##### 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, 2010ORo

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-T o o
  Regulation S-K Form 10-K 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   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


3Investment Activities


13Sources of Funds


14Competition


17Employees


17Regulation


171A.


Risk Factors


181B.


Unresolved Staff Comments


232.


Properties


233.


Legal Proceedings


234.


(Removed and Reserved)


23PART II5.


Market for Registrants Common Equity and
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities


246.


Selected Financial Data


267.


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


287A.


Quantitative and Qualitative Disclosures About
    Market Risk


448.


Financial Statements and Supplementary Data


479.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


989A.


Controls and Procedures


989B.


Other Information


98PART III10.


Directors and Executive Officers and Corporate
    Governance


9811.


Executive Compensation


9812.


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


9813.


Certain Relationships and Related Transactions
    and Director Independence


9914.


Principal Accountant Fees and Services


99PART IV15.


Exhibits, Financial Statement Schedules


100Signatures


101Exhibit Index


102EX-21EX-23EX-31.1EX-31.2EX-32




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##### Table of Contents



PART I  Item 1.
    Description
    of Business GENERAL  Form 10-K
  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,
 2




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##### Table of Contents



LENDING
    ACTIVITIES  General.
  Loan Portfolio Composition.
  At December 31,2010


2009


2008


2007


2006Percent 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

$
757,426



44.58
%

$
773,831



40.58
%

$
909,567



40.65
%

$
871,019



38.41
%

$
854,829



37.65
%Multifamily residential


135,771



7.99
%


150,480



7.89
%


187,711



8.39
%


179,535



7.92
%


163,541



7.20
%Non-residential


331,390



19.50
%


397,895



20.87
%


375,463



16.78
%


359,070



15.84
%


348,528



15.35
%Land


25,138



1.48
%


23,502



1.23
%


23,517



1.05
%


22,818



1.01
%


26,684



1.18
%Total permanent


1,249,725



73.55
%


1,345,708



70.57
%


1,496,258



66.87
%


1,432,442



63.18
%


1,393,582



61.38
%Construction loans:One-to four-family residential


108,583



6.39
%


178,095



9.34
%


255,355



11.41
%


357,153



15.75
%


388,926



17.13
%Multifamily and non-residential


15,077



0.89
%


13,741



0.72
%


35,797



1.60
%


25,191



1.11
%


25,215



1.11
%Total construction


123,660



7.28
%


191,836



10.06
%


291,152



13.01
%


382,344



16.86
%


414,141



18.24
%Total real estate loans


1,373,385



80.83
%


1,537,544



80.63
%


1,787,410



79.88
%


1,814,786



80.04
%


1,807,723



79.62
%Consumer loans:Home equity


220,582



12.98
%


237,569



12.46
%


253,348



11.32
%


234,362



10.33
%


220,679



9.72
%Auto


11,525



0.68
%


13,784



0.72
%


24,138



1.08
%


31,206



1.38
%


36,605



1.61
%Marine


7,285



0.43
%


9,366



0.49
%


11,781



0.53
%


14,196



0.63
%


19,218



0.85
%RV


35,671



2.10
%


43,722



2.29
%


54,003



2.41
%


63,587



2.80
%


59,642



2.63
%Other(1)


4,390



0.26
%


4,761



0.25
%


5,564



0.25
%


6,096



0.27
%


9,463



0.42
%Total consumer


279,453



16.45
%


309,202



16.21
%


348,834



15.59
%


349,447



15.41
%


345,607



15.23
%Commercial loans


46,304



2.72
%


60,217



3.16
%


101,489



4.53
%


103,208



4.55
%


116,952



5.15
%Total loans


1,699,142



100.00
%


1,906,963



100.00
%


2,237,733



100.00
%


2,267,441



100.00
%


2,270,282



100.00
%Less net items


49,656







40,945







34,280







30,453







16,723Total loans, net

$
1,649,486






$
1,866,018






$
2,203,453






$
2,236,988






$
2,253,559     (1)
    
    Consists primarily of overdraft protection loans and loans to
    individuals secured by demand accounts, deposits and other
    consumer assets. 3




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##### Table of Contents



Loan Maturity. due-on-sale
  Principal Repayments ContractuallyDue in the Years Ended December 31,2011


2012-2015


2016 and thereafter


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

$
73,375


$
7,106


$
28,102


$
108,583Multifamily and nonresidential


7,401







7,676



15,077Commercial loans


14,533



26,021



5,750



46,304Total

$
95,309


$
33,127


$
41,528


$
169,964     Due after December 31, 2011(Dollars in thousands)Fixed rate

$
41,454Adjustable rate


33,201$
74,655   Loans Secured by One-to Four-Family Real
    Estate.
  30-year
     4




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##### Table of Contents



Loans Secured by Multifamily Residences.
      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.
 6




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##### Table of Contents



Reduction in loan concentrations.
  Loan Solicitation and Processing.
     7




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##### Table of Contents



Loan Originations, Purchases and Sales.
    tm
    Loans to One Borrower Limits.
   8




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##### Table of Contents



Delinquent Loans, Nonperforming Assets and Classified
    Assets.
  At December 31,2010


2009Percent of








Percent ofNet








NetNumber


Amount


Loans


Number


Amount


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


231


$
16,716



1.01
%


366


$
33,455



1.79
%60-89 days


101



25,066



1.52
%


130



16,133



0.87
%90 days or over


651



123,830



7.51
%


712



107,533



5.76
%Total delinquent loans


983


$
165,612



10.04
%


1,208


$
157,121



8.42
%     deed-in-lieu
     9




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##### Table of Contents



At December 31,2010


2009


2008


2007


2006(Dollars in thousands)Nonperforming loans:Nonaccrual loansReal estate loans:One-to four-family residential

$
27,417


$
26,720


$
21,622


$
12,708


$
8,977Multifamily and nonresidential


50,821



31,954



23,969



27,201



16,569Construction (net of loans in process) and land


45,647



45,239



42,560



48,043



20,858Total real estate loans


123,885



103,913



88,151



87,952



46,404Consumer


3,371



4,892



5,549



4,809



3,245Commercial


5,945



3,413



4,553



4,738



2,997Total nonaccrual loans


133,201



112,218



98,253



97,499



52,646Past due 90 days and still accruing


6,330



3,669



6,631



1,215



796Total nonperforming loans


139,531



115,887



104,884



98,714



53,442Real estate acquired through foreclosure and other repossessed
    assets


40,336



30,962



29,258



10,510



3,242Total nonperforming assets

$
179,867


$
146,849


$
134,142


$
109,224


$
56,684Nonperforming loans as a percent of loans, net


8.46
%


6.21
%


4.76
%


4.41
%


2.37
%Nonperforming assets as a percent of total assets


8.19
%


6.28
%


5.12
%


3.94
%


2.10
%Allowance for loan losses as a percent of nonperforming loans


36.47
%


36.49
%


34.29
%


32.42
%


31.73
%Allowance for loan losses as a percent of loans, net


2.99
%


2.22
%


1.61
%


1.41
%


0.75
%     case-by-case loan-by-loan
   10




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##### Table of Contents



December 31,


September 30,


June 30,


March 31,


December 31,2010


2010


2010


2010


2009(Dollars in thousands)Nonperforming loans:Nonaccrual loansReal estate loans:One-to four-family residential

$
27,417


$
27,505


$
30,233


$
30,007


$
26,720Multifamily and nonresidential


50,821



57,004



57,469



43,968



31,954Construction (net of loans in process) and land


45,647



44,434



55,312



54,972



45,239Total real estate loans


123,885



128,943



143,014



128,947



103,913Consumer


3,371



3,213



3,092



3,409



4,892Commercial


5,945



6,304



6,406



5,672



3,413Total nonaccrual loans


133,201



138,460



152,512



138,028



112,218Past due 90 days and still accruing


6,330



4,253



2,628



536



3,669Total nonperforming loans


139,531



142,713



155,140



138,564



115,887Real estate acquired through foreclosure and other repossessed
    assets


40,336



40,297



42,218



35,418



30,962Total nonperforming assets

$
179,867


$
183,010


$
197,358


$
173,982


$
146,849Nonperforming loans as a percent of loans, net


8.46
%


8.27
%


8.69
%


7.60
%


6.21
%Nonperforming assets as a percent of total assets


8.19
%


7.90
%


8.53
%


7.63
%


6.28
%Allowance for loan losses as a percent of nonperforming loans


36.47
%


28.65
%


26.25
%


34.47
%


36.49
%Allowance for loan losses as a percent of loans, net


2.99
%


2.37
%


2.28
%


2.62
%


2.22
%       Allowance for Loan Losses.
 11




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##### Table of Contents



Year Ended December 31,2010


2009


2008


2007


2006(Dollars in thousands)Balance at beginning of period

$
42,287


$
35,962


$
32,006


$
16,955


$
15,723Provision for loan losses


62,427



49,074



25,329



28,750



4,347Charge-offs:Permanent real estate


(28,153
)


(11,552
)


(6,827
)


(962
)


(737
)Construction real estate


(20,648
)


(12,793
)


(9,151
)


(5,924
)


(320
)Consumer


(4,316
)


(6,117
)


(3,978
)


(3,605
)


(2,334
)Commercial


(1,962
)


(13,230
)


(2,132
)


(3,729
)


(47
)Total charge-offs


(55,079
)


(43,692
)


(22,088
)


(14,220
)


(3,438
)Recoveries:Permanent real estate


336



117



29



10



34Construction real estate


133



9



10







1Consumer


538



814



575



509



283Commercial


241



3



101



2



5Total recoveries


1,248



943



715



521



323Net charge-offs


(53,831
)


(42,749
)


(21,373
)


(13,699
)


(3,115
)Balance at end of year

$
50,883


$
42,287


$
35,962


$
32,006


$
16,955Ratio of net charge-offs to average net loans


(3.03
)%


(2.10
)%


(0.96
)%


(0.60
)%


(0.14
)%    12




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##### Table of Contents



At December 31,2010


2009


2008


2007


2006Percent 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

$
28,066



73.55
%

$
15,288



70.57
%

$
12,785



66.87
%

$
10,285



63.18
%

$
5,459



61.39
%Construction real estate loans


8,533



7.28
%


19,020



10.06
%


11,342



13.01
%


12,499



16.86
%


3,321



18.24
%Consumer loans


5,260



16.45
%


4,959



16.21
%


4,870



15.59
%


5,485



15.41
%


5,147



15.22
%Commercial loans


9,024



2.72
%


3,020



3.16
%


6,965



4.53
%


3,737



4.55
%


3,028



5.15
%Total

$
50,883



100.00
%

$
42,287



100.00
%

$
35,962



100.00
%

$
32,006



100.00
%

$
16,955



100.00
%  INVESTMENT
    ACTIVITIES  General.
  Home Savings Investment Activities.
   13




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##### Table of Contents



United Community Investment Activities.
    At December 31, 2010After 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

$





%

$





%

$





%

$
65,099



2.34
%Mortgage-related securities: residential


























29



1.61Other securities(a)


235



2.12























Total securities

$
235



2.12
%

$





%

$





%

$
65,128



2.34
%   At December 31, 2010After Ten Years


TotalAmortized


Average


Amortized


Average


FairCost


Yield


Cost


Yield


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

$





%

$
65,099



2.34
%

$
62,935Mortgage-related securities: residential


300,261



3.60



300,290



3.60



298,713Other securities(a)










235



2.12



394Total securities

$
300,261



3.60
%

$
365,624



3.37
%

$
362,042     (a)
    
    Yield on equity securities only SOURCES
    OF FUNDS  General.
  Deposits.
   14




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##### Table of Contents



At December 31, 2010


For the Year Ended December 31, 2010Percent


Weighted





Percent


Weightedof Total


Average


Average


of Average


AverageAmount


Deposits


Rate


Balance


Deposits


Rate(Dollars in thousands)Noninterest bearing demand

$
138,571



8.20
%



%

$
131,770



7.69
%



%Checking and money market accounts


421,784



24.96



0.61



412,672



24.09



0.77Savings accounts


218,946



12.96



0.31



212,146



12.38



0.37Certificates of deposit


910,480



53.88



2.54



956,824



55.84



2.94Total deposits

$
1,689,781



100.00
%


1.56
%

$
1,713,412



100.00
%


1.87
%   For the Year Ended December 31, 2009


For the Year Ended December 31, 2008Percent


Weighted





Percent


WeightedAverage


of Average


Average


Average


of Average


AverageBalance


Deposits


Rate


Balance


Deposits


Rate(Dollars in thousands)Noninterest bearing demand

$
117,587



6.51
%



%

$
110,000



5.83
%



%Checking and money market accounts


382,076



21.15



1.12



426,790



22.63



2.22Savings accounts


194,957



10.79



0.48



180,010



9.54



0.45Certificates of deposit


1,112,042



61.55



3.66



1,169,403



62.00



4.27Total deposits

$
1,806,662



100.00
%


2.54
%

$
1,886,203



100.00
%


3.19
%     Over


OverUp to


1 Year to


2 Years toRate

One Year


2 Years


3 Years


Thereafter


Total(Dollars in thousands)2.00% or less

$
324,573


$
150,754


$
15,086


$
1,091


$
491,5042.01% to 4.00%


74,070



12,209



17,549



83,708



187,5364.01% to 6.00%


41,125



184,220



5,714



381



231,440Total certificates of deposit

$
439,768


$
347,183


$
38,349


$
85,180


$
910,480    15




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##### Table of Contents



Maturity

Amount(Dollars in thousands)Three months or less

$
27,822Over 3 months to 6 months


18,674Over 6 months to 12 months


42,414Over 12 months


104,676Total

$
193,586     Maturity

Amount(Dollars in thousands)Three months or less

$
1,952Over 3 months to 6 months


2,600Over 6 months to 12 months


5,265Over 12 months


7,365Total

$
17,182     Year Ended December 31,2010


2009(Dollars in thousands)Beginning balance

$
1,769,501


$
1,885,931Net decrease in brokered deposits


(15,033
)


(130,166
)Net decrease in other deposits


(97,271
)


(30,393
)Net deposits before interest credited


1,657,197



1,725,372Interest credited


32,584



44,129Ending balance

$
1,689,781


$
1,769,501Net decrease

$
(79,720
)

$
(116,430
)Percent decrease


(4.51
)%


(6.17
)%   Borrowings.
   16




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##### Table of Contents



COMPETITION   EMPLOYEES   REGULATION    truth-in-lending
       17




---



##### Table of Contents



1 3
      notice-and-comment
  Item 1A.
    Risk
    Factors   18




---



##### Table of Contents



Corporate Risk Management and
    Control Policy
  Cease
    and desist orders prohibit dividends and restrict certain
    business activities.
      Deteriorating
    economic conditions may adversely affect our results of
    operations and financial condition.
       19




---



##### Table of Contents



Changes
    in interest rates could adversely affect our financial condition
    and results of operations.
        Increasing
    credit risks could continue to adversely affect our results of
    operations.
    We
    operate in an extremely competitive market, and our business
    will suffer if we are unable to compete
    effectively.
    The
    Dodd-Frank Act and other legislative or regulatory changes or
    actions could adversely impact the financial services industry
    or our business, financial condition or results of
    operations.
   20




---



##### Table of Contents



10-K
      
    the Dodd-Frank Act abolishes the OTS and transfers its functions
    to other federal banking agencies;
    the Dodd-Frank Act creates a Consumer Financial Protection
    Bureau with broad powers to adopt and enforce consumer
    protection regulations;
    new capital regulations for thrift holding companies will be
    adopted and any new trust preferred securities will no longer
    count toward Tier I capital;
    the federal law prohibition on the payment of interest on
    commercial demand deposit accounts will be eliminated effective
    in July 2011;
    the standard maximum amount of deposit insurance per customer
    has been permanently increased to $250,000, and non-interest
    bearing transaction accounts will have unlimited insurance
    through December 31, 2012;
    the assessment base for determining deposit insurance premiums
    will be expanded to include liabilities other than just
    deposits; and
    new corporate governance requirements applicable generally to
    all public companies in all industries will require new
    compensation practices, including requiring companies to
    claw back incentive compensation under certain
    circumstances, to provide shareholders the opportunity to cast a
    non-binding vote on executive compensation, and to consider the
    independence of compensation advisers, and new executive
    compensation disclosure requirements.    The
    preparation of financial statements requires management to make
    estimates about matters that are inherently
    uncertain.
   21




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##### Table of Contents



Material
    breaches in security of our systems may have a significant
    effect on our business.
    We may
    elect or be compelled to seek additional capital in the future,
    but that capital may not be available when it is
    needed.
      Our
    allowance for loan losses may prove to be insufficient to absorb
    potential losses in our loan portfolio.
  and/or
       22




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##### Table of Contents



The
    Companys results of operations, financial condition or
    liquidity may be adversely impacted by issues arising in
    foreclosure practices, including delays in the foreclosure
    process related to certain industry deficiencies, as well as
    potential losses in connection with actual or projected
    repurchases and indemnification payments related to mortgages
    sold into the secondary market.
        Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Removed
    and Reserved 23




---



##### 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


Quarter2010High

$
1.90


$
2.30


$
1.84


$
1.55Low


1.15



1.50



1.15



1.12Dividends declared and paid














   First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2009High

$
1.59


$
2.72


$
1.80


$
1.80Low


0.46



0.99



0.80



1.28Dividends declared and paid














      24




---



##### Table of Contents



Performance
    Graph
    United
    Community Financial Corp.
 Total Return Performance
  
  Period EndingIndex

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09

12/31/10United Community Financial Corp.


100.00



106.70



50.45



8.66



13.95



12.89NASDAQ Composite


100.00



110.39



122.15



73.32



106.57



125.91SNL Thrift


100.00



116.57



69.93



44.50



41.50



43.37  25




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  At December 31,2010


2009


2008


2007


2006(Dollars in thousands)Selected financial condition data:Total assets

$
2,197,298


$
2,338,427


$
2,618,073


$
2,771,117


$
2,703,545Cash and cash equivalents


37,107



45,074



43,417



33,502



33,711Securities:Trading, at fair value














312



559Available for sale, at fair value


362,042



281,348



215,731



240,035



233,936Loans held for sale


10,870



10,497



16,032



87,236



26,960Loans, net


1,649,486



1,866,018



2,203,453



2,236,988



2,253,559Federal Home Loan Bank stock, at cost


26,464



26,464



26,464



25,432



25,432Cash surrender value of life insurance


27,303



26,198



25,090



24,053



23,137Assets of discontinued operations










5,562



20,314



20,923Deposits


1,689,781



1,769,501



1,885,931



1,875,206



1,822,935Borrowed funds


300,615



318,156



462,872



586,786



562,862Liabilities of discontinued operations










2,388



4,371



4,475Total shareholders equity


176,055



219,783



234,923



269,714



281,333   Year Ended December 31,2010


2009


2008


2007


2006(Dollars in thousands)Summary of earnings:Interest income

$
110,748


$
131,863


$
152,178


$
168,815


$
163,763Interest expense


39,387



55,949



78,916



96,103



83,953Net interest income


71,361



75,914



73,262



72,712



79,810Provision for loan losses


62,427



49,074



25,329



28,750



4,347Net interest income after provision for loan losses


8,934



26,840



47,933



43,962



75,463Non-interest income


21,893



13,918



5,784



14,302



13,203Non-interest expenses


68,331



63,640



94,186
(1)


55,640



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


(37,504
)


(22,882
)


(40,469
)


2,624



35,356Income tax expense (benefit)


(231
)


(1,160
)


(3,240
)


910



12,393Net income (loss) before discontinued operations


(37,273
)


(21,722
)


(37,229
)


1,714



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






4,949



1,950



2,419



1,148Net income (loss)

$
(37,273
)

$
(16,773
)

$
(35,279
)

$
4,133


$
24,111     (1)
    
    Non-interest expense in 2008 includes a goodwill impairment
    charge of $33.6 million.  26




---



##### Table of Contents



At or for the Year Ended December 31,2010

2009

2008

2007

2006Selected financial ratios and other data:Performance ratios:Return on average assets(1)


(1.62
)%


(0.67
)%


(1.30
)%


0.15
%


0.92
%Return on average shareholders equity(2)


(17.28
)%


(6.92
)%


(12.91
)%


1.44
%


8.72
%Interest rate spread(3)(4)


3.06
%


2.91
%


2.53
%


2.41
%


2.84
%Net interest margin(3)(5)


3.30
%


3.20
%


2.87
%


2.84
%


3.24
%Non-interest expense to average assets(3)


2.97
%


2.54
%


2.22
%


2.04
%


2.03
%Efficiency ratio(3)(6)


76.37
%


65.60
%


68.53
%


62.77
%


56.68
%Average interest earning assets to average interest bearing
    liabilities(3)


112.68
%


112.46
%


110.85
%


111.59
%


111.74
%Capital ratios:Average equity to average assets


9.38
%


9.68
%


10.03
%


10.56
%


10.53
%Shareholders equity to assets at year end


8.01
%


9.39
%


8.97
%


9.73
%


10.41
%Home Savings Tier 1 leverage ratio


7.84
%


8.22
%


8.20
%


7.47
%


7.68
%Home Savings Tier 1 risk-based capital ratio


11.26
%


11.53
%


10.80
%


9.26
%


9.49
%Home Savings Total risk-based capital ratio


12.54
%


12.80
%


12.06
%


11.88
%


11.70
%Asset quality ratios:Nonperforming loans to loans, net(7)


8.46
%


6.21
%


4.76
%


4.41
%


2.37
%Nonperforming assets to total assets at year end(8)


8.19
%


6.28
%


5.12
%


3.94
%


2.10
%Allowance for loan losses as a percent of loans


2.99
%


2.22
%


1.61
%


1.41
%


0.75
%Allowance for loan losses as a percent of nonperforming loans(7)


36.47
%


36.49
%


34.29
%


32.42
%


31.73
%Texas ratio(9)


79.43
%


56.18
%


49.68
%


36.34
%


19.10
%Total classified assets as a percent of Tier 1 capital


124.52
%


117.77
%


58.08
%


71.99
%


26.64
%Net chargeoffs as a percent of average loans


3.03
%


2.10
%


0.96
%


0.60
%


0.14
%Total 90+ days past due as a percent of total loans, net


7.51
%


5.76
%


4.53
%


4.14
%


2.32
%Number of:Loans


32,765



42,121



44,195



44,842



46,333Deposit accounts


169,291



176,010



180,531



187,132



189,588Per share data:Basic earnings (loss) from continuing operations(10)(11)

$
(1.22
)

$
(0.73
)

$
(1.26
)

$
0.06


$
0.77Basic earnings from discontinued operations(10)(11)






0.17



0.06



0.08



0.04Basic earnings (loss)(10)(11)


(1.22
)


(0.56
)


(1.20
)


0.14



0.81Diluted earnings (loss) from continuing operations(10)(11)


(1.22
)


(0.73
)


(1.26
)


0.06



0.76Diluted earnings from discontinued operations(10)(11)






0.17



0.06



0.08



0.04Diluted earnings (loss)(10)(11)


(1.22
)


(0.56
)


(1.20
)


0.14



0.80Book value(12)


5.69



7.11



7.60



8.73



8.83Tangible book value(13)


5.67



7.09



7.57



7.60



7.95Cash dividend per share










0.1386



0.3697



0.3502Dividend payout ratio(14)


n/a



n/a



(12.61
)%


271.43
%


43.90
%     (1)
    
    Net income (loss) divided by average total assets. 27




---



##### Table of Contents



(2)
    
    Net income (loss) divided by average total equity.(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, foreclosed assets and gain on branch
    sale.(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)
    
    Nonperforming assets divided by the sum of tangible common
    equity and the allowance for loan losses(10)
    
    Earnings per share were retroactively adjusted to reflect the
    effect of a 2.8% stock dividend declared in November 2008.(11)
    
    Net income divided by average number of basic or diluted
    shares outstanding.(12)
    
    Shareholders equity divided by the number of shares
    outstanding.(13)
    
    Shareholders equity minus goodwill and core deposit
    intangible divided by the number of shares outstanding.(14)
    
    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
   28




---



##### Table of Contents



loan-to-value loan-to-value
  Allowance for Loan Losses.
 29




---



##### Table of Contents



Allowance for Loan LossesDecember 31,











December 31,2009


Provision


Recovery


Chargeoff


2010(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
6,546


$
8,226


$
312


$
(6,945
)

$
8,139Multifamily residential


2,182



7,531



7



(4,638
)


5,082Nonresidential


5,894



22,605



17



(15,957
)


12,559Land


666



2,233







(613
)


2,286Total


15,288



40,595



336



(28,153
)


28,066Construction LoansOne-to four-family residential


18,787



9,679



133



(20,339
)


8,260Multifamily and nonresidential


233



349







(309
)


273Total


19,020



10,028



133



(20,648
)


8,533Consumer LoansHome Equity


2,390



1,804



79



(1,309
)


2,964Auto


162



(28
)


50



(80
)


104Marine


701



327



15



(682
)


361Recreational vehicle


1,392



1,737



62



(1,672
)


1,519Other


314



239



332



(573
)


312Total


4,959



4,079



538



(4,316
)


5,260Commercial LoansSecured


1,084



2,165



20



(658
)


2,611Unsecured


1,936



5,560



221



(1,304
)


6,413Total


3,020



7,725



241



(1,962
)


9,024Total

$
42,287


$
62,427


$
1,248


$
(55,079
)

$
50,883  30




---



##### Table of Contents



Impaired Loans.
  Impaired LoansDecember 31,


December 31,2010


2009


Change(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
25,493


$
18,764


$
6,729Multifamily residential


11,487



7,863



3,624Nonresidential


58,861



25,686



33,557Land


5,569



5,160



409Total


101,410



57,473



44,319Construction LoansOne-to four-family residential


46,672



53,666



(6,994
)Multifamily and nonresidential


382



392



(392
)Total


47,054



54,058



(7,386
)Consumer LoansHome Equity


1,438



2,088



(650
)Auto


55



30



25Boat






1,103



(1,103
)Recreational vehicle


47



353



(306
)Other


7



8



(1
)Total


1,547



3,582



(2,035
)Commercial LoansSecured


2,171



3,365



(1,194
)Unsecured


4,273



327



3,946Total


6,444



3,692



2,752Total Impaired Loans

$
156,455


$
118,805


$
37,650   Troubled Debt Restructurings.
  
    Transfer from the borrower to Home Savings of receivables from
    third parties, real estate, or other assets to fully or
    partially satisfy a debt (including a transfer resulting from
    foreclosure or repossession).
    Issuance or other granting of an equity interest to Home Savings
    by the borrower to satisfy fully or partially a debt unless the
    equity interest is granted pursuant to existing terms for
    converting the debt into an equity interest.
    Modification of terms of a debt, such as one or a combination
    of:  
    Reduction of the stated interest rate for the remaining original
    life of the debt.
    Extension of the maturity date or dates at a stated interest
    rate lower than the current market rate for new debt with
    similar risk.
    Reduction of the face amount or maturity amount of the debt as
    stated in the instrument or other agreement.
    Reduction of accrued interest. 31




---



##### Table of Contents




    the fair value of cash, other assets, or an equity interest
    accepted by Home Savings from a borrower in full satisfaction of
    its receivable at least equals the recorded investment in the
    loan;
    the fair value of cash, other assets, or an equity interest
    transferred by a borrower to Home Savings in full settlement of
    its loan at least equals the carrying amount of the loan;
    Home Savings reduces the effective interest rate on the loan
    primarily to reflect a decrease in market interest rates in
    general or a decrease in the risk so as to maintain a
    relationship with a borrower that can readily obtain funds from
    other sources at the current market interest rate; or
    Home Savings issues, in exchange for the original loan, a new
    marketable loan having an effective interest rate based on its
    market price that is at or near the current market interest
    rates of loans with similar maturity dates and stated interest
    rates issued by other banks.    Troubled Debt RestructuringsDecember 31,


December 31,2010


2009


Change(Dollars in thousands)Real Estate LoansPermanentOne-to four-family

$
10,830


$
2,167


$
8,663Multifamily residential


2,410







2,410Nonresidential


22,313



3,595



18,718Land


1,344



1,050



294Total


36,897



6,812



30,085Construction LoansOne-to four-family residential


6,879



15,213



(8,334
)Multifamily and nonresidential










Total


6,879



15,213



(8,334
)Consumer LoansHome Equity


347



240



107Auto


9



18



(9
)Marine










Recreational vehicle










Other


7



8



(1
)Total


363



266



97Commercial LoansSecured


348



357



(9
)Unsecured


84







84Total


432



357



75Total Restructured Loans

$
44,571


$
22,648


$
21,923  32




---



##### Table of Contents



Nonperforming Loans.
  Nonperforming LoansDecember 31,


December 31,2010


2009


Change(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
27,417


$
26,766


$
651Multifamily residential


10,983



7,863



3,120Nonresidential


39,838



24,091



15,747Land


5,188



5,160



28Total


83,426



63,880



19,546Construction LoansOne-to four-family residential


44,021



42,819



1,202Multifamily and nonresidential


2,414



392



2,022Total


46,435



43,211



3,224Consumer LoansHome Equity


3,389



3,168



221Auto


89



148



(59
)Marine






1,103



(1,103
)Recreational vehicle


237



900



(663
)Other


10



64



(54
)Total


3,725



5,383



(1,658
)Commercial LoansSecured


1,822



3,061



(1,239
)Unsecured


4,123



352



3,771Total


5,945



3,413



2,532Total Nonperforming Loans

$
139,531


$
115,887


$
23,644     and/or and/or
 33




---



##### Table of Contents



Real Estate Owned


Repossessed Assets


Total(Dollars in thousands)Balance at December 31, 2009

$
30,340


$
622


$
30,962Acquisitions


32,408



1,393



33,801Sales


(18,262
)


(1,593
)


(19,855
)Change in valuation allowance


(4,572
)






(4,572
)Balance at December 31, 2010

$
39,914


$
422


$
40,336  34




---



##### Table of Contents



ValuationBalance


Allowance


Net Balance(Dollars in thousands)Real estate ownedOne-to four-family

$
10,458


$
(136
)

$
10,322Multifamily residential


6,769



(1,048
)


5,721Nonresidential


3,244







3,244One-to four-family residential construction


25,920



(6,148
)


19,772Land


855







855Total real estate owned


47,246



(7,332
)


39,914Repossessed assetsMarine


200







200Recreational vehicle


222







222Total repossessed assets


422







422Total real estate owned and other repossessed assets

$
47,668


$
(7,332
)

$
40,336          35




---



##### Table of Contents



Comparison
    of Operating Results for the Years Ended December 31, 2010
    and December 31, 2009
  Net Loss
  Net Interest Income
 36




---



##### Table of Contents



Provision for Loan Losses
  Non-interest Income
  Non-interest Expense
   37




---



##### Table of Contents



Federal Income Taxes true-up
  Comparison
    of Operating Results for the Years Ended December 31, 2009
    and December 31, 2008
  Net Loss
  Net Interest Income
        Provision for Loan Losses
 38




---



##### Table of Contents



Non-interest Income other-than-temporary
        Non-interest Expense
  Federal Income Taxes
  Discontinued Operations
 39




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
    other-than-temporary
  Allowance for loan losses.
        Mortgage servicing rights.
      Goodwill.
 40




---



##### Table of Contents



Income taxes.
      Other-than-temporary
    impairment. other-than-temporary. other-than-temporary other-than-temporary other-than-temporary
 41




---



##### Table of Contents



Yields
    Earned and Rates Paid
    Year Ended December 31,2010


2009


2008Average


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)

$
1,777,537


$
97,413



5.48
%

$
2,032,669


$
118,122



5.81
%

$
2,231,692


$
136,556



6.12
%Loans held for sale


9,209



415



4.51
%


26,898



1,006



3.74
%


9,674



466



4.82
%Securities:Trading











%











%


184



3



1.63
%Available for sale


327,782



11,727



3.58
%


266,121



11,455



4.30
%


276,396



13,652



4.94
%Federal Home Loan Bank stock


26,464



1,158



4.38
%


26,464



1,223



4.62
%


25,878



1,360



5.26
%Other interest earning assets


24,695



35



0.14
%


20,634



57



0.28
%


13,135



141



1.07
%Total interest earning assets


2,165,687



110,748



5.11
%


2,372,786



131,863



5.56
%


2,556,959



152,178



5.95
%Assets of discontinued operations














1,034











22,965Non-interest earning assets


134,263











131,881











144,096Total assets

$
2,299,950










$
2,505,701










$
2,724,020Interest bearing liabilities:Deposits:Checking accounts

$
412,672


$
3,176



0.77
%

$
382,076


$
4,297



1.12
%

$
426,790


$
9,475



2.22
%Savings accounts


212,146



792



0.37
%


194,957



933



0.48
%


180,010



811



0.45
%Certificates of deposit


956,824



28,094



2.94
%


1,112,042



40,755



3.66
%


1,169,403



49,953



4.27
%Federal Home Loan Bank advances


242,680



3,588



1.48
%


314,237



5,797



1.84
%


384,260



12,358



3.22
%Repurchase agreements and other


97,717



3,737



3.82
%


106,631



4,167



3.91
%


146,233



6,319



4.32
%Total interest bearing liabilities

$
1,922,039



39,387



2.05
%

$
2,109,943



55,949



2.65
%

$
2,306,696



78,916



3.42
%Liabilities of discontinued operations














1,770











8,290Non-interest bearing liabilities


162,211











151,437











135,861Total liabilities

$
2,084,250










$
2,263,150










$
2,450,847Shareholders equity


215,700











242,551











273,173Total liabilities and equity

$
2,299,950










$
2,505,701










$
2,724,020Net interest income andinterest rate spread





$
71,361



3.06
%





$
75,914



2.91
%





$
73,262



2.53
%Net interest margin










3.30
%










3.20
%










2.87
%Average interest earning assets to average interest bearing
    liabilities










112.68
%










112.46
%










110.85
%     (1)
    
    Nonaccrual loans are included in the average balance. 42




---



##### Table of Contents



Year Ended December 31,2010 vs. 2009


2009 vs. 2008Increase


Total


Increase


Total(Decrease) Due to


Increase


(Decrease) Due to


IncreaseRate


Volume


(Decrease)


Rate


Volume


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

$
(6,464
)

$
(14,245
)

$
(20,709
)

$
(6,648
)

$
(11,786
)

$
(18,434
)Loans held for sale


268



(859
)


(591
)


(78
)


618



540Securities:Trading














(2
)


(1
)


(3
)Available for sale


(731
)


1,003



272



(1,704
)


(493
)


(2,197
)Federal Home Loan Bank stock


(65
)






(65
)


(169
)


32



(137
)Other interest earning assets


(37
)


15



(22
)


(363
)


279



(84
)Total interest earning assets

$
(7,029
)

$
(14,086
)

$
(21,115
)

$
(8,964
)

$
(11,351
)

$
(20,315
)Interest bearing liabilities:Savings accounts

$
(235
)

$
94


$
(141
)

$
(4,271
)

$
(907
)

$
(5,178
)Checking accounts


(1,502
)


381



(1,121
)


52



70



122Certificates of deposit


(7,439
)


(5,222
)


(12,661
)


(6,837
)


(2,361
)


(9,198
)Federal Home Loan Bank advances


(1,029
)


(1,180
)


(2,209
)


(4,597
)


(1,964
)


(6,561
)Repurchase agreements and other


(88
)


(342
)


(430
)


(562
)


(1,590
)


(2,152
)Total interest bearing liabilities

$
(10,293
)

$
(6,269
)

$
(16,562
)

$
(16,215
)

$
(6,752
)

$
(22,967
)Change in net interest income









$
(4,553
)









$
2,652   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


$
657


$
940


$
521


$
1,915


$
4,033Deposits without a stated maturity


11



779,301















779,301Certificates of deposit


11



439,768



385,532



85,180







910,480Federal Home Loan Bank advances


12



113,210



29,165



10,188



50,255



202,818Repurchase agreements and other borrowings


13



7,797











90,000



97,797    43




---



##### 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, 2010NPV as % of Portfolio Value of Assets

Next 12 Months Net Interest IncomeInternal PolicyInternal Policy



Limitations on



Internal PolicyChange in Rates (Basis Points)

NPV Ratio

Limitations

Change in %

NPV % Change

$ Change

Limitations

% Change(Dollars in thousands)+300


7.37
%


6.00
%


(2.04
)%


25.0
%

$
(121
)


(15.00
)%


(0.17
)%+200


8.33



7.00



(1.08
)


25.0



123



(10.00
)


0.17+100


9.08



7.00



(0.33
)


25.0



215



(5.00
)


0.30Static


9.41



7.00



















     Year Ended December 31, 2009NPV 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


8.19
%


6.00
%


(1.76
)%

$
(4,414
)


(15.00
)%


(5.67
)%+200


9.31



7.00



(0.64
)


(2,125
)


(10.00
)


(2.73
)+100


10.03



7.00



0.08



(640
)


(5.00
)


(0.82
)Static


9.95



7.00















    44




---



##### Table of Contents



Potential
    Impact of Changes in Interest Rates
    Liquidity
    and Capital
    Years Ended December 31,2010


2009


2008(Dollars in thousands)Net loss

$
(37,273
)

$
(16,773
)

$
(35,279
)Adjustments to reconcile net income to net cash from operating
    activities


68,919



61,029



63,802Net cash from operating activities


31,646



44,256



28,523Net cash from investing activities


30,563



218,562



96,692Net cash from financing activities


(70,176
)


(261,161
)


(115,300
)Net change in cash and cash equivalents


(7,967
)


1,657



9,915Cash and cash equivalents at beginning of year


45,074



43,417



33,502Cash and cash equivalents at end of year

$
37,107


$
45,074


$
43,417        45




---



##### Table of Contents



(Shortfall) Excess ofMinimum

Actual Capital Over

ApplicableActual Capital

Requirement

Minimum Requirement

Asset BaseAmount

Percent

Amount

Percent

Amount

Percent

Total(Dollars in thousands)Tier 1 capital (leverage)

$
177,776



7.84
%

$
181,513



8.00
%

$
(3,737
)


(0.16
)%

$
2,268,913
(1)Risk-based capital


197,891



12.54



189,412



12.00



8,479



0.54



1,578,430
(2)     (1)
    
    Average tangible assets for the quarter ended December 31,
    2010(2)
    
    Total risk-weighted assets as of December 31, 2010    Excess of ActualMinimum


Capital Over Minimum


ApplicableActual Capital


Requirement


Requirement


Asset BaseAmount


Percent


Amount


Percent


Amount


Percent


Total(Dollars in thousands)Tangible capital

$
177,776



7.84
%

$
34,034



1.50
%

$
143,742



6.34
%

$
2,268,913
(1)Tier 1 capital (leverage)


177,776



7.84



90,757



4.00



87,019



3.84



2,268,913
(2)Risk-based capital


197,891



12.54



126,274



8.00



71,617



4.54



1,578,430
(3)     (1)
    
    Average tangible assets for the quarter ended December 31,
    2010(2)
    
    Average total assets for leverage capital purposes for the
    quarter ended December 31, 2010(3)
    
    Total risk-weighted assets as of December 31, 2010 46




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  CONSOLIDATED
    STATEMENTS OF FINANCIAL CONDITION
  December 31,2010


2009(Dollars in thousands)ASSETSCash and deposits with banks

$
18,627


$
22,330Federal funds sold


18,480



22,744Total cash and cash equivalents


37,107



45,074Securities:Available for sale, at fair value


362,042



281,348Loans held for sale


10,870



10,497Loans, net of allowance for loan losses of $50,883 and $42,287


1,649,486



1,866,018Federal Home Loan Bank stock, at cost


26,464



26,464Premises and equipment, net


22,076



23,139Accrued interest receivable


7,720



9,090Real estate owned and other repossessed assets


40,336



30,962Core deposit intangible


485



661Cash surrender value of life insurance


27,303



26,198Other assets


13,409



18,976Total assets

$
2,197,298


$
2,338,427LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDeposits:Non-interest bearing

$
138,571


$
126,779Interest bearing


1,551,210



1,642,722Total deposits


1,689,781



1,769,501Borrowed funds:Federal Home Loan Bank advances


202,818



221,323Repurchase agreements and other


97,797



96,833Total borrowed funds


300,615



318,156Advance payments by borrowers for taxes and insurance


20,668



19,791Accrued interest payable


809



1,421Accrued expenses and other liabilities


9,370



9,775Total liabilities


2,021,243



2,118,644Commitments 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
    and 30,937,704 and 30,897,825 shares, respectively
    outstanding


142,318



145,775Retained earnings


111,049



148,674Accumulated other comprehensive income (loss)


(4,778
)


4,110Unearned employee stock ownership plan shares






(5,821
)Treasury stock, at cost, 6,866,753 and 6,906,632 shares,
    respectively


(72,534
)


(72,955
)Total shareholders equity


176,055



219,783Total liabilities and shareholders equity

$
2,197,298


$
2,338,427    47




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2010


2009


2008(Dollars in thousands, except per share data)Interest incomeLoans

$
97,413


$
118,122


$
136,556Loans held for sale


415



1,006



466Securities:Trading










3Available for sale


11,727



11,455



13,652Federal Home Loan Bank stock dividends


1,158



1,223



1,360Other interest earning assets


35



57



141Total interest income


110,748



131,863



152,178Interest expenseDeposits


32,062



45,985



60,239Federal Home Loan Bank advances


3,588



5,797



12,358Repurchase agreements and other


3,737



4,167



6,319Total interest expense


39,387



55,949



78,916Net interest income


71,361



75,914



73,262Provision for loan losses


62,427



49,074



25,329Net interest income after provision for loan losses


8,934



26,840



47,933Non-interest incomeNon-deposit investment income


1,619



1,424



1,624Service fees and other charges


6,369



8,531



6,177Net gains (losses):Securities available for sale


8,803



1,863



1,936Other-than-temporary
    loss on equity securitiesTotal impairment loss


(58
)


(778
)


(6,087
)Loss recognized in other comprehensive income










Net impairment loss recognized in earnings


(58
)


(778
)


(6,087
)Trading securities










(38
)Mortgage banking income


4,365



6,164



2,809Real estate owned and other repossessed assets


(6,123
)


(7,918
)


(4,770
)Gain on sale of a retail branch


1,387







Other income


5,531



4,632



4,133Total non-interest income


21,893



13,918



5,784Non-interest expenseSalaries and employee benefits


32,699



30,493



32,570Goodwill impairment charge










33,593Occupancy


3,583



3,669



3,731Equipment and data processing


6,627



6,525



6,814Franchise tax


2,011



2,083



2,122Advertising


860



1,136



964Amortization of core deposit intangible


176



223



285Deposit insurance premiums


5,686



7,304



3,233Professional fees


4,106



3,520



3,400Real estate owned and other repossessed asset expenses


4,971



2,713



2,061Other expenses


7,612



5,974



5,413Total non-interest expense


68,331



63,640



94,186Loss before income taxes and discontinued operations


(37,504
)


(22,882
)


(40,469
)Income tax benefit


(231
)


(1,160
)


(3,240
)Net loss before discontinued operations


(37,273
)


(21,722
)


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






4,949



1,950Net loss

$
(37,273
)

$
(16,773
)

$
(35,279
)Net loss available to common shareholders

$
(37,273
)

$
(16,773
)

$
(35,279
)Other comprehensive incomeUnrealized gain/(loss) on securities, net of tax


(9,558
)


588



2,938Unrealized gain/(loss) on postretirement plan, net of tax


670



(113
)


36Comprehensive income (loss)

$
(46,161
)

$
(16,298
)

$
(32,305
)Earnings (loss) per shareBasic-continuing operations

$
(1.22
)

$
(0.73
)

$
(1.26
)Basic-discontinued operations






0.17



0.06Basic


(1.22
)


(0.56
)


(1.20
)Diluted-continuing operations


(1.22
)


(0.73
)


(1.26
)Diluted-discontinued operations






0.17



0.06Diluted


(1.22
)


(0.56
)


(1.20
)    48




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  UnearnedAccumulated


EmployeeOther


StockShares


Common


Retained


Comprehensive


Ownership


TreasuryOutstanding


Stock


Earnings


Income (Loss)


Plan Shares


Stock


Total(Shares outstanding and dollars in thousands, except per
    share data)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
)


234,923Comprehensive income:Net loss










(16,773
)














(16,773
)Other comprehensive income














475











475Comprehensive loss


























(16,298
)Shares allocated to ESOP participants






(786
)










1,822







1,036Stock based compensation






122



















122Balance December 31, 2009


30,898



145,775



148,674



4,110



(5,821
)


(72,955
)


219,783Comprehensive income:Net loss










(37,273
)














(37,273
)Other comprehensive loss














(8,888
)










(8,888
)Comprehensive loss


























(46,161
)Shares allocated to ESOP participants






(3,739
)










5,821







2,082Stock based compensation


40



282



(352
)










421



351Balance December 31, 2010


30,938


$
142,318


$
111,049


$
(4,778
)

$



$
(72,534
)

$
176,055    49




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2010


2009


2008(Dollars in thousands)Cash Flows from Operating ActivitiesNet loss

$
(37,273
)

$
(16,773
)

$
(35,279
)Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for loan losses


62,427



49,074



25,329Mortgage banking income


(4,365
)


(6,164
)


(2,809
)Net losses on real estate owned and other repossessed assets sold


6,123



7,918



4,763Net gain on retail branch sold


(1,387
)






Net gains on available for sale securities sold


(8,803
)


(1,863
)


(1,936
)Net (gains) losses on other assets sold


(301
)


(17
)


45Other than temporary impairment of securities available for sale


58



778



6,087Amortization of premiums and accretion of discounts


1,012



2,710



5,312Depreciation and amortization


1,953



2,148



2,532Federal Home Loan Bank stock dividends










(1,032
)Decrease in interest receivable


1,370



992



2,905Decrease in interest payable


(612
)


(1,656
)


(4,760
)Decrease in net deferred tax assets


3,650



3,795



401Decrease (increase) in prepaid and other assets


2,654



(6,822
)


(3,744
)Increase (decrease) in other liabilities


209



142



(1,797
)Decrease in trading securities










274Stock based compensation


351



122



150Goodwill impairment charges










33,593Net principal disbursed on loans originated for sale


(266,339
)


(344,121
)


(160,276
)Proceeds from sale of loans originated for sale


268,546



357,906



156,553ESOP compensation


2,082



1,036



1,428Net change in interest rate caps


116







Operating cash flows from discontinued operations






(4,949
)


784Net cash from operating activities


31,471



44,256



28,523Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Securities available for sale


87,532



56,199



50,569Proceeds from sale of:Securities available for sale


396,291



75,493



139,938Real estate owned and other repossessed assets


18,438



13,570



12,917Premises and equipment


35



38



35Interest rate caps


2,301







Loans transferred from portfolio to held for sale






69,621



77,736Purchases of:Securities available for sale


(568,328
)


(196,295
)


(167,141
)Interest rate caps


(2,126
)






Principal disbursed on loans, net of repayments


126,347



197,152



58,371Loans purchased


(6,712
)


(4,365
)


(86,758
)Purchases of premises and equipment


(882
)


(974
)


(960
)Sale of a retail branch


(22,158
)






Investing cash flows from discontinued operations






8,123



11,985Net cash from investing activities


30,573



218,562



96,692Cash Flows from Financing ActivitiesNet increase (decrease) in checking, savings and money market
    accounts


56,266



68,837



(43,969
)Net (decrease) increase in certificates of deposit


(109,778
)


(185,267
)


54,694Net increase (decrease) in advance payments by borrowers for
    taxes and insurance


877



(15
)


1,953Proceeds from Federal Home Loan Bank advances


961,200



737,800



718,900Repayment of Federal Home Loan Bank advances


(979,705
)


(854,080
)


(818,550
)Net change in repurchase agreements and other borrowings


964



(28,436
)


(24,264
)Cash dividends paid










(4,064
)Net cash from financing activities


(70,176
)


(261,161
)


(115,300
)Change in cash and cash equivalents


(7,967
)


1,657



9,915Cash and cash equivalents, beginning of year


45,074



43,417



33,502Cash and cash equivalents, end of year

$
37,107


$
45,074


$
43,417    50




---



##### 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
    Cash
    Flows
   51




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Securities
    other-than-temporary
  Loans
    Held for Sale
      Loans
       52




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Concentration
    of Credit Risk
    Allowance
    for Loan Losses
    non-classified
  case-by-case loan-by-loan
   53




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        Servicing
    Assets
        Transfers
    of Financial Assets
    Real
    Estate Owned and Other Repossessed Assets
   54




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Premises
    and Equipment
    Federal
    Home Loan Bank (FHLB) stock
    Cash
    Surrender Value of Life Insurance
    Goodwill
    and Core Deposit Intangible
      Mortgage
    Banking Derivatives
    Long-term
    Assets
    Loan
    Fees
   55




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Stock
    Compensation
    Income
    Taxes
      and/or
  401(k)
    Savings Plan
    Postretirement
    Benefit Plans
    Employee
    Stock Ownership Plan
    Stock
    Dividends
   56




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Dividend
    Restriction
    Earnings
    Per Share
    Loss
    Contingencies
    Fair
    Value of Financial Instruments
    Comprehensive
    Income
    Off
    Balance Sheet Financial Instruments
    New
    Accounting Standards
  other-than-temporary 1) other-than-temporary
 57




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  other-than-temporary
    No. 2011-01, No. 2010-20. no. 2010-20,
  Operating
    Segments
    Reclassifications
    2.
    CASH AND
    CASH EQUIVALENTS    3.
    REGULATORY
    ENFORCEMENT ACTION   58




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
          4.
    DISCONTINUED
    OPERATIONS   59




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31,2009


2008(Dollars in thousands)IncomeInterest income

$
32


$
813Brokerage commissions






25,667Service fees and other charges


1,287



5,876Underwriting and investment banking






1,151Gain on the sale of Butler Wick subsidiaries


7,904



3,317Other income






117Total income


9,223



36,941ExpensesInterest expense on borrowings






243Salaries and employee benefits


1,198



25,772Occupancy expenses


68



1,553Equipment and data processing


84



2,508Other expenses


258



3,798Total expenses


1,608



33,874Income before tax


7,615



3,067Income tax


2,666



1,117Net income

$
4,949


$
1,950   5.
    SECURITIES    December 31, 2010Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Available for SaleU.S. Treasury and government sponsored entities securities

$
65,099


$



$
(2,164
)

$
62,935Equity securities


235



159







394Mortgage-backed GSE securities: residential


300,290



1,688



(3,265
)


298,713Total

$
365,624


$
1,847


$
(5,429
)

$
362,042   60




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  December 31, 2009Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Available for SaleU.S. Treasury and government sponsored entities securities

$
48,717


$
313


$
(108
)

$
48,922Equity securities


472



236







708Mortgage-backed GSE securities: residential


226,182



5,536







231,718Total

$
275,371


$
6,085


$
(108
)

$
281,348     December 31, 2010Amortized


FairCost


Value(Dollars in thousands)Due in one year or less

$



$
Due after one year through five years






Due after five years through ten years


65,099



62,935Mortgage-backed GSE securities: residential


300,290



298,713Total

$
365,389


$
361,648       2010

2009

2008(Dollars in thousands)Proceeds

$
396,291


$
75,493


$
139,938Gross gains


8,970



1,863



1,936Gross losses


(167
)






Impairment charges


(58
)


(778
)


(6,087
)     available-for-sale
   61




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        Less than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


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

$
62,935


$
(2,164
)

$



$



$
62,935


$
(2,164
)Mortgage-backed securities GSE: residential


203,569



(3,265
)










203,569



(3,265
)Total temporarily impaired securities

$
266,504


$
(5,429
)

$



$



$
266,504


$
(5,429
)     Less than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


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

$
27,898


$
(108
)

$



$



$
27,898


$
(108
)Mortgage-backed securities GSE: residential


6















6



Total temporarily impaired securities

$
27,904


$
(108
)

$



$



$
27,904


$
(108
)            62




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  6.
    LOANS    December 31,2010


2009(Dollars in thousands)Real Estate:One-to four-family residential

$
757,426


$
773,831Multi-family residential


135,771



150,480Nonresidential


331,390



397,895Land


25,138



23,502Construction:One-to four-family residential and land development


108,583



178,095Multi-family and nonresidential


15,077



13,741Total real estate


1,373,385



1,537,544ConsumerHome equity


220,582



237,569Auto


11,525



13,784Marine


7,285



9,366Recreational vehicles


35,671



43,722Other


4,390



4,761Total consumer


279,453



309,202CommercialSecured


28,876



32,707Unsecured


17,428



27,510Total commercial


46,304



60,217Total loans


1,699,142



1,906,963Less:Allowance for loan losses


50,883



42,287Deferred loan costs, net


(1,227
)


(1,342
)Total


49,656



40,945Loans, net

$
1,649,486


$
1,866,018     sixty-day case-by-case
 63




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31,2010

2009Fixed Rate

Variable Rate

Fixed Rate

Variable Rate(Dollars in thousands)Commitments to make loans

$
53,677


$
7,137


$
51,625


$
2,535Undisbursed loans in process


1,676



24,792



3,838



48,372Unused lines of credit


52,232



61,444



64,619



51,766       tm tm
    Year Ended December 31,2010


2009


2008(Dollars in thousands)Balance, beginning of year

$
42,287


$
35,962


$
32,006Provision for loan losses


62,427



49,074



25,329Amounts charged off


(55,079
)


(43,692
)


(22,088
)Recoveries


1,248



943



715Balance, end of year

$
50,883


$
42,287


$
35,962  64




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Allowance for Loan LossesPermanentReal Estate


Construction


Consumer


CommercialLoans


Loans


Loans


Loans


Unallocated


Total(Dollars in thousands)2010Beginning balance

$
15,288


$
19,020


$
4,959


$
3,020


$



$
42,287Provision


40,595



10,028



4,079



7,725







62,427Chargeoffs


(28,153
)


(20,648
)


(4,316
)


(1,962
)






(55,079
)Recoveries


336



133



538



241







1,248Net chargeoffs


(27,817
)


(20,515
)


(3,778
)


(1,721
)






(53,831
)Ending balance

$
28,066


$
8,533


$
5,260


$
9,024


$



$
50,883Period-end amount allocated to:Loans individually evaluated for impairment

$
7,509


$
3,360


$



$
2,575


$



$
13,444Loans collectively evaluated for impairment


20,557



5,173



5,260



6,449







37,439Ending balance

$
28,066


$
8,533


$
5,260


$
9,024


$



$
50,883Period-end balances:Loans individually evaluated for impairment

$
56,744


$
23,589


$



$
4,269


$



$
84,602Loans collectively evaluated for impairment


1,192,981



100,071



279,453



42,035







1,614,540Ending balance

$
1,249,725


$
123,660


$
279,453


$
46,304


$



$
1,699,1422009Beginning balance

$
12,785


$
11,342


$
4,870


$
6,965


$



$
35,962Provision


13,938



20,462



5,392



9,282







49,074Chargeoffs


(11,552
)


(12,793
)


(6,117
)


(13,230
)






(43,692
)Recoveries


117



9



814



3







943Net chargeoffs


(11,435
)


(12,784
)


(5,303
)


(13,227
)






(42,749
)Ending balance

$
15,288


$
19,020


$
4,959


$
3,020


$



$
42,287Period-end amount allocated to:Loans individually evaluated for impairment

$
1,881


$
2,080


$
34


$
69


$



$
4,064Loans collectively evaluated for impairment


13,407



16,940



4,925



2,951







38,223Ending balance

$
15,288


$
19,020


$
4,959


$
3,020


$



$
42,287Period-end balances:Loans individually evaluated for impairment

$
16,313


$
19,068


$
338


$
643


$



$
36,362Loans collectively evaluated for impairment


1,329,395



172,768



308,864



59,574







1,870,601Ending balance

$
1,345,708


$
191,836


$
309,202


$
60,217


$



$
1,906,963  65




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  As of or for the Year EndedDecember 31,2010


2009


2008(Dollars in thousands)Impaired loans on which no specific valuation allowance was
    provided

$
71,853


$
82,443


$
43,256Impaired loans on which specific valuation allowance was provided


84,602



36,362



43,992Total impaired loans at year-end

$
156,455


$
118,805


$
87,248Specific valuation allowances on impaired loans at year-end


13,444



4,064



10,968Average impaired loans during year


144,977



103,026



85,812Interest income recognized on impaired loans during the year


1,778



2,056



513Interest income received on impaired loans during the year


4,570



2,056



513     Impaired LoansAllowanceUnpaid





for LoanPrincipal


Recorded


LossesBalance


Investment


Allocated(Dollars in thousands)With no specific allowance recordedPermanent real estate

$
60,516


$
44,666


$
Construction loans


31,715



23,465



Consumer loans


3,407



1,547



Commercial loans


16,148



2,175



Total


111,786



71,853



With a specific allowance recordedPermanent real estate


65,869



56,744



7,509Construction loans


35,777



23,589



3,360Consumer loans










Commercial loans


5,419



4,269



2,575Total


107,065



84,602



13,444Total

$
218,851


$
156,455


$
13,444      66




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Nonaccrual Loans and Loans Past Due Over 90 Days and Still
    AccruingLoans Past DueOver 90 Daysand StillNonaccrual


Accruing(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
27,417


$
Multifamily residential


10,983



Nonresidential


39,838



Land


5,188



Total


83,426



Construction LoansOne-to four-family residential


40,077



3,944Multifamily and nonresidential


382



2,032Total


40,459



5,976Consumer LoansHome Equity


3,179



210Auto


89



Marine






Recreational vehicle


93



144Other


10



Total


3,371



354Commercial LoansSecured


1,822



Unsecured


4,123



Total


5,945



Total

$
133,201


$
6,330  67




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Past Due LoansGreater30-59


60-89


than 90Days


Days


Days Past


Total Past


Current


TotalPast Due


Past Due


Due


Due


Loans


Loans(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
6,620


$
2,351


$
24,914


$
33,885


$
723,541


$
757,426Multifamily residential


326







9,898



10,224



125,547



135,771Nonresidential


1,888



13,146



30,382



45,416



285,974



331,390Land


12



426



5,188



5,626



19,512



25,138Total


8,846



15,923



70,382



95,151



1,154,574



1,249,725Construction LoansOne-to four-family residential


3,688



7,579



42,855



54,122



54,461



108,583Multifamily and nonresidential










2,414



2,414



12,663



15,077Total


3,688



7,579



45,269



56,536



67,124



123,660Consumer LoansHome Equity


2,003



880



2,519



5,402



215,180



220,582Auto


194



56



87



337



11,188



11,525Marine


61











61



7,224



7,285Recreational vehicle


1,693



618



188



2,499



33,172



35,671Other


25



10



9



44



4,346



4,390Total


3,976



1,564



2,803



8,343



271,110



279,453Commercial LoansSecured


163







1,822



1,985



26,891



28,876Unsecured


43







3,554



3,597



13,831



17,428Total


206







5,376



5,582



40,722



46,304Total

$
16,716


$
25,066


$
123,830


$
165,612


$
1,533,530


$
1,699,142    68




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Credit
    Quality Indicators:
      Special Mention.
  Substandard.
  Doubtful.
  Loss.
   69




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    LoansDecember 31, 2010Unclassified


ClassifiedSpecial











Total


TotalUnclassified


Mention


Substandard


Doubtful


Loss


Classified


Loans(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
723,814


$
2,404


$
31,208


$



$



$
31,208


$
757,426Multifamily residential


106,839



6,900



22,032











22,032



135,771Nonresidential


200,816



55,197



75,377











75,377



331,390Land


9,677



1,100



14,361











14,361



25,138Total


1,041,146



65,601



142,978











142,978



1,249,725Construction LoansOne-to four-family residential


47,308



6,122



55,021



132







55,153



108,583Multifamily and nonresidential


1,091



13,604



382











382



15,077Total


48,399



19,726



55,403



132







55,535



123,660Consumer LoansHome Equity


216,994







3,588











3,588



220,582Auto


11,420







105











105



11,525Marine


7,285























7,285Recreational vehicle


35,430







241











241



35,671Other


4,375







15











15



4,390Total


275,504







3,949











3,949



279,453Commercial LoansSecured


14,608



1,327



12,134



807







12,941



28,876Unsecured


9,327



2,132



4,304



1,665







5,969



17,428Total


23,935



3,459



16,438



2,472







18,910



46,304Total

$
1,388,984


$
88,786


$
218,768


$
2,604


$



$
221,372


$
1,699,142   70




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  LoansDecember 31, 2009Unclassified


ClassifiedSpecial











Total


TotalUnclassified


Mention


Substandard


Doubtful


Loss


Classified


Loans(Dollars in thousands)Real Estate LoansPermanentOne-to four-family residential

$
744,121


$
103


$
29,607


$



$



$
29,607


$
773,831Multifamily residential


128,444



6,497



15,539











15,539



150,480Nonresidential


303,102



28,484



65,612



697







66,309



397,895Land


9,612



7,046



6,844











6,844



23,502Total


1,185,279



42,130



117,602



697







118,299



1,345,708Construction LoansOne-to four-family residential


81,868



3,862



90,233



2,132







92,365



178,095Multifamily and nonresidential


9,287



4,062



392











392



13,741Total


91,155



7,924



90,625



2,132







92,757



191,836Consumer LoansHome Equity


234,132







3,437











3,437



237,567Auto


13,635







149











149



13,784Marine


8,263







1,103











1,103



9,366Recreational vehicle


42,822







900











900



43,722Other


4,690







71











71



4,761Total


303,542







5,660











5,660



309,202Commercial LoansSecured


18,202



822



12,683



1,000







13,683



32,707Unsecured


23,686



318



3,506











3,506



27,510Total


41,888



1,140



16,189



1,000







17,189



60,217Total

$
1,621,864


$
51,194


$
230,076


$
3,829


$



$
233,905


$
1,906,963   and/or
  (Dollars in thousands)Balance as of December 31, 2009

$
306New loans to officers and/or directors


246Loan payments during 2010


(57
)Reductions due to changes in officers and/or directors


(1
)Balance as of December 31, 2010

$
494   7.
    MORTGAGE
    BANKING ACTIVITIES   71




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2010


2009


2008(Dollars in thousands)Balance, beginning of year

$
6,228


$
5,562


$
6,184Originations


2,621



3,220



1,337Amortized to expense


(2,449
)


(2,554
)


(1,959
)Balance, end of year


6,400



6,228



5,562Less valuation allowance


(285
)


(423
)


(2,233
)Net balance

$
6,115


$
5,805


$
3,329       2010


2009


2008(Dollars in thousands)Balance, beginning of year

$
(423
)

$
(2,233
)

$
(562
)Impairment charges


(1,279
)






(2,233
)Recoveries


1,417



1,810



562Balance, end of year

$
(285
)

$
(423
)

$
(2,233
)     2010


2009Weighted average prepayment rate


332 PSA



325 PSAWeighted average life (in years)


3.71



3.65Weighted average discount rate


8
%


8
%     (Dollars in thousands)2011

$
1,4942012


1,3042013


1,0802014


9502015


812     8.
    OTHER
    REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS    2010


2009


2008(Dollars in thousands)Other real estate owned and other repossessed assets

$
47,668


$
38,829


$
32,012Valuation allowance


(7,332
)


(7,867
)


(2,754
)End of year

$
40,336


$
30,962


$
29,258  72




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2010


2009


2008(Dollars in thousands)Beginning of year

$
7,867


$
2,754


$
Additions charged to expense


4,572



7,925



3,753Direct write-downs


(5,107
)


(2,812
)


(999
)End of year

$
7,332


$
7,867


$
2,754     2010


2009


2008(Dollars in thousands)Net loss (gain) on sales

$
1,551


$
(187
)

$
2,016Provision for unrealized losses


4,572



8,105



2,754Operating expenses, net of rental income


4,971



2,713



2,061Total expenses

$
11,094


$
10,631


$
6,831   9.
    PREMISES
    AND EQUIPMENT    December 31,2010


2009(Dollars in thousands)Land

$
7,390


$
7,691Buildings


23,479



24,185Leasehold improvements


743



729Furniture and equipment


19,388



17,99151,000



50,596Less: Accumulated depreciation and amortization


28,924



27,457Total

$
22,076


$
23,139     (Dollars in thousands)2011

$
6572012


6162013


3242014


2742015


247Thereafter


1,915Total

$
4,033  73




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  10.
    GOODWILL
    AND INTANGIBLE ASSETS  Goodwill
      Acquired
    Intangible Assets
  As of December 31,2010


2009Gross





GrossCarrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


Amortization(Dollars in thousands)Amortized intangible assets:Core deposit intangibles

$
8,952


$
8,467


$
8,952


$
8,291Total

$
8,952


$
8,467


$
8,952


$
8,291Estimated amortization expense:For the year ended:December 31, 2011

$
139December 31, 2012


109December 31, 2013


86December 31, 2014


68December 31, 2015


54    74




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  11.
    DEPOSITS    December 31,2010


2009(Dollars in thousands)Checking accounts:Interest bearing

$
110,092


$
108,513Non-interest bearing


138,571



126,779Savings accounts


218,946



202,900Money market accounts


311,692



291,320Certificates of deposit


910,480



1,039,989Total deposits

$
1,689,781


$
1,769,501     Year Ended December 31,2010


2009


2008(Dollars in thousands)Interest bearing demand deposits and money market accounts

$
3,176


$
4,297


$
9,475Savings accounts


792



933



811Certificates of deposit


28,094



40,755



49,953Total

$
32,062


$
45,985


$
60,239     December 31, 2010(Dollars in thousands)Within 12 months

$
439,76812 months to 24 months


347,183Over 24 months to 36 months


38,349Over 36 months to 48 months


11,481Over 48 months


73,699Total

$
910,480     December 31,


December 31,2010


2009(Dollars in thousands)Three months or less

$
27,822


$
38,634Over three months to six months


18,674



35,250Over six months to twelve months


42,414



61,258Over twelve months


104,676



81,410Total

$
193,586


$
216,552  75




---



##### Table of Contents



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


December 31,2010


2009(Dollars in thousands)Three months or less

$
1,952


$
3,594Over three months to six months


2,600



3,873Over six months to twelve months


5,265



8,552Over twelve months


7,365



6,965Total

$
17,182


$
22,984     12.
    FEDERAL
    HOME LOAN BANK ADVANCES    December 31,2010


2009Weighted





WeightedYear of Maturity

Amount


Average Rate


Amount


Average Rate(Dollars in thousands)2010


n/a



n/a


$
153,118



0.63
%2011

$
113,210



0.35
%


5,590



4.992012


6,361



1.85



1,571



3.932013


22,804



2.48



10,598



3.862014


104



3.70



104



3.702015


10,084



2.52



84



3.70Thereafter


50,255



4.20



50,258



4.20Total Federal Home Loan Bank advances

$
202,818



1.70


$
221,323



1.73   loan-to-value
 76




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  13.
    SECURITIES
    SOLD UNDER AGREEMENT TO REPURCHASE AND OTHER
    BORROWINGS    December 31,2010


2009Weighted





WeightedAmount


Average Rate


Amount


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

$
97,161



3.79
%

$
96,180



3.85
%Other borrowings


636



4.00



653



4.00Total repurchase agreements and other

$
97,797



3.79
%

$
96,833



3.85
%   December 31,2010


2009(Dollars in thousands)Average daily balance during the year

$
97,717


$
105,357Average interest rate during the year


3.55
%


3.96
%Maximum month end balance during the year

$
98,815


$
99,103Weighted average interest rate at year end


3.79
%


3.85
%       14.
    LOSS
    CONTINGENCIES    15.
    INCOME
    TAXES    Year Ended December 31,2010


2009


2008(Dollars in thousands)Current

$
(3,881
)

$
(4,670
)

$
(2,048
)Deferred


(10,652
)


(4,090
)


(1,192
)Establish valuation allowance


14,302



7,600



Total

$
(231
)

$
(1,160
)

$
(3,240
)  77




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Year Ended December 31,2010


2009


2008Dollars


Rate


Dollars


Rate


Dollars


Rate(Dollars in thousands)Tax (benefit) at statutory rate

$
(13,126
)


35.0
%

$
(8,009
)


35.0
%

$
(14,164
)


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


















11,800



(29.2
)Tax exempt income


(3
)






(4
)






(15
)


0.0Life insurance


(377
)


1.0



(379
)


1.7



(321
)


0.8State taxes


















(14
)


0.0Acquisition/sale
    adjustments


















(649
)


1.6Other


(1,027
)


2.7



(368
)


1.6



123



(0.3
)Valuation allowance


14,302



(38.1
)


7,600



(33.2
)Income tax provision (benefit)

$
(231
)


0.6
%

$
(1,160
)


5.1
%

$
(3,240
)


7.9
%     December 31,2010


2009(Dollars in thousands)Deferred tax assets:Loan loss reserves

$
17,809


$
14,800Postretirement benefits


1,328



1,313ESOP shares released






992Other real estate owned valuation


2,566



2,753Tax credits carryforward


238



Securities impairment charges


266



2,403Interest on nonaccrual loans


2,030



951Net operating loss carryforward


9,683



Other


118



81Less: Valuation allowance


(21,902
)


(7,600
)Deferred tax assets


12,136



15,693Deferred tax liabilities:Purchase accounting adjustments


12



62Deferred loan fees


443



484Federal Home Loan Bank stock dividends


6,715



6,715Mortgage servicing rights


2,140



2,032Unrealized gain on securities available for sale


2,092



2,092Postretirement benefits accrual


121



121Prepaid expenses


548



519Other


65



18Deferred tax liabilities


12,136



12,043Net deferred tax asset

$



$
3,650  78




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
            16.
    SHAREHOLDERS
    EQUITY  Dividends
     79




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Other
    Comprehensive Income
      As of December 31,2010


2009


2008(Dollars in thousands)Unrealized holding (loss) gain on securities available for sale

$
(813
)

$
1,990


$
369Changes in net gains (losses) on postretirement benefit plans


670



(174
)


55Reclassification adjustment for (gains) losses realized in income


(8,745
)


(1,085
)


4,151Net unrealized gains (losses)


(8,888
)


731



4,575Tax effect (35)%






256



1,601Net of tax amount

$
(8,888
)

$
475


$
2,974     Balance at


Current


Balance atDecember 31,


Period


December 31,2009


Change


2010(Dollars in thousands)Unrealized gains (losses) on securities available for sale

$
3,885


$
(9,558
)

$
(5,673
)Unrealized gains (losses) on postretirement benefits


225



670



895Total

$
4,110


$
(8,888
)

$
(4,778
)   Liquidation
    Account
    17.
    REGULATORY
    CAPITAL REQUIREMENTS      80




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  As of December 31, 2010MinimumCapitalRequirementsActual


per Bank OrderAmount


Ratio


Amount


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

$
197,891



12.54
%

$
189,412



12.00
%Tier 1 capital to risk-weighted assets


177,776



11.26
%


*



*Tier 1 capital to average total assets


177,776



7.84
%


181,513



8.00
%   As of December 31, 2010Minimum


To Be Well CapitalizedCapital


Under PromptRequirements


Correctiveper Regulation


Action ProvisionsAmount


Ratio


Amount


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

$
126,274



8.00
%

$
157,843



10.00
%Tier 1 capital to risk-weighted assets


*



*



94,706



6.00
%Tier 1 capital to average total assets


90,757



4.00
%


113,446



5.00
%   As of December 31, 2009MinimumCapitalRequirementsActual


per Bank OrderAmount


Ratio


Amount


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

$
220,395



12.80
%

$
206,674



12.00
%Tier 1 capital to risk-weighted assets


198,610



11.53
%


*



*Tier 1 capital to average total assets


198,610



8.22
%


193,316



8.00
%   As of December 31, 2009To Be WellMinimum


CapitalizedCapital


Under PromptRequirements


Correctiveper Regulation


Action ProvisionsAmount


Ratio


Amount


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

$
137,783



8.00
%

$
172,229



10.00
%Tier 1 capital to risk-weighted assets


*



*



103,337



6.00
%Tier 1 capital to average total assets


96,658



4.00
%


120,822



5.00
%     *
    
    Ratio is not required under regulations.   81




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      18.
    BENEFIT
    PLANS  Postretirement
    Benefit Plans
    Year Ended December 31,2010


2009(Dollars in thousands)Change in Benefit Obligation:Benefit obligation at beginning of year

$
3,405


$
3,273Service cost






Interest cost


185



168Actuarial (gain)/loss


(670
)


174Benefits paid


(142
)


(210
)Benefit obligation at end of the year

$
2,778


$
3,405Funded status of the plan

$
(2,778
)

$
(3,405
)     The Year Ended December 31,2010


2009(Dollars in thousands)Net actuarial gains (losses)

$
1,015


$
224Prior service credit (cost)


1



1$
1,016


$
225    82




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Year Ended December 31,2010


2009


2008(Dollars in thousands)Service cost

$



$



$
Interest cost


186



187



193Expected return on plan assets










Net amortization of prior service cost


(1
)


(1
)


(1
)Amortization of net actuarial gain






(18
)


(12
)Net periodic benefit cost


185



168



180Net loss (gain)


(671
)


(155
)


52Prior service cost










3Amortization of prior service cost


1



(19
)


Total recognized in other comprehensive income


(670
)


(174
)


55Total recognized in net periodic benefit cost and other
    comprehensive income

$
(485
)

$
(6
)

$
235Assumptions used in the valuations were as follows:Weighted average discount rate


5.75
%


5.75
%


6.00
%       1 Percentage


1 PercentagePoint Increase


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

$
12


$
11Effect on the postretirement benefit obligation


186



165     (Dollars in thousands)2011

$
2512012


2552013


2562014


2542015


2482016-2020


1,093Total

$
2,357  83




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  401(k)
    Savings Plan
    Employee
    Stock Ownership Plan
        Stock-based
    Compensation: Stock Options
       84




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      For the Year Ended December 31, 2010Weighted Average


Aggregate IntrinsicShares


Exercise Price


Value(Dollars in thousands)Outstanding at beginning of year


2,200,672


$
7.95Granted


423,695



2.09Exercised






Forfeited


(387,045
)


7.75Outstanding at end of period


2,237,322


$
6.88


$
1Fully vested and expected to vest


2,237,322


$
6.88


$
Options exercisable at end of period


1,929,728


$
7.65


$
     2010

2009

2008Intrinsic value of options exercised

$



$



$
Cash received from option exercises










Tax benefit realized from option exercises










Weighted average fair value of options granted


1.33



1.07



0.68       Risk-free interest rate


2.47
%Expected term (years)


5Expected stock volatility


77.25
%Dividend yield


0.00
%     Stock-based
    Compensation: Restricted Stock Awards
   85




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      Weighted AverageGrant DateShares


Fair ValueNonvested shares at January 1, 2010





$
Granted


39,879



1.32Vested






Forfeited






Nonvested shares at December 31, 2010


39,879


$
1.32   Employee
    Stock Purchase Plan
    19.
    FAIR
    VALUE    Level 1:
  Level 2:
  Level 3:
    Available for sale securities:
  Impaired loans:
 86




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Foreclosed assets:
  Mortgage servicing rights:
  Loans held for sale:
  Assets
    and Liabilities Measured on a Recurring Basis
    Fair Value Measurements at December 31, 2010 Using:Quoted Prices in

SignificantActive Markets

Other

Significantfor Identical

Observable

UnobservableDecember 31,

Assets

Inputs

Inputs2010

(Level 1)

(Level 2)

(Level 3)(Dollars in thousands)Assets:Available for sale securitiesUS Treasury and government sponsored entities securities

$
62,935


$



$
62,935


$
Equity securities


394



394







Mortgage-backed securities GSE: residential


298,713







298,713



   Fair Value Measurements at December 31, 2009 Using:Quoted Prices in

SignificantActive Markets

Other

Significantfor Identical

Observable

UnobservableDecember 31,

Assets

Inputs

Inputs2009

(Level 1)

(Level 2)

(Level 3)(Dollars in thousands)Assets:Available for sale securitiesUS Treasury and government sponsored entities securities

$
48,922


$



$
48,922


$
Equity securities


708



708







Mortgage-backed securities GSE: residential


231,718







231,718



  87




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Assets
    and Liabilities Measured on a Non-Recurring Basis
    Fair Value Measurements at December 31, 2010 Using:Quoted Prices in

SignificantActive Markets

Other

Significantfor Identical

Observable

UnobservableDecember 31,

Assets

Inputs

Inputs2010

(Level 1)

(Level 2)

(Level 3)(Dollars in thousands)Assets:Impaired loansPermanent real estate loans

$
49,235


$



$



$
49,235Construction loans


20,229











20,229Commercial loans


1,694











1,694Loans held for sale


10,845







10,845



Mortgage servicing assets


2,278







2,278



Foreclosed assetsPermanent real estate loans


3,930











3,930Construction loans


10,527











10,527   Fair Value Measurements at December 31, 2009 Using:Quoted Prices in

SignificantActive Markets

Other

Significantfor Identical

Observable

UnobservableDecember 31,

Assets

Inputs

Inputs2009

(Level 1)

(Level 2)

(Level 3)(Dollars in thousands)Assets:Impaired loans

$
32,298


$



$



$
32,298Mortgage servicing assets


1,865







1,865



Foreclosed assets


19,534











19,534        88




---



##### 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 
  Limitations
     89




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31, 2010


December 31, 2009Carrying


Fair


Carrying


FairValue


Value


Value


Value(Dollars in thousands)Assets:Cash and cash equivalents

$
37,107


$
37,107


$
45,074


$
45,074Available for sale securities


362,042



362,042



281,348



281,348Loans held for sale


10,870



10,870



10,497



10,551Loans, net


1,649,486



1,675,610



1,866,018



1,873,776Federal Home Loan Bank stock


26,464



n/a



26,464



n/aAccrued interest receivable


7,720



7,720



9,090



9,090Liabilities:Deposits:Checking, savings and money market accounts


(779,301
)


(779,301
)


(729,512
)


(729,512
)Certificates of deposit


(910,480
)


(925,325
)


(1,039,989
)


(1,051,133
)Federal Home Loan Bank advances


(202,818
)


(210,497
)


(221,323
)


(227,350
)Repurchase agreements and other


(97,797
)


(107,299
)


(96,833
)


(105,546
)Advance payments by borrowers for taxes and insurance


(20,668
)


(20,668
)


(19,791
)


(19,791
)Accrued interest payable


(809
)


(809
)


(1,421
)


(1,421
)     20.
    STATEMENT
    OF CASH FLOWS SUPPLEMENTAL DISCLOSURE    Year Ended December 31,2010

2009

2008(Dollars in thousands)Supplemental disclosures of cash flow information:Cash paid (refunded) during the year for:Interest on deposits and borrowings

$
39,999


$
57,605


$
83,676Income taxes


(4,480
)


600



(2,108
)Supplemental schedule of noncash activities:Loans transferred to held for sale






71,707



Transfers from loans to real estate owned


33,936



23,192



36,429Transfers from premises and equipment to assets held for sale






714



  90




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  21.
    PARENT
    COMPANY FINANCIAL STATEMENTS  Condensed
    Statements of Financial Condition
  December 31,2010


2009(Dollars in thousands)AssetsCash and deposits with banks

$
2,619


$
8,015Federal funds sold and other


2



9Total cash and cash equivalents


2,621



8,024Securities:Available for sale


394



633Note receivable from ESOP






8,657Investment in subsidiary-Home Savings


173,407



203,227Other assets


6



272Total assets

$
176,428


$
220,813Liabilities and Shareholders EquityAccrued expenses and other liabilities

$
373


$
1,030Total liabilities


373



1,030Total shareholders equity


176,055



219,783Total liabilities and shareholders equity

$
176,428


$
220,813   Condensed
    Statements of Income
  Year Ended December 31,2010


2009


2008(Dollars in thousands)IncomeCash dividends from Butler Wick

$



$
11,890


$
14,700Interest income


349



847



2,208Non-interest income (loss)


228



(681
)


(1,226
)Total income


577



12,056



15,682ExpensesInterest expense






48



1,341Non-interest expenses


1,957



2,190



1,980Total expenses


1,957



2,238



3,321Income before income taxes


(1,380
)


9,818



12,361Income tax benefit






(721
)


(1,304
)Income before equity in undistributed net earnings of
    subsidiaries


(1,380
)


10,539



13,665Decrease in undistributed earnings of subsidiaries


(35,893
)


(27,312
)


(48,944
)Net income (loss)

$
(37,273
)

$
(16,773
)

$
(35,279
)  91




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Condensed
    Statements of Cash Flows
  Year Ended December 31,2010


2009


2008(Dollars in thousands)Cash Flows from Operating ActivitiesNet loss

$
(37,273
)

$
(16,773
)

$
(35,279
)Adjustments to reconcile net income to net cash provided by
    operating activities:Decrease in undistributed earnings of the subsidiaries


35,893



27,312



48,944Gains on available for sale securities sold


(255
)






Security impairment charges


58



752



1,188Decrease in trading securities










312Decrease (increase) in other assets


266



1,903



(1,752
)(Decrease) increase in accrued interest payable






(46
)


(197
)Stock based compensation


52



30



Decrease in other liabilities


(662
)


(3,641
)


(763
)Net cash from operating activities


(1,921
)


9,537



12,453Cash Flows from Investing ActivitiesSales of:Securities available for sale


359







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










30,000Equity investment in Home Savings


(12,498
)






(16,250
)ESOP loan repayment


8,657



2,294



2,120Net cash from investing activities


(3,482
)


2,294



15,870Cash Flows from Financing ActivitiesCash dividends paid










(4,064
)Net decrease in borrowed funds






(6,900
)


(29,400
)Net cash from (used in) financing activities






(6,900
)


(33,464
)Increase (decrease) in cash and cash equivalents


(5,403
)


4,931



(5,141
)Cash and cash equivalents, beginning of year


8,024



3,093



8,234Cash and cash equivalents, end of year

$
2,621


$
8,024


$
3,093   22.
    SEGMENT
    INFORMATION     92




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  23.
    EARNINGS
    PER SHARE    2010


2009


2008(Dollars in thousands, except per share data)Numerator:Income (loss) from continuing operations

$
(37,273
)

$
(21,722
)

$
(37,229
)Income from discontinued operations






4,949



1,950Net income (loss)

$
(37,273
)

$
(16,773
)

$
(35,279
)Denominator:Weighted average common shares outstanding  basic


30,457



29,766



29,463Dilutive effect of stock options










Weighted average common shares outstanding  dilutive


30,457



29,766



29,463Basic earnings (loss) per share:Basic earnings (loss) per common
    share  continuing operations

$
(1.22
)

$
(0.73
)

$
(1.26
)Basic earnings per common share-discontinued operations






0.17



0.06Basic earnings (loss) per common share


(1.22
)


(0.56
)


(1.20
)Dilutive earnings (loss) per share:Dilutive earnings (loss) per common
    share  continuing operations

$
(1.22
)

$
(0.73
)

$
(1.26
)Dilutive earnings per common share-discontinued operations






0.17



0.06Dilutive earnings (loss) per common share


(1.22
)


(0.56
)


(1.20
)  93




---



##### Table of Contents



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


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(Dollars in thousands, except per share data)2010:Interest income

$
28,805


$
28,185


$
28,240


$
25,518


$
110,748Interest expense


11,089



10,214



9,454



8,630



39,387Net interest income


17,716



17,971



18,786



16,888



71,361Provision for loan losses


12,450



10,310



17,116



22,551



62,427Net interest income after provision for loan losses


5,266



7,661



1,670



(5,663
)


8,934Non-interest income


6,560



4,745



4,115



6,473



21,893Non-interest expenses


16,968



17,291



15,700



18,372



68,331Loss before taxes


(5,142
)


(4,885
)


(9,915
)


(17,562
)


(37,504
)Income tax benefit














(231
)


(231
)Net income (loss)

$
(5,142
)

$
(4,885
)

$
(9,915
)

$
(17,331
)


(37,273
)Earnings (loss) per share:Basic earnings (loss) from continuing operations

$
(0.17
)

$
(0.16
)

$
(0.32
)

$
(0.56
)

$
(1.22
)Basic earnings from discontinued operations


















Basic earnings (loss)


(0.17
)


(0.16
)


(0.32
)


(0.56
)


(1.22
)Diluted earnings (loss) from continuing operations


(0.17
)


(0.16
)


(0.32
)


(0.56
)


(1.22
)Diluted earnings from discontinued operations


















Diluted earnings (loss)


(0.17
)


(0.16
)


(0.32
)


(0.56
)


(1.22
)  94




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    UnauditedFirst


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(Dollars in thousands, except per share data)2009:Interest income

$
34,428


$
33,391


$
32,755


$
31,289


$
131,863Interest expense


15,699



14,704



13,350



12,196



55,949Net interest income


18,729



18,687



19,405



19,093



75,914Provision for loan losses


8,444



12,311



5,579



22,740



49,074Net interest income after provision for loan losses


10,285



6,376



13,826



(3,647
)


26,840Non-interest income


2,743



6,205



119



4,851



13,918Non-interest expenses


16,399



17,202



15,385



14,654



63,640Income (loss) before taxes and discontinued operations


(3,371
)


(4,621
)


(1,440
)


(13,450
)


(22,882
)Income tax expense (benefit)


(1,692
)


(1,707
)


(573
)


2,812



(1,160
)Net income (loss) before discontinued operations


(1,679
)


(2,914
)


(867
)


(16,262
)


(21,722
)Discontinued operationsNet income of Butler Wick Corp., net of tax


4,949















4,949Net income (loss)

$
3,270


$
(2,914
)

$
(867
)

$
(16,262
)

$
(16,773
)Earnings per share:Basic earnings (loss) from continuing operations

$
(0.06
)

$
(0.10
)

$
(0.03
)

$
(0.54
)

$
(0.73
)Basic earnings from discontinued operations


0.17















0.17Basic earnings (loss)


0.11



(0.10
)


(0.03
)


(0.54
)


(0.56
)Diluted earnings (loss) from continuing operations


(0.06
)


(0.10
)


(0.03
)


(0.54
)


(0.73
)Diluted earnings from discontinued operations


0.17















0.17Diluted earnings (loss)


0.11



(0.10
)


(0.03
)


(0.54
)


(0.56
)    95




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
  Board of
    Directors and Shareholders
                /s/ Crowe Horwath LLP
      96




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##### 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
  /S/ Patrick W.
    Bevack

/S/ James R.
    ReskePatrick W. Bevack, Chief Executive Officer

James R. Reske, Chief Financial OfficerMarch 25, 2011

March 25, 2011  97




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##### 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     98




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##### Table of Contents



Equity
    Compensation Plan Information
  (a)

(b)

(a)

(b)

(c)Number ofSecuritiesRemainingAvailablefor FutureIssuanceUnder EquityNumber of



CompensationNumber of

Weighted-

Securities to be

Weighted-

PlansSecurities to be

Average

Issued Upon

Average

(ExcludingIssued Upon

Exercise

Vesting of

Grant Price of

SecuritiesExercise of

Price of

Restricted

Restricted

Reflected inOutstanding

Outstanding

Stock

Stock

ColumnPlan Category

Options

Options

Awards

Awards

(a))Equity compensation plans approved by security holders


2,237,322


$
6.88



39,879


$
1.32



1,404,211   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   99




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  (a)
    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 Regulations10

Material Contracts11

Statement Regarding Computation of Per Share Earnings20

Proxy Statement for 2011 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  100




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##### Table of Contents



SIGNATURES    UNITED COMMUNITY FINANCIAL CORP.
  /s/  Patrick
    W. Bevack         /s/  Richard
    J.
    Schiraldi

/s/  Patrick
    W.
    BevackRichard J. Schiraldi
    Chairman of the Board and Director
    Date: March 25, 2011

Patrick W. Bevack
    Chief Executive Officer, Principal Executive Officer and
    Director
    Date: March 25, 2011/s/  James
    R.
    Reske

/s/  Eugenia
    C.
    AtkinsonJames R. Reske
    Treasurer, Chief Financial Officer, and Principal Financial
    Officer
    Date: March 25, 2011

Eugenia C. Atkinson
    Director 
    Date: March 25, 2011/s/  Richard
    J. Buoncore

/s/  Scott
    N.
    CrewsonRichard J. Buoncore

Scott N. CrewsonDirector

DirectorDate: March 25, 2011

Date: March 25, 2011/s/  Scott
    D.
    Hunter

/s/  David
    C.
    SweetScott D. Hunter

David C. SweetDirector

DirectorDate: March 25, 2011

Date: March 25, 2011/s/  Donald
    J.
    VarnerDonald J. VarnerDirectorDate: March 25, 2011  101




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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 3.210.1

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 April 30,
    2010

Incorporated by reference to the Second Quarter form 10-Q filed
    by United Community on August 16, 2010 via Edgar, film
    number 101021114, Exhibit 10.210.4

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and Gregory G. Krontiris dated
    April 30, 2010

Incorporated by reference to the Second Quarter form 10-Q filed
    by United Community on August 16, 2010 via Edgar, film
    number 101021114, Exhibit 10.310.5

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and Jude J. Nohra dated April 30, 2010

Incorporated by reference to the Second Quarter form 10-Q filed
    by United Community on August 16, 2010 via Edgar, film
    number 101021114, Exhibit 10.410.6

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and James R. Reske dated April 30, 2010

Incorporated by reference to the Second Quarter form 10-Q filed
    by United Community on August 16, 2010 via Edgar, film
    number 101021114, Exhibit 10.510.7

Amended and Restated United Community 1999 Long -Term Incentive
    Plan

Incorporated by reference to the 2008 10-K filed by United
    Community on March 17, 2010 via Edgar, film number 09686271
    (2008 10-K), Exhibit 10.810.8

Amended and Restated United Community 2007 Long-Term Incentive
    Plan

Incorporated by reference to the 2008 10-K filed by United
    Community on March 17, 2010 via Edgar, film number 09686271
    (2008 10-K), Exhibit 10.910.9

2010 Director
    Sub-Plan to
    the Amended and Restated United Community 2007 Long -Term
    Incentive Plan

Incorporated by reference to the Third Quarter 2010 form  10-Q
    filed by United Community on November 12, 2010 via Edgar,
    film number 101187428, Exhibit 10.110.10

Executive Incentive Plan

Incorporated by reference to the 8-K filed by United Community
    on July 21, 2009 via Edgar, film number 0995568510.11

OTS Order

Incorporated by reference to the 8-K filed by United Community
    on August 13, 2008 via Edgar, film number 081011722 Exhibit 10.1 102




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##### Table of Contents



ExhibitNumber10.12

Amendment to the OTS Order

Incorporated by reference to the Third Quarter 2010 form  10-Q
    filed by United Community on November 12, 2010 via Edgar,
    film number 101187428, Exhibits 10.2 and 10.310.13

Bank Order

Incorporated by reference to the 8-K filed by United Community
    on August 13, 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 Item 8 herein20

Proxy Statement for 2011 Annual Meeting of Shareholders

Incorporated by reference to the Proxy Statement, to be filed
    with the Securities and Exchange Commission on or about March
    25, 201121

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  103