04

12/31/05

12/31/06

12/31/07

12/31/08United Community Financial Corp.


100.00



100.68



109.39



116.72



55.18



9.47NASDAQ Composite


100.00



108.59



110.08



120.56



132.39



78.72SNL Thrift


100.00



111.42



115.35



134.46



80.67



51.34  21




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##### Table of Contents



Item 6.
    Selected
    Financial Data  At December 31,2008


2007


2006


2005


2004(In thousands)Selected financial condition data:Total assets

$
2,618,073


$
2,771,117


$
2,703,545


$
2,528,850


$
2,287,788Cash and cash equivalents


43,417



33,502



33,711



35,195



39,057Securities:Trading, at fair value






312



559



992



1,990Available for sale, at fair value


215,731



240,035



233,936



199,047



193,754Loans held for sale


16,032



87,236



26,960



29,109



59,099Loans, net


2,203,453



2,236,988



2,253,559



2,097,433



1,815,976Federal Home Loan Bank stock, at cost


26,464



25,432



25,432



24,006



22,842Cash surrender value of life insurance


25,090



24,053



23,137



22,260



21,406Assets of discontinued operations


5,562



20,314



20,923



40,122



58,089Deposits


1,885,931



1,875,206



1,822,935



1,681,844



1,522,952Borrowed funds


462,872



586,786



562,862



528,821



445,043Liabilities of discontinued operations


2,388



4,371



4,475



24,948



41,325Total shareholders equity


234,923



269,714



281,333



264,735



252,352   Year Ended December 31,2008


2007


2006


2005


2004(In thousands)Summary of earnings:Interest income

$
152,178


$
168,815


$
163,763


$
133,794


$
111,822Interest expense


78,916



96,103



83,953



56,357



39,971Net interest income


73,262



72,712



79,810



77,437



71,851Provision for loan losses


25,329



28,750



4,347



3,028



9,370Net interest income after provision for loan losses


47,933



43,962



75,463



74,409



62,481Non-interest income


5,784



14,302



13,203



12,184



11,629Non-interest expenses


94,186



55,640



53,310



53,413



48,348Income (loss) before taxes and discontinued operations


(40,469
)


2,624



35,356



33,180



25,762Income tax expense (benefit)


(3,240
)


910



12,393



11,234



8,698Net income (loss) before discontinued operations


(37,229
)


1,714



22,963



21,946



17,064Discontinued operations Net income of Butler Wick Corp., net of
    tax


1,950



2,419



1,148



1,251



801Net income (loss)

$
(35,279
)

$
4,133


$
24,111


$
23,197


$
17,865   22




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##### Table of Contents



At or for the Year Ended December 31,2008


2007


2006


2005


2004Selected financial ratios and other data:Performance ratios:Return on average assets(1)


(1.30
)%


0.15
%


0.92
%


0.96
%


0.83
%Return on average shareholders equity(2)


(12.91
)


1.44



8.72



8.89



7.01Interest rate spread(3)(4)


2.53



2.41



2.84



3.19



3.38Net interest margin(3)(5)


2.87



2.84



3.24



3.49



3.63Non-interest expense to average assets(3)


2.22



2.04



2.03



2.22



2.24Efficiency ratio(3)(6)


68.53



62.77



56.68



58.92



56.84Average interest earning assets to average interest bearing
    liabilities(3)


110.85



111.59



111.74



111.62



112.29Capital ratios:Average equity to average assets


10.03



10.56



10.53



10.83



11.78Shareholders equity to assets at year end


8.97



9.73



10.41



10.47



11.03Home Savings Tier 1 leverage ratio


8.20



7.47



7.68



8.36



8.36Home Savings Tier 1 risk-based capital ratio


10.80



9.26



9.49



10.08



9.92Home Savings Total risk-based capital ratio


12.06



11.88



11.70



10.86



10.79Asset quality ratios:Nonperforming loans to loans, net(7)


4.84



4.52



2.43



1.22



1.24Nonperforming assets to total assets at year end(8)


5.19



4.03



2.15



1.11



1.06Allowance for loan losses as a percent of loans


1.61



1.41



0.75



0.74



0.87Allowance for loan losses as a percent of nonperforming loans(7)


33.71



31.67



30.92



61.26



70.38Number of:Loans


44,195



44,842



46,333



43,630



41,690Deposit accounts


180,531



187,132



189,588



183,565



173,997Per share data:Basic earnings (loss) from continuing operations(9)(10)

$
(1.26
)

$
0.06


$
0.77


$
0.75


$
0.56Basic earnings from discontinued operations(9)(10)


0.06



0.08



0.04



0.04



0.03Basic earnings (loss)(9)(10)


(1.20
)


0.14



0.81



0.79



0.59Diluted earnings (loss) from continuing operations(9)(10)


(1.26
)


0.06



0.76



0.74



0.55Diluted earnings from discontinued operations(9)(10)


0.06



0.08



0.04



0.04



0.03Diluted earnings (loss)(9)(10)


(1.20
)


0.14



0.80



0.78



0.58Book value(11)


7.60



8.73



8.83



8.29



7.87Cash dividend per share


0.1386



0.3697



0.3502



0.3510



0.2918Dividend payout ratio(12)


(12.61
)%


271.43
%


43.90
%


41.25
%


50.00
%     (1)
    
    Net income (loss) divided by average total assets.(2)
    
    Net income (loss) divided by average total equity. 23




---



##### Table of Contents



(3)
    
    Ratios have been revised to reflect the impact of
    discontinued operations. Ratios exclude the effect of goodwill
    impairment charges recognized.(4)
    
    Difference between weighted average yield on interest earning
    assets and weighted average cost of interest bearing
    liabilities.(5)
    
    Net interest income as a percentage of average interest
    earning assets.(6)
    
    Non-interest expense, excluding the amortization of core
    deposit intangible and the goodwill impairment charge, divided
    by the sum of net interest income and non-interest income,
    excluding gains and losses on securities, other than temporary
    impairment charges and other.(7)
    
    Nonperforming loans consist of nonaccrual loans, loans past
    due ninety days and still accruing, and restructured loans.(8)
    
    Nonperforming assets consist of nonperforming loans, real
    estate acquired in settlement of loans and other repossessed
    assets.(9)
    
    Earnings per share were retroactively adjusted to reflect the
    effect of a 2.8% stock dividend declared in November 2008.(10)
    
    Net income divided by average number of basic or diluted
    shares outstanding.(11)
    
    Shareholders equity divided by number of shares
    outstanding.(12)
    
    Historical per share dividends declared and paid for the year
    divided by the diluted earnings per share for the year.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  General
      Forward-Looking
    Statements
    Changes
    in Financial Condition
   24




---



##### Table of Contents



25




---



##### Table of Contents



Allowance for Loan LossesDecember 31,











December 31,2007


Provision


Recovery


Chargeoff


2008(In thousands)Real Estate LoansPermanentOne-to four-family

$
2,803


$
5,530


$
23


$
(3,370
)

$
4,986Multifamily residential


2,365



2,803



3



(2,827
)


2,344Nonresidential


4,488



1,009



3



(630
)


4,870Land


629



(44
)










585Total


10,285



9,298



29



(6,827
)


12,785Construction LoansOne-to four-family residential


11,892



7,869



10



(9,151
)


10,620Multifamily and nonresidential


607



115











722Total


12,499



7,984



10



(9,151
)


11,342Consumer LoansHome Equity


1,260



1,717







(1,591
)


1,386Auto


447



(118
)


36



(123
)


242Marine


1,468



288



64



(316
)


1,504Recreational vehicle


2,050



543



133



(1,301
)


1,425Other


260



358



342



(647
)


313Total


5,485



2,788



575



(3,978
)


4,870Commercial LoansSecured


2,375



2,779







(1,799
)


3,355Unsecured


1,362



2,480



101



(333
)


3,610Total


3,737



5,259



101



(2,132
)


6,965Total Allowance

$
32,006


$
25,329


$
715


$
(22,088
)

$
35,962      26




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##### Table of Contents



Impaired LoansDecember 31,


December 31,2008


2007


Change(In thousands)Real Estate LoansPermanentOne-to four-family

$
12,675


$
2,681


$
9,994Multifamily residential


8,724



13,604



(4,880
)Nonresidential


14,855



13,597



1,258Land


4,757



3,700



1,057Total


41,011



33,582



7,429Construction LoansOne-to four-family residential


36,903



43,518



(6,615
)Multifamily and nonresidential


816



825



(9
)Total


37,719



44,343



(6,624
)Consumer LoansHome Equity


1,657







1,657Auto










Marine


2,614



1,714



900Recreational vehicle










Other










Total


4,271



1,714



2,557Commercial LoansSecured


3,496



4,554



(1,058
)Unsecured


751



184



567Total


4,247



4,738



(491
)Total Impaired Loans

$
87,248


$
84,377


$
2,871     27




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##### Table of Contents



Nonperforming LoansDecember 31,


December 31,





2008 Interest2008


2007


Change


Foregone(In thousands)Real Estate Loans
    PermanentOne-to four-family

$
21,669


$
12,752


$
8,917


$
803Multifamily residential


8,724



13,604



(4,880
)


288Nonresidential


15,246



13,597



1,649



154Land


4,840



3,700



1,140



447Total


50,479



43,653



6,826



1,692Construction LoansOne-to four-family residential


43,167



44,680



(1,513
)


554Multifamily and nonresidential


816



825



(9
)


97Total


43,983



45,505



(1,522
)


651Consumer LoansHome Equity


2,312



2,454



(142
)


145Auto


154



211



(57
)


(5
)Marine


2,614



1,714



900



87Recreational vehicle


756



376



380



27Other


33



64



(31
)


Total


5,869



4,819



1,050



254Commercial LoansSecured


3,496



4,554



(1,058
)


438Unsecured


1,057



184



873



72Total


4,553



4,738



(185
)


510Restructured Loans


1,797



2,341



(544
)


Total Nonperforming Loans

$
106,681


$
101,056


$
5,625


$
3,107        28




---



##### Table of Contents



29




---



##### Table of Contents



Employers Accounting for
    Defined Benefit Pension and Other Postretirement
    Plans  an amendment of FASB Statements No. 87,
    88, 106 and 132(R)
  Comparison
    of Operating Results for the Years Ended December 31, 2008
    and December 31, 2007
  Net Income
  Net Interest Income
   30




---



##### Table of Contents



Provision for Loan Losses
  Non-interest Income
  Non-interest Expense
  Federal Income Taxes
  Discontinued Operations
  Comparison
    of Operating Results for the Years Ended December 31, 2007
    and December 31, 2006
  Net Income
  Net Interest Income
 31




---



##### Table of Contents



Provision for Loan Losses
  Non-interest Income
  Non-interest Expense
  Federal Income Taxes
 32




---



##### Table of Contents



Discontinued Operations
  Critical
    Accounting Policies and Estimates
      Allowance for loan losses.
        Mortgage servicing rights.
   33




---



##### Table of Contents



Goodwill. Goodwill and Other
    Intangible Assets
    Income taxes.
      Other-than-temporary impairment.
 34




---



##### Table of Contents



Yields
    Earned and Rates Paid
    Year Ended December 31,2008


2007


2006Average


Interest





Average


Interest





Average


InterestOutstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/Balance


Paid


Rate


Balance


Paid


Rate


Balance


Paid


Rate(Dollars in thousands)Interest earning assets:Net loans(1)

$
2,231,692


$
136,556



6.12
%

$
2,268,914


$
154,252



6.80
%

$
2,186,559


$
151,029



6.91
%Loans held for sale


9,674



466



4.82



18,781



914



4.87



37,549



1,894



5.04Securities:Trading


184



3



1.63



482



26



5.39



817



38



4.65Available for sale


276,396



13,652



4.94



243,059



11,818



4.86



211,562



9,281



4.39Federal Home Loan Bank stock


25,878



1,360



5.26



25,432



1,677



6.59



24,533



1,426



5.81Other interest earning assets


13,135



141



1.07



2,247



128



5.70



1,783



95



5.33Total interest earning assets

$
2,556,959


$
152,178



5.95
%

$
2,558,915


$
168,815



6.60
%

$
2,462,803


$
163,763



6.65
%Assets of discontinued operations


22,965











22,225











29,997Non-interest earning assets


144,096











141,154











131,491Total assets

$
2,724,020










$
2,722,294










$
2,624,291Interest bearing liabilities:Deposits:Checking accounts

$
426,790


$
9,475



2.22
%

$
397,290


$
13,907



3.50
%

$
330,856


$
10,060



3.04
%Savings accounts


180,010



811



0.45



185,949



769



0.41



218,590



899



0.41Certificates of deposit


1,169,403



49,953



4.27



1,125,117



53,376



4.74



1,111,602



47,681



4.29Federal Home Loan Bank advances


384,260



12,358



3.22



448,714



21,493



4.79



452,023



21,246



4.70Repurchase agreements and other


146,233



6,319



4.32



136,135



6,558



4.82



91,027



4,067



4.47Total interest bearing liabilities

$
2,306,696


$
78,916



3.42
%

$
2,293,205


$
96,103



4.19
%

$
2,204,098


$
83,953



3.81
%Liabilities of discontinued operations


8,290











4,710











14,234Non-interest bearing liabilities


135,861











136,858











129,545Total liabilities

$
2,450,847










$
2,434,773










$
2,347,877Shareholders equity


273,173











287,521











276,414Total liabilities and equity

$
2,724,020










$
2,722,294










$
2,624,291Net interest income and interest rate spread





$
73,262



2.53
%





$
72,712



2.41
%





$
79,810



2.84
%Net interest margin










2.87
%










2.84
%










3.24
%Average interest earning assets to average interest bearing
    liabilities










110.85
%










111.59
%










111.74
%     (1)
    
    Nonaccrual loans are included in the average balance. 35




---



##### Table of Contents



Year Ended December 31,2008 vs. 2007


2007 vs. 2006Increase


Total


Increase


Total(Decrease) Due to


Increase


(Decrease) Due to


IncreaseRate


Volume


(Decrease)


Rate


Volume


(Decrease)(Dollars in thousands)Interest earning assets:Loans

$
(15,201
)

$
(2,495
)

$
(17,696
)

$
(2,312
)

$
5,535


$
3,223Loans held for sale


(9
)


(439
)


(448
)


(64
)


(916
)


(980
)Securities:Trading


(12
)


(11
)


(23
)


8



(20
)


(12
)Available for sale


191



1,643



1,834



1,068



1,469



2,537Federal Home Loan Bank stock


(347
)


30



(317
)


197



54



251Other interest earning assets


(3
)


16



13



7



26



33Total interest earning assets

$
(15,381
)

$
(1,256
)

$
(16,637
)

$
(1,096
)

$
6,148


$
5,052Interest bearing liabilities:Checking accounts

$
(5,561
)

$
1,129


$
(4,432
)

$
1,653


$
2,194


$
3,847Savings accounts


65



(23
)


42



5



(135
)


(130
)Certificates of deposit


(5,661
)


2,238



(3,423
)


5,109



586



5,695Federal Home Loan Bank advances


(6,356
)


(2,779
)


(9,135
)


401



(154
)


247Repurchase agreements and other


(854
)


615



(239
)


340



2,151



2,491Total interest bearing liabilities

$
(18,367
)

$
1,180


$
(17,187
)

$
7,508


$
4,642


$
12,150Change in net interest income









$
550










$
(7,098
)   Contractual
    Obligations, Commitments, Contingent Liabilities and Off-balance
    Sheet Arrangements
    Payments Due InNote


One Year


One to


Three to


OverReference


or Less


Three Years


Five Years


Five Years


Total(Dollars in thousands)Operating leases


9


$
574


$
1,164


$
830


$
687


$
3,255Deposits without a stated maturity


11



660,675















660,675Certificates of deposit


11



594,099



418,780



212,377







1,225,256Federal Home Loan Bank advances


12



247,650



23,281



16,226



50,446



337,603Repurchase agreements and other borrowings


13



15,269



10,000



10,000



90,000



125,269    36




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Qualitative Aspects of Market Risk.
  Quantitative Aspects of Market Risk.
      Year Ended December 31, 2008NPV as % of Portfolio Value of Assets


Next 12 Months Net Interest IncomeInternal Policy








Internal PolicyChange in Rates (Basis Points)

NPV Ratio


Limitations


Change in %


$ Change


Limitations


% Change(Dollars in thousands)+300


7.37
%


5.00
%


(1.38
)%

$
(1,879
)


(15.00
)%


(2.48
)%+200


8.35



6.00



(0.40
)


(734
)


(10.00
)


(0.97
)+100


8.99



6.00



0.24



60



(5.00
)


0.08Static


8.75



7.00















     Year Ended December 31, 2007NPV as % of Portfolio Value of Assets


Next 12 Months Net Interest IncomeInternal Policy








Internal PolicyChange in Rates (Basis Points)

NPV Ratio


Limitations


Change in %


$ Change


Limitations


% Change(Dollars in thousands)+300


7.99
%


5.00
%


(1.48
)%

$
(7,009
)


(15.00
)%


(9.93
)%+200


8.73



6.00



(0.75
)


(4,353
)


(10.00
)


(6.17
)+100


9.29



6.00



(0.18
)


(2,139
)


(5.00
)


(3.03
)Static


9.47



7.00















(100)


9.53



6.00



0.05



2,723



(5.00
)


3.86(200)


8.82



6.00



(0.66
)


3,467



(15.00
)


4.91(300)


7.90



5.00



(1.57
)


3,397



(20.00
)


4.81  37




---



##### Table of Contents



Potential
    Impact of Changes in Interest Rates
    Liquidity
    and Capital
    Years Ended December 31,2008


2007


2006(Dollars in thousands)Net income (loss)

$
(35,279
)

$
4,133


$
24,111Adjustments to reconcile net income to net cash from operating
    activities


141,538



46,074



7,821Net cash from operating activities


106,259



50,207



31,932Net cash from investing activities


18,956



(106,616
)


(199,891
)Net cash from financing activities


(115,300
)


56,200



166,474Net change in cash and cash equivalents


9,915



(209
)


(1,485
)Cash and cash equivalents at beginning of year


33,502



33,711



35,196Cash and cash equivalents at end of year

$
43,717


$
33,502


$
33,711      38




---



##### Table of Contents



Excess of ActualCurrent


Capital Over Current


ApplicableActual Capital


Minimum Requirement


Requirement


Asset BaseAmount


Percent


Amount


Percent


Amount


Percent


Total(Dollars in thousands)Tangible capital

$
217,630



8.20
%

$
39,817



1.50
%

$
177,813



6.70
%

$
2,654,488Tier 1 capital


217,630



8.20



106,180



4.00



111,450



4.20



2,654,488Risk-based capital


242,944



12.06



161,163



8.00



81,781



4.06



2,014,534  39




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  CONSOLIDATED
    STATEMENTS OF FINANCIAL CONDITION
  December 31,2008


2007(In thousands)ASSETSCash and deposits with banks

$
21,745


$
29,405Federal funds sold


21,672



4,097Total cash and cash equivalents


43,417



33,502Securities:Trading, at fair value






312Available for sale, at fair value


215,731



240,035Loans held for sale


16,032



87,236Loans, net of allowance for loan losses of $35,962 and $32,006


2,203,453



2,236,988Federal Home Loan Bank stock, at cost


26,464



25,432Premises and equipment, net


25,015



26,596Accrued interest receivable


10,082



12,987Real estate owned and other repossessed assets


29,258



10,510Goodwill






33,593Core deposit intangible


884



1,169Cash surrender value of life insurance


25,090



24,053Assets of discontinued operations  Butler Wick
    Corp.


5,562



20,314Other assets


17,085



18,390Total assets

$
2,618,073


$
2,771,117LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDeposits:Non-interest bearing

$
106,255


$
106,449Interest bearing


1,779,676



1,768,757Total deposits


1,885,931



1,875,206Borrowed funds:Federal Home Loan Bank advances


337,603



437,253Repurchase agreements and other


125,269



149,533Total borrowed funds


462,872



586,786Advance payments by borrowers for taxes and insurance


19,806



17,853Accrued interest payable


3,077



7,837Liabilities of discontinued operations  Butler Wick
    Corp.


2,388



4,371Accrued expenses and other liabilities


9,076



9,350Total liabilities


2,383,150



2,501,403Commitments and contingent liabilities (Note 6 and
    Note 14)






Shareholders EquityPreferred stock-no par value; 1,000,000 shares authorized
    and unissued






Common stock  no par value; 499,000,000 shares
    authorized; 37,804,457 shares issued


146,439



146,683Retained earnings


165,447



213,727Accumulated other comprehensive income


3,635



661Unearned employee stock ownership plan shares


(7,643
)


(9,465
)Treasury stock, at cost, 2008  6,906,632 shares
    and 2007  7,752,684 shares


(72,955
)


(81,892
)Total shareholders equity


234,923



269,714Total liabilities and shareholders equity

$
2,618,073


$
2,771,117    40




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF INCOME
  Year Ended December 31,2008


2007


2006(In thousands, except per share data)Interest incomeLoans

$
136,556


$
154,252


$
151,029Loans held for sale


466



914



1,894Securities:Trading


3



26



38Available for sale


13,652



11,818



9,281Federal Home Loan Bank stock dividends


1,360



1,677



1,426Other interest earning assets


141



128



95Total interest income


152,178



168,815



163,763Interest expenseDeposits


60,239



68,052



58,640Federal Home Loan Bank advances


12,358



21,493



21,246Repurchase agreements and other


6,319



6,558



4,067Total interest expense


78,916



96,103



83,953Net interest income


73,262



72,712



79,810Provision for loan losses


25,329



28,750



4,347Net interest income after provision for loan losses


47,933



43,962



75,463Non-interest incomeNon-deposit investment income


1,624



1,429



565Service fees and other charges


6,177



7,707



6,443Net gains (losses):Securities available for sale


1,936



(21
)


Other than temporary impairment charges on securities available
    for sale


(6,087
)






Trading securities


(38
)


31



60Loans sold


2,809



2,624



2,943Real estate owned and other repossessed assets sold


(4,770
)


(1,061
)


(63
)Other income


4,133



3,593



3,255Total non-interest income


5,784



14,302



13,203Non-interest expenseSalaries and employee benefits


32,570



33,128



33,340Goodwill impairment charge


33,593







Occupancy


3,731



3,443



3,127Equipment and data processing


6,814



6,502



5,666Franchise tax


2,122



2,102



2,091Advertising


964



1,206



1,162Amortization of core deposit intangible


285



365



584Deposit insurance premiums


3,233



215



216Professional fees


3,400



2,505



1,979Real estate owned and other repossessed asset expenses


2,061



720



308Other expenses


5,413



5,454



4,837Total non-interest expense


94,186



55,640



53,310Income (loss) before income taxes and discontinued
    operations


(40,469
)


2,624



35,356Income tax expense (benefit)


(3,240
)


910



12,393Net income (loss) before discontinued operations


(37,229
)


1,714



22,963Discontinued operationsNet income of Butler Wick Corp., net of tax


1,950



2,419



1,148Net income (loss)

$
(35,279
)

$
4,133


$
24,111Earnings (loss) per shareBasic-continuing operations

$
(1.26
)

$
0.06


$
0.77Basic-discontinued operations


0.06



0.08



0.04Basic


(1.20
)


0.14



0.81Diluted-continuing operations


(1.26
)


0.06



0.76Diluted-discontinued operations


0.06



0.08



0.04Diluted


(1.20
)


0.14



0.80    41




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  Accumulated


UnearnedOther


Employee StockShares


Common


Retained


Comprehensive


Ownership


TreasuryOutstanding


Stock


Earnings


Income (Loss)


Plan Shares


Stock


Total(In thousands, except per share data)Balance December 31, 2005


31,062


$
143,896


$
207,120


$
(1,845
)

$
(13,108
)

$
(71,328
)

$
264,735Comprehensive income:Net income










24,111















24,111Other comprehensive income














681











681Comprehensive income


























24,792Adjustment to initially apply SFAS 158, net of taxes
    of $72














(132
)










(132
)Shares allocated to ESOP participants






1,797











1,821







3,618Purchase of treasury stock


(196
)


















(2,298
)


(2,298
)Exercise of stock options


111



141



(303
)










1,181



1,019Dividends paid, $0.3502 per share










(10,401
)














(10,401
)Balance December 31, 2006


30,977



145,834



220,527



(1,296
)


(11,287
)


(72,445
)


281,333Comprehensive income:Net income










4,133















4,133Other comprehensive income














1,957











1,957Comprehensive income


























6,090Shares allocated to ESOP participants






837











1,822







2,659Purchase of treasury stock


(950
)


















(9,709
)


(9,709
)Exercise of stock options


25



12



(86
)










262



188Dividends paid, $0.3697 per share










(10,847
)














(10,847
)Balance December 31, 2007


30,052



146,683



213,727



661



(9,465
)


(81,892
)


269,714Comprehensive income:Net loss










(35,279
)














(35,279
)Other comprehensive income














2,974











2,974Comprehensive loss


























(32,305
)Shares allocated to ESOP participants






(394
)










1,822







1,428Stock based compensation






150



















150Stock dividends paid


846







(8,937
)










8,937



Cash dividends paid, $0.1386 per share










(4,064
)














(4,064
)Balance December 31, 2008


30,898


$
146,439


$
165,447


$
3,635


$
(7,643
)

$
(72,955
)

$
234,923    42




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008


2007


2006(In thousands)Cash Flows from Operating ActivitiesNet income (loss)

$
(35,279
)

$
4,133


$
24,111Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for loan losses


25,329



28,750



4,347Net gains on loans


(2,809
)


(2,624
)


(2,943
)Net losses on real estate owned and other repossessed assets


4,763



1,053



95Net losses on other assets


(1,891
)


(14
)


(95
)Other than temporary impairment of securities available for sale


6,087







Amortization of premiums and accretion of discounts


5,312



3,334



3,095Depreciation and amortization


2,532



2,778



2,503Federal Home Loan Bank stock dividends


(1,032
)






(1,426
)Decrease (increase) in interest receivable


2,905



689



(1,692
)(Decrease) increase in interest payable


(4,760
)


4,996



230Increase in prepaid and other assets


(3,343
)


(1,296
)


(3,947
)(Decrease) increase in other liabilities


(1,797
)


(13,700
)


(342
)Decrease in trading securities


274



289



433Stock based compensation


150







Goodwill impairment charges


33,593







Net principal disbursed on loans originated for sale


(160,276
)


(205,994
)


(219,924
)Proceeds from sale of loans originated for sale


234,289



224,632



225,126ESOP compensation


1,428



2,659



3,618Operating cash flows from discontinued operations


784



522



(1,257
)Net cash from operating activities


106,259



50,207



31,932Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Securities available for sale


50,569



56,982



42,666Proceeds from sale of:Securities available for sale


139,938



16,899



Nonperforming loans










210Premises and equipment










531Real estate owned and other repossessed assets


12,917



6,035



4,059Purchases of:Securities available for sale


(167,141
)


(77,641
)


(76,588
)Principal disbursed on loans, net of repayments


58,371



80,922



31,818Loans purchased


(86,758
)


(184,892
)


(198,229
)Purchases of premises and equipment


(925
)


(4,903
)


(4,341
)Investing cash flows from discontinued operations


11,985



(18
)


(17
)Net cash from investing activities


18,956



(106,616
)


(199,891
)Cash Flows from Financing ActivitiesNet increase (decrease) in checking, savings and money market
    accounts


(43,969
)


35,824



53,093Net increase in certificates of deposit


54,694



16,450



88,012Net increase in advance payments by borrowers for taxes and
    insurance


1,953



381



3,149Proceeds from Federal Home Loan Bank advances


718,900



737,953



671,326Repayment of Federal Home Loan Bank advances


(818,550
)


(765,953
)


(681,622
)Net change in repurchase agreements and other borrowings


(24,264
)


51,925



44,337Cash dividends paid


(4,064
)


(10,847
)


(10,401
)Proceeds from exercise of stock options






176



878Purchase of treasury stock






(9,709
)


(2,298
)Net cash from financing activities


(115,300
)


56,200



166,474Change in cash and cash equivalents


9,915



(209
)


(1,485
)Cash and cash equivalents, beginning of year


33,502



33,711



35,196Cash and cash equivalents, end of year

$
43,417


$
33,502


$
33,711    43




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Nature
    of Operations
      Basis
    of Presentation
    Use of
    Estimates in the Preparation of Financial
    Statements
    Securities
   44




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      Loans
    Held for Sale
      Loans
        Concentration
    of Credit Risk
    Certain
    Purchased Loans
   45




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        Allowance
    for Loan Losses
      case-by-case loan-by-loan
  Servicing
    Assets
   46




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      Transfers
    of Financial Assets
    Premises
    and Equipment
    Federal
    Home Loan Bank (FHLB) stock
    Real
    Estate Owned and Other Repossessed Assets
    Goodwill
    and Core Deposit Intangible
      Cash
    Surrender Value of Life Insurance
  EITF 06-05,
 47




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    401(k)
    Savings Plan
    Postretirement
    Benefit Plans
    Long-term
    Assets
    Loan
    Fees
    Commissions
    and Service Fees
    Stock
    Compensation
   48




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Income
    Taxes
      Accounting for
    Uncertainty in Income Taxes
    Employee
    Stock Ownership Plan
    Stock
    Dividends
    Earnings
    Per Share
    Statements
    of Cash Flows
   49




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Loss
    Contingencies
    Fair
    Value of Financial Instruments
    Comprehensive
    Income
    Off
    Balance Sheet Financial Instruments
    New
    Accounting Standards
  Fair Value Measurements 157-2, Effective Date of FASB Statement No. 157. 157-3, Determining the Fair Value of a Financial Asset when the
    Market for That Asset Is Not Active.
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  No. 06-4, Accounting for Deferred Compensation and Postretirement
    Benefit Aspects of Endorsement Split-Dollar Life Insurance
    Arrangements
 50




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Written Loan Commitments Recorded
    at Fair Value through Earnings Application of Accounting Principles to Loan
    Commitments
    Newly
    Issued But Not Yet Effective Accounting Standards
  Business Combinations
  Noncontrolling Interest in Consolidated Financial Statements,
    an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of SFAS No. 133
  Operating
    Segments
    Dividend
    Restriction
   51




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Reclassifications
    2.
    CASH AND
    CASH EQUIVALENTS    3.
    REGULATORY
    ENFORCEMENT ACTION        4.
    DISCONTINUED
    OPERATIONS   52




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31,


December 31,2008


2007(In thousands)AssetsCash and deposits with banks

$
1,126


$
3,861Total cash and cash equivalents


1,126



3,861Securities:Trading






4,752Available for sale


3,337



4,718Premises and equipment, net


86



926Accrued interest receivable


29



89Other assets


984



5,968Total assets

$
5,562


$
20,314Liabilities and Shareholders EquityAccrued expenses and other liabilities

$
2,388


$
4,371Total liabilities


2,388



4,371Total shareholders equity


3,174



15,943Total liabilities and shareholders equity

$
5,562


$
20,314     December 31,2008


2007


2006(In thousands)IncomeInterest income

$
813


$
1,135


$
1,667Brokerage commissions


25,667



24,963



19,317Service fees and other charges


5,876



6,349



6,103Underwriting and investment banking


1,151



764



814Gain on the sale of Butler Wick & Co., Inc.


3,317







Other income


117



521



837Total income


36,941



33,732



28,738ExpensesInterest expense on borrowings


243



345



475Salaries and employee benefits


25,772



22,841



18,932Occupancy expenses


1,553



1,403



1,324Equipment and data processing


2,508



2,515



3,331Other expenses


3,798



2,929



2,921Total expenses


33,874



30,033



26,983Income before taxes


3,067



3,699



1,755Income tax


1,117



1,280



607Net income

$
1,950


$
2,419


$
1,148  53




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  5.
    SECURITIES    December 31, 2008


December 31, 2007Gross


Gross





Gross


GrossFair


Unrealized


Unrealized


Fair


Unrealized


UnrealizedValue


Gains


Losses


Value


Gains


Losses(In thousands)Available for SaleU.S. Treasury and
    government sponsored
    entities securities

$
27,170


$
865


$



$
79,670


$
311


$
(126
)Equity securities


910



70



(411
)


7,064



221



(494
)Mortgage-related securities


187,651



4,527



(107
)


153,301



977



(443
)Total

$
215,731


$
5,462


$
(518
)

$
240,035


$
1,509


$
(1,063
)     December 31, 2008Fair Value(In thousands)Due in one year or less

$
Due after one year through five years


11,366Due after five years through ten years


15,804Mortgage-related securities


187,651Total

$
214,821       2008


2007


2006(In thousands)Proceeds

$
139,938


$
16,899


$
Gross gains


1,936



96



Gross losses






(117
)


Impairment charges


(6,087
)






      54




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2008


2007(In thousands)Debt Securities:Mutual funds

$



$
312Total trading securities

$



$
312     Less Than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


Loss(In thousands)Description of securities:U.S. Treasury and government sponsored entities

$



$



$



$



$



$
Equity securities


282



(411
)










282



(411
)Mortgage-related securities


2,765



(69
)


1,026



(38
)


3,791



(107
)Total temporarily impaired securities

$
3,047


$
(480
)

$
1,026


$
(38
)

$
4,073


$
(518
)     Less Than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


Loss(In thousands)Description of securities:U.S. Treasury and government sponsored entities

$
7,734


$
(12
)

$
22,844


$
(114
)

$
30,578


$
(126
)Equity securities


1,228



(473
)


92



(21
)


1,320



(494
)Mortgage-related


12







36,569



(443
)


36,581



(443
)Total temporarily impaired securities

$
8,974


$
(485
)

$
59,505


$
(578
)

$
68,479


$
(1,063
)    55




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  6.
    LOANS    December 31,2008


2007(In thousands)Real Estate:One- to four-family residential

$
909,567


$
871,019Multi-family residential


187,711



179,535Non-residential


375,463



359,070Land


23,517



22,818Construction:One- to four-family residential


255,355



357,153Multi-family and non-residential


35,797



25,191Total real estate


1,787,410



1,814,786Consumer


348,834



349,447Commercial


101,489



103,208Total loans


2,237,733



2,267,441Less:Allowance for loan losses


35,962



32,006Deferred loan costs, net


(1,682
)


(1,553
)Total


34,280



30,453Loans, net

$
2,203,453


$
2,236,988     sixty-day case-by-case
  December 31,2008


2007Fixed Rate


Variable Rate


Fixed Rate


Variable Rate(In thousands)Commitments to make loans

$
63,362


$
11,999


$
47,324


$
38,822Undisbursed loans in process


7,746



129,828



5,377



234,281Unused lines of credit


80,101



61,196



86,261



86,807    56




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      tm tm
    Year Ended December 31,2008


2007


2006(In thousands)Balance, beginning of year

$
32,006


$
16,955


$
15,723Provision for loan losses


25,329



28,750



4,347Amounts charged off


(22,088
)


(14,220
)


(3,438
)Recoveries


715



521



323Balance, end of year

$
35,962


$
32,006


$
16,955     As of or for the Year EndedDecember 31,2008


2007


2006(In thousands)Impaired loans on which no specific valuation allowance was
    provided

$
43,256


$
30,475


$
28,329Impaired loans on which specific valuation allowance was provided


43,992



53,902



14,217Total impaired loans at year-end

$
87,248


$
84,377


$
42,546Specific valuation allowances on impaired loans at year-end


10,968



13,165



2,841Average impaired loans during year


85,812



63,468



23,617Interest income recognized on impaired loans during the year


513



348



372Interest income received on impaired loans during the year


513



348



373  57




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  and/or
  (In thousands)Balance as of December 31, 2007

$
1,279New loans to officers and/or directors


Loan payments during 2008


(43
)Reductions due to changes in officers and/or directors


(513
)Balance as of December 31, 2008


723   7.
    MORTGAGE
    BANKING ACTIVITIES      2008


2007


2006(In thousands)Balance, beginning of year

$
6,184


$
6,820


$
6,923Originations


1,337



1,268



1,917Sale of servicing










(323
)Amortized to expense


(1,959
)


(1,904
)


(1,697
)Balance, end of year


5,562



6,184



6,820Less valuation allowance


(2,233
)


(562
)


(435
)Net balance

$
3,329


$
5,622


$
6,385       2008


2007


2006(In thousands)Balance, beginning of year

$
(562
)

$
(435
)

$
Impairment charges


(2,233
)


(562
)


(435
)Recoveries


562



435



Balance, end of year

$
(2,233
)

$
(562
)

$
(435
)     2008


2007Weighted average prepayment rate


644 PSA



272 PSAWeighted average life (in years)


3.34



3.87Weighted average discount rate


8
%


8
%  58




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    (In thousands)2009

$
1,7162010


1,3262011


1,0122012


7682013


441     8.
    OTHER
    REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS    2008


2007


2006(In thousands)Other real estate owned and other repossessed assets

$
32,012


$
10,510


$
3,296Valuation allowance


(2,754
)






(54
)End of year

$
29,258


$
10,510


$
3,242     2008


2007


2006(In thousands)Beginning of year

$



$
54


$
Additions charged to expense


3,753







54Direct write-downs


(999
)


(54
)


End of year

$
2,754


$



$
54     2008


2007


2006(In thousands)Net loss (gain) on sales

$
2,016


$
1,061


$
9Provision for unrealized losses


2,754







54Operating expenses, net of rental income


2,061



720



308Total expenses

$
6,831


$
1,781


$
371   9.
    PREMISES
    AND EQUIPMENT    December 31,2008


2007(In thousands)Land

$
7,691


$
7,691Buildings


23,919



24,170Leasehold improvements


728



728Furniture and equipment


18,069



17,46850,407



50,057Less: Accumulated depreciation and amortization


25,392



23,461Total

$
25,015


$
26,596  59




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    (In thousands)2009

$
5742010


5772011


5872012


5122013


318Thereafter


687Total

$
3,255   10.
    GOODWILL
    AND INTANGIBLE ASSETS  Goodwill
  Goodwill and Other Intangible
    Assets (as amended)
    Acquired
    Intangible Assets
  As of December 31,2008


2007Gross





GrossCarrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


Amortization(In thousands)Amortized intangible assets:Core deposit intangibles

$
8,952


$
8,068


$
8,952


$
7,783Total

$
8,952


$
8,068


$
8,952


$
7,783Estimated amortization expense:For the year ended:December 31, 2009

$
223December 31, 2010


176December 31, 2011


139December 31, 2012


109December 31, 2013


86  60




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    11.
    DEPOSITS    December 31,2008


2007(In thousands)Checking accounts:Interest bearing

$
99,418


$
94,459Non-interest bearing


106,255



106,449Savings accounts


181,643



175,464Money market accounts


273,359



328,272Certificates of deposit


1,225,256



1,170,562Total deposits

$
1,885,931


$
1,875,206     Year Ended December 31,2008


2007


2006(In thousands)Interest bearing demand deposits and money market accounts

$
9,475


$
13,907


$
10,060Savings accounts


811



769



900Certificates of deposit


49,953



53,376



47,680Total

$
60,239


$
68,052


$
58,640     December 31, 2008(In thousands)Within 12 months

$
594,09912 months to 24 months


371,367Over 24 months to 36 months


47,413Over 36 months to 48 months


190,058Over 48 months


22,319Total

$
1,225,256     December 31,


December 31,2008


2007(In thousands)Three months or less

$
17,960


$
58,685Over three months to six months


30,503



62,268Over six months to twelve months


41,096



97,000Over twelve months


119,085



52,157Total

$
208,644


$
270,110    61




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2009


2010(In thousands)Balance maturing

$
130,166


$
15,053Rate


3.70
%


4.35
%   12.
    FEDERAL
    HOME LOAN BANK ADVANCES    December 31,2008


2007Weighted





WeightedYear of Maturity

Amount


Average Rate


Amount


Average Rate(In thousands)2008


n/a



n/a


$
286,350



2.59
%2009

$
247,650



1.51
%


65,950



4.742010


17,412



4.95



17,412



4.952011


5,869



4.93



5,869



4.932012


1,861



3.92



1,861



3.922013


14,365



3.86



9,365



3.88Thereafter


50,446



4.14



50,446



4.41Total Federal Home Loan Bank advances

$
337,603






$
437,253   loan-to-value
  13.
    SECURITIES
    SOLD UNDER AGREEMENT TO REPURCHASE AND OTHER
    BORROWINGS    December 31,2008


2007Weighted





WeightedAmount


Average Rate


Amount


Average Rate(In thousands)Securities sold under agreement to repurchase-term

$
117,600



3.84
%

$
112,035



4.10
%Other borrowings


7,669



4.24



37,498



7.71Total repurchase agreements and other

$
125,269



3.86
%

$
149,533



5.01
%  62




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
                14.
    LOSS
    CONTINGENCIES    15.
    INCOME
    TAXES    Year Ended December 31,2008


2007


2006(In thousands)Current

$
(2,048
)

$
8,213


$
12,252Deferred


(1,192
)


(7,303
)


141Total

$
(3,240
)

$
910


$
12,393  63




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Year Ended December 31,2008


2007


2006Dollars


Rate


Dollars


Rate


Dollars


Rate(In thousands)Tax at statutory rate

$
(14,164
)


35.0
%

$
919



35.0
%

$
12,375



35.0
%Increase (decrease) due to:Goodwill impairment charge


11,800



(29.2
)














Tax exempt income


(15
)


0.0



(25
)


(1.0
)


(30
)


(0.1
)Life insurance


(321
)


0.8



(311
)


(11.9
)


(297
)


(0.8
)State taxes


(14
)


0.0



(30
)


(1.1
)


(143
)


(0.4
)Acquisition/sale adjustments


(649
)


1.6















Other


123



(0.3
)


357



13.6



488



1.4Income tax provision

$
(3,240
)


7.9
%

$
910



34.6
%

$
12,393



35.1
%     December 31,2008


2007(In thousands)Deferred tax assets:Loan loss reserves

$
12,587


$
11,202Postretirement benefits


1,328



1,342ESOP shares released


1,158



1,262Other real estate owned valuation


964



Security impairment charges


2,130



Compensation accruals






109Interest on non-accrual loans


318



4,041Other


36



28Deferred tax assets


18,521



17,875Deferred tax liabilities:Purchase accounting adjustments


129



238Deferred loan fees


659



572Federal Home Loan Bank stock dividends


6,715



6,354Mortgage servicing rights


1,165



1,968Unrealized gain on securities available for sale


1,746



172SFAS 158 pension accrual


182



163Prepaid expenses


406



333Other


74



229Deferred tax liabilities


11,076



10,029Net deferred tax asset

$
7,445


$
7,846    64




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      16.
    SHAREHOLDERS
    EQUITY  Dividends
      Other
    Comprehensive Income
      As of December 31,2008


2007


2006(In thousands)Unrealized holding gain (loss) on securities available for sale

$
8,671


$
2,364


$
1,048Changes in net gains (losses) on postretirement benefit plan


55



668



Reclassification adjustment for losses (gains) realized in income


(4,151
)


(5
)


Net unrealized gains


4,575



3,011



1,048Tax effect (35)%


1,601



1,054



367Net of tax amount

$
2,974


$
1,957


$
681  65




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Balance at


Current


Balance atDecember 31,


Period


December 31,2007


Change


2008(In thousands)Unrealized gains (losses) on securities available for sale

$
359


$
2,938


$
3,297Unrealized gains (losses) on postretirement benefits


302



36



338Total

$
661


$
2,974


$
3,635   Liquidation
    Account
    17.
    REGULATORY
    CAPITAL REQUIREMENTS      As of December 31, 2008Minimum


To Be Well CapitalizedCapital


Under Prompt CorrectiveActual


Requirements


Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


Ratio(In thousands)Total risk-based capital to risk-weighted assets

$
242,944



12.06
%

$
161,163



8.00
%

$
201,454



10.00
%Tier 1 capital to risk-weighted assets


217,630



10.80



*



*



120,872



6.00Tier 1 capital to average total assets


217,630



8.20



106,180



4.00



132,724



5.00Tangible capital to adjusted total assets


217,630



8.20



39,817



1.50



*



*   66




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  As of December 31, 2007Minimum


To Be Well CapitalizedCapital


Under Prompt CorrectiveActual


Requirements


Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


Ratio(In thousands)Total risk-based capital to risk-weighted assets

$
259,087



11.88
%

$
174,635



8.00
%

$
218,294



10.00
%Tier 1 capital to risk-weighted assets


201,779



9.26



*



*



130,976



6.00Tier 1 capital to average total assets


201,779



7.47



108,066



4.00



135,082



5.00Tangible capital to adjusted total assets


201,779



7.47



40,525



1.50



*



*     *
    
    Ratio is not required under regulations.      18.
    BENEFIT
    PLANS  Postretirement
    Benefit Plans
    Year Ended December 31,2008


2007(In thousands)Change in Benefit Obligation:Benefit obligation at beginning of year

$
3,370


$
4,015Service cost






Interest cost


180



221Actuarial (gain)/loss


(55
)


(668
)Benefits paid


(222
)


(198
)Benefit obligation at end of the year

$
3,273


$
3,370Funded status of the plan

$
(3,273
)

$
(3,370
)  67




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    The Year Ended December 31,2008


2007(In thousands)Net gains (losses)

$
336


$
302Prior service credit (cost)


2



$
338


$
302     Year Ended December 31,2008


2007


2006(In thousands)Service cost

$



$



$
2Interest cost


193



222



221Expected return on plan assets










Net amortization of prior service cost


(1
)


(1
)


(1
)Recognized net actuarial gain


(12
)






Net periodic benefit cost/(gain)


180



221



222Net loss (gain)


52



665



Prior service cost (credit)


3



3



Amortization of prior service cost










Total recognized in other comprehensive income


55



668



Total recognized in net periodic benefit cost and other
    comprehensive income

$
235


$
889


$
222Assumptions used in the valuations were as follows:Weighted average discount rate


6.00
%


5.75
%


5.75
%     1 Percentage


1 PercentagePoint Increase


Point Decrease(In thousands)Effect on total of service and interest cost components

$
13


$
12Effect on the postretirement benefit obligation


212



209  68




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    In thousands2009

$
2992010


3062011


3092012


3082013


3042014-2018


1,391Total

$
2,917   401(k)
    Savings Plan
    Employee
    Stock Ownership Plan
      Long-Term
    Incentive Plan
   69




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        For the Year Ended December 31, 2008Weighted Average


Aggregate IntrinsicShares


Exercise Price


Value(In thousands)Outstanding at beginning of year


2,101,193


$
9.39Granted


243,721



5.89Exercised






Forfeited


(252,786
)


8.61Outstanding at end of period


2,092,128


$
9.08


$
Options exercisable at end of period


2,092,128


$
9.08


$
     2008


2007


2006Intrinsic value of options exercised

$



$
99


$
512Cash received from option exercises






176



878Tax benefit realized from option exercises






12



141Weighted average fair value of options granted


0.68







     Risk-free interest rate


3.03
%Expected term (years)


5Expected stock volatility


23.8Dividend yield


6.28
%     Employee
    Stock Purchase Plan
   70




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  19.
    FAIR
    VALUE    Level 1:
  Level 2:
  Level 3:
      Assets
    and Liabilities Measured on a Recurring Basis
    Fair Value Measurements at December 31, 2008 Using:Quoted Prices inActive Markets


Significant Other


Significantfor Identical


Observable


UnobservableDecember 31,


Assets


Inputs


Inputs2008


(Level 1)


(Level 2)


(Level 3)Assets:Available for sale securities

$
215,731


$
809


$
214,922


$
   Assets
    and Liabilities Measured on a Non-Recurring Basis
    Fair Value Measurements at December 31, 2008 Using:Quoted Prices inActive Markets


Significant Other


Significantfor Identical


Observable


UnobservableDecember 31,


Assets


Inputs


Inputs2008


(Level 1)


(Level 2)


(Level 3)Assets:Impaired loans

$
33,024










$
33,024Mortgage servicing rights


2,421







2,421



    71




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Fair
    value of financial instruments
  and/or
  Cash and cash equivalents, accrued interest receivable and
    payable and advance payments by borrowers for taxes and
    insurance
  Securities
  Loans held for sale 
  Loans 
  Federal Home Loan Bank stock
  Deposits
  Borrowed funds 
   72




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31,


December 31,2008


2007Carrying


Fair


Carrying


FairValue


Value


Value


Value(In thousands)Assets:Cash and cash equivalents

$
43,417


$
43,417


$
33,502


$
33,502Securities:Trading










312



312Available for sale


215,731



215,731



240,035



240,035Loans held for sale


16,032



16,358



87,236



87,236Loans, net


2,203,453



2,203,606



2,236,988



2,246,948Federal Home Loan Bank stock


26,464



n/a



25,432



n/aAccrued interest receivable


10,082



10,082



12,987



12,987Liabilities:Deposits:Checking, savings and money market accounts


(660,675
)


(660,675
)


(704,644
)


(704,644
)Certificates of deposit


(1,225,256
)


(1,237,262
)


(1,170,562
)


(1,170,790
)Federal Home Loan Bank advances


(337,603
)


(348,185
)


(437,253
)


(440,910
)Repurchase agreements and other


(125,269
)


(138,862
)


(149,533
)


(152,827
)Advance payments by borrowers for taxes and insurance


(19,806
)


(19,806
)


(17,853
)


(17,853
)Accrued interest payable


(3,077
)


(3,077
)


(7,837
)


(7,837
)     20.
    STATEMENT
    OF CASH FLOWS SUPPLEMENTAL DISCLOSURE    Year Ended December 31,2008


2007


2006(In thousands)Supplemental disclosures of cash flow information:Cash paid during the year for:Interest on deposits and borrowings

$
83,676


$
91,107


$
83,724Interest capitalized on borrowings






30



19Income taxes


3,859



13,146



13,050Supplemental schedule of noncash activities:Loans transferred to held for sale






76,493



Transfers from loans to real estate owned


36,429



14,356



4,814  73




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  21.
    PARENT
    COMPANY FINANCIAL STATEMENTS  Condensed
    Statements of Financial Condition
  December 31,2008


2007(In thousands)AssetsCash and deposits with banks

$
3,060


$
8,234Federal funds sold and other


33



Total cash and cash equivalents


3,093



8,234Securities:Trading






312Available for sale


809



2,064Note receivable from ESOP


10,951



13,071Subordinated note receivable from Home Savings






30,000Investment in subsidiary-Home Savings


222,287



237,430Investment in subsidiary-Butler Wick


3,174



15,944Other assets


1,662



131Total assets

$
241,976


$
307,186Liabilities and Shareholders EquityRepurchase agreements and other

$
6,900


$
36,300Accrued interest payable


46



243Accrued expenses and other liabilities


107



929Total liabilities


7,053



37,472Total shareholders equity


234,923



269,714Total liabilities and shareholders equity

$
241,976


$
307,186   Condensed
    Statements of Income
  Year Ended December 31,2008


2007


2006(In thousands)IncomeCash dividends from Home Savings

$



$
6,000


$
30,000Cash dividends from Butler Wick


14,700



3,000



Interest income


2,208



3,380



1,411Non-interest income


(1,226
)


31



60Total income


15,682



12,411



31,471ExpensesInterest expense


1,341



2,092



820Non-interest expenses


1,980



2,419



1,405Total expenses


3,321



4,511



2,225Income before income taxes


12,361



7,900



29,246Income tax benefit


(1,304
)


(270
)


(425
)Income before equity in undistributed net earnings of
    subsidiaries


13,665



8,170



29,671Dividends in excess of earnings of subsidiary


(48,944
)


(4,037
)


(5,560
)Net income (loss)

$
(35,279
)

$
4,133


$
24,111  74




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Condensed
    Statements of Cash Flows
  Year Ended December 31,2008


2007


2006(In thousands)Cash Flows from Operating ActivitiesNet Income (loss)

$
(35,279
)

$
4,133


$
24,111Adjustments to reconcile net income to net cash provided by
    operating activities:Dividends in excess of earnings of the subsidiaries


48,944



4,037



5,560Security impairment charges


1,188







Decrease in trading securities


312



247



433Decrease (increase) in interest receivable






18



(18
)(Increase) decrease in other assets


(1,752
)






27(Decrease) increase in accrued interest payable


(197
)


142



50Decrease in other liabilities


(763
)


(64
)


(712
)Net cash from operating activities


12,453



8,513



29,451Cash Flows from Investing ActivitiesPurchases of:Securities available for sale










(36
)Repayment of (investment in) subordinated debt issued by Home
    Savings


30,000







(30,000
)Equity investment in Home Savings


(16,250
)






ESOP loan repayment


2,120



1,263



1,044Net cash from investing activities


15,870



1,263



(28,992
)Cash Flows from Financing ActivitiesCash dividends paid


(4,064
)


(10,847
)


(10,401
)Net (decrease) increase in borrowed funds


(29,400
)


18,000



11,700Purchase of treasury stock






(9,709
)


(2,298
)Exercise of stock options






176



878Net cash from financing activities


(33,464
)


(2,380
)


(121
)(Decrease) increase in cash and cash equivalents


(5,141
)


7,396



338Cash and cash equivalents, beginning of year


8,234



838



500Cash and cash equivalents, end of year

$
3,093


$
8,234


$
838  75




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  22.
    SEGMENT
    INFORMATION      23.
    EARNINGS
    PER SHARE    2008


2007


2006(In thousands, except per share data)Numerator:Income (loss) from continuing operations

$
(37,229
)

$
1,714


$
22,963Income from discontinued operations


1,950



2,419



1,148Net income

$
(35,279
)

$
4,133


$
24,111Denominator:Weighted average common shares outstanding  basic


29,463



29,519



29,846Dilutive effect of stock options






118



386Weighted average common shares outstanding  dilutive


29,463



29,637



30,232Basic earnings (loss) per share:Basic earnings (loss) per common
    share  continuing operations

$
(1.26
)

$
0.06


$
0.77Basic earnings per common share  discontinued
    operations


0.06



0.08



0.04Basic earnings (loss) per common share


(1.20
)


0.14



0.81Dilutive earnings (loss) per share:Dilutive earnings (loss) per common
    share  continuing operations

$
(1.26
)

$
0.06


$
0.76Dilutive earnings per common share  discontinued
    operations


0.06



0.08



0.04Dilutive earnings (loss) per common share


(1.20
)


0.14



0.80  76




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  24.
    QUARTERLY
    FINANCIAL INFORMATION (UNAUDITED)    UnauditedFirst


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands, except per share data)2008:Interest income

$
39,627


$
38,202


$
37,748


$
36,601


$
152,178Interest expense


22,685



19,287



18,951



17,993



78,916Net interest income


16,942



18,915



18,797



18,608



73,262Provision for loan losses


2,466



3,248



8,995



10,620



25,329Net interest income after provision for loan losses


14,476



15,667



9,802



7,988



47,933Non-interest income


6,270



2,908



(2,375
)


(1,019
)


5,784Non-interest expenses


14,964



15,161



49,516



14,545



94,186Income (loss) before taxes and discontinued operations


5,782



3,414



(42,089
)


(7,576
)


(40,469
)Income tax expense (benefit)


2,018



1,110



(3,132
)


(3,236
)


(3,240
)Net income (loss) before discontinued operations


3,764



2,304



(38,957
)


(4,340
)


(37,229
)Discontinued operationsNet income of Butler Wick Corp., net of tax


279



425



403



843



1,950Net income (loss)

$
4,043


$
2,729


$
(38,554
)

$
(3,497
)

$
(35,279
)Earnings (loss) per share:Basic earnings (loss) from continuing operations

$
0.13


$
0.08


$
(1.32
)

$
(0.15
)

$
(1.26
)Basic earnings from discontinued operations


0.01



0.02



0.01



0.03



0.06Basic earnings (loss)


0.14



0.10



(1.31
)


(0.12
)


(1.20
)Diluted earnings (loss) from continuing operations


0.13



0.08



(1.32
)


(0.15
)


(1.26
)Diluted earnings from discontinued operations


0.01



0.02



0.01



0.03



0.06Diluted earnings (loss)


0.14



0.10



(1.31
)


(0.12
)


(1.20
)     77




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  UnauditedFirst


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands, except per share data)2007:Interest income

$
42,569


$
41,696


$
42,105


$
42,445


$
168,815Interest expense


23,331



23,761



24,433



24,578



96,103Net interest income


19,238



17,935



17,672



17,867



72,712Provision for loan losses


2,325



2,744



5,363



18,318



28,750Net interest income after provision for loan losses


16,913



15,191



12,309



(451
)


43,962Non-interest income


3,617



3,698



4,121



2,867



14,302Non-interest expenses


14,088



13,760



13,462



14,330



55,640Income (loss) before taxes and discontinued operations


6,442



5,129



2,968



(11,914
)


2,625Income tax expense (benefit)


2,298



1,864



983



(4,234
)


910Net income (loss) before discontinued operations


4,144



3,265



1,985



(7,680
)


1,714Discontinued operationsNet income of Butler Wick Corp., net of tax


525



665



598



631



2,419Net income (loss)

$
4,669


$
3,930


$
2,583


$
(7,049
)

$
4,133Earnings per share:Basic earnings (loss) from continuing operations

$
0.13


$
0.12


$
0.07


$
(0.26
)

$
0.06Basic earnings from discontinued operations


0.03



0.02



0.02



0.01



0.08Basic earnings (loss)


0.16



0.14



0.09



(0.25
)


0.14Diluted earnings (loss) from continuing operations


0.13



0.12



0.07



(0.26
)


0.06Diluted earnings from discontinued operations


0.03



0.02



0.02



0.01



0.08Diluted earnings (loss)


0.16



0.14



0.09



(0.25
)


0.14     25.
    PARTICIPATION
    IN THE U.S. TREASURY CAPITAL PURCHASE PROGRAM   78




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
 FINANCIAL STATEMENTS
              /S/ Crowe Horwath LLP
      79




---



##### Table of Contents



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  Rules 13a-15(f) 15d-15(f)
    Report of Independent
    Registered Public Accounting Firm on Internal Control Over
    Financial Reporting
  /S/ Douglas M.
    McKay

/S/ James R.
    ReskeDouglas M. McKay, Chief Executive Officer

James R. Reske,  Chief Financial OfficerMarch 16, 2009

March 16, 2009  80




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
    INTERNAL CONTROL OVER FINANCIAL REPORTING
                  /S/ Crowe Horwath LLP
      81




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e) Form 10-K Form 10-K
  Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers and Corporate Governance      Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Shareholder Matters     82




---



##### Table of Contents



Equity
    Compensation Plan Information
  (a)


(b)


(c)Number of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities





Equity Compensationto be Issued Upon


Weighted-Average


Plans (ExcludingExercise of


Exercise Price of


SecuritiesPlan Category

Outstanding Options


Outstanding Options


Reflected in Column (a))Equity compensation plans approved by security holders


2,092,128


$
9.08



2,103,053   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   83




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Exhibits
  Form 10-K.
  (2)
    Financial Statement Schedules.  All schedules
    are omitted because they are not applicable or the required
    information is shown in the financial statements or notes
    thereto.    3.1

Articles of Incorporation3.2

Amended Code of Regulations4

Agreement to Furnish Instruments10

Material Contracts11

Statement Regarding Computation of Per Share Earnings20

Proxy Statement for 2009 Annual Meeting of Shareholders21

Subsidiaries of Registrant23

Crowe Horwath LLP Consent31.1

Section 302 Certification by Chief Executive Officer31.2

Section 302 Certification by Chief Financial Officer32

Certification of Financial Statements by Chief Executive Officer
    and Chief Financial Officer  84




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##### Table of Contents



SIGNATURES    UNITED COMMUNITY FINANCIAL CORP.
  /s/  Douglas
    M. McKay  
     /s/  Douglas
    M.
    McKay

/s/  James
    R.
    ReskeDouglas M. McKay Chairman of the Board, Chief
    Executive Officer and Director

James R. Reske Treasurer and Chief Financial Officer 
    Date:  March 16, 2009Date: March 16, 2009/s/  Eugenia
    C.
    Atkinson

/s/  Richard
    J.
    BuoncoreEugenia C. Atkinson

Richard J. BuoncoreDirector

DirectorDate: March 16, 2009

Date:  March 16, 2009/s/  Richard
    J
    Schiraldi

/s/  Clarence
    R.
    SmithRichard J. Schiraldi

Clarence R. SmithDirector

DirectorDate: March 16, 2009

Date:  March 16, 2009/s/  David
    C.
    Sweet

/s/  Donald
    J.
    VarnerDavid C. Sweet

Donald J. VarnerDirector

DirectorDate: March 16, 2009

Date:  March 16, 2009  85




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##### Table of Contents



INDEX TO
    EXHIBITS  ExhibitNumber3.1

Articles of Incorporation

Incorporated by reference to the Registration Statement on
    Form S-1
    filed by United Community on March 13, 1998
    (S-1) with
    the Securities and Exchange Commission (SEC), Exhibit 3.13.2

Amended Code of Regulations

Incorporated by reference to the 1998
    10-K filed
    by United Community on March 31, 1999 via Edgar, film
    number 99582343, Exhibit 3.24

Agreement to furnish instruments and agreements defining rights
    of holders of long-term debt10.1

The Home Savings and Loan Company of Youngstown, Ohio Employee
    Stock Ownership Plan

Incorporated by reference to the 2001
    10-K filed
    by United Community on March 29, 2002 via Edgar, film
    number 02593161, Exhibit 10.110.2

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and Douglas M. McKay dated December 31, 2004

Incorporated by reference to the 2004
    10-K/A filed
    by United Community on May 2, 2005 via Edgar, film number
    04666159 (2004 10K/A), Exhibit 10.210.3

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and Patrick W. Bevack dated December 31, 2004

Incorporated by reference to the 2004
    10-K/A,
    Exhibit 10.310.4

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and James R. Reske dated May 19, 200810.5

Amendment to Employment Agreement between The Home Savings and
    Loan Company of Youngstown, Ohio and Douglas M. McKay dated
    January 1, 200910.6

Amendment to Employment Agreement between The Home Savings and
    Loan Company of Youngstown, Ohio and Patrick W. Bevack dated
    January 1, 200910.7

Amendment to Employment Agreement between The Home Savings and
    Loan Company of Youngstown, Ohio and James R. Reske dated
    January 1, 200910.8

Amended and Restated United Community 1999 Long -Term Incentive
    Plan10.9

Amended and Restated United Community 2007 Long-Term Incentive
    Plan10.10

Separation Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and Patrick A. Kelly dated January 27, 200910.11

Amendment to the United Community Financial Corp. Employee Stock
    Ownership Plan for the Pension Protection Act of 2006 and other
    guidance10.12

Stock Purchase Agreement10.13

OTS Orders

Incorporated by reference to the 8-K filed by United Community
    on August 3, 2008 via Edgar, film number 081011722
    Exhibit 10.1 86




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##### Table of Contents



ExhibitNumber10.14

Bank Orders

Incorporated by reference to the 8-K filed by United Community
    on August 3, 2008 via Edgar, film number 081011722
    Exhibit 10.211

Statement Regarding Computation of Per Share Earnings

Incorporated by reference to Note 23 to the Financial
    Statements included in the Annual Report, Item 820

Proxy Statement for 2009 Annual Meeting of Shareholders

Incorporated by reference to the Proxy Statement, to be filed
    with the Securities and Exchange Commission on or about
    March 26, 200921

Subsidiaries of Registrant23

Crowe Horwath LLP Consent31.1

Section 302 Certification by Chief Executive Officer31.2

Section 302 Certification by Chief Financial Officer32

Certification of Financial Statements by Chief Executive Officer
    and Chief Financial Officer  87