4.	STOCK COMPENSATION

Stock Options:

On April 26, 2007, shareholders approved the United Community Financial Corp. 2007 Long-Term Incentive Plan (as amended, the 2007 Plan). The purpose of the 2007 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, by facilitating their purchase of an ownership interest in United Community. The 2007 Plan provides for the issuance of up to 2,000,000 shares that are to be used for awards of restricted stock, stock options, performance awards, stock appreciation rights (SARs), or other forms of stock-based incentive awards. There were 5,443 stock options granted in 2014 and there were 12,317 stock options granted in 2013 under the 2007 Plan. The options must be exercised within 10 years from the date of grant.

On July 12, 1999, shareholders approved the United Community Financial Corp. 1999 Long-Term Incentive Plan (as amended, the 1999 Plan). The purpose of the 1999 Plan was the same as the 2007 Plan. The 1999 Plan terminated on May 20, 2009, although the 1999 Plan survives so long as options issued under the 1999 Plan remain outstanding and exercisable.

The 1999 Plan provided for the grant of either incentive or nonqualified stock options. Options were awarded at exercise prices that were not less than the fair market value of the share at the grant date. The maximum number of common shares that could be issued under the 1999 Plan was 3,569,766. Because the 1999 Plan terminated, no additional options may be issued under it. All of the options awarded became exercisable on the date of grant except that options granted in 2009 became exercisable over three years beginning on December 31, 2009. All options expire 10 years from the date of grant.

Expenses related to stock option grants are included with salaries and employee benefits. The Company recognized $6,197 in stock option expenses for the three months ended September 30, 2014. The Company recognized $18,748 in stock option expenses for the nine months ended September 30, 2014. The Company recognized $5,344 in stock option expenses for the three months ended September 30, 2013. The Company recognized $14,814 in stock option expenses for the nine months ended September 30, 2013. The Company expects to recognize additional expense of $5,729 for the remainder of 2014, $17,661 in 2015 and $1,406 in 2016.

A summary of activity in the plans is as follows:

	For the nine months ended September 30, 2014
	Shares		Weighted average exercise price		Aggregate intrinsic value (in thousands)
Outstanding at beginning of year		948,690	$	5.44
Granted		5,443		3.91
Exercised		(85,000)		2.02
Forfeited and expired		(290,909)		12.24
Outstanding at end of period		578,224		2.51	$	1,341
Options exercisable at end of period		557,358		2.47	$	1,321

Information related to the stock option plans for the nine months ended September 30, 2014 follows:

	September 30, 2014
Intrinsic value of options exercised	$	147,410
Cash received from option exercises		173,000
Tax benefit realized from option exercises		10,267
Weighted average fair value of options granted, per share	$	2.07

As of September 30, 2014, the cost of nonvested stockoptions is expected to be recognized over a weighted-average period of 2.0 years.

The fair value of options granted during the third quarter of 2014 was determined using the following weighted-average assumptions as of the grant date:

	July 3, 2014
Risk-free interest rate		1.74	%
Expected term (years)		5
Expected stock volatility		55.96	%
Dividend yield		—	%

Outstanding stock options have a weighted average remaining life of 5.22 years and may be exercised in the range of $1.20 to $5.89.

Restricted Stock Awards:

The 2007 Plan permits the issuance of restricted stock awards to employees and nonemployee directors. Nonvested shares at September 30, 2014 aggregated 333,588, of which 113,801 will vest during 2014, 93,958 will vest in 2015, 60,615 will vest in 2016 and 65,214 will vest in 2017. Expenses related to restricted stock awards are charged to salaries and employee benefits and are recognized over the vesting period of the awards based on the market value of the shares at the grant date. The Company recognized approximately $120,000 in restricted stock award expenses for the three months ended September 30, 2014. The Company recognized approximately $356,000 in restricted stock award expenses for the nine months ended September 30, 2014. The Company recognized approximately $68,000 in restricted stock award expenses for the three months ended September 30, 2013 and approximately $260,000 in restricted stock award expenses for the nine months ended September 30, 2013. The Company expects to recognize additional expenses of approximately $117,000 in 2014, $379,000 in 2015, $299,000 in 2016 and $86,000 in 2017.

A summary of changes in the Company’s nonvested restricted shares for the first nine months of 2014 is as follows:

	Shares			Weighted average grant date fair value
Nonvested shares at January 1, 2014		192,937		$	3.49
Granted		248,213			3.86
Vested		(52,951	)		3.55
Forfeited		(54,611	)		3.55
Nonvested shares at September 30, 2014		333,588		$	3.74