8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 21, 2010

UNITED COMMUNITY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

OHIO	0-024399	34-1856319
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

275 West Federal Street, Youngstown, Ohio	44503-1203
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (330) 742-0500

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02 Results of Operation and Financial Condition

(a) On April 21, 2010, United Community Financial Corp. issued a press release announcing its results of operations for the first quarter of 2010. A copy of the press release is attached as Exhibit 99.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
Number	Description
99	Press Release of United Community dated April 21, 2010.	Included herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITED COMMUNITY FINANCIAL CORP.
By:	/s/ James R. Reske
	James R. Reske, Chief Financial Officer

Date: April 22, 2010

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EX-99

EXHIBIT 99

275 West Federal Street
Youngstown, Ohio 44503-1203

FOR IMMEDIATE RELEASE

Media Contact:	Investor Contact:
Susan E. Stricklin Vice President, Marketing Home Savings (330) 742-0638 sstricklin@homesavings.com	James R. Reske Chief Financial Officer United Community Financial Corp. (330) 742-0592 jreske@ucfconline.com

United Community Financial Corp. Announces First Quarter Results

YOUNGSTOWN, Ohio (April 21, 2010) — United Community Financial Corp. (Company) (Nasdaq: UCFC), holding company of The Home Savings and Loan Company (Home Savings), today reported a consolidated net loss of $3.0 million, or $(0.10) per diluted share, for the three months ended March 31, 2010. This compares to net income of $3.3 million, or $0.11 per diluted share, for the three months ended March 31, 2009.

Selected first quarter results:

• Net interest margin was 3.28%

• Tier 1 leverage ratio was 8.57%

• Total Risk Based Capital was 12.84%

• Tangible common equity to tangible assets was 9.47%

• Nonperforming loans were $138.6 million

• Nonperforming assets were $174.0 million

• Book value per share and tangible book value per share were $7.01 and $6.99, respectively

Chairman, President and Chief Executive Officer Douglas M. McKay commented, “While we are disappointed in the lack of positive earnings for the first quarter, we recognize that the primary causes are the insufficient cash flows and reduced collateral valuations affecting the loans of our customers. In taking the difficult, but necessary, steps to provide for loan portfolio weaknesses, we are working together with our customers to take advantage of the opportunities that will present themselves once the effects of the slowly recovering economy are felt.”

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Net Interest Income

Net interest income was $17.7 million in the first quarter of 2010, a decrease from $18.7 million for the first quarter of 2009. The change in net interest income for the quarter ended March 31, 2010 as compared to the quarter ended March 31, 2009 is primarily due to a planned decline in average interest earning assets.

Deposit expenses declined in the first quarter of 2010 to $9.3 million compared to $12.7 million in the first quarter of 2009. Interest expense on Federal Home Loan Bank advances declined $1.0 million from $1.9 million for the three months ended March 31, 2009 to $848,000 for the three months ended March 31, 2010. Interest expense on deposits declined primarily because of a decrease in the average balance of certificates of deposit of $154.2 million along with a 59 basis point reduction in interest paid on those deposits. Interest expense on Federal Home Loan Bank advances declined because of the decline in average balance of those liabilities of $168.8 million and a 25 basis point reduction in interest paid on those advances. This decline is driven by reduced funding needs.

The Company’s net interest margin in the first quarter increased to 3.28% compared to 3.04% in the first quarter of 2009.

Noninterest Income

Noninterest income increased in the first quarter of 2010 to $6.6 million, as compared to the first quarter of 2009 of $2.7 million. Driving the increase in noninterest income was the recognition of gains on the sale of available for sale securities of $2.8 million along with a gain recognized on the sale of Home Savings’ Findlay, Ohio branch of $1.4 million. The Company sold approximately $116.1 million in securities available for sale in order to realize gains on certain securities.

On November 30, 2009, Home Savings entered into an agreement for the sale of Home Savings’ Findlay, Ohio branch. The sale was completed on March 26, 2010, at which time Home Savings recognized a $1.4 million gain on the transaction.

Noninterest Expense

Noninterest expense was $17.0 million in the first quarter of 2010, compared to $16.4 million in the first quarter of 2009. The increase in noninterest expense was driven by higher professional fees associated with legal expenses paid by the Company during the first quarter of 2010 as compared to the first quarter of 2009. Professional fees include legal, audit, tax consulting and other professional services obtained by the Company. Legal fees were elevated during the first quarter of 2010 primarily because of the continued resolution of asset quality issues.

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Asset Quality

The provision for loan losses increased to $10.3 million in the first quarter of 2010, compared to $8.4 million in the first quarter of 2009. The increase in the provision for loan losses in the first quarter of 2010 is primarily the result of credit downgrades within the commercial real estate portfolio and specific reserves assigned to a number of commercial real estate properties. Also contributing to the increase is the effect of charge-offs to record foreclosed and repossessed assets at fair market value before the Company takes possession of the properties in satisfaction of loans. The remaining increase in the provision for loan losses taken in the first quarter related primarily to the application of the Company’s elevated historical charge-off experience to the various pools of loans in the Company’s portfolio.

Net loan charge-offs were $7.0 million in the first quarter of 2010, compared to $6.6 million in the first quarter a year ago. The net charge-offs include partial charge-offs of select one-to four-family mortgage loans, multifamily loans, non-residential real estate loans and commercial loans to appropriately reflect the declining value of the collateral supporting such loans.

The allowance for loan losses increased to $45.6 million, or 2.44% of the loan portfolio, as of March 31, 2010, compared to $42.3 million, or 2.22% of the loan portfolio, as of December 31, 2009. The allowance for loan losses was equal to 32.93% of nonperforming loans at March 31, 2010, compared to 36.49% at December 31, 2009.

During the first three months of 2010, nonperforming loans increased $22.7 million, to $138.6 million at March 31, 2010 as compared to $115.9 million at December 31, 2009. During the first three months of 2010, eight loans in excess of $1.0 million each, aggregating $20.5 million, became nonperforming. Commercial real estate had the most significant increase in nonperforming loans, with four loans aggregating $16.0 million becoming nonperforming.

Nonperforming assets, which consist of the nonperforming loans discussed above plus real estate owned and other repossessed assets, increased $27.1 million to $174.0 million at March 31, 2010 compared to $146.8 million at December 31, 2009. The increase in nonperforming assets was due primarily to the increase in nonperforming loans mentioned above along with an increase in real estate and tangible property of $4.5 million acquired in satisfaction of loans.

Net Loans

Net loans decreased $40.0 million during the first three months of 2010. The primary source of the decrease is the overall decline in construction loans and commercial real estate loans. Home Savings has made a conscious effort to decrease its construction and commercial real estate portfolios. The Company expects to experience continued declines in construction and commercial real estate loan balances as it continues to reduce loan concentration levels.

Available for Sale Securities

Available for sale securities decreased $9.1 million during the first three months of 2010 as a result of various security transactions initiated in the first quarter. During the first quarter of 2010, the Company sold approximately $116.1 million in securities and realized paydowns and maturities of $14.1 million. The Company also sold its investments in a Fannie Mae auction rate pass through trust security and an equity investment in which impairment charges had previously been recognized. The sale of these two securities had the benefit of reducing the Company’s remaining net deferred tax asset.

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In order to replace the investments that were either sold, paid-down or matured, the Company purchased certain mortgage-backed and agency securities having a cost of $122.1 million.

Deposits and Borrowed Funds

Deposits decreased $40.9 million during the quarter ended March 31, 2010. The primary cause for the decline in deposits is the aforementioned sale of Home Savings’ Findlay, Ohio branch. Also affecting the change was the maturity and paydown of $12.7 million in brokered certificates of deposit during the first three months of 2010.

Borrowed funds decreased $7.5 million during the three-month period ending March 31, 2010. Federal Home Loan Bank advances declined $7.2 million and repurchase agreements and other borrowings decreased $280,000. The change is primarily the result of lower funding needs due to declining loan balances.

Income Taxes

Management recorded a valuation allowance against deferred tax assets at year-end 2009 based on its estimate of future reversal and utilization. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income, tax planning strategies and projected future reversals of deferred tax items. Based on these criteria, the Company determined that it was not necessary to establish an additional valuation allowance against deferred tax assets as of March 31, 2010. The net deferred tax asset at March 31, 2010 is the amount of the asset supported by taxable income in prior periods available for carryback claims.

Home Savings is a wholly-owned subsidiary of the Company and operates 38 full-service banking offices and six loan production offices located throughout Ohio and western Pennsylvania. Additional information on the Company and Home Savings may be found on the Company’s web site: www.ucfconline.com.

###

When used in this press release, the words or phrases “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the

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Company’s market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

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UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

	March 31,			December 31,
	2010			2009
	(Dollars in thousands)
Assets:
Cash and deposits with banks	$	20,609		$	22,330
Federal funds sold and other		19,446			22,744
Total cash and cash equivalents		40,055			45,074
Securities:
Available for sale, at fair value		272,239			281,348
Loans held for sale		4,318			10,497
Loans, net of allowance for loan losses of $45,627 and $42,287, respectively		1,826,040			1,866,018
Federal Home Loan Bank stock, at cost		26,464			26,464
Premises and equipment, net		22,697			23,139
Accrued interest receivable		8,405			9,090
Real estate owned and other repossessed assets		35,418			30,962
Core deposit intangible		613			661
Cash surrender value of life insurance		26,475			26,198
Other assets		19,136			18,976
Total assets	$	2,281,860		$	2,338,427
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Interest bearing	$	1,602,851		$	1,642,722
Non-interest bearing		125,741			126,779
Total deposits		1,728,592			1,769,501
Borrowed funds:
Federal Home Loan Bank advances		214,099			221,323
Repurchase agreements and other		96,553			96,833
Total borrowed funds		310,652			318,156
Advance payments by borrowers for taxes and insurance		13,761			19,791
Accrued interest payable		1,751			1,421
Accrued expenses and other liabilities		10,481			9,775
Total liabilities		2,065,237			2,118,644
Shareholders’ Equity:
Preferred stock-no par value; 1,000,000 shares authorized and unissued		—			—
Common stock-no par value; 499,000,000 shares authorized; 37,804,457 shares issued and 30,897,825 shares outstanding		145,586			145,775
Retained earnings		145,673			148,674
Accumulated other comprehensive income		3,685			4,110
Unearned employee stock ownership plan shares		(5,366	)		(5,821	)
Treasury stock, at cost, 6,906,632 shares		(72,955	)		(72,955	)
Total shareholders’ equity		216,623			219,783
Total liabilities and shareholders’ equity	$	2,281,860		$	2,338,427

UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	For the Three Months Ended
	March 31,
	2010			2009
	(Dollars in thousands,
	except per share data)
Interest income
Loans	$	25,843		$	31,067
Loans held for sale		70			263
Securities:
Available for sale		2,585			2,770
Federal Home Loan Bank stock dividends		300			299
Other interest earning assets		7			29
Total interest income		28,805			34,428
Interest expense
Deposits		9,318			12,651
Federal Home Loan Bank advances		848			1,858
Repurchase agreements and other		923			1,190
Total interest expense		11,089			15,699
Net interest income		17,716			18,729
Provision for loan losses		10,309			8,444
Net interest income after provision for loan losses		7,407			10,285
Non-interest income
Non-deposit investment income		428			304
Service fees and other charges		1,751			1,512
Net gains (losses):
Securities available for sale		2,843			—
Other -than-temporary loss in equity securities
Total impairment loss		—			(150	)
Loss recognized in other comprehensive income		—			—
Net impairment loss recognized in earnings		—			(150	)
Mortgage banking income		386			1,140
Real estate owned and other repossessed assets		(1,484	)		(1,138	)
Gain on retail branch sale		1,387			—
Other income		1,249			1,075
Total non-interest income		6,560			2,743
Non-interest expense
Salaries and employee benefits		8,174			8,023
Occupancy		1,004			984
Equipment and data processing		1,667			1,730
Franchise tax		511			592
Advertising		222			229
Amortization of core deposit intangible		48			60
Deposit insurance premiums		1,461			1,783
Professional fees		1,033			716
Real estate owned and other repossessed asset expenses		607			951
Other expenses		2,241			1,331
Total non-interest expenses		16,968			16,399
Income (loss) before income taxes and discontinued operations		(3,001	)		(3,371	)
Income taxes expense (benefit)		—			(1,692	)
Net income (loss) before discontinued operations		(3,001	)		(1,679	)
Discontinued operations
Net income of Butler Wick Corp., net of tax		—			4,949
Net income (loss)	$	(3,001	)	$	3,270
Earnings (loss) per share
Basic—continuing operations	$	(0.10	)	$	(0.06	)
Basic—discontinued operations		—			0.17
Basic		(0.10	)		0.11
Diluted—continuing operations		(0.10	)		(0.06	)
Diluted—discontinued operations		—			0.17
Diluted
		(0.10	)		0.11

UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)

				At or for the quarters ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2010			2009			2009			2009			2009
				(In thousands, except per share data)
Financial Data
Total assets	$	2,281,860		$	2,338,427		$	2,462,185		$	2,487,055		$	2,562,588
Total loans, net		1,826,040			1,866,018			1,919,803			2,032,404			2,114,855
Total securities		272,239			281,348			296,461			255,845			248,981
Total deposits		1,728,592			1,769,501			1,755,503			1,828,214			1,835,515
Total shareholders’ equity		216,623			219,783			235,926			234,613			239,297
Net interest income		17,716			19,093			19,405			18,687			18,729
Provision for loan losses		10,309			22,740			5,579			12,311			8,444
Noninterest income, excluding other-than-temporary impairment losses		6,560			4,907			691			6,205			2,893
Net impairment losses recognized in earnings		—			56			572			—			150
Noninterest expense		16,968			14,654			15,385			17,202			16,399
Income tax expense (benefit)		—			2,812			(573	)		(1,707	)		(1,692	)
Net income (loss)		(3,001	)		(16,262	)		(867	)		(2,914	)		3,270
Share Data
Basic earnings (loss) per share	$	(0.10	)	$	(0.54	)	$	(0.03	)	$	(0.10	)	$	0.11
Diluted earnings (loss) per share		(0.10	)		(0.54	)		(0.03	)		(0.10	)		0.11
Dividends declared per share		—			—			—			—			—
Book value per share		7.01			7.11			7.64			7.59			7.74
Tangible book value per share		6.99			7.09			7.61			7.57			7.72
Market value per share		1.50			1.45			1.74			1.09			1.21
Shares outstanding at end of period		30,898			30,898			30,898			30,898			30,898
Weighted average shares outstanding—basic		29,955			29,879			29,803			29,727			29,632
Weighted average shares outstanding—diluted		29,955			29,879			29,803			29,727			29,632
Key Ratios
Return on average assets		-0.52	%		-2.69	%		-0.14	%		-0.46	%		0.50	%
Return on average equity		-5.36	%		-27.18	%		-1.45	%		-4.74	%		5.30	%
Net interest margin		3.28	%		3.33	%		3.32	%		3.12	%		3.04	%
Efficiency ratio		78.59	%		56.97	%		65.02	%		69.38	%		71.85	%
Capital Ratios
Tier 1 leverage ratio		8.57	%		8.22	%		8.68	%		8.50	%		8.33	%
Tier 1 risk-based capital ratio		11.58	%		11.53	%		11.77	%		11.50	%		11.22	%
Total risk-based capital ratio		12.84	%		12.80	%		13.03	%		12.76	%		12.48	%
Equity to assets		9.49	%		9.40	%		9.58	%		9.43	%		9.34	%
Tangible common equity to tangible assets		9.47	%		9.37	%		9.56	%		9.41	%		9.31	%

UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)

				At or for the quarters ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2010			2009			2009			2009			2009
				(Dollars in thousands, except per share data)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential	$	777,380		$	773,831		$	771,891		$	852,833		$	888,948
Multi-family residential*		143,992			150,480			158,342			164,376			168,432
Nonresidential*		389,407			397,895			407,853			396,688			381,263
Land*		25,122			23,502			23,625			23,221			22,968
Construction Loans
One-to four-family residential and land development		161,625			178,095			190,123			209,610			233,708
Multi-family and nonresidential*		14,682			13,741			13,675			15,007			33,992
Total real estate loans		1,512,208			1,537,544			1,565,509			1,661,735			1,729,311
Consumer Loans		301,457			309,202			320,106			322,874			331,853
Commercial Loans		56,726			60,217			71,727			86,286			90,089
Total Loans		1,870,391			1,906,963			1,957,342			2,070,895			2,151,253
Less:
Allowance for loan losses		45,627			42,287			38,845			39,832			37,856
Deferred loan costs, net		(1,276	)		(1,342	)		(1,306	)		(1,341	)		(1,458	)
Total		44,351			40,945			37,539			38,491			36,398
Loans, net	$	1,826,040		$	1,866,018		$	1,919,803		$	2,032,404		$	2,114,855

* Such categories are considered commercial real estate

				At or for the quarters ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2010			2009			2009			2009			2009
				(Dollars in thousands, except per share data)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts	$	101,068		$	108,513		$	102,525		$	102,584		$	99,326
Non-interest bearing checking accounts		125,741			126,779			115,092			116,899			112,769
Total checking accounts		226,809			235,292			217,617			219,483			212,095
Savings accounts		210,091			202,900			199,233			196,541			194,107
Money market accounts		300,610			291,320			282,438			274,931			274,345
Total non-time deposits		737,510			729,512			699,288			690,955			680,547
Retail certificates of deposit		988,747			1,024,961			1,041,196			1,045,079			1,062,837
Brokered certificates of deposit		2,335			15,028			15,019			92,181			92,131
Total certificates of deposit		991,082			1,039,989			1,056,215			1,137,260			1,154,968
Total deposits	$	1,728,592		$	1,769,501		$	1,755,503		$	1,828,215		$	1,835,515
Certificates of deposit as a percent of total deposits		57.33	%		58.77	%		60.17	%		62.21	%		62.92	%

UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)

				At or for the quarters ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2010			2009			2009			2009			2009
				(Dollars in thousands, except per share data)
Allowance For Loan Losses
Beginning balance	$	42,287		$	38,845		$	39,832		$	37,856		$	35,962
Provision		10,309			22,740			5,579			12,311			8,444
Net chargeoffs		(6,969	)		(19,298	)		(6,566	)		(10,335	)		(6,550	)
Ending balance	$	45,627		$	42,287		$	38,845		$	39,832		$	37,856
Net Charge-offs
Real Estate Loans
One-to four-family	$	998		$	762		$	1,634		$	1,258		$	1,096
Multi-family		1,585			208			254			652			1,381
Nonresidential		1,951			1,410			435			1,693			652
Land		318			—			—			—			—
Construction Loans
One-to four-family residential and land development		1,018			3,860			2,724			4,532			1,550
Multi-family and nonresidential		—			118			—			—			—
Total real estate loans		5,870			6,358			5,047			8,135			4,679
Consumer Loans		904			1,312			1,447			1,466			1,078
Commercial Loans		195			11,628			72			734			793
Total	$	6,969		$	19,298		$	6,566		$	10,335		$	6,550

			At or for the quarters ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2010		2009		2009		2009		2009
			(Dollars in thousands, except per share data)
Nonperforming Loans
Real Estate Loans
One-to four family residential	$	30,054	$	26,766	$	25,808	$	23,081	$	24,409
Multi-family residential		7,885		7,863		5,612		5,349		5,747
Nonresidential		36,083		24,091		16,623		15,046		13,191
Land		11,627		5,160		5,168		5,169		5,179
Construction Loans
One-to four-family residential and land development		42,963		42,819		46,623		36,806		42,232
Multi-family and nonresidential		382		392		531		555		789
Total real estate loans		128,994		107,091		100,365		86,006		91,547
Consumer Loans		3,898		5,383		5,253		5,889		6,375
Commercial Loans		5,672		3,413		6,174		7,614		4,255
Total Loans	$	138,564	$	115,887	$	111,792	$	99,509	$	102,177
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status	$	131,951	$	103,864	$	93,806	$	91,757	$	90,573
Past due 90 days and still accruing		536		3,669		4,330		3,007		607
Past due 90 days		132,487		107,533		98,136		94,764		91,180
Past due less than 90 days and on nonaccrual		6,077		8,354		13,656		4,745		10,997
Total Nonperforming Loans		138,564		115,887		111,792		99,509		102,177
Other Real Estate Owned		34,605		30,340		26,905		31,411		29,001
Repossessed Assets		813		622		702		1,666		1,429
Total Nonperforming Assets	$	173,982	$	146,849	$	139,399	$	132,586	$	132,607
Total Troubled Debt Restructured Loans
Accruing	$	23,153	$	17,640	$	1,949	$	2,494	$	2,726
Non-accruing		8,764		5,008		1,469		1,998		1,837
Total	$	31,917	$	22,648	$	3,418	$	4,492	$	4,563