##### 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, 2009ORo

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 o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K 




---



##### 





TABLE OF
    CONTENTS
   
 ItemNumber



PagePART I1.


Description of Business


1General


1Discussion of Forward-Looking
    Statements


2Lending Activities


2Investment Activities


11Sources of Funds


12Competition


15Employees


15Regulation


151A.


Risk Factors


171B.


Unresolved Staff Comments


202.


Properties


203.


Legal Proceedings


204.


Submission of Matters to a Vote of Security
    Holders


20PART II5.


Market for Registrants Common Equity and
    Related Shareholder Matters


216.


Selected Financial Data


237.


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


257A.


Quantitative and Qualitative Disclosures About
    Market Risk


428.


Financial Statements and Supplemental Data


459.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


919A.


Controls and Procedures


919B.


Other Information


91PART III10.


Directors and Executive Officers and Corporate
    Governance


9111.


Executive Compensation


9112.


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


9113.


Certain Relationships and Related Transactions
    and Director Independence


9214.


Principal Accountant Fees and Services


92PART IV15.


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


93Signatures


94Exhibit Index


95EX-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,
   LENDING
    ACTIVITIES  General.
 2




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##### Table of Contents



Loan Portfolio Composition.
  At December 31,2009


2008


2007


2006


2005Percent 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

$
773,831



40.58
%

$
909,567



40.65
%

$
871,019



38.41
%

$
854,829



37.65
%

$
749,362



35.44
%Multifamily residential


150,480



7.89



187,711



8.39



179,535



7.92



163,541



7.20



154,702



7.32Nonresidential


397,895



20.87



375,463



16.78



359,070



15.84



348,528



15.35



314,124



14.86Land


23,502



1.23



23,517



1.05



22,818



1.01



26,684



1.18



14,979



0.71Total permanent


1,345,708



70.57



1,496,258



66.87



1,432,442



63.18



1,393,582



61.38



1,233,167



58.33Construction loans:One-to four-family residential and land development


178,095



9.34



255,355



11.41



357,153



15.75



388,926



17.13



389,558



18.43Multifamily and nonresidential


13,741



0.72



35,797



1.60



25,191



1.11



25,215



1.11



66,788



3.16Total construction


191,836



10.06



291,152



13.01



382,344



16.86



414,141



18.24



456,346



21.59Total real estate loans


1,537,544



80.63



1,787,410



79.88



1,814,786



80.04



1,807,723



79.62



1,689,513



79.92Consumer loans:Home equity


237,569



12.46



253,348



11.32



234,362



10.33



220,679



9.72



196,986



9.32Auto


13,784



0.72



24,138



1.08



31,206



1.38



36,605



1.61



42,975



2.03Marine


9,366



0.49



11,781



0.53



14,196



0.63



19,218



0.85



23,434



1.11RV


43,722



2.29



54,003



2.41



63,587



2.80



59,642



2.63



48,108



2.27Other(1)


4,761



0.25



5,564



0.25



6,096



0.27



9,463



0.42



12,012



0.57Total consumer


309,202



16.21



348,834



15.59



349,447



15.41



345,607



15.23



323,515



15.30Commercial loans


60,217



3.16



101,489



4.53



103,208



4.55



116,952



5.15



100,977



4.78Total loans


1,906,963



100.00
%


2,237,733



100.00
%


2,267,441



100.00
%


2,270,282



100.00
%


2,114,005



100.00
%Less net items


40,945







34,280







30,453







16,723







16,572Total loans, net

$
1,866,018






$
2,203,453






$
2,236,988






$
2,253,559






$
2,097,433     (1)
    
    Consists primarily of overdraft protection loans and loans to
    individuals secured by demand accounts, deposits and other
    consumer assets.  Loan Maturity. due-on-sale
  Principal Repayments ContractuallyDue in the Years Ended December 31,2010


2011-2014


2015 and thereafter


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

$
134,940


$
19,253


$
23,902


$
178,095Multifamily and nonresidential


7,242



1,689



4,810



13,741Commercial loans


38,785



11,241



10,191



60,217Total

$
180,967


$
32,183


$
38,903


$
252,053  3




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##### Table of Contents



Due after December 31, 2010(Dollars in thousands)Fixed rate

$
33,058Adjustable rate


38,028$
71,086   Loans Secured by One-to Four-Family Real
    Estate.
  30-year
          Loans Secured by Multifamily Residences.
   4




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##### Table of Contents



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




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##### Table of Contents



Commercial Loans.
        Reduction in loan concentrations.
 6




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##### Table of Contents



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




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##### Table of Contents



Loans to One Borrower Limits.
    Delinquent Loans, Nonperforming Assets and Classified
    Assets.
  At December 31,2009


2008Percent of








Percent ofNet








NetNumber


Amount


Loans


Number


Amount


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


366


$
33,455



1.79
%


528


$
46,365



2.10
%60-89 days


130



16,133



0.87



181



17,455



0.7990 days or over


712



107,533



5.76



606



99,715



4.53Total delinquent loans


1,208


$
157,121



8.42
%


1,315


$
163,535



7.42
%     deed-in-lieu
     8




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##### Table of Contents



At December 31,2009


2008


2007


2006


2005(Dollars in thousands)Nonperforming loans:Nonaccrual loansReal estate loans:One-to four-family residential

$
26,720


$
21,622


$
12,708


$
8,977


$
6,795Multifamily and nonresidential


31,954



23,969



27,201



16,569



6,368Construction (net of loans in process) and land


45,239



42,560



48,043



20,858



4,732Total real estate loans


103,913



88,151



87,952



46,404



17,895Consumer


4,892



5,549



4,809



3,245



2,495Commercial


3,413



4,553



4,738



2,997



3,889Total nonaccrual loans


112,218



98,253



97,499



52,646



24,279Past due 90 days and still accruing


3,669



6,631



1,215



796



563Total nonperforming loans


115,887



104,884



98,714



53,442



24,842Real estate acquired through foreclosure and other repossessed
    assets


30,962



29,258



10,510



3,242



2,514Total nonperforming assets

$
146,849


$
134,142


$
109,224


$
56,684


$
27,356Nonperforming loans as a percent of loans, net


6.21
%


4.76
%


4.41
%


2.37
%


1.18
%Nonperforming assets as a percent of total assets


6.28



5.12



3.94



2.10



1.08Allowance for loan losses as a percent of nonperforming loans


36.49



34.29



32.42



31.73



63.29Allowance for loan losses as a percent of loans, net


2.22



1.61



1.41



0.75



0.74           Allowance for Loan Losses.
 9




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##### Table of Contents



Year Ended December 31,2009


2008


2007


2006


2005(Dollars in thousands)Balance at beginning of period

$
35,962


$
32,006


$
16,955


$
15,723


$
15,877Provision for loan losses


49,074



25,329



28,750



4,347



3,028Charge-offs:Permanent real estate


(11,552
)


(6,827
)


(962
)


(737
)


(961
)Construction real estate


(12,793
)


(9,151
)


(5,924
)


(320
)


(35
)Consumer


(6,117
)


(3,978
)


(3,605
)


(2,334
)


(2,848
)Commercial


(13,230
)


(2,132
)


(3,729
)


(47
)


(241
)Total charge-offs


(43,692
)


(22,088
)


(14,220
)


(3,438
)


(4,085
)Recoveries:Permanent real estate


117



29



10



34



51Construction real estate


9



10







1



2Consumer


814



575



509



283



848Commercial


3



101



2



5



2Total recoveries


943



715



521



323



903Net charge-offs


(42,749
)


(21,373
)


(13,699
)


(3,115
)


(3,182
)Balance at end of year

$
42,287


$
35,962


$
32,006


$
16,955


$
15,723Ratio of net charge-offs to average net loans


(2.10
)%


(0.96
)%


(0.60
)%


(0.14
)%


(0.16
)%    10




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##### Table of Contents



2009


2008


2007


2006


2005Percent 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

$
15,288



70.57
%

$
12,785



66.87
%

$
10,285



63.18
%

$
5,459



61.39
%

$
7,152



58.33
%Construction real estate loans


19,020



10.06
%


11,342



13.01
%


12,499



16.86
%


3,321



18.24
%


2,531



21.59
%Consumer loans


4,959



16.21
%


4,870



15.59
%


5,485



15.41
%


5,147



15.22
%


3,378



15.30
%Commercial loans


3,020



3.16
%


6,965



4.53
%


3,737



4.55
%


3,028



5.15
%


2,662



4.78
%Total

$
42,287



100.00
%

$
35,962



100.00
%

$
32,006



100.00
%

$
16,955



100.00
%

$
15,723



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




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##### Table of Contents



At December 31, 2009After 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

$





%

$
499



5.09
%

$
40,071



3.01
%

$
8,147



4.30
%Mortgage-related securities


















445



6.20



6,055



4.70Other securities(a)


472



2.87























Total securities

$
472



2.87
%

$
499



5.09
%

$
40,516



3.05
%

$
14,202



4.47
%   At December 31, 2009After Ten Years


TotalAmortized


Average


Amortized


Average


FairCost


Yield


Cost


Yield


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

$





%

$
48,717



3.25
%

$
48,922Mortgage-related securities


219,682



4.43



226,182



4.44



231,718Other securities(a)










472



2.87



708Total securities

$
219,682



4.43
%

$
275,371



4.23
%

$
281,348     (a)
    
    Yield on equity securities only SOURCES
    OF FUNDS  General.
  Deposits.
   12




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##### Table of Contents



At December 31, 2009


For The Year Ended December 31, 2009Percent


Weighted





Percent


Weightedof Total


Average


Average


of Average


AverageAmount


Deposits


Rate


Balance


Deposits


Rate(Dollars in thousands)Noninterest bearing demand

$
126,779



7.16
%



%

$
117,587



6.51
%



%Checking and money market accounts


399,833



22.60



1.00



382,076



21.15



1.12Savings accounts


202,900



11.47



0.47



194,957



10.79



0.48Certificates of deposit


1,039,989



58.77



3.37



1,112,042



61.55



3.66Total deposits

$
1,769,501



100.00
%


2.26
%

$
1,806,662



100.00
%


2.54
%   For the Year Ended December 31, 2008


For the Year Ended December 31, 2007Percent


Weighted





Percent


WeightedAverage


of Average


Average


Average


of Average


AverageBalance


Deposits


Rate


Balance


Deposits


Rate(Dollars in thousands)Noninterest bearing demand

$
110,000



5.83
%



%

$
103,268



5.70
%



%Checking and money market accounts


426,790



22.63



2.22



397,290



21.93



3.50Savings accounts


180,010



9.54



0.45



185,949



10.26



0.41Certificates of deposit


1,169,403



62.00



4.27



1,125,117



62.11



4.74Total deposits

$
1,886,203



100.00
%


3.19
%

$
1,811,624



100.00
%


3.75
%     Over


OverUp to


1 Year to


2 Years toRate

One Year


2 Years


3 Years


Thereafter


Total(Dollars in thousands)2.00% or less

$
154,162


$
42,592


$
1,704


$
222


$
198,6802.01% to 4.00%


223,169



75,770



7,198



39,364



345,5014.01% to 6.00%


259,944



42,417



187,341



6,106



495,808Total certificates of deposit

$
637,275


$
160,779


$
196,243


$
45,692


$
1,039,989    13




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##### Table of Contents



Maturity

Amount(Dollars in thousands)Three months or less

$
38,634Over 3 months to 6 months


35,250Over 6 months to 12 months


61,258Over 12 months


81,410Total

$
216,552     Maturity

Amount(Dollars in thousands)Three months or less

$
3,594Over 3 months to 6 months


3,873Over 6 months to 12 months


8,552Over 12 months


6,965Total

$
22,984     Year Ended December 31,2009


2008(Dollars in thousands)Beginning balance

$
1,885,931


$
1,875,206Net (decrease) increase in brokered deposits


(130,166
)


105,259Net (decrease) increase in other deposits


(30,393
)


(155,951
)Net deposits before interest credited


1,725,372



1,824,508Interest credited


44,129



61,423Ending balance

$
1,769,501


$
1,885,931Net (decrease) increase

$
(116,430
)

$
10,725Percent (decrease) increase


(6.17
)%


0.57
%   Borrowings.
   14




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##### Table of Contents



COMPETITION   EMPLOYEES     REGULATION    truth-in-lending
   15




---



##### Table of Contents



1 3
     16




---



##### Table of Contents



Item 1A.
    Risk
    Factors    Corporate Risk Management and Control Policy
  Cease
    and desist orders restrict dividends and certain business
    activities.
      Deteriorating
    economic conditions may adversely affect our results of
    operations and financial condition.
     17




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##### 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.
   18




---



##### Table of Contents



Legislative
    or regulatory changes or actions could adversely impact the
    financial services industry.
  10-K
  The
    preparation of financial statements requires management to make
    estimates about matters that are inherently
    uncertain.
    We
    face risks with respect to future expansion.
      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.
   19




---



##### Table of Contents



Our
    allowance for loan losses may prove to be insufficient to absorb
    potential losses in our loan portfolio.
  and/or
        Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Reserved 20




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##### 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


Quarter2009High

$
1.59


$
2.72


$
1.80


$
1.80Low


0.46



0.99



0.80



1.28Dividends declared and paid














   First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2008High

$
6.70


$
8.50


$
5.84


$
5.11Low


4.16



3.62



2.82



0.75Dividends declared and paid


0.0924



0.0462







2.8% stock
    dividend      21




---



##### Table of Contents



Performance
    Graph
    United
    Community Financial Corp
    Total Return Performance
  
  Period EndingIndex

12/31/04

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09United Community Financial Corp.


100.00



108.66



115.94



54.81



9.41



15.16NASDAQ Composite


100.00



101.37



111.03



121.92



72.49



104.31SNL Thrift


100.00



103.53



120.68



72.40



46.07



42.97  22




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##### Table of Contents



Item 6.
    Selected
    Financial Data  At December 31,2009


2008


2007


2006


2005(Dollars in thousands)Selected financial condition data:Total assets

$
2,338,427


$
2,618,073


$
2,771,117


$
2,703,545


$
2,528,850Cash and cash equivalents


45,074



43,417



33,502



33,711



35,195Securities:Trading, at fair value










312



559



992Available for sale, at fair value


281,348



215,731



240,035



233,936



199,047Loans held for sale


10,497



16,032



87,236



26,960



29,109Loans, net


1,866,018



2,203,453



2,236,988



2,253,559



2,097,433Federal Home Loan Bank stock, at cost


26,464



26,464



25,432



25,432



24,006Cash surrender value of life insurance


26,198



25,090



24,053



23,137



22,260Assets of discontinued operations






5,562



20,314



20,923



40,122Deposits


1,769,501



1,885,931



1,875,206



1,822,935



1,681,844Borrowed funds


318,156



462,872



586,786



562,862



528,821Liabilities of discontinued operations






2,388



4,371



4,475



24,948Total shareholders equity


219,783



234,923



269,714



281,333



264,735   Year Ended December 31,2009


2008


2007


2006


2005(Dollars in thousands)Summary of earnings:Interest income

$
131,863


$
152,178


$
168,815


$
163,763


$
133,794Interest expense


55,949



78,916



96,103



83,953



56,357Net interest income


75,914



73,262



72,712



79,810



77,437Provision for loan losses


49,074



25,329



28,750



4,347



3,028Net interest income after provision for loan losses


26,840



47,933



43,962



75,463



74,409Non-interest income


13,918



5,784



14,302



13,203



12,184Non-interest expenses


63,640



94,186



55,640



53,310



53,413Income (loss) before taxes and discontinued operations


(22,882
)


(40,469
)


2,624



35,356



33,180Income tax expense (benefit)


(1,160
)


(3,240
)


910



12,393



11,234Net income (loss) before discontinued operations


(21,722
)


(37,229
)


1,714



22,963



21,946Discontinued operationsNet income of Butler Wick Corp., net of tax


4,949



1,950



2,419



1,148



1,251Net income (loss)

$
(16,773
)

$
(35,279
)

$
4,133


$
24,111


$
23,197   23




---



##### Table of Contents



At or for the Year Ended December 31,2009


2008


2007


2006


2005Selected financial ratios and other data:Performance ratios:Return on average assets(1)


(0.67
)%


(1.30
)%


0.15
%


0.92
%


0.96
%Return on average shareholders equity(2)


(6.92
)


(12.91
)


1.44



8.72



8.89Interest rate spread(3)(4)


2.91



2.53



2.41



2.84



3.19Net interest margin(3)(5)


3.20



2.87



2.84



3.24



3.49Non-interest expense to average assets(3)


2.54



2.22



2.04



2.03



2.22Efficiency ratio(3)(6)


65.60



68.53



62.77



56.68



58.92Average interest earning assets to average interest bearing
    liabilities(3)


112.46



110.85



111.59



111.74



111.62Capital ratios:Average equity to average assets


9.68



10.03



10.56



10.53



10.83Shareholders equity to assets at year end


9.39



8.97



9.73



10.41



10.47Home Savings Tier 1 leverage ratio


8.22



8.20



7.47



7.68



8.36Home Savings Tier 1 risk-based capital ratio


11.53



10.80



9.26



9.49



10.08Home Savings Total risk-based capital ratio


12.80



12.06



11.88



11.70



10.86Asset quality ratios:Nonperforming loans to loans, net(7)


6.21



4.76



4.41



2.37



1.18Nonperforming assets to total assets at year end(8)


6.28



5.12



3.94



2.10



1.08Allowance for loan losses as a percent of loans


2.22



1.61



1.41



0.75



0.74Allowance for loan losses as a percent of nonperforming loans(7)


36.49



34.29



32.42



31.73



63.29Texas ratio(9)


56.03



49.52



36.20



19.00



9.75Total classified assets as a percent of Tier 1 capital


117.77



58.08



71.99



26.64



15.50Net chargeoffs as a percent of average loans


2.10



0.96



0.60



0.14



0.16Total 90+ days past due as a percent of total loans, net


5.76



4.53



4.14



2.32



1.16Number of:Loans


42,121



44,195



44,842



46,333



43,630Deposit accounts


176,010



180,531



187,132



189,588



183,565Per share data:Basic earnings (loss) from continuing operations(10)(11)

$
(0.73
)

$
(1.26
)

$
0.06


$
0.77


$
0.75Basic earnings from discontinued operations (10)(11)


0.17



0.06



0.08



0.04



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


(0.56
)


(1.20
)


0.14



0.81



0.79Diluted earnings (loss) from continuing operations(10) (11)


(0.73
)


(1.26
)


0.06



0.76



0.74Diluted earnings from discontinued operations(10)(11)


0.17



0.06



0.08



0.04



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


(0.56
)


(1.20
)


0.14



0.80



0.78Book value(12)


7.11



7.60



8.73



8.83



8.29Tangible book value(13)


7.09



7.57



7.60



7.95



7.37Cash dividend per share


0.00



0.1386



0.3697



0.3502



0.3510Dividend payout ratio(14)


n/a



(12.61
)%


271.43
%


43.90
%


41.25
%     (1)
    
    Net income (loss) divided by average total assets. 24




---



##### 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 and foreclosed assets.(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
   25




---



##### Table of Contents



30-year
    loan-to-value loan-to-value
 26




---



##### Table of Contents



Allowance for Loan LossesDecember 31,December 31, 2008


Provision


Recovery


Chargeoff


2009(In thousands)Real Estate LoansPermanentOne-to four-family

$
4,986


$
6,310


$
109


$
(4,859
)

$
6,546Multifamily residential


2,344



2,333



3



(2,498
)


2,182Nonresidential


4,870



5,214



5



(4,195
)


5,894Land


585



81











666Total


12,785



13,938



117



(11,552
)


15,288Construction LoansOne-to four-family residential


10,620



20,833



9



(12,675
)


18,787Multifamily and nonresidential


722



(371
)






(118
)


233Total


11,342



20,462



9



(12,793
)


19,020 27




---



##### Table of Contents



Allowance for Loan LossesDecember 31,December 31, 2008


Provision


Recovery


Chargeoff


2009(In thousands)Consumer LoansHome Equity


1,386



3,301



2



(2,299
)


2,390Auto


242



231



23



(334
)


162Marine


1,504



(82
)


331



(1,052
)


701Recreational vehicle


1,425



1,556



124



(1,713
)


1,392Other


313



386



334



(719
)


314Total


4,870



5,392



814



(6,117
)


4,959Commercial LoansSecured


3,355



624







(2,895
)


1,084Unsecured


3,610



8,658



3



(10,335
)


1,936Total


6,965



9,282



3



(13,230
)


3,020Total Allowance

$
35,962


$
49,074


$
943


$
(43,692
)

$
42,287     Impaired LoansDecember 31,


December 31,2009


2008


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

$
18,764


$
12,675


$
6,089Multifamily residential


7,863



8,724



(861
)Nonresidential


25,686



14,855



10,831Land


5,160



4,757



403Total


57,473



41,011



16,462Construction LoansOne-to four-family residential


53,666



36,903



16,763Multifamily and nonresidential


392



816



(424
)Total


54,058



37,719



16,339Consumer LoansHome Equity


2,088



1,657



431Auto


30







30Marine


1,103



2,614



(1,511
)Recreational vehicle


353







353Other


8







8Total


3,582



4,271



(689
)Commercial LoansSecured


3,365



3,496



(131
)Unsecured


327



751



(424
)Total


3,692



4,247



(555
)Total Impaired Loans

$
118,805


$
87,248


$
31,557  28




---



##### Table of Contents




    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.    
    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. 29




---



##### Table of Contents



Troubled Debt RestructuringsDecember 31,


December 31,2009


2008


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

$
2,167


$
1,015


$
1,152Multifamily residential






345



(345
)Nonresidential


3,595



95



3,500Land


1,050



1,057



(7
)Total


6,812



2,512



4,300Construction LoansOne-to four-family residential


15,213







15,213Multifamily and nonresidential










Total


15,213







15,213Consumer LoansHome Equity


240



249



(9
)Auto


18



23



(5
)Marine






373



(373
)Recreational vehicle






27



(27
)Other


8



8



Total


266



680



(414
)Commercial LoansSecured


357



366



(9
)Unsecured










Total


357



366



(9
)Total Impaired Loans

$
22,648


$
3,558


$
19,090       30




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##### Table of Contents



Nonperforming LoansDecember 31,


December 31,





2009 Interest2009


2008


Change


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

$
26,766


$
21,669


$
5,097


$
768Multifamily residential


7,863



8,724



(861
)


(436
)Nonresidential


24,091



15,246



8,845



1,042Land


5,160



4,840



320



417Total


63,880



50,479



13,401



1,791Construction LoansOne-to four-family residential


42,819



43,167



(348
)


242Multifamily and nonresidential


392



816



(424
)


(284
)Total


43,211



43,983



(772
)


(42
)Consumer LoansHome Equity


3,168



2,312



856



110Auto


148



154



(6
)


(1
)Marine


1,103



2,614



(1,511
)


(100
)Recreational vehicle


900



756



144



28Other


64



33



31



2Total


5,383



5,869



(486
)


39Commercial LoansSecured


3,061



3,496



(435
)


161Unsecured


352



1,057



(705
)


236Total


3,413



4,553



(1,140
)


397Total Nonperforming Loans

$
115,887


$
104,884


$
11,003


$
2,185          31




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##### Table of Contents



Real Estate Owned


Repossessed Assets


Total(In thousands)Balance at December 31, 2008

$
27,437


$
1,821


$
29,258Acquisitions


18,838



3,755



22,593Sales


(10,822
)


(4,954
)


(15,776
)Change in valuation allowance


(5,113
)






(5,113
)Balance at December 31, 2009

$
30,340


$
622


$
30,962     ValuationBalance


Allowance


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

$
3,709


$
(156
)

$
3,553Multifamily residential


10,515



(2,601
)


7,914Nonresidential


6,001



(842
)


5,159One-to four-family residential construction


17,726



(4,268
)


13,458Land


256







256Total real estate owned


38,207



(7,867
)


30,340Repossessed assetsAuto


54







54Marine


230







230Recreational vehicle


338







338Total repossessed assets


622







622Total real estate owned and other repossessed assets

$
38,829


$
(7,867
)

$
30,962    32




---



##### Table of Contents



33




---



##### Table of Contents



Comparison
    of Operating Results for the Years Ended December 31, 2009
    and December 31, 2008
  Net Loss
  Net Interest Income
   34




---



##### Table of Contents



Provision for Loan Losses
  Non-interest Income other-than-temporary other-than-temporary
     35




---



##### Table of Contents



Non-interest Expense
  Federal Income Taxes
  Discontinued Operations
  Comparison
    of Operating Results for the Years Ended December 31, 2008
    and December 31, 2007
  Net Income other-than-temporary
  Net Interest Income
    Provision for Loan Losses
 36




---



##### Table of Contents



Non-interest Income Other-than-temporary
  Non-interest Expense
  Federal Income Taxes
  Discontinued Operations
  Critical
    Accounting Policies and Estimates
    other-than-temporary
  Allowance for loan losses.
 37




---



##### Table of Contents



Mortgage servicing rights.
      Goodwill.
    Income taxes.
 38




---



##### Table of Contents



Other-than-temporary
    impairment. other-than-temporary. other-than-temporary other-than-temporary other-than-temporary
 39




---



##### Table of Contents



Yields
    Earned and Rates Paid
    Year Ended December 31,2009


2008


2007Average


Interest





Average


Interest





Average


InterestOutstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/Balance


Paid


Rate


Balance


Paid


Rate


Balance


Paid


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

$
2,032,669


$
118,122



5.81
%

$
2,231,692


$
136,556



6.12
%

$
2,268,914


$
154,252



6.80
%Loans held for sale


26,898



1,006



3.74



9,674



466



4.82



18,781



914



4.87Securities:Trading














184



3



1.63



482



26



5.39Available for sale


266,121



11,455



4.30



276,396



13,652



4.94



243,059



11,818



4.86Federal Home Loan Bank stock


26,464



1,223



4.62



25,878



1,360



5.26



25,432



1,677



6.59Other interest earning assets


20,634



57



0.28



13,135



141



1.07



2,247



128



5.70Total interest earning assets

$
2,372,786


$
131,863



5.56
%

$
2,556,959


$
152,178



5.95
%

$
2,558,915


$
168,815



6.60
%Assets of discontinued operations


1,034











22,965











22,225Non-interest earning assets


131,881











144,096











141,154Total assets

$
2,505,701










$
2,724,020










$
2,722,294Interest bearing liabilities:Deposits:Checking accounts

$
382,076


$
4,297



1.12
%

$
426,790


$
9,475



2.22
%

$
397,290


$
13,907



3.50
%Savings accounts


194,957



933



0.48



180,010



811



0.45



185,949



769



0.41Certificates of deposit


1,112,042



40,755



3.66



1,169,403



49,953



4.27



1,125,117



53,376



4.74Federal Home Loan Bank advances


314,237



5,797



1.84



384,260



12,358



3.22



448,714



21,493



4.79Repurchase agreements and other


106,631



4,167



3.91



146,233



6,319



4.32



136,135



6,558



4.82Total interest bearing liabilities

$
2,109,943


$
55,949



2.65
%

$
2,306,696


$
78,916



3.42
%

$
2,293,205


$
96,103



4.19
%Liabilities of discontinued operations


1,770











8,290











4,710Non-interest bearing liabilities


151,437











135,861











136,858Total liabilities

$
2,263,150










$
2,450,847










$
2,434,773Shareholders equity


242,551











273,173











287,521Total liabilities and equity

$
2,505,701










$
2,724,020










$
2,722,294Net interest income andinterest rate spread





$
75,914



2.91
%





$
73,262



2.53
%





$
72,712



2.41
%Net interest margin










3.20
%










2.87
%










2.84
%Average interest earning assets to average interest bearing
    liabilities










112.46
%










110.85
%










111.59
%     (1)
    
    Nonaccrual loans are included in the average balance. 40




---



##### Table of Contents



Year Ended December 31,2009 vs. 2008


2008 vs. 2007Increase


Total


Increase


Total(Decrease) Due to


Increase


(Decrease) Due to


IncreaseRate


Volume


(Decrease)


Rate


Volume


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

$
(6,648
)

$
(11,786
)

$
(18,434
)

$
(15,201
)

$
(2,495
)

$
(17,696
)Loans held for sale


(78
)


618



540



(9
)


(439
)


(448
)Securities:Trading


(2
)


(1
)


(3
)


(12
)


(11
)


(23
)Available for sale


(1,704
)


(493
)


(2,197
)


191



1,643



1,834Federal Home Loan Bank stock


(169
)


32



(137
)


(347
)


30



(317
)Other interest earning assets


(363
)


279



(84
)


(3
)


16



13Total interest earning assets

$
(8,964
)

$
(11,351
)

$
(20,315
)

$
(15,381
)

$
(1,256
)

$
(16,637
)Interest bearing liabilities:Checking accounts

$
(4,271
)

$
(907
)

$
(5,178
)

$
(5,561
)

$
1,129


$
(4,432
)Savings accounts


52



70



122



65



(23
)


42Certificates of deposit


(6,837
)


(2,361
)


(9,198
)


(5,661
)


2,238



(3,423
)Federal Home Loan Bank advances


(4,597
)


(1,964
)


(6,561
)


(6,356
)


(2,779
)


(9,135
)Repurchase agreements and other


(562
)


(1,590
)


(2,152
)


(854
)


615



(239
)Total interest bearing liabilities

$
(16,215
)

$
(6,752
)

$
(22,967
)

$
(18,367
)

$
1,180


$
(17,187
)Change in net interest income









$
2,652










$
550   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


$
528


$
1,171


$
542


$
1,981


$
4,222Deposits without a stated maturity


11



729,512















729,512Certificates of deposit


11



637,275



357,022



45,692







1,039,989Federal Home Loan Bank advances


12



153,118



7,161



10,702



50,342



221,323Repurchase agreements and other borrowings


13



6,833











90,000



96,833    41




---



##### 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, 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















     Year Ended December 31, 2008NPV as % of Portfolio Value of Assets


Next 12 Months Net Interest IncomeInternal Policy








Internal PolicyChange in Rates (Basis Points)

NPV Ratio


Limitations


Change in %


$ Change


Limitations


% Change(Dollars in thousands)+300


7.37
%


5.00
%


(1.38
)%

$
(1,879
)


(15.00
)%


(2.48
)%+200


8.35



6.00



(0.40
)


(734
)


(10.00
)


(0.97
)+100


8.99



6.00



0.24



60



(5.00
)


0.08Static


8.75



7.00















    42




---



##### Table of Contents



Potential
    Impact of Changes in Interest Rates
    Liquidity
    and Capital
    Years Ended December 31,2009


2008


2007(Dollars in thousands)Net income (loss)

$
(16,773
)

$
(35,279
)

$
4,133Adjustments to reconcile net income to net cash from operating
    activities


62,892



63,802



46,074Net cash from operating activities


46,119



28,523



50,207Net cash from investing activities


216,699



96,692



(106,616
)Net cash from financing activities


(261,161
)


(115,300
)


56,200Net change in cash and cash equivalents


1,657



9,915



(209
)Cash and cash equivalents at beginning of year


43,417



33,502



33,711Cash and cash equivalents at end of year

$
45,074


$
43,417


$
33,502        43




---



##### Table of Contents



Excess of ActualCapital over Minimum


ApplicableActual Capital


Minimum Requirement


Requirement


Asset BaseAmount


Percent


Amount


Percent


Amount


Percent


Total(Dollars in thousands)Tangible capital

$
198,610



8.22
%

$
36,247



1.50
%

$
162,363



6.72
%

$
2,416,444
(1)Tier 1 capital (leverage)


198,610



8.22



96,658



4.00



101,952



4.22



2,416,444
(2)Risk-based capital


220,394



12.80



137,783



8.00



82,611



4.80



1,722,286
(3)     (1)
    
    Average tangible assets for the quarter ended December 31,
    2009(2)
    
    Average total assets for leverage capital purposes for the
    quarter ended December 31, 2009(3)
    
    Total risk-weighted assets as of December 31, 2009    Excess of ActualCapital over Minimum


ApplicableActual Capital


Minimum Requirement


Requirement


Asset BaseAmount


Percent


Amount


Percent


Amount


Percent


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

$
198,610



8.22
%

$
193,316



8.00
%

$
5,294



0.22
%

$
2,416,444
(1)Risk-based capital


220,394



12.80



206,674



12.00



13,720



0.80



1,722,286
(2)     (1)
    
    Average tangible assets for the quarter ended December 31,
    2009(2)
    
    Total risk-weighted assets as of December 31, 2009 44




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  CONSOLIDATED
    STATEMENTS OF FINANCIAL CONDITION
  December 31,2009


2008(Dollars in thousands)ASSETSCash and deposits with banks

$
22,330


$
21,745Federal funds sold


22,744



21,672Total cash and cash equivalents


45,074



43,417Securities:Available for sale, at fair value


281,348



215,731Loans held for sale


10,497



16,032Loans, net of allowance for loan losses of $42,287 and $35,962


1,866,018



2,203,453Federal Home Loan Bank stock, at cost


26,464



26,464Premises and equipment, net


23,139



25,015Accrued interest receivable


9,090



10,082Real estate owned and other repossessed assets


30,962



29,258Core deposit intangible


661



884Cash surrender value of life insurance


26,198



25,090Assets of discontinued operations  Butler Wick
    Corp.






5,562Other assets


18,976



17,085Total assets

$
2,338,427


$
2,618,073LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDeposits:Non-interest bearing

$
126,779


$
106,255Interest bearing


1,642,722



1,779,676Total deposits


1,769,501



1,885,931Borrowed funds:Federal Home Loan Bank advances


221,323



337,603Repurchase agreements and other


96,833



125,269Total borrowed funds


318,156



462,872Advance payments by borrowers for taxes and insurance


19,791



19,806Accrued interest payable


1,421



3,077Liabilities of discontinued operations  Butler Wick
    Corp.






2,388Accrued expenses and other liabilities


9,775



9,076Total liabilities


2,118,644



2,383,150Commitments 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


145,775



146,439Retained earnings


148,674



165,447Accumulated other comprehensive income


4,110



3,635Unearned employee stock ownership plan shares


(5,821
)


(7,643
)Treasury stock, at cost, 6,906,632 shares


(72,955
)


(72,955
)Total shareholders equity


219,783



234,923Total liabilities and shareholders equity

$
2,338,427


$
2,618,073    45




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF INCOME
  Year Ended December 31,2009


2008


2007(In thousands, except per share data)Interest incomeLoans

$
118,122


$
136,556


$
154,252Loans held for sale


1,006



466



914Securities:Trading






3



26Available for sale


11,455



13,652



11,818Federal Home Loan Bank stock dividends


1,223



1,360



1,677Other interest earning assets


57



141



128Total interest income


131,863



152,178



168,815Interest expenseDeposits


45,985



60,239



68,052Federal Home Loan Bank advances


5,797



12,358



21,493Repurchase agreements and other


4,167



6,319



6,558Total interest expense


55,949



78,916



96,103Net interest income


75,914



73,262



72,712Provision for loan losses


49,074



25,329



28,750Net interest income after provision for loan losses


26,840



47,933



43,962Non-interest incomeNon-deposit investment income


1,424



1,624



1,429Service fees and other charges


8,531



6,177



7,707Net gains (losses):Securities available for sale


1,863



1,936



(21
)Other-than-temporary
    loss on equity securitiesTotal impairment loss


(778
)


(6,087
)


Loss recognized in other comprehensive income










Net impairment loss recognized in earnings


(778
)


(6,087
)


Trading securities






(38
)


31Mortgage banking income


6,164



2,809



2,624Real estate owned and other repossessed assets


(7,918
)


(4,770
)


(1,061
)Other income


4,632



4,133



3,593Total non-interest income


13,918



5,784



14,302Non-interest expenseSalaries and employee benefits


30,493



32,570



33,128Goodwill impairment charge






33,593



Occupancy


3,669



3,731



3,443Equipment and data processing


6,525



6,814



6,502Franchise tax


2,083



2,122



2,102Advertising


1,136



964



1,206Amortization of core deposit intangible


223



285



365Deposit insurance premiums


7,304



3,233



215Professional fees


3,520



3,400



2,505Real estate owned and other repossessed asset expenses


2,713



2,061



720Other expenses


5,974



5,413



5,454Total non-interest expense


63,640



94,186



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


(22,882
)


(40,469
)


2,624Income tax expense (benefit)


(1,160
)


(3,240
)


910Net income (loss) before discontinued operations


(21,722
)


(37,229
)


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


4,949



1,950



2,419Net income (loss)

$
(16,773
)

$
(35,279
)

$
4,133Earnings (loss) per shareBasic-continuing operations

$
(0.73
)

$
(1.26
)

$
0.06Basic-discontinued operations


0.17



0.06



0.08Basic


(0.56
)


(1.20
)


0.14Diluted-continuing operations


(0.73
)


(1.26
)


0.06Diluted-discontinued operations


0.17



0.06



0.08Diluted


(0.56
)


(1.20
)


0.14    46




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  UnearnedAccumulated


EmployeeOther


StockShares


Common


Retained


Comprehensive


Ownership


TreasuryOutstanding


Stock


Earnings


Income (Loss)


Plan Shares


Stock


Total(In thousands, except per share data)Balance December 31, 2006


30,977


$
145,834


$
220,527


$
(1,296
)

$
(11,287
)

$
(72,445
)

$
281,333Comprehensive income:Net income










4,133















4,133Other comprehensive income














1,957











1,957Comprehensive income


























6,090Shares allocated to ESOP participants






837











1,822







2,659Purchase of treasury stock


(950
)


















(9,709
)


(9,709
)Exercise of stock options


25



12



(86
)










262



188Cash dividends paid, $0.3697 per share










(10,847
)














(10,847
)Balance December 31, 2007


30,052



146,683



213,727



661



(9,465
)


(81,892
)


269,714Comprehensive income:Net loss










(35,279
)














(35,279
)Other comprehensive income














2,974











2,974Comprehensive loss


























(32,305
)Shares allocated to ESOP participants






(394
)










1,822







1,428Stock based compensation






150



















150Stock dividends paid


846







(8,937
)










8,937



Cash dividends paid, $0.1386 per share










(4,064
)














(4,064
)Balance December 31, 2008


30,898



146,439



165,447



3,635



(7,643
)


(72,955
)


234,923Comprehensive 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
)

$
219,783    47




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2009


2008


2007(In thousands)Cash Flows from Operating ActivitiesNet income (loss)

$
(16,773
)

$
(35,279
)

$
4,133Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for loan losses


49,074



25,329



28,750Net gains on loans


(6,164
)


(2,809
)


(2,624
)Net losses on real estate owned and other repossessed assets


7,918



4,763



1,053Net losses on other assets


(17
)


(1,891
)


(14
)Other than temporary impairment of securities available for sale


778



6,087



Amortization of premiums and accretion of discounts


2,710



5,312



3,334Depreciation and amortization


2,148



2,532



2,778Federal Home Loan Bank stock dividends






(1,032
)


Decrease in interest receivable


992



2,905



689(Decrease) increase in interest payable


(1,656
)


(4,760
)


4,996Decrease (increase) in net deferred tax assets


3,795



401



(6,723
)(Increase) decrease in prepaid and other assets


(6,822
)


(3,744
)


5,427Increase (decrease) in other liabilities


142



(1,797
)


(13,700
)Decrease in trading securities






274



289Stock based compensation


122



150



Goodwill impairment charges






33,593



Net principal disbursed on loans originated for sale


(344,121
)


(160,276
)


(205,994
)Proceeds from sale of loans sold


357,906



156,553



224,632ESOP compensation


1,036



1,428



2,659Operating cash flows from discontinued operations


(4,949
)


784



522Net cash from operating activities


46,119



28,523



50,207Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Securities available for sale


56,199



50,569



56,982Proceeds from sale of:Securities available for sale


73,630



139,938



16,899Real estate owned and other repossessed assets


13,570



12,917



6,035Loans transferred from portfolio to held for sale


69,621



77,736



Purchases of:Securities available for sale


(196,295
)


(167,141
)


(77,641
)Principal disbursed on loans, net of repayments


197,152



58,371



80,922Loans purchased


(4,365
)


(86,758
)


(184,892
)Purchases of premises and equipment


(936
)


(925
)


(4,903
)Investing cash flows from discontinued operations


8,123



11,985



(18
)Net cash from investing activities


216,699



96,692



(106,616
)Cash Flows from Financing ActivitiesNet increase (decrease) in checking, savings and money market
    accounts


68,837



(43,969
)


35,824Net (decrease) increase in certificates of deposit


(185,267
)


54,694



16,450Net (decrease) increase in advance payments by borrowers for
    taxes and insurance


(15
)


1,953



381Proceeds from Federal Home Loan Bank advances


737,800



718,900



737,953Repayment of Federal Home Loan Bank advances


(854,080
)


(818,550
)


(765,953
)Net change in repurchase agreements and other borrowings


(28,436
)


(24,264
)


51,925Cash dividends paid






(4,064
)


(10,847
)Proceeds from exercise of stock options










176Purchase of treasury stock










(9,709
)Net cash from financing activities


(261,161
)


(115,300
)


56,200Change in cash and cash equivalents


1,657



9,915



(209
)Cash and cash equivalents, beginning of year


43,417



33,502



33,711Cash and cash equivalents, end of year

$
45,074


$
43,417


$
33,502    48




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Nature
    of Operations
      Basis
    of Presentation
    Use of
    Estimates in the Preparation of Financial
    Statements
    Securities
   49




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    other-than-temporary
  Loans
    Held for Sale
      Loans
        Concentration
    of Credit Risk
    Allowance
    for Loan Losses
   50




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    non-classified
  case-by-case loan-by-loan
  Servicing
    Assets
        Transfers
    of Financial Assets
   51




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Premises
    and Equipment
    Federal
    Home Loan Bank (FHLB) stock
    Real
    Estate Owned and Other Repossessed Assets
    Goodwill
    and Core Deposit Intangible
      Mortgage
    Banking Derivatives
    Cash
    Surrender Value of Life Insurance
   52




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  401(k)
    Savings Plan
    Postretirement
    Benefit Plans
    Long-term
    Assets
    Loan
    Fees
    Stock
    Compensation
    Income
    Taxes
     53




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  and/or
  Employee
    Stock Ownership Plan
    Stock
    Dividends
    Dividend
    Restriction
    Earnings
    Per Share
    Statements
    of Cash Flows
    Loss
    Contingencies
    Fair
    Value of Financial Instruments
   54




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Comprehensive
    Income
    Off
    Balance Sheet Financial Instruments
    New
    Accounting Standards
           55




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  The Hierarchy of Generally
    Accepted Accounting Principles FASB Accounting
    Standards Codification TM
      other-than-temporary 1) other-than-temporary other-than-temporary
     56




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Newly
    Issued But Not Yet Effective Accounting Standards
        Operating
    Segments
    Reclassifications
   57




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   2.
    CASH AND
    CASH EQUIVALENTS    3.
    REGULATORY
    ENFORCEMENT ACTION        4.
    DISCONTINUED
    OPERATIONS   58




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31, 2008(In thousands)AssetsCash and deposits with banks

$
1,126Total cash and cash equivalents


1,126Securities:Trading


Available for sale


3,337Premises and equipment, net


86Accrued interest receivable


29Other assets


984Total assets

$
5,562Liabilities and Shareholders EquityAccrued expenses and other liabilities

$
2,388Total liabilities


2,388Total shareholders equity


3,174Total liabilities and shareholders equity

$
5,562     December 31,2009


2008


2007(In thousands)IncomeInterest income

$
32


$
813


$
1,135Brokerage commissions






25,667



24,963Service fees and other charges


1,287



5,876



6,349Underwriting and investment banking






1,151



764Gain on the sale of Butler Wick subsidiaries


7,904



3,317



Other income






117



521Total income


9,223



36,941



33,732ExpensesInterest expense on borrowings






243



345Salaries and employee benefits


1,198



25,772



22,841Occupancy expenses


68



1,553



1,403Equipment and data processing


84



2,508



2,515Other expenses


258



3,798



2,929Total expenses


1,608



33,874



30,033Income before tax


7,615



3,067



3,699Income tax


2,666



1,117



1,280Net income

$
4,949


$
1,950


$
2,419  59




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   5.
    SECURITIES    December 31, 2009Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


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

$
48,717


$
313


$
(108
)

$
48,922Equity securities


472



236







708Mortgage-related securities: residential


226,182



5,536







231,718Total

$
275,371


$
6,085


$
(108
)

$
281,348   December 31, 2008Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


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

$
26,305


$
865


$



$
27,170Equity securities


1,251



70



(411
)


910Mortgage-related securities: residential


183,231



4,527



(107
)


187,651Total

$
210,787


$
5,462


$
(518
)

$
215,731     December 31, 2009Amortized


FairCost


Value(In thousands)Due in one year or less

$
499


$
514Due after one year through five years


40,071



39,988Due after five years through ten years


8,147



8,420Mortgage-related securities


226,182



231,718Total

$
274,899


$
280,640       2009


2008


2007(In thousands)Proceeds

$
73,630


$
139,938


$
16,899Gross gains


1,863



1,936



96Gross losses










(117
)Impairment charges


(778
)


(6,087
)


    60




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  available-for-sale
        Less than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


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

$
27,898


$
(108
)

$



$



$
27,898


$
(108
)Equity securities






















Mortgage-related securities: residential


6















6



Total temporarily impaired securities

$
27,905


$
(108
)

$



$



$
27,905


$
(108
)     Less than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


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

$



$



$



$



$



$
Equity securities


282



(411
)










282



(411
)Mortgage-related securities: residential


2,765



(69
)


1,026



(38
)


3,791



(107
)Total temporarily impaired securities

$
3,047


$
(480
)

$
1,026


$
(38
)

$
4,073


$
(518
)    61




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   6.
    LOANS    December 31,2009


2008(In thousands)Real Estate:One-to four-family residential

$
773,831


$
909,567Multi-family residential


150,480



187,711Nonresidential


397,895



375,463Land


23,502



23,517Construction:One-to four-family residential and land development


178,095



255,355Multi-family and nonresidential


13,741



35,797Total real estate


1,537,544



1,787,410Consumer


309,202



348,834Commercial


60,217



101,489Total loans


1,906,963



2,237,733Less:Allowance for loan losses


42,287



35,962Deferred loan costs, net


(1,342
)


(1,682
)Total


40,945



34,280Loans, net

$
1,866,018


$
2,203,453     sixty-day case-by-case
  December 31,2009


2008Fixed Rate


Variable Rate


Fixed Rate


Variable Rate(In thousands)Commitments to make loans

$
51,625


$
2,535


$
63,362


$
11,999Undisbursed loans in process


3,838



48,372



7,746



129,828Unused lines of credit


64,619



51,766



80,101



61,196    62




---



##### Table of Contents



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


2008


2007(In thousands)Balance, beginning of year

$
35,962


$
32,006


$
16,955Provision for loan losses


49,074



25,329



28,750Amounts charged off


(43,692
)


(22,088
)


(14,220
)Recoveries


943



715



521Balance, end of year

$
42,287


$
35,962


$
32,006     As of or for the Year EndedDecember 31,2009


2008


2007(In thousands)Impaired loans on which no specific valuation allowance was
    provided

$
82,443


$
43,256


$
30,475Impaired loans on which specific valuation allowance was provided


36,362



43,992



53,902Total impaired loans at year-end

$
118,805


$
87,248


$
84,377Specific valuation allowances on impaired loans at year-end


4,064



10,968



13,165Average impaired loans during year


103,026



85,812



63,468Interest income recognized on impaired loans during the year


2,056



513



348Interest income received on impaired loans during the year


2,056



513



348    63




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    and/or
  (In thousands)Balance as of December 31, 2008

$
723New loans to officers and/or directors


171Loan payments during 2009


(124
)Reductions due to changes in officers and/or directors


(464
)Balance as of December 31, 2009

$
306   7.
    MORTGAGE
    BANKING ACTIVITIES      2009


2008


2007(In thousands)Balance, beginning of year

$
5,562


$
6,184


$
6,820Originations


3,220



1,337



1,268Amortized to expense


(2,554
)


(1,959
)


(1,904
)Balance, end of year


6,228



5,562



6,184Less valuation allowance


(423
)


(2,233
)


(562
)Net balance

$
5,805


$
3,329


$
5,622       2009


2008


2007(In thousands)Balance, beginning of year

$
(2,233
)

$
(562
)

$
(435
)Impairment charges






(2,233
)


(562
)Recoveries


1,810



562



435Balance, end of year

$
(423
)

$
(2,233
)

$
(562
)     2009


2008Weighted average prepayment rate


325 PSA



644 PSAWeighted average life (in years)


3.65



3.34Weighted average discount rate


8
%


8
%  64




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    (In thousands)2010

$
1,6872011


1,2972012


8972013


7092014


596     8.
    OTHER
    REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS    2009


2008


2007(In thousands)Other real estate owned and other repossessed assets

$
38,829


$
32,012


$
10,510Valuation allowance


(7,867
)


(2,754
)


End of year

$
30,962


$
29,258


$
10,510     2009


2008


2007(In thousands)Beginning of year

$
2,754


$



$
54Additions charged to expense


7,925



3,753



Direct write-downs


(2,812
)


(999
)


(54
)End of year

$
7,867


$
2,754


$
     2009


2008


2007(In thousands)Net (gain) loss on sales

$
(187
)

$
2,016


$
1,061Provision for unrealized losses


8,105



2,754



Operating expenses, net of rental income


2,713



2,061



720Total expenses

$
10,631


$
6,831


$
1,781  65




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   9.
    PREMISES
    AND EQUIPMENT    December 31,2009


2008(In thousands)Land

$
7,691


$
7,691Buildings


24,185



23,919Leasehold improvements


729



728Furniture and equipment


17,991



18,06950,596



50,407Less: Accumulated depreciation and amortization


27,457



25,392Total

$
23,139


$
25,015     (In thousands)2010

$
5282011


5922012


5792013


3072014


235Thereafter


1,981Total

$
4,222   10.
    GOODWILL
    AND INTANGIBLE ASSETS  Goodwill
     66




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Acquired
    Intangible Assets
  As of December 31,2009


2008Gross





GrossCarrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


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

$
8,952


$
8,291


$
8,952


$
8,068Total

$
8,952


$
8,291


$
8,952


$
8,068Estimated amortization expense:For the year ended:December 31, 2010

$
176December 31, 2011


139December 31, 2012


109December 31, 2013


86December 31, 2014


68     11.
    DEPOSITS    December 31,2009


2008(In thousands)Checking accounts:Interest bearing

$
108,513


$
99,418Non-interest bearing


126,779



106,255Savings accounts


202,900



181,643Money market accounts


291,320



273,359Certificates of deposit


1,039,989



1,225,256Total deposits

$
1,769,501


$
1,885,931     Year Ended December 31,2009


2008


2007(In thousands)Interest bearing demand deposits and money market accounts

$
4,297


$
9,475


$
13,907Savings accounts


933



811



769Certificates of deposit


40,755



49,953



53,376Total

$
45,985


$
60,239


$
68,052  67




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    December 31, 2009(In thousands)Within 12 months

$
637,27512 months to 24 months


160,779Over 24 months to 36 months


196,243Over 36 months to 48 months


22,252Over 48 months


23,440Total

$
1,039,989     December 31,


December 31,2009


2008(In thousands)Three months or less

$
38,634


$
17,960Over three months to six months


35,250



30,503Over six months to twelve months


61,258



41,096Over twelve months


81,410



119,085Total

$
216,552


$
208,644     December 31,


December 31,2009


2008(In thousands)Three months or less

$
3,594


$
3,000Over three months to six months


3,873



3,391Over six months to twelve months


8,552



8,346Over twelve months


6,965



13,106Total

$
22,984


$
27,843    68




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   12.
    FEDERAL
    HOME LOAN BANK ADVANCES    December 31,2009


2008Weighted





WeightedYear of Maturity

Amount


Average Rate


Amount


Average Rate(In thousands)2009


n/a



n/a


$
247,650



1.51
%2010

$
153,118



0.63
%


17,412



4.952011


5,590



4.99



5,869



4.932012


1,571



3.93



1,861



3.922013


10,598



3.86



14,365



3.862014


104



3.70



104



3.70Thereafter


50,342



4.20



50,342



4.20Total Federal Home Loan Bank advances

$
221,323






$
337,603   loan-to-value
  13.
    SECURITIES
    SOLD UNDER AGREEMENT TO REPURCHASE AND OTHER
    BORROWINGS    December 31,2009


2008Weighted





WeightedAmount


Average Rate


Amount


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

$
96,180



3.85
%

$
117,600



3.84
%Other borrowings


653



4.00



7,669



4.24Total repurchase agreements and other

$
96,833



3.85
%

$
125,269



3.86
%      69




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      14.
    LOSS
    CONTINGENCIES    15.
    INCOME
    TAXES    Year Ended December 31,2009


2008


2007(In thousands)Current

$
(4,670
)

$
(2,048
)

$
8,213Deferred


(4,090
)


(1,192
)


(7,303
)Establish valuation allowance


7,600







Total

$
(1,160
)

$
(3,240
)

$
910     Year Ended December 31,2009


2008


2007Dollars


Rate


Dollars


Rate


Dollars


Rate(In thousands)Tax (benefit) at statutory rate

$
(8,009
)


35.0
%

$
(14,164
)


35.0
%

$
919



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










11,800



(29.2
)






Tax exempt income


(4
)






(15
)


0.0



(25
)


(1.0
)Life insurance


(379
)


1.7



(321
)


0.8



(311
)


(11.9
)State taxes










(14
)


0.0



(30
)


(1.1
)Acquisition/sale adjustments










(649
)


1.6







Other


(368
)


1.6



123



(0.3
)


357



13.6Valuation allowance


7,600



(33.2
)Income tax provision (benefit)

$
(1,160
)


5.1
%

$
(3,240
)


7.9
%

$
910



34.6
%  70




---



##### Table of Contents



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


2008(In thousands)Deferred tax assets:Loan loss reserves

$
14,800


$
12,587Postretirement benefits


1,313



1,328ESOP shares released


992



1,158Other real estate owned valuation


2,753



964Securities impairment charges


2,403



2,130Interest on nonaccrual loans


951



318Other


81



36Less: Valuation allowance


(7,600
)


Deferred tax assets


15,693



18,521Deferred tax liabilities:Purchase accounting adjustments


62



129Deferred loan fees


484



659Federal Home Loan Bank stock dividends


6,715



6,715Mortgage servicing rights


2,032



1,165Unrealized gain on securities available for sale


2,092



1,746Postretirement benefits accrual


121



182Prepaid expenses


519



406Other


18



74Deferred tax liabilities


12,043



11,076Net deferred tax asset

$
3,650


$
7,445        71




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    16.
    SHAREHOLDERS
    EQUITY  Dividends
      Other
    Comprehensive Income
      As of December 31,2009


2008


2007(In thousands)Unrealized holding gain (loss) on securities available for sale

$
1,990


$
369


$
2,338Changes in net gains (losses) on postretirement benefit plans


(174
)


55



668Reclassification adjustment for losses (gains) realized in income


(1,085
)


4,151



5Net unrealized gains


731



4,575



3,011Tax effect (35)%


256



1,601



1,054Net of tax amount

$
475


$
2,974


$
1,957  72




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Balance at


Current


Balance atDecember 31,


Period


December 31,2008


Change


2009(In thousands)Unrealized gains (losses) on securities available for sale

$
3,297


$
588


$
3,885Unrealized gains (losses) on postretirement benefits


338



(113
)


225Total

$
3,635


$
475


$
4,110   Liquidation
    Account
    17.
    REGULATORY
    CAPITAL REQUIREMENTS      As of December 31, 2009To Be WellMinimum


CapitalizedCapital


Under Prompt CorrectiveActual


Requirements


Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


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

$
220,395



12.80
%

$
137,783



8.00
%

$
172,229



10.00
%Tier 1 capital to risk-weighted assets


198,610



11.53



*



*



103,337



6.00Tier 1 capital to average total assets (leverage ratio)


198,610



8.22



96,658



4.00



120,822



5.00   73




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  As of December 31, 2008To Be WellMinimum


CapitalizedCapital


Under Prompt CorrectiveActual


Requirements


Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


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

$
242,944



12.06
%

$
161,163



8.00
%

$
201,454



10.00
%Tier 1 capital to risk-weighted assets


217,630



10.80



*



*



120,872



6.00Tier 1 capital to average total assets (leverage ratio)


217,630



8.20



106,180



4.00



132,724



5.00     *
    
    Ratio is not required under regulations.      18.
    BENEFIT
    PLANS  Postretirement
    Benefit Plans
    Year Ended December 31,2009


2008(In thousands)Change in Benefit Obligation:Benefit obligation at beginning of year

$
3,273


$
3,370Service cost






Interest cost


168



180Actuarial (gain)/loss


174



(55
)Benefits paid


(210
)


(222
)Benefit obligation at end of the year

$
3,405


$
3,273Funded status of the plan

$
(3,405
)

$
(3,273
)  74




---



##### Table of Contents



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


2008(In thousands)Net actuarial gains (losses)

$
224


$
336Prior service credit (cost)


1



2$
225


$
338       Year Ended December 31,2009


2008


2007(In thousands)Service cost

$



$



$
Interest cost


187



193



222Expected return on plan assets










Net amortization of prior service cost


(1
)


(1
)


(1
)Amortization of net actuarial gain


(18
)


(12
)


Net periodic benefit cost


168



180



221Net loss (gain)


(155
)


52



665Prior service cost






3



3Amortization of prior service cost


(19
)






Total recognized in other comprehensive income


(174
)


55



668Total recognized in net periodic benefit cost and other
    comprehensive income

$
(6
)

$
235


$
889Assumptions used in the valuations were as follows:Weighted average discount rate


5.75
%


6.00
%


5.75
%       1 Percentage


1 PercentagePoint Increase


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

$
13


$
12Effect on the postretirement benefit obligation


231



213  75




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    In thousands2010

$
3052011


3122012


3162013


3162014


3122015-2019


1,410Total

$
2,971   401(k)
    Savings Plan
    Employee
    Stock Ownership Plan
      Long-Term
    Incentive Plan
   76




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        For the Year Ended December 31, 2009Weighted Average


Aggregate IntrinsicShares


Exercise Price


Value(In thousands)Outstanding at beginning of year


2,092,128


$
9.08Granted


344,000



1.86Exercised






Forfeited


(232,790
)


9.17Outstanding at end of period


2,203,338


$
7.94


$
Fully vested and expected to vest


2,203,338


$
7.94


$
Options exercisable at end of period


1,974,021


$
8.65


$
     2009


2008


2007Intrinsic value of options exercised

$



$



$
99Cash received from option exercises










176Tax benefit realized from option exercises










12Weighted average fair value of options granted


1.07



0.68



       Risk-free interest rate


2.19
%Expected term (years)


5Expected stock volatility


67.66
%Dividend yield


0.00
%    77




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Employee
    Stock Purchase Plan
    19.
    FAIR
    VALUE    Level 1:
  Level 2:
  Level 3:
    Available for sale securities:
  Impaired loans:
  Foreclosed assets:
  Mortgage servicing rights:
  Loans held for sale:
 78




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Assets
    and Liabilities Measured on a Recurring Basis
    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: residential


231,718







231,718



   Fair Value Measurements at December 31, 2008 Using:Quoted Prices in


SignificantActive Markets


Other


Significantfor Identical


Observable


UnobservableDecember 31,


Assets


Inputs


Inputs2008


(Level 1)


(Level 2)


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

$
27,170


$



$
27,170


$
Equity securities


910



910







Mortgage-backed securities: residential


187,651







187,651



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


SignificantActive Markets


Other


Significantfor Identical


Observable


UnobservableDecember 31,


Assets


Inputs


Inputs2008


(Level 1)


(Level 2)


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

$
33,024


$



$



$
33,024Mortgage servicing assets


2,421







2,421



  79




---



##### 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
   80




---



##### Table of Contents



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


December 31, 2008Carrying


Fair


Carrying


FairValue


Value


Value


Value(In thousands)Assets:Cash and cash equivalents

$
45,074


$
45,074


$
43,417


$
43,417Available for sale securities


281,348



281,348



215,731



215,731Loans held for sale


10,497



10,551



16,032



16,358Loans, net


1,866,018



1,873,776



2,203,453



2,203,606Federal Home Loan Bank stock


26,464



n/a



26,464



n/aAccrued interest receivable


9,090



9,090



10,082



10,082Liabilities:Deposits:Checking, savings and money market accounts


(729,512
)


(729,512
)


(660,675
)


(660,675
)Certificates of deposit


(1,039,989
)


(1,051,133
)


(1,225,256
)


(1,237,262
)Federal Home Loan Bank advances


(221,323
)


(227,350
)


(337,603
)


(348,185
)Repurchase agreements and other


(96,833
)


(105,546
)


(125,269
)


(138,862
)Advance payments by borrowers for taxes and insurance


(19,791
)


(19,791
)


(19,806
)


(19,806
)Accrued interest payable


(1,421
)


(1,421
)


(3,077
)


(3,077
)    81




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  20.
    STATEMENT
    OF CASH FLOWS SUPPLEMENTAL DISCLOSURE    Year Ended December 31,2009


2008


2007(In thousands)Supplemental disclosures of cash flow information:Cash paid during the year for:Interest on deposits and borrowings

$
57,605


$
83,676


$
91,107Interest capitalized on borrowings










30Income taxes


600



3,859



13,146Supplemental schedule of noncash activities:Loans transferred to held for sale


71,707







76,493Transfers from loans to real estate owned


23,192



36,429



14,356Transfers from premises and equipment to assets held for sale


714







   21.
    PARENT
    COMPANY FINANCIAL STATEMENTS  Condensed
    Statements of Financial Condition
  December 31,2009


2008(In thousands)AssetsCash and deposits with banks

$
8,015


$
3,060Federal funds sold and other


9



33Total cash and cash equivalents


8,024



3,093Securities:Available for sale


633



809Note receivable from ESOP


8,657



10,951Investment in subsidiary-Home Savings


203,227



222,287Investment in subsidiary-Butler Wick






3,174Other assets


272



1,662Total assets

$
220,813


$
241,976Liabilities and Shareholders EquityRepurchase agreements and other

$



$
6,900Accrued interest payable






46Accrued expenses and other liabilities


1,030



107Total liabilities


1,030



7,053Total shareholders equity


219,783



234,923Total liabilities and shareholders equity

$
220,813


$
241,976  82




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Condensed
    Statements of Income
  Year Ended December 31,2009


2008


2007(In thousands)IncomeCash dividends from Home Savings

$



$



$
6,000Cash dividends from Butler Wick


11,890



14,700



3,000Interest income


847



2,208



3,380Non-interest income (loss)


(681
)


(1,226
)


31Total income


12,056



15,682



12,411ExpensesInterest expense


48



1,341



2,092Non-interest expenses


2,190



1,980



2,419Total expenses


2,238



3,321



4,511Income before income taxes


9,818



12,361



7,900Income tax benefit


(721
)


(1,304
)


(270
)Income before equity in undistributed net earnings of
    subsidiaries


10,539



13,665



8,170Decrease in undistributed earnings of subsidiaries


(27,312
)


(48,944
)


(4,037
)Net income (loss)

$
(16,773
)

$
(35,279
)

$
4,133  83




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Condensed
    Statements of Cash Flows
  Year Ended December 31,2009


2008


2007(In thousands)Cash Flows from Operating ActivitiesNet income (loss)

$
(16,773
)

$
(35,279
)

$
4,133Adjustments to reconcile net income to net cash provided by
    operating activities:Dividends in excess of earnings of the subsidiaries


27,312



48,944



4,037Security impairment charges


752



1,188



Decrease in trading securities






312



247Decrease (increase) in interest receivable










18Decrease (increase) in other assets


1,903



(1,752
)


(Decrease) increase in accrued interest payable


(46
)


(197
)


142Stock based compensation


30







Decrease in other liabilities


(3,641
)


(763
)


(64
)Net cash from operating activities


9,537



12,453



8,513Cash Flows from Investing ActivitiesPurchases of:Securities available for sale










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






30,000



Equity investment in Home Savings






(16,250
)


ESOP loan repayment


2,294



2,120



1,263Net cash from investing activities


2,294



15,870



1,263Cash Flows from Financing ActivitiesCash dividends paid






(4,064
)


(10,847
)Net (decrease) increase in borrowed funds


(6,900
)


(29,400
)


18,000Purchase of treasury stock










(9,709
)Exercise of stock options










176Net cash from financing activities


(6,900
)


(33,464
)


(2,380
)Increase (decrease) in cash and cash equivalents


4,931



(5,141
)


7,396Cash and cash equivalents, beginning of year


3,093



8,234



838Cash and cash equivalents, end of year

$
8,024


$
3,093


$
8,234   22.
    SEGMENT
    INFORMATION     84




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  23.
    EARNINGS
    PER SHARE    2009


2008


2007(In thousands, except per share data)Numerator:Income (loss) from continuing operations

$
(21,722
)

$
(37,229
)

$
1,714Income from discontinued operations


4,949



1,950



2,419Net income (loss)

$
(16,773
)

$
(35,279
)

$
4,133Denominator:Weighted average common shares outstanding  basic


29,766



29,463



29,519Dilutive effect of stock options










118Weighted average common shares outstanding  dilutive


29,766



29,463



29,637Basic earnings (loss) per share:Basic earnings (loss) per common
    share  continuing operations

$
(0.73
)

$
(1.26
)

$
0.06Basic earnings per common share  discontinued
    operations


0.17



0.06



0.08Basic earnings (loss) per common share


(0.56
)


(1.20
)


0.14Dilutive earnings (loss) per share:Dilutive earnings (loss) per common
    share  continuing operations

$
(0.73
)

$
(1.26
)

$
0.06Dilutive earnings per common share  discontinued
    operations


0.17



0.06



0.08Dilutive earnings (loss) per common share


(0.56
)


(1.20
)


0.14  85




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##### Table of Contents



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


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands, except per share data)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
)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 (loss) 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
)  86




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##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    UnauditedFirst


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


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

$
39,627


$
38,202


$
37,748


$
36,601


$
152,178Interest expense


22,685



19,287



18,951



17,993



78,916Net interest income


16,942



18,915



18,797



18,608



73,262Provision for loan losses


2,466



3,248



8,995



10,620



25,329Net interest income after provision for loan losses


14,476



15,667



9,802



7,988



47,933Non-interest income


6,270



2,908



(2,375
)


(1,019
)


5,784Non-interest expenses


14,964



15,161



49,516



14,545



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


5,782



3,414



(42,089
)


(7,576
)


(40,469
)Income tax expense (benefit)


2,018



1,110



(3,132
)


(3,236
)


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


3,764



2,304



(38,957
)


(4,340
)


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


279



425



403



843



1,950Net income (loss)

$
4,043


$
2,729


$
(38,554
)

$
(3,497
)

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

$
0.13


$
0.08


$
(1.32
)

$
(0.15
)

$
(1.26
)Basic earnings from discontinued operations


0.01



0.02



0.01



0.03



0.06Basic earnings (loss)


0.14



0.10



(1.31
)


(0.12
)


(1.20
)Diluted earnings (loss) from continuing operations


0.13



0.08



(1.32
)


(0.15
)


(1.26
)Diluted earnings from discontinued operations


0.01



0.02



0.01



0.03



0.06Diluted earnings (loss)


0.14



0.10



(1.31
)


(0.12
)


(1.20
)     25.
    OTHER
    EVENTS   87




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON FINANCIAL STATEMENTS
              
     88




---



##### Table of Contents



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

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

James R. Reske,  Chief Financial OfficerMarch 18, 2010

March 18, 2010  89




---



##### Table of Contents





REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
    CONTROL OVER FINANCIAL REPORTING
                  
     90




---



##### 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     91




---



##### Table of Contents



Equity
    Compensation Plan Information
  (a)


(b)


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





Equity Compensationto be Issued upon


Weighted-Average


Plans (ExcludingExercise of


Exercise Price of


SecuritiesPlan Category

Outstanding Options


Outstanding Options


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


2,203,338


$
7.94



1,749,020   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   92




---



##### 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 Regulations4

Agreement to Furnish Instruments10

Material Contracts11

Statement Regarding Computation of Per Share Earnings20

Proxy Statement for 2010 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  93




---



##### Table of Contents



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

/s/  James
    R.
    ReskeDouglas M. McKay
    Chairman of the Board, Chief Executive Officer and Director
    Date: March 18, 2010

James R. Reske
    Treasurer, Chief Financial Officer, and Principal Financial
    Officer 
    Date: March 18, 2010/s/  Eugenia
    C.
    Atkinson

/s/  Richard
    J.
    BuoncoreEugenia C. Atkinson

Richard J. BuoncoreDirector

DirectorDate: March 18, 2010

Date:  March 18, 2010/s/  Scott
    N.
    Crewson

/s/  Scott
    D.
    HunterScott N. Crewson

Scott D. HunterDirector

DirectorDate: March 18, 2010

Date:  March 18, 2010/s/  F.
    Scott
    ODonnell

/s/  Richard
    J
    SchiraldiF. Scott ODonnell

Richard J. SchiraldiDirector

DirectorDate: March 18, 2010

Date: March 18, 2010/s/  Clarence
    R.
    Smith

/s/  David
    C.
    SweetClarence R. Smith

David C. SweetDirector

DirectorDate: March 18, 2010

Date: March 18, 2010/s/  Donald
    J.
    VarnerDonald J. VarnerDirectorDate: March 18, 2010  94




---



##### 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
    December 31, 2004

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

Employment Agreement between The Home Savings and Loan Company
    of Youngstown, Ohio and James R. Reske dated May 19, 2008

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 10.410.5

Amendment to Employment Agreement between The Home Savings and
    Loan Company of Youngstown, Ohio and Douglas M. McKay dated
    January 1, 2009

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 10.510.6

Amendment to Employment Agreement between The Home Savings and
    Loan Company of Youngstown, Ohio and Patrick W. Bevack dated
    January 1, 2009

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 10.610.7

Amendment to Employment Agreement between The Home Savings and
    Loan Company of Youngstown, Ohio and James R. Reske dated
    January 1, 2009

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 10.710.8

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 10.810.9

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 10.910.10

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 Orders

Incorporated by reference to the
    8-K filed by
    United Community on August 13, 2008 via Edgar, film number
    081011722 Exhibit 10.110.12

Bank Orders

Incorporated by reference to the
    8-K filed by
    United Community on August 13, 2008 via Edgar, film number
    081011722 Exhibit 10.2 95