Profile: United Community Financial Corp (UCFC.O)

United Community Financial Corp. (United Community), incorporated in February 1998, serves as the holding company for its wholly owned subsidiary, The Home Savings and Loan Company (Home Savings or the Bank). Home Savings is a state-chartered savings bank and is a member of the Federal Home Loan Bank of Cincinnati (FHLB). The Bank 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 its 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. 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. On March 31, 2009, the Company completed the sale of Butler Wick Trust Co., a wholly owned subsidiary of Butler Wick Corp. to Farmers National BancCorp.

Lending Activities

The Bank’s principal lending activity is the origination of real estate loans secured by real estate 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, education loans, loans secured by savings accounts, motor vehicles, boats and recreational vehicles and unsecured loans.

Home Savings originates conventional loans secured by first mortgages on one- to four-family residences. At December 31, 2008, its one- to four-family residential real estate loans held for investment totaled approximately $909.6 million, or 40.7% of total loans. The Bank offers fixed-rate mortgage loans and adjustable-rate mortgage loans.

The Bank originates loans secured by multifamily properties that contain more than four units. At December 31, 2008, loans secured by multifamily properties totaled approximately $ 187.7 million, or 8.4% of total loans. 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. The Bank originates loans secured by nonresidential real estate including shopping centers, office buildings, hotels and motels. 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 total loans were nonperforming.

Home Savings also originates a limited number of loans secured by vacant land primarily for the construction of single-family houses. 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.

The Bank originates loans for the construction of one- to four-family residences, multifamily properties and nonresidential real estate projects. At December 31, 2008, Home Savings had approximately $291.2 million, or 13% 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. 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.

The Bank originates various types of consumer loans, including home equity loans, vehicle loans, education loans, recreational vehicle loans, marine loans, overdraft protection loans, loans to individuals secured by demand accounts, deposits and other consumer assets and unsecured loans. At December 31, 2008, Home Savings had approximately $348.8 million, or 15.6% of its total loans, invested in consumer loans. At December 31, 2008, approximately $253.3 million, or 72.6%, of Home Savings’ consumer loan portfolio consisted of home equity loans.

Commercial loans including traditional lines of credit, revolving lines of credit, term loans and acquisition and development loans are offered to businesses. At December 31, 2008, Home Savings had approximately $101.5 million invested in commercial loans.

Investment Activities

Home Savings invests in marketable securities, including interest-bearing deposits in other financial institutions, federal funds, United States Treasury and agency obligations, mortgage-related securities, and certain other specified investments. Home Savings maintains a portfolio of mortgage-backed securities that are issued by Federal National Mortgage Association, Federal Home Loan Mortgage Company and Government National Mortgage Association. Mortgage-related securities classified as available for sale also provide Home Savings with an additional source of liquid funds.

Sources of Funds

Deposits traditionally have been the primary source of the Bank’s 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. Home Savings is offering 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. At December 31, 2008, approximately $594.1 million of Home Savings’ certificates of deposit will mature within one year. Home Savings had $337.6 million in outstanding advances.