##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 UNITED COMMUNITY FINANCIAL CORP.
  OHIO
    
    0-024399
    
    34-1856319(State or other jurisdiction of incorporation)
    
    (Commission File No.)
    
    (IRS Employer I.D. No.)
 275 West Federal Street, Youngstown, Ohio 44503-1203
 (330) 742-0500
 (Former name or former address, if changed since last report)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Small reporting company þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 o þ




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##### 



TABLE OF CONTENTS
 PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of June 30, 2010 (Unaudited) and December 31, 2009
    
    
    1Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2010 and 2009 (Unaudited)
    
    
    2Consolidated Statement of Shareholders Equity for the Six Months ended June 30, 2010 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6 - 22Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23-35Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    36Item 4T. Controls and Procedures
    
    
    37Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    38Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities (None)Item 4. (Removed and Reserved)Item 5. Other Information (None)Item 6. Exhibits
    
    
    39Signatures
    
    
    40ExhibitExhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 10.5Exhibit 31.1Exhibit 31.2Exhibit 32




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)
 June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Assets:Cash and deposits with banks
    
    $
    23,673
    
    
    $
    22,330Federal funds sold and other
    
    
    18,189
    
    
    
    22,744Total cash and cash equivalents
    
    
    41,862
    
    
    
    45,074Securities:Available for sale, at fair value
    
    
    307,154
    
    
    
    281,348Loans held for sale
    
    
    4,946
    
    
    
    10,497Loans, net of allowance for loan losses of $40,728 and $42,287,
respectively
    
    
    1,786,038
    
    
    
    1,866,018Federal Home Loan Bank stock, at cost
    
    
    26,464
    
    
    
    26,464Premises and equipment, net
    
    
    22,308
    
    
    
    23,139Accrued interest receivable
    
    
    8,473
    
    
    
    9,090Real estate owned and other repossessed assets
    
    
    42,046
    
    
    
    30,962Core deposit intangible
    
    
    568
    
    
    
    661Cash surrender value of life insurance
    
    
    26,751
    
    
    
    26,198Other assets
    
    
    47,499
    
    
    
    18,976Total assets
    
    $
    2,314,109
    
    
    $
    2,338,427Liabilities and Shareholders EquityLiabilities:Deposits:Interest bearing
    
    $
    1,570,093
    
    
    $
    1,642,722Non-interest bearing
    
    
    126,438
    
    
    
    126,779Total deposits
    
    
    1,696,531
    
    
    
    1,769,501Borrowed funds:Federal Home Loan Bank advances
    
    
    275,773
    
    
    
    221,323Repurchase agreements and other
    
    
    98,440
    
    
    
    96,833Total borrowed funds
    
    
    374,213
    
    
    
    318,156Advance payments by borrowers for taxes and insurance
    
    
    17,939
    
    
    
    19,791Accrued interest payable
    
    
    1,024
    
    
    
    1,421Accrued expenses and other liabilities
    
    
    11,711
    
    
    
    9,775Total liabilities
    
    
    2,101,418
    
    
    
    2,118,644Shareholders EquityPreferred stock-no par value; 1,000,000 shares authorized and unissued
    
    
    
    
    
    
    Common stock-no par value; 499,000,000 shares authorized; 37,804,457
shares issued and 30,897,825 shares outstanding
    
    
    142,808
    
    
    
    145,775Retained earnings
    
    
    138,647
    
    
    
    148,674Accumulated other comprehensive income
    
    
    4,191
    
    
    
    4,110Unearned employee stock ownership plan shares
    
    
    
    
    
    
    (5,821
    )Treasury stock, at cost, 6,906,632 shares
    
    
    (72,955
    )
    
    
    (72,955
    )Total shareholders equity
    
    
    212,691
    
    
    
    219,783Total liabilities and shareholders equity
    
    $
    2,314,109
    
    
    $
    2,338,427
 See Notes to Consolidated Financial Statements.
  1




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands, except per share data)Interest incomeLoans
    
    $
    24,918
    
    
    $
    30,076
    
    
    $
    50,761
    
    
    $
    61,143Loans held for sale
    
    
    69
    
    
    
    216
    
    
    
    139
    
    
    
    479Available for sale securities
    
    
    2,896
    
    
    
    2,796
    
    
    
    5,481
    
    
    
    5,566Federal Home Loan Bank stock dividends
    
    
    294
    
    
    
    294
    
    
    
    594
    
    
    
    593Other interest earning assets
    
    
    8
    
    
    
    9
    
    
    
    15
    
    
    
    38Total interest income
    
    
    28,185
    
    
    
    33,391
    
    
    
    56,990
    
    
    
    67,819Interest expenseDeposits
    
    
    8,408
    
    
    
    12,074
    
    
    
    17,726
    
    
    
    24,725Federal Home Loan Bank advances
    
    
    875
    
    
    
    1,569
    
    
    
    1,723
    
    
    
    3,427Repurchase agreements and other
    
    
    931
    
    
    
    1,061
    
    
    
    1,854
    
    
    
    2,251Total interest expense
    
    
    10,214
    
    
    
    14,704
    
    
    
    21,303
    
    
    
    30,403Net interest income
    
    
    17,971
    
    
    
    18,687
    
    
    
    35,687
    
    
    
    37,416Provision for loan losses
    
    
    10,310
    
    
    
    12,311
    
    
    
    22,760
    
    
    
    20,755Net interest income after provision for loan losses
    
    
    7,661
    
    
    
    6,376
    
    
    
    12,927
    
    
    
    16,661Non-interest incomeNon-deposit investment income
    
    
    484
    
    
    
    404
    
    
    
    912
    
    
    
    708Service fees and other charges
    
    
    424
    
    
    
    2,721
    
    
    
    2,175
    
    
    
    4,233Net gains (losses):Securities available for sale
    
    
    3,671
    
    
    
    1,382
    
    
    
    6,514
    
    
    
    1,382Other -than-temporary loss in equity securitiesTotal impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )Loss recognized in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net impairment loss recognized in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )Mortgage banking income
    
    
    651
    
    
    
    1,788
    
    
    
    1,037
    
    
    
    2,928Real estate owned and other repossessed assets
    
    
    (1,755
    )
    
    
    (1,182
    )
    
    
    (3,239
    )
    
    
    (2,320
    )Gain on sale of retail branch
    
    
    
    
    
    
    
    
    
    
    1,388
    
    
    
    Other income
    
    
    1,270
    
    
    
    1,092
    
    
    
    2,518
    
    
    
    2,167Total non-interest income
    
    
    4,745
    
    
    
    6,205
    
    
    
    11,305
    
    
    
    8,948Non-interest expenseSalaries and employee benefits
    
    
    9,105
    
    
    
    7,764
    
    
    
    17,279
    
    
    
    15,787Occupancy
    
    
    839
    
    
    
    899
    
    
    
    1,843
    
    
    
    1,883Equipment and data processing
    
    
    1,720
    
    
    
    1,660
    
    
    
    3,387
    
    
    
    3,390Franchise tax
    
    
    503
    
    
    
    555
    
    
    
    1,014
    
    
    
    1,147Advertising
    
    
    147
    
    
    
    187
    
    
    
    369
    
    
    
    416Amortization of core deposit intangible
    
    
    45
    
    
    
    58
    
    
    
    93
    
    
    
    118Deposit insurance premiums
    
    
    1,459
    
    
    
    2,940
    
    
    
    2,920
    
    
    
    4,723Professional fees
    
    
    940
    
    
    
    907
    
    
    
    1,973
    
    
    
    1,623Real estate owned and other repossessed asset expenses
    
    
    1,024
    
    
    
    804
    
    
    
    1,631
    
    
    
    1,755Other expenses
    
    
    1,509
    
    
    
    1,428
    
    
    
    3,750
    
    
    
    2,759Total non-interest expenses
    
    
    17,291
    
    
    
    17,202
    
    
    
    34,259
    
    
    
    33,601Loss from continuing operations before income taxes
    
    
    (4,885
    )
    
    
    (4,621
    )
    
    
    (10,027
    )
    
    
    (7,992
    )Income tax benefit
    
    
    
    
    
    
    (1,707
    )
    
    
    
    
    
    
    (3,399
    )Net loss from continuing operations
    
    
    (4,885
    )
    
    
    (2,914
    )
    
    
    (10,027
    )
    
    
    (4,593
    )Discontinued operationsNet income of Butler Wick Corp., net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,949Net income (loss)
    
    $
    (4,885
    )
    
    $
    (2,914
    )
    
    $
    (10,027
    )
    
    $
    356
   2




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UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Comprehensive loss
    
    $
    (4,379
    )
    
    $
    (4,835
    )
    
    $
    (9,946
    )
    
    $
    (655
    )Earnings (loss) per shareBasiccontinuing operations
    
    $
    (0.16
    )
    
    $
    (0.10
    )
    
    $
    (0.33
    )
    
    $
    (0.16
    )Basicdiscontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17Basic
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    0.01Dilutedcontinuing operations
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    (0.16
    )Diluteddiscontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17Diluted
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    0.01
 See Notes to Consolidated Financial Statements.
  3




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 (Unaudited)
 UnearnedAccumulated
    
    
    EmployeeOther
    
    
    StockShares
    
    
    Common
    
    
    Retained
    
    
    Comprehensive
    
    
    Ownership
    
    
    TreasuryOutstanding
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Plan Shares
    
    
    Stock
    
    
    Total(Dollars in thousands, except share data)Balance December 31, 2009
    
    
    30,898
    
    
    $
    145,775
    
    
    $
    148,674
    
    
    $
    4,110
    
    
    $
    (5,821
    )
    
    $
    (72,955
    )
    
    $
    219,783Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (10,027
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,027
    )Change in net unrealized gain
     on securities, net
of tax expense of $44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    81Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,946
    )Shares allocated to ESOP participants
    
    
    
    
    
    
    (3,078
    )
    
    
    
    
    
    
    
    
    
    
    5,821
    
    
    
    
    
    
    
    2,743Stock based compensation
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111Balance June 30, 2010
    
    
    30,898
    
    
    $
    142,808
    
    
    $
    138,647
    
    
    $
    4,191
    
    
    $
    
    
    
    $
    (72,955
    )
    
    $
    212,691
 UnearnedAccumulated
    
    
    EmployeeOther
    
    
    StockShares
    
    
    Common
    
    
    Retained
    
    
    Comprehensive
    
    
    Ownership
    
    
    TreasuryOutstanding
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Plan Shares
    
    
    Stock
    
    
    Total(Dollars in thousands, except share data)Balance December 31, 2008
    
    
    30,898
    
    
    $
    146,439
    
    
    $
    165,447
    
    
    $
    3,635
    
    
    $
    (7,643
    )
    
    $
    (72,955
    )
    
    $
    234,923Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356Change in net unrealized gain
     on securities, net of
tax benefit of $544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,011
    )
    
    
    
    
    
    
    
    
    
    
    (1,011
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (655
    )Shares allocated to ESOP participants
    
    
    
    
    
    
    (595
    )
    
    
    
    
    
    
    
    
    
    
    911
    
    
    
    
    
    
    
    316Stock based compensation
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Balance June 30, 2009
    
    
    30,898
    
    
    $
    145,873
    
    
    $
    165,803
    
    
    $
    2,624
    
    
    $
    (6,732
    )
    
    $
    (72,955
    )
    
    $
    234,613
 See Notes to Consolidated Financial Statements
  4




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months Ended June 30,2010
    
    
    2009(Dollars in thousands)Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    (10,027
    )
    
    $
    356Adjustments to reconcile net income to net cash provided by operating activitiesProvision for loan losses
    
    
    22,760
    
    
    
    20,755Mortgage banking income
    
    
    (1,037
    )
    
    
    (2,928
    )Net losses on real estate owned and other repossessed assets sold
    
    
    3,239
    
    
    
    2,337Net gain on retail branch sold
    
    
    (1,388
    )
    
    
    Net gain on available for sale securities sold
    
    
    (6,514
    )
    
    
    (1,382
    )Net gains on other assets sold
    
    
    (3
    )
    
    
    (17
    )Other than temporary impairment of securities available for sale
    
    
    
    
    
    
    150Amortization of premiums and accretion of discounts
    
    
    (1,149
    )
    
    
    1,156Depreciation and amortization
    
    
    993
    
    
    
    1,124Decrease in interest receivable
    
    
    617
    
    
    
    1,040Decrease in interest payable
    
    
    (397
    )
    
    
    (379
    )Decrease (increase) in prepaid and other assets
    
    
    611
   
    
    
    (4,042
    )Increase in other liabilities
    
    
    1,836
    
    
    
    3,104Stock based compensation
    
    
    111
    
    
    
    29Net principal disbursed on loans originated for sale
    
    
    (80,372
    )
    
    
    (262,788
    )Proceeds from sale of loans originated for sale
    
    
    85,175
    
    
    
    267,691ESOP Compensation
    
    
    2,743
    
    
    
    316Operating cash flows from discontinued operations
    
    
    
    
    
    
    (4,949
    )Net cash from operating activities
    
    
    17,198
    
    
    
    21,573Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Securities available for sale
    
    
    40,945
    
    
    
    25,923Proceeds from sale of:Securities available for sale
    
    
    174,022
    
    
    
    47,433Real estate owned and other repossessed assets
    
    
    11,183
    
    
    
    6,797Fixed assets
    
    
    20
    
    
    
    37Purchases of:Securities available for sale
    
    
    (263,157
    )
    
    
    (114,047
    )Net change in loans
    
    
    33,913
    
    
    
    138,926Loans purchased
    
    
    (2,460
    )
    
    
    (2,009
    )Purchases of premises and equipment
    
    
    (161
    )
    
    
    (371
    )Sale of retail branch
    
    
    (22,158
    )
    
    
    Investing cash flows from discontinued operations
    
    
    
    
    
    
    11,921Net cash from investing activities
    
    
    (27,853
   )
    
    
    114,610Cash Flows from Financing ActivitiesNet increase in checking, savings and money market accounts
    
    
    31,590
    
    
    
    30,279Net decrease in certificates of deposit
    
    
    (78,352
    )
    
    
    (87,996
    )Net decrease in advance payments by borrowers for taxes and insurance
    
    
    (1,852
    )
    
    
    (5,755
    )Proceeds from Federal Home Loan Bank advances
    
    
    509,200
    
    
    
    423,400Repayment of Federal Home Loan Bank advances
    
    
    (454,750
    )
    
    
    (466,851
    )Net change in repurchase agreements and other borrowed funds
    
    
    1,607
    
    
    
    (28,017
    )Net cash from financing activities
    
    
    7,443
    
    
    
    (134,940
    )Change in cash and cash equivalents
    
    
    (3,212
    )
    
    
    1,243Cash and cash equivalents, beginning of period
    
    
    45,074
    
    
    
    43,417Cash and cash equivalents, end of period
    
    $
    41,862
    
    
    $
    44,660
 See Notes to Consolidated Financial Statements
  5




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UNITED COMMUNITY FINANCIAL CORP.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. BASIS OF PRESENTATION
     2. REGULATORY ENFORCEMENT ACTION
  
  6




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##### Table of Contents



3. DISCONTINUED OPERATIONS
  SixMonthsEndedJune 30,2009IncomeInterest income
    
    $
    32Brokerage commissions
    
    
    Service fees and other charges
    
    
    1,287Underwriting and investment banking
    
    
    Gain on the sale of Butler Wick Trust
    
    
    7,904Other income
    
    
    Total income
    
    
    9,223ExpensesInterest expense on borrowings
    
    
    Salaries and employee benefits
    
    
    1,198Occupancy expenses
    
    
    68Equipment and data processing
    
    
    84Other expenses
    
    
    258Total expenses
    
    
    1,608Income before taxes
    
    
    7,615Income tax
    
    
    2,666Net income
    
    $
    4,949
 4. RECENT ACCOUNTING DEVELOPMENTS
 Accounting for Transfers of Financial Assets: Consolidation
 Amendments to FASB Interpretation No. 46(R) (ASC 810-10):  Consolidation of Variable Interest Entities,
  7




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##### Table of Contents



Improving Disclosures About Fair Value Measurements: Improving Disclosures About Fair Value
Measurements
 Pooled Purchased Loans: Receivables (Topic 310):
Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted for as a Single
Asset  a consensus of the FASB Emerging Issues Task Force
 Disclosure on Credit Quality:
 5. STOCK COMPENSATION
      8




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##### Table of Contents



For the six months ended June 30, 2010AggregateWeighted
    
    
    intrinsicaverage
    
    
    value (inShares
    
    
    exercise price
    
    
    thousands)Outstanding at beginning of year
    
    
    2,200,672
    
    
    $
    7.95Granted
    
    
    418,200
    
    
    
    2.10Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (358,379
    )
    
    
    8.21Outstanding at end of period
    
    
    2,260,493
    
    
    $
    6.82
    
    
    $
    10Options exercisable at end of period
    
    
    1,628,974
    
    
    $
    8.69
    
    
    $
    3
  June 30, 2010Intrinsic value of options exercised
    
    
    n/aCash received from option exercises
    
    
    n/aTax benefit realized from option exercises
    
    
    n/aWeighted average fair value of options granted, per share
    
    $
    1.34
   April 29, 2010Risk-free interest rate
    
    
    2.49
    %Expected term (years)
    
    
    5Expected stock volatility
    
    
    77.2Dividend yield
    
    
    
    %
  6. SECURITIES
  June 30, 2010(Dollars in thousands)Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and government
sponsored entities securities
    
    $
    54,900
    
    
    $
    383
    
    
    $
    (8
    )
    
    $
    55,275Equity securities
    
    
    293
    
    
    
    124
    
    
    
    (24
    )
    
    
    393Mortgage-backed securities GSE  issued:  residential
    
    
    245,859
    
    
    
    5,627
    
    
    
    
    
    
    
    251,486Total
    
    $
    301,052
    
    
    $
    6,134
    
    
    $
    (32
    )
    
    $
    307,154
  9




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December 31, 2009(Dollars in thousands)Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and government
sponsored entities securities
    
    $
    48,717
    
    
    $
    313
    
    
    $
    (108
    )
    
    $
    48,922Equity securities
    
    
    472
    
    
    
    236
    
    
    
    
    
    
    
    708Mortgage-backed securities GSE
issued: residential
    
    
    226,182
    
    
    
    5,536
    
    
    
    
    
    
    
    231,718Total
    
    $
    275,371
    
    
    $
    6,085
    
    
    $
    (108
    )
    
    $
    281,348
  June 30, 2010(Dollars in thousands)Amortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    500
    
    
    $
    503Due after one year through five years
    
    
    25,000
    
    
    
    25,228Due after five years through ten years
    
    
    29,400
    
    
    
    29,544Mortgage-backed securities: residential
    
    
    245,859
    
    
    
    251,486Total
    
    $
    300,759
    
    
    $
    306,761
    June 30, 2010(Dollars in thousands)Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossU.S. Treasury and government sponsored entities securities
    
    $
    11,402
    
    
    $
    (8
    )
    
    $
    
    
    
    $
    
    
    
    $
    11,402
    
    
    $
    (8
    )Equity securities
    
    
    105
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    105
    
    
    
    (24
    )Mortgage-backed securities GSE
issued: residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,507
    
    
    $
    (32
    )
    
    $
    
    
    
    $
    
    
    
    $
    11,507
    
    
    $
    (32
    )
  10




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December 31, 2009(Dollars in thousands)Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossU.S. Treasury and government sponsored entities securities
    
    $
    27,898
    
    
    $
    (108
    )
    
    $
    
    
    
    $
    
    
    
    $
    27,898
    
    
    $
    (108
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities GSE
issued: residential
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Total
    
    $
    27,905
    
    
    $
    (108
    )
    
    $
    
    
    
    $
    
    
    
    $
    27,905
    
    
    $
    (108
    )
    Other-Than-Temporary-Impairment
      11




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##### Table of Contents



7. LOANS
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Real Estate:One- to four-family residential
    
    $
    779,565
    
    
    $
    773,831Multifamily residential
    
    
    138,875
    
    
    
    150,480Nonresidential
    
    
    383,882
    
    
    
    397,895Land
    
    
    26,217
    
    
    
    23,502Construction:One- to four-family residential
    
    
    133,534
    
    
    
    178,095Multifamily and non-residential
    
    
    14,870
    
    
    
    13,741Total real estate
    
    
    1,476,943
    
    
    
    1,537,544Consumer
    
    
    295,007
    
    
    
    309,202Commercial
    
    
    53,566
    
    
    
    60,217Total loans
    
    
    1,825,516
    
    
    
    1,906,963Less:Allowance for loan losses
    
    
    40,728
    
    
    
    42,287Deferred loan fees, net
    
    
    (1,250
    )
    
    
    (1,342
    )Total
    
    
    39,478
    
    
    
    40,945Loans, net
    
    $
    1,786,038
    
    
    $
    1,866,018
  Three months
    
    
    Three monthsended
    
    
    endedJune 30,
    
    
    June 30,2010
    
    
    2009(Dollars in thousands)Balance, beginning of period
    
    $
    47,768
    
    
    $
    37,856Provision for loan losses
    
    
    10,310
    
    
    
    12,311Amounts charged off
    
    
    (17,558
    )
    
    
    (10,815
    )Recoveries
    
    
    208
    
    
    
    480Balance, end of period
    
    $
    40,728
    
    
    $
    39,832
  12




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Six months
    
    
    Six months
    
    
    Twelve monthsended
    
    
    ended
    
    
    endedJune 30,
    
    
    June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009(Dollars in thousands)Balance, beginning of period
    
    $
    42,287
    
    
    $
    35,962
    
    
    $
    35,962Provision for loan losses
    
    
    22,760
    
    
    
    20,755
    
    
    
    49,074Amounts charged off
    
    
    (24,678
    )
    
    
    (17,506
    )
    
    
    (43,692
    )Recoveries
    
    
    379
    
    
    
    621
    
    
    
    943Balance, end of period
    
    $
    40,728
    
    
    $
    39,832
    
    
    $
    42,287
   As of or for the
    
    
    As of or forSix
    
    
    the YearMonths Ended
    
    
    EndedJune 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Impaired loans on which no specific valuation allowance was provided
    
    $
    82,736
    
    
    $
    83,443Impaired loans on which a specific valuation allowance was provided
    
    
    76,041
    
    
    
    36,362Total impaired loans at period-end
    
    $
    158,777
    
    
    $
    119,805Specific valuation allowances on impaired loans at period-end
    
    $
    10,029
    
    
    $
    4,064Average impaired loans during the period
    
    
    138,791
    
    
    
    103,026Interest income recognized on impaired loans during the period
    
    
    816
    
    
    
    2,056Interest income received on impaired loans during the period
    
    
    816
    
    
    
    2,056
 8. MORTGAGE BANKING ACTIVITIES
   Six Months Ended
    
    
    Year EndedJune 30, 2010
    
    
    December 31, 2009(Dollars in thousands)Balance, beginning of year
    
    $
    6,228
    
    
    $
    5,562Originations
    
    
    840
    
    
    
    3,220Amortized to expense
    
    
    (1,199
    )
    
    
    (2,554
    )Balance, end of period
    
    
    5,869
    
    
    
    6,228Less valuation allowance
    
    
    (1,579
    )
    
    
    (423
    )Net balance
    
    $
    4,290
    
    
    $
    5,805
  13




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Six Months Ended
    
    
    Year EndedJune 30, 2010
    
    
    December 31, 2009(Dollars in thousands)Balance, beginning of year
    
    $
    (423
    )
    
    $
    (2,233
    )Impairment charges
    
    
    (1,260
    )
    
    
    Recoveries
    
    
    104
    
    
    
    1,810Balance, end of period
    
    $
    (1,579
    )
    
    $
    (423
    )
   June 30,
    
    December 31,2010
    
    2009Weighted average prepayment rate
    
    553 PSA
    
    325 PSAWeighted average life (in years)
    
    3.48
    
    3.65Weighted average discount rate
    
    8%
    
    8%
 9. OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Real estate owned and other repossessed assets
    
    $
    49,348
    
    
    $
    38,829Valuation allowance
    
    
    (7,302
    )
    
    
    (7,867
    )End of period
    
    $
    42,046
    
    
    $
    30,962
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Beginning of year
    
    $
    7,867
    
    
    $
    2,754Additions charged to expense
    
    
    2,656
    
    
    
    7,925Direct write-downs
    
    
    (3,221
    )
    
    
    (2,812
    )End of period
    
    $
    7,302
    
    
    $
    7,867
  For the three months ended June 30,
    
    
    For the six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)
    
    
    (Dollars in thousands)Net loss (gain) on sales
    
    $
    775
    
    
    $
    497
    
    
    $
    875
    
    
    $
    922Provision for unrealized losses, net
    
    
    980
    
    
    
    685
    
    
    
    2,364
    
    
    
    1,398Operating expenses, net of rental income
    
    
    1,024
    
    
    
    804
    
    
    
    1,631
    
    
    
    1,755Total expenses
    
    $
    2,779
    
    
    $
    1,986
    
    
    $
    4,870
    
    
    $
    4,075
  14




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10. OTHER POSTRETIREMENT BENEFIT PLANS
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    47
    
    
    
    47
    
    
    
    94
    
    
    
    94Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognized net actuarial gain
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (8
    )Net periodic benefit cost/(gain)
    
    $
    47
    
    
    $
    43
    
    
    $
    94
    
    
    $
    86Assumptions used in the valuations
were as follows:Weighted average discount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.00
    %
 11. FAIR VALUE MEASUREMENT
        15




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Fair Value Measurements at June 30, 2010 Using:Quoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableJune 30,
    
    
    Assets
    
    
    Observable
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    Inputs (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Available for sale securitiesUS Treasury and government
sponsored entities
securities
    
    $
    55,275
    
    
    $
    
    
    
    $
    55,275
    
    
    $
    Equity securities
    
    
    393
    
    
    
    393
    
    
    
    
    
    
    
    Mortgage-backed
securities: residential
    
    
    251,486
    
    
    
    
    
    
    
    251,486
    
    
    
    
 Fair Value Measurements at December 31, 2009 Using:Quoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Observable
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    Inputs (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 June 30, 2010 Using:Quoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableJune 30,
    
    
    Assets
    
    
    Observable
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    Inputs (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loans
    
    $
    66,012
    
    
    
    
    
    
    
    
    
    
    $
    66,012Mortgage servicing assets
    
    
    4,065
    
    
    
    
    
    
    
    4,065
    
    
    
    Foreclosed assets
    
    
    16,392
    
    
    
    
    
    
    
    
    
    
    
    16,392
 Fair Value Measurements at December 31, 2009 Using:Quoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Observable
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    Inputs (Level 2)
    
    
    (Level 3)(Dollars in thousands)Assets:Impaired loans
    
    $
    32,298
    
    
    
    
    
    
    
    
    
    
    $
    32,298Mortgage servicing rights
    
    
    1,865
    
    
    
    
    
    
    
    1,865
    
    
    
    Foreclosed assets
    
    
    19,534
    
    
    
    
    
    
    
    
    
    
    
    19,534
  16




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##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    Value(Dollars in thousands)Assets:Cash and cash equivalents
    
    $
    41,862
    
    
    $
    41,862
    
    
    $
    45,074
    
    
    $
    45,074Securities:Available for sale
    
    
    307,154
    
    
    
    307,154
    
    
    
    281,348
    
    
    
    281,348Loans held for sale
    
    
    4,946
    
    
    
    5,110
    
    
    
    10,497
    
    
    
    10,551Loans, net
    
    
    1,786,038
    
    
    
    1,798,899
    
    
    
    1,866,018
    
    
    
    1,873,776Federal Home Loan Bank stock
    
    
    26,464
    
    
    
    n/a
    
    
    
    26,464
    
    
    
    n/aAccrued interest receivable
    
    
    8,473
    
    
    
    8,473
    
    
    
    9,090
    
    
    
    9,090Liabilities:Deposits:Checking, savings and money market accounts
    
    
    (754,626
    )
    
    
    (754,626
    )
    
    
    (729,512
    )
    
    
    (729,512
    )Certificates of deposit
    
    
    (941,905
    )
    
    
    (950,741
    )
    
    
    (1,039,989
    )
    
    
    (1,051,133
    )Federal Home Loan Bank advances
    
    
    (275,773
    )
    
    
    (284,272
    )
    
    
    (221,323
    )
    
    
    (227,350
    )Repurchase agreements and other
    
    
    (98,440
    )
    
    
    (108,522
    )
    
    
    (96,833
    )
    
    
    (105,546
    )Advance payments by borrowers for taxes
and insurance
    
    
    (17,939
    )
    
    
    (17,939
    )
    
    
    (19,791
    )
    
    
    (19,791
    )Accrued interest payable
    
    
    (1,024
    )
    
    
    (1,024
    )
    
    
    (1,421
    )
    
    
    (1,421
    )
 Fair value of financial instruments:
  Cash and cash equivalents, accrued interest receivable and payable and advance payments by
borrowers for taxes and insurance
 Securities
  17




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##### Table of Contents



Loans held for sale
 Loans
 Federal Home Loan Bank stock
 Deposits
 Borrowed funds
 Limitations
  12. STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE
  June 30, 2010
    
    
    June 30, 2009(Dollars in thousands)Supplemental disclosures of cash flow informationCash paid during the period for:Interest on deposits and borrowings
    
    $
    21,700
    
    
    $
    30,782Income taxes
    
    
    
    
    
    
    600Supplemental schedule of noncash activities:Transfers from loans to real estate owned and
other repossessed assets
    
    
    25,505
    
    
    
    12,953
 13. SEGMENT INFORMATION
    18




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##### Table of Contents



14. EARNINGS PER SHARE
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Income (loss) from continuing operations
    
    $
    (4,885
    )
    
    $
    (2,914
    )
    
    $
    (10,027
    )
    
    $
    (4,593
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,949Net income
    
    $
    (4,885
    )
    
    $
    (2,914
    )
    
    $
    (10,027
    )
    
    $
    356Denominator:Weighted average common shares outstandingbasic
    
    
    30,039
    
    
    
    29,727
    
    
    
    29,997
    
    
    
    29,632Dilutive effect of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares outstandingdilutive
    
    
    30,039
    
    
    
    29,727
    
    
    
    29,997
    
    
    
    29,632Basic earnings (loss) per share:Basic earnings (loss) per common share continuing operations
    
    $
    (0.16
    )
    
    $
    (0.10
    )
    
    $
    (0.33
    )
    
    $
    (0.16
    )Basic earnings per common share-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17Basic earnings (loss) per common share
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    0.01Dilutive earnings (loss) per share:Dilutive earnings (loss) per common share continuing
operations
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    (0.16
    )Dilutive earnings per common share-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17Dilutive earnings (loss) per common share
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    0.01
 15. BROKERED CERTIFICATES OF DEPOSIT
   19




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##### Table of Contents



16. OTHER COMPREHENSIVE INCOME (LOSS)
   Three months ended June 30,2010
    
    
    2009(Dollars in thousands)Unrealized holding gain (loss) on securities available for sale
    
    $
    4,449
    
    
    $
    (4,337
    )Unrealized holding gain (loss) on postretirement benefits
    
    
    
    
    
    
    Reclassification adjustment for (gains) losses realized in income
    
    
    (3,671
    )
    
    
    1,382Net unrealized gains
    
    
    778
    
    
    
    (2,955
    )Tax effect (35%)
    
    
    (272
    )
    
    
    1,034Net of tax amount
    
    $
    506
    
    
    $
    (1,921
    )
 Six months ended June 30,2010
    
    
    2009(Dollars in thousands)Unrealized holding gain (loss) on securities available for sale
    
    $
    6,639
    
    
    $
    (2,787
    )Unrealized holding gain (loss) on postretirement benefits
    
    
    
    
    
    
    Reclassification adjustment for (gains) losses realized in income
    
    
    (6,514
    )
    
    
    1,232Net unrealized gains
    
    
    125
    
    
    
    (1,555
    )Tax effect (35%)
    
    
    (44
    )
    
    
    544Net of tax amount
    
    $
    81
    
    
    $
    (1,011
    )
  Balance at
    
    
    Current
    
    
    Balance atDecember 31,
    
    
    Period
    
    
    June 30,2009
    
    
    Change
    
    
    2010Unrealized gains (losses) on securities available for sale
    
    $
    3,885
    
    
    $
    81
    
    
    $
    3,966Unrealized gains (losses) on post-retirement benefits
    
    
    225
    
    
    
    
    
    
    
    225Total
    
    $
    4,110
    
    
    $
    81
    
    
    $
    4,191
 17. REGULATORY CAPITAL REQUIREMENTS
   20




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##### Table of Contents



As of June 30, 2010Minimum CapitalRequirementsActual
    
    
    Per Bank OrderAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(In thousands)Total risk-based capital to risk-weighted assets
    
    $
    222,340
    
    
    
    13.16
    %
    
    $
    202,687
    
    
    
    12.00
    %Tier 1 capital to risk-weighted assets
    
    
    200,985
    
    
    
    11.90
    %
    
    
    *
    
    
    
    *Tier 1 capital to average total assets
    
    
    200,985
    
    
    
    8.71
    %
    
    
    184,600
    
    
    
    8.00
    %
 As of June 30, 2010Minimum Capital
    
    
    To Be Well CapitalizedRequirements
    
    
    Under Prompt CorrectivePer Regulation
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(In thousands)Total risk-based capital to risk-weighted assets
    
    $
    135,125
    
    
    
    8.00
    %
    
    $
    168,906
    
    
    
    10.00
    %Tier 1 capital to risk-weighted assets
    
    
    *
    
    
    
    *
    
    
    
    101,343
    
    
    
    6.00
    %Tier 1 capital to average total assets
    
    
    92,300
    
    
    
    4.00
    %
    
    
    115,375
    
    
    
    5.00
    %
 As of December 31, 2009Minimum CapitalRequirementsActual
    
    
    Per Bank OrderAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(In thousands)Total risk-based capital to risk-weighted assets
    
    $
    220,395
    
    
    
    12.80
    %
    
    $
    206,674
    
    
    
    12.00
    %Tier 1 capital to risk-weighted assets
    
    
    198,610
    
    
    
    11.53
    %
    
    
    *
    
    
    
    *Tier 1 capital to average total assets
    
    
    198,610
    
    
    
    8.22
    %
    
    
    193,316
    
    
    
    8.00
    %
 As of December 31, 2009Minimum Capital
    
    
    To Be Well CapitalizedRequirements
    
    
    Under Prompt CorrectivePer Regulation
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(In thousands)Total risk-based capital to risk-weighted assets
    
    $
    137,783
    
    
    
    8.00
    %
    
    $
    172,229
    
    
    
    10.00
    %Tier 1 capital to risk-weighted assets
    
    
    *
    
    
    
    *
    
    
    
    103,337
    
    
    
    6.00
    %Tier 1 capital to average total assets
    
    
    96,658
    
    
    
    4.00
    %
    
    
    120,822
    
    
    
    5.00
    %
 *
    
    Amount/Ratio is not required under the Bank Order or regulations.   21




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18. EMPLOYEE STOCK OWNERSHIP PLAN
    22




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 UNITED COMMUNITY FINANCIAL CORP.
 At or For the Three
    
    
    At or For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Selected financial ratios and other data: (1)Performance ratios:Return on average assets (2)
    
    
    -0.85
    %
    
    
    -0.46
    %
    
    
    -0.87
    %
    
    
    0.03
    %Return on average equity (3)
    
    
    -8.91
    %
    
    
    -4.74
    %
    
    
    -9.05
    %
    
    
    0.29
    %Interest rate spread (4)
    
    
    3.06
    %
    
    
    2.81
    %
    
    
    3.03
    %
    
    
    2.78
    %Net interest margin (5)
    
    
    3.30
    %
    
    
    3.12
    %
    
    
    3.29
    %
    
    
    3.08
    %Non-interest expense to average assets
    
    
    2.99
    %
    
    
    2.72
    %
    
    
    2.98
    %
    
    
    2.62
    %Efficiency ratio (6)
    
    
    82.92
    %
    
    
    69.38
    %
    
    
    80.72
    %
    
    
    70.56
    %Average interest-earning assets to average interest-bearing liabilities
    
    
    112.93
    %
    
    
    112.66
    %
    
    
    113.14
    %
    
    
    112.08
    %Capital ratios:Average equity to average assets
    
    
    9.48
    %
    
    
    9.74
    %
    
    
    9.63
    %
    
    
    9.58
    %Equity to assets, end of period
    
    
    9.19
    %
    
    
    9.43
    %
    
    
    9.19
    %
    
    
    9.43
    %Tier 1 leverage ratio
    
    
    8.71
    %
    
    
    8.50
    %
    
    
    8.71
    %
    
    
    8.50
    %Tier 1 risk-based capital ratio
    
    
    11.90
    %
    
    
    11.50
    %
    
    
    11.90
    %
    
    
    11.50
    %Total risk-based capital ratio
    
    
    13.16
    %
    
    
    12.76
    %
    
    
    13.16
    %
    
    
    12.76
    %Asset quality ratios:Non-performing loans to total loans at end of period (7)
    
    
    8.69
    %
    
    
    4.90
    %
    
    
    8.69
    %
    
    
    4.90
    %Non-performing assets to average assets (8)
    
    
    8.53
    %
    
    
    5.25
    %
    
    
    8.57
    %
    
    
    5.16
    %Non-performing assets to total assets at end of period (8)
    
    
    8.52
    %
    
    
    5.33
    %
    
    
    8.52
    %
    
    
    5.33
    %Allowance for loan losses as a percent of loans
    
    
    2.23
    %
    
    
    1.92
    %
    
    
    2.23
    %
    
    
    1.92
    %Allowance for loan losses as a percent of nonperforming loans (7)
    
    
    26.25
    %
    
    
    40.03
    %
    
    
    26.25
    %
    
    
    40.03
    %Texas ratio (9)
    
    
    77.99
    %
    
    
    48.45
    %
    
    
    77.99
    %
    
    
    48.45
    %Total classified assets as a percent of Tier 1 capital
    
    
    111.23
    %
    
    
    68.62
    %
    
    
    111.23
    %
    
    
    68.62
    %Net charge-offs as a percent of average loans
    
    
    3.84
    %
    
    
    1.99
    %
    
    
    2.66
    %
    
    
    1.60
    %Total 90+ days past due as a percent of total loans
    
    
    7.40
    %
    
    
    4.66
    %
    
    
    7.40
    %
    
    
    4.66
    %Office data:Number of full service banking offices
    
    
    38
    
    
    
    39
    
    
    
    38
    
    
    
    39Number of loan production offices
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Per share data:Basic earnings (loss) from continuing operations (10)
    
    $
    (0.16
    )
    
    $
    (0.10
    )
    
    $
    (0.33
    )
    
    $
    (0.16
    )Basic earnings from discontinued operations (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17Basic earnings (loss) (10)
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    0.01Diluted earnings (loss) from continuing operations (10)
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    (0.16
    )Diluted earnings from discontinued operations (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17Diluted earnings (loss) (10)
    
    
    (0.16
    )
    
    
    (0.10
    )
    
    
    (0.33
    )
    
    
    0.01Book value (11)
    
    
    6.88
    
    
    
    7.59
    
    
    
    6.88
    
    
    
    7.59Tangible book value (12)
    
    
    6.87
    
    
    
    7.57
    
    
    
    6.87
    
    
    
    7.57
 Notes:1.
    
    Ratios for the three and six month periods are annualized where appropriate2.
    
    Net income (loss) divided by average total assets3.
    
    Net income (loss) divided by average total equity4.
    
    Difference between weighted average yield on interest-earning assets and weighted average cost of interest-bearing liabilities5.
    
    Net interest income as a percentage of average interest-earning assets6.
    
    Noninterest expense, excluding the amortization of core deposit intangible, divided by the sum of net interest income and noninterest income, excluding gains and losses on securities, other than temporary
impairment charges, gains and losses on foreclosed assets and gain on the sale of a retail branch7.
    
    Nonperforming loans consist of nonaccrual loans and loans past due ninety days and still accruing8.
    
    Nonperforming assets consist of nonperforming loans, real estate owned and other repossessed assets9.
    
    Nonperforming assets divided by the sum of tangible common equity and the allowance for loan losses10.
    
    Net income (loss) divided by the number of basic or diluted shares outstanding11.
    
    Shareholders equity divided by number of shares outstanding12.
    
    Shareholders equity minus core deposit intangible divided by the number of shares outstanding  23




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##### Table of Contents



Forward Looking Statements
  Comparison of Financial Condition at June 30, 2010 and December 31, 2009
        24




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##### Table of Contents



Allowance For Loan Losses(Dollars in thousands)December 31,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 30,2009
    
    
    Provision
    
    
    Recovery
    
    
    Chargeoff
    
    
    2010Real Estate LoansPermanentOne-to four-family residential
    
    $
    6,546
    
    
    $
    5,014
    
    
    $
    57
    
    
    $
    (3,373
    )
    
    $
    8,244Multifamily residential
    
    
    2,182
    
    
    
    2,953
    
    
    
    
    
    
    
    (2,652
    )
    
    
    2,483Nonresidential
    
    
    5,894
    
    
    
    4,842
    
    
    
    14
    
    
    
    (1,990
    )
    
    
    8,760Land
    
    
    666
    
    
    
    571
    
    
    
    
    
    
    
    (318
    )
    
    
    919Total
    
    
    15,288
    
    
    
    13,380
    
    
    
    71
    
    
    
    (8,333
    )
    
    
    20,406Construction LoansOne-to four-family residential
    
    
    18,787
    
    
    
    3,684
    
    
    
    49
    
    
    
    (12,991
    )
    
    
    9,529Multifamily and nonresidential
    
    
    233
    
    
    
    344
    
    
    
    
    
    
    
    (310
    )
    
    
    267Total
    
    
    19,020
    
    
    
    4,028
    
    
    
    49
    
    
    
    (13,301
    )
    
    
    9,796Consumer LoansHome Equity
    
    
    2,390
    
    
    
    912
    
    
    
    29
    
    
    
    (712
    )
    
    
    2,619Auto
    
    
    162
    
    
    
    (21
    )
    
    
    24
    
    
    
    (51
    )
    
    
    114Marine
    
    
    701
    
    
    
    484
    
    
    
    
    
    
    
    (615
    )
    
    
    570Recreational vehicle
    
    
    1,392
    
    
    
    728
    
    
    
    27
    
    
    
    (845
    )
    
    
    1,302Other
    
    
    314
    
    
    
    132
    
    
    
    174
    
    
    
    (265
    )
    
    
    355Total
    
    
    4,959
    
    
    
    2,235
    
    
    
    254
    
    
    
    (2,488
    )
    
    
    4,960Commercial LoansSecured
    
    
    1,084
    
    
    
    661
    
    
    
    5
    
    
    
    (421
    )
    
    
    1,329Unsecured
    
    
    1,936
    
    
    
    2,456
    
    
    
    
    
    
    
    (155
    )
    
    
    4,237Total
    
    
    3,020
    
    
    
    3,117
    
    
    
    5
    
    
    
    (576
    )
    
    
    5,566Total
    
    $
    42,287
    
    
    $
    22,760
    
    
    $
    379
    
    
    $
    (24,698
    )
    
    $
    40,728
      25




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##### Table of Contents



Impaired Loans(Dollars in thousands)June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    ChangeReal Estate LoansPermanentOne-to four-family
residential
    
    $
    23,758
    
    
    $
    18,764
    
    
    $
    4,994Multifamily residential
    
    
    11,571
    
    
    
    7,863
    
    
    
    3,708Nonresidential
    
    
    50,651
    
    
    
    25,686
    
    
    
    24,965Land
    
    
    6,588
    
    
    
    5,160
    
    
    
    1,428Total
    
    
    92,568
    
    
    
    57,473
    
    
    
    35,095Construction LoansOne-to four-family
residential
    
    
    55,196
    
    
    
    53,666
    
    
    
    1,530Multifamily and
nonresidential
    
    
    2,413
    
    
    
    392
    
    
    
    2,021Total
    
    
    57,609
    
    
    
    54,058
    
    
    
    3,551Consumer LoansHome Equity
    
    
    1,137
    
    
    
    2,088
    
    
    
    (951
    )Auto
    
    
    42
    
    
    
    30
    
    
    
    12Boat
    
    
    267
    
    
    
    1,103
    
    
    
    (836
    )Recreational vehicle
    
    
    283
    
    
    
    353
    
    
    
    (70
    )Other
    
    
    50
    
    
    
    8
    
    
    
    42Total
    
    
    1,779
    
    
    
    3,582
    
    
    
    (1,803
    )Commercial LoansSecured
    
    
    2,429
    
    
    
    3,365
    
    
    
    (936
    )Unsecured
    
    
    4,415
    
    
    
    327
    
    
    
    4,088Total
    
    
    6,844
    
    
    
    3,692
    
    
    
    3,152Total Impaired Loans
    
    $
    158,800
    
    
    $
    118,805
    
    
    $
    39,995
  
    
    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 the 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.
  26




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##### Table of Contents




    
    the fair value of cash, other assets, or an equity interest accepted by Home Savings
from a borrower in full satisfaction of its receivable at least equals the recorded
investment in the loan;
 
    
    the fair value of cash, other assets, or an equity interest transferred by a borrower to
Home Savings in full settlement of its loan at least equals the carrying amount of the
loan;
 
    
    Home Savings reduces the effective interest rate on the loan primarily to reflect a
decrease in market interest rates in general or a decrease in the risk so as to maintain a
relationship with a borrower that can readily obtain funds from other sources at the
current market interest rate; or
 
    
    Home Savings issues, in exchange for the original loan, a new marketable loan having an
effective interest rate based on its market price that is at or near the current market
interest rates of loans with similar maturity dates and stated interest rates issued by
other banks.
  Troubled Debt RestructuringsJune 30,
    
    
    December 31,2010
    
    
    2009
    
    
    Change(In thousands)Real Estate LoansPermanentOne-to four-family
    
    $
    6,988
    
    
    $
    2,167
    
    
    $
    4,821Multifamily residential
    
    
    2,383
    
    
    
    
    
    
    
    2,383Nonresidential
    
    
    7,639
    
    
    
    3,595
    
    
    
    4,044Land
    
    
    2,147
    
    
    
    1,050
    
    
    
    1,097Total
    
    
    19,157
    
    
    
    6,812
    
    
    
    12,345Construction LoansOne-to four-family
residential
    
    
    9,319
    
    
    
    15,213
    
    
    
    (5,894
    )Multifamily and
nonresidential
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    9,319
    
    
    
    15,213
    
    
    
    (5,894
    )Consumer LoansHome Equity
    
    
    83
    
    
    
    240
    
    
    
    (157
    )Auto
    
    
    14
    
    
    
    18
    
    
    
    (4
    )Marine
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    50
    
    
    
    8
    
    
    
    42Total
    
    
    147
    
    
    
    266
    
    
    
    (119
    )Commercial LoansSecured
    
    
    353
    
    
    
    357
    
    
    
    (4
    )Unsecured
    
    
    93
    
    
    
    
    
    
    
    93Total
    
    
    446
    
    
    
    357
    
    
    
    89Total Restructured Loans
    
    $
    29,069
    
    
    $
    22,648
    
    
    $
    6,421
  27




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##### Table of Contents



Nonperforming Loans(Dollars in thousands)June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    ChangeReal Estate LoansPermanentOne-to four-family
residential
    
    $
    30,279
    
    
    $
    26,766
    
    
    $
    3,513Multifamily residential
    
    
    8,816
    
    
    
    7,863
    
    
    
    953Nonresidential
    
    
    48,653
    
    
    
    24,091
    
    
    
    24,562Land
    
    
    5,943
    
    
    
    5,160
    
    
    
    783Total
    
    
    93,691
    
    
    
    63,880
    
    
    
    29,811Construction LoansOne-to four-family
residential
    
    
    49,146
    
    
    
    42,819
    
    
    
    6,327Multifamily and
nonresidential
    
    
    2,414
    
    
    
    392
    
    
    
    2,022Total
    
    
    51,560
    
    
    
    43,211
    
    
    
    8,349Consumer LoansHome Equity
    
    
    2,557
    
    
    
    3,168
    
    
    
    (611
    )Auto
    
    
    65
    
    
    
    148
    
    
    
    (83
    )Marine
    
    
    267
    
    
    
    1,103
    
    
    
    (836
    )Recreational vehicle
    
    
    570
    
    
    
    900
    
    
    
    (330
    )Other
    
    
    23
    
    
    
    64
    
    
    
    (41
    )Total
    
    
    3,482
    
    
    
    5,383
    
    
    
    (1,901
    )Commercial LoansSecured
    
    
    2,035
    
    
    
    3,061
    
    
    
    (1,026
    )Unsecured
    
    
    4,372
    
    
    
    352
    
    
    
    4,020Total
    
    
    6,407
    
    
    
    3,413
    
    
    
    2,994Total Nonperforming Loans
    
    $
    155,140
    
    
    $
    115,887
    
    
    $
    39,253
     28




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##### Table of Contents



Real Estate
    
    
    RepossessedOwned
    
    
    Assets
    
    
    Total(In thousands)Balance at December 31, 2009
    
    $
    30,340
    
    
    $
    622
    
    
    $
    30,962Acquisitions
    
    
    24,416
    
    
    
    1,184
    
    
    
    25,600Sales
    
    
    (10,922
    )
    
    
    (1,230
    )
    
    
    (12,152
    )Change in valuation allowance
    
    
    (2,364
    )
    
    
    
    
    
    
    (2,364
    )Balance at June 30, 2010
    
    $
    41,470
    
    
    $
    576
    
    
    $
    42,046
  Valuation
    
    
    NetBalance
    
    
    Allowance
    
    
    Balance(In thousands)Real estate ownedOne-to four-family
    
    $
    7,156
    
    
    $
    (90
    )
    
    $
    7,066Multifamily residential
    
    
    6,384
    
    
    
    (408
    )
    
    
    5,976Nonresidential
    
    
    7,183
    
    
    
    (1,916
    )
    
    
    5,267One-to four-family residential construction
    
    
    27,964
    
    
    
    (4,888
    )
    
    
    23,076Land
    
    
    85
    
    
    
    
    
    
    
    85Total real estate owned
    
    
    48,772
    
    
    
    (7,302
    )
    
    
    41,470Repossessed assetsAuto
    
    
    9
    
    
    
    
    
    
    
    9Marine
    
    
    
    
    
    
    
    
    
    
    Recreational vehicle
    
    
    567
    
    
    
    
    
    
    
    567Total repossessed assets
    
    
    576
    
    
    
    
    
    
    
    576Total real estate owned and other
repossessed assets
    
    $
    49,348
    
    
    $
    (7,302
    )
    
    $
    42,046
     29




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##### Table of Contents



Comparison of Operating Results for the Three Months Ended
June 30, 2010 and June 30, 2009
 Net Income (Loss).
 Net Interest Income.
    30




---



##### Table of Contents



For the Three Months Ended June 30,2010 vs. 2009Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    (1,382
    )
    
    $
    (3,776
    )
    
    $
    (5,158
    )Loans held for sale
    
    
    80
    
    
    
    (227
    )
    
    
    (147
    )Investment securities:Available for sale
    
    
    (217
    )
    
    
    317
    
    
    
    100FHLB stock
    
    
    
    
    
    
    
    
    
    
    Other interest-earning assets
    
    
    (2
    )
    
    
    1
    
    
    
    (1
    )Total interest-earning assets
    
    $
    (1,521
    )
    
    $
    (3,685
    )
    
    $
    (5,206
    )Interest-bearing liabilities:Savings accounts
    
    
    (44
    )
    
    
    24
    
    
    
    (20
    )NOW and money market accounts
    
    
    (309
    )
    
    
    107
    
    
    
    (202
    )Certificates of deposit
    
    
    (1,862
    )
    
    
    (1,582
    )
    
    
    (3,444
    )Federal Home Loan Bank advances
    
    
    (442
    )
    
    
    (252
    )
    
    
    (694
    )Repurchase agreements and other
    
    
    (18
    )
    
    
    (112
    )
    
    
    (130
    )Total interest-bearing liabilities
    
    $
    (2,675
    )
    
    $
    (1,815
    )
    
    
    (4,490
    )Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    (716
    )
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
  31




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##### Table of Contents



Comparison of Operating Results for the Six Months Ended
June 30, 2010 and June 30, 2009
 Net Income (Loss).
 Net Interest Income.
    32




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##### Table of Contents



For the Six Months Ended June 30,2010 vs. 2009Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    (2,237
    )
    
    $
    (8,145
    )
    
    $
    (10,382
    )Loans held for sale
    
    
    9
    
    
    
    (349
    )
    
    
    (340
    )Investment securities:Available for sale
    
    
    1,197
    
    
    
    (1,282
    )
    
    
    (85
    )FHLB stock
    
    
    1
    
    
    
    
    
    
    
    1Other interest-earning assets
    
    
    (31
    )
    
    
    8
    
    
    
    (23
    )Total interest-earning assets
    
    $
    (1,061
    )
    
    $
    (9,768
    )
    
    $
    (10,829
    )Interest-bearing liabilities:Savings accounts
    
    
    (111
    )
    
    
    54
    
    
    
    (57
    )NOW and money market accounts
    
    
    (721
    )
    
    
    194
    
    
    
    (527
    )Certificates of deposit
    
    
    (3,463
    )
    
    
    (2,952
    )
    
    
    (6,415
    )Federal Home Loan Bank advances
    
    
    (693
    )
    
    
    (1,011
    )
    
    
    (1,704
    )Repurchase agreements and other
    
    
    (26
    )
    
    
    (371
    )
    
    
    (397
    )Total interest-bearing liabilities
    
    $
    (5,014
    )
    
    $
    (4,086
    )
    
    
    (9,100
    )Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    (1,729
    )
 Provision for Loan Losses.
 Noninterest Income.
  Noninterest Expense.
  33




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 AVERAGE BALANCE SHEETS
  Three Months Ended June 30,2010
    
    
    2009Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Interest-earning assets:Net loans (1)
    
    $
    1,805,766
    
    
    $
    24,918
    
    
    
    5.52
    %
    
    $
    2,075,751
    
    
    $
    30,076
    
    
    
    5.80
    %Net loans held for sale
    
    
    4,466
    
    
    
    69
    
    
    
    6.18
    %
    
    
    17,658
    
    
    
    216
    
    
    
    4.89
    %Investment securities:Available for sale
    
    
    315,794
    
    
    
    2,896
    
    
    
    3.67
    %
    
    
    250,655
    
    
    
    2,796
    
    
    
    4.46
    %Federal Home Loan Bank stock
    
    
    26,464
    
    
    
    294
    
    
    
    4.44
    %
    
    
    26,464
    
    
    
    294
    
    
    
    4.44
    %Other interest-earning assets
    
    
    23,621
    
    
    
    8
    
    
    
    0.14
    %
    
    
    21,696
    
    
    
    9
    
    
    
    0.17
    %Total interest-earning assets
    
    
    2,176,091
    
    
    
    28,185
    
    
    
    5.18
    %
    
    
    2,392,224
    
    
    
    33,391
    
    
    
    5.58
    %Noninterest-earning assets
    
    
    135,107
    
    
    
    
    
    
    
    
    
    
    
    133,688Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512Total assets
    
    $
    2,311,198
    
    
    
    
    
    
    
    
    
    
    $
    2,526,424Interest-bearing liabilities:NOW and money market accounts
    
    $
    411,555
    
    
    $
    810
    
    
    
    0.79
    %
    
    $
    376,696
    
    
    $
    1,012
    
    
    
    1.07
    %Savings accounts
    
    
    212,153
    
    
    
    203
    
    
    
    0.38
    %
    
    
    194,703
    
    
    
    223
    
    
    
    0.46
    %Certificates of deposit
    
    
    961,958
    
    
    
    7,395
    
    
    
    3.07
    %
    
    
    1,144,895
    
    
    
    10,839
    
    
    
    3.79
    %Federal Home Loan Bank advances
    
    
    244,326
    
    
    
    875
    
    
    
    1.43
    %
    
    
    298,538
    
    
    
    1,569
    
    
    
    2.10
    %Repurchase agreements and other
    
    
    96,969
    
    
    
    931
    
    
    
    3.84
    %
    
    
    108,563
    
    
    
    1,061
    
    
    
    3.91
    %Total interest-bearing liabilities
    
    
    1,926,961
    
    
    
    10,214
    
    
    
    2.12
    %
    
    
    2,123,395
    
    
    
    14,704
    
    
    
    2.77
    %Noninterest-bearing liabilities
    
    
    165,026
    
    
    
    
    
    
    
    
    
    
    
    152,622Liabilities of discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,311Total liabilities
    
    
    2,091,987
    
    
    
    
    
    
    
    
    
    
    
    2,280,328Equity
    
    
    219,211
    
    
    
    
    
    
    
    
    
    
    
    246,096Total liabilities and equity
    
    $
    2,311,198
    
    
    
    
    
    
    
    
    
    
    $
    2,526,424Net interest income and interest
rate spread
    
    
    
    
    
    $
    17,971
    
    
    
    3.06
    %
    
    
    
    
    
    $
    18,687
    
    
    
    2.81
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.30
    %
    
    
    
    
    
    
    
    
    
    
    3.12
    %Average interest-earning assets
to average interest-bearing
liabilities
    
    
    
    
    
    
    
    
    
    
    112.93
    %
    
    
    
    
    
    
    
    
    
    
    112.66
    %
 (1)
    
    Nonaccrual loans are included in the average balance at a yield of 0%.  34




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 AVERAGE BALANCE SHEETS
  Six Months Ended June 30,2010
    
    
    2009Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Interest-earning assets:Net loans (1)
    
    $
    1,826,479
    
    
    $
    50,761
    
    
    
    5.56
    %
    
    $
    2,117,111
    
    
    $
    61,143
    
    
    
    5.78
    %Net loans held for sale
    
    
    5,954
    
    
    
    139
    
    
    
    4.67
    %
    
    
    20,897
    
    
    
    479
    
    
    
    4.58
    %Investment securities:Available for sale
    
    
    286,434
    
    
    
    5,481
    
    
    
    3.83
    %
    
    
    245,185
    
    
    
    5,566
    
    
    
    4.54
    %Federal Home Loan Bank stock
    
    
    26,464
    
    
    
    594
    
    
    
    4.49
    %
    
    
    26,464
    
    
    
    593
    
    
    
    4.48
    %Other interest-earning assets
    
    
    23,931
    
    
    
    15
    
    
    
    0.13
    %
    
    
    20,320
    
    
    
    38
    
    
    
    0.37
    %Total interest-earning assets
    
    
    2,169,262
    
    
    
    56,990
    
    
    
    5.25
    %
    
    
    2,429,977
    
    
    
    67,819
    
    
    
    5.58
    %Noninterest-earning assets
    
    
    132,205
    
    
    
    
    
    
    
    
    
    
    
    135,426Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,069Total assets
    
    $
    2,301,467
    
    
    
    
    
    
    
    
    
    
    $
    2,567,472Interest-bearing liabilities:NOW and money market accounts
    
    $
    405,623
    
    
    $
    1,687
    
    
    
    0.83
    %
    
    $
    375,909
    
    
    $
    2,214
    
    
    
    1.18
    %Savings accounts
    
    
    209,809
    
    
    
    411
    
    
    
    0.39
    %
    
    
    191,154
    
    
    
    468
    
    
    
    0.49
    %Certificates of deposit
    
    
    991,735
    
    
    
    15,628
    
    
    
    3.15
    %
    
    
    1,160,376
    
    
    
    22,043
    
    
    
    3.80
    %Federal Home Loan Bank advances
    
    
    213,155
    
    
    
    1,723
    
    
    
    1.62
    %
    
    
    324,339
    
    
    
    3,427
    
    
    
    2.11
    %Repurchase agreements and other
    
    
    96,978
    
    
    
    1,854
    
    
    
    3.82
    %
    
    
    116,391
    
    
    
    2,251
    
    
    
    3.87
    %Total interest-bearing liabilities
    
    
    1,917,300
    
    
    
    21,303
    
    
    
    2.22
    %
    
    
    2,168,169
    
    
    
    30,403
    
    
    
    2.80
    %Noninterest-bearing liabilities
    
    
    162,606
    
    
    
    
    
    
    
    
    
    
    
    149,911Liabilities of discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,541Total liabilities
    
    
    2,079,906
    
    
    
    
    
    
    
    
    
    
    
    2,321,621Equity
    
    
    221,561
    
    
    
    
    
    
    
    
    
    
    
    245,851Total liabilities and equity
    
    $
    2,301,467
    
    
    
    
    
    
    
    
    
    
    $
    2,567,472Net interest income and interest
rate spread
    
    
    
    
    
    $
    35,687
    
    
    
    3.03
    %
    
    
    
    
    
    $
    37,416
    
    
    
    2.78
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %Average interest-earning assets
to average interest-bearing
liabilities
    
    
    
    
    
    
    
    
    
    
    113.14
    %
    
    
    
    
    
    
    
    
    
    
    112.08
    %
 (1)
    
    Nonaccrual loans are included in the average balance at a yield of 0%.  35




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 Qualitative Aspects of Market Risk.
 Quantitative Aspects of Market Risk.
   Quarter ended June 30, 2010NPV as % of portfolio value of assets

    
    
    Next 12 months net interest income(Dollars in thousands)InternalpolicyChange
    
    

    
    
    
    
    
    
    limitationsin rates
    
    
    
    
    
    Internal policy limitations
    
    
    
    
    
    
    
    
    
    
    on(Basis
    
    NPV
    
    
    Minimum
    
    
    Maximum
    
    
    Change
    
    
    $

    
    
    maximum
    
    
    %points)
    
    Ratio
    
    
    level
    
    
    change
    
    
    in %
    
    
    Change
    
    
    change
    
    
    Change300
    
    
    8.66
    %
    
    
    6.00
    %
    
    
    -35.00
    %
    
    
    -0.79
    %
    
    $
    (3,081
    )
    
    
    -15.00
    %
    
    
    -3.99
    %200
    
    
    9.57
    %
    
    
    7.00
    %
    
    
    
    
    
    
    0.12
    %
    
    
    (1,444
    )
    
    
    -10.00
    %
    
    
    -1.87
    %100
    
    
    10.00
    %
    
    
    7.00
    %
    
    
    
    
    
    
    0.55
    %
    
    
    (489
    )
    
    
    -5.00
    %
    
    
    -0.63
    %Static
    
    
    9.45
    %
    
    
    8.00
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  36




---



##### Table of Contents



Year Ended December 31, 2009NPV as % of portfolio value of assets
    
    
    Next 12 months net interest income(Dollars in thousands)InternalpolicyChange
    
    

    
    
    
    
    
    
    limitationsin rates
    
    
    
    
    
    Internal policy limitations
    
    
    
    
    
    
    
    
    
    
    on(Basis
    
    NPV
    
    
    Minimum
    
    
    Maximum
    
    
    Change
    
    
    $
    
    
    maximum
    
    
    %points)
    
    Ratio
    
    
    level
    
    
    change
    
    
    in %
    
    
    Change
    
    
    change
    
    
    Change300
    
    
    8.19
    %
    
    
    6.00
    %
    
    
    -35.00
    %
    
    
    -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
    %
    
    
    
    
    
    
    0.80
    %
    
    
    (640
    )
    
    
    -5.00
    %
    
    
    -0.82
    %Static
    
    
    9.95
    %
    
    
    8.00
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   Potential Impact of Changes in Interest Rates.
  
 ITEM 4T. Controls and Procedures
   37




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##### Table of Contents



PART II. OTHER INFORMATION
 UNITED COMMUNITY FINANCIAL CORP.
 
 ITEM 1    Legal Proceedings
  
 ITEM 1A    Risk Factors
 The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may
adversely affect our business, financial condition and results of operations.
   
    
    the Dodd-Frank Act abolishes the OTS and transfers its functions to other federal
banking agencies;
 
    
    the Dodd-Frank Act creates a Consumer Financial Protection Bureau with broad powers to
adopt and enforce consumer protection regulations;
 
    
    new capital regulations for thrift holding companies will be adopted and any new trust
preferred securities will no longer count toward Tier I capital;
 
    
    the federal law prohibition on the payment of interest on commercial demand deposit
accounts will be eliminated effective in July 2011;
 
    
    the standard maximum amount of deposit insurance per customer is permanently increased
to $250,000, and non-interest bearing transaction accounts will have unlimited insurance
through December 31, 2013;
 
    
    the assessment base for determining deposit insurance premiums will be expanded to
include liabilities other than just deposits; and
 
    
    new corporate governance requirements applicable generally to all public companies in
all industries will require new compensation practices, including requiring companies to
claw back incentive compensation under certain circumstances, to provide shareholders
the opportunity to cast a non-binding vote on executive compensation, and to consider the
independence of compensation advisers, and new executive compensation disclosure
requirements.
   38




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##### Table of Contents



10-K Form 10-K
 
 ITEM 2   Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 6   Exhibits
  Exhibit Number
    
    Description3.1
    
    
    Articles of Incorporation3.2
    
    
    Amended Code of Regulations10.1
    
    
    Executive Incentive Plan10.2
    
    
    Employment Agreement with Mr. Bevack10.3
    
    
    Employment Agreement with Mr. Krontiris10.4
    
    
    Employment Agreement with Mr. Nohra10.5
    
    
    Employment Agreement with Mr. Reske31.1
    
    
    Section 302 Certification by Chief Executive Officer31.2
    
    
    Section 302 Certification by Chief Financial Officer32
    
    
    Certification of Statements by Chief Executive Officer and
Chief Financial Officer
  39




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 SIGNATURES
  UNITED COMMUNITY FINANCIAL CORP.Date: August 16, 2010
    
    /S/ Douglas M. McKayDouglas M. McKayChairman, President and Chief Executive Officer(Principal Executive Officer)Date: August 16, 2010
    
    /S/ James R. ReskeJames R. Reske, CFATreasurer and Chief Financial Officer(Principal Financial Officer)
  40




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 Exhibit 3.1
  Exhibit 3.2
  Exhibit 10.1
   41