UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March~~September 3130, 2012

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: 0-51800

United Community Bancorp

(Exact name of registrant as specified in its charter)

United States of America	36-4587081
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

92 Walnut Street, Lawrenceburg, Indiana	47025
(Address of principal executive offices)	(Zip Code)

(812) 537-4822 (Registrant’s telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report)

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

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

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of ~~May~~November 109, 2012, there were 7,834,782 shares of the registrant’s common stock outstanding, of which 4,655,200 shares were held by United Community MHC.

UNITED COMMUNITY BANCORP

Table of Contents

Part I. Financial Information	Page No.
		Page No.
Item 1. Financial Statements (Unaudited)
Part I. Financial Information
Consolidated Statements of Financial Condition at March 31, 2012 and June 30, 2011	1
Item 1.	Financial Statements (Unaudited)
Consolidated Statements of Operations for the Three and Nine Month Periods Ended March 31, 2012 and 2011	2
	Consolidated Statements of Financial Condition at September 30, 2012 and June 30, 2012	1
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Month Periods Ended March 31, 2012 and 2011	3
	Consolidated Statements of Income for the Three Month Periods Ended September 30, 2012 and 2011	2
Consolidated Statements of Cash Flows for the Nine Month Periods Ended March 31, 2012 and 2011	4
	Consolidated Statements of Comprehensive Income for the Three Month Periods Ended September 30, 2012 and 2011	3
Notes to Unaudited Consolidated Financial Statements	5
	Consolidated Statements of Cash Flows for the Three Month Periods Ended September 30, 2012 and 2011	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Notes to Unaudited Consolidated Financial Statements	5
Item 3. Quantitative and Qualitative Disclosures about Market Risk	36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 4. Controls and Procedures	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Part II. Other Information
Item 4.	Controls and Procedures	41
Item 1. Legal Proceedings	38
Part II. Other Information
Item 1A. Risk Factors	38
Item 1.	Legal Proceedings	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 1A.	Risk Factors	42
Item 3. Defaults Upon Senior Securities	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 4. Mine Safety Disclosures	38
Item 3.	Defaults Upon Senior Securities	42
Item 5. Other Information	38
Item 4.	Mine Safety Disclosures	42
Item 6. Exhibits	38
Item 5.	Other Information	42
Signatures	40
Item 6.	Exhibits	43
Signatures		44

~~Part~~PART I. ~~Financial~~FINANCIAL ~~Information~~INFORMATION

Item 1. Financial Statements

UNITED COMMUNITY BANCORP AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, except share amounts)	~~March~~September 3130, 2012			June 30, ~~2011~~2012
Assets
Cash and due from banks	$	321,~~375~~677		$	311,~~159~~872
Interest-earning deposits in other financial institutions		29,594			27,207
Cash and cash equivalents		31,271			29,079
Investment securities:
Securities available for sale - at estimated market value		2925,~~539~~355			4921,~~230~~275
Securities held to maturity - at amortized cost		~~493~~471			~~564~~493
Mortgage-backed securities available for sale - at estimated market value		~~120~~135,~~126~~600			74124,~~119~~621
Loans receivable, net		~~284~~272,~~415~~076			~~285~~283,~~877~~154
Loans available for sale		-802			~~196~~393
Property and equipment, net		76,~~144~~943			7,~~396~~062
Federal Home Loan Bank stock, at cost		6,588			26,~~507~~588
Accrued interest receivable:
Loans		1,~~173~~213			1,~~291~~137
Investments and mortgage-backed securities		~~599~~678			~~681~~585
Other real estate owned, net		~~328~~763			~~139~~197
Cash surrender value of life insurance policies		109,~~108~~963			710,~~882~~010
Deferred income taxes		2,~~433~~491			23,~~880~~004
Prepaid expenses and other assets		4,~~862~~587			54,~~060~~913
Goodwill		2,522			2,522
Intangible asset		~~909~~830			~~1,028~~870
Total assets		~~503~~502,~~614~~153		$	~~472~~495,~~531~~903
Liabilities and Stockholders' Equity
Deposits	$	433,~~646~~059			~~413~~426,~~091~~967
Advances from FHLB		1110,~~083~~583			110,833
Accrued interest on deposits		3431			4433
Accrued interest on FHLB advance		8			38
Advances from borrowers for payment of insurance and taxes		~~483~~528			~~230~~325
Accrued expenses and other liabilities		32,~~003~~647			32,~~184~~749
Total liabilities		~~448~~446,~~257~~856			~~418~~440,~~385~~915
Stockholders' equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued		-			-
Common stock, $0.01 par value; 19,000,000 shares authorized, 8,464,000
Common stock, $0.01 par value; 19,000,000 shares authorized, 8,464,000 shares issued at September 30, 2012 and June 30, 2012; 7,834,782 shares outstanding at September 30, 2012 and June 30, 2012		36			36
shares issued at March 31, 2012 and June 30, 2011; 7,834,782 and 7,840,382
Additional paid-in capital		36,928			36,958
shares outstanding at March 31, 2012 and June 30, 2011, respectively		36			36
Retained earnings		26,693			27,060
Additional paid-in capital		36,995			37,089
Less shares purchased for stock plans		(2,343	)		(2,416	)
Retained earnings		27,067			26,435
Treasury Stock, at cost - 629,218 shares at September 30, 2012 and June 30, 2012		(7,122	)		(7,122	)
Less shares purchased for stock plans		(2,507	)		(2,775	)
Treasury Stock, at cost - 629,218 shares at March 31, 2012 and 623,628 shares at June 30, 2011		(7,122	)		(7,091	)
Accumulated other comprehensive income:
Unrealized gain on securities available for sale, net of income taxes		~~888~~1,105			~~452~~472
Total stockholders' equity		55,~~357~~297			54,~~146~~988
Total liabilities and stockholders' equity	$	~~503~~502,~~614~~153		$	~~472~~495,~~531~~903

See accompanying notes to the consolidated financial statements.

UNITED COMMUNITY BANCORP AND SUBSIDIARIES

Consolidated Statements of ~~Operations~~Income

(In thousands, except share amounts)

	For the three months ended March 31,						For the nine months ended March 31,
	For the three months ended September 30,
(In thousands, except per share data)	2012			2011			~~2012~~		~~2011~~
				(As Restated)					(As Restated)
Interest income:
Interest income:
Loans	$	3,450		$	3,898
Loans	$	3,575		$	4,140		$	11,472	$	12,821
Investments and mortgage-backed securities		775			789
Investments and mortgage - backed securities		715			736			2,205		2,118
Total interest income		4,225			4,687
Total interest income		4,290			4,876			13,677		14,939
Interest expense:
Interest expense:
Deposits		956			1,138
Deposits		996			1,273			3,179		4,299
Borrowed funds		47			14
Borrowed funds		29			13			55		55
Total interest expense		1,003			1,152
Total interest expense		1,025			1,286			3,234		4,354
Net interest income		3,222			3,535
Net interest income		3,265			3,590			10,443		10,585
Provision for loan losses		250			898
Provision for loan losses		333			2,204			1,912		3,385
Net interest income after provision for loan losses		2,972			2,637
Net interest income after
Other income:
provision for loan losses		2,932			1,386			8,531		7,200
Service charges		621			639
Other income:
Gain on sale of loans		248			83
Service charges		569			558			1,829		1,765
Gain on sale of investments		-			236
Gain on sale of loans		109			18			322		460
Gain on sale of other real estate owned		7			-
Gain on sale of investments		94			88			657		132
Income from bank owned life insurance		135			67
Gain (loss) on sale of other real estate owned		(2	)		-			-		(25	)
Other		56			101
Income from Bank Owned Life Insurance		86			68			217		207
Total other income		1,067			1,126
Other		32			63			194		224
Other expense:
Total other income		888			795			3,219		2,763
Compensation and employee benefits		1,809			1,736
Other expense:
Premises and occupancy expense		339			328
Compensation and employee benefits		1,755			1,593			5,186		4,951
Deposit insurance premium		177			137
Premises and occupancy expense		326			346			964		991
Advertising expense		96			93
Deposit insurance premium		26			199			240		607
Data processing expense		373			305
Advertising expense		77			56			284		274
Intangible amortization		40			39
Data processing expense		327			276			943		839
Professional fees		302			198
Acquisition expense		-			-			-		38
Other operating expenses		281			313
Other operating expenses		545			479			1,729		1,704
Total other expense		3,417			3,149
Total other expense		3,056			2,949			9,346		9,404
Income before income taxes		622			614
Net income (loss) before income taxes		764			(768	)		2,404		559
Income tax provision		128			138
Income tax provision (benefit)		307			(125	)		759		185
Net income	$	494		$	476
Net income (loss)	$	457		$	(643	)	$	1,645	$	374
Basic and diluted earnings per share	$	0.06		$	0.06
Basic and diluted earnings (loss) per share	$	0.06		$	(0.08	)	$	0.22	$	0.05

See accompanying notes to the consolidated financial statements.

UNITED COMMUNITY BANCORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income ~~(Loss)~~

(In thousands)

	For the three months						For the nine months
	For the three months ended
	ended March 31,						March 31,
	September 30,
	2012			2011			~~2012~~			~~2011~~
				(As Restated)						(As Restated)
Net income	$	494		$	476
Net income (loss)	$	457		$	(643	)	$	1,645		$	374
Other comprehensive income, net of tax
Other comprehensive income (loss), net of tax
Unrealized gain on securities available for sale		633			946
Unrealized gain (loss) on available for sale securities		519			267			837			(178	)
Reclassification adjustment for gains on securities available for sale included in income		-			(236	)
Reclassification adjustment for gains on available
Total comprehensive income	$	1,127		$	1,186
for sale securities included in income		(57	)		(58	)		(401	)		(85	)
Total comprehensive income (loss)	$	919		$	(434	)	$	2,081		$	111

See accompanying notes to the consolidated financial statements.

UNITED COMMUNITY BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	(Unaudited)
	For the three months ended
	For the nine months ended
	September 30,
	March 31,
(In thousands)	2012			2011
				(As Restated)
Operating activities:
Net income	$	~~1,645~~494		$	~~374~~476
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		~~427~~131			~~406~~144
Amortization of intangible asset		119			328
Provision for loan losses		250			898
Provision for loan losses		1,912			3,385
Deferred loan origination costs		(36	)		(22	)
Deferred loan origination fees costs		(151	)		53
Amortization of premium on investments		681			530
Amortization of premium (discount) on investments		1,769			1,083
Proceeds from sale of loans		6,378			5,422
Proceeds from sale of loans		10,847			19,631
Loans disbursed for sale in the secondary market		(6,539	)		(5,840	)
Loans disbursed for sale in the secondary market		(10,329	)		(19,189	)
Gain on sale of loans		(248	)		(83	)
Gain on sale of loans		(322	)		(460	)
Amortization of intangible asset		40			39
Amortization of acquisition-related loan yield adjustment		-(61	)		~~(124~~-	)
Amortization of acquisition-related credit risk adjustment		-			(102	)
Amortization of acquisition-related CD yield adjustment		(4	)		(9	)
Amortization of acquisition-related CD yield adjustment		(21	)		(86	)
Gain on sale of investment securities		-			(236	)
Gain on sale of available for sale investment securities		(657	)		(132	)
Gain on sale of other real estate owned		(7	)		-
(Gain) loss on sale of other real estate owned		(2	)		25
Increase in cash surrender value of life insurance		(135	)		(67	)
ESOP shares committed to be released		~~127~~42			~~(62~~42	)
Stock-based compensation expense		48-			~~133~~24
Deferred income taxes		~~163~~110			~~1,543~~(156	)
Effects of change in operating assets and liabilities:
Accrued interest receivable		~~200~~(169	)		~~362~~137
Prepaid expenses and other assets		~~198~~326			~~(1,227~~578	)
Accrued interest		(52	)		(723	)
Accrued expenses and other		(~~178~~102	)		(~~188~~76	)
Net cash provided by operating activities		51,~~790~~149			51,~~681~~798
Investing activities:
Proceeds from maturity of available for sale investment securities		~~9,000~~-			256,~~802~~000
Proceeds from sale of available for sale investment securities		~~21,681~~-			1011,~~004~~362
Proceeds from maturity of held to maturity securities		7122			6721
Proceeds from repayment of mortgage-backed securities available for sale		176,~~779~~506			135,~~147~~187
Proceeds from sale of mortgage-backed securities available for sale		~~31,012~~-			1914,~~661~~193
Proceeds from sale of other real estate owned		~~409~~41			~~273~~-
Proceeds from sale of Federal Home Loan Bank stock		-			8
Purchases of available for sale investment securities		(3,934	)		(860	)
Purchases of mortgage-backed securities available for sale		(9517,~~895~~274	)		(5942,~~274~~151	)
Purchases of available for sale investment securities		(10,286	)		(18,402	)
Purchases of Federal Home Loan Bank stock		-			(4,081	)
Purchases of Federal Home Loan Bank stock		(4,081	)		-
Net decrease in loans		10,325			1,483
Net decrease (increase) in loans		(897	)		14,537
Proceeds from (purchase of) bank owned life insurance		182			(1,999	)
Increase in cash surrender value of life insurance		(2,226	)		(206	)
Capital expenditures		(12	)		(56	)
Capital expenditures		(175	)		(408	)
Net cash used in investing activities		(4,144	)		(10,901	)
Net cash provided (used) in investing activities		(33,608	)		5,209
Financing activities:
Net decrease in deposits		20,576			(13,185	)
Net increase in deposits		6,096			2,262
Borrowings from Federal Home Loan Bank		11,000			-
Repayments of Federal Home Loan Bank advances		(250	)		(250	)
Repayments of Federal Home Loan Bank advances		(1,750	)		(750	)
Dividends paid to stockholders		(862	)		(372	)
Dividends paid to stockholders		(1,014	)		(985	)
Net increase in advances from borrowers for payment of insurance and taxes		203			182
Repurchases of common stock		(31	)		(37	)
Net cash provided by financing activities		5,187			1,822
Net increase in advances from borrowers for payment of insurance and taxes		253			226
Net increase (decrease) in cash and cash equivalents		2,192			(7,281	)
Net cash provided (used) in financing activities		29,034			(14,731	)
Cash and cash equivalents at beginning of period		29,079			31,159
Net increase (decrease) in cash and cash equivalents		1,216			(3,841	)
Cash and cash equivalents at end of period	$	31,271		$	23,878
Cash and cash equivalents at beginning of period		31,159			32,023
Cash and cash equivalents at end of period	$	32,375		$	28,182

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANCORP AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ~~RESTATEMENT~~ BASIS OF PRESENTATION- The Company, a Federally-chartered corporation, is the mid-tier holding company for United Community Bank (the “Bank”), which is a Federally-chartered, FDIC-insured savings bank. The Company was organized in conjunction with the Bank’s reorganization from a mutual savings bank to the mutual holding company structure on March 30, 2006. United Community MHC (the “MHC”), a Federally-chartered corporation, is the mutual holding company parent of the Company. At September 30, 2012, the MHC owned approximately 59.4% of the Company and must always own at least a majority of the voting stock of the Company. The Company, through the Bank, operates in a single business segment providing traditional banking services through its office and branches in southeastern Indiana. UCB Real Estate Management Holding, LLC is a wholly-owned subsidiary of the Bank. The entity was formed for the purpose of holding assets that are acquired by the Bank through, or in lieu of, foreclosure. UCB Financial Services, Inc, a wholly-owned subsidiary of United Community Bank, was formed for the purpose of collecting commissions on investments referred to Lincoln Financial Group.

The ~~March~~accompanying ~~31,~~unaudited ~~2011~~consolidated financial statements were ~~and~~prepared ~~certain~~in ~~schedules~~accordance inwith ~~this~~the ~~Quarterly~~rules ~~Report~~and onregulations ~~Form~~of ~~10-Q~~the ~~have~~Securities ~~been~~and ~~restated~~Exchange asCommission, aand ~~result~~therefore ofdo ~~determining~~not ~~that~~include ~~certain~~all ~~charge~~information ~~offs~~or ~~originally~~footnotes ~~reported~~necessary infor ~~the~~complete ~~March~~financial ~~31,~~statements ~~2011~~in ~~period~~conformity ~~should~~with ~~have~~accounting ~~been~~principles ~~recorded~~generally accepted in ~~earlier periods. The restatement is~~ the ~~result~~United States of ~~material~~America. ~~weaknesses~~However, inall ~~internal~~normal ~~control~~recurring ~~over~~adjustments ~~financial~~that, ~~reporting. The Company experienced control deficiencies~~ in the ~~monitoring~~opinion of ~~certain~~management, ~~loans~~are ~~and~~necessary ~~loan~~for a ~~relationships.~~fair ~~These~~presentation ~~control~~of ~~deficiencies resulted in~~ the ~~Company~~ ~~not~~financial ~~properly~~statements ~~identifying~~have ~~impaired~~been ~~loans~~included. ~~and~~No ~~troubled~~other ~~debt~~adjustments ~~restructurings~~have ~~under~~been ~~ASC 310-10-35 and ASC 310-40-35~~included. The ~~Company~~ ~~also~~results ~~experienced~~for ~~deficiencies~~the three-month inperiod ~~measuring~~ended ~~impairment~~September on30, ~~impaired~~2012 ~~loans~~are ~~and~~not ~~troubled~~necessarily ~~debt~~indicative ~~restructurings~~of ~~under~~the ~~ASC 310-10-35.~~results ~~These~~that ~~deficiencies~~may ~~primarily~~be ~~related~~expected tofor the ~~reliance~~fiscal year onending ~~required~~June ~~personal~~30, ~~cash~~2013. ~~infusions~~These ~~of co-borrowers who were experiencing~~ financial ~~difficulties~~statements onshould ~~troubled~~be ~~debt~~read ~~restructurings~~in ~~when~~conjunction ~~determining~~with the ~~present~~Company’s ~~value~~audited ~~of future cash flows.~~consolidated ~~For~~financial ~~additional~~statements ~~information~~and on the ~~restatement,~~accompanying ~~see~~notes ~~Note~~thereto 1for to the ~~Consolidated~~year ~~Financial~~ended ~~Statements~~June ~~included~~30, in2012, ~~Item~~which 8are ofincluded on the Company’s Annual Report on Form 10-K/A as filed with the Securities and Exchange Commission ~~(“SEC”)~~ on ~~April~~September 267, 2012.

The following discloses the impact of these adjustments on the consolidated statements of operations for the three and nine month periods ended March 31, 2011:

	Three month period ended			Nine month period ended
	March 31, 2011			March 31, 2011
(in thousands)	(As Previously Reported)			(As Previously Reported)
Net interest income	$	3,590		$	10,585
Provision for loan losses		3,971			5,427
Other income		795			2,763
Other expense		2,949			9,404
Income (loss) before taxes	$	(2,535	)	$	(1,483	)
Provision (benefit) for income taxes		(814	)		(612	)
Net income (loss)	$	(1,721	)	$	(871	)
Earnings (loss) per common share:
Basic	$	(0.23	)	$	(0.11	)
Diluted	$	(0.23	)	$	(0.11	)

	Three month period ended			Nine month period ended
	March 31, 2011			March 31, 2011
(in thousands)	(As Restated)			(As Restated)
Net interest income	$	3,590		$	10,585
Provision for loan losses		2,204			3,385
Other income		795			2,763
Other expense		2,949			9,404
Income (loss) before taxes	$	(768	)	$	559
Provision for income taxes		(125	)		185
Net income (loss)	$	(643	)	$	374
Earnings (loss) per common share:
Basic	$	(0.08	)	$	0.05
Diluted	$	(0.08	)	$	0.05

	Three month period ended			Nine month period ended
	March 31,			March 31,
	2011			2011
(in thousands)	(amount of adjustment)			(amount of adjustment)
Net interest income	$	-		$	-
Provision for loan losses		(1,767	)		(2,042	)
Other income		-			-
Other expense		-			-
Income (loss) before taxes	$	1,767		$	2,042
Provision for income taxes		689			797
Net income (loss)	$	1,078		$	1,245
Earnings (loss) per common share:
Basis	$	0.15		$	0.16
Diluted	$	0.15		$	0.16

2. BASIS OF PRESENTATION- The Company, a Federally-chartered corporation, is the mid-tier holding company for United Community Bank (the “Bank”), which is a Federally-chartered, FDIC-insured savings bank. The Company was organized in conjunction with the Bank’s reorganization from a mutual savings bank to the mutual holding company structure on March 30, 2006. United Community MHC (the “MHC”), a Federally-chartered corporation, is the mutual holding company parent of the Company. At March 31, 2012, the MHC owned approximately 59% of the Company and must always own at least a majority of the voting stock of the Company. The Company, through the Bank, operates in a single business segment providing traditional banking services through its office and branches in southeastern Indiana. UCB Real Estate Management Holding, LLC is a wholly-owned subsidiary of the Bank. The entity was formed for the purpose of holding assets that are acquired by the Bank through, or in lieu of, foreclosure. UCB Financial Services, Inc, a wholly-owned subsidiary of United Community Bank, was formed for the purpose of collecting commissions on investments referred to Lincoln Financial Group.

The accompanying unaudited consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission, and therefore do not include all information or footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America. However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the financial statements have been included. No other adjustments have been included. The results for the three and nine month periods ended March 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2012. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes thereto for the year ended June 30, 2011, which are included on the Company’s Annual Report on Form 10-K/A as filed with the Securities and Exchange Commission on April 26, 2012.

The Company evaluates events and transactions occurring subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements.

32. PLAN OF CONVERSION AND REORGANIZATION – The Boards of Directors of the MHC and the Company adopted a Plan of Conversion and Reorganization (the “Plan”) on March 10, ~~2011~~ 2011 as amended and restated on May 12, 2011 and September 6, 2012. Pursuant to the Plan, the MHC will convert from the mutual holding company form of organization to the fully public form. The MHC will be merged into the Company, and the MHC will no longer exist. The Company will merge into a new Indiana corporation named United Community Bancorp. As part of the conversion, the MHC’s ownership interest of the Company will be offered for sale in a public offering. The existing publicly held shares of the Company, which represents the remaining ownership interest in the Company, will be exchanged for new shares of common stock of United Community Bancorp, the new Indiana corporation. The exchange ratio will ensure that immediately after the conversion and public offering, the public shareholders of the Company will own the same aggregate percentage of United Community Bancorp common stock that they owned immediately prior to that time (excluding shares purchased in the stock offering and cash received in lieu of fractional shares). When the conversion and public offering are completed, all of the capital stock of United Community Bank will be owned by United Community Bancorp, the Indiana corporation.

The Plan provides for the establishment, upon the completion of the conversion, of special “liquidation accounts” for the benefit of certain depositors of United Community Bank in an amount equal to the greater of the MHC’s ownership interest in the retained earnings of the Company as of the date of the latest balance sheet contained in the prospectus or the retained earnings of United Community Bank at the time it reorganized into the MHC. Following the completion of the conversion, under the rules of the Office of the Comptroller of the Currency (“OCC”), United Community Bank will not be permitted to pay dividends on its capital stock to United Community Bancorp, its sole shareholder, if United Community Bank’s shareholder’s equity would be reduced below the amount of the liquidation accounts. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts.

Direct costs of the conversion and public offering will be deferred and reduce the proceeds from the shares sold in the public offering. If the conversion and public offering are not completed, all costs will be charged to expense in the period in which the public offering is terminated. Costs of $557,000 had been incurred and capitalized related to the conversion during the fiscal year ended June 30, 2011. Additional costs of $712,000 had been incurred and capitalized related to the conversion during the fiscal year ended June 30, 2012. Additional costs of $101,000 have been incurred and capitalized related to the conversion during the three months ended September 30, 2012.

3. EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”) – As of September 30, 2012 and June 30, 2012, the ESOP owned 151,632 shares of the Company’s common stock, which were held in a suspense account until released for allocation to participants.

4. EARNINGS PER SHARE (“EPS”) – The Company’s restricted share awards contain non-forfeitable dividend rights but do not contractually obligate the holders to share in the losses of the Company. Accordingly, during periods of net income, unvested restricted shares are included in the determination of both basic and diluted EPS. During periods of net loss, these shares are excluded from both basic and diluted EPS.

Basic EPS is based on the weighted average number of common shares and unvested restricted shares outstanding, adjusted for ESOP shares not yet committed to be released. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock. For each of the three month periods ended September 30, 2012 and 2011, outstanding options to purchase 346,304 shares were excluded from the computations of diluted earnings per share as their effect would have not been dilutive. The following is a reconciliation of the basic and diluted weighted average number of common shares outstanding:

	Three Months Ended
	September 30,
	2012		2011

Basic weighted average outstanding shares		7,683,150		7,638,321
Effect of dilutive stock options		—		—
Diluted weighted average outstanding shares		7,683,150		7,638,321

5. STOCK-BASED COMPENSATION – The Company applies the provisions of ASC 718-10-35-2, Compensation-Stock Compensation, to stock-based compensation, which requires the Company to measure the cost of employee services received in exchange for awards of equity instruments and to recognize this cost in the financial statements over the period during which the employee is required to provide such services. The Company has elected to recognize compensation cost associated with its outstanding stock-based compensation awards with graded vesting on an accelerated basis pursuant to ASC 718-10-35-8. The expense is calculated for stock options at the date of grant using the Black-Scholes option pricing model. The expense associated with restricted stock awards is calculated based upon the value of the common stock on the date of grant. No stock-based compensation awards were granted during the three-month periods ended September 30, 2012 and 2011.

6. DIVIDENDS – On July 26, 2012, the Board of Directors of the Company declared cash dividends on the Company’s outstanding shares of stock of $0.11 per share. The dividend, totaling $862,000 was paid on August 31, 2012.

7. SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended
	September 30,
	2012		2011
	(Dollars in thousands)
Supplemental disclosure of cash flow information is as follows:
Cash paid during the period for:
Income taxes	$	33	$	—
Interest	$	1,005	$	1,155

Supplemental disclosure of non-cash investing and financing activities is as follows:
Unrealized gains on securities designated as available for sale, net of tax	$	633	$	710
Transfers of loans to other real estate owned	$	600	$	237

~~Direct~~8. DISCLOSURES ~~costs~~ABOUT ofFAIR ~~the~~VALUE ~~conversion~~OF ~~and~~ASSETS ~~public~~AND ~~offering will be deferred~~LIABILITIES ~~and~~- ~~reduce~~ASC ~~the~~820, ~~proceeds~~Fair ~~from~~Value ~~the~~Measurements ~~shares sold in the public offering. If the conversion~~ and ~~public offering are not completed~~Disclosures, ~~all costs~~requires ~~will~~disclosure ~~be charged to expense in the period in which the public offering is terminated. Costs~~ of ~~$557,000 had been incurred and capitalized related to~~ the ~~conversion~~fair asvalue of ~~June~~financial 30instruments, ~~2011.~~both assets ~~Additional~~and ~~costs of $556~~liabilities,~~000~~ ~~have~~whether ~~been~~or ~~incurred~~not ~~and~~recognized ~~capitalized related~~in to the ~~conversion~~consolidated ~~during~~balance ~~the nine months ended March 31~~sheet, ~~2012.~~for ~~The~~which ~~Company~~it ~~previously~~is ~~filed~~practicable ~~a registration statement on Form S-1 with the SEC relating~~ to ~~the~~estimate ~~conversion and~~ the ~~public offering~~ ~~(the “Registration Statement”)~~value. AsFor offinancial ~~the~~instruments ~~date~~where ofquoted ~~the~~market ~~filing~~prices ofare ~~this~~not ~~Form 10-Q~~available, ~~the~~fair ~~Company expects~~values toare ~~file~~estimated anusing ~~amendment~~present tovalue ~~the Registration Statement,~~or ~~using~~other ~~the~~valuation ~~Company’s June 30, 2012 audited financial information~~methods.

4. EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”) – As of March 31, 2012 and June 30, 2011, the ESOP owned 182,878 and 202,061 shares, respectively of the Company’s common stock, which were held in a suspense account until released for allocation to participants.

5. EARNINGS PER SHARE (“EPS”) –The Company’s restricted share awards contain non-forfeitable dividend rights but do not contractually obligate the holders to share in the losses of the Company. Accordingly, during periods of net income, unvested restricted shares are included in the determination of both basic and diluted EPS. During periods of net loss, these shares are excluded from both basic and diluted EPS.

Basic EPS is based on the weighted average number of common shares and unvested restricted shares outstanding, adjusted for ESOP shares not yet committed to be released. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock. For each of the three and nine month periods ended March 31, 2012 and 2011, outstanding options to purchase 346,304 shares were excluded from the computations of diluted earnings per share as their effect would have not been dilutive. The following is a reconciliation of the basic and diluted weighted average number of common shares outstanding:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2012		2011		2012		2011
Basic weighted average outstanding shares		7,652,150		7,612,759		7,642,897		7,623,133
Effect of dilutive stock options		-		-		-		-
Diluted weighted average outstanding shares		7,652,150		7,612,759		7,642,897		7,623,133

6. STOCK-BASED COMPENSATION – The Company applies the provisions of ASC 718-10-35-2, Compensation-Stock Compensation, to stock-based compensation, which requires the Company to measure the cost of employee services received in exchange for awards of equity instruments and to recognize this cost in the financial statements over the period during which the employee is required to provide such services. The Company has elected to recognize compensation cost associated with its outstanding stock-based compensation awards with graded vesting on an accelerated basis pursuant to ASC 718-10-35-8. The expense is calculated for stock options at the date of grant using the Black-Scholes option pricing model. The expense associated with restricted stock awards is calculated based upon the value of the common stock on the date of grant. No stock-based compensation awards were granted during the three and nine month periods ended March 31, 2012 and 2011.

7. DIVIDENDS – On January 26, 2012, October 27, 2011 and August 11, 2011, the Board of Directors of the Company declared cash dividends on the Company’s outstanding shares of stock of $0.11 per share. The dividends, totaling $1.0 million were paid on February 29, 2012, November 30, 2011 and August 31, 2011, respectively. United Community MHC, which owns 4,655,200 shares of the Company’s common stock, waived receipt of the dividends.

8. SUPPLEMENTAL CASH FLOW INFORMATION

	Nine Months Ended
	March 31,
	2012		2011
	(Dollars in thousands)
Supplemental disclosure of cash flow information is as follows:
Cash paid during the period for:
Income taxes	$	-	$	827
Interest	$	3,239	$	4,426
Supplemental disclosure of non-cash investing and financing activities is as follows:
Unrealized gains (losses) on securities
designated as available for sale, net of tax	$	436	$	(263	)
Transfers of loans to other real estate owned	$	598	$	180

9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - ASC 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments, both assets and liabilities, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate the value. For financial instruments where quoted market prices are not available, fair values are estimated using present value or other valuation methods.

The following methods and assumptions are used in estimating the fair values of financial instruments:

Cash and cash equivalents

The carrying values presented in the consolidated statements of position approximate fair value.

Investments and mortgage-backed securities

For investment securities (debt instruments) and mortgage-backed securities, fair values are based on quoted market prices, where available. If a quoted market price is not available, fair value is estimated using quoted market prices of comparable instruments.

Loans receivable

The fair value of the loan portfolio is estimated by evaluating homogeneous categories of loans with similar financial characteristics. Loans are segregated by types, such as residential mortgage, commercial real estate, and consumer. Each loan category is further segmented into fixed and adjustable rate interest, terms, and by performing and non-performing categories. The fair value of performing loans, except residential mortgage loans, is calculated by discounting contractual cash flows using estimated market discount rates which reflect the credit and interest rate risk inherent in the loan. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources. The fair value for significant non-performing loans is based on recent internal or external appraisals. Assumptions regarding credit risk, cash flow, and discount rates are judgmentally determined by using available market information.

Federal Home Loan Bank stock

The Bank is a member of the Federal Home Loan Bank system and is required to maintain an investment based upon a pre-determined formula. The carrying values presented in the consolidated statements of position approximate fair value.

Deposits

The fair values of passbook accounts, NOW accounts, and money market savings and demand deposits approximate their carrying values. The fair values of fixed maturity certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently offered for deposits of similar maturities.

Advance from Federal Home Loan Bank

The fair value is calculated using rates available to the Company on advances with similar terms and remaining maturities.

Off-balance sheet items

Carrying value is a reasonable estimate of fair value. These instruments are generally variable rate or short-term in nature, with minimal fees charged.

~~The estimated fair values of the Company’s financial instruments at March 31, 2012 and June 30, 2011 are as follows:~~7

	March 31, 2012				June 30, 2011
	Carrying Amounts		Fair Value		Carrying Amounts		Fair Value
	(In thousands)
Financial assets:
Cash and due from banks	$	32,375	$	32,375	$	31,159	$	31,159
Investment securities available for sale		29,539		29,539		49,230		49,230
Investment securities held to maturity		493		493		564		564
Mortgage-backed securities available for sale		120,126		120,126		74,119		74,119
Loans receivable and loans receivable held for sale		284,415		279,551		285,877		288,198
Accrued interest receivable		1,772		1,772		1,972		1,972
Investment in FHLB stock		6,588		6,588		2,507		2,507
Financial liabilities:
Deposits	$	433,646	$	435,925	$	413,091	$	414,794
Accrued interest payable		42		42		47		47
FHLB advance		11,083		11,018		1,833		1,874
Off-balance sheet items	$	-	$	-	$	-	$	-

The estimated fair values of the Company’s financial instruments at September 30, 2012 and June 30, 2012 are as follows:

	September 30, 2012				June 30, 2012
	Carrying Amounts		Fair Value		Carrying Amounts		Fair Value
	(In thousands)
Financial assets:
Cash and due from banks	$	31,271	$	31,271	$	29,079	$	29,079
Investment securities available for sale		25,355		25,355		21,275		21,275
Investment securities held to maturity		471		471		493		493
Mortgage-backed securities		135,600		135,600		124,621		124,621
Loans receivable and loans receivable held for sale		272,878		270,642		283,547		280,244
Accrued interest receivable		1,891		1,891		1,722		1,722
Investment in FHLB stock		6,588		6,588		6,588		6,588

Financial liabilities:
Deposits		433,059		435,172		426,967		429,208
Accrued interest payable		39		39		33		33
FHLB advance		10,583		10,833		10,883		10,911

Off-balance sheet items	$	—	$	—	$	—	$	—

ASC 820-10-50-2 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair value methods and assumptions are set forth below for each type of financial instrument. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 2 securities include U.S. Government and agency mortgage-backed securities, U.S. Government agency bonds, municipal securities, and other real estate owned. If quoted market prices are not available, the Bank utilizes a third party vendor to calculate the fair value of its available for sale securities. The third party vendor uses quoted prices of securities with similar characteristics when available. If such quotes are not available, the third party vendor uses pricing models or discounted cash flow models with observable inputs to determine the fair value of these securities.

Fair value measurements for certain assets and liabilities measured at fair value on a recurring basis:

	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant other unobservable inputs (Level 3)
March 31, 2012:	(In thousands)
	(In thousands)
Mortgage-backed securities	$	120,126	$	-	$	120,126	$	-
September 30, 2012:
U.S. Government corporations and agencies		5,012		-		5,012		-
Mortgage-backed securities	$	135,600	$	—	$	135,600	$	—
Municipal bonds		2425,~~404~~228		-—		2425,~~404~~228		-—
Other equity securities		~~123~~127		~~123~~127		-—		-—
June 30, 2011:
June 30, 2012:
Mortgage-backed securities	$	74124,~~119~~621	$	-—	$	74124,~~119~~621	$	-—
U.S. Government corporations and agencies		28,856		-		28,856		-
Municipal bonds		21,148		—		21,148		—
Municipal bonds		20,244		-		20,244		-
Other equity securities		127		127		—		—
Other equity securities		130		130		-		-

Fair value measurements for certain assets and liabilities measured at fair value on a nonrecurring basis:

	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant other unobservable inputs (Level 3)
March 31, 2012:		(In thousands)
	(In thousands)
Other real estate owned	$	328	$	-	$	328	$	-
September 30, 2012:
Impaired loans		26,653		-		26,653		-
Other real estate owned	$	763	$	—	$	763	$	—
June 30, 2011:
Loans held for sale		802		—		802		—
Other real estate owned	$	139	$	-	$	139	$	-
Impaired loans		26,746		—		26,746		—
Loans held for sale		196		-		196		-
June 30, 2012:
Impaired loans		25,202		-		25,202		-
Other real estate owned	$	197	$	—	$	197	$	—
Loans held for sale		393		—		393		—
Impaired loans		28,190		—		28,190		—

The adjustments to other real estate owned and impaired loans are based primarily on appraisals of the real estate, cash flow analysis or other observable market prices. The Bank’s policy is that fair values for these assets are based on current appraisals or cash flow analysis.

9. INVESTMENT SECURITIES

Investment securities available for sale at September 30, 2012 consist of the following:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Mortgage-backed securities	$	134,458	$	1,467	$	325	$	135,600
Municipal bonds		24,465		831		68		25,228
Other equity securities		210		—		83		127
	$	159,133	$	2,298	$	476	$	160,955

Investment securities held to maturity at September 30, 2012 consist of the following:

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Market Value
Municipal Bonds		$	471			$	—			$	—			$	471

Investment securities available for sale at June 30, 2012 consist of the following:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Mortgage-backed securities	$	124,354	$	566	$	299	$	124,621
Municipal bonds		20,548		693		93		21,148
Other equity securities		210		—		83		127
	$	145,112	$	1,259	$	475	$	145,896

Investment securities held to maturity at June 30, 2012 consist of the following:

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Market Value
Municipal Bonds		$	493			$	—			$	—			$	493

The mortgage-backed securities, callable bonds and municipal bonds available for sale have the following maturities at September 30, 2012:

	Amortized cost		Estimated market value
Due or callable in one year or less	$	-	$	-
Due or callable in 1 - 5 years		85,353		86,339
Due or callable in 5 - 10 years		59,552		60,121
Due or callable in greater than 10 years		14,018		14,368
Total debt securities	$	158,923	$	160,828

All other securities available for sale at September 30, 2012 are saleable within one year. The Bank held $471,000 and $493,000 in investment securities that are being held to maturity at September 30, 2012 and June 30, 2012, respectively. The investment securities held to maturity have annual returns of principal and will be fully matured between 2014 and 2019.

~~10. INVESTMENT~~The ~~SECURITIES~~expected returns of principal of investments held to maturity are as follows as of September 30, 2012

~~Investment~~(dollars ~~securities~~in ~~available for sale at March 31, 2012 consist of the following~~thousands):

			Gross		Gross		Estimated
October 1, 2012 through June 30, 2013	$	24
	Amortized		Unrealized		Unrealized		Market
2014		49
	Cost		Gains		Losses		Value
2015		147
	(In thousands)
2016		56
Mortgage-backed securities	$	119,464	$	762	$	100	$	120,126
2017 and thereafter		195
U.S. Government corporations and agencies		5,003		9		-		5,012
	$	471
Municipal bonds		23,519		970		85		24,404
Other equity securities		210		-		87		123
	$	148,196	$	1,741	$	272	$	149,665

~~Investment~~Gross proceeds on the sale of investment and mortgage-backed securities ~~held~~were to$-0- ~~maturity~~and at$25.6 ~~March~~million 31for the three-month periods ended September 30, 2012 ~~consist~~and 2011, respectively. Gross realized ofgains for the ~~following:~~three-month periods ended September 30, 2012 and 2011 were $-0- and $236,000, respectively. There were no gross realized losses for the three months ended September 30, 2012 and 2011.

Gross

Estimated

Amortized

Unrealized

Market

Cost

Gains

Losses

Value

(In thousands)

Municipal bonds

493

The table below indicates the length of time individual investment securities and mortgage-backed securities have been in a continuous loss position at September 30, 2012:

Investment securities available for sale at June 30, 2011 consist of the following:

	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Mortgage-backed securities	$	39,680	$	291	$	2,652	$	34	$	42,332	$	325
Municipal bonds		6,869		68		-		-		6,869		68
Other equity securities		-		-		127		83		127		83
	$	46,549	$	359	$	2,779	$	117	$	49,328	$	476
Number of investments		22				2				24

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
	(In thousands)
Mortgage-backed securities	$	73,827	$	364	$	72	$	74,119
U.S. Government corporations and agencies		28,817		39		-		28,856
Municipal bonds		19,744		544		44		20,244
Other equity securities		210		-		80		130
	$	122,598	$	947	$	196	$	123,349

Investment securities held to maturity at June 30, 2011 consist of the following:

Gross

Estimated

Amortized

Unrealized

Market

Cost

Gains

Losses

Value

(In thousands)

Municipal bonds

564

The mortgage-backed securities, callable bonds and municipal bonds available for sale have the following maturities at March 31, 2012:

	Amortized		Estimated
	cost		market value
	(In thousands)
Due or callable in one year or less	$	5,003	$	5,012
Due or callable in 1 - 5 years		86,137		86,637
Due or callable in 5 - 10 years		39,766		40,344
Due or callable in greater than 10 years		17,080		17,542
Total debt securities	$	147,986	$	149,535

All other securities available for sale at March 31, 2012 are saleable within one year. The Bank held $493,000 and $564,000 in investment securities that are being held to maturity at March 31, 2012 and June 30, 2011, respectively. The investment securities held to maturity have annual returns of principal and will be fully matured between 2014 and 2019.

The expected returns of principal of investments held to maturity are as follows as of March 31, 2012 (dollars in thousands):

April 1, 2012 through June 30, 2012	$	-
2013		71
2014		74
2015		77
2016		81
2017 and thereafter		190
	$	493

Gross proceeds on the sale of investment and mortgage-backed securities were $1.1 million and $19.6 million for the three month periods ended March 31, 2012 and 2011, respectively. Gross proceeds on the sale of investment and mortgage-backed securities were $52.7 million and $23.6 million for the nine month periods ended March 31, 2012 and 2011, respectively. Gross realized gains for the three month periods ended March 31, 2012 and 2011 were $94,000 and $166,000, respectively. Gross realized losses for the three month periods ended March 31, 2012 and 2011 were $-0- and $78,000, respectively. Gross realized gains for the nine month periods ended March 31, 2012 and 2011 were $657,000 and $210,000, respectively. Gross realized losses for the nine periods ended March 31, 2012 and 2011 were $-0- and $78,000, respectively.

The table below indicates the length of time individual investment securities and mortgage-backed securities have been in a continuous loss position at March 31, 2012:

	Less than 12 months					12 months or longer				Total
	Fair Value			Unrealized Losses		Fair Value		Unrealized Losses		Fair Value			Unrealized Losses
	(In thousands)
Mortgage-backed securities	$	21,032		$	100	$	-	$	-	$	21,032		$	100
Municipal bonds		3,136			85		-		-		3,136			85
Other equity securities		-			-		130		87		130			87
	$	24,168		$	185	$	130	$	87	$	24,298		$	272
Number of investments			14				1					15

Securities available for sale are reviewed for possible other-than-temporary impairment on a quarterly basis. During this review, management considers the severity and duration of the unrealized losses as well as its intent and ability to hold the securities until recovery, taking into account balance sheet management strategies and its market view and outlook. Management also assesses the nature of the unrealized losses taking into consideration factors such as changes in risk-free interest rates, general credit spread widening, market supply and demand, creditworthiness of the issuer or any credit enhancement providers, and the quality of the underlying collateral. Management does not intend to sell these securities in the foreseeable future, and does not believe that it is more likely than not that the Bank will be required to sell a security in an unrealized loss position prior to a recovery in its value. The decline in market value is due to changes in market interest rates. The fair values are expected to recover as the securities approach maturity dates.

1210. GOODWILL AND INTANGIBLE ASSET

11. GOODWILL AND INTANGIBLE ASSET

In June 2010, the Company acquired three branches from Integra Bank National Association (“Integra”), which was accounted for under the purchase method of accounting. Under the purchase method, the Company is required to allocate the cost of an acquired company to the assets acquired, including identified intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition. The excess cost over the value of net assets acquired represents goodwill, which is not subject to amortization.

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill recorded by the Company in connection with its acquisition relates to the inherent value in the business acquired and this value is dependent upon the Company’s ability to provide quality, cost-effective services in a competitive market place. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.

Goodwill is not amortized but is tested for impairment when indicators of impairment exist, or at least annually. Potential goodwill impairment exists when the fair value of the reporting unit (as defined by U.S. GAAP) is less than its carrying value. An impairment loss is recognized in earnings only when the carrying amount of goodwill is less than its implied fair value.

The following table indicates changes to the core deposit intangible asset and goodwill balances for the ~~nine~~three month period ended ~~March~~September 3130, 2012:

	Core Deposit Intangible			Goodwill
	(dollars in thousands)
	( in thousands)
Balance at June 30, 2011	$	1,028		$	2,522
Balance at June 30, 2012	$	870		$	2,522
Amortization		(~~119~~40	)		-
Balance at March 31, 2012	$	909		$	2,522
Balance at September 30, 2012	$	830		$	2,522

The core deposit intangible is being amortized using the double declining balance method over its estimated useful life of 8.75 years. Remaining amortization of the core deposit intangible is as follows (dollars in thousands) as of ~~March~~September 3130, 2012:

April 1, 2012 through June 30, 2012	$	40
October 1, 2012 through June 30, 2013	$	140
2013		179
2014		143
2014		142
2015		118
2016		~~118~~117
2017 and thereafter		312
2017		117
	$	909
2018 and thereafter		195
	$	830

11. DISCLOSURES ABOUT THE CREDIT QUALITY OF LOANS RECEIVABLE AND THE ALLOWANCE FOR LOAN LOSSES (IN THOUSANDS)

The following tables illustrate certain disclosures required by ASC 310-10-50-11B(c), (g) and (h), the changes to the allowance for loan losses, for the three months ended September 30, 2012 (in thousands):

	One- to Four- Family Owner- Occupied Mortgage			Consumer			One- to Four-family Non-owner Occupied Mortgage			Multi- family Non- owner Occupied Mortgage			Non- Residential Real estate			Construction		Land		Commercial and Agricultural			Total
Allowance for Credit Losses:
Balance, July 1, 2012:	$	666		$	477		$	236		$	1,915		$	2,282		$	3	$	11	$	24		$	5,614
Charge offs		(59	)		(50	)		-			-			(100	)		-		-		-			(209	)
Recoveries		5			13			(1	)		9			1			-		-		1			28
Provision		323			111			22			(253	)		38			3		8		(2	)		250
Ending Balance:	$	935		$	551		$	257		$	1,671		$	2,221		$	6	$	19	$	23		$	5,683

Balance, Individually Evaluated	$	17		$	-		$	6		$	448		$	435		$	-	$	-	$	-		$	906

Balance, Collectively Evaluated	$	918		$	551		$	251		$	1,223		$	1,786		$	6	$	19	$	23		$	4,777

Financing receivables:
Ending balance	$	119,524		$	35,519		$	18,329		$	35,424		$	55,547		$	1,386	$	3,665	$	7,775		$	277,169

Ending Balance: individually evaluated for impairment	$	4,903		$	1,619		$	1,976		$	13,547		$	6,047		$	-	$	27	$	236		$	28,355

Ending Balance: collectively evaluated for impairment	$	101,429		$	28,873		$	15,621		$	21,497		$	45,034		$	1,386	$	3,556	$	6,577		$	223,973

Ending Balance: loans acquired with deteriorated credit quality	$	13,192		$	5,027		$	732		$	380		$	4,466		$	-	$	82	$	962		$	24,841

12. DISCLOSURES ABOUT THE CREDIT QUALITY OF LOANS RECEIVABLE AND THE ALLOWANCE FOR LOAN LOSSES (IN THOUSANDS)

The following table illustrates certain disclosures required by ASC 310-10-50-11B(c), (g) and (h).

Allowance for Credit Losses and Recorded Investment in Loans Receivable

For the ~~three~~year ~~and nine months~~ ended ~~March~~June 3130, 2012 (in thousands):

	One- to Four- Family Owner Occupied Mortgage			Consumer			One- to Four-family Non-owner Occupied Mortgage		Multi-family Non-owner Occupied Mortgage			Non- Residential Real estate			Construction			Land			Commercial and Agricultural			Total
	One- to Four- Family Owner- Occupied Mortgage			Consumer			One- to Four-family Non-owner Occupied Mortgage		Multi- family Non- owner Occupied Mortgage			Non- Residential Real estate			Construction			Land			Commercial and Agricultural			Total
Allowance for Credit Losses:
Balance, January 1, 2012:	$	825		$	317		$	180	$	2,536		$	1,402		$	2		$	12		$	31		$	5,305
Beginning balance:	$	800		$	310		$	112	$	2,610		$	1,462		$	3		$	12		$	26		$	5,335
Charge offs		98(529	)		~~163~~(302	)		-		-(1,233	)		78(1,804	)		-			(8	)		14(23	)		~~361~~(3,899	)
Recoveries		~~109~~135			70105			-		57256			14			-			-			116			~~238~~516
Provision		~~(343~~260	)		~~187~~364			30124		~~108~~282			~~335~~2,620			-			7			95			~~333~~3,662
Ending Balance:	$	~~493~~666		$	~~411~~477		$	~~210~~236	$	21,~~701~~915		$	12,~~660~~282		$	23		$	11		$	2724		$	5,~~515~~614
Balance, July 1, 2011:	$	800		$	310		$	112	$	2,610		$	1,462		$	3		$	12		$	26		$	5,335
Balance, Individually Evaluated	$	17		$	-		$	9	$	487		$	562		$	-		$	-		$	-		$	1,075
Charge offs		298			199			-		1,233			238			-			8			14			1,990
Balance, Collectively Evaluated	$	649		$	477		$	227	$	1,428		$	1,720		$	3		$	11		$	24		$	4,539
Recoveries		115			81			-		58			2			-			-			2			258
Provision		(124	)		219			98		1,266			434			(1	)		7			13			1,912
Ending Balance:	$	493		$	411		$	210	$	2,701		$	1,660		$	2		$	11		$	27		$	5,515
Balance, Individually Evaluated	$	17		$	-		$	9	$	1,167		$	337		$	-		$	-		$	-		$	1,530
Balance, Collectively Evaluated	$	476		$	411		$	201	$	1,534		$	1,323		$	2		$	11		$	27		$	3,985
Financing receivables:
Ending Balance	$	121,614		$	35,338		$	17,952	$	44,900		$	58,946		$	680		$	3,627		$	6,190		$	289,247
Ending balance	$	121,701		$	35,595		$	17,821	$	42,325		$	59,123		$	1,189		$	3,441		$	7,004		$	288,199
Ending Balance: individually evaluated for impairment	$	45,~~052~~992		$	1,~~153~~652		$	~~849~~1,051	$	1214,~~931~~000		$	67,~~947~~177		$	~~200~~-		$	-28		$	-240		$	2630,~~132~~140
Ending Balance: collectively evaluated for impairment	$	102,~~482~~175		$	28,~~135~~561		$	16,~~292~~019	$	3127,~~509~~914		$	4647,~~928~~307		$	~~480~~1,189		$	3,~~538~~330		$	45,~~656~~616		$	~~234~~232,~~020~~111
Ending Balance: loans
Ending Balance: loans acquired with deteriorated credit quality	$	13,534		$	5,382		$	751	$	411		$	4,639		$	-		$	83		$	1,148		$	25,948
acquired with deteriorated
credit quality	$	15,080		$	6,050		$	811	$	460		$	5,071		$	-		$	89		$	1,534		$	29,095

Allowance for Credit Losses and Recorded Investment in Loans Receivable

For the year ended June 30, 2011 (in thousands):

	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four-family Non-owner Occupied Mortgage		Multi- family Non- owner Occupied Mortgage		Non- Residential Real estate		Construction			Land		Commercial and Agricultural			Total
Allowance for Credit Losses:
Balance, July 1, 2010:	$	419	$	908	$	-	$	3,159	$	3,298	$	4		$	10	$	221		$	8,019
Charge offs		803		959		-		2,008		3,065		-			-		38			6,873
Recoveries		26		15		-		-		7		-			-		1			49
Provision		1,158		346		112		1,459		1,222		(1	)		2		(158	)		4,140
Ending Balance:	$	800	$	310	$	112	$	2,610	$	1,462	$	3		$	12	$	26		$	5,335
Balance, Individually Evaluated	$	18	$	-	$	-	$	1,573	$	-	$	-		$	-	$	-		$	1,591
Balance, Collectively Evaluated	$	782	$	310	$	112	$	1,037	$	1,462	$	3		$	12	$	26		$	3,744
Financing receivables:
Ending Balance	$	112,902	$	36,639	$	18,251	$	46,296	$	65,156	$	1,084		$	3,985	$	6,521		$	290,834
Ending Balance: individually evaluated for impairment	$	-	$	-	$	531	$	11,223	$	4,545	$	167		$	-	$	-		$	16,466
Ending Balance: collectively evaluated for impairment	$	97,258	$	29,640	$	16,744	$	34,568	$	53,694	$	917		$	3,743	$	4,183		$	240,747
Ending Balance: loans acquired with deteriorated credit quality	$	15,644	$	6,999	$	976	$	505	$	6,917	$	-		$	242	$	2,338		$	33,621

The following tables illustrate certain disclosures required by ASC 310-10-50-29(b).

Credit Risk Profile by Internally Assigned Grade

At ~~March~~September 3130, 2012

	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four-family Non-owner Occupied Mortgage		Multi-family Non-owner Occupied Mortgage		Non- Residential Real estate		Construction		Land		Commercial and Agricultural		Total
Grade:
Pass	$	108,992	$	34,032	$	12,862	$	19,274	$	29,465	$	-	$	2,603	$	4,817	$	212,045
Watch		6,495		769		3,166		9,809		11,344		480		994		1,035		34,092
Special mention		245		214		829		-		10,309		-		-		17		11,614
Substandard		5,882		323		1,095		15,817		7,828		200		30		321		31,496
Total:	$	121,614	$	35,338	$	17,952	$	44,900	$	58,946	$	680	$	3,627	$	6,190	$	289,247

(in thousands)

	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four-family Non-owner Occupied Mortgage		Multi-family Non-owner Occupied Mortgage		Non- Residential Real estate		Construction		Land		Commercial and Agricultural		Total
Grade:
Pass	$	105,945	$	33,961	$	12,080	$	16,203	$	30,256	$	707	$	2,673	$	6,441	$	208,266
Watch		7,279		1,004		3,945		3,006		11,554		479		965		639		28,871
Special mention		526		22		823		344		7,623		—		—		46		9,384
Substandard		5,774		532		1,481		15,871		6,114		200		27		649		30,648
Total:	$	119,524	$	35,519	$	18,329	$	35,424	$	55,547	$	1,386	$	3,665	$	7,775	$	277,169

Credit Risk Profile by Internally Assigned Grade

At June 30, ~~2011~~2012

	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four-family Non-owner Occupied Mortgage		Multi-family Non-owner Occupied Mortgage		Non- Residential Real estate		Construction		Land		Commercial and Agricultural		Total
Grade:
Pass	$	100,380	$	35,893	$	13,234	$	17,140	$	36,307	$	273	$	2,663	$	4,208	$	210,098
Watch		6,805		378		2,865		13,023		11,845		644		1,322		1,911		38,793
Special mention		1,002		127		1,030		1,593		9,573		-		-		163		13,488
Substandard		4,715		241		1,122		14,540		7,431		167		-		239		28,455
Total:	$	112,902	$	36,639	$	18,251	$	46,296	$	65,156	$	1,084	$	3,985	$	6,521	$	290,834

(in thousands)

	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four-family Non-owner Occupied Mortgage		Multi-family Non-owner Occupied Mortgage		Non- Residential Real estate		Construction		Land		Commercial and Agricultural		Total
Grade:
Pass	$	108,642	$	34,380	$	11,836	$	15,423	$	30,379	$	510	$	2,577	$	6,015	$	209,762
Watch		6,503		683		4,059		10,223		11,250		479		836		615		34,648
Special mention		268		24		827		347		10,249		—		—		—		11,715
Substandard		6,288		508		1,099		16,332		7,245		200		28		374		32,074
Total:	$	121,701	$	35,595	$	17,821	$	42,325	$	59,123	$	1,189	$	3,441	$	7,004	$	288,199

The following tables illustrate certain disclosures required by ASC 310-10-50-7A for gross loans.

Age Analysis of Past Due Loans Receivable

At ~~March~~September 3130, 2012

	(in thousands)
	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total current		Total loans receivable
Mortgage One- to Four- Family - Owner-Occupied	$	~~852~~1,000	$	~~262~~218	$	1,~~338~~213	$	2,~~452~~431	$	~~119~~117,~~162~~093	$	~~121~~119,~~614~~524
Consumer		~~174~~296		~~215~~3		93102		~~482~~401		3435,~~856~~118		35,~~338~~519
One- to Four- Family Non-Owner Occupied Mortgage		~~538~~1,251		-		5356		~~591~~1,307		17,~~361~~022		1718,~~952~~329
Multifamily Residential Real Estate Mortgage		-		-		2,515		2,515		42,385		44,900
Multi-family Residential Real Estate Mortgage		488		-		2,405		2,893		32,531		35,424
Non-Residential Real Estate		~~226~~41		-		~~593~~-		~~819~~41		5855,~~127~~506		5855,~~946~~547
Construction		-		-		-		-		~~680~~1,386		~~680~~1,386
Land		-50		-		-		-50		3,~~627~~615		3,~~627~~665
Commercial and Agricultural		376		1746		~~286~~-		~~340~~52		57,~~850~~723		67,~~190~~775
Total	$	13,~~827~~132	$	~~494~~267	$	43,~~878~~776	$	7,~~199~~175	$	~~282~~269,~~048~~994	$	~~289~~277,~~247~~169

1615

Age Analysis of Past Due Loans Receivable

At June 30, ~~2011~~2012

	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total current		Total loans receivable
Mortgage One- to Four- Family - Owner-Occupied	$	978	$	995	$	939	$	2,912	$	109,990	$	112,902
Consumer		425		187		54		666		35,973		36,639
One- to Four- Family Non-Owner Occupied Mortgage		177		98		301		576		17,675		18,251
Multifamily Residential Real Estate Mortgage		—		—		—		—		46,296		46,296
Non-Residential Real Estate		732		307		—		1,039		64,117		65,156
Construction		—		—		—		—		1,084		1,084
Land		—		—		—		—		3,985		3,985
Commercial and Agricultural		240		—		204		444		6,077		6,521
Total	$	2,552	$	1,587	$	1,498	$	5,637	$	285,197	$	290,834

(in thousands)

	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Total current		Total loans receivable
Mortgage One- to Four- Family - Owner-Occupied	$	1,764	$	355	$	993	$	3,112	$	118,589	$	121,701
Consumer		195		15		274		484		35,111		35,595
One- to Four- Family Non-Owner-Occupied Mortgage		947		—		53		1,000		16,821		17,821
Multi-family Residential Real Estate Mortgage		489		—		—		489		41,836		42,325
Nonresidential Real Estate		207		306		698		1,211		57,912		59,123
Construction		—		—		—		—		1,189		1,189
Land		—		—		—		—		3,441		3,441
Commercial and Agricultural		246		—		—		246		6,758		7,004
Total	$	3,848	$	676	$	2,018	$	6,542	$	281.657	$	288,199

The following table illustrates certain disclosures required by ASC 310-10-50-15.

Impaired Loans

							For the three months ended March 31, 2012				For the nine months ended March 31, 2012
	For the three months ended September 30, 2012
	Recorded investment		Unpaid principal balance		Specific allowance		Interest income recognized		Average recorded investment		~~Interest income recognized~~		~~Average recorded investment~~
With a related allowance recorded:
	(in thousands)
Mortgage One- to Four- Family - Owner-Occupied	$	41	$	71	$	17	$	0	$	48	$	2	$	56
With a related allowance recorded:
Consumer		-		-		-		-		-		-		-
Mortgage One- to Four- Family - Owner-Occupied	$	39	$	68	$	17	$	-	$	39
One- to Four- Family Non-Owner Occupied Mortgage		477		485		9		4		477		18		481
Consumer		341		347		6		5		409
Multifamily Residential Real Estate Mortgage		4,899		6,065		1,167		20		4,459		157		4,300
One- to Four- Family Non-Owner Occupied Mortgage		4,237		4,685		448		20		4,252
Non-Residential Real Estate		5,217		5,717		337		15		4,233		44		3,810
Multi-family Residential Real Estate Mortgage		4,287		5,847		435		16		4,601
Construction		-		-		-		-		-		-		-
Nonresidential Real Estate		-		-		-		-		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-
Commercial and Agricultural		-		-		-		-		-		-		-
Land		-		-		-		-		-
Total	$	10,634	$	12,338	$	1,530	$	39	$	9,217	$	221	$	8,647
Commercial and Agricultural		-		-		-		-		-
Total	$	8,904	$	10,947	$	906	$	41	$	9,301

Impaired Loans

							For the three months ended March 31, 2012				For the nine months ended March 31, 2012
							For the three months ended September 30, 2012
	Recorded investment		Unpaid principal balance		Specific allowance		Interest income recognized		Average recorded investment		~~Interest income recognized~~		~~Average recorded investment~~
With no related allowance recorded:
	(in thousands)
Mortgage One- to Four- Family - Owner-Occupied	$	5,143	$	5,678	$	-	$	14	$	5,064	$	68	$	4,615
With no related allowance recorded:
Consumer		61		178		-		5		31		5		15
Mortgage One- to Four- Family - Owner-Occupied	$	5,717	$	6,503	$	-	$	16	$	6,097
One- to Four- Family Non-Owner Occupied Mortgage		39		67		-		5		40		7		39
Consumer		532		1,226		-		5		520
Multifamily Residential Real Estate Mortgage		8,580		8,959		-		57		9,094		237		9,000
One- to Four- Family Non-Owner Occupied Mortgage		1,136		1,256		-		6		710
Non-Residential Real Estate		1,966		2,234		-		4		3,145		54		3,597
Multi-family Residential Real Estate Mortgage		8,862		12,572		-		66		9,054
Construction		200		200		-		0		200		2		191
Nonresidential Real Estate		1,333		3,839		-		5		1,521
Land		30		38		-		-		15		-		7
Construction		-		-		-		-		-
Commercial and Agricultural		-		-		-		2		-		2		-
Land		27		49		-		-		28
Total	$	16,019	$	17,354	$	-	$	87	$	17,589	$	375	$	17,464
Commercial and Agricultural		235		244		-		5		238
Total	$	17,842	$	25,689	$	-	$	103	$	18,168

Impaired Loans

							For the three months ended March 31, 2012				For the nine months ended March 31, 2012
							For the three months ended September 30, 2012
	Recorded investment		Unpaid principal balance		Specific allowance		Interest income recognized		Average recorded investment		~~Interest income recognized~~		~~Average recorded investment~~
Total:
	(in thousands)
Mortgage One- to Four- Family - Owner-Occupied	$	5,184	$	5,749	$	17	$	14	$	5,112	$	70	$	4,671
Total:
Consumer		61		178		-		5		31		5		15
Mortgage One- to Four- Family - Owner-Occupied	$	5,756	$	6,571	$	17	$	16	$	6,136
One- to Four- Family Non-Owner Occupied Mortgage		516		552		9		9		517		25		520
Consumer		873		1,573		6		10		929
Multifamily Residential Real Estate Mortgage		13,479		15,024		1,167		77		13,553		394		13,300
One- to Four- Family Non-Owner Occupied Mortgage		5,373		5,941		448		26		4,962
Non-Residential Real Estate		7,183		7,951		337		19		7,378		98		7,407
Multi-family Residential Real Estate Mortgage		13,149		18,419		435		82		13,655
Construction		200		200		-		0		200		2		191
Nonresidential Real Estate		1,333		3,839		-		5		1,521
Land		30		38		-		-		15		-		7
Construction		-		-		-		-		-
Commercial and Agricultural		-		-		-		2		-		2		-
Land		27		49		-		-		28
Total	$	26,653	$	29,692	$	1,530	$	126	$	28,806	$	596	$	26,111
Commercial and Agricultural		235		244		-		5		238
Total	$	26,746	$	36,636	$	906	$	144	$	27,469

							For the year ended June 30, 2011
	Recorded investment		Unpaid principal balance		Specific allowance		Interest income recognized		Average recorded investment
With a related allowance recorded:
Mortgage One- to Four- Family - Owner-Occupied	$	26	$	44	$	18	$	2	$	26
Consumer		-		-		-		-		-
One- to Four- Family Non-Owner Occupied Mortgage		-		-		-		-		-
Multifamily Residential Real Estate Mortgage		6,484		8,057		1,573		278		5,637
Non-Residential Real Estate		-		-		-		-		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Commercial and Agricultural		-		-		-		-		-
Total	$	6,510	$	8,101	$	1,591	$	280	$	5,663

								For the year ended June 30, 2012
	Recorded investment		Unpaid principal balance		Specific allowance			Interest income recognized		Average recorded investment
	(in thousands)
With an allowance recorded:
One- to Four- Family - Owner-Occupied	$	40	$	70	$	(17	)		—	$	33
Consumer		—		—		—			—		—
One- to Four- Family Non-Owner Occupied Mortgage		476		485		(9	)		14		238
Multi-family Residential Real Estate Mortgage		4,266		4,754		(487	)		119		5,375
Nonresidential Real Estate		4,915		6,661		(562	)		61		2,457
Construction		—		—		—			—		—
Land		—		—		—			—		—
Commercial and Agricultural		—		—		—			—		—
Total	$	9,697	$	11,970	$	(1,075	)	$	194	$	8,103

							For the year ended June 30, 2012
	Recorded investment		Unpaid principal balance		Specific allowance		Interest income recognized		Average recorded investment
	(in thousands)
Without an allowance recorded:
Mortgage One- to Four- Family - Owner-Occupied	$	6,476	$	7,353	$	—	$	96	$	6,293
Consumer		508		1,168		—		40		254
One- to Four- Family Non-Owner Occupied Mortgage		285		403		—		2		260
Multi-family Residential Real Estate Mortgage		9,247		12,923		—		230		7,865
Non-residential Real Estate		1,709		4,216		—		39		4,510
Construction		—		—		—		—		—
Land		28		49		—		—		14
Commercial and Agricultural		240		249		—		13		120
Total	$	18,493	$	26,361	$	—	$	420	$	19,316

								For the year ended June 30, 2011
								For the year ended June 30, 2012
	Recorded investment		Unpaid principal balance		Specific allowance			Interest income recognized		Average recorded investment
Without a related allowance recorded:
	(in thousands)
Mortgage One- to Four- Family - Owner-Occupied	$	6,111	$	6,301	$	-		$	148	$	3,661
Total:
Consumer		-		-		-			-		-
Mortgage One- to Four- Family - Owner-Occupied	$	6,516	$	7,423	$	(17	)	$	96	$	6,326
One- to Four- Family Non-Owner Occupied Mortgage		234		352		-			7		117
Consumer		508		1,168		—			40		254
Multifamily Residential Real Estate Mortgage		6,483		6,483		-			108		5,261
One- to Four- Family Non-Owner-Occupied Mortgage		761		888		(9	)		16		498
Non-Residential Real Estate		7,311		7,443		-			100		7,115
Multifamily Residential Real Estate Mortgage		13,513		17,677		(487	)		349		13,240
Construction		-		-		-			-		-
Nonresidential Real Estate		6,624		10,877		(562	)		100		6,967
Land		-		-		-			-		-
Construction		—		—		—			—		—
Commercial and Agricultural		-		-		-			-		-
Land		28		49		—			—		14
Total	$	20,139	$	20,580	$	-		$	363	$	16,174
Commercial and Agricultural		240		249		—			13		120
Total	$	28,190	$	38,331	$	(1,075	)	$	614	$	27,419

							For the year ended June 30, 2011
	Recorded investment		Unpaid principal balance		Specific allowance		Interest income recognized		Average recorded investment
Total:
Mortgage One- to Four- Family - Owner-Occupied	$	6,137	$	6,345	$	18	$	150	$	3,687
Consumer		-		-		-		-		-
One- to Four- Family Non-Owner Occupied Mortgage		234		352		-		7		117
Multifamily Residential Real Estate Mortgage		12,967		14,541		1,573		386		10,898
Non-Residential Real Estate		7,311		7,443		-		100		7,115
Construction		-		-		-		-		-
Land		-		-		-		-		-
Commercial and Agricultural		-		-		-		-		-
Total	$	26,649	$	28,681	$	1,591	$	643	$	21,817

The Bank did not have any investments in subprime loans at September 30, 2012. Impaired loans at September 30, 2012 included troubled debt restructurings with an aggregate principal balance of $22.4 million and a recorded investment of $21.8 million. See Note 12 for more discussion on troubled debt restructurings.

~~The~~12. TROUBLED ~~Bank~~DEBT ~~did~~RESTRUCTURINGS - ~~not~~From ~~have~~time ~~any~~to ~~investments~~time, inas ~~subprime~~part of our loss mitigation process, loans atmay ~~March~~be renegotiated in a troubled debt restructuring (“TDR”) 31when we determine that greater economic value will ultimately be recovered under the new restructured terms than through foreclosure, liquidation, ~~2012~~or bankruptcy. ~~Impaired~~We ~~loans~~may atconsider ~~March~~the 31borrower’s payment status and history, ~~2012~~the ~~included~~borrower’s ~~troubled~~ability ~~debt~~to ~~restructurings~~pay upon ~~with~~a rate reset on an ~~aggregate~~adjustable ~~principal~~rate ~~balance~~mortgage, size of ~~$25.8~~the ~~million~~payment increase upon a rate reset, period of time remaining prior to the rate reset, and other relevant factors in determining whether a ~~recorded~~borrower ~~investment~~is ofexperiencing ~~$23~~financial difficulty.6 ~~million~~TDRs are accounted for as set forth in ASC 310-40 Troubled Debt Restructurings by Creditors (“ASC 310-40”). ~~See~~A ~~Note~~TDR 13may be on nonaccrual or it may accrue interest. A TDR is typically on non-accrual until the borrower successfully performs under the new terms for ~~more~~at ~~discussion~~least six consecutive months. However, a TDR may be placed on ~~troubled~~accrual ~~debt~~immediately ~~restructurings~~following the restructuring in those instances where a borrower’s payments are current prior to the modification, the loan is restructured at a market rate and management determines that principal and interest under the new terms are fully collectible. All TDRs are considered to be impaired loans. A TDR will be removed from TDR classification if it is restructured at a market rate, is not impaired under restructured terms and has been performing for at least twelve months.

13. TROUBLED DEBT RESTRUCTURINGS - From time to time, as part of our loss mitigation process, loans may be renegotiated in a troubled debt restructuring (“TDR”) when we determine that greater economic value will ultimately be recovered under the new restructured terms than through foreclosure, liquidation, or bankruptcy. We may consider the borrower’s payment status and history, the borrower’s ability to pay upon a rate reset on an adjustable rate mortgage, size of the payment increase upon a rate reset, period of time remaining prior to the rate reset, and other relevant factors in determining whether a borrower is experiencing financial difficulty. TDRs are accounted for as set forth in ASC 310-40 Troubled Debt Restructurings by Creditors (“ASC 310-40”). A TDR may be on non-accrual or it may accrue interest. A TDR is typically on non-accrual until the borrower successfully performs under the new terms for at least six consecutive months. However, a TDR may be placed on accrual immediately following the restructuring in those instances where a borrower’s payments are current prior to the modification, the loan is restructured at a market rate and management determines that principal and interest under the new terms are fully collectible. All TDRs are considered to be impaired loans. A TDR will be removed from TDR classification if it is restructured at a market rate, is not impaired under restructured terms and has been performing for at least twelve months.

Existing performing loan customers who request a loan (non-TDR) modification and who meet the Bank’s underwriting standards may, usually for a fee, modify their original loan terms to terms currently offered. The modified terms of these loans are similar to the terms offered to new customers with similar credit risk. The fee assessed for modifying the loan is deferred and amortized over the life of the modified loan using the level-yield method and is reflected as an adjustment to interest income. Each modification is examined on a loan-by-loan basis and if the modification of terms represents more than a minor change to the loan, then the unamortized balance of the pre-modification deferred fees or costs associated with the mortgage loan are recognized in interest income at the time of the modification. If the modification of terms does not represent more than a minor change to the loan, then the unamortized balance of the pre-modification deferred fees or costs continue to be deferred.

During the quarter ended March 31, 2011, we began restructuring loans into a split note or Note A/Note B format. With respect to a particular loan relationship, upon performing a global analysis of the relationship with the borrower, the terms of Note A are calculated using current financial information to determine the amount of payment at which the borrower would have a debt service coverage ratio of 1.5x or better. The resulting payment is calculated based upon a 30 -year amortization period, then fixed for two years, with the loan maturing at the end of the two year period. ~~The~~ The amount for Note B is the difference between Note A and the original amount to be refinanced, plus all other expenses necessary to restructure the loans. The Note B bears the same interest rate and balloon term as Note A, but no principal or interest payments are due until maturity. While no amount of the original indebtedness of the borrower is forgiven through this process, the full amount of Note B is charged-off at the time of issuance of the Note B. Note A is treated as any other troubled debt restructuring and initially is placed on non-accrual. Generally, Note A may return to accrual status after a history of performance in accordance with the restructured terms of at least six consecutive months is established.

2019

The following tables summarize TDRs by loan type and accrual status.

	At March 31, 2012
	At September 30, 2012
	Loan Status				Total ~~unpaid~~Unpaid ~~principal~~Principal		Related		Recorded		Number of		Average ~~recorded~~Recorded
(In thousands)	Accrual		Nonaccrual		~~balance~~Balance		~~allowance~~Allowance		~~investment~~Investment		~~of loans~~Loans		~~investment~~Investment
One- to Four-Family residential real estate	$	12,~~894~~095	$	32,~~043~~693	$	4,~~937~~788	$	1723	$	4,~~556~~765		2426	$	4,~~668~~858
One- to Four- Family non-owner		485		-		485		9		477		4		740
Multi-family residential real estate		7,377		4,179		11,556		160		11,396		12		11,598
Multifamily residential real estate		5,339		7,604		12,943		809		11,755		12		11,491
Nonresidential real estate		3,111		2,926		6,037		435		5,602		8		5,623
Nonresidential real estate		3,166		4,058		7,224		337		6,600		7		6,673
Total	$	12,583	$	9,798	$	22,381	$	618	$	21,763		46	$	22,079
Construction		200		-		200		-		200		1		100
Total	$	11,084	$	14,705	$	25,789	$	1,172	$	23,588		48	$	23,672

	At June 30, 2011
	At June 30, 2012
	Loan Status				Total ~~unpaid~~Unpaid ~~principal~~Principal		Related		Recorded		Number of		Average ~~recorded~~Recorded
(In thousands)	Accrual		Nonaccrual		~~balance~~Balance		~~allowance~~Allowance		~~investment~~Investment		~~of loans~~Loans		~~investment~~Investment
One- to Four-Family residential real estate	$	42,~~128~~374	$	12,~~653~~601	$	54,~~781~~975	$	-26	$	54,~~781~~949		3428	$	35,~~474~~365
Multifamily residential real estate		2,041		10,358		12,399		1,173		11,226		11		7,800
Multi-family residential real estate		7,715		4,251		11,966		165		11,801		12		11,514
Nonresidential real estate		23,~~599~~122		42,~~146~~987		6,~~745~~109		-465		65,~~745~~644		78		46,~~976~~194
Total	$	813,~~768~~211	$	169,~~157~~839	$	2423,~~925~~050	$	~~1,173~~656	$	2322,~~752~~394		5248	$	1623,~~250~~073

Interest income recognized on TDRs is as follows:

	For the three months		For the nine months
	For the three months ended September 30, 2012
	ended March 31, 2012		ended March 31, 2012
One-to Four-Family residential real estate	$	17
One-to-Four Family residential real estate	$	22	$	93
Multi-family residential real estate		86
Multifamily residential real estate		77		309
Nonresidential real estate		20
Nonresidential real estate		19		98
Construction		-
Construction		-		2
Commercial		-
Commercial		-		-
Consumer		-
Consumer		-		-
Total	$	123
Total	$	118	$	502

At ~~March~~September 3130, 2012, the Bank had 4846 loans with a recorded ~~investment~~ investment totaling $2321.68 million that qualified as TDRs, and has reserved an aggregate of $618,000 for losses on these loans ~~of $1~~.~~2 million.~~ At ~~March~~September 3130, 2012, TDRs with no related allowance totaled $14.76 million and TDRs with a related allowance totaled $87.92 million. At ~~March~~September 3130, 2012, the Bank had no other commitments to lend on its TDRs. At June 30, ~~2011~~2012, the Bank had 5248 loans totaling $23.81 million that qualified as TDRs, and has ~~reserved~~established an allowance for losses on these loans of $1656,000.2 ~~million.~~ At June 30, ~~2011~~2012, TDRs with no related allowance totaled $2017.9 4 million and TDRs with a related allowance totaled $25.97 million. Management continues to monitor the performance of loans classified as TDRs.

Loans that were included in ~~troubled~~TDRs ~~debt restructuring~~ at ~~March 31~~September 30, 2012 and June 30, ~~2011~~2012 were generally given concessions of interest rate reductions of between 25 and 300 basis points, and/or ~~structured~~ structured as interest only payment loans for periods of one to three years. Many of these loans also have balloon payments due at the end of their lowered interest rate period, requiring the borrower to refinance at market rates at that time. At ~~March~~September 3130, 2012, ~~there~~ there were 38 loans with required principal and interest payments, 10and eight loans with required interest only payments. At June 30, ~~2011~~2012, there were 4339 loans with required principal and interest payments, 9and nine loans with required interest only payments.

2120

The following table is a roll forward of activity in our TDRs:

	Three Months Ended March 31, 2012						Nine Months Ended March 31, 2012
	Three Months Ended September 30, 2012
	Recorded Investment			Number of Loans			~~Recorded Investment~~			~~Number of Loans~~
(Dollar amounts in thousands)
Beginning balance	$	2522,~~377~~394			5348		$	~~23,752~~			52
Additions to TDRs		31156			1-			~~2,924~~			6
Removal of TDRs(1)		(~~1,197~~146	)		(62	)		~~(1,880~~	)		~~(10~~	)
Charge-offs		(404	)		-			(404	)		-
Payments		(641	)		-
Payments		(219	)		-			(804	)		-
Ending balance	$	21,763			46
Ending balance	$	23,588			48		$	23,588			48

(1) ~~TDRs~~One ~~that~~TDR ~~are~~was ~~performing~~foreclosed ~~(for~~on atduring ~~least twelve~~the ~~consecutive~~period ~~months),~~and ~~restructured~~transferred atto aREO ~~market~~in ~~interest~~the ~~rate~~amount ~~and~~of ~~not~~$146,000. ~~impaired~~At ~~under~~June 30, ~~the~~2012, ~~restructured~~one ~~terms~~customer had two TDRs that were ~~removed~~restructured ~~from~~ during the ~~TDR~~quarter ~~classification~~ended September 30, 2012 into one loan.

~~The~~Two ~~following~~loans ~~table~~that ~~provides~~were arecorded ~~summary~~as ofTDRs ~~the~~at ~~loans~~June ~~that~~30, 2012 were restructured ~~as TDRs~~ during the ~~three~~quarter ~~months~~ ended ~~March~~September 3130, 2012: upon the end of the original restructured terms. The restructuring increased the recorded investment in these loans by $156,000 and the loans continue to be carried as TDRs.

							Allocation of allowance for loan loss
	Number of Modifications		Recorded investment prior to restructuring		Recorded investment after restructuring		Prior to restructuring		After restructuring
(Dollar amount in thousands)
Mortgage One- to Four- Family - Owner-Occupied		1	$	60	$	31	$	-	$	-
Non-Residential Real Estate		-		-		-		-		-
Multifamily Residential Real Estate Mortgage		-		-		-		-		-
Totals		1	$	60	$	31	$	-	$	-

No new loans were restructured during the quarter ended September 30, 2012.

~~The~~13. EFFECT ~~following~~OF ~~table~~RECENT ~~provides~~ACCOUNTING aPRONOUNCEMENTS ~~summary of the loans that were restructured as TDRs during the nine months ended March 31, 2012:~~

							Allocation of allowance for loan loss
	Number of Modifications		Recorded investment prior to restructuring		Recorded investment after restructuring		Prior to restructuring		After restructuring
(Dollar amount in thousands)
Mortgage One- to Four- Family - Owner-Occupied		4	$	1,340	$	1,181	$	-	$	-
Non-Residential Real Estate		1		722		615		93		-
Multifamily Residential Real Estate Mortgage		1		1,543		1,128		-		-
Totals		6	$	3,605	$	2,924	$	93	$	-

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The ASU became effective for the Company during the quarter ended September 30, 2012. The adoption of this ASU does not impact the way the Company reports comprehensive income, and did not have an impact on the Company’s consolidated financial statements.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The ASU became effective for the Company during the quarter ended September 30, 2012. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.

In July 2012 the FASB issued ASU 2012-02, Intangibles - goodwill and other (Topic 350). The amendments in this Update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. Effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued.

In August 2012 the FASB issued ASU 2012-03, Technical Amendments and Corrections to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22. Because the amendments in this ASU reflect only guidance modifications that the SEC had previously issued, the amendments have no incremental impact on the reporting entity.

In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements. The amendments in this update clarify the Codification or corrects unintended application of guidance and includes amendments identifying when the use of fair value should be linked to the definition of fair value in Topic 820, Fair Value Measurement. For public entities, amendments subject to transition guidance will be effective for fiscal periods beginning after December 15, 2012.

~~The~~Item ~~Mortgage One-to Four-Family-Owner-Occupied loan restructurings consisted of an interest rate reduction to a below market interest rate~~2. ~~The~~Management ~~Non-Residential~~Discussion ~~Real~~and ~~Estate~~Analysis ~~loan restructuring consisted~~ of aFinancial ~~rate~~Condition ~~reduction to a below market interest rate. The Multifamily Residential Real Estate Mortgage loan was restructured into a Note A/B with a market rate of interest on Note A~~ and aResults ~~below market rate~~ of ~~interest on Note B.~~Operations

~~The Company considers TDRs that become 90 days or more past due under the modified terms as subsequently defaulted. During the nine month period ended March 31, 2012 the Company had one one~~Forward-~~to-four family~~Looking loan subsequently default after modification. The recorded investment in the loan at the time of default was approximately $81,000. The Company does not anticipate any further loss on the loan and the default of this loan had no impact on the allowance for loan losses for the period.Statements

23This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets, changes in deposit flows, and changes in the quality or composition of the Company’s loan or investment portfolios. Additionally, other risks and uncertainties may be described in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on September 7, 2012, which is available through the SEC’s website at www.sec.gov. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake the responsibility, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

~~14. EFFECT~~Critical OFAccounting ~~RECENT ACCOUNTING PRONOUNCEMENTS~~Policies

InWe ~~September~~consider ~~2011,~~accounting ~~the~~policies ~~FASB~~involving ~~issued~~significant ~~Accounting Standards Update~~judgments ~~(ASU)~~and ~~2011-08,~~assumptions ~~Testing~~by ~~Goodwill~~management ~~for~~that ~~Impairment~~have, toor ~~simplify~~could ~~how~~have, ~~entities~~a ~~test~~material ~~goodwill~~impact ~~for~~on ~~impairment. This guidance permits an entity to assess qualitative factors to determine whether it is more likely than not (defined as more than fifty percent) that~~ the ~~fair~~carrying value of acertain ~~reporting~~assets ~~unit~~or ison ~~less than its carrying amount as a basis for determining whether it is necessary~~ income to ~~perform the~~be ~~current~~critical ~~two-step~~accounting ~~goodwill impairment test~~policies. ~~The~~We ~~two-step~~consider ~~goodwill impairment test is only required if~~ the ~~entity~~following ~~determines that~~to itbe isour ~~more~~critical ~~likely~~accounting ~~than~~policies: ~~not that~~ the ~~fair~~allowance ~~value~~for ofloan alosses and ~~reporting~~the ~~unit~~valuation ~~is less than its carrying amount. The adoption~~ of ~~this guidance~~deferred ~~did~~income ~~not have a material effect on the Company’s financial statements~~taxes.

InALLOWANCE ~~June~~FOR ~~2011,~~LOAN ~~the~~LOSSES ~~FASB~~- ~~issued~~The ~~ASU~~allowance ~~2011-05, Presentation~~for ofloan ~~Comprehensive~~losses ~~Income,~~is the ~~which~~amount ~~requires~~estimated anby ~~entity~~management as necessary to ~~present~~cover probable credit losses in the ~~total~~loan portfolio at the statement of ~~comprehensive~~financial condition ~~income,~~date. The allowance is established through the ~~components of~~provision ~~net~~for ~~income~~loan losses, ~~and~~which ~~the~~is ~~components~~charged to income. Determining the amount of ~~other~~the ~~comprehensive~~allowance ~~income~~for ~~either~~loan inlosses anecessarily ~~single~~involves ~~continuous~~a ~~statement~~high degree of ~~comprehensive~~judgment. ~~income~~Among the material estimates required orto inestablish ~~two~~the ~~separate~~allowance ~~but~~are: ~~consecutive~~loss ~~statements.~~exposure Inat ~~both~~default; ~~choices,~~the anamount ~~entity~~and istiming ~~required~~of future cash flows on impacted loans; and value of collateral. Inherent loss factors are then applied to ~~present~~the ~~each~~remaining ~~component~~loan portfolio. All of ~~net~~these ~~income~~estimates are susceptible ~~along~~to ~~with~~significant ~~total~~change. ~~net~~Management ~~income,~~reviews ~~each~~the ~~component~~level of ~~other~~the ~~comprehensive~~allowance ~~income~~on ~~along~~a ~~with~~quarterly abasis ~~total~~and establishes the provision for ~~other~~loan losses ~~comprehensive~~based ~~income~~upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related ato ~~total~~the ~~amount~~collectibility ~~for~~of ~~comprehensive~~the ~~income~~loan portfolio. ~~This~~Although ~~ASU~~we ~~eliminates~~believe that we use the ~~option~~best information available to ~~present~~establish the ~~components~~allowance for ofloan ~~other~~losses, ~~comprehensive~~future ~~income as~~adjustments ~~part~~to of the ~~statement~~allowance ofmay ~~changes~~be innecessary ~~stockholders’~~if ~~equity.~~economic ~~The~~conditions ~~amendments~~differ insubstantially ~~this~~from ~~ASU~~the doassumptions used ~~not~~in ~~change~~making the ~~items~~evaluation. ~~that~~In ~~must be~~addition, ~~reported~~the inOffice ~~other~~of ~~comprehensive~~the ~~income~~Comptroller orof ~~when~~the Currency (“OCC”), as an ~~item~~integral part of ~~other~~its ~~comprehensive~~examination ~~income~~process, ~~must~~periodically bereviews ~~reclassified~~our toallowance ~~net~~for ~~income~~loan losses. ~~The~~Such agency may require us to recognize adjustments ~~ASU~~to isthe ~~effective~~allowance ~~for~~based ~~fiscal~~on ~~years,~~its ~~and~~judgments ~~interim~~about ~~periods~~information ~~within~~available ~~those~~to ~~years,~~it ~~beginning~~at ~~after~~the ~~December~~time ~~15,~~of ~~2011~~its examination. ~~The~~A ~~adoption~~large ofloss could deplete ~~this~~the ~~ASU~~allowance ~~will~~and ~~not~~require ~~impact~~increased ~~the~~provisions ~~way~~to replenish the ~~Company~~allowance, ~~currently~~which ~~reports~~would ~~comprehensive~~negatively ~~income~~affect earnings. For additional discussion, see notes 11 and ~~will~~12 ~~not~~of ~~have~~the aNotes ~~material~~to ~~impact~~the onConsolidated Financial Statements included in Item 8 of the Annual Report ~~Company’s~~on ~~financial~~Form ~~statements~~10-K filed with the Securities and Exchange Commission on September 7, 2012.

InDEFERRED ~~May~~INCOME ~~2011,~~TAXES - We use the ~~FASB~~asset ~~issued~~and ~~ASU~~liability ~~2011~~method of accounting for income taxes as prescribed in Accounting Standards Codification (“ASC”) 740-~~04,~~10-50. ~~Fair~~Under ~~Value~~this ~~Measurement~~method, ~~(Topic~~deferred ~~820):~~tax ~~Amendments~~assets and liabilities are recognized for the future tax consequences attributable to ~~Achieve~~differences ~~Common~~between ~~Fair~~the ~~Value~~financial statement ~~Measurement~~carrying amounts of existing assets and ~~Disclosure~~liabilities ~~Requirements~~and intheir Urespective tax bases.S. ~~GAAP~~If ~~and~~current ~~IFRSs,~~available ~~which~~information ~~generally~~raises ~~represents~~doubt ~~clarifications~~as to the realization of ~~Topic~~the ~~820~~deferred tax assets, ~~Fair~~a ~~Value~~valuation ~~Measurements,~~allowance ~~but~~is ~~also~~established. ~~includes~~Deferred ~~certain~~tax ~~instances~~assets ~~where~~and aliabilities are ~~particular~~measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are ~~principle~~expected to be recovered or ~~requirement~~settled. ~~for~~We ~~measuring~~exercise ~~fair~~significant ~~value~~judgment orin ~~disclosing~~evaluating ~~information~~the ~~about~~amount ~~fair~~and ~~value~~timing ~~measurements~~of ~~has~~recognition ~~changed~~of the resulting tax liabilities and assets. ~~This~~These ~~ASU is~~judgments ~~intended~~require us to ~~result~~make inprojections ~~common~~of ~~principles~~future taxable income. The judgments and estimates ~~requirements~~we ~~for~~make ~~measuring~~in ~~fair~~determining ~~value~~our ~~and~~deferred ~~for~~tax ~~disclosing~~assets, ~~information~~which ~~about~~are ~~fair~~inherently subjective, are reviewed on a continual basis as ~~value~~regulatory ~~measurements~~and business factors change. Any reduction in ~~accordance~~estimated ~~with~~future Utaxable income may require us to record a valuation allowance against our deferred tax assets.S. ~~GAAP~~A ~~and~~valuation ~~International~~allowance ~~Financial~~would ~~Reporting~~result ~~Standards~~in ~~(IFRS)~~additional income tax expense in the period, which would negatively affect earnings. ~~ASU~~The ~~2011~~Company applies the provisions of ASC 275-0410-50-8 isto ~~effective prospectively~~account for ~~interim~~uncertainty in income taxes. The Company had no unrecognized tax benefits as of September 30, 2012 and ~~annual~~June ~~periods~~30, ~~beginning~~2012. ~~after~~The ~~December~~Company 15recognized no interest and penalties on the underpayment of income taxes during the three month periods ended September 30, 2012 and 2011, ~~with~~and ~~earlier~~had ~~application~~no accrued ~~not~~interest ~~permitted~~and penalties on the balance sheet as of September 30, 2012 and June 30, 2012. ~~This~~The ~~ASU~~Company has no tax positions ~~did~~for ~~not~~which ~~have~~it ais ~~material~~reasonably ~~impact~~possible onthat the total amounts of unrecognized tax benefits will significantly increase with the next twelve months. The Company’s ~~financial~~is ~~statements~~no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years before the fiscal year ended June 30, 2009.

In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310) – A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies which loan modifications constitute troubled debt restructurings. In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude under the guidance in ASU 2011-02 that the restructuring constitutes a concession and that the debtor is experiencing financial difficulties. The amendments also clarify that a creditor is precluded from using the effective interest rate test in the debtor’s guidance on restructuring of payables when evaluating whether a restructuring constitutes a troubled debt restructuring. ASU 2011-02 is effective for the first interim or annual period beginning on or after June 15, 2011. The adoption of this ASU did not have a material impact on the Company’s financial statements.23

InComparison January 2010, the FASB issued ASU No. 2010-06, Improving Disclosure about Fair Value Measurements, under Topic 820, Fair value Measurements and Disclosures, to improve and provide new disclosures for recurring and nonrecurring fair value measurements under the three-level hierarchy of ~~inputs~~Financial ~~for~~Condition ~~transfers in~~at ~~and~~September ~~out of Levels 1 and 2~~30, ~~and activity in Level 3. This update also clarifies existing disclosures of the level of disaggregation~~2012 ~~for the classes of assets~~ and ~~liabilities and the disclosure about inputs and valuation techniques. ASU No. 2010-06 became effective during the year ended~~ June 30, ~~2010,~~2012 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which became effective for the interim period ending September 30, 2011. The adoption of this remaining guidance did not have an impact on the Company’s financial statements.

InBalance ~~December~~Sheet ~~2011,~~Analysis the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. This ASU is not expected to have a significant impact on the Company's financial statements.

24Total assets were $502.2 million at September 30, 2012, compared to $495.9 million at June 30, 2012. Total assets increased $6.3 million, or 1.3%, primarily as a result of a $15.0 million increase in investment securities, partially offset by an $11.1 million decrease in loans. Our investment securities increased as a result of an increase in deposits and a decrease in loans. The increase in investment securities was primarily related to purchases of both mortgage-backed securities and municipal bonds. The decrease in loans was primarily the result of payoffs aggregating $5.8 million for three performing commercial real estate loans as described below.

~~Item~~Total liabilities were $446.9 million at September 30, 2012, compared to $440.9 million at June 30, 2012. The increase of $6.0 million was primarily the result of a $6.1 million increase in deposits which reflected a $3.8 million net increase in municipal deposits and a $2.3 million increase in retail customer deposits. The increase in municipal deposits consisted of an increase in demand deposits totaling $5.0 million, partially offset by a decrease in savings accounts totaling $1.2 million. The increase in retail deposits consisted of increases in demand deposit accounts of $1.0 million and savings accounts of $2.7 million, partially offset by declines in certificate of deposit of $1.4 million.

~~Management~~Total ~~Discussion~~stockholders’ ~~and~~equity ~~Analysis~~was $55.3 million at September 30, 2012, compared to $55.0 million at June 30, 2012. The increase was primarily the result of net ~~Financial~~income ~~Condition~~of $494,000 and a $633,000 increase in net unrealized gains on investments, partially offset by dividends paid of $862,000. As previously announced, the Company suspended the payment of dividends as a result of the cost and ~~Results~~uncertainty associated with United Community MHC’s ability to waive receipt of ~~Operations~~the Company’s dividends. This cost and uncertainty was due to the Federal Reserve Board requirement that a “grandfathered” mutual holding company, like United Community MHC, obtain member (depositor) approval and comply with other procedural requirements prior to waiving dividends, which would make dividend waivers impracticable. Accordingly, on August 31, 2012, the Company paid a cash dividend to all stockholders, including United Community MHC, for the quarter ended June 30, 2012, which totalled $862,000, including $512,000 paid to United Community MHC.

~~Forward~~Loans. At September 30, 2012, one-~~Looking~~ ~~Statements~~to four- family residential loans totaled $137.9 million, or 49.7% of total gross loans, compared to $139.5 million, or 48.4% of total gross loans, at June 30, 2012. The reduction in the one- to four-family residential portfolio during the 2012 period was primarily due principal repayments coupled with our strategy of selling in the secondary market newly-originated fixed-rate loans with terms longer than 10 years.

~~This report contains forward~~Multi-~~looking~~family ~~statements~~and ~~that~~nonresidential ~~are~~real ~~based~~estate ~~on assumptions~~ and ~~may~~land ~~describe~~loans ~~future~~totaled ~~plans,~~$91.0 ~~strategies~~million and ~~expectations~~represented ~~of the Company~~32.8% ~~These forward-looking statements are generally identified by use~~ of ~~the~~total ~~words~~loans ~~“believe,”~~at ~~“expect~~September 30,” ~~“intend~~2012,” ~~“anticipate,” “estimate,”~~compared ~~“project”~~to ~~or similar expressions~~$101.4 ~~The Company’s ability to predict results or the actual~~million, ~~effect of future plans~~ or ~~strategies is inherently uncertain~~35.2% ~~Factors which could have a material adverse effect on the operations~~ of ~~the~~total ~~Company and its subsidiaries include~~loans, ~~but~~at ~~are not limited to~~June 30, ~~general~~2012. ~~economic~~The ~~conditions,~~decrease ~~changes~~was inprimarily ~~the~~attributable ~~interest~~to rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the ~~securities~~repayment ~~markets,~~of ~~changes~~one ~~in deposit flows,~~nonresidential ~~and~~real ~~changes~~estate ~~in the quality or composition of the Company’s~~ loan ortotaling ~~investment portfolios~~$1.8 ~~Additionally,~~million ~~other risks~~ and ~~uncertainties~~ ~~may~~two ~~be described in the Company’s Annual Report on Form 10~~multi-~~K/A~~family asreal ~~filed~~estate ~~with~~loans ~~the~~totaling ~~Securities and Exchange Commission on April 26, 2012, which is available through the SEC’s website at www~~$4.~~sec.gov.~~0 ~~These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements~~million. Except as required by applicable law or regulation, the Company does not undertake the responsibility, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

~~Critical Accounting Policies~~24

WeThe ~~consider~~following ~~accounting~~table ~~policies~~sets ~~involving~~forth ~~significant judgments and assumptions by management that have, or could have, a material impact on~~ the ~~carrying value~~ composition of ~~certain assets or on income to be critical accounting policies. We consider the following to be~~ our ~~critical~~loan ~~accounting~~portfolio ~~policies:~~at the ~~allowance~~dates ~~for loan losses and the valuation of deferred income taxes~~indicated.

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is the amount estimated by management as necessary to cover probable credit losses in the loan portfolio at the statement of financial condition date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; and value of collateral. Inherent loss factors are then applied to the remaining loan portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance on a quarterly basis and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of the Comptroller of the Currency (“OCC”), as an integral part of its examination process, periodically reviews our allowance for loan losses. Such agency may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings. For additional discussion, see notes 2 and 6 of the Notes to the Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 26, 2012.

	At September 30, 2012						At June 30, 2012
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Residential real estate:
One- to four-family	$	137,853			49.7	%	$	139,522			48.4	%
Multi-family		35,424			12.8			42,325			14.7
Construction		1,386			0.5			1,189			0.4
Nonresidential real estate		55,547			20.0			59,123			20.5
Land		3,665			1.3			3,441			1.2
Commercial business		4,278			1.6			3,854			1.3
Agricultural		3,497			1.3			3,150			1.1
Consumer:
Home equity		31,338			11.3			31,242			10.9
Auto		1,991			0.7			1,820			0.6
Share loans		1,143			0.4			1,200			0.4
Other		1,047			0.4			1,333			0.5
Total consumer loans		35,519			12.8			35,595			12.4
Total loans	$	277,169			100.0	%	$	288,199			100.0	%
Less (plus):
Deferred loan costs, net		(960	)					(924	)
Undisbursed portion of loans in process		370						355
Allowance for loan losses		5,683						5,614
Loans, net		272,076					$	283,154

~~DEFERRED~~Loan ~~INCOME~~Maturity TAXES - We use the asset and liability method of accounting for income taxes as prescribed in Accounting Standards Codification (“ASC”) 740-10-50. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings. The Company adopted the provisions of ASC 275-10-50-8 to account for uncertainty in income taxes effective July 1, 2007. Implementation resulted in no cumulative effect adjustment to retained earnings as of the date of adoption. The Company had no unrecognized tax benefits as of March 31, 2012 and June 30, 2011. The Company recognized no interest and penalties on the underpayment of income taxes during the three and nine month periods ended March 31, 2012 and 2011, and had no accrued interest and penalties on the balance sheet as of March 31, 2012 and June 30, 2011. The Company has no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase with the next twelve months. The Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years before the fiscal year ended June 30, 2006.

25The following table sets forth certain information at September 30, 2012 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The table does not include any estimate of prepayments, which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from the contractual requirements shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less.

Comparison of Financial Condition at March 31, 2012 and June 30, 2011

	Less Than One Year		More Than One Year to Five Years		More Than Five Years		Total Loans
	(in thousands)
One- to four-family residential real estate	$	2,253	$	31,905	$	103,695	$	137,853
Multi-family real estate		231		11,212		23,981		35,424
Construction		884		244		258		1,386
Nonresidential real estate		2,527		20,745		32,275		55,547
Land		231		2,153		1,281		3,665
Commercial		156		2,651		1,471		4,278
Agricultural		78		1,306		2,113		3,497
Consumer		5,424		2,755		27,340		35,519
Total	$	11,784	$	72,971	$	192,414	$	277,169

Total assets were $503.6 million at March 31, 2012, compared to $472.5 million at June 30, 2011. Total assets increased $31.1 million, or 6.6%, primarily as a result of a $26.2 million increase in investment securities, a $4.1 million increase in Federal Home Loan Bank (“FHLB”) stock and a $2.2 million increase bank owned life insurance (“BOLI”). The increase in investment securities was primarily due to purchases of mortgage-backed securities offset by sales of other available for sale securities. The increase in FHLB stock was attributable to the Bank’s desire to increase its borrowing capacity. BOLI was increased to offset and recover existing benefit expenses.25

~~Total~~The ~~liabilities~~following ~~were~~table ~~$448.3~~sets ~~million~~forth atthe ~~March 31, 2012, compared~~dollar toamount ~~$418.4~~of ~~million~~all loans at ~~June~~ September 30, ~~2011.~~2012 ~~The~~due ~~increase~~after ofSeptember 30, ~~$29.9~~2013 ~~million~~that ~~was~~have ~~primarily~~either ~~the~~fixed ~~result~~interest ofrates aor ~~$20.6 million increase in deposits~~adjustable ~~and~~interest ~~a $9~~rates.3 ~~million increase in FHLB advances.~~ The ~~increase~~amounts inshown ~~deposits~~below ~~was~~exclude ~~primarily~~unearned ~~the~~interest ~~result~~on ofconsumer anloans ~~increase in retail customer deposits. The increase in FHLB stock was attributable to the Bank’s desire to increase its borrowing capacity. BOLI was increased to offset~~ and ~~recover~~deferred ~~existing~~loan ~~benefit expenses~~fees.

Total stockholders’ equity was $55.4 million at March 31, 2012, compared to $54.1 million at June 30, 2011. The increase was primarily the result of net income of $1.6 million, partially offset by dividends paid of $1.0 million. At March 31, 2012, the Bank was considered “well-capitalized” under applicable regulatory requirements.

	Fixed Rates		Floating or Adjustable Rates		Total
	(in thousands)
One- to four-family residential real estate	$	42,933	$	92,667	$	135,600
Multi-family real estate		4,248		30,945		35,193
Construction		225		277		502
Nonresidential real estate		7,381		45,639		53,020
Land		1,235		2,199		3,434
Commercial		1,404		2,718		4,122
Agricultural		728		2,691		3,419
Consumer		2,281		27,814		30,095
Total	$	60,435	$	204,950	$	265,385

~~Comparison~~Loan ofActivity ~~Operating Results for the Three and Nine Months Ended March 31, 2012 and 2011~~

~~General.~~The ~~Net~~following ~~income~~table ~~was~~shows ~~$457,000~~loan ~~for the quarter ended March 31~~origination, ~~2012 compared to a loss of $643,000 for the same period in the prior year. Net income for the nine months ended~~ ~~March~~repayment ~~31,~~and ~~2012~~sale ~~was~~activity ~~$1.6~~during ~~million compared to $374,000 for~~ the ~~nine~~periods ~~months ended March 31, 2011~~indicated.

Net Interest Income. The following table summarizes changes in interest income and interest expense for the three and nine months ended March 31, 2012 and 2011.

	Three Months Ended September 30,
	2012			2011
	(in thousands)
Total loans at beginning of period	$	288,199		$	290,834
Loans originated (1):
One- to four-family residential real estate		9,636			2,606
Multi-family residential real estate		—			—
Construction		471			351
Nonresidential real estate		52			—
Land		—			58
Commercial business		391			25
Consumer		3,132			549
Total loans originated		13,682			3,589
Deduct:
Loan principal repayments		18,173			2,765
Loans originated for sale		6,539			3,459
Net loan activity		(11,030	)		(2,635	)
Total loans at end of period	$	277,169		$	288,199

	Three Months Ended							Nine Months Ended
	March 31,							March 31,
	2012		2011		% Change			2012		2011		% Change
	(Dollars in thousands)
Interest income:
Loans	$	3,575	$	4,140		(13.6	)%	$	11,472	$	12,821		(10.5	)%
Investment and mortgage backed securities		712		732		(2.7	)		2,196		2,102		4.5
Other interest-earning assets		3		4		(25.0	)		9		16		(43.8	)
Total interest income		4,290		4,876		(12.0	)		13,677		14,939		(8.4	)
Interest expense:
NOW and money market deposit accounts		129		148		(12.8	)		434		631		(31.2	)
Passbook accounts		64		70		(8.6	)		194		205		(5.4	)
Certificates of deposit		803		1,055		(23.9	)		2,551		3,463		(26.3	)
Total interest-bearing deposits		996		1,273		(21.8	)		3,179		4,299		(26.1	)
FHLB advances		29		13		123.1			55		55		-
Total interest expense		1,025		1,286		(20.3	)		3,234		4,354		(25.7	)
Net interest income	$	3,265	$	3,590		(9.1	)	$	10,443	$	10,585		(1.3	)

(1)

Includes loan renewals, loan refinancings and restructured loans.

26Results of Operations for the Three Months Ended September 30, 2012 and 2011

Overview. Net ~~interest~~ income ~~decreased $325,000, or 9.1%, to $3.3 million~~ for the ~~quarter~~three months ended ~~March 31~~September 30, 2012 aswas $494,000, compared to ~~$3.6~~net ~~million~~income of $476,000 for the ~~quarter~~three months ended ~~March 31~~September 30, 2011. A ~~decrease of~~ $~~586~~648,000 decrease in ~~interest~~ ~~income~~the provision for loan losses was partially offset by a $~~261~~313,000 decrease in ~~interest~~net ~~expense. The decrease in~~ interest income ~~was primarily~~ ~~the~~and ~~result of a~~ $~~8.8~~268,000 ~~million~~increase ~~decrease~~ in ~~average~~noninterest ~~outstanding loans combined with a decrease in the average rate earned on loans from 5.65% to 5.03%. The decrease in interest~~ expense ~~was primarily the result of a decrease in the average interest rate paid on deposits from 1~~.~~21% to 0.95%. Changes in interest rates are reflective of decreases in overall market rates.~~

Net Interest Income. Net interest income decreased $~~142~~313,000, or 18.39%, to $103.42 million for the ~~nine~~quarter ~~months~~ ended ~~March 31~~September 30, 2012 as compared to $103.6 5 million for the ~~nine~~quarter ~~months~~ ended ~~March 31~~September 30, 2011. A decrease of $~~1.3 million~~462,000 in interest income was partially offset by a $~~1.1 million~~ 149,000 decrease in interest expense. The decrease in interest income was ~~primarily~~principally the result of a ~~$14.8 million~~ decrease in the average ~~outstanding~~rate earned on loans ~~combined~~from ~~with~~5.48% to 4.99%, and a decrease in the average interest rate earned on ~~loans~~investments from 52.7140% to 52.3701%. The impact of a $7.8 million decrease in ~~interest~~average ~~expense~~loans was ~~primarily~~largely ~~the~~offset ~~result~~by of a $1523.50 million ~~decrease~~increase in average investments. The decrease ~~deposits~~in ~~combined~~interest ~~with~~expense was primarily the result of a decrease in the average interest rate paid on deposits from 1.3310% to 10.0289%, partially offset by a $15.4 million increase in average outstanding deposits. Changes in interest rates are reflective of decreases in overall market rates. Net interest margin for the quarter ended September 30, 2012 was 2.79%, a decrease of 17 basis points from the quarter ended June 30, 2012 and a decrease of 43 basis points from the quarter ended September 30, 2011.

2726

~~The~~Average Balances and Yields. The following table ~~summarizes~~presents information regarding average balances of assets and ~~average~~liabilities, the total dollar amounts of interest ~~yields~~income and ~~costs~~dividends offrom average interest-earning assets, ~~and~~the total dollar amounts of interest expense on average interest-bearing liabilities, ~~for~~and the ~~three~~resulting annualized average yields and ~~nine~~costs. ~~months~~The ~~ended~~yields ~~March~~and ~~31,~~costs ~~2012~~for the periods indicated are derived ~~and~~by ~~2011.~~dividing ~~For~~income or expense by the ~~purposes~~average balances of assets or liabilities, respectively, for the periods presented. For purposes of this table, average balances have been calculated using month-end balances, and nonaccrual loans are included in average balances only. ~~Yields~~Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented. Loan fees are included in interest income on loans and are insignificant. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.

	Three Months Ended March 31,														Nine Months Ended March 31,
	Three Months Ended September 30,
	2012							2011							~~2012~~							~~2011~~
			Interest							Interest							Interest							Interest
	Average Balance		Interest and Dividends		Yield/ Cost			Average Balance		Interest and Dividends		Yield/ Cost
	Average		and		Yield/			Average		and		Yield/			Average		and		Yield/			Average		and		Yield/
	(Dollars in thousands)
	Balance		Dividends		Cost			Balance		Dividends		Cost			Balance		Dividends		Cost			Balance		Dividends		Cost
Assets:
Assets:	(Dollars in thousands)
Interest-earning assets:
Interest-earning assets:
Loans	$	276,830	$	3,450		4.99	%	$	284,642	$	3,898		5.48	%
Loans	$	284,350	$	3,575		5.03	%	$	293,199	$	4,140		5.65	%	$	284,789	$	11,472		5.37	%	$	299,553	$	12,821		5.71	%
Investment securities		154,006		772		2.01			131,011		786		2.40
Investment and mortgage backed securities		133,035		712		2.14			133,321		732		2.20			131,518		2,196		2.23			126,734		2,102		2.21
Other interest-earning assets		30,972		3		0.04			23,413		3		0.05
Other interest-earning assets		31,085		3		0.04			24,462		4		0.07			26,109		9		0.05			34,592		16		0.06
Total interest-earning assets		461,808		4,225		3.66			439,066		4,687		4.27
		448,470		4,290		3.83			450,982		4,876		4.32			442,416		13,677		4.12			460,879		14,939		4.32
Noninterest-earning assets		36,451							34,375
Noninterest-earning assets		37,094							30,574							36,144							30,544
Total assets	$	498,259						$	473,441
Total assets	$	485,564						$	481,556						$	478,560						$	491,423
Liabilities and equity:
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing liabilities:
NOW and money market deposit accounts	$	156,988		127		0.32	%		146,058		175		0.48
NOW and money market deposit accounts (1)		148,298		129		0.35			146,365		148		0.40			147,041		434		0.39			154,282		631		0.55
Passbook accounts		81,200		104		0.51			70,557		68		0.39
Passbook accounts (1)		74,694		64		0.34			70,299		70		0.40			72,260		194		0.36			63,083		205		0.43
Certificates of deposit		190,678		725		1.52			196,827		895		1.82
Certificates of deposit (1)		195,077		803		1.65			205,367		1,055		2.05			196,299		2,551		1.73			213,716		3,463		2.16
Total interest-bearing deposits		428,866		956		0.89			413,442		1,138		1.10
Total interest-bearing deposits		418,069		996		0.95			422,031		1,273		1.21			415,600		3,179		1.02			431,081		4,299		1.33
FHLB advances		10,708		47		1.76			1,708		14		3.28
FHLB advances		8,708		29		1.33			2,208		13		2.36			4,458		55		1.64			2,458		55		2.98
Total interest-bearing liabilities		439,574		1,003		0.91			415,150		1,152		1.11
Total interest-bearing liabilities		426,777		1,025		0.96			424,239		1,286		1.21			420,058		3,234		1.03			433,539		4,354		1.34
Noninterest-bearing liabilities		3,509							3,790
Noninterest bearing liabilities		3,558							3,720							3,753							3,915
Total liabilities		443,083							418,940
Total liabilities		430,335							427,959							423,811							437,454
Total stockholders’ equity		55,176							54,501
Stockholders' equity		55,229							53,597							54,749							53,969
Total liabilities and stockholders’ equity	$	498,259						$	473,441
Total liabilities and stockholders' equity	$	485,564						$	481,556						$	478,560						$	491,423
Net interest income			$	3,222						$	3,535
Net interest income			$	3,265						$	3,590						$	10,443						$	10,585
Interest rate spread						2.75	%						3.16	%
Interest rate spread						2.87	%						3.11	%						3.09	%						2.98	%
Net interest margin						2.79	%						3.22	%
Net interest margin (annualized)						2.91	%						3.18	%						3.15	%						3.06	%
Average interest-earning assets to average interest-bearing liabilities						105.06	%						105.76	%
Average interest-earning assets to average interest-bearing liabilities						105.08	%						106.30	%						105.32	%						106.31	%

~~1) Includes municipal deposits~~27

28Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

Provision for Loan Losses. The provision for loan losses was $333,000 for the quarter ended March 31, 2012, compared to $2.2 million for the same quarter in the prior year. The provision for loan losses was $1.9 million for the nine months ended March 31, 2012, compared to $3.4 million for the same period in the prior year. Management evaluates the Bank’s allowance for loan loss for adequacy on at least a quarterly basis. As part of this evaluation, management considers the amounts and types of loans, concentrations, the value of underlying collateral, current economic conditions, historical charge-offs, and other relevant information, such as the size of the overall portfolio and the financial condition of the borrowers. The decrease in the loan loss was primarily due to the restructuring of certain commercial and multi-family loans into a Note A/B format, and the resultant additional reserves recorded in the March 2011 quarter. No such restructuring occurred in the March 2012 quarter. For more information on the provision for loan losses for the quarter and nine months ended March 31, 2011, see Note 1, “Restatement”, to the unaudited consolidated financial statements.

	Three Months Ended September 30, 2012 Compared to 2011
	Increase (Decrease) Due to
	Volume			Rate			Net
	(In thousands)
Interest and dividend income:
Loans	$	(107	)	$	(341	)	$	(448	)
Investment securities		138			(152	)		(14	)
Other interest-earning assets		1			(1	)		—
Total interest-earning assets		32			(494	)		(462	)

Interest expense:
Deposits		42			(224	)		(182	)
FHLB advances		74			(41	)		33
Total interest-bearing liabilities		116			(265	)		(149	)
Net change in net interest income	$	(84	)	$	(229	)	$	(313	)

~~For~~Provision ~~more~~for ~~information~~Loan onLosses. The ~~how~~provision for loan losses was $250,000 for the ~~Company~~quarter ~~reviews~~ended ~~its~~September 30, ~~allowance~~ 2012, compared to $898,000 for ~~loan~~the ~~losses~~same ~~and~~quarter in ~~determines~~the ~~any~~prior ~~necessary~~year. The decrease in the loan loss provision ~~see,~~was ~~“Critical~~primarily ~~Accounting~~due ~~Policies~~to –a ~~Allowance~~decrease ~~for~~in ~~Loan~~the ~~Losses~~loan portfolio of approximately $11.”1 million combined with a decrease in nonperforming loans from June 30, 2012 of approximately $1.0 million.

29Other Income. The following table summarizes other income for the three months ended September 30, 2012 and 2011.

The following table provides information with respect to our recorded investment in nonperforming assets at the dates indicated. We did not have any accruing loans past due 90 days or more at the dates presented.

	Three Months Ended September 30,				%
	2012		2011		Change
	(Dollars in thousands)
Service charges	$	621	$	639		(2.8	)
Gain on sale of loans		248		83		198.8
Gain on sale of investments		—		236		(100.0	)
Gain on sale of other real estate owned		7		—		100.0
Income from bank-owned life insurance		135		67		101.5
Other		56		101		(44.6	)
Total other income	$	1,067	$	1,126		(5.2	)

	At March 31, 2012			At June 30, 2011			% Change
	(Dollars in thousands)
Nonaccrual loans:
One- to-four-family residential real estate	$	1,830		$	1,652			10.8	%
Multi-family		2,081			1,742			19.5
Nonresidential real estate and land		1,002			566			77.0
Construction		-			-			-
Commercial		287			240			19.6
Consumer		323			240			61.3
Total nonaccrual loans		5,523			4,440			24.4
Nonaccrual restructured loans:
One- to-four-family residential real estate	$	2,680		$	1,653			62.1	%
Multi-family		7,225			10,358			(30.2	)
Nonresidential real estate and land		3,772			4,146			(9.0	)
Total nonaccrual restructured loans		13,677			16,157			(15.3	)
Total nonperforming loans		19,200			20,597			(6.8	)
Real estate owned		328			139			136.0
Total nonperforming assets	$	19,528		$	20,736			(5.8	)
Accruing restructured loans		11,084			8,768			26.4
Accruing restructured loans and nonperforming assets	$	30,612		$	29,504			3.8
Total nonperforming loans to total loans		6.64	%		7.08	%		(6.2	)
Total nonperforming loans to total assets		3.81	%		4.36	%		(12.6	)
Total nonperforming assets to total assets		3.88	%		4.39	%		(11.6	)

Other income remained flat at $1.1 million in the quarters ended September 30, 2012 and 2011. Increases of $165,000 in gain on sale of loans and $68,000 in income from bank owned life insurance during the quarter ended September 30, 2012 were offset by a $236,000 decrease in gain on sale of investments. The increase in the gain on sale of loans was the result of an increase in loan sales to Freddie Mac in the September 30, 2012 quarter when compared to the same quarter in the prior year, primarily due to an increase in refinancing activity as a result of the continued low interest rate environment. The increase in income from bank owned life insurance was the result of the purchase of additional bank owned life insurance during the latter part of the fiscal year ended June 30, 2012. The decrease in gain on sale of investments was the result of no sales of mortgage-backed securities and other available for sale investment securities during the current year quarter as compared to the prior year quarter.

Nonperforming loans decreased $1.4 million, from $20.6 million at June 30, 2011 to $19.2 million at March 31, 2012. The decrease in nonperforming loans in the current year period was primarily the result of troubled debt restructurings that were placed on accrual (performing) status after performing in accordance with their restructured terms for at least six consecutive months, partially offset by additional nonperforming loans in the current year period.28

AsNoninterest ~~previously disclosed, the Company restructured $13~~Expense.7 ~~million~~The offollowing ~~loans~~table ~~during~~shows the ~~third~~components ~~quarter~~ of ~~the~~noninterest ~~fiscal~~expense ~~year~~and ~~ended June 30, 2011. The loans restructured during~~ the ~~third~~percentage ~~quarter~~changes offor the ~~fiscal~~ ~~year~~three months ended ~~June~~ September 30, ~~2011 included five of our largest loans. All of these loans were restructured using a split note strategy~~ ~~whereby the Bank’s remaining recorded investment in the borrowing reflected the “as is” value of the collateral, based on current cash flow. At March 31,~~ 2012, ~~all~~and ~~of the restructured loans have been performing in accordance with their restructured terms~~2011.

Under the split note or Note A/Note B strategy, the Note A was underwritten based on the Company’s normal underwriting standards with the exception that a debt service coverage ratio of 1.5x or higher was required. This is more stringent than the Company’s normal underwriting guidelines which generally require a debt service coverage of 1.2x or better. The Note A payment was based on a thirty year amortization schedule and matures at the end of two years. The amount of Note B under the split note strategy is the difference between the amount of Note A and the principal amount to be refinanced. The interest rate and two year maturity of the Note B loan are identical to the Note A loan, but the Note B loan requires no payments of interest or principal until maturity. While no amount of the original indebtedness was forgiven through this process, the full amount of the borrowers’ Note B indebtedness was charged-off in March, 2011.

	Three Months Ended September 30,				%
	2012		2011		Change
	(Dollars in thousands)
Compensation and employee benefits	$	1,809	$	1,736		4.2	%
Premises and occupancy expense		339		328		3.4
Deposit insurance premium		177		137		29.2
Advertising expense		96		93		3.2
Data processing expense		373		305		22.3
Intangible amortization		40		39		2.6
Professional fees		302		198		52.5
Other operating expenses		281		313		(10.2	)
Total noninterest expense	$	3,417	$	3,149		8.5	%

ANoninterest ~~discussion~~expense ofincreased ~~the~~$268,000, or ~~most~~8.5%, ~~significant~~from ~~troubled~~$3.1 ~~debt~~million ~~restructurings at~~for ~~March~~the ~~31,~~quarter ~~2012~~ended ~~are~~September 30, ~~noted~~2011 ~~below~~to $3.4 ~~Management~~million ~~monitors~~for the ~~performance~~quarter ofended ~~these~~September 30, 2012. ~~loans~~The ~~and~~increase ~~reviews~~is ~~all~~primarily ~~options~~due ~~available~~ to ~~keep the~~increases ~~loans~~of ~~current~~$104,000 ~~including~~in ~~further~~professional ~~restructuring~~fees, of$73,000 ~~the~~in ~~loans.~~compensation Ifand ~~restructuring~~employee ~~efforts~~benefits, and ~~ultimately are not successful~~$68,000 ~~management will~~in ~~initiate~~data ~~foreclosure~~processing ~~proceedings~~expenses. AThe ~~more~~increase ~~detailed~~in ~~discussion~~professional offees ~~these~~was ~~loan~~primarily ~~relationships~~due isto ~~included~~an increase in ~~Item~~audit, 7.legal ~~Management’s~~and ~~Discussion~~consulting ~~and~~expenses ~~Analysis~~related ofto ~~Financial~~annual ~~Condition~~reporting ~~and~~requirements. ~~Results~~The ofincrease ~~Operations~~in ~~under~~compensation ~~the~~and ~~section~~employee ~~entitled~~benefits ~~“Analysis~~expense ofwas ~~Nonperforming~~primarily ~~and~~due ~~Classified~~to ~~Assets”~~the addition of employees in the ~~Company’s~~accounting ~~Annual~~and ~~Report~~collections ondepartments ~~Form~~and ~~10-K/A~~annual aswage ~~filed~~increases. ~~with~~The increase in data processing expense was primarily due to the ~~Securities~~implementation ~~and~~of ~~Exchange Commission~~a onnew ~~April~~branch ~~26,~~network ~~2012~~communication system.

Income Taxes. Income tax expense for the three months ended September 30, 2012 was $128,000, compared to an expense of $138,000 for the three months ended September 30, 2011.

•Analysis ~~Loan Relationship A. This relationship consists~~ of ~~three~~Nonperforming ~~loans with a total carrying value of $6~~Assets.4 We ~~million~~consider ~~prior~~foreclosed toreal ~~its restructuring. One loan is secured by a first mortgage on an apartment complex near a college campus~~estate, ~~another~~repossessed ~~is secured by a first mortgage on two mobile home parks~~assets, ~~and~~nonaccrual ~~the last is secured by the first mortgage on another apartment complex. All three~~ loans ~~are included in the above table as “Accruing restructured loans” at March 31~~, ~~2012~~ and ~~“Nonaccrual~~TDRs ~~restructured~~that ~~loans”~~are atdelinquent ~~June~~or ~~30,~~have ~~2011.~~not In the “Credit Risk Profile by Internally Assigned Grade” table, these loans were classified as “Multi-family residential real estate”, “Substandard” at March 31, 2012 and June 30, 2011. The recorded investment at March 31, 2012 for this relationship was $5.1 million. One loan for $1.7 million was on the accrual status as it has been performing ~~for~~in ~~more~~accordance ~~than~~with ~~six~~their ~~months.~~restructured ~~Two~~terms ~~loans~~ for ~~$3.4~~a ~~million~~specified ~~have~~period ~~been~~of ~~performing~~time ~~according~~ to ~~restructured~~be ~~terms~~nonperforming ~~since the restructuring but are on non-accrual status as all doubt about future payments has not been removed~~assets.

• Loan Relationship B. The loans comprising Loan Relationship B, totaling $2.5 million, are secured by a first mortgage on two separate retail strip shopping centers and a single purpose commercial use property. All ~~the~~of ~~loans are included in~~ the ~~above~~TDRs ~~table as “Accruing restructured loans”~~ at ~~March 31~~September 30, 2012 ~~and~~represented ~~“Nonaccrual~~loan ~~restructured~~relationships ~~loans,”~~with ~~“Nonresidential~~long-time ~~real~~borrowers. ~~estate”~~In atmeasuring ~~June 30~~impairment, ~~2011.~~management Inconsidered the ~~“Credit~~results ~~Risk~~of ~~Profile~~independent property ~~by Internally Assigned Grade” table~~appraisals, ~~these~~together ~~loans~~with ~~were~~estimated ~~classified~~selling ~~as “Nonresidential real estate~~expenses, ~~Substandard”~~and/or atdetailed ~~March~~cash ~~31,~~flow ~~2012~~analyses. ~~and~~At ~~June~~ September 30, ~~2011. This relationship was performing in accordance with its restructured terms at March 31~~2012, 46 ~~2012~~loans ~~and~~were ~~because~~considered ~~the~~to ~~loan~~be ~~has~~TDRs ~~performed in accordance~~ (with ~~its~~an ~~restructured~~aggregate ~~terms~~balance ~~for~~of ~~at least six consecutive months, the loan had been previously reported as accrual status~~$21.8 Inmillion) ~~March 2012, the Company was informed that one~~ of ~~the~~which ~~tenants~~23 isloans ~~leaving.~~(with ~~Based on the revised cash flows, the Company recorded~~ an ~~impairment~~aggregate balance of $~~195,000 and placed the loan on non-accrual status~~9.8 ~~The~~million) ~~loan~~were ~~has~~included ~~continued~~in tononperforming ~~perform according to the restructured terms~~assets.

• Loan Relationship C. This loan relationship is secured by a first mortgage on a single-family home, a 24-unit apartment complex, one- to four-family residential properties and several residential building lots. The relationship is included in the above table as “Accrual restructured loans, multi-family real estate” at March 31, 2012 and “Nonaccrual restructured loans, multi-family real estate” at June 30, 2011. In the “Credit Risk Profile by Internally Assigned Grade” table, these loans were classified as “Multi-family real estate, Substandard” at March 31, 2012 and June 30, 2011. The loan balance at March 31, 2012 for this relationship was $1.5 million. This relationship was performing in accordance with its restructured terms at March 31, 2012 and, because the loan has performed in accordance with its restructured terms for at least six consecutive months the loan has been reported as accrual status.29

~~• Loan Relationship D.~~ The ~~loan~~following ~~comprising~~table ~~Loan~~provides ~~Relationship~~information with Drespect ~~is secured by a first mortgage on a 62-unit apartment complex near a college campus. The loan was made in 2008~~ to anour ~~experienced~~nonperforming ~~property~~assets manager who made major improvements to the property. The loan required interest only payments through December 2011. The borrower has completed renovations to the property and the cash flow of the property has improved, supporting the carrying value of the loan. At March 31, 2012, the carrying value of this loan was $1.3 million. In December 2011, this loan was restructured into a split Note A/Note B. The $1.3 million carrying value was restructured at ~~a market rate of interest on a 30 year amortizing note with a two year balloon. Note B in~~ the ~~amount~~dates ~~of $~~indicated.4 million was restructured at a below market rate of interest with no payments for two years and a balloon payment due after 2 years. Note B was fully reserved prior to the restructuring and was charged off in December 2011. This charge off had no impact to the allowance for loan loss as of March 31, 2012. The loan was on nonaccrual status at both March 31, 2012 and June 30, 2011.

• Loan Relationship E. This relationship has an aggregate carrying value of $544,000 at March 31, 2012, and was secured by nonresidential real estate. These loans are included in the above table as “Accruing restructured loans” at March 31, 2012 and “Nonaccrual restructured loans, nonresidential real estate” at June 30, 2011. In the “Credit Risk Profile by Internally Assigned Grade” table, these loans were classified as “Nonresidential real estate, Substandard” at March 31, 2012 and June 30, 2011. This relationship was performing in accordance with its restructured terms at March 31, 2012 and because the loan has performed in accordance with its restructured terms for at least six consecutive months, the loans are reported as accrual status.

	At September 30, 2012			At June 30, 2012
(Dollars in thousands)	(Unaudited)
Nonaccrual loans:
One- to four-family residential real estate	$	2,467		$	2,412
Multi-family real estate		1,991			2,034
Nonresidential real estate and land		46			1,106
Commercial		236			240
Consumer		532			508
Total nonaccrual loans		5,272			6,300
Nonaccrual restructured loans:
One- to four-family residential real estate		2,693			2,601
Multi-family real estate		4,179			4,251
Nonresidential real estate and land		2,926			2,987
Total nonaccrual restructured loans		9,798			9,839
Total nonperforming loans		15,070			16,139
Real estate owned		763			197
Total nonperforming assets		15,833			16,336
Accruing restructured loans		12,583			13,211
Accruing restructured loans and nonperforming assets	$	28,416		$	29,547
Total nonperforming loans to total loans		5.44	%		5.60	%
Total nonperforming loans to total assets		3.00	%		3.26	%
Total nonperforming assets to total assets		3.15	%		3.30	%
Total number of nonperforming loans		79			74

31The decrease in nonperforming loans is primarily due to a payoff of approximately $300,000 of a nonresidential real estate loan and the acquisition through foreclosure of a nonresidential real estate loan with a carrying value of $600,000.

•Interest ~~Loan~~income ~~Relationship~~that F.would ~~This~~have ~~loan~~been ~~relationship~~recorded for ~~had~~the anthree ~~aggregate~~months ~~carrying~~ended ~~value of $460~~September 30,~~000~~ ~~at March 31,~~ 2012. ~~These~~had nonaccruing loans ~~are~~been ~~secured~~current byaccording ~~single-family~~to ~~and~~their ~~multifamily~~original ~~residential~~terms ~~real~~was ~~estate~~$80,000. Interest ~~These~~recognized ~~loans~~on ~~are included in~~ the ~~above~~cash ~~table~~basis aswith ~~“Accruing~~regard ~~restructured~~to ~~loans”~~nonaccrual ~~at March 31, 2012 and “Nonaccrual~~ restructured loans, ~~multi-family~~was ~~real estate” at June 30~~$21,000 ~~2011.~~for In the ~~“Credit~~three ~~Risk~~months ~~Profile~~ended ~~by Internally Assigned Grade” table, these loans were classified as “Multi-family real estate, Substandard” at March 31, 2012 and June~~ September 30, ~~2011. This loan relationship was performing in accordance with its restructured terms for at least six consecutive months at March 31,~~ 2012 ~~and, as a result, the loans are reported as accrual status~~.

32A discussion of our most significant nonaccrual loans follows. At September 30, 2012, these loans comprised $13.8 million. The five largest nonaccrual loans at September 30, 2012 were comprised of: loans A-1 and A-3 of Loan Relationship A, and the loans in Loan Relationships B, G, H and I. Loan A-2 (within Loan Relationship A), and the loans in Loan Relationships C, E and F, which were reported as “accruing restructured loans” at June 30, 2012, have been performing in accordance with their restructured terms for a sufficiently long period of time and are reported as “accruing restructured loans” at September 30, 2012.

~~Other Income. The following table summarizes other income for the three and nine months ended March 31, 2012 and 2011.~~30

	Three Months Ended								Nine Months Ended
	March 31,								March 31,
	2012			2011		% Change			2012		2011			% Change
	(Dollars in thousands)
Service charges	$	569		$	558		2.0	%	$	1,829	$	1,765			3.6	%
Gain on sale of loans		109			18		505.6			322		460			(30.0	)
Gain on sale of investments		94			88		6.8			657		132			397.7
Loss on sale of other real estate owned		(2	)		-		(100.0	)		-		(25	)		100.0
Income from Bank Owned Life Insurance		86			68		26.5			217		207			4.8
Other		32			63		(49.2	)		194		224			(13.4	)
Total	$	888		$	795		11.7		$	3,219	$	2,763			16.5

Loan Relationship A. The loans comprising this loan relationship (with Loan A-3 using the split note strategy) had a net carrying value of $5.1 million at September 30, 2012. Three loans, all included in one loan relationship, with a carrying value of $6.4 million prior to its restructuring in the third quarter of the year ended June 30, 2011. One loan (A-1) is secured by a first mortgage on an apartment complex near a college campus, another (A-2) is secured by a first mortgage on two mobile home parks, and the last (A-3) is secured by the first mortgage on another apartment complex. At September 30, 2012 and June 30, 2012, Loan A-1 and Loan A-3 are included in the above table in “Nonaccrual restructured loans, Multi-family real estate.” Loan A-2 is included in “Accruing restructured loans.” In the “Credit Risk Profile by Internally Assigned Grade” table on page 15, Loans A-1, A-2, and A-3 were classified as Multi-Family Residential Real Estate, Substandard, at September 30, 2012 and June 30, 2012. The loans comprising Loan Relationship A were originally restructured in October and November, 2010. At the time of the first restructuring in 2010, Loan A-1, with a carrying value of $3.0 million, was 180 days delinquent, and Loans A-2 and A-3 were performing. Management performed a global analysis of the borrowers and restructured each of the three loans by reducing the original loan rates by 125 to 225 basis points to a rate that was 25 basis points below market rate. Foregone interest income amounted to $51,000 on the two performing loans that were restructured. The borrowers paid a loan modification fee of $3,000 for this restructuring. At June 30, 2010, after the effect of restating the June 30, 2010 financial statements, management established a specific allocation on these three loans through a charge-off to the general allowance for loan losses of $1.1 million. On each of the three loans, one of the borrowers is a corporate entity. Also, on the three loans, each of the principals of the corporate borrowers individually signed as co-borrowers. At the time of the restructuring, the Bank analyzed the personal net worth, liquid net worth, debt to income ratios and credit scores of the co-borrowers. While the co-borrowers were not expected to cover a total loss on the loans, management believed the co-borrowers would mitigate the amount of the potential future losses. In March 2011, Loan A-3 was again restructured through a troubled debt restructuring as a result of the borrower experiencing cash flow problems during the quarter ended March 31, 2011. The cash flow problems experienced were the combined effect of decreased rental income and the failure to pay real estate property taxes. However, due to certain financial difficulties experienced by the co-borrowers, including the cash flow problems of the subject properties and a decrease in other outside sources of income, the co-borrowers were unable to mitigate the losses on the loan. Based upon a cash flow analysis of the properties performed by management, $651,000 of the $6.4 million in loans was charged-off during the restructuring using the split note strategy. This split was done for one loan that had a balance of $1.6 million before the split. After the split, Note A had a balance of $994,000 and Note B had a balance of $651,000. Prior to the loan being restructured in March, 2011, the restructured loan carried a $650,000 specific reserve as restated on the Company’s Form 10-K, as amended, for the year ended June 30, 2011 filed with the SEC on March 28, 2012 that was included in Note B and charged-off. The split note loans have an interest rate that is 275 basis points below their original restructured rate for a period of two years, and 475 basis points below their original rates. At the end of the two year period, balloon payments are due, unless the borrower refinances into a market rate loan at that time. This relationship was performing in accordance with its restructured terms at September 30, 2012. The property securing Loan A-3 was sold in April 2012 for $2.2 million. The buyer made a down payment of $50,000 and pays a monthly principal and interest payment, based on a 5% interest rate and a 30-year term. This land contract has a balloon payment in April 2014. The buyer has made all scheduled payments as of September 30, 2012.

Other income increased $93,000, or 11.7%, from $795,000 in the prior year quarter to $888,000 in the current year quarter. The increase was primarily due to a $91,000 increase in gain on the sale of loans. The increase in the gain on sale of loans was the result of an increase in loan sales to Freddie Mac in the current year quarter when compared to the same quarter in the prior year, primarily due to an increase in refinancing activity due to the continued low interest rate environment.31

~~Other~~- ~~income~~Loan ~~increased~~Relationship ~~$456~~B. The loans comprising Loan Relationship B,~~000~~ using the split note strategy, orhad 16a net carrying value of $1.5% million at September 30, ~~from~~2012. The loans comprising Loan Relationship B were originally restructured in June, 2010, with an aggregate carrying value of $24.81 million until their restructuring in the ~~prior~~quarter ~~year~~ended ~~period~~March to31, $32011.2 ~~million~~These loans are secured by a first mortgage on two separate retail strip shopping centers and a single purpose commercial use property. The loans are included in the ~~current~~above ~~year~~table ~~period~~as “Nonaccrual restructured loans, Nonresidential real estate” at September 30, 2012 and June 30, 2012. ~~The~~In ~~increase~~the “Credit Risk Profile by Internally Assigned Grade” table on page 15, these loans were classified as “Nonresidential real estate, Substandard” at September 30, 2012 and June 30, 2012. At the time of the original restructuring, the property value was based primarily ~~due~~on tothe acollateral’s ~~$525~~cash flow,~~000~~ ~~increase~~including required personal cash infusions from the co-borrowers. Management believed that the lower debt service would improve the borrowers’ cash flow, and in ~~gain~~ turn, the performance of the loans. One of the borrowers is a corporate entity. The principals of the corporate borrower are also co-borrowers on ~~sale~~the note. At the time of ~~investments~~the ~~offset~~restructuring, bythe Bank analyzed the personal net worth, liquid net worth, debt to income ratios and credit scores of the co-borrowers. While the co-borrowers were not expected to cover a total loss on the loans, management believed the co-borrowers would mitigate the amount of potential future losses. The restructured loans were considered impaired at June 30, 2010 with an allowance for loan loss of $~~138~~600,000 ~~decrease~~to reflect the reduction in ~~gain~~carrying onvalue resulting from the ~~sale~~exclusion of the required personal cash infusions from the co-borrowers from the calculation of the carrying value. In March, 2011, the loans comprising Loan Relationship B again were experiencing cash flow problems. The ~~increase~~cash flow problems experienced were the combined effect of the level of the required monthly loan payments, decreases in ~~gain~~rental revenue from the properties, and failure to pay real estate property taxes. Due to certain financial difficulties experienced by the co-borrowers, including the cash flow problems of the subject properties and a decrease in other outside sources of income, the co-borrowers were unable to mitigate the losses on ~~sale~~the loan. Therefore, in March 2011, the two loans secured by the two separate retail strip shopping centers were combined and refinanced into two loans, using the split note strategy. The first loan was for $2.4 million and was classified as substandard and was a troubled debt restructuring because of ~~investments~~ a below market interest rate. The second loan was for $1.3 million and was charged-off. In March 2011, the ~~result~~loan ofsecured by the ~~sale~~single purpose commercial use property was also refinanced into two loans, using the split note strategy. The first loan was for $238,000 and was classified as substandard and was a troubled debt restructuring because of ~~securities~~a ~~totaling~~below market interest rate. The second loan was for $52169,000 and was charged-off.7 ~~million~~The restructured loans have an interest rate that is 275 basis points lower than the 2010 restructured rate for a period of two years, and 500 basis points below their original rates. The loan secured by the two retail strip shopping centers was classified as substandard and the loan secured by the single purpose commercial use property was classified as substandard, were both included in “Nonaccrual restructured loans, Nonresidential real estate” as of June 30, 2012. At the ~~current~~end of the two year period, ~~compared~~balloon topayments are due, unless the ~~sale~~borrower refinances the loans into a market rate loan at that time. In May 2012, the loan secured by the two retail strip shopping centers experienced the loss of ~~securities totaling~~a major tenant. As a result of the decrease in cash flow, the Bank had the two retail strip shopping centers appraised in June 2012. The appraisal reflected that the value of the properties declined to $291.745 million from the previous appraisal of $2.95 million in February 2011. Management has determined that this loan will ultimately be settled through the ~~prior~~sale ~~year~~of ~~period~~the property. ~~The~~A ~~decrease~~charge-off in the ~~gain~~amount of $956,000 was established in the quarter ended June 30, 2012 based on ~~sale~~the most recent appraisal indicating a known loss, and an additional impairment of ~~loans~~$189,000 was established based on the ~~result~~Bank’s experience in settling foreclosed property. The carrying value of ~~fewer~~this loan ~~sales~~is classified as substandard, and this loan is a troubled debt restructuring. The Bank also appraised the single purpose commercial use property in June 2012. The value of this property declined to ~~Freddie~~ ~~Mac~~$225,000 from $325,000 in February 2011 due to decreased cash flow from the current ~~year~~tenant. ~~period~~Management ~~when~~decided ~~compared~~that tothis loan would also be settled from the ~~same~~sale ~~period~~of the property. A charge-off in the ~~prior~~amount ~~year~~of as$22,000 was established based on the most recent appraisal indicating a ~~result~~known loss, and an additional impairment of ~~lower~~$29,000 was established based on the Bank’s experience in settling foreclosed property. The carrying value of this loan ~~demand~~is classified as substandard, and this loan is a troubled debt restructuring. The loans were performing in accordance with their restructured terms at September 30, 2012.

~~Other Expense. The following table summarizes other expense for the three and nine months ended March 31, 2012 and 2011.~~32

	Three Months Ended							Nine Months Ended
	March 31,							March 31,
	2012		2011		% Change			2012		2011		% Change
	(Dollars in thousands)
Compensation and employee benefits	$	1,755	$	1,593		10.2	%	$	5,186	$	4,951		4.7	%
Premises and occupancy expense		326		346		(5.8	)		964		991		(2.7	)
Deposit insurance premium		26		199		(86.9	)		240		607		(60.5	)
Advertising expense		77		56		37.5			284		274		3.6
Data processing expense		327		276		18.5			943		839		12.4
Acquisition expense		-		-		-			-		38		(100.0	)
Other		545		479		13.8			1,729		1, 704		1.5
Total	$	3,056	$	2,949		3.6		$	9,346	$	9,404		(0.6	)

Loan Relationship C. The loans comprising this relationship, using the split note strategy, had a net carrying value of $1.5 million at September 30, 2012. The original two loans included in this relationship had an aggregate value of $2.1 million prior to being restructured in the quarter ended March 31, 2011. One of the original loans was secured by a first mortgage on a single-family home. The other original loan was secured by a 24-unit apartment complex, six one- to four-family residential properties and ten residential building lots. In March 2011, these two loans were restructured into two loans, using the split note strategy. The two loans using the split note strategy had an aggregate carrying value of $1.51 million at September 30, 2012 and $ 1.52 million at June 30, 2012. The Note A loan is included in the above table in “Accruing restructured loans” at September 30, 2012 and at June 30, 2012. In the “Credit Risk Profile by Internally Assigned Grade” table on page 15, the Note A loan is classified as “Multi-family real estate, Substandard” at September 30, 2012 and June 30, 2012, respectively. The loans comprising Loan Relationship C were originally restructured in August 2009. At the time of the first restructuring, management established a specific reserve through a charge-off to the general allowance for loan losses of $29,000. In August 2009, the loans were originally restructured by reducing the interest rates on the loans by a range of 400 to 600 basis points to a rate that was 300 basis points below market rate. These loans were performing at the initial time of the restructuring in August 2009, but the borrowers were beginning to experience cash flow difficulties. Management believed that the lower debt service would improve the borrowers’ cash flow, and in turn, the performance of the loans. At the time the loans were initially restructured, independent appraisals were performed on each piece of underlying collateral. These appraisals supported the aggregate $2.1 million carrying value of the two loans. One of the borrowers is a corporate entity, with one principal who has personally signed on the loan. At the time of the restructuring, we analyzed the personal net worth, liquid net worth, debt to income ratios and credit scores of the co-borrower and determined that the co-borrower was not expected to cover a total loss, but would mitigate the amount of potential future losses. Based on the restatement of the June 30, 2010 audited consolidated financial statements, these loans were considered impaired at June 30, 2010, with an allowance for loan losses of $675,000 established to reflect the reduction in the carrying value resulting from the exclusion of the required personal cash infusions from the calculation of the carrying value. During the quarter ended March 2011, the borrower again began to experience cash flow difficulties and these loans were refinanced through a troubled debt restructuring. The cash flow problems contributed to the combined effect of the failure to pay required monthly loan payments, the failure to pay association dues, and the failure to pay real estate property taxes. Due to certain financial difficulties experienced by the co-borrower, including the cash flow problems of the subject properties and a decrease in other outside sources of income, the co-borrower was unable to mitigate the losses on the loan. As stated above, based upon a cash flow analysis of the properties performed by management, the loans were restructured during the quarter ended March 31, 2011, utilizing the split note strategy. After the restructuring, the previous aggregate balance of $2.1 million was split into two notes with Note A having a balance of $1.5 million which was classified as substandard, and Note B having a balance of $626,000 which was charged-off. A restructuring fee of $14,000 was charged and included in Note B at March 31, 2011. The restructured loans have an interest rate that is 275 basis points lower than the 2010 restructured rate for a period of two years, and 675 to 875 basis points below the original rates. At the end of the two year period, balloon payments are due, unless the borrower refinances into a market rate loan at that time. This relationship was performing in accordance with its restructured terms at September 30, 2012, and no further impairments have been recorded since the most recent restructuring. Also, United Community Bank is in the negotiations with this borrower to take over these properties. Based on the appraisals, the Bank does not expect any additional losses as a result of repossessing the properties.

~~Other~~- ~~expense~~Loan ~~increased~~Relationship ~~$107,000,~~D. orThe ~~3.6%,~~loan tocomprising this loan relationship had a net carrying value of $3.1.3 million ~~for the~~at ~~quarter~~September ~~ended March 31~~30, 2012,. ~~from~~The $2loan comprising Loan Relationship D was originally restructured in December 2008.9 ~~million~~The loan is secured by a first mortgage on a 62-unit apartment complex near a college campus. The loan was made in ~~the~~2008 ~~prior~~to ~~year~~a ~~quarter~~seasoned property manager who made major improvements to the property. The ~~increase~~property was ~~primarily~~purchased in December 2008 from a Bank borrower who was delinquent at the ~~result~~time of acquisition. At the time the loan was acquired from the delinquent borrower in 2008, it was restructured with a ~~$162~~new borrower,~~000 increase~~ in ~~compensation~~lieu ~~and~~of ~~employee~~foreclosure, ~~benefits~~pursuant ~~expense~~to which the Bank loaned the borrower funds to purchase and renovate the property. At the time of the restructuring, management established a specific reserve through a charge-off to the general allowance for loan losses of $51113,000. ~~increase~~We inhave ~~data~~no ~~processing~~personal ~~expense~~guarantee or co-borrower on this loan. The loan required interest only payments through December 2011. In January, ~~partially~~2012, ~~offset~~the interest rate on the loan was adjusted to the prime interest rate as published by The Wall Street Journal, plus a ~~$173~~ spread. At the time of the acquisition,~~000~~ ~~decrease~~management believed that the new borrower would be able to renovate the property with a view toward improving the property’s cash flow, and in ~~deposit~~turn, ~~insurance~~the ~~premiums~~performance of the loan. ~~The~~After ~~increase~~the inclosing ~~compensation~~of the loan, the borrower completed renovations to the property and ~~employee~~the ~~benefits~~cash ~~expense~~flow isof ~~primarily~~the ~~due~~property has improved. At the time the loan was made, an independent appraisal was performed on the collateral underlying the loan. This appraisal supported the $1.6 million carrying value of the loan. In November 2011, the borrower approached the Bank and expressed concern about being able to ~~additional~~ ~~employees~~pay the principal and ~~annual~~interest ~~wage~~payment ~~increases~~that would go into effect in January 2012. The ~~increase~~internal incash ~~data~~flow ~~processing~~analysis ~~expense~~completed isby ~~primarily~~the ~~due~~Bank indicated that the payment could be made based on the higher monthly occupancy rates after the renovations were completed. An appraisal was ordered to anprovide ~~increase~~the “as is” value of the property. The Bank obtained the appraisal in ~~ATM~~ December 2011, and ~~data~~the ~~center~~appraised ~~service~~value ~~charges~~of the property had decreased to $1.4 million. Therefore, this loan was restructured into two loans using the split note strategy. Based on the cash flows supported by the property, the first loan was originated for $1.3 million at a market interest rate. This loan was put on nonaccrual, classified as substandard, and reported as a troubled debt restructuring. The ~~decrease~~second loan was originated for $393,000 and was charged-off in ~~deposit~~December ~~insurance~~2011. ~~premiums~~At isSeptember ~~reflective~~30, 2012, the carrying value of anthe ~~overall~~first ~~decrease~~loan was $1.29 million. At June 30, 2012, this loan had performed in ~~average~~accordance ~~deposits~~ with its restructured terms for six months. Therefore, as of September 30, 2012 and June 30, 2012 this loan is included in “Accruing restructured loans” in the ~~current~~above ~~year~~table. ~~compared~~In tothe “Credit Risk Profile by Internally Assigned Grade” table on page 15, the ~~prior~~carrying ~~year~~value of Loan A was classified as “Multi-family residential real estate, Substandard,” at September 30, 2012 and at June 30 2012. At September 30, 2012, this loan was performing in accordance with its restructured terms.

~~Other~~- ~~expense~~Loan ~~decreased~~Relationship E. Two loans (which consisted of one note prior to the use of the split note strategy) with an aggregate carrying value of $58532,000 toat $9September 30, 2012, secured by nonresidential real estate.3 ~~million~~Note ~~for~~A is included in the ~~nine months~~above ~~ended~~table ~~March~~in 31“Accruing restructured loans” at September 30, 2012, ~~from~~and $9at June 30, 2012.4 ~~million~~In the “Credit Risk Profile by Internally Assigned Grade” table on page 15, these loans were classified in ~~the~~“Nonresidential ~~prior~~real ~~year~~estate, ~~period~~Substandard” at September 30, 2012 and at June 30, 2012, respectively. The ~~decrease~~loan was ~~primarily~~structured ~~the~~in ~~result~~April, of2010, and a new appraisal was obtained. At June 30, 2010, the charge-off to the general allowance for loan losses, based upon the appraisal, was $~~367~~308,000. ~~decrease in~~The ~~deposit~~restructured ~~insurance~~loan ~~premiums~~had payments deferred for one year, ~~partially~~while ~~offset~~accruing byinterest at a ~~$235~~market rate. This loan was scheduled to undergo an interest rate and payment reset in February,~~000~~ ~~increase~~2011, pursuant to the terms of the note. We have no personal guarantee or co-borrower on this loan. During the loan adjustment period, it became apparent the borrower was going to struggle to make the required monthly payments beginning in ~~compensation~~February, ~~and~~2011. ~~employee~~As ~~benefits~~a ~~expense~~result, management completed a detailed analysis of this loan and determined to again restructure the loan utilizing the split note strategy in March, 2011. The terms of Note A were calculated using current financial information to determine the amount of the payment at which the borrower would have a debt service coverage ratio of approximately 1.5x, which is more stringent than our normal underwriting standards. A restructuring fee of $~~104~~9,000 ~~increase~~ was charged and included in ~~data~~Note ~~processing~~B ~~expense~~at March 31, 2011. ~~The~~After ~~decrease~~the restructuring in ~~deposit~~March, ~~insurance~~2011, ~~premiums~~Note isA awas ~~result~~in the amount of $569,000 and Note B was in the ~~aforementioned~~amount ~~decrease~~of $508,000, all of which was charged-off in ~~average deposits~~the quarter ended March 31, 2011 inclusive of the previous specific reserve of $308,000. ~~The~~At ~~increase~~the inend ~~compensation~~of ~~and~~the ~~employee~~two ~~benefits~~year ~~expense~~period, isballoon ~~primarily~~payments are due, tounless ~~additional~~the ~~employees~~borrower ~~and~~refinances ~~annual~~into ~~wage~~a ~~increases~~market rate loan at that time. ~~The~~ ~~increase~~At inSeptember ~~data~~30, ~~processing~~2012, ~~expense~~no isfurther ~~primarily~~impairments ~~due~~have tobeen anrecorded ~~increase~~since the most recent restructuring. This relationship was performing in ~~ATM~~accordance ~~and~~with ~~data~~its ~~center~~restructured ~~service~~terms ~~charges~~at September 30, 2012.

~~Income~~- ~~Taxes~~Loan Relationship F. This relationship consists of two loans (based on the split note strategy) with an aggregate carrying value of $453,000 at September 30, 2012. These loans are secured by single-family and multi-family residential real estate. Note A is included in the above table as “Accruing restructured loans, at September 30, 2012 and at June 30, 2012. In the “Credit Risk Profile by Internally Assigned Grade” table on page 15, the A loan was classified as “Multi-family real estate, Substandard” at September 30 and June 30, 2012, respectively. The ~~provision~~original loan was initially restructured using the split note strategy in June, 2010 based on an 80% loan-to-value ratio derived from an April, 2010 appraisal. The loans were considered impaired at June 30, 2010 with an additional increase in the allowance for ~~income~~loan ~~taxes was~~losses of $~~307~~117,000 ~~for~~to reflect the ~~quarter~~reduction ~~ended~~in ~~March~~carrying value resulting from the exclusion of the required personal cash infusions from the co-borrower from the calculation of the carrying value. At December 31, ~~2012~~2010, ~~compared~~the loan was 160 days delinquent. The delinquency was a result of personal problems between the borrowers affecting their ability to manage the multi-family residential real estate and the single-family real estate. The personal problems between the borrowers also resulted in the borrowers’ inability to make the required personal cash infusions. In the latter part of 2010 and into early 2011, one of the borrowers effectively took control of the multi-family residential real estate and the single-family real estate, and brought the business current with respect to property taxes, refunds to former tenants, and made required monthly loan payments in January and February, 2011. Other than the January and February 2011 loan payments, the borrowers were unable to bring the loan current under their current cash flow. Based upon those developments, management completed a ~~benefit~~detailed analysis of the total lending relationship with the borrowers. As a result of this analysis, these loans were again restructured, using the split note strategy in March, 2011. The terms of Note A were calculated using current financial information to determine the amount of the payment at which the borrowers would have a debt service coverage ratio of approximately 1.5x, which is more stringent than our current underwriting standards. A restructuring fee of $~~125~~7,000 ~~for~~was ~~the~~charged ~~same~~and ~~period~~included in Note B at March 31, 2011. The ~~provision for~~borrower ~~income~~is ~~taxes~~a corporate entity, with two principals, who also individually signed the loan as co-borrowers. After the restructuring in March, 2011, Note A was for $~~759~~475,000 ~~for~~and Note B in the ~~nine~~amount ~~months~~of $405,000 was charged-off in the quarter ended March 31, ~~2012~~2011, ~~compared~~including to $~~185~~188,000 ~~for~~that was charged-off against the ~~same~~general ~~period~~allowance infor ~~2011~~loan losses. ~~The~~At ~~increase in~~the ~~expense~~end ~~for~~of the ~~three~~two ~~and~~year ~~nine~~period, ~~month~~a ~~periods~~balloon payment is ~~primarily~~ due, tounless anthe ~~increase~~borrower refinances into a market rate loan at that time. The loan has performed in ~~income~~accordance ~~before~~with ~~income~~its ~~taxes~~restructured asterms ~~well~~at asSeptember a30, ~~receipt of~~2012, aand ~~prior~~no ~~period~~further ~~state~~impairments ~~tax~~have ~~refund~~been ~~during~~recorded since the ~~prior~~most ~~year~~recent ~~period~~restructuring.

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities and borrowings from the Federal Home Loan Bank of Indianapolis. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.34

We- ~~regularly~~Loan ~~adjust~~Relationship ~~our~~G. ~~investments~~A loan which is secured by a 93-pad mobile home park, and an 87-pad mobile home park, is included in ~~liquid~~the ~~assets~~above ~~based~~table ~~upon our~~in ~~assessment~~“Nonaccrual Loans, Multi-family real estate” as of: ~~(1)~~September ~~expected~~30, ~~loan~~2012 ~~demands;~~and ~~(2)~~as ~~expected~~of ~~deposit~~June ~~flows~~30, in2012. ~~particular~~In ~~municipal~~the ~~deposit~~“Credit ~~flows;~~Risk ~~(3)~~Profile ~~yields~~by ~~available~~ Internally Assigned Grade” table on page 15, this is classified as Multi-family residential real estate, Substandard, at September 30, 2012 and at June 30, 2012. The borrowers are two limited liability corporations and the two co-borrowers are the principals of the corporations. This loan is a participation loan with another financial institution. The Bank is the lead lender and has a 79% interest in the loan. The borrowers approached the Bank in May, 2011 and stated they were having cash flow problems even though the loan was current. The Bank received updated financial information following this conversation. The financial information showed there were cash flow problems, but that the co-~~earning~~borrowers ~~deposits~~had been infusing their personal funds. Based on the cash flow of the properties, the Bank established an impairment in the amount of $400,000, effective June 30, 2011, based on the information available when the June 30, 2011, financial statements were issued. At June 30, 2011, the Bank’s portion of the loan balance was $2.14 million, and ~~securities~~the carrying value of the Bank’s portion of the loan was $1.74 million. At January 31, 2012, the loan was 39 days delinquent. The Bank was still not receiving current financial information; ~~and~~therefore, ~~(4)~~new appraisals were ordered. The appraisals were received in March 2012, in the ~~objectives~~total amount of ~~our~~$2.8 ~~asset/liability~~million. ~~management~~The ~~policy~~borrower was able to bring the loan current by June 30, 2012. At September 30, 2012, United Community Bancorp’s portion of the loan balance was $2.0 million. At September 30, 2012, the loan was performing in accordance with its restructured terms.

~~Our~~• ~~most~~Loan ~~liquid~~Relationship ~~assets~~H. ~~are~~As ~~cash~~of ~~and~~September ~~cash~~30, ~~equivalents.~~2012, ~~The~~this ~~levels~~ loan relationship consists of ~~these~~two ~~assets~~loans ~~depend~~with ona ~~our~~net ~~operating~~carrying value of $744,000. ~~financing~~As stated in the June 30, ~~lending~~2012 ~~and~~narrative, ~~investing~~this ~~activities~~relationship ~~during~~was ~~any~~restructured ~~given~~using ~~period~~the split note strategy in the September 30, 2012 quarter. ~~Cash~~Both of the loans in the “Split Note Strategy” have the same security and ~~cash~~priority ~~equivalents totaled~~as ~~$32.4~~the ~~million~~one atloan ~~March~~discussed 31in the June 30, 2012 ~~and~~narrative. The collateral value is $31978,000 on properties for which United Community Bank has a first lien.2 ~~million~~No atadditional loss was incurred when the loan was restructured using the split note strategy in the September, 2012 quarter. As of June 30, ~~2011.~~2012, ~~Securities~~this ~~classified~~relationship asconsisted ~~available-for-sale~~of ~~whose~~one ~~market value~~loan ~~exceeds~~which ~~our~~was ~~cost~~secured by a first lien on an 18-unit apartment complex, ~~which~~a ~~provide~~single-family ~~additional~~dwelling ~~sources~~and a 6.3 acre tract of ~~liquidity~~land, ~~totaled~~and ~~$112~~a second lien on a single-family owner occupied dwelling on 11.336 ~~million~~acres. atThis ~~March~~loan 31is included in the above table, as “Nonaccrual Loans, Multi-family Real Estate” as of June 30, 2012., ~~Total~~in ~~securities~~ the “Credit Risk Profile by Internally Assigned Grade” table on page 15, this relationship is classified as ~~available~~“Multi-~~for-sale~~family ~~were~~Residential ~~$149.7~~Real ~~million~~Estate, Substandard” at ~~March~~June 3130, 2012. InThe ~~addition~~“A” loan of the split note strategy is included in the above table as “Nonaccrual Loans, atMulti-family ~~March~~Real 31Estate” as of September 30, 2012. Also, wein ~~had~~the “Credit Risk Profile by Internally Assigned Grade” table on page 15, the ~~ability~~“A” toloan ~~borrow a~~is ~~total~~classified ofas ~~approximately~~“Multi-Family ~~$104~~Residential Real Estate, Substandard” at September 30, 2012.6 ~~million~~The ~~from~~“B” loan of the ~~Federal~~split ~~Home~~note ~~Loan~~strategy ~~Bank~~is ofcharged ~~Indianapolis~~off.

At• ~~March~~Loan ~~31,~~Relationship ~~2012,~~I. weThis ~~had~~relationship ~~$31.8~~is ~~million~~comprised inof one loan ~~commitments outstanding,~~which ~~consisting~~is ofsecured ~~$2.0~~by ~~million~~an inindustrial/office ~~mortgage~~nonresidential ~~loan~~property ~~commitments,~~and ~~$1.6~~is ~~million~~included in ~~commercial~~the ~~loan~~above ~~commitments~~table, ~~$22.5 million~~ in ~~unused~~“Nonaccrual ~~home~~loans ~~equity~~nonresidential ~~lines~~real ofestate” ~~credit,~~as ~~$5.4~~of ~~million~~September in30, ~~commercial~~2012 ~~lines~~and as of ~~credit,~~June ~~and $334~~30,~~000~~ in2012. ~~letters~~In ofthe ~~credit~~“Credit ~~outstanding. Certificates~~Risk ofProfile ~~deposit~~by ~~due~~Internally ~~within~~Assigned ~~one~~Grade” ~~year~~table ofon ~~March~~page 3115, ~~2012~~this ~~totaled~~is ~~$118.3~~classified ~~million.~~as ~~This~~“Nonresidential ~~represented~~real ~~59.4%~~estate, ofSubstandard” ~~certificates~~at ~~of deposit~~September 30, 2012 and at ~~March~~June 3130, 2012. WeThe ~~believe~~borrower ~~that~~is a limited liability corporation and the ~~large~~two ~~percentage~~co-borrowers ofare ~~certificates~~principals of ~~deposit~~the limited liability corporation. The borrower approached United Community Bank in March 2012, indicating that ~~mature~~a ~~within~~major ~~one~~tenant ~~year~~was ~~reflects customers’~~not ~~hesitancy~~going to ~~invest~~renew ~~their~~its ~~funds~~lease ~~for~~in ~~longer~~November ~~periods~~2012. However, the tenant would remain in the ~~current~~property ~~low~~until ~~interest~~its ~~rate~~lease ~~environment~~expired. IfUnited ~~these maturing~~Community ~~deposits~~Bank doordered ~~not~~an ~~remain~~appraisal ~~with~~based ~~us,~~on wethis ~~will~~information. beThe ~~required~~appraisal towas ~~seek~~received ~~other~~in ~~sources~~March 2012 and reflected a value of ~~funding~~$900,000. ~~including~~At ~~other~~March ~~certificates~~31, 2012, the carrying value of ~~deposit~~ ~~and~~the ~~borrowings~~loan was reduced by $177,000 to $819,000. ~~Depending~~After onthe ~~market~~2011 ~~conditions~~tax returns were received late in the second quarter of 2012, weUnited ~~may~~Community Bank conducted further cash flow analyses and determined that the only way the loan would be ~~required~~paid off would be to ~~pay~~sell ~~higher~~the ~~rates~~property. onUnited ~~such~~Community ~~deposits~~Bank orrecorded ~~other~~a ~~borrowings than~~charge-off weof ~~currently~~$146,000 ~~pay~~based on the ~~certificates~~most ofrecent ~~deposit~~appraisal. ~~due~~An onimpairment orin ~~before~~the ~~March~~amount 31of $120,000 ~~2012.~~was ~~However,~~also established as an estimate to impair the loan further based on ~~past~~United Community Bank’s experience, wein ~~believe that~~settling aforeclosed ~~significant~~properties. ~~portion~~The carrying value of ~~our~~the ~~certificates~~loan ofwas ~~deposit~~$711,000 ~~will~~at ~~remain~~September ~~with~~30, us2012. WeThe ~~have~~borrower ~~the~~has ~~ability~~continued to ~~attract~~make ~~and~~the ~~retain~~required, ~~deposits by~~market ~~adjusting~~rate, ~~the~~monthly principal and interest ~~rates~~payments ~~offered~~through September 30, 2012.

~~Our~~The ~~primary~~following ~~investing~~table ~~activities~~summarizes all ~~are~~Note ~~the~~A/B ~~origination~~format ~~and purchase of~~ loans ~~and~~at the purchase of securities. Our primary financing activities consist of activity in deposit accounts and Federal Home Loan Bank advances. Deposit flows are affected by the overall level of interest ratesSeptember 30, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive and to increase core deposit relationships. Occasionally, we offer promotional rates on certain deposit products to attract deposits.2012:

Capital Management. United Community Bank is subject to various regulatory capital requirements administered by the OCC, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2012, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Regulation of Federal Savings Associations—Capital Requirements,” and Note 17 to the Consolidated Financial Statements included in Item 8 to the Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 26, 2012.

*(Dollars in thousands)*	Loan Balances						Number of Loans
	Note A		Note B		Total		Note A		Note B
Nonresidential real estate	$	3,818	$	2,382	$	6,200		4		4
Multi-family residential real estate		6,255		3,331		9,586		7		7
One- to four-family residential real estate		520		61		581		1		1
Total (1)	$	10,593	$	5,774	$	16,367		12		12

34(1) Included in this total are an aggregate of $7.4 million comprised of Note As and $4.1 million comprised of Note Bs that are included in the discussion of Loan Relationships A, B, C, D, E, F and H.

~~The~~Based ~~following~~on ~~table~~the ~~summarizes~~fact ~~the~~that ~~Bank’s~~our ~~capital~~loans ~~amounts~~receivable greater than 30 days past due and accruing in the ~~ratios~~multi-family ~~required~~residential atreal ~~March~~estate 31and nonresidential real estate portfolios totaled $529,000, which represents 0.6% of these loans at September 30, 2012:, management does not believe there are any other large concentrations of credit risk that are not performing under the original terms or modified terms, as applicable.

											To be well
											capitalized under
											prompt corrective
						For capital					action
	Actual					adequacy purposes					provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2012 (unaudited)	(in thousands)
Tier 1 capital to risk-weighted assets	$	45,626		17.56	%	$	10,393		4.0	%	$	15,590		6.0	%
Total capital to risk-weighted assets		48,902		18.82	%		20,786		8.0	%		25,983		10.0	%
Tier 1 capital to adjusted total assets		45,626		9.16	%		19,924		4.0	%		24,905		5.0	%
Tangible capital to adjusted total assets		45,626		9.16	%		7,472		1.5	%

~~Off-Balance~~The ~~Sheet~~following ~~Arrangements.~~table Inprovides ~~the normal~~information ~~course~~with ofrespect ~~operations,~~to weall ~~engage in a variety~~ of ~~financial~~our ~~transactions~~loans that, ~~in accordance with U.S. generally accepted accounting principles,~~ are ~~not~~classified ~~recorded~~as introubled ~~our~~debt ~~financial statements~~restructurings. ~~These~~For ~~transactions~~additional ~~involve,~~information toregarding ~~varying~~troubled debt ~~degrees,~~restructurings ~~elements~~on ofnonaccrual ~~credit~~status, ~~interest rate~~see ~~and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take~~ the ~~form of~~table ~~loan commitments, letters~~ of ~~credit~~nonperforming ~~and~~assets ~~lines of credit~~above. ~~We currently have no plans to engage in hedging activities in the future.~~

For the three and nine months ended March 31, 2012, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

	At September 30, 2012
	Loan Status				Total Unpaid Principal		Related		Recorded		Number		Average Recorded
*(in thousands)*	Accrual		Nonaccrual		Balance		Allowance		Investment		of Loans		Investment
One- to four-family residential real estate	$	2,095	$	2,693	$	4,788	$	23	$	4,765		26	$	4,858
Multi-family residential real estate		7,377		4,179		11,556		160		11,396		12		11,598
Nonresidential real estate		3,111		2,926		6,037		435		5,602		8		5,623
Total	$	12,583	$	9,798	$	22,381	$	618	$	21,763		46	$	22,079

35The following table is a roll forward of activity in our TDRs:

Item 3.

	Three Months Ended September 30, 2012
	Recorded Investment			Number of Loans
(Dollars in thousands)
Beginning balance	$	22,394			48
Additions to TDRs		156			—
Removal from TDRs (1)		(146	)		(2	)
Payments		(641	)		—

Ending balance	$	21,763			46

~~Quantitative~~(1) One TDR was foreclosed on during the period and ~~Qualitative~~transferred ~~Disclosures~~to ~~about~~REO ~~Market~~in ~~Risk~~the amount of $146,000. At June 30, 2012, one customer had two TDRs that were restructured during the quarter ended September 30, 2012 into one loan.

~~For~~Two aloans ~~discussion~~that ofwere ~~the~~recorded ~~Company’s~~as ~~asset~~TDRs ~~and liability~~at ~~management~~June 30, ~~policies~~2012 aswere ~~well~~restructured asduring the ~~potential~~quarter ~~impact~~ended ofSeptember 30, ~~interest~~2012 ~~rate changes~~ upon the ~~market~~end ~~value~~ of the ~~Company’s~~original ~~portfolio~~restructured equity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K/A, filed with the Securities and Exchange Commission on April 26, 2012terms. The ~~main~~restructuring ~~components~~increased ~~of market risk for~~ the ~~Company~~recorded ~~are~~investment ~~interest~~in ~~rate~~these ~~risk~~loans ~~and liquidity risk. The Company manages interest rate risk and liquidity risk~~ by ~~establishing and monitoring the volume~~$156,000 ~~maturities, pricing~~ and ~~mix of assets and funding sources with~~ the ~~objective~~loans ofcontinue ~~managing assets and funding sources~~ to ~~provide~~be ~~results~~carried ~~that are consistent with liquidity, growth, risk limits and profitability goals. Model simulation~~as ~~is used to measure earnings volatility under both rising and falling rate scenarios~~TDRs.

WeNo ~~use~~new aloans ~~net~~were ~~portfolio~~restructured ~~value analysis prepared by the OCC to~~during ~~review our level of interest rate risk. This analysis measures interest rate risk by computing changes in net portfolio value of our cash flows from assets, liabilities and off-balance sheet items in~~ the ~~event~~quarter ofended a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilitiesSeptember 30, ~~with adjustments made for off-balance sheet items~~2012. This analysis assesses the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 50 to 300 basis point increase or 50 and 100 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. Because of the low level of market interest rates, this analysis is not performed for decreases of more than 200 basis points.

~~The~~Loans ~~following~~that ~~table~~were ~~presents~~included ~~the change~~ in ~~our~~TDRs ~~net~~at ~~portfolio~~September 30, ~~value~~2012 atwere ~~December~~generally 31given concessions of interest rate reductions of between 25 and 300 basis points, ~~2011~~and/or ~~that~~structured ~~would~~as ~~occur~~interest only inpayment ~~the~~loans ~~event~~for periods of anone ~~immediate~~to ~~change~~three inyears. ~~interest~~Many ~~rates~~of ~~based~~these onloans ~~OCC~~also ~~assumptions,~~have ~~with~~balloon payments due at the end of their lowered norate ~~effect~~period, ~~given~~requiring the borrower to ~~any~~refinance ~~steps~~at market rates at that wetime. ~~might~~At ~~take~~September 30, to2012, ~~counteract~~there were 38 loans that ~~change~~required payments of principal and interest, and eight loans that required interest payments only.

			Net Portfolio Value (Dollars in thousands)								Net Portfolio Value as % of Portfolio Value of Assets
Basic Point (“bp”) Change in Rates			Amount		Change			% Change			NPV Ratio			Change (bp)
	300		$	61,724	$	(726	)		(1	)%		12.88	%		1	bps
	200			63,216		766			1			13.11			24
	100			63,785		1,334			2			13.16			29
	50			63,050		599			1			13.00			13
	0			62,451		-			-			12.87			-
	(50	)		61,022		(1,428	)		(2	)		12.60			(27	)
	(100	)		60,872		(1,578	)		(3	)		12.57			(30	)

The following table shows the aggregate amounts of our classified assets at the dates indicated.

The OCC uses various assumptions in assessing interest rate risk. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analyses presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table. Prepayment rates can have a significant impact on interest income. Because of the large percentage of loans and mortgage-backed securities we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that in turn affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slow and vice versa. While we believe these assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

	At September 30,
	2012		2011
	(In thousands)
Special mention assets	$	9,384	$	10,254
Substandard assets		30,648		33,280

Total classified assets	$	40,032	$	43,534

~~Item~~The 4following tables illustrate certain disclosures required by ASC 310-10-50-29(b) at September 30, 2012 and at June 30, 2012.

~~Procedures.~~At September 30, 2012:

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

	Credit Risk Profile by Internally Assigned Grade
	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four- Family Non- Owner Occupied Mortgage		Multi- family Non- Owner- Occupied Mortgage		Non- Residential Real estate		Construction		Land		Commercial and Agricultural		Total
	(In thousands)
Grade:
Pass	$	105,945	$	33,961	$	12,080	$	16,203	$	30,256	$	707	$	2,673	$	6,441	$	208,266
Watch		7,279		1,004		3,945		3,006		11,554		479		965		639		28,871
Special mention		526		22		823		344		7,623		—		—		46		9,384
Substandard		5,774		532		1,481		15,871		6,114		200		27		649		30,648
Total	$	119,524	$	35,519	$	18,329	$	35,424	$	55,547	$	1,386	$	3,665	$	7,775	$	277,169

AsAt ~~disclosed in Note 1 to the unaudited consolidated financial statements included in this Form 10-Q, in the Company’s Annual Report on Form 10-K/A as of and for the year ended~~ June 30, 2011 (the “Form 10-K/A”) and in the Quarterly Report on Form 10-Q/A as of and for the period ended December 31, 2011 (the “Form 10-Q/A”), management determined that a material weaknesses existed with respect to the oversight of the calculation of the allowance for loan losses related to certain impaired loans. These deficiencies resulted in the Company not properly identifying impaired loans and troubled debt restructurings under ASC 310-10-35 and ASC 310-40-35. The Company also experienced deficiencies in measuring impairment on impaired loans and troubled debt restructurings under ASC 310-10-35. These deficiencies primarily related to the reliance on personal cash infusions of co-borrowers that had been experiencing financial difficulties on troubled debt restructurings when determining the present value of future cash flows. Management has determined that relying on required personal cash infusions from co-borrowers who were experiencing financial difficulties in these circumstances was inconsistent with U.S. generally accepted accounting principles. U.S. generally accepted accounting principles require that the Company’s assumptions be “reasonable and supportable” and the facts and circumstances surrounding the existence of financial difficulties render the assumption regarding co-borrower cash infusions more difficult to support.2012:

The Company has implemented process improvements in order to address the material weakness which resulted in the restatement of the financial information included in this Form 10-Q, the Form 10-K/A and the Form 10-Q/A. Specifically, in connection with the impairment calculations under ASC 310, management no longer relies on agreed upon cash flows from co-borrowers. In addition the following monitoring controls have been implemented:

	Credit Risk Profile by Internally Assigned Grade
	One- to Four- Family Owner- Occupied Mortgage		Consumer		One- to Four- Family Non- Owner Occupied Mortgage		Multi- family Non- Owner- Occupied Mortgage		Non- Residential Real estate		Construction		Land		Commercial and Agricultural		Total
	(In thousands)
Grade:
Pass	$	108,642	$	34,380	$	11,836	$	15,423	$	30,379	$	510	$	2,577	$	6,015	$	209,762
Watch		6,503		683		4,059		10,223		11,250		479		836		615		34,648
Special mention		268		24		827		347		10,249		—		—		—		11,715
Substandard		6,288		508		1,099		16,332		7,245		200		28		374		32,074
Total	$	121,701	$	35,595	$	17,821	$	42,325	$	59,123	$	1,189	$	3,441	$	7,004	$	288,199

· When calculating impairments under ASC 310-10-35 for noncollateral dependent loans, the contractual cash flows discounted at the original effective rate are used to determine the required specific allocation.37

·The ~~Our~~following ~~monitoring~~table ofillustrates ~~noncollateral~~certain disclosures ~~dependent troubled debt restructurings and impaired loans has been enhanced to include a~~ required ~~review~~by ofASC a310-10-50-7A ~~borrower’s~~for ~~cash~~gross ~~flows, performed at least quarterly, which includes the review of rent rolls, financial statements, and tax returns~~loans.

· Management has gained a further understanding of the accounting for troubled debt restructurings and impaired loans under ASC 310-10-35 and ASC 310-40-35 and the complexities involved . The Company has implemented a quarterly monitoring process as described above to record impairment in a timely manner, based on the known facts and circumstances up through the date the financial statements are issued.

	At September 30, 2012				At June 30, 2012
	30-59 Days Past Due		60-89 Days Past Due		30-59 Days Past Due		60-89 Days Past Due
	(in thousands)
One- to four-family mortgage – owner-occupied	$	1,000	$	218	$	1,764	$	355
Consumer		296		3		195		15
One- to four-family mortgage – nonowner-occupied		1,251		—		947		—
Multi-family mortgage		488		—		489		—
Nonresidential real estate mortgage – commercial and office buildings		41		—		207		306
Construction		—		—		—		—
Land		50		—		—		—
Commercial and agricultural		6		46		246		—
Total	$	3,132	$	267	$	3,848	$	676

~~During~~The ~~the~~following ~~quarter~~table ~~ended~~illustrates ~~March 31, 2012, management believes that~~ the ~~enhancements~~ changes to the ~~Company’s~~allowance ~~internal~~for ~~controls~~loan ~~and~~losses ~~procedures~~for ~~have resolved~~ the ~~material~~ ~~weaknesses~~three ~~that~~months ~~existed~~ended ~~as of December 31, 2011 and June~~ September 30, ~~2011 and 2010 and March 31, 2011. Other than as described above, during the quarter ended March 31,~~ 2012 there were no changes in the Company’s internal control over financial reporting which materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.:

	One- to Four- Family Mortgage Owner- Occupied			Consumer			One- to Four- Family Mortgage Nonowner- Occupied			Multi- Family Mortgage Nonowner- Occupied			Non- Residential Real Estate			Construction		Land		Commercial and Agricultural			Total
	(In thousands)
Allowance for Loan Losses:
Beginning Balance:	$	666		$	477		$	236		$	1,915		$	2,282		$	3	$	11	$	24		$	5,614
Charge offs		(59	)		(50	)		—			—			(100	)		—		—		—			(209	)
Recoveries		5			13			(1	)		9			1			—		—		1			28
Provision		323			111			22			(253	)		38			3		8		(2	)		250
Ending Balance:	$	935		$	551		$	257		$	1,671		$	2,221		$	6	$	19	$	23		$	5,683

Balance, Individually Evaluated	$	17		$	—		$	6		$	448		$	435		$	—	$	—	$	—		$	906
Balance, Collectively Evaluated		918			551			251			1,223			1,786			6		19		23			4,777
Financing receivables: ending balance		119,524			35,519			18,329			35,424			55,547			1,386		3,665		7,775			277,169
Ending Balance: individually evaluated for impairment		4,903			1,619			1,976			13,547			6,047			—		27		236			28,355
Ending Balance: collectively evaluated for impairment		101,429			28,873			15,621			21,497			45,034			1,386		3,556		6,577			223,973
Ending Balance: loans acquired at fair value		13,192			5,027			732			380			4,466			—		82		962			24,841

~~PART II OTHER INFORMATION~~38

~~Item~~The 1.following ~~LEGAL~~table ~~PROCEEDINGS~~sets forth the allocation of the allowance for loan losses by loan category at the dates indicated.

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens and contracts, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

	At September 30,								At June 30,
	2012								2012
	Amount		% of Allowance to Total Allowance			% of Loans in Category to Total Loans			Amount		% of Allowance to Total Allowance			% of Loans in Category to Total Loans
	(Dollars in thousands)
One- to four-family residential real estate	$	1,192		21.0	%		49.7	%	$	902		16.1	%		48.4	%
Multi-family real estate		1,671		29.4			12.8			1,915		34.1			14.7
Nonresidential real estate		2,221		39.1			20.0			2,282		40.6			20.5
Land		19		0.3			1.3			11		0.2			1.2
Agricultural		—		—			1.3			—		—			1.1
Commercial		23		0.4			1.6			24		0.4			1.3
Consumer		551		9.7			12.8			477		8.5			12.4
Construction		6		0.1			0.5			3		0.1			0.4
Total allowance for loan losses	$	5,683		100.0	%		100.0	%	$	5,614		100.0	%		100.0	%
Total loans	$	277,169							$	288,199

~~Item~~Liquidity 1AManagement. ~~RISK~~Liquidity is ~~FACTORS~~the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities and borrowings from the Federal Home Loan Bank of Indianapolis. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

InWe ~~addition~~regularly toadjust ~~the~~our ~~other~~investments ~~information set forth~~ in ~~this~~liquid ~~report,~~assets ~~you~~based ~~should~~upon ~~carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in~~ our ~~Annual~~assessment ~~Report on~~of: ~~Form~~(1) ~~10-K/A~~expected ~~for~~loan ~~the~~demands; ~~year~~(2) ~~ended~~expected ~~June~~deposit 30flows, ~~2011,~~in ~~which~~particular ~~could~~municipal ~~materially affect our business, financial condition or future results.~~deposit ~~The~~flows; ~~risks~~(3) ~~described~~yields inavailable ~~our Annual Report~~ on ~~Form 10~~interest-~~K/A~~earning ~~are~~deposits ~~not~~and ~~the~~securities; ~~only risks that we face. Additional risks~~ and ~~uncertainties not~~(4) ~~currently~~the ~~known~~objectives toof ~~us or that we currently deem to be immaterial also may materially affect~~ our ~~business, financial condition and~~asset/orliability ~~operating results~~management policy.

~~Item~~Our 2most liquid assets are cash and cash equivalents. ~~UNREGISTERED~~The ~~SALES~~levels OFof ~~EQUITY~~these assets depend on our operating, financing, lending and investing activities during any given ~~SECURITIES~~period. ~~AND~~Cash ~~USE~~and OFcash ~~PROCEEDS~~equivalents totaled $31.3 million at September 30, 2012 and $29.1 million at June 30, 2012. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $110.1 million at September 30, 2012. Total securities classified as available-for-sale were $160.8 million at September 30, 2012. In addition, at September 30, 2012, we had the ability to borrow a total of approximately $110.8 million from the Federal Home Loan Bank of Indianapolis.

~~The~~At ~~following~~September ~~table~~30, ~~sets~~2012, ~~forth~~we ~~information~~had ~~regarding~~$30.3 million in loan commitments outstanding, consisting of $1.4 million in mortgage loan commitments, $21,000 in commercial loan commitments, $23.7 million in unused home equity lines of credit, $4.8 million in commercial lines of credit, and $334,000 in letters of credit outstanding. Certificates of deposit due within one year of September 30, 2012 totaled $114.0 million. This represented 26.3% of certificates of deposit at September 30, 2012. We believe that the ~~Company~~large percentage of certificates of deposit that mature within one year reflects customers’s ~~repurchases~~hesitancy to invest their funds for longer periods in the current low interest rate environment. If these maturing deposits do not remain with us, we will be required to seek other sources of ~~its~~funding, ~~common~~including other ~~stock~~certificates ~~during~~of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the ~~quarter~~certificates ~~ended~~of ~~March~~deposit 31due on or before September 30, 2012. However, based on past experience, we believe that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

(c)

Total Number

of Shares

(d)

Purchased

Maximum

(a)

as Part of

Number of Shares

Total

(b)

Publicly

that May Yet Be

Number of

Average

Announced Plans

Purchased Under

Price Paid

the Plans or

Period

Purchased

per Share

Programs

January 1, 2012 to January 31, 2012

5,600

5.53

10,772

121,090

February 1, 2012 to February 22, 2012

10,772

121,090

March 1, 2012 to March 31, 2012

10,772

121,090

Total

5,600

5.53

10,772

121,090

Our primary investing activities are the origination and purchase of loans and the purchase of securities. Our primary financing activities consist of activity in deposit accounts and Federal Home Loan Bank advances. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive and to increase core deposit relationships. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

~~Item 3. DEFAULTS UPON SENIOR SECURITIES~~39

~~Not~~Capital ~~applicable~~ Management. United Community Bank is subject to various regulatory capital requirements administered by the OCC, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At September 30, 2012, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Regulation of Federal Savings Associations—Capital Requirements,” and Note 16 to the Consolidated Financial Statements included in Item 8 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 7, 2012.

~~Item~~The 4.following ~~MINE~~table ~~SAFETY~~summarizes ~~DISCLOSURES~~the Bank’s capital amounts and the ratios required at September 30, 2012:

Not applicable

									To be well
									capitalized under
									prompt corrective
					For capital				action
	Actual				adequacy purposes				provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2012 (unaudited)	(in thousands)
Tier 1 capital to risk-weighted assets	$	45,848		18.37%	$	9,983		4%	$	14,975		6%
Total capital to risk-weighted assets		48,999		19.64%		19,959		8%		24,949		10%
Tier 1 capital to adjusted total assets		45,848		9.18%		19,977		4%		24,972		5%
Tangible capital to adjusted total assets		45,848		9.18%		7,492		1.5%		NA		NA

~~Item~~Off-Balance 5Sheet Arrangements. In ~~OTHER~~the ~~INFORMATION~~normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, letters of credit and lines of credit. We currently have no plans to engage in hedging activities in the future.

~~Not~~For ~~applicable~~the three months ended September 30, 2012, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 63. ~~EXHIBITS~~Quantitative and Qualitative Disclosures about Market Risk

Exhibit 31.1	Certification of Chief Executive Officer
Exhibit 31.2	Certification of Chief Financial Officer

For a discussion of the Company’s asset and liability management policies as well as the potential impact of interest rate changes upon the market value of the Company’s portfolio equity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 7, 2012. The main components of market risk for the Company are interest rate risk and liquidity risk. The Company manages interest rate risk and liquidity risk by establishing and monitoring the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals. Model simulation is used to measure earnings volatility under both rising and falling rate scenarios.

38We use an economic value of equity analysis prepared by a consulting firm to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in net economic value of our cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. Economic value of equity represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. These analyses assess the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or 100 and 200 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. Because of the low level of market interest rates, these analyses are not performed for decreases of more than 200 basis points.

Exhibit 32

Section 1305 Certifications

Exhibit 101.0*

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Unaudited Consolidated Financial Statements, tagged as blocks of text.

~~_____________________________~~The following table presents the change in our net economic value of equity at September 30, 2012 that would occur in the event of an immediate change in interest rates, with no effect given to any steps that we might take to counteract that change.

* Furnished, not filed.

		Economic Value of Equity (Dollars in Thousands)								Economic Value of Equity as % of Economic Value of Total Assets
Basis Point (“bp”) Change in Rates		Amount		Change			% Change			Economic Value Ratio
	300	$	51,458	$	(15,501	)		(23.15	)%		10.77	%
	200		55,647		(11,312	)		(16.89	)%		11.38	%
	100		62,899		(4,060	)		(6.06	)%		12.48	%
	0		66,959		—			—			12.98	%
	(100)		70,026		3,067			4.58	%		13.35	%
	(200)		62,523		(4,436	)		(6.62	)%		12.09	%

39The model uses various assumptions in assessing interest rate risk. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analyses presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table. Prepayment rates can have a significant impact on interest income. Because of the large percentage of loans and mortgage-backed securities we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that in turn affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slow and vice versa. While we believe these assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

~~SIGNATURES~~We use a net portfolio value analysis prepared by the OCC to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in net portfolio value of our cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 50 to 300 basis point increase or 50 and 100 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. Because of the low level of market interest rates, this analysis is not performed for decreases of more than 200 basis points.

~~Pursuant~~Item to4. ~~the~~Controls ~~requirements~~and ~~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.~~Procedures

	UNITED COMMUNITY BANCORP
Date: May 15, 2012	By:	/s/ William F. Ritzmann
		William F. RitzmannPresident and Chief Executive Officer

Date: May 15, 2012	By:	/s/ Vicki A. March
		Vicki A. MarchSenior Vice President, Chief Financial Officer and Treasurer

40PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2012, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10 are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no repurchases of the Company’s common stock during the quarter ended September 30, 2012.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

	Exhibit 31.1	Certification of Chief Executive Officer

	Exhibit 31.2	Certification of Chief Financial Officer

	Exhibit 32	Section 1305 Certifications

	Exhibit 101.0*	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Consolidated Financial Statements

* Furnished, not filed.

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 BANCORP


Date: November 15, 2012	By:	/s/ William F. Ritzmann
		William F. Ritzmann
		President and Chief Executive Officer


Date: November 15, 2012	By:	/s/ Vicki A. March
		Vicki A. March
		Senior Vice President, Chief Financial Officer and Treasurer

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