##### 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 September 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




---



##### Table of Contents



TABLE OF CONTENTS
 PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of September 30, 2006 (Unaudited)
and December 31, 2005
    
    1Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2006 and 2005 (Unaudited)
    
    2Consolidated Statement of Shareholders Equity for the Nine Months ended September 30,
2006 (Unaudited)
    
    3Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2006 and 2005 (Unaudited)
    
    4Notes to Consolidated Financial Statements
    
    5 - 12Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    13-21Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    22Item 4. Controls and Procedures
    
    23Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    24Item 1A. Risk Factors
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    24Item 3. Defaults Upon Senior Securities (None)Item 4. Submission of Matters to a Vote of Security Holders (None)Item 5. Other Information (None)Item 6. Exhibits
    
    24Signatures
    
    25Exhibits
    
    26-29EX-31.1EX-31.2EX-32




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash and deposits with banks
    
    $
    33,391
    
    
    $
    36,043Federal funds sold and other
    
    
    1,498
    
    
    
    1,502Total cash and cash equivalents
    
    
    34,889
    
    
    
    37,545Securities:Trading, at fair value
    
    
    4,514
    
    
    
    10,812Available for sale, at fair value
    
    
    209,794
    
    
    
    201,870Loans, net of allowance for loan losses of $16,582 and $15,723,
respectively
    
    
    2,249,243
    
    
    
    2,097,433Loans held for sale
    
    
    25,597
    
    
    
    29,109Margin accounts
    
    
    96
    
    
    
    15,705Federal Home Loan Bank stock, at cost
    
    
    25,053
    
    
    
    24,006Premises and equipment, net
    
    
    24,340
    
    
    
    23,771Accrued interest receivable
    
    
    13,637
    
    
    
    12,053Real estate owned and other repossessed assets
    
    
    3,679
    
    
    
    2,514Goodwill
    
    
    33,593
    
    
    
    33,593Core deposit intangible
    
    
    1,739
    
    
    
    2,118Cash surrender value of life insurance
    
    
    22,912
    
    
    
    22,260Other assets
    
    
    21,726
    
    
    
    16,061Total assets
    
    $
    2,670,812
    
    
    $
    2,528,850Liabilities and Shareholders EquityLiabilities:Deposits:Interest bearing
    
    $
    1,693,200
    
    
    $
    1,584,926Non-interest bearing
    
    
    96,704
    
    
    
    96,918Total deposits
    
    
    1,789,904
    
    
    
    1,681,844Federal Home Loan Bank advances
    
    
    477,215
    
    
    
    475,549Repurchase agreements and other borrowings
    
    
    100,301
    
    
    
    75,214Advance payments by borrowers for taxes and insurance
    
    
    10,328
    
    
    
    14,322Accrued interest payable
    
    
    2,830
    
    
    
    2,622Accrued expenses and other liabilities
    
    
    13,516
    
    
    
    14,564Total liabilities
    
    
    2,394,094
    
    
    
    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
    
    
    145,215
    
    
    
    143,896Retained earnings
    
    
    217,464
    
    
    
    207,120Accumulated other comprehensive loss
    
    
    (1,612
    )
    
    
    (1,845
    )Unearned stock compensation
    
    
    (11,742
    )
    
    
    (13,108
    )Treasury stock, at cost, 6,842,389 and 6,742,345 shares, respectively
    
    
    (72,607
    )
    
    
    (71,328
    )Total shareholders equity
    
    
    276,718
    
    
    
    264,735Total liabilities and shareholders equity
    
    $
    2,670,812
    
    
    $
    2,528,850
 See Notes to Consolidated Financial Statements.
 1




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)Interest incomeLoans
    
    $
    38,763
    
    
    $
    32,152
    
    
    $
    111,834
    
    
    $
    89,760Loans held for sale
    
    
    550
    
    
    
    420
    
    
    
    1,538
    
    
    
    1,225Securities:Trading
    
    
    58
    
    
    
    217
    
    
    
    220
    
    
    
    793Available for sale
    
    
    2,335
    
    
    
    1,692
    
    
    
    6,915
    
    
    
    5,186Margin accounts
    
    
    362
    
    
    
    312
    
    
    
    1,069
    
    
    
    876Federal Home Loan Bank stock dividends
    
    
    357
    
    
    
    287
    
    
    
    1,047
    
    
    
    821Other interest earning assets
    
    
    39
    
    
    
    26
    
    
    
    114
    
    
    
    61Total interest income
    
    
    42,464
    
    
    
    35,106
    
    
    
    122,737
    
    
    
    98,722Interest expenseDeposits
    
    
    15,602
    
    
    
    9,867
    
    
    
    42,175
    
    
    
    26,814Federal Home Loan Bank advances
    
    
    5,636
    
    
    
    4,723
    
    
    
    15,517
    
    
    
    12,415Repurchase agreements and other
    
    
    1,254
    
    
    
    454
    
    
    
    3,347
    
    
    
    1,344Total interest expense
    
    
    22,492
    
    
    
    15,044
    
    
    
    61,039
    
    
    
    40,573Net interest income
    
    
    19,972
    
    
    
    20,062
    
    
    
    61,698
    
    
    
    58,149Provision for loan losses
    
    
    1,475
    
    
    
    702
    
    
    
    3,026
    
    
    
    1,753Net interest income after provision for
loan losses
    
    
    18,497
    
    
    
    19,360
    
    
    
    58,672
    
    
    
    56,396Non-interest incomeBrokerage commissions
    
    
    4,875
    
    
    
    4,771
    
    
    
    14,688
    
    
    
    13,998Service fees and other charges
    
    
    3,161
    
    
    
    3,064
    
    
    
    9,568
    
    
    
    9,255Underwriting and investment banking
    
    
    194
    
    
    
    153
    
    
    
    220
    
    
    
    761Net gains (losses):Available for sale securities
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    195Trading securities
    
    
    38
    
    
    
    157
    
    
    
    70
    
    
    
    188Loans sold
    
    
    870
    
    
    
    777
    
    
    
    1,899
    
    
    
    1,676Other
    
    
    10
    
    
    
    83
    
    
    
    (17
    )
    
    
    140Other income
    
    
    1,051
    
    
    
    811
    
    
    
    3,115
    
    
    
    2,724Total non-interest income
    
    
    10,199
    
    
    
    9,772
    
    
    
    29,543
    
    
    
    28,937Non-interest expenseSalaries and employee benefits
    
    
    12,603
    
    
    
    12,753
    
    
    
    39,132
    
    
    
    37,875Occupancy
    
    
    1,116
    
    
    
    1,012
    
    
    
    3,330
    
    
    
    3,028Equipment and data processing
    
    
    2,055
    
    
    
    2,356
    
    
    
    6,700
    
    
    
    6,860Franchise tax
    
    
    525
    
    
    
    468
    
    
    
    1,596
    
    
    
    1,482Advertising
    
    
    318
    
    
    
    292
    
    
    
    1,109
    
    
    
    1,150Amortization of core deposit intangible
    
    
    119
    
    
    
    160
    
    
    
    379
    
    
    
    514Other expenses
    
    
    2,629
    
    
    
    2,396
    
    
    
    7,602
    
    
    
    7,584Total non-interest expenses
    
    
    19,365
    
    
    
    19,437
    
    
    
    59,848
    
    
    
    58,493Income before income taxes
    
    
    9,331
    
    
    
    9,695
    
    
    
    28,367
    
    
    
    26,840Income taxes
    
    
    3,272
    
    
    
    3,304
    
    
    
    9,926
    
    
    
    9,070Net income
    
    $
    6,059
    
    
    $
    6,391
    
    
    $
    18,441
    
    
    $
    17,770Comprehensive income
    
    $
    8,335
    
    
    $
    5,703
    
    
    $
    18,674
    
    
    $
    16,053Earnings per shareBasic
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.64
    
    
    $
    0.62Diluted
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.63
    
    
    $
    0.61
 See Notes to Consolidated Financial Statements.
 2




---



##### Table of Contents



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
    
    
    
    
    
    
    
    
    
    
    18,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,441Change in net unrealized
gain/(loss) on
securities, net of taxes of $125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233
    
    
    
    
    
    
    
    
    
    
    
    233Comprehensive income
    
    
    
    
    
    
    
    
    
    
    18,441
    
    
    
    233
    
    
    
    
    
    
    
    
    
    
    
    18,674Shares allocated to ESOP participants
    
    
    
    
    
    
    1,319
    
    
    
    
    
    
    
    
    
    
    
    1,366
    
    
    
    
    
    
    
    2,685Purchase of treasury stock
    
    
    (196
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,298
    )
    
    
    (2,298
    )Exercise of stock options
    
    
    96
    
    
    
    
    
    
    
    (293
    )
    
    
    
    
    
    
    
    
    
    
    1,019
    
    
    
    726Dividends paid, $0.27 per share
    
    
    
    
    
    
    
    
    
    
    (7,804
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,804
    )Balance September 30, 2006
    
    
    30,962
    
    
    $
    145,215
    
    
    $
    217,464
    
    
    $
    (1,612
    )
    
    $
    (11,742
    )
    
    $
    (72,607
    )
    
    $
    276,718
 See Notes to Consolidated Financial Statements.
 3




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months Ended September 30,2006
    
    
    2005(Dollars in thousands)Cash Flows from Operating ActivitiesNet income
    
    $
    18,441
    
    
    $
    17,770Adjustments to reconcile net income to net cash provided by
operating activities:Provision for loan losses
    
    
    3,026
    
    
    
    1,753Net gains
    
    
    (1,889
    )
    
    
    (1,859
    )Amortization of premiums and accretion of discounts
    
    
    2,283
    
    
    
    2,729Depreciation and amortization
    
    
    2,057
    
    
    
    1,777ESOP compensation
    
    
    2,685
    
    
    
    2,398FHLB stock dividends
    
    
    (1,047
    )
    
    
    (821
    )Decrease in trading securities
    
    
    6,298
    
    
    
    15,181Decrease (increase) in margin accounts
    
    
    15,609
    
    
    
    (1,634
    )Increase in interest receivable
    
    
    (1,584
    )
    
    
    (2,132
    )(Increase) decrease in prepaid and other assets
    
    
    (7,505
    )
    
    
    85Increase in interest payable
    
    
    208
    
    
    
    955Net principal disbursed on loans held for sale
    
    
    (161,206
    )
    
    
    (161,863
    )Proceeds from sale of loans held for sale
    
    
    166,613
    
    
    
    157,958(Decrease) increase in other liabilities
    
    
    (1,242
    )
    
    
    188Net cash from operating activities
    
    
    42,747
    
    
    
    32,485Cash Flows from Investing ActivitiesProceeds from principal repayments and maturities of:Available for sale securities
    
    
    22,835
    
    
    
    42,497Proceeds from sale of:Available for sale securities
    
    
    
    
    
    
    20,883Real estate owned and other repossessed assets
    
    
    2,283
    
    
    
    1,862Commercial loan participations
    
    
    
    
    
    
    1,500Non-performing loans
    
    
    210
    
    
    
    6,173Premises and equipment
    
    
    532
    
    
    
    167Purchases of:Securities available for sale
    
    
    (30,470
    )
    
    
    (40,266
    )Net principal disbursed on loans
    
    
    (1,615
    )
    
    
    (31,852
    )Loans purchased
    
    
    (157,528
    )
    
    
    (209,162
    )Purchases of premises and equipment
    
    
    (3,105
    )
    
    
    (4,174
    )Net cash from investing activities
    
    
    (166,858
    )
    
    
    (212,372
    )Cash Flows from Financing ActivitiesNet increase (decrease) in NOW, savings and money market accounts
    
    
    40,655
    
    
    
    (82,591
    )Net increase in certificates of deposit
    
    
    67,417
    
    
    
    180,123Net decrease in advance payments by borrowers
for taxes and insurance
    
    
    (3,994
    )
    
    
    (3,090
    )Proceeds from FHLB advances
    
    
    496,526
    
    
    
    465,782Repayment of FHLB advances
    
    
    (494,860
    )
    
    
    (376,082
    )Net change in other borrowed funds
    
    
    25,087
    
    
    
    (2,713
    )Dividends paid
    
    
    (7,804
    )
    
    
    (7,101
    )Proceeds from the exercise of stock options
    
    
    726
    
    
    
    413Purchase of treasury stock
    
    
    (2,298
    )
    
    
    (2,499
    )Net cash from financing activities
    
    
    121,455
    
    
    
    172,242Decrease in cash and cash equivalents
    
    
    (2,656
    )
    
    
    (7,645
    )Cash and cash equivalents, beginning of period
    
    
    37,545
    
    
    
    40,281Cash and cash equivalents, end of period
    
    $
    34,889
    
    
    $
    32,636Supplemental disclosures of cash flow informationCash paid during the period for:Interest on deposits and borrowings, net of amounts capitalized
    
    $
    60,831
    
    
    $
    39,618Interest capitalized on borrowings
    
    
    16
    
    
    
    33Income taxes
    
    
    9,950
    
    
    
    5,741Supplemental schedule of noncash activities:Loans transferred to the loan portfolio from held for sale
    
    
    
    
    
    
    37,075Transfers from loans to loans held for sale
    
    
    
    
    
    
    64,999Transfers from loans to real estate owned and other repossessed assets
    
    
    3,485
    
    
    
    3,642
 See Notes to Consolidated Financial Statements.
 4




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. BASIS OF PRESENTATION
     2. RECENT ACCOUNTING DEVELOPMENTS
    5




---



##### Table of Contents



3. STOCK COMPENSATION
    6




---



##### Table of Contents



Nine Months Ended September 30, 2006Total Options Outstanding(Dollars in thousands)Weighted
    
    WeightedAverage
    
    Average FairShares
    
    Exercise Price
    
    ValueOptions outstanding, beginning of period
    
    
    2,217,216
    
    
    $
    9.59
    
    
    $
    4.44Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (96,256
    )
    
    
    7.55
    
    
    
    4.77Forfeited
    
    
    (37,156
    )
    
    
    12.73
    
    
    
    Options outstanding and exercisable, end of period
    
    
    2,083,804
    
    
    $
    9.62
    
    
    $
    4.43
  4. SECURITIES
  September 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
    
    $
    87,830
    
    
    $
    15
    
    
    $
    (1,003
    )
    
    $
    88,799
    
    
    $
    
    
    
    $
    (1,493
    )Tax exempt municipal obligation
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Equity securities
    
    
    7,960
    
    
    
    655
    
    
    
    (33
    )
    
    
    2,962
    
    
    
    661
    
    
    
    Mortgage-related securities
    
    
    114,001
    
    
    
    66
    
    
    
    (2,260
    )
    
    
    110,106
    
    
    
    73
    
    
    
    (2,159
    )Total
    
    $
    209,794
    
    
    $
    736
    
    
    $
    (3,296
    )
    
    $
    201,870
    
    
    $
    734
    
    
    $
    (3,652
    )
  7




---



##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Obligations of U.S. Government
    
    $
    855
    
    
    $
    2,531State and municipal obligations
    
    
    3,055
    
    
    
    7,061Corporate bonds, debentures and notes
    
    
    
    
    
    
    224Mutual funds, stocks and warrants
    
    
    604
    
    
    
    996Total trading securities
    
    $
    4,514
    
    
    $
    10,812
 5. LOANS
  September 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Real Estate:One- to four-family residential
    
    $
    837,104
    
    
    $
    749,362Multifamily residential
    
    
    156,321
    
    
    
    154,702Nonresidential
    
    
    351,275
    
    
    
    314,124Land
    
    
    21,287
    
    
    
    14,979Construction:One- to four-family residential
    
    
    413,067
    
    
    
    389,558Multifamily and non-residential
    
    
    35,698
    
    
    
    66,788Total real estate
    
    
    1,814,752
    
    
    
    1,689,513Consumer
    
    
    344,972
    
    
    
    323,515Commercial
    
    
    106,920
    
    
    
    100,977Total loans
    
    
    2,266,644
    
    
    
    2,114,005Less:Allowance for loan losses
    
    
    16,582
    
    
    
    15,723Deferred loan fees, net
    
    
    819
    
    
    
    849Total
    
    
    17,401
    
    
    
    16,572Loans, net
    
    $
    2,249,243
    
    
    $
    2,097,433
  As of or For theNine Months
    
    
    As of or For theending
    
    
    Year EndedSeptember 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Balance, beginning of year
    
    $
    15,723
    
    
    $
    15,877Provision for loan losses
    
    
    3,026
    
    
    
    3,028Amounts charged off
    
    
    (2,392
    )
    
    
    (4,085
    )Recoveries
    
    
    225
    
    
    
    903Balance, end of period
    
    $
    16,582
    
    
    $
    15,723
  8




---



##### Table of Contents



As of or Forthe NineMonths
    
    
    As of or ForEnded
    
    
    the YearSeptember 30,
    
    
    Ended2006
    
    
    December 31, 2005(Dollars in thousands)Impaired loans on which no specific valuation allowance was provided
    
    $
    3,732
    
    
    $
    13,119Impaired loans on which a specific valuation allowance was provided
    
    
    18,856
    
    
    
    4,573Total impaired loans at period-end
    
    $
    22,588
    
    
    $
    17,692Specific valuation allowances on impaired loans at period-end
    
    $
    1,749
    
    
    $
    667Average impaired loans during the period
    
    
    20,029
    
    
    
    15,209Interest income recognized on impaired loans during the period
    
    
    249
    
    
    
    386Interest income received on impaired loans during the period
    
    
    250
    
    
    
    403Interest income foregone based on original contract terms of
impaired loans
    
    
    1,518
    
    
    
    1,503
 6. MORTGAGE BANKING ACTIVITIES
   As of or For theNine Months
    
    
    As of or for theEnded
    
    
    Year EndedSeptember 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Balance, beginning of year
    
    $
    6,923
    
    
    $
    5,533Originations
    
    
    1,185
    
    
    
    2,961Amortized to expense
    
    
    (1,256
    )
    
    
    (1,571
    )Impairment charges
    
    
    (21
    )
    
    
    Balance, end of period
    
    $
    6,831
    
    
    $
    6,923
  September 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Balance, beginning of year
    
    $
    
    
    
    $
    Impairment charges
    
    
    21
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance, end of period
    
    $
    21
    
    
    $
    
   9




---



##### Table of Contents



September 30,
    
    December 31,2006
    
    2005Weighted average prepayment rate
    
    202 PSA
    
    278 PSAWeighted average life (in years)
    
    
    4.66
    
    
    
    5.11Weighted average discount rate
    
    
    8
    %
    
    
    8
    %
 7. OTHER POSTRETIREMENT BENEFIT PLANS
   Three Months Ended September 30,2006
    
    
    2005(Dollars in thousands)Service cost
    
    $
    1
    
    
    $
    2Interest cost
    
    
    55
    
    
    
    50Expected return on plan assets
    
    
    
    
    
    
    Net amortization of prior service cost
    
    
    (1
    )
    
    
    (1
    )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
    %
 Nine Months Ended September 30,2006
    
    
    2005(Dollars in thousands)Service cost
    
    $
    1
    
    
    $
    4Interest cost
    
    
    166
    
    
    
    150Expected return on plan assets
    
    
    
    
    
    
    Net amortization of prior service cost
    
    
    (1
    )
    
    
    (1
    )Recognized net actuarial gain
    
    
    
    
    
    
    Net periodic benefit cost/(gain)
    
    $
    166
    
    
    $
    153Assumptions used in the
valuations were as follows:Weighted average discount rate
    
    
    5.50
    %
    
    
    5.75
    %
 10




---



##### Table of Contents



8. SEGMENT INFORMATION
  For the Three Months Ended September 30, 2006Banking Services
    
    
    Investment Services
    
    
    Total(Dollars in thousands)Interest income
    
    $
    41,995
    
    
    $
    469
    
    
    $
    42,464Interest expense
    
    
    22,391
    
    
    
    101
    
    
    
    22,492Provision for loan loss
    
    
    1,475
    
    
    
    
    
    
    
    1,475Net interest income after
provision for loan loss
    
    
    18,129
    
    
    
    368
    
    
    
    18,497Non-interest income
    
    
    3,793
    
    
    
    6,406
    
    
    
    10,199Non-interest expense
    
    
    13,015
    
    
    
    6,350
    
    
    
    19,365Income before tax
    
    
    8,907
    
    
    
    424
    
    
    
    9,331Income tax expense
    
    
    3,121
    
    
    
    151
    
    
    
    3,272Net income
    
    $
    5,786
    
    
    $
    273
    
    
    $
    6,059
 For the Three Months Ended September 30, 2005Banking
    
    
    InvestmentServices
    
    
    Services
    
    
    Total(Dollars in thousands)Interest income
    
    $
    34,550
    
    
    $
    556
    
    
    $
    35,106Interest expense
    
    
    14,833
    
    
    
    211
    
    
    
    15,044Provision for loan loss
    
    
    702
    
    
    
    
    
    
    
    702Net interest income after
provision for loan loss
    
    
    19,015
    
    
    
    345
    
    
    
    19,360Non-interest income
    
    
    3,341
    
    
    
    6,431
    
    
    
    9,772Non-interest expense
    
    
    12,925
    
    
    
    6,512
    
    
    
    19,437Income before tax
    
    
    9,431
    
    
    
    264
    
    
    
    9,695Income tax expense
    
    
    3,206
    
    
    
    98
    
    
    
    3,304Net income
    
    $
    6,225
    
    
    $
    166
    
    
    $
    6,391
 For the Nine Months Ended September 30, 2006Banking
    
    
    InvestmentServices
    
    
    Services
    
    
    Total(Dollars in thousands)Interest income
    
    $
    121,324
    
    
    $
    1,413
    
    
    $
    122,737Interest expense
    
    
    60,673
    
    
    
    366
    
    
    
    61,039Provision for loan loss
    
    
    3,026
    
    
    
    
    
    
    
    3,026Net interest income after
provision for loan loss
    
    
    57,625
    
    
    
    1,047
    
    
    
    58,672Non-interest income
    
    
    9,752
    
    
    
    19,791
    
    
    
    29,543Non-interest expense
    
    
    40,262
    
    
    
    19,586
    
    
    
    59,848Income before tax
    
    
    27,115
    
    
    
    1,252
    
    
    
    28,367Income tax expense
    
    
    9,485
    
    
    
    441
    
    
    
    9,926Net income
    
    $
    17,630
    
    
    $
    811
    
    
    $
    18,441
 11




---



##### Table of Contents



For the Nine Months Ended September 30, 2005Banking
    
    
    InvestmentServices
    
    
    Services
    
    
    Total(Dollars in thousands)Interest income
    
    $
    96,967
    
    
    $
    1,755
    
    
    $
    98,722Interest expense
    
    
    39,765
    
    
    
    808
    
    
    
    40,573Provision for loan loss
    
    
    1,753
    
    
    
    
    
    
    
    1,753Net interest income after
provision for loan loss
    
    
    55,449
    
    
    
    947
    
    
    
    56,396Non-interest income
    
    
    9,189
    
    
    
    19,748
    
    
    
    28,937Non-interest expense
    
    
    39,187
    
    
    
    19,306
    
    
    
    58,493Income before tax
    
    
    25,451
    
    
    
    1,389
    
    
    
    26,840Income tax expense
    
    
    8,576
    
    
    
    494
    
    
    
    9,070Net income
    
    $
    16,875
    
    
    $
    895
    
    
    $
    17,770
 9. EARNINGS PER SHARE
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in thousands,
    
    
    (Dollars in thousands,except per share data)
    
    
    except per share data)Net income applicable to common stock
    
    $
    6,059
    
    
    $
    6,391
    
    
    $
    18,441
    
    
    $
    17,770Weighted average common shares outstanding
    
    
    28,999
    
    
    
    28,774
    
    
    
    29,006
    
    
    
    28,789Dilutive effect of stock options
    
    
    382
    
    
    
    343
    
    
    
    370
    
    
    
    327Weighted average common shares outstanding
for dilutive computation
    
    
    29,381
    
    
    
    29,117
    
    
    
    29,376
    
    
    
    29,116Basic earnings per share as reported
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.64
    
    
    $
    0.62Diluted earnings per share as reported
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.63
    
    
    $
    0.61
 12




---



##### 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 NineMonths Ended
    
    Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Selected financial ratios and other data: (1)Performance ratios:Return on average assets (2)
    
    
    0.91
    %
    
    
    1.05
    %
    
    
    0.94
    %
    
    
    1.00
    %Return on average equity (3)
    
    
    8.74
    %
    
    
    9.75
    %
    
    
    8.97
    %
    
    
    9.16
    %Interest rate spread (4)
    
    
    2.75
    %
    
    
    3.15
    %
    
    
    2.92
    %
    
    
    3.17
    %Net interest margin (5)
    
    
    3.18
    %
    
    
    3.48
    %
    
    
    3.33
    %
    
    
    3.46
    %Non-interest expense to average assets
    
    
    2.92
    %
    
    
    3.19
    %
    
    
    3.06
    %
    
    
    3.28
    %Efficiency ratio (6)
    
    
    63.89
    %
    
    
    65.04
    %
    
    
    65.22
    %
    
    
    66.98
    %Average interest-earning assets to average interest-
bearing liabilities
    
    
    112.08
    %
    
    
    112.56
    %
    
    
    112.45
    %
    
    
    112.36
    %Capital ratios:Average equity to average assets
    
    
    10.46
    %
    
    
    10.76
    %
    
    
    10.51
    %
    
    
    10.88
    %Equity to assets, end of period
    
    
    10.36
    %
    
    
    10.55
    %
    
    
    10.36
    %
    
    
    10.55
    %Tier 1 leverage ratio
    
    
    8.67
    %
    
    
    8.53
    %
    
    
    8.67
    %
    
    
    8.53
    %Tier 1 risk-based capital ratio
    
    
    10.64
    %
    
    
    10.16
    %
    
    
    10.64
    %
    
    
    10.16
    %Total risk-based capital ratio
    
    
    11.43
    %
    
    
    10.94
    %
    
    
    11.43
    %
    
    
    10.94
    %Asset quality ratios:Non-performing loans to total loans at end of period (7)
    
    
    1.68
    %
    
    
    1.27
    %
    
    
    1.68
    %
    
    
    1.27
    %Non-performing assets to average assets (8)
    
    
    1.57
    %
    
    
    1.20
    %
    
    
    1.59
    %
    
    
    1.23
    %Non-performing assets to total assets at end of period
    
    
    1.56
    %
    
    
    1.18
    %
    
    
    1.56
    %
    
    
    1.18
    %Allowance for loan losses as a percent of loans
    
    
    0.73
    %
    
    
    0.75
    %
    
    
    0.73
    %
    
    
    0.75
    %Allowance for loan losses as a percent of
non-performing loans (7)
    
    
    43.78
    %
    
    
    59.54
    %
    
    
    43.78
    %
    
    
    59.54
    %Office data:Number of full service banking offices
    
    
    37
    
    
    
    35
    
    
    
    37
    
    
    
    36Number of loan production offices
    
    
    5
    
    
    
    6
    
    
    
    5
    
    
    
    6Number of brokerage offices
    
    
    20
    
    
    
    12
    
    
    
    20
    
    
    
    12Number of trust offices
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Per share data:Basic earnings per share (9)
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.64
    
    
    $
    0.62Diluted earnings per share (9)
    
    $
    0.21
    
    
    $
    0.22
    
    
    $
    0.63
    
    
    $
    0.61Book value (10)
    
    $
    8.94
    
    
    $
    8.43
    
    
    $
    8.94
    
    
    $
    8.43Tangible book value (11)
    
    $
    7.80
    
    
    $
    7.27
    
    
    $
    7.80
    
    
    $
    7.27Market value as a percent of book value (12)
    
    
    142
    %
    
    
    133
    %
    
    
    142
    %
    
    
    133
    %
 
 (1)
    
    Ratios for the three and nine 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. 13




---



##### Table of Contents



Forward Looking Statements
  Comparison of Financial Condition at September 30, 2006 and December 31, 2005
         14




---



##### Table of Contents



15




---



##### Table of Contents



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




---



##### Table of Contents



For the Three Months Ended September 30,2006 vs. 2005Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    2,090
    
    
    $
    4,521
    
    
    $
    6,611Loans held for sale
    
    
    (64
    )
    
    
    194
    
    
    
    130Investment securities:Trading
    
    
    (310
    )
    
    
    151
    
    
    
    (159
    )Available for sale
    
    
    351
    
    
    
    292
    
    
    
    643Margin accounts
    
    
    78
    
    
    
    (28
    )
    
    
    50FHLB stock
    
    
    49
    
    
    
    21
    
    
    
    70Other interest-earning assets
    
    
    10
    
    
    
    3
    
    
    
    13Total interest-earning assets
    
    $
    2,204
    
    
    $
    5,154
    
    
    $
    7,358Interest-bearing liabilities:Savings accounts
    
    
    20
    
    
    
    (96
    )
    
    
    (76
    )NOW and money market accounts
    
    
    1,791
    
    
    
    294
    
    
    
    2,085Certificates of deposit
    
    
    1,459
    
    
    
    2,267
    
    
    
    3,726Federal Home Loan Bank advances
    
    
    813
    
    
    
    100
    
    
    
    913Repurchase agreements and other
    
    
    585
    
    
    
    215
    
    
    
    800Total interest-bearing liabilities
    
    $
    4,668
    
    
    $
    2,780
    
    
    
    7,448Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    (90
    )
 Provision for Loan Losses.
 Non-interest Income.
 Non-interest Expense.
 Comparison of Operating Results for the Nine Months Ended
September 30, 2006 and September 30, 2005
 Net Income.
 17




---



##### Table of Contents



Net Interest Income.
    For the Nine Months Ended September 30,2006 vs. 2005Increase
    
    
    Total(decrease) due to
    
    
    increaseRate
    
    
    Volume
    
    
    (decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    11,408
    
    
    $
    10,666
    
    
    $
    22,074Loans held for sale
    
    
    27
    
    
    
    286
    
    
    
    313Investment securities:Trading
    
    
    891
    
    
    
    (1,464
    )
    
    
    (573
    )Available for sale
    
    
    808
    
    
    
    921
    
    
    
    1,729Margin accounts
    
    
    202
    
    
    
    (9
    )
    
    
    193FHLB stock
    
    
    179
    
    
    
    46
    
    
    
    225Other interest-earning assets
    
    
    45
    
    
    
    9
    
    
    
    54Total interest-earning assets
    
    $
    13,560
    
    
    $
    10,455
    
    
    $
    24,015Interest-bearing liabilities:Savings accounts
    
    
    (1
    )
    
    
    (214
    )
    
    
    (215
    )NOW and money market accounts
    
    
    4,352
    
    
    
    418
    
    
    
    4,770Certificates of deposit
    
    
    5,161
    
    
    
    5,645
    
    
    
    10,806Federal Home Loan Bank advances
    
    
    3,239
    
    
    
    (137
    )
    
    
    3,102Repurchase agreements and other
    
    
    1,025
    
    
    
    978
    
    
    
    2,003Total interest-bearing liabilities
    
    $
    13,776
    
    
    $
    6,690
    
    
    
    20,466Change in net interest income
    
    
    
    
    
    
    
    
    
    $
    3,549
 18




---



##### Table of Contents



Provision for Loan Losses.
 Non-interest Income.
 Non-interest Expense.
 Federal Income Taxes.
 19




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS
  Three Months Ended September 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)
    
    $
    2,214,216
    
    
    $
    38,763
    
    
    
    7.00
    %
    
    $
    2,032,602
    
    
    $
    32,152
    
    
    
    6.33
    %Net loans held for sale
    
    
    39,855
    
    
    
    550
    
    
    
    5.52
    %
    
    
    29,980
    
    
    
    420
    
    
    
    5.60
    %Investment securities:Trading
    
    
    4,546
    
    
    
    58
    
    
    
    5.10
    %
    
    
    23,911
    
    
    
    217
    
    
    
    3.63
    %Available for sale
    
    
    210,831
    
    
    
    2,335
    
    
    
    4.43
    %
    
    
    175,833
    
    
    
    1,692
    
    
    
    3.85
    %Margin accounts
    
    
    13,766
    
    
    
    362
    
    
    
    10.52
    %
    
    
    15,486
    
    
    
    312
    
    
    
    8.06
    %FHLB stock
    
    
    24,699
    
    
    
    357
    
    
    
    5.78
    %
    
    
    23,379
    
    
    
    287
    
    
    
    4.91
    %Other interest-earning assets
    
    
    3,750
    
    
    
    39
    
    
    
    4.16
    %
    
    
    3,640
    
    
    
    26
    
    
    
    2.86
    %Total interest-earning assets
    
    
    2,511,663
    
    
    
    42,464
    
    
    
    6.76
    %
    
    
    2,304,831
    
    
    
    35,106
    
    
    
    6.09
    %Noninterest-earning assets
    
    
    139,902
    
    
    
    
    
    
    
    
    
    
    
    131,781Total assets
    
    $
    2,651,565
    
    
    
    
    
    
    
    
    
    
    $
    2,436,612Interest-bearing liabilities:NOW and money market accounts
    
    $
    351,001
    
    
    $
    2,922
    
    
    
    3.33
    %
    
    $
    259,429
    
    
    $
    837
    
    
    
    1.29
    %Savings accounts
    
    
    207,388
    
    
    
    217
    
    
    
    0.42
    %
    
    
    281,969
    
    
    
    293
    
    
    
    0.42
    %Certificates of deposit
    
    
    1,119,756
    
    
    
    12,463
    
    
    
    4.45
    %
    
    
    966,216
    
    
    
    8,737
    
    
    
    3.62
    %Federal Home Loan Bank advances
    
    
    458,911
    
    
    
    5,636
    
    
    
    4.91
    %
    
    
    486,223
    
    
    
    4,723
    
    
    
    3.89
    %Repurchase agreements and other
    
    
    103,938
    
    
    
    1,254
    
    
    
    4.83
    %
    
    
    53,891
    
    
    
    454
    
    
    
    3.37
    %Total interest-bearing liabilities
    
    
    2,240,994
    
    
    
    22,492
    
    
    
    4.01
    %
    
    
    2,047,728
    
    
    
    15,044
    
    
    
    2.94
    %Noninterest-bearing liabilities
    
    
    133,187
    
    
    
    
    
    
    
    
    
    
    
    126,817Total liabilities
    
    
    2,374,181
    
    
    
    
    
    
    
    
    
    
    
    2,174,545Equity
    
    
    277,384
    
    
    
    
    
    
    
    
    
    
    
    262,067Total liabilities and equity
    
    $
    2,651,565
    
    
    
    
    
    
    
    
    
    
    $
    2,436,612Net interest
income and interest rate spread
    
    
    
    
    
    $
    19,972
    
    
    
    2.75
    %
    
    
    
    
    
    $
    20,062
    
    
    
    3.15
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.48
    %Average interest-earning assets to
average interest- bearing liabilities
    
    
    
    
    
    
    
    
    
    
    112.08
    %
    
    
    
    
    
    
    
    
    
    
    112.56
    %
 
 (1)
    
    Nonaccrual loans are included in the average balance. 20




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS
  Nine Months Ended September 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)
    
    $
    2,165,063
    
    
    $
    111,834
    
    
    
    6.89
    %
    
    $
    1,946,456
    
    
    $
    89,760
    
    
    
    6.15
    %Net loans held for sale
    
    
    41,353
    
    
    
    1,538
    
    
    
    4.96
    %
    
    
    33,643
    
    
    
    1,225
    
    
    
    4.85
    %Investment securities:Trading
    
    
    6,632
    
    
    
    220
    
    
    
    4.42
    %
    
    
    35,753
    
    
    
    793
    
    
    
    2.96
    %Available for sale
    
    
    212,261
    
    
    
    6,915
    
    
    
    4.34
    %
    
    
    182,206
    
    
    
    5,186
    
    
    
    3.79
    %Margin accounts
    
    
    15,253
    
    
    
    1,069
    
    
    
    9.34
    %
    
    
    15,414
    
    
    
    876
    
    
    
    7.58
    %FHLB stock
    
    
    24,356
    
    
    
    1,046
    
    
    
    5.73
    %
    
    
    23,110
    
    
    
    821
    
    
    
    4.74
    %Other interest-earning assets
    
    
    4,032
    
    
    
    115
    
    
    
    3.80
    %
    
    
    3,580
    
    
    
    61
    
    
    
    2.27
    %Total interest-earning assets
    
    
    2,468,950
    
    
    
    122,737
    
    
    
    6.63
    %
    
    
    2,240,162
    
    
    
    98,722
    
    
    
    5.88
    %Noninterest-earning assets
    
    
    137,274
    
    
    
    
    
    
    
    
    
    
    
    136,882Total assets
    
    $
    2,606,224
    
    
    
    
    
    
    
    
    
    
    $
    2,377,044Interest-bearing liabilities:NOW and money market accounts
    
    $
    320,556
    
    
    $
    6,982
    
    
    
    2.90
    %
    
    $
    275,301
    
    
    $
    2,212
    
    
    
    1.07
    %Savings accounts
    
    
    225,562
    
    
    
    695
    
    
    
    0.41
    %
    
    
    295,146
    
    
    
    910
    
    
    
    0.41
    %Certificates of deposit
    
    
    1,101,721
    
    
    
    34,498
    
    
    
    4.18
    %
    
    
    906,042
    
    
    
    23,692
    
    
    
    3.49
    %Federal Home Loan Bank advances
    
    
    449,178
    
    
    
    15,517
    
    
    
    4.61
    %
    
    
    454,234
    
    
    
    12,415
    
    
    
    3.64
    %Repurchase agreements and other
    
    
    98,595
    
    
    
    3,347
    
    
    
    4.53
    %
    
    
    63,008
    
    
    
    1,344
    
    
    
    2.84
    %Total interest-bearing liabilities
    
    
    2,195,612
    
    
    
    61,039
    
    
    
    3.71
    %
    
    
    1,993,731
    
    
    
    40,573
    
    
    
    2.71
    %Noninterest-bearing liabilities
    
    
    136,609
    
    
    
    
    
    
    
    
    
    
    
    124,639Total liabilities
    
    
    2,332,221
    
    
    
    
    
    
    
    
    
    
    
    2,118,370Equity
    
    
    274,003
    
    
    
    
    
    
    
    
    
    
    
    258,674Total liabilities and equity
    
    $
    2,606,224
    
    
    
    
    
    
    
    
    
    
    $
    2,377,044Net interest income and
Interest rate spread
    
    
    
    
    
    $
    61,698
    
    
    
    2.92
    %
    
    
    
    
    
    $
    58,149
    
    
    
    3.17
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.33
    %
    
    
    
    
    
    
    
    
    
    
    3.46
    %Average interest-earning assets to
average interest-bearing
liabilities
    
    
    
    
    
    
    
    
    
    
    112.45
    %
    
    
    
    
    
    
    
    
    
    
    112.36
    %
 
 (1)
    
    Nonaccrual loans are included in the average balance. 21




---



##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 Qualitative Aspects of Market Risk.
 Quantitative Aspects of Market Risk.
   Quarter ended September 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
    
    
    9.41
    %
    
    
    5.00
    %
    
    
    (2.58
    )%
    
    $
    (7,064
    )
    
    
    (15.00
    )%
    
    
    (9.60
    )%+200
    
    
    10.37
    
    
    
    6.00
    
    
    
    (1.62
    )
    
    
    (4,547
    )
    
    
    (10.00
    )
    
    
    (6.18
    )+100
    
    
    11.28
    
    
    
    6.00
    
    
    
    (0.70
    )
    
    
    (2,149
    )
    
    
    (5.00
    )
    
    
    (2.92
    )Static
    
    
    11.99
    
    
    
    7.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100)
    
    
    12.25
    
    
    
    6.00
    
    
    
    0.26
    
    
    
    2,239
    
    
    
    (5.00
    )
    
    
    3.04(200)
    
    
    11.85
    
    
    
    6.00
    
    
    
    (0.14
    )
    
    
    3,470
    
    
    
    (15.00
    )
    
    
    4.71(300)
    
    
    11.05
    
    
    
    5.00
    
    
    
    (0.94
    )
    
    
    2,726
    
    
    
    (20.00
    )
    
    
    3.70
 22




---



##### 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
  23




---



##### Table of Contents



PART II. OTHER INFORMATION
 UNITED COMMUNITY FINANCIAL CORP.
 
 ITEM 1   Legal Proceedings
  
 ITEM 1A   Risk Factors
  
 ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity SecuritiesTotal Number ofShares Purchased as
    
    
    Maximum Number ofPart of Publicly
    
    
    Shares that May Yet BeTotal Number of
    
    
    Average Price
    
    
    Announced Plans or
    
    
    Purchased Under the PlansPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Programs
    
    
    or Programs7/1 to 7/31/2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    435,547
    (1)8/1 to 8/31/2006
    
    
    7,500
    
    
    
    12.05
    
    
    
    7,500
    
    
    
    428,0479/1 to 9/30/2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    428,047Total
    
    
    7,500
    
    
    $
    12.05
    
    
    
    7,500
    
    
    
    428,047
 
 (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 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
 24




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 
 SIGNATURES
  UNITED COMMUNITY FINANCIAL CORP.Date: November 8, 2006
    
    /S/ Douglas M. McKayDouglas M. McKay, Chief Executive OfficerDate: November 8, 2006
    
    /S/ Patrick A. KellyPatrick A. Kelly, Chief Financial Officer
 25




---



##### Table of Contents



UNITED COMMUNITY FINANCIAL CORP.
 Exhibit 3.1
  Exhibit 3.2
  26