UNITED COMMUNITY FINANCIAL CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended September 30, 2002

[ ]		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 0-24399

UNITED COMMUNITY FINANCIAL CORP.
(Exact name of registrant as specified in its charter)


Ohio (State or other jurisdiction of incorporation or organization)		34-1856319 (IRS Employer Identification Number)

275 Federal Plaza West Youngstown, Ohio (Address of principal executive offices)		44503-1203 (Zip Code)

(330) 742-0500
(Registrant’s telephone number, including area code)

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 X No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

35,261,588 common shares as of October 31, 2002

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
	ITEM 4. Controls and Procedures
PART II. OTHER INFORMATION
	Items 1, 2, 3, 4 and 5 — Not applicable
	Item 6 — Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATION
Certification of CEO
Certification of CFO

TABLE OF CONTENTS


			PAGE

Part I. FINANCIAL INFORMATION

	Item 1. Financial Statements

		Consolidated Statements of Financial Condition as of September 30, 2002 (Unaudited) and December 31, 2001		1

		Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited)		2

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001 (Unaudited)		3

		Notes to Consolidated Financial Statements		4 - 9

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			10-15

	Item 3. Quantitative and Qualitative Disclosures about Market Risk			16

	Item 4. Controls and Procedures			16

Part II. OTHER INFORMATION				17

Signatures				18

Certifications				19-20

Exhibits				21-23

UNITED COMMUNITY FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


			September 30,			December 31,
			2002			2001
			(unaudited)

			(Dollars in thousands)
Assets:
Cash and deposits with banks			$	33,434		$	35,588
Federal funds sold and other				24,346			170,296

		Total cash and cash equivalents		57,780			205,884

Marketable securities:
	Trading, at fair value			44,401			8,352
	Available for sale, at fair value			82,437			51,081
	Held to maturity (fair value of $2,670 and $1,695, respectively)			2,596			1,698
Mortgage-related securities:
	Available for sale, at fair value			114,372			67,069
	Held to maturity (fair value of $60,244 and $80,644, respectively)			57,321			78,798
Loans, net (including allowance for loan losses of $14,865 and $11,480, respectively)				1,529,847			1,406,479
Loans held for sale, net				22,124			20,192
Margin accounts				17,360			20,979
Federal Home Loan Bank stock				20,832			18,760
Premises and equipment				19,667			17,481
Accrued interest receivable				10,182			9,575
Real estate owned				1,622			477
Goodwill				33,593			19,664
Identified intangible assets				5,534			6,312
Other assets				9,603			11,979

		Total assets	$	2,029,271		$	1,944,780

Liabilities and Shareholders’ Equity
Liabilities:
Deposits			$	1,485,174		$	1,383,418
Other borrowed funds				252,751			271,631
Advance payments by borrowers for taxes and insurance				3,367			5,760
Accrued interest payable				1,515			2,983
Accrued expenses and other liabilities				16,102			19,108

		Total liabilities		1,758,909			1,682,900

Shareholders’ Equity:
Preferred stock-no par value; 1,000,000 shares authorized and unissued at September 30, 2002				—			—
Common stock-no par value; 499,000,000 shares authorized; 37,804,457 and 37,754,086 shares issued, respectively				137,953			136,903
Retained earnings				169,126			160,915
Accumulated other comprehensive income				1,401			1,402
Unearned stock compensation				(20,616	)		(22,988	)
Treasury stock, at cost; 2,465,742 and 2,086,500 shares, respectively				(17,502	)		(14,352	)

		Total shareholders’ equity		270,362			261,880

		Total liabilities and shareholders’ equity	$	2,029,271		$	1,944,780

See Notes to Consolidated Financial Statements.

UNITED COMMUNITY FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


				For the Three Months Ended						For the Nine Months Ended
				September 30,						September 30,

				2002			2001			2002			2001

				(Dollars in thousands, except per share data)						(Dollars in thousands, except per share data)
Interest Income
	Loans			$	27,745		$	28,242		$	83,661		$	65,714
	Loans held for sale				223			69			474			69
	Mortgage-related securities:
		Available for sale			1,230			1,236			2,974			4,112
		Held to maturity			1,015			1,523			3,384			4,957
	Marketable securities:
		Trading			45			15			106			80
		Available for sale			765			698			2,508			3,053
		Held to maturity			21			8			57			33
	Margin accounts				204			389			638			1,512
	FHLB stock dividend				246			321			696			821
	Other interest-earning assets				276			371			1,135			1,204

			Total interest income		31,770			32,872			95,633			81,555
Interest expense
	Deposits				11,040			13,735			34,749			34,736
	Other borrowed funds				2,112			3,084			7,023			6,008

			Total interest expense		13,152			16,819			41,772			40,744

Net interest income					18,618			16,053			53,861			40,811
Provision for loan losses					750			465			1,978			1,045

Net interest income after provision for loan losses					17,868			15,588			51,883			39,766

Noninterest income
	Brokerage commissions				3,189			3,019			10,248			10,031
	Service fees and other charges				2,209			2,156			6,123			5,923
	Underwriting and investment banking fees				22			127			193			511
	Net gains (losses):
		Mortgage-related securities			—			—			45			140
		Marketable securities			—			—			604			245
		Loans sold			1,309			258			4,758			339
		Trading securities			(490	)		(655	)		(829	)		(850	)
		Other			(89	)		46			(254	)		52
	Other income				124			285			1,515			753

			Total noninterest income		6,274			5,236			22,403			17,144

Noninterest expenses
	Salaries and employee benefits				9,568			8,097			29,238			24,496
	Occupancy				818			702			2,369			1,896
	Equipment and data processing				2,048			1,930			6,033			5,324
	Franchise tax				522			500			1,521			1,514
	Advertising				372			428			1,651			1,416
	Amortization of core deposit intangible				507			915			1,746			915
	Other expenses				2,138			1,946			7,532			5,289

			Total noninterest expenses		15,973			14,518			50,090			40,850

Income before income taxes					8,169			6,306			24,196			16,060
Income taxes					2,964			2,341			8,739			5,954

Net income				$	5,205		$	3,965		$	15,457		$	10,106

Comprehensive income				$	5,293		$	4,575		$	15,368		$	11,465
Earnings per share:
		Basic and diluted		$	0.16		$	0.12		$	0.48		$	0.31

See Notes to Consolidated Financial Statements.

UNITED COMMUNITY FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


					Nine Months Ended September 30,

					2002			2001

					(Dollars in thousands)
Cash Flows from Operating Activities:
		Net income			$	15,457		$	10,106
		Adjustments to reconcile net income to net cash provided by (used in) operating activities:
				Provision for loan loss allowances		1,978			1,045
				Net gains		(5,153	)		(776	)
				Amortization of premiums (accretion of discounts)		1,128			(1,846	)
				Depreciation		2,082			1,664
				ESOP compensation		1,804			1,486
				Amortization of restricted stock compensation		1,618			1,248
				FHLB stock dividends		(696	)		(821	)
				Increase in trading securities		(36,049	)		(193	)
				Decrease in margin accounts		3,619			11,317
				Decrease (increase) in interest receivable		160			(533	)
				Decrease in prepaid and other assets		3,123			1,189
				(Decrease) increase in interest payable		(1,563	)		1,324
				Increase in loans held for sale		(1,932	)		—
				Proceeds from sale of loans held for sale		122,517			—
				(Decrease) increase in other liabilities		(8,398	)		1,269

				Net cash provided by operating activities		99,695			26,479

Cash Flows from Investing Activities:
		Proceeds from principal repayments and maturities of:
				Mortgage-related securities held to maturity		20,620			20,112
				Mortgage-related securities available for sale		28,728			25,754
				Marketable securities held to maturity		100			900
				Marketable securities available for sale		18,000			65,575
		Proceeds from sale of:
				Mortgage-related securities held to maturity		932			1,454
				Mortgage-related securities available for sale		—			15,839
				Marketable securities available for sale		7,551			6,438
				Loans		112,620			31,335
				Real estate owned		972			589
				Fixed assets		17			—
		Purchases of:
				Marketable securities available for sale		(54,523	)		(14,553	)
				Marketable securities held to maturity		(999	)		(585	)
				Mortgage-related securities available for sale		(75,816	)		(27,555	)
		Net cash paid for acquisition				(13,729	)		(69,844	)
		Net principal disbursed on loans				(219,363	)		(265,676	)
		Loans purchased				(26,335	)		(2,576	)
		Purchases of premises and equipment				(2,636	)		(1,613	)

				Net cash used in investing activities		(203,861	)		(214,406	)

Cash Flows from Financing Activities:
				Net increase in NOW, savings and money market accounts		30,962			50,392
				Net (decrease) increase in certificates of deposit		(41,303	)		75,788
				Net decrease in advance payments by borrowers for taxes and insurance		(2,627	)		(1,792	)
				Proceeds from FHLB advances and other long term debt		23,239			193,000
				Repayment of FHLB advances and other long term debt		(70,017	)		(8,000	)
				Net change in other borrowed funds		26,205			(74,175	)
				Dividends paid		(7,241	)		(7,383	)
				Proceeds from the exercise of stock options		107			—
				Purchase of treasury stock		(3,263	)		(10,135	)

				Net cash (used in) provided by financing activities		(43,938	)		217,695

(Decrease) increase in cash and cash equivalents						(148,104	)		29,768
Cash and cash equivalents, beginning of period						205,884			45,972

Cash and cash equivalents, end of period					$	57,780		$	75,740

Supplemental disclosures of cash flow information:
	Cash paid during the period for:
			Interest on deposits and borrowings		$	43,240		$	38,636
			Income taxes			7,053			5,530
Supplemental schedule of noncash activities:
		Transfers from loans to loans held for sale				—			120,981
		Transfers from loans to real estate owned				2,035			534

See Notes to Consolidated Financial Statements.

UNITED COMMUNITY FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

United Community Financial Corp. (United Community) was incorporated under Ohio law in February 1998 by The Home Savings & Loan Company of Youngstown, Ohio (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. Home Savings has 33 full service offices and five loan production offices throughout northern Ohio and western Pennsylvania. Butler Wick Corp. (Butler Wick) became a wholly owned subsidiary of United Community on August 12, 1999. Butler Wick is the parent company for three wholly owned subsidiaries: Butler Wick & Co., Inc., Butler Wick Asset Management Company and Butler Wick Trust Company. Through these subsidiaries, Butler Wick’s business includes investment brokerage services, which it has conducted for over 70 years, and a network of integrated financial services, including asset management, trust and estate services, public finance and insurance. Butler Wick and its subsidiaries have ten full service offices and two trust offices throughout northeastern Ohio and western Pennsylvania.

The accompanying consolidated financial statements of United Community have been prepared in accordance with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for fair statement of results for the interim periods.

The results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of the results to be expected for the year ending December 31, 2002. The consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2001, contained in United Community’s Form 10-K for the year ended December 31, 2001.

2. SALE OF MORTGAGE-RELATED SECURITIES

During the nine months ended September 30, 2002, Home Savings sold approximately $932,000 of mortgage-related securities held to maturity with outstanding balances less than 15% of the principal outstanding at acquisition. A gain of approximately $45,000 was recorded on the sale. During the nine months ended September 30, 2001, Home Savings sold approximately $15.8 million of mortgage-related securities available for sale. A gain of approximately $79,000 was recorded on the sale. During the nine months ended September 30, 2001, Home Savings sold approximately $1.5 million of mortgage-related securities held to maturity with outstanding balances of less than 15% of the principal outstanding at acquisition. A gain of approximately $61,000 was recorded on the sale.

3. MORTGAGE BANKING ACTIVITIES

Loans serviced for others, which are not reported as assets, totaled $332.4 million at September 30, 2002.

Activity for capitalized mortgage servicing rights in 2002 was as follows:


		(In thousands)
Balance, beginning of year		$	1,605
	Additions		2,056
	Amortized to expense		(556	)
	Impairment		(78	)

Balance, end of period		$	3,027

4. SECURITIZATIONS

During 2002, $107.9 million in residential mortgage loans were sold in securitization transactions. The securities received in these transactions were then immediately sold. A gain of $2.0 million was recorded on the sale. Home Savings retained servicing responsibilities for the loans, for which it receives annual servicing fees approximating 0.25% of the outstanding balance of the loans.

Approximately $33.9 million of the loans sold had loan to value ratios greater than 80 percent and did not have mortgage insurance coverage on the delivery date. These loans were sold with recourse to Home Savings. The recourse obligation will terminate for each loan on June 30, 2004, provided that on that date, the loan is not 30 days or more delinquent. If this criteria is not met, the recourse obligation on that loan will continue until such time as the loan becomes and remains current for a period of 12 consecutive scheduled monthly payments from the date of the last delinquency. Home Savings reduced the recorded gain from the securitization by the fair value of the recourse obligation.

During 2002, Home Savings securitized one- to four-family residential mortgage loans and retained the rights to service those loans. An analysis of the activity in securitizations serviced by Home Savings during 2002 follows:


			(Dollars in 000's)
Balance at December 31, 2001
	Principal balance of loans		$	102,487
	Amortized cost of servicing rights			929
	Servicing rights as a % of principal			0.91	%

New securitizations during the year
	Principal balance of loans			107,897
	Fair value of servicing rights			1,215
	Servicing rights as a % of principal			1.14	%

Principal payments received in 2002 on loans securitized				28,458

Balance at September 30, 2002
	Principal balance of loans		$	181,926
	Amortized cost of servicing rights			1,610
	Servicing rights as a % of principal			0.88	%

Other information at end of period
	Weighted average rate of securitized loans			7.01	%
	Weighted average maturity in months of securitized loans			293
	Fair value assumptions pertaining to mortgage servicing rights
		Discount rate		8.00	%
		Weighted average prepayment assumptions		248	PSA
		Anticipated delinquency		1.00	%

Cash flows from all securitizations of mortgage loans were as follows in 2002:


Securitization proceeds	$	108,895
Servicing fees received		247

In the securitization transactions, Home Savings retained residual interests in the form of servicing assets. The servicing assets represent the allocated value of retained servicing rights on the loans securitized. The following table indicates how fair value might decline if the assumptions changed unfavorably in two different magnitudes:


Fair value at September 30, 2002		$	1,676
Weighted average life (in months)			77
Projected fair value based on:
	Increase in PSA of 50	$	1,535
	Increase in PSA of 100		1,418

The effect of adverse changes is hypothetical and should not be extrapolated to other changes as the effects are not linear.

5. SEGMENT INFORMATION

United Community has two principal segments, retail banking and investment advisory services. Retail banking provides consumer and corporate banking services. Investment advisory services provide investment brokerage and a network of integrated financial services. Condensed statements of income and selected financial information by operating segment for the three and nine months ended September 30, 2002 and 2001 are as follows:

Three Months Ended September 30, 2002


	Retail		Investment
	Banking		Advisory Services		Eliminations			Total

	(In thousands)
Interest income	$	31,955	$	266	$	(451	)	$	31,770
Interest expense		13,549		54		(451	)		13,152
Provision for loan loss		750		—		—			750

Net interest income after provision for loan loss		17,656		212		—			17,868
Non-interest income		1,735		4,539		—			6,274
Non-interest expense		11,678		4,295		—			15,973

Income before tax		7,713		456		—			8,169
Income tax expense		2,804		160		—			2,964

Net income	$	4,909	$	296	$	—		$	5,205

Three Months Ended September 30, 2001


	Retail		Investment
	Banking		Advisory Services		Eliminations			Total

	(In thousands)
Interest income	$	32,915	$	433	$	(476	)	$	32,872
Interest expense		17,125		170		(476	)		16,819
Provision for loan loss		465		—		—			465

Net interest income after provision for loan loss		15,325		263		—			15,588
Non-interest income		874		4,362		—			5,236
Non-interest expense		10,298		4,220		—			14,518

Income before tax		5,901		405		—			6,306
Income tax expense		2,200		141		—			2,341

Net income	$	3,701	$	264	$	—		$	3,965

Nine Months Ended September 30, 2002


	Retail		Investment
	Banking		Advisory Services		Eliminations			Total

	(In thousands)
Interest income	$	96,197	$	788	$	(1,352	)	$	95,633
Interest expense		42,964		160		(1,352	)		41,772
Provision for loan loss		1,978		—		—			1,978

Net interest income after provision for loan loss		51,255		628		—			51,883
Non-interest income		7,946		14,457		—			22,403
Non-interest expense		35,771		14,319		—			50,090

Income before tax		23,430		766		—			24,196
Income tax expense		8,468		271		—			8,739

Net income	$	14,962	$	495	$	—		$	15,457

Nine Months Ended September 30, 2001


	Retail		Investment
	Banking		Advisory Services		Eliminations			Total

	(In thousands)
Interest income	$	81,704	$	1,664	$	(1,813	)	$	81,555
Interest expense		41,832		725		(1,813	)		40,744
Provision for loan loss		1,045		—		—			1,045

Net interest income after provision for loan loss		38,827		939		—			39,766
Non-interest income		2,776		14,368		—			17,144
Non-interest expense		26,228		14,622		—			40,850

Income before tax		15,375		685		—			16,060
Income tax expense		5,707		247		—			5,954

Net income	$	9,668	$	438	$	—		$	10,106

6. EARNINGS PER SHARE

Earnings per share is 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 shares determined for the basic computation plus the dilutive effect of potential common shares that could be issued under outstanding stock options and restricted stock awards. No shares of common stock were anti-dilutive for the periods ended September 30, 2002 and September 30, 2001.


		Three Months Ended				Nine Months Ended
		September 30,				September 30,

		2002		2001		2002		2001

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

Net income applicable to common stock		$	5,205	$	3,965	$	15,457	$	10,106

Weighted average common shares outstanding			31,773		31,921		31,801		32,307
Dilutive effect of restricted stock			146		185		162		181
Dilutive effect of stock options			399		91		309		29

Weighted average common shares outstanding for dilutive computation			32,318		32,197		32,272		32,517

Earnings per share:
	Basic	$	0.16	$	0.12	$	0.48	$	0.31
	Diluted	$	0.16	$	0.12	$	0.48	$	0.31

7. NEW ACCOUNTING STANDARDS

In June 2001, FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets,” which addresses the accounting for such assets arising from prior and future business combinations. Upon adopting this Statement, goodwill arising from business combinations is no longer amortized, but assessed annually for impairment, with any such impairment recognized as a reduction to earnings in the period identified. Other intangible assets, such as core deposit intangible assets, continue to be amortized over their estimated useful lives. United Community adopted this Statement on January 1, 2002. Management evaluated goodwill for impairment in the first quarter of 2002 and determined that it was not impaired. United Community had goodwill of $33.6 million and core deposit intangible assets of $5.5 million as of September 30, 2002.

In April 2002, FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which addresses the accounting for early extinguishment of debt. Upon adopting this Statement, any gains or losses from the early extinguishment of debt that do not meet specific criteria for classification as an extraordinary item are no longer classified as an extraordinary item and should be reclassified. United Community adopted this statement on April 1, 2002 and subsequently reclassified the loss on early extinguishment of debt, previously recognized as an extraordinary item, as an ordinary expense.

8. ACQUISITIONS

On April 1, 2002, United Community acquired all of the capital stock of Potters Financial Corporation (Potter’s), the holding company for Potters Bank, an Ohio-chartered state savings bank. Potters Bank was merged into Home Savings. The assets acquired consisted principally of loans and securities.

United Community accounted for the acquisition as a purchase and has included Potters’ results of operations from the effective date of the acquisition in its 2002 financial statements. Based on Potters 991,546 outstanding shares, the acquisition was valued at $22.2 million, which was paid in cash. The excess of the aggregate purchase price over the fair value of net assets acquired of approximately $11.7 million will be assessed annually for impairment.

In connection with the acquisition, United Community acquired all of the equipment and other physical property of Potters. United Community intends to continue to use the assets acquired in this transaction in the manner utilized by Potters prior to the acquisition. Management believes the acquisition of Potters helped accomplish its strategic goal of geographic expansion by strengthening Home Savings presence in Columbiana County in Ohio and by giving it a presence in Pennsylvania. Home Savings will be able to enhance the ability to compete in these markets by offering a new array of products, such as Internet banking, to Potters’ customers.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.


		At April 1, 2002

		(Dollars in thousands)

Cash and securities		$	11,474
Loans, net			112,071
Premises and equipment			1,787
Goodwill			11,719
Core deposit intangible			968
Other assets			1,552

Total assets acquired		$	139,571

Deposits		$	113,791
Other borrowed funds			2,000
Other liabilities			1,534

Total liabilities assumed		$	117,325

	Net assets acquired	$	22,246

The following summarized unaudited pro forma financial information for the nine months ended September 30, 2002 and 2001 assumes the Potters Financial Corporation merger occurred as of January 1, 2001:


	September 30, 2002		September 30, 2001

	(In thousands, except per share data)

Net interest income after provision for loan losses	$	52,048	$	42,547
Net income		14,745		10,362
Diluted earnings per share	$	0.46	$	0.32

Pro forma excludes acquisition related charges.

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

UNITED COMMUNITY FINANCIAL CORP.


		At or For the						At or For the
		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
Selected financial ratios and other data: (1)		2002			2001			2002			2001

Performance ratios:
	Return on average assets (2)		1.04	%		0.84	%		1.02	%		0.86	%
	Return on average equity (3)		7.70	%		6.13	%		7.71	%		5.19	%
	Interest rate spread (4)		3.52	%		2.99	%		3.31	%		2.86	%
	Net interest margin (5)		3.93	%		3.57	%		3.73	%		3.60	%
	Noninterest expense to average assets		3.19	%		3.09	%		3.29	%		3.49	%
	Efficiency ratio (6)		60.72	%		66.26	%		63.03	%		69.97	%
	Average interest-earning assets to average interest- bearing liabilities		114.77	%		115.41	%		114.39	%		120.69	%
Capital ratios:
	Average equity to average assets		13.49	%		13.76	%		13.19	%		16.65	%
	Equity to assets, end of period		13.32	%		13.61	%		13.32	%		13.61	%
	Tangible capital (7)		9.11	%		8.90	%		9.11	%		8.90	%
	Core capital (7)		9.11	%		8.90	%		9.11	%		8.90	%
	Risk-based capital (7)		14.03	%		14.01	%		14.03	%		14.01	%
Asset quality ratios:
	Nonperforming loans to total loans at end of period (8)		0.95	%		0.88	%		0.95	%		0.88	%
	Nonperforming assets to average assets (9)		0.81	%		0.72	%		0.81	%		0.87	%
	Nonperforming assets to total assets at end of period		0.81	%		0.71	%		0.81	%		0.71	%
	Allowance for loan losses as a percent of loans		0.96	%		0.68	%		0.96	%		0.68	%
	Allowance for loan losses as a percent of nonperforming loans (8)		100.98	%		77.46	%		100.98	%		77.46	%
Per share data:
	Basic earnings per share (10)	$	0.16		$	0.12		$	0.48		$	0.31
	Diluted earnings per share (10)	$	0.16		$	0.12		$	0.48		$	0.31
	Dividends per share	$	0.075		$	0.075		$	0.225		$	0.225
	Book value per share (11)	$	7.65		$	7.24		$	7.65		$	7.24
Office data
	Number of full service banking offices		33			29			33			29
	Number of loan production offices		5			4			5			4
	Number of full service brokerage offices		10			11			10			11
	Number of trust offices		2			2			2			2

(1)		Ratios for the three and nine month periods are annualized where appropriate.

(2)		Net income divided by average total assets.

(3)		Net income divided by average total equity.

(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)		Noninterest expense, excluding the amortization of core deposit intangible, divided by the sum of net interest income and noninterest income, excluding gains and losses on securities and other.

(7)		Home Savings only.

(8)		Nonperforming loans consist of nonaccrual loans and restructured loans.

(9)		Nonperforming assets consist of nonperforming loans and real estate acquired in settlement of loans.

(10)		Net income divided by average number of shares outstanding.

(11)		Equity divided by number of shares outstanding.

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 “anticipates,” “plans,” “expects,” “believes,” 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 materially differ 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, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services.

Comparison of Financial Condition at September 30, 2002 and December 31, 2001

Total assets increased $84.5 million, or 4.3%, to $2.0 billion at September 30, 2002 compared to December 31, 2001, primarily as a result of acquiring $127.0 million from Potters Financial Corporation (Potters). United Community had increases of $123.4 million in net loans, $94.1 million in securities and $13.9 million in goodwill, which were partially offset by a $148.1 million decrease in cash and cash equivalents. The asset growth was funded by a $101.8 million increase in deposits, which was partially offset by a $18.9 million decline in borrowed funds.

Net loans increased $123.4 million, or 8.8%, to $1.5 billion at September 30, 2002, compared to $1.4 billion at December 31, 2001, primarily as a result of the Potters acquisition. Nonresidential and multifamily real estate loans increased $93.5 million, consumer loans increased $54.5 million, construction loans increased $15.1 million, and commercial loans increased $12.0 million. These increases were partially offset by a $39.0 million decline in one- to -four-family real estate loans and a $5.2 million decline in land loans. The decline in one- to -four-family loans is due to the sale of approximately $107.9 million in fixed-rate loans out of the portfolio during the second quarter of 2002 to help reduce interest rate risk. The allowance for loan losses increased to $14.9 million at September 30, 2002 from $11.5 million at December 31, 2001, which includes a $1.9 million allowance as a result of the Potters acquisition. Home Savings is expecting growth in all loan categories, which will increase the risk of loan losses. Nonresidential real estate lending and commercial lending are generally 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 businesses and income-producing properties.

United Community has become active in the secondary market for mortgage loans through its subsidiary Home Savings. Loans held for sale increased $1.9 million, or 9.6%, to $22.1 million at September 30, 2002 compared to $20.2 million at December 31, 2001. Home Savings will continue to sell loans going forward as a part of its strategic plan to reduce interest rate risk.

Funds that are available for general corporate purposes, such as loan originations, enhanced customer services and possible acquisitions, are invested in overnight funds and marketable and mortgage-related securities available for sale. Cash and deposits with banks decreased $2.2 million, or 6.1%, to $33.4 million at September 30, 2002 compared to $35.6 million at December 31, 2001. Federal funds sold and other overnight funds decreased $146.0 million, or 85.7%, to $24.3 million at September 30, 2002 from $170.3 million at December 31, 2001. Securities available for sale, which include both marketable and mortgage-related securities, increased $78.7 million, or 66.6%, since December 31, 2001. Securities held to maturity, which also consist of both marketable securities and mortgage-related securities, decreased $20.6 million, or 25.6%, since December 31, 2001. Trading securities, which consist of marketable securities, increased $36.0 million to $44.4 million at September 30, 2002. The net decrease in cash and deposits and overnight funds, along with an increase in deposits, was primarily used to fund increases in higher yielding net loans and securities and the decrease in other borrowed funds.

Nonperforming assets, which include nonaccrual and restructured loans and real estate owned, increased approximately $3.4 million, or 26.3%, to $16.3 million at September 30, 2002 from $12.9 million at December 31, 2001, primarily due to the acquisition of Potters, an increase in nonperforming commercial loans and loans being foreclosed. Total nonaccrual and restructured loans accounted for 0.95% of net loans receivable at September 30, 2002 and 0.89% of net loans receivable at December 31, 2001. Total nonperforming assets were 0.81% of total assets as of September 30, 2002 and 0.67% as of December 31, 2001.

Total deposits increased $101.8 million from $1.4 billion at December 31, 2001 to $1.5 billion at September 30, 2002, primarily as a result of acquiring $113.0 million from the acquisition of Potters. The increase consisted of a $58.6 million increase in savings accounts, a $33.9 million increase in checking accounts and a $10.2 million increase in certificates of deposits.

Other borrowed funds decreased $18.8 million to $252.8 million at September 30, 2002 compared to $271.6 million at December 31, 2001. The decrease was primarily due to the maturity of borrowings from the Federal Home Loan Bank (FHLB) and early

extinguishment of FHLB debt. As of September 30, 2002, $180.0 million of the other borrowed funds consisted of FHLB advances. The remaining funds consist of a revolving line of credit and other short-term borrowings.

Shareholders’ equity increased $8.4 million, or 3.2%, to $270.4 million at September 30, 2002 from $261.9 million at December 31, 2001. The increase was primarily due to earnings for the year, which were offset by quarterly dividends of $0.075 per share and treasury stock purchases. Book value per share was $7.65 as of September 30, 2002.

Comparison of Operating Results for the Three Months Ended
September 30, 2002 and September 30, 2001

Net Income. Net income for the three months ended September 30, 2002 was $5.2 million, or $0.16 per diluted share, compared to net income of $4.0 million, or $0.12 per diluted share, for the three months ended September 30, 2001. Net interest income increased $2.6 million and noninterest income increased $1.0 million, which were partially offset by a $1.5 million increase in noninterest expense and a $285,000 increase in the provision for loan losses. United Community acquired Potters Financial Corporation in the second quarter of 2002, which contributed to the increases in 2002. United Community’s annualized return on average assets and return on average equity were 1.04% and 7.70%, respectively, for the three months ended September 30, 2002. The annualized return on average assets and return on average equity for the comparable period in 2001 were 0.84% and 6.13%, respectively.

Net Interest Income. Net interest income increased $2.6 million, or 16.0%, for the three months ended September 30, 2002, compared to the third quarter of 2001. The increase is primarily due to a $2.7 million decrease in interest expense on deposits and a $972,000 decrease in interest expense on other borrowed funds as a result of the current interest rate environment. These decreases were partially offset by decreases in interest income of $497,000 on loans and $508,000 on mortgage-related securities held to maturity. The interest rate spread for the three months ended September 30, 2002 was 3.52%.

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 to provide for probable losses based on management’s evaluation of such factors as the delinquency status of loans, current economic conditions, the fair value of the underlying collateral, changes in the composition of the loan portfolio and prior loan loss experience. Due to growth in the loan portfolio, an increase in nonperforming assets and current economic conditions, the provision for loan losses was $750,000 for the third quarter of 2002 compared to a $465,000 provision booked in the third quarter of 2001. Home Savings anticipates additional growth in the loan portfolio which may have further impact on the loan loss provision in the future. Home Savings’ allowance for loan losses totaled $14.9 million at September 30, 2002, which was 0.96% of total loans, compared to 0.68% at September 30, 2001.

Noninterest Income. Noninterest income increased $1.0 million, or 19.8%, from $5.2 million for the three months ended September 30, 2001, to $6.3 million for the three months ended September 30, 2002. The primary reason for the increase is a $1.1 million increase in gains recognized on the sale of loans. Increases of $170,000 in commissions, $165,000 in gains on trading securities and $53,000 in service fees and other charges also contributed to the increases in noninterest income. These increases were partially offset by a $161,000 decrease in other income, a $135,000 decline in other recognized gains and a $105,000 decrease in underwriting and investment banking income. The increase in recognized gains on trading securities is related to the market valuation of the trading portfolio. The decrease in other income is primarily related to a $100,000 impairment charge related to mortgage loan servicing as a result of the current interest rate environment and the decrease in other recognized gains is primarily related to the disposal of fixed assets.

Noninterest Expense. Total noninterest expense increased $1.5 million, or 10.0%, to $16.0 million for the three months ended September 30, 2002, from $14.5 million for the three months ended September 30, 2001. The increase is partially due to an increase of $1.5 million in salaries and employee benefits primarily as a result of the acquisition of Potters and increased costs associated with new grants of Recognition and Retention Plan (RRP) shares. Other factors that contributed to the increase in noninterest expense include increases of $118,000 in equipment and data processing and $116,000 in occupancy, which are related to increased costs as a result of the acquisition. Other expenses increased $192,000, which consists of increases in postage, courier fees, telephone expense, and professional fees.

Federal Income Taxes. The provision for federal income taxes increased $623,000 for the three months ended September 30, 2002, compared to the three months ended September 30, 2001 due to higher pre-tax income in 2002. The effective tax rates were 36.3% and 37.1% for the three months ended September 30, 2002 and 2001, respectively.

Comparison of Operating Results for the Nine Months Ended
September 30, 2002 and September 30, 2001

Net Income. Net income for the nine months ended September 30, 2002 was $15.5 million, or $0.48 per diluted share, compared to net income of $10.1 million, or $0.31 per diluted share, for the nine months ended September 30, 2001. Net interest income increased $13.1 million and noninterest income increased $5.3 million, which were offset by a $9.2 million increase in noninterest expense and a $933,000 increase in the provision for loan losses. United Community acquired Industrial Bancorp in the third quarter of 2001 and Potters Financial Corporation in the second quarter of 2002, which partially account for the increases in 2002. United Community’s annualized return on average assets and return on average equity were 1.02% and 7.71%, respectively, for the nine months ended September 30, 2002. The annualized return on average assets and return on average equity for the comparable period in 2001 were 0.86% and 5.19%, respectively.

Net Interest Income. Net interest income increased $13.1 million, or 32.0%, for the nine months ended September 30, 2002, compared to the first nine months of 2001. The increase is primarily due to an increase in interest income on loans of $17.9 million as a result of higher loan volume and loans acquired from Industrial and Potters. This increase was partially offset by an increase of $1.0 million in other borrowed funds and decreases of $3.2 million and $874,000 in interest earned on securities and margin accounts, respectively. Interest rate spread for the nine months ended September 30, 2002 was 3.31%.

Provision for Loan Losses. Due to growth in the loan portfolio, the increase in nonperforming assets and the current economic conditions, the provision for loan loss allowances was $2.0 million for the first nine months of 2002 compared to $1.0 million for the first nine months of 2001.

Noninterest Income. Noninterest income increased $5.3 million, or 30.7%, from $17.1 million for the nine months ended September 30, 2001, to $22.4 million for the nine months ended September 30, 2002. The primary reasons for the increase in noninterest income are a $4.4 million increase in gains on loans sold, an increase in commission of $217,000 and an increase in service fees and other charges of $200,000. Increases in other income of $762,000 and gains recognized on marketable securities of $359,000 also contributed to the increase in noninterest income. Since Anthem is Home Savings’ health care provider, Home Savings received shares of Anthem stock through the demutualization of Anthem, Inc. and subsequently sold the stock in March 2002. To recognize the receipt, other income was increased by $847,000. To recognize the subsequent sale of the stock, a gain of $476,000 was recognized on the sale of marketable securities. These increases were partially offset by a $318,000 decrease in underwriting and investment banking fees and a $306,000 decline in other recognized gains primarily related to the disposal of fixed assets.

Noninterest Expense. Total noninterest expense increased $9.2 million, or 22.6%, to $50.1 million for the nine months ended September 30, 2002, from $40.9 million for the nine months ended September 30, 2001. The primary reasons for the increase are increases of $4.7 million in salaries and employee benefits, $2.2 million in other expense, $831,000 in the amortization of the core deposit intangible from the two acquisitions, $709,000 in equipment and data processing expense, $473,000 in occupancy expense and $235,000 in advertising expense. Approximately $3.2 million of the increase in salaries and benefits is related to the two acquisitions. In addition to the acquisitions, ESOP expense increased due to the increase in United Community’s stock price, RRP expense increased as a result of additional grants that vested in 2002 and commissions paid to loan originators increased as a result of increased loan volume. The increases in equipment and data processing, occupancy and advertising are primarily related to increased costs associated with the two acquisitions. The increase in other expense is primarily related to $1.3 million in costs associated with the early extinguishment of debt, previously recognized as an extraordinary item, which has been reclassified to other expense in accordance with FAS No. 145, adopted on April 1, 2002. The remaining increase in other expense is related to increases in telephone, postage, courier fees, insurance and professional fees as a result of the two acquisitions.

Federal Income Taxes. The provision for federal income taxes increased $2.8 million for the nine months ended September 30, 2002, compared to the nine months ended September 30, 2001 due to higher pre-tax income in 2002. The effective tax rates were 36.1% and 37.1% for the nine months ended September 30, 2002 and 2001, respectively.

UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS

The following table presents the total dollar amounts of interest income and interest expense on the indicated amounts of average interest-earning assets or interest-bearing liabilities together with the weighted average interest rates for the three month periods ended September 30, 2002 and 2001. Average balance calculations were based on daily balances.


		Three Months Ended September 30,

		2002							2001

		Average		Interest					Average		Interest
		Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/
		Balance		Paid		Cost			Balance		Paid		Cost

		(In thousands)
Interest-earning assets:
Net loans (1)		$	1,518,533	$	27,745		7.31	%	$	1,462,232	$	28,242		7.73	%
Net loans held for sale			14,922		223		5.98	%		3,945		69		7.00	%
Mortgage-related securities:
Available for sale			96,738		1,230		5.09	%		84,497		1,236		5.85	%
Held to maturity			60,354		1,015		6.73	%		90,081		1,523		6.76	%

Marketable securities:
	Trading		10,944		46		1.68	%		5,634		15		1.06	%
	Available for sale		87,177		765		3.51	%		57,996		698		4.81	%
	Held to maturity		2,512		21		3.34	%		652		8		4.91	%
Margin accounts			16,980		204		4.81	%		25,568		389		6.09	%
FHLB stock			20,589		246		4.78	%		16,875		321		7.61	%
Other interest-earning assets			64,734		276		1.71	%		51,269		371		2.89	%


Total interest-earning assets			1,893,483		31,771		6.71	%		1,798,749		32,872		7.31	%

Noninterest-earning assets			110,091							81,385

Total assets		$	2,003,574						$	1,880,134


Interest-bearing liabilities:
NOW and money market accounts		$	279,821	$	1,224		1.75	%	$	200,136	$	1,518		3.03	%
Savings accounts			316,045		1,233		1.56	%		259,623		1,545		2.38	%
Certificates of deposit			855,939		8,583		4.01	%		821,786		10,672		5.19	%
Other borrowed funds			198,047		2,112		4.27	%		276,963		3,084		4.45	%

Total interest-bearing liabilities			1,649,852		13,152		3.19	%		1,558,508		16,819		4.32	%


Noninterest-bearing liabilities			83,463							62,920

Total liabilities			1,733,315							1,621,428
Equity			270,259							258,706

Total liabilities and equity		$	2,003,574						$	1,880,134


Net interest income and Interest rate spread				$	18,619		3.52	%			$	16,053		2.99	%

Net interest margin							3.93	%						3.57	%


Average interest-earning assets to average interest- bearing liabilities							114.77	%						115.41	%

(1)

Nonaccrual loans are included in the average balance.

UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS

The following table presents the total dollar amounts of interest income and interest expense on the indicated amounts of average interest-earning assets or interest-bearing liabilities together with the weighted average interest rates for the nine months ended September 30, 2002 and September 30, 2001. Average balance calculations were based on daily balances.


		Nine Months Ended September 30,

		2002							2001

		Average		Interest					Average		Interest
		Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/
		Balance		Paid		Rate			Balance		Paid		Rate

		(In thousands)
Interest-earning assets:
Net loans (1)		$	1,543,520	$	83,661		7.23	%	$	1,157,182	$	65,714		7.57	%
Net loans held for sale			12,417		474		5.09	%		1,329		69		6.92	%
Mortgage-related securities:
	Available for sale		72,479		2,974		5.47	%		90,576		4,112		6.05	%
	Held to maturity		67,063		3,384		6.73	%		97,369		4,957		6.79	%

Marketable securities:
	Trading		8,496		106		1.66	%		6,053		80		1.76	%
	Available for sale		89,586		2,508		3.73	%		71,438		3,053		5.70	%
	Held to maturity		2,147		57		3.54	%		811		33		5.43	%
Margin accounts			18,616		638		4.57	%		28,448		1,512		7.09	%
FHLB stock			19,909		696		4.66	%		14,917		821		7.34	%
Other interest-earning assets			91,950		1,135		1.65	%		42,076		1,204		3.82	%


Total interest-earning assets			1,926,183		95,633		6.62	%		1,510,199		81,555		7.20	%

Noninterest-earning assets			100,821							49,527

Total assets		$	2,027,004						$	1,559,726


Interest-bearing liabilities:
NOW and money market accounts		$	281,116	$	4,118		1.95	%	$	169,834	$	3,708		2.91	%
Savings accounts			311,784		3,868		1.65	%		226,005		3,792		2.24	%
Certificates of deposit			874,503		26,763		4.08	%		677,410		27,236		5.36	%
Other borrowed funds			216,494		7,023		4.33	%		178,068		6,008		4.50	%


Total interest-bearing liabilities			1,683,897		41,772		3.31	%		1,251,317		40,744		4.34	%


Noninterest-bearing liabilities			75,779							48,774


Total liabilities			1,759,676							1,300,091

Equity			267,328							259,635

Total liabilities and equity		$	2,027,004						$	1,559,726


Net interest income and Interest rate spread				$	53,861		3.31	%			$	40,811		2.86	%


Net interest margin							3.73	%						3.60	%


Average interest-earning assets to average interest-bearing liabilities							114.39	%						120.69	%

(1)

Nonaccrual loans are included in the average balance.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

United Community sold fixed rate mortgages during the last nine months to help mitigate interest rate risk. This was the only material change in information about market risk from that provided in the 2001 Annual Report to Shareholder’s, which was incorporated by reference into United Community’s 2001 Annual Report on Form 10-K.

ITEM 4. Controls and Procedures

Within the 90-day period prior to the filing of this report, an evaluation was carried out by United Community’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c)/15d-14(c) of the Securities Exchange Act of 1934). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that United Community’s disclosure controls and procedures are effective. Subsequent to the date of their evaluation, there were no significant changes in United Community’s internal controls or in other factors that could significantly affect these controls.

PART II. OTHER INFORMATION

UNITED COMMUNITY FINANCIAL CORP.

Items 1, 2, 3, 4 and 5 — Not applicable

Item 6 — Exhibits and Reports on Form 8-K

a. Exhibits


Exhibit
Number		Description

3.1		Articles of Incorporation
3.2		Amended Code of Regulations
99.1		Certification of Financial Statements by Chief Executive Officer
99.2		Certification of Financial Statements by Chief Financial Officer

b. Reports on Form 8-K

On July 17, 2002, United Community filed an 8-K under Item 5, Other Events, disclosing operating results for the quarter ended June 30, 2002.

UNITED COMMUNITY FINANCIAL CORP.

SIGNATURES

Pursuant to the requirements 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.

Date: November 7, 2002		/s/ Douglas M. McKay Douglas M. McKay, President

Date: November 7, 2002		/s/ Patrick A. Kelly Patrick A. Kelly, Treasurer

UNITED COMMUNITY FINANCIAL CORP.

CERTIFICATION

I, Douglas M. McKay, certify that:

1) I have reviewed this quarterly report on Form 10-Q of United Community Financial Corp.

2) Based on my knowledge, this quarterly 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 by this quarterly report;

3) Based on my knowledge, the financial statements and other financial information included in this quarterly 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 the quarterly 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-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6) The registrant’s other certifying officers and I have indicated in the quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Douglas M. McKay
Douglas M. McKay
Chief Executive Officer
November 7, 2002

UNITED COMMUNITY FINANCIAL CORP.

CERTIFICATION

I, Patrick A. Kelly, certify that:

/s/ Patrick A. Kelly
Patrick A. Kelly
Chief Financial Officer
November 7, 2002

UNITED COMMUNITY FINANCIAL CORP.

Exhibit 3.1

Incorporated by reference to the Registration Statement on Form S-1 filed by United Community on March 13, 1998 with the Securities and Exchange Commission (SEC), Exhibit 3.1.

Exhibit 3.2

Incorporated by reference to the 1998 Form 10-K filed by United Community on March 31, 1999 with the SEC, Exhibit 3.2.

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1)		I have reviewed this quarterly report on Form 10-Q of United Community Financial Corp.

2)		Based on my knowledge, this quarterly 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 by this quarterly report;

3)		Based on my knowledge, the financial statements and other financial information included in this quarterly 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 the quarterly 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-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures 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 quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and