10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File Number: 0-024399

UNITED COMMUNITY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Ohio (State or other jurisdiction of incorporation or organization)	34-1856319 (I.R.S. Employer Identification Number)
275 West Federal Street, Youngstown, Ohio (Address of principal executive offices)	44503 (Zip Code)

Registrant’s telephone number:

(330) 742-0500

Securities registered pursuant to Section 12(b) of the Act:

Common shares, no par value per share
(Title of Class) Nasdaq
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in a definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this 10K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.).  Yes o     No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the last reported sale on June 30, 2008 was approximately $104.1 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

As of March 10, 2009, there were 30,897,825 of the Registrant’s Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of Form 10-K — Portions of the Proxy Statement for the 2009 Annual Meeting of Shareholders

TABLE OF CONTENTS

Item
Number			Page
PART I
	1.	Description of Business		1
		General		1
		Discussion of Forward-Looking Statements		2
		Lending Activities		2
		Investment Activities		11
		Sources of Funds		12
		Competition		15
		Employees		15
		Regulation		15
	1A.	Risk Factors		16
	1B.	Unresolved Staff Comments		19
	2.	Properties		19
	3.	Legal Proceedings		19
	4.	Submission of Matters to a Vote of Security Holders		19
PART II
	5.	Market for Registrant’s Common Equity and Related Shareholder Matters		20
	6.	Selected Financial Data		22
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	7A.	Quantitative and Qualitative Disclosures About Market Risk		37
	8.	Financial Statements and Supplemental Data		40
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		83
	9A.	Controls and Procedures		83
	9B.	Other Information		83
PART III
	10.	Directors and Executive Officers and Corporate Governance		83
	11.	Executive Compensation		83
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		83
	13.	Certain Relationships and Related Transactions and Director Independence		84
	14.	Principal Accountant Fees and Services		84
PART IV
	15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		85
Signatures				86
Exhibit Index				87
EX-4
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-10.12
EX-21
EX-23
EX-31.1
EX-31.2
EX-32

PART I

Item 1.   Description of Business

GENERAL

United Community Financial Corp. (United Community) was incorporated in the State of Ohio in February 1998 for the purpose of owning all of the outstanding capital stock of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings) issued upon the conversion of Home Savings from a mutual savings association to a permanent capital stock savings association (Conversion). The Conversion was completed on July 8, 1998.

United Community’s Internet site, http://www.ucfconline.com, contains a hyperlink to the Securities and Exchange Commission (SEC) where United Community’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 Insider Reports and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge as soon as reasonably practicable after United Community has filed the report with the SEC.

As a unitary thrift holding company, United Community is subject to regulation, supervision and examination by the Office of Thrift Supervision (OTS), the Division of Financial Institutions of the Ohio Department of Commerce (Ohio Division) and the SEC. United Community’s primary activity is holding the common shares of Home Savings. Consequently, the following discussion focuses primarily on the business of Home Savings.

Home Savings was organized as a mutual savings association under Ohio law in 1889. Currently, Home Savings is a state-chartered savings bank, subject to supervision and regulation by the Federal Deposit Insurance Corporation (FDIC) and the Ohio Division. Home Savings is a member of the Federal Home Loan Bank of Cincinnati (FHLB) and the deposits of Home Savings are insured up to applicable limits by the FDIC.

Home Savings conducts business from its main office located in Youngstown, Ohio, 39 full-service branches and six loan production offices located throughout Ohio and western Pennsylvania. The principal business of Home Savings is the origination of mortgage loans, including construction loans on residential and nonresidential real estate located in Home Savings’ primary market area, which consists of Ashland, Columbiana, Cuyahoga, Erie, Franklin, Geauga, Hancock, Huron, Lake, Mahoning, Montgomery, Portage, Richland, Sandusky, Seneca, Stark, Summit and Trumbull Counties in Ohio and Beaver County in Pennsylvania. In addition to real estate lending, Home Savings originates commercial loans and various types of consumer loans. For liquidity and interest rate risk management purposes, Home Savings invests in various financial instruments as discussed below under “Investment Activities.” Funds for lending and other investment activities are obtained primarily from savings deposits, which are insured up to applicable limits by the FDIC, principal repayments of loans, borrowings from the FHLB, repurchase agreements, and maturities of securities.

Interest on loans and other investments is Home Savings’ primary source of income. Home Savings’ principal expenses are interest paid on deposit accounts and other borrowings and salaries and benefits paid to employees. Operating results are dependent to a significant degree on the net interest income of Home Savings, which is the difference between interest earned on loans and other investments and interest paid on deposits and borrowed funds. Like most financial institutions, Home Savings’ interest income and interest expense are affected significantly by general economic conditions and by the policies of various regulatory authorities.

On August 8, 2008, the board of directors of United Community approved a Stipulation and Consent to Issuance of Order to Cease and Desist (OTS Order) with the OTS. Simultaneously, the board of directors of Home Savings approved a Stipulation and Consent to the Issuance of an Order to Cease and Desist (Bank Order) with the FDIC and the Ohio Division. Although United Community and Home Savings have agreed to the issuance of the OTS Order and the Bank Order, respectively, neither has admitted or denied any allegations of unsafe or unsound banking practices, or any legal or regulatory violations. No monetary penalties were assessed by the OTS, the FDIC, or the Ohio Division.

The OTS Order requires United Community to obtain OTS approval prior to: (i) incurring or increasing its debt position; (ii) repurchasing any United Community stock; or (iii) paying any dividends. The OTS Order also requires United Community to develop a debt reduction plan and submit the plan to the OTS for approval.

1

The Bank Order requires Home Savings, within specified timeframes, to take or refrain from certain actions, including: (i) retaining a bank consultant to assess Home Savings’ management needs and submitting a management plan that identifies officer positions needed, identifies and establishes board and internal operating committees, evaluates Home Savings’ senior officers, and provides for the hiring of any additional personnel; (ii) seeking regulatory approval prior to adding any individuals to the board of directors or employing any individual as a senior executive officer of Home Savings; (iii) not extending additional credit to classified borrowers; (iv) establishing a compliant Allowance for Loan and Lease Loss methodology; (v) enhancing its risk management policies and procedures; (vi) adopting and implementing plans to reduce its classified assets and delinquent loans, and to reduce loan concentrations in nonowner-occupied commercial real estate and construction, land development, and land loans; (vii) establishing board of directors’ committees to evaluate and approve certain loans and oversee Home Savings’ compliance with the Bank Order; (viii) revising its loan policy and enhancing its underwriting and credit administration functions; (ix) developing a strategic plan and budget and profit plan; (x) correcting all violations of laws, rules, and regulations and implementing procedures to ensure future compliance; (xi) increasing its Tier 1 capital to 8.00% and its total risk-based capital to 12.00% by December 31, 2008; and (xii) seeking regulatory approval prior to declaring or paying any cash dividend. At December 31, 2008, Home Savings’ Tier 1 capital was 8.20% and its total risk-based capital was 12.06%. Because of the consent to the Bank Order, Home Savings is deemed ‘adequately capitalized’ for regulatory capital purposes.

On August 12, 1999, United Community acquired Butler Wick, the parent company for two wholly owned subsidiaries: Butler Wick & Co., Inc. and Butler Wick Trust Company. On December 31, 2008, the Company completed the sale of Butler Wick & Co., Inc., to Stifel Financial Corp. for $12.0 million. On January 7, 2009, the Company announced the sale of Butler Wick Trust to Farmers National Banc Corp. As a result, Butler Wick has been reported as a discontinued operation and consolidated financial statement information for all periods presented has been reclassified to reflect this presentation.

DISCUSSION OF FORWARD-LOOKING STATEMENTS

When used in this Form 10-K, the words or phrases “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 United Community’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in Home Savings’ market area, and competition, that could cause actual results to differ materially from results presently anticipated or projected. United Community cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. United Community advises readers that the factors listed above could affect United Community’s financial performance and could cause United Community’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

United Community does not undertake, and specifically disclaims any obligation, to publicly release 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.

LENDING ACTIVITIES

General.  Home Savings’ principal lending activity is the origination of conventional real estate loans secured by real estate located in Home Savings’ primary market area, including single family residences, multifamily residences and nonresidential real estate, including construction projects. In addition to real estate lending, Home Savings originates commercial loans and various types of consumer loans, including home equity loans, loans secured by savings accounts, motor vehicles, boats and recreational vehicles and unsecured loans.

2

Loan Portfolio Composition.  The following table presents certain information regarding the composition of Home Savings’ loan portfolio at the dates indicated:

	At December 31,
	2008					2007					2006					2005					2004
			Percent of					Percent of					Percent of					Percent of					Percent of
	Amount		total loans			Amount		total loans			Amount		total loans			Amount		total loans			Amount		total loans
	(Dollars in thousands)
Real estate loans:
Permanent loans:
One- to four-family residential	$	909,567		40.65	%	$	871,019		38.41	%	$	854,829		37.65	%	$	749,362		35.44	%	$	690,413		37.68	%
Multifamily residential		187,711		8.39			179,535		7.92			163,541		7.20			154,702		7.32			153,011		8.35
Non-residential		375,463		16.78			359,070		15.84			348,528		15.35			314,124		14.86			289,755		15.81
Land		23,517		1.05			22,818		1.01			26,684		1.18			14,979		0.71			14,701		0.80
Total permanent		1,496,258		66.87			1,432,442		63.18			1,393,582		61.38			1,233,167		58.33			1,147,880		62.64
Construction loans:
One- to four-family residential		255,355		11.41			357,153		15.75			388,926		17.13			389,558		18.43			301,193		16.43
Multifamily and non-residential		35,797		1.60			25,191		1.11			25,215		1.11			66,788		3.16			47,230		2.58
Total construction		291,152		13.01			382,344		16.86			414,141		18.24			456,346		21.59			348,423		19.01
Total real estate loans		1,787,410		79.88			1,814,786		80.04			1,807,723		79.62			1,689,513		79.92			1,496,303		81.65
Consumer loans:
Home equity		253,348		11.32			234,362		10.33			220,679		9.72			196,986		9.32			133,441		7.28
Auto		24,138		1.08			31,206		1.38			36,605		1.61			42,975		2.03			58,148		3.17
Marine		11,781		0.53			14,196		0.63			19,218		0.85			23,434		1.11			31,622		1.73
RV		54,003		2.41			63,587		2.80			59,642		2.63			48,108		2.27			27,330		1.49
Other(1)		5,564		0.25			6,096		0.27			9,463		0.42			12,012		0.57			17,105		0.94
Total consumer		348,834		15.59			349,447		15.41			345,607		15.23			323,515		15.30			267,646		14.61
Commercial loans		101,489		4.53			103,208		4.55			116,952		5.15			100,977		4.78			68,523		3.74
Total loans		2,237,733		100.00	%		2,267,441		100.00	%		2,270,282		100.00	%		2,114,005		100.00	%		1,832,472		100.00	%
Less net items		34,280					30,453					16,723					16,572					16,496
Total loans, net	$	2,203,453				$	2,236,988				$	2,253,559				$	2,097,433				$	1,815,976

(1) Consists primarily of overdraft protection loans and loans to individuals secured by demand accounts, deposits and other consumer assets.

Loan Maturity.  The following table sets forth certain information as of December 31, 2008, regarding the dollar amount of construction and commercial loans maturing in Home Savings’ portfolio based on their contractual terms to maturity. Demand and other loans having no stated schedule of repayments or no stated maturity are reported as due in one year or less. Mortgage loans originated by Home Savings generally include due-on-sale clauses that provide Home Savings with the contractual right to deem the loan immediately due and payable in the event the borrower transfers the ownership of the property without Home Savings’ consent. The table does not include the effects of possible prepayments or scheduled repayments.

	Principal Repayments Contractually
	Due in the Years Ended December 31,
	2009		2010-2013		2014 and thereafter		Total
	(Dollars in thousands)
Construction loans:
One- to four-family residential	$	216,298	$	17,700	$	21,357	$	255,355
Multifamily and non-residential		9,405		7,273		19,119		35,797
Commercial loans		69,034		12,411		20,044		101,489
Total	$	294,737	$	37,384	$	60,520	$	392,641

3

The next table sets forth the dollar amount of all loans reported above as due after December 31, 2009, which have fixed or adjustable interest rates:

	Due after December 31, 2009
	(Dollars in thousands)
Fixed rate	$	37,554
Adjustable rate		60,350
	$	97,904

Loans Secured by One- to Four-Family Real Estate.  Home Savings originates conventional loans secured by first mortgages on one- to four-family residences primarily located within Home Savings’ primary market area. At December 31, 2008, Home Savings’ one- to four-family residential real estate loans held for investment totaled approximately $909.6 million, or 40.7% of total loans. At December 31, 2008, $21.7 million, or 2.3%, of Home Savings’ one- to four-family loans were nonperforming.

Home Savings currently offers fixed-rate mortgage loans and adjustable-rate mortgage loans (ARMs). Although Home Savings’ loan portfolio includes a significant amount of 30-year fixed-rate loans, a significant portion of fixed rate loans are originated for sale. The interest rate adjustment periods on ARMs are typically one, three, or five years. The maximum interest rate adjustment on most of the ARMs is 2.0% on any adjustment date and a total of 6.0% over the life of the loan. The interest rate adjustments on three-year and five-year ARMs presently offered by Home Savings are indexed to the weekly average rate on the one-year U.S. Treasury securities. Rate adjustments are computed by adding a stated margin to the index.

FDIC regulations and Ohio law limit the amount that Home Savings may lend in relationship to the appraised value of the real estate and improvements that secure the loan at the time of loan origination. In accordance with such regulations, Home Savings may make loans on one- to four-family residences of up to 100% of the value of the real estate and improvements (LTV). Home Savings typically requires private mortgage insurance on the portion of the principal amount of the loan that exceeds 85% of the appraised value of the property securing the loan.

Under certain circumstances, Home Savings will offer loans with LTV’s exceeding 85% without private mortgage insurance. Customers may borrow up to 80% of the home’s appraised value and obtain a second loan or line of credit for up to 15% of the appraised value without having to purchase mortgage insurance. Home Savings also offers a first-time homebuyers product that permits an LTV of 95% without private mortgage insurance. Such loans involve a higher degree of risk because, in the event of a borrower default, the value of the underlying collateral may not satisfy the principal and interest outstanding on the loan. To reduce this risk, Home Savings underwrites all portfolio loans to Freddie Mac underwriting guidelines. At December 31, 2008, these loans totaled $85.3 million. There were approximately $2.9 million loans with LTV’s greater than 80% that were nonperforming at December 31, 2008.

Currently, no interest-only one- to four-family loans are contained in Home Savings portfolio.

Home Savings issues loan origination commitments to qualified borrowers primarily for the purchase of single-family residential real estate. Such commitments have specified terms and conditions and are made for periods of up to 60 days, during which time the interest rate is locked in.

Loans Secured by Multifamily Residences.  Home Savings originates loans secured by multifamily properties that contain more than four units. Multifamily loans are offered with adjustable rates of interest, which adjust according to a specified index, and typically have terms ranging from five to ten years and LTVs of up to 80%.

Multifamily lending generally is considered to involve a higher degree of risk than one- to four-family residential lending because the borrower typically depends upon income generated by the project to cover operating expenses and debt service. The profitability of a project can be affected by economic conditions, government policies and other factors beyond the control of the borrower. Home Savings attempts to reduce the risk associated with multifamily lending by evaluating the creditworthiness of the borrower and the projected income from the project and by obtaining personal guarantees on loans made to corporations, limited liability companies, and partnerships. Home Savings requires borrowers to submit financial statements annually to enable management to monitor the loan, and requires an assignment of rents from borrowers.

4

At December 31, 2008, loans secured by multifamily properties totaled approximately $187.7 million, or 8.4% of total loans. The largest loan as of December 31, 2008 had a principal balance of $14.4 million and was performing according to its terms. There were approximately $8.7 million in multifamily loans, or 4.6% of Home Savings total multifamily portfolio, that were considered nonperforming at December 31, 2008.

Loans Secured by Nonresidential Real Estate.  Home Savings originates loans secured by nonresidential real estate, such as shopping centers, office buildings, hotels, and motels. Home Savings’ nonresidential real estate loans have adjustable rates, terms of up to 25 years and, generally, LTVs of up to 75%. The majority of such properties are located within Home Savings’ primary lending area.

Nonresidential real estate lending generally is considered to involve a higher degree of risk than residential lending due to the relatively larger loan amounts and the effects of general economic conditions on the successful operation of income-producing properties. Home Savings has endeavored to reduce such risk by evaluating the credit history of the borrower, the location of the real estate, the financial condition of the borrower, obtaining personal guarantees by the borrower, the quality and characteristics of the income stream generated by the property and the appraisal supporting the property’s valuation.

At December 31, 2008, Home Savings’ largest loan secured by nonresidential real estate had a balance of $17.8 million and was performing according to its terms. At December 31, 2008, approximately $375.5 million, or 16.8% of Home Savings’ total loans, were secured by mortgages on nonresidential real estate, of which $15.2 million of such loans, or 4.1% of Home Savings’ total nonresidential real estate loans, were considered nonperforming.

Loans Secured by Vacant Land.  Home Savings also originates a limited number of loans secured by vacant land, primarily for the construction of single-family houses. Home Savings’ land loans generally are fixed-rate loans for terms of up to five years and require a LTV of 65% or less. At December 31, 2008, approximately $23.5 million, or 1.1%, of Home Savings’ total loans were land loans, a majority of which were loans to individuals intending to construct and occupy single-family residences on the properties. Nonperforming land loans totaled $4.8 million, or 20.4% of such loans, at December 31, 2008.

Construction Loans.  Home Savings originates loans for the construction of one- to four-family residences, multifamily properties and nonresidential real estate projects. Residential construction loans are made to both owner-occupants and to builders on a speculative (unsold) basis. Construction loans to owner-occupants are structured as permanent loans with fixed or adjustable rates of interest and terms of up to 30 years. During the first year, while the residence is being constructed, the borrower is required to pay interest only. Construction loans for one- to four-family residences have LTVs at origination of up to 95%, and construction loans for multifamily and nonresidential properties have LTVs at origination of up to 80% based on estimated value at completion, with the value of the land included as part of the owner’s equity.

At December 31, 2008, Home Savings had approximately $291.2 million, or 13.0% of its total loans, invested in construction loans, including $255.4 million in one- to four-family residential construction and approximately $35.8 million in multifamily and nonresidential construction loans. Approximately 58.4% of Home Savings’ residential construction loans are made to builders for homes for which the builder does not have a contract with a buyer. Home Savings, however, limits the number of outstanding loans to each builder on unsold homes under construction, both in dollar and number depending on the borrower.

Construction loans involve greater underwriting and default risks than loans secured by mortgages on existing properties because construction loans are more difficult to appraise and to monitor. Loan funds are advanced upon the security of the project under construction. In the event a default on a construction loan occurs and foreclosure follows, Home Savings usually will take control of the project and attempt either to arrange for completion of construction or dispose of the unfinished project.

Nonperforming construction loans at December 31, 2008, totaled $44.0 million, or 15.1% of such loans.

5

Consumer Loans.  Home Savings originates various types of consumer loans, including home equity loans, vehicle loans, recreational vehicle loans, marine loans, overdraft protection loans, loans to individuals secured by demand accounts, deposits and other consumer assets and unsecured loans. Consumer loans are made at fixed and adjustable rates of interest and for varying terms based on the type of loan. At December 31, 2008, Home Savings had approximately $348.8 million, or 15.6% of its total loans, invested in consumer loans.

Home Savings generally makes closed-end home equity loans in an amount that, when added to the prior indebtedness secured by the real estate, does not exceed 90% of the estimated value of the real estate. Home equity loans typically are secured by a second mortgage on the real estate. Home Savings frequently holds the first mortgage, although Home Savings will make home equity loans in cases where another lender holds the first mortgage. Home Savings also offers home equity loans with a line of credit feature. Home equity loans are made with adjustable and fixed rates of interest. Fixed-rate home equity loans have terms of five years but can be called at any time. Rate adjustments on adjustable home equity loans are determined by adding a margin to the current prime interest rate for loans on residences of up to 85% LTV in the first lien position and 80% LTV in the second lien position. At December 31, 2008, approximately $253.3 million, or 72.6%, of Home Savings’ consumer loan portfolio consisted of home equity loans. Home Savings also makes consumer loans secured by a deposit or savings account for up to 100% of the principal balance of the account. These loans generally have adjustable rates, which adjust based on the weekly average yield on U.S. Treasury securities plus a margin.

For new automobiles, loans are originated for up to 110% of the MSRP value of the car with terms of up to 72 months, and, for used automobiles, loans are made for up to the National Automobile Dealers Association (N.A.D.A) retail value of the car model and a term of up to 66 months. Most automobile loans are originated indirectly by approved auto dealerships. At December 31, 2008, automobile loans totaled $24.1 million of Home Savings’ consumer loan portfolio.

Nonperforming consumer loans at December 31, 2008, amounted to $5.9 million, or 1.7% of such loans.

Commercial Loans.  Home Savings makes commercial loans to businesses in its primary market area, including traditional lines of credit, revolving lines of credit, term loans and acquisition and development loans. The LTV ratios for commercial loans depend upon the nature of the underlying collateral, but generally commercial loans are made with LTVs of 70% to 80%, up to a maximum of 90%, and have adjustable interest rates. Lines of credit and revolving credits generally are priced on a floating rate basis, which is tied to the prime interest rate or U.S. Treasury bill rate. Term loans usually have adjustable rates, but can have fixed rates of interest, and have terms of one to five years.

At December 31, 2008, Home Savings had approximately $101.5 million invested in commercial loans. The majority of these loans are secured by inventory, accounts receivable, machinery, investment property, vehicles or other assets of the borrower. Home Savings also originates unsecured commercial loans including lines of credit for periods of less than 12 months, short-term loans and, occasionally, term loans for periods of up to 36 months. These loans are underwritten based on the creditworthiness of the borrower and the guarantors, if any. Home Savings had $53.7 million in unsecured commercial loans as of December 31, 2008.

Commercial loans generally entail greater risk than real estate lending. The repayment of commercial loans typically is dependent on the income stream and successful operation of a business, which can be affected by economic conditions. The collateral for commercial loans, if any, often consists of rapidly depreciating assets.

Nonperforming commercial loans at December 31, 2008, amounted to $4.6 million, or 4.5% of total commercial loans.

Reduction in loan concentrations.  The Bank Order requires Home Savings to adopt and implement plans to reduce loan concentrations in nonowner-occupied commercial real estate and construction, land development, and land loans. The plan was developed and adopted by Home Savings and was implemented in the third quarter of 2008. The plan included sharply reducing the origination of new construction, land, and land development loans as well as loans secured by commercial real estate. The Company has also reduced the level of construction loans purchased from another financial institution. The concentration of construction and land development loans declined from 156.7% of total risk-based capital as of December 31, 2007, to 129.8% of total risk-based capital as of December 31, 2008.

6

Loan Solicitation and Processing.  The lending activities of Home Savings are subject to the written, non-discriminatory underwriting standards and loan origination procedures approved by Home Savings’ Board of Directors (Board). Loan originations generally are obtained from existing customers and members of the local community and from referrals by real estate brokers, lawyers, accountants and current and former customers. Home Savings also advertises in the local print media, radio and on television.

Each of Home Savings’ 39 offices and six loan production offices have loan personnel who can accept loan applications, which are then forwarded to Home Savings’ Underwriting Department for processing and approval. In underwriting real estate loans, Home Savings typically obtains a credit report, verification of employment and other documentation concerning the creditworthiness of the borrower. An appraisal of the fair market value of the real estate that will be given as security for the loan is prepared by an approved independent fee appraiser. For all nonresidential real estate loans, the appraisal is conducted by an outside fee appraiser whose report is reviewed by Home Savings’ chief appraiser. Upon the completion of the appraisal and the receipt of information on the credit history of the borrower, the loan application is submitted for review to the appropriate persons. Commercial, residential, and nonresidential real estate loans up to $999,999 may be approved by an authorized executive officer. Loan requests of $1.0 million up to $5.0 million require the approval of the Officers’ Loan Committee. All loans which would cause the aggregate lending relationship to be greater than $5.0 million require approval by the Officers’ Loan Committee and the Board Loan Committee. Lending relationships of $15.0 million or greater must be approved by the full board of directors. In addition, under the terms of the Bank Order, certain loans require Board Loan Committee approval.

Borrowers are required to carry satisfactory fire and casualty insurance and flood insurance, if applicable, and to name Home Savings as an insured mortgagee. Home Savings generally obtains a title guarantee or title insurance on real estate loans.

The procedure for approval of construction loans is the same as for permanent real estate loans, except that an appraiser evaluates the building plans, construction specifications and estimates of construction costs. Home Savings also evaluates the feasibility of the proposed construction project and the experience and record of the builder. Once approved, the construction loan is disbursed in installments based upon periodic inspections of the construction progress.

Consumer loans are underwritten on the basis of the borrower’s credit history and an analysis of the borrower’s income and expenses, ability to repay the loan and the value of the collateral, if any.

Loan Originations, Purchases and Sales.  Home Savings’ residential loans generally are made on terms and conditions and documented to conform to the secondary market guidelines for sale to the Federal Home Loan Mortgage Company (FHLMC), the Federal National Mortgage Association (FNMA) and other institutional investors in the secondary market. Home Savings originates first mortgage loans insured by the Federal Housing Authority with the intention to sell in the secondary market. Home Savings does not originate loans guaranteed by the Veterans Administration, but it has purchased such loans as well as participation interests in such loans.

Home Savings generally retains the servicing rights on the sale of loans originated in the geographic area surrounding its full service branches. Home Savings anticipates continued participation in the secondary mortgage loan market to maintain its desired risk profile.

At December 31, 2008, Home Savings had $75.4 million of outstanding commitments to make loans, $141.1 million available to borrowers under consumer and commercial lines of credit and $41.2 million available in the OverdraftPrivledge^tm program. At December 31, 2008, Home Savings had $92.6 million in undisbursed funds related to construction and commercial loans in process.

In 2003, Home Savings entered into an agreement to purchase one- to four-family construction loans from another institution. Loans purchased under this agreement earn a floating rate of interest, are guaranteed as to principal and interest by a third party and are for the purpose of constructing either pre-sold or market homes. At December 31, 2008, approximately $48.5 million was outstanding under this program. This represents a decrease of $35.9 million over the outstanding balance of $84.4 million included in net loans as of December 31, 2007. The effort to reduce the outstanding balance of this relationship is a direct result of Home Savings’ compliance with the Bank Order, as mentioned above. At December 31, 2008, $6.2 million of these loans were nonperforming.

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Loans to One Borrower Limits.  Regulations generally limit the aggregate amount that Home Savings may lend to any one borrower to an amount equal to 15.0% of Home Savings’ unimpaired capital and unimpaired surplus (Lending Limit Capital). A savings association may lend to one borrower an additional amount not to exceed 10.0% of Lending Limit Capital if the additional amount is fully secured by certain forms of “readily marketable collateral”. Real estate is not considered “readily marketable collateral”. In applying this limit, regulations require that loans to certain related or affiliated borrowers be aggregated.

Based on such limits, Home Savings could lend approximately $36.4 million to one borrower at December 31, 2008. The largest amount Home Savings had committed to one borrower at December 31, 2008, was $23.4 million, of which $22.5 million was outstanding at that time. At December 31, 2008, this nonresidential real estate loan was performing in accordance with its terms.

Delinquent Loans, Nonperforming Assets and Classified Assets.  The following table reflects the amount of all loans in a delinquent status as of the dates indicated:

	At December 31,
	2008							2007
					Percent of							Percent
					Net							of Net
	Number		Amount		Loans			Number		Amount		Loans
	(Dollars in thousands)
Loans delinquent for:
30-59 days		528	$	46,365		2.10	%		341	$	41,478		1.85	%
60-89 days		181		17,455		0.79			120		17,331		0.78
90 days or over		606		99,715		4.53			425		92,671		4.14
Total delinquent loans		1,315	$	163,535		7.42	%		886	$	151,480		6.77	%

In the fourth quarter of 2008, Home Savings adopted the more conservative practice of determining the past due status of loans based on the number of days the loan is past due. Previously, Home Savings had determined a loan’s past due status based on the number of calendar months the loan is past due. The effect of this change has caused an increase in reported past due one-to four-family real estate loans.

Nonperforming assets include loans past due 90 days and on a nonaccrual status, loans past due 90 days and still accruing, loans less than 90 days past due and on a nonaccrual status, restructured loans, real estate acquired by foreclosure or by deed-in-lieu of foreclosure and repossessed assets. Once a loan becomes 90 days delinquent, it generally is placed on non-accrual status.

Loans are reviewed through monthly reports to the Board and management and are placed on nonaccrual status when collection in full is considered doubtful by management. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is charged against interest income. Subsequent cash payments generally are applied to interest income unless, in the opinion of management, the collection of principal and interest is doubtful. In those cases, subsequent cash payments are applied to principal.

In compliance with the Bank Order, Home Savings does not extend additional credit to classified borrowers. The Bank has also developed a comprehensive plan to reduce the level of classified assets in the loan portfolio. A complete database of all classified borrowers is shared with underwriters and other authorized personnel. This database is queried prior to making any credit decisions to ensure the extension of any credit is not granted to classified borrowers. Home Savings has also modified its loan policies to address specifically the prohibition of the extension of credit to classified borrowers.

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The following table sets forth information with respect to Home Savings’ nonperforming loans and other assets at the dates indicated:

	At December 31,
	2008			2007			2006			2005			2004
	(Dollars in thousands)
Nonperforming loans:
Nonaccrual loans
Real estate loans:
One- to four-family residential	$	21,622		$	12,708		$	8,977		$	6,795		$	6,511
Multifamily and nonresidential		23,969			27,201			16,569			6,368			2,880
Construction (net of loans in process) and land		42,560			48,043			20,858			4,732			1,350
Total real estate loans		88,151			87,952			46,404			17,895			10,741
Consumer		5,549			4,809			3,245			2,495			5,152
Commercial		4,553			4,738			2,997			3,889			4,960
Total nonaccrual loans		98,253			97,499			52,646			24,279			20,853
Restructured loans		1,797			2,342			1,385			825			1,329
Past due 90 days and still accruing		6,631			1,215			796			563			377
Total nonperforming loans		106,681			101,056			54,827			25,667			22,559
Real estate acquired through foreclosure and other repossessed assets		29,258			10,510			3,242			2,514			1,682
Total nonperforming assets	$	135,939		$	111,566		$	58,069		$	28,181		$	24,241
Nonperforming loans as a percent of loans, net		4.84	%		4.52	%		2.43	%		1.22	%		1.24	%
Nonperforming assets as a percent of total assets		5.19			4.03			2.15			1.11			1.06
Allowance for loan losses as a percent of nonperforming loans		33.71			31.67			30.92			61.26			70.38
Allowance for loan losses as a percent of loans, net		1.61			1.41			0.75			0.74			0.87

During 2008, interest collected on nonperforming loans and included in net income was approximately $415,000. During 2008, approximately $3.1 million in additional interest income would have been recorded had nonaccrual and restructured loans been accruing pursuant to contractual terms.

Nonperforming assets increased approximately $24.4 million, or 21.8%, to $135.9 million at December 31, 2008, from $111.6 million at December 31, 2007. The increase in reported nonperforming assets was due in part to the adoption by Home Savings in the fourth quarter of 2008 of the more conservative practice of determining the past due status of loans based on the number of days the loan is past due, rather than the number of calendar months the loan is past due (as described above). At December 31, 2008, total nonperforming loans accounted for 4.84% of net loans receivable, compared to 4.52% at December 31, 2007. Total nonperforming assets were 5.19% of total assets as of December 31, 2008, up from 4.03% as of December 31, 2007.

Real estate acquired in settlement of loans is classified separately on the balance sheet at the lower of cost or estimated fair value less costs to sell as of the date of acquisition. At foreclosure, the loan is written down to the value of the underlying collateral by a charge to the allowance for loan losses, if necessary. Any subsequent write-downs are charged against operating expenses. Operating expenses of such properties, net of related income or loss on disposition, are included in other expenses. At December 31, 2008, the carrying value of real estate and other repossessed assets acquired in settlement of loans was $29.3 million and consisted primarily of $1.8 million in single-family properties, $14.1 million secured by land and properties under construction, $1.8 million secured by commercial real estate, and $1.6 million in boats, recreational vehicles, and automobiles.

In addition to the nonperforming loans identified above, other loans may be identified as having potential credit problems that result in those loans being classified by our internal loan review function. These potential problem loans, which have not exhibited the more severe weaknesses generally present in nonperforming loans, amounted to $42.3 million.

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Allowance for Loan Losses.  Management establishes the allowance for loan losses at a level it believes adequate to absorb probable losses incurred in the loan portfolio. Pursuant to the Bank Order, Home Savings has revised its Allowance for Loan Losses methodology. The methodology developed is reviewed regularly by the board of directors and will be revised as conditions and circumstances within the Bank’s loan portfolio dictate. Management bases its determination of the adequacy of the allowance upon estimates derived from an analysis of individual credits, prior and current loss experience, loan portfolio delinquency levels, overall growth in the loan portfolio, current economic conditions, and results of regulatory examinations. Furthermore, in determining the level of the allowance for loan losses, management reviews and evaluates on a monthly basis the necessity of a reserve for individual impaired loans classified by management. The specifically allocated reserve for a classified loan is determined based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, market value of collateral, other sources of cash flow and legal options available to Home Savings. Once a review is completed, the need for a specific reserve is determined by the Home Savings Asset Review Committee and allocated to the loan. Other loans not reviewed specifically by management are evaluated as a homogeneous group of loans (generally single-family residential mortgage loans and all consumer credit except marine loans) using a loss factor applied to the outstanding loan balance to determine the level of reserve required. The loss factor described consists of two components, a quantitative component, and a qualitative component. The quantitative component is based on a historical analysis of all charged-off loans, net of recovery. This component is combined with the qualitative component to arrive at the loss factor, which is applied to the outstanding balances of homogeneous loans. In determining the qualitative factors, consideration is given to such factors as economic conditions, changes in the nature and volume of the portfolio, lending personnel, lending policies, past-due loan trends, and trends in collateral values. Specific reserves on individual loans and historical ratios are reviewed periodically and adjusted as necessary based on subsequent collections, loan upgrades or downgrades, nonperforming trends or actual principal charge-offs. When evaluating the adequacy of the allowance for loan losses, consideration is given to geographic concentrations and the effect changing economic conditions have on Home Savings. These estimates are particularly susceptible to changes that could result in a material adjustment to results of operations. The provision for loan losses represents a charge against current earnings in order to maintain the allowance for loan losses at an appropriate level.

The following table sets forth an analysis of Home Savings’ allowance for loan losses for the periods indicated:

	Year Ended December 31,
	2008			2007			2006			2005			2004
	(Dollars in thousands)
Balance at beginning of period	$	32,006		$	16,955		$	15,723		$	15,877		$	15,111
Provision for loan losses		25,329			28,750			4,347			3,028			9,370
Charge-offs:
Permanent real estate		(6,827	)		(962	)		(737	)		(961	)		(902	)
Construction real estate		(9,151	)		(5,924	)		(320	)		(35	)		(114	)
Consumer		(3,978	)		(3,605	)		(2,334	)		(2,848	)		(6,177	)
Commercial		(2,132	)		(3,729	)		(47	)		(241	)		(1,867	)
Total charge-offs		(22,088	)		(14,220	)		(3,438	)		(4,085	)		(9,060	)
Recoveries:
Permanent real estate		29			10			34			51			325
Construction real estate		10			—			1			2			—
Consumer		575			509			283			848			72
Commercial		101			2			5			2			59
Total recoveries		715			521			323			903			456
Net charge-offs		(21,373	)		(13,699	)		(3,115	)		(3,182	)		(8,604	)
Balance at end of year	$	35,962		$	32,006		$	16,955		$	15,723		$	15,877
Ratio of net charge-offs to average net loans		(0.96	)%		(0.60	)%		(0.14	)%		(0.16	)%		(0.50	)%

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At December 31, 2008, the allowance for loan losses was 1.61% of total loans and 33.7% of total nonperforming loans.

The following table sets forth the allocation of the allowance for loan losses by category. The allocations are based on management’s assessment of the risk characteristics of each of the components of the total loan portfolio and are subject to change as and when the risk factors of each component change. The allocation is not indicative of either the specific amounts or the loan categories in which future charge-offs may be taken, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category is not indicative necessarily of future loss in any particular category and does not restrict the use of the allowance to absorb losses in any category.

	At December 31,
	2008					2007							2006			2005					2004
			Percent of					Percent of					Percent of					Percent of					Percent of
			Loans in Each					loans in Each					Loans in Each					Loans in Each					Loans in Each
			Category					Category					Category					Category					Category
	Amount		to Total Loans			Amount		to Total Loans			Amount		to Total Loans			Amount		to Total Loans			Amount		to Total Loans
											(Dollars in thousands)
Permanent real estate loans	$	12,785		66.87	%	$	10,285		63.18	%	$	5,459		61.39	%	$	7,152		58.33	%	$	7,956		62.64	%
Construction real estate loans		11,342		13.01			12,499		16.86			3,321		18.24			2,531		21.59			2,603		19.01
Consumer loans		4,870		15.59			5,485		15.41			5,147		15.22			3,378		15.30			3,615		14.61
Commercial loans		6,965		4.53			3,737		4.55			3,028		5.15			2,662		4.78			1,703		3.74
Total	$	35,962		100.00	%	$	32,006		100.00	%	$	16,955		100.00	%	$	15,723		100.00	%	$	15,877		100.00	%

INVESTMENT ACTIVITIES

General.  Investment securities are classified upon acquisition as available for sale, held to maturity or trading. Securities classified as available for sale are carried at estimated fair value with the unrealized holding gain or loss, net of taxes, reflected in other comprehensive income and as a component of shareholders’ equity. Securities classified as held to maturity are carried at amortized cost. Securities classified as trading are carried at estimated fair value with the unrealized holding gain or loss reflected as a component of income. United Community and Home Savings recognize premiums and discounts in interest income over the period to maturity or call by the level yield method and realized gains or losses on the sale of debt securities based on the amortized cost of the specific securities sold.

Home Savings Investment Activities.  Federal regulations and Ohio law permit Home Savings to invest in various types of marketable securities, including interest-bearing deposits in other financial institutions, federal funds, U.S. Treasury and agency obligations, mortgage-related securities, and certain other specified investments. The Board has adopted an investment policy that authorizes management to make investments in U.S. Treasury obligations, U.S. Federal agency and federally-sponsored corporation obligations, mortgage-related securities issued or sponsored by Federal National Mortgage Association (FNMA), FHLMC, Government National Mortgage Association (GNMA), as well as private issuers, investment-grade municipal obligations, creditworthy, unrated securities issued by municipalities in which an office of Home Savings is located, investment-grade corporate debt securities, investment-grade asset-backed securities, certificates of deposit that are fully-insured by the FDIC, bankers’ acceptances, federal funds and money market funds. Home Savings’ investment policy is designed primarily to provide and maintain liquidity within regulatory guidelines, to maintain a balance of high quality investments to minimize risk, and to maximize return without sacrificing liquidity and safety.

Home Savings maintains a significant portfolio of mortgage-backed securities that are issued by FNMA, GNMA and FHLMC. Mortgage-backed securities generally entitle Home Savings to receive a portion of the cash flows from an identified pool of mortgages. Home Savings is exposed to prepayment risk and reinvestment risk to the extent that actual prepayments will differ from those estimated in pricing the security, which may result in adjustments to the net yield on such securities. Mortgage-related securities enable Home Savings to generate positive interest rate spreads with minimal administrative expense and reduce credit risk due to either guarantees provided by the issuer or the high credit rating of the issuer. Mortgage-related securities classified as available for sale also provide Home Savings with an additional source of liquid funds.

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United Community Investment Activities.  Funds maintained by United Community for general corporate purposes, including possible acquisitions, primarily are invested in an account with Home Savings. United Community also owns a small portfolio of bank equities.

The following table presents the amortized cost, fair value, and weighted average yield of securities at December 31, 2008 by maturity:

	At December 31, 2008
											After One Year					Five Years
	No Stated										through					through
	Maturity					One Year or Less					Five Years					Ten Years
	Amortized		Average			Amortized		Average			Amortized		Average			Amortized		Average
	Cost		Yield			Cost		Yield			Cost		Yield			Cost		Yield
	(Dollars in thousands)
Securities:
U.S Government agencies and corporations	$	—		—	%	$	—		—	%	$	10,957		3.37	%	$	15,348		4.19	%
Mortgage-related securities		—		—			6		7.25			3		10.36			9,000		4.30
Other securities(a)		1,251		2.04			—		—			—		—			—		—
Total securities	$	1,251		2.04	%	$	6		7.25	%	$	10,960		3.37	%	$	24,348		4.23	%

	At December 31, 2008
	After Ten Years					Total
	Amortized		Average			Amortized		Average			Fair
	Cost		Yield			Cost		Yield			Value
	(Dollars in thousands)
Securities:
U.S. Government agencies and corporations	$	—		—	%	$	26,305		3.85	%	$	27,170
Mortgage-related securities		174,222		5.09			183,231		5.05			187,651
Other securities(a)		—		—			1,251		2.04			910
Total securities	$	174,222		5.09	%	$	210,787		4.88	%	$	215,731

(a) Yield on equity securities only

SOURCES OF FUNDS

General.  Deposits traditionally have been the primary source of Home Savings’ funds for use in lending and other investment activities. In addition to deposits, Home Savings derives funds from interest payments and principal repayments on loans and income on other earning assets. Loan payments are a relatively stable source of funds, while deposit inflows and outflows fluctuate in response to general interest rates and money market conditions. Home Savings also may borrow from the FHLB, other suitable lenders as well as use repurchase agreements as sources of funds.

Deposits.  Deposits are attracted principally from within Home Savings’ primary market area through the offering of a selection of deposit instruments, including regular passbook savings accounts, demand deposits, individual retirement accounts (IRAs), checking accounts, money market accounts, and certificates of deposit. Interest rates paid, maturity terms, service fees, and withdrawal penalties for the various types of accounts are monitored weekly by management. The amount of deposits from outside Home Savings’ primary market area is not significant.

Brokered deposits represent funds which Home Savings obtained, directly or indirectly, through a deposit broker. A deposit broker places deposits from third parties with insured depository institutions or places deposits with an institution for the purpose of selling interest in those deposits to third parties. Under the terms of the Bank Order, Home Savings cannot obtain additional brokered certificates of deposit without prior consent of the FDIC and Ohio Division. Home Savings had brokered deposits of $145.0 million with a weighted average yield of 3.85%

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at December 31, 2008, compared to brokered deposits of $39.8 million with a weighted average rate of 5.08% at December 31, 2007.

The following table sets forth the dollar amount of deposits in the various types of accounts offered by Home Savings at the dates indicated:

	At December 31, 2008								For the Year Ended December 31, 2008
			Percent			Weighted					Percent			Weighted
			of Total			Average					of Average			Average
	Amount		Deposits			Rate			Average Balance		Deposits			Rate
						(Dollars in thousands)
Noninterest bearing demand	$	106,255		5.63	%		—	%	$	110,000		5.83	%		—	%
Checking and money market accounts		372,777		19.77			1.60			426,790		22.63			2.22
Savings accounts		181,643		9.63			0.50			180,010		9.54			0.45
Certificates of deposit		1,225,256		64.97			3.92			1,169,403		62.00			4.27
Total deposits	$	1,885,931		100.00	%		2.91	%	$	1,886,203		100.00	%		3.19	%

	For the Year Ended December 31, 2007								For the Year Ended December 31, 2006
			Percent			Weighted					Percent			Weighted
			of Average			Average					of Average			Average
	Average Balance		Deposits			Rate			Average Balance		Deposits			Rate
						(Dollars in thousands)
Noninterest bearing demand	$	103,268		5.70	%		—	%	$	96,067		5.47	%		—	%
Checking and money market accounts		397,290		21.93			3.50			330,856		18.83			3.04
Savings accounts		185,949		10.26			0.41			218,590		12.44			0.41
Certificates of deposit		1,125,117		62.11			4.74			1,111,602		63.26			4.29
Total deposits	$	1,811,624		100.00	%		3.75	%	$	1,757,115		100.00	%		3.34	%

The following table shows rate and maturity information for Home Savings’ certificates of deposit at December 31, 2008:

			Over		Over
	Up to		1 Year to		2 Years to
Rate	One Year		2 Years		3 Years		Thereafter		Total
	(Dollars in thousands)
2.00% or less	$	4,610	$	628	$	66	$	91	$	5,395
2.01% to 4.00%		441,550		112,932		4,887		168,473		727,842
4.01% to 6.00%		147,939		257,807		42,460		43,813		492,019
Total certificates of deposit	$	594,099	$	371,367	$	47,413	$	212,377	$	1,225,256
Percent of total certificates of deposit

At December 31, 2008, approximately $594.1 million of Home Savings’ certificates of deposit will mature within one year. Based on past experience and Home Savings’ prevailing pricing strategies, management believes that a substantial percentage of such certificates will be renewed with Home Savings at maturity. If, however, Home Savings is unable to renew the maturing certificates for any reason, borrowings of up to $619.1 million are available from the FHLB as well as the use of repurchase agreements. Under the terms of the Bank Order, Home Savings cannot obtain additional brokered certificates of deposit without prior consent of the FDIC and Ohio Division.

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The following table presents the amount of Home Savings’ certificates of deposit of $100,000 or more by the time remaining until maturity at December 31, 2008:

Maturity	Amount
	(Dollars in thousands)
Three months or less	$	17,960
Over 3 months to 6 months		30,503
Over 6 months to 12 months		41,096
Over 12 months		119,085
Total	$	208,644

The following table sets forth Home Savings’ deposit account balance activity for the periods indicated:

	Year Ended December 31,
	2008			2007
	(Dollars in thousands)
Beginning balance	$	1,875,206		$	1,822,935
Net (decrease) increase in deposits		(50,698	)		(11,353	)
Net deposits before interest credited		1,824,508			1,811,582
Interest credited		61,423			63,624
Ending balance	$	1,885,931		$	1,875,206
Net increase	$	10,725		$	52,271
Percent increase		0.57	%		2.87	%

Borrowings.  The FHLB system functions as a central reserve bank providing credit for its member institutions and certain other financial institutions. As a member in good standing of the FHLB, Home Savings is authorized to apply for advances, provided certain standards of creditworthiness have been met. Under current regulations, an association must meet certain qualifications to be eligible for FHLB advances. The extent to which an association is eligible for such advances will depend upon whether it meets the Qualified Thrift Lender (QTL) test. If an association meets the QTL test, it will be eligible for 100% of the advances available. If an association does not meet the QTL test, the association will be eligible for such advances only to the extent it holds specified QTL test assets. At December 31, 2008, Home Savings was in compliance with the QTL test. Home Savings may borrow up to $619.1 million from the FHLB, and had $337.6 million in outstanding advances at December 31, 2008. Of the $337.6 million, one advance totaling $10.0 million is callable quarterly and matures in February 2009.

United Community has a Credit Agreement with JP Morgan Chase Bank, N.A. (JP Morgan) dated September 12, 2005, as amended on July 18, 2007, March 28, 2008, August 29, 2008, and January 31, 2009 (Credit Agreement). The Credit Agreement provided United Community with a line of credit of up to $40.0 million. The Credit Agreement sets forth numerous covenants with which United Community must comply.

On March 28, 2008, United Community and JP Morgan amended the Credit Agreement to provide, among other things, (1) a waiver of all existing defaults under the credit agreement, (2) that no new funds would be advanced to United Community on the line of credit, and (3) an increase in the allowable non-performing asset ratio to 6.50% of total loans and other real estate owned. As of December 31, 2008, that ratio was 5.97%.

On August 29, 2008, United Community and JP Morgan amended the Credit Agreement in response to the event of default that occurred when United Community entered into the OTS Order and the Bank Order, as described below under “Regulation”. The Amendment waived the events of default and extended the maturity date of the borrowings until January 31, 2009. Over the course of 2008, the Company paid down approximately $29.4 million on this line of credit, under which $36.3 million had been outstanding as of December 31, 2007. In January 2009, the Company paid down an additional $1.8 million on this line of credit, further reducing the balance to $5.1 million.

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On January 31, 2009, United Community and JP Morgan amended the Credit Agreement in response to the proposed sale of Butler Wick Trust to Farmers National Banc Corp. The amendment includes provisions to use a portion of the cash proceeds of the sale to repay the entire principal balance outstanding and any unpaid interest that has accrued no later than April 30, 2009.

The OTS Order requires United Community to obtain regulatory approval prior to incurring or increasing its debt position. A debt reduction plan was developed and submitted to the OTS for approval within the required time frame. United Community has implemented the plan and has reduced the principal balance of the aforementioned line of credit from $36.3 million at January 1, 2008 to $5.1 million as of February 28, 2009. United Community does not intend to seek approval to borrow additional funds in the near term.

COMPETITION

Home Savings faces competition for deposits and loans from other savings and loan associations, credit unions, banks and mortgage originators in Home Savings’ primary market area. The primary factors in competition for deposits are customer service, convenience of office location and interest rates. Home Savings competes for loan originations primarily through the interest rates and loan fees it charges and through the efficiency and quality of service it provides to borrowers. Competition is affected by, among other things, the general availability of lendable funds, general and local economic conditions, current interest rate levels and other factors, which are not readily predictable.

EMPLOYEES

At December 31, 2008, Home Savings had 570 full-time equivalent employees. Home Savings believes that relations with its employees are good. Home Savings offers health, life, and disability benefits, a 401(k) plan, and an employee stock ownership plan for its employees.

The Bank Order requires Home Savings to retain a consulting firm to assess management needs and to submit a management plan that identifies officer positions needed, identifies and establishes board and internal operating committees, evaluates Home Savings’ senior officers, and provides for the hiring of any additional personnel, subject to the requirement for regulatory approval prior to adding any individuals the board of directors or employing any individual as a senior executive officer of the Bank. A consulting firm has been engaged and that report shared with regulators, as required.

REGULATION

United Community is a unitary thrift holding company within the meaning of the Home Owners Loan Act, as amended (HOLA), and is subject to regulation, examination, and oversight by the Office of Thrift Supervision (OTS), although there generally are no restrictions on the activities of United Community unless the OTS determines that there is reasonable cause to believe that an activity constitutes a serious risk to the financial safety, soundness, or stability of Home Savings. Home Savings is subject to regulation, examination, and oversight by the Division of Financial Institutions of the Ohio Department of Commerce (Ohio Division) and the Federal Deposit Insurance Corporation (FDIC), and it also is subject to certain provisions of the Federal Reserve Act. United Community and Home Savings are also subject to the provisions of the Ohio Revised Code applicable to corporations generally, including laws that restrict takeover bids, tender offers and control-share acquisitions involving public companies which have significant ties to Ohio.

The OTS, the FDIC, the Ohio Division, and the SEC each have various powers to initiate supervisory measures or formal enforcement actions if United Community or the subsidiary they regulate does not comply with applicable regulations. If the grounds provided by law exist, the FDIC or the Ohio Division may place Home Savings in conservatorship or receivership. Home Savings also is subject to regulatory oversight under various consumer protection and fair lending laws that govern, among other things, truth-in-lending disclosures, equal credit opportunity, fair credit reporting and community reinvestment. Failure to abide by federal laws and regulations governing community reinvestment could limit the ability of Home Savings to open a new branch or engage in a merger.

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On August 8, 2008, the board of directors of United Community approved a Stipulation and Consent to Issuance of the OTS Order and the board of directors of Home Savings approved a Stipulation and Consent to the Issuance of the Bank Order, as discussed above.

Federal law prohibits Home Savings from making a capital distribution to anyone or paying management fees to any person having control of Home Savings if, after such distribution or payment, Home Savings would be undercapitalized. In addition, each company controlling an undercapitalized institution will comply with its capital restoration plan until the institution has been adequately capitalized on average during each of the four preceding calendar quarters and must provide adequate assurances of performance. Under the Bank Order, Home Savings may not pay a cash dividend to United Community without first seeking regulatory approval.

Federal Reserve Board regulations currently require savings associations to maintain reserves of 3% of net transaction accounts (primarily checking accounts) up to $43.9 million (subject to an exemption of up to $9.3 million), and of 10% of net transaction accounts in excess of $46.9 million. At December 31, 2008, Home Savings was in compliance with its reserve requirements.

Loans by Home Savings to executive officers, directors, and principal shareholders and their related interests must conform to the lending limit on loans to one borrower, and the total of such loans to executive officers, directors, principal shareholders, and their related interests cannot exceed specified limits. Most loans to directors, executive officers, and principal shareholders must be approved in advance by a majority of the “disinterested” members of the Board with any “interested” director not participating. All loans to directors, executive officers, and principal shareholders must be made on terms substantially the same as offered in comparable transactions with the general public or as offered to all employees in a company-wide benefit program, and loans to executive officers are subject to additional limitations. All other transactions between Home Savings and its affiliates must comply with Sections 23A and 23B of the Federal Reserve Act. United Community is an affiliate of Home Savings for this purpose.

Under federal law and regulations, no person, directly or indirectly, or acting in concert with others, may acquire control of Home Savings or United Community without 60 days’ prior notice to the OTS. “Control” is generally defined as having more than 25% ownership or voting power; however, ownership or voting power of more than 10% may be deemed “control” if certain factors are in place. If the acquisition of control is by a company, the acquirer must obtain approval, rather than give notice, of the acquisition as a savings and loan holding company.

In addition, a statutory limitation on the acquisition of control of an Ohio savings bank requires the written approval of the Ohio Division prior to the acquisition by any person or entity of a controlling interest in an Ohio association. Control exists, for purposes of Ohio law, when any person or entity which, either directly or indirectly, or acting in concert with one or more other persons or entities, owns, controls, holds with power to vote, or holds proxies representing, 15% or more of the voting shares or rights of an association, or controls in any manner the election or appointment of a majority of the directors. Ohio law also requires that certain acquisitions of voting securities that would result in the acquiring shareholder owning 20%, 331/3% or 50% of the outstanding voting securities of United Community must be approved in advance by the holders of at least a majority of the outstanding voting shares represented at a meeting at which a quorum is present and a majority of the portion of the outstanding voting shares represented at such a meeting, excluding the voting shares by the acquiring shareholder.

Federal law generally prohibits a unitary thrift holding company, such as United Community, from controlling any other savings association or savings and loan holding company without prior approval of the OTS, or from acquiring or retaining more than 5% of the voting shares of a savings association or holding company thereof, which is not a subsidiary. Except with the prior approval of the OTS, no director or officer of a savings and loan holding company or person owning or controlling by proxy or otherwise more than 25% of such holding company’s stock also may acquire control of any savings institution, other than a subsidiary institution, or any other savings and loan holding company.

Item 1A.  Risk Factors

Like all financial companies, United Community’s business and results of operations are subject to a number of risks, many of which are outside of our control. In addition to the other information in this report, readers should

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carefully consider that the following important factors, among others, could materially impact our business and future results of operations.

Pursuant to the Bank Order, Home Savings retained a consultant to assist in the development of an Enterprise Risk Management Program. An Officers Risk Management Committee was appointed and is developing and leading the process of assessing risk and reviewing policies and procedures to enhance the Bank’s controls and risk management practices. The plan was submitted to the FDIC and the Ohio Division for approval in December 2008. The Board also adopted the Corporate Risk Management and Control Policy of Home Savings in December 2008. The Enterprise Risk Management Program is ongoing and will be fully implemented throughout 2009.

Cease and desist orders restrict dividends and certain business activities.

United Community’s ability to pay regular quarterly dividends to shareholders and to pay interest on United Community’s debt depends to a large extent upon the dividends received from Home Savings. The Bank Order prohibits Home Savings from paying dividends to United Community without prior regulatory approval. In addition, the OTS Order prohibits United Community from paying dividends to shareholders without prior regulatory approval.

Management believes that United Community, on a stand-alone basis, currently has adequate resources to meet its current obligations, which are primarily interest payments on a $6.9 million line of credit. However, in the longer term, United Community’s ability to service debt depends on its ability to receive dividends from Home Savings and, when debt matures, on its ability to renew, refinance, or pay down the line of credit. Furthermore, the OTS Order prohibits United Community to issue or renew debt without prior approval. We cannot predict whether regulatory approval will be received for payments of dividends by Home Savings to United Community, or for the payment of future dividends by United Community to shareholders or how long these restrictions will remain in effect.

Changes in interest rates could adversely affect our financial condition and results of operations.

Our results of operations depend substantially on our net interest income, which is the difference between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits and other borrowings. These rates are highly sensitive to many factors beyond our control, including general economic conditions, inflation, recession, unemployment, the money supply, and the policies of various governmental and regulatory authorities. While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that these measures will be effective in avoiding undue interest rate risk.

Increases in interest rates can affect the value of loans and other assets, including our ability to realize gains on the sale of assets. We originate loans for sale and for our portfolio. Increasing interest rates may reduce the origination of loans for sale and consequently the fee income we earn on such sales. Further, increasing interest rates may adversely affect the ability of borrowers to pay the principal or interest on loans and leases, resulting in an increase in nonperforming assets and a reduction of income recognized.

In contrast, decreasing interest rates have the effect of causing clients to refinance mortgage loans faster than anticipated. This causes the value of assets related to the servicing rights on loans sold to be lower than originally anticipated. If this happens, we may need to write down our servicing assets faster, which would accelerate our expense and lower our earnings.

Our ability to pay cash dividends is limited.

We are dependent primarily upon the earnings of our operating subsidiaries for funds to pay dividends on our common shares. The payment of dividends by Home Savings is subject to certain regulatory restrictions and restrictions placed upon us by the Bank Order. United Community’s dividend payments to its shareholders is restricted by the OTS Order. As a result, any payment of dividends in the future will be dependent, in large part, on our ability to satisfy these regulatory restrictions and Home Savings’ earnings, capital requirements, financial condition and other factors. Although our financial earnings and financial condition have allowed us to declare and

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pay periodic cash dividends to our shareholders, there can be no assurance that dividend payments will continue or increase in the future.

Increasing credit risks could continue to adversely affect our results of operations.

There are inherent risks associated with our lending activities, including credit risk, which is the risk that borrowers may not repay outstanding loans or the value of the collateral securing loans will decrease. We attempt to manage credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of the credit already extended. However, conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may increase our credit risk. Such changes in the economy may have a negative impact on the ability of borrowers to repay their loans. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of our collateral. In addition, substantial portions of our loans are to individuals and businesses in Ohio where foreclosure rates are among the highest in the nation. Consequently, any further decline in the state’s economy could have a materially adverse effect on our financial condition and results of operations.

Over the last two years, United Community has experienced a significant increase in the amount of impaired loans in its construction loan portfolio. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect both the contractual interest payments and the contractual principal payments, as scheduled in the loan agreement. Construction loans generally involve greater underwriting and default risks than loans secured by mortgages on existing properties because construction loans are more difficult to appraise and to monitor. In the event a default on a construction loan occurs and foreclosure follows, we may need to take control of the project and attempt either to arrange for completion of construction or dispose of the unfinished project.

Economic Conditions.

There can be no assurance that recent legislation and regulatory initiatives to address difficult market and economic conditions will stabilize the United States banking system and the enactment of these initiatives may significantly affect our financial condition, results of operation, liquidity, or stock price.

We operate in an extremely competitive market, and our business will suffer if we are unable to compete effectively.

In our market area, we encounter significant competition from savings and loan associations, banks, credit unions, mortgage banking firms, securities brokerage firms, asset management firms and insurance companies. Many of our competitors have substantially greater resources and lending limits than we do and may offer services that we do not or cannot provide.

Legislative or regulatory changes or actions could adversely impact the financial services industry.

The financial services industry is extensively regulated. Federal and state banking laws and regulations are primarily intended for the protection of consumers, depositors and the deposit insurance funds, and are not necessarily intended to benefit our shareholders. Changes to laws and regulations or other actions by regulatory agencies may negatively impact us. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for loan losses. The significant federal and state banking regulations that affect us are described in this 10-K under the heading “Regulation.”

The preparation of financial statements requires management to make estimates about matters that are inherently uncertain.

Management’s accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure that they comply with generally accepted accounting

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principles and reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. Two of the most critical estimates are the level of the allowance of loan losses and the valuation of mortgage servicing rights. Due to the inherent nature of these estimates, we cannot provide absolute assurance that we will not significantly increase the allowance for loan losses, sustain loan losses that are significantly higher than the provided allowance, or recognize a significant provision for the impairment of mortgage servicing rights.

We face risks with respect to future expansion.

We may acquire other financial institutions in the future. Also, we may engage in de novo branch expansion or consider and enter into new lines of business or offer new products or services. We may incur substantial costs to expand, and we can give no assurance such expansion will result in the levels of profits we seek. Also, we may issue equity securities in connection with future acquisitions, which would dilute current shareholders’ ownership interests.

If we acquire other businesses, we may not be able to achieve fully the cost savings and synergies that we expect to result from any acquisition. In addition, because the markets in which we operate are highly competitive, we may lose customers or the customers of acquired entities as a result of an acquisition. We also may lose key personnel, either from the acquired entity or from United Community, as a result of an acquisition.

Material breaches in security of our systems may have a significant effect on our business.

United Community collects, processes and stores sensitive customer data by using computer systems and telecommunication networks operated by the Company and its service providers. The Company has security, backup and recovery systems in place and a comprehensive business continuity plan to ensure the systems will not be inoperable. United Community also has security in place to prevent unauthorized access to the system. Third party service providers are required to maintain similar controls. United Community cannot be certain the measures will be successful to prevent a security breach. If such a breach occurs, the Company may lose customer’s confidence and, therefore, lose their business.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

Home Savings owns its corporate headquarters building located in Youngstown, Ohio. Of Home Savings’ 39 branch offices, 32 are owned and the remaining offices are leased. Loan origination offices are leased under long-term lease agreements. The information contained in Note 9 “Premises and Equipment” to the consolidated financial statements is incorporated herein by reference.

Item 3.   Legal Proceedings

United Community and its subsidiaries are parties to litigation arising in the normal course of business. While it is impossible to determine the ultimate resolution of these contingent matters, management believes any resulting liability would not have a material effect upon United Community’s financial statements.

Item 4.   Submission of Matters to a Vote of Security Holders

Not applicable.

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PART II

Item 5.   Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

There were 37,804,457 common shares of United Community stock issued and 30,897,825 shares outstanding and held by approximately 10,300 record holders as of February 28, 2009. United Community’s common shares are traded on The Nasdaq Stock Market^® under the symbol “UCFC”. Quarterly stock prices and dividends declared are shown in the following table. Prior period data has been updated to reflect the stock dividend declared in November 2008.

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
2008
High	$	6.70	$	8.50	$	5.84	$5.11
Low		4.16		3.62		2.82	0.75
Dividends declared and paid		0.0924		0.0462		—	2.8% stock dividend
2007
High	$	12.15	$	10.78	$	9.93	$7.44
Low		10.10		9.71		6.27	5.16
Dividends declared and paid		0.0924		0.0924		0.0924	0.0924

Under the terms of the OTS Order, United Community must seek regulatory approval prior to the declaration and payment of any cash dividends. The payment of dividends by United Community is limited also by the ability of Home Savings to pay dividends to United Community which also requires regulatory approval under the Bank Order. See the discussion of these limits in Note 3 and Note 16 to the Consolidated Financial Statements.

Under the terms of the OTS Order, United Community must seek regulatory approval prior to the repurchase of any shares. United Community did not repurchase any shares during the fourth quarter of 2008.

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Performance Graph

The following graph compares the cumulative total return on United Community’s common shares since December 31, 2003, with the total return of an index of companies whose shares are traded on The Nasdaq Stock Market and an index of publicly traded thrift institutions and thrift holding companies. The graph assumes that $100 was invested in United Community shares on December 31, 2003.

United Community Financial Corp
Total Return Performance

	Period Ending
Index	12/31/03		12/31/04		12/31/05		12/31/06		12/31/07		12/31/08
United Community Financial Corp.		100.00		100.68		109.39		116.72		55.18		9.47
NASDAQ Composite		100.00		108.59		110.08		120.56		132.39		78.72
SNL Thrift		100.00		111.42		115.35		134.46		80.67		51.34

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Item 6.   Selected Financial Data

	At December 31,
	2008		2007		2006		2005		2004
	(In thousands)
Selected financial condition data:
Total assets	$	2,618,073	$	2,771,117	$	2,703,545	$	2,528,850	$	2,287,788
Cash and cash equivalents		43,417		33,502		33,711		35,195		39,057
Securities:
Trading, at fair value		—		312		559		992		1,990
Available for sale, at fair value		215,731		240,035		233,936		199,047		193,754
Loans held for sale		16,032		87,236		26,960		29,109		59,099
Loans, net		2,203,453		2,236,988		2,253,559		2,097,433		1,815,976
Federal Home Loan Bank stock, at cost		26,464		25,432		25,432		24,006		22,842
Cash surrender value of life insurance		25,090		24,053		23,137		22,260		21,406
Assets of discontinued operations		5,562		20,314		20,923		40,122		58,089
Deposits		1,885,931		1,875,206		1,822,935		1,681,844		1,522,952
Borrowed funds		462,872		586,786		562,862		528,821		445,043
Liabilities of discontinued operations		2,388		4,371		4,475		24,948		41,325
Total shareholders’ equity		234,923		269,714		281,333		264,735		252,352

	Year Ended December 31,
	2008			2007		2006		2005		2004
	(In thousands)
Summary of earnings:
Interest income	$	152,178		$	168,815	$	163,763	$	133,794	$	111,822
Interest expense		78,916			96,103		83,953		56,357		39,971
Net interest income		73,262			72,712		79,810		77,437		71,851
Provision for loan losses		25,329			28,750		4,347		3,028		9,370
Net interest income after provision for loan losses		47,933			43,962		75,463		74,409		62,481
Non-interest income		5,784			14,302		13,203		12,184		11,629
Non-interest expenses		94,186			55,640		53,310		53,413		48,348
Income (loss) before taxes and discontinued operations		(40,469	)		2,624		35,356		33,180		25,762
Income tax expense (benefit)		(3,240	)		910		12,393		11,234		8,698
Net income (loss) before discontinued operations		(37,229	)		1,714		22,963		21,946		17,064
Discontinued operations Net income of Butler Wick Corp., net of tax		1,950			2,419		1,148		1,251		801
Net income (loss)	$	(35,279	)	$	4,133	$	24,111	$	23,197	$	17,865

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	At or for the Year Ended December 31,
	2008			2007			2006			2005			2004
Selected financial ratios and other data:
Performance ratios:
Return on average assets(1)		(1.30	)%		0.15	%		0.92	%		0.96	%		0.83	%
Return on average shareholders’ equity(2)		(12.91	)		1.44			8.72			8.89			7.01
Interest rate spread(3)(4)		2.53			2.41			2.84			3.19			3.38
Net interest margin(3)(5)		2.87			2.84			3.24			3.49			3.63
Non-interest expense to average assets(3)		2.22			2.04			2.03			2.22			2.24
Efficiency ratio(3)(6)		68.53			62.77			56.68			58.92			56.84
Average interest earning assets to average interest bearing liabilities(3)		110.85			111.59			111.74			111.62			112.29
Capital ratios:
Average equity to average assets		10.03			10.56			10.53			10.83			11.78
Shareholders’ equity to assets at year end		8.97			9.73			10.41			10.47			11.03
Home Savings’ Tier 1 leverage ratio		8.20			7.47			7.68			8.36			8.36
Home Savings’ Tier 1 risk-based capital ratio		10.80			9.26			9.49			10.08			9.92
Home Savings’ Total risk-based capital ratio		12.06			11.88			11.70			10.86			10.79
Asset quality ratios:
Nonperforming loans to loans, net(7)		4.84			4.52			2.43			1.22			1.24
Nonperforming assets to total assets at year end(8)		5.19			4.03			2.15			1.11			1.06
Allowance for loan losses as a percent of loans		1.61			1.41			0.75			0.74			0.87
Allowance for loan losses as a percent of nonperforming loans(7)		33.71			31.67			30.92			61.26			70.38
Number of:
Loans		44,195			44,842			46,333			43,630			41,690
Deposit accounts		180,531			187,132			189,588			183,565			173,997
Per share data:
Basic earnings (loss) from continuing operations(9)(10)	$	(1.26	)	$	0.06		$	0.77		$	0.75		$	0.56
Basic earnings from discontinued operations(9)(10)		0.06			0.08			0.04			0.04			0.03
Basic earnings (loss)(9)(10)		(1.20	)		0.14			0.81			0.79			0.59
Diluted earnings (loss) from continuing operations(9)(10)		(1.26	)		0.06			0.76			0.74			0.55
Diluted earnings from discontinued operations(9)(10)		0.06			0.08			0.04			0.04			0.03
Diluted earnings (loss)(9)(10)		(1.20	)		0.14			0.80			0.78			0.58
Book value(11)		7.60			8.73			8.83			8.29			7.87
Cash dividend per share		0.1386			0.3697			0.3502			0.3510			0.2918
Dividend payout ratio(12)		(12.61	)%		271.43	%		43.90	%		41.25	%		50.00	%

(1)	Net income (loss) divided by average total assets.
(2)	Net income (loss) divided by average total equity.

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(3)	Ratios have been revised to reflect the impact of discontinued operations. Ratios exclude the effect of goodwill impairment charges recognized.
(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)	Non-interest expense, excluding the amortization of core deposit intangible and the goodwill impairment charge, divided by the sum of net interest income and non-interest income, excluding gains and losses on securities, other than temporary impairment charges and other.
(7)	Nonperforming loans consist of nonaccrual loans, loans past due ninety days and still accruing, and restructured loans.
(8)	Nonperforming assets consist of nonperforming loans, real estate acquired in settlement of loans and other repossessed assets.
(9)	Earnings per share were retroactively adjusted to reflect the effect of a 2.8% stock dividend declared in November 2008.
(10)	Net income divided by average number of basic or diluted shares outstanding.
(11)	Shareholders’ equity divided by number of shares outstanding.
(12)	Historical per share dividends declared and paid for the year divided by the diluted earnings per share for the year.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

United Community Financial Corp. (United Community) was incorporated in the State of Ohio in February 1998 for the purpose of owning all of the outstanding capital stock of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings) issued upon the conversion of Home Savings from a mutual savings association to a permanent capital stock savings association (Conversion). The Conversion was completed on July 8, 1998.

The following discussion and analysis of the financial condition and results of operations of United Community and its subsidiaries should be read in conjunction with the consolidated financial statements, and the notes thereto, included in this Annual Report.

Forward-Looking Statements

Certain statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipate,” “plan,” “expect,” “believe,” and similar expressions as they relate to United Community or its management are intended to identify such forward-looking statements. United Community’s actual results, performance or achievements may differ materially from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, the interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations and rapidly changing technology affecting financial services.

Changes in Financial Condition

Total assets decreased $153.0 million, or 5.5%, from $2.8 billion at December 31, 2007 to $2.6 billion at December 31, 2008. The net change in assets consisted primarily of decreases of $71.2 million in net loans held for sale, $33.6 million in goodwill, $33.5 million in net loans, $24.3 million in available for sale securities, and assets of discontinued operations of $14.8 million. These decreases were offset partially by increases of $18.7 million in real estate owned and other repossessed assets, and $9.9 million in cash and cash equivalents. Total liabilities decreased $118.3 million, or 4.7%, primarily as a result of decreases of $99.7 million in Federal Home Loan Bank advances, $24.3 million in repurchase agreements and other borrowings, $4.8 million in accrued interest payable and

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$2.0 million in liabilities of discontinued operations, partially offset by a $10.9 million increase in interest-bearing deposits.

Funds not currently utilized for general corporate purposes are invested in overnight funds and securities. Cash and cash equivalents increased $9.9 million, or 29.6%, to $43.4 million at December 31, 2008, compared to $33.5 million at December 31, 2007.

Available for sale securities decreased $24.3 million during 2008 primarily as a result of the sales of securities of $138.0 million in addition to paydowns and maturities of $56.7 million, offset partially by purchases of $167.1 million. The majority of United Community’s available for sale portfolio is held by Home Savings.

Net loans decreased $33.5 million, or 1.5%, to $2.2 billion at December 31, 2008, compared to December 31, 2007. The change is largely attributable to a decline in Home Savings’ construction loan portfolio of $91.2 million, as Home Savings reduced its origination efforts in this portfolio and shifted its focus to permanent real estate lending to reduce the concentration of construction loans, land loans, land development loans and nonowner-occupied commercial real estate, in accordance with the Bank Order. Home Savings also had decreases of $1.7 million in commercial loans and $613,000 in consumer loans. All of these decreases were offset by increases in permanent real estate loans of $63.8 million. The change in permanent real estate loans was primarily attributable to increases in one- to four-family residential real estate lending and non-residential real estate lending. Non-residential real estate lending generally is considered to involve a higher degree of risk than residential real estate lending due to the relatively larger loan amounts and the effects of general economic conditions on the successful operation of income-producing properties. Consumer lending also can involve a higher degree of risk than residential real estate lending as collateral for consumer loans can decline in value more quickly than real estate collateral. See Note 6 to the consolidated financial statements for additional information regarding the composition of net loans.

Loans held for sale were $16.0 million at December 31, 2008, compared to $87.2 million at December 31, 2007. Contributing to the decrease was the designation of $76.5 million of one-to four-family residential mortgage loans as held for sale in 2007, which Home Savings sold in February 2008 with a gain of $1.5 million. Home Savings sells other loans as part of its risk management strategy and anticipates doing so in the future. Home Savings purchases other loans, both for its portfolio and to be sold in the secondary market.

For residential real estate lending, customers may borrow up to 80% of the home’s appraised value and obtain a second loan or line of credit for up to 15% of the appraised value without having to purchase mortgage insurance. In addition, Home Savings offers a first-time homebuyers product that permits a 95% loan-to-value and has no mortgage insurance requirement. At December 31, 2008, loans to first-time homebuyers with an original loan-to-value of 95% aggregated $21.9 million. Home Savings does not offer products where customers may pay a monthly amount that is less than the interest expense incurred on the loan. Further, Home Savings does not offer loan products where customers may qualify for the loan based on their ability to pay a minimum payment, even though the customers will be required to pay a significantly higher monthly payment in future periods unless the mortgage is prepaid. Interest-only loans are originated for sale only.

The allowance for loan losses increased to $36.0 million at December 31, 2008, from $32.0 million at December 31, 2007. The allowance for loan losses is monitored closely and may increase or decrease depending on a variety of factors such as levels and trends of delinquencies, chargeoffs and recoveries, non-performing loans, and potential risk in the portfolios. Management has developed and maintains an appropriate, systematic and consistently applied process to determine the amount of allowance and provision for loan losses. The allowance for loan losses as a percentage of net loans (coverage ratio) was 1.61% at December 31, 2008, compared to 1.41% at

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December 31, 2007. See Note 6 to the financial statements for a summary of the allowance for loan losses. The following table summarizes the trend in the allowance for loan losses for 2008.

	Allowance for Loan Losses
	December 31,										December 31,
	2007		Provision			Recovery		Chargeoff			2008
	(In thousands)
Real Estate Loans
Permanent
One-to four-family	$	2,803	$	5,530		$	23	$	(3,370	)	$	4,986
Multifamily residential		2,365		2,803			3		(2,827	)		2,344
Nonresidential		4,488		1,009			3		(630	)		4,870
Land		629		(44	)		—		—			585
Total		10,285		9,298			29		(6,827	)		12,785
Construction Loans
One-to four-family residential		11,892		7,869			10		(9,151	)		10,620
Multifamily and nonresidential		607		115			—		—			722
Total		12,499		7,984			10		(9,151	)		11,342
Consumer Loans
Home Equity		1,260		1,717			—		(1,591	)		1,386
Auto		447		(118	)		36		(123	)		242
Marine		1,468		288			64		(316	)		1,504
Recreational vehicle		2,050		543			133		(1,301	)		1,425
Other		260		358			342		(647	)		313
Total		5,485		2,788			575		(3,978	)		4,870
Commercial Loans
Secured		2,375		2,779			—		(1,799	)		3,355
Unsecured		1,362		2,480			101		(333	)		3,610
Total		3,737		5,259			101		(2,132	)		6,965
Total Allowance	$	32,006	$	25,329		$	715	$	(22,088	)	$	35,962

Home Savings has made changes to its methodology for determining the adeqvacy of the allowance for loan losses as a result of compliance with the Bank Order. Stricter underwriting standards, better collection efforts and the overall efforts to reduce delinquencies will affect the allowance for loan losses in the future.

A loan is impaired when, based on current information and events, it is probable that Home Savings will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. An insignificant delay or insignificant shortfall in amount of payments does not require application of this definition. A loan is not impaired during a period of delay in payment if Home Savings expects to collect all amounts due including interest accrued at the contractual interest rate for the period of delay.

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The total outstanding balance of all impaired loans was $87.2 million at December 31, 2008 as compared to $84.4 million at December 31, 2007. The amount of allowance for loan losses specifically allocated to impaired loans at December 31, 2008 and 2007 was $11.0 million and $13.2 million, respectively. The schedule below summarizes impaired loans for 2008.

	Impaired Loans
	December 31,		December 31,
	2008		2007		Change
	(In thousands)
Real Estate Loans
Permanent
One-to four-family	$	12,675	$	2,681	$	9,994
Multifamily residential		8,724		13,604		(4,880	)
Nonresidential		14,855		13,597		1,258
Land		4,757		3,700		1,057
Total		41,011		33,582		7,429
Construction Loans
One-to four-family residential		36,903		43,518		(6,615	)
Multifamily and nonresidential		816		825		(9	)
Total		37,719		44,343		(6,624	)
Consumer Loans
Home Equity		1,657		—		1,657
Auto		—		—		—
Marine		2,614		1,714		900
Recreational vehicle		—		—		—
Other		—		—		—
Total		4,271		1,714		2,557
Commercial Loans
Secured		3,496		4,554		(1,058	)
Unsecured		751		184		567
Total		4,247		4,738		(491	)
Total Impaired Loans	$	87,248	$	84,377	$	2,871

Non-performing loans consist of loans past due 90 days or more and on a non-accrual status, past due 90 days or more and still accruing, past due less than 90 days and on a non-accrual status and restructured loans. Non-performing loans increased $5.6 million from $101.1 million at December 31, 2007 to $106.7 million at December 31, 2008. The change occurred primarily in the permanent real estate segments of the portfolio. The schedule below summarizes the change in nonperforming loans for 2008.

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	Nonperforming Loans
	December 31,		December 31,					2008 Interest
	2008		2007		Change			Foregone
	(In thousands)
Real Estate Loans Permanent
One-to four-family	$	21,669	$	12,752	$	8,917		$	803
Multifamily residential		8,724		13,604		(4,880	)		288
Nonresidential		15,246		13,597		1,649			154
Land		4,840		3,700		1,140			447
Total		50,479		43,653		6,826			1,692
Construction Loans
One-to four-family residential		43,167		44,680		(1,513	)		554
Multifamily and nonresidential		816		825		(9	)		97
Total		43,983		45,505		(1,522	)		651
Consumer Loans
Home Equity		2,312		2,454		(142	)		145
Auto		154		211		(57	)		(5	)
Marine		2,614		1,714		900			87
Recreational vehicle		756		376		380			27
Other		33		64		(31	)		—
Total		5,869		4,819		1,050			254
Commercial Loans
Secured		3,496		4,554		(1,058	)		438
Unsecured		1,057		184		873			72
Total		4,553		4,738		(185	)		510
Restructured Loans		1,797		2,341		(544	)		—
Total Nonperforming Loans	$	106,681	$	101,056	$	5,625		$	3,107

The $8.9 million increase in nonperforming loans secured by one-to four-family properties was primarily a result of the overall increase in the number of loans reported as 90 or more days past due. The increase in reported nonperforming loans was due in part to the adoption by Home Savings in the fourth quarter of 2008 of the more conservative practice of determining the past due status of loans based on the number of days the loan is past due, rather than the number of calendar months the loan is past due. The decrease in nonperforming construction loans was primarily the result of Home Savings taking into possession property collateralizing three lending relationships totaling $12.5 million in the first quarter of 2008.

The Company continues to monitor changes in nonperforming loans due to rapidly changing conditions in the current economic environment. Nonperforming loans at February 28, 2009 were $102.8 million, compared to $106.7 million at December 31, 2008. Real estate owned and other repossessed assets at February 28, 2009 were $30.9 million, compared to $29.3 million at December 31, 2008. These changes were expected as a result of the implementation of Home Saving’s plan to reduce loan concentrations, loan delinquencies, and classified assets. These areas are being monitored on an ongoing basis in compliance with the Bank Order and Home Savings expects these concentrations, delinquencies and classified assets to be reduced as a result of that plan.

Federal Home Loan Bank stock increased $1.0 million to $26.5 million at December 31, 2008, compared to December 31, 2007. The quarterly dividend payments received by Home Savings were paid in stock. In the prior year, these dividends were paid in cash to Home Savings.

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Premises and equipment decreased $1.6 million from $26.6 million at December 31, 2007 to $25.0 million at December 31, 2008. The primary cause of this change was a full year’s depreciation expenses recognized during the year on projects completed in 2007. Those projects included the completion of two new Home Savings branches and the remodeling of the lobby in United Community’s headquarters. Similar projects were not undertaken in 2008.

Accrued interest receivable decreased $2.9 million, or 22.4%, to $10.1 million at December 31, 2008, compared to $13.0 million at December 31, 2007. Home Savings had overall decreases in accrued interest on all loan portfolio segments. Interest accrued on mortgage loans decreased $715,000 due primarily to an increase of $1.2 million in reserves for uncollected interest on mortgage loans. Interest accrued on installment loans decreased $402,000, due primarily to an increase in reserves for uncollected interest on consumer loans of $259,000. Interest accrued on commercial loans decreased $1.3 million, due primarily to an increase in reserves for uncollected interest on commercial loans of $2.3 million. The increase in the reserves for uncollected interest is affected directly by the increase in loans on non-accrual status. Interest accrued on securities available for sale decreased $510,000 due primarily to a decrease in the average balance of securities held in Home Savings’ portfolio over the year. As the Bank’s plan to reduce loan concentrations, loan delinquencies, and classified assets is carried out in compliance with the Bank Order, the Company expects these reserves for uncollected interest to decrease.

Home Savings has an investment in bank-owned life insurance, which is insurance on the lives of certain employees where Home Savings is the beneficiary. Bank-owned life insurance provides a long-term asset to offset long-term benefit obligations, while generating competitive investment yields. Home Savings recognized $943,000 as other non-interest income based on the cash value of the policies in 2008 and $917,000 in 2007. The increase in the cash value of the policies is tax exempt as long as the policies are not cashed in, and any death benefit proceeds received by Home Savings are tax-free.

Assets of discontinued operations of Butler Wick decreased as a result of the completion of the sale of Butler Wick & Co., Inc. on December 31, 2008, to Stifel Financial Corp. for $12.0 million. Refer to Note 4 for further discussion on discontinued operations.

Other assets decreased $1.3 million during 2008. The decrease is a result primarily of a decrease in deferred tax assets at Home Savings of $1.6 million and a decrease in mortgage servicing rights of $2.3 million, offset by an increase in payments due from securities of $1.4 million.

Total deposits increased $10.7 million to $1.9 billion at December 31, 2008, compared to December 31, 2007. The change is primarily as a result of an increase in certificates of deposit of $54.7 million and an increase in savings accounts of $6.2 million. This increase was offset by a decrease of $55.0 million in money market demand accounts. The change in certificates of deposit is attributable to a decline in retail certificates of deposit of $50.6 million, offset by an increase in brokered certificates of deposit of $105.3 million. In the third quarter of 2008 Home Savings utilized the services of an investment broker to attract brokered certificates of deposit. These deposits were utilized to enhance the Company’s liquidity. Pursuant to the Bank Order, Home Savings cannot obtain additional brokered certificates of deposit without prior consent of the FDIC and Ohio Division. Management continually evaluates many variables when pricing deposits, including cash requirements, liquidity targets, asset growth rates, the liability mix and interest rate risk.

Funds needed in excess of deposit growth are borrowed in the normal course of business. Home Savings has an established credit relationship with the Federal Home Loan Bank of Cincinnati under which Home Savings can borrow up to $619.1 million. Of the total borrowing capacity at the Federal Home Loan Bank, Home Savings had outstanding advances of $337.6 million at December 31, 2008, which is a decrease of $99.7 million compared to December 31, 2007. These borrowings are collateralized primarily by one- to four-family residential mortgage loans.

Repurchase agreements used for general corporate purposes have decreased $24.3 million to $125.3 million at December 31, 2008, as a result of Home Savings securing brokered deposits as a funding source. Home Savings also offers a sweep product to certain customers that are collateralized by investment securities. This type of borrowing offers customers of Home Savings a higher rate of return than what would be offered within deposit product

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offerings. These funds are not deposit accounts and are not insured by the FDIC. United Community continually evaluates funding alternatives and may borrow additional funds in 2009 to satisfy funding requirements.

United Community has a Credit Agreement with JP Morgan Chase Bank, N.A., dated September 12, 2005, as amended on July 18, 2007, March 28, 2008, August 29, 2008, and January 31, 2009, (Credit Agreement). The Credit Agreement provided United Community with a line of credit of up to $40.0 million. The Credit Agreement sets forth numerous covenants with which United Community must comply.

On March 28, 2008, United Community and JP Morgan amended the Credit Agreement to provide, among other things, (1) a waiver of all existing defaults under the credit agreement, (2) that no new funds would be advanced to United Community on the line of credit, and (3) an increase in the allowable non-performing asset ratio to 6.50% of total loans and other real estate owned. As of December 31, 2008, that ratio was 5.97%.

On August 29, 2008, United Community and JP Morgan amended the Credit Agreement in response to the event of default that occurred when United Community entered into the OTS Order and Home Savings entered into the Bank Order. The Amendment waived the events of default and extended the maturity date of the borrowings until January 31, 2009. Over the course of 2008, the Company paid down approximately $29.4 million on this line of credit, under which $36.3 million had been outstanding at December 31, 2007. In January 2009, the Company paid down an additional $1.8 million on this line of credit, further reducing the balance to $5.1 million.

On January 31, 2009, United Community and JP Morgan amended the Credit Agreement in response to the proposed sale of Butler Wick Trust to Farmers National Banc Corp. The amendment includes provisions to use a portion of the cash proceeds of the sale to repay the entire principal balance outstanding and any unpaid interest that has accrued no later than April 30, 2009.

Accrued interest payable decreased during 2008 as a result of a net decrease in the borrowings mentioned above.

Total shareholders’ equity decreased $34.8 million, or 12.9%, from December 31, 2007 to December 31, 2008. The decrease was primarily due to net loss of $35.3 million, and cash dividends paid to shareholders totaling $4.1 million. Accumulated other comprehensive income changed as a result of the change in market value of available for sale securities at December 31, 2008 compared to December 31, 2007 and the effect of the recognition of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R) . Refer to Note 18 for a further discussion of the effect this pronouncement had on the Company’s financial statements. Book value per share and tangible book value per share were $7.60 and $7.57, respectively, as of December 31, 2008. Book value per share and tangible book value per share were $8.73 and $7.60, respectively, as of December 31, 2007.

Comparison of Operating Results for the Years Ended December 31, 2008 and December 31, 2007

Net Income — Net loss for the year ended December 31, 2008 was $35.3 million, compared to net income of $4.1 million for the year ended December 31, 2007. This change was due primarily to impairment charges recognized on goodwill of $33.6 million and other-than-temporary impairment charges recognized on securities available for sale of $6.1 million. Similar impairment charges were not required in 2007.

Net Interest Income — Net interest income for the year ended December 31, 2008, was $73.3 million compared to $72.7 million for 2007. The decline in interest expenses more than offset the decline in interest income during 2008, compared to 2007. Interest expenses decreased in 2008 compared to 2007, due mainly to declines in interest paid on FHLB advances of $9.1 million and interest paid on deposits of $7.8 million. In keeping with the reduction in total assets in 2008, the Company was able to reduce its debt and utilize lower cost funds.

Interest income decreased $16.6 million in 2008 primarily due to decreases in interest earned on net loans of $17.7 million, loans held for sale of $448,000, and dividends received on shares of FHLB stock of $317,000. The change in interest earned on loans was a result of a decrease of $37.2 million in the average balance of outstanding loans, due in part to the sale of $76.5 million of mortgage loans in February 2008, as well as a decrease of 68 basis points in the yield earned on these assets. Interest earned on available for sale securities increased and offset

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partially the decline in interest earned on loans. The average balance of available for sale securities increased $33.3 million and the yield on these assets increased eight basis points.

Provision for Loan Losses — The provision for loan losses was $25.3 million for the year ended December 31, 2008, compared to $28.8 million for the year ended December 31, 2007, a decrease of $3.4 million. Management’s analysis of the loan portfolio led to increased provisions of $9.3 million related to the permanent real estate portfolio, $8.0 million related to the construction loan portfolio, $2.8 million related to the consumer loan portfolio and $5.3 million related to the commercial portfolio. Net loan chargeoffs for the year ended December 31, 2008 were $21.4 million, compared to $13.7 million for the year ended December 31, 2007. The allowance for loan losses totaled $36.0 million at December 31, 2008, which was 1.61% of net loans and 33.7% of nonperforming loans, compared to $32.0 million at December 31, 2007, which was 1.41% of net loans and 31.7% of nonperforming loans.

Non-interest Income — Non-interest income decreased $8.5 million, or 59.6%, to $5.8 million for the year ended December 31, 2008, from $14.3 million for the year ended December 31, 2007. Other-than-temporary impairment charges to the Company’s Fannie Mae auction rate pass through trust security and a write-down of the Company’s equity investments in the common shares of three financial institutions of $6.1 million were recognized in 2008. Similar charges were not required in 2007. Also contributing to the decrease was Home Savings’ recognition of increased losses on real estate owned and other assets acquired in the settlement of loans, the write-down of mortgage servicing rights and the valuation of the loans held for sale portfolio.

Non-interest Expense — Non-interest expenses rose $38.5 million during the year ended December 31, 2008, compared to 2007, primarily as a result of goodwill impairment charges of $33.6 million recognized in 2008. Refer to Note 10 for a discussion of goodwill. Also, increased consulting fees and FDIC insurance premiums related to the enforcement actions of the OTS, FDIC and the Ohio Division have cause non-interest expenses to rise. FDIC insurance premiums are expected to approximate $10.9 million in 2009, due in part to the enforcement actions mentioned above and the special assessment passed for the second quarter of 2009. Refer to Note 3 for a further discussion of the regulatory enforcement actions. Additionally, fees incurred within our real estate owned and other repossessed assets portfolio have increased as Home Savings incurred additional expenses related to the payment of real estate taxes, repairs and general maintenance on property in northern and central Ohio acquired in the settlement of construction and commercial loans.

Federal Income Taxes — During the year ended December 31, 2008, United Community recorded a $3.2 million benefit for income taxes as a result of lower pretax income earned in 2008 compared to 2007. Refer to Note 15 for a further discussion on these expenses.

Discontinued Operations — Net income recognized on the discontinued operations of Butler Wick decreased $469,000 from $2.4 million for the year ended December 31, 2007 to $2.0 million for the year ended December 31, 2008. The primary cause of the change is an increase in salary expenses related to compensation expense to employees of Butler Wick resulting from the completion of the sale of a Butler Wick & Co., a securities broker/dealer subsidiary, to Stifel Financial Corp., on December 31, 2008. Butler Wick also earned lower net interest income and lower service fees during the year ended December 31, 2008 as compared to the year ended December 31, 2007. Partially offsetting these increases was the gain recognized on the sale of Butler Wick and Co., Inc. of $3.3 million. Refer to Note 4 for a further discussion of discontinued operations.

Comparison of Operating Results for the Years Ended December 31, 2007 and December 31, 2006

Net Income — Net income for the year ended December 31, 2007 was $4.1 million, compared to $24.1 million for the year ended December 31, 2006. This change was due primarily to increases in the provision for loan losses of $24.4 million, interest expense of $12.2 million, and non-interest expense of $2.3 million. These increases were only partially offset by an increase in interest income of $5.1 million, an increase in non-interest income of $1.1 million, and an increase in income from discontinued operations of $1.3 million.

Net Interest Income — Net interest income for the twelve months ended December 31, 2007, was $72.7 million compared to $79.8 million for the same period the previous year. Interest income increased $5.1 million for the year 2007 compared to the year 2006, despite an increase in nonperforming loans. The change in interest income was primarily due to an increase in income on net loans of $3.2 million as a result of an increase of $82.4 million in the

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average balance of outstanding loans. Interest earned on available for sale securities increased $2.5 million, as the average balance of those assets grew by $31.5 million and the yield earned on those securities increased 47 basis points.

Total interest expense increased $12.2 million for the year ended December 31, 2007, as compared to 2006. The increase was due primarily to increases in interest expense on deposits of $9.4 million, repurchase agreements and other borrowings of $2.5 million and Federal Home Loan Bank advances of $247,000.

The primary reason for the rise in interest expense on deposits was an increase in interest paid on certificates of deposit, which was $5.7 million greater in the year 2007 compared to 2006. Additionally, interest expense on NOW and money market accounts was $3.7 million higher in 2007 compared to 2006. Home Savings had an increase in the average balance of certificates of deposit of $13.5 million as well as an increase of 45 basis points paid on those deposits. The average balance of NOW and money market accounts increased $66.4 million, and the rate paid on those deposits increased 46 basis points. The increase in interest expense on Federal Home Loan Bank advances was due to an increase in the cost of those funds of nine basis points. Interest expense on repurchase agreements and other borrowed funds increased as a result of an increase in the average balance and an increase of 35 basis points paid for those funds.

Provision for Loan Losses — A provision for loan losses is charged to operations to bring the total allowance for loan losses to a level considered by management to be adequate, based on management’s evaluation of such factors as the delinquency status of loans, current economic conditions, the net realizable value of the underlying collateral, changes in the composition of the loan portfolio, prior loan loss experience and results of regulatory examinations. The provision for loan losses was $28.8 million, an increase of $24.4 million, for the year ended December 31, 2007, compared to the year ended December 31, 2006. Management’s analysis of the loan portfolio led to provisions of $5.8 million related to the permanent real estate portfolio, $15.1 million related to the construction loan portfolio, $3.4 million related to the consumer loan portfolio and $4.4 million related to the commercial portfolio. Net loan chargeoffs for the year ended December 31, 2007 were $13.7 million, compared to $3.1 million for the year ended December 31, 2006. The allowance for loan losses totaled $32.0 million at December 31, 2007, which was 1.41% of net loans and 31.7% of nonperforming loans, compared to $17.0 million at December 31, 2006, which was 0.75% of net loans and 30.9% of nonperforming loans.

Non-interest Income — Non-interest income increased $1.1 million, or 8.3%, to $14.3 million for the year ended December 31, 2007, from $13.2 million for the year ended December 31, 2006. The change was due primarily to increases in non-deposit investment income of $864,000 due to greater sales activity, and an increase in service fees and other charges of $1.3 million. These changes were offset partially by declines in gains recognized on the sale of loans, available for sale securities and trading securities. Increased losses incurred in disposal of real estate owned and other repossessed assets also contributed to the offset.

Non-interest Expense — Non-interest expenses rose $2.3 million during the year ended December 31, 2007, compared to 2006, primarily as a result of equipment and data processing expenses increasing $836,000, occupancy expenses increasing $316,000 and other expenses increasing $1.6 million. The 14.8% increase in equipment and data processing expense is attributable to increased depreciation due to the new branches constructed in 2007, and increased core system processing fees paid. Occupancy expenses increased primarily as a result of increased costs related to the construction of two new Home Savings branches and other remodeling projects completed during 2007. Increases in other expenses are attributable to increased consulting fees recognized as a result of merger costs associated with the abandoned merger with PVF Capital Corp. as well as fees incurred for outside consultants for their recommendation of operating efficiencies within our deposit products and services. Additionally, fees incurred within our real estate owned and other repossessed assets portfolio increased $412,000, as Home Savings incurred additional expenses related to the payment of real estate taxes, repairs and general maintenance on property in northern and central Ohio acquired in the settlement of construction and commercial loans.

Federal Income Taxes — During the year ended December 31, 2007, United Community recorded a $910,000 provision for income taxes. This is a decrease of $11.5 million over the year ended December 31, 2006 as a result of lower pretax income earned in 2007 compared to 2006. The effective tax rate at December 31, 2007 was 34.7% compared to 35.0% at December 31, 2006. Refer to Note 15 for a further discussion of these expenses.

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Discontinued Operations — Net income recognized on the discontinued operations of Butler Wick increased $1.3 million from $1.1 million at December 31, 2006 to $2.4 million at December 31, 2007. The primary cause of the change is an increase in brokerage commissions earned in 2007 compared to 2006 due to greater brokerage activity and increased service fees charged to customers. Partially offsetting these increases were higher expenses related to increased commissions paid to Butler Wick employees and associated employment taxes recognized as a result of the increased brokerage activity. Refer to Note 4 for a further discussion of discontinued operations.

Critical Accounting Policies and Estimates

The accounting and reporting policies of United Community comply with accounting principles generally accepted within the United States of America and conform to general practices within the financial services industry. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements. Accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments.

The most significant accounting policies followed by United Community are presented in Note 1 to the consolidated financial statements. Accounting and reporting policies for the allowance for loan losses, mortgage servicing rights and other-than-temporary impairment are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by management could result in material changes in United Community’s financial position or results of operations.

Allowance for loan losses.  The allowance for loan losses is an amount that management believes will be adequate to absorb probable incurred losses in existing loans taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, collateral values securing loans, and current economic conditions that affect the borrower’s ability to pay. Determination of the allowance inherently is subjective due to the aforementioned reasons. Loan losses are charged off against the allowance when management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged off are credited to the allowance.

In compliance with the Bank Order, Home Savings maintains a well documented methodology for maintaining an allowance for loan losses that is compliant with all interagency guidance. The documentation of the adequacy of the allowance for loan losses is reviewed by the board of directors on a regular basis. The methodology is revised when appropriate for changes in risk factors within the loan portfolio.

The allowance is based on management’s evaluation of homogeneous groups of loans (single-family residential mortgage loans and all consumer credit except marine loans) to which loss factors have been applied, as well as an evaluation of individual credits (multi-family, non-residential mortgage loans, marine loans and commercial loans) that are based on internal risk ratings, collateral and other unique characteristics of each loan.

Management believes that it uses the best information available to determine the adequacy of the allowance for loan losses. However, future adjustments to the allowance may be necessary and the results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

Mortgage servicing rights.  The cost of mortgage loans sold or securitized is allocated between the mortgage servicing rights and the mortgage loans based on the relative fair values of each. The fair value of the mortgage servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio, about which management must make assumptions considering future expectations based on various factors, such as servicing costs, expected prepayment speeds and discount rates.

Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income. Management periodically evaluates mortgage servicing rights for impairment by stratifying the loans by original maturity, interest rate and loan type. Impairment is measured by estimating the fair value of each pool, taking into consideration the estimated level of prepayments based upon current industry expectations. An

33

impairment allowance is recorded for a pool when, and in an amount which, its fair value is less than its carrying value.

The value of mortgage servicing rights is subject to prepayment risk. Future expected net cash flows from servicing a loan will not be realized if the loan pays off earlier than anticipated. Since most of these loans do not contain prepayment penalties, United Community receives no economic benefit if the loan pays off earlier than anticipated.

Goodwill.  For acquisitions, we are required to record the assets acquired, including identified intangible assets, and the liabilities assumed at their fair value. These often involve estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques that may include estimates of attrition, inflation, asset growth rates, or other relevant factors. In addition, the determination of the useful lives over which an intangible asset will be amortized is subjective. Under SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and indefinite-lived assets recorded must be reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill or the indefinite-lived intangible asset. The determination of fair values is based on internal valuations using management’s assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors.

Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying values of goodwill or intangible assets and could result in impairment losses affecting the financials of United Community as a whole and the individual lines of business in which the goodwill or intangibles reside.

Income taxes.  We are subject to the income tax laws of the United States, its states and the municipalities in which we operate. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. We review income tax expense and the carrying value of deferred tax assets quarterly; and as new information becomes available, the balances are adjusted as appropriate. On January 1, 2007, we adopted FIN 48 to account for uncertain tax positions. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. See Note 15 to the Consolidated Financial Statements for a further description of our provision and related income tax assets and liabilities.

In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon examination or audit.

Although management believes that the judgments and estimates used are reasonable, actual results could differ and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement would result in a reduction in our effective income tax rate in the period of resolution.

Other-than-temporary impairment.  Securities are written down to fair value when a decline in fair value is other-than-temporary. Declines in the fair value of securities below their cost that are other-than-temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) United Community’s intent and ability to hold the security for a period sufficient to allow for any anticipated recovery in fair value. Management must use its judgment based on information available in assessing the likelihood of recovery in value.

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Yields Earned and Rates Paid

The following table sets forth certain information relating to United Community’s average balance sheet and reflects the average yield on interest earning assets and the average cost of interest bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balances of interest earning assets or interest bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances. Nonaccruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income. The average balance for securities available for sale is computed using the carrying value, and the average yield on securities available for sale has been computed using the historical amortized cost average balance.

	Year Ended December 31,
	2008							2007							2006
	Average		Interest					Average		Interest					Average		Interest
	Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/
	Balance		Paid		Rate			Balance		Paid		Rate			Balance		Paid		Rate
	(Dollars in thousands)
Interest earning assets:
Net loans(1)	$	2,231,692	$	136,556		6.12	%	$	2,268,914	$	154,252		6.80	%	$	2,186,559	$	151,029		6.91	%
Loans held for sale		9,674		466		4.82			18,781		914		4.87			37,549		1,894		5.04
Securities:
Trading		184		3		1.63			482		26		5.39			817		38		4.65
Available for sale		276,396		13,652		4.94			243,059		11,818		4.86			211,562		9,281		4.39
Federal Home Loan Bank stock		25,878		1,360		5.26			25,432		1,677		6.59			24,533		1,426		5.81
Other interest earning assets		13,135		141		1.07			2,247		128		5.70			1,783		95		5.33
Total interest earning assets	$	2,556,959	$	152,178		5.95	%	$	2,558,915	$	168,815		6.60	%	$	2,462,803	$	163,763		6.65	%
Assets of discontinued operations		22,965							22,225							29,997
Non-interest earning assets		144,096							141,154							131,491
Total assets	$	2,724,020						$	2,722,294						$	2,624,291
Interest bearing liabilities:
Deposits:
Checking accounts	$	426,790	$	9,475		2.22	%	$	397,290	$	13,907		3.50	%	$	330,856	$	10,060		3.04	%
Savings accounts		180,010		811		0.45			185,949		769		0.41			218,590		899		0.41
Certificates of deposit		1,169,403		49,953		4.27			1,125,117		53,376		4.74			1,111,602		47,681		4.29
Federal Home Loan Bank advances		384,260		12,358		3.22			448,714		21,493		4.79			452,023		21,246		4.70
Repurchase agreements and other		146,233		6,319		4.32			136,135		6,558		4.82			91,027		4,067		4.47
Total interest bearing liabilities	$	2,306,696	$	78,916		3.42	%	$	2,293,205	$	96,103		4.19	%	$	2,204,098	$	83,953		3.81	%
Liabilities of discontinued operations		8,290							4,710							14,234
Non-interest bearing liabilities		135,861							136,858							129,545
Total liabilities	$	2,450,847						$	2,434,773						$	2,347,877
Shareholders’ equity		273,173							287,521							276,414
Total liabilities and equity	$	2,724,020						$	2,722,294						$	2,624,291
Net interest income and interest rate spread			$	73,262		2.53	%			$	72,712		2.41	%			$	79,810		2.84	%
Net interest margin						2.87	%						2.84	%						3.24	%
Average interest earning assets to average interest bearing liabilities						110.85	%						111.59	%						111.74	%

(1) Nonaccrual loans are included in the average balance.

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The table below describes the extent to which changes in interest rates and changes in volume of interest earning assets and interest bearing liabilities have affected United Community’s interest income and interest expense during the periods indicated. For each category of interest earning assets and interest bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in volume multiplied by prior period rate), (ii) changes in rate (change in rate multiplied by prior period volume) and (iii) total changes in rate and volume. The combined effects of changes in both volume and rate, which cannot be separately identified, have been allocated in proportion to the changes due to volume and rate:

	Year Ended December 31,
	2008 vs. 2007									2007 vs. 2006
	Increase						Total			Increase						Total
	(Decrease) Due to						Increase			(Decrease) Due to						Increase
	Rate			Volume			(Decrease)			Rate			Volume			(Decrease)
	(Dollars in thousands)
Interest earning assets:
Loans	$	(15,201	)	$	(2,495	)	$	(17,696	)	$	(2,312	)	$	5,535		$	3,223
Loans held for sale		(9	)		(439	)		(448	)		(64	)		(916	)		(980	)
Securities:
Trading		(12	)		(11	)		(23	)		8			(20	)		(12	)
Available for sale		191			1,643			1,834			1,068			1,469			2,537
Federal Home Loan Bank stock		(347	)		30			(317	)		197			54			251
Other interest earning assets		(3	)		16			13			7			26			33
Total interest earning assets	$	(15,381	)	$	(1,256	)	$	(16,637	)	$	(1,096	)	$	6,148		$	5,052
Interest bearing liabilities:
Checking accounts	$	(5,561	)	$	1,129		$	(4,432	)	$	1,653		$	2,194		$	3,847
Savings accounts		65			(23	)		42			5			(135	)		(130	)
Certificates of deposit		(5,661	)		2,238			(3,423	)		5,109			586			5,695
Federal Home Loan Bank advances		(6,356	)		(2,779	)		(9,135	)		401			(154	)		247
Repurchase agreements and other		(854	)		615			(239	)		340			2,151			2,491
Total interest bearing liabilities	$	(18,367	)	$	1,180		$	(17,187	)	$	7,508		$	4,642		$	12,150
Change in net interest income							$	550								$	(7,098	)

Contractual Obligations, Commitments, Contingent Liabilities and Off-balance Sheet Arrangements

The following table presents, as of December 31, 2008, United Community’s significant fixed and determinable contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient and do not include any unamortized premiums or discounts or other similar carrying value adjustments. Further detail of the nature of each obligation is included in the referenced note to the consolidated financial statements.

	Payments Due In
	Note		One Year		One to		Three to		Over
	Reference		or Less		Three Years		Five Years		Five Years		Total
	(Dollars in thousands)
Operating leases		9	$	574	$	1,164	$	830	$	687	$	3,255
Deposits without a stated maturity		11		660,675		—		—		—		660,675
Certificates of deposit		11		594,099		418,780		212,377		—		1,225,256
Federal Home Loan Bank advances		12		247,650		23,281		16,226		50,446		337,603
Repurchase agreements and other borrowings		13		15,269		10,000		10,000		90,000		125,269

Discussion of loan commitments is included in Note 6 to the consolidated financial statements. In addition, United Community has commitments under benefit plans as described in Note 18 to the consolidated financial statements.

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Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

Qualitative Aspects of Market Risk.  The principal market risk affecting United Community is interest rate risk. United Community is subject to interest rate risk to the extent that its interest earning assets reprice differently than its interest bearing liabilities. Interest rate risk is defined as the sensitivity of United Community’s earnings and net asset values to changes in interest rates. As part of its efforts to monitor and manage the interest rate risk, the Board of Directors of Home Savings has adopted an interest rate risk policy that requires the Home Savings Board to review quarterly reports related to interest rate risk and annually set exposure limits for Home Savings as a guide to management in setting and implementing day to day operating strategies.

Quantitative Aspects of Market Risk.  As part of its interest rate risk analysis, Home Savings uses the “net portfolio value” (NPV) methodology. Generally, NPV is the discounted present value of the difference between incoming cash flows on interest earning and other assets and outgoing cash flows on interest bearing and other liabilities. The application of the methodology attempts to quantify interest rate risk as the change in the NPV and net interest income that would result from various levels of theoretical basis point changes in market interest rates.

Home Savings uses a NPV and earnings simulation model prepared internally as its primary method to identify and manage its interest rate risk profile. The model is based on actual cash flows and repricing characteristics for all financial instruments and incorporates market-based assumptions regarding the impact of changing interest rates on future volumes and the prepayment rate of applicable financial instruments. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates also are incorporated into the model. These assumptions inherently are uncertain and, as a result, the model cannot measure precisely NPV or net interest income or precisely predict the impact of fluctuations in interest rates on net interest rate changes as well as changes in market conditions and management strategies.

Presented below are analyses of Home Savings’ interest rate risk as measured by changes in NPV and net interest income for instantaneous and sustained parallel shifts of 100 basis point increments in market interest rates. As noted, for the year ended December 31, 2008, the percentage changes fall within the policy limits set by the Board of Directors of Home Savings as the minimum NPV ratio and the maximum change in interest income the Home Savings Board deems advisable in the event of various changes in interest rates. See the table below for Board adopted policy limits.

	Year Ended December 31, 2008
	NPV as % of Portfolio Value of Assets									Next 12 Months Net Interest Income
				Internal Policy									Internal Policy
Change in Rates (Basis Points)	NPV Ratio			Limitations			Change in %			$ Change			Limitations			% Change
	(Dollars in thousands)
+300		7.37	%		5.00	%		(1.38	)%	$	(1,879	)		(15.00	)%		(2.48	)%
+200		8.35			6.00			(0.40	)		(734	)		(10.00	)		(0.97	)
+100		8.99			6.00			0.24			60			(5.00	)		0.08
Static		8.75			7.00			—			—			—			—

Due to a low interest rate environment, it was not possible to calculate results for a drop in interest rates.

	Year Ended December 31, 2007
	NPV as % of Portfolio Value of Assets									Next 12 Months Net Interest Income
				Internal Policy									Internal Policy
Change in Rates (Basis Points)	NPV Ratio			Limitations			Change in %			$ Change			Limitations			% Change
	(Dollars in thousands)
+300		7.99	%		5.00	%		(1.48	)%	$	(7,009	)		(15.00	)%		(9.93	)%
+200		8.73			6.00			(0.75	)		(4,353	)		(10.00	)		(6.17	)
+100		9.29			6.00			(0.18	)		(2,139	)		(5.00	)		(3.03	)
Static		9.47			7.00			—			—			—			—
(100)		9.53			6.00			0.05			2,723			(5.00	)		3.86
(200)		8.82			6.00			(0.66	)		3,467			(15.00	)		4.91
(300)		7.90			5.00			(1.57	)		3,397			(20.00	)		4.81

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As with any method of measuring interest rate risk, certain shortcomings are inherent in the NPV approach. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Further, in the event of a change in interest rates, expected rates of prepayment on loans and early withdrawal levels from certificates of deposit may deviate significantly from those assumed in making risk calculations.

Potential Impact of Changes in Interest Rates

Home Savings’ profitability depends to a large extent on its net interest income, which is the difference between interest income from loans and securities and interest expense on deposits and borrowings. Like most financial institutions, Home Savings’ short-term interest income and interest expense are significantly affected by changes in market interest rates and other economic factors beyond its control. Accordingly, Home Savings’ earnings could be adversely affected during a continued period of rising interest rates.

Liquidity and Capital

United Community’s liquidity, primarily represented by cash and cash equivalents, is a result of its operating, investing and financing activities. These activities are summarized below for the years ended December 31, 2008, 2007 and 2006.

	Years Ended December 31,
	2008			2007			2006
	(Dollars in thousands)
Net income (loss)	$	(35,279	)	$	4,133		$	24,111
Adjustments to reconcile net income to net cash from operating activities		141,538			46,074			7,821
Net cash from operating activities		106,259			50,207			31,932
Net cash from investing activities		18,956			(106,616	)		(199,891	)
Net cash from financing activities		(115,300	)		56,200			166,474
Net change in cash and cash equivalents		9,915			(209	)		(1,485	)
Cash and cash equivalents at beginning of year		33,502			33,711			35,196
Cash and cash equivalents at end of year	$	43,717		$	33,502		$	33,711

The principal sources of funds for United Community are deposits, loan repayments, maturities of securities, borrowings from financial institutions, repurchase agreements, and other funds provided by operations. Home Savings also has the ability to borrow from the Federal Home Loan Bank. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan prepayments are more influenced by interest rates, general economic conditions, and competition. Investments in liquid assets maintained by United Community and Home Savings are based upon management’s assessment of (1) the need for funds, (2) expected deposit flows, (3) yields available on short-term liquid assets, and (4) objectives of the asset and liability management program. At December 31, 2008, approximately $594.1 million of Home Savings’ certificates of deposit are expected to mature within one year. Based on past experience and Home Savings’ prevailing pricing strategies, management believes that a substantial percentage of such certificates will be renewed with Home Savings at maturity, although there can be no assurance that this will occur.

On April 30, 2007, United Community announced that its Board of Directors had approved the purchase of up to 2,000,000 treasury shares to be made in the open market or in negotiated transactions from time to time, depending on market conditions. United Community acquired no shares in 2008 under this program. United Community acquired 950,243 common shares for $9.7 million and 196,300 common shares for $2.3 million, during the years ended December 31, 2007 and 2006. As of December 31, 2008, United Community had remaining authorization to repurchase 1,477,804 shares under the current repurchase program but the OTS Order prohibits

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United Community from repurchasing shares without prior approval. Refer to Note 3 of the Consolidated Financial Statements for a complete discussion of the limitations of the regulatory enforcement actions.

Home Savings is required by federal regulations to meet certain minimum capital requirements. Minimum regulatory capital requirements call for tangible capital of 1.5% of average tangible assets; Tier 1 capital of 4.0% of average total assets (the Tier 1 Leverage Ratio) and total risk-based capital (which for Home Savings consists of Tier 1 capital and a portion of the allowance for loan losses) of 8.0% of risk-weighted assets (assets are weighted at percentage levels ranging from 0% to 100% as defined by law and regulation depending on their relative risk). The Bank Order requires Home Savings to maintain a Tier 1 Leverage Ratio at a minimum of 8.0% and a total risk-based capital ratio of no less than 12.0%. At December 31, 2008, Home Savings’ Tier 1 capital was 8.20% and its total risk-based capital was 12.06%. Because of the consent to the Bank Order, Home Savings is deemed “adequately capitalized’’ for regulatory capital purposes. Refer to Note 3 of the Consolidated Financial Statements for a complete discussion of the limitations of the regulatory enforcement actions.

The following table summarizes Home Savings’ regulatory capital requirements and actual capital at December 31, 2008.

											Excess of Actual
						Current					Capital Over Current					Applicable
	Actual Capital					Minimum Requirement					Requirement					Asset Base
	Amount		Percent			Amount		Percent			Amount		Percent			Total
						(Dollars in thousands)
Tangible capital	$	217,630		8.20	%	$	39,817		1.50	%	$	177,813		6.70	%	$	2,654,488
Tier 1 capital		217,630		8.20			106,180		4.00			111,450		4.20			2,654,488
Risk-based capital		242,944		12.06			161,163		8.00			81,781		4.06			2,014,534

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Item 8.   Financial Statements and Supplementary Data

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	December 31,
	2008			2007
	(In thousands)
ASSETS
Cash and deposits with banks	$	21,745		$	29,405
Federal funds sold		21,672			4,097
Total cash and cash equivalents		43,417			33,502
Securities:
Trading, at fair value		—			312
Available for sale, at fair value		215,731			240,035
Loans held for sale		16,032			87,236
Loans, net of allowance for loan losses of $35,962 and $32,006		2,203,453			2,236,988
Federal Home Loan Bank stock, at cost		26,464			25,432
Premises and equipment, net		25,015			26,596
Accrued interest receivable		10,082			12,987
Real estate owned and other repossessed assets		29,258			10,510
Goodwill		—			33,593
Core deposit intangible		884			1,169
Cash surrender value of life insurance		25,090			24,053
Assets of discontinued operations — Butler Wick Corp.		5,562			20,314
Other assets		17,085			18,390
Total assets	$	2,618,073		$	2,771,117
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Non-interest bearing	$	106,255		$	106,449
Interest bearing		1,779,676			1,768,757
Total deposits		1,885,931			1,875,206
Borrowed funds:
Federal Home Loan Bank advances		337,603			437,253
Repurchase agreements and other		125,269			149,533
Total borrowed funds		462,872			586,786
Advance payments by borrowers for taxes and insurance		19,806			17,853
Accrued interest payable		3,077			7,837
Liabilities of discontinued operations — Butler Wick Corp.		2,388			4,371
Accrued expenses and other liabilities		9,076			9,350
Total liabilities		2,383,150			2,501,403
Commitments and contingent liabilities (Note 6 and Note 14)		—			—
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		146,439			146,683
Retained earnings		165,447			213,727
Accumulated other comprehensive income		3,635			661
Unearned employee stock ownership plan shares		(7,643	)		(9,465	)
Treasury stock, at cost, 2008 — 6,906,632 shares and 2007 — 7,752,684 shares		(72,955	)		(81,892	)
Total shareholders’ equity		234,923			269,714
Total liabilities and shareholders’ equity	$	2,618,073		$	2,771,117

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2008			2007			2006
	(In thousands, except per share data)
Interest income
Loans	$	136,556		$	154,252		$	151,029
Loans held for sale		466			914			1,894
Securities:
Trading		3			26			38
Available for sale		13,652			11,818			9,281
Federal Home Loan Bank stock dividends		1,360			1,677			1,426
Other interest earning assets		141			128			95
Total interest income		152,178			168,815			163,763
Interest expense
Deposits		60,239			68,052			58,640
Federal Home Loan Bank advances		12,358			21,493			21,246
Repurchase agreements and other		6,319			6,558			4,067
Total interest expense		78,916			96,103			83,953
Net interest income		73,262			72,712			79,810
Provision for loan losses		25,329			28,750			4,347
Net interest income after provision for loan losses		47,933			43,962			75,463
Non-interest income
Non-deposit investment income		1,624			1,429			565
Service fees and other charges		6,177			7,707			6,443
Net gains (losses):
Securities available for sale		1,936			(21	)		—
Other than temporary impairment charges on securities available for sale		(6,087	)		—			—
Trading securities		(38	)		31			60
Loans sold		2,809			2,624			2,943
Real estate owned and other repossessed assets sold		(4,770	)		(1,061	)		(63	)
Other income		4,133			3,593			3,255
Total non-interest income		5,784			14,302			13,203
Non-interest expense
Salaries and employee benefits		32,570			33,128			33,340
Goodwill impairment charge		33,593			—			—
Occupancy		3,731			3,443			3,127
Equipment and data processing		6,814			6,502			5,666
Franchise tax		2,122			2,102			2,091
Advertising		964			1,206			1,162
Amortization of core deposit intangible		285			365			584
Deposit insurance premiums		3,233			215			216
Professional fees		3,400			2,505			1,979
Real estate owned and other repossessed asset expenses		2,061			720			308
Other expenses		5,413			5,454			4,837
Total non-interest expense		94,186			55,640			53,310
Income (loss) before income taxes and discontinued operations		(40,469	)		2,624			35,356
Income tax expense (benefit)		(3,240	)		910			12,393
Net income (loss) before discontinued operations		(37,229	)		1,714			22,963
Discontinued operations
Net income of Butler Wick Corp., net of tax		1,950			2,419			1,148
Net income (loss)	$	(35,279	)	$	4,133		$	24,111
Earnings (loss) per share
Basic-continuing operations	$	(1.26	)	$	0.06		$	0.77
Basic-discontinued operations		0.06			0.08			0.04
Basic		(1.20	)		0.14			0.81
Diluted-continuing operations		(1.26	)		0.06			0.76
Diluted-discontinued operations		0.06			0.08			0.04
Diluted		(1.20	)		0.14			0.80

See Notes to Consolidated Financial Statements.

41

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

										Accumulated			Unearned
										Other			Employee Stock
	Shares			Common			Retained			Comprehensive			Ownership			Treasury
	Outstanding			Stock			Earnings			Income (Loss)			Plan Shares			Stock			Total
	(In thousands, except per share data)
Balance December 31, 2005		31,062		$	143,896		$	207,120		$	(1,845	)	$	(13,108	)	$	(71,328	)	$	264,735
Comprehensive income:
Net income		—			—			24,111			—			—			—			24,111
Other comprehensive income		—			—			—			681			—			—			681
Comprehensive income																				24,792
Adjustment to initially apply SFAS 158, net of taxes of $72		—			—						(132	)		—			—			(132	)
Shares allocated to ESOP participants		—			1,797			—			—			1,821			—			3,618
Purchase of treasury stock		(196	)		—			—			—			—			(2,298	)		(2,298	)
Exercise of stock options		111			141			(303	)		—			—			1,181			1,019
Dividends paid, $0.3502 per share		—			—			(10,401	)		—			—			—			(10,401	)
Balance December 31, 2006		30,977			145,834			220,527			(1,296	)		(11,287	)		(72,445	)		281,333
Comprehensive income:
Net income		—			—			4,133			—			—			—			4,133
Other comprehensive income		—			—			—			1,957			—			—			1,957
Comprehensive income																				6,090
Shares allocated to ESOP participants		—			837			—			—			1,822			—			2,659
Purchase of treasury stock		(950	)		—			—			—			—			(9,709	)		(9,709	)
Exercise of stock options		25			12			(86	)		—			—			262			188
Dividends paid, $0.3697 per share		—			—			(10,847	)		—			—			—			(10,847	)
Balance December 31, 2007		30,052			146,683			213,727			661			(9,465	)		(81,892	)		269,714
Comprehensive income:
Net loss		—			—			(35,279	)		—			—			—			(35,279	)
Other comprehensive income		—			—			—			2,974			—			—			2,974
Comprehensive loss																				(32,305	)
Shares allocated to ESOP participants		—			(394	)		—			—			1,822			—			1,428
Stock based compensation		—			150			—			—			—			—			150
Stock dividends paid		846			—			(8,937	)		—			—			8,937			—
Cash dividends paid, $0.1386 per share		—			—			(4,064	)		—			—			—			(4,064	)
Balance December 31, 2008		30,898		$	146,439		$	165,447		$	3,635		$	(7,643	)	$	(72,955	)	$	234,923

See Notes to Consolidated Financial Statements.

42

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Cash Flows from Operating Activities
Net income (loss)	$	(35,279	)	$	4,133		$	24,111
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		25,329			28,750			4,347
Net gains on loans		(2,809	)		(2,624	)		(2,943	)
Net losses on real estate owned and other repossessed assets		4,763			1,053			95
Net losses on other assets		(1,891	)		(14	)		(95	)
Other than temporary impairment of securities available for sale		6,087			—			—
Amortization of premiums and accretion of discounts		5,312			3,334			3,095
Depreciation and amortization		2,532			2,778			2,503
Federal Home Loan Bank stock dividends		(1,032	)		—			(1,426	)
Decrease (increase) in interest receivable		2,905			689			(1,692	)
(Decrease) increase in interest payable		(4,760	)		4,996			230
Increase in prepaid and other assets		(3,343	)		(1,296	)		(3,947	)
(Decrease) increase in other liabilities		(1,797	)		(13,700	)		(342	)
Decrease in trading securities		274			289			433
Stock based compensation		150			—			—
Goodwill impairment charges		33,593			—			—
Net principal disbursed on loans originated for sale		(160,276	)		(205,994	)		(219,924	)
Proceeds from sale of loans originated for sale		234,289			224,632			225,126
ESOP compensation		1,428			2,659			3,618
Operating cash flows from discontinued operations		784			522			(1,257	)
Net cash from operating activities		106,259			50,207			31,932
Cash Flows from Investing Activities
Proceeds from principal repayments and maturities of:
Securities available for sale		50,569			56,982			42,666
Proceeds from sale of:
Securities available for sale		139,938			16,899			—
Nonperforming loans		—			—			210
Premises and equipment		—			—			531
Real estate owned and other repossessed assets		12,917			6,035			4,059
Purchases of:
Securities available for sale		(167,141	)		(77,641	)		(76,588	)
Principal disbursed on loans, net of repayments		58,371			80,922			31,818
Loans purchased		(86,758	)		(184,892	)		(198,229	)
Purchases of premises and equipment		(925	)		(4,903	)		(4,341	)
Investing cash flows from discontinued operations		11,985			(18	)		(17	)
Net cash from investing activities		18,956			(106,616	)		(199,891	)
Cash Flows from Financing Activities
Net increase (decrease) in checking, savings and money market accounts		(43,969	)		35,824			53,093
Net increase in certificates of deposit		54,694			16,450			88,012
Net increase in advance payments by borrowers for taxes and insurance		1,953			381			3,149
Proceeds from Federal Home Loan Bank advances		718,900			737,953			671,326
Repayment of Federal Home Loan Bank advances		(818,550	)		(765,953	)		(681,622	)
Net change in repurchase agreements and other borrowings		(24,264	)		51,925			44,337
Cash dividends paid		(4,064	)		(10,847	)		(10,401	)
Proceeds from exercise of stock options		—			176			878
Purchase of treasury stock		—			(9,709	)		(2,298	)
Net cash from financing activities		(115,300	)		56,200			166,474
Change in cash and cash equivalents		9,915			(209	)		(1,485	)
Cash and cash equivalents, beginning of year		33,502			33,711			35,196
Cash and cash equivalents, end of year	$	43,417		$	33,502		$	33,711

See Notes to Consolidated Financial Statements.

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of United Community Financial Corp. (United Community), a unitary savings and loan holding company, The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), an Ohio chartered savings bank, and Butler Wick Corp. (Butler Wick), a holding company for (i) an investment brokerage firm registered with the Securities and Exchange Commission (SEC) as well as a member of the Financial Industry Regulatory Authority, Inc. (FINRA) and the Chicago Stock Exchange and (ii) a state chartered trust company, conform to accounting principles generally accepted in the United States of America and prevailing practices within the banking, thrift and brokerage industries. A summary of the more significant accounting policies follows.

Nature of Operations

United Community was incorporated under Ohio law in February 1998 by Home Savings in connection with the conversion of Home Savings from an Ohio mutual savings and loan association to an Ohio capital stock savings and loan association (Conversion). Upon consummation of the Conversion on July 8, 1998, United Community became the unitary savings and loan holding company for Home Savings. The business of Home Savings is providing consumer and business banking service to its market area in Ohio and western Pennsylvania. At the end of 2008, Home Savings was doing business through 39 full-service banking branches and six loan production offices. Loans and deposits are primarily generated from the areas where banking branches are located. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the market area. Home Savings derives its income predominantly from interest on loans, securities, and to a lesser extent, non-interest income. Home Savings’ principal expenses are interest paid on deposits, Federal Home Loan Bank advances, and normal operating costs. Consistent with internal reporting, Home Savings’ operations are reported in one operating segment, which is banking services.

On August 12, 1999, United Community acquired Butler Wick, the parent company for two wholly owned subsidiaries: Butler Wick & Co., Inc. and Butler Wick Trust Company. On December 31, 2008, the Company completed the sale of Butler Wick & Co., Inc., to Stifel Financial Corp. for $12.0 million. On January 7, 2009, the Company announced the sale of Butler Wick Trust, to Farmers National Banc Corp. As a result, Butler Wick has been reported as a discontinued operation and consolidated financial statement information for all periods presented has been reclassified to reflect this presentation.

Basis of Presentation

The consolidated financial statements include the accounts of United Community and its subsidiaries. All material inter-company transactions have been eliminated. Certain prior period data has been reclassified to conform to current period presentation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair value of financial instruments, fair value of servicing rights, fair value of other real estate owned and other repossessed assets, realizability of deferred tax assets, and status of contingencies are particularly subject to change.

Securities

Securities are classified as available for sale or trading upon their acquisition. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at estimated fair

44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

value with the unrealized holding gain or loss reported in other comprehensive income. Securities classified as trading are held principally for resale in the near term and are recorded at fair market value with any changes in fair value included in income. Quoted market prices are used to determine the fair value of trading securities. Restricted securities such as Federal Home Loan Bank stock are carried at cost. Interest income includes amortization of purchase premium or discount on debt securities. Premiums or discounts are amortized on the level-yield method without anticipating prepayments. Gains and losses on sales are recorded on the trade date and are based on the amortized cost of the individual security sold.

Securities are written down to fair value when a decline in fair value is other-than-temporary. Declines in the fair value of securities below their cost that are other-than-temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Loans held for sale primarily consist of residential mortgage loans originated for sale and other loans which have been identified for sale. These loans are carried at the lower of cost or fair value, determined in the aggregate. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Mortgage loans held for sale are sold with either servicing rights retained or servicing released. The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing right. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the outstanding principal balance, net of purchase premiums or discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income includes amortization of net deferred loan fees and costs over the loan term. Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Consumer loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for a loan placed on nonaccrual is reversed against interest income. Nonaccrual loans are comprised principally of loans 90 days past due as well as certain loans which are less than 90 days past due, but where serious doubt exists as to the ability of the borrowers to comply with the repayment terms. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when future payments are reasonably assured.

Concentration of Credit Risk

Most of the Company’s business activity is with customers located within Home Savings’ market area. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in Northeast Ohio.

Certain Purchased Loans

The Company purchases individual loans and groups of loans, some of which have shown evidence of credit deterioration since origination. These purchased loans are recorded at the amount paid, such that there is no

45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

carryover of the seller’s allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses.

Such purchased loans are accounted for individually or aggregated into pools of loans based on common risk characteristics (e.g., credit score, loan type, and date of origination). The Company estimates the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on an analysis using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, general economic conditions in the market area and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers pools of other loans and is based on historical loss experience adjusted for current factors.

A loan is considered impaired when, based on current information and events, it is probable that United Community will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement and the loan is non-homogeneous in nature and includes one-to four-family loans with partial chargeoffs and select consumer loans, the loan will be considered impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the facts and circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. For sales of mortgage loans prior to January 1, 2007, a portion of the cost of the loan was allocated to the servicing right based on relative fair values. The Company adopted SFAS No. 156 on January 1, 2007, and for sales of mortgage loans beginning in 2007, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying assets.

46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as original maturity, interest rate and loan type. Impairment is recognized through a valuation allowance for an individual tranche. If United Community later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal, or a fixed amount per loan, and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation and amortization. Buildings and related components are depreciated and amortized using the straight-line method over the useful lives, generally ranging from 20 years to 40 years (or term of the lease, if shorter) of the related assets. Furniture and fixtures are depreciated using the straight-line method with useful lives ranging from three to five years.

Federal Home Loan Bank (FHLB) stock

The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Real Estate Owned and Other Repossessed Assets

Real estate owned, including property acquired in settlement of foreclosed loans, is carried at fair value less estimated cost to sell after foreclosure, establishing a new cost basis. If fair value declines after acquisition, a valuation allowance is recorded through expense. Costs relating to the development and improvement of real estate owned are capitalized, whereas costs relating to holding and maintaining the properties are charged to expense. Other repossessed assets are carried at the lower of cost or estimated fair value less estimated cost to sell after acquisition.

Goodwill and Core Deposit Intangible

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment has been recognized in the period identified.

Core deposit intangible assets arose from whole bank acquisitions. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives.

Cash Surrender Value of Life Insurance

Life insurance is carried on the lives of certain employees where Home Savings is the beneficiary. In accordance with EITF 06-05, life insurance is recorded at its cash surrender value, or the amount currently

47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

realizable. Increases in the Home Savings’ policy cash surrender value are tax exempt and death benefit proceeds received by Home Savings are tax-free. Income from these policies and changes in the cash surrender value are recorded in other income.

401(k) Savings Plan

Employee 401(k) and profit sharing plan expense is the amount of matching contributions and administrative costs to administer the plan.

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 for 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 is measured annually by a third-party actuary.

Long-term Assets

Premises and equipment and other long — term assets are reviewed for impairment when events indicate their carrying amounts may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Loan Fees

Loan origination fees received for loans, net of direct origination costs, are deferred and amortized to interest income over the contractual lives of the loans using the level yield method. Fees received for loan commitments that are expected to be drawn, based on Home Savings’ experience with similar commitments, are deferred and amortized over the lives of the loans using the level-yield method. Fees for other loan commitments are deferred and amortized over the loan commitment period on a straight-line basis. Unamortized deferred loan fees or costs related to loans paid off are included in income. Unamortized net fees or costs on loans sold are included in the basis of the loans in calculating gains and losses. Amortization of net deferred fees is discontinued for loans that are deemed to be nonperforming.

Commissions and Service Fees

Brokerage commissions are recognized when earned which is generally the settlement date of the security. Service fees are assessed to customer accounts on a regular basis. Trust fees are recognized in income on the accrual basis. Fees are assessed to customer accounts on a regularly scheduled basis and are generally based on the value of the assets under management.

Stock Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Taxes

Income tax expense is the total of current year income tax due or refundable and change in deferred tax assets and liabilities. Deferred income taxes, which result from temporary differences in the recognition of income and expense for financial statement and tax return purposes, are included in the calculation of income tax expense. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in income in the period that includes the enactment date.

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation allowances are established, based on the weight of available evidence, when it is more likely than not that some portion or all of the deferred tax asset will not be realized. Income tax expense is the tax payable or refundable for the period adjusted for the change during the period in deferred tax assets and liabilities.

The Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no affect on the Company’s financial statements.

The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other expense. The Company did not have any amounts accrued for interest and penalties at January 1, 2008 or December 31, 2008.

Employee Stock Ownership Plan

The cost of shares issued to the Employee Stock Ownership Plan (ESOP), but not yet allocated to participants, is shown as a reduction of shareholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

Stock Dividends

Stock dividends paid using treasury shares are reported by reducing retained earnings and treasury shares by the fair value of the shares issued. The difference between fair value and cost of treasury shares issued is also reflected as a transfer to or from retained earnings and treasury shares. There are no dividends paid on fractional shares. Earnings per share is affected by the change in the number of shares outstanding. All prior period share and per share disclosures have been adjusted to reflect the payment of a stock dividend declared in November 2008.

Earnings Per Share

Basic earnings per share (EPS) are based on the weighted average number of common shares outstanding during the year. Diluted EPS are based on the weighted average number of common shares and common share equivalents outstanding during the year. Unearned ESOP shares are not considered outstanding for this calculation. See further discussion at Note 23.

Statements of Cash Flows

For purposes of the statement of cash flows, United Community considers all highly liquid investments with a term of three months or less to be cash equivalents. Net cash flows are reported for loan and deposit transactions, trading securities, margin accounts, short-term borrowings and advance payments by borrowers for taxes and insurance.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. See further discussion at Note 14.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 19. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Comprehensive Income

Comprehensive income consists of net income and unrealized gains and losses on securities available for sale and changes in unrealized gains and losses on postretirement liabilities, which are also recognized as separate components of equity.

Off Balance Sheet Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

New Accounting Standards

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (FAS 157). This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard was effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material. In October 2008, the FASB issued Staff Position (FSP) 157-3, Determining the Fair Value of a Financial Asset when the Market for That Asset Is Not Active. This FSP clarifies the application of FAS 157 in a market that is not active. The impact of adoption was not material.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The new standard was effective for the Company on January 1, 2008. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008 or any subsequent date.

In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This issue requires that a liability be recorded during the service period when a split-dollar life insurance agreement continues after participants’ employment or retirement. The required accrued liability will be based on either the post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement. This issue was effective for fiscal years beginning after December 15, 2007. The impact of adoption was not material.

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On November 5, 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value through Earnings (SAB 109). Previously, SAB 105, Application of Accounting Principles to Loan Commitments, stated that in measuring the fair value of a derivative loan commitment, a company should not incorporate the expected net future cash flows related to the associated servicing of the loan. SAB 109 supersedes SAB 105 and indicates that the expected net future cash flows related to the associated servicing of the loan should be included in measuring fair value for all written loan commitments that are accounted for at fair value through earnings. SAB 105 also indicated that internally-developed intangible assets should not be recorded as part of the fair value of a derivative loan commitment, and SAB 109 retains that view. SAB 109 was effective for derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The impact of adoption was not material.

In December 2007, the SEC issued SAB No. 110, which expresses the views of the SEC regarding the use of a “simplified” method, as discussed in SAB No. 107, in developing an estimate of expected term of “plain vanilla” share options in accordance with SFAS No. 123(R), Share-Based Payment. The SEC concluded that a company could, under certain circumstances, continue to use the simplified method for share option grants after December 31, 2007. The Company does not use the simplified method for share options and therefore SAB No. 110 has no impact on the Company’s consolidated financial statements.

Newly Issued But Not Yet Effective Accounting Standards

In December 2007, the FASB issued FAS No. 141 (revised 2007), Business Combinations (FAS 141(R)), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. FAS No. 141(R) is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160), which will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheets. FAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. Earlier adoption is prohibited and the Company does not expect the adoption of FAS No. 160 to have a significant impact on its results of operations or financial position.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133. FAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 for derivative instruments and hedging activities. FAS No. 161 requires qualitative disclosure about objectives and strategies for using derivative and hedging instruments, quantitative disclosures about fair value amounts of the instruments and gains and losses on such instruments, as well as disclosures about credit-risk features in derivative agreements. FAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of this standard is not expected to have a material effect on the Corporation’s results of operations or financial position.

Operating Segments

Internal financial information is primarily reported and aggregated in one line of business, which is banking services. As a result of the sale of Butler Wick & Co., Inc., and the pending sale of Butler Wick Trust, Butler Wick has been reported as a discontinued operation and consolidated financial statement information for all periods presented has been reclassified to reflect this presentation.

Dividend Restriction

Banking regulations require maintaining certain capital levels and may limit the dividends paid by Home Savings to the holding company or by the holding company to shareholders. The OTS Order prohibits United

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Community from paying a cash dividend to shareholders without prior approval. See Notes 3 and 16 for further discussion.

Reclassifications

Some items in the prior year financial statements were reclassified to conform to the current presentation.

2.   CASH AND CASH EQUIVALENTS

Federal Reserve Board regulations require depository institutions to maintain certain non-interest bearing reserve balances. These reserves, which consisted of vault cash at Home Savings, totaled approximately $12.7 million and $11.2 million at December 31, 2008 and 2007, respectively.

3.   REGULATORY ENFORCEMENT ACTION

On August 8, 2008, the board of directors of United Community approved a Stipulation and Consent to Issuance of Order to Cease and Desist (OTS Order) with the Office of Thrift Supervision (OTS). Simultaneously, the board of directors of Home Savings approved a Stipulation and Consent to the Issuance of an Order to Cease and Desist (Bank Order) with the Federal Deposit Insurance Corporation (FDIC) and the Division of Financial Institutions of the Ohio Department of Commerce (Ohio Division). Although United Community and Home Savings have agreed to the issuance of the OTS Order and the Bank Order, respectively, neither has admitted or denied any allegations of unsafe or unsound banking practices, or any legal or regulatory violations. No monetary penalties were assessed by the OTS, the FDIC, or the Ohio Division.

The OTS Order requires United Community to obtain OTS approval prior to: (i) incurring or increasing its debt position; (ii) repurchasing any United Community stock; or (iii) paying any dividends. The OTS Order also requires United Community to develop a debt reduction plan and submit the plan to the OTS for approval.

The Bank Order requires Home Savings, within specified timeframes, to take or refrain from certain actions, including: (i) retaining a bank consultant to assess Home Savings management needs and submitting a management plan that identifies officer positions needed, identifies and establishes board and internal operating committees, evaluates Home Savings’ senior officers, and provides for the hiring of any additional personnel; (ii) seeking regulatory approval prior to adding any individuals to the board of directors or employing any individual as a senior executive officer of Home Savings; (iii) not extending additional credit to classified borrowers; (iv) establishing a compliant Allowance for Loan and Lease Loss methodology; (v) enhancing its risk management policies and procedures; (vi) adopting and implementing plans to reduce its classified assets and delinquent loans, and to reduce loan concentrations in nonowner-occupied commercial real estate and construction, land development, and land loans; (vii) establishing board of directors committees to evaluate and approve certain loans and oversee Home Savings’ compliance with the Bank Order; (viii) revising its loan policy and enhancing its underwriting and credit administration functions; (ix) developing a strategic plan and budget and profit plan; (x) correcting all violations of laws, rules, and regulations and implementing procedures to ensure future compliance; (xi) increasing its Tier 1 leverage ratio to 8.0% and its total risk-based capital ratio to 12.0% by December 31, 2008; and (xii) seeking regulatory approval prior to declaring or paying any cash dividend. At December 31, 2008, Home Savings’ Tier 1 leverage ratio was 8.20% and its total risk-based capital ratio was 12.06%. Because of the consent to the Bank Order, Home Savings is deemed ‘adequately capitalized’ for regulatory capital purposes.

4.   DISCONTINUED OPERATIONS

On December 31, 2008, the Company completed the sale of Butler Wick & Co., Inc., a wholly-owned subsidiary of Butler Wick, to Stifel Financial Corp. for $12.0 million. Butler Wick recognized a gain on this sale of $3.3 million. United Community used $9.8 million of these proceeds to reduce outstanding debt. On January 7, 2009, the Company announced the sale of Butler Wick Trust, a wholly-owned subsidiary of Butler Wick, to Farmers National Banc Corp. As a result, Butler Wick has been reported as a discontinued operation and consolidated

52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

financial statement information for all periods presented has been reclassified to reflect this presentation. Major classes of assets and liabilities included in the consolidated balance sheet are as follows:

	December 31,		December 31,
	2008		2007
	(In thousands)
Assets
Cash and deposits with banks	$	1,126	$	3,861
Total cash and cash equivalents		1,126		3,861
Securities:
Trading		—		4,752
Available for sale		3,337		4,718
Premises and equipment, net		86		926
Accrued interest receivable		29		89
Other assets		984		5,968
Total assets	$	5,562	$	20,314
Liabilities and Shareholder’s Equity
Accrued expenses and other liabilities	$	2,388	$	4,371
Total liabilities		2,388		4,371
Total shareholder’s equity		3,174		15,943
Total liabilities and shareholder’s equity	$	5,562	$	20,314

Butler Wick’s results of operations for the years ended December 31, 2008, 2007 and 2006 are as follows:

	December 31,
	2008		2007		2006
	(In thousands)
Income
Interest income	$	813	$	1,135	$	1,667
Brokerage commissions		25,667		24,963		19,317
Service fees and other charges		5,876		6,349		6,103
Underwriting and investment banking		1,151		764		814
Gain on the sale of Butler Wick & Co., Inc.		3,317		—		—
Other income		117		521		837
Total income		36,941		33,732		28,738
Expenses
Interest expense on borrowings		243		345		475
Salaries and employee benefits		25,772		22,841		18,932
Occupancy expenses		1,553		1,403		1,324
Equipment and data processing		2,508		2,515		3,331
Other expenses		3,798		2,929		2,921
Total expenses		33,874		30,033		26,983
Income before taxes		3,067		3,699		1,755
Income tax		1,117		1,280		607
Net income	$	1,950	$	2,419	$	1,148

53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.   SECURITIES

The components of securities are as follows:

	December 31, 2008							December 31, 2007
			Gross		Gross					Gross		Gross
	Fair		Unrealized		Unrealized			Fair		Unrealized		Unrealized
	Value		Gains		Losses			Value		Gains		Losses
	(In thousands)
Available for Sale
U.S. Treasury and government sponsored entities’ securities	$	27,170	$	865	$	—		$	79,670	$	311	$	(126	)
Equity securities		910		70		(411	)		7,064		221		(494	)
Mortgage-related securities		187,651		4,527		(107	)		153,301		977		(443	)
Total	$	215,731	$	5,462	$	(518	)	$	240,035	$	1,509	$	(1,063	)

Debt securities available for sale by contractual maturity, repricing or expected call date are shown below:

	December 31, 2008
	Fair Value
	(In thousands)
Due in one year or less	$	—
Due after one year through five years		11,366
Due after five years through ten years		15,804
Mortgage-related securities		187,651
Total	$	214,821

Since equity securities do not have a contractual maturity, they are excluded from the table above.

Proceeds, gross realized gains, losses and impairment charges of available for sale securities were as follows:

	2008			2007			2006
	(In thousands)
Proceeds	$	139,938		$	16,899		$	—
Gross gains		1,936			96			—
Gross losses		—			(117	)		—
Impairment charges		(6,087	)		—			—

Home Savings holds in its available-for-sale securities portfolio a Fannie Mae auction rate pass through trust security with a cost basis of $5.0 million. This security represents an interest in a trust that is collateralized with Fannie Mae non-cumulative preferred stock. The market value of the security held by the Company declined following the September 7, 2008 announcement of the appointment of a conservator for Fannie Mae. Because the effects of the conservatorship may trigger the redemption provisions of the trust, UCFC management determined it was necessary for the Company to recognize a write-down of $4.9 million in 2008. In addition, a write-down of the Company’s equity investment in the common shares of three financial institutions of $1.1 million was recognized in 2008. These shares have traded below the Company’s cost basis for an extended period and a forecasted recovery was unable to be determined.

Securities pledged for public funds deposits were approximately $2.1 million and $19.0 million at December 31, 2008 and 2007, respectively. See further discussion regarding pledged securities in Note 13.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

United Community’s trading securities are carried at fair value and consist of the following:

	2008		2007
	(In thousands)
Debt Securities:
Mutual funds	$	—	$	312
Total trading securities	$	—	$	312

Securities available for sale in a continuous unrealized loss position are as follows at December 31, 2008:

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
	(In thousands)
Description of securities:
U.S. Treasury and government sponsored entities	$	—	$	—		$	—	$	—		$	—	$	—
Equity securities		282		(411	)		—		—			282		(411	)
Mortgage-related securities		2,765		(69	)		1,026		(38	)		3,791		(107	)
Total temporarily impaired securities	$	3,047	$	(480	)	$	1,026	$	(38	)	$	4,073	$	(518	)

Securities available for sale in an unrealized loss position are as follows at December 31, 2007:

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
	(In thousands)
Description of securities:
U.S. Treasury and government sponsored entities	$	7,734	$	(12	)	$	22,844	$	(114	)	$	30,578	$	(126	)
Equity securities		1,228		(473	)		92		(21	)		1,320		(494	)
Mortgage-related		12		—			36,569		(443	)		36,581		(443	)
Total temporarily impaired securities	$	8,974	$	(485	)	$	59,505	$	(578	)	$	68,479	$	(1,063	)

All of the government sponsored entities and mortgage related securities that are temporarily impaired at December 31, 2008, are impaired due to the current level of interest rates. All of these securities continue to pay on schedule and management expects to receive all principal and interest owed on the securities. The three equity securities that are temporarily impaired at December 31, 2008, are all well capitalized financial institutions and each exhibit a low to moderate level of nonperforming assets.

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6.   LOANS

Portfolio loans consist of the following:

	December 31,
	2008			2007
	(In thousands)
Real Estate:
One- to four-family residential	$	909,567		$	871,019
Multi-family residential		187,711			179,535
Non-residential		375,463			359,070
Land		23,517			22,818
Construction:
One- to four-family residential		255,355			357,153
Multi-family and non-residential		35,797			25,191
Total real estate		1,787,410			1,814,786
Consumer		348,834			349,447
Commercial		101,489			103,208
Total loans		2,237,733			2,267,441
Less:
Allowance for loan losses		35,962			32,006
Deferred loan costs, net		(1,682	)		(1,553	)
Total		34,280			30,453
Loans, net	$	2,203,453		$	2,236,988

The Bank Order requires Home Savings to adopt and implement plans to reduce loan concentrations in nonowner-occupied commercial real estate and construction, land development, and land loans. The plan was developed and adopted by Home Savings and was implemented in the third quarter of 2008. The plan included sharply reducing the origination of new construction, land, and land development loans as well as loans secured by commercial real estate. The Company has also reduced the level of construction loans purchased from another financial institution.

Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments extend over various periods of time with the majority of such commitments disbursed within a sixty-day period. Commitments generally have fixed expiration dates or other termination clauses, may require payment of a fee and may expire unused. Commitments to extend credit at fixed rates expose Home Savings to some degree of interest rate risk. Home Savings evaluates each customer’s creditworthiness on a case-by-case basis. The type or amount of collateral obtained varies and is based on management’s credit evaluation of the potential borrower. Home Savings normally has a number of outstanding commitments to extend credit.

	December 31,
	2008				2007
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
	(In thousands)
Commitments to make loans	$	63,362	$	11,999	$	47,324	$	38,822
Undisbursed loans in process		7,746		129,828		5,377		234,281
Unused lines of credit		80,101		61,196		86,261		86,807

Terms of the commitments in both years extend up to six months, but are generally less than two months. The fixed rate loan commitments have interest rates ranging from 5.875% to 18% and maturities ranging from six months to 30 years. Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships pursuant to SFAS 133. At year-end 2008, the Company had approximately $40.8 million of interest rate lock commitments and $66.9 million of forward commitments for the future delivery of residential mortgage loans. At year-end 2007, the Company had approximately $11.1 million of interest rate lock commitments and $17.2 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was not material at year end 2008 or 2007.

At December 31, 2008 and 2007, there were $2.9 million and $7.2 million, respectively, of outstanding standby letters of credit. These are issued to guarantee the performance of a customer to a third party. Standby letters of credit are generally contingent upon the failure of the customer to perform according to the terms of an underlying contract with the third party.

At December 31, 2008 and 2007, there was $41.2 million and $40.1 million in outstanding commitments to fund the OverdraftPrivledge^tm Program at Home Savings. With OverdraftPrivledge^tm, Home Savings pays non-sufficient funds (NSF) checks and fees on checking accounts up to a preapproved limit.

Changes in the allowance for loan losses are as follows:

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Balance, beginning of year	$	32,006		$	16,955		$	15,723
Provision for loan losses		25,329			28,750			4,347
Amounts charged off		(22,088	)		(14,220	)		(3,438	)
Recoveries		715			521			323
Balance, end of year	$	35,962		$	32,006		$	16,955

Nonaccrual loans were $98.3 million, $97.5 million, and $52.6 million at December 31, 2008, 2007 and 2006, respectively. Restructured loans were $1.8 million, $2.3 million and $1.4 million at December 31, 2008, 2007 and 2006. Loans that are greater than ninety days past due and still accruing were $6.6 million at December 31, 2008, $1.2 million at December 31, 2007, and $796,000 at December 31, 2006.

	As of or for the Year Ended
	December 31,
	2008		2007		2006
	(In thousands)
Impaired loans on which no specific valuation allowance was provided	$	43,256	$	30,475	$	28,329
Impaired loans on which specific valuation allowance was provided		43,992		53,902		14,217
Total impaired loans at year-end	$	87,248	$	84,377	$	42,546
Specific valuation allowances on impaired loans at year-end		10,968		13,165		2,841
Average impaired loans during year		85,812		63,468		23,617
Interest income recognized on impaired loans during the year		513		348		372
Interest income received on impaired loans during the year		513		348		373

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Directors and officers of United Community and Home Savings are customers of Home Savings in the ordinary course of business. The following describes loans to officers and/or directors of United Community and Home Savings:

	(In thousands)
Balance as of December 31, 2007	$	1,279
New loans to officers and/or directors		—
Loan payments during 2008		(43	)
Reductions due to changes in officers and/or directors		(513	)
Balance as of December 31, 2008		723

7.   MORTGAGE BANKING ACTIVITIES

Mortgage loans serviced for others, which are not reported in United Community’s assets, totaled $921.0 million and $876.1 million at December 31, 2008 and 2007.

Activity for capitalized mortgage servicing rights, included in other assets, was as follows:

	2008			2007			2006
	(In thousands)
Balance, beginning of year	$	6,184		$	6,820		$	6,923
Originations		1,337			1,268			1,917
Sale of servicing		—			—			(323	)
Amortized to expense		(1,959	)		(1,904	)		(1,697	)
Balance, end of year		5,562			6,184			6,820
Less valuation allowance		(2,233	)		(562	)		(435	)
Net balance	$	3,329		$	5,622		$	6,385

Fair value of mortgage servicing rights was $3.9 million, $8.7 million and $9.3 million at December 31, 2008, 2007, and 2006, respectively.

Activity in the valuation allowance for mortgage servicing rights was as follows:

	2008			2007			2006
	(In thousands)
Balance, beginning of year	$	(562	)	$	(435	)	$	—
Impairment charges		(2,233	)		(562	)		(435	)
Recoveries		562			435			—
Balance, end of year	$	(2,233	)	$	(562	)	$	(435	)

Key economic assumptions used in measuring the value of mortgage servicing rights at December 31, 2008 and 2007 were as follows:

	2008			2007
Weighted average prepayment rate		644 PSA			272 PSA
Weighted average life (in years)		3.34			3.87
Weighted average discount rate		8	%		8	%

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Estimated amortization expense for each of the next five years is as follows:

	(In thousands)
2009	$	1,716
2010		1,326
2011		1,012
2012		768
2013		441

Amounts held in custodial accounts for investors amounted to $11.2 million and $9.2 million at December 31, 2008 and 2007, respectively.

8.   OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS

Real estate owned and other repossessed assets at December 31, 2008, 2007 and 2006 was as follows:

	2008			2007		2006
	(In thousands)
Other real estate owned and other repossessed assets	$	32,012		$	10,510	$	3,296
Valuation allowance		(2,754	)		—		(54	)
End of year	$	29,258		$	10,510	$	3,242

Activity in the valuation allowance was as follows:

	2008			2007			2006
	(In thousands)
Beginning of year	$	—		$	54		$	—
Additions charged to expense		3,753			—			54
Direct write-downs		(999	)		(54	)		—
End of year	$	2,754		$	—		$	54

Expenses related to foreclosed and repossessed assets include:

	2008		2007		2006
	(In thousands)
Net loss (gain) on sales	$	2,016	$	1,061	$	9
Provision for unrealized losses		2,754		—		54
Operating expenses, net of rental income		2,061		720		308
Total expenses	$	6,831	$	1,781	$	371

9.   PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

	December 31,
	2008		2007
	(In thousands)
Land	$	7,691	$	7,691
Buildings		23,919		24,170
Leasehold improvements		728		728
Furniture and equipment		18,069		17,468
		50,407		50,057
Less: Accumulated depreciation and amortization		25,392		23,461
Total	$	25,015	$	26,596

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Rent expense was $710,000 for 2008, $627,000 for 2007, and $544,000 for 2006. Rent commitments under noncancelable operating leases for offices were as follows, before considering renewal options that generally are present:

	(In thousands)
2009	$	574
2010		577
2011		587
2012		512
2013		318
Thereafter		687
Total	$	3,255

10.   GOODWILL AND INTANGIBLE ASSETS

Goodwill

United Community had no goodwill recorded at December 31, 2008, and $33.6 million at December 31, 2007, and 2006. All of the goodwill previously recorded is associated with the Banking Services segment. Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (as amended), requires goodwill to be tested for impairment on an annual basis, or more frequently if circumstances indicate that an asset might be impaired, by comparing the fair value of such goodwill to its recorded or carrying amount. If the carrying amount of the goodwill exceeds the fair value, an impairment charge must be recorded in an amount equal to the excess. Based on the level that United Community shares had been trading and other factors, management determined that it would be appropriate under the guidance of SFAS No. 142, to test the value of the goodwill previously recorded as a result of the mergers with Industrial Bancorp, Inc. in 2001 and Potters Financial Corporation in 2002 for goodwill impairment during the third quarter of 2008. As a result of impairment testing performed, the Company recorded an impairment charge of $33.6 million in 2008.

The fair value of goodwill was estimated using a number of measurement methods. These included the application of various metrics from bank sale transactions for institutions comparable to Home Savings, including the application of market-derived multiples of tangible book value and earnings, as well as estimations of the present value of future cash flows. Home Savings’ management reviewed the valuation of the fair value of Home Savings with the Audit Committee and concluded that Home Savings should recognize an impairment charge and write down its goodwill to a balance of zero.

Acquired Intangible Assets

	As of December 31,
	2008				2007
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
	(In thousands)
Amortized intangible assets:
Core deposit intangibles	$	8,952	$	8,068	$	8,952	$	7,783
Total	$	8,952	$	8,068	$	8,952	$	7,783
Estimated amortization expense:
For the year ended:
December 31, 2009	$	223
December 31, 2010		176
December 31, 2011		139
December 31, 2012		109
December 31, 2013		86

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Aggregate amortization expense for the years ended December 31, 2008, 2007 and 2006, was $285,000, $365,000 and $584,000, respectively.

11.   DEPOSITS

Deposits consist of the following:

	December 31,
	2008		2007
	(In thousands)
Checking accounts:
Interest bearing	$	99,418	$	94,459
Non-interest bearing		106,255		106,449
Savings accounts		181,643		175,464
Money market accounts		273,359		328,272
Certificates of deposit		1,225,256		1,170,562
Total deposits	$	1,885,931	$	1,875,206

Interest expense on deposits is summarized as follows:

	Year Ended December 31,
	2008		2007		2006
	(In thousands)
Interest bearing demand deposits and money market accounts	$	9,475	$	13,907	$	10,060
Savings accounts		811		769		900
Certificates of deposit		49,953		53,376		47,680
Total	$	60,239	$	68,052	$	58,640

A summary of certificates of deposit by maturity follows:

	December 31, 2008
	(In thousands)
Within 12 months	$	594,099
12 months to 24 months		371,367
Over 24 months to 36 months		47,413
Over 36 months to 48 months		190,058
Over 48 months		22,319
Total	$	1,225,256

A summary of certificates of deposit with balances of $100,000 or more by maturity is as follows:

	December 31,		December 31,
	2008		2007
	(In thousands)
Three months or less	$	17,960	$	58,685
Over three months to six months		30,503		62,268
Over six months to twelve months		41,096		97,000
Over twelve months		119,085		52,157
Total	$	208,644	$	270,110

Deposits in excess of $250,000 are not federally insured. Brokered deposits represent funds which Home Savings obtained, directly or indirectly, through a deposit broker. A deposit broker places deposits from third parties

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

with insured depository institutions or places deposits with an institution for the purpose of selling interest in those deposits to third parties. Under the terms of the Bank Order, Home Savings cannot obtain additional brokered certificates of deposit without prior consent of the FDIC and Ohio Division. Home Savings had brokered deposits of $145.2 million with a weighted average rate of 3.77% at December 31, 2008. Home Savings had brokered deposits of $39.8 million with a weighted average rate of 5.08% at December 31, 2007. A summary of brokered deposits by maturity is as follows:

	2009			2010
	(In thousands)
Balance maturing	$	130,166		$	15,053
Rate		3.70	%		4.35	%

12.   FEDERAL HOME LOAN BANK ADVANCES

The following is a summary of Federal Home Loan Bank advances:

	December 31,
	2008					2007
			Weighted					Weighted
Year of Maturity	Amount		Average Rate			Amount		Average Rate
	(In thousands)
2008		n/a		n/a		$	286,350		2.59	%
2009	$	247,650		1.51	%		65,950		4.74
2010		17,412		4.95			17,412		4.95
2011		5,869		4.93			5,869		4.93
2012		1,861		3.92			1,861		3.92
2013		14,365		3.86			9,365		3.88
Thereafter		50,446		4.14			50,446		4.41
Total Federal Home Loan Bank advances	$	337,603				$	437,253

Home Savings has available credit, subject to collateral requirements, with the Federal Home Loan Bank of approximately $619.1 million, of which $337.6 million is outstanding. All advances must be secured by eligible collateral as specified by the Federal Home Loan Bank. Accordingly, United Community has a blanket pledge of its one- to four-family mortgages and multi-family loans as collateral for the advances outstanding at December 31, 2008. The required minimum ratio of collateral to advances is 125% for one- to four-family loans and 250% for multi-family loans. Additional changes in value can be applied to one-to four-family mortgage collateral based upon characteristics such as loan-to-value ratios and FICO scores.

13.   SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE AND OTHER BORROWINGS

The following is a summary of securities sold under an agreement to repurchase and other borrowings:

	December 31,
	2008					2007
			Weighted					Weighted
	Amount		Average Rate			Amount		Average Rate
	(In thousands)
Securities sold under agreement to repurchase-term	$	117,600		3.84	%	$	112,035		4.10	%
Other borrowings		7,669		4.24			37,498		7.71
Total repurchase agreements and other	$	125,269		3.86	%	$	149,533		5.01	%

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Securities sold under agreements to repurchase are secured primarily by mortgage-backed securities with a fair value of approximately $131.5 million at December 31, 2008 and $121.4 million at December 31, 2007. Securities sold under agreements to repurchase are typically held by the brokerage firm in a wholesale transaction and by an independent third party when they are for retail customers. At maturity, the securities underlying the agreements are returned to United Community. Other borrowings consist of a line of credit with JP Morgan Chase Bank, NA (JP Morgan) with a balance of $6.9 million at December 31, 2008, compared to $36.3 million at December 31, 2007 and a match-funding advance related to a commercial participation loan aggregating $769,000 at December 31, 2008 compared to $1.2 million at December 31, 2007.

Included in other borrowings is $6.9 million outstanding at December 31, 2008 under a Credit Agreement between JP Morgan and United Community, dated September 12, 2005, as amended on July 18, 2007, and March 28, 2008, (the Credit Agreement). The Credit Agreement provided United Community with a line of credit of up to $40.0 million. The Credit Agreement sets forth numerous covenants with which United Community must comply.

On March 28, 2008, United Community and JP Morgan amended the Credit Agreement to provide, among other things, (1) a waiver of all existing defaults under the credit agreement, (2) that no new funds would be advanced to United Community on the line of credit, and (3) an increase in the allowable non-performing asset ratio to 6.50% of total loans and other real estate owned. As of December 31, 2008, that ratio was 5.97%.

On August 29, 2008, United Community and JP Morgan amended the Credit Agreement in response to the event of default that occurred when United Community entered into the OTS Order and Home Savings entered into the Bank Order. The Amendment waived the events of default and extended the maturity date of the borrowings until January 31, 2009. Over the course of 2008, the Company paid down approximately $29.4 million on this line of credit under which $36.3 million had been outstanding as of December 31, 2007. In January 2009, the Company paid down an additional $1.8 million on this line of credit, further reducing the balance to $5.1 million.

On January 31, 2009, United Community and JP Morgan amended the Credit Agreement in response to the proposed sale of Butler Wick Trust to Farmers National Banc Corp. The amendment includes provisions to use a portion of the cash proceeds of the sale to repay the entire principal balance outstanding and any unpaid interest that has accrued no later than April 30, 2009.

The OTS Order requires United Community to obtain regulatory approval prior to incurring or increasing its debt position. A debt reduction plan was developed and submitted to the OTS for approval. United Community has implemented the plan and has reduced the principal balance of the aforementioned line of credit to $5.1 million as of February 28, 2009.

The remaining segment of other borrowings is associated with a match-funded commercial participation.

14.   LOSS CONTINGENCIES

United Community and its subsidiaries are parties to litigation arising in the normal course of business. While it is impossible to determine the ultimate resolution of these matters, management believes any resulting liability would not have a material effect upon United Community’s financial statements.

15.   INCOME TAXES

The provision for income taxes consists of the following components:

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Current	$	(2,048	)	$	8,213		$	12,252
Deferred		(1,192	)		(7,303	)		141
Total	$	(3,240	)	$	910		$	12,393

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective tax rates differ from the statutory federal income tax rate of 35% due to the following:

	Year Ended December 31,
	2008						2007						2006
	Dollars			Rate			Dollars			Rate			Dollars			Rate
	(In thousands)
Tax at statutory rate	$	(14,164	)		35.0	%	$	919			35.0	%	$	12,375			35.0	%
Increase (decrease) due to:
Goodwill impairment charge		11,800			(29.2	)		—			—			—			—
Tax exempt income		(15	)		0.0			(25	)		(1.0	)		(30	)		(0.1	)
Life insurance		(321	)		0.8			(311	)		(11.9	)		(297	)		(0.8	)
State taxes		(14	)		0.0			(30	)		(1.1	)		(143	)		(0.4	)
Acquisition/sale adjustments		(649	)		1.6			—			—			—			—
Other		123			(0.3	)		357			13.6			488			1.4
Income tax provision	$	(3,240	)		7.9	%	$	910			34.6	%	$	12,393			35.1	%

Significant components of the deferred tax assets and liabilities are as follows:

	December 31,
	2008		2007
	(In thousands)
Deferred tax assets:
Loan loss reserves	$	12,587	$	11,202
Postretirement benefits		1,328		1,342
ESOP shares released		1,158		1,262
Other real estate owned valuation		964		—
Security impairment charges		2,130		—
Compensation accruals		—		109
Interest on non-accrual loans		318		4,041
Other		36		28
Deferred tax assets		18,521		17,875
Deferred tax liabilities:
Purchase accounting adjustments		129		238
Deferred loan fees		659		572
Federal Home Loan Bank stock dividends		6,715		6,354
Mortgage servicing rights		1,165		1,968
Unrealized gain on securities available for sale		1,746		172
SFAS 158 pension accrual		182		163
Prepaid expenses		406		333
Other		74		229
Deferred tax liabilities		11,076		10,029
Net deferred tax asset	$	7,445	$	7,846

Retained earnings at December 31, 2008 include approximately $21.1 million for which no provision for federal income taxes has been made. This amount represents the tax bad debt reserve at December 31, 1987, which is the end of United Community’s base year for purposes of calculating the bad debt deduction for tax purposes. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, the amount used will be added to future taxable income. The unrecorded deferred tax liability on the above amount at December 31, 2008 was approximately $7.3 million.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The adoption of FIN 48 had no impact on United Community’s financial statements. As of January 1, 2007 and December 31, 2008, United Community had no unrecognized tax benefits or accrued interest penalties recorded. United Community does not expect the total amount of unrecognized tax benefits to increase significantly within the next twelve months. United Community will record interest and penalties as a component of income tax expense.

United Community and its subsidiaries are subject to US federal income tax. United Community and its subsidiaries are subject to tax in Ohio based upon their net worth. United Community and its subsidiaries also file state income tax returns in Pennsylvania, Indiana, and Florida. United Community is no longer subject to examination by taxing authorities for years prior to 2005.

16.   SHAREHOLDERS’ EQUITY

Dividends

United Community’s source of funds for dividends to its shareholders is earnings on its investments and dividends from Home Savings. During the year ended December 31, 2008, United Community paid cash dividends in the amount of $4.1 million and a stock dividend having a fair market value of $998,000. While Home Savings’ primary regulator is the FDIC, the OTS has regulations that impose certain restrictions on payments of dividends to United Community.

Home Savings must file an application with, and obtain approval from, the OTS (i) if the proposed distribution would cause total distributions for the calendar year to exceed net income for that year to date plus retained net income (as defined) for the preceding two years; (ii) if Home Savings would not be at least adequately capitalized following the capital distribution; (iii) if the proposed distribution would violate a prohibition contained in any applicable statute, regulation or agreement between Home Savings and the OTS or the FDIC, or any condition imposed on Home Savings in an OTS-approved application or notice. If Home Savings is not required to file an application, it must file a notice of the proposed capital distribution with the OTS. Home Savings paid no dividends to United Community during 2008. Under the Bank Order, Home Savings is not permitted to pay cash dividends to United Community without obtaining prior regulatory approval, and under the OTS Order, United Community is not permitted to pay cash dividends to its shareholders without obtaining prior regulatory approval. As of December 31, 2008, Home Savings had no retained earnings that could be distributed without requiring the prior approval of the OTS.

Other Comprehensive Income

Other comprehensive income included in the Consolidated Statements of Shareholders’ Equity consists of unrealized gains and losses on available for sale securities and changes in unrealized gains and losses on postretirement liability. The change includes reclassification of gains or (losses) and impairment charges on sales of securities of $(4.2 million), $(21,000) and $0 for the years ended December 31, 2008, 2007 and 2006.

Other comprehensive income (loss) components and related tax effects are as follows:

	As of December 31,
	2008			2007			2006
	(In thousands)
Unrealized holding gain (loss) on securities available for sale	$	8,671		$	2,364		$	1,048
Changes in net gains (losses) on postretirement benefit plan		55			668			—
Reclassification adjustment for losses (gains) realized in income		(4,151	)		(5	)		—
Net unrealized gains		4,575			3,011			1,048
Tax effect (35)%		1,601			1,054			367
Net of tax amount	$	2,974		$	1,957		$	681

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of accumulated other comprehensive income (loss) balances, net of tax:

	Balance at		Current		Balance at
	December 31,		Period		December 31,
	2007		Change		2008
	(In thousands)
Unrealized gains (losses) on securities available for sale	$	359	$	2,938	$	3,297
Unrealized gains (losses) on postretirement benefits		302		36		338
Total	$	661	$	2,974	$	3,635

Liquidation Account

At the time of the Conversion, Home Savings established a liquidation account, totaling $141.4 million, which was equal to its regulatory capital as of the latest practicable date prior to the Conversion. In the event of a complete liquidation, each eligible depositor will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances for the accounts then held.

17.   REGULATORY CAPITAL REQUIREMENTS

Home Savings is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Home Savings and United Community. The regulations require Home Savings to meet specific capital adequacy guidelines and the regulatory framework for prompt corrective action that involve quantitative measures of Home Savings’ assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Home Savings’ capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation for capital adequacy require Home Savings to maintain minimum amounts and ratios of Tier 1 (or Core) and Tangible capital (as defined in the regulations) to average total assets (as defined) and of total risk-based capital (as defined) to risk-weighted assets (as defined). Actual and statutory required capital amounts and ratios for Home Savings are presented below.

	As of December 31, 2008
						Minimum					To Be Well Capitalized
						Capital					Under Prompt Corrective
	Actual					Requirements					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(In thousands)
Total risk-based capital to risk-weighted assets	$	242,944		12.06	%	$	161,163		8.00	%	$	201,454		10.00	%
Tier 1 capital to risk-weighted assets		217,630		10.80			*		*			120,872		6.00
Tier 1 capital to average total assets		217,630		8.20			106,180		4.00			132,724		5.00
Tangible capital to adjusted total assets		217,630		8.20			39,817		1.50			*		*

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	As of December 31, 2007
						Minimum					To Be Well Capitalized
						Capital					Under Prompt Corrective
	Actual					Requirements					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(In thousands)
Total risk-based capital to risk-weighted assets	$	259,087		11.88	%	$	174,635		8.00	%	$	218,294		10.00	%
Tier 1 capital to risk-weighted assets		201,779		9.26			*		*			130,976		6.00
Tier 1 capital to average total assets		201,779		7.47			108,066		4.00			135,082		5.00
Tangible capital to adjusted total assets		201,779		7.47			40,525		1.50			*		*

* Ratio is not required under regulations.

As of December 31, 2008, the FDIC and OTS, respectively, categorized Home Savings as adequately capitalized pursuant to the Bank Order and OTS Order discussed in Note 3. Home Savings was deemed well capitalized under the regulatory framework for Prompt Corrective Action as of December 31, 2007. The Bank Order provided for Home Savings to increase its Tier 1 leverage ratio to 8.0% and total risk-based capital ratio to 12.0% by December 31, 2008. As depicted in the table above, Home Savings exceeded this requirement.

Management believes, as of December 31, 2008, that Home Savings meets all capital requirements to which it is subject, inclusive of the Bank Order. Events beyond management’s control, such as fluctuations in interest rates or a downturn in the economy in areas in which Home Savings’ loans and securities are concentrated, could adversely affect future earnings, and consequently Home Savings’ ability to meet its future capital requirements. Refer to Note 3 of the Consolidated Financial Statements for a complete discussion of the limitations of the regulatory enforcement actions.

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 for 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 was measured on December 31, 2008 and 2007. Information about changes in obligations of the benefit plan follows:

	Year Ended December 31,
	2008			2007
	(In thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	3,370		$	4,015
Service cost		—			—
Interest cost		180			221
Actuarial (gain)/loss		(55	)		(668	)
Benefits paid		(222	)		(198	)
Benefit obligation at end of the year	$	3,273		$	3,370
Funded status of the plan	$	(3,273	)	$	(3,370	)

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amounts recognized in accumulated other comprehensive income, net of tax at December 31, 2008 and 2007 consists of the following:

	The Year Ended December 31,
	2008		2007
	(In thousands)
Net gains (losses)	$	336	$	302
Prior service credit (cost)		2		—
	$	338	$	302

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

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Service cost	$	—		$	—		$	2
Interest cost		193			222			221
Expected return on plan assets		—			—			—
Net amortization of prior service cost		(1	)		(1	)		(1	)
Recognized net actuarial gain		(12	)		—			—
Net periodic benefit cost/(gain)		180			221			222
Net loss (gain)		52			665			—
Prior service cost (credit)		3			3			—
Amortization of prior service cost		—			—			—
Total recognized in other comprehensive income		55			668			—
Total recognized in net periodic benefit cost and other comprehensive income	$	235		$	889		$	222
Assumptions used in the valuations were as follows:
Weighted average discount rate		6.00	%		5.75	%		5.75	%

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 2007 valuation was 10.0% and was assumed to decrease to 5.0% for the year 2013 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, 2008:

	1 Percentage		1 Percentage
	Point Increase		Point Decrease
	(In thousands)
Effect on total of service and interest cost components	$	13	$	12
Effect on the postretirement benefit obligation		212		209

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

	In thousands
2009	$	299
2010		306
2011		309
2012		308
2013		304
2014-2018		1,391
Total	$	2,917

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 2008, 2007 and 2006, 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 2008, 2007 and 2006, the expense related to this plan was approximately $521,000, $531,000 and $532,000, 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 is 15 years and is 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 the year, 42,890 shares were added to the plan from the stock dividend paid in the fourth quarter of that year.

The loan is collateralized by the shares of common stock held by the ESOP. As the note is repaid, shares are 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 are then allocated to participants on the basis of compensation as described in the plan. Compensation expense is determined by multiplying the average per share market price of United Community’s stock during the period by the number of shares to be released. United Community recognized approximately $1.4 million, $2.7 million and $3.6 million in compensation expense for the years ended December 31, 2008, 2007 and 2006, respectively, related to the ESOP. Unallocated shares are considered neither outstanding shares for computation of basic earnings per share nor potentially dilutive securities for computation of diluted earnings per share. Dividends on unallocated ESOP shares are reflected as a reduction in the loan (and Home Savings’ contribution is reduced accordingly). During the year ended December 31, 2008, 303,057 shares were released or committed to be released for allocation and equivalent share amounts were released or committed to be released in 2007 and 2006. Shares remaining not released or committed to be released for allocation at December 31, 2008 totaled 1,271,588 and had a fair value of approximately $1.1 million.

Long-Term Incentive Plan

On July 12, 1999, shareholders approved the United Community Financial Corp. 1999 Long-Term Incentive Plan (1999 Plan). The purpose of the 1999 Plan is 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 and Butler Wick, by facilitating their purchase of an ownership interest in United Community.

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The 1999 Plan provides for the grant of options, which may qualify as either incentive or nonqualified stock options. The incentive plan provides 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 may be issued under the plan is 3,569,766. There are currently 273,680 shares remaining in the plan that could be granted. All of the options awarded became exercisable on the date of grant. The option period expires 10 years from the date of grant.

On April 26, 2007, shareholders approved the United Community Financial Corp. 2007 Long-Term Incentive Plan (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 243,721 stock options granted in the first quarter of 2008 under the 2007 Plan. All of the options awarded became exercisable on the date of grant. The option period expires 10 years from the date of grant. United Community recognized $150,000 in expenses related to this grant.

A summary of activity in the plans is as follows:

	For the Year Ended December 31, 2008
				Weighted Average		Aggregate Intrinsic
	Shares			Exercise Price		Value
						(In thousands)
Outstanding at beginning of year		2,101,193		$	9.39
Granted		243,721			5.89
Exercised		—			—
Forfeited		(252,786	)		8.61
Outstanding at end of period		2,092,128		$	9.08	$	—
Options exercisable at end of period		2,092,128		$	9.08	$	—

Information related to the stock option plan during each year follows:

	2008		2007		2006
Intrinsic value of options exercised	$	—	$	99	$	512
Cash received from option exercises		—		176		878
Tax benefit realized from option exercises		—		12		141
Weighted average fair value of options granted		0.68		—		—

The fair value of options granted in 2008 was determined using the following weighted-average assumptions as of the grant date:

Risk-free interest rate	3.03	%
Expected term (years)	5
Expected stock volatility	23.8
Dividend yield	6.28	%

Outstanding stock options have a weighted average remaining life of 4.64 years and may be exercised in the range of $5.89 to $12.38.

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 considered immaterial.

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19.   FAIR VALUE

Statement 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:  Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used to in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at December 31, 2008 Using:
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Available for sale securities	$	215,731	$	809	$	214,922	$	—

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2008 Using:
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans	$	33,024		—		—	$	33,024
Mortgage servicing rights		2,421		—		2,421		—

Impaired loans, carried at fair value, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $69.6 million, with a valuation allowance of $11.0, resulting in an additional provision for loan losses of $1.0 million, during the period.

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Mortgage servicing rights are valued by an independent third party that is active in purchasing and selling these instruments. The value reflects the characteristics of the underlying loans discounted at a market multiple.

Fair value of financial instruments

The estimated fair values of financial instruments have been determined by United Community using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that United Community could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents, accrued interest receivable and payable and advance payments by borrowers for taxes and insurance — The carrying amounts as reported in the Statements of Financial Condition are a reasonable estimate of fair value due to their short-term nature.

Securities — Fair values are based on quoted market prices, dealer quotes, and prices obtained from independent pricing services.

Loans held for sale — The fair value of loans held for sale is based on market quotes.

Loans — The fair value is estimated by discounting the future cash flows using the current market rates for loans of similar maturities with adjustments for market and credit risks.

Federal Home Loan Bank stock — It is not practical to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

Deposits — The fair value of demand deposits, savings accounts and money market deposit accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using rates currently offered for deposits of similar remaining maturities.

Borrowed funds — For short-term borrowings, fair value is estimated to be carrying value. The fair value of other borrowings is based on current rates for similar financing.

Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, a significant asset not considered a financial asset is premises and equipment. In addition, tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2008 and 2007, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and, therefore, current estimates of fair value may differ significantly from the amounts presented herein. Carrying amount and estimated fair values of financial instruments, not previously presented, were as follows:

	December 31,						December 31,
	2008						2007
	Carrying			Fair			Carrying			Fair
	Value			Value			Value			Value
	(In thousands)
Assets:
Cash and cash equivalents	$	43,417		$	43,417		$	33,502		$	33,502
Securities:
Trading		—			—			312			312
Available for sale		215,731			215,731			240,035			240,035
Loans held for sale		16,032			16,358			87,236			87,236
Loans, net		2,203,453			2,203,606			2,236,988			2,246,948
Federal Home Loan Bank stock		26,464			n/a			25,432			n/a
Accrued interest receivable		10,082			10,082			12,987			12,987
Liabilities:
Deposits:
Checking, savings and money market accounts		(660,675	)		(660,675	)		(704,644	)		(704,644	)
Certificates of deposit		(1,225,256	)		(1,237,262	)		(1,170,562	)		(1,170,790	)
Federal Home Loan Bank advances		(337,603	)		(348,185	)		(437,253	)		(440,910	)
Repurchase agreements and other		(125,269	)		(138,862	)		(149,533	)		(152,827	)
Advance payments by borrowers for taxes and insurance		(19,806	)		(19,806	)		(17,853	)		(17,853	)
Accrued interest payable		(3,077	)		(3,077	)		(7,837	)		(7,837	)

The Company has not considered market illiquidity in estimating the fair value of loans due to uncertain and inconsistent market pricing being experienced at December 31, 2008. It was not practical to determine the fair value of FHLB stock due to restrictions placed in its transferability.

20.   STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE

Supplemental disclosures of cash flow information are summarized below:

	Year Ended December 31,
	2008		2007		2006
	(In thousands)
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings	$	83,676	$	91,107	$	83,724
Interest capitalized on borrowings		—		30		19
Income taxes		3,859		13,146		13,050
Supplemental schedule of noncash activities:
Loans transferred to held for sale		—		76,493		—
Transfers from loans to real estate owned		36,429		14,356		4,814

73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

21.   PARENT COMPANY FINANCIAL STATEMENTS

Condensed Statements of Financial Condition

	December 31,
	2008		2007
	(In thousands)
Assets
Cash and deposits with banks	$	3,060	$	8,234
Federal funds sold and other		33		—
Total cash and cash equivalents		3,093		8,234
Securities:
Trading		—		312
Available for sale		809		2,064
Note receivable from ESOP		10,951		13,071
Subordinated note receivable from Home Savings		—		30,000
Investment in subsidiary-Home Savings		222,287		237,430
Investment in subsidiary-Butler Wick		3,174		15,944
Other assets		1,662		131
Total assets	$	241,976	$	307,186
Liabilities and Shareholders’ Equity
Repurchase agreements and other	$	6,900	$	36,300
Accrued interest payable		46		243
Accrued expenses and other liabilities		107		929
Total liabilities		7,053		37,472
Total shareholders’ equity		234,923		269,714
Total liabilities and shareholders’ equity	$	241,976	$	307,186

Condensed Statements of Income

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Income
Cash dividends from Home Savings	$	—		$	6,000		$	30,000
Cash dividends from Butler Wick		14,700			3,000			—
Interest income		2,208			3,380			1,411
Non-interest income		(1,226	)		31			60
Total income		15,682			12,411			31,471
Expenses
Interest expense		1,341			2,092			820
Non-interest expenses		1,980			2,419			1,405
Total expenses		3,321			4,511			2,225
Income before income taxes		12,361			7,900			29,246
Income tax benefit		(1,304	)		(270	)		(425	)
Income before equity in undistributed net earnings of subsidiaries		13,665			8,170			29,671
Dividends in excess of earnings of subsidiary		(48,944	)		(4,037	)		(5,560	)
Net income (loss)	$	(35,279	)	$	4,133		$	24,111

74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Statements of Cash Flows

	Year Ended December 31,
	2008			2007			2006
	(In thousands)
Cash Flows from Operating Activities
Net Income (loss)	$	(35,279	)	$	4,133		$	24,111
Adjustments to reconcile net income to net cash provided by operating activities:
Dividends in excess of earnings of the subsidiaries		48,944			4,037			5,560
Security impairment charges		1,188			—			—
Decrease in trading securities		312			247			433
Decrease (increase) in interest receivable		—			18			(18	)
(Increase) decrease in other assets		(1,752	)		—			27
(Decrease) increase in accrued interest payable		(197	)		142			50
Decrease in other liabilities		(763	)		(64	)		(712	)
Net cash from operating activities		12,453			8,513			29,451
Cash Flows from Investing Activities
Purchases of:
Securities available for sale		—			—			(36	)
Repayment of (investment in) subordinated debt issued by Home Savings		30,000			—			(30,000	)
Equity investment in Home Savings		(16,250	)		—			—
ESOP loan repayment		2,120			1,263			1,044
Net cash from investing activities		15,870			1,263			(28,992	)
Cash Flows from Financing Activities
Cash dividends paid		(4,064	)		(10,847	)		(10,401	)
Net (decrease) increase in borrowed funds		(29,400	)		18,000			11,700
Purchase of treasury stock		—			(9,709	)		(2,298	)
Exercise of stock options		—			176			878
Net cash from financing activities		(33,464	)		(2,380	)		(121	)
(Decrease) increase in cash and cash equivalents		(5,141	)		7,396			338
Cash and cash equivalents, beginning of year		8,234			838			500
Cash and cash equivalents, end of year	$	3,093		$	8,234		$	838

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

22.   SEGMENT INFORMATION

United Community’s chief decision-makers monitor the revenue streams of the various Company products and services. The identifiable segments are not material, operations are managed, and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company’s financial service operations are considered by management to be aggregated in one reportable operating segment, which is banking services.

Discontinued operations are essentially the results of operations from Butler Wick Corp which were previously reported as a separate segment, investment services. Refer to Note 4 for a discussion on discontinued operations and its impact on segment reporting.

23.   EARNINGS PER SHARE

Earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share is 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. Stock options for 2,092,128 shares were anti-dilutive for the year ended December 31, 2008. Stock options for 734,353 shares were anti-dilutive for the years ended December 31, 2007 and 2006. Earnings per share for 2007 and 2006 have been adjusted to reflect a stock dividend declared in November 2008.

	2008			2007		2006
	(In thousands, except per share data)
Numerator:
Income (loss) from continuing operations	$	(37,229	)	$	1,714	$	22,963
Income from discontinued operations		1,950			2,419		1,148
Net income	$	(35,279	)	$	4,133	$	24,111
Denominator:
Weighted average common shares outstanding — basic		29,463			29,519		29,846
Dilutive effect of stock options		—			118		386
Weighted average common shares outstanding — dilutive		29,463			29,637		30,232
Basic earnings (loss) per share:
Basic earnings (loss) per common share — continuing operations	$	(1.26	)	$	0.06	$	0.77
Basic earnings per common share — discontinued operations		0.06			0.08		0.04
Basic earnings (loss) per common share		(1.20	)		0.14		0.81
Dilutive earnings (loss) per share:
Dilutive earnings (loss) per common share — continuing operations	$	(1.26	)	$	0.06	$	0.76
Dilutive earnings per common share — discontinued operations		0.06			0.08		0.04
Dilutive earnings (loss) per common share		(1.20	)		0.14		0.80

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

24.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents summarized quarterly data for each of the years indicated.

	Unaudited
	First		Second		Third			Fourth
	Quarter		Quarter		Quarter			Quarter			Total
	(In thousands, except per share data)
2008:
Interest income	$	39,627	$	38,202	$	37,748		$	36,601		$	152,178
Interest expense		22,685		19,287		18,951			17,993			78,916
Net interest income		16,942		18,915		18,797			18,608			73,262
Provision for loan losses		2,466		3,248		8,995			10,620			25,329
Net interest income after provision for loan losses		14,476		15,667		9,802			7,988			47,933
Non-interest income		6,270		2,908		(2,375	)		(1,019	)		5,784
Non-interest expenses		14,964		15,161		49,516			14,545			94,186
Income (loss) before taxes and discontinued operations		5,782		3,414		(42,089	)		(7,576	)		(40,469	)
Income tax expense (benefit)		2,018		1,110		(3,132	)		(3,236	)		(3,240	)
Net income (loss) before discontinued operations		3,764		2,304		(38,957	)		(4,340	)		(37,229	)
Discontinued operations
Net income of Butler Wick Corp., net of tax		279		425		403			843			1,950
Net income (loss)	$	4,043	$	2,729	$	(38,554	)	$	(3,497	)	$	(35,279	)
Earnings (loss) per share:
Basic earnings (loss) from continuing operations	$	0.13	$	0.08	$	(1.32	)	$	(0.15	)	$	(1.26	)
Basic earnings from discontinued operations		0.01		0.02		0.01			0.03			0.06
Basic earnings (loss)		0.14		0.10		(1.31	)		(0.12	)		(1.20	)
Diluted earnings (loss) from continuing operations		0.13		0.08		(1.32	)		(0.15	)		(1.26	)
Diluted earnings from discontinued operations		0.01		0.02		0.01			0.03			0.06
Diluted earnings (loss)		0.14		0.10		(1.31	)		(0.12	)		(1.20	)

In the third quarter of 2008 the Company recognized an impairment charge related to goodwill that increased noninterest expense. Also in the third quarter, other-than-temporary impairment charges related to securities were taken that reduced noninterest income.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Unaudited
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter			Total
	(In thousands, except per share data)
2007:
Interest income	$	42,569	$	41,696	$	42,105	$	42,445		$	168,815
Interest expense		23,331		23,761		24,433		24,578			96,103
Net interest income		19,238		17,935		17,672		17,867			72,712
Provision for loan losses		2,325		2,744		5,363		18,318			28,750
Net interest income after provision for loan losses		16,913		15,191		12,309		(451	)		43,962
Non-interest income		3,617		3,698		4,121		2,867			14,302
Non-interest expenses		14,088		13,760		13,462		14,330			55,640
Income (loss) before taxes and discontinued operations		6,442		5,129		2,968		(11,914	)		2,625
Income tax expense (benefit)		2,298		1,864		983		(4,234	)		910
Net income (loss) before discontinued operations		4,144		3,265		1,985		(7,680	)		1,714
Discontinued operations
Net income of Butler Wick Corp., net of tax		525		665		598		631			2,419
Net income (loss)	$	4,669	$	3,930	$	2,583	$	(7,049	)	$	4,133
Earnings per share:
Basic earnings (loss) from continuing operations	$	0.13	$	0.12	$	0.07	$	(0.26	)	$	0.06
Basic earnings from discontinued operations		0.03		0.02		0.02		0.01			0.08
Basic earnings (loss)		0.16		0.14		0.09		(0.25	)		0.14
Diluted earnings (loss) from continuing operations		0.13		0.12		0.07		(0.26	)		0.06
Diluted earnings from discontinued operations		0.03		0.02		0.02		0.01			0.08
Diluted earnings (loss)		0.16		0.14		0.09		(0.25	)		0.14

Beginning in the third quarter of 2007 and extending through the fourth quarter of 2007, increased loan delinquencies, charge-offs and foreclosures occurred, particularly within the construction portfolio. Because of these trends, the Company re-evaluated its estimate of probable losses and determined that a larger provision for loan losses were required in the third and fourth quarters of 2007.

25.   PARTICIPATION IN THE U.S. TREASURY CAPITAL PURCHASE PROGRAM

On October 3, 2008, Congress passed the Emergency Stabilization Act of 2008 (“EESA”), which provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. markets. One of the provisions resulting from the Act is the Treasury Capital Purchase Program (“CPP”) , which provides direct equity investment of perpetual preferred stock by the Treasury in qualified financial institutions. The Company applied for participation in the CPP in November 2008. In February 2009, the Company evaluated the decision to participate in the CPP and determined that it would be in the best interest of the Company to withdraw the application.

78

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

FINANCIAL STATEMENTS

To the Shareholders and Board of Directors

United Community Financial Corp.

Youngstown, Ohio

We have audited the accompanying consolidated statements of financial condition of United Community Financial Corp. as of December 31, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of United Community Financial Corp.’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Community Financial Corp. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of United Community Financial Corp.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16, 2009 expressed an unqualified opinion thereon.

/S/ Crowe Horwath LLP

Crowe Horwath LLP

Cleveland, Ohio

March 16, 2009

79

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of United Community Financial Corp. (United Community) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934). United Community’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. United Community’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of United Community; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of United Community are being made only in accordance with authorizations of management and directors of United Community; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of United Community’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of United Community’s internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, management concluded that United Community maintained effective internal control over financial reporting as of December 31, 2008.

United Community’s independent registered public accounting firm has issued its report on the effectiveness of United Community’s internal control over financial reporting. That report follows under the heading, Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.

/S/ Douglas M. McKay	/S/ James R. Reske
Douglas M. McKay, Chief Executive Officer	James R. Reske, Chief Financial Officer
March 16, 2009	March 16, 2009

80

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors

United Community Financial Corp.

Youngstown, Ohio

We have audited United Community Financial Corp.’s internal control over financial reporting as of December 31, 2008 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). United Community Financial Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal controls over financial reporting. Our responsibility is to express an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, United Community Financial Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of United Community Financial Corp. as of December 31, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008 and our report dated March 16, 2009 expressed an unqualified opinion on those consolidated financial statements.

/S/ Crowe Horwath LLP

Crowe Horwath LLP

Cleveland, Ohio

March 16, 2009

81

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.   Controls and Procedures

United Community’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934. As of December 31, 2008, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of United Community’s disclosure controls and procedures. Based on that evaluation, management concluded that disclosure controls and procedures as of December 31, 2008 were effective in ensuring material information required to be disclosed in this Annual Report on Form 10-K was recorded, processed, summarized and reported on a timely basis. Additionally, there were no changes in United Community’s internal control over financial reporting that occurred during the quarter ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, United Community’s internal control over financial reporting. See “Management’s Report on Internal Control Over Financial Reporting” and the “Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting”, both of which are contained in Item 8 of this Form 10-K and incorporated herein by reference.

Item 9B.   Other Information

None.

PART III

Item 10.   Directors and Executive Officers and Corporate Governance

The information contained in the Proxy Statement for the 2009 Annual Meeting of Shareholders of United Community (Proxy Statement), to be filed with the Securities and Exchange Commission (Commission) on or about March 26, 2009, under the captions “Election of Directors,” “Incumbent Directors,” “Board Meetings, Committees and Compensation,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.

United Community has adopted a code of ethics applicable to all officers, directors and employees that complies with SEC requirements. A copy of the code may be obtained free of charge upon written request to James R. Reske, Chief Financial Officer, United Community Financial Corp., 275 West Federal Street, Youngstown, Ohio 44503.

Item 11.   Executive Compensation

The information contained in the Proxy Statement under the captions “Compensation of Executive Officers,” “Compensation Committee Report” and “Compensation Discussion and Analysis,” is incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information contained in the Proxy Statement under the caption “Ownership of UCFC Shares” is incorporated herein by reference.

United Community maintains the United Community Financial Corp. 1999 Long-Term Incentive Plan (1999 Plan) and the United Community Financial Corp. Recognition and Retention Plan and Trust Agreement (RRP) under which it issued equity securities to its directors, officers and employees in exchange for goods or services. The 1999 Plan and the RRP were approved by United Community’s shareholders at the 1999 Special Meeting of Shareholders.

82

On April 26, 2007, shareholders approved the United Community Financial Corp. 2007 Long-Term Incentive Plan (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 and is 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. Further description of the 1999 Plan, RRP and 2007 Plan is included in Note 18 to the financial statements and incorporated herein by reference.

The following table shows, as of December 31, 2008, the number of common shares issuable upon the exercise of outstanding stock options, the weighted average exercise price of those stock options, and the number of common shares remaining for future issuance under the 2007 Plan, the 1999 Plan and the RRP, excluding shares issuable upon exercise of outstanding stock options.

Equity Compensation Plan Information

	(a)		(b)		(c)
					Number of Securities
					Remaining Available for
					Future Issuance Under
	Number of Securities				Equity Compensation
	to be Issued Upon		Weighted-Average		Plans (Excluding
	Exercise of		Exercise Price of		Securities
Plan Category	Outstanding Options		Outstanding Options		Reflected in Column (a))
Equity compensation plans approved by security holders		2,092,128	$	9.08		2,103,053

Item 13.   Certain Relationships and Related Transactions and Director Independence

The information contained in the Proxy Statement under the captions “Board Meetings, Committees and Compensation,” and “Compensation of Executive Officers — Related Person Transactions” is incorporated herein by reference.

Item 14.   Principal Accountant Fees and Services

The information contained in the Proxy Statement under the caption “Audit Fees” is incorporated herein by reference.

83

PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a) Exhibits

(1) The Financial Statements are included in Item 8 to this Form 10-K.

(2)  Financial Statement Schedules.  All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(3) 

3.1	Articles of Incorporation
3.2	Amended Code of Regulations
4	Agreement to Furnish Instruments
10	Material Contracts
11	Statement Regarding Computation of Per Share Earnings
20	Proxy Statement for 2009 Annual Meeting of Shareholders
21	Subsidiaries of Registrant
23	Crowe Horwath LLP Consent
31.1	Section 302 Certification by Chief Executive Officer
31.2	Section 302 Certification by Chief Financial Officer
32	Certification of Financial Statements by Chief Executive Officer and Chief Financial Officer

84

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

/s/  Douglas M. McKay

Douglas M. McKay Chairman of the Board and
Chief Executive Officer

(Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.

/s/  Douglas M. McKay	/s/  James R. Reske
Douglas M. McKay Chairman of the Board, Chief Executive Officer and Director	James R. Reske Treasurer and Chief Financial Officer Date: March 16, 2009
Date: March 16, 2009
/s/  Eugenia C. Atkinson	/s/  Richard J. Buoncore
Eugenia C. Atkinson	Richard J. Buoncore
Director	Director
Date: March 16, 2009	Date: March 16, 2009
/s/  Richard J Schiraldi	/s/  Clarence R. Smith
Richard J. Schiraldi	Clarence R. Smith
Director	Director
Date: March 16, 2009	Date: March 16, 2009
/s/  David C. Sweet	/s/  Donald J. Varner
David C. Sweet	Donald J. Varner
Director	Director
Date: March 16, 2009	Date: March 16, 2009

85

INDEX TO EXHIBITS

Exhibit
Number
3.1	Articles of Incorporation	Incorporated by reference to the Registration Statement on Form S-1 filed by United Community on March 13, 1998 (S-1) with the Securities and Exchange Commission (SEC), Exhibit 3.1
3.2	Amended Code of Regulations	Incorporated by reference to the 1998 10-K filed by United Community on March 31, 1999 via Edgar, film number 99582343, Exhibit 3.2
4	Agreement to furnish instruments and agreements defining rights of holders of long-term debt
10.1	The Home Savings and Loan Company of Youngstown, Ohio Employee Stock Ownership Plan	Incorporated by reference to the 2001 10-K filed by United Community on March 29, 2002 via Edgar, film number 02593161, Exhibit 10.1
10.2	Employment Agreement between The Home Savings and Loan Company of Youngstown, Ohio and Douglas M. McKay dated December 31, 2004	Incorporated by reference to the 2004 10-K/A filed by United Community on May 2, 2005 via Edgar, film number 04666159 (2004 10K/A), Exhibit 10.2
10.3	Employment Agreement between The Home Savings and Loan Company of Youngstown, Ohio and Patrick W. Bevack dated December 31, 2004	Incorporated by reference to the 2004 10-K/A, Exhibit 10.3
10.4	Employment Agreement between The Home Savings and Loan Company of Youngstown, Ohio and James R. Reske dated May 19, 2008
10.5	Amendment to Employment Agreement between The Home Savings and Loan Company of Youngstown, Ohio and Douglas M. McKay dated January 1, 2009
10.6	Amendment to Employment Agreement between The Home Savings and Loan Company of Youngstown, Ohio and Patrick W. Bevack dated January 1, 2009
10.7	Amendment to Employment Agreement between The Home Savings and Loan Company of Youngstown, Ohio and James R. Reske dated January 1, 2009
10.8	Amended and Restated United Community 1999 Long -Term Incentive Plan
10.9	Amended and Restated United Community 2007 Long-Term Incentive Plan
10.10	Separation Agreement between The Home Savings and Loan Company of Youngstown, Ohio and Patrick A. Kelly dated January 27, 2009
10.11	Amendment to the United Community Financial Corp. Employee Stock Ownership Plan for the Pension Protection Act of 2006 and other guidance
10.12	Stock Purchase Agreement
10.13	OTS Orders	Incorporated by reference to the 8-K filed by United Community on August 3, 2008 via Edgar, film number 081011722 Exhibit 10.1

86

Exhibit
Number
10.14	Bank Orders	Incorporated by reference to the 8-K filed by United Community on August 3, 2008 via Edgar, film number 081011722 Exhibit 10.2
11	Statement Regarding Computation of Per Share Earnings	Incorporated by reference to Note 23 to the Financial Statements included in the Annual Report, Item 8
20	Proxy Statement for 2009 Annual Meeting of Shareholders	Incorporated by reference to the Proxy Statement, to be filed with the Securities and Exchange Commission on or about March 26, 2009
21	Subsidiaries of Registrant
23	Crowe Horwath LLP Consent
31.1	Section 302 Certification by Chief Executive Officer
31.2	Section 302 Certification by Chief Financial Officer
32	Certification of Financial Statements by Chief Executive Officer and Chief Financial Officer

87

EX-4

Exhibit 4

March 16, 2009

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Re:   United Community Financial Corp. — Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 2008

Ladies and Gentlemen:

Today, United Community Financial Corp., an Ohio corporation (“United Community”), is filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “Form 10-K”) with the Securities and Exchange Commission (the “SEC”).

Pursuant to the instructions relating to the Exhibits in Item 601(b)(4)(iii) of Regulation S-K, United Community hereby agrees to furnish the SEC, upon request, copies of instruments and agreements, defining the rights of holders of United Community’s long-term debt and of the long-term debt of its consolidated subsidiaries, which are not being filed as exhibits to the Form 10-K. The total amount of securities issued under any instrument of such long-term debt does not exceed 10% of the total assets of United Community and its subsidiaries on a consolidated basis.

Very truly yours,

UNITED COMMUNITY FINANCIAL CORP.

James R. Reske
Chief Financial Officer

EX.4-1

EX-10.4

EXHIBIT 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (hereinafter referred to as this “Agreement”), is entered into as of this 19th day of May, 2008 (“Effective Date”) by and between THE HOME SAVINGS AND LOAN COMPANY OF YOUNGSTOWN, OHIO, an Ohio chartered stock savings bank (hereinafter referred to as the “Company”), and JAMES R. RESKE, an individual (hereinafter referred to as the “Executive”);

WITNESSETH:

     WHEREAS, as a result of the skill, knowledge and experience of the Executive, the Board of Directors of the Company desires to retain the services of the Executive as the Chief Financial Officer and Treasurer of the Company;

     WHEREAS, the Executive desires to serve as the Chief Financial Officer and Treasurer of the Company; and

     WHEREAS, the Executive and the Company desire to enter into this Agreement to set forth the terms and conditions of the employment relationship between the Company and the Executive;

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and the Executive, each party intending to be legally bound, hereby agree as follows:

1. Employment and Term.

     (a) Term. Upon the terms and subject to the conditions of this Agreement, the Company hereby employs the Executive, and the Executive hereby accepts employment, as the Chief Financial Officer and Treasurer of the Company. The term of this Agreement shall commence on May 19, 2008 and shall end on December 31, 2010, unless extended by the Company, with the consent of the Executive, as provided in subsection (b) of this Section 1 (hereinafter referred to, together with such extensions, as the “Term”).

     (b) Extension. On, or before, each annual anniversary date of the Effective Date, the Term of Agreement may be extended for up to an additional one-year period beyond the then effective Term upon a determination of the Board of Directors that the performance of the Executive has met the requirements and standards of the Board. References herein to the Term of this Agreement shall refer both to the initial term and successive terms. Any such extension shall be subject to the consent of the Executive.

2. Duties of the Executive.

     (a) General Duties and Responsibilities. The Executive shall serve as the Chief Financial Officer and Treasurer of the Company. Subject to the direction of the Board of Directors of the Company and such Executive’s manager, the Executive shall perform all duties

10.4-1

and shall have all powers that commonly are incident to the office of Chief Financial Officer and Treasurer or that, consistent therewith, are delegated to him by the Board of Directors or by the Chief Executive Officer and/or President of the Company.

     (b) Devotion of Entire Time to the Business of the Company. The Executive shall devote his entire productive time, ability and attention during normal business hours throughout the Term to the faithful performance of his duties under this Agreement. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any person or organization other than the Company, United Community Financial Corp. (hereinafter referred to as the “Holding Company”), or its subsidiaries without the prior written consent of the Board of Directors of the Company; provided, however, that the Executive shall not be precluded from (i) vacations and other leave time in accordance with Section 3 (d) below, (ii) reasonable participation in community, civic, charitable or similar organizations, (iii) reasonable participation in industry-related activities, including, but not limited to, attending state and national trade association meetings and serving as an officer, director or trustee of a state or national trade association or Federal Home Loan Bank, (iv) serving as an officer or director of the Holding Company or its subsidiaries and receiving a salary, director’s fees or other compensation or benefits, as appropriate, or (v) pursuing personal investments that do not interfere or conflict with the performance of the Executive’s duties to the Company.

     (c) Standards. During the Term of this Agreement, the Executive shall perform his duties in accordance with such reasonable standards expected of executives with comparable positions in comparable organizations and as may be established from time to time by the Board of Directors.

3. Remuneration.

     (a) Base Compensation. The Executive shall receive during the Term compensation established by the Board of Directors or Compensation Committee of the Company or the Holding Company, and shall include a base salary of not less than One Hundred and Eighty Thousand Dollars ($180,000.00) per year.

     (b) Annual Review. On or about December 31 of each year, commencing during the year including the Effective Date, the annual base salary of the Executive shall be reviewed by the Board of Directors or Compensation Committee of the Company or the Holding Company and shall be set at an amount not less than One Hundred and Eighty Thousand Dollars ($180,000.00), based upon the Executive’s individual performance and such other factors as the Board of Directors may deem appropriate.

     (c) Executive Benefit Programs. During the Term, the Executive shall be entitled to participate in all formally established benefit, bonus, insurance, profit sharing plans, stock benefit plans and similar programs (hereinafter collectively referred to as “Benefit Plans”), in accordance with the terms and conditions of such Benefit Plans that are maintained by the Company or the Holding Company from time to time and all Executive benefit plans or programs hereafter adopted in writing by the Board of Directors of the Company or the Holding Company for which senior management personnel of the Company are eligible.

10.4-2

Notwithstanding any statement to the contrary contained elsewhere in this Agreement, the Company or the Holding Company, as applicable, may at any time discontinue or terminate any Benefit Plan now existing or hereafter adopted, to the extent permitted by the terms of such Benefit Plan, and shall not be required to compensate the Executive for such discontinuance or termination to the extent such discontinuance or termination pertains to all employees of the Company or the Holding Company who are eligible participants at the time.

     (d) Vacation and Sick Leave. The Executive shall be entitled, without loss of pay, to be absent voluntarily from the performance of his duties under this Agreement, in accordance with the policies periodically established by the Board of Directors of the Company for senior management officials of the Company. The Executive shall be entitled to annual sick leave in accordance with the policies periodically established by the Board of Directors of the Company for senior management officials of the Company.

     (e) Expenses. The Company shall pay or reimburse the Executive for reasonable travel, entertainment and miscellaneous expenses incurred in connection with the performance of his duties under this Agreement, including participation in industry-related activities upon furnishing timely documentation to the Company of such expenses incurred.

4. Termination of Employment.

     (a) General. The employment of the Executive shall terminate at any time during the Term: (i) at the option of the Company, upon the delivery by the Company of written notice of termination to the Executive with or without “Cause” (as defined hereinafter), or (ii) at the option of the Executive, upon delivery by the Executive of written notice of termination to the Company if the present capacity or circumstances in which the Executive is employed are materially adversely changed (including, but not limited to, a material reduction in responsibilities or authority or the assignment of duties or responsibilities substantially inconsistent with those normally associated with the Executive’s position described in Section 2 (a) of this Agreement, change of title or removal as a director of the Company or the Holding Company, the requirement that the Executive regularly perform his principal executive functions more than thirty-five (35) miles from his primary office as it existed on the date of this Agreement or the Executive’s benefits provided under this Agreement are reduced, unless the benefit reductions are part of a Company-wide reduction. The following subsections (b), (c), (d) and (e) of this Section 4 shall govern the obligations of the Company to the Executive upon the occurrence of the events described in such subparagraphs. If the Executive terminates this Agreement without the written consent of the Company, other than pursuant to Section 4(a)(ii) of this Agreement, the Executive shall not receive, and shall have no right to receive, any compensation or other benefits for any period after such termination and the Executive shall not engage in the financial institutions business as a director, officer, Executive or consultant for any business or enterprise that competes with the principal business of the Company or the Holding Company or any of their subsidiaries within any county in which the Company or the Holding Company has an office for the unexpired Term of this Agreement. The provisions of this subparagraph 4(a) shall survive the termination of this Agreement.

10.4-3

     (b) Termination for Cause. In the event that the Company terminates the employment of the Executive during the Term because of the Executive’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure or refusal to perform the duties and responsibilities assigned in this Agreement, willful violation of any law, rule or regulation (other than traffic violations or other minor offenses), or final cease-and-desist order or material breach of any provision of this Agreement (hereinafter collectively referred to as “Cause”), the Executive shall not receive, and shall have no right to receive, any compensation or other benefits for any period after such termination.

     (c) Termination in Connection with Change of Control. In the event that the employment of the Executive is terminated by Company within one (1) year before or after a Change of Control (hereinafter defined) for any reason other than Cause, death, or disability, or within one (1) year before or after a Change of Control the Executive’s employment is terminated at the Executive’s option as provided in Section 4 (a) (ii) above, then the following shall occur:

          (i) The Company shall promptly pay to the Executive or to his beneficiaries, dependents or estate an amount equal to the product of three (3) multiplied by the Executive’s “base amount” as defined in Section 280G(b) (3) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder less one dollar ($1.00) (hereinafter collectively referred to as “Section 280G”).

          (ii) The Executive, his dependents, beneficiaries and estate shall: continue to be covered at the Company’s expense under all health and welfare benefit plans of the Company in which the Executive was a participant prior to the effective date of the termination of his employment as if the Executive were still employed under this Agreement until the earlier of the expiration of the Term or the date on which the Executive is included in another employer’s benefit plans as a full-time Executive; be eligible for benefit distribution from any of the Company’s stock benefit plans in accordance with the terms and conditions of any such plans; but the Executive shall not accrue any further benefit, vesting, or service credits under any qualified retirement plans maintained by the Company after the effective date of the Executive’s termination of employment.

          (iii) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any amounts received from other employment or otherwise by the Executive offset in any manner the obligations of the Company hereunder, except as specifically stated in subparagraph (ii) above.

          (iv) For purposes of this Agreement, a “Change of Control” shall mean any one of the following events:

          (A) the acquisition of ownership or power to vote more than 20% of the voting stock of the Company or the Holding Company, provided that acquisition of ownership or power to vote by a qualified employee stock ownership plan sponsored by the Company shall not be considered a Change of Control;

10.4-4

          (B) the acquisition of the ability to control the election of a majority of the directors of Company or the Holding Company

          (C) during any period of three or less consecutive years individuals who at the beginning of such period constitute the Board of Directors of the Company or the Holding Company cease for any reason to constitute at least a majority thereof; provided, however, that any individual whose election or nomination for election as a member of the Board of Directors of the Company or the Holding Company was approved by a vote of at least two-thirds of the directors then in office shall be considered to have continued to be a member of the Board of Directors of the Company or the Holding Company;

          (D) the acquisition of “control” of the Company, within the meaning of 12 C.F.R. Section 303.81(c), by any individual or corporation, partnership, trust, association or other organization other than the Executive and any person, corporation, partnership, trust, association or other organization with whom the Executive is “acting in concert” within the meaning of 12 C.F.R. Section 303.81 (b); or

          (E) an event that would be required to be reported in response to Item 1 (a) of Form 8-K or Item 6 (e) of Schedule 14A pursuant to the Securities Exchange Act of 1934, as amended (hereinafter referred to as the “Exchange Act”), or any successor thereto, whether or not any class of securities of the Corporation is registered under the Exchange Act.

          (v) In the event that any payments pursuant to this Section 4(c) would result in or contribute to the imposition of a penalty tax pursuant to Section 280G and Internal Revenue Code Section 4999, such payments shall be reduced to the maximum amount that may be paid under Section 280G without exceeding such limits. Any payments made to the Executive pursuant to this Agreement are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.

          (vi) In the event the Executive’s employment terminates pursuant to this Section 4 (c), the Executive shall not engage in the financial institutions business as a director, officer, executive or consultant for any business or enterprise which competes with the principal business of the Company or the Holding Company or any of their subsidiaries within any county in which the Company or the Holding Company has an office for a period of eight (8) months from the Executive’s date of employment termination. In exchange for Executive’s agreement concerning non-competition, the Company agrees to pay Executive eight (8) months of base salary.

     (d) Death of the Executive. The Term shall automatically expire upon the death of the Executive. In such event, the Executive’s estate shall be entitled to receive the Executive’s monthly base salary continuation for ninety (90) days following the day death occurred, except as otherwise specified herein.

10.4-5

     (e) Disability of the Executive. If the Executive is unable to perform the essential functions of the position assigned by reason of illness or incapacity for a period up to one hundred and fifty (150) consecutive days, then, despite the Company’s efforts to reasonably accommodate such illness or incapacity, the Company may terminate this Agreement upon written notice to Executive. Upon termination, the Executive may be eligible for long term disability benefits under the Company’s disability plan, subject to the terms and conditions of that plan. In the event that the Executive is (and continues to be) eligible for long term disability benefits under the Company’s disability plan, then the Executive shall be entitled to be covered under the health and life insurance welfare benefits plans in which the Executive was a participant prior to the effective date of the termination of his employment as if the Executive were still employed under this Agreement for a period of two (2) years after the effective date of the Executive’s termination of employment; be eligible for benefit distribution from any of the Company’s stock benefit plans in accordance with the terms and conditions of any such plans; but the Executive shall not accrue any further benefit, vesting, or service credits under any qualified retirement plans maintained by the Company after the effective date of the Executive’s termination of employment.

     (f) Other Termination. In the event that the employment of the Executive is terminated by the Company before expiration of the Term for any reason other than death, termination for Cause or termination in connection with a Change of Control, or disability, then the following shall occur:

          (i) The Company shall be obligated to continue to pay on at least a monthly basis, until the expiration of the Term, to the Executive, his designated beneficiaries or his estate, the total compensation in effect at the time of termination pursuant to Section 3 above, plus a cash bonus equal to the cash bonus, if any, paid to the Executive in the twelve month period prior to the termination of employment.

          (ii) The Executive shall (A) continue to be covered at the Executive’s expense under all health and welfare benefits plans in which the Executive was a participant prior to the effective date of the termination of his employment as if the Executive were still employed under this Agreement until the earlier of the expiration of the Term or the date on which the Executive is included in another employer’s benefit plans as a full-time Executive, and (B) be eligible for benefit distribution from any of the Company’s stock benefit plans in accordance with the terms and conditions of any such plans; provided, however, that the Executive shall not accrue any further benefit, vesting, or service credits under any qualified retirement plans maintained by the Company after the effective date of the Executive’s termination of employment.

          (iii) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any amounts received from other employment or otherwise by the Executive offset in any manner the obligations of the Company hereunder, except as specifically stated in subparagraph (ii) above.

5. Withholding. All payments required to be made by the Company hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to Federal, State

10.4-6

and local tax and other payroll deductions as the Company may reasonably determine should be withheld pursuant to any applicable law or regulation.

6. Indemnification; Insurance.

     (a) Indemnification. The Company agrees to indemnify the Executive and his heirs, executors, and administrators to the fullest extent permitted under applicable law and regulations, including, without limitation 12 U.S.C. Section 1828(k), against any and all expenses and liabilities reasonably incurred by the Executive in connection with or arising out of any action, suit or proceeding in which the Executive may be involved by reason of having been a director or officer of the Bank or any of its subsidiaries, whether or not the Executive is a director or officer at the time of incurring any such expenses or liabilities. Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs and attorney’s fees and the cost of reasonable settlements. The Executive shall be entitled to indemnification in respect of a settlement only if the Board of Directors of the Company has approved such settlement. Notwithstanding anything herein to the contrary, (I) indemnification for expenses shall not extend to matters for which the Executive has been terminated for, and (ii) the obligations of this Section shall survive the termination of this Agreement. Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation.

     (b) Insurance. During the Term of the Agreement, the Company shall provide the Executive with coverage under a directors’ and officers’ liability policy at the Company’s expense, at least equivalent to such coverage otherwise provided to the other directors and senior officers of the Company.

7. Special Regulatory Events. Notwithstanding the provisions of Section 4 of this Agreement, the obligations of the Company to the Executive shall be as follows in the event of the following circumstances:

     (a) If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Company’s affairs by a notice served under section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (hereinafter referred to as the “FDIA”), the Company’s obligations under this Agreement shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company may pay the Executive all or part of the compensation withheld while the obligations in this Agreement were suspended and reinstate, in whole or in part, any of the obligations that were suspended;

     (b) If the Executive is removed and/or permanently prohibited from participating in the conduct of the Company’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the FDIA, all obligations of the Company under this Agreement shall terminate as of the effective date of such order; provided, however, that vested rights of the Executive shall not be affected by such termination; or

10.4-7

     (c) If the Company is in default, as defined in section 3(x)(1) of the FDIA, all obligations under this Agreement shall terminate as of the date of default; provided, however, that vested rights of the Executive shall not be affected.

8. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall preclude the Company or the Holding Company from consolidating with, merging into, or transferring all, or substantially all, of their assets to another corporation that assumes all their obligations and undertakings hereunder. Upon such a consolidation, merger or transfer of assets, the term “Company” as used herein, shall mean such other corporation or entity, and this Agreement shall continue in full force and effect.

9. Confidential Information. The Executive acknowledges that during his employment he will learn and have access to confidential information regarding the Company and its customers and businesses. The Executive agrees not to disclose or use for his own benefit, or the benefit of any other person or entity, any confidential information, unless or until the Company consents to such disclosure or use of such information is otherwise legally in the public domain. The Executive shall not knowingly disclose or reveal to any unauthorized person any confidential information relating to the Holding Company, its subsidiaries, or affiliates, or any of the businesses operated by them, and the Executive confirms that such information constitutes the exclusive property of the Company. The provisions of this Section 9 shall survive the termination or expiration of this Agreement.

10. Non-Assignability. Neither this Agreement nor any right or interest hereunder shall be assignable by the Executive, by the Executive, his beneficiaries or legal representatives without the Company’s prior written consent; provided, however, that nothing in this Section 10 shall preclude the Executive from designating a beneficiary to receive any benefits payable hereunder upon his death or the executors, administrators or legal representatives of the Executive or his estate from assigning any rights hereunder to the person or persons entitled thereto.

11. No Attachment. Except as required by law, no right to receive payment under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy, or similar process of assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

12. Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, the Executive and the Company and its successors and assigns.

13. Amendment of Agreement. This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto.

14. Waiver. No term or condition of this Agreement shall deemed to have been waived, nor shall there be an estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver, unless specifically stated therein, and each waiver shall

10.4-8

operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than the act specifically waived.

15. Severability. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect the other provisions of this Agreement not held so invalid, and each such other provision shall, to the full extent consistent with applicable law, continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then any prior Agreement between the Company (or any predecessor thereof) and the Executive shall be deemed reinstated to the full extent permitted by law, as this Agreement had not been executed.

16. Headings. The headings of the paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

17. Governing Law. This Agreement has been executed and delivered in the State of Ohio and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Ohio, except to the extent that federal law is governing.

18. Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Company or any predecessor of the Company and the Executive, including, but not limited to that certain Offer Letter of the Company dated May 7, 2008 (“Offer Letter”). Notwithstanding the foregoing, paragraph numbers 1, 3, 6 and 7 of the Offer Letter shall survive the execution of this Agreement.

19. Arbitration. Any dispute concerning the interpretation or application of this Agreement that cannot be resolved by mutual agreement of the Company and Executive must be submitted for determination by an impartial arbitrator selected in accordance with the American Arbitration Association’s Employment Dispute Resolution Rules.

20. Notices. Any notice or other communication required or permitted pursuant to this Agreement shall be deemed delivered if such notice or communication is in writing and is delivered personally or by facsimile transmission or is deposited in the United States mail, postage prepaid, addressed as follows:

If to the Company:

Chairman and CEO
The Home Savings and Loan Company of Youngstown, Ohio
275 West Federal Plaza Street
Youngstown, Ohio 44503

If to the Executive:

To the last address on file with the Company as provided by Executive to the Company.

10.4-9

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has signed this Agreement, each as of the day and year first above written.

THE HOME SAVINGS AND LOAN COMPANY OF YOUNGSTOWN, OHIO
By:	/s/ Douglas M. McKay
Name: Douglas M. McKay
Title: Chairman of the Board and Chief Executive Officer
Executive
/s/ James R. Reske
James R. Reske

10.4-10

EX-10.5

EXHIBIT 10.5

AMENDMENT

TO

EMPLOYMENT AGREEMENT

     WHEREAS, The Home Savings and Loan Company of Youngstown, Ohio (the “Company”) previously entered into an Employment Agreement with Douglas M. McKay (the “Executive”) effective as of December 31, 2004 (the “Agreement”); and

     WHEREAS, the Company and the Executive recognize certain aspects of the terms and conditions of the employment relationship between the Company and the Executive are subject to certain requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Section 409A Requirements”) which, among other things, necessitate specific documentation of compliance with such requirements; and

     WHEREAS, the Company is subject to certain regulatory requirements and restrictions which may impact or interact with its ability to implement changes to the Agreement (the “Regulatory Restrictions”); and

     WHEREAS, the Company and the Executive desire to amend the Agreement to comply with the Section 409A Requirements to avoid potential adverse tax consequences to the Executive, recognizing the potential applicability of the Regulatory Restrictions:

NOW, THEREFORE, effective January, 1, 2009, the Agreement is amended as follows:

1. A new Subsection 7(e) is added as follows:

“(e) In the event and to the extent the terms and conditions of this Agreement are subject to regulatory approval and/or may be nullified or rendered inoperative or inapplicable by operation of applicable law, the Agreement shall be effective only to extent permissible under such regulatory and/or other legal requirements, but to the fullest extent as may be permissible thereunder.”

2. A new Section 21 is added to the end of the Agreement as follows:

“21. Code Section 409A Requirements.

     (a) Specified Employee Restrictions. Anything contained in the preceding provisions of this Agreement to the contrary notwithstanding, any payments otherwise payable to or with respect to a Specified Employee (as hereinafter defined) shall not be paid to or with respect to a Specified Employee until at least six (6) months after such Specified Employee’s Separation from Service (as hereinafter defined); provided, however, that, if such Separation from Service is an “involuntary separation from service” under Treas. Reg. Section 1.409A-1(n), then such delay shall only be applied to

10.5-1

the extent such amounts, when added to all other amounts required to be taken into account under the “separation pay” limitation of Treas. Reg. Section 1.409A-1(b)(9)(iii), would, if paid within such period, exceed the Specified Employee’s Statutory Maximum (as hereinafter defined). Payment of any delayed amounts shall be made as soon as is administratively practicable after the expiration of such six (6) month period.

     (b) No Delay or Acceleration of Payment. Except as expressly indicated under Subsection (a) above, all payments required to be made under this Agreement shall not be subject to delay or acceleration, except as may be permitted by action of the Company under the applicable Code Section 409A requirements.

     (c) Separation from Service Requirement. For purposes of determining the entitlement to any payment in connection with or relating to the Executive’s “termination” of employment, the existence of such termination shall not exist unless and until the Executive experiences a Separation from Service (as hereinafter defined).

     (d) Benefit Continuation. In the event benefit continuation under Section 4 would result in the recognition of taxable income by the Executive, such continuation shall occur only to the extent permitted in the exceptions contained in Treas. Reg. Section 1.409A-1(a)(5) or 1.409A-1(b)(9)(v).

     (e) Mandatory Applicability. In the event that the effectiveness, operation or applicability of this Amendment is prevented, delayed or called into question under the requirements of Section 7 of this Agreement, this Section 21 shall nevertheless be fully effective to apply to all payments under this Agreement and any other payments from the Company which are subject or pertinent to the application of the Code Section 409A requirements, as determined by the Company.

     (f) Definitions.

          (i) For purposes of this Agreement, “Separation from Service” shall mean a “separation from service” by the Executive with respect to the Company within the meaning of Treas. Reg. Section 1.409A-1(h)(1).

          (ii) For purposes of this Agreement, “Specified Employee” shall mean any person identified as such as of the relevant time under Treas. Reg. Section 1.409A-1(i); provided, however, that a person’s “officer” status for purposes of the application of the rules referenced thereunder may be construed by the Company in a manner consistent with preventing a possible or inadvertent violation of the Specified Employee restrictions of Code Section 409A.

          (iii) For purposes of this Agreement, “Statutory Maximum” shall, with respect to a Specified Employee, mean the “two (2) times the lesser of” amount described in Treas. Reg. 1.409A-1(b)(9)(iii)(A).”

10.5-2

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, and the Executive has signed this Amendment, effective January 1, 2009.

THE HOME SAVINGS AND LOAN COMPANY OF YOUNGSTOWN, OHIO

By:	/s/ Jude J. Nohra Jude J. Nohra
	Vice President, General Counsel & Secretary
Date:	December 22, 2008
By:	/s/ Douglas M. McKay Douglas M. McKay
Date:	December 22, 2008

10.5-3

EX-10.6

EXHIBIT 10.6

AMENDMENT

TO

EMPLOYMENT AGREEMENT

     WHEREAS, The Home Savings and Loan Company of Youngstown, Ohio (the “Company”) previously entered into an Employment Agreement with Patrick W. Bevack (the “Executive”) effective as of December 31, 2004 (the “Agreement”); and

     WHEREAS, the Company and the Executive recognize certain aspects of the terms and conditions of the employment relationship between the Company and the Executive are subject to certain requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Section 409A Requirements”) which, among other things, necessitate specific documentation of compliance with such requirements; and

     WHEREAS, the Company is subject to certain regulatory requirements and restrictions which may impact or interact with its ability to implement changes to the Agreement (the “Regulatory Restrictions”); and

     WHEREAS, the Company and the Executive desire to amend the Agreement to comply with the Section 409A Requirements to avoid potential adverse tax consequences to the Executive, recognizing the potential applicability of the Regulatory Restrictions:

NOW, THEREFORE, effective January, 1, 2009, the Agreement is amended as follows:

1. A new Subsection 7(e) is added as follows:

“(e) In the event and to the extent the terms and conditions of this Agreement are subject to regulatory approval and/or may be nullified or rendered inoperative or inapplicable by operation of applicable law, the Agreement shall be effective only to extent permissible under such regulatory and/or other legal requirements, but to the fullest extent as may be permissible thereunder.”

2. A new Section 21 is added to the end of the Agreement as follows:

“21. Code Section 409A Requirements.

     (a) Specified Employee Restrictions. Anything contained in the preceding provisions of this Agreement to the contrary notwithstanding, any payments otherwise payable to or with respect to a Specified Employee (as hereinafter defined) shall not be paid to or with respect to a Specified Employee until at least six (6) months after such Specified Employee’s Separation from Service (as hereinafter defined); provided, however, that, if such Separation from Service is an “involuntary separation from service” under Treas. Reg. Section 1.409A-1(n), then such delay shall only be applied to

10.6-1

the extent such amounts, when added to all other amounts required to be taken into account under the “separation pay” limitation of Treas. Reg. Section 1.409A-1(b)(9)(iii), would, if paid within such period, exceed the Specified Employee’s Statutory Maximum (as hereinafter defined). Payment of any delayed amounts shall be made as soon as is administratively practicable after the expiration of such six (6) month period.

     (b) No Delay or Acceleration of Payment. Except as expressly indicated under Subsection (a) above, all payments required to be made under this Agreement shall not be subject to delay or acceleration, except as may be permitted by action of the Company under the applicable Code Section 409A requirements.

     (c) Separation from Service Requirement. For purposes of determining the entitlement to any payment in connection with or relating to the Executive’s “termination” of employment, the existence of such termination shall not exist unless and until the Executive experiences a Separation from Service (as hereinafter defined).

     (d) Benefit Continuation. In the event benefit continuation under Section 4 would result in the recognition of taxable income by the Executive, such continuation shall occur only to the extent permitted in the exceptions contained in Treas. Reg. Section 1.409A-1(a)(5) or 1.409A-1(b)(9)(v).

     (e) Mandatory Applicability. In the event that the effectiveness, operation or applicability of this Amendment is prevented, delayed or called into question under the requirements of Section 7 of this Agreement, this Section 21 shall nevertheless be fully effective to apply to all payments under this Agreement and any other payments from the Company which are subject or pertinent to the application of the Code Section 409A requirements, as determined by the Company.

     (f) Definitions.

          (i) For purposes of this Agreement, “Separation from Service” shall mean a “separation from service” by the Executive with respect to the Company within the meaning of Treas. Reg. Section 1.409A-1(h)(1).

          (ii) For purposes of this Agreement, “Specified Employee” shall mean any person identified as such as of the relevant time under Treas. Reg. Section 1.409A-1(i); provided, however, that a person’s “officer” status for purposes of the application of the rules referenced thereunder may be construed by the Company in a manner consistent with preventing a possible or inadvertent violation of the Specified Employee restrictions of Code Section 409A.

          (iii) For purposes of this Agreement, “Statutory Maximum” shall, with respect to a Specified Employee, mean the “two (2) times the lesser of” amount described in Treas. Reg. 1.409A-1(b)(9)(iii)(A).”

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, and the Executive has signed this Amendment, effective January 1, 2009.

10.6-2

THE HOME SAVINGS AND LOAN COMPANY OF YOUNGSTOWN, OHIO

By:	/s/ Douglas M. McKay Douglas M. McKay
	Chairman and Chief Executive Officer
Date:	December 22, 2008
By:	/s/ Patrick W. Bevack Patrick W. Bevack
Date:	December 22, 2008

10.6-3

EX-10.7

EXHIBIT 10.7

AMENDMENT

TO

EMPLOYMENT AGREEMENT

     WHEREAS, The Home Savings and Loan Company of Youngstown, Ohio (the “Company”) previously entered into an Employment Agreement with James R. Reske (the “Executive”) effective as of May 19, 2008 (the “Agreement”); and

     WHEREAS, the Company and the Executive recognize certain aspects of the terms and conditions of the employment relationship between the Company and the Executive are subject certain requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Section 409A Requirements”) which, among other things, necessitate specific documentation of compliance with such requirements; and

     WHEREAS, the Company is subject to certain regulatory requirements and restrictions which may impact or interact with its ability to implement changes to the Agreement (the “Regulatory Restrictions”); and

     WHEREAS, the Company and the Executive desire to amend the Agreement to comply with the Section 409A Requirements to avoid potential adverse tax consequences to the Executive, recognizing the potential applicability of the Regulatory Restrictions:

NOW, THEREFORE, effective January, 1, 2009, the Agreement is amended as follows:

1. A new Subsection 7(d) is added as follows:

“In addition to the events provided in Subsections (a), (b) and (c) of this Section 7, in the event and to the extent the terms and conditions of this Agreement are subject to regulatory approval and/or may be nullified or rendered inoperative or inapplicable by operation of applicable law, the Agreement shall be effective only to extent permissible under such regulatory and/or other legal requirements, but to the fullest extent as may be permissible thereunder.”

2. A new Section 21 is added to the end of the Agreement as follows:

“21. Code Section 409A Requirements.

     (a) Specified Employee Restrictions. Anything contained in the preceding provisions of this Agreement to the contrary notwithstanding, any payments otherwise payable to or with respect to a Specified Employee (as hereinafter defined) shall not be paid to or with respect to a Specified Employee until at least six (6) months after such Specified Employee’s Separation from Service (as hereinafter defined); provided, however, that, if such Separation from Service is an “involuntary separation from

10.7-1

service” under Treas. Reg. Section 1.409A-1(n), then such delay shall only be applied to the extent such amounts, when added to all other amounts required to be taken into account under the “separation pay” limitation of Treas. Reg. Section 1.409A-1(b)(9)(iii), would, if paid within such period, exceed the Specified Employee’s Statutory Maximum (as hereinafter defined). Payment of any delayed amounts shall be made as soon as is administratively practicable after the expiration of such six (6) month period.

     (b) No Delay or Acceleration of Payment. Except as expressly indicated under Subsection (a) above, all payments required to be made under this Agreement shall not be subject to delay or acceleration, except as may be permitted by action of the Company under the applicable Code Section 409A requirements.

     (c) Separation from Service Requirement. For purposes of determining the entitlement to any payment in connection with or relating to the Executive’s “termination” of employment, the existence of such termination shall not exist unless and until the Executive experiences a Separation from Service (as hereinafter defined).

     (d) Benefit Continuation. In the event benefit continuation under Section 4 would result in the recognition of taxable income by the Executive, such continuation shall occur only to the extent permitted in the exceptions contained in Treas. Reg. Section 1.409A-1(a)(5) or 1.409A-1(b)(9)(v).

     (e) Mandatory Applicability. In the event that the effectiveness, operation or applicability of this Amendment is prevented, delayed or called into question under the requirements of Section 7 of this Agreement, this Section 21 shall nevertheless be fully effective to apply to all payments under this Agreement and any other payments from the Company which are subject or pertinent to the application of the Code Section 409A requirements, as determined by the Company.

     (f) Definitions.

          (i) For purposes of this Agreement, “Separation from Service” shall mean a “separation from service” by the Executive with respect to the Company within the meaning of Treas. Reg. Section 1.409A-1(h)(1).

          (ii) For purposes of this Agreement, “Specified Employee” shall mean any person identified as such as of the relevant time under Treas. Reg. Section 1.409A-1(i); provided, however, that a person’s “officer” status for purposes of the application of the rules referenced thereunder may be construed by the Company in a manner consistent with preventing a possible or inadvertent violation of the Specified Employee restrictions of Code Section 409A.

          (iii) For purposes of this Agreement, “Statutory Maximum” shall, with respect to a Specified Employee, mean the “two (2) times the lesser of” amount described in Treas. Reg. 1.409A-1(b)(9)(iii)(A).”

10.7-2

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, and the Executive has signed this Amendment, effective January 1, 2009.

THE HOME SAVINGS AND LOAN COMPANY OF YOUNGSTOWN, OHIO

By:	/s/ Douglas M. McKay Douglas M. McKay
	Chairman and Chief Executive Officer
Date:	December 22, 2008
By:	/s/ James R. Reske James R. Reske
Date:	December 22, 2008

10.7-3

EX-10.8

EXHIBIT 10.8

United Community Financial Corp.
AMENDED AND RESTATED
1999 LONG-TERM INCENTIVE PLAN

10.8-A

United Community Financial Corp.
AMENDED AND RESTATED
1999 LONG-TERM INCENTIVE PLAN

INDEX

SECTION	DESCRIPTION
1	Purpose of the Plan
2	Definitions
3	Types of Awards Covered
4	Administration
5	Eligibility
6	Shares of Stock Subject to the Plan
7	Stock Options
8	Stock Appreciation Rights
9	Restricted Stock
10	Performance Awards
11	Other Stock-Based Incentive Awards
12	Exercise of Options
13	Rights in Event of Death, Disability or Retirement
14	Award Agreements
15	Tax Withholding
16	Change of Control
17	Dilution or Other Adjustment
18	Transferability
19	Amendment, Termination or Modification
20	General Provisions
21	Plan Effective Date
22	Plan Termination
23	Governing Law

10.8-B

United Community Financial Corp.
AMENDED AND RESTATED
1999 LONG-TERM INCENTIVE PLAN

SECTION 1
Purpose of the Plan

1.1 The purpose of the United Community Financial Corp. Amended and Restated 1999 Long-Term Incentive Plan is to attract and retain qualified directors, directors emeritus and employees and to strengthen the mutuality of interests between such directors, directors emeritus and employees and the Corporation’s shareholders by providing directors, directors emeritus and employees with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Corporation.

1.2 The Plan was adopted by the Board on May 20, 1999, and was approved by the shareholders of the Corporation on July 12. 1999. The Plan is hereby amended and restated effective as of October 20, 2008, for compliance with Section 409A of the Code and to make other administrative clarifications.

SECTION 2
Definitions

2.1 Unless the context indicates otherwise, the following terms, when used in this Plan, shall have the meanings set forth in this Section:

a)	“Award” means a grant or award under this Plan in the form of an Option, an SAR, Restricted Shares, a Performance Award or any other stock-based incentive award.
b)	“Board” means the Board of Directors of the Corporation.
c)	“Change of Control” means an event defined in Section 16 of this Plan.
d)	“Code” means the Internal Revenue Code of 1986, as amended, and related Treasury Regulations.
e)	“Committee” means any Committee comprised of three or more Outside Directors designated by the Board to administer the Plan in accordance with Section 4 of this Plan.
f)	“Common Shares” means the common shares, without par value, of the Corporation.
g)	“Corporation” means United Community Financial Corp.

10.8-1

1

United Community Financial Corp.
Amended and Restated 1999 Long-Term Incentive Plan

h)	“Deferred Shares” means an award made pursuant to Section 11 of this Plan of the right to receive Common Shares in lieu of cash thereof at the end of a specified time period.
i)	“Director” means any member of the Board of Directors of the Corporation or the Board of Directors of a Subsidiary.
j)	“Director Emeritus” means any director emeritus of the Corporation or a Subsidiary.
k)	“Disability” means (i) with respect to any Award that is subject to Section 409A of the Code, the Grantee is (A) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (B) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Grantee’s employer, or (C) determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board; and (ii) with respect to any other Awards, permanent and total disability within the meaning of Section 22(e)(3) of the Code.
l)	“Effective Date” means the date defined in Section 21.1 of this Plan.
m)	“Employee” means any full-time employee of the Corporation or any of its Subsidiaries (including Directors or Directors Emeritus who are employed on a full-time basis by the Corporation or any of its Subsidiaries).
n)	“Exchange Act” means the Securities Exchange Act of 1934, as amended.
o)	“Fair Market Value” of a Common Share on a given date shall be based upon the last sales price or, if unavailable, the average of the closing bid and asked prices of a Common Share on such date (or, if there was no trading or quotation in the Common Shares on such date, on the next preceding date on which there was trading or quotation) if the Common Shares are listed on a national securities exchange or quoted on an interdealer quotation system. If the Common Shares are not listed on a national securities exchange or quoted on an interdealer quotation system, the Fair Market Value of a Common Share shall be determined: (i) with respect to an ISO, within the meaning of Section 422 of the Code; (ii) with respect to any Award that is subject to Section 409A of the Code or any NQSO or SAR, by the reasonable application of a reasonable valuation method within the meaning of Treasury Regulation §1.409A-1(b)(5)(iv)(B); and (iii) with respect to any other Award, by the Committee in good faith based upon the best available facts and circumstances at the time.

10.8-2

2

United Community Financial Corp.
Amended and Restated 1999 Long-Term Incentive Plan

p)	“Grantee” means a person granted an Award under this Plan.
q)	“Immediate Family” means, with respect to a given Grantee, that Grantee’s spouse, children or grandchildren (including adopted children or grandchildren).
r)	“ISO” means an Award that is intended to qualify as an incentive stock option under Section 422 of the Code, as now or hereafter constituted.
s)	“Non-Employee Director” means a Director or Director Emeritus of the Corporation or a Subsidiary who is not an Employee.
t)	“NQSO” means an Award that is not intended to qualify as an incentive stock option under Section 422 of the Code, as now or hereafter constituted.
u)	“Options” refers collectively to NQSOs and ISOs issued under this Plan.
v)	“OTS” means the Office of Thrift Supervision, Department of the Treasury.
w)	“Outside Director” means a non-employee Director or Director Emeritus within the meaning of Rule 16b-3(b)(3) under the Exchange Act, or any successor thereto, who is also an “outside director” within the meaning of Section 162(m) of the Code and the regulations thereunder.
x)	“Performance Award” means an Award under the Plan, payable in cash, Common Shares, other securities or other awards which confers on the holder thereof the right to receive payments upon the achievement of certain performance goals during the performance periods established by the Committee.
y)	“Permitted Transferee” means any individual or entity as defined in Section 18.2 of this Plan.
z)	“Plan” means this Amended and Restated 1999 Long-Term Incentive Plan as set forth herein and as amended from time to time.
aa)	“Restricted Shares” means an Award of Common Shares subject to restrictions on transfer and/or any other restrictions on incidents of ownership as the Committee may determine.
bb)	“Retirement” means the retirement of a Grantee between ages 60 and 64 with 15 or more years of service to the Corporation or a Subsidiary, or the retirement of a Grantee at or after age 65.
cc)	“Rules” means Rule 16(b)(3) and any successor provisions promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
dd)	“SAR” means an Award constituting the right to receive, upon surrender of the right, but without payment, an amount payable in cash.

10.8-3

3

United Community Financial Corp.
Amended and Restated 1999 Long-Term Incentive Plan

ee)	“Subsidiary or Subsidiaries” means (i) with respect to an ISO, a “subsidiary corporation” as defined in Section 424(f) of the Code or a “parent corporation” as defined in Section 424(e) of the Code; (ii) with respect to a NQSO, SAR or any Award that is subject to Section 409A of the Code, any person with whom the Corporation would be considered a single employer under Section 414(b) or (c) of the Code; and (iii) with respect to any other Award, any entity or entities in which the Corporation owns a majority of the voting power.
ff)	“Ten Percent Shareholder” means any Employee who, at the time an ISO is granted, owns, directly or indirectly, more than 10% of the combined voting power of all classes of stock of the Corporation or any Subsidiary, within the meaning of Section 422 of the Code.
gg)	“Terminated for Cause” means any removal of a Director or discharge of an Employee for the personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of a material provision of any law, rule or regulation (other than traffic violations or similar offenses) or a material violation of a final cease-and-desist order or for any other action of a Director or Employee which results in a substantial financial loss to the Corporation or a Subsidiary.

SECTION 3
Types of Awards Covered

3.1 Awards granted under this Plan may be:

a)	Options which may be designated as:
(i)	NQSOs; or
(ii)	ISOs;
b)	SARs;
c)	Restricted Shares;
d)	Performance Awards; or
e)	other forms of stock-based incentive awards.

SECTION 4
Administration

4.1 This Plan shall be administered by the Committee. The members of the Committee shall be appointed from time to time by the Board. Members of the Committee shall

10.8-4

4

United Community Financial Corp.
Amended and Restated 1999 Long-Term Incentive Plan

serve at the pleasure of the Board, and the Board may from time to time remove members from, or add members to, the Committee. Subject to the provisions of this Plan and applicable law, the Committee shall have full discretion and the exclusive power:

a)	to select the Employees, Directors and Directors Emeritus who will participate in the Plan and to make Awards to such Employees, Directors and Directors Emeritus;
b)	to determine the times at which Awards shall be granted and any terms and conditions with respect to Awards as shall not be inconsistent with the provisions of this Plan; and
c)	to resolve all questions relating to the administration of this Plan and applicable law.

4.2 The interpretation of, and application by, the Committee of any provision of this Plan shall be final and conclusive. The Committee, in its sole discretion, may establish rules and guidelines relating to this Plan as it may deem appropriate.

4.3 A majority of the members of the Committee shall constitute a quorum for the transaction of business. An action in writing by all members of the Committee then serving shall be fully effective as if the action had been taken by unanimous vote at a meeting duly called and held.

4.4 The Committee may employ such legal counsel, consultants, and agents as it may deem desirable for the administration of this Plan and may rely upon any opinion received from any retained counsel or consultant and any computation received from any retained consultant or agent. The Committee shall keep minutes of its actions under this Plan.

4.5 No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to this Plan or any Awards. If a member of the Board or of the Committee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of anything done or not done by such member in such capacity under or with respect to this Plan, the Corporation shall indemnify such member against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such member in connection with such action, suit or proceeding if such member acted in good faith and in a manner such member reasonably believed to be in or not opposed to the best interests of the Corporation and its Subsidiaries and, with respect to any criminal action or proceeding, had no reasonable cause to believe such member’s conduct was unlawful.

10.8-5

5

United Community Financial Corp.
Amended and Restated 1999 Long-Term Incentive Plan

SECTION 5
Eligibility

5.1 The individuals who shall be eligible to participate in this Plan shall be Directors, Directors Emeritus, officers, management, and such other key Employees of the Corporation and the Subsidiaries as the Committee may from time to time determine.

SECTION 6
Shares of Stock Subject to the Plan

6.1 Awards may be granted with respect to the Common Shares.

6.2 Shares delivered upon exercise of an Award, at the election of the Board, may be Common Shares that are authorized but previously unissued, or Common Shares reacquired by the Corporation, or both.

6.3 The maximum number of Common Shares that may be issued pursuant to Awards granted under this Plan, subject to adjustment as provided in Section 17 of this Plan, shall be 3,471,562 Common Shares, all of which may be granted as ISOs. For the purpose of computing the total number of Common Shares available for Awards under this Plan, there shall be counted against the foregoing limitation the number of Common Shares subject to issuance upon exercise of Awards as of the dates on which such Awards are granted. If any Awards are forfeited, terminated or exchanged for other Awards, or expire unexercised, the Common Shares which were theretofore subject to such Awards shall again be available for Awards under this Plan to the extent of such forfeiture, termination or expiration of such Awards.

6.4 Notwithstanding any other provision of this Plan to the contrary, subject to adjustment as provided in Section 17 of this Plan, the maximum number of Common Shares that may be issued to any individual during the term of this Plan pursuant to Options granted under this Plan shall be 25% of the number of Common Shares that may be issued pursuant to this Plan.

6.5 Any Common Shares subject to an Award which, for any reason, expires or is terminated unexercised, shall again be available for the grant of other Awards under this Plan; provided, however, that forfeited shares or other securities shall not be available for further Awards if the Grantee has realized any benefits of ownership from such shares.

SECTION 7
Stock Options

7.1 The Committee may grant Options, as follows, which shall be evidenced by a stock option agreement and may be designated as NQSOs or ISOs:

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Amended and Restated 1999 Long-Term Incentive Plan

     a) NQSOs

(i)	A NQSO is a right to purchase a specified number of Common Shares during a period determined by the Committee, not to exceed ten years, at a price determined by the Committee that is not less than the Fair Market Value of the Common Shares on the date the Option is granted.
(ii)	The exercise price of the NQSO may be paid in cash. At the discretion of the Committee, the exercise price may also be paid by the tender of Common Shares to the Corporation or through a combination of Common Shares and cash or through such other means as the Committee determines are consistent with the purpose of this Plan and applicable law. No fractional Common Shares will be issued or accepted by the Corporation.
(iii)	No NQSO may be exercised more than ten years after the date the NQSO is granted.
(iv)	The Committee may permit the person exercising the NQSO, either on a selective or an aggregate basis, to simultaneously exercise the NQSO and sell the Common Shares acquired, pursuant to a brokerage or similar arrangement approved in advance by the Committee, and use the proceeds from the sale as payment of the exercise price of the NQSO.

     (b) ISOs

(i)	No ISO may be granted under this Plan to a Non-Employee Director.
(ii)	To the extent the aggregate Fair Market Value (determined at the time of the grant of the Award) of the number of Common Shares with respect to which ISOs are exercisable under all plans of the Corporation or a Subsidiary for the first time by a Grantee during any calendar year exceeds $100,000, or such other limit as may be required by the Code, such ISOs shall be treated as NQSOs to the extent of such excess.
(iii)	No ISO may be exercisable more than:

A)	ten years after the date the ISO is granted in the case of a Grantee who is not a Ten Percent Shareholder on the date the ISO is granted; and
B)	five years after the date the ISO is granted in the case of a Grantee who is a Ten Percent Shareholder on the date the ISO is granted.

(iv) The exercise price of any ISO shall be determined by the Committee and shall not be less than:

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Amended and Restated 1999 Long-Term Incentive Plan

A)	the Fair Market Value of the Common Shares subject to the ISO on the date of grant in the case of a Grantee who is not a Ten Percent Shareholder on the date the ISO is granted; and
B)	110 percent of the Fair Market Value of the Common Shares subject to the ISO on the date of grant in the case of a Grantee who is a Ten Percent Shareholder on the date the ISO is granted.

(v) The Committee may provide that the exercise price under an ISO may be paid by one or more of the methods available for paying the exercise price of an NQSO under Sections 7.1(a)(ii) and (iv) of this Plan.

SECTION 8
Stock Appreciation Rights

8.1 The amount payable with respect to each SAR shall be equal in value to the excess, if any, of the Fair Market Value of a Common Share on the exercise date over the exercise price of the SAR. The exercise price of the SAR shall be determined by the Committee and shall not be less than the Fair Market Value of a Common Share on the date the SAR is granted. SARs may be granted in tandem with an Option in which event the Grantee has the right to elect to exercise either the SAR or the Option. Upon the election to exercise one of these Awards, the other Award is subsequently terminated. Notwithstanding anything in the Plan to the contrary, a tandem SAR may not be exercised with respect to an ISO if the Fair Market Value of the ISO is less than the exercise price of the ISO. An SAR may also be granted as an independent Award.

8.2 In the case of an SAR granted in tandem with an ISO to an Employee who is a Ten Percent Shareholder on the date of such grant, the amount payable with respect to each SAR shall be equal in value to the excess, if any, of the Fair Market Value of a Common Share on the exercise date over the exercise price of the SAR, which exercise price shall not be less than 110 percent of the Fair Market Value of a Common Share on the date the SAR is granted.

8.3 The exercise price and exercise period of a SAR shall be established by the Committee at the time the SAR is granted.

SECTION 9
Restricted Stock

9.1 Restricted Shares are Common Shares that are issued to a Grantee at a price determined by the Committee, which price may be zero, and are subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine.

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9.2 The Committee shall specify in the restricted share award agreement the terms upon which Restricted Shares shall vest; provided, however that the Grantee continues to be employed by the Corporation on the vesting date.

9.3 The Committee may, in its discretion, provide for accelerated vesting of Restricted Shares upon the achievement of specified performance goals to be determined by the Committee.

9.4 A Grantee may make an election under Section 83(b) of the Code.

SECTION 10
Performance Awards

10.1 A Performance Award granted under this Plan:

a)	may be denominated or payable in cash, Common Shares, Restricted Shares, other securities or other Awards; and
b)	shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish.

10.2 Subject to the terms of this Plan and any applicable Award agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee.

SECTION 11
Other Stock-Based Incentive Awards

11.1 The Committee may from time to time grant Awards under this Plan that provide a Grantee the right to purchase Common Shares or units that are valued by reference to the Fair Market Value of the Common Shares (including, but not limited to, phantom securities or dividend equivalents) or to receive Deferred Shares. Such Awards shall be in a form determined by the Committee (and may include terms contingent upon a Change of Control); provided that such Awards shall not be inconsistent with the terms and purposes of this Plan.

SECTION 12
Exercise of Options

12.1 The Committee may provide for the exercise of Options in installments and upon such terms, conditions and restrictions as it may determine subject to applicable law and the other requirements of this Plan.

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Amended and Restated 1999 Long-Term Incentive Plan

12.2 Except in the event of the death, Disability or Retirement of a Grantee, upon the resignation or removal from the board of directors of any Grantee who is a Director or upon the termination of employment of a Grantee who is not a Director, any Option which has not yet become exercisable shall thereupon terminate and be of no further force or effect, and, unless the Committee shall specifically state otherwise at the time an Option is granted, any Option which has become exercisable shall terminate if it is not exercised within three months of such resignation, removal or termination of employment or directorship.

12.3 Unless the Committee shall specifically state otherwise at the time an Option is granted, in the event the employment or the directorship of a Grantee is Terminated for Cause, any Option that has not been exercised shall thereupon terminate and be of no further force or effect.

12.4 An Option granted hereunder shall be exercisable, in whole or in part, only by written notice delivered in person or by mail to the Secretary of the Corporation at its principal office, specifying the portion of the Option being exercised and accompanied by payment of the exercise price and otherwise in accordance with the stock option award agreement pursuant to which the Option was granted.

SECTION 13
Rights in Event of Death, Disability or Retirement

13.1 If a Grantee dies, becomes subject to a Disability or enters Retirement prior to termination of his or her right to exercise an Option in accordance with the provisions of his or her stock option award agreement without having totally exercised the Option, the stock option award agreement may provide that the Option shall become exercisable in full on the date of the Grantee’s death, Disability or Retirement, (i) in the event of the Grantee’s death, by the Grantee’s estate or by the person who acquired the right to exercise the Option by bequest or inheritance (ii) in the event of the Grantee’s Disability, by the Grantee or his or her personal representative or (iii) in the event of a Grantee’s Retirement, by the Grantee.

13.2 In the event of the Grantee’s death, Disability or Retirement the Option, if it has become exercisable in full, shall not be exercisable after the date of its expiration or more than twelve months from the date of the Grantee’s death, Disability or Retirement, whichever first occurs.

13.3 The date of Disability of a Grantee shall be determined (a) with respect to Awards that are subject to Section 409A of the Code, in accordance with the requirements of Section 409A of the Code, and (b) with respect to all other Awards, by the Committee.

13.4 Regardless of any other provision of the Plan or any Award agreement:

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Amended and Restated 1999 Long-Term Incentive Plan

a)

Subject to Section 13.4(b), if a Grantee becomes entitled to the payment, exercise or settlement of any Award that is subject to Section 409A of the Code upon the Grantee’s termination, the payment exercise or settlement of such Award will not be made or permitted before the Grantee incurs a “separation from service” as defined in Treasury Regulation §1.409A-1(h) from the Corporation and all Subsidiaries (a “Separation from Service”).

b)

If a Grantee is a specified employee (within the meaning of Treasury Regulation §1.409A-1(i) and as determined under the Corporation’s policy for determining specified employees) and becomes entitled to the payment, exercise or settlement of any Award that is subject to Section 409A of the Code upon the Grantee’s Separation from Service (as defined above), such payment, exercise or settlement of such an Award shall not be made until the first business day of the seventh month following the Grantee’s Separation from Service or, if earlier, the Grantee’s death.

SECTION 14
Award Agreements

14.1 Each Award granted under this Plan shall be evidenced by an award agreement, as the Committee may deem appropriate, between the Grantee to whom the Award is granted and the Corporation, setting forth the number of Common Shares, SARs, or units subject to the Award and such other terms and conditions applicable to the Award not inconsistent with this Plan.

14.2 The award agreement for an Option shall also be referred to as a stock option award agreement.

SECTION 15
Tax Withholding

15.1 The Committee may establish such rules and procedures as it considers desirable in order to satisfy any obligation of the Corporation to withhold federal income taxes or other taxes with respect to any Award made under this Plan. Such rules and procedures may provide:

a)	in the case of Awards paid in Common Shares, the Corporation may withhold Common Shares otherwise issuable upon exercise or settlement of such Award in order to satisfy withholding obligations, unless otherwise instructed by the Grantee or unless the Committee determines otherwise at the time of Grant; and
b)	in the case of an Award paid in cash, that the withholding obligation shall be satisfied by withholding the applicable amount at the time payable and paying the net amount in cash to the Grantee; provided that the requirements of the Rules, to

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Amended and Restated 1999 Long-Term Incentive Plan

the extent applicable, must be satisfied with regard to any withholding pursuant to clause (a).

SECTION 16
Change of Control

16.1 For the purpose of this Plan, a “Change of Control” of the Corporation means a change of control of a nature that:

(i)	would be required to be reported in response to Item 1(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Exchange Act; or
(ii)	results in a Change of Control of the Corporation within the meaning of the Home Owners’ Loan Act of 1933, as amended, and the Rules and Regulations promulgated by the OTS, as in effect on the Effective Date (provided, that in applying the definition of change of control as set forth under the rules and regulations of the OTS, the Board shall substitute its judgment for that of the OTS); or
(iii)	without limitation, such a Change of Control shall be deemed to have occurred at such time as;

(a)	any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the Corporation’s outstanding securities ordinarily having the right to vote at the election of directors;
(b)	individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least 75% of the directors comprising the Incumbent Board, or whose nomination for election by the Corporation’s shareholders was approved by the same Nominating Committee serving under an Incumbent Board shall be, for purposes of this clause (b), considered as though he were a member of the Incumbent Board;
(c)	a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Corporation or similar transaction occurs in which the Corporation is not the resulting entity or;
(d)	the approval by shareholders of a proxy statement proposal soliciting proxies from shareholders of the Corporation, by someone other than the

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Amended and Restated 1999 Long-Term Incentive Plan

current management of the Corporation; seeking shareholder approval of a plan of reorganization, merger or consolidation of the Corporation or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan or transaction are exchanged for or converted into cash or property or securities not issued by the Corporation; or

(e) a tender offer is made and completed for 20% or more of the voting securities of the Corporation.

16.2 In the event of a Change of Control affecting the Corporation, then, notwithstanding any provision of this Plan or of any provisions of any Award agreements entered into between the Corporation and any Grantee to the contrary, all Awards that have not expired and which are then held by any Grantee (or the person or persons to whom any deceased Grantee’s rights have been transferred) shall, as of such Change of Control, become fully and immediately vested and exercisable and may be exercised for the remaining term of such Awards; provided, however, that in the event that any exercise or receipt of an Award in connection with a Change of Control alone, or in the aggregate with other payments to a Grantee, would result in the imposition of a penalty tax pursuant to Section 280G of the Code, such exercise or receipt would remain subject to any vesting schedule set forth in the Award agreement. Notwithstanding the foregoing, any Awards that are subject to Section 409A of the Code and become vested pursuant to this Section 16.2 shall not be paid or settled unless the Change of Control constitutes a “change in control event” for purposes of Section 409A of the Code and Treasury Regulation §1.409A-3(i)(5).

SECTION 17
Dilution or Other Adjustment

17.1 If the Corporation is a party to any merger or consolidation, or undergoes any merger, consolidation, separation, reorganization, liquidation or the like, the Committee shall have the power to make arrangements, which shall be binding upon the holders of unexpired Awards, for the substitution of new Awards for, or the assumption by another corporation of, any unexpired Awards then outstanding hereunder; provided that such substitution or assumption complies with Section 409A of the Code, to the extent applicable.

17.2 In the event of any change in capitalization affecting the Common Shares, such as a stock split, stock dividend, recapitalization, merger, consolidation, spin-off, split-up, combination or exchange of shares or other form of reorganization, or any other change affecting the Common Shares, including a distribution (other than normal cash dividends) of Corporation assets to shareholders, the Committee shall conclusively determine the appropriate adjustment in the terms of outstanding Awards, including the option prices of outstanding Options, and the number and kind of shares or other securities as to which outstanding Awards shall be exercisable, and the aggregate

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Amended and Restated 1999 Long-Term Incentive Plan

number of shares with respect to which Awards may be granted. Notwithstanding the foregoing, an adjustment pursuant to this Section 17.2 shall be made only to the extent such adjustment complies with Section 409A of the Code, to the extent applicable.

17.3 The existence of this Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board or the shareholders of the Corporation to make or authorize the following: any adjustment, recapitalization, reorganization or other change in the Corporation’s capital structure or its business; any merger, acquisition or consolidation of the Corporation; any issuance of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Corporation’s capital stock or the rights thereof; the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business; or any other corporate act or proceeding, including any merger or acquisition which would result in the exchange of cash, stock of another company or options to purchase the stock of another company for any Award outstanding at the time of such corporate transaction or which would involve the termination of all Awards outstanding at the time of such corporate transaction.

SECTION 18
Transferability

18.1 Except as set forth in Section 18.2 of this Plan, no Award shall be sold, pledged, assigned, transferred, or encumbered by a Grantee other than by will or by the laws of descent and distribution.

18.2 Only an NQSO may be pledged, assigned, or transferred by a Grantee to another individual provided that the NQSO is pledged, assigned, or transferred without consideration by a Grantee, subject to such rules as the Committee may adopt, to (i) a member of the Grantee’s Immediate Family, (ii) a trust solely for the benefit of the Grantee and his or her Immediate Family or (iii) a partnership or limited liability company whose only partners or members are the Grantee and his or her Immediate Family (hereinafter referred to as the Permitted Transferee); provided that the Committee is notified in advance in writing of the terms and conditions of any proposed pledge, assignment or transfer and the Committee determines that such pledge, assignment or transfer complies with the requirements of this Plan and the applicable Award agreement.

18.3 Any pledge, assignment or transfer of an Award that does not comply with the provisions of this Plan and the applicable Award agreement shall be void and unenforceable against the Corporation.

18.4 All terms and conditions of a pledged, assigned or transferred Award shall apply to the beneficiary, executor, administrator, and Permitted Transferee, whether one or more, of the Grantee (including the beneficiary, executor and administrator of a permitted transferee), including the right to amend the applicable Award agreement; provided

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Amended and Restated 1999 Long-Term Incentive Plan

     that the Permitted Transferee shall not pledge, assign or transfer an Award other than by will or by the laws of descent and distribution.

SECTION 19
Amendment, Termination or Modification

19.1 Without further approval of the shareholders of the Corporation, the Board may at any time terminate this Plan, or may amend it from time to time in such respects as the Board may deem advisable, except that the Board may not, without approval of the shareholders, make any amendment which would (i) increase the aggregate number of Common Shares that may be issued under this Plan, except for adjustments pursuant to Section 17 of this Plan, (ii) materially modify the requirements as to eligibility for participation in this Plan, or (iii) materially increase the benefits accruing under this Plan. The above notwithstanding, the Board may amend this Plan to take into account changes in applicable securities, federal income tax and other applicable laws.

19.2 The Board may authorize the Committee to direct the execution of an instrument providing for the modification of any outstanding Option which the Board believes to be in the best interests of the Corporation; provided, however, that no such modification, extension or renewal shall confer on the holder of such Option any right or benefit which could not be conferred on him by the grant of a new Option at such time and shall not materially decrease the holder’s benefits under the Option without the consent of the holder of the Option, except as otherwise permitted under this Plan. Notwithstanding the foregoing, any modification, extension or renewal under this Section 19.2 shall comply with the requirements of Section 409A of the Code, to the extent applicable.

SECTION 20
General Provisions

20.1 No Awards may be exercised by a Grantee if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Corporation, contrary to law or the regulations of any duly constituted authority having jurisdiction over this Plan.

20.2 No Awards may be granted to an Employee while he or she is on a bona fide leave of absence. Notwithstanding the foregoing:

(a) With respect to ISOs, a bona fide leave of absence shall be treated in accordance with Treasury Regulation §1.421-1(h)(2).

(b) With respect to any Award that is subject to Section 409A of the Code, a bona fide leave of absence shall be treated in accordance with Treasury Regulation §1.409A-1(h)(1).

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(c) With respect to any other Award, a bona fide leave of absence approved by a duly constituted officer of the Corporation shall not be considered interruption or termination of service of any Grantee for any purposes of this Plan or Awards granted thereunder.

20.3 No Grantee shall have any rights as a shareholder with respect to any shares subject to Awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such shares upon the stock records of the Corporation.

20.4 Nothing contained in this Plan or in an Award agreement granted thereunder shall confer upon any Grantee any right to (i) continue in the employ of the Corporation or any of its Subsidiaries or continue serving on the Board or the Board of Directors of a Subsidiary or (ii) interfere in any way with the right of the Corporation or any of its Subsidiaries to terminate the Grantee’s employment at any time or service on the Board.

20.5 Any Award agreement may provide that shares issued upon exercise of any Awards may be subject to such restrictions, including, without limitation, restrictions as to transferability and restrictions constituting substantial risks of forfeiture as the Committee may determine at the time such Award is granted.

20.6 It is intended that the Awards granted under the Plan comply with, or be exempt from, Section 409A of the Code and the Treasury Regulations promulgated thereunder, and the Plan shall be interpreted, administered and operated accordingly. Nothing herein shall be construed as an entitlement to or a guarantee of any particular tax treatment to a Grantee, and none of the Corporation, its Subsidiaries, the Board or the Committee shall have any liability with respect to any failure to comply with the requirements of Section 409A of the Code.

SECTION 21
Plan Effective Date

21.1 This Plan became effective on the date of its adoption by the Board subject to approval of this Plan by the shareholders of the Corporation within twelve (12) months after the date of this Plan’s adoption by the Board (the “Effective Date”).

SECTION 22
Plan Termination

22.1 No Award may be granted under this Plan on or after the date which is ten years following the Effective Date specified in Section 21, but Awards previously granted may be exercised in accordance with their terms.

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SECTION 23
Governing Law

23.1 This Plan and all actions taken hereunder shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent federal law shall be deemed applicable.

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EX-10.9

Exhibit 10.9

United Community Financial Corp.

AMENDED AND RESTATED
2007 LONG-TERM INCENTIVE PLAN

10.9-A

United Community Financial Corp.

AMENDED AND RESTATED
2007 LONG-TERM INCENTIVE PLAN

INDEX

SECTION	DESCRIPTION
1	Purpose of the Plan
2	Definitions
3	Types of Awards Covered
4	Administration
5	Eligibility
6	Shares of Stock Subject to the Plan
7	Stock Options
8	Stock Appreciation Rights
9	Restricted Stock
10	Performance Awards
11	Other Stock-Based Incentive Awards
12	Rights in the Event of Resignation, Removal or Termination
13	Rights in Event of Death, Disability or Retirement
14	Award Agreements
15	Tax Withholding
16	Change of Control
17	Dilution or Other Adjustment
18	Transferability
19	Amendment, Termination or Modification
20	General Provisions
21	Plan Effective Date
22	Plan Termination
23	Governing Law

10.9-B

United Community Financial Corp.
AMENDED AND RESTATED
2007 LONG-TERM INCENTIVE PLAN

SECTION 1
Purpose of the Plan

1.1

The purpose of the United Community Financial Corp. Amended and Restated 2007 Long-Term Incentive Plan is to attract and retain qualified directors, directors emeritus and employees and to strengthen the mutuality of interests between such directors, directors emeritus and employees and the Corporation’s shareholders by providing directors, directors emeritus and employees with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Corporation.

1.2

The Plan was adopted by the Board on February 21, 2007 and was approved by the shareholders of the Corporation on April 26, 2007. The Plan is hereby amended and restated effective as of October 20, 2008 for compliance with Section 409A of the Code and to make other administrative clarifications.

SECTION 2
Definitions

2.1 Unless the context indicates otherwise, the following terms, when used in this Plan, shall have the meanings set forth in this Section:

a)	“Award” means a grant or award under this Plan in the form of an Option, an SAR, Restricted Shares, a Performance Award or any other stock-based incentive award.
b)	“Board” means the Board of Directors of the Corporation.
c)	“Change of Control” means an event defined in Section 16 of this Plan.
d)	“Code” means the Internal Revenue Code of 1986, as amended, and related Treasury Regulations.
e)	“Committee” means any Committee comprised of three or more Outside Directors designated by the Board to administer the Plan in accordance with Section 4 of this Plan.
f)	“Common Shares” means the common shares, without par value, of the Corporation.
g)	“Corporation” means United Community Financial Corp.

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h)	“Deferred Shares” means an award made pursuant to Section 11 of this Plan of the right to receive Common Shares in lieu of cash thereof at the end of a specified time period.
i)	“Director” means any member of the Board of Directors of the Corporation or the Board of Directors of a Subsidiary.
j)	“Director Emeritus” means any director emeritus of the Corporation or a Subsidiary.
k)	“Disability” means (i) with respect to any Award that is subject to Section 409A of the Code, the Grantee is (1) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (2) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Grantee’s employer, or (3) determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board; and (ii) with respect to any other Awards, permanent and total disability within the meaning of Section 22(e)(3) of the Code.
l)	“Effective Date” means the date defined in Section 21.1 of this Plan.
m)	“Employee” means any full-time employee of the Corporation or any of its Subsidiaries (including Directors or Directors Emeritus who are employed on a full-time basis by the Corporation or any of its Subsidiaries).
n)	“Exchange Act” means the Securities Exchange Act of 1934, as amended.
o)	“Fair Market Value” of a Common Share on a given date shall be based upon the last sales price or, if unavailable, the average of the closing bid and asked prices of a Common Share on such date (or, if there was no trading or quotation in the Common Shares on such date, on the next preceding date on which there was trading or quotation) if the Common Shares are listed on a national securities exchange or quoted on an interdealer quotation system. If the Common Shares are not listed on a national securities exchange or quoted on an interdealer quotation system, the Fair Market Value of a Common Share shall be determined: (i) with respect to an ISO, within the meaning of Section 422 of the Code; (ii) with respect to any Award that is subject to Section 409A of the Code or any NQSO or SAR, by the reasonable application of a reasonable valuation method within the meaning of Treasury Regulation §1.409A-1(b)(5)(iv)(B); and (iii) with respect to any other Award, by the Committee in good faith based upon the best available facts and circumstances at the time.
p)	“Grantee” means a person granted an Award under this Plan.

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q)	“Immediate Family” means, with respect to a given Grantee, that Grantee’s parents, spouse, brothers, sisters, children or grandchildren (including adopted children or grandchildren).
r)	“ISO” means an Award that is intended to qualify as an incentive stock option under Section 422 of the Code, as now or hereafter constituted.
s)	“Non-Employee Director” means a Director or Director Emeritus of the Corporation or a Subsidiary who is not an Employee.
t)	“NQSO” means an Award that is not intended to qualify as an incentive stock option under Section 422 of the Code, as now or hereafter constituted.
u)	“Options” refers collectively to NQSOs and ISOs issued under this Plan.
v)	“OTS” means the Office of Thrift Supervision, Department of the Treasury.
w)	“Outside Director” means a non-employee Director or Director Emeritus within the meaning of Rule 16b-3(b)(3) under the Exchange Act, or any successor thereto, who is also an “outside director” within the meaning of Section 162(m) of the Code and the regulations thereunder.
x)	“Performance Award” means an Award under the Plan, payable in cash, Common Shares, other securities or other awards which confers on the holder thereof the right to receive payments upon the achievement of certain performance goals during the performance periods established by the Committee.
y)	“Permitted Transferee” means any individual or entity as defined in Section 18.2 of this Plan.
z)	“Plan” means this Amended and Restated 2007 Long-Term Incentive Plan as set forth herein and as amended from time to time.
aa)	“Restricted Shares” means an Award of Common Shares subject to restrictions on transfer and/or any other restrictions on incidents of ownership as the Committee may determine.
bb)	“Retirement” means the retirement of a Grantee between ages 60 and 64 with 15 or more years of service to the Corporation or a Subsidiary, or the retirement of a Grantee at or after age 65, or as such meaning may be modified by the Committee or Board in the future.
cc)	“Rules” means Rule 16(b)(3) and any successor provisions promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
dd)	“SAR” means an Award constituting the right to receive, upon surrender of the right, but without payment, an amount payable in stock or cash, as determined by the Committee.

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ee)	“Subsidiary or Subsidiaries” means (i) with respect to an ISO, a “subsidiary corporation” as defined in Section 424(f) of the Code or a “parent corporation” as defined in Section 424(e) of the Code; (ii) with respect to a NQSO, SAR or any Award that is subject to Section 409A of the Code, any persons with whom the Corporation would be considered a single employer under Sections 414(b) and (c) of the Code; and (iii) with respect to any other Award, any entity or entities in which the Corporation owns a majority of the voting power.
ff)	“Ten Percent Shareholder” means any Employee who, at the time an ISO is granted, owns, directly or indirectly, within the meaning of Section 424(d) of the Code, more than 10% of the combined voting power of all classes of stock of the Corporation or any Subsidiary.
gg)	“Terminated for Cause” means any removal of a Director or discharge of an Employee for personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of a material provision of any law, rule or regulation (other than traffic violations or similar offenses) or a material violation of a final cease-and-desist order or for any other action of a Director or Employee which results in a substantial financial loss to the Corporation or a Subsidiary.

SECTION 3
Types of Awards Covered

3.1 Awards granted under this Plan may be:

a) Options which may be designated as:

(i)	NQSOs; or
(ii)	ISOs;

b)	SARs;
c)	Restricted Shares;
d)	Performance Awards; or
e)	other forms of stock-based incentive awards.

SECTION 4
Administration

4.1 This Plan shall be administered by the Committee. The members of the Committee shall be appointed from time to time by the Board. Members of the Committee shall

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serve at the pleasure of the Board, and the Board may from time to time remove members from, or add members to, the Committee. Subject to the provisions of this Plan and applicable law, the Committee shall have full discretion and the exclusive power to:

a)	select the Employees, Directors and Directors Emeritus who will participate in the Plan and to make Awards to such Employees and Directors;
b)	determine the times at which Awards shall be granted and any terms and conditions with respect to Awards as shall not be inconsistent with the provisions of this Plan; and
c)	resolve all questions relating to the administration of this Plan and applicable law.

4.2	The interpretation of, and application by, the Committee of any provision of this Plan shall be final and conclusive. The Committee, in its sole discretion, may establish rules and guidelines relating to this Plan as it may deem appropriate.
4.3	A majority of the members of the Committee shall constitute a quorum for the transaction of business. An action in writing by all members of the Committee then serving shall be fully effective as if the action had been taken by unanimous vote at a meeting duly called and held.
4.4	The Committee may employ such legal counsel, consultants, and agents as it may deem desirable for the administration of this Plan and may rely upon any opinion received from any retained counsel or consultant and any computation received from any retained consultant or agent. The Committee shall keep minutes of its actions under this Plan.

SECTION 5
Eligibility

5.1 The individuals who shall be eligible to participate in this Plan shall be Directors, Directors Emeritus, officers, management, and such other key Employees of the Corporation and the Subsidiaries as the Committee may from time to time determine.

SECTION 6
Shares of Stock Subject to the Plan

6.1	Awards may be granted with respect to the Common Shares.
6.2	Shares delivered upon exercise of an Award, at the election of the Board, may be Common Shares that are authorized but previously unissued, or Common Shares reacquired by the Corporation, or both.

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6.3

The maximum number of Common Shares that may be issued pursuant to Awards granted under this Plan, subject to adjustment as provided in Section 17 of this Plan, shall be 2,000,000 Common Shares, all of which may be granted as ISOs. For the purpose of computing the total number of Common Shares available for Awards under this Plan, there shall be counted against the foregoing limitation the number of Common Shares subject to issuance upon exercise of Awards as of the dates on which such Awards are granted. If any Awards are forfeited, terminated or exchanged for other Awards, or expire unexercised, the Common Shares which were subject to such Awards shall again be available for Awards under this Plan to the extent of such forfeiture, termination or expiration; provided, however, that forfeited shares or other securities shall not be available for further Awards if the Grantee has realized any benefits of ownership from such shares.

6.4

Notwithstanding any other provision of this Plan to the contrary, subject to adjustment as provided in Section 17 of this Plan, the maximum number of Common Shares that may be issued to any individual during the term of this Plan pursuant to Options granted under this Plan shall be 25% of the number of Common Shares that may be issued pursuant to this Plan, all of which may be granted as ISOs.

SECTION 7
Stock Options

7.1 The Committee may grant Options, as follows, which shall be evidenced by a stock option agreement and may be designated as NQSOs or ISOs:

a) NQSOs

(i)

A NQSO is a right to purchase a specified number of Common Shares during a period determined by the Committee, not to exceed ten years, at a price determined by the Committee that is not less than the Fair Market Value of the Common Shares on the date the Option is granted.

(ii)

The exercise price of the NQSO may be paid in cash. At the discretion of the Committee, the exercise price may also be paid by the tender of Common Shares to the Corporation or through a combination of Common Shares and cash or through such other means as the Committee determines are consistent with the purpose of this Plan and applicable law. No fractional Common Shares will be issued or accepted by the Corporation.

b) ISOs

(i)	No ISO may be granted under this Plan to a Non-Employee Director.
(ii)	To the extent the aggregate Fair Market Value (determined at the time of the grant of the Award) of the number of Common Shares with respect to which

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ISOs are exercisable under all plans of the Corporation or a Subsidiary for the first time by a Grantee during any calendar year exceeds $100,000, or such other limit as may be required by the Code, such ISOs shall be treated as NQSOs to the extent of such excess.

(iii) No ISO may be exercisable more than:

A)	ten years after the date the ISO is granted in the case of a Grantee who is not a Ten Percent Shareholder on the date the ISO is granted; and
B)	five years after the date the ISO is granted in the case of a Grantee who is a Ten Percent Shareholder on the date the ISO is granted.

(iv) The exercise price of any ISO shall be determined by the Committee and shall not be less than:

A)	the Fair Market Value of the Common Shares subject to the ISO on the date of grant in the case of a Grantee who is not a Ten Percent Shareholder on the date the ISO is granted; and
B)	110 percent of the Fair Market Value of the Common Shares subject to the ISO on the date of grant in the case of a Grantee who is a Ten Percent Shareholder on the date the ISO is granted.

(v) The Committee may provide that the exercise price under an ISO may be paid by one or more of the methods available for paying the exercise price of an NQSO under Section 7.1(a)(ii) of this Plan.

SECTION 8
Stock Appreciation Rights

8.1

The amount payable with respect to each SAR shall be equal in value to the excess, if any, of the Fair Market Value of a Common Share on the exercise date over the exercise price of the SAR. The exercise price of the SAR shall be determined by the Committee and shall not be less than the Fair Market Value of a Common Share on the date the SAR is granted. SARs may be granted in tandem with an Option in which event the Grantee has the right to elect to exercise either the SAR or the Option. Upon the election to exercise one of these Awards, the other Award is subsequently terminated. Notwithstanding anything in the Plan to the contrary, a tandem SAR may not be exercised with respect to an ISO if the Fair Market Value of the ISO is less than the exercise price of the ISO.

8.2

In the case of an SAR granted in tandem with an ISO to an Employee who is a Ten Percent Shareholder on the date of such grant, the amount payable with respect to each SAR shall be equal in value to the excess, if any, of the Fair Market Value of a Common Share on the exercise date over the exercise price of the SAR, which exercise

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price shall not be less than 110 percent of the Fair Market Value of a Common Share on the date the SAR is granted.

8.3 The exercise price and exercise period of an SAR shall be established by the Committee at the time the SAR is granted.

SECTION 9
Restricted Stock

9.1	Restricted Shares are Common Shares that are issued to a Grantee at a price determined by the Committee, which price may be zero, and are subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine.
9.2	The Committee shall specify in the restricted share award agreement the terms upon which Restricted Shares shall vest.
9.3	The Committee may, in its discretion, provide for accelerated vesting of Restricted Shares upon the achievement of specified performance goals to be determined by the Committee.
9.4	A Grantee may make an election under Section 83(b) of the Code.

SECTION 10
Performance Awards

10.1 A Performance Award granted under this Plan:

a)	may be denominated or payable in cash, Common Shares, Restricted Shares, other securities or other Awards; and
b)	shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee or a majority of the Outside Directors, excluding Directors Emeritus, shall establish.

10.2 Subject to the terms of this Plan and any applicable Award agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee.

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SECTION 11
Other Stock-Based Incentive Awards

11.1 The Committee may from time to time grant Awards under this Plan that provide a Grantee the right to purchase Common Shares or units that are valued by reference to the Fair Market Value of the Common Shares (including, but not limited to, phantom securities or dividend equivalents) or to receive Deferred Shares. Such Awards shall be in a form determined by the Committee (and may include terms contingent upon a Change of Control); provided that such Awards shall not be inconsistent with the terms and purposes of this Plan.

SECTION 12
Rights in the Event of Resignation, Removal or Termination

12.1	The Committee may provide for the exercise of Options or SARs in installments and upon such terms, conditions and restrictions as it may determine subject to applicable law and the other requirements of this Plan.
12.2	Except in the event of the death, Disability or Retirement of a Grantee, upon the resignation or removal from the board of directors of any Grantee who is a Non-Employee Director or upon the termination of employment of a Grantee who is not a Non-Employee Director (unless Terminated for Cause), any Option or SAR which has not yet become exercisable or any other Award which has not yet vested shall thereupon terminate and be of no further force or effect, and, unless the Committee shall specifically state otherwise at the time an Option or SAR is granted, any Option or SAR which has become exercisable shall terminate if it is not exercised before the earlier to occur of the date of its expiration or three months after such resignation, removal or termination of employment or directorship.
12.3	Unless the Committee shall specifically state otherwise at the time an Award is granted, in the event the employment or the directorship of a Grantee is Terminated for Cause, any Option or SAR that has not been exercised and any other Award that has not vested shall thereupon terminate and be of no further force or effect.
12.4	An Option or SAR granted hereunder shall be exercisable, in whole or in part, only by written notice delivered in person or by mail to the Secretary of the Corporation at its principal office, specifying the portion of the Option or SAR being exercised and accompanied by payment of the exercise price and otherwise in accordance with the Award agreement pursuant to which the Option or SAR was granted.
12.5	Regardless of any other provision of the Plan or any Award agreement:

a) Subject to Section 12.5(b), if a Grantee becomes entitled to the payment, exercise or settlement of any Award that is subject to Section 409A of the Code, upon the Grantee’s termination, the payment, exercise or settlement of such Award will

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not be made or permitted before the Grantee incurs a “separation from service” as defined in Treasury Regulation §1.409A-1(h) from the Corporation and all Subsidiaries (a “Separation from Service”).

b) If a Grantee is a specified employee within the meaning of Treasury Regulation §1.409A-1(i) and as determined under the Corporation’s policy for determining specified employees and becomes entitled to the payment, exercise or settlement of any Award that is subject to Section 409A of the Code upon the Grantee’s Separation from Service (as defined above), such payment, exercise or settlement of such an Award shall not be made until the first day of the seventh month following the Grantee’s Separation from Service or, if earlier, the Grantee’s death.

SECTION 13
Rights in Event of Death, Disability or Retirement

13.1	If a Grantee dies, becomes subject to a Disability or enters Retirement prior to termination of his or her right to exercise an Option or SAR in accordance with the provisions of his or her Award agreement without having totally exercised the Option or SAR, the Option or SAR will become exercisable in full on the date of the Grantee’s death, Disability or Retirement, (i) in the event of the Grantee’s death, by the Grantee’s estate or by the person who acquired the right to exercise the Option or SAR by bequest or inheritance, (ii) in the event of the Grantee’s Disability, by the Grantee or his or her personal representative or (iii) in the event of a Grantee’s Retirement, by the Grantee.
13.2	In the event of the Grantee’s death, Disability or Retirement, the Option or SAR shall not be exercisable after the date of its expiration or more than twelve months from the date of the Grantee’s death, Disability or Retirement, whichever first occurs.
13.3	If a Grantee dies, becomes subject to a Disability or enters Retirement prior to the vesting of any other Award, all Awards that have not expired and which are then held by any Grantee (or the person or persons to whom any deceased Grantee’s rights have been transferred) shall become fully and immediately vested and exercisable. Notwithstanding the foregoing, any Awards that are subject to Section 409A of the Code and become vested due to Retirement pursuant to this Section 13.3 shall not be paid, exercised or settled before the Grantee incurs a Separation from Service (as defined in Section 12.5(a)).
13.4	The date of Disability of a Grantee shall be determined (a) with respect to Awards subject to Section 409A of the Code, in accordance with the requirements of Section 409A of the Code and (b) with respect to all other Awards, by the Committee.

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SECTION 14
Award Agreements

14.1	Each Award granted under this Plan shall be evidenced by an award agreement, as the Committee may deem appropriate, between the Grantee to whom the Award is granted and the Corporation, setting forth the number of Common Shares, SARs, or units subject to the Award and such other terms and conditions applicable to the Award not inconsistent with this Plan.
14.2	The award agreement for an Option shall also be referred to as a stock option award agreement.

SECTION 15
Tax Withholding

15.1 The Committee may establish such rules and procedures as it considers desirable in order to satisfy any obligation of the Corporation to withhold federal income taxes or other taxes with respect to any Award made under this Plan. Such rules and procedures may provide:

a)	in the case of Awards paid in Common Shares, the Corporation may withhold Common Shares otherwise issuable upon exercise or settlement of such Award in order to satisfy withholding obligations, unless otherwise instructed by the Grantee or unless the Committee determines otherwise at the time of Grant; and
b)	in the case of an Award paid in cash, that the withholding obligation shall be satisfied by withholding the applicable amount at the time payable and paying the net amount in cash to the Grantee; provided that the requirements of the Rules, to the extent applicable, must be satisfied with regard to any withholding pursuant to clause (a).

SECTION 16
Change of Control

16.1 For the purpose of this Plan, a “Change of Control” of the Corporation means:

(i)	a change of control of the Corporation within the meaning of the Home Owners’ Loan Act of 1933, as amended, and the Rules and Regulations promulgated by the OTS, as in effect on the Effective Date (provided, that in applying the definition of change of control as set forth under the rules and regulations of the OTS, the Board shall substitute its judgment for that of the OTS);
(ii)	the time at which any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in

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Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the Corporation’s outstanding securities ordinarily having the right to vote at the election of directors;

(iii)	the time at which individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least 75% of the directors comprising the Incumbent Board, or whose nomination for election by the Corporation’s shareholders was approved by the same Nominating Committee serving under an Incumbent Board shall be, for purposes of this clause (iii), considered as though he were a member of the Incumbent Board;
(iv)	the consummation of a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Corporation or similar transaction in which the Corporation is not the resulting entity;
(v)	the approval by shareholders of a proxy statement proposal submitted by someone other than management of the Corporation seeking shareholder approval of a plan of reorganization, merger or consolidation of the Corporation or similar transaction with one or more corporations as a result of which the outstanding             shares of the class of securities then subject to the plan or transaction are exchanged for or converted into cash or property or securities not issued by the Corporation; or
(vi)	a completed tender offer for 20% or more of the voting securities of the Corporation by anyone other than the Corporation.

16.2 In the event of a Change of Control affecting the Corporation, then, notwithstanding any provision of this Plan or of any provisions of any Award agreements entered into between the Corporation and any Grantee to the contrary, all Awards that have not expired and which are then held by any Grantee (or the person or persons to whom any deceased Grantee’s rights have been transferred) shall, as of such Change of Control, become fully and immediately vested and exercisable and may be exercised for the remaining term of such Awards; provided, however, that in the event that any exercise or receipt of an Award in connection with a Change of Control alone, or in the aggregate with other payments to a Grantee, would result in the imposition of a penalty tax pursuant to Section 280G of the Code, such exercise or receipt would remain subject to any vesting schedule set forth in the Award agreement. Notwithstanding the foregoing, any Awards that are subject to Section 409A of the Code and become vested pursuant to this Section 16.2 shall not be paid or settled unless the Change of Control constitutes a “change in control event” for purposes of Section 409A of the Code and Treasury Regulation §1.409A-3(i)(5).

SECTION 17

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Dilution or Other Adjustment

17.1	If the Corporation is a party to any merger or consolidation, or undergoes any merger, consolidation, separation, reorganization, liquidation or the like, the Committee shall have the power to make arrangements, which shall be binding upon the holders of unexpired Awards, for the substitution of new Awards for, or the assumption by another corporation of, any unexpired Awards then outstanding hereunder; provided that such substitution or assumption complies with Section 409A of the Code, to the extent applicable.
17.2	In the event of any change in capitalization affecting the Common Shares, such as a stock split, stock dividend, recapitalization, merger, consolidation, spin-off, split-up, combination or exchange of shares or other form of reorganization, or any other change affecting the Common Shares, including a distribution (other than normal cash dividends) of Corporation assets to shareholders, the Committee shall conclusively determine the appropriate adjustment in the terms of outstanding Awards, including the option prices of outstanding Options, and the number and kind of shares or other securities as to which outstanding Awards shall be exercisable, and the aggregate number of shares or other securities with respect to which Awards may be granted. Notwithstanding the foregoing, an adjustment pursuant to this Section 17.2 shall be made only to the extent such adjustment complies with Section 409A of the Code, to the extent applicable.
17.3	The existence of this Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board or the shareholders of the Corporation to make or authorize the following: any adjustment, recapitalization, reorganization or other change in the Corporation’s capital structure or its business; any merger, acquisition or consolidation of the Corporation; any issuance of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Corporation’s capital stock or the rights thereof; the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business; or any other corporate act or proceeding, including any merger or acquisition which would result in the exchange of cash, stock of another company or options to purchase the stock of another company for any Award outstanding at the time of such corporate transaction or which would involve the termination of all Awards outstanding at the time of such corporate transaction.

SECTION 18
Transferability

18.1	Except as set forth in Section 18.2 of this Plan, no Award shall be sold, pledged, assigned, transferred, or encumbered by a Grantee other than by will or by the laws of descent and distribution.
18.2	Only an NQSO may be pledged, assigned, or transferred by a Grantee to another individual provided that the NQSO is pledged, assigned, or transferred without

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	consideration by a Grantee, subject to such rules as the Committee may adopt, to (i) a member of the Grantee’s Immediate Family, (ii) a trust solely for the benefit of the Grantee and his or her Immediate Family or (iii) a partnership or limited liability company whose only partners or members are the Grantee and his or her Immediate Family (hereinafter referred to as the Permitted Transferee); provided that the Committee is notified in advance in writing of the terms and conditions of any proposed pledge, assignment or transfer and the Committee determines that such pledge, assignment or transfer complies with the requirements of this Plan and the applicable Award agreement.
18.3	Any pledge, assignment or transfer of an Award that does not comply with the provisions of this Plan and the applicable Award agreement shall be void and unenforceable against the Corporation.
18.4	All terms and conditions of a pledged, assigned or transferred Award shall apply to the beneficiary, executor, administrator, and Permitted Transferee, whether one or more, of the Grantee (including the beneficiary, executor and administrator of a permitted transferee), including the right to amend the applicable Award agreement; provided that the Permitted Transferee shall not pledge, assign or transfer an Award other than by will or by the laws of descent and distribution.

SECTION 19
Amendment, Termination or Modification

19.1

Without further approval of the shareholders of the Corporation, the Board may at any time terminate this Plan, or may amend it from time to time in such respects as the Board may deem advisable, except that the Board may not, without approval of the shareholders, make any amendment which would (i) increase the aggregate number of Common Shares that may be issued under this Plan, except for adjustments pursuant to Section 17 of this Plan, (ii) materially modify the requirements as to eligibility for participation in this Plan, or (iii) materially increase the benefits accruing under this Plan. The above notwithstanding, the Board may amend this Plan to take into account changes in applicable securities, federal income tax and other applicable laws.

19.2

The Board may authorize the Committee to direct the execution of an instrument providing for the modification of any outstanding Award which the Board believes to be in the best interests of the Corporation; provided, however, that no such modification, extension or renewal shall confer on the holder of such Award any right or benefit which could not be conferred on him by the grant of a new Award at such time and shall not materially decrease the holder’s benefits under the Award without the consent of the holder of the Award, except as otherwise permitted under this Plan. Notwithstanding the foregoing, any modification, extension or renewal under this Section 19.2 shall comply with the requirements of Section 409A of the Code, to the extent applicable.

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SECTION 20
General Provisions

20.1	No Awards may be exercised by a Grantee if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Corporation, contrary to law or the regulations of any duly constituted authority having jurisdiction over this Plan.
20.2	(a) With respect to ISOs, a bona fide leave of absence shall be treated in accordance with Treasury Regulation §1.421-1(h)(2).

(b) With respect to any Award that is subject to Section 409A of the Code, a bona fide leave of absence shall be treated in accordance with Treasury Regulation §1.409A-1(h)(l).

(c) With respect to any other Award, a bona fide leave of absence approved by a duly constituted officer of the Corporation shall not be considered interruption or termination of service of any Grantee for any purposes of this Plan or Awards granted thereunder.

No Awards may be granted to an Employee while he or she is on a bona fide leave of absence.

20.3	Nothing contained in this Plan or in an Award agreement granted thereunder shall confer upon any Grantee any right to (i) continue in the employ of the Corporation or any of its Subsidiaries or continue serving on the Board or the Board of Directors of a Subsidiary, or (ii) interfere in any way with the right of the Corporation or any of its Subsidiaries to terminate the Grantee’s employment or service on the Board at any time.
20.4	Any Award agreement may provide that shares issued upon exercise of any Awards may be subject to such restrictions, including, without limitation, restrictions as to transferability and restrictions constituting substantial risks of forfeiture as the Committee may determine at the time such Award is granted.
20.5	It is intended that the Awards granted under the Plan comply with, or be exempt from, Section 409A of the Code and the Treasury Regulations promulgated thereunder (and any subsequent notices or guidance issued by the Internal Revenue Service), and the Plan shall be interpreted, administered and operated accordingly. Nothing herein shall be construed as an entitlement to or guarantee of any particular tax treatment to a Grantee.

SECTION 21
Plan Effective Date

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21.1 This Plan became effective on April 26, 2007 upon its adoption by the shareholders of the Corporation (the “Effective Date”).

SECTION 22
Plan Termination

22.1 No Award may be granted under this Plan on or after the date which is ten years following the Effective Date, but Awards previously granted may be exercised in accordance with their terms; provided, however, that ISOs may not be granted after the date which is ten years following the date this Plan was adopted by the Board.

SECTION 23
Governing Law

23.1 This Plan and all actions taken hereunder shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent federal law shall be deemed applicable.

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EX-10.10

Exhibit 10.10

AMENDED AND RESTATED
CONFIDENTIAL SEPARATION AND GENERAL RELEASE AGREEMENT

     THIS AMENDED AND RESTATED CONFIDENTIAL SEPARATION AND GENERAL RELEASE AGREEMENT (“Agreement”) is made and entered into as of this 27th day of January, 2009, by and between PATRICK A. KELLY, an individual, whose address is 45 Timber Run Court, Canfield, Ohio 44406 (“Employee”) and THE HOME SAVINGS AND LOAN COMPANY OF YOUNGSTOWN, OHIO, an Ohio chartered stock savings bank (the “Home Savings”), whose principal place of business is located at 275 West Federal Street, Youngstown, Ohio 44503.

     WHEREAS, United Community Financial Corp., an Ohio corporation and the sole shareholder of Home Savings (“UCFC”, and together with Home Savings, the “Company”) employed Employee as the Chief Financial Officer and Treasurer of Home Savings and UCFC;

     WHEREAS, the terms and conditions of the Employee’s employment with Home Savings are set forth in that certain Employment Agreement, dated December 31, 2004, by and between Home Savings and Employee, as extended by the Board of Directors of Home Savings (the “Employment Agreement”).

     WHEREAS, Employee separated from employment with the Company as of May 21, 2008 (the “Separation Date”), and Employee subsequently resigned as a member of the Board of Directors of Home Savings and Butler Wick Corp.

     WHEREAS, Employee is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and the Regulations promulgated thereunder.

     WHEREAS, except as otherwise provided herein, the Company and Employee wish to resolve all matters that exist between them arising from Employee’s employment and termination thereof, including those that have been or could have been asserted by either party against the other, and define all rights and obligations of the parties relating to such separation.

     WHEREAS, this Agreement is subject to the determination of the Federal Deposit Insurance Corporation (the “FDIC”) that the lump sum payment under this Agreement is permissible, pursuant to 12 CFR Section 359 et seq. (“Federal Regulator’s Consent”).

     WHEREAS, Employee and the Company previously agreed upon an amount constituting the Separation Pay (as defined below), and the Company filed an application with the FDIC on November 13, 2008 (the “Application”), to pay such amount to Employee, but such amount was not approved by the FDIC.

     WHEREAS, the Company and Employee have agreed to the amount of the Separation Pay set forth below, and in accordance with the instructions provided to the Company by the

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FDIC, the Company has agreed to amend the Application to seek the Federal Regulator’s Consent to pay Employee the Separation Pay.

     NOW THEREFORE, in consideration of the mutual promises, covenants and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties agree as follows:

1. Payment by the Company.

     (a) The Company agrees to pay Employee the lump sum payment of Three Hundred Sixty-Four Thousand, Six Hundred Eighty-Four Dollars and 32/100 ($364,684.32) (the “Separation Pay”). The Company acknowledges that Employee is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”). The Company acknowledges and agrees that the foregoing lump sum Separation Pay includes (i) the separate payments (Separation Date through March 15, 2009) under the “Short-Term Deferral” exclusion under Code Section 409A, including Treasury Regulation Section 1.409A-1(b)(4), and (ii) the separate payments (March 16, 2009 through May 20, 2010) under the “Two (2) Times – Two (2) Year” exclusion under Code Section 409A, including Treasury Regulation Section 1.409A-1 and Section 1.409A-1(b)(9)(iii), and, consistent with the foregoing, the Company hereby agrees not to report such amounts in Box 12 of Internal Revenue Service Form W-2 using Code Z.

     (b) The Company agrees to provide Employee with the Separation Pay and the other benefits set forth in Exhibit A, which Exhibit A is attached to this Agreement, incorporated herein and made a part hereof, less all customary payroll deductions, in accordance with its ordinary payroll procedures, as applicable, as soon as practicably possible after receipt of the Federal Regulator’s Consent.

     (c) The Company shall promptly amend the Application to obtain the Federal Regulator’s Consent, which consent the Company hereby represents and warrants is necessary to make the payment to Employee under this Agreement or the Employment Agreement. The Company hereby agrees to keep Employee and his legal counsel informed of the status of the filing, including any and all replies and responses from and to the FDIC. Except as specifically set forth in this Agreement or Exhibit A, no additional compensation, wages, pay or employment benefits of any type or nature will accrue as a result of the Separation Pay described herein.

2. Status as Terminated Employee. Employee agrees that Employee’s employment with the Company ended as of the close of business on the Separation Date.

3. Health Insurance; Employee’s Benefits. After the Separation Date, Employee shall have the right to elect and pay for continued coverage for Employee and Employee’s dependents under the plans listed on Exhibit A, until the earlier of December 31, 2010, or the date Employee is included in another employer’s benefit plans as a full time employee. As of the date hereof, Employee represents and warrants that Employee is included in another employer’s benefit plans as a full time employee, and such coverage began as of January 1, 2009. Except as otherwise indicated in this Agreement and Exhibit A, all of Employee’s other benefits of employment with

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the Company, including but not limited to any bonus, profit sharing, incentive or other compensation enhancement, shall terminate as of the Separation Date.

4. This provision intentionally deleted.

5. Employee and Company Property. Employee agrees that prior to and upon the separation from employment, Employee will only remove personal items from Employee’s office and Employee will return to the Company all records, files, equipment (including but not limited to all computer equipment, or electronic devices of any type or nature), office, loge, desk or file keys, credit cards, computer programs or disks, or other Company property that are in Employee’s possession, without further request from the Company. By signing this Agreement, Employee represents that Employee has returned all property, electronic or otherwise, of the Company, including all Confidential Information, in Employee’s possession and Employee agrees that Employee will not copy any property of the Company, including Confidential Information, directly or indirectly, in any fashion (e.g. by computer copy, CD, disk, cassette or any other electronic method), except that Employee has retained his cellular telephone, with the consent of the Company. Employee shall be solely responsible for all fees and charges incurred after the Separation Date for any calling/data or other service plans utilized by the cellular telephone. Employee further agrees that any violation of this section will cause irreparable harm to Company, and if Employee violates this section, Company is entitled to pursue all remedies available, including a temporary or permanent restraining order. Employee shall turn over the automobile provided to Employee, together with all keys and electronic entry devices on or before the Separation Date.

6. Confidential Information. The parties acknowledge and agree that Section 9 of the Employment Agreement shall survive execution of this Agreement and the termination of the Employment Agreement.

7. General Release of Claims

     (a) The Company and Employee expressly covenant and agree that in consideration for the payment of Separation Pay, the reimbursement of outplacement services obtained by Employee and other consideration set forth herein, Employee does hereby voluntarily and fully release, acquit, and forever discharge the Company, its subsidiaries, affiliates, predecessors, successors and assigns and their officers, directors, employees, agents, attorneys and other representatives (hereinafter collectively referred to as the “Releasees”) from any and all actions, claims, damages, liabilities, promises, costs (including reasonable attorneys’ fees), rights or demands, of whatsoever kind or nature, in law or in equity, Employee now has, may have had in the past or will have at any time hereafter, by reason of any acts, causes, matters or things arising prior to this date and arising out of or in connection with Employee’s employment and/or separation from employment with the Company, including any and all wages, benefits or other employment related matters. Employee understands that this is a general and complete release of claims Employee could have against the Company as an employee or former employee of the Company but not as a shareholder of the Company and includes but is not limited to any claims under the Age Discrimination in Employment Act, Family Medical Leave Act; Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; Sections 1981 through 1988 of Title 42 of the United

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States Code, as amended; the Employee Retirement Income Security Act of 1974, as amended; the Americans with Disabilities Act of 1990, as amended; any other federal, state or local civil rights law or any other local, state or federal law, regulation or ordinance; any public policy, contract, tort or common law theory; or any statutory or common law principle allowing for the recovery of fees or other expenses, including attorneys’ fees, relating to any claim or claims Employee is releasing in this Agreement.

     Notwithstanding the foregoing in this Section 7(a), nothing in this Section 7(a) shall be deemed to release any of the Releasees from any of the Releasees’ obligations under this Agreement.

     Nothing in this Agreement precludes the filing of a charge with any appropriate federal, state or local government agency and/or responding to a request for information from any such agency. In no event, however, will Employee seek or accept any monetary relief in connection with any complaint or charge brought against the Company, without regard as to who brought that complaint or charge, and Employee agrees not to file against Releasees any action or proceeding in federal, state or other court under any statute, law, ordinance or regulation relating to or arising out of Employee’s employment with and/or separation of employment from the Company. Employee further agrees to waive and not to seek or accept from Releasees any further benefit or consideration, including reinstatement, back pay, attorneys’ fees, or any additional monies with respect to employment or separation of employment from the Company.

     (b) The Company does voluntarily and fully release, acquit, and forever discharge Employee, his successors, assigns, heirs, executor, attorneys and other representatives from any and all actions, claims, damages, liabilities, promises, costs (including reasonable attorneys’ fees), rights or demands, of whatsoever kind or nature, in law or in equity, the Company now has, may have had in the past or will have at any time hereafter, by reason of any acts, causes, matters or things arising prior to this date and arising out of or in connection with Employee’s employment and/or separation from employment with the Company, except those arising out of fraud perpetrated by, or the intentional or willful misconduct of, Employee.

8. Release of Age Discrimination Claims.

     (a) Exclusively as this Agreement pertains to Employee’s release of claims under the Age Discrimination in Employment Act, Employee, pursuant to and in compliance with rights afforded them under the Older Workers Benefit Protection Act:

     (i) Is advised that Employee does not waive rights or claims that arise after the date on which this Agreement is signed by Employee and the Company;

     (ii) Is advised to consult with an attorney prior to executing this Agreement;

     (iii) Is given twenty-one (21) days from the receipt of this Agreement in which to consider it; and

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     (iv) Is given a period of seven (7) days following the signing of this Agreement in which to revoke it. A revocation of this Agreement shall be effective only on the delivery of a written revocation to The Home Savings and Loan Company of Youngstown, Ohio, 275 West Federal Street, Youngstown, Ohio 44503, Attention: Vice President—Human Resources. This Agreement shall not become effective or enforceable until this seven-day revocation period has expired.

     (b) Employee’s knowing and voluntary execution of this Agreement is an express acknowledgment and agreement that:

     (i) This Agreement is written in a manner that enables Employee to fully understand its content and meaning;

     (ii) This Agreement specifically refers to the waiver and release of all claims under the Age Discrimination in Employment Act;

     (iii) This Agreement does not waive or release any rights or claims that may arise after the date on which it is executed;

     (iv) Employee has received consideration under this Agreement in addition to anything of value to which Employee was otherwise already entitled;

     (v) Employee has had the opportunity to review this Agreement with Employee’s attorney and to consult with Employee’s attorney concerning the signing of this Agreement;

     (vi) Employee was afforded a twenty-one (21) day period of time to consider it before executing it;

     (vii) Employee was given a seven-day period of time in which to revoke this Agreement after it was signed; and

     (viii) Employee’s execution of this Agreement is knowing and voluntary.

9. Agreement to not Seek or Accept Future Employment; Mitigation. Employee agrees that, because of circumstances unique to Employee (including Employee’s separation from the Company and the Board of Directors of Home Savings and Butler Wick Corp.), Employee will not apply for or accept future employment with the Company or seek appointment to the Board of Directors of UCFC or Home Savings. The Company agrees that Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any amounts received from other employment or otherwise by Employee offset in any manner the obligations of either Company under this Agreement.

10. Confidentiality. Employee and Company mutually agree not to disclose any information regarding the existence or substance of this Agreement, except (i) for purposes of enforcement of this Agreement, (ii) to the FDIC for purposes of requesting the Federal Regulator’s Consent, (iii)

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as otherwise required by law or regulation, (iv) to Employee’s spouse, and (v) to any financial advisor, tax advisor, and any attorneys with whom Employee or the Company chooses to consult regarding its respective consideration of this Agreement, provided that they agree to keep that information strictly confidential and disclose it to no other person. Employee and Company understand that the confidentiality of this Agreement is an important part of the consideration under this Agreement. Employee and Company further agree that any violation of this section will cause irreparable harm to Employee and Company, as the case may be, and if either Employee or Company violates this section, the other party is entitled to pursue all remedies available, including a temporary or permanent restraining order.

11. Governing Law and Interpretation. This Agreement shall be governed by and interpreted under the laws of Ohio and, except as set forth in Section 16 of this Agreement, any legal matters will be brought in any Federal court sitting within the Northern District of Ohio or any State court sitting in Mahoning County, Ohio. Should any court of competent jurisdiction declare any provision of this Agreement unenforceable, the provision shall be void but the remainder of this Agreement shall remain in effect.

12. Nonadmission of Wrongdoing. The parties have entered into this Agreement in exchange for the releases granted herein and to avoid potential litigation. Accordingly, neither this Agreement nor any of the promises made by the Company or Employee in it may be construed by any person or entity as an admission of any liability or wrongdoing of any kind.

13. Amendment. This Agreement may not be modified except through a written document in which the parties expressly agree to modify it, and that is signed by both parties.

14. Entire Agreement. This Agreement and Exhibit A attached hereto set forth the entire agreement between the parties and supersede any prior agreements or understandings between them regarding its subject matter, including, but not limited to, the Employment Agreement, except as otherwise specifically provided in this Agreement. Employee acknowledges that Employee has not relied on any representations, promises, or agreements of any kind made to Employee in connection with Employee’s decision to make this Agreement, except for those set forth in this Agreement.

15. Headings. The headings and numbering of paragraphs in this Agreement are solely for convenience of reference and shall not be construed to define or limit any of the terms herein contained or to affect the meaning or interpretation of this Agreement. Unless the context clearly indicates otherwise, words used in the singular include the plural, words used in the plural include the singular and the word “including” means “including but not limited to.”

16. Dispute Resolution. The Employee agrees that if the Employee asserts a claim against the Company regarding the interpretation or enforcement of this Agreement, such claim shall be resolved by binding arbitration before a single arbitrator, and the Employee shall not have the right to pursue any claim in court or to have a jury trial on the claim. The Company and Employee shall share equally all costs and expenses of the impartial arbitrator. Unless inconsistent with applicable law, each party shall bear the expenses of their respective attorneys, experts and witness fees, regardless of which party prevails in the arbitration. Any arbitration hearing will

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take place in Youngstown, Ohio and will be conducted by a mutually-chosen arbitrator who is a well-recognized and respected arbitrator. An arbitration can only decide Employee’s claim and may not consolidate or join the claims of any other person who may have similar claims unless specifically agreed to by the Company. If any portion of this arbitration provision is deemed invalid or unenforceable, it shall not invalidate the remaining portion of this arbitration provision.

17. Indemnification. The parties acknowledge and agree that Section 6(a) of the Employment Agreement shall survive the execution of this Agreement and the termination of the Employment Agreement.

     ONCE YOU SIGN BELOW, THIS DOCUMENT WILL BECOME A LEGALLY ENFORCEABLE AGREEMENT UNDER WHICH YOU WILL BE GIVING UP RIGHTS AND CLAIMS YOU MAY HAVE, ON THE TERMS STATED IN THIS AGREEMENT.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

By:	/s/ Patrick A. Kelly Patrick A. Kelly
THE HOME SAVINGS AND LOAN COMPANY OF
YOUNGSTOWN, OHIO
By:	/s/ Douglas M. McKay Douglas M. McKay
	Chairman of the Board and Chief Executive Officer

10.10-7

Exhibit 10.10

CONFIDENTIAL SEPARATION AND GENERAL RELEASE AGREEMENT
EXHIBIT A

     Capitalized terms used but not defined in this Exhibit A shall have the meaning ascribed to them in the Agreement.

Benefit Plans:

Employee shall be entitled to elect to receive a benefit distribution from any of the Company’s benefit/retirement plans in which Employee was a participant in accordance with the terms and conditions of such plans; provided, however, that Employee acknowledges and agrees that Employee shall not accrue any further benefit, vesting or service credits under any of the stock benefit/retirement plans after the Separation Date.

Employee and the Company acknowledge and agree that Employee participated in the following stock benefit plans:

(i)	United Community Financial Corp. Employee Stock Ownership Plan;
(ii)	The Home Savings and Loan Company 401(k) Savings Plan;
(iii)	The United Community Financial Corp. 1999 Long-Term Incentive Plan; and
(iv)	The United Community Financial Corp. 2007 Long-Term Incentive Plan.

Health and Welfare Plans:

The following are the Health and Welfare Plans that Employee may continue at Employee’s expense after the Separation Date.

Disability (UNUM) – This coverage provides a monthly benefit of $3,803.00. The annual premium is $1,353.89 and is due to renew in June, 2008. To maintain this benefit, you would be required to pay the premium when the policy renews.

Life Insurance (John Hancock) – This term life insurance policy is currently owned by Home Savings; the insured is the Employee. The face amount of the policy is $1,200,000.00. The annual premium is $1,996.00 and is due to renew in July, 2008. The ownership of this policy can be changed to the Employee, but the Employee will be required to pay the premium when the policy renews.

The bank’s Group Life Insurance Plan with Sunlife provides $50,000.00 in coverage. There is a conversion option available through Sunlife to convert the $50,000.00 to a personal policy. Contact Sunlife directly for information on how to convert to a personal policy.

Healthcare (Anthem) – Health and dental insurance family coverage, comparable to that available to other senior executives of the Company, will be available to the Employee at the full premium expense until December 31, 2010 or until the Employee is included in another employer’s benefit plans as a full-time employee.

Current monthly healthcare and dental rates are as follows:

PPO	Family	$	1,222.44
Dental	Family	$	94.27

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EX-10.11

Exhibit 10.11

AMENDMENT TO THE
UNITED COMMUNITY FINANCIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
FOR THE
PENSION PROTECTION ACT. OF 2006
AND OTHER GUIDANCE

     WHEREAS, UNITED COMMUNITY FINANCIAL CORP. (the “Sponsor”) has adopted the UNITED COMMUNITY FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN (the “Plan”); and

     WHEREAS, the Plan provides that it may be amended from time to time; and

     WHEREAS, the Pension Protection Act of 2006 (the “PPA”); final regulations under Section 415 of the Internal Revenue Code of 1986, as amended (“Code”); and other guidance affect the Plan; and

     WHEREAS, the following amendments to the Plan are intended to constitute good faith compliance with the requirements of the PPA, final regulations under Section 415 of the Code and other guidance, and shall be construed in accordance with the PPA and guidance issued thereunder;

     NOW, THEREFORE, the Plan is amended as follows:

PREAMBLE

     The Sponsor adopts this Amendment to the Plan to reflect changes to the Plan as a result of the PPA, final regulations under Section 415 of the Code and other guidance. This Amendment is effective as set forth below and supersedes the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment.

AMENDMENTS

     1. The following shall be added to Section 2.04 effective for Limitation Years beginning on or after July 1, 2007:

     Except as provided below, the following amounts otherwise meeting the definition of Section 415 Compensation may only be treated as Section 415 Compensation if such amounts are paid by the later of 2¹/₂ months after “severance from employment” (within the meaning of Treasury Regulation 1.415(a)-l(f)(5)) from the Employer or the end of the Limitation Year that includes the date of severance from employment from the Employer:

(i) regular payments received by the Participant after severance of employment if (A) the payments are regular compensation for

10.11-1

services during the Participant’s regular working hours, or compensation for services outside the Participant’s regular working hours (such as overtime or shift differential), commissions, bonuses or other similar payments; and (B) the payments would have been paid to the Participant prior to severance from employment if the Participant had continued in employment with the Employer.

(ii) payment for unused accrued bona fide sick, vacation or other leave received after severance from employment, but only if the Participant would have been able to use the leave if employment continued and such amounts would have been included in the definition of compensation if the amounts were paid prior the Participant’s severance from employment.

     Notwithstanding the foregoing, Section 415 Compensation shall include, regardless of whether paid within the time period specified above, payments to an individual who does not currently perform services for the Employer by reason of Qualified Military Service to the extent the payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering into Qualified Military Service.

     Notwithstanding the foregoing, Section 415 Compensation shall not include the following amounts: (A) amounts paid to a Participant who is permanently and totally disabled (as defined in Code Section 22(e)(3)); (B) amounts that are treated as severance pay or parachute payments (within the meaning of Section 280G(b)(2)) if paid after severance from employment; or (C) payments under a nonqualified unfunded deferred compensation plan which are paid after severance from employment.

     For Limitation Years beginning on or after July 1, 2007, Section 415 Compensation shall be subject to the dollar limitation set forth in Code Section 401 (a)(17)(A), as adjusted by401 (a)(17)(B).

     If a Plan is terminated effective as of a date other than the last day of the Plan’s Limitation Year, the Plan is treated for purposes of this section as if the Plan was amended to change its Limitation Year. As a result of this deemed amendment, the Code Section 415(c)(l)(A) dollar limit must be prorated under the short Limitation Year rules.

     The Plan shall incorporate by reference the provisions of Section 415 of the Code and final regulations thereunder to the extent not set forth above.

     If excess Annual Additions are the result of Annual Additions to more than one plan of an Employer or Affiliate, the excess Annual Additions shall be first taken from this Plan. Notwithstanding Section 3.01, excess Annual Additions shall be corrected in the manner permitted by the Internal Revenue Service in accordance with its Employee

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Plans Compliance Resolution System, as set forth in Rev. Proc. 2006-27, or other successor guidance.

     2. The following shall be added to the end of the second paragraph of Section 12.04 of the Plan effective for distribution notices for Plan Years commencing on or after January 1, 2008:

A Participant who is eligible for a distribution from the Plan prior to his Normal Retirement Age shall be informed of his right to defer a distribution from the Plan and the consequences of the failure to do so. The period for providing the notice described in this paragraph or a notice explaining a Participant’s right to make a rollover as further set forth in Section 12.05 shall be extended from not more than 90 days to not more than 180 days.

     3. The vesting schedule set forth in Section 11.01 of the Plan is deleted in its entirety and the following shall be substituted therefor and applicable to any Participant who is credited with one Hour of Service for any Plan Year commencing on or after January 1, 2013, or the date the current loan is paid off, if earlier:

	NONFORFEITABLE
YEARS OF SERVICE	PERCENTAGE
Less than 3		0	%
3 or more		100	%

     4. The following shall be added to Section 12.05 of the Plan effective for distributions from the Plan commencing on or after January
1, 2007, or as otherwise provided below:

          a. the following shall be added to the end of Section 12.05(b)(ii) of the Plan, “eligible retirement plan”:

Effective on and after January 1, 2008, an eligible retirement plan shall also mean a Roth IRA, provided the distributee could have otherwise rolled over a traditional IRA to the Roth IRA during such taxable year. Effective on and after January 1, 2007, with regard to a rollover from a non-spouse Beneficiary who is a “designated beneficiary” (as defined by Treasury Regulation 1.401(a)(9)-4), an eligible retirement plan shall mean an inherited individual retirement account or annuity.

          b. The following shall be added to the end of Section 12.05(b)(iii) of the Plan:

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A non-spouse Beneficiary who is a “designated beneficiary” (as defined by Treasury Regulation 1.401(a)(9)-4) is a distributee with regard to the interest of such person.

     5. The second paragraph of Section 15.01 shall be deleted in its entirety and the following shall be substituted therefor:

     No amendment may reduce a Participant’s nonforfeitable percentage in his Account determined as of the date the amendment is effective or executed, whichever is later. Effective for amendments to the Plan prior to August 9, 2006, if an amendment changes the vesting schedule set forth in Section 10.01, and such amendment reduces the nonforfeitable interest of a Participant for any Year of Service to be earned by the Participant, each Participant having not less than three Years of Service may elect, during the period beginning when the amendment is adopted and ending no earlier than the latest of (a) 60 days after the amendment’s adoption; (b) 60 days after the amendment’s effective date; or (c) 60 days after the Participant is issued a written notice of the amendment, to have the vested amount of his Account computed without regard to such amendment.

     6. The following shall be added to the end of the definition of “Compensation” set forth in Section 23 of the Plan:

With respect to Compensation paid in Plan Years beginning on or after July 1, 2007, Compensation shall not include amounts otherwise includable in the definition of Compensation which are not paid to the Participant by the later of 2¹/₂ months after “severance from employment” (within the meaning of Treasury Regulation 1.415(a)-l(f)(5)) from the Employer or the end of the Limitation Year that includes the date of severance from employment from the Employer. Notwithstanding the foregoing, Compensation shall in no event include severance payments paid after a Participant’s severance from employment.

     7. The following shall be added to the end of the definition of “Annual Additions” set forth in Section 23 of the Plan:

     Effective for Limitation Years commencing on and after July 1, 2007, restorative payments that are used to restore losses to the Plan resulting from actions by a fiduciary for which there is a reasonable risk of liability for breach of fiduciary duty under Title I of ERISA or under other applicable federal or state law, where Plan Participants who are similarly situated are treated similarly with respect to the payments, are not treated as Annual Additions.

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IN WITNESS WHEREOF, this amendment shall be effective as of the dates set forth above.

	UNITED COMMUNITY FINANCIAL CORP.
	By:	/s/ James Reske
	Name (Print): James Reske
	Title:  SVP/CFO/Treasurer
Date: 11/21/08

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EX-10.12

EXHIBIT 10.12

STOCK PURCHASE AGREEMENT

by and among

FARMERS NATIONAL BANC CORP.

BUTLER WICK TRUST COMPANY

BUTLER WICK CORP.

and

UNITED COMMUNITY FINANCIAL CORP.

Dated January 7, 2009

10.12-A

STOCK PURCHASE AGREEMENT

     This STOCK PURCHASE AGREEMENT is entered into as of this 7^th day of January, 2009, by and among Farmers National Banc Corp., an Ohio corporation (“Parent”), Butler Wick Trust Company, an Ohio corporation (the “Company”), United Community Financial Corp., an Ohio corporation (“UCFC”), and Butler Wick Corp., an Ohio corporation (“BWC”, and, together with UCFC, “Sellers”). Parent, the Company, UCFC and BWC are each referred to herein as a “Party” and collectively as the “Parties”. Capitalized terms are defined in Article 1.

RECITALS

     A. Parent desires to purchase from BWC and UCFC, on the following terms and conditions, the Shares (as defined below), which comprise all of the issued and outstanding capital stock of the Company; and

     B. UCFC desires to cause BWC to sell the Shares to Parent, on the following terms and conditions.

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, representations, warranties, conditions, and agreements contained herein and in the Related Agreements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:

ARTICLE 1
DEFINITIONS

     The following terms shall have the meanings set forth below in this Article 1.

     1.1 “Acquisition Proposal” means any proposal or offer from any Person or group acting in concert relating to any direct or indirect acquisition or purchase of 50% or more of the assets of the Company, or 50% or more of the equity securities of the Company then outstanding and any merger, consolidation, business combination, recapitalization, liquidation, or similar transaction involving the Company, other than the transactions contemplated by this Agreement.

     1.2 “Affiliate” means with respect to any specified Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. If the Person referred to is a natural person, the term “Affiliate” refers to any member of such Person’s immediate family. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, that the term “control” shall not include any power of the Company to vote outstanding securities of a Person or otherwise direct the management policies of a

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Person that arises out of or relates to the Company serving as a trustee or custodian in connection with the conduct of the Company’s Business.

     1.3 “Agreement” means this Stock Purchase Agreement as executed on the date hereof and as amended or supplemented in accordance with the terms hereof, including the Company Disclosure Letter, the UCFC Disclosure Letter, the Parent Disclosure Letter and all Schedules, Annexes and Exhibits hereto.

     1.4 “Assets” has the meaning set forth in Section 3.9.

     1.5 “Audited Financial Information” has the meaning set forth in Section 3.8(a).

     1.6 “Butler Wick Principal Marks” includes any trademarks that include the term “Butler Wick” or any variation thereof or the Butler Wick or BW design.

     1.7 “Business” means the business conducted by the Company on the date hereof.

     1.8 “Business Day” means any day that is not a Saturday, Sunday or legal holiday in the State of Ohio, United States of America.

     1.9 “Business Employee” means collectively the employees of the Company, including, without limitation, James H. Sisek, engaged in the Business on the date hereof and at any time prior to Closing.

     1.10 “Butler Wick Principal Marks” includes any Trademarks that include the term “Butler Wick” or any variation thereof or the Butler Wick or BW design.

     1.11 “BWC” has the meaning set forth in the introductory paragraph.

     1.12 “Closing” means the consummation of the transactions contemplated by this Agreement, as provided for in Section 2.2(c).

     1.13 “Closing Date” has the meaning set forth in Section 2.2(c).

     1.14 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     1.15 “Company” has the meaning set forth in the introductory paragraph hereof.

     1.16 “Company Benefit Plan” means each Plan to which BWC or the Company has any obligation with respect to the Business Employees, or that is sponsored, maintained or contributed to or required to be contributed to by the Company with respect to the Business Employees, or under which the Company has or may have any Liability.

     1.17 “Company Capital Stock” has the meaning set forth in Section 3.17(a).

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     1.18 “Company Customer” means any Person to which the Company provides retirement plan, personal trust, charitable foundation, fiduciary, estate and financial planning, executor and investment agency, investment management and other related services to any Person.

     1.19 “Company Customer Contract” means each material Contract pursuant to which the Company provides retirement plan, personal trust, charitable foundation, fiduciary, estate and financial planning, executor and investment agency, investment management and other related services to any Person.

     1.20 “Company Disclosure Letter” means the letter from the Company to Parent, dated the date hereof and as may be amended or supplemented from time to time on or prior to Closing, of exceptions to the representations and warranties made, and the listings of information provided, by the Company pursuant to the terms and conditions hereof.

     1.21 “Company Financial Information” has the meaning set forth in Section 3.8(a).

     1.22 “Company Lease” means any lease, sublease or license, including any amendment with respect thereto, pursuant to which the Company uses, leases, subleases, occupies or holds any material Company Leased Real Property in connection with the Business.

     1.23 “Company Leased Real Property” means the real property leased, subleased, occupied and/or licensed by the Company or any Controlled Affiliate of the Company, as tenant, subtenant or licensee in connection with the Business, together with, to the extent leased, subleased, occupied and/or licensed in connection with the Business by the Company or any Controlled Affiliate of the Company, all buildings and other structures, facilities or improvements currently located thereon, all fixtures thereto, and all easements, licenses, rights and other appurtenances relating to the foregoing.

     1.24 “Company Licensed Intellectual Property” means the Intellectual Property used in the Business that is not Company Owned Intellectual Property, excluding standard, commercially available software licensed via “click-wrap” or “shrink-wrap” license agreements.

     1.25 “Company Owned Intellectual Property” means the Intellectual Property solely or primarily related to the Business that is owned by the Company.

     1.26 “Company Qualified Plan” has the meaning set forth in Section 3.10(d).

     1.27 “Company Stock” means the Company’s common shares, $100 par value per share.

     1.28 “Confidential Information” means any and all information not publicly available or generally available to the industry that relates to specific matters concerning BWC, the Company, Controlled Affiliates and the Business of the Company.

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     1.29 “Consent” means any consent, approval, authorization, waiver, permit, license, grant, agreement, exemption or order of, or registration, declaration or filing with, any Person, including any Governmental Authority, that is required in connection with (a) the execution and delivery by UCFC, the Company, and/or Parent of this Agreement or any Related Agreement or (b) the consummation by UCFC, Parent, and/or the Company of the transactions contemplated hereby and thereby.

     1.30 “Contract” means any written contract, agreement, understanding, lease, indenture, mortgage, deed of trust, evidence of indebtedness, binding commitment or instrument or offer, to which the Company is a party or by which any of their respective assets is bound.

     1.31 “Controlled Affiliate” of any Person means a Person that is directly or indirectly controlled by such other Person (it being the intention of the parties that a Controlled Affiliate of the Company means any direct or indirect subsidiary which is directly or indirectly controlled by the Company).

     1.32 “Disclosing Party” has the meaning set forth in Section 6.1.

     1.33 “Effective Time” the effective time of the Closing, which shall be deemed to be as of 11:00 a.m. Eastern time on the Closing Date.

     1.34 “ERISA” means the Employee Retirement Income Security Act of 1974 and regulations promulgated thereunder, as amended from time to time.

     1.35 “ERISA Affiliate” means with respect to any specified Person, any other Person that is or has been treated as a single employer with such specified Person for purposes of Section 414 of the Code.

     1.36 “Estimated Closing Date Balance Sheet” has the meaning set forth in Section 2.3.

     1.37 “Estimated Net Equity Value” has the meaning set forth in Section 2.3.

     1.38 “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder by the SEC.

     1.39 “Filings” has the meaning set forth in Section 3.7(c).

     1.40 “Final Closing Date Balance Sheet” has the meaning set forth in Section 2.4(a)(ii).

     1.41 “GAAP” means the accounting principles generally accepted in the U.S. and applied consistently throughout the periods involved.

     1.42 “Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative

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authority, agency or commission or any court, tribunal, or judicial or arbitral body, including the SEC, the ODFI and any self-regulatory organization within or outside the United States.

     1.43 “Income Tax” means any Tax imposed upon or measured by net income or gross income (excluding any Tax based solely on gross receipts) including any interest, penalty, or additions thereto, whether disputed or not.

     1.44 “Indebtedness” means, without duplication, (a) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the Ordinary Course), whether or not evidenced by a writing, (b) any other indebtedness that is evidenced by a note, bond, debenture, draft or similar instrument, (c) all obligations under financing or capital leases, (d) all obligations in respect of acceptances issued or created, (e) notes payable and drafts accepted representing extensions of credit, (f) all liabilities secured by any Lien on any property other than liens relating to equipment leased by the Company not constituting a capital lease, (g) letters of credit and any other agreements relating to the borrowing of money or extension of credit and (h) any guarantee (including by way of a “keep well” or other similar undertaking) of any of the foregoing obligations.

     1.45 “Indemnified Losses” has the meaning set forth in Section 9.2.

     1.46 “Indemnified Party” has the meaning set forth in Section 9.4.

     1.47 “Indemnifying Party” has the meaning set forth in Section 9.4.

     1.48 “Intellectual Property” means any of the following which is material to the Business: all material patents, patent applications, trademarks, copyright registrations and applications for registration thereof, Internet domain names and universal resource locators (URLs), trade secrets, inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, show-how, maskworks, formulae, methods (whether or not patentable), designs, processes, procedures, technology, source codes, object codes, computer software programs, databases, data collectors and other proprietary information or material of any type, whether written or unwritten (and all good will associated with, and all derivatives, improvements and refinements of, any of the foregoing).

     1.49 “Internal Controls” has the meaning set forth in Section 3.8(d).

     1.50 “IRS” means the United States Internal Revenue Service.

     1.51 “Knowledge” or “knowledge” means, with respect to Company, the actual knowledge of the individuals set forth in Annex A hereto and, with respect to Parent, means the actual knowledge of the individuals set forth in Annex B hereto, which in each case shall be deemed to include the knowledge any such person would have had after he or she had made due inquiry of those persons that such individual would reasonably expect to have actual knowledge of the relevant subject matter . The words “know,” “knowing” and “known” shall be construed accordingly.

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     1.52 “Liability” or “Liabilities” means all debts, adverse claims, liabilities and/or obligations, direct, indirect, absolute or contingent, whether accrued, vested or otherwise and whether or not reflected or required to be reflected on the financial statements of a Person.

     1.53 “Lien” means any lien, security interest, mortgage, indenture, deed of trust, pledge, charge, adverse claim, easement, restriction or other encumbrance.

     1.54 “Losses” has the meaning set forth in Section 9.2.

     1.55 “Management Closing Bonus Amount” has the meaning set forth in Section 6.5(c).

     1.56 “Material Adverse Effect” means:

          (a) with respect to the Company, a material adverse effect on the assets, business, financial condition or results of operations of the Business taken as a whole, but shall not be deemed to include (i) any changes resulting from general economic, regulatory or political conditions, (ii) circumstances that generally affect the industries in which the Company operates, (iii) any changes resulting from the announcement, pendency or Closing of the transactions provided for in this Agreement, including the impact thereof on relationships with customers of the Company or any Affiliate, suppliers, vendors, lenders, joint venture participants or employees, (iv) force majeure events, disruptions of supplies or acts of terrorism, war or acts of God, national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or (v) any adverse effect that Parent had Knowledge of as of the date of this Agreement or that the Company, UCFC or BWC otherwise cures; and

          (b) with respect to Parent, a material adverse effect on the assets, business, financial condition or results of operations of Parent’s and its subsidiaries’ businesses taken as a whole, but shall not be deemed to include (i) any changes resulting from general economic, regulatory or political conditions, (ii) circumstances that generally affect the industries in which Parent and its subsidiaries operate, (iii) any changes resulting from the announcement, pendency or Closing of the transactions provided for in this Agreement, including the impact thereof on relationships with customers, suppliers, vendors, lenders, joint venture participants or employees, (iv) force majeure events, disruptions of supplies or acts of terrorism, war or acts of God, national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or (v) any adverse effect that the Company had Knowledge of as of the date of this Agreement or that Parent otherwise cures.

     1.57 “Material Contract” has the meaning set forth in Section 3.14.

     1.58 “Net Equity Value” means (a) the total consolidated assets of the Company less (b) the total consolidated liabilities of the Company, in each case as reflected on the Reference Balance Sheet, Estimated Closing Date Balance Sheet or the Final Closing Date Balance Sheet, as the case may be, in accordance with GAAP, and the accounting principles, procedures, policies and methods used in the preparation of the Reference Balance Sheet.

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     1.59 “New Name” has the meaning set forth in Section 6.12(a).

     1.60 “Non-Competition Period” has the meaning set forth in Section 6.3(a).

     1.61 “Non-Income Taxes” means any Taxes other than Income Taxes including any interest, penalties or additions thereto, whether or not disputed.

     1.62 “ODFI” means the Ohio Division of Financial Institutions.

     1.63 “Order” means an order, writ, injunction, or decree of any court or Governmental Authority.

     1.64 “Ordinary Course” means, with respect to the Business, only the ordinary course of commercial operations customarily engaged in by the Company consistent with prior practices. For purposes hereof, Ordinary Course shall not include (a) any material violation or material default under any applicable Requirement of Law or (b) any activity which the Company has expressly agreed not to undertake pursuant to this Agreement.

     1.65 “Parent” has the meaning set forth in the introductory paragraph hereof.

     1.66 “Parent Common Stock” means the common shares, without par value, of Parent.

     1.67 “Parent Disclosure Letter” means the letter from Parent to UCFC, dated the date hereof and as may be amended or supplemented from time to time on or prior to Closing, of exceptions to the representations and warranties made, and the listings of information provided, by Parent pursuant to the terms and conditions hereof.

     1.68 “Parent Indemnified Persons” has the meaning set forth in Section 9.2.

     1.69 “Party” or “Parties” has the meaning set forth in the first paragraph hereof.

     1.70 “PBGC” means the Pension Benefit Guaranty Corporation.

     1.71 “Pension Plan” means an employee pension benefit plan (within the meaning of ERISA Section 3(2)).

     1.72 “Permits” means all material licenses, registrations, franchises, permits, certificates, approvals, accreditations, or other similar authorizations.

     1.73 “Permitted Liens” means, collectively, (a) Liens that are disclosed in the Company Disclosure Letter or identified in the Company Financial Information, (b) liens for Taxes, fees, levies, duties or other governmental charges of any kind which are not yet delinquent or are being contested in good faith by appropriate proceedings, (c) liens for mechanics, materialmen, laborers, employees, suppliers or similar liens arising by operation of law for amounts which are owed, but not yet delinquent, (d) in the case of real property, any matters, restrictions, covenants, conditions, limitations, rights, rights of way, encumbrances, encroachments, reservations, easements, agreements and other matters of

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record, such state of facts of which an accurate survey or title search of the property would reveal and (e) other minor encumbrances in property that do not materially impair the use of such property in the normal operation of the Business or the value of such property for the purpose of such Business.

     1.74 “Person” means and shall include a natural person, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity (or any department, agency or political subdivision thereof).

     1.75 “Plan” means any agreement, arrangement, plan, or policy, qualified or non-qualified, whether or not considered legally binding and whether or not written, that involves any (a) pension, retirement, profit sharing, savings, deferred compensation, stock option, stock purchase, phantom stock, or incentive plan, (b) welfare or “fringe” benefits, including without limitation vacation, holiday, severance, disability, medical, hospitalization, dental, life and other insurance, tuition, company car, club dues, sick leave, maternity, paternity or family leave, health care reimbursement, dependent care assistance, cafeteria plan, regular in-kind gifts or other benefits, or (c) any employment, consulting, engagement, retainer or golden parachute agreement or arrangement, including without limitation any “employee benefit plan” as defined in ERISA Section 3(3), (together “Plans” and each item thereunder a “Plan”).

     1.76 “Post-Closing Periods” means all taxable periods commencing after the Effective Time and the portion of any Straddle Period commencing after the Effective Time.

     1.77 “Pre-Closing Periods” means all taxable periods ending as of or prior to the Effective Time and the portion of any Straddle Period ending as of the Effective Time.

     1.78 “Proceeding” has the meaning set forth in Section 3.7(d).

     1.79 “Purchase Price” has the meaning set forth in Section 2.2(a).

     1.80 “Receiving Party” has the meaning set forth in Section 6.1.

     1.81 “Records” has the meaning set forth in Section 6.6.

     1.82 “Reference Balance Sheet” has the meaning set forth in Section 3.8(a).

     1.83 “Reference Income Statement” has the meaning set forth in Section 3.8(a).

     1.84 “Related Agreements” means any certificate or document to be delivered by the parties pursuant to this Agreement.

     1.85 “Requirement of Law” means, with respect to any Person, any domestic or foreign federal or state statute, law, ordinance, rule, administrative code, administrative interpretation, regulation, order, consent, writ, injunction, directive, judgment, decree, policy, ordinance, decision, guideline or other requirement of (or agreement with) any

10.12-8

Governmental Authority (including any memorandum of understanding or similar arrangement with any Governmental Authority), in each case binding on that Person or its property or assets.

     1.86 “Revenue Sharing Agreement” means that certain revenue sharing agreement dated as of December 31, 2008 between the Company and Butler Wick & Co., Inc.

     1.87 “SEC” means the Securities and Exchange Commission.

     1.88 “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder by the SEC.

     1.89 “Seller Indemnified Persons” has the meaning set forth in Section 9.3.

     1.90 “Sellers” means, collectively, UCFC and BWC.

     1.91 “Senior Executive Officer” has the meaning set forth in Section 6.5(c).

     1.92 “September 30, 2008 Financial Information” has the meaning set forth in Section 3.8(a).

     1.93 “Shares” means the 5,000 shares of Company Stock to be sold by Sellers to Parent hereunder.

     1.94 “Straddle Period” has the meaning set forth in Section 6.4(c).

     1.95 “Subsidiary” means, with respect to any specified Person, any other Person of which such specified Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, a majority of the outstanding equity securities or securities carrying a majority of the voting power in the election of the board of directors or other governing body of such Person.

     1.96 “Sublease Arrangements” mean the subleasing arrangements that the Company maintains with Butler Wick & Co., Inc. with respect to the Subleased Property, pursuant to those certain Sublease Agreements between the Company and Butler Wick & Co. each dated as of December 31, 2008.

     1.97 “Subleased Property” means the Company Leased Real Property located at (a) City Centre One, 100 Federal Plaza East, Youngstown, Ohio, and (b) Harvard Commons, Suite #1, 1695 Niles-Cortland Rd., NE Warren, Ohio.

     1.98 “Superior Proposal” means any bona fide Acquisition Proposal not solicited or initiated by UCFC, BWC or the Company in violation of Section 6.13(a) that the board of directors of either UCFC, BWC or the Company determines in its good faith judgment would, if consummated, result in a transaction that is more favorable to UCFC, BWC and/or the Company from a financial point of view than the transactions contemplated b y this Agreement.

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     1.99 “Tax Returns” means all reports, estimates, declarations, claims for refund, information statements and returns relating to or required by Requirements of Law to be filed in connection with any Taxes, and reports relating to Taxes payable by, pursuant to or in connection with any Plans, including any amendment or supplement thereof. Any one of the foregoing Tax Returns shall be referred to sometimes as a “Tax Return.”

     1.100 “Tax Neutrality Payment” has the meaning set forth in Section 6.4(e)(iii).

     1.101 “Taxes” means all taxes, charges, fees, levies, or other like assessments, including without limitation, all federal, possession, state, city, county and foreign (or governmental unit, agency, or political subdivision of any of the foregoing) income, profits, employment (including Social Security, unemployment insurance and employee income tax withholding), franchise, gross receipts, sales, use, transfer, stamp, occupation, property, capital, severance, premium, windfall profits, customs, duties, ad valorem, value added and excise taxes; PBGC premiums and any other charges of any Governmental Authority of the same or similar nature, including any interest, penalty or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person. Any one of the foregoing Taxes shall be referred to sometimes as a “Tax.”

     1.102 “Termination Fee” means an amount in cash equal to the sum of $485,000.

     1.103 “Territory” has the meaning set forth in Section 6.3(a).

     1.104 “Third Person” has the meaning set forth in Section 9.5.

     1.105 “Third Person Claim” has the meaning set forth in Section 9.5.

     1.106 “Transition Services Agreement” means that certain transition services agreement dated as of December 31, 2008 between the Company and Butler Wick & Co., Inc.

     1.107 “Treasury Regulations” means the rules and regulations under the Code issued by the U.S. Department of Treasury.

     1.108 “UCFC” has the meaning set forth in the introductory paragraph.

     1.109 “UCFC Benefit Plan” means each Plan, other than a Company Benefit Plan, to which UCFC or any of its ERISA Affiliates sponsors, maintains or contributes to, or is required to contribute to, or under which UCFC or any of its ERISA Affiliates has or may have any Liability.

     1.110 “UCFC Disclosure Letter” means the letter from UCFC and BWC to Parent, dated the date hereof and as may be amended or supplemented from time to time on or prior to Closing, of exceptions to the representations and warranties made, and the listings of information provided, by UCFC and BWC pursuant to the terms and conditions hereof.

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     1.111 “Unaudited Financial Information” has the meaning set forth in Section 3.8(a).

ARTICLE 2
PURCHASE AND SALE OF SHARES

     2.1 Transfer of Shares. Upon the terms and subject to the conditions of this Agreement, at the Closing on the Closing Date and as of the Effective Time, UCFC shall cause BWC to sell, assign, transfer and convey to Parent, and Parent shall purchase, acquire and accept from BWC, all of BWC’s right, title and interest in and to the Shares free and clear of all Liens.

     2.2 Consideration.

          (a) Subject to adjustment pursuant to Section 2.4 hereof, in consideration for the sale of the Shares, the aggregate purchase price (the “Purchase Price”) payable by Parent to the Sellers shall be $12,125,000 (the “Purchase Price”). The Purchase Price shall be adjusted as described in Section 2.4 hereof on a dollar-for-dollar basis to the extent that the Net Equity Value at Closing (determined in accordance with Section 2.4 hereof) is other than the Net Equity Value as is expressed on the Reference Balance Sheet (the “Reference Net Equity Value”).

          (b) At Closing, Parent shall deliver, by wire transfer of immediately available funds an amount equal to (x) the Purchase Price, less (y) if the Estimated Net Equity Value is less than the Reference Net Equity Value, then the difference between the Reference Net Equity Value and such Estimated Net Equity Value, to an account designated and controlled by UCFC not less than two (2) Business Days prior to Closing. If the Estimated Net Equity Value is greater than the Reference Net Equity Value, UCFC shall be entitled to receive the difference between the Estimated Net Equity Value and the Reference Net Equity value immediately prior to Closing. Any amount of Net Equity Value in excess of the Reference Net Equity Value shall be paid in accordance with Section 2.4(c)(i) below.

          (c) Subject to the provisions of Article 7 and Article 8, the closing of the purchase and sale of the Shares and the transactions contemplated hereby (the “Closing”) shall take place at the offices of Charles D. Niehaus, 7150 Granite Circle, Suite 203, Toledo, Ohio 43617 no later than two (2) Business Days after the date the last of the conditions set forth in Articles 7 and 8 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing) has been satisfied or, to the extent permissible, waived by the Party or Parties entitled to the benefit of such conditions, or at such other place, at such other time or on such other date as Parent, on the one hand, and UCFC and the Company, on the other hand, may mutually agree (the date on which the Closing actually occurs being herein referred to as the “Closing Date”).

     2.3 Preliminary Information. UCFC shall cause to be delivered to Parent at least two (2) Business Days prior to the Closing Date, an estimated Closing Date balance sheet of the Company as of immediately prior to the Closing (the “Estimated Closing Date Balance

10.12-11

Sheet”), substantially in the form of the Reference Balance Sheet, prepared in accordance with GAAP and otherwise using the accounting principles, procedures, policies and methods used by the Company in preparing the Reference Balance Sheet, and a calculation, in reasonable detail based upon such updated Estimated Closing Date Balance Sheet, setting forth the estimated amount of the Net Equity Value of the Company (the “Estimated Net Equity Value”).

     2.4 Net Equity Value Purchase Price Adjustment.

          (a) (i) Not later than 60 days after the Closing Date or such other time as is mutually agreed by the Parties, Parent shall cause to be prepared and delivered to UCFC the Final Closing Date Balance Sheet prepared in accordance with Section 2.4(a)(ii), and a calculation, in reasonable detail based upon such Final Closing Date Balance Sheet, setting forth the amount of the Net Equity Value.

               (ii) Parent shall prepare or cause to be prepared the final balance sheet of the Company, as of immediately prior to the Closing in accordance with GAAP and otherwise using the accounting principles, procedures, policies and methods used by the Company in preparing the Reference Balance Sheet (the “Final Closing Date Balance Sheet”). From and after the Closing, in connection with the preparation and delivery of the Final Closing Date Balance Sheet and calculation of Net Equity Value as set forth therein and during the period of any dispute contemplated by this Section 2.4, Parent shall give, and use its reasonable best efforts to cause its advisors to give, UCFC and its authorized representatives reasonable access to the relevant books and records, facilities and employees of the Company, subject to the confidentiality and indemnity agreements as executed by the parties contemporaneously herewith, as may be necessary to enable UCFC and its advisers to review and analyze the Final Closing Date Balance Sheet and such calculations based thereon.

          (b) (i) Within 60 days following its receipt of the Final Closing Date Balance Sheet, UCFC shall deliver to Parent either (i) its agreement as to the calculation of the Net Equity Value as set forth therein or (ii) a written dispute notice, specifying in reasonable detail the nature of its dispute of the calculation of the Net Equity Value as set forth therein. During the 30 days after the delivery of a dispute notice to Parent, Parent and UCFC shall attempt in good faith to resolve any such dispute and finally determine the Net Equity Value set forth in the Final Closing Date Balance Sheet. If at the end of such 30-day period, Parent and UCFC have failed to reach agreement with respect to such dispute, the matter shall be submitted to a nationally recognized accounting firm that is not the principal independent auditor for either Parent or UCFC and is otherwise neutral and impartial; provided, however, that if Parent and UCFC are unable to select such other accounting firm within 45 days after delivery of a dispute notice to Parent, either party may request the American Arbitration Association to appoint, within 20 Business Days from the date of such request, an independent public accountant with significant relevant experience and that is not the principal independent auditor for either Parent or UCFC. The accounting firm or accountant so selected shall be referred to herein as the “Accountant.” The Accountant shall act as arbitrator and resolve the disputed portions of the calculation of the Net Equity Value set forth in the Final Closing Date Balance Sheet in accordance with the terms and

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conditions of this Agreement. In making such determination, the Accountant may only consider those items and amounts as to which Parent and UCFC have disagreed within the time periods and on the terms specified above and must resolve the matter in accordance with the terms and provisions of this Agreement; provided that the determination of the Accountant will neither be more favorable to Parent than reflected in the Final Closing Date Balance Sheet nor more favorable to UCFC than reflected in UCFC’s dispute notice. The Accountant shall deliver to UCFC and Parent, as promptly as practicable after its appointment, a written report setting forth the resolution of each disputed matter and its determination of the Net Equity Value set forth in the Final Closing Date Balance Sheet as determined in accordance with the terms of this Agreement. Such report shall be final and binding upon the Parties to the fullest extent permitted under applicable Requirements of Laws and may be enforced in any court having jurisdiction. Each of Parent and UCFC shall bear all the respective fees and costs incurred by it in connection with this arbitration, and Parent and UCFC shall equally bear all the fees and costs relating to the foregoing work by the Accountant.

          (c) On the second Business Day after the later of (x) the date UCFC and Parent agree to the calculation of the Net Equity Value as set forth in the Final Closing Date Balance Sheet and (y) if UCFC and Parent are unable to agree on such calculation of the Net Equity Value, the date that UCFC and Parent receive notice from the Accountant, of the final determination of the amount(s) being so disputed, the Purchase Price shall be adjusted as follows:

               (i) If the Net Equity Value is greater than the Reference Net Equity Value, Parent shall pay to UCFC the difference between the Net Equity Value and the Reference Net Equity Value.

               (ii) If the Net Equity Value is less than the Reference Net Equity Value, the Purchase Price shall be reduced dollar-for-dollar by the amount of such difference, and either (A) UCFC shall pay to Parent the difference between the Estimated Net Equity Value and the Net Equity Value (if the Estimated Net Equity Value is higher than the Net Equity Value) or (B) Parent shall pay to UCFC the difference between the Net Equity Value and the Estimated Net Equity Value (if the Net Equity Value is higher than the Estimated Net Equity Value, but less than the Reference Net Equity Value).

               (iii) Any payment so required to be made by UCFC or Parent pursuant to this Section 2.4(c) shall be by transfer of immediately available funds to an account or accounts specified in writing by UCFC or Parent (as the case may be) and shall bear interest from the Closing Date through the date of payment at the rate of 3.25% per annum.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company hereby makes the following representations and warranties to Parent as of the date hereof and as of the Closing.

     3.1 Organization and Good Standing; No Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State

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of Ohio with full power and authority to own, operate and lease its assets and to carry on its business as currently conducted. The Company is duly qualified and licensed by the ODFI to solicit or engage in accepting and executing trusts of property, serving as a trustee, executor, administrator, guardian, receiver, conservator or other fiduciary, and providing fiduciary services in the State of Ohio as provided for in accordance with Chapter 1111 of the Ohio Revised Code. The Company has made available to Parent true and complete copies of its articles of incorporation and code of regulations. The Company does not own, directly or indirectly, any equity or other interest in any Subsidiary.

     3.2 Other Interests. Section 3.2 of the Company Disclosure Letter sets forth a true and complete list of any material interest or investment in (whether equity or debt) any corporation, partnership, limited liability company, joint venture, business, trust or other Person owned, directly or indirectly, by the Company, other than (i) interests or investments held by the Company for the account of clients as of the date hereof and Liens on interests or investments securing Indebtedness of such clients or (ii) securities, interests and investments maintained by the Company in the Ordinary Course.

     3.3 Authorization; Binding Obligations. The Company has all necessary power and authority to make, execute and deliver this Agreement and the Related Agreements to which it is a party and to perform all of the obligations to be performed by it hereunder and thereunder. The making, execution, delivery and performance by the Company of this Agreement and the Related Agreements and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Company. This Agreement has been and, as of the Closing Date, the Related Agreements will be, duly and validly executed and delivered by the Company, and assuming the due authorization, execution and delivery by Parent, each of this Agreement and the Related Agreements will constitute the valid, legal and binding obligation of the Company, enforceable against it in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar Requirements of Law, now or hereafter in effect, relating to or affecting the rights of creditors generally and the availability of specific remedies may be limited by legal and equitable principles of general applicability.

     3.4 No Conflicts. Except as set forth in Section 3.4 of the Company Disclosure Letter, the execution, delivery and performance by the Company of this Agreement and each of the Related Agreements to which it is a party, and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) result in the creation of any Lien upon the shares of Company Stock to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any Consent or other action by, notice to, or filing with, any third party or Governmental Authority pursuant to, the articles of incorporation or code of regulations of the Company, or any applicable Requirements of Law or Material Contract to which the Company, or its properties or the shares of Company Stock are subject, except for such conflicts, violations, Liens, contraventions, cancellations, defaults or Consents, the

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failure of which to obtain or violation of which will not individually or in the aggregate reasonably be expected to have a Material Adverse Effect.

     3.5 Approvals. There are no notices, reports or other filings required to be made by the Company, or Consents required to be obtained by the Company or any of the Subsidiaries from, any Governmental Authority or other third party in order for the Company to execute, deliver or perform this Agreement and the Related Agreements and to consummate the transactions contemplated hereby and thereby, except (a) as set forth in Section 3.5 of the Company Disclosure Letter, or (b) where the failure to make such notices, reports or other filings or the failure to obtain such Consents, individually or in the aggregate, would not reasonably be expected to (i) prevent, impair or delay the consummation of the transactions contemplated by this Agreement and the Related Agreements, or (ii) have or cause a Material Adverse Effect.

     3.6 Litigation. Except as set forth on Section 3.6 of the Company Disclosure Letter there is no investigation, action, suit, proceeding, claim, arbitration or other litigation pending or, to the Knowledge of the Company, threatened, nor has any event occurred or circumstance exist that may give rise to or serve as a basis for the commencement of any of the same, against or affecting the Company or the Business (including any claim involving a Company Customer Contract or a Company Customer or any Company Leased Real Property) that, individually or in the aggregate, (a) as of the date of this Agreement, involves a claim against, or is reasonably likely to result in a liability of, the Business in excess of $10,000 net of existing reserves and after application of available insurance proceeds, if any, provided that multiple claims or causes of action arising out of a single circumstance or a collection of circumstances based on the same related set of facts shall be deemed to be a single claim or cause of action for purposes of this determination, (b) would reasonably be expected to have a Material Adverse Effect, or (c) would affect the legality, validity or enforceability of this Agreement or any Related Agreement or prevent or materially impair or delay the consummation of the transactions contemplated hereby or thereby.

     3.7 Compliance with Requirements of Law, Regulatory Matters. Except as set forth on Section 3.7 of the Company Disclosure Letter: (a) The Company is, and since December 31, 2005 the Business has been operated, in compliance in all material respects with all material Requirements of Law. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Since December 31, 2005, neither UCFC nor the Company has received any written, or, to the Knowledge of the Company, oral notice from (and otherwise does not have any Knowledge of) any Governmental Authority, including the ODFI, that alleges any noncompliance (or that the Company is under any investigation by any such Governmental Authority for such alleged noncompliance) with any Requirement of Law relating to the Business.

          (b) (i) The Company holds all Permits that are required in order to conduct the Business in the manner presently conducted under and pursuant to all Requirements of Law in all material respects; (ii) all such Permits are in full force and effect and are not subject to any suspension, cancellation, modification, revocation or any proceedings or investigations related thereto, and, to the Knowledge of the Company, no such suspension, cancellation, modification, revocation, proceeding or investigation is

10.12-15

threatened, nor do facts exist which would reasonably form the basis for any such suspension, cancellation, modification, revocation, proceeding or investigation that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, and (iii) the Company is not in default, and no condition exists that with notice or lapse of time or otherwise would constitute a default, under any such Permit that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

          (c) All material registrations, reports, statements of additional information, financial statements, sales literature, statements, notices and other filings required to be filed with any Governmental Authority, including all amendments or supplements to any of the above (the “Filings”) required to be filed by the Company since December 31, 2005 related to the Business have been filed in compliance in all material respects with all Requirements of Law and the information contained therein was true and correct in all material respects. The Company has made available to Parent true and complete copies of its regulatory compliance files, including without limitation copies of all ODFI related materials, maintained by the Company.

          (d) Except for routine examinations conducted by any Governmental Authority in the regular course of the Business, since December 31, 2005 (i) no Governmental Authority has initiated any proceeding, investigation, examination, audit or review into the Business (a “Proceeding”) and no such Proceeding is ongoing, unresolved or, to the Knowledge of the Company, threatened by any Governmental Authority and (ii) the Company has not received any notice or communication (A) of any unresolved violation or exception by any Governmental Authority with respect to any report or statement by any Governmental Authority relating to any examination of any of the Company, (B) threatening to revoke or condition the continuation of any Permit or (C) restricting or disqualifying their activities (except for restrictions generally imposed by rule, regulation or administrative policy on similarly regulated Persons generally), which would have or cause a Material Adverse Effect.

          (e) The Company has complied in all material respects with all material Requirements of Laws regarding the privacy of Company Customers and has established and complied in all material respects with policies and procedures in this regard reasonably designed to ensure compliance with Requirements of Law.

          (f) The Company, to the extent required by Requirements of Law, has a written anti-money laundering program and a written customer identification program in compliance with Requirements of Law and has complied with the terms of such program in all material respects.

     3.8 Financial Statements. (a) (i) The audited balance sheets at December 31 in each of the years 2005, 2006 and 2007, and the related audited statements of income, changes in shareholder equity and cash flows and notes related thereto of the Company on a consolidated basis for each of the fiscal years then ended (the “Audited Financial Information”), (ii) the unaudited consolidated balance sheet of the Company at September 30, 2008 and related unaudited statements of income, changes in shareholder equity and cash

10.12-16

flows and notes related thereto of the Company on a consolidated basis as of and for the nine-month period then ended (the “September 30, 2008 Financial Information”), and (iii) an unaudited consolidated balance sheet of the Company at November 30, 2008 (the “Reference Balance Sheet” and together with the September 30, 2008 Financial Information, the “Unaudited Financial Information”) and related unaudited statements of income, changes in shareholder equity and cash flows and notes related thereto of the Company as of and for the eleven-month period then ended (the “Reference Income Statement”), including in each case the notes thereto (such information in items (i), (ii) and (iii) collectively, the “Company Financial Information”) have been delivered to Parent. The Reference Balance Sheet is included as Exhibit 3.8(a) hereto. As of the date hereof, the Company has not made or declared any dividends on the Company Stock since the date of the Reference Balance Sheet.

          (b) The Company Financial Information has been (i) derived from the books of account and other financial records of the Business and (ii) prepared in accordance with GAAP consistently applied, subject only to normal recurring year-end adjustments and the absence of notes for the Unaudited Financial Information and except as otherwise expressly provided in the Company Financial Information. The Company Financial Information fairly presents in all material respects the consolidated financial position of the Company as of the respective dates thereof and their consolidated results of operations and cash flows for the respective periods then ended (subject, in the case of unaudited interim financial statements, to the absence of notes and normal and recurring year-end audit adjustments).

          (c) The corporate minute books of the Company that have been made available to the Parent for inspection, including such corporate minute books from December 31, 2005, are complete and correct in all material respects. A true and complete list of the incumbent directors and officers of the Company is attached as Section 3.8(c) of the Company Disclosure Letter.

          (d) The Company maintains in all material respects internal controls over financial reporting (“Internal Controls”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company that could materially and adversely effect the Company’s financial statements.

     3.9 Title; Sufficiency of Assets. Upon consummation of the transactions contemplated by this Agreement and the Related Agreements, Parent or one or more of its subsidiaries and Controlled Affiliates (including the Company), taken together, will own, possess, have a valid license to, have a valid lease in or otherwise have the right to use all of

10.12-17

the rights, properties and assets necessary to conduct the Business in all material respects as currently conducted and as the same will be conducted on the Closing Date, including all such assets reflected in the Reference Balance Sheet or acquired since the date thereof (collectively, the “Assets”), except for any failure to have such title, interests or rights that, individually or in the aggregate, has not had and would not reasonably be expected to have or result in a Material Adverse Effect. The Company has maintained in all material respects all tangible Assets in good repair, working order and operating condition, subject only to ordinary wear and tear.

     3.10 Employee Benefit Plans; Employee Matters.

          (a) Section 3.10(a) of the Company Disclosure Letter lists each Company Benefit Plan applicable to the Company and the Business. Except as disclosed in Section 3.10(a) of the Company Disclosure Letter, (i) each Company Benefit Plan is in writing and the Company has made available to Parent a true and complete copy of each Company Benefit Plan and a true and complete copy of the following items (in each case, only if applicable) (A) each trust or other funding arrangement, (B) each summary plan description and summary of material modifications, (C) the most recently filed annual reports on the IRS Form 5500 for each such Company Benefit Plan, including without limitation all schedules thereto, all financial statements with attached opinions of independent accountants and all actuarial reports, and (D) the most recently received IRS determination letter for each such Company Benefit Plan, and (ii) the Company has no express or implied commitment with respect to the Business to create, incur any Liability with respect to or cause to exist any other Plan or to modify, change or terminate any Company Benefit Plan.

          (b) Except as disclosed in Section 3.10(b) of the Company Disclosure Letter, (i) each of the Company Benefit Plans is, and has always been, operated in accordance in all material respects with all applicable provisions of ERISA, the Code, and all other Requirements of Law and has in all material respects been administered, operated and managed in accordance with its governing documents, (ii) no prohibited transactions (as defined in ERISA Section 406 or Code Section 4975), except any as to which an exemption described in ERISA Section 408 applies, and no violations of ERISA Section 407 have occurred with respect to any Company Benefit Plan, and (iii) and each Company Benefit Plan (including any Plan covering former employees and retirees of the Company) may be amended or terminated by the Company or other applicable sponsor of the Plan on or at any time after the Closing Date.

          (c) Except as disclosed in Section 3.10(c) of the Company Disclosure Letter, none of UCFC, the Company nor any of their ERISA Affiliates has now or at any time contributed to or been required to contribute to, sponsored, or maintained, or has any liability with respect to, (i) a multiemployer plan (as defined in ERISA Section 3(37) or 4001(a)(3)) or (ii) any Pension Plan which is subject to the provisions of Title IV of ERISA.

          (d) Except as disclosed in Section 3.10(d) of the Company Disclosure Letter, the IRS has issued a favorable determination letter with respect to each of the Company Benefit Plans that is intended to be qualified under Section 401(a) of the Code (a “Company Qualified Plan”) to the effect that such plan is qualified under Section 401(a) of

10.12-18

the Code. No circumstances exist that would adversely affect the qualified status of any Company Qualified Plan or that could be expected to result in the revocation of its related trust’s exemption from United States federal income taxation.

          (e) Except as disclosed in Section 3.10(e) of the Company Disclosure Letter, each of the Company Benefit Plans that is a nonqualified deferred compensation arrangement has been maintained, administered and operated in material compliance with Code Section 409A and the regulations and guidance thereunder.

          (f) Except as otherwise disclosed in Section 3.10(f) of the Company Disclosure Letter, there are no pending or, to the Knowledge of the Company, threatened material claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations which have been asserted or instituted against the Company Benefit Plans, any fiduciaries thereof with respect to their duties to the Company Benefit Plans or the assets of any of the trusts under any of the Company Benefit Plans; and the Company has no liability with respect to a Company Benefit Plan by virtue of its being a member of a controlled group with a Person who has liability under the Code or ERISA.

          (g) To the Knowledge of the Company, no labor union, labor organization or group of employees of the Company has made a pending demand for recognition or certification with respect to the Business Employees, there are no representation or certification proceedings or petitions seeking a representation proceeding with respect to the Business Employees presently pending or, to the Knowledge of the Company, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority and there have been no such actions, events or disputes since December 31, 2005. There are no strikes, organized work stoppages, organized slowdowns, lockouts or other material labor disputes pending or, to the Knowledge of the Company, threatened against or involving the Business Employees. The Company is not a party to, bound by, or in the process of negotiating a collective bargaining agreement or other agreement with a labor union or labor organization covering any of the Business Employees.

          (h) Except as disclosed in Section 3.10(h) of the Company Disclosure Letter or in Section 6.5 of this Agreement, the consummation of the transactions contemplated by this Agreement will not (i) entitle any Business Employee to separation, termination or severance pay, unemployment compensation or any other similar-type benefit payment, (ii) result in the payment to any present or former employee, officer, director or consultant of the Company of any money or other property, or (iii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee.

          (i) Except as disclosed in Section 3.10(i) of the Company Disclosure Letter or except to the extent required under ERISA Section 601 et. seq. and Code Section 4980B, none of the Company Benefit Plans provides for or promises medical, disability or life insurance or any other welfare benefits after retirement or other termination of employment to any current or former employee, officer, director or consultant of the Company.

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     3.11 Absence of Undisclosed Liabilities. The Company is not subject to any claims, liabilities or obligations (whether known, unknown, absolute, accrued, contingent or otherwise) and, to the Knowledge of the Company, there are no existing conditions, situations or facts that could reasonably be expected to result in any such claim, obligation or liability, except (a) as and to the extent disclosed on, or as to which a reserve has been established on, the Reference Balance Sheet, (b) claims, obligations and liabilities that (i) are incurred after the date of the Reference Balance Sheet in the Ordinary Course consistent with past practice of Company, and (ii) individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect, or (c) as set forth on Section 3.11 of the Company Disclosure Letter.

     3.12 Absence of Certain Changes. Except for the matters contemplated by this Agreement and as set forth on Section 3.12 of the Company Disclosure Letter, since November 30, 2008, the Business has been conducted in the Ordinary Course and there has not been any change in the business, operations, properties, assets, condition (financial or otherwise) or results of the Company taken as a whole which would have or cause a Material Adverse Effect; and as of the date of this Agreement, James H. Sisek is not actually aware of any Company Customers who intend to terminate their existing Company Customer Contract as currently in effect, or otherwise terminate or conclude their relationship with the Company, upon effecting the transactions contemplated by this Agreement.

     3.13 Company Real Property.

          (a) Except as set forth in Section 3.13 of the Company Disclosure Letter, the Company does not own or ground lease any real property. Section 3.13(a) of the Company Disclosure Letter sets forth a true and complete list of all Company Leased Real Property, identifying each Company Lease and the identity of the lessee and lessor thereunder. Each Company Lease is in full force and effect.

          (b) Except as set forth in Section 3.13 of the Company Disclosure Letter, The Company has not subleased any of the Company Leased Real Property to any third party or given any third party any license or other right to occupy any portion of the Company Leased Real Property leased by the Company.

     3.14 Certain Contracts. Except as set forth on Section 3.14 of the Company Disclosure Letter, the Company is not a party to or bound by any Contract, arrangement, commitment or understanding (other than any Plan described elsewhere herein) (each a “Material Contract”) which shall include (i) any agreement (or group of related agreements) with any Person, other than agreements with Company Customers, involving payments by or to the Company in excess of, or that would reasonably be expected to be in excess of, $50,000 for any consecutive twelve-month period, (ii) any material agreement concerning a partnership or joint venture, (iii) any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $50,000 or under which it has imposed a Lien on any of its assets, tangible or intangible, (iv) any material agreement concerning confidentiality or non-competition, (v) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other material plan or

10.12-20

arrangement for the benefit of its current or former directors, officers, and employees, (vi) any collective bargaining agreement, (vii) any agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $50,000 or providing material severance benefits, (viii) any agreement under which the consequences of a default or termination could have a Material Adverse Effect, (ix) any agreement under which the Company has advanced or loaned any other Person amounts in the aggregate exceeding $50,000, (x) any other agreement (or group of related agreements) the performance of which involves consideration in excess of $50,000. Except as set forth on Section 3.14 of the Company Disclosure Letter, the Company has no Knowledge of, or has received no notice of, any material breach of any Material Contract by any of the other parties thereto. Except as set forth in Section 3.14 of the Company Disclosure Letter, the Company is not in material default under any Material Contract to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receives benefits and, to the Knowledge of the Company, there has not occurred any event that with the lapse of time or the giving of notice or both, would constitute such a material default.

     3.15 Intellectual Property.

          (a) Section 3.15(a) of the Company Disclosure Letter sets forth, as of the date hereof, a complete list of all Company Owned Intellectual Property that is the subject of an application or registration.

          (b) Except as set forth in Section 3.15(b) of the Company Disclosure Letter, there is no material litigation pending or, to the Knowledge of the Company, threatened against the Business that involves a claim (i) alleging that the operation of the Business infringes, misappropriates, dilutes or otherwise violates a third party’s Intellectual Property rights or (ii) challenging the ownership, use, validity, enforceability or registrability of any Company Owned Intellectual Property or Company Licensed Intellectual Property. To the Knowledge of the Company, the Business as currently conducted does not infringe, misappropriate, or otherwise violate any third party’s Intellectual Property rights in any manner that would have or cause a Material Adverse Effect. The Company has not brought or, to the Knowledge of the Company, threatened a claim against any third party (A) alleging infringement, misappropriation, dilution or other violation of any material Company Owned Intellectual Property or (B) challenging any such third party’s ownership or use of, or the validity, enforceability or registrability of, such third party’s Intellectual Property, and, to the Knowledge of the Company, there is no basis for a claim regarding any of the foregoing.

     3.16 Taxes. Except as disclosed in Section 3.16 of the Company Disclosure Letter:

          (a) The Company has filed, or caused to be filed, on a timely basis all material Tax Returns required to be filed on or before the date hereof and such Tax Returns are true, correct and complete in all material respects. Without limiting the foregoing, none of the Tax Returns contains any position that is, or would be, subject to penalties under Section 6662 of the Code (or any corresponding provisions of state, local or foreign Tax law). The Company has not entered into any “listed transactions” as defined in Treasury Regulation section 1.6011-4(b)(2), and each has properly disclosed all reportable transactions

10.12-21

as required by Treasury Regulation section 1.6011-4, including filing Form 8886 with Tax Returns and with the Office of Tax Shelter Analysis.

          (b) The Company has not requested an extension of time within which to file any Tax Return in respect of any taxable period for which such Tax Return has not since been filed. There are no outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to a Tax assessment or deficiency or Tax Returns of the Company.

          (c) All Taxes due and owing by the Company (whether or not reflected on any Tax Return) have been timely and fully paid in all material respects.

          (d) The Company has timely and properly withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party, including, but not limited to, amounts required to be withheld under Sections 1441 and 1442 of the Code (or similar provisions of state, local or foreign Law).

          (e) There are no Liens for Taxes (other than for current Taxes not yet due and payable) upon any assets of the Company.

          (f) Except for the group of which UCFC is presently a member, the Company (i) is not and never has been a member of an “Affiliated Group” within the meaning of Section 1504 of the Code and (ii) does not have any liability for the Taxes of any Person under Treasury Regulation section 1.1502-6 (or similar provision of state, local or foreign Tax law) as a transferee or successor, by contract or otherwise.

          (g) The Company is not a party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement or arrangement.

          (h) No claim has ever been made by a Governmental Authority in a jurisdiction where the Company does not file Tax Returns that the Company may be subject to taxation by that jurisdiction.

          (i) No federal, state, local or foreign Tax audits or administrative or judicial Tax proceedings are pending or being conducted or to the Knowledge of the Company, threatened with respect to the Company. The Company has not since January 1, 2005, received from any Governmental Authority (including jurisdictions where Company has not filed a Tax Return) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice or deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Governmental Authority against the Company.

          (j) The Company does not presently have and has not in the past had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the U.S. and such foreign country.

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          (k) The Company is in compliance with the requirements of Section 482 of the Code and the Treasury Regulations thereunder as they apply to transfer pricing between controlled entities, including the contemporaneous documentation requirements regarding transfer pricing policies.

          (l) The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any Tax period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made on or prior to the Closing Date, or (iv) prepaid amount received on or prior to the Closing Date.

          (m) True, correct and complete copies of all income Tax Returns, Tax examination reports and statements of deficiencies assessed against, or agreed to with respect to the Company with respect to the last three years with the IRS or any other taxing authority have been made available to Parent.

     3.17 Company Capitalization.

          (a) As of the date hereof, the authorized capital stock of the Company consisted of 5,000 common shares, $100 par value per share (the “Company Capital Stock”). As of the date hereof, the Shares are the only outstanding shares of Company Capital Stock, and no other shares of Company Capital Stock were issued and outstanding, and no shares of Company Capital Stock were reserved for issuance (including shares underlying any outstanding stock options and other convertible securities of the Company).

          (b) As of the date of this Agreement, all of the issued and outstanding shares of Company Capital Stock have been duly authorized, validly issued and are fully paid and non-assessable and were not issued in violation of any preemptive rights. There are no outstanding options, warrants, convertible securities, “tag along” or “drag along” rights or other rights, agreements, arrangements or commitments relating to the Company Capital Stock obligating the Company or any of its Affiliates, at any time or upon the occurrence of certain events, to offer, issue, sell, transfer, vote, redeem or otherwise dispose of or sell any shares of Company Capital Stock. The Company has no (i) outstanding Indebtedness that could entitle or convey to any Person the right to vote, or that is convertible into or exercisable for, Company Capital Stock or (ii) outstanding options, warrants, convertible securities or other rights, agreements, arrangements or commitments that entitle or convey to any Person the right to vote with UCFC on any matter in respect of the Company Capital Stock absent the exercise or conversion thereof. There are no voting trusts or other agreements or understandings outstanding with respect to the Company Capital Stock.

     3.18 Affiliate Transactions.

          (a) Except for Contracts and arrangements (i) which are on customary arms-length terms, (ii) in respect of services and products that are to be continued or

10.12-23

provided pursuant to the Related Agreements or (iii) as set forth on Section 3.18 of the Company Disclosure Letter which are to be terminated on or prior to the Closing Date, the Company is not a party to any Contract or arrangement with UCFC or its Affiliates.

          (b) Except as set forth on Section 3.18(b) of the Company Disclosure Letter, to the Knowledge of the Company, no director, officer or employee of the Company: (i) owns, directly or indirectly, any economic or ownership interest in (x) any property or asset, real or personal, tangible or intangible, used in or held for use in connection with or pertaining to the Business, (y) any Company Customer or (z) any supplier, lessor, lessee or competitor of the Company, in each case of (x), (y) and (z) where such interest would be material to the Business, taken as a whole, (ii) serves as a trustee, officer, director or employee of any Person that is a supplier, lessor, lessee or competitor of the Company or (iii) has received any loans from or is otherwise a debtor of, or made any loans to or is otherwise a creditor of, the Company, where the amount of any such loans would be material to the Company, taken as a whole.

          (c) Except as set forth on Section 3.18(c) of the Company Disclosure Letter, the Company has no loan outstanding, has extended or maintained credit, or has arranged for the extension of credit, to any director, officer or employee of any of them.

     3.19 Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or similar fee or commission in connection with the transactions contemplated by this Agreement and the Related Agreements based upon arrangements made by or on behalf of the Company or UCFC, except those for which UCFC will be solely responsible.

     3.20 Insurance. The Company has at all times since December 31, 2005 maintained insurance policies or been provided with coverage under UCFC’s insurance policies including, without limitation, general comprehensive liability, unemployment and workers’ compensation coverage. Section 3.20 of the Company Disclosure Letter sets forth the material insurance policies maintained by the Company (or provided by UCFC), together with the amount of coverage for each policy, the premium due dates (solely with respect to those Company maintained policies) and the dates of last payment and indicates which of such insurance policies are claims—made policies and which of such policies are occurrence-based policies. To the Knowledge of the Company, the policies evidence insurance in such amounts and against such risks and losses as are generally maintained with respect to comparable companies and properties. All of such insurance policies maintained by the Company and, to the Knowledge of the Company, all such insurance policies maintained by UCFC under which the Company receives coverage, are in full force and effect (with respect to the applicable coverage periods), and the Company is not in default in any material respect of any of its obligations under any of such insurance policies.

     3.21 Disclosure. The representations, warranties and other statements of the Company contained in this Agreement, the Company Disclosure Letter, or any Exhibit or Schedule delivered by the Company to Parent in connection with the execution and delivery of this Agreement, taken as a whole, do not contain any untrue statement of a material fact

10.12-24

or omit to state a material fact necessary in order to make any of them, in light of the circumstances under which they were made, not misleading.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UCFC AND BWC

     UCFC and BWC hereby jointly and severally make the following representations and warranties to Parent as of the date hereof and as of the Closing.

     4.1 Ownership. As of the date of this Agreement, BWC owns, and as of the Closing Date BWC will own free and clear of all Liens, all of the issued and outstanding Shares of Company Stock, and UCFC owns, and as of the Closing Date will own, all of the voting capital stock of BWC and otherwise controls the board of directors of BWC.

     4.2 Authorization; Binding Obligations. UCFC and BWC each have all necessary power and authority to make, execute and deliver this Agreement and the Related Agreements to which it is a party and to perform all of the obligations to be performed by it hereunder and thereunder. The making, execution, delivery and performance by UCFC and BWC of this Agreement and the Related Agreements, if any, and the consummation by each of them of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of UCFC and BWC. This Agreement has been and, as of the Closing Date, the Related Agreements, if any, will be, duly and validly executed and delivered by each of UCFC and BWC, and assuming the due authorization, execution and delivery by Parent and the Company, each of this Agreement and the Related Agreements will constitute the valid, legal and binding obligation of each of UCFC and BWC, enforceable against each of them in accordance with its terms, except that the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar Requirements of Law, now or hereafter in effect, relating to or affecting the rights of creditors generally and the availability of specific remedies may be limited by legal and equitable principles of general applicability.

     4.3 No Conflicts. Except as set forth in Section 4.3 of the UCFC Disclosure Letter, the execution, delivery and performance by UCFC and BWC of this Agreement and each of the Related Agreements to which they are a party, and the fulfillment of and compliance with the respective terms hereof and thereof by UCFC and BWC, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) give any third party the right to modify, terminate or accelerate any obligation under, (d) result in a violation of, or (e) require any Consent or other action by, notice to, or filing with, any third party or Governmental Authority pursuant to, the articles of incorporation or code of regulations of UCFC or BWC, or any applicable Requirements of Law or material contract to which either of them are subject, except for such conflicts, violations, Liens, contraventions, cancellations, defaults or Consents, the failure of which to obtain or violation of which will not individually or in the aggregate reasonably be expected to have a material adverse effect on UCFC and BWC.

11.12-25

     4.4 Approvals. There are no notices, reports or other filings required to be made by UCFC and BWC with, or Consents required to be obtained by UCFC and BWC from, any Governmental Authority or other third party in order for UCFC and BWC to execute, deliver or perform this Agreement or the Related Agreements or to consummate the transactions contemplated hereby and thereby, except (a) as set forth in Section 4.4 of the UCFC Disclosure Letter, or (b) where the failure to make such notices, reports or other filings or the failure to obtain such Consents, individually or in the aggregate, would not reasonably be expected to (i) prevent, impair or delay the consummation of the transactions contemplated by this Agreement and the Related Agreements or (ii) have or cause a Material Adverse Effect.

     4.5 Company Customer Lists. Neither UCFC nor BWC has in its possession, custody or control (except by virtue of their equity ownership of the Company) any listing or other description of Company Customers.

     4.6 Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or similar fee or commission in connection with the transactions contemplated by this Agreement and the Related Agreements based upon arrangements made by or on behalf of the Company or UCFC, except those for which UCFC will be solely responsible.

     4.7 Insurance. UCFC has at all times since December 31, 2005 maintained insurance policies which provide coverage to the Company including, without limitation, general comprehensive liability coverage (but excluding unemployment and workers’ compensation coverage). The policies evidence insurance in such amounts and against such risks and losses as UCFC believes are generally maintained with respect to comparable companies and properties. All of such insurance policies currently maintained by UCFC under which the Company receives coverage, are in full force and effect (with respect to the applicable coverage periods), and UCFC is not in default in any material respect of any of its obligations under any of such insurance policies.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT

     Parent hereby makes the following representations and warranties to the Sellers as of the date hereof and as of the Closing.

     5.1 Organization and Good Standing. Parent is a legal entity duly organized, validly existing and in good standing under the Requirements of Law of its jurisdiction of organization with full power and authority to own, operate and lease its assets and to carry on its business as currently conducted. Parent is duly qualified to do business and is in good standing (where applicable) as a foreign corporation in each jurisdiction where the ownership, operation or leasing of its assets or the conduct of its business as currently conducted requires such qualification, except for those jurisdictions where the failure to be so qualified or to be in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

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     5.2 Authority; Binding Obligations. Parent has all necessary power and authority to make, execute and deliver this Agreement and the Related Agreements to which it is a party and to perform all of the obligations to be performed by it hereunder and thereunder. The making, execution, delivery and performance by Parent of this Agreement and the Related Agreements and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of Parent. This Agreement has been and, as of the Closing Date, the Related Agreements will be, duly and validly executed and delivered by Parent, and assuming the due authorization, execution and delivery by UCFC, BWC and the Company, each of this Agreement and the Related Agreements will constitute the valid, legal and binding obligation of Parent, enforceable against Parent in accordance with its terms, except that the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar Requirements of Law, now or hereafter in effect, relating to or affecting the rights of creditors generally and the availability of specific remedies may be limited by legal and equitable principles of general applicability. Consummation of the transactions contemplated herein shall not trigger or otherwise cause a breach under the terms of any shareholder rights plan or arrangement of Parent currently in effect.

     5.3 Compliance with Securities Laws. Parent is acquiring the Shares for investment and not with a view to distribution thereof, and will not sell, offer for sale, pledge, transfer or otherwise dispose of such Shares or any interest therein except in compliance with the Securities Act and any other applicable federal and states securities laws.

     5.4 No Conflicts. Except as set forth in Section 5.4 of the Parent Disclosure Letter, the execution, delivery and performance by Parent of this Agreement and each of the Related Agreements to which it is a party, and the fulfillment of and compliance with the respective terms hereof and thereof by Parent, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) give any third party the right to modify, terminate or accelerate any obligation under, (d) result in a violation of, or (e) require any Consent or other action by, notice to, or filing with, any third party or Governmental Authority pursuant to, the articles of incorporation or code of regulations of Parent, or any applicable Requirements of Law or material contract to which Parent is subject, except for such conflicts, violations, Liens, contraventions, cancellations, defaults or Consents, the failure of which to obtain or violation of which will not individually or in the aggregate reasonably be expected to have a Material Adverse Effect.

     5.5 Approvals. There are no notices, reports or other filings required to be made by Parent or any of its Affiliates with, or Consents required to be obtained by Parent or any of its Affiliates from, any Governmental Authority or other third party in order for Parent and its applicable Subsidiaries to execute, deliver or perform this Agreement or the Related Agreements or to consummate the transactions contemplated hereby and thereby, except (a) as set forth in Section 5.4 of the Parent Disclosure Letter, or (b) where the failure to make such notices, reports or other filings or the failure to obtain such Consents, individually or in the aggregate, would not reasonably be expected to (i) prevent, impair or delay the consummation of the transactions contemplated by this Agreement and the Related Agreements or (ii) have or cause a Material Adverse Effect.

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     5.6 Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or similar fee or commission in connection with the transactions contemplated by this Agreement and the Related Agreements based upon arrangements made by or on behalf of Parent or its subsidiaries, except those for which Parent will be solely responsible, including, without limitation, payment to Meechaert Capital Markets.

ARTICLE 6
ADDITIONAL COVENANTS OF THE PARTIES

     6.1 Confidentiality. In addition to the terms, provisions and covenants of the Confidentiality Agreement dated September 25, 2008, between Parent and the Company, which shall remain in full force and effect until Closing, Parent acknowledges that, in the course of its investigation of the Company, Parent and its representatives have and will become aware of Confidential Information and documents of the Company, and that its use of such Confidential Information and documents, or communication of such Confidential Information to third parties, could be detrimental to the Company. Parent (the “Receiving Party”) covenants that prior to Closing all information and documents concerning the Company (the “Disclosing Party”) reviewed by a Receiving Party or its representatives in connection with this Agreement or the transactions contemplated hereby shall be maintained in confidence and shall not be disclosed or used by the Receiving Party or its representatives without the Disclosing Party’s prior written consent, unless such information (i) was, is now or becomes publicly available, (ii) is required to be disclosed pursuant to any Requirement of Law, (iii) was disclosed to a Receiving Party by a third party not subject to any duty of confidentiality to UCFC, BWC or the Company, or Parent, as the case may be, or (iv) required to be disclosed by the rules of a securities exchange on which Parent may from time to time be listed or the SEC. In the event that a Receiving Party or any of its representatives is required pursuant to any Requirement of Law to disclose any such Confidential Information or documents referred to in this Section 6.1, such Receiving Party shall, to the extent reasonably practicable, provide the Disclosing Party with prompt written notice before such disclosure, sufficient to enable the Disclosing Party either to seek a protective order, at its expense, or another appropriate remedy preventing or prohibiting such disclosure or to waive compliance with the provisions of this Section 6.1, or both. With respect to information and documents related to the Receiving Party, at the Disclosing Party’s request, in the event that the Closing shall not occur, or as soon as practicable following termination of this Agreement: (i) the Receiving Party shall, and shall cause its representatives to, promptly destroy all Confidential Information and documents concerning the Disclosing Party (including any copies thereof or extracts therefrom), (ii) an officer of the Receiving Party shall certify to the Disclosing Party that such destruction has occurred, and (iii) the Receiving Party shall and shall cause its representatives to keep confidential and not use any such Confidential Information or documents unless required to disclose such Confidential Information or documents pursuant to judicial order, regulation or Requirements of Law.

     6.2 Conduct of Business Until Closing. Except as set forth on Section 6.2 of the Company Disclosure Letter or as otherwise provided in this Agreement, or as Parent may

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otherwise consent to (which consent shall not be unreasonably withheld, delayed or conditioned), on and after the date hereof and prior to the Closing Date, the Company shall:

          (a) not amend the organizational documents of the Company;

          (b) not effect any transactions relating to the disposition of any material part of the assets of the Company, other than in the Ordinary Course;

          (c) (i) conduct the Business in the Ordinary Course, (ii) use commercially reasonable efforts to preserve the Company’s current business organization and existing business relationships, (iii) maintain the Company’s property in substantially the condition currently existing, normal wear and tear excepted, and (iv) not intentionally take or fail to take any action outside the Ordinary Course that would cause any of the representations and warranties set forth in Article III to be untrue or incorrect in any material respect at any time on or after the date hereof and through the Closing Date;

          (d) not make any distribution or declare, pay or set aside any dividend with respect to, or split, combine, redeem, reclassify, purchase or otherwise acquire directly, or indirectly, any equity interests or shares of capital stock of, or other equity or voting interest in, the Company, or make any other changes in the capital structure of the Company; provided however, that the Company may pay to UCFC or BWC immediately prior to Closing the difference between the Net Equity Value and the Reference Net Equity Value, as provided for in Section 2.2(b) above.

          (e) except as required by Requirements of Law or an existing Plan or Contract and except with respect to the arrangements expressly contemplated to be implemented by the Company prior to the Closing pursuant to Section 6.5 or Section 7.5 hereof, not (A) make or agree to make any increase in compensation, pension, or other fringe benefits or perquisites payable to any officer or investment professional or other employee of the Company other than routine wage or salary increases in the Ordinary Course (B) grant or agree to grant any severance or termination pay or enter into any Contract to make or grant any severance or termination pay or pay any bonus, other than those set forth on Section 6.2(e) of the Company Disclosure Letter, (C) grant or agree to grant or accelerate the time of vesting or payment of any awards under a Plan (including any equity rights to acquire any equity interests of the Company) other than as required by Requirements of Law or in accordance with or to facilitate the transactions contemplated by this Agreement, or (D) establish, adopt, amend, modify or terminate any Plan; provided, however, that the foregoing shall not prohibit the Company from employing financial consultants in the Ordinary Course;

          (f) neither (i) merge with or into, consolidate with or acquire all or substantially all of the stock or assets of any other Person, (ii) enter into, materially amend or become subject to any limited liability company agreement, joint venture, partnership, strategic alliance, shareholders’ agreement, co-marketing, co-promotion, joint development or similar arrangement, except in the Ordinary Course, (iii) enter into, terminate or amend in any material respect any material Contract (except to the extent necessary to obtain any consents for transfer contemplated by this Agreement), (iv) amend, breach, terminate or

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allow to lapse any material Permit relating to the Business, as applicable that would have or cause a Material Adverse Effect, other than (A) amendments required by Requirements of Law or (B), any such action in the Ordinary Course, or (v) except in the Ordinary Course, sell, lease or grant any option to sell or lease, give a security interest in or otherwise create any Lien (other than a Permitted Lien) on any of the assets of the Company;

          (g) not make any individual commitment or agreement for capital expenditures in excess of $25,000, or $100,000 in the aggregate, except as set forth on the capital budget set forth on Section 6.2(g) of the Company Disclosure Letter;

          (h) not pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $10,000, the payment, discharge or satisfaction, in the Ordinary Course or in accordance with their terms, of liabilities reflected or reserved against in the Company Financial Information (or the notes thereto), or not required by GAAP to be so reflected or reserved, or incurred since the date of the Company Financial Information in the Ordinary Course, or waive any material benefits of, or agree to modify any material confidentiality, standstill, non-solicitation or similar agreement to which the Company is a party; provided, however, that notwithstanding the foregoing, the parties hereby acknowledge that the Management Closing Bonus Amount shall be paid to the Senior Executive Officer in accordance with Section 6.5(c);

          (i) not incur, assume or guarantee (including by way of any agreement to “keep well” or of any similar arrangement) or cancel or waive any claims under any Indebtedness or amend or modify the terms relating to any such Indebtedness, except for any such incurrence, assumption or guarantee of Indebtedness or amendment of the terms of such Indebtedness in the Ordinary Course;

          (j) not create, issue or sell, or grant any option or other right to subscribe, purchase or redeem, any of its securities;

          (k) not change any material financial accounting principle, method or practice (including any principles, methods or practices relating to the estimation of reserves or other liabilities), other than changes required by GAAP or Requirements of Law or required to be implemented during such period;

          (l) not enter into any binding agreement or arrangement with the IRS (or any similar Tax authority), with respect to the Company, which relates to any period or periods after the Effective Time, nor change any material Tax accounting method or practice;

          (m) use commercially reasonable efforts to comply in all material respects with all applicable material Requirements of Law affecting or relating to the Company; and

          (n) not enter into any amendment or other modification to the Revenue Sharing Agreement or the Subleasing Arrangements.

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          (o) not enter into any agreement (conditional or otherwise) to do any of the foregoing.

     6.3 Covenant Not To Compete.

          (a) Non-Compete. UCFC acknowledges and agrees that the Business is conducted within the geographic area described in Section 6.3 of the Company Disclosure Letter (the “Territory”) and that the Company’s reputation and goodwill are an integral part of its business success throughout the Territory. If UCFC deprives Parent of the Company’s goodwill (except any goodwill associated with the Company’s current name) or in any manner utilize its reputation and goodwill in competition with Parent, Parent will be deprived of the benefits it has paid for pursuant to this Agreement. Accordingly, as an inducement for Parent to enter into this Agreement, UCFC agrees that for a period ending on the second anniversary of the Closing Date (the “Non-Competition Period”), neither UCFC nor any Controlled Affiliate of UCFC shall, without Parent’s prior written consent, directly or indirectly, own a controlling interest in, or manage or operate, any company, organization or business in the Territory, that is engaged in the trust or fiduciary business, which such business shall include the Business of the Company. Further, during the Non-Competition Period, neither UCFC nor any of its Controlled Affiliates shall directly solicit any employee or agent of the Company to work for UCFC or its Controlled Affiliates in the trust or fiduciary services industry; provided, however, that the foregoing limitation on solicitation shall not apply (i) if such employee or agent’s relationship with the Company has terminated for any reason, or (ii) if such employee or agent is hired as a result of general solicitation for employment not specifically targeted to employees of the Company engaged in the Business. During the Non-Competition Period, neither UCFC nor any of its Controlled Affiliates shall directly or indirectly solicit any Company Customer as of the Effective Date for the purpose of offering trust or fiduciary services which are offered by the Company as of the Effective Date. Notwithstanding the foregoing, (i) UCFC shall not be prohibited from acquiring any thrift or bank that owns and operates a trust company and in the event UCFC is acquired by any third party, such third party shall not be subject to the restrictions set forth in this Section 6.3(a), and (ii) UCFC’s savings bank subsidiary shall not be prohibited from engaging in any trust or fiduciary activities or offering any trust or fiduciary services that are otherwise permitted in accordance with applicable Requirements of Law, or otherwise from contracting with third parties to provide or offer its customers with trust fiduciary services or brokerage, investment advisory, insurance or other related services at its branch locations in accordance with applicable Requirements of Law. In the event the agreement in this Section 6.3 shall be determined by a court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over the maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

          (b) Remedies. UCFC acknowledges that a breach of the covenants contained in this Section 6.3 will cause irreparable damage to Parent, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach will be

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inadequate. Accordingly, UCFC agrees that if it breaches the covenants contained in this Section 6.3, in addition to any other remedy that may be available at law or in equity, Parent shall be entitled to specific performance and injunctive relief, without posting bond or other security.

     6.4 Taxes.

          (a) All transfer, documentary, sales, use, stamp, registration and other such Taxes and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be split equally and paid by UCFC and Parent, and UCFC and Parent shall cooperate in the preparation and filing of any Tax Returns and other documentation with respect to all such Taxes, fees and charges, and if required by Requirements of Law, Parent will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

          (b) Other than the consolidated federal Income Tax Return of UCFC of which the Company is a member, the Company shall prepare, or cause to be prepared, and file, or cause to be filed, all Tax Returns required to be filed by the Company for any taxable year or period ending on or before the Closing Date that are due after the Closing Date. The Company shall be responsible for payment of any Taxes shown due on such Tax Returns. Such Tax Returns shall be prepared in a manner consistent with the prior practices of the Company, except as required by any applicable Requirement of Law. Parent shall permit UCFC or its representatives to review and comment on each such Tax Return described in this paragraph prior to filing, and Parent shall make all changes reasonably requested by UCFC in good faith (unless Parent is advised in writing by its independent outside accountants or attorneys that such changes are contrary to applicable law). In the event that Parent and UCFC are unable to agree on the reporting of any item on such Tax Returns, Parent and UCFC shall mutually choose an independent public accounting firm to resolve such dispute, and the decision of such firm with respect to such item shall be final.

          (c) Parent shall prepare, or cause to be prepared, and file, or cause to be filed, all non-federal Tax Returns pertaining to the Company for any taxable year or period commencing prior to the Closing Date and ending after the Closing Date (a “Straddle Period”). The Company shall be responsible for payment of any Taxes shown as due on such Tax Returns.

          (d) Parent and UCFC agree to furnish or cause to be furnished to each other, upon request, as promptly as practical, such information (including reasonable access to books and records, Tax Returns and Tax filings) and assistance as is reasonably necessary for the filing of any Tax Return, the conduct of any Tax audit, and for the prosecution or defense of any claim, suit or proceeding relating to any Tax matter. Parent and UCFC shall cooperate with each other in the conduct of any Tax audit, accounting audit or other Tax proceeding and each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Section 6.4. Any Tax audit or other Tax proceeding shall be deemed to be a Third Person Claim subject to the procedures set forth in Article 9 of this Agreement.

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          (e) Section 338 Election.

     (i) At or after the Closing, at the option of Parent, in its sole discretion, UCFC and Parent shall make the election provided for by Section 338(h)(10) of the Code and any corresponding elections under state or local tax law (the “Election”) with respect to the purchase and sale of the Stock; provided, Parent pays to UCFC the Tax Neutrality Payment (as provided and defined in paragraph (ii) below). UCFC and Parent shall cooperate and provide to the other all necessary information to evaluate making the Election and to permit the Election to be made. UCFC and Parent shall take all actions that are reasonable, necessary, customary and required by Requirement of Law to effectuate and preserve the Election and mutually determine (X) which forms, returns, elections, schedules, attachments and other documents are to be prepared and/or filed (and the content thereof) to effectuate the Election in accordance with Requirement of Law, (Y) the allocation of the Purchase Price among the assets of the Company in accordance with Requirement of Law relating to the Election, and (Z) any other matters and decisions that are necessary and/or customary to effectuate the Election in accordance with Requirement of Law.

     (ii) The “Tax Neutrality Payment” shall equal an amount necessary to make the after-tax net proceeds of UCFC and BWC from the purchase and sale of the Shares with the Election in effect the same as the after-tax net proceeds of UCFC and BWC from the purchase and sale of the Shares would be without the Election in effect; provided that, if the forgoing calculation would result in a negative number, then the Tax Neutrality Payment shall be equal to zero ($0.00). As soon as practicable after the Closing Date, but in no case later than the 8 months after the Closing Date, UCFC shall provide Parent with a calculation of the Tax Neutrality Payment and all information required to calculate the Tax Neutrality Payment, which includes final inside/outside tax basis calculations for UCFC and BWC and the consolidated effective tax rates based on state tax apportionment data as of the Closing Date. Within 30 days after Parent is provided such information, Parent shall notify UCFC in writing if it disagrees with the amount of the Tax Neutrality Payment as calculated by UCFC. If Parent does not timely notify UCFC that it disagrees with UCFC’s calculation of the Tax Neutrality Payment, the Tax Neutrality Payment calculated by UCFC shall be the final Tax Neutrality Payment and binding on the parties. In the event that Parent and UCFC are unable to resolve their differences within 10 days, Parent and UCFC shall mutually choose an independent public accounting firm to resolve such dispute, and the decision of such firm with respect to such item shall be final. UCFC, on one hand, and Parent, on the other hand, shall each pay one-half of the cost of the independent public accounting firm for calculating the Tax Neutrality Payment. The final Tax Neutrality Payment shall be paid in accordance with paragraph (iii) of this subsection.

     (iii) To the extent the amount of the Tax Neutrality Payment is a positive amount, Parent shall pay to UCFC an amount equal to the Tax Neutrality Payment within 10 days after the date on which such amount is finally determined. If no Election is made, the Tax Neutrality Payment is deemed to be zero ($0.00).

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          (f) Management Closing Bonus Deduction.

     (i) UCFC, Parent, BWC and the Company agree that UCFC and/or BWC will claim a deduction for federal and state tax purposes (to the extent such deduction is legally allowed to be claimed) of the full amount of the Management Closing Bonus Amount on the tax return that includes the Closing Date (and that the Company will not claim a deduction for such amount for any taxable year beginning subsequent to such Closing Date).

     (ii) In the event that after the Closing Date, Parent, the Company or any related party thereto takes any action that results in the non-deductibility (in whole or in part) of the Management Closing Bonus Amount by UCFC and/or BWC, Parent shall indemnify and hold harmless UCFC and/or BWC, on an after-tax basis, for any Losses attributable to such lost deduction.

     6.5 Employees of the Company.

          (a) Plans to be Withdrawn from or Transferred by the Company. UCFC and/or BWC hereby agrees that it shall take or cause the Company to take all necessary action to cause the withdrawal of the Company, as a participating employer, from all UCFC Benefit Plans, and each Company Benefit Plan with respect to which the Company is a participating employer, but not the sponsor, effective as of or prior to the Closing Date. UCFC and/or BWC further agree to take all necessary action prior to Closing to withdraw from any Company Benefit Plan in which the Company is the plan sponsor and UCFC and/or BWC is a participating employer. All payroll and certain other benefits for Business Employees shall continue to be provided to the Company after the date of this Agreement by Butler Wick & Co. in accordance with the terms of the Transition Services Agreement.

          (b) Reserved.

          (c) Senior Management Agreements. At or prior to the Closing Date, BWC and/or the Company shall cause the change of control agreements and all other agreements and compensation arrangements applicable to the Company and the Business between BWC and/or the Company and the senior management officers identified on Schedule 6.5(c) to be terminated, and no further payments (other than contemplated by this Section 6.5(c)) shall be made thereunder. Such terminations shall be in form and substance reasonably acceptable to Parent and UCFC. At or prior to the Closing Date, BWC and/or the Company shall cause a payment to be made to the executive officer identified on Schedule 6.5(c) (the “Senior Executive Officer”) of an amount identified in Schedule 6.5(c) (such amount, the “Management Closing Bonus Amount”), subject to such other terms and conditions as may be agreed upon between BWC and/or the Company and the Senior Executive Officer; provided, however, that the payment of the Management Closing Bonus Amount to the Senior Executive Officer will be considered to have occurred immediately prior to the Effective Time.

          (d) Severance Payments. Promptly following the execution and delivery of this Agreement, Parent shall establish reasonable severance policy provisions to facilitate the

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transition of the Company’s operations following Closing. In addition, the Company shall cause terminated employees to receive their pro-rata vested portion of existing deferred compensation grants in accordance with the Company’s plan. Notwithstanding the foregoing, in no event shall Parent, UCFC or the Company be required to take any action that would cause deferred compensation to be immediately includible in income or subject to additional taxes or penalties, or to otherwise violate, Section 409A of the Code.

          (e) Retiree Welfare Benefits. Except as required pursuant to any Requirement of Law, Section 6.5(f) hereof and Sections 601 through 608 of ERISA, the Company and Parent shall not have any obligation to provide welfare benefits to any former employees, officers, directors or consultants of the Company or its Affiliates after the Closing Date.

          (f) COBRA. After the Closing Date, the Company shall be responsible for the continuation of health plan coverage, in accordance with the requirements of COBRA and Sections 601 through 608 of ERISA, for any employee of the Company, or qualified beneficiary under a group health plan of the Company, who, prior to the Closing, is receiving or is entitled to receive COBRA benefits or who loses health coverage in connection with the transactions contemplated in this Agreement.

          (g) No Third-Party Beneficiary. No provision of this Agreement, including without limitation this Section 6.5, shall create any third-party beneficiary rights in any Person, including without limitation employees or former employees (including any beneficiary or dependent thereof) of the Company or UCFC, unions or other representatives of such employees or former employees, or trustees, administrators, participants, or beneficiaries of any Plan, and no provision of this Agreement, including this Section 6.5, shall create such third-party beneficiary rights in any such Person in respect of any benefits that may be provided, directly or indirectly, under any Plan, including the currently existing Plan.

     6.6 Books and Records. From and after the Closing, subject to appropriate confidentiality agreements, Parent shall provide UCFC and its representatives with reasonable access, for any reasonable purpose, including but not limited to (a) preparing Tax Returns, or (b) defending any claim in respect of which a notice of claim has been served on UCFC, during normal business hours, to all relevant books and records, including, but not limited to, accounting and Tax records, sales and purchase documents, notes, memoranda, and any other electronic or written data (“Records”). Unless otherwise consented to in writing by UCFC, Parent shall not, for a period of 5 years following the date hereof or such longer period as retention thereof is required by applicable Requirements of Law, destroy, alter or otherwise dispose of (or allow the destruction, alteration or disposal of) any of the Records without first offering to surrender such Records to UCFC.

     6.7 Public Announcements. UCFC, Parent and the Company shall consult with each other before issuing any press release, making any other public statement or scheduling any press conference or conference call with investors or analysts with respect to this Agreement or the transactions contemplated hereby and, except as may be required by any Requirements of Law or any listing agreement with or rule of any national securities

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exchange or association, shall not issue any such press release, make any such other public statement or schedule any such press conference or conference call before such consultation.

     6.8 Filings and Approvals. Immediately following execution of this Agreement the Parties shall proceed expeditiously and in good faith to make all necessary filings with all Governmental Authorities, seek such approvals and take all such other actions as may be reasonably necessary to satisfy the conditions to Closing. Each Party shall consult with the other Party with respect to the obtaining of all material Consents of all Governmental Authorities necessary or advisable to consummate the transactions contemplated by this Agreement to the extent reasonably practicable and shall each use best efforts to obtain as expeditiously as reasonably possible such material Consents of Governmental Authorities, and each Party shall keep the other Party apprised of the status of material matters relating to completion of the transactions contemplated by this Agreement. Each Party shall, upon request, furnish the other Party with all information concerning itself, its subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other Party or any of its subsidiaries to any third party or Governmental Authority; provided, however, in the event that information is required regarding any individual person, such information need not be provided to any other Party. The Company shall use commercially reasonable efforts to obtain all necessary Consents required hereunder.

     6.9 Further Assurances; Cooperation. From and after the Closing, the Parties shall take such acts and execute such documents and instruments as may be reasonably required to make effective the transactions contemplated hereby. On or after the Closing Date, the Parties shall, on request, cooperate with one another by furnishing any additional information, executing and delivering any additional documents and instruments, including Contract assignments, and doing any and all such other things as may be reasonably requested by the Parties or their counsel to consummate or otherwise implement the transactions contemplated by this Agreement.

     6.10 Notices of Certain Events. Each of Parent and the Company shall, to the extent permitted by applicable Requirements of Law, promptly notify the other of:

          (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

          (b) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement;

          (c) any actions, suits, claims, investigations or proceedings commenced or threatened against, relating to or involving or otherwise affecting the Company or Parent and any of its Subsidiaries, as the case may be, that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to any Section of Article 3 or Article 5 of this Agreement (as the case may be) or that relate to the consummation of the transactions contemplated by this Agreement;

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          (d) any material inaccuracy of any representation or warranty contained in this Agreement at any time during the term of this Agreement that could reasonably be expected to cause the conditions to closing set forth in Article 7 and Article 8 hereof not to be satisfied in any material respect; and

          (e) any failure of a Party to materially comply with or materially satisfy any covenant, condition or agreement to be complied with or satisfied by such Party hereunder; provided, however, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the Party receiving that notice.

     6.11 Company Directives. Parent covenants and agrees with UCFC that during the period commencing on the date hereof and continuing until the Closing, none of Parent nor any of its Affiliates shall, directly or indirectly, give any directive to any Business Employee without the consent of UCFC. Parent further agrees that neither it nor any of its Affiliates shall enter into any agreement or arrangement with the Company on or prior to the date hereof without the prior written consent of UCFC.

     6.12 Change of Name; Right to Use Certain Marks.

          (a) Immediately after the Effective Time, Parent shall cause the Company to file an amendment to its articles of incorporation, changing the name of the Company to a new name as selected by Parent (the “New Name”). Parent shall notify UCFC, BWC and the Company of the New Name not less than ten days prior to the Closing Date, and such New Name shall not include or be similar to any trademarks, logos, service marks, brand names or trade, corporate or business names employing the Butler Wick Principal Marks or any part or variation thereof.

          (b) It is expressly agreed that Parent shall not acquire any right, title or interest in the Butler Wick Principal Marks; provided however, that in accordance with the terms of the Transition Services Agreement, the Company has a temporary non-exclusive license to use the Butler Wick Principal Marks, including, without limitation, the name “Butler Wick Trust Company,” subject to the terms of the Transition Services Agreement. To the extent the Butler Wick Principal Marks are used by the Company on any materials constituting their properties and assets, including any stationery, signage, invoices, receipts, forms, packaging, advertising and promotional materials, product, training and service literature and materials, software or like materials at the Closing Date, Parent shall, and shall cause the Company to, remove, strike over or otherwise obliterate all the Butler Wick Principal Marks from all such materials. Parent agrees that neither Parent nor the Company shall make any use of the Butler Wick Principal Marks after the Effective Time.

     6.13 Acquisition Proposals.

          (a) Prior to the Effective Time, except as expressly permitted by Section 6.13(b) below, none of UCFC, BWC or the Company will solicit or initiate any Acquisition

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Proposal, or the making of any Acquisition Proposal or any offer constituting an Acquisition Proposal.

          (b) Notwithstanding Section 6.13(a) above, if at any time prior to the Effective Time, (i) either UCFC, BWC or the Company receives an Acquisition Proposal from a third party that the board of directors of either UCFC, BWC or the Company believes to be bona fide, (ii) such Acquisition Proposal did not occur as a result of a breach of this Section 6.13, and (iii) the board of directors of any of UCFC, BWC or the Company determines in good faith, after consultation with its legal counsel, that such Acquisition Proposal constitutes or could possibly lead to a Superior Proposal, then any of UCFC, BWC or the Company may in response to such Acquisition Proposal (x) furnish information with respect to the Company to the Person who has made such Acquisition Proposal and (y) participate in discussions and negotiations regarding such Acquisition Proposal and otherwise execute or enter into any agreement, understanding, or arrangement with respect to such Acquisition Proposal, subject to Section 10.3(e) below. From and after the date of this Agreement, UCFC, BWC and the Company shall promptly advise Parent orally and in writing upon the receipt of any Acquisition Proposal or any inquiry with respect to, or that could reasonably be expected to lead to, any Acquisition Proposal.

ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT

     The obligation of Parent to proceed with the Closing shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions precedent, any of which may be waived in whole or in part by Parent:

     7.1 Accuracy of Representations and Warranties and Performance of Obligations. All representations and warranties made by the Company, UCFC and BWC pursuant to this Agreement shall be true and correct in all material respects, except for those representations and warranties that are qualified as to materiality which shall be true and correct in all respects, on and as of the Closing Date with the same effect as if such representations and warranties had been made on and as of the Closing Date (other than representations or warranties that address matters only as of a certain date, which shall be true and correct in all material respects as of such certain date), except to the extent of any change expressly permitted by the terms of this Agreement or expressly consented to in writing by Parent. The Company shall have performed or complied in all material respects with all covenants, agreements and conditions contained in this Agreement required to be performed or complied with at or prior to the Closing. Each of the Company, UCFC and BWC shall deliver to Parent at the Closing a certificate certifying that the conditions stated in this Section 7.1 as applicable to such entity have been fulfilled by the Company, UCFC or BWC, as the case may be.

     7.2 Consents and Approvals. All material filings with applicable Governmental Authorities shall have been made and any necessary Consents required from such Governmental Authorities shall have been obtained and shall be in full force and effect, except for such Consents and approvals from Governmental Authorities, the failure of

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which to obtain would not constitute a violation of any Requirement of Law or have or cause a Material Adverse Effect.

     7.3 No Litigation or Contrary Judgment. On the Closing Date, no valid Order, executive order, stay, decree, judgment or injunction shall be in effect which prohibits or prevents the consummation of the transactions contemplated by this Agreement.

     7.4 No Material Adverse Change. There shall not have occurred after the date hereof any event that has had or reasonably would be expected to have a Material Adverse Effect with respect to the Business.

     7.5 Payments Required by Section 6.5(c). The Company and BWC shall have caused the payment Required by Section 6.5(c) to have been made to the Senior Executive Officer as identified on Schedule 6.5(c).

     7.6 Deliveries at Closing. At Closing, the Company, UCFC and BWC, as applicable, shall deliver or cause to be delivered to Parent:

          (a) certificates representing all the Shares, free and clear of all Liens, duly endorsed to Parent (or to any assignee of Parent permitted hereunder, if elected by Parent) or in blank accompanied by duly executed stock powers;

          (b) from Squire, Sanders and Dempsey L.L.P., counsel to the Company, UCFC and BWC, an opinion of such counsel, dated the Closing Date, in form and substance reasonably acceptable to Parent;

          (c) the written resignation of each member of the Board of Directors and to the extent requested by Parent, each officer of the Company set forth on Section 7.6(c) of the Company Disclosure Letter;

          (d) all consents and approvals from Governmental Authorities;

          (e) a certificate of good standing of the Company, dated within five (5) Business Days of the Closing Date, from the Ohio Secretary of State;

          (f) all share transfer books, minute books and other corporate records of the Company;

          (g) a copy, certified by the Secretary of the Company to be true, complete and correct as of the Closing Date, of the articles or certificate of incorporation, code of regulations and resolutions of the shareholders and board of directors of the Company, authorizing and approving the transactions contemplated hereby and the incumbency of certain officers;

          (h) a copy, certified by the Secretary of UCFC to be true, complete and correct as of the Closing Date, of the resolutions of the board of directors of UCFC, authorizing and approving the transactions contemplated hereby;

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          (i) a copy, certified by the Secretary of BWC to be true, complete and correct as of the Closing Date, of the resolutions of the board of directors of BWC, authorizing and approving the transactions contemplated hereby;

          (j) the certificate required to be delivered pursuant to Section 7.1;

          (k) such other customary documents, instruments or certificates as shall be reasonably requested by Parent and as shall be consistent with the terms of this Agreement.

ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF UCFC AND THE
COMPANY

     The obligation of the Company and UCFC to proceed with the Closing shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions precedent, any of which may be waived in whole or in part by UCFC:

     8.1 Accuracy of Representations and Warranties of Parent and Performance of Obligations. All representations and warranties made by Parent in this Agreement shall be true and correct in all material respects, except for those representations and warranties that are qualified as to materiality which shall be true and correct in all respects, on and as of the Closing Date with the same effect as if such representations and warranties had been made on and as of the Closing Date (and if elected by Parent, as if made on and as of the Closing Date by Parent and any assignee of Parent permitted hereunder) (in each case, other than representations or warranties that address matters only as of a certain date, which shall be true and correct in all material respects as of such certain date), except to the extent of any change permitted by the terms of this Agreement or consented to by UCFC. Parent shall have performed or complied in all material respects with all covenants, agreements and conditions contained in this Agreement on its part required to be performed or complied with at or prior to the Closing. Parent shall deliver to UCFC at the Closing a certificate of an officer of Parent certifying that the conditions stated in this Section 8.1 have been fulfilled.

     8.2 Consents and Approvals. All filings with Governmental Authorities shall have been made and any necessary Consents required from such Governmental Authorities shall have been obtained and shall be in full force and effect, except for such Consents and approvals of Governmental Authorities, the failure of which to obtain would not constitute a violation of any Requirement of Law or have or cause a Material Adverse Effect.

     8.3 No Litigation or Contrary Judgment. On the Closing Date, no valid Order, executive order, stay decree, judgment or injunction shall be in effect which prohibits or prevents the consummation of the transactions contemplated by this Agreement.

     8.4 Deliveries of Parent at Closing. At Closing Parent shall deliver, or cause to be delivered, to UCFC (on behalf of itself and BWC):

          (a) the Purchase Price as described in Section 2.2;

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          (b) the certificate required to be delivered pursuant to Section 8.1;

          (c) a certificate of good standing of Parent (and if elected by Parent, a certificate of good standing of any assignee of Parent permitted hereunder), dated within five (5) Business Days of the Closing Date, from the Ohio Secretary of State;

          (d) an opinion of Niehaus & Associates LTD, counsel to Parent, in form and substance reasonably acceptable to UCFC;

          (e) such other customary documents, instruments or certificates as shall be reasonably requested by UCFC and as shall be consistent with the terms of this Agreement.

     8.5 Certificate. Parent, and if elected by Parent, any assignee of Parent permitted hereunder, shall deliver to UCFC and the Company a certificate executed by its respective Secretary certifying as of the Closing Date (x) a true and correct copy of its currently effective articles or certificate of incorporation, as applicable, and bylaws or code of regulations, as applicable, (y) a true and correct copy of the resolutions of its board of directors authorizing the execution, delivery and performance by it of this Agreement and the Related Agreements to which it is a party and the consummation of the transactions contemplated hereunder and thereunder, and (z) as to incumbency matters.

ARTICLE 9
INDEMNIFICATION

     9.1 Survival of Representations and Warranties. All of the representations and warranties made by any Party in this Agreement, the Disclosure Letter or any certificates or documents delivered hereunder, shall survive the Closing Date and consummation of the transactions contemplated hereby and will continue for a period of eighteen (18) months following the Closing Date, at which time they shall expire; provided, however, that such expiration shall have no effect on any notice of claim made prior to such expiration with respect to any breach of such representation or warranty occurring prior to such expiration and set out in such notice of claim; and provided further, that the representations and warranties of UCFC and the Company contained in (i) Section 3.17 (Company Capitalization) and Section 4.1 (Ownership) shall survive the Closing Date indefinitely and not terminate, and (ii) Section 3.16 (Taxes) shall survive the Closing Date until the expiration of the applicable statute of limitation, including any suspensions, tollings or extensions thereof; provided, however, that any such expiration shall have no effect on any notice of claim made prior to such expiration with respect to any breach of such representation or warranty occurring prior to such expiration and set out in such notice of claim. No Parent Indemnified Party shall be entitled to indemnification for breach of any such surviving representation and warranty unless a notice of claim of such breach has been given to the Indemnifying Party within the period of survival of such representation and warranty as set forth herein.

     9.2 Indemnification by UCFC and BWC. Subject to the terms and conditions of this Article 9, including the limitations with respect to amounts and sources of funds set

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forth in Section 9.6 below, among others, from and after Closing, UCFC and BWC shall jointly and severally, indemnify and hold harmless Parent and its Affiliates (including, from and after the Closing, the Company and its Affiliates) and the shareholders, directors, officers, partners, employees, successors, assigns, representatives and agents of each of them in their capacities as such (collectively, the “Parent Indemnified Persons” and each a “Parent Indemnified Person”), from and against, and UCFC and BWC shall not have, and shall have deemed to waive, any claim for contribution or indemnity against any such Parent Indemnified Person with respect to, any and all claims, losses, monetary damages, liabilities, fines, fees, penalties, expenses or costs (collectively, “Losses”), plus reasonable attorneys’ fees and expenses, including court costs and expert witness fees and costs, incurred in connection with Losses, but excluding consequential, punitive, indirect, exemplary damages or any damages measured by lost profits or a multiple of earnings; provided however, that the foregoing exclusion shall not apply to amounts paid to unaffiliated third parties in respect of an indemnifiable claim hereunder (in all, “Indemnified Losses”), incurred or to be incurred by any of them resulting from or arising out of the breach of any covenant, representation, warranty, or other obligation of the Company or UCFC made or incurred under or pursuant to this Agreement or the Related Agreements delivered pursuant hereto or in connection with the Closing.

     9.3 Indemnification by Parent. Subject to the terms and conditions of this Article 9, including the limitations set forth in Section 9.6 below, Parent shall indemnify and hold harmless UCFC and BWC and their respective heirs, legal representatives, assigns and agents (the “Seller Indemnified Persons”) from and against any and all Indemnified Losses incurred or to be incurred by any of them, resulting from or arising out of the breach of any covenant, representation, warranty, or other obligation of Parent made or incurred under this Agreement or the Related Agreements delivered pursuant hereto or in connection with the Closing.

     9.4 Notice of Claim. In the event that Parent seeks indemnification on behalf of a Parent Indemnified Person, or UCFC seeks indemnification on behalf of a Seller Indemnified Person, such Party seeking indemnification (the “Indemnified Party”) shall give reasonably prompt written notice to the indemnifying Party (the “Indemnifying Party”) specifying the facts constituting the basis for such claim and the amount, to the extent known, of the claim asserted; provided, however, that the right of a Person to be indemnified hereunder shall not be adversely affected by a failure to give such notice unless, and then only to the extent that, an Indemnifying Party is actually irrevocably and materially prejudiced thereby. Subject to the terms hereof, the Indemnifying Party shall pay the amount of any valid claim not more than 20 days after the Indemnified Party provides notice to the Indemnifying Party of such amount.

     9.5 Right to Contest Claims of Third Persons. If an Indemnified Party is entitled to indemnification hereunder (notwithstanding the limitations contained in Section 9.6 hereof) because of a claim asserted by any claimant (other than an indemnified person hereunder) (“Third Person”), the Indemnified Party shall give the Indemnifying Party prompt notice thereof after such assertion is actually known to the Indemnified Party; provided, however, that the right of a Person to be indemnified hereunder in respect of claims made by a Third Person shall not be adversely affected by a failure to give such notice

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unless, and then only to the extent that, an Indemnifying Party is actually irrevocably and materially prejudiced thereby. The Indemnifying Party shall have the right, upon written notice to the Indemnified Party, and using counsel reasonably satisfactory to the Indemnified Party, to control any such matter including the right to investigate, contest or settle the claim alleged by such Third Person (a “Third Person Claim”), provided that the Indemnifying Party has unconditionally acknowledged to the Indemnified Party in writing of its obligation, subject to any and all limitations contained in this Article 9, to indemnify the Indemnified Person or Indemnified Persons with respect to such Third Person Claim and to discharge (and does in fact so discharge) any cost or expense arising out of such investigation, contest or settlement. The Indemnified Party may thereafter participate in (but not control) the defense of any such Third Person Claim with its own counsel at its own expense. Unless and until the Indemnifying Party so acknowledges its obligation to indemnify, the Indemnified Party shall have the right, at its option, to assume and control defense of the matter and to look to the Indemnifying Party for the full amount of the reasonable costs of defense. If the Indemnifying Party thereafter seeks to question the manner in which the Indemnified Party defended such Third Person Claim or the amount or nature of any such settlement, the Indemnifying Party shall have the burden to prove by clear and convincing evidence that the conduct of the Indemnified Party in the defense and/or settlement of such Third Person Claim constituted gross negligence or willful misconduct. The Parties shall make available to each other all relevant information in their possession relating to any such Third Person Claim and shall cooperate in the defense thereof.

     9.6 Limitations on Indemnity.

          (a) Notwithstanding anything contained herein to the contrary, UCFC and BWC shall have no obligation to indemnify the Parent Indemnified Persons in respect of Indemnified Losses until all Indemnified Losses exceed $75,000 (after application of any reserves previously established and included in the Reference Balance Sheet, all in accordance with GAAP) in the aggregate and then only for those Indemnified Losses in excess of $75,000 (except for Indemnified Losses resulting from or arising under Section 3.17 (Company Capitalization) and Section 4.1 (Ownership), as to which the foregoing $75,000 limitation shall not apply). Additionally, notwithstanding anything contained herein to the contrary, in no event shall UCFC and BWC be liable to or be required to indemnify any of the Parent Indemnified Parties for any Indemnifiable Loss or Losses of any of the Parent Indemnified Parties under Sections 9.2 hereof that arise after the eighteen (18) month anniversary of the Closing Date at which time the obligations contained in such sections shall terminate; provided, however, that any such expiration shall have no effect on any notice of any specific claim made by any Parent Indemnified Persons occurring prior to any such expiration set forth in such notice of claim.

          (b) In no event shall the Sellers have any obligation to indemnify the Parent Indemnified Persons in respect of Indemnified Losses (over and above the $75,000 limitation in Section 9.6(a)) in excess of $1,500,000 (except for Indemnified Losses resulting from or arising under Section 3.17 (Company Capitalization) and Section 4.1 (Ownership), as to which the foregoing $1,500,000 limitation shall not apply).

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          (c) Notwithstanding anything herein to the contrary, no party (whether Parent or UCFC) nor any of such party’s indemnified Persons (whether Parent Indemnified Persons or Seller Indemnified Persons) will have any right to claims for indemnification of Indemnified Losses related to matters as to which such party (whether Parent or UCFC) or any of its representatives or agents had actual knowledge at or prior to the Closing; provided that knowledge that the officers, employees or agents of the Company possessed prior to Closing shall not be imputed to the Parent simply by reason of the purchase and sale transaction contemplated hereby. Except for the representations and warranties contained in this Agreement, as the same may be qualified by the applicable disclosure letters, of the Company, UCFC and BWC and Parent, and any amendments or supplements thereto, no party makes any other express or implied representation or warranty to the others, and the parties acknowledge that, in entering into this Agreement, they have not relied on any representations or warranties of any party other than the representations and warranties set forth in this Agreement, as the same may be qualified by the applicable disclosure letters, and any amendments or supplements thereto.

     9.7 Indemnified Losses Covered by Insurance. To avoid any duplicative recovery by the any Indemnified Parties, any such Indemnified Parties shall not be entitled to indemnification to the extent of any available insurance proceeds for any such Loss or Losses (whether under the Company’s or Parent’s insurance policies), less the reasonable expenses incurred to obtain such proceeds. Parent and UCFC agree that any Indemnifying Party may pursue coverage of any Indemnifiable Loss for the benefit of an Indemnified Party under all available insurance policies, including control of any required litigation against an insurer. Any such Indemnified Party shall use reasonable best efforts (but shall not be required to institute legal proceedings) to pursue insurance claims that may reduce such Indemnified Losses.

     9.8. Characterization of Indemnity Payments. Any indemnification payments made pursuant to this Agreement shall be considered, to the extent permissible under Requirements of Law, as adjustments to the Purchase Price for all Tax purposes.

     9.9. Exclusive Remedy. The Parties acknowledge and agree that the foregoing indemnification provisions in this Article 9 shall be the exclusive remedy of the Parties for damages arising out of, resulting from or incurred in connection with any claims related to this Agreement or arising out of the transactions contemplated by this Agreement. Notwithstanding the foregoing, the Parties may pursue injunctive relief for breach of any covenant or agreement contained herein and in the event of any acts of fraud, the Parties shall have all remedies available in law or in equity (including for tort) with respect to such fraud.

ARTICLE 10
TERMINATION

     10.1 Methods of Termination. This Agreement may be terminated at any time:

          (a) by mutual consent of Parent and UCFC;

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          (b) by (i) Parent or (ii) UCFC, if the Closing has not occurred on or before April 30, 2009 (the “Termination Date”); provided that if any Party has breached or defaulted with respect to its obligations under this Agreement on or before such date, such Party may not terminate this Agreement pursuant to this Section 10.1(b), and each other Party to this Agreement may at its option enforce its rights against such breaching or defaulting Party and seek any remedies against such Party, in either case as provided hereunder or under applicable Requirements of Law; provided further, however, that if the Closing has not occurred by the Termination Date solely as a result of the breach of Parent of its covenant herein with respect to obtaining approval of any applicable Governmental Authority, Parent may not terminate this Agreement without the consent of UCFC;

          (c) by Parent, prior to the Termination Date, if (i) any of the conditions specified in Article 7 hereof becomes incapable of being satisfied or (ii) if after notice and twenty (20) days opportunity to cure, the Company or UCFC are otherwise in material default under this Agreement or if such material default is incapable of being cured; provided that the right to terminate this Agreement under this Section 10.1(c) shall not be available to Parent if the nonfulfillment of the conditions to Parent’s obligation to close set forth in Article 7 results from the breach by Parent of any of its representations, warranties, covenants or obligations contained herein; or

          (d) by UCFC on or prior to the Termination Date, if (i) any of the conditions specified in Article 8 hereof becomes incapable of being satisfied or (ii) if, after notice and twenty (20) days opportunity to cure, Parent is otherwise in material default under this Agreement or if such material default is incapable of being cured; provided that the right to terminate this Agreement under this Section 10.1(d) shall not be available to UCFC if the nonfulfillment of the conditions to UCFC’s obligation to close set forth in Article 8 results from the breach by UCFC of any of its representations, warranties, covenants or obligations contained herein.

          (e) By UCFC on or prior to the Termination Date in order to enter into a binding definitive agreement relating to a Superior Proposal, but only if such Superior Proposal did not result, directly or indirectly, from a breach by UCFC, BWC or the Company of Section 6.13.

     10.2 Procedure Upon Termination. In the event of termination of this Agreement pursuant to Section 10.1 above, and subject to the proviso contained in Section 10.1(b), this Agreement shall terminate and the transactions contemplated hereunder shall not occur, without further action by any of the parties hereto. If this Agreement is terminated as provided herein:

          (a) each Party shall either destroy or redeliver all documents and other material of any other Party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the Party furnishing the same;

          (b) all information received by any Party hereto with respect to the business of any other Party (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public

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distribution or filed as public information with any governmental authority) shall not at any time be used for the advantage of, or disclosed to third parties by, such Party to the detriment of the Party furnishing such information.

     10.3 Termination Fee. Each of the Parties agree that if this Agreement is terminated by UCFC pursuant to Section 10.1(e), then UCFC shall pay to Parent, within two (2) Business Days of such termination, the Termination Fee in immediately available funds, as directed by Parent in writing; provided however that in no event shall UCFC be required to pay the Termination Fee on more than one occasion.

     10.4 Effect of Termination. In the event of the termination of this Agreement as provided in Section 10.1, this Agreement shall forthwith become void and there shall be no liability of any Party hereto except (a) as set forth in Section 6.1, Section 10.3 and this Section 10.4, and (b) that nothing herein shall relieve any Party hereto from liability for any breach of this Agreement and all rights and remedies arising as a result of such breach shall remain available to any non-breaching Party. The provisions of this Section 10.4 shall survive any termination of this Agreement.

ARTICLE 11
MISCELLANEOUS PROVISIONS

     11.1 Notice. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) by fax, receipt confirmed, (c) on the next Business Day when sent by overnight courier, or (d) on the second succeeding Business Day when sent by registered or certified mail (postage prepaid, return receipt requested), to the respective Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to Parent:

Farmers National Banc Corp.
20 South Broad Street
P.O. box 555
Canfield, Ohio 44406
Telephone: (330) 533-3341
Fax: (330) 533-0451
Attention: Frank L. Paden, President and Chief Executive Officer

With a copy to:

Niehaus & Associates, LTD
7150 Granite Circle, Suite 203
Toledo, Ohio 43617
Telephone: (419) 517-9090
Fax: (419) 517-9091

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Attention: Charles D. Niehaus, Esq.

If to UCFC:

United Community Financial Corp.
275 West Federal Street
Youngstown, Ohio 44503-1203
Telephone: (330) 742-0500
Fax: (330) 742-0532
Attn: General Counsel

With a copy to:

Squire, Sanders & Dempsey L.L.P.
221 East Fourth Street
Suite 2900
Cincinnati, Ohio 45202
Telephone: (513) 361-1200
Fax: (513) 361-1201
Attn: James J. Barresi, Esq.

     11.2 Entire Agreement. This Agreement, the Company Disclosure Letter, the UCFC Disclosure Letter, the Parent Disclosure Letter and the Schedules and Exhibits hereto embody the entire agreement and understanding of the Parties hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements and understandings relative to such subject matter.

     11.3 Amendment and Modification. To the extent permitted by applicable Law, this Agreement shall be amended, modified or supplemented only by a written agreement between Parent and UCFC.

     11.4 Assignment; Binding Agreement. This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the Parties hereto and their successors, and permitted assigns. Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be transferred, delegated, or assigned (by operation of law or otherwise), by the Parties hereto without the prior written consent of the other Parties, except that (i) Parent shall have the right to transfer and assign any or all of its rights and obligations hereunder to any entity which at the time of such transfer and assignment is controlled by Parent or by an Affiliate of Parent, provided that, in the event of any such assignment, Parent shall remain liable in full for the performance of the obligations hereunder of Parent and its assignee; and (ii) UCFC shall have the right to assign its rights to receive payments, but not its obligations, hereunder.

     11.5 Waiver of Compliance; Consents. Any failure of either UCFC, on the one hand, or Parent, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Parent, on the one hand, or UCFC, on the other hand, only by a written instrument signed by the Party granting such waiver, but such waiver or

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failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any Party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 11.5.

     11.6 Expenses. Except as otherwise provided for in Section 10.3, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs or expenses.

     11.7 Counterparts. This Agreement may be executed in multiple counterparts, and on separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any party hereto may execute this Agreement by electronic signature (including facsimile or portable document format (PDF)), and the other parties hereto will be entitled to rely on such signature as conclusive evidence that this Agreement has been duly executed by such party.

     11.8 Severability. Subject to the provisions set forth in Section 6.3(a) regarding judicial modification of the covenant not to compete, if any other provision of this Agreement shall be determined to be contrary to law and unenforceable by any court of law, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

     11.9 Governing Law. This Agreement shall in all respects be construed in accordance with and governed by the laws of the State of Ohio, without reference to its choice of law rules.

     11.10 No Third Party Beneficiaries or Other Rights. Nothing contained herein, including, without limitation, the provisions of Section 6.5 regarding employees of the Company, shall grant to or create in any Person not a Party hereto, or any such Person’s dependents, heirs, successors or assigns, any right to any benefits hereunder, and no such Person shall be entitled to sue any Party to this Agreement with respect thereto. The representations and warranties contained in this Agreement are made for purposes of this Agreement only and shall not be construed to confer any additional rights on the Parties under applicable state and federal securities laws.

     11.11 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY

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ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION 11.11.

     11.12 Company Disclosure Letter. The sections of the Company Disclosure Letter shall be arranged in separate parts corresponding to the numbered and lettered sections, and except as otherwise identified on such disclosure schedules or sections, the disclosure in any numbered or lettered section shall be deemed to relate to and to qualify only the particular representation or warranty set forth in the corresponding numbered or lettered section, and not any other representation or warranty; provided that the inclusion of an item in the Company Disclosure Letter as an exception to a representation or warranty shall not be deemed an admission by the Company that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect..

     11.13 Headings; Interpretation. The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. Each reference in this Agreement to an Article, Section, Schedule or Exhibit, unless otherwise indicated, shall mean an Article or a Section of this Agreement or a Schedule or Exhibit attached to this Agreement, respectively. Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement, (iv) the terms “include,” “includes,” “including,” and derivative or similar words shall be construed to be followed by the phrase “without limitation”, and (v) references herein to “days” are to consecutive calendar days unless Business Days are specified. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under generally accepted accounting principles. The Parties have participated substantially in the negotiation and drafting of this Agreement and agree that no ambiguity herein should be construed against the drafting Party.

[SIGNATURE PAGE FOLLOWS]

10.12-49

     IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written.

FARMERS NATIONAL BANC CORP.
By:	/s/ Frank L. Paden
	Frank L. Paden
	President and Chief Executive Officer
BUTLER WICK TRUST COMPANY
By:	/s/ James H. Sisek
	James H. Sisek
	President & Chief Executive Officer
UNITED COMMUNITY FINANCIAL CORP.
By:	/s/ Douglas M. McKay
	Douglas M. McKay
	Chairman of the Board and Chief Executive Officer
BUTLER WICK CORP.
By:	/s/ Douglas M. McKay
	Douglas M. McKay
	Chairman of the Board

10.12-50

EX-21

EXHIBIT 21

SUBSIDIARIES

	State of
Name	Incorporation
The Home Savings and Loan Company of Youngstown, Ohio		Ohio
Butler Wick Corp.		Ohio

EX. 21-1

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (No. 333-38028, No. 333-86015, and 333-100081) on Form S-8 of our reports dated March 16, 2009 with respect to the consolidated financial statements of United Community Financial Corp. and the effectiveness of internal control over financial reporting, which reports appear in the Annual Report on Form 10-K of United Community Financial Corp. for the year ended December 31, 2008.

/S/ Crowe Horwath LLP

Crowe Horwath LLP

Cleveland, Ohio

March 16, 2009

EX. 23-1

EX-31.1

EXHIBIT 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Douglas M. McKay, certify that:

1) I have reviewed this annual report on Form 10-K of United Community Financial Corp.

2) Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Douglas M. McKay

Douglas M. McKay

Chief Executive Officer

March 16, 2009

EX. 31.1-1

EX-31.2

EXHIBIT 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, James R. Reske, certify that:

1) I have reviewed this annual report on Form 10-K of United Community Financial Corp.

2) Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  James R. Reske

James R. Reske

Chief Financial Officer

March 16, 2009

EX. 31.2-1

EX-32

EXHIBIT 32

UNITED COMMUNITY FINANCIAL CORP.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of United Community Financial Corp. (the “Company”) on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/  Douglas M. McKay	/s/  James R. Reske
Douglas M. McKay Chief Executive Officer	James R. Reske Chief Financial Officer
March 16, 2009	March 16, 2009

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX. 32-1