Benefit Plans

12 Months Ended

Dec. 31, 2011

Benefit Plans [Abstract]

BENEFIT PLANS

18. BENEFIT PLANS

Postretirement Benefit Plans

In addition to Home Savings’ retirement plans, Home Savings sponsors a defined benefit health care plan that was curtailed in 2000 to provide postretirement medical benefits only for these employees who worked 20 years and attained a minimum age of 60 by September 1, 2000, while in service with Home Savings. The plan is unfunded and, as such, has no assets. Furthermore, the plan is contributory and contains minor cost-sharing features such as deductibles and coinsurance. In addition, postretirement life insurance coverage is provided for employees who were participants prior to December 10, 1976. The life insurance plan is non-contributory. Home Savings’ policy is to pay premiums monthly, with no pre-funding. The benefit obligation measurement date is December 31. Information about changes in obligations of the benefit plan follows:

		September 30,			September 30,
	Year ended December 31,
	2011			2010
	(Dollars in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	2,778		$	3,405
Service cost		—			—
Interest cost		54			185
Actuarial (gain)/loss		(690	)		(670	)
Benefits paid		(161	)		(142	)
Benefit obligation at end of the year	$	1,981		$	2,778
Funded status of the plan	$	(1,981	)	$	(2,778	)

Amounts recognized in accumulated other comprehensive income, net of tax at December 31, 2011 and 2010 consists of the following:

		September 30,		September 30,
	The year ended December 31,
	2011		2010
	(Dollars in thousands)
Net actuarial gains	$	1,016	$	1,015
Prior service credit		690		1
	$	1,706	$	1,016

The accumulated benefit obligation was $2.0 million and $2.8 million at year-end 2011 and 2010, respectively.

Components of net periodic benefit cost/(gain) are as follows:

		September 30,			September 30,			September 30,
	Year Ended December 31,
	2011			2010			2009
	(Dollars in thousands)
Service cost	$	—		$	—		$	—
Interest cost		132			186			187
Expected return on plan assets		—			—			—
Net amortization of prior service cost		(78	)		(1	)		(1	)
Amortization of net actuarial gain		—			—			(18	)
Net periodic benefit cost		54			185			168
Net loss (gain)		(79	)		(671	)		(155	)
Prior service credit		(689	)		—			—
Amortization of prior service cost		78			1			(19	)
Total recognized in other comprehensive income		(690	)		(670	)		(174	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(636	)	$	(485	)	$	(6	)
Assumptions used in the valuations were as follows:
Weighted average discount rate		4.00	%		5.00	%		5.75	%

The estimated net gain and prior service costs for the postretirement plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $92,000 and $78,000, respectively.

The weighted-average annual assumed rate of increase in the per capita cost of coverage benefits (i.e., health care cost trend rate) used in the 2011 valuation was 7.5% and was assumed to decrease to 4.5% for the year 2019 and remain at that level thereafter. The weighted-average annual assumed rate of increase in the per capita cost of coverage benefits used in the 2010 valuation was 9.0% and was assumed to decrease to 5.0% for the year 2016 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. A one-percentage point change in assumed health care cost trend rates would have the following effects as of December 31, 2011:

		September 30,		September 30,
	1  Percentage Point Increase		1  Percentage Point Decrease
	(Dollars in thousands)
Effect on total of service and interest cost components	$	8	$	(8	)
Effect on the postretirement benefit obligation		124		(113	)

United Community anticipates benefits payable over the next ten years as follows:

		September 30,
	(Dollars in thousands)
2012	$	172
2013		173
2014		173
2015		171
2016		167
2017-2021		754
Total	$	1,610

Effective January 1, 2012, the benefit plan for eligible retirees over age 65 has changed. These retirees are now enrolled in a Medicare Advantage program. A Medicare Advantage is another Medicare health plan choice provided as part of Medicare. The Medicare Advantage Plan is offered by a private company, which has been approved by Medicare. Medicare Advantage plans are required to offer coverage that meets or exceeds the standards set by the original Medicare program, but they do not have to cover every benefit in the same way. If a plan chooses to pay less than Medicare for some benefits, the savings may be used to offset the cost of the insurance.

401(k) Savings Plan

Home Savings sponsors a defined contribution 401(k) savings plan, which covers substantially all employees. Under the provisions of the plan, Home Savings’ matching contribution is discretionary and may be changed from year to year. For 2011, no matching contributions were made. For 2010 and 2009, Home Savings’ match was 50% of pre-tax contributions, up to a maximum of 6% of the employees’ base pay. Participants become 100% vested in Home Savings contributions upon completion of three years of service. For the years ended 2011, 2010 and 2009, the expense related to this plan was approximately $0, $476,000 and $518,000, respectively.

Employee Stock Ownership Plan

In conjunction with the Conversion, United Community established an Employee Stock Ownership Plan (ESOP) for the benefit of the employees of United Community and Home Savings. All full-time employees who meet certain age and years of service criteria are eligible to participate in the ESOP. The ESOP is a tax-qualified retirement plan designed to invest primarily in the stock of United Community. The ESOP borrowed $26.8 million from United Community to purchase 2,752,615 shares in conjunction with the Conversion. The term of the loan was 15 years and was being repaid primarily with contributions from Home Savings to the ESOP. Additionally, 1,643,817 shares were purchased with the return of capital distribution in 1999. During 2008, 42,890 shares were added to the plan from the stock dividend paid in the fourth quarter of that year.

The loan was collateralized by the common shares held by the ESOP. As the note was repaid, shares were released from collateral based on the proportion of the payment in relation to total payments required to be made on the loan. The shares released from collateral were then allocated to participants on the basis of compensation as described in the plan. Compensation expense is determined by multiplying the per share market price of United Community’s shares at the end of the period by the number of shares to be released. On June 29, 2010, the ESOP paid in full the remaining balance of the loan and Home Savings recognized $1.3 million in additional compensation expense in the second quarter as shares were allocated to plan participants. Proceeds from the ESOP loan prepayment gave United Community the opportunity to infuse approximately $9.0 million of capital into Home Savings, in addition to taking advantage of certain tax benefits available for these types of plans.

During the year ended December 31, 2011, the only shares remaining for allocation are those shares forfeited. During the year ended December 31, 2010, 631,946 shares were released or committed to be released for allocation. During the year ended December 31, 2009, 639,641 shares were released or committed to be released for allocation.

Stock-based Compensation: Stock Options

On July 12, 1999, shareholders approved the United Community Financial Corp. 1999 Long-Term Incentive Plan (1999 Plan). The purpose of the 1999 Plan was to promote and advance the interests of United Community and its shareholders by enabling United Community to attract, retain and reward directors, directors emeritus, managerial and other key employees of United Community, including Home Savings, by facilitating their purchase of an ownership interest in United Community. The 1999 Plan terminated on May 20, 2009.

The 1999 Plan provided for the grant of options, which may qualify as either incentive or nonqualified stock options. The incentive plan provided that option prices will not be less than the fair market value of the share at the grant date. The maximum number of common shares that could be issued under the plan was 3,569,766. There were 312,000 stock options granted in 2009 under the 1999 plan, however, no additional options may be issued under the 1999 Plan. All of the options awarded under the 1999 plan became exercisable on the date of grant except for options granted in 2009, one third of which became exercisable on December 31, 2009, 2010 and 2011. The option period for each grant expires no more than 10 years from the date of grant.

On April 26, 2007, shareholders approved the United Community Financial Corp. 2007 Long-Term Incentive Plan, which was subsequently amended by Section 409A of the Internal Revenue Code (2007 Plan). The purpose of the 2007 Plan is the same as that of the 1999 Plan. The 2007 Plan provides for the issuance of up to 2,000,000 shares that are to be used for awards of restricted stock shares, stock options, performance awards, stock appreciation rights (SARs), or other forms of stock-based incentive awards. There were 25,710 stock options granted in 2011 and there were 423,695 stock options granted in 2010 under the 2007 Plan. The option period for each grant expires no more than 10 years from the date of grant.

A summary of activity in the 1999 Plan and the 2007 Plan is as follows:

		September 30,			September 30,		September 30,
	For the year ended December 31,
	2011
	Shares			Weighted average exercise price		Aggregate intrinsic  value (Dollars in thousands)
Outstanding at beginning of year		2,237,322		$	6.88
Granted		25,710			1.33
Exercised		—			—
Forfeited		(270,900	)		8.15
Outstanding at end of period		1,992,132		$	6.63	$	—
Options exercisable at end of period		1,964,927		$	6.70	$	—

Information related to the stock options granted under the 1999 Plan and the 2007 Plan during each year follows:

		September 30,		September 30,		September 30,
	2011		2010		2009
Intrinsic value of options exercised	$	—	$	—	$	—
Cash received from option exercises		—		—		—
Tax benefit realized from option exercises		—		—		—
Weighted average fair value of options granted		0.87		1.33		1.07

As of December 31, 2011, there was $16,000 of total unrecognized compensation cost related to nonvested stock options granted under the 2007 Plan. The cost is expected to be recognized over a weighted-average period of 1.0 year.

The fair value of options granted in 2011 was determined using the following weighted-average assumptions as of the grant date:

	September 30,
Risk-free interest rate	1.84	%
Expected term (years)	5
Expected stock volatility	65.14	%
Dividend yield	0.00	%

Outstanding stock options have a weighted average remaining life of 4.14 years and may be exercised in the range of $1.24 to $12.38.

Stock-based Compensation: Restricted Stock Awards

The 2007 Plan permits the issuance of awards to nonemployee directors. Compensation expense is recognized over the vesting period of the awards based on the market value of the shares at the issue date. Total restricted shares issued under the 2007 Plan were 62,768 shares in 2011 and 39,879 shares in 2010. These restricted shares vest on the first anniversary of the grant date. Expenses related to restricted stock awards are included with salaries and employee benefits. The cost will be recognized over a weighted average period of one year. The Company recognized approximately $85,000 in restricted stock award expenses for the year ended December 31, 2011. The Company recognized approximately $44,000 in restricted stock award expenses for the year ended December 31, 2010. The Company recognized approximately no restricted stock award expenses for the year ended December 31, 2009. The Company expects to recognize additional expenses of approximately $30,000 in 2012.

A summary of changes in the Company’s nonvested restricted shares for the year is as follows:

		September 30,			September 30,
	Shares			Weighted average grant date  fair value
Nonvested shares at January 1, 2011		39,879		$	1.32
Granted		62,768			1.30
Vested		(43,628	)		1.32
Forfeited		—			—
Nonvested shares at December 31, 2011		59,019		$	1.30

Employee Stock Purchase Plan

During 2005, United Community established an employee stock purchase plan (ESPP). Under this plan, United Community provides employees of Home Savings the opportunity to purchase United Community Financial Corporation’s common shares through payroll deduction. Participation in the plan is voluntary and payroll deductions are made on an after-tax basis. The maximum amount an employee can have deducted is nine hundred dollars per biweekly pay. Shares are purchased on the open market and administrative fees are paid by United Community. Expense related to this plan is a component of the Shareholder Dividend Reinvestment Plan and the expense recognized is not material.