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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

_X_ QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004

OR

___ 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: 0-28080

UNITED FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)

P.O. Box 2779, 120 First Avenue North, Great Falls, Montana 59403
(Address of Principal Executive Offices) (Zip Code)

(406) 727-6106
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 [X]          No [   ]

Indicate by check mark whether the Registrant is an accelerated filer
(as defined by Rule 12b-2 of the Securities Exchange Act of 1934).

Yes [   ]          No [X]

Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date:

Common Stock, no par value; 2,436,249 shares outstanding as of July 30, 2004

UNITED FINANCIAL CORP.
TABLE OF CONTENTS

Page i

PART I – FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS.

UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share and per share data)
(Unaudited)

See Notes to Consolidated Condensed Financial Statements

Page 1

UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

See Notes to Consolidated Condensed Financial Statements

Page 2

UNITED FINANCIAL CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

See Notes to Consolidated Condensed Financial Statements

Page 3

UNITED FINANCIAL CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1.      GENERAL

        United Financial Corp. (“United”) is a bank holding company headquartered in Great Falls, Montana, with operations in 15 locations in 13 Montana communities. United was organized as a Minnesota corporation in 1996. United’s banking business in Montana is conducted through its wholly owned subsidiary, Heritage Bank, a Montana corporation established in 1923.

        Heritage Bank is a state-chartered commercial bank with locations in Billings, Bozeman, Chester, Fort Benton, Geraldine, Glendive, Great Falls (three locations), Hamilton, Havre, Kalispell, Missoula, Libby and Shelby, Montana. Heritage Bank is engaged in the community banking business of attracting deposits from the general public through its branches and using those deposits, together with other available funds, to originate commercial (including lease financing), commercial real estate, residential, agricultural and consumer loans primarily in its market areas in Montana. Heritage Bank’s banking business is concentrated in the Great Falls area through its two full service branches and one separate drive up location. Based on total assets, 58% of United’s assets are located at Heritage Bank’s Great Falls locations. Heritage Bank also invests in mortgage-backed securities, U.S. Treasury obligations, other U.S. Government agency obligations and other interest-earning assets.

        Heritage Bank’s financial condition and results of operations, and therefore the financial condition and results of operations of United, are dependent primarily on net interest income and fee income. Heritage Bank’s financial condition and results of operations are also significantly influenced by local and national economic conditions, changes in market interest rates, governmental policies, tax laws and the actions of various regulatory agencies.

        At December 31, 2002, United owned 65.32% of the outstanding stock of Valley Bancorp, Inc. (“Valley”), a bank holding company for an Arizona state-chartered commercial bank, with locations in Phoenix and Scottsdale. United completed the sale of Valley to Marquette Financial Companies on July 31, 2003. All previously issued consolidated financial statements have been restated to disclose the operations of Valley as discontinued operations.

        Heritage Bank also holds a 14% ownership interest in Bankers’ Resource Center, a computer data center, located in Helena, Montana.

        In December 2003, Heritage Bank incorporated a new wholly-owned subsidiary, Heritage Northwest, Inc. which will operate a mortgage banking company in Bellingham, Washington. Operations began in the spring of 2004.

        United’s principal offices are located at 120 First Avenue North, Great Falls, Montana 59401, and its telephone number is (406) 727-6106.

        United makes available all periodic and current reports, free of charge, on its website as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). United’s website address is www.ufcmontana.com. The contents of our website are not incorporated into this report or into our other filings with the SEC.

2.     BASIS OF PRESENTATION

        United’s consolidated financial statements, included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition, results of operations, and cash flows for the periods disclosed. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results anticipated for the year ending December 31, 2004. For additional information, refer to the consolidated audited financial statements and footnotes thereto included in United’s Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2003.

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3. COMPREHENSIVE INCOME

        United’s only significant element of comprehensive income is unrealized gains and losses on securities available-for-sale.

(In thousands)
(Unaudited)

4. CASH EQUIVALENTS

        For purposes of the consolidated condensed statements of cash flows, United considers all cash, daily interest and non-interest bearing demand deposits with banks with original maturities of six months or less to be cash equivalents.

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5. COMPUTATION OF EARNINGS PER SHARE

        Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income by the weighted average number of common shares used to compute basic EPS plus the incremental amount of potential common stock determined by the treasury stock method. Potential common stock includes the incremental shares under stock option plans.

The following table sets forth the computation of basic and diluted earnings per share.

(In thousands)
(Unaudited)

6. RELATED PARTIES

        Central Financial Services, Inc. (“CFS”) provides various management services to United, including certain accounting and tax services, investment consulting, personnel consulting, asset-liability management and regulatory consulting. CFS is owned by United’s former Chairman of the Board of Directors and its current largest shareholder and has been providing similar services to various banks and financial services organizations since December of 1988. CFS fees billed to United were approximately $ .1 million and $ .2 million for each of the three and six month periods ended June 30, 2004 and 2003, respectively. The fees are billed by CFS on an hourly basis for work performed by United’s current Chairman and CEO, its former Chairman, and four other employees. Neither the former Chairman nor the current Chairman and CEO of United receive direct compensation from United for their services. Each is compensated for services as a director through director’s fees of $350 per month, and for services as an officer of United through CFS. Through CFS, the former Chairman and current Chairman and CEO earn annual salaries of $139,000 and $145,000, respectively. United’s portion of those salaries was approximately 54%, based upon CFS billings during those periods.

        Banker’s Resource Center (“BRC”) provides data processing services for Heritage Bank. The charges for BRC’s services were $ .2 million and $ .4 million for each of the three and six months ended June 30, 2004 and 2003, respectively.

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7. SUBSEQUENT EVENT-DIVIDENDS DECLARED

        On July 27, 2004, the Board of Directors of United declared a quarterly cash dividend of $.27 per share, payable September 1, 2004, to shareholders of record on August 18, 2004.

8. STOCK-BASED COMPENSATION

        United has a stock-based employee compensation plan, which is a stock option plan described more fully in footnotes included in United’s Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2003. United accounts for the plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and Related Interpretations.” No stock-based employee compensation cost is reflected in net income, as all options granted under the plan have an exercise price at or above to the market value of the underlying common stock on the date of grant. On May 25, 2004, the Board of Directors approved option grants for 8,000 shares of United stock..

        The following table illustrates the effect on net income and earnings per share if United had applied the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Statement No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

(In thousands, except per share data)
(Unaudited)

9. CRITICAL ACCOUNTING POLICIES

        United has identified its most critical accounting policy to be that related to the allowance for loan losses. United’s allowance for loan losses methodology incorporates a variety of risk considerations in establishing an allowance for loan losses that management believes is appropriate. Risk factors include historical loss experience, delinquency and charge-off trends, collateral values, an analysis of the current loan portfolio, and the level of non-performing and impaired loans. An internal loan risk grading system is also used to evaluate potential losses of individual loans. Other factors include the future economic trends in United’s markets and, in particular, the state of certain industries. Changes in any of the above factors could have a significant affect on the calculation of the allowance for loan losses in any given period. Therefore, a full analysis is performed by management on a quarterly basis to ensure that changes in estimated loan loss levels are adjusted on a timely basis.

        Another critical accounting policy of United is that related to the carrying value of goodwill in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). United adopted a market valuation approach in assessing goodwill impairment and will measure the carrying value similarly at least annually under the new accounting rules. Ongoing impairment analysis of the fair value of the remaining goodwill will involve a substantial amount of judgment, as will establishing and monitoring estimated amounts and lives of other intangible assets. At June 30, 2004 and December 31, 2003, United had $1.4 million of recorded goodwill.

        SFAS No. 123, “Accounting for Stock-Based Compensation,” requires disclosure about stock-based compensation arrangements regardless of the method used to account for them. As permitted by SFAS No. 123, United has decided to apply

Page 7

the accounting provisions of Accounting Principles Board (APB) Opinion No. 25, and therefore discloses the difference between compensation cost included in net income and the related cost measured by the fair value-based method defined by SFAS No. 123, including tax effects, that would have been recognized in the statement of operations if the fair value method had been used. Under APB Opinion No. 25, no compensation cost has been recognized for United’s stock option plan. Had compensation cost for this plan been determined consistent with SFAS No. 123 and recognized over the vesting period, United’s net income and earnings per share would have been reduced to the pro forma amounts as presented in Note 8 above.

        United has also identified its accounting method for securities available-for-sale to be a critical accounting policy. Securities available-for-sale are carried at fair value and unrealized gains and losses (net of related tax effects) are excluded from earnings and reported as a separate component of stockholders’ equity. While fair values are determined per market quotes from independent brokers and not subject to management estimation, the carrying value of the securities is subject to market variations.

10.  DECONSOLIDATION OF SUBSIDIARY TRUST

        United previously issued $3.0 million of trust preferred securities. Pursuant to FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities,” issued in December 2003, United deconsolidated its trust preferred entities during the first quarter of 2004 and restated the December 31, 2003 balance sheet. As a result, the 2004 and 2003 balance sheets include $3.1 million of subordinated debt, which was previously included on United’s balance sheet as $3.0 million in trust preferred securities, after a consolidation elimination of $.1 million. The overall effect on United’s financial position and operating results of the deconsolidation was not material.

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS.

1.  FORWARD LOOKING STATEMENTS

        This Quarterly Report on Form 10-Q contains forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including the following factors, in addition to those contained in United’s other reports on file with the SEC: (i) general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for loan losses, or a reduced demand for United’s products and services; (ii) changes in the domestic interest rate environment could reduce net interest income and could increase loan losses; (iii) changes in the extensive laws, regulations and policies governing financial services companies could alter United’s business environment or affect operations; (iv) the potential need to adapt to industry changes in information technology systems, on which United is highly dependent, could present operational issues or require significant capital spending; (v) competitive pressures could intensify and affect United’s profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments, or bank regulatory reform; (vi) the impact of weather conditions in the geographic markets and business areas in which United conducts it business; and (vii) capital investments in United’s businesses may not produce expected growth in earnings anticipated at the time of the expenditure. Forward-looking statements speak only as of the date they are made, and United undertakes no obligation to update them in light of new information or future events.

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2.  KEY PERFORMANCE INDICATORS

        The following are considered by executive level management of United to be key performance indicators.

Page 9

3.  MATERIAL CHANGES IN FINANCIAL CONDITION. COMPARISON OF JUNE 30, 2004 TO DECEMBER 31, 2003.

        Total assets increased $29.2 million to $334.1 million at June 30, 2004 from $304.8 million at December 31, 2003. The increase in assets was primarily the result of a net increase in loans receivable and loans held for sale of approximately $29.4 million. Other net decreases totaling $ .2 million are detailed in the table above.

        One of the goals of United’s management in 2004 is to build its loan portfolio at Heritage Bank. At June 30, 2004, loans receivable, net has increased $24.9 million over December 31, 2003. With only five classified loans at Heritage Bank at June 30, 2004, asset quality is exceptional. Overall loan demand has been steady in 2004, especially for commercial real estate and non-real estate loans. Although the volume of residential mortgage loan refinancing has slowed in 2004 as compared to 2003, activity in the residential loan origination market has increased at Heritage Bank during June of 2004, bringing loans held for sale to $8.3 million or an increase of $4.5 million over December 31, 2003 levels. Heritage Bank completed the construction of its new Billings, Montana branch bank building in 2004, adding approximately $.6 million to its net premises and equipment balances. United reported increases of $13.3 million in deposits and $17.9 million in Federal Home Bank advances in 2004 over December 31, 2003 which have funded the loan growth mentioned above.

        Securities available-for-sale — Securities available-for–sale decreased $ .7 million to $42.6 million at June 30, 2004 from $43.3 million at December 31, 2003. The decrease was the result of $9.0 million of purchases, offset by $9.0 million of maturities and calls, sales and principal repayments. The remaining decrease of $. 7 million was the result of a change in the unrealized loss on securities available-for-sale of $. 9 million and realized gains on sales of $ .2 million.

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        A comparison of the amortized cost and estimated fair value of the consolidated available-for-sale investment portfolio at the dates indicated is as follows:

(In thousands)
(Unaudited)

        Loans Receivable and Loans Held for Sale — Net loans receivable increased $24.9 million to $252.1 million at June 30, 2004 from $227.2 million at December 31, 2003. The increase in loans during the first six months of 2004 was primarily in the real estate loan category. First mortgage loans and contracts secured by real estate increased $18.9 million. Commercial real estate loans increased $2.3 million and all other loans increased $3.7 million. Heritage Bank also purchases and participates in commercial and lease financing loans. Heritage Bank had $28.1 million and $32.8 million of participation and purchased loans as of June 30, 2004 and December 31, 2003, respectively.

        During the six months ended June 30, 2004, loans held for sale increased $4.5 million to $8.3 million at June 30, 2004, as loan originations outpaced secondary market sales. Approximately $70.5 million of residential real estate loans were originated for sale and $66.0 million of residential real estate loans were sold to the secondary market during the six month period ending June 30, 2004.

        Allowance for Loan Losses — The loan loss reserve was $3.7 million at June 30, 2004 and December 31, 2003. The loan loss reserve at June 30, 2004 is an amount which management believes is adequate given the relatively low level of non-performing assets and management’s assessment of loan risk. The allowance for loan losses to total loans at June 30, 2004 was 1.46%.

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        Loans receivable, net of unamortized net deferred loan fees, at the dates indicated are summarized as follows:

(In thousands)
(Unaudited)

        A summary of activity in the allowance for loan losses for the dates indicated are as follows:

(In Thousands)

        Non-Performing Assets — When a borrower fails to make a scheduled payment on a loan and does not cure the delinquency within 15 days, United’s policy is to contact the borrower between the 15th and 30th day of delinquency to establish a repayment schedule. If a loan is not current, or a realistic repayment schedule is not being followed by the 90th day of delinquency, United will generally proceed with legal action to foreclose the property after the loan has been contractually delinquent for 90 days. Loans contractually past due for 90 days are classified as non-performing. However, not all loans past due for 90 days automatically result in the non-accrual of interest income. If a 90 day past due loan has adequate collateral, or is FHA insured or VA guaranteed, leading to the conclusion that loss of principal and interest would likely not be realized, then interest income will continue to be accrued.

        Heritage Bank follows regulatory guidelines with respect to placing loans on non-accrual status. When a loan is placed on non-accrual status, all previously accrued and uncollected interest is reversed. At June 30, 2004, Heritage Bank had non-accrual loans totaling $ .4 million and loans totaling $ .1 million past due for 90 days and still accruing interest. At December 31, 2003 by comparison, Heritage Bank’s non-accrual loans totaled $.5 million and loans past due for 90 days and still accruing totaled $.3 million.

        Heritage Bank is required to review, classify and report to the Board of Directors their assets on a regular basis and classify them as “substandard” (the distinct possibility that some loss will be sustained), “doubtful” (high likelihood of loss), or “loss” (uncollectible). Adequate valuation allowances are required to be established for assets classified as substandard or doubtful in accordance with generally accepted accounting principles. If an asset is classified as a loss, the institution must either establish a specific valuation allowance equal to the amount classified as loss or charge off such amount. At June 30, 2004 and December 31, 2003 Heritage Bank had no assets classified as losses. At both June 30, 2004 and December 31, 2003, Heritage Bank had no assets classified as doubtful. At June 30, 2004 and December 31, 2003, Heritage Bank had $ ..4 and $ .6 million of reported substandard assets, respectively. As a percent of total Heritage Bank assets, substandard assets were approximately .12% and .19% at June 30, 2004 and December 31, 2003, respectively. At June 30, 2004 and December 31,

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2003, impaired loans were $ .4 and $ .6 million, respectively. Impaired loans included those loans classified as either substandard or doubtful. As a percentage of total Heritage Bank assets, impaired loans were approximately .12% and .19% at June 30, 2004 and December 31, 2003, respectively.

        Deposits — Deposits increased $13.3 million to $240.8 million at June 30, 2004 from $227.5 million at December 31, 2003. This increase primarily resulted from a combination of competitive rates on all deposit offerings, and Heritage Bank’s commitment to community banking, both of which continue to attract depositors. Specifically, deposits have increased $5.0 million at Heritage Bank’s new Billings branch, which opened during the first quarter of 2004.

(Unaudited)

        Borrowed Funds — FHLB advances increased $17.9 million from $31.0 million at December 31, 2003 to $48.9 million at June 30, 2004. The increase of $17.9 million was a net result of $42.0 million in advances and $24.1 million in repayments. Securities sold under agreements to repurchase increased $ .9 million to $8.8 million at June 30, 2004 from $7.9 million at December 31, 2003.

        Stockholders’ Equity — Stockholders’ equity totaled $29.6 and $32.4 million at June 30, 2004 and December 31, 2003, respectively. Stockholder’s equity activity included $1.9 million of net income for the six months ended June 30, 2004 less cash dividends declared of $3.7 million, and a $ .6 million decrease due to purchases of corporate stock. The special one-time dividend of $1.00 per share payable June 1, 2004 was declared as a result of the increased earnings in 2003 and the current overall financial condition of the company. In addition $ .2 million in stock was issued under employee stock option plans. Finally, the equity adjustment for the change in market values of securities available-for-sale decreased $ .6 million.

4. MATERIAL CHANGES IN RESULTS OF OPERATIONS-COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003.

(In thousands)
(Unaudited)