##### 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, 2006
 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 Federal Plaza West, Youngstown, Ohio 44503-1203
 (330) 742-0500
 (Former name or former address, if changed since last report)
  þ o
  o þ o
  o þ




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##### Table of Contents



TABLE OF CONTENTS
 PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of June 30, 2006 (Unaudited)
and December 31, 2005
    
    
    1Consolidated Statements of Income for the Three and Six Months Ended
June 30, 2006 and 2005 (Unaudited)
    
    
    2Consolidated Statement of Shareholders Equity for the Six Months ended June 30,
2006 (Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2006 and 2005 (Unaudited)
    
    
    4Notes to Consolidated Financial Statements
    
    
    5-11Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    12-19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors (None)Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities (None)Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information (None)Item 6. Exhibits
    
    
    23Signatures
    
    
    24EX-31.1EX-31.2EX-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 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash and deposits with banks
    
    $
    29,883
    
    
    $
    36,043Federal funds sold and other
    
    
    1,526
    
    
    
    1,502Total cash and cash equivalents
    
    
    31,409
    
    
    
    37,545Securities:Trading, at fair value
    
    
    7,031
    
    
    
    10,812Available for sale, at fair value
    
    
    214,619
    
    
    
    201,870Loans, net of allowance for loan losses of $15,970 and $15,723, respectively
    
    
    2,204,471
    
    
    
    2,097,433Loans held for sale
    
    
    28,587
    
    
    
    29,109Margin accounts
    
    
    16,677
    
    
    
    15,705Federal Home Loan Bank stock, at cost
    
    
    24,696
    
    
    
    24,006Premises and equipment, net
    
    
    23,784
    
    
    
    23,771Accrued interest receivable
    
    
    13,176
    
    
    
    12,053Real estate owned and other repossessed assets
    
    
    2,927
    
    
    
    2,514Goodwill
    
    
    33,593
    
    
    
    33,593Core deposit intangible
    
    
    1,858
    
    
    
    2,118Cash surrender value of life insurance
    
    
    22,692
    
    
    
    22,260Other assets
    
    
    15,029
    
    
    
    16,061Total assets
    
    $
    2,640,549
    
    
    $
    2,528,850Liabilities and Shareholders EquityLiabilities:Deposits:Interest bearing
    
    $
    1,675,266
    
    
    $
    1,584,926Non-interest bearing
    
    
    100,931
    
    
    
    96,918Total deposits
    
    
    1,776,197
    
    
    
    1,681,844Federal Home Loan Bank advances
    
    
    455,785
    
    
    
    475,549Repurchase agreements and other
    
    
    110,916
    
    
    
    75,214Advance payments by borrowers for taxes and insurance
    
    
    13,401
    
    
    
    14,322Accrued interest payable
    
    
    2,942
    
    
    
    2,622Accrued expenses and other liabilities
    
    
    11,471
    
    
    
    14,564Total liabilities
    
    
    2,370,712
    
    
    
    2,264,115Shareholders 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
    
    
    144,762
    
    
    
    143,896Retained earnings
    
    
    214,119
    
    
    
    207,120Accumulated other comprehensive loss
    
    
    (3,888
    )
    
    
    (1,845
    )Unearned stock compensation
    
    
    (12,197
    )
    
    
    (13,108
    )Treasury stock, at cost, 6,876,573 and 6,742,345 shares, respectively
    
    
    (72,959
    )
    
    
    (71,328
    )Total shareholders equity
    
    
    269,837
    
    
    
    264,735Total liabilities and shareholders equity
    
    $
    2,640,549
    
    
    $
    2,528,850
 See Notes to Consolidated Financial Statements.
 1




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)Interest incomeLoans
    
    $
    37,961
    
    
    $
    29,890
    
    
    $
    73,071
    
    
    $
    57,608Loans held for sale
    
    
    480
    
    
    
    297
    
    
    
    988
    
    
    
    805Securities:Trading
    
    
    80
    
    
    
    330
    
    
    
    162
    
    
    
    576Available for sale
    
    
    2,366
    
    
    
    1,741
    
    
    
    4,580
    
    
    
    3,495Margin accounts
    
    
    367
    
    
    
    293
    
    
    
    707
    
    
    
    564Federal Home Loan Bank stock dividends
    
    
    349
    
    
    
    281
    
    
    
    690
    
    
    
    534Other interest earning assets
    
    
    44
    
    
    
    21
    
    
    
    75
    
    
    
    36Total interest income
    
    
    41,647
    
    
    
    32,853
    
    
    
    80,273
    
    
    
    63,618Interest expenseDeposits
    
    
    14,153
    
    
    
    8,918
    
    
    
    26,573
    
    
    
    16,947Federal Home Loan Bank advances
    
    
    5,251
    
    
    
    4,074
    
    
    
    9,881
    
    
    
    7,692Repurchase agreements and other
    
    
    1,207
    
    
    
    526
    
    
    
    2,094
    
    
    
    890Total interest expense
    
    
    20,611
    
    
    
    13,518
    
    
    
    38,548
    
    
    
    25,529Net interest income
    
    
    21,036
    
    
    
    19,335
    
    
    
    41,725
    
    
    
    38,089Provision for loan losses
    
    
    812
    
    
    
    418
    
    
    
    1,551
    
    
    
    1,051Net interest income after provision for
loan losses
    
    
    20,224
    
    
    
    18,917
    
    
    
    40,174
    
    
    
    37,038Non-interest incomeBrokerage commissions
    
    
    4,814
    
    
    
    4,603
    
    
    
    9,814
    
    
    
    9,227Service fees and other charges
    
    
    3,209
    
    
    
    3,073
    
    
    
    6,407
    
    
    
    6,190Underwriting and investment banking
    
    
    (4
    )
    
    
    487
    
    
    
    26
    
    
    
    607Net gains (losses):Available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239Trading securities
    
    
    (12
    )
    
    
    249
    
    
    
    32
    
    
    
    31Loans sold
    
    
    466
    
    
    
    651
    
    
    
    1,029
    
    
    
    899Other
    
    
    (32
    )
    
    
    52
    
    
    
    (27
    )
    
    
    56Other income
    
    
    1,092
    
    
    
    1,182
    
    
    
    2,064
    
    
    
    1,913Total non-interest income
    
    
    9,533
    
    
    
    10,297
    
    
    
    19,345
    
    
    
    19,162Non-interest expenseSalaries and employee benefits
    
    
    13,005
    
    
    
    12,510
    
    
    
    26,528
    
    
    
    25,122Occupancy
    
    
    1,106
    
    
    
    968
    
    
    
    2,214
    
    
    
    2,015Equipment and data processing
    
    
    2,386
    
    
    
    2,175
    
    
    
    4,645
    
    
    
    4,504Franchise tax
    
    
    530
    
    
    
    488
    
    
    
    1,071
    
    
    
    1,014Advertising
    
    
    447
    
    
    
    554
    
    
    
    792
    
    
    
    858Amortization of core deposit intangible
    
    
    127
    
    
    
    169
    
    
    
    260
    
    
    
    355Other expenses
    
    
    2,525
    
    
    
    2,535
    
    
    
    4,973
    
    
    
    5,187Total non-interest expenses
    
    
    20,126
    
    
    
    19,399
    
    
    
    40,483
    
    
    
    39,055Income before income taxes
    
    
    9,631
    
    
    
    9,815
    
    
    
    19,036
    
    
    
    17,145Income taxes
    
    
    3,381
    
    
    
    3,317
    
    
    
    6,654
    
    
    
    5,766Net income
    
    $
    6,250
    
    
    $
    6,498
    
    
    $
    12,382
    
    
    $
    11,379Comprehensive income
    
    $
    4,695
    
    
    $
    7,495
    
    
    $
    10,339
    
    
    $
    10,350Earnings per shareBasic
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.43
    
    
    $
    0.40Diluted
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.42
    
    
    $
    0.39
 See Notes to Consolidated Financial Statements.
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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
 AccumulatedOtherShares
    
    
    Common
    
    
    Retained
    
    
    Comprehensive
    
    
    Unearned Stock
    
    
    TreasuryOutstanding
    
    
    Stock
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Compensation
    
    
    Stock
    
    
    Total(Dollars in thousands, except share data)Balance December 31, 2005
    
    
    31,062
    
    
    $
    143,896
    
    
    $
    207,120
    
    
    $
    (1,845
    )
    
    $
    (13,108
    )
    
    $
    (71,328
    )
    
    $
    264,735Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    12,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,382Change in net unrealized
gain/(loss) on
securities, net of taxes of $1,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,043
    )
    
    
    
    
    
    
    
    
    
    
    (2,043
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    12,382
    
    
    
    (2,043
    )
    
    
    
    
    
    
    
    
    
    
    10,339Shares allocated to ESOP participants
    
    
    
    
    
    
    866
    
    
    
    
    
    
    
    
    
    
    
    911
    
    
    
    
    
    
    
    1,777Purchase of treasury stock
    
    
    (189
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,208
    )
    
    
    (2,208
    )Exercise of stock options
    
    
    55
    
    
    
    
    
    
    
    (174
    )
    
    
    
    
    
    
    
    
    
    
    577
    
    
    
    403Dividends paid, $0.18 per share
    
    
    
    
    
    
    
    
    
    
    (5,209
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,209
    )Balance June 30, 2006
    
    
    30,928
    
    
    $
    144,762
    
    
    $
    214,119
    
    
    $
    (3,888
    )
    
    $
    (12,197
    )
    
    $
    (72,959
    )
    
    $
    269,837
 See Notes to Consolidated Financial Statements.
 3




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UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended June 30,2006
    
    
    2005(Dollars in thousands)Cash Flows from Operating ActivitiesNet income
    
    $
    12,382
    
    
    $
    11,379Adjustments to reconcile net income to net cash provided by
operating activities:Provision for loan losses
    
    
    1,551
    
    
    
    1,051Net gains
    
    
    (1,010
    )
    
    
    (1,194
    )Amortization of premiums and accretion of discounts
    
    
    1,501
    
    
    
    1,822Depreciation and amortization
    
    
    1,364
    
    
    
    1,188ESOP compensation
    
    
    1,777
    
    
    
    1,584FHLB stock dividends
    
    
    (690
    )
    
    
    (534
    )Decrease (increase) in trading securities
    
    
    3,781
    
    
    
    (5,583
    )Increase in margin accounts
    
    
    (972
    )
    
    
    (1,342
    )Increase in interest receivable
    
    
    (1,123
    )
    
    
    (1,193
    )Decrease in prepaid and other assets
    
    
    (223
    )
    
    
    (1,163
    )Increase in interest payable
    
    
    320
    
    
    
    432Net principal disbursed on loans held for sale
    
    
    (92,816
    )
    
    
    (89,223
    )Proceeds from sale of loans held for sale
    
    
    94,432
    
    
    
    86,939(Decrease) increase in other liabilities
    
    
    (1,993
    )
    
    
    1,993Net cash from operating activities
    
    
    18,281
    
    
    
    6,156Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Available for sale securities
    
    
    14,369
    
    
    
    30,370Proceeds from sale of:Available for sale securities
    
    
    
    
    
    
    17,328Real estate owned and other repossessed assets
    
    
    1,436
    
    
    
    1,064Commercial loan participations
    
    
    
    
    
    
    1,500Non-performing loans
    
    
    210
    
    
    
    6,173Premises and equipment
    
    
    531
    
    
    
    Purchases of:Securities available for sale
    
    
    (30,334
    )
    
    
    (31,320
    )Net principal repaid (disbursed) on loans
    
    
    (1,735
    )
    
    
    (34,297
    )Loans purchased
    
    
    (109,395
    )
    
    
    (116,936
    )Purchases of premises and equipment
    
    
    (1,865
    )
    
    
    (3,039
    )Net cash from investing activities
    
    
    (126,783
    )
    
    
    (129,157
    )Cash Flows from Financing ActivitiesNet increase (decrease) in NOW, savings and money market accounts
    
    
    45,815
    
    
    
    (56,464
    )Net increase in certificates of deposit
    
    
    48,548
    
    
    
    117,443Net decrease in advance payments by borrowers
for taxes and insurance
    
    
    (921
    )
    
    
    (1,002
    )Proceeds from FHLB advances
    
    
    287,096
    
    
    
    292,077Repayment of FHLB advances
    
    
    (306,860
    )
    
    
    (236,147
    )Net change in other borrowed funds
    
    
    35,702
    
    
    
    11,569Dividends paid
    
    
    (5,209
    )
    
    
    (4,741
    )Proceeds from the exercise of stock options
    
    
    403
    
    
    
    302Purchase of treasury stock
    
    
    (2,208
    )
    
    
    (2,499
    )Net cash from financing activities
    
    
    102,366
    
    
    
    120,538Decrease in cash and cash equivalents
    
    
    (6,136
    )
    
    
    (2,463
    )Cash and cash equivalents, beginning of period
    
    
    37,545
    
    
    
    40,281Cash and cash equivalents, end of period
    
    $
    31,409
    
    
    $
    37,818Supplemental disclosures of cash flow informationCash paid during the period for:Interest on deposits and borrowings, net of amounts capitalized
    
    $
    38,868
    
    
    $
    25,097Interest capitalized on borrowings
    
    
    16
    
    
    
    15Income taxes
    
    
    6,550
    
    
    
    1,541Supplemental schedule of noncash activities:Loans transferred to the loan portfolio from held for sale
    
    
    
    
    
    
    37,075Transfers from loans to real estate owned and other repossessed assets
    
    
    1,895
    
    
    
    2,458
 See Notes to Consolidated Financial Statements.
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UNITED COMMUNITY FINANCIAL CORP.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. BASIS OF PRESENTATION
     2. STOCK COMPENSATION
    5




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Six Months Ended June 30, 2006Total Options Outstanding(Dollars in thousands)Weighted
    
    WeightedAverage
    
    Average FairShares
    
    Exercise Price
    
    ValueOptions outstanding, beginning of period
    
    
    2,217,216
    
    
    $
    9.59
    
    
    $
    4.52Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (54,572
    )
    
    
    7.38
    
    
    
    4.81Forfeited
    
    
    (8,306
    )
    
    
    12.73
    
    
    
    Options outstanding and exercisable, end of period
    
    
    2,154,338
    
    
    $
    9.63
    
    
    $
    4.59
  3. SECURITIES
  June 30, 2006
    
    
    December 31, 2005(Dollars in thousands)Gross
    
    
    Gross
    
    
    
    
    
    
    Gross
    
    
    GrossFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Gains
    
    
    LossesU.S. Treasury and agency
securities
    
    $
    89,860
    
    
    $
    
    
    
    $
    (1,915
    )
    
    $
    88,799
    
    
    $
    
    
    
    $
    (1,493
    )Tax exempt municipal obligation
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Equity securities
    
    
    7,906
    
    
    
    609
    
    
    
    (4
    )
    
    
    2,962
    
    
    
    661
    
    
    
    Mortgage-related securities
    
    
    116,850
    
    
    
    16
    
    
    
    (4,768
    )
    
    
    110,106
    
    
    
    73
    
    
    
    (2,159
    )Total
    
    $
    214,619
    
    
    $
    625
    
    
    $
    (6,687
    )
    
    $
    201,870
    
    
    $
    734
    
    
    $
    (3,652
    )
  June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Obligations of U.S. Government
    
    $
    1,595
    
    
    $
    2,531State and municipal obligations
    
    
    4,265
    
    
    
    7,061Corporate bonds, debentures and notes
    
    
    103
    
    
    
    224Mutual funds, stocks and warrants
    
    
    1,068
    
    
    
    996Total trading securities
    
    $
    7,031
    
    
    $
    10,812
 6




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##### Table of Contents



4. LOANS
  June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Real Estate:One- to four-family residential
    
    $
    802,820
    
    
    $
    749,362Multifamily residential
    
    
    157,719
    
    
    
    154,702Nonresidential
    
    
    343,495
    
    
    
    314,124Land
    
    
    15,991
    
    
    
    14,979Construction:One- to four-family residential
    
    
    423,342
    
    
    
    389,558Multifamily and non-residential
    
    
    45,741
    
    
    
    66,788Total real estate
    
    
    1,789,108
    
    
    
    1,689,513Consumer
    
    
    334,560
    
    
    
    323,515Commercial
    
    
    97,731
    
    
    
    100,977Total loans
    
    
    2,221,399
    
    
    
    2,114,005Less:Allowance for loan losses
    
    
    15,970
    
    
    
    15,723Deferred loan fees, net
    
    
    958
    
    
    
    849Total
    
    
    16,928
    
    
    
    16,572Loans, net
    
    $
    2,204,471
    
    
    $
    2,097,433
  As of or For the
    
    
    As of or For theSix Months ending
    
    
    Year Ended DecemberJune 30, 2006
    
    
    31, 2005(Dollars in thousands)Balance, beginning of year
    
    $
    15,723
    
    
    $
    15,877Provision for loan losses
    
    
    1,551
    
    
    
    3,028Amounts charged off
    
    
    (1,472
    )
    
    
    (4,085
    )Recoveries
    
    
    168
    
    
    
    903Balance, end of period
    
    $
    15,970
    
    
    $
    15,723
  7




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##### Table of Contents



As of or For the
    
    
    As of or For theSix Months
    
    
    Year EndedEnded June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Impaired loans on which no specific valuation allowance was provided
    
    $
    15,314
    
    
    $
    13,119Impaired loans on which a specific valuation allowance was provided
    
    
    4,788
    
    
    
    4,573Total impaired loans at period-end
    
    $
    20,102
    
    
    $
    17,692Specific valuation allowances on impaired loans at period-end
    
    $
    838
    
    
    $
    667Average impaired loans during the period
    
    
    19,176
    
    
    
    15,209Interest income recognized on impaired loans during the period
    
    
    227
    
    
    
    386Interest income received on impaired loans during the period
    
    
    224
    
    
    
    403Interest income foregone based on original contract terms of
impaired loans
    
    
    1,071
    
    
    
    1,503
 5. MORTGAGE BANKING ACTIVITIES
   As of or For theSix Months
    
    
    As of or for theEnded
    
    
    Year EndedJune 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Balance, beginning of year
    
    $
    6,923
    
    
    $
    5,533Originations
    
    
    946
    
    
    
    2,961Amortized to expense
    
    
    (822
    )
    
    
    (1,571
    )Balance, end of period
    
    $
    7,047
    
    
    $
    6,923
   June 30,
    
    
    December 31,2006

    
    2005Weighted average prepayment rate
    
    172 PSA
    
    278 PSAWeighted average life (in years)
    
    
    4.82
    
    
    
    5.11Weighted average discount rate
    
    
    8
    %
    
    
    8
    %
 8




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6. OTHER POSTRETIREMENT BENEFIT PLANS
   Three Months Ended June 30,2006
    
    
    2005(Dollars in thousands)Service cost
    
    $
    
    
    
    $
    1Interest cost
    
    
    55
    
    
    
    50Expected return on plan assets
    
    
    
    
    
    
    Net amortization of prior service cost
    
    
    
    
    
    
    Recognized net actuarial gain
    
    
    
    
    
    
    Net periodic benefit cost/(gain)
    
    $
    55
    
    
    $
    51Assumptions used in the valuations were as follows:Weighted average discount rate
    
    
    5.50
    %
    
    
    5.75
    %
 Six Months Ended June 30,2006
    
    
    2005(Dollars in thousands)Service cost
    
    $
    1
    
    
    $
    2Interest cost
    
    
    111
    
    
    
    100Expected return on plan assets
    
    
    
    
    
    
    Net amortization of prior service cost
    
    
    
    
    
    
    Recognized net actuarial gain
    
    
    
    
    
    
    Net periodic benefit cost/(gain)
    
    $
    112
    
    
    $
    102Assumptions used in the valuations were as follows:Weighted average discount rate
    
    
    5.50
    %
    
    
    5.75
    %
 9




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7. SEGMENT INFORMATION
  For the Three Months Ended June 30, 2006Banking
    
    
    InvestmentServices


    Services

    Total(Dollars in thousands)Interest income
    
    $
    41,156
    
    
    $
    491
    
    
    $
    41,647Interest expense
    
    
    20,470
    
    
    
    141
    
    
    
    20,611Provision for loan loss
    
    
    812
    
    
    
    
    
    
    
    812Net interest income after
provision for loan loss
    
    
    19,874
    
    
    
    350
    
    
    
    20,224Non-interest income
    
    
    3,022
    
    
    
    6,511
    
    
    
    9,533Non-interest expense
    
    
    13,630
    
    
    
    6,496
    
    
    
    20,126Income before tax
    
    
    9,266
    
    
    
    365
    
    
    
    9,631Income tax expense
    
    
    3,253
    
    
    
    128
    
    
    
    3,381Net income
    
    $
    6,013
    
    
    $
    237
    
    
    $
    6,250
 For the Three Months Ended June 30, 2005Banking
    
    
    InvestmentServices

    Services

    Total(Dollars in
thousands)Interest income
    
    $
    32,197
    
    
    $
    656
    
    
    $
    32,853Interest expense
    
    
    13,164
    
    
    
    354
    
    
    
    13,518Provision for loan loss
    
    
    418
    
    
    
    
    
    
    
    418Net interest income after
provision for loan loss
    
    
    18,615
    
    
    
    302
    
    
    
    18,917Non-interest income
    
    
    3,291
    
    
    
    7,006
    
    
    
    10,297Non-interest expense
    
    
    12,959
    
    
    
    6,440
    
    
    
    19,399Income before tax
    
    
    8,947
    
    
    
    868
    
    
    
    9,815Income tax expense
    
    
    3,013
    
    
    
    304
    
    
    
    3,317Net income
    
    $
    5,934
    
    
    $
    564
    
    
    $
    6,498
 For the Six Months Ended June 30, 2006Banking
    
    
    InvestmentServices

    Services

    Total(Dollars in thousands)Interest income
    
    $
    79,329
    
    
    $
    944
    
    
    $
    80,273Interest expense
    
    
    38,283
    
    
    
    265
    
    
    
    38,548Provision for loan loss
    
    
    1,551
    
    
    
    
    
    
    
    1,551Net interest income after
provision for loan loss
    
    
    39,495
    
    
    
    679
    
    
    
    40,174Non-interest income
    
    
    5,962
    
    
    
    13,383
    
    
    
    19,345Non-interest expense
    
    
    27,248
    
    
    
    13,235
    
    
    
    40,483Income before tax
    
    
    18,209
    
    
    
    827
    
    
    
    19,036Income tax expense
    
    
    6,365
    
    
    
    289
    
    
    
    6,654Net income
    
    $
    11,844
    
    
    $
    538
    
    
    $
    12,382
 10




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##### Table of Contents



For the Six Months Ended June 30, 2005Banking
    
    
    InvestmentServices

    Services

    Total(Dollars in thousands)Interest income
    
    $
    62,419
    
    
    $
    1,199
    
    
    $
    63,618Interest expense
    
    
    24,932
    
    
    
    597
    
    
    
    25,529Provision for loan loss
    
    
    1,051
    
    
    
    
    
    
    
    1,051Net interest income after
provision for loan loss
    
    
    36,436
    
    
    
    602
    
    
    
    37,038Non-interest income
    
    
    5,846
    
    
    
    13,316
    
    
    
    19,162Non-interest expense
    
    
    26,262
    
    
    
    12,793
    
    
    
    39,055Income before tax
    
    
    16,020
    
    
    
    1,125
    
    
    
    17,145Income tax expense
    
    
    5,370
    
    
    
    396
    
    
    
    5,766Net income
    
    $
    10,650
    
    
    $
    729
    
    
    $
    11,379
 8. EARNINGS PER SHARE
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands, except
    
    
    (In thousands, exceptper share data)
    
    
    per share data)Net income applicable to common stock
    
    $
    6,250
    
    
    $
    6,498
    
    
    $
    12,382
    
    
    $
    11,379Weighted average common shares outstanding
    
    
    29,029
    
    
    
    28,779
    
    
    
    29,009
    
    
    
    28,797Dilutive effect of stock options
    
    
    361
    
    
    
    321
    
    
    
    379
    
    
    
    322Weighted average common shares outstanding
for dilutive computation
    
    
    29,388
    
    
    
    29,100
    
    
    
    29,388
    
    
    
    29,119Basic earnings per share as reported
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.43
    
    
    $
    0.40Diluted earnings per share as reported
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.42
    
    
    $
    0.39
 11




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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,Selected financial ratios and other data: (1)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Performance ratios:Return on average assets (2)
    
    
    0.95
    %
    
    
    1.09
    %
    
    
    0.96
    %
    
    
    0.97
    %Return on average equity (3)
    
    
    9.13
    %
    
    
    10.09
    %
    
    
    9.09
    %
    
    
    8.86
    %Interest rate spread (4)
    
    
    2.97
    %
    
    
    3.15
    %
    
    
    3.01
    %
    
    
    3.17
    %Net interest margin (5)
    
    
    3.38
    %
    
    
    3.44
    %
    
    
    3.41
    %
    
    
    3.45
    %Non-interest expense to average assets
    
    
    3.07
    %
    
    
    3.25
    %
    
    
    3.14
    %
    
    
    3.33
    %Efficiency ratio (6)
    
    
    65.33
    %
    
    
    65.56
    %
    
    
    65.87
    %
    
    
    67.98
    %Average interest-earning assets to average interest-
bearing liabilities
    
    
    112.42
    %
    
    
    112.25
    %
    
    
    112.64
    %
    
    
    112.26
    %Capital ratios:Average equity to average assets
    
    
    10.44
    %
    
    
    10.79
    %
    
    
    10.55
    %
    
    
    10.95
    %Equity to assets, end of period
    
    
    10.22
    %
    
    
    10.62
    %
    
    
    10.22
    %
    
    
    10.62
    %Tier 1 leverage ratio
    
    
    8.49
    %
    
    
    8.46
    %
    
    
    8.49
    %
    
    
    8.46
    %Tier 1 risk-based capital ratio
    
    
    10.34
    %
    
    
    10.04
    %
    
    
    10.34
    %
    
    
    10.04
    %Total risk-based capital ratio
    
    
    11.10
    %
    
    
    10.83
    %
    
    
    11.10
    %
    
    
    10.83
    %Asset quality ratios:Non-performing loans to total loans at end of period (7)
    
    
    1.33
    %
    
    
    1.37
    %
    
    
    1.33
    %
    
    
    1.37
    %Non-performing assets to average assets (8)
    
    
    1.23
    %
    
    
    1.27
    %
    
    
    1.25
    %
    
    
    1.29
    %Non-performing assets to total assets at end of period
    
    
    1.22
    %
    
    
    1.25
    %
    
    
    1.22
    %
    
    
    1.25
    %Allowance for loan losses as a percent of loans
    
    
    0.72
    %
    
    
    0.75
    %
    
    
    0.72
    %
    
    
    0.75
    %Allowance for loan losses as a percent of
non-performing loans (7)
    
    
    54.42
    %
    
    
    55.56
    %
    
    
    54.42
    %
    
    
    55.56
    %Office data:Number of full service banking offices
    
    
    37
    
    
    
    36
    
    
    
    37
    
    
    
    36Number of loan production offices
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Number of brokerage offices
    
    
    20
    
    
    
    12
    
    
    
    20
    
    
    
    12Number of trust offices
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Per share data:Basic earnings per share (9)
    
    $
    0.22
    
    
    $
    0.23
    
    
    $
    0.43
    
    
    $
    0.40Diluted earnings per share (9)
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.42
    
    
    $
    0.39Book value (10)
    
    $
    8.72
    
    
    $
    8.30
    
    
    $
    8.72
    
    
    $
    8.30Tangible book value (11)
    
    $
    7.58
    
    
    $
    7.13
    
    
    $
    7.58
    
    
    $
    7.13Market value as a percent of book value (12)
    
    
    138
    %
    
    
    132
    %
    
    
    138
    %
    
    
    132
    %
 
 (1)
    
    Ratios for the three and six month periods are annualized where appropriate.(2)
    
    Net income divided by average total assets.(3)
    
    Net income divided by average total equity.(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)
    
    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
and other.(7)
    
    Nonperforming loans consist of loans ninety days past due, loans less than ninety days past
due and not accruing interest and restructured loans.(8)
    
    Nonperforming assets consist of nonperforming loans and real estate owned and other
repossessed assets.(9)
    
    Earnings per share are computed by dividing net income by the weighted average number of
shares outstanding during the period. Diluted earnings per share are computed using the
weighted average number of common shares determined for the basic computation plus the
dilutive effect of potential common shares that could be issued under outstanding stock
options.(10)
    
    Equity divided by number of shares outstanding.(11)
    
    Equity minus goodwill and core deposit intangible divided by number of shares outstanding.(12)
    
    Market value divided by book value. 12




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Forward Looking Statements
  Comparison of Financial Condition at June 30, 2006 and December 31, 2005
          13




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Comparison of Operating Results for the Three Months Ended
June 30, 2006 and June 30, 2005
 Net Income.
 Net Interest Income.
 14




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##### Table of Contents



For the Three Months Ended June 30,2006 vs. 2005Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    4,418
    
    
    $
    3,653
    
    
    $
    8,071Loans held for sale
    
    
    (30
    )
    
    
    213
    
    
    
    183Investment securities:Trading
    
    
    619
    
    
    
    (869
    )
    
    
    (250
    )Available for sale
    
    
    267
    
    
    
    358
    
    
    
    625Margin accounts
    
    
    55
    
    
    
    19
    
    
    
    74FHLB stock
    
    
    52
    
    
    
    16
    
    
    
    68Other interest-earning assets
    
    
    15
    
    
    
    8
    
    
    
    23Total interest-earning assets
    
    $
    5,396
    
    
    $
    3,398
    
    
    $
    8,794Interest-bearing liabilities:Savings accounts
    
    
    
    
    
    
    (77
    )
    
    
    (77
    )NOW and money market accounts
    
    
    1,591
    
    
    
    173
    
    
    
    1,764Certificates of deposit
    
    
    1,672
    
    
    
    1,876
    
    
    
    3,548Federal Home Loan Bank advances
    
    
    1,140
    
    
    
    37
    
    
    
    1,177Repurchase agreements and other
    
    
    423
    
    
    
    258
    
    
    
    681Total interest-bearing liabilities
    
    $
    4,826
    
    
    $
    2,267
    
    
    
    7,093Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    1,701
 Provision for Loan Losses.
 Non-interest Income.
 Non-interest Expense.
 15




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Comparison of Operating Results for the Six Months Ended
June 30, 2006 and June 30, 2005
 Net Income.
 Net
Interest Income.
   16




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##### Table of Contents



For the Six Months Ended June 30,2006 vs. 2005Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    7,821
    
    
    $
    7,642
    
    
    $
    15,463Loans held for sale
    
    
    29
    
    
    
    154
    
    
    
    183Investment securities:Trading
    
    
    756
    
    
    
    (1,170
    )
    
    
    (414
    )Available for sale
    
    
    528
    
    
    
    557
    
    
    
    1,085Margin accounts
    
    
    120
    
    
    
    23
    
    
    
    143FHLB stock
    
    
    126
    
    
    
    29
    
    
    
    155Other interest-earning assets
    
    
    33
    
    
    
    7
    
    
    
    40Total interest-earning assets
    
    $
    9,413
    
    
    $
    7,242
    
    
    $
    16,655Interest-bearing liabilities:Savings accounts
    
    
    (3
    )
    
    
    (137
    )
    
    
    (140
    )NOW and money market accounts
    
    
    2,572
    
    
    
    113
    
    
    
    2,685Certificates of deposit
    
    
    2,985
    
    
    
    4,096
    
    
    
    7,081Federal Home Loan Bank advances
    
    
    2,078
    
    
    
    111
    
    
    
    2,189Repurchase agreements and other
    
    
    735
    
    
    
    469
    
    
    
    1,204Total interest-bearing liabilities
    
    $
    8,367
    
    
    $
    4,652
    
    
    
    13,019Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    3,636
 Provision for Loan Losses.
 Non-interest Income.
 Non-interest Expense.
 Federal Income Taxes.
 17




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS
  Three Months Ended June 30,2006
    2005Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars In thousands)Interest-earning assets:Net loans (1)
    
    $
    2,175,424
    
    
    $
    37,961
    
    
    
    6.98
    %
    
    $
    1,951,085
    
    
    $
    29,890
    
    
    
    6.13
    %Net loans held for sale
    
    
    42,931
    
    
    
    480
    
    
    
    4.47
    %
    
    
    23,435
    
    
    
    297
    
    
    
    5.07
    %Investment securities:Trading
    
    
    7,359
    
    
    
    80
    
    
    
    4.35
    %
    
    
    48,716
    
    
    
    330
    
    
    
    2.71
    %Available for sale
    
    
    216,544
    
    
    
    2,366
    
    
    
    4.37
    %
    
    
    181,947
    
    
    
    1,742
    
    
    
    3.83
    %Margin accounts
    
    
    16,366
    
    
    
    367
    
    
    
    8.97
    %
    
    
    15,432
    
    
    
    293
    
    
    
    7.59
    %FHLB stock
    
    
    24,350
    
    
    
    349
    
    
    
    5.73
    %
    
    
    23,099
    
    
    
    281
    
    
    
    4.87
    %Other interest-earning assets
    
    
    4,596
    
    
    
    44
    
    
    
    3.83
    %
    
    
    3,425
    
    
    
    20
    
    
    
    2.34
    %Total interest-earning assets
    
    
    2,487,570
    
    
    
    41,647
    
    
    
    6.70
    %
    
    
    2,247,139
    
    
    
    32,853
    
    
    
    5.85
    %Noninterest-earning assets
    
    
    135,647
    
    
    
    
    
    
    
    
    
    
    
    140,804Total assets
    
    $
    2,623,217
    
    
    
    
    
    
    
    
    
    
    $
    2,387,943Interest-bearing liabilities:NOW and money market accounts
    
    $
    330,408
    
    
    $
    2,466
    
    
    
    2.99
    %
    
    $
    273,570
    
    
    $
    702
    
    
    
    1.03
    %Savings accounts
    
    
    223,236
    
    
    
    229
    
    
    
    0.41
    %
    
    
    297,999
    
    
    
    306
    
    
    
    0.41
    %Certificates of deposit
    
    
    1,099,823
    
    
    
    11,458
    
    
    
    4.17
    %
    
    
    904,932
    
    
    
    7,910
    
    
    
    3.50
    %Federal Home Loan Bank advances
    
    
    453,654
    
    
    
    5,251
    
    
    
    4.63
    %
    
    
    449,577
    
    
    
    4,074
    
    
    
    3.62
    %Repurchase agreements and other
    
    
    105,633
    
    
    
    1,207
    
    
    
    4.57
    %
    
    
    75,740
    
    
    
    526
    
    
    
    2.78
    %Total interest-bearing liabilities
    
    
    2,212,754
    
    
    
    20,611
    
    
    
    3.73
    %
    
    
    2,001,818
    
    
    
    13,518
    
    
    
    2.70
    %Noninterest-bearing liabilities
    
    
    136,572
    
    
    
    
    
    
    
    
    
    
    
    128,425Total liabilities
    
    
    2,349,326
    
    
    
    
    
    
    
    
    
    
    
    2,130,243Equity
    
    
    273,891
    
    
    
    
    
    
    
    
    
    
    
    257,700Total liabilities and equity
    
    $
    2,623,217
    
    
    
    
    
    
    
    
    
    
    $
    2,387,943Net interest income and
Interest rate spread
    
    
    
    
    
    $
    21,036
    
    
    
    2.97
    %
    
    
    
    
    
    $
    19,335
    
    
    
    3.15
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.38
    %
    
    
    
    
    
    
    
    
    
    
    3.44
    %Average interest-earning assets to average
interest- bearing liabilities
    
    
    
    
    
    
    
    
    
    
    112.42
    %
    
    
    
    
    
    
    
    
    
    
    112.25
    %
 
 (1)
    
    Nonaccrual loans are included in the average balance. 18




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS
  Six Months Ended June 30,2006
    2005Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interestoutstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rate(Dollars In thousands)Interest-earning assets:Net loans (1)
    
    $
    2,140,079
    
    
    $
    73,071
    
    
    
    6.83
    %
    
    $
    1,902,669
    
    
    $
    57,608
    
    
    
    6.06
    %Net loans held for sale
    
    
    42,114
    
    
    
    988
    
    
    
    4.69
    %
    
    
    35,505
    
    
    
    805
    
    
    
    4.53
    %Investment securities:Trading
    
    
    7,676
    
    
    
    162
    
    
    
    4.22
    %
    
    
    41,677
    
    
    
    576
    
    
    
    2.76
    %Available for sale
    
    
    212,989
    
    
    
    4,580
    
    
    
    4.30
    %
    
    
    185,447
    
    
    
    3,495
    
    
    
    3.77
    %Margin accounts
    
    
    15,996
    
    
    
    707
    
    
    
    8.84
    %
    
    
    15,378
    
    
    
    564
    
    
    
    7.34
    %FHLB stock
    
    
    24,181
    
    
    
    689
    
    
    
    5.70
    %
    
    
    22,972
    
    
    
    534
    
    
    
    4.65
    %Other interest-earning assets
    
    
    4,174
    
    
    
    76
    
    
    
    3.64
    %
    
    
    3,552
    
    
    
    36
    
    
    
    2.03
    %Total interest-earning assets
    
    
    2,447,209
    
    
    
    80,273
    
    
    
    6.56
    %
    
    
    2,207,200
    
    
    
    63,618
    
    
    
    5.76
    %Noninterest-earning assets
    
    
    134,890
    
    
    
    
    
    
    
    
    
    
    
    139,464Total assets
    
    $
    2,582,099
    
    
    
    
    
    
    
    
    
    
    $
    2,346,664Interest-bearing liabilities:NOW and money market accounts
    
    $
    305,081
    
    
    $
    4,060
    
    
    
    2.66
    %
    
    $
    283,369
    
    
    $
    1,375
    
    
    
    0.97
    %Savings accounts
    
    
    234,800
    
    
    
    478
    
    
    
    0.41
    %
    
    
    301,844
    
    
    
    618
    
    
    
    0.41
    %Certificates of deposit
    
    
    1,092,551
    
    
    
    22,035
    
    
    
    4.03
    %
    
    
    875,454
    
    
    
    14,954
    
    
    
    3.42
    %Federal Home Loan Bank advances
    
    
    444,231
    
    
    
    9,881
    
    
    
    4.45
    %
    
    
    437,976
    
    
    
    7,692
    
    
    
    3.51
    %Repurchase agreements and other
    
    
    95,869
    
    
    
    2,094
    
    
    
    4.37
    %
    
    
    67,538
    
    
    
    890
    
    
    
    2.64
    %Total interest-bearing liabilities
    
    
    2,172,532
    
    
    
    38,548
    
    
    
    3.55
    %
    
    
    1,966,181
    
    
    
    25,529
    
    
    
    2.60
    %Noninterest-bearing liabilities
    
    
    137,281
    
    
    
    
    
    
    
    
    
    
    
    123,530Total liabilities
    
    
    2,309,813
    
    
    
    
    
    
    
    
    
    
    
    2,089,711Equity
    
    
    272,286
    
    
    
    
    
    
    
    
    
    
    
    256,953Total liabilities and equity
    
    $
    2,582,099
    
    
    
    
    
    
    
    
    
    
    $
    2,346,664Net interest income and
Interest rate spread
    
    
    
    
    
    $
    41,725
    
    
    
    3.01
    %
    
    
    
    
    
    $
    38,089
    
    
    
    3.17
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.41
    %
    
    
    
    
    
    
    
    
    
    
    3.45
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    112.64
    %
    
    
    
    
    
    
    
    
    
    
    112.26
    %
 
 (1)
    
    Nonaccrual loans are included in the average balance. 19




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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, 2006NPV as % of portfolio value of assets
    
    Next 12 months net interest incomeChangein rates(basis
    
    
    
    
    
    Internal policy
    
    
    
    
    
    
    
    
    
    Internal policypoints)
    
    NPV ratio
    
    limitations
    
    Change in %
    
    $ Change
    
    limitations
    
    % Change+300
    
    
    9.58
    %
    
    
    5.00
    %
    
    
    (2.42
    )%
    
    $
    (4,202
    )
    
    
    (15.00
    )%
    
    
    (5.53
    )%+200
    
    
    10.39
    
    
    
    6.00
    
    
    
    (1.61
    )
    
    
    (2,746
    )
    
    
    (10.00
    )
    
    
    (3.61
    )+100
    
    
    11.15
    
    
    
    6.00
    
    
    
    (0.85
    )
    
    
    (1,299
    )
    
    
    (5.00
    )
    
    
    (1.71
    )Static
    
    
    12.00
    
    
    
    7.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100)
    
    
    12.18
    
    
    
    6.00
    
    
    
    0.18
    
    
    
    1,377
    
    
    
    (5.00
    )
    
    
    1.81(200)
    
    
    12.26
    
    
    
    6.00
    
    
    
    0.26
    
    
    
    2,289
    
    
    
    (15.00
    )
    
    
    3.01(300)
    
    
    11.77
    
    
    
    5.00
    
    
    
    (0.23
    )
    
    
    1,609
    
    
    
    (20.00
    )
    
    
    2.12
 20




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##### Table of Contents



Year ended December 31, 2005NPV as % of portfolio value of assets
    
    Next 12 months net interest incomeChangein rates(basis
    
    
    
    
    
    Internal policy
    
    
    
    
    
    
    
    
    
    Internal policypoints)
    
    NPV ratio
    
    limitations
    
    Change in %
    
    $ Change
    
    limitations
    
    % Change+300
    
    
    11.90
    %
    
    
    5.00
    %
    
    
    (1.35
    )%
    
    $
    322
    
    
    
    (15.00
    )%
    
    
    0.43
    %+200
    
    
    12.45
    
    
    
    6.00
    
    
    
    (0.80
    )
    
    
    390
    
    
    
    (10.00
    )
    
    
    0.52+100
    
    
    12.88
    
    
    
    6.00
    
    
    
    (0.36
    )
    
    
    (276
    )
    
    
    (5.00
    )
    
    
    (0.37
    )Static
    
    
    13.24
    
    
    
    7.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100)
    
    
    13.08
    
    
    
    6.00
    
    
    
    (0.16
    )
    
    
    (649
    )
    
    
    (5.00
    )
    
    
    (0.87
    )(200)
    
    
    12.38
    
    
    
    6.00
    
    
    
    (0.86
    )
    
    
    (3,638
    )
    
    
    (15.00
    )
    
    
    (4.89
    )(300)
    
    
    10.98
    
    
    
    5.00
    
    
    
    (2.26
    )
    
    
    (10,678
    )
    
    
    (20.00
    )
    
    
    (14.37
    )
   Potential Impact of Changes in Interest Rates.
 
 ITEM 4. Controls and Procedures
  21




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##### Table of Contents



PART II. OTHER INFORMATION
 UNITED COMMUNITY FINANCIAL CORP.
 
 ITEM 1   Legal Proceedings
  
 ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity SecuritiesTotal Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares that May Yet BePart of Publicly
    
    
    Purchased Under theTotal Number of
    
    
    Average Price
    
    
    Announced Plans or
    
    
    PlansPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Programs
    
    
    or Programs4/1 to 4/30/2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    624,347
    (1)5/1 to 5/31/2006
    
    
    74,800
    
    
    
    11.62
    
    
    
    74,800
    
    
    
    549,5476/1 to 6/30/2006
    
    
    114,000
    
    
    
    11.74
    
    
    
    114,000
    
    
    
    435,547Total
    
    
    188,800
    
    
    $
    11.69
    
    
    
    188,800
    
    
    
    435,547
 
 (1)
    
    On April 21, 2003, United Community announced that its Board of Directors had approved
a plan to repurchase 1,000,000 shares of stock. 
 ITEM 4  Submission of Matters to a Vote of Security Holders
  Director
    
    For
    
    WithheldRichard M. Barrett
    
    
    24,474,442
    
    
    
    455,072Thomas J. Cavalier
    
    
    24,321,949
    
    
    
    607,565Douglas M. McKay
    
    
    24,519,446
    
    
    
    410,068
   For
    
    Against
    
    Abstain24,649,719
    
    143,833
    
    135,962
 22




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##### Table of Contents



ITEM 6  Exhibits
  ExhibitNumber
    
    Description3.1
    
    Articles of Incorporation3.2
    
    Amended Code of Regulations31.1
    
    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
 23




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 SIGNATURES
   Date: August 8, 2006
    
    /s/ Douglas M. McKay

Douglas M. McKay, Chief Executive OfficerDate: August 8, 2006
    
    /s/ Patrick A. Kelly

Patrick A. Kelly, Chief Financial Officer
 24




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##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 Exhibit 3.1
  Exhibit 3.2
  25