Edgar Filing: United Community Bancorp

basis and a discount of 35.17% to the peer group on a price-to-

tangible book basis. This means that, at the maximum of the offering

range, a share of our common stock would be more expensive than

the peer group on a core earnings per share basis and less expensive

than the peer group on a tangible book value per share basis.

The independent appraisal does not indicate market value. You

should not assume or expect that the valuation described above

means that our common stock will trade at or above the $10.00

purchase price after the reorganization.

Mutual Holding Company Data

The following table presents a summary of selected pricing ratios, on

a non-fully-converted basis, for publicly traded mutual holding

companies and the pricing ratios for us.

Form S-1

As filed with the Securities and Exchange Commission on December 14, 2005

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

United Community Bancorp

and

United Community Bank 401(k) Profit Sharing Plan and Trust

(Exact name of registrant as specified in its charter)


United States	6035	To Be Applied For
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification No.)

92 Walnut Street

Lawrenceburg, Indiana 47025

(812) 537-4822

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

William F. Ritzmann

President and Chief Executive Officer

United Community Bancorp

92 Walnut Street

Lawrenceburg, Indiana 47025

(812) 537-4822

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

Paul M. Aguggia, Esquire

Victor L. Cangelosi, Esquire

Edward G. Olifer, Esquire

Muldoon Murphy & Aguggia LLP

5101 Wisconsin Avenue, NW

Washington, DC 20016

(202) 362-0840

Thomas M. Maxwell, Esquire

Barnes & Thornburg LLP

11 South Meridian Street

Indianapolis, Indiana 46204

(317) 236-1313

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

Calculation of Registration Fee



Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per unit	Proposed maximum aggregate offering price (2)	Amount of registration fee
Common Stock $.01 par value	3,808,800 Shares(1)	$10.00	$38,088,000	$4,076
Participation Interests	(3)	—	$2,409,930	(4)

(1)	Includes shares of common stock to be issued to United Community Bank Charitable Foundation, a private foundation.

(2)	Estimated solely for the purpose of calculating the registration fee.

(3)	In addition, pursuant to Rule 416(c) under the Securities Act, this registration statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein.

(4)

The securities of United Community Bancorp to be purchased by the United Community Bank 401(k) Profit Sharing Plan are included in the amount shown for common stock. Accordingly, no separate fee is required for the participation interests. In accordance with Rule 457(h) of the Securities Act, as amended, the registration fee has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such Plan.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

FORM OF

Prospectus Supplement

INTERESTS IN

UNITED COMMUNITY BANK

401(K) PROFIT SHARING PLAN

AND

OFFERING OF 240,993 SHARES OF

UNITED COMMUNITY BANCORP

COMMON STOCK ($.01 PAR VALUE)

This prospectus supplement relates to the offer and sale to participants in the United Community Bank 401(k) Profit Sharing Plan of participation interests and shares of common stock of United Community Bancorp, Inc.

401(k) Plan participants may direct MG Trust Company, LLC, the trustee for the United Community Bancorp Stock Fund, to use their current account balances to subscribe for and purchase shares of United Community Bancorp common stock to be held in the United Community Bancorp Stock Fund. Based upon the value of the 401(k) Plan assets as of September 30, 2005, the United Community Bancorp Stock Fund trustee may purchase up to 240,993 shares of United Community Bancorp common stock, assuming a purchase price of $10.00 per share. This prospectus supplement relates to the election of 401(k) Plan participants to direct the United Community Bancorp Stock Fund trustee to invest all or a portion of their 401(k) Plan accounts in United Community Bancorp, Inc. common stock.

The prospectus dated , 200 of United Community Bancorp, which accompanies this prospectus supplement, includes detailed information regarding the reorganization of United Community Bank into the mutual holding company form of ownership and the offering of United Community Bancorp common stock, and the financial condition, results of operations and business of United Community Bank. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement, together with the prospectus, and keep both for future reference.

Please refer to “Risk Factors” beginning on page of the prospectus.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, nor any other state or federal agency or any state securities commission, has approved or disapproved these securities. Any representation to the contrary is a criminal offense.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

This prospectus supplement may be used only in connection with offers and sales by United Community Bancorp of interests or shares of common stock under the 401(k) Plan to employees of United Community Bank. No one may use this prospectus supplement to reoffer or resell interests or shares of common stock acquired through the 401(k) Plan.

You should rely only on the information contained in this prospectus supplement and the attached prospectus. United Community Bancorp, United Community Bank and the 401(k) Plan have not authorized anyone to provide you with information that is different.

This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock shall under any circumstances imply that there has been no change in the affairs of United Community Bank or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

The date of this Prospectus Supplement is , 200 .

TABLE OF CONTENTS


THE OFFERING		1
Securities Offered		1
Election to Purchase United Community Bancorp Common Stock in the Reorganization		1
Value of Participation Interests		2
Method of Directing Transfer		2
Time for Directing Transfer		2
Irrevocability of Transfer Direction		2
Purchase Price of United Community Bancorp Common Stock		3
Nature of a Participant’s Interest in United Community Bancorp Common Stock		3
Voting and Tender Rights of United Community Bancorp Common Stock		3

DESCRIPTION OF THE PLAN		3
Introduction		3
Eligibility and Participation		4
Contributions Under the Plan		4
Limitations on Contributions		4
401(k) Plan Investments		5
Benefits Under the Plan		7
Withdrawals and Distributions From the Plan		7
Administration of the Plan		8
Reports to Plan Participants		8
Plan Administrator		8
Amendment and Termination		8
Merger, Consolidation or Transfer		8
Federal Income Tax Consequences		9
Restrictions on Resale		10
SEC Reporting and Short-Swing Profit Liability		11

LEGAL OPINION		11

THE OFFERING

Securities Offered

The securities offered in connection with this prospectus supplement are participation interests in the 401(k) Plan. Assuming a purchase price of $10.00 per share, the trustee may acquire up to shares of United Community Bancorp common stock for the new United Community Bancorp Stock Fund. The participation interests offered under this prospectus supplement are conditioned on the completion of the reorganization and stock offering of United Community Bank. Your investment in the United Community Bancorp Stock Fund in connection with the reorganization of United Community Bank is also governed by the purchase priorities contained in the plan of reorganization. See the “Reorganization and Stock Offering - Subscription Rights” and “Limitations on Purchases of Shares” sections of the prospectus attached to this prospectus supplement for a discussion of the purchase priorities contained in the plan of reorganization.

This prospectus supplement contains information regarding the Plan. The attached prospectus contains information regarding the reorganization of United Community Bank and the financial condition, results of operations and business of United Community Bank. The address of the principal executive office of United Community Bank is 92 Walnut Street, Lawrenceburg, Indiana 47025. The telephone number of United Community Bank is (812) 537-4822.

Election to Purchase United Community Bancorp Common Stock in the Reorganization

In connection with the reorganization of United Community Bank, the 401(k) Plan will permit you to direct the trustee to transfer all or part of the funds which represent your current beneficial interest in the assets of the 401(k) Plan to the United Community Bancorp Stock Fund. The trustee of the Stock Fund will subscribe for United Community Bancorp common stock offered for sale in connection with the reorganization in accordance with each participant’s direction. However, please note that, in order to maintain a cash buffer within the United Community Bancorp Stock Fund, percent ( %) of your investment direction will be held in cash. Approximately % ( %) of your investment direction will be held in cash. Approximately % ( %) of the total amount that you transfer will be used to purchase common stock in the offering, rounded down to the nearest $10.00 increment, with any remainder also held in cash within the Stock Fund. Prior to the completion of the reorganization and stock offering, the funds you elect to transfer to the Stock Fund will be transferred to the Plan’s fund. If there is not enough common stock in the reorganization to fill all subscriptions, the common stock will be apportioned and the trustee for the 401(k) Plan may not be able to purchase all of the common stock you requested. In such case, [the trustee will purchase shares in the open market, on your behalf, after the reorganization to fulfill your initial request] / [all or a portion of the funds you elected to transfer will not be used to purchase common stock, and will instead remain in the fund. After the close of the offering, you may reinvest in the funds held in the fund amount the Plan’s other investment funds, including the Stock Fund.] Please note that open market purchases may be made at prices higher or lower than the initial public offering price of $10.00 per share.

Plan participants may direct a transfer of funds to the United Community Bancorp Stock Fund. However, as mentioned above, your transfer directions are subject to subscription rights and purchase priorities. Your order for shares in the stock offering will be filled based on your purchase priority in the offering. United Community Bank has granted subscription rights to the following persons in the following order of priority: (1) depositors with $50.00 or more on deposit at United Community Bank as of

August 31, 2004; (2) the United Community Bank Employee Stock Ownership Plan; (3) depositors with $50.00 or more on deposit at United Community Bank as of December 31, 2005; and (4) depositors of United Community Bank as of , 2006. No individual or group of individuals may purchase more than $150,000 of United Community Bancorp common stock in the offering. If you fall into one of the above subscription offering categories, you have subscription rights in the offering and you may use funds in your 401(k) Plan account to purchase shares of United Community Bancorp common stock.

In addition to using funds allocated to your 401(k) Plan accounts, you may also purchase United Community Bancorp common stock in the offering using other funds. You have received or will soon receive stock offering materials in the mail, including a Stock Order Form. If you choose to place an order for stock in the offering using funds other than those in your 401(k) Plan accounts, you must complete and submit a separate Stock Order Form to the location and by the deadline indicated on that form.

Value of Participation Interests

As of September 30, 2005, the market value of the assets of the 401(k) Plan equaled approximately $2,409,930. United Community Bank has informed each participant of the value of his or her beneficial interest in the Plan as of September 30, 2005. The value of Plan assets represents past contributions to the Plan on your behalf, plus or minus earnings or losses on the contributions, less previous withdrawals and loans.

Method of Directing Transfer

The last two pages of this prospectus supplement contain a form for you to direct a transfer to the United Community Bancorp Stock Fund (the “Investment Form”). If you wish to transfer all, or part, in multiples of not less than 1%, of your beneficial interest in the assets of the Plan to the United Community Bancorp Stock Fund, you should complete the Investment Form. If you do not wish to invest in the Stock Fund through the 401(k) Plan, you do not need to take any action. The minimum investment in the United Community Bancorp Stock Fund during the initial public offering is $250.

Time for Directing Transfer

The deadline for submitting the Investment Form with your directions to transfer amounts from your other investment funds to the United Community Bancorp Stock Fund in connection with the reorganization is , 2006. You must submit the Investment Form to by : p.m. on , 2006.

Irrevocability of Transfer Direction

Once you submit your Investment Form to transfer amounts credited to your account in the 401(k) Plan to the United Community Bancorp Stock Fund, you cannot change your investment direction prior to the completion of the reorganization and stock offering. You may be able to change your investments in other investment funds under the 401(k) Plan, subject, however, to the terms of the Plan and any “blackout” notices to the contrary that you receive from the Plan Administrator. Following the closing of the stock offering and the trustee’s initial purchase of units in the United Community Bancorp Stock Fund, and subject to the terms and requirements of the 401(k) Plan, including any “blackout” notices, you may direct the investment of additional funds into the Stock Fund, which will continue to be an investment option under the 401(k) Plan.

Purchase Price of United Community Bancorp Common Stock

The trustee will use the funds transferred to the United Community Bancorp Stock Fund to purchase shares of United Community Bancorp common stock in the reorganization. As discussed above, the United Community Bancorp Stock Fund will be comprised of stock units and a cash buffer. The trustee will pay the same price for shares of United Community Bancorp common stock, $10.00 per share, as all other persons who purchase shares of United Community Bancorp common stock in the offering.

Nature of a Participant’s Interest in United Community Bancorp Common Stock

The Stock Fund trustee will hold United Community Bancorp common stock in the name of the 401(k) Plan. The trustee will credit units of the United Community Bancorp Stock Fund acquired at your investment direction to your account under the 401(k) Plan.

Voting and Tender Rights of United Community Bancorp Common Stock

The Stock Fund trustee generally will exercise voting and tender rights attributable to all United Community Bancorp common stock held by the United Community Bancorp Stock Fund as directed by participants with interests in the Stock Fund. With respect to each matter as to which holders of United Community Bancorp common stock have a right to vote, you will be given voting instruction rights reflecting your proportionate interest in the Stock Fund. [The number of shares of United Community Bancorp common stock held in the United Community Bancorp Stock Fund that are voted for and against each matter will be proportionate to the number of voting instruction rights exercised by participants. If there is a tender offer for United Community Bancorp common stock, the Plan provides that each participant will be allotted a number of tender instruction rights reflecting the participant’s proportionate interest in the United Community Bancorp Stock Fund. The percentage of shares of United Community Bancorp common stock held in the Stock Fund that will be tendered will be the same as the percentage of the total number of tender instruction rights that are exercised in favor of the tender offer. The remaining shares of United Community Bancorp common stock held in the United Community Bancorp Stock Fund will not be tendered. The Plan makes provisions for participants to exercise their voting instruction rights and tender instruction rights on a confidential basis].

DESCRIPTION OF THE PLAN

Introduction

Effective , 200 , United Community Bank amended and restated the United Community Bank 401(k) Profit Sharing Plan, originally effective as of April 1, 1997, in its entirety. United Community Bank intends for the Plan to comply, in form and in operation, with all applicable provisions of the Internal Revenue Code of 1986, as amended, and the Employee Retirement Income Security Act of 1974, as amended, or “ERISA.” United Community Bank may change the Plan from time to time in the future to ensure continued compliance with these laws. United Community Bank may also amend the Plan from time to time in the future to add, modify, or eliminate certain features of the plan, as it sees fit. As a plan governed by ERISA, federal law provides you with various rights and protections as a plan participant. Although the Plan is governed by many of the provisions of ERISA, the Pension Benefit Guaranty Corporation does not guarantee your retirement benefits under the 401(k) Plan.

Reference to Full Text of the Plan. The following portions of this prospectus supplement provide an overview of the material provisions of the 401(k) Plan. United Community Bank qualifies this overview in its entirety, however, by reference to the full text of the Plan. You may obtain copies of the full Plan document by contacting at United Community Bank. You should carefully read the full text of the Plan document to understand your rights and obligations under the plan.

Eligibility and Participation

Eligible employees of United Community Bank may participate in the 401(k) Plan as of the January 1^st or July 1^st coinciding with or next following their satisfaction of the eligibility requirements. [Generally, employees who are at least 18 years of age may participate in the Plan upon their completion of one year of service.]

As of , 200 , of the employees at United Community Bank elected to participate in the Plan.

Contributions Under the 401(k) Plan

Plan Participant Contributions. Subject to certain Internal Revenue Code limitations, the 401(k) Plan permits each participant to contribute up to 100% of their annual compensation to the Plan (See “Limitations on Contributions” below.). [Participants may change their rate of contribution with respect to pre-tax deferrals upon providing thirty (30) days’ notice to the Bank.]

United Community Bank Contributions. The 401(k) Plan provides that United Community Bank may make matching contributions. United Community Bank currently matches 50% of each participant’s salary deferrals, up to a maximum of 10% of annual compensation. United Community Bank may also make discretionary contributions on behalf of Plan participants. Employer contributions (matching and discretionary) are allocated to each participant who has completed 500 hours of service during the Plan Year (i.e., the calendar year) and remains employed on the last day of the Plan Year (or who terminated employment during the Plan Year due to disability, retirement or death).

Limitations on Contributions

Limitations on Employee Salary Deferrals. Although the Plan permits you to defer up to 100% of your compensation, by law your total deferrals under the Plan, together with similar plans, may not exceed $15,000 for 2006. Employees who are age 50 and over may make additional catch-up contributions to the Plan, in amounts up to $5,000 for 2006. (The Internal Revenue Service will periodically increase these annual limitations.) Contributions in excess of these limitations, or “excess deferrals,” will be included in an affected participant’s gross income for federal income tax purposes in the year the contributions are made, provided they are distributed to the participant no later than the first April 15th following the close of the taxable year in which the excess deferrals were made. Excess deferrals distributed after that date will be treated, for federal income tax purposes, as earned and received by the participant in the taxable year of the distribution.

Limitations on Annual Additions and Benefits. Under the requirements of the Internal Revenue Code, the Plan provides that the total amount of contributions and forfeitures (annual additions) credited to a participant during any year under all defined contribution plans of United Community Bank (including the

401(k) Plan and the proposed United Community Bank Employee Stock Ownership Plan) may not exceed the lesser of 100% of the participant’s compensation, or $42,000 for 2005 ($44,000 for 2006).

Limitations on Plan Contributions for Highly Compensated Employees. Special provisions of the Internal Revenue Code limit the amount of salary deferrals and matching contributions that may be made to the 401(k) Plan in any year on behalf of highly compensated employees in relation to the amount of deferrals and matching contributions made by or on behalf of all other employees eligible to participate in the Plan. If contributions exceed these limitations, the Plan must adjust the contribution levels for highly compensated employees.

In general, a highly compensated employee includes any employee who (1) was a five percent owner of the sponsoring employer at any time during the year or preceding year, or (2) had compensation for the preceding year in excess of $100,000 and, if the sponsoring employer so elects, was in the top 20% of employees by compensation for such year. These dollar amounts may be adjusted periodically by the IRS.

Top-Heavy Plan Requirements. If the Plan is a Top-Heavy Plan for any calendar year, United Community Bank may be required to make certain minimum contributions to the Plan on behalf of non-key employees. In general, the Plan will be treated as a “Top-Heavy Plan” for any calendar year if, as of the last day of the preceding calendar year, the aggregate balance of the accounts of participants who are Key Employees exceeds 60% of the aggregate balance of the accounts of all participants. A Key Employee generally includes any employee who, at any time during the calendar year or any of the four preceding years, is:

(1)

an officer of United Community Bank whose annual compensation exceeds $140,000;

(2)

5% owner, meaning an employee who owns more than 5% of the outstanding stock of United Community Bancorp, or who owns stock that possesses more than 5% of the total combined voting power of all stock of United Community Bancorp; or

(3)

1% owner, meaning an employee who owns more than 1% of the outstanding stock of United Community Bancorp or who owns stock that possesses more than 1% of the combined voting power of the total stock of United Community Bancorp and whose annual compensation exceeds $150,000.

401(k) Plan Investments

Investment of Contributions. Prior to 200 , contributions under the Plan were invested in the funds specified below. The annual percentage return on these funds (net of fees) for the prior three years was:


	2004	2003	2002
[List Funds]

Effective , 200 , the 401(k) Plan changed certain investment choices available under the Plan. The Plan currently offers the following investment choices:

[Names of Funds]. [Descriptions of Funds.]

The annual percentage return (net of fees) for the prior three years on the investment choices offered under the Plan after , 200 was:


	2004	2003	2002
[List Funds.]

The 401(k) Plan now offers the United Community Bancorp Stock Fund as an additional choice to the investment alternatives described above. The Stock Fund invests primarily in the common stock of United Community Bancorp, Participants in the Plan may direct the trustee to invest all or a portion of their Plan account balances in United Community Bancorp common stock.

The United Community Bancorp Stock Fund consists of investments in the common stock of United Community Bancorp and cash. Each participant’s proportionate undivided beneficial interest in the United Community Bancorp Stock Fund is measured by units. The daily unit value is calculated by determining the market value of the common stock held and adding to that any cash held by the trustee. This total will be divided by the number of units outstanding to determine the unit value of the United Community Bancorp Stock Fund.

Upon payment of a cash dividend, the trustee will determine the unit value prior to distributing the dividend. The trustee may use the dividend to purchase shares of United Community Bancorp common stock. The trustee will, to the extent practicable, use amounts held in the Stock Fund to purchase shares of common stock. Pending investment in the common stock, assets held in the Stock Fund will be placed in bank deposits and other short-term investments.

As of the date of this prospectus supplement, no shares of United Community Bancorp common stock have been issued or are outstanding and there is no established market for the United Community Bancorp common stock. Accordingly, there is no record of the historical performance of the United Community Bancorp Stock Fund. The performance of the Stock Fund will depend on a number of factors, including the financial condition and profitability of United Community Bancorp and United Community Bank and general market conditions for United Community Bancorp common stock.

Benefits Under the Plan

Vesting. 401(k) Plan participants are 100% vested in their elective salary deferrals. Employer contributions to the 401(k) Plan vest 100% upon the completion of three years of service; participants are 0% vested prior to their completion of three years of service.

Withdrawals and Distributions From the Plan

Withdrawals Before Termination of Employment. You may receive in-service distributions from the 401(k) Plan under limited circumstances in the form of hardship distributions and loans. In order to qualify for a hardship withdrawal, you must have an immediate and substantial need to meet certain expenses and have no other reasonably available resources to meet the financial need. If you qualify for a hardship distribution, the Plan trustee will make the distribution proportionately from the investment funds in which you have invested your account balances. Participants and beneficiaries are also eligible for Plan loans, subject to the procedures and requirements established by the Plan Administrator. You may obtain additional information from at United Community Bank.

Distribution Upon Retirement or Disability. Upon retirement or disability, you may receive a full lump sum payment or installment payments from the 401(k) Plan equal to the value of your account. Distribution Upon Death. If you die before your benefits are paid from the 401(k) Plan, your benefits will be paid to your surviving spouse or beneficiary under one or more of the forms available under the Plan.

Distribution Upon Termination for Any Other Reason. If you terminate employment for any reason other than retirement, disability or death and your account balance exceeds [$1,000], the Plan trustee will make your distribution on your normal retirement date, unless you request otherwise. If your account balances do not exceed [$1,000], the trustee will generally distribute your benefits to you as soon as administratively practicable following termination of employment.

Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the 401(k) Plan to another qualified retirement plan or to an individual retirement account.

Nonalienation of Benefits. Except with respect to federal income tax withholding and as provided for under a qualified domestic relations order, benefits payable under the 401(k) Plan will not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to benefits payable under the Plan will be void.

Applicable federal tax law requires the 401(k) Plan to impose substantial restrictions on your right to withdraw amounts held under the Plan before your termination of employment with United Community Bank. Federal law may also impose an excise tax on withdrawals from the Plan before you attain 59¹/2 years of age, regardless of whether the withdrawal occurs during your employment with United Community Bank or after your termination of employment.

Administration of the Plan

Trustees. The trustee of the 401(k) Plan is the named fiduciary of the Plan for purposes of ERISA. The board of directors of United Community Bank has appointed William F. Ritzmann as trustee of the 401(k) Plan. The board of directors has also appointed a separate, independent trustee for the United Community Bancorp Stock Fund. MG Trust Company, LLC serves as Stock Fund trustee.

The Plan trustee receives, holds and invests the assets of the Plan (other than the Stock Fund) and distributes them to participants and beneficiaries in accordance with the terms of the Plan. The Stock Fund trustee holds the assets of the Stock Fund and invests them in United Community Bancorp common stock on behalf of Plan participants.

Reports to Plan Participants

United Community Bank, as Plan Administrator, will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses.

Plan Administrator

The current Plan Administrator is United Community Bank. The Plan Administrator is responsible for the administration of the 401(k) Plan, interpretation of the provisions of the Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the Plan, maintenance of records, books of account and all other data necessary for the proper administration of the Plan, preparation and filing of all returns and reports required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures to participants, beneficiaries and others required under ERISA.

Amendment and Termination

United Community Bank expects to continue the 401(k) Plan indefinitely. Nevertheless, United Community Bank may terminate the Plan at any time. If United Community Bank terminates the Plan in whole or in part, regardless of any contrary provisions of the Plan, all affected participants will become fully vested in their accounts. United Community Bank reserves the right to make, from time to time, changes which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that United Community Bank may amend the plan as it determines necessary or desirable, with or without retroactive effect, to comply with ERISA or the Internal Revenue Code.

Merger, Consolidation or Transfer

If the 401(k) Plan merges or consolidates with another plan or transfers the trust assets to another plan, and if either the Plan or the other plan is then terminated, you would receive a benefit immediately after the merger, consolidation or transfer that would be equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer.

Federal Income Tax Consequences

The following summarizes only briefly the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. You should consult with your tax advisor with respect to any transaction involving the 401(k) Plan and any distribution from the Plan.

As a “qualified retirement plan,” the Internal Revenue Code affords the Plan tax advantages, including the following:

(1) The sponsoring employer is allowed an immediate tax deduction for the amount contributed to the Plan each year;

(2) Participants pay no current income tax on amounts contributed by the employer on their behalf; and

(3) Earnings of the plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

United Community Bank administers the Plan to comply with the operational requirements of the Internal Revenue Code as of the applicable effective date of any change in the law. If United Community Bank should receive an adverse determination letter regarding the Plan’s tax exempt status from the Internal Revenue Service, all participants would generally recognize income equal to their vested interest in the Plan, the participants would not be permitted to transfer amounts distributed from the Plan to an Individual Retirement Account or to another tax-qualified retirement plan, and United Community Bank would be denied certain deductions with respect to the Plan.

Lump Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59¹/2, and consists of the balance credited to the participant under the 401(k) Plan and all other profit sharing plans, if any, maintained by United Community Bank. The portion of any lump sum distribution included in taxable income for federal income tax purposes consists of the entire amount of the lump sum distribution, less the amount of after-tax contributions, if any, you have made to any other profit sharing plans maintained by United Community Bank, if the distribution includes those amounts.

United Community Bancorp Common Stock Included in Lump Sum Distribution. If a lump sum distribution includes United Community Bancorp common stock, the distribution generally is taxed in the manner described above. The total taxable amount is reduced, however, by the amount of any net unrealized appreciation with respect to United Community Bancorp common stock; that is, the excess of the value of United Community Bancorp common stock at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of United Community Bancorp common stock, for purposes of computing gain or loss on its subsequent sale, equals the value of United Community Bancorp common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a

subsequent sale or other taxable disposition of United Community Bancorp common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, is long-term capital gain, regardless of how long you hold the United Community Bancorp common stock, or the “holding period.” Any gain on a subsequent sale or other taxable disposition of United Community Bancorp common stock that exceeds the amount of net unrealized appreciation at the time of distribution is considered long-term capital gain, regardless of the holding period. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed under IRS regulations.

We have provided you with a brief description of the material federal income tax aspects of the 401(k) Plan that are generally applicable under the Internal Revenue Code. We do not intend this to be a complete or definitive description of the federal income tax consequences of participating in or receiving distributions from the Plan. Accordingly, you should consult a tax advisor concerning the federal, state and local tax consequences of participating in and receiving distributions from the Plan.

Restrictions on Resale

Any “affiliate” of United Community Bancorp under Rules 144 and 405 of the Securities Act of 1933, as amended, who receives a distribution of common stock under the 401(k) Plan, may re-offer or resell such shares only under a registration statement filed under the Securities Act of 1933, as amended, assuming the availability of a registration statement, or under Rule 144 or some other exemption from the registration requirements. An “affiliate” of United Community Bank is someone who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, United Community Bank. Generally, a director, principal officer or major shareholder of a corporation is deemed to be an “affiliate” of that corporation.

Any person who may be an “affiliate” of United Community Bank may wish to consult with counsel before transferring any common stock they own. In addition, participants should consult with counsel regarding the applicability to them of Section 16 of the Securities Exchange Act of 1934, as amended, which may restrict the sale of United Community Bancorp common stock acquired under the 401(k) Plan or other sales of United Community Bancorp common stock.

Persons who are not deemed to be “affiliates” of United Community Bank at the time of resale may resell freely any shares of United Community Bancorp common stock distributed to them under the 401(k) Plan, either publicly or privately, without regard to the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, or compliance with the restrictions and conditions contained in the exemptions available under federal law. A person deemed an “affiliate” of United Community Bank at the time of a proposed resale may publicly resell common stock only under a “re-offer” prospectus or in accordance with the restrictions and conditions contained in Rule 144 of the Securities Act of 1933, as amended, or some other exemption from registration, and may not use this prospectus in connection with any such resale. In general, Rule 144 restricts the amount of common stock which an affiliate may publicly resell in any three-month period to the greater of one percent of United Community Bancorp common stock then outstanding or the average weekly trading volume reported on the Nasdaq Stock Market during the four calendar weeks before the sale. Affiliates may sell only through brokers without solicitation and only at a time when United Community Bancorp is current in filing all required reports under the Securities Exchange Act of 1934, as amended.

SEC Reporting and Short-Swing Profit Liability

Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on officers, directors and persons who beneficially own more than ten percent of public companies such as United Community Bancorp. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the filing of reports of beneficial ownership. Within ten days of becoming a person required to file reports under Section 16(a), a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Reporting persons must also report certain changes in beneficial ownership involving allocation or reallocation of assets held in their Plan accounts, either on a Form 4 within two days after a transaction, or annually on a Form 5 within 45 days after the close of a company’s fiscal year.

In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by United Community Bancorp of profits realized from the purchase and sale, or sale and purchase, of the common stock within any six-month period by any officer, director or any person who beneficially owns more than ten percent of the common stock.

The SEC has adopted rules that exempt many transactions involving the 401(k) Plan from the “short-swing” profit recovery provisions of Section 16(b). The exemptions generally involve restrictions upon the timing of elections to buy or sell employer securities for the accounts of any officer, director or other person who beneficially owns more than ten percent of the common stock.

Except for distributions of the common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons who are governed by Section 16(b) may be required, under limited circumstances involving the purchase of common stock within six months of a distribution, to hold shares of the common stock distributed from the Plan for six months after the distribution date.

LEGAL OPINION

The validity of the issuance of the common stock of United Community Bancorp will be passed upon by Muldoon Murphy & Aguggia LLP, Washington, D.C. Muldoon Murphy & Aguggia LLP acted as special counsel for United Community Bank in connection with the reorganization and stock offering of United Community Bank.


*SPECIAL ONE-TIME FORM FOR USE IN STOCK OFFERING*		SAMPLE ONLY

UNITED COMMUNITY BANK

401(k) Profit Sharing Plan

INVESTMENT FORM

Name of Plan Participant:

(Please Print)

Social Security Number:

1. Instructions. In connection with the offering to the public of the common stock of United Community Bancorp (the “Common Stock”), the United Community Bank 401(k) Profit Sharing Plan (the “401(k) Plan”) now permits participants to direct their current 401(k) Plan account balances into a new fund: the United Community Bancorp Stock Fund (the “Stock Fund”). The percentages of your accounts that you direct to be transferred into the Stock Fund will be used to purchase shares of Common Stock in the offering. Please note that approximately percent (__%) of the total amount that you transfer into the Stock Fund will not be used to purchase shares of Common Stock, but will instead be held as cash, as discussed on Page 1 of the attached Prospectus Supplement. Approximately percent (__%) of the total amount that you transfer will be used to purchase Common Stock in the offering, rounded down to the nearest $10.00 increment, with any remainder also held in cash within the Stock Fund.

To transfer all or part of your 401(k) Plan funds to the Stock Fund, you should complete and file this form with at United Community Bank. This form must be received no later than p.m. on , 2006. If you need any assistance in completing this form, please contact at (812)537-4822. If you do not complete and return this form by p.m. on , 2006, your 401(k) Plan funds will continue to be invested in accordance with your prior investment directions, or in accordance with the terms of the 401(k) Plan if you have not provided investment directions. You need not submit this form if you do not wish to purchase Common Stock in the offering with your 401(k) Plan funds. PLEASE KEEP A COPY OF THE COMPLETED FORM FOR YOUR RECORDS.

2. Purchaser Information. Your ability to purchase Common Stock in the offering and to direct your 401(k) Plan funds into the Stock Fund may be based upon your subscription rights. Please indicate only the earliest date that applies to you:

Check here if you had $50.00 or more on deposit with United Community Bank as of August 31, 2004.

Check here if you had $50.00 or more on deposit with United Community Bank as of December 31, 2005.

Check here if you had a deposit with United Community Bank as of , 2006.

3. Investment Directions. I hereby authorize the Plan Administrator to direct the trustee to transfer the following percentages (in whole percentages only) of each of my 401(k) Plan account balances into the Stock Fund:


*Investment Funds*	*Percentage*

*[List Funds]*		%

		%

		%

		%

		%

		%

		%

		%

		%

I understand that, if there is not enough Common Stock available in the stock offering to fill my subscription in whole or in part pursuant to the investment directions above, any funds not used to purchase Common Stock will [be used to purchase shares on the open market]/[remain in fund until I provide directions to reinvest the funds in accordance with the terms of the Plan.]

4. Acknowledgment of Participant. I understand that this Investment Form shall be subject to all of the terms and conditions of the 401(k) Plan. I acknowledge that I have received a copy of the Prospectus and the Prospectus Supplement.




Signature of Participant				Date

Acknowledgment of Receipt by Plan Administrator. This Investment Form was received by United Community Bank on the date noted below.




By:
								Date

THE PARTICIPATION INTERESTS REPRESENTED BY THE COMMON STOCK OFFERED HEREBY ARE NOT DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY, AND ARE NOT GUARANTEED BY UNITED COMMUNITY BANCORP, UNITED COMMUNITY MHC OR UNITED COMMUNITY BANK. THE COMMON STOCK IS SUBJECT TO AN INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL INVESTED.


PROSPECTUS		[LOGO]

United Community Bancorp

(Proposed Holding Company for United Community Bank)

Up to 3,172,160 Shares of Common Stock

This is the initial public offering of shares of common stock of United Community Bancorp, a company to be

formed in connection with the reorganization of United Community Bank into the mutual holding company form of

organization. The shares we are offering will represent approximately 43.1% of our outstanding common stock. United

Community MHC, a mutual holding company to be formed in connection with the reorganization, will own approximately

55.0% of our outstanding common stock. The remaining 1.9% of our common stock will be held by United Community

Bank Charitable Foundation, a charitable foundation to be formed in connection with the reorganization. We intend to

have our common stock quoted on the Nasdaq National Market.

If you are or were a depositor of United Community Bank:

•

You may have priority rights to purchase shares of common stock.

If you are a participant in the United Community Bank 401(k) Profit Sharing Plan:

•

You may direct that all or part of your current account balances in this plan be invested in shares of

common stock.

•

You will be receiving separately a supplement to this prospectus that describes your rights under this

plan.

If you fit neither of the categories above, but are interested in purchasing shares of our common stock:

•

You may have an opportunity to purchase shares of common stock after priority orders are filled.

We are offering up to 3,172,160 shares of common stock for sale on a best efforts basis, subject to certain

conditions. We must sell a minimum of 2,344,640 shares to complete the offering. If, as a result of regulatory

considerations, demand for the shares or changes in market conditions, the independent appraiser determines our market

value has increased, we may sell up to 3,647,984 shares without giving you further notice or the opportunity to change or

cancel your order. The offering is expected to terminate at 12:00 noon, Eastern time, on [Expiration Date]. We may

extend this termination date without notice to you until [Extension Date #1], unless the Office of Thrift Supervision

approves a later date, which will not be beyond [Expiration Date #2].

Keefe, Bruyette & Woods, Inc. will use its best efforts to assist us in our selling efforts, but is not required to

purchase any of the common stock that is offered for sale. Purchasers will not pay a commission to purchase shares of

common stock in the offering. All shares offered for sale are offered at a price of $10.00 per share.

The minimum purchase is 25 shares. Once submitted, orders are irrevocable unless the offering is terminated or

extended beyond [Extension Date #1]. If the offering is extended beyond [Extension Date #1], subscribers will have

their funds promptly returned unless they reconfirm their subscription. Funds received before completion of the offering

will be held in an escrow account at United Community Bank or, at our discretion, at another insured financial institution,

and will earn interest at our statement savings rate, which is currently % per annum. In addition, if we do not sell

the minimum number of shares or if we terminate the offering for any other reason, we will promptly return your funds

with interest at our statement savings rate.

We expect our directors and executive officers, together with their associates, to subscribe for 482,500 shares,

which equals 15.2% of the shares offered for sale at the maximum of the offering range.

On , 2006, the Office of Thrift Supervision conditionally approved the plan of reorganization and

stock issuance. However, such approval does not constitute a recommendation or endorsement of this offering by that

agency.

This investment involves a degree of risk, including the possible loss of principal.

Please read “Risk Factors” beginning on page .

OFFERING SUMMARY

Price Per Share: $10.00


	Minimum		Maximum		Maximum As Adjusted
Number of shares		2,344,640		3,172,160		3,647,984
Gross offering proceeds	$	23,446,400	$	31,721,600	$	36,479,840
Estimated offering expenses	$	1,098,000	$	1,154,000	$	1,275,000
Estimated net proceeds	$	22,348,400	$	30,567,600	$	35,204,840
Estimated net proceeds per share	$	9.53	$	9.64	$	9.65

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal

Deposit Insurance Corporation or any other government agency.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision nor any state securities

regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete.

Any representation to the contrary is a criminal offense.

For assistance, please contact the stock information center at .

Keefe, Bruyette & Woods

The date of this prospectus is , 2006

[map of Indiana showing current and future office locations of United Community Bank appears here]

Table of Contents


		*Page*

Summary		1

Risk Factors		17

A Warning About Forward-Looking Statements		24

Selected Financial and Other Data		25

Use of Proceeds		27

Our Dividend Policy		28

Market for the Common Stock		29

Capitalization		30

Regulatory Capital Compliance		31

Pro Forma Data		32

Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation		38

Our Business		39

Management’s Discussion and Analysis of Financial Condition and Results of Operations		49

Our Management		80

Subscriptions by Executive Officers and Directors		91

Regulation and Supervision		93

Federal and State Taxation		101

The Reorganization and Stock Offering		102

United Community Bank Charitable Foundation		123

Restrictions on Acquisition of United Community Bancorp and United Community Bank		126

Description of United Community Bancorp Capital Stock		130

Transfer Agent and Registrar		131

Registration Requirements		131

Legal and Tax Opinions		131

Experts		131

Where You Can Find More Information		132

Index to Consolidated Financial Statements of United Community Bank		133

Summary

This summary highlights selected information from this document and may not contain all the information that is

important to you. To understand the reorganization and stock offering more fully, you should read this entire document

carefully. For assistance, please contact our stock information center at ( ) .

The Companies


United Community MHC 92 Walnut Street Lawrenceburg, Indiana 47025 (812) 537-4822		United Community MHC is a federally chartered mutual holding company that we are forming to own 55.0% of the common stock of United Community Bancorp. As a savings and loan holding company, United Community MHC will be examined by, and must comply with the rules and regulations of, the Office of Thrift Supervision. As a mutual holding company, United Community MHC will be a non-stock company whose members are the depositors of United Community Bank. Under federal regulations, so long as United Community MHC exists, it will own a majority of the voting stock of United Community Bancorp, and through its board of directors, will be able to exercise voting control over most matters put to a vote of stockholders. The same persons who will comprise the board of directors of United Community Bancorp and United Community Bank will also comprise the board of directors of United Community MHC. United Community MHC is not currently an operating company and has not engaged in any business to date. United Community MHC will be formed upon completion of the reorganization. We do not expect that United Community MHC will engage in any business activity other than owning a majority of the common stock of United Community Bancorp.

United Community Bancorp 92 Walnut Street Lawrenceburg, Indiana 47025 (812) 537-4822		This offering is made by United Community Bancorp. United Community Bancorp is a federally chartered mid-tier stock holding company that we are forming. As a savings and loan holding company, United Community Bancorp will be examined by, and must comply with the rules and regulations of, the Office of Thrift Supervision. United Community Bancorp is not currently an operating company and has not engaged in any business to date. After the reorganization, United Community Bancorp will own all of United Community Bank’s capital stock and will direct, plan and coordinate United Community Bank’s business activities. In the future, United Community Bancorp might also acquire or organize other operating subsidiaries, including other financial institutions or financial services companies, although it currently has no specific plans or agreements to do so.

United Community Bank 92 Walnut Street Lawrenceburg, Indiana 47025 (812) 537-4822		United Community Bank is a community-oriented financial institution dedicated to serving the financial services needs of consumers and businesses within its market area. United Community Bank is subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, its primary federal regulator, and the Federal Deposit Insurance Corporation, its deposit insurer. We attract deposits from the general public and local municipalities and use such funds to originate primarily one- to four-family residential real estate loans. To a lesser but growing extent, we originate multi-family and nonresidential real estate loans, construction loans, commercial loans and consumer loans.


		At September 30, 2005, we operated out of our main office and three branch offices in Lawrenceburg, Indiana, and a temporary office in Aurora, Indiana, pending construction of a permanent facility. At September 30, 2005, we had total assets of $321.3 million, deposits of $289.1 million and total equity of $29.8 million.

Our Operating Strategy (page )		Our mission is to operate and grow a profitable community-oriented and independent financial institution serving primarily retail customers and small businesses in our market area. After the reorganization, we plan to continue our strategy of: • offering a full range of financial services to retail customers and businesses in our market area; • expanding our branch network into new market areas; • increasing deposits by continuing to offer exceptional customer service and emphasizing our commercial deposit offerings; • managing our net interest margin and net interest spread by seeking to increase lending levels and by originating higher-yielding loans; • pursuing opportunities to increase commercial and multi-family lending in our primary market area; • applying disciplined underwriting practices to maintain the high quality of our loan portfolio; and • managing our investment and borrowings portfolios to manage interest rate risk. Opening new branch offices is an integral part of our growth strategy. In August 2005, we opened a branch office in a temporary facility in Aurora, Indiana. We are in the process of building a permanent full-service facility for the Aurora branch which we anticipate will be completed in June 2006. In addition, we have acquired property and intend to build and open a full-service branch office in both St. Leon, Indiana, and Milan, Indiana. Aurora and St. Leon are located in Dearborn County, Indiana. Milan is located in adjacent Ripley County. We consider our primary market area to be Dearborn County and the surrounding Indiana counties, as well as the Greater Cincinnati metropolitan area and Northern Kentucky.

The Reorganization

Description of the

Reorganization (page ____)

Currently, we are a federally chartered mutual savings bank with no

stockholders. Our depositors currently have the right to vote on

certain matters such as the election of directors and this

reorganization.

The mutual holding company reorganization process that we are now

undertaking involves a series of transactions by which we will

convert our organization from the mutual form of organization to the

mutual holding company form of organization. In the mutual

holding company structure, United Community Bank will become a

federally chartered stock savings bank to be named United

Community Bank and all of its stock will be owned by United

Community Bancorp. In addition, 43.1% of United Community

Bancorp’s stock will be owned by the public, including our employee

stock ownership plan, 1.9% of United Community Bancorp’s stock

will be owned by United Community Bank Charitable Foundation

and 55.0% of United Community Bancorp’s stock will be owned by

United Community MHC. Our depositors will become members of

United Community MHC and will have similar voting rights in

United Community MHC as they currently have in United

Community Bank.

After the reorganization, our ownership structure will be as follows:

LOGO

Our normal business operations will continue without interruption

during the reorganization. The same directors who adopted the plan

of reorganization and stock issuance and who continue to be directors

of United Community Bank at the time of the reorganization will

serve as directors of United Community MHC, United Community

Bancorp and United Community Bank after the reorganization. The

initial officers of United Community MHC, United Community

Bancorp and United Community Bank will be persons who are

currently officers of United Community Bank.

The Offering


Purchase Price		The purchase price is $10.00 per share.

Number of Shares to be Sold		We are offering for sale between 2,344,640 and 3,172,160 shares of United Community Bancorp common stock in this reorganization to persons other than United Community MHC and the charitable foundation. With regulatory approval, we may increase the number of shares to be sold to 3,647,984 shares without giving you further notice or the opportunity to change or cancel your order. The Office of Thrift Supervision will consider the level of subscriptions, the views of our independent appraiser, our financial condition and results of operations and changes in market conditions in connection with a request to increase the offering size.

How We Determined the Offering Range (page )		We decided to offer between 2,344,640 and 3,172,160 shares, which is our offering range, based on an independent appraisal of our pro forma market value prepared by Keller & Company, Inc., an appraisal firm experienced in appraisals of financial institutions. Keller & Company will receive fees totaling $37,000 for its appraisal services, plus $1,000 for each appraisal valuation update and reimbursement of out-of-pocket expenses. Keller & Company estimates that as of November 14, 2005, our pro forma market value on a fully converted basis was between $54.4 million and $73.6 million, with a midpoint of $64.0 million. The term “fully converted” means that Keller & Company assumed that 100.0% of our common stock had been sold to the public or contributed to the charitable foundation, rather than the 45.0% that will be sold or contributed in connection with this offering. In preparing its appraisal, Keller & Company considered the information in this prospectus, including our financial statements. Keller & Company also considered the following factors, among others: • our historical, present and projected operating results and financial condition and the economic and demographic characteristics of our market areas; • a comparative evaluation of the operating and financial statistics of United Community Bank with those of other similarly-situated, publicly-traded savings associations and savings association holding companies; • the effect of the capital raised in this offering on our net worth and earnings potential; • the trading market for securities of comparable institutions and general conditions in the market for such securities; and • our intention to make a contribution to the United Community Bank Charitable Foundation of 1.9% of United Community Bancorp’s common stock and $250,000 in cash.

Our board of directors determined that the common stock should be

sold at $10.00 per share and that 43.1% of the shares of our common

stock should be offered for sale to the public in the offering. The

following table shows the number of shares that will be sold in the

offering, issued to United Community MHC and contributed to the

charitable foundation, based on the estimated valuation range and the

purchase price.


	At Minimum of Offering Range	At Maximum of Offering Range	Percent of Shares Outstanding
Shares sold in the offering	2,344,640	3,172,160	43.1	%
Shares issued to United Community MHC	2,992,000	4,048,000	55.0
Shares contributed to the charitable foundation	103,360	139,480	1.9

Total	5,440,000	7,360,000	100.0	%

Two measures that some investors use to analyze whether a stock

might be a good investment are the ratio of the offering price to the

issuer’s “tangible book value” and the ratio of the offering price to

the issuer’s annual core earnings. Keller & Company considered

these ratios in preparing its appraisal, among other factors. Tangible

book value is the same as total equity, less intangibles, and represents

the difference between the issuer’s tangible assets and liabilities.

Core earnings, for purposes of the appraisal, is defined as net

earnings after taxes, plus non-recurring expenses and minus non-

recurring income, adjusted for income taxes in each case. Keller &

Company’s appraisal also incorporates an analysis of a peer group of

publicly traded fully converted savings associations and fully

converted savings association holding companies that Keller &

Company considered as comparable to us.

The following table presents a summary of selected pricing ratios for

the peer group companies and the pricing ratios for us, utilized by

Keller & Company in its appraisal. The ratios are presented on a

fully-converted basis. Our ratios are based on core earnings for the

twelve months ended September 30, 2005 and tangible book value as

of September 30, 2005.


	Fully Converted Price to Core Earnings Multiple		Fully Converted Price to Tangible Book Value Ratio
United Community Bancorp (pro forma):
Minimum	16.39	x	68.84	%
Maximum	19.66		76.08
Peer group companies as of November 14, 2005:
Average	16.61	x	117.35	%
Median	13.66		123.52

Compared to the average pricing ratios of the peer group, at the

maximum of the offering range, our stock would be priced at a

premium of 18.42% to the peer group on a price-to-core earnings


	Non-Fully Converted Price to Earnings Multiple		Non-Fully Converted Price to Tangible Book Value Ratio
United Community Bancorp (pro forma):
Minimum	20.83	x	111.11	%
Maximum	27.78		131.06

Publicly traded mutual holding companies as of November 14, 2005⁽¹⁾:
Average	35.08	x	171.54	%
Median	34.84		160.78
(1) The information for publicly traded mutual holding companies may not be meaningful to investors because it presents average and median information for mutual holding companies that issued a different percentage of their stock in their offerings than the 45.0% that we are offering to the public. In addition, the effect of stock repurchases also affects the ratios to a greater or lesser degree depending upon repurchase activity.


		offering. If we do not sell the minimum number of shares, or if we terminate the offering for any other reason, we will promptly return all funds with interest at our current statement savings rate.

Conditions to Completing the Reorganization		We are conducting the reorganization under the terms of our plan of reorganization and stock issuance. We cannot complete the reorganization and related offering unless: • the plan of reorganization and stock issuance is approved by at least a majority of votes eligible to be cast by members of United Community Bank (depositors of United Community Bank); • we sell at least the minimum number of shares offered; and • we receive the final approval of the Office of Thrift Supervision to complete the reorganization and offering.

Reasons for the Reorganization (page )		Our primary reasons for the reorganization are to: • increase the capital of United Community Bank; • support future lending and operational growth; • support future branching activities and/or the acquisition of other financial institutions or financial services companies or their assets; and • enhance our ability to attract and retain qualified directors and management through stock-based compensation plans. While we exceed all of our regulatory capital requirements and are considered “well capitalized” for regulatory purposes, our core capital level of $29.5 million, or 9.2% of adjusted total assets, at September 30, 2005 restricts our ability both to grow and continue to maintain our “well capitalized” status. Accordingly, we require additional capital in order to increase our lending activities and expand our operations. As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Strategy,” we have branch expansion plans that are already underway. The new branches have been and are expected to continue to be funded by cash generated by our business and we do not expect to borrow funds for these expansion plans. Funding for these branches is also not contingent on this offering. Although we are interested in establishing branches in addition to branch expansion plans that are already underway, we do not have any additional specific plans or arrangements for further expansion. We do not now have any specific acquisition plans. We chose to conduct a mutual holding company reorganization and minority stock offering rather than a full mutual-to-stock conversion because it permits us, by issuing less than 50.0% of our common stock to the public, to control the amount of capital being raised,


		which will enable us to deploy the proceeds of the offering more prudently and to provide for the control of United Community Bancorp by United Community MHC through its majority ownership position. We chose to sell 43.1% of our shares to the public, rather than a smaller portion, because we believe that we will be able to deploy the capital raised through an offering of this size. We also will be able to increase our philanthropic endeavors to the communities we serve through the formation and funding of United Community Bank Charitable Foundation.

We Will Form the United Community Bank Charitable Foundation (page )		To continue our long-standing commitment to our local communities, we intend to establish a charitable foundation, named the United Community Bank Charitable Foundation, as part of the reorganization. Subject to separate approval by at least a majority of votes eligible to be cast by members of United Community Bank, the charitable foundation will be funded with a number of shares of United Community Bancorp common stock that will result in the charitable foundation owning 1.9% of our outstanding shares and $250,000 in cash. At the midpoint of the offering range, we would contribute 121,600 shares of United Community Bancorp common stock. At the midpoint of the offering range, our contribution to the charitable foundation would reduce net earnings by $968,000, after tax, in the year in which the charitable foundation is established, which is expected to be fiscal 2006. United Community Bank Charitable Foundation will make grants and donations to non-profit and community groups and projects located within our market areas. The amount of common stock that we would offer for sale would be greater if the reorganization were to be completed without the formation of United Community Bank Charitable Foundation. For a further discussion of the financial impact of the charitable foundation, including its effect on those who purchase shares in the offering and on the shares issued to stockholders of United Community Bancorp, see “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation.”

Benefits of the Reorganization to Management (page )		We intend to adopt the following benefit plans and employment agreements: • *Employee Stock Ownership Plan.* We intend to establish an employee stock ownership plan that will provide retirement benefits to our employees. The plan will purchase 3.92% of the shares issued in the reorganization, including shares issued to United Community MHC and contributed to United Community Bank Charitable Foundation, with the proceeds of a loan from United Community Bancorp. As the loan is repaid and shares are released from collateral, the shares will be allocated to the accounts of participants based on a participant’s compensation as a percentage of total plan compensation. Non-employee directors are not eligible to participate in the employee stock ownership plan. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan.

• Equity Incentive Plan. We intend to implement an equity-

based incentive plan no earlier than six months after the

reorganization. Under Office of Thrift Supervision regulations,

the plan must be approved by a majority of the total votes

eligible to be cast by our stockholders, other than United

Community MHC, unless we obtain a waiver that allows

approval by a majority of votes cast, other than by United

Community MHC. Under this plan, we may award stock

options and shares of restricted stock to employees and

directors. Shares of restricted stock will be awarded at no cost

to the recipient. Stock options will be granted at an exercise

price equal to 100% of the fair market value of our common

stock on the option grant date. We will incur additional

compensation expense as a result of this plan. See “Pro Forma

Data” for an illustration of the effects of this plan. Under this

plan, we may grant stock options in an amount up to 4.9% of

the number of shares issued in the offering, including shares

issued to United Community MHC and contributed to the

charitable foundation, and restricted stock awards in an amount

equal to 1.96% of the shares issued in the offering, including

shares issued to United Community MHC and contributed to the

charitable foundation. The equity incentive plan will comply

with all applicable Office of Thrift Supervision regulations.

The following table presents the total value of all shares to be

available for restricted stock awards under the equity incentive plan,

based on a range of market prices from $8.00 per share to $14.00 per

share. Ultimately, the value of the grants will depend on the actual

trading price of our common stock, which depends on numerous

factors.


	Value of
Share Price	106,624 Shares Awarded at Minimum of Range		125,440 Shares Awarded at Midpoint of Range		144,256 Shares Awarded at Maximum of Range		165,894 Shares Awarded at 15% Above Maximum of Range
	(In thousands)
$8.00	$	853	$	1,004	$	1,154	$	1,327
10.00		1,066		1,254		1,443		1,659
12.00		1,279		1,505		1,731		1,991
14.00		1,493		1,756		2,020		2,323

The following table presents the total value of all stock options

available for grant under the equity incentive plan, based on a range

of market prices from $8.00 per share to $14.00 per share. For

purposes of this table, the value of the stock options was determined

using the Black-Scholes option-pricing formula. See “Pro Forma

Data.” Ultimately, financial gains can be realized on a stock option

only if the market price of the common stock increases above the

price at which the option is granted.


				Value of
Exercise Price		Option Value		266,560 Options Granted at Minimum of Range		313,600 Options Granted at Midpoint of Range		360,640 Options Granted at Maximum of Range		414,736 Options Granted at 15% Above Maximum of Range
				(In thousands)
$	8.00	$	5.09	$	1,357	$	1,596	$	1,836	$	2,111
	10.00		4.08		1,088		1,279		1,471		1,692
	12.00		3.23		674		1,013		1,165		1,340
	14.00		2.53		861		793		912		1,049

• Employment Agreements. United Community Bancorp

intends to enter into three-year employment agreements with

William F. Ritzmann, our President and Chief Executive Officer

and Elmer G. McLaughlin, Executive Vice President and Chief

Operating Officer. United Community Bancorp also intends to

enter into a two-year employment agreement with Vicki A.

March, Senior Vice President, Chief Financial Officer and

Treasurer. These agreements will provide for severance benefits

if the executives are terminated following a change in control of

United Community Bancorp or United Community Bank.

Based solely on cash compensation earned for the year ended

June 30, 2005 and excluding any benefits that would be payable

under any employee benefit plan, if a change in control of

United Community Bancorp and United Community Bank

occurred, and we terminated these officers, the total payments

due under the employment agreements would equal

approximately $1.41 million.

• Supplemental Executive Retirement Plan. This plan will

provide benefits to eligible employees if their retirement benefits

under the employee stock ownership plan and the 401(k) plan

are reduced because of federal tax law limitations. The plan

will also provide benefits to eligible employees if they retire or

are terminated following a change in control but before the

complete allocation of shares under the employee stock

ownership plan.

• Employee Severance Compensation Plan. This plan

will provide severance benefits to eligible employees if there is a

change in control. Based solely on compensation levels as of

December 31, 2004 and years of service at September 30, 2005,

if a change in control of United Community Bancorp and

United Community Bank occurred, and we terminated all

employees covered by the severance compensation plan, the

total payment due under the plan would equal approximately

$1.45 million.

The following table summarizes, at the maximum of the offering

range, the total number and value of the shares of common stock that

the employee stock ownership plan expects to acquire and the total

value of all restricted stock awards that are expected to be available

under the equity incentive plan. At the maximum of the offering

range, we will sell 3,172,160 shares and have 7,360,000 shares

outstanding.



	Number of Shares to be Granted or Purchased
	At Maximum of Offering Range	As a % of Common Stock Sold at Maximum of Offering Range		As a % of Common Stock Outstanding		Total Estimated Value of Grants
	(Dollars in thousands)
Employee stock ownership plan (1)	288,512	9.10	%	3.92	%	$	2,885
Restricted stock awards (1)	144,256	4.55		1.96			1,443
Stock options (2)	360,640	11.37		4.90			1,471

Total	793,408	25.01	%	10.78	%	$	5,799


		(1) Assumes the value of United Community Bancorp’s common stock is $10.00 per share for purposes of determining the total estimated value of the grants. (2) Assumes the value of a stock option is $4.08, which was determined using the Black-Scholes option-pricing formula. See “Pro Forma Data.”

Tax Consequences (page )		As a general matter, the reorganization will not be a taxable transaction for purposes of federal or state income taxes to us or persons who receive or exercise subscription rights. Our special counsel, Muldoon Murphy & Aguggia LLP, has issued a federal tax opinion to us that, among other items, provides: • the reorganization will qualify as a tax-free reorganization and no gain or loss will be recognized by us as a result of the reorganization; • no gain or loss will be recognized by our account holders upon the issuance to them of deposit accounts in United Community Bank immediately after the reorganization; • it is more likely than not that the fair market value of the rights to subscribe for shares of our common stock is zero and, accordingly, that no income will be realized by our members upon the issuance or exercise of the subscription rights; • it is more likely than not that the tax basis to the purchasers in the offering will be the amount paid for our common stock, and that the holding period for shares of common stock will begin on the date of completion of the offering; and • the holding period for shares of common stock purchased in the community offering or syndicated community offering will begin on the day after the date of the purchase. We have also received an opinion from Clark, Schaefer, Hackett & Co. stating that, assuming the reorganization does not result in any federal income tax liability to us or our account holders,


		implementation of the plan of reorganization and stock issuance will not result in any Indiana income tax liability to those entities or persons. See “The Reorganization and Stock Offering—Material Income Tax Consequences.”

Persons Who Can Order Stock in the Offering (page ) Note: Subscription rights are not transferable, and persons with subscription rights may not subscribe for shares for the benefit of any other person. If you violate this prohibition, you may lose your rights to purchase shares and may face criminal prosecution and/or other sanctions.		We have granted rights to subscribe for shares of our common stock in a “subscription offering” to the following persons in the following order of priority: 1. Persons with $50 or more on deposit at United Community Bank as of August 31, 2004. 2. Our employee stock ownership plan. 3. Persons with $50 or more on deposit at United Community Bank as of December 31, 2005. 4. United Community Bank’s depositors as of , 2006 who were not able to subscribe for shares under categories 1 and 3. If we receive subscriptions for more shares than are to be sold in this offering, we may be unable to fill or may only partially fill your order. Shares will be allocated in order of the priorities described above under a formula outlined in the plan of reorganization and stock issuance. If we increase the number of shares to be sold above 3,172,640, our employee stock ownership plan will have the first priority right to purchase any shares exceeding that amount to the extent that its subscription has not previously been filled. Any shares remaining will be allocated in the order of priorities described above. See “The Reorganization and Stock Offering—Subscription Offering and Subscription Rights” for a description of the allocation procedure. We may offer shares not sold in the subscription offering to the general public in a community offering or through a syndicate of broker-dealers. People and trusts for the benefit of people who are residents of Dearborn County, Indiana will have first preference to purchase shares in the community offering. The community offering and syndicated community offering, if held, may begin at any time during or immediately following the subscription offering.

Subscription Rights Are Not Transferable		You are not allowed to transfer your subscription rights and we will act to ensure that you do not do so. You will be required to certify that you are purchasing shares solely for your own account and that you have no agreement or understanding with another person involving the transfer of the shares that you purchase. We will not accept any stock orders that we believe involve the transfer of subscription rights. Eligible depositors who enter into agreements to allow ineligible investors to participate in the subscription offering may be violating federal law and may be subject to civil enforcement actions or criminal prosecution.

Deadline for Ordering Stock (page )		The subscription offering will end at 12:00 noon, Eastern time, on [Expiration Date]. We expect that the community offering will terminate at the same time, although it may continue for up to 45


		days after the end of the subscription offering, or longer if regulators approve a later date. No single extension may be for more than 90 days. If we extend the offering beyond [Extension Date #1] or if we intend to sell fewer than 2,344,640 shares or more than 3,172,160, all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will return your funds promptly, in full and with interest, at our statement savings rate.

Purchase Limitations (page )		Our plan of reorganization and stock issuance establishes limitations on the purchase of stock in the offering. These limitations include the following: • The minimum purchase is 25 shares. • No individual (or individuals on a single deposit account) may purchase more than $150,000 of common stock (which equals 15,000 shares) in the subscription offering. • No individual, no individual together with any associates, and no group of persons acting in concert may purchase more than $650,000 of common stock (which equals 65,000 shares) in the offering. Subject to the Office of Thrift Supervision’s approval, we may increase or decrease the purchase and ownership limitations at any time.

How to Purchase Common Stock (page )		If you want to place an order for shares in the offering, you must complete an original stock order and certification form and send it to us, together with full payment. You must sign the certification that is on the reverse side of the stock order and certification form. We must receive your stock order and certification form before the end of the subscription offering or the end of the community offering, as appropriate. Once we receive your order, you cannot cancel or change it without our consent. To ensure that we properly identify your subscription rights, you must list all of your deposit accounts as of the eligibility dates on the stock order and certification form. If you fail to do so, your subscription may be reduced or rejected if the offering is oversubscribed. To preserve your purchase priority, you must register the shares only in the name or names of eligible purchasers at the applicable date of eligibility. You may not add the names of others who were not eligible to purchase common stock in the offering on the applicable date of eligibility. We may, in our sole discretion, reject orders received in the community offering either in whole or in part. For example, we may reject an order submitted by a person who we believe is making false representations or who we believe is attempting to violate, evade or circumvent the terms and conditions of the plan of reorganization and stock issuance. If your order is rejected in part, you cannot cancel the remainder of your order. You may pay for shares in the subscription offering or the community offering in any of the following ways:



	2,344,640 Shares at $10.00 Per Share		3,172,160 Shares at $10.00 Per Share
	(In thousands)
Offering proceeds	$	23,446	$	31,722
Less: offering expenses		1,098		1,211

Net offering proceeds		22,348		30,511

Less:
Proceeds contributed to United Community Bank		11,174		15,256
Proceeds used for loan to employee stock ownership plan		2,132		2,885
Proceeds contributed to the charitable foundation		250		250
Proceeds contributed to United Community MHC		100		100

Proceeds remaining for United Community Bancorp	$	8,692	$	12,020

United Community Bancorp may use the portion of the proceeds that it

retains to, among other things, invest in securities, pay dividends to

stockholders, repurchase shares of its common stock (subject to

regulatory restrictions), finance the possible acquisition of financial

institutions or other businesses that are related to banking or for

general corporate purposes. United Community Bank may use the

portion of the proceeds that it receives to fund new loans, open new

branches, invest in securities and expand its business activities.


Purchases by Directors and Executive Officers (page )		We expect that our directors and executive officers, together with their associates, will subscribe for 482,500 shares, which equals 15.2% of the shares offered for sale at the maximum of the offering range. Directors and executive officers will pay the same $10.00 per share price as everyone else who purchases shares in the offering. Like all of our depositors, our directors and executive officers have subscription rights based on their deposits and, in the event of an oversubscription, their orders will be subject to the allocation provisions set forth in our plan of reorganization and stock issuance. Purchases by our directors and executive officers will count towards the minimum number of shares we must sell to close the offering.

Market for United Community Bancorp Common Stock (page )		We intend to have our common stock quoted on the Nasdaq National Market. Keefe, Bruyette & Woods, Inc. currently intends to become a market maker in the common stock, but is under no obligation to do so. We cannot assure you that other market makers will be obtained or that an active and liquid trading market for our common stock will develop or, if developed, will be maintained. After shares of the common stock begin trading, you may contact a stock broker to buy or sell shares.

United Community Bancorp’s Dividend Policy (page )		We have not yet determined whether we will pay a dividend on the common stock. After the reorganization, we will consider a policy of paying regular cash dividends. Our ability to pay dividends will depend on a number of factors, including capital requirements, regulatory limitations and our operating results and financial condition. We anticipate that United Community MHC will waive receipt of any dividends that we may pay.

Possible Conversion of United Community MHC to Stock Form (page )		In the future, we may undertake a transaction commonly known as a “second-step conversion” in which we would sell to the public the shares held by United Community MHC. In a second-step conversion, members of United Community MHC would have subscription rights to purchase common stock of United Community Bancorp or its successor, and the public stockholders of United Community Bancorp would be entitled to exchange their shares of common stock for an equal percentage of shares of the new holding company. This percentage may be adjusted to reflect any assets owned by United Community MHC. United Community Bancorp’s public stockholders, therefore, would own approximately the same percentage of the resulting entity as they owned before the second- step conversion. Any second-step conversion would require the approval of the stockholders of United Community Bancorp, other than United Community MHC, and the members of United Community MHC. The board of directors has no current plan to undertake a second-step conversion transaction.

Stock Information Center		If you have any questions regarding the offering or our reorganization, please call the stock information center at ( ) . The stock information center is open Monday through Friday, except bank holidays, from 9:00 a.m. to 5:00 p.m., Eastern time. To ensure that each purchaser in the subscription and community offering receives a prospectus at least 48 hours before the

expiration date of the subscription and community offering in

accordance with federal law, no prospectus will be mailed any

later than five days before the expiration date, sent via overnight

delivery any later than three days before the expiration date or

hand delivered any later than two days before the expiration date.

Order forms will be distributed only when preceded or accompanied

by a prospectus.

Risk Factors

You should consider carefully the following risk factors before purchasing United Community Bancorp

common stock.

Risks Related to Our Business

Our primary market area depends substantially on the gaming industry, and a downturn in that

industry could hurt our business and our prospects.

Our business is concentrated in the Lawrenceburg, Indiana area. Lawrenceburg is the site of a riverboat

casino that opened in 1996. The economy of the Lawrenceburg metropolitan area significantly depends on services

and industries related to gaming and tourism. Any event that negatively and materially impacts the gaming and

tourism industry will adversely impact the Lawrenceburg economy.

Gaming revenue is vulnerable to fluctuations in the national economy. A prolonged downturn in the

national economy could have a significant adverse effect on the economy of the Lawrenceburg area. Virtually any

development or event that could dissuade travel or spending related to gaming and tourism, whether inside or

outside of Lawrenceburg, could adversely affect the Lawrenceburg economy. Consequently, the Lawrenceburg

economy is more susceptible than the economies of other cities to issues such as higher gasoline and other fuel

prices, unemployment levels, recession, rising interest rates, and other economic conditions, whether domestic or

foreign.

A deterioration in economic conditions generally, and a slowdown in gaming and tourism activities in

particular, could result in the following consequences, any of which could adversely affect our business, financial

condition, results of operations and prospects and expose us to a greater risk of loss:

•

Loan delinquencies may increase;

•

Problem assets and foreclosures may increase;

•

Demand for our products and services may decline; and

•

Collateral for loans made by us may decline in value, reducing the amount of money that our

customers may borrow against the collateral, and reducing the value of assets and collateral

associated with our loans.

An expansion of permissible gaming activities in other states, particularly in Kentucky and/or

Ohio, may lead to a decline in gaming revenue in Lawrenceburg, Indiana, which could hurt our

business and our prospects.

Lawrenceburg, Indiana competes with other areas of the country for gaming revenue, and it is possible

that the expansion of gaming operations in other states, as a result of changes in laws or otherwise, could

significantly reduce gaming revenue in the Lawrenceburg area. This is particularly true of gaming operations in

Kentucky and/or Ohio, states from which Lawrenceburg generally draws substantial year-round clientele.

Kentucky and/or Ohio legislative proposals could permit gaming activities. The establishment of casino gaming in

Kentucky and/or Ohio, or other states, could have a substantial adverse effect on gaming revenue in Lawrenceburg

which would adversely affect the Lawrenceburg economy and our business.

We rely heavily on municipal deposits as a source of funds and a reduced level of those deposits

may hurt our profits.

Historically, municipal deposits, consisting primarily of tax revenues from the local river boat casino

operations, have been a significant source of funds for our lending and investment activities. At September 30,

2005, $139.2 million, or 48.1% of our total deposits, consisted of municipal deposits. Municipal deposits are

generally short-term deposits and are generally considered rate-sensitive instruments. Consequently, if our

municipal deposits decrease to a level where we would need to resort to other sources of funds for our lending and

investment activities, such as borrowings from the Federal Home Loan Bank of Indianapolis, the interest expense

associated with these other funding sources may be higher than the rates we pay on the municipal deposits, which

would also hurt our profits.

Rising interest rates may hurt our earnings and asset value.

Interest rates have recently been at historically low levels. However, since June 30, 2004, the U.S. Federal

Reserve has increased its target for the federal funds rate 12 times, from 1.0% to 4.0%. While these short-term

market interest rates (which we use as a guide to price our deposits) have increased, longer-term market interest

rates (which we use as a guide to price our longer-term loans) have not. This “flattening” of the market yield curve

has had a negative impact on our interest rate spread and net interest margin, and if short-term interest rates

continue to rise, and if rates on our deposits and borrowings continue to reprice upwards faster than the rates on

our long-term loans and investments, we would continue to experience compression of our interest rate spread and

net interest margin, which would have a negative effect on our profitability.

Changes in interest rates also affect the value of our interest-earning assets, and in particular our

securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates.

Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of

tax. Decreases in the fair value of securities available for sale resulting from increases in interest rates could have

an adverse effect on stockholders’ equity. In addition, we invest in callable securities that expose us to

reinvestment risk, particularly during periods of rising market interest rates when issuers of callable securities tend

to call or redeem their securities. Reinvestment risk is the risk that we may have to reinvest the proceeds from

called securities at lower rates of return than the rates earned on the called securities. For further discussion of

how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition

and Results of Operations— Operations Risk Management—Interest Rate Risk Management.”

Our increased emphasis on multi-family residential and nonresidential real estate and land

lending may expose us to increased lending risks.

At September 30, 2005, $72.5 million, or 34.5%, of our loan portfolio consisted of multi-family

residential and nonresidential real estate and land loans. We have grown our loan portfolio in recent years,

particularly with respect to multi-family residential and nonresidential real estate and land loans and intend to

continue to emphasize these types of lending. These types of loans generally expose a lender to greater risk of non-

payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends

on the successful operation of the property and the income stream of the borrowers. Such loans typically involve

larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential

mortgage loans. In addition, since such loans generally entail greater credit risk than one- to four-family

residential mortgage loans, we may need to increase our allowance for loan losses in the future to account for the

likely increase in probable incurred credit losses associated with the growth of such loans. Also, many of our

multi-family residential and nonresidential real estate and land borrowers have more than one loan outstanding

with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to

a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family

residential mortgage loan. At September 30, 2005, our largest multi-family residential and nonresidential real

estate and land lending relationship was a $4.3 million commercial real estate loan relationship. This loan

relationship was within our maximum lending limit to one borrower at September 30, 2005. See “Our

Business—Lending Activities—Loans to One Borrower.”

If we do not achieve profitability on new branches, the new branches may hurt our earnings.

We cannot assure you that our branch expansion strategy and our branch upgrading will increase our

earnings in the short term or within a reasonable period of time, if at all. Numerous factors will affect our branch

expansion strategy, such as our ability to select suitable branch locations, real estate acquisition costs, competition,

interest rates, managerial resources, our ability to hire and retain qualified personnel, the effectiveness of our

marketing strategy and our ability to attract deposits. It takes time for a new branch to generate significant

deposits and loan volume to offset expenses, some of which, like salaries and occupancy expense, are relatively

fixed costs. We can provide no assurance that we will be successful in increasing the volume of our loans and

deposits by expanding our branch network. Building and staffing new branch offices will increase our operating

expenses. We can provide no assurance that we will be able to manage the costs and implementation risks

associated with this strategy so that expansion of our branch network will be profitable.

Strong competition within our market areas could hurt our profits and slow growth.

We face intense competition both in making loans and attracting deposits. In particular, several financial

institutions have recently opened new offices or branches in Dearborn County. This competition has made it more

difficult for us to make new loans and at times has forced us to offer higher deposit rates. Price competition for

loans and deposits might result in us earning less on our loans and paying more on our deposits, which would

reduce net interest income. Competition also makes it more difficult to grow loans and deposits. As of June 30,

2005, the most recent date for which information is available, we held 36.3% of the deposits in Dearborn County,

Indiana. Competition also makes it more difficult to hire and retain experienced employees. Some of the

institutions with which we compete have substantially greater resources and lending limits than we have and may

offer services that we do not provide. We expect competition to increase in the future as a result of legislative,

regulatory and technological changes and the continuing trend of consolidation in the financial services industry.

Our profitability depends upon our continued ability to compete successfully in our market areas. For more

information about our market areas and the competition we face, see “Our Business—Market Areas” and “Our

Business—Competition.”

We operate in a highly regulated environment and we may be adversely affected by changes in

laws and regulations.

We are subject to extensive regulation, supervision and examination by the Office of Thrift Supervision,

our primary federal regulator, and by the Federal Deposit Insurance Corporation, as insurer of our deposits. United

Community MHC, United Community Bancorp and United Community Bank will all be subject to regulation and

supervision by the Office of Thrift Supervision. Such regulation and supervision governs the activities in which an

institution and its holding company may engage, and are intended primarily for the protection of the insurance

fund and the depositors and borrowers of United Community Bank rather than for holders of United Community

Bancorp common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement

activities, including the imposition of restrictions on our operations, the classification of our assets and

determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether

in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our

operations.

Risks Related to this Offering

Additional expenses following the offering from operating as a public company and from new

stock-based benefit plans will adversely affect our profitability.

Following the offering, our noninterest expenses are likely to increase as a result of the financial

accounting, legal and various other additional expenses usually associated with operating as a public company. We

also will recognize additional annual salaries and employee benefits expenses stemming from the shares purchased

or granted to employees and executives under new benefit plans. These additional expenses will adversely affect

our profitability. We cannot determine the actual amount of these new stock-related compensation and benefit

expenses at this time because applicable accounting practices require that they be based on the fair market value of

the shares of common stock at specific points in the future; however, we expect them to be material. We will

recognize expenses for our employee stock ownership plan when shares are committed to be released to

participants’ accounts and will recognize expenses for restricted stock awards and stock options over the vesting

period of awards made to recipients. These benefit expenses in the first year following the offering have been

estimated to be approximately $511,000 at the maximum of the offering range as set forth in the pro forma

financial information under “Pro Forma Data” assuming the $10.00 per share purchase price as fair market value.

Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further

discussion of these plans, see “Our Management—Benefit Plans.”

We will need to implement additional finance and accounting systems, procedures and controls

in order to satisfy our new public company reporting requirements.

Upon the completion of this offering, we will become a public reporting company. The federal securities

laws and the regulations of the Securities and Exchange Commission require that we file annual, quarterly and

current reports and that we maintain effective disclosure controls and procedures and internal controls over

financial reporting. We expect that the obligations of being a public company, including substantial public

reporting obligations, will require significant expenditures and place additional demands on our management

team. These obligations will increase our operating expenses and could divert our management’s attention from

our operations. Compliance with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the

Securities and Exchange Commission will require us to certify the adequacy of our internal controls and

procedures, which will require us to upgrade our accounting systems, which will increase our operating costs.

Our low return on equity may negatively impact the value of our common stock.

Return on equity, which equals net income divided by average equity, is a ratio used by many investors to

compare the performance of a particular company with other companies. For the year ended June 30, 2005 and the

three months ended September 30, 2005, our return on equity was 7.02% and 7.50%, respectively. Our pro forma

return on equity for the same periods is expected to be 3.96% and 4.17%, respectively, assuming the midpoint of

the offering range. Our peer group used in the valuation of United Community Bancorp had a average return on

equity of 8.11% for the 12 months ended September 30, 2005, while all publicly traded fully converted thrifts had a

average return on equity of 12.73% for the same period. Over time, we intend to use the net proceeds from this

offering to increase earnings per share and book value per share, without assuming undue risk, with the goal of

achieving a return on equity that is competitive with other publicly held subsidiaries of mutual holding companies.

This goal could take a number of years to achieve, and we cannot assure you that it will be attained. Consequently,

you should not expect a competitive return on equity in the near future. Failure to achieve a competitive return on

equity might make an investment in our common stock unattractive to some investors and might cause our

common stock to trade at lower prices than comparable companies with higher returns on equity. See “Pro Forma

Data” for an illustration of the financial impact of this offering. The information in “Pro Forma Data” does not

reflect the impact that the new expenses we expect to incur as a result of our expansion and operating as a public

company will have on our return on equity.

We have broad discretion in allocating the proceeds of the offering. Our failure to utilize

effectively such proceeds would reduce our profitability.

United Community Bancorp intends to contribute approximately 50.0% of the net proceeds of the offering

to United Community Bank. We may use the remaining net proceeds to pay dividends to stockholders, repurchase

common stock, purchase securities, finance the acquisition of other financial institutions or other businesses that

are related to banking, or for other general corporate purposes. We expect to use a portion of the net proceeds to

fund the purchase by our employee stock ownership plan of shares in the offering. United Community Bank may

use the proceeds it receives to fund new loans, purchase loans, purchase securities, establish or acquire new

branches, acquire financial institutions or other businesses that are related to banking, or for general corporate

purposes. We have not allocated specific amounts of proceeds for any of these purposes, and we will have

significant flexibility in determining how much of the net proceeds we apply to different uses and the timing of

such applications. Our failure to utilize these funds effectively would reduce our profitability.

Issuance of shares for benefit programs may dilute your ownership interest.

We intend to adopt an equity incentive plan following the reorganization. If stockholders approve the new

equity incentive plan, we intend to issue shares to our officers and directors through this plan. If the restricted

stock awards under the equity incentive plan are funded from authorized but unissued stock, your ownership

interest in the shares issued to persons other than United Community MHC could be diluted by up to

approximately 4.17%, assuming awards of common stock equal to 1.96% of the shares issued in the offering,

including shares issued to United Community MHC and contributed to United Community Bank Charitable

Foundation, are awarded under the plan. If the shares issued upon the exercise of stock options under the equity

incentive plan are issued from authorized but unissued stock, your ownership interest in the shares issued to

persons other than United Community MHC could be diluted by up to approximately 9.82%, assuming stock option

grants equal to 4.9% of the shares issued in the reorganization, including shares issued to United Community

MHC and contributed to United Community Bank Charitable Foundation, are granted under the plan. See “Pro

Forma Data” and “Our Management—Benefit Plans.”

United Community MHC’s majority control of our common stock will enable it to exercise voting

control over most matters put to a vote of stockholders and will prevent stockholders from

forcing a sale or a second-step conversion transaction you may find advantageous.

United Community MHC will own a majority of United Community Bancorp’s common stock after the

offering and, through its board of directors, will be able to exercise voting control over most matters put to a vote of

stockholders. The same directors and officers who will manage United Community Bancorp and United

Community Bank will also manage United Community MHC. As a federally chartered mutual holding company,

the board of directors of United Community MHC must ensure that the interests of depositors of United

Community Bank are represented and considered in matters put to a vote of stockholders of United Community

Bancorp. Therefore, the votes cast by United Community MHC may not be in your personal best interests as a

stockholder. For example, United Community MHC may exercise its voting control to defeat a stockholder

nominee for election to the board of directors of United Community Bancorp. In addition, stockholders will not be

able to force a merger or second-step conversion transaction without the consent of United Community MHC.

Some stockholders may desire a sale or merger transaction, since stockholders typically receive a premium for their

shares, or a second-step conversion transaction, since fully converted institutions tend to trade at higher multiples

than mutual holding companies.

Office of Thrift Supervision policy on remutualization transactions could prohibit acquisition of

United Community Bancorp, which may adversely affect our stock price.

Current Office of Thrift Supervision regulations permit a mutual holding company to be acquired by a

mutual institution in a remutualization transaction. The possibility of a remutualization transaction has recently

resulted in a degree of takeover speculation for mutual holding companies that is reflected in the per share price of

mutual holding companies’ common stock. However, the Office of Thrift Supervision has issued a policy

statement indicating that it views remutualization transactions as raising significant issues concerning disparate

treatment of minority stockholders and mutual members of the target entity and raising issues concerning the effect

on the mutual members of the acquiring entity. Under certain circumstances, the Office of Thrift Supervision

intends to give these issues special scrutiny and reject applications providing for the remutualization of a mutual

holding company unless the applicant can clearly demonstrate that the Office of Thrift Supervision’s concerns are

not warranted in the particular case. Should the Office of Thrift Supervision prohibit or otherwise restrict these

transactions in the future, our per share stock price may be adversely affected. For further information, see

“Restrictions on Acquisition of United Community Bancorp and United Community Bank—Regulatory

Restrictions.”

Office of Thrift Supervision regulations and anti-takeover provisions in our charter restrict the

accumulation of our common stock, which may adversely affect our stock price.

Office of Thrift Supervision regulations provide that for a period of three years following the date of the

completion of the reorganization, no person, acting alone, together with associates or in a group of persons acting

in concert, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10.0% of our

common stock without the prior written approval of the Office of Thrift Supervision. In addition, United

Community Bancorp’s charter provides that, for a period of five years from the date of the reorganization, no

person, other than United Community MHC may acquire directly or indirectly the beneficial ownership of more

than 10.0% of any class of any equity security of United Community Bancorp. In the event a person acquires

shares in violation of this charter provision, all shares beneficially owned by such person in excess of 10.0% will be

considered “excess shares” and will not be counted as shares entitled to vote or counted as voting shares in

connection with any matters submitted to the stockholders for a vote. These factors make it more difficult and less

attractive for stockholders to acquire a significant amount of our common stock, which may adversely affect our

stock price.

Our stock price may decline when trading commences.

We cannot guarantee that if you purchase shares in the offering that you will be able to sell them at or

above the $10.00 purchase price. The shares of several recent minority offerings by mutual holding companies

have traded below the initial offering price after completion of the offering. After the shares of our common stock

begin trading, the trading price of the common stock will be determined by the marketplace, and will be influenced

by many factors outside of our control, including prevailing interest rates, investor perceptions and general

industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions,

often experience substantial market price volatility. These market fluctuations might not be related to the

operating performance of particular companies whose shares are traded.

There may be a limited market for our common stock, which may adversely affect our stock price.

Although we intend to have our stock quoted on the Nasdaq National Market, there is no guarantee that

the shares will be actively traded. If an active trading market for our common stock does not develop, you may not

be able to sell all of your shares of common stock on short notice and the sale of a large number of shares at one

time could temporarily depress the market price. There also may be a wide spread between the bid and asked price

for our common stock. When there is a wide spread between the bid and asked price, the price at which you may

be able to sell our common stock may be significantly lower than the price at which you could buy it at that time.

Risks Related to the Formation of the Charitable Foundation

The contribution to United Community Bank Charitable Foundation will decrease the ownership

interest and voting interest in the shares issued to persons other than United Community MHC

by 4.2% after the contribution.

Purchasers of shares other than United Community MHC will have their ownership and voting interests

diluted by 4.2% at the close of the reorganization when United Community Bancorp issues and contributes an

additional number of shares to United Community Bank Charitable Foundation. For a further discussion regarding

the effect of the contribution to the charitable foundation, see “Pro Forma Data” and “Comparison of Independent

Valuation and Pro Forma Financial Information With and Without the Foundation.”

Our contribution to United Community Bank Charitable Foundation may not be tax deductible,

which could hurt our profits.

We believe that our contribution to United Community Bank Charitable Foundation, valued at $1.7

million at the maximum of the offering, pre-tax, will be deductible for federal income tax purposes. However, we

do not have any assurance that the Internal Revenue Service will grant tax-exempt status to the foundation. If the

contribution is not deductible, we would not receive any tax benefit from the contribution. In addition, even if the

contribution is tax deductible, we may not have sufficient profits to be able to use the deduction fully. In the event

it is more likely than not that we will be unable to use the entire deduction, we will be required to establish a

valuation allowance related to any deferred tax asset that has been recorded for this contribution.

Establishment of United Community Bank Charitable Foundation will hurt our profits for fiscal

year 2006.

United Community Bancorp intends to contribute $250,000 in cash and 1.9% of United Community

Bancorp’s common stock to United Community Bank Charitable Foundation. This contribution will be an

additional operating expense and will reduce net income during the fiscal year in which the foundation is

established, which is expected to be the year ending June 30, 2006. Based on the pro forma assumptions, at the

midpoint of the offering range, the contribution to United Community Bank Charitable Foundation would reduce

net earnings by $968,000, after tax, in fiscal year 2006. See “Pro Forma Data.”

A Warning About Forward-Looking Statements

This prospectus contains forward-looking statements, which can be identified by the use of words such as

“believes,” “expects,” “anticipates,” “estimates” or similar expressions. Forward-looking statements include:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans, prospects, growth and operating strategies;

•

statements regarding the quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks and uncertainties. Actual results may

differ materially from those contemplated by the forward-looking statements due to, among others, the following

factors:

•

general economic conditions, either nationally or in our market areas, that are worse than

expected;

•

changes in the interest rate environment that reduce our interest margins or reduce the fair value

of financial instruments;

•

increased competitive pressures among financial services companies;

•

changes in consumer spending, borrowing and savings habits;

•

legislative or regulatory changes that adversely affect our business;

•

adverse changes in the securities markets;

•

inability of key third-party providers to perform their obligations to United Community Bank;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies,

the Financial Accounting Standards Board or the Public Company Accounting Oversight Board;

and

•

our ability to successfully implement our branch expansion strategy.

Any of the forward-looking statements that we make in this prospectus and in other public statements we

make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors

illustrated above or because of other factors that we cannot foresee. Consequently, no forward-looking statement

can be guaranteed.

Selected Financial and Other Data

The summary financial information presented below is derived in part from our financial statements. The

following is only a summary and you should read it in conjunction with the financial statements and notes

beginning on page F-1. The information at June 30, 2005 and 2004 and for the years ended June 30, 2005, 2004

and 2003 is derived in part from the audited financial statements of United Community Bank that appear

elsewhere in this prospectus. The information at and for the years ended June 30, 2002 and 2001 is derived in part

from audited financial statements of United Community Bank that do not appear in this prospectus. The selected

data at September 30, 2005 and for the three months ended September 30, 2005 and 2004 was not audited, but in

the opinion of management, reflects all adjustments necessary for a fair presentation. All of these adjustments are

normal and recurring. The results of operations for the three months ended September 30, 2005 are not necessarily

indicative of the results of operations that may be expected for the entire year.


	At September 30, 2005		At June 30,
	At September 30, 2005		2005		2004		2003		2002		2001
	(In thousands)
Financial Condition Data:
Total assets	$	321,315	$	331,505	$	257,145	$	267,145	$	232,942	$	214,121
Cash and cash equivalents		18,345		76,263		6,681		15,801		8,998		16,637
Securities held-to-maturity		265		265		669		761		846		923
Securities available-for-sale		31,704		9,937		16,025		32,199		32,265		21,698
Mortgage-backed securities available-for-sale		48,592		28,199		40,082		60,942		18,034		5,664
Loans receivable, net		206,022		200,878		179,257		145,753		160,115		162,129
Deposits		289,134		299,379		227,939		237,924		206,862		189,949
Advances from Federal Home Loan Bank		—		—		—		328		594		464
Total equity		29,765		29,736		27,584		26,230		23,533		21,794


	For the Three Months Ended September 30,				For the Year Ended June 30,
	2005		2004		2005		2004		2003		2002		2001
	(In thousands)
Operating Data:
Interest income	$	4,130	$	3,210	$	13,470	$	12,488	$	14,011	$	14,974	$	16,024
Interest expense		1,819		999		4,655		4,134		6,091		7,524		9,167

Net interest income		2,311		2,211		8,815		8,354		7,920		7,450		6,857
Provision for loan losses		30		30		857		120		620		—		—

Net interest income after provision for loan losses		2,281		2,181		7,958		8,234		7,300		7,450		6,857
Other income		360		320		1,708		1,373		2,933		1,121		773
Other expense		1,757		1,690		6,979		6,252		5,760		5,202		4,541

Income before income taxes		884		811		2,687		3,355		4,473		3,369		3,089
Provision for income taxes		323		281		642		1,199		1,658		1,353		1,205

Net income	$	561	$	530	$	2,045	$	2,156	$	2,815	$	2,016	$	1,884


	At or for the Three Months Ended September 30,				At or for the Year Ended June 30,
	2005		2004		2005		2004		2003		2002		2001
Performance Ratios: (1)
Return on average assets	0.69	%	0.80	%	0.75	%	0.82	%	1.12	%	0.90	%	0.91	%
Return on average equity	7.50		7.52		7.02		7.99		11.42		8.90		9.40
Interest rate spread (2)	2.88		3.50		3.33		3.23		3.13		3.23		3.04
Net interest margin (3)	3.01		3.54		3.44		3.35		3.31		3.54		3.42
Noninterest expense to average assets	2.18		2.46		2.55		2.39		2.30		2.33		2.20
Efficiency ratio (4)	65.78		66.77		68.06		64.27		53.07		60.69		59.52
Average interest-earning assets to average interest-bearing liabilities	105.65		102.48		105.64		107.46		107.19		108.12		108.28
Average equity to average assets	9.26		10.28		10.64		10.31		9.46		10.14		9.70

Capital Ratios:
Tangible capital	9.20		10.19		8.76		10.46		9.29		9.49		9.34
Core capital	9.19		10.19		8.76		10.46		9.29		9.49		9.34
Total risk-based capital	16.04		16.67		15.59		17.26		8.87		16.23		14.96

Asset Quality Ratios:
Nonperforming loans as a percent of total loans	0.73		0.80		0.72		0.61		0.47		0.36		0.49
Allowance for loan losses as a percent of total loans	1.09		0.82		1.10		0.85		1.00		0.60		0.63
Allowance for loan losses as a percent of nonperforming loans	150.13		102.03		153.21		138.15		209.90		120.57		77.34
Net charge-offs (recoveries) to average outstanding loans during the period	—		0.01		0.07		0.03		0.07		0.05		0.04

Other Data:
Number of:
Real estate loans outstanding	2,339		2,203		2,288		2,198		2,213		2,574		2,812
Deposit accounts	18,464		18,168		18,362		18,205		18,194		18,086		17,633
Offices	5		4		4		4		4		4		4

(1)	Performance ratios for the three months ended September 30, 2005 and 2004 are annualized.

(2)	Represents the difference between the weighted average yield on average interest-earning assets and the weighted

average cost on average interest-bearing liabilities.

(3)	Represents net interest income as a percent of average interest-earning assets.

(4)	Represents noninterest expense divided by the sum of net interest income and noninterest income.

Use of Proceeds

The following table shows how we expect to use the net proceeds of the offering. The actual net proceeds

will depend on the number of shares of common stock sold in the offering and the expenses incurred in connection

with the offering. Payments for shares made through withdrawals from deposit accounts at United Community

Bank will reduce United Community Bank’s deposits and will not result in the receipt of new funds for investment.

See “Pro Forma Data” for the assumptions used to arrive at these amounts.


	Minimum of Offering Range				Midpoint of Offering Range				Maximum of Offering Range				15% of Maximum of Offering Range
	2,344,640 Shares at $10.00 Per Share		Percent of Net Proceeds		2,758,400 Shares at $10.00 Per Share		Percent of Net Proceeds		3,172,160 Shares at $10.00 Per Share		Percent of Net Proceeds		3,647,984 Shares at $10.00 Per Share		Percent of Net Proceeds
	(Dollars in thousands)
Offering proceeds	$	23,446			$	27,584			$	31,722			$	36,480
Less: offering expenses		1,098				1,154				1,211				1,275

Net offering proceeds		22,348	100.0	%		26,430	100.0	%		30,511	100.0	%		35,205	100.0	%

Less:
Proceeds contributed to United Community Bank		11,174	50.0			13,215	50.0			15,256	50.0			17,603	50.0
Proceeds used for loan to employee stock ownership plan		2,132	9.6			2,509	9.5			2,885	9.5			3,318	9.4
Proceeds contributed to charitable foundation		250	1.1			250	1.0			250	0.8			250	0.7
Proceeds contributed to United Community MHC		100	0.4			100	0.3			100	0.3			100	0.3

Proceeds remaining for United Community Bancorp	$	8,692	38.9	%	$	10,356	39.2	%	$	12,020	39.4	%	$	13,934	39.6	%

United Community Bancorp intends to invest the proceeds it retains from the offering initially in short-

term, liquid investments. Over time, United Community Bancorp may use the proceeds it retains from the

offering:

•

to invest in securities;

•

to pay dividends to stockholders;

•

to repurchase shares of its common stock, subject to regulatory restrictions;

•

to finance the possible acquisition of financial institutions or other businesses that are related to banking; and

•

for general corporate purposes.

Under current Office of Thrift Supervision regulations, United Community Bancorp may not repurchase

shares of its common stock during the first year following the reorganization, except to fund stock-based benefit

plans or, with prior regulatory approval, when extraordinary circumstances exist.

United Community Bank intends to invest the proceeds it receives from the offering initially in short-

term, liquid investments. Over time, United Community Bank may use the proceeds that it receives from the

offering, which are shown in the table above as the amount contributed to United Community Bank:

•

to fund new loans;

•

to invest in securities;

•

to finance the possible expansion of its business activities, including developing new branch

locations; and

•

for general corporate purposes.

United Community Bank may need regulatory approvals to engage in some of the activities listed above.

It currently has no specific plans or agreements regarding any expansion activities or acquisitions other than the

planned branch office openings discussed under “Our Business—Properties.” Financing for opening these

branches is not contingent on this offering.

Except as described above, neither United Community Bancorp nor United Community Bank has any

specific plans for the investment of the proceeds of this offering and has not allocated a specific portion of the

proceeds to any particular use. For a discussion of our business reasons for undertaking the reorganization, see

“The Reorganization and Stock Offering—Reasons for the Reorganization.”

Our Dividend Policy

Following the reorganization, our board of directors intends to adopt a policy of paying regular cash

dividends, but has not decided the amount that may be paid or when the payments may begin. In addition, the

board of directors may declare and pay periodic special cash dividends in addition to, or in lieu of, regular cash

dividends. In determining whether to declare or pay any dividends, whether regular or special, the board of

directors will take into account United Community Bancorp’s financial condition and results of operations, tax

considerations, capital requirements, industry standards and economic conditions. The regulatory restrictions that

affect the payment of dividends by United Community Bank to United Community Bancorp discussed below will

also be considered. United Community Bancorp cannot guarantee that it will pay dividends or that, if paid, United

Community Bancorp will not reduce or eliminate dividends in the future.

If United Community Bancorp pays dividends to its stockholders, it also will be required to pay dividends

to United Community MHC, unless United Community MHC elects to waive the receipt of dividends. We

anticipate that United Community MHC will waive any dividends that United Community Bancorp may pay. Any

decision to waive dividends will be subject to regulatory approval.

United Community Bancorp will not be subject to Office of Thrift Supervision regulatory restrictions on

the payment of dividends. However, United Community Bancorp’s ability to pay dividends may depend, in part,

upon its receipt of dividends from United Community Bank because United Community Bancorp initially will have

no source of income other than earnings from the investment of the net proceeds from the offering that it retains.

Office of Thrift Supervision regulations limit dividends and other distributions from United Community Bank to

United Community Bancorp. In addition, United Community Bank may not make a distribution that would

constitute a return of capital during the three-year term of the business plan submitted in connection with the

reorganization. No insured depository institution may make a capital distribution if, after making the distribution,

the institution would be undercapitalized. See “Regulation and Supervision—Regulation of Federal Savings

Associations—Limitation on Capital Distributions.”

Any payment of dividends by United Community Bank to United Community Bancorp that would be

deemed to be drawn out of United Community Bank’s bad debt reserves would require United Community Bank to

pay federal income taxes at the then-current income tax rate on the amount deemed distributed. See “Federal and

State Taxation—Federal Income Taxation” and note 15 of the notes to financial statements included in this

prospectus. United Community Bancorp does not contemplate any distribution by United Community Bank that

would result in this type of tax liability.

Market for the Common Stock

We have not previously issued common stock and there is currently no established market for the common

stock. Upon completion of the reorganization, we expect to meet the listing standards of and expect that our shares

of common stock will be quoted on, the Nasdaq National Market. Keefe, Bruyette & Woods, Inc. intends to

become a market maker in our common stock following the reorganization, but is under no obligation to do so. We

cannot assure you that other market makers will be obtained or that an active and liquid trading market for the

common stock will develop or, if developed, will be maintained.

The development of a public market having the desirable characteristics of depth, liquidity and orderliness

depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of

any market maker. The number of active buyers and sellers of our common stock at any particular time may be

limited, which may have an adverse effect on the price at which our common stock can be sold. There can be no

assurance that persons purchasing the common stock will be able to sell their shares at or above the $10.00 price

per share in the offering. Purchasers of our common stock should have a longer term investment intent and should

recognize that there may be a limited trading market in the common stock.

Capitalization

The following table presents the historical capitalization of United Community Bank at September 30,

2005 and the capitalization of United Community Bancorp reflecting the offering (referred to as “pro forma”

information). The pro forma capitalization gives effect to the assumptions listed under “Pro Forma Data,” based

on the sale of the number of shares of common stock indicated in the table. This table does not reflect the issuance

of additional shares under the proposed equity incentive plan. A change in the number of shares to be issued in

the offering may materially affect pro forma capitalization. United Community Bancorp is offering its

common stock on a best efforts basis. United Community Bancorp must sell a minimum of 2,344,640 shares to

complete the offering.


	United Community Bank Capitalization as of September 30, 2005		United Community Bancorp Pro Forma Capitalization Based Upon the Sale of
			2,344,640 Shares at $10.00 Per Share			2,758,400 Shares at $10.00 Per Share			3,172,160 Shares at $10.00 Per Share			3,647,984 Shares at $10.00 Per Share
	(In thousands)
Deposits (1)	$	289,134	$	289,134		$	289,134		$	289,134		$	289,134
Borrowings		—		—			—			—			—

Total deposits and borrowed funds	$	289,134	$	289,134		$	289,134		$	289,134		$	289,134

Stockholders’ equity:
Preferred stock:
1,000,000 shares, $.01 par value per share, authorized; none issued or outstanding	$	—	$	—		$	—		$	—		$	—

Common stock:
19,000,000 shares, $.01 par value per share, authorized; specified number of shares assumed to be issued and outstanding (2)		—		54			64			74			85

Additional paid-in capital		—		22,265			26,338			30,408			35,091

Retained earnings (3)		29,525		29,525			29,525			29,525			29,525

Accumulated other comprehensive income		240		240			240			240			240

Shares issued to the foundation		—		1,034			1,216			1,398			1,608

Less:
Capitalization of United Community MHC		—		100			100			100			100

Foundation contribution expense - shares (4)		—		682			803			923			1,061

Foundation contribution - cash (4)		—		165			165			165			165

Common stock acquired by employee stock ownership plan (5)		—		2,132			2,509			2,885			3,318

Common stock to be acquired by equity incentive plan (6)		—		1,066			1,255			1,443			1,659

Total stockholders’ equity	$	29,765	$	48,973		$	52,551		$	56,129		$	60,246

Total pro forma stockholders’ equity as a percentage of pro forma total assets (1)				14.39	%		15.29	%		16.16	%		17.15	%

(1)	Does not reflect withdrawals from deposit accounts for the purchase of common stock in the offering. Withdrawals to

purchase common stock will reduce pro forma deposits by the amounts of the withdrawals.

(2)	Reflects total issued and outstanding shares of 5,440,000, 6,400,000, 7,360,000 and 8,464,000 at the minimum, midpoint,

maximum and adjusted maximum of the offering range, respectively. Issued and outstanding shares include shares sold in

the offering, issued to United Community MHC and contributed to United Community Bank Charitable Foundation.

(3)	Retained earnings are restricted by applicable regulatory capital requirements.

(4)	Represents the expense, net of tax, of the contribution of common stock to United Community Bank Charitable

Foundation based on an estimated tax rate of 34.0%. The actual rate experienced by United Community Bancorp may

vary. The realization of the tax benefit is limited annually to 10.0% of our annual taxable income. However, for federal

and state tax purposes, we can carry forward any unused portion of the deduction for five years following the year in which

the contribution is made.

(5)	Assumes that 3.92% of the common stock issued in the reorganization, including shares issued to United Community

MHC and contributed to United Community Bank Charitable Foundation, will be acquired by the employee stock

ownership plan in the offering with funds borrowed from United Community Bancorp. Under U.S. generally accepted

accounting principles, the amount of common stock to be purchased by the employee stock ownership plan represents

unearned compensation and is, accordingly, reflected as a reduction of equity. As shares are released to plan participants’

accounts, a corresponding reduction in the charge against equity will occur. Since the funds are borrowed from United

Community Bancorp, the borrowing will be eliminated in consolidation and no liability or interest expense will be

reflected in the financial statements of United Community Bancorp. See “Pro Forma Data” and “Our

Management—Benefit Plans—Employee Stock Ownership Plan.”

(6)	Assumes the purchase in the open market at $10.00 per share, under the proposed equity incentive plan, of a number of

shares equal to 1.96% of the shares of common stock issued in the reorganization, including shares issued to United

Community MHC and contributed to United Community Bank Charitable Foundation. The shares are reflected as a

reduction of stockholders’ equity. The equity incentive plan will be submitted to stockholders for approval at a meeting

following the reorganization. See “Risk Factors—Risks Related to this Offering—Issuance of shares for benefit programs

may dilute your ownership interest,” “Pro Forma Data” and “Our Management—Benefit Plans—Future Equity Incentive

Plan.”

Regulatory Capital Compliance

At September 30, 2005, United Community Bank exceeded all regulatory capital requirements to be

considered a “well capitalized” institution. The following table presents United Community Bank’s capital

position relative to its regulatory capital requirements at September 30, 2005, on a historical and pro forma basis.

The table reflects receipt by United Community Bank of 50.0% of the net proceeds of the offering. For purposes of

the table, the amount expected to be borrowed by the employee stock ownership plan and the cost of the shares

expected to be awarded under the equity incentive plan as restricted stock (3.92% and 1.96% of the shares of

common stock issued, including shares issued to United Community MHC and contributed to United Community

Bank Charitable Foundation, respectively) are deducted from pro forma regulatory capital. For a discussion of the

assumptions underlying the pro forma capital calculations presented below, see “Use of Proceeds,”

“Capitalization” and “Pro Forma Data.” The definitions of the terms used in the table are those provided in the

capital regulations issued by the Office of Thrift Supervision. For a discussion of the capital standards applicable

to United Community Bank, see “Regulation and Supervision—Regulation of Federal Savings

Associations—Capital Requirements.”


					Pro Forma at September 30, 2005
					Minimum of Offering Range				Midpoint of Offering Range				Maximum of Offering Range				15% Above Maximum of Offering Range
	Historical at September 30, 2005				2,344,640 Shares at $10.00 Per Share				2,758,400 Shares at $10.00 Per Share				3,172,160 Shares at $10.00 Per Share				3,647,984 Shares at $10.00 Per Share
	Amount		Percent of Assets (1)		Amount		Percent of Assets		Amount		Percent of Assets		Amount		Percent of Assets		Amount		Percent of Assets
	(Dollars in thousands)
U.S. generally accepted accounting principles equity	$	29,765	9.26	%	$	37,641	11.43	%	$	39,117	11.83	%	$	40,593	12.22	%	$	42,291	12.67	%

Tangible Capital:
Capital level (2)	$	29,525	9.20	%	$	37,401	11.38	%	$	38,877	11.77	%	$	40,353	12.16	%	$	42,051	12.61	%
Requirement		4,813	1.50			4,931	1.50			4,954	1.50			4,976	1.50			5,001	1.50

Excess	$	24,712	7.70	%	$	32,470	9.88	%	$	33,923	10.27	%	$	35,377	10.66	%	$	37,050	11.11	%

Core Capital:
Capital level (2)	$	29,499	9.19	%	$	37,375	11.37	%	$	38,851	11.76	%	$	40,327	12.16	%	$	42,025	12.60	%
Requirement		12,836	4.00			13,151	4.00			13,210	4.00			13,269	4.00			13,337	4.00

Excess	$	16,663	5.19	%	$	24,224	7.37	%	$	25,641	7.76	%	$	27,058	8.16	%	$	28,688	8.60	%

Total Risk-Based Capital:
Capital level (3)	$	31,482	16.04	%	$	39,358	19.89	%	$	40,834	20.60	%	$	42,310	21.32	%	$	44,008	22.41	%
Requirement		15,704	8.00			15,830	8.00			15,854	8.00			15,878	8.00			15,905	8.00

Excess	$	15,778	8.04	%	$	23,528	11.89	%	$	24,980	12.60	%	$	26,432	13.60	%	$	28,103	14.41	%

(1)	Tangible capital shown as a percentage of adjusted total assets of $320.1 million. Risk-based and core capital levels are shown as a percentage

of risk-weighted assets of $196.3 million.

(2)	A portion of the unrealized gains on available-for-sale securities accounts for the difference between capital calculated under U.S. generally

accepted accounting principles and each of tangible capital and core capital. See note 14 to the notes to financial statements for additional

information.

(3)	Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20.0% risk-weighting.

Pro Forma Data

The following tables show information about our net income and stockholders’ equity reflecting the

reorganization. The information provided illustrates our pro forma net income and stockholders’ equity based on

the sale of common stock at the minimum of the offering range, the midpoint of the offering range, the maximum

of the offering range and 15% above the maximum of the offering range. The actual net proceeds from the sale of

the common stock cannot be determined until the reorganization is completed. Net proceeds indicated in the

following tables are based upon the following assumptions:

•

All shares of stock will be sold in the subscription and community offerings;

•

Our employee stock ownership plan will purchase a number of shares equal to 3.96% of the
shares issued in the reorganization, including shares issued to United Community MHC and
contributed to United Community Bank Charitable Foundation, with a loan from United
Community Bancorp that will be repaid in equal installments over a period of 15 years;

•

Keefe, Bruyette & Woods, Inc. will receive a fee equal to 1.5% of the aggregate purchase price of
the shares sold in the offering, except that no fee will be paid with respect to shares contributed to
the charitable foundation or purchased by the employee stock ownership plan or by our officers,
directors and employees and members of their immediate families;

•

Total expenses of the offering, excluding fees paid to Keefe, Bruyette & Woods, Inc., will be
$850,000; and

•

We will make a charitable contribution of a number of shares of United Community Bancorp
common stock equal to 1.9% of the shares issued in the reorganization, including shares issued to
United Community MHC, with an assumed value of $10.00 per share, plus $250,000 in cash.
The number of shares contributed to the foundation would equal 103,360, 121,600, 139,840 and
160,816 at the minimum, midpoint, maximum and adjusted maximum of the offering range,
respectively.

Actual expenses may vary from this estimate, and the fees paid will depend upon whether a syndicate of

broker-dealers or other means is necessary to sell the shares (which would increase offering expenses), and other

factors.

Pro forma net income for the three months ended September 30, 2005 and the year ended June 30, 2005

have been calculated as if the reorganization was completed at the beginning of each period, and the net proceeds

had been invested at 4.36% for the three months ended September 30, 2005 and 3.25% for the year ended June 30,

2005, which represents the one-year treasury rate on each date. We believe that the one-year treasury rate

represents a more realistic yield on the investment of the offering proceeds than the arithmetic average of the

weighted average yield earned on our interest-earning assets and the weighted average rate paid on our deposits,

which is the reinvestment rate required by Office of Thrift Supervision regulations.

A pro forma after-tax return of 2.88% is used for the three months ended September 30, 2005 and 2.15%

for the year ended June 30, 2005, after giving effect to a combined federal and state income tax rate of 34.0% for

each period. The actual rate experienced by United Community Bancorp may vary. Historical and pro forma per

share amounts have been calculated by dividing historical and pro forma amounts by the number of shares of

common stock indicated in the tables.

When reviewing the following tables, you should consider the following:

•

The final column gives effect to a 15% increase in the offering range, which may occur without

any further notice if Keller & Company increases its appraisal to reflect the results of this

offering, changes in our financial condition or results of operations or changes in market or
economic conditions after the offering begins or due to regulatory considerations. See “The
Reorganization and Stock Offering—How We Determined the Offering Range and the $10.00
Purchase Price.”

•

Since funds on deposit at United Community Bank may be withdrawn to purchase shares of
common stock, the amount of funds available for investment will be reduced by the amount of
withdrawals for stock purchases. The pro forma tables do not reflect withdrawals from deposit
accounts.

•

Historical per share amounts have been computed as if the shares of common stock expected to be
issued in the reorganization had been outstanding at the beginning of the period covered by the
table. However, neither historical nor pro forma stockholders’ equity has been adjusted to reflect
the investment of the estimated net proceeds from the sale of the shares in the reorganization, the
additional employee stock ownership plan expense or the proposed equity incentive plan.

•

Pro forma stockholders’ equity (“book value”) represents the difference between the stated
amounts of our assets and liabilities. Book value amounts do not represent fair market values or
amounts available for distribution to stockholders in the unlikely event of liquidation. The
amounts shown do not reflect the federal income tax consequences of the restoration to income of
United Community Bank’s special bad debt reserves for income tax purposes, which would be
required in the unlikely event of liquidation. See “Federal and State Taxation.”

•

The amounts shown as pro forma stockholders’ equity per share do not represent possible future
price appreciation of United Community Bancorp’s common stock.

•

The pro forma tables do not reflect the impact of the net expenses we initially expect to incur as a
result of the construction of branch offices in Aurora, St. Leon and Milan, Indiana, and our
operating as a public company.

The following pro forma data may not represent the actual financial effects of the reorganization or our

operating results after the reorganization. The pro forma data rely exclusively on the assumptions outlined above

and in the notes to the pro forma tables. The pro forma data do not represent the fair market value of our common

stock, the current fair market value of our assets or liabilities or the amount of money that would be available for

distribution to stockholders if we are liquidated after the reorganization.

We are offering our common stock on a best efforts basis. United Community Bancorp must sell a

minimum of 2,344,640 shares to complete the offering.


	Three Months Ended September 30, 2005
	Minimum of Offering Range			Midpoint of Offering Range			Maximum of Offering Range			15% Above Maximum of Offering Range
	2,344,640 Shares at $10.00 Per Share			2,758,400 Shares at $10.00 Per Share			3,172,160 Shares at $10.00 Per Share			3,647,984 Shares at $10.00 Per Share
	(Dollars in thousands, except per share amounts)
Gross proceeds	$	23,446		$	27,584		$	31,722		$	36,480
Less: estimated offering expenses		(1,098	)		(1,154	)		(1,211	)		(1,275	)

Estimated net proceeds		22,368			26,430			30,511			35,205
Less: cash contributed to charitable foundation		(250	)		(250	)		(250	)		(250	)
Less: cash to United Community MHC		(100	)		(100	)		(100	)		(100	)
Less: common stock acquired by employee stock ownership plan (1)		(2,132	)		(2,509	)		(2,885	)		(3,318	)
Less: common stock to be acquired by equity incentive plan (2)		(1,066	)		(1,254	)		(1,443	)		(1,659	)

Net investable proceeds	$	18,800		$	22,317		$	25,833		$	29,878

Pro Forma Net Income:

Pro forma net income (3):
Historical	$	561		$	561		$	561		$	561
Pro forma income on net investable proceeds		135			161			186			215
Less: pro forma employee stock ownership plan adjustments (1)		(23	)		(28	)		(32	)		(36	)
Less: pro forma restricted stock award expense (2)		(35	)		(41	)		(48	)		(55	)
Less: pro forma stock option expense (4)		(36	)		(42	)		(49	)		(56	)

Pro forma net income	$	602		$	611		$	618		$	629

Pro forma net income per share (3):
Historical	$	0.11		$	0.09		$	0.08		$	0.07
Pro forma income on net investable proceeds		0.03			0.03			0.03			0.03
Less: pro forma employee stock ownership plan adjustments (1)		—			—			—			—
Less: pro forma restricted stock award expense (2)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Less: pro forma stock option expense (4)		(0.01	)		(0.01	)		(0.01	)		(0.01	)

Pro forma net income per share	$	0.12		$	0.10		$	0.09		$	0.08

Offering price as a multiple of pro forma net income per share		20.83	x		25.00	x		27.78	x		31.25	x
Number of shares used to calculate pro forma net income per share (5)		5,230,306			6,153,301			7,076,297			8,137,741

Pro Forma Stockholders’ Equity:

Pro forma stockholders’ equity (book value) (4):
Historical	$	29,765		$	29,765		$	29,765		$	29,765
Estimated net proceeds		22,348			26,430			30,511			35,205
Plus: shares issued to the foundation		1,034			1,216			1,398			1,608
Less: after-tax cost of foundation shares		(682	)		(803	)		(923	)		(1,061	)
Less: after-tax cost of foundation cash		(165	)		(165	)		(165	)		(165	)
Less: capitalization of United Community MHC		(100	)		(100	)		(100	)		(100	)
Less: common stock acquired by employee stock ownership plan (1)		(2,132	)		(2,509	)		(2,885	)		(3,318	)
Less: common stock to be acquired by equity incentive plan (2)		(1,066	)		(1,254	)		(1,443	)		(1,659	)

Pro forma stockholders’ equity	$	49,002		$	52,580		$	56,158		$	60,275

Pro forma stockholders’ equity per share (4):
Historical	$	5.47		$	4.65		$	4.04		$	3.52
Estimated net proceeds		4.11			4.13			4.15			4.16
Plus: shares issued to the foundation		0.19			0.19			0.19			0.19
Less: after-tax cost of foundation shares		(0.13	)		(0.13	)		(0.13	)		(0.13	)
Less: after-tax cost of foundation cash		(0.03	)		(0.03	)		(0.02	)		(0.02	)
Less: capitalization of United Community MHC		(0.02	)		(0.02	)		(0.01	)		(0.01	)
Less: common stock acquired by employee stock ownership plan (1)		(0.39	)		(0.39	)		(0.39	)		(0.39	)
Less: common stock to be acquired by equity incentive plan (2)		(0.20	)		(0.20	)		(0.20	)		(0.20	)

Pro forma stockholders’ equity per share	$	9.00		$	8.20		$	7.63		$	7.12

Offering price as a percentage of pro forma stockholders’ equity per share		111.11	%		121.95	%		131.06	%		140.45	%

Number of shares used to calculate pro forma stockholders’ equity per share (5)		5,440,000			6,400,000			7,360,000			8,464,000

(footnotes on page )


	Year Ended June 30, 2005
	Minimum of Offering Range			Midpoint of Offering Range			Maximum of Offering Range			15% Above Maximum of Offering Range
	2,344,640 Shares at $10.00 Per Share			2,758,400 Shares at $10.00 Per Share			3,172,160 Shares at $10.00 Per Share			3,647,984 Shares at $10.00 Per Share
	(Dollars in thousands, except per share amounts)
Gross proceeds	$	23,446		$	27,584		$	31,722		$	36,480
Less: estimated offering expenses		(1,098	)		(1,154	)		(1,211	)		(1,275	)

Estimated net proceeds		22,348			26,430			30,511			35,205
Less: cash contribution to charitable foundation		(250	)		(250	)		(250	)		(250	)
Less: cash to United Community MHC		(100	)		(100	)		(100	)		(100	)
Less: common stock acquired by employee stock ownership plan (1)		(2,132	)		(2,509	)		(2,885	)		(3,318	)
Less: common stock to be acquired by equity incentive plan (2)		(1,066	)		(1,254	)		(1,443	)		(1,659	)

Net investable proceeds	$	18,800		$	22,317		$	25,833		$	29,878

Pro Forma Net Income:

Pro forma net income (3):
Historical	$	2,045		$	2,045		$	2,045		$	2,045
Pro forma income on net investable proceeds		403			479			554			641
Less: pro forma employee stock ownership plan adjustments (1)		(94	)		(110	)		(127	)		(146	)
Less: pro forma restricted stock award expense (2)		(141	)		(166	)		(190	)		(219	)
Less: pro forma stock option expense (4)		(144	)		(169	)		(194	)		(223	)

Pro forma net income	$	2,069		$	2,079		$	2,088		$	2,098

Pro forma net income per share (3):
Historical	$	0.39		$	0.33		$	0.29		$	0.25
Pro forma income on net investable proceeds		0.08			0.08			0.08			0.08
Less: pro forma employee stock ownership plan adjustments (1)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Less: pro forma restricted stock award expense (2)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Less: pro forma stock option expense (4)		(0.03	)		(0.03	)		(0.03	)		(0.03	)

Pro forma net income per share	$	0.39		$	0.33		$	0.29		$	0.25

Offering price as a multiple of pro forma net income per share		25.64	x		30.30	x		34.48	x		40.00	x

Number of shares used to calculate pro forma net income per share (5)		5,240,969			6,165,845			7,090,722			8,154,330

Pro Forma Stockholders’ Equity:

Pro forma stockholders’ equity (book value) (4):
Historical	$	29,736		$	29,736		$	29,736		$	29,736
Estimated net proceeds		22,348			26,430			30,511			35,205
Plus: shares issued to the foundation		1,034			1,216			1,398			1,608
Less: after-tax cost of foundation shares		(682	)		(803	)		(923	)		(1,061	)
Less: after-tax cost of foundation cash		(165	)		(165	)		(165	)		(165	)
Less: capitalization of United Community MHC		(100	)		(100	)		(100	)		(100	)
Less: common stock acquired by employee stock ownership plan (1)		(2,132	)		(2,509	)		(2,885	)		(3,318	)
Less: common stock to be acquired by equity incentive plan (2)		(1,066	)		(1,254	)		(1,443	)		(1,659	)

Pro forma stockholders’ equity	$	48,973		$	52,551		$	56,129		$	60,246

Pro forma stockholders’ equity per share (4):
Historical	$	5.47		$	4.65		$	4.04		$	3.51
Estimated net proceeds		4.11			4.13			4.15			4.16
Plus: shares issued to the foundation		0.19			0.19			0.19			0.19
Less: after-tax cost of foundation shares		(0.13	)		(0.13	)		(0.13	)		(0.13	)
Less: after-tax cost of foundation cash		(0.03	)		(0.03	)		(0.02	)		(0.02	)
Less: capitalization of United Community MHC		(0.02	)		(0.02	)		(0.01	)		(0.01	)
Less: common stock acquired by employee stock ownership plan (1)		(0.39	)		(0.39	)		(0.39	)		(0.39	)
Less: common stock to be acquired by equity incentive plan (2)		(0.20	)		(0.20	)		(0.20	)		(0.20	)

Pro forma stockholders’ equity per share	$	9.00		$	8.20		$	7.63		$	7.11

Offering price as a percentage of pro forma stockholders’ equity per share		111.11	%		121.95	%		131.06	%		140.65	%

Number of shares used to calculate pro forma stockholders’ equity per share (5)		5,440,000			6,400,000			7,360,000			8,464,000

(footnotes on following page)

(1)	Assumes that the employee stock ownership plan will acquire a number of shares equal to 3.92% of the shares issued in

the reorganization, including shares issued to United Community MHC and contributed to United Community Bank

Charitable Foundation (213,248, 250,880, 288,512 and 331,789 shares at the minimum, midpoint, maximum and adjusted

maximum of the offering range, respectively). The employee stock ownership plan will borrow the funds used to acquire

these shares from the net proceeds from the reorganization retained by United Community Bancorp. The amount of this

borrowing has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. This

borrowing will have an interest rate equal to the prime rate as published in The Wall Street Journal, which is currently

%, and a term of 15 years. United Community Bank intends to make contributions to the employee stock ownership

plan in amounts at least equal to the principal and interest requirement of the debt. Interest income that United

Community Bancorp will earn on the loan will offset the interest paid on the loan by United Community Bank. As the

debt is paid down, shares will be released for allocation to participants’ accounts and stockholders’ equity will be

increased.

The adjustment to pro forma net income for the employee stock ownership plan reflects the after-tax compensation

expense associated with the plan. Applicable accounting principles require that compensation expense for the employee

stock ownership plan be based upon shares committed to be released and that unallocated shares be excluded from

earnings per share computations. An equal number of shares (1/15 of the total, based on a 15-year loan) will be released

each year over the term of the loan. The valuation of shares committed to be released would be based upon the average

market value of the shares during the year, which, for purposes of this calculation, was assumed to be equal to the $10.00

per share purchase price. If the average market value per share is greater than $10.00 per share, total employee stock

ownership plan expense would be greater. See “Our Management—Benefit Plans—Employee Stock Ownership Plan.”

(2)	Assumes that United Community Bancorp will purchase in the open market a number of shares equal to 1.96% of the

shares issued in the offering, including shares issued to United Community MHC and contributed to United Community

Bank Charitable Foundation (106,624, 125,440, 144,256 and 165,894 shares at the minimum, midpoint, maximum and

adjusted maximum of the offering range, respectively), that will be reissued as restricted stock awards under an equity

incentive plan to be adopted following the reorganization. Repurchases will be funded with cash on hand at United

Community Bancorp or with dividends paid to United Community Bancorp by United Community Bank. The cost of these

shares has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. In

calculating the pro forma effect of the restricted stock awards, it is assumed that the required stockholder approval has

been received, that the shares used to fund the awards were acquired at the beginning of the respective period and that the

shares were acquired at the $10.00 per share purchase price. The issuance of authorized but unissued shares of the

common stock instead of shares repurchased in the open market would dilute the ownership interests of existing

stockholders, other than United Community MHC, by approximately 4.17%.

The adjustment to pro forma net income for the restricted stock awards reflects the after-tax compensation expense

associated with the awards. It is assumed that the fair market value of a share of United Community Bancorp common

stock was $10.00 at the time the awards were made, that shares of restricted stock issued under the equity incentive plan

vest 20.0% per year, that compensation expense is recognized on a straight-line basis over each vesting period so that

20.0% of the value of the shares awarded was an amortized expense during each year, and that the combined federal and

state income tax rate was 34.0%. If the fair market value per share is greater than $10.00 per share on the date shares are

awarded under the equity incentive plan, total equity incentive plan expense would be greater.

(3)	Does not give effect to the non-recurring expense that will be recognized in fiscal 2006 as a result of the contribution of

common stock to United Community Bank Charitable Foundation.

The following table shows the estimated after-tax expense associated with the contribution to the foundation, as well as

pro forma net income (loss) and pro forma net income (loss) per share assuming the contribution to the foundation was

expensed during the periods presented.


	Minimum of Offering Range			Midpoint of Offering Range			Maximum of Offering Range			15% Above Maximum of Offering Range
	(Dollars in thousands, except per share amounts)
After-tax expense of contribution to foundation:
Three months ended September 30, 2005	$	847		$	968		$	1,088		$	1,226
Year ended June 30, 2005		847			968			1,088			1,226

Pro forma net income (loss):
Three months ended September 30, 2005	$	(245	)	$	(357	)	$	(470	)	$	(597	)
Year ended June 30, 2005		1,222			1,129			1,000			872

Pro forma net income (loss) per share:
Three months ended September 30, 2005	$	(0.05	)	$	(0.06	)	$	(0.07	)	$	(0.07	)
Year ended June 30, 2005		0.23			0.18			0.14			0.11

The pro forma data assume that we will realize 100.0% of the income tax benefit as a result of the contribution to the

foundation based on a 34.0% tax rate. The realization of the tax benefit is limited annually to 10.0% of our annual taxable

income. However, for federal and state tax purposes, we can carry forward any unused portion of the deduction for five

years following the year in which the contribution is made.

(4)	The adjustment to pro forma net income for stock options reflects the after-tax compensation expense associated with the

stock options that may be granted under the equity incentive plan to be adopted following the offering. If the equity

incentive plan is approved by stockholders, a number of shares equal to 4.9% of the number of shares issued in the

offering, including shares issued to United Community MHC and contributed to United Community Bank Charitable

Foundation (266,560, 313,600, 360,640 and 414,736 shares at the minimum, midpoint, maximum and adjusted maximum

of the offering range, respectively) will be reserved for future issuance upon the exercise of stock options that may be

granted under the plan. Using the Black-Scholes option-pricing formula, the options are assumed to have a value of $4.08

each option, based on the following assumptions: exercise price, $10.00; trading price on date of grant, $10.00; dividend

yield, 0.0%; expected life, 10 years; expected volatility, 16.3%; and risk-free interest rate, 4.56%. Because there currently

is no market for United Community Bancorp common stock, the assumed expected volatility is based on the SNL

Financial MHC Index. The dividend yield is assumed to be 0.0% because there is no history of dividend payments and the

board of directors has not expressed an intention to commence dividend payments upon completion of the offering. It is

assumed that stock options granted under the equity incentive plan vest 20.0% per year, that compensation expense is

recognized on a straight-line basis over each vesting period so that 20.0% of the value of the options awarded was an

amortized expense during each year, that 25.0% of the options awarded are non-qualified options and that the combined

federal and state income tax rate was 34.0%. If the fair market value per share is different than $10.00 per share on the

date options are awarded under the equity incentive plan, or if the assumptions used in the option-pricing formula are

different from those used in preparing this pro forma data, the value of the stock options and the related expense would be

different. Applicable accounting standards do not prescribe a specific valuation technique to be used to estimate the fair

value of employee stock options. United Community Bancorp may use a valuation technique other than the Black-Scholes

option-pricing formula and that technique may produce a different value. The issuance of authorized but unissued shares

of common stock to satisfy option exercises instead of shares repurchased in the open market would dilute the ownership

interests of existing stockholders, other than United Community MHC, by approximately 8.92%.

(5)	The number of shares used to calculate pro forma net income per share is equal to the total number of shares to be outstanding

upon completion of the reorganization, less the number of shares purchased by the employee stock ownership

plan not committed to be released within one year following the reorganization. The number of shares used to calculate

pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the

offering.

Comparison of Independent Valuation and Pro Forma Financial

Information With and Without the Foundation

As set forth in the following table, if we do not establish and fund United Community Bank Charitable

Foundation as part of the offering, Keller & Company estimates that our pro forma valuation would be greater,

which would have resulted in an increase in the amount of common stock offered for sale in the offering. If the

foundation were not established, there is no assurance that the updated appraisal that Keller & Company will

prepare at the closing of the offering would conclude that our pro forma market value would be the same as the

estimate set forth in the table below. The updated appraisal will be based on the facts and circumstances existing

at that time, including, among other things, market and economic conditions.

The information presented in the following table is for comparative purposes only. It assumes that the

offering was completed at September 30, 2005, based on the assumptions set forth under “Pro Forma Data.”


	At the Minimum of Estimated Valuation Range						At the Midpoint of Estimated Valuation Range						At the Maximum of Estimated Valuation Range						At the Maximum, as Adjusted, of Estimated Valuation Range
	With Foundation			No Foundation			With Foundation			No Foundation			With Foundation			No Foundation			With Foundation			No Foundation
	(Dollars in thousands, except per share amounts)
Estimated offering amount (1)	$	23,446		$	25,628		$	27,584		$	30,150		$	31,721		$	34,673		$	36,480		$	39,873
Pro forma market capitalization (excluding United Community MHC)		24,480			25,628			28,800			30,150			33,120			34,673			38,088			39,878
Estimated pro forma valuation		54,400			56,950			64,000			67,000			73,600			77,050			84,640			88,608
Pro forma total assets		340,465			342,460			343,982			346,330			347,498			350,200			351,543			354,650
Pro forma total liabilities		291,463			291,648			291,402			291,649			291,340			291,649			291,268			291,650
Pro forma stockholders’ equity		49,002			50,812			52,580			54,681			56,158			58,551			60,275			63,000
Pro forma net income		602			612			611			624			618			634			629			647
Pro forma stockholders’ equity per share		9.00			8.92			8.20			8.16			7.63			7.60			7.12			7.11
Pro forma net income per share		0.12			0.11			0.10			0.10			0.09			0.09			0.08			0.08

Pro Forma Pricing Ratios:
Offering price as a percentage of pro forma stockholders’ equity		111.11	%		112.11	%		121.95	%		122.55	%		131.06	%		131.58	%		140.45	%		140.65	%
Offering price as a multiple of pro forma net income per share (annualized)		20.83			22.36			25.00			25.83			27.78			29.24			31.25			32.89
Offering price to assets		15.98			16.63			18.61			19.35			21.18			22.00			24.08			24.98

Pro Forma Financial Ratios:
Return on assets (annualized)		0.71	%		0.71	%		0.71	%		0.72	%		0.71	%		0.72	%		0.72	%		0.73	%
Return on stockholders’ equity (annualized)		4.91			4.82			4.65			4.56			4.40			4.33			4.17			4.11
Stockholders’ equity to total assets		14.39			14.84			15.29			15.79			16.16			16.72			17.15			17.76

(1)	Based on independent valuation prepared by Keller & Company as of November 14, 2005.

Our Business

General

United Community Bancorp will be organized as a federal corporation upon completion of the

reorganization. As a result of the reorganization, United Community Bank will be a wholly owned subsidiary of

United Community Bancorp and United Community Bancorp will be a majority-owned subsidiary of United

Community MHC. Upon completion of the reorganization, United Community Bancorp’s business activities will

be the ownership of the outstanding capital stock of United Community Bank and management of the investment

of offering proceeds retained from the reorganization. Initially, United Community Bancorp will neither own nor

lease any property but will instead use the premises, equipment and other property of United Community Bank

with the payment of appropriate rental fees, as required by applicable law and regulations. In the future, United

Community Bancorp may acquire or organize other operating subsidiaries; however, there are no current plans,

arrangements, agreements or understandings, written or oral, to do so.

United Community Bank was created on April 12, 1999 through the merger of Perpetual Federal Savings

and Loan Association, originally chartered in 1894, and Progressive Federal Savings Bank, originally chartered in

1914. Both institutions were headquarted in Lawrenceburg, Indiana and operated as community-oriented financial

institutions in the Lawrenceburg market area. At the time of our merger, we had approximately $185.0 million in

assets and $166.0 million in deposits. At September 30, 2005, we have approximately $321.3 million in assets and

$289.1 million in deposits.

United Community Bank provides customers with quality customer service combined with a full menu of

banking services and products. Recent years have seen the expansion of services we offer from a traditional

savings and loan product mix to one of a full-service financial institution servicing the needs of consumer and

commercial customers. We give back to the communities we serve by assuming a role in community affairs, not

only through monetary donations, but by asking our employees to also contribute their time by taking leadership

roles in the many organizations dedicated to serving the community.

We operate as a community-oriented financial institution offering traditional financial services to

consumers and businesses in our market areas. We attract deposits from the general public and local

municipalities and use those funds to originate one- to four-family real estate, multi-family and nonresidential real

estate and land, construction, commercial and consumer loans, which, with the exception of long-term fixed-rate

one-to four-family real estate loans, we primarily hold for investment. We also maintain an investment portfolio.

We offer non-deposit investment products through a third-party network arrangement with a registered broker-

dealer.

Our website address is www.bankucb.com. Information on our website should not be considered a part of

this prospectus.

Market Areas

We are headquartered in Lawrenceburg, Indiana, which is in the eastern part of Dearborn County,

Indiana, along the Ohio River. The economy of the region in which our current offices are located, and planned

future offices will be located, has historically been a mixture of light industrial enterprises and services. The

economy in Lawrenceburg has been strong in recent years as a result of the opening of a Riverboat casino in

Lawrenceburg whose presence has led to new retail centers, job growth and an increase in housing development.

Located 20 miles from Cincinnati, Ohio, Dearborn County has also benefitted from the growth in and around

Cincinnati and Northern Kentucky, as many residents commute to these areas for employment.

Dearborn County’s road system includes eight state highways and two U.S. highways. I-275 enters

Indiana near Lawrenceburg and offers easy connection to 1-71 and 1-75. At the northern end of the county, 1-74

connects us with Indianapolis to the west and Cincinnati to the east. Dearborn County is 20 minutes from the

Greater Cincinnati/Northern Kentucky International Airport by way of Interstate 275. The county has four rail

lines and port facilities due to the proximity of the Ohio River.

Based on United States Census data, in 2000, personal income per capita for Dearborn County, Indiana

approximately $27,472 compared to $26,933 for Indiana and $29,469 for the entire United States. In addition, the

population of Dearborn County was 46,000 as compared to 6.1 million for Indiana.

Competition

We face significant competition for the attraction of deposits and origination of loans. Our most direct

competition for deposits has historically come from the several financial institutions operating in our market areas

and, to a lesser extent, from other financial service companies such as brokerage firms, credit unions and insurance

companies. We also face competition for investors’ funds from money market funds, mutual funds and other

corporate and government securities. At June 30, 2005, which is the most recent date for which data is available

from the Federal Deposit Insurance Corporation, we held approximately 36.3% of the deposits in Dearborn

County, which was the largest market share out of the nine financial institutions with offices in Dearborn County.

In addition, banks owned by large out-of-state bank holding companies such as Wells Fargo & Company, Fifth

Third Bancorp and U.S. Bancorp also operate in our market areas. These institutions are significantly larger than

us and, therefore, have significantly greater resources.

Our competition for loans comes primarily from financial institutions in our market areas, and, to a lesser

extent, from other financial service providers such as mortgage companies and mortgage brokers. Competition for

loans also comes from the increasing number of non-depository financial service companies entering the mortgage

market such as insurance companies, securities companies and specialty finance companies.

We expect competition to increase in the future as a result of legislative, regulatory and technological

changes and the continuing trend of consolidation in the financial services industry. Technological advances, for

example, have lowered the barriers to market entry, allowed banks and other lenders to expand their geographic

reach by providing services over the Internet and made it possible for non-depository institutions to offer products

and services that traditionally have been provided by banks. Changes in federal law permit affiliation among

banks, securities firms and insurance companies, which promotes a competitive environment in the financial

services industry. Competition for deposits and the origination of loans could limit our future growth.

Lending Activities

General. We originate loans primarily for investment purposes. The largest segment of our loan

portfolio is one- to four-family residential real estate loans. The other significant segments of our loan portfolio

are nonresidential real estate and land loans, multifamily residential real estate loans, residential loans and

consumer loans.

One- to Four-Family Residential Real Estate Loans. The largest segment of our loan portfolio is

comprised of mortgage loans to enable borrowers to purchase or refinance existing homes most of which serve as

the primary residence of the owner. We offer fixed-rate and adjustable-rate loans with terms up to 30 years.

Borrower demand for adjustable-rate loans versus fixed-rate loans is a function of the level of interest rates, the

expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees

offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans.

The relative amount of fixed-rate mortgage loans and adjustable-rate mortgage loans that can be originated at any

time is largely determined by the demand for each in a competitive environment. The loan fees, interest rates and

other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive

market conditions. Most of our loan originations result from relationships with existing or past customers,

members of our local community and referrals from realtors, attorneys and builders.

While one- to four-family residential real estate loans are normally originated with up to 30-year terms,

such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans

in full upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan

maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market,

prevailing interest rates and the interest rates payable on outstanding loans. Additionally, our current practice is

generally to (i) sell to the secondary market newly originated conforming fixed-rate 15-, 20- and 30-year one- to

four-family residential real estate loans, and (ii) to hold in our portfolio fixed-rate loans with 10-year terms or less

and adjustable-rate loans. Occasionally, we have purchased loans and purchased participation interests in loans

originated by other institutions to supplement our origination efforts.

Interest rates and payments on our adjustable-rate mortgage loans generally adjust annually after an initial

fixed period that ranges from one to 10 years. Interest rates and payments on these adjustable-rate loans generally

are based on the one-year constant maturity Treasury index (three-year constant maturity Treasury index in the

case of three-year adjustable-rate loans) as published by the Federal Reserve in Statistical Release H.15. The

maximum amount by which the interest rate may be increased is generally two percentage points per adjustment

period and the lifetime interest rate cap ranges from five to six percentage points over the initial interest rate of the

loan. Our adjustable-rate residential mortgage loans generally do not provide for a decrease in the rate paid below

the initial contract rate. The inability of our residential real estate loans to adjust downward below the initial

contract rate can contribute to increased income in periods of declining interest rates, and also assists us in our

efforts to limit the risks to earnings and equity value resulting from changes in interest rates, subject to the risk that

borrowers may refinance these loans during periods of declining interest rates.

We generally do not make conventional loans with loan-to-value ratios exceeding 95% at the time the

loan is originated. Private mortgage insurance is generally required for all fixed-rate loans with loan-to-value

ratios in excess of 80%, and all adjustable-rate loans with loan-to-value ratios exceeding 85%. We require all

properties securing mortgage loans to be appraised by a board-approved independent appraiser. We generally

require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance

for loans on properties located in a flood zone, before closing the loan.

In an effort to provide financing for low- and moderate-income and first-time buyers, we offer a special

home buyers program. We offer residential mortgage loans through this program to qualified individuals and

originate the loans using reduced interest rates, fees and loan conditions.

Multi-Family Real Estate Loans. We offer adjustable-rate mortgage loans secured by multi-family

real estate. Our multi-family real estate loans are generally secured by apartment buildings. We also make multi-

family real estate loans secured by apartment buildings outside of our primary market area to existing customers

who reside in our primary market area. We intend to continue to grow this segment of our loan portfolio.

These loans are typically repaid or the term extended before maturity, in which case a new rate is

negotiated to meet market conditions and an extension of the loan is executed for a new term with a new

amortization schedule. We originate adjustable-rate multi-family real estate loans with terms up to 30 years.

Interest rates and payments on most of these loans typically adjust annually after an initial fixed term of five

or seven years. Interest rates and payments on our adjustable-rate loans generally are based on the prime interest rate.

The maximum amount by which the interest rate may be increased is generally two percentage points per

adjustment period and the lifetime interest rate cap is six percentage points over the initial interest rate of the loan

(five percentage points for loans with three-year terms). Loans are secured by first mortgages that generally do not

exceed 80% of the property’s appraised value. When the borrower is a corporation, partnership or other entity, we

generally require that significant equity holders serve as co-borrowers on the loan, or, to a lesser extent, serve as a

personal guarantor of the loan.

Loans secured by multi-family real estate generally have larger balances and involve a greater degree of

risk than one- to four-family residential mortgage loans. Of primary concern in multi-family real estate lending is

the borrower’s creditworthiness and the feasability and cash flow potential of the project. Payments on loans

secured by income properties often depend on successful operation and management of the properties. As a result,

repayment of such loans may be subject to a greater extent than one- to four-family residential real estate loans to

adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we

require borrowers and loan guarantors of loan relationships totaling more than $1.0 million, in the aggregate, to

provide annual financial statements and/or tax returns. In reaching a decision on whether to make a multi-family

real estate loan, we consider the net operating income of the property, the borrower’s expertise, credit history and

profitability and the value of the underlying property. In addition, with respect to rental properties, we will also

consider the term of the lease and the credit quality of the tenants. We have generally required that the properties

securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt

service) of at least 1.20x.

At September 30, 2005, the largest outstanding multi-family real estate loan had an outstanding balance

of $2.2 million and is secured by an apartment building located in Northern Kentucky. This loan was performing

according to its original terms at September 30, 2005.

Nonresidential Real Estate and Land Loans. We offer adjustable-rate mortgage loans secured by

nonresidential real estate. Our nonresidential real estate loans are generally secured by apartment buildings. We

intend to continue to grow this segment of our loan portfolio. These loans are typically repaid or the term

extended before maturity, in which case a new rate is negotiated to meet market conditions and an extension of the

loan is executed for a new term with a new amortization schedule. We originate adjustable-rate nonresidential real

estate loans with terms up to 30 years. Interest rates and payments on most of these loans typically adjust annually

after an initial fixed term of five or seven years. Interest rates and payments on these loans generally are based on

the prime interest rate. The maximum amount by which the interest rate may be increased is generally two

percentage points per adjustment period and the lifetime interest rate cap is six percentage points over the initial

interest rate of the loan (five percentage points for loans with three-year terms). Loans are secured by first

mortgages that generally do not exceed 80% of the property’s appraised value (75% for land only loans). When

the borrower is a corporation, partnership or other entity, we generally require that significant equity holders serve

as co-borrowers or as personal guarantors of the loan.

Loans secured by nonresidential real estate generally have larger balances and involve a greater degree of

risk than one- to four-family residential mortgage loans. Of primary concern in nonresidential real estate lending

is the borrower’s creditworthiness and the feasability and cash flow potential of the project. Payments on loans

secured by income properties often depend on successful operation and management of the properties. As a result,

repayment of such loans may be subject to a greater extent than one- to four-family residential real estate loans to

adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we

require borrowers and loan guarantors of loan relationships totaling more than $1.0 million, in the aggregate, to

provide annual financial statements and/or tax returns. In reaching a decision on whether to make a nonresidential

real estate loan, we consider the net operating income of the property, the borrower’s expertise, credit history and

profitability and the value of the underlying property. In addition, with respect to rental properties, we will also

consider the term of the lease and the credit quality of the tenants. We have generally required that the properties

securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt

service) of at least 1.20x. Environmental surveys and inspections are generally required for loans over $500,000.

We also originate loans secured by unimproved property, including lots for single family homes and for

mobile homes, raw land, commercial property and agricultural property. The terms and rates of our land loans are

the same as our nonresidential and multifamily real estate loans. Loans secured by undeveloped land or improved

lots generally involve greater risks than residential mortgage lending because land loans are more difficult to

evaluate. If the estimate of value proves to be inaccurate, in the event of default and foreclosure, we may be

confronted with a property the value of which is insufficient to assure full repayment. Loan amounts generally do

not exceed 80% of the lesser of the appraised value or the purchase price.

At September 30, 2005, we had $49.5 million in nonresidential real estate loans outstanding, or 24.0% of

total loans, and $9.7 million in land loans outstanding, or 4.6% of total loans.

At September 30, 2005, the largest outstanding nonresidential real estate loan had an outstanding balance

of $2.9 million. This loan is a participation loan in which we have a 4.3% interest. This loan is secured by truck

terminals located in 26 states across the United States and was performing according to its original terms at

September 30, 2005. At September 30, 2005, our largest land loan, which was performing according to its original

terms at that date, was for $1.5 million and was secured by a mobile home park.

Construction Loans. We originate fixed-rate and adjustable-rate loans to individuals and, to a lesser

extent, builders to finance the construction of residential dwellings. We also make construction loans for

commercial development projects, including apartment buildings, restaurants, shopping centers and owner-

occupied properties used for businesses. Our construction loans generally provide for the payment of interest only

during the construction phase, which is usually nine months for residential properties and 12 months for

commercial properties. At the end of the construction phase, the loan generally converts to a permanent mortgage

loan. Loans generally can be made with a maximum loan to value ratio of 95% on residential construction and

80% on commercial construction at the time the loan is originated. Before making a commitment to fund a

construction loan, we require an appraisal of the property by an independent licensed appraiser. We also will

require an inspection of the property before disbursement of funds during the term of the construction loan.

At September 30, 2005, our largest outstanding residential construction loan was for $440,000, of which

$283,000 was outstanding. At September 30, 2005, our largest outstanding commercial construction loan was for

$500,000, of which $167,000 was outstanding. This loan is secured by a medical professional building. These

loans were performing in accordance with their original terms at September 30, 2005.

Commercial Loans. We occasionally make commercial business loans to professionals, sole

proprietorships and small businesses in our market area. We extend commercial business loans on an unsecured

basis and secured basis, the maximum amount of which is limited by our in-house-loans-to one borrower limit.

We originate secured and unsecured commercial lines of credit to finance the working capital needs of

businesses to be repaid by seasonal cash flows or to provide a period of time during which the business can borrow

funds for planned equipment purchases. Secured commercial lines of credit secured by nonresidential real estate

are adjustable-rate loans and whose rates are based on the prime interest rate and adjust monthly. Commercial

lines of credit secured by nonresidential real estate have a maximum term of five years and a maximum loan-to-

value ratio of 80% of the pledged collateral when the collateral is commercial real estate. We also originate

commercial lines of credit secured by marketable securities and unsecured lines of credit. These lines of credit, as

well as certain commercial lines of credit secured by nonresidential real estate, require that only interest be paid

on a monthly or quarterly basis and have a maximum term of five years.

We also originate secured and unsecured commercial loans. Secured commercial loans are generally

collateralized by nonresidential real estate, marketable securities, accounts receivable, inventory,

industrial/commercial machinery and equipment and furniture and fixtures. We originate both fixed-rate and

adjustable-rate commercial loans with terms up to 20 years for secured loans and up to five years for unsecured

loans. Adjustable-rate loans are based on prime and adjust either monthly or annually. Where the borrower is a

corporation, partnership or other entity, we generally require significant equity holders to be co-borrowers and in

cases where they are not co-borrowers we require personal guarantees from significant equity holders.

When making commercial business loans, we consider the financial statements and/or tax returns of the

borrower, the borrower’s payment history of both corporate and personal debt, the debt service capabilities of the

borrower, the projected cash flows of the business, the viability of the industry in which the customer operates and

the value of the collateral.

At September 30, 2005, our largest commercial loan was a $649,000 loan secured by the assets of a local

privately owned utility company. This loan was performing in accordance with its original terms at September 30,

2005.

Consumer Loans. We offer a variety of consumer loans, primarily home equity loans and lines of

credit, and, to a much lesser extent, loans secured by savings accounts or certificate of deposits (share loans), new

farm and garden equipment, automobile and recreational vehicle loans and secured and unsecured personal loans.

The procedures for underwriting consumer loans include an assessment of the applicant’s payment history

on other debts and ability to meet existing obligations and payments on the proposed loan. Although the

applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the

value of the collateral, if any, to the proposed loan amount.

We generally offer home equity loans and lines of credit with a maximum combined loan to value ratio of

90%. Home equity lines of credit have adjustable-rates of interest that are based on the prime interest rate. Home

equity lines of credit generally require that only interest be paid on a monthly basis and have terms up to 20 years.

Interest rates on these loans typically adjust monthly. We offer fixed-rate and adjustable-rate home equity loans.

Home equity loans with fixed-rates have terms that range from one to 15 years. Home equity loans with

adjustable-rates have terms that range from 16 to 30 years. Interest rates on these loans are based on the prime

interest rate. We hold a first mortgage position on most of the homes that secure our home equity loans and home

equity lines of credit.

We offer loans secured by new and used vehicles. These loans have fixed interest rates and generally have

terms up to five years.

We offer loans secured by new and used boats, motor homes, campers and motorcycles. We offer fixed

and adjustable-rate loans for new motor homes and boats with terms up to 20 years for adjustable-rate loans and up

to 10 years for fixed-rate loans. We offer fixed-rate loans for all other new and used recreational vehicles with

terms up to 10 years for campers and five years for motorcycles.

We offer secured consumer loans with fixed interest rates and terms up to 10 years and secured lines of

credit with adjustable-rates based on prime with terms up to five years. We also offer fixed-rate unsecured

consumer loans and lines of credit with terms up to five years. For more information on our loan commitments,

see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity

Management.”

Loan Underwriting Risks

Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse

effects of an increase in interest rates as compared to fixed_rate mortgages, the increased mortgage payments

required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in

delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high

interest rate environment. In addition, although adjustable-rate mortgage loans help make our loan portfolio more

responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime

interest rate adjustment limits.

Multi-Family and Nonresidential Real Estate and Land Loans. Loans secured by multi-family

and nonresidential real estate generally have larger balances and involve a greater degree of risk than one- to

four-family residential mortgage loans. Of primary concern in multi-family and nonresidential real estate lending

is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans

secured by income properties often depend on successful operation and management of the properties. As a result,

repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in

the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan

guarantors of loan relationships totaling more than $1.0 million, in the aggregate, to provide annual financial

statements and/or tax returns. In reaching a decision on whether to make a multi-family and nonresidential real

estate loan, we consider the net operating income of the property, the borrower’s expertise, credit history and

profitability and the value of the underlying property. We have generally required that the properties securing

these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of

at least 1.20x. Environmental surveys and inspections are obtained when circumstances suggest the possibility of

the presence of hazardous materials.

We underwrite all loan participations to our own underwriting standards and will not participate in a loan

unless each participant has at least a 10% interest in the loan. In addition, we also consider the financial strength

and reputation of the lead lender. To monitor cash flows on loan participations, we require the lead lender to

provide annual financial statements for the borrower. Generally, we also conduct an annual internal loan review

for loan participations.

Construction Loans. Construction financing is generally considered to involve a higher degree of risk

of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends

largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the

estimated cost (including interest) of construction. During the construction phase, a number of factors could result

in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to

advance funds beyond the amount originally committed to permit completion of the building. If the estimate of

value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a

value which is insufficient to assure full repayment. If we are forced to foreclose on a building before or at

completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of,

and accrued interest on, the loan as well as related foreclosure and holding costs.

Commercial Loans. Unlike residential mortgage loans, which generally are made on the basis of the

borrower’s ability to make repayment from his or her employment or other income, and which are secured by real

property the value of which tends to be more easily ascertainable, commercial loans are of higher risk and typically

are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

As a result, the availability of funds for the repayment of commercial loans may depend substantially on the

success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult

to appraise and may fluctuate in value.

Consumer Loans. Consumer loans may entail greater risk than do residential mortgage loans,

particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such

cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for

the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts

against the borrower. In addition, consumer loan collections depend on the borrower’s continuing financial

stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may

limit the amount that can be recovered on such loans.

Loan Originations, Purchases and Sales. Loan originations come from a number of sources. The

primary source of loan originations are existing customers, walk-in traffic, advertising and referrals from

customers. We advertise on television, on the radio and in newspapers that are widely circulated in Dearborn

County, Indiana. Accordingly, when our rates are competitive, we attract loans from throughout Dearborn County.

We occasionally purchase loans and participation interests in loans to supplement our origination efforts.

We generally originate loans for our portfolio but our current practice is to sell to the secondary market

almost all newly originated conforming fixed-rate, 15-, 20- and 30-year one- to four-family residential real estate

loans and to hold in our portfolio fixed-rate loans with 10-year terms or less and adjustable-rate loans. Our decision

to sell loans is based on prevailing market interest rate conditions and interest rate risk management. Generally,

loans are sold to Freddie Mac with servicing retained.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory,

underwriting standards and loan origination procedures established by our board of directors and management. The

board has granted the Management Mortgage Loan Committee (comprised of the President, Executive Vice

President and the Senior Vice President, Lending) with loan approval authority for mortgage loans up to $100,000

and to the Board Loan Committee up to $1 million.

The board has granted authority to approve consumer loans to certain employees up to prescribed limits,

depending on the officer’s experience and tenure. The board also granted loan approval authority to the

Management Consumer Loan Committee, consisting of the President and the Executive Vice President, the Senior

Vice President, Lending and the Vice President, Consumer Lending. Any two members of the committee may

approve consumer loans secured by real estate up to $250,000, consumer loans secured by assets other than real

estate up to $100,000 and unsecured consumer loans up to $50,000. The board of directors has also granted loan

approval authority to the Management Commercial Loan Committee, consisting of the President, the Executive

Vice President, the Senior Vice President, Lending and the Senior Vice President, Investments Officer and

Commercial Lending Officer. Any two members of the committee may approve commercial loans secured by real

estate up to $250,000, commercial loans secured by assets other than real estate up to $50,000 and unsecured

commercial loans up to $25,000. A majority of the Management Commercial Loan Committee may approve

commercial loans secured by real estate up to $500,000, commercial loans secured by assets other than real estate

up to $100,000 and unsecured commercial loans up to $50,000.

The Board Loan Committee, consisting of the President, the Executive Vice President and five to six other

members of the board, may approve consumer and commercial loans secured by real estate up to $1,000,000,

consumer and commercial loans secured by assets other than real estate up to $300,000 and unsecured consumer

commercial loans up to $100,000.

All loans in excess of these limits must be approved by the full board of directors.

Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower’s

related entities generally is limited, by regulation, to 15% of our stated capital and reserves. At September 30,

2005, our general regulatory limit on loans to one borrower was $4.5 million. On September 30, 2005, our largest

lending relationship was a $4.3 million commercial real estate loan relationship. The loans that comprise this

relationship were performing according to their original terms at September 30, 2005.

Loan Commitments. We issue commitments for fixed- and adjustable-rate mortgage loans conditioned

upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to

lend to our customers. Generally, our mortgage loan commitments expire after 30 days.

Investment Activities

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations,

securities of various federal agencies and municipal governments, deposits at the Federal Home Loan Bank of

Indianapolis and certificates of deposit of federally insured institutions. Within certain regulatory limits, we also

may invest a portion of our assets in mutual funds. We also are required to maintain an investment in Federal

Home Loan Bank of Indianapolis stock. While we have the authority under applicable law to invest in derivative

securities, our investment policy does not permit this investment. We had no investments in derivative securities at

September 30, 2005.

At September 30, 2005, our investment portfolio totaled $80.6 million and consisted primarily of U.S.

Government sponsored entity securities and mortgage-backed securities issued primarily by Fannie Mae, Freddie

Mac and Ginnie Mae, securities of municipal governments, corporate debt securities and mutual funds that invest

in adjustable-rate mortgages and U.S. Treasury obligations.

At September 30, 2005, $27.5 million of our investment portfolio consisted of callable securities. These

securities contain either a one-time call option or may be called anytime during the life of the security. We face

reinvestment risk with callable securities, particularly during periods of falling market interest rates when issuers

of callable securities tend to call or redeem their securities. Reinvestment risk is the risk that we may have to

reinvest the proceeds from called securities at lower rates of return than the rates paid on the called securities.

Our investment objectives are to provide and maintain liquidity, to establish an acceptable level of interest

rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to

generate a favorable return. The Investment Committee is responsible for the implementation of the investment

policy. The Management Investment Committee, consisting of the President and Chief Executive Officer, the

Chief Operating Officer and the Senior Vice President, Investment Officer, is responsible for monitoring our

investment performance. Individual investment transactions, portfolio composition and performance are reviewed

by our board of directors monthly.

Deposit Activities and Other Sources of Funds

General. Deposits, borrowings and loan repayments are the major sources of our funds for lending and

other investment purposes. Loan repayments are a relatively stable source of funds, while deposit inflows and

outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

Deposit Accounts. Substantially all of our depositors are residents of the State of Indiana. We attract

deposits in our market area through advertising and through our website. We offer a broad selection of deposit

instruments, including noninterest-bearing demand accounts (such as checking accounts), interest-bearing

accounts (such as NOW and money market accounts), regular savings accounts and certificates of deposit.

Municipal deposits comprise a substantial portion of our total deposits. At September 30, 2005, $139.2 million, or

48.1% of our total deposits were municipal deposits. At September 30, 2005, we did not utilize brokered deposits.

Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on

deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider

the rates offered by our competition, our liquidity needs, profitability to us, matching deposit and loan products and

customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our current

strategy is to offer competitive rates and to be in the middle of the market for rates on all types of deposit products.

Borrowings. We may utilize advances from the Federal Home Loan Bank of Indianapolis to supplement

our supply of investable funds. The Federal Home Loan Bank functions as a central reserve bank providing credit

for its member financial institutions. As a member, we are required to own capital stock in the Federal Home Loan

Bank and are authorized to apply for advances on the security of such stock and certain of our whole first mortgage

loans and other assets (principally securities which are obligations of, or guaranteed by, the United States),

provided certain standards related to creditworthiness have been met. Advances are made under several different

programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the

amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home

Loan Bank’s assessment of the institution’s creditworthiness.

Properties

The following table sets forth certain information relating to our properties as of September 30, 2005.


Location	Year Opened	Owned/ Leased		Date of Lease Expiration	Net Book Value as of September 30, 2005
					(In thousands)
Main Office:
92 Walnut Street Lawrenceburg, Indiana 47025	2004	Owned		–	$	1,968

Full-Service Branch:
215 W. Eads Parkway Lawrenceburg, Indiana 47025	1914	Owned		–		896

19710 Stateline Road Lawrenceburg, Indiana 47025	2000	Owned		–		775

447 Bielby Road Lawrenceburg, Indiana 47025	1999	Leased		1/2008		27

Other Offices:
(Temporary Branch Office)⁽¹⁾ 513 Green Blvd, Unit #2 Aurora, Indiana 47001	2005	Leased		5/2006		–

Other Properties:
(Future Site of Aurora Branch Office) Corner of Sunnyside Avenue & U.S. 50 Aurora, Indiana 47001	Expected 2006	Owned	⁽²⁾	–		1,201

(Future Site of St. Leon Branch Office) State Route 1 St. Leon, Indiana 47012	Expected 2006	Owned	⁽²⁾	–		269

(Future Site of Milan Branch Office) Corner of State Route 350 & State Route 101 Milan, Indiana 47031	Expected 2007	Owned	⁽²⁾	–		135

(1)	Branch is temporarily housed in a modular facility until a permanent building is constructed.

(2)	Land only.

In 2003, we purchased the oldest three-story brick building in the State of Indiana, renovated it and

moved our headquarters there in 2004. In addition to our main office, we operate from three additional locations

in Lawrenceburg, Indiana. In the beginning of 2004, our Board of Directors made the strategic decision to expand

into other select markets in Dearborn County, Indiana and adjacent Ripley County, Indiana. In April 2004, we

purchased land in Aurora and St. Leon, Indiana and in May 2004 purchased land in Milan, Indiana (Ripley

County), each for the purpose of opening a full-service branch office. We opened a limited-service branch office in

a temporary facility across the street from the Aurora property in August 2005 and we are in the process of

building a permanent full-service facility for the Aurora branch on the Aurora property. We expect the Aurora full-

service branch office to be completed in June 2006. In addition, we intend to build and open a full-service branch

office on the St. Leon, Indiana property, which we also expect will be completed in June 2006. In addition, we

expect to open a full-service branch office on the Milan, Indiana property in 2007.

Personnel

As of September 30, 2005, we had 65 full-time employees and eight part-time employees, none of whom is

represented by a collective bargaining unit. We believe our relationship with our employees is good.

Legal Proceedings

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 a 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.

Subsidiaries

United Community Bank’s only active subsidiary is United Community Bank Financial Services, Inc.

United Community Bank Financial Services, Inc. receives commissions from the sale of non-deposit investment

and insurance products.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

The objective of this section is to help potential investors understand our results of operations and

financial condition. You should read this discussion in conjunction with the financial statements and notes to the

financial statements that appear at the end of this prospectus.

Overview

Income. Our primary source of pre-tax income is net interest income. Net interest income is the

difference between interest income, which is the income that we earn on our loans and securities, and interest

expense, which is the interest that we pay on our deposits and Federal Home Loan Bank borrowings. Other

significant sources of pre-tax income are service charges on deposit accounts and other loan fees. In addition, we

recently created a relationship with Lincoln Financial Advisors that allows us to provide non-deposit investment

products and services to our community which has enabled us to increase our fee income, and we recognize

income or losses from the sale of investments in years that we have such sales.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable

credit losses inherent in the loan portfolio. The allowance is established through the provision for loan losses,

which is charged to income. Charge-offs, if any, are charged to the allowance. Subsequent recoveries, if any, are

credited to the allowance. Management estimates the allowance balance required using past loan loss experience,

the nature and value of the portfolio, information about specific borrower situations, and estimated collateral

values, economic conditions, and other factors. Allocation of the allowance may be made for specific loans, but the

entire allowance is available for any loan that, in management’s judgment, should be charged off.

Expenses. The noninterest expenses we incur in operating our business consist of salaries and employee

benefits expenses, occupancy and equipment expenses, advertising and public relations expenses and various other

miscellaneous expenses.

Salaries and employee benefits consist primarily of salaries and wages paid to our employees, payroll

taxes and expenses for health insurance and other employee benefits. Following the offering, we will recognize

additional annual employee compensation expenses stemming from the adoption of new stock-based benefit plans.

We cannot determine the actual amount of these new stock-related compensation and benefit expenses at this time

because applicable accounting practices require that they be based on the fair market value of the shares of

common stock at specific points in the future. For an illustration of these expenses, see “Pro Forma Data.”

Occupancy and equipment expenses, which are the fixed and variable costs of buildings and equipment,

consist primarily of depreciation charges, furniture and equipment expenses, maintenance, real estate taxes and

costs of utilities. Depreciation of premises and equipment is computed using the straight-line method based on the

useful lives of the related assets, which range from three to 40 years.

Advertising and public relations expenses include expenses for print, radio and television advertisements,

promotions, third-party marketing services and premium items.

Regulatory fees and deposit insurance premiums are primarily payments we make to the Federal Deposit

Insurance Corporation for insurance of our deposit accounts.

Other expenses include expenses for supplies, telephone and postage, data processing, contributions and

donations, director and committee fees, insurance and surety bond premiums and other fees and expenses.

Following the offering, our noninterest expenses are likely to increase as a result of operating as a public

company. These additional expenses will be primarily legal and accounting fees, expenses necessary to comply

with the internal control over financial reporting provisions of the Sarbanes-Oxley Act and expenses related to

stockholder communications and meetings.

We also expect that noninterest expenses will increase as a result of our strategy to expand our branch

network. These additional expenses will be primarily salaries and employee benefits and occupancy and equipment

expenses. Over time, we anticipate that we will generate sufficient income to offset the expenses related to our new

facilities and new employees, but we cannot assure you that our branch expansion will increase our earnings or that

it will increase our earnings within a reasonable period of time.

In addition, our contribution to the charitable foundation will be an additional operating expense that will

reduce net income during the fiscal quarter in which the foundation is established and, as a result, we expect to

record a loss in the third quarter of fiscal 2006.

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that

have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting

policies. We consider the following to be our critical accounting policies: allowance for loan losses and deferred

income taxes.

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; value of collateral; and determination of loss factors to be applied to the various elements

of the 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 Thrift Supervision, 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 note 1 of the notes to the consolidated

financial statements included in this prospectus.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes as

prescribed in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” 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.

Operating Strategy

Our mission is to operate and grow a profitable, independent community-oriented financial institution
serving primarily retail customers and small businesses in our market areas. After the reorganization, we plan to
continue our strategy of:

•

expanding our branch network and upgrading our existing branches;

•

pursuing opportunities to increase and diversify our loan portfolio in our expanding market areas;

•

increasing core deposits through the expansion of our branch network and new deposit products;

•

continuing to increase our sale of non-deposit investment products and services; and

•

applying disciplined underwriting practices to maintain the high quality of our loan portfolio.

Expanding our branch network and upgrading our existing branches

Since our merger in 1999, we have opened two new branches and are leasing a third new temporary

modular branch in Aurora, Indiana until the permanent branch construction is complete in June 2006. In

addition to these branches, we have acquired two more branch sites and intend to have a branch open in St. Leon,

Indiana in June 2006 and one in Milan, Indiana open in 2007. We expect the total cost of the land and

construction for the new Aurora location to be approximately $1.8 million, of which approximately $1.2 million

had been incurred at September 30, 2005. We have entered into an agreement to lease part of the Aurora property

for $88,000 per year until March 2008, when the lessee will purchase that portion of the Aurora property for

$750,000. We expect the total cost of the land and construction for the new St. Leon location to be approximately

$1.0 million, of which $250,000 had been incurred at September 30, 2005. We purchased the site in Milan for a

cost of $135,000 and expect the total cost, including improvements, to be approximately $750,000.

In connection with the addition of three new branches to our branch network, we expect to need to hire

approximately 20 new employees to support our expanded infrastructure, eight of whom have been hired through

September 30, 2005.

The new branches have been and are expected to continue to be, funded by cash generated by our business.

Consequently, we do not expect to borrow funds for these expansion projects. Furthermore, funding for these

expansion projects is not contingent on this offering. We may continue to upgrade our current branch facilities and

may pursue further expansion in Southeastern Indiana, Northern Kentucky or Southwest Ohio in future years

through de novo branching, branch acquisitions and acquisitions of other financial institutions. See “Risk

Factors–Risks Related to Our Business—We may not be able to successfully implement our plans for growth” and

“—We are expanding our branch network into geographic markets in which we have no previous experience.”

Pursuing opportunities to increase and diversify our lending portfolio in our expanding

market areas

In recent years we have sought to diversify our loan portfolio beyond residential mortgage loans. In

particular, since June 30, 2003, our multi-family and nonresidential real estate, commercial business and

construction loan portfolio has increased $42.2 million, or 109.6%, and at September 30, 2005 was 38.5% of our

total loan portfolio. During this period, we have taken advantage of the significant growth in both residential and

nonresidential real estate development in our market and have originated loans in other market areas. With the

additional capital raised in the offering, we expect to continue to expand all of our lending activities and, in

particular, intend to continue to pursue the larger lending relationships associated with multi-family and

nonresidential real estate and construction lending opportunities. We expect that our loan portfolio, including our

multi-family and nonresidential real estate, commercial business and construction loan portfolio, will continue to

increase. For a discussion of the risks related to our commercial and construction loan portfolio, see “Risk

Factors—Risks Related to Our Business—Our increased emphasis on commercial and construction lending may

expose us to increased lending risk” and “Our Business—Lending Activities—Loan Underwriting Risks.”

Increasing core deposits through the expansion of our branch network and new deposit

products

Historically, retail deposits are our primary source of funds for investing and lending. However, in recent

years, we have increased our reliance on municipal deposits significantly. These municipal deposits represent tax

and other revenues from the local gaming industry. Currently, our core deposits, which include all deposit account

types except certificates of deposit and municipal deposits. Core deposits are generally lower cost to us than

certificate of deposit accounts, and they are generally less sensitive to withdrawal when interest rates fluctuate. At

September 30, 2005, core deposits represented 15.7% of our total deposits. We believe that our expanding branch

network and offering new deposit and savings products will contribute to increasing core deposits.

Continuing to increase non-interest income

Our profits rely heavily on the spread between the interest earned on loans and securities and interest paid

on deposits and Federal Home Loan Bank borrowings. In order to decrease our reliance on interest rate spread

income, we have pursued initiatives to increase noninterest income. Our primary recurring source of non-interest

income has been services charges on deposit products and other services. In addition, we now offer non-deposit

investment products through a third party registered broker-dealer, Lincoln Financial Advisors. In connection

with our expanding branch network, we intend to continue to increase our sale of non-deposit investment products

and expect to increase service charge income.

Applying disciplined underwriting practices to maintain the high quality of our loan
portfolio

We believe that high asset quality is a key to long-term financial success. We have sought to grow and

diversify the loan portfolio, while maintaining a high level of asset quality and moderate credit risk, using

underwriting standards, that we believe are conservative, and diligent monitoring and collection efforts. At June

30, 2005 and September 30, 2005, our nonperforming loans (nonaccrual loans and accruing loans which are 90 or

more days delinquent) were 0.72% and 0.73% of our total loan portfolio, respectively. Although we intend to

continue our efforts to originate multi-family and nonresidential real estate, commercial business and construction

loans after the reorganization, we intend to continue our philosophy of managing large loan exposure through our

conservative approach to lending.

Balance Sheet Analysis

Loans. Our primary lending activity is the origination of loans secured by real estate. We originate one-

to four-family residential loans, multi-family and nonresidential real estate loans and construction loans. To a

lesser extent, we originate commercial and consumer loans.

The largest segment of our loan portfolio is one- to four-family residential loans. At September 30, 2005,

these loans totaled $111.5 million, or 53.1% of total gross loans. At June 30, 2005, these loans totaled $109.3

million, or 53.2% of total loans, compared to $107.6 million, or 58.9% of total loans, at June 30, 2004 and $99.0

million, or 66.9% of total loans, at June 30, 2003. The size of our one- to four-family residential loan portfolio has

increased over this period as new originations outpaced payoffs during the recent refinancing boom. As a

percentage of the total loan portfolio, one- to four-family residential loans have decreased as we grew other

segments of the portfolio.

Multi-family and nonresidential real estate loans totaled $72.5 million and represented 34.5% of total

loans at September 30, 2005. At June 30, 2005, these loans totaled $70.9 million, or 34.5% of total loans,

compared to $59.2 million, or 32.4% of total loans, at June 30, 2004 and $34.8 million, or 23.5% of total loans, at

June 30, 2003. Our multi-family and nonresidential real estate loan portfolio increased over the period as a result

of our efforts to diversify our total loan portfolio.

Construction loans totaled $4.4 million, or 2.1% of total loans at September 30, 2005. At June 30, 2005,

these loans totaled $5.9 million, or 2.9% of total loans, compared to $1.2 million, or 0.6% of total loans, at June

30, 2004 and $1.6 million, or 1.1% of total loans, at June 30, 2003. Our construction loan portfolio decreased in

the third quarter of 2005 primarily as a result of large construction loans converting to amortizing loans. Between

June 30, 2004, and June 30, 2005, the portfolio increased by $4.7 million as a result of the origination of several

large construction loans.

Commercial business loans totaled $3.9 million, or 1.8% of total loans at September 30, 2005. At June

30, 2005, these loans totaled $5.0 million, or 2.4% of total loans, compared to $2.1 million, or 1.1% of total loans,

at June 30, 2004 and $2.1 million, or 1.4% of total loans, at June 30, 2003. Commercial business loans decreased

$1.1 million, or 22.9% in the quarter ended September 30, 2005 as a result of the payoff of a sizeable commercial

business loan and increased $2.9 million, or 140.1%, in the year ended June 30, 2005 as a result of our efforts to

increase our commercial business loan portfolio.

Consumer loans totaled $17.6 million, or 8.5% of total loans at September 30, 2005. At June 30, 2005,

these loans totaled $12.8 million, or 6.2% of total loans, compared to $12.6 million, or 6.9% of total loans, at

June 30, 2004 and $10.5 million, or 7.1% of total loans, at June 30, 2003.

The following table sets forth the composition of our loan portfolio at the dates indicated.


	At September 30, 2005					At June 30,
	At September 30, 2005					2005					2004					2003					2002					2001
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount		Percent
	(Dollars in thousands)
Residential real estate:
One- to four-family	$	111,503		53.1	%	$	109,325		53.2	%	$	107,589		58.9	%	$	98,990		66.9	%	$	113,631		69.7	%	$	123,364	74.5	%
Multi-family		13,268		6.3			13,194		6.4			10,932		6.0			4,449		3.0			5,183		3.2			2,760	1.7

Total residential real estate loans		124,771		59.4			122,519		59.6			118,521		64.9			103,439		69.9			118,814		72.1			126,124	76.2

Construction		4,365		2.1			5,899		2.9			1,186		0.6			1,596		1.1			4,351		2.7			1,970	1.2
Nonresidential real estate and land		59,217	⁽¹⁾	28.2			59,263		28.8			48,237		26.4			30,310		20.5			27,396		16.8			24,314	14.7
Commercial business		3,852		1.8			4,996		2.4			2,074		1.1			2,141		1.4			2,067		1.3			2,233	1.4
Consumer:
Home equity		11,420		5.5			9,205		4.5			5,268		2.9			4,441		3.0			4,364		2.7			4,989	3.0
Auto		2,074		1.0			2,161		1.1			2,837		1.6			3,039		2.1			2,977		1.8			3,133	1.9
Share loans		1,028		0.5			861		0.4			2,495		1.4			796		0.5			843		0.5			810	0.4
Other		3,087		1.5			610		0.3			1,975		1.1			2,227		1.5			2,123		1.3			1,956	1.2

Total consumer loans		17,609		8.5			12,837		6.2			12,563		6.9			10,503		7.1			10,307		6.3			10,888	6.5

Total loans	$	209,814		100.0	%	$	205,514		100.0	%	$	182,581		100.0	%	$	147,989		100.0	%	$	162,935		100.0	%	$	165,529	100.0	%

Less (Plus):
Deferred loan fees		(216	)				(173	)				(113	)				(147	)				(119	)				—
Undisbursed portion of loans in process		1,714					2,543					1,887					899					1,965					2,309
Allowance for losses		2,294					2,266					1,550					1,484					974					1,091

Loans, net	$	206,022				$	200,878				$	179,257				$	145,753				$	160,115				$	162,129

(1)	Includes construction loans secured by commercial properties totaling $2.1 million.

Loan Maturity

The following table sets forth certain information at September 30, 2005 and June 30, 2005 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 that shown below. Demand loans having no stated schedule of repayments

and no stated maturity are reported as due in one year or less.


	One- to Four-Family Real Estate Loans		Multi- family Real Estate Loans		Construction Loans		Non- residential Real Estate and Land Loans		Consumer and Commercial Business		Total Loans
	(In thousands)
At September 30, 2005
Amounts due in:
One year or less	$	37,207	$	1,285	$	3,730	$	12,777	$	16,299	$	71,298
More than one year to five years		33,892		5,500		358		32,135		3,421		75,306
More than five years		40,404		6,483		277		14,305		1,741		63,210

Total	$	111,503	$	13,268	$	4,365	$	59,217	$	21,461	$	209,814

At June 30, 2005
Amounts due in:
One year or less	$	35,324	$	1,671	$	5,361	$	13,260	$	13,388	$	69,004
More than one year to five years		36,061		5,388		436		31,811		3,187		76,883
More than five years		37,940		6,135		102		14,192		1,258		59,627

Total	$	109,325	$	13,194	$	5,899	$	59,263	$	17,833	$	205,514

The following table sets forth the dollar amount of all loans at September 30, 2005 and June 30, 2005 that

have either fixed interest rates or adjustable interest rates. The amounts shown below exclude unearned interest on

consumer loans and deferred loan fees.


	Fixed-Rates		Floating or Adjustable-Rates		Total
	(In thousands)
September 30, 2005
Residential real estate:
One- to four-family	$	32,665	$	78,838	$	111,503
Multi-family		13,268		–		13,268
Construction		190		4,175		4,365
Nonresidential real estate and land		10,300		48,917		59,217
Consumer and commercial business		5,915		15,546		21,461

Total	$	62,338	$	147,476	$	209,814

June 30, 2005
Residential real estate:
One- to four-family	$	31,368	$	77,957	$	109,325
Multi-family		13,043		151		13,194
Construction		1,598		4,301		5,899
Nonresidential real estate and land		7,210		52,053		59,263
Consumer and commercial business		5,799		12,034		17,833

Total	$	59,018	$	146,496	$	205,514

Loans Originated

The following table shows loan origination, participation and purchase activity during the periods

indicated.


	Three Months Ended September 30,				Year Ended June 30,
	2005		2004		2005		2004		2003
	(In thousands)
Total loans at beginning of period	$	205,514	$	182,581	$	182,581	$	147,989	$	162,935
Loans originated:
Real estate mortgages		12,857		19,164		51,134		77,021		81,332
Land		561		1,544		3,246		5,083		1,177
Construction		1,269		813		6,058		3,812		3,247
Commercial business		290		154		1,890		300		794
Consumer		5,722		3,956		14,400		8,474		6,589

Total loans originated		20,699		25,631		76,728		94,690		93,139
Loans purchased		—		—		—		—		—
Deduct:
Loan principal repayments		15,446		16,695		51,906		55,872		80,036
Loan sales		953		302		1,889		4,226		28,049
Other repayments		—		—		—		—		—

Net loan activity		4,300		8,634		22,933		34,592		(14,946	)

Total loans at end of period	$	209,814	$	191,215	$	205,514	$	182,581	$	147,989

Securities. Our securities portfolio consists primarily of callable U.S. government agency bonds and

U.S. government agency mortgage-backed securities. Securities increased $43.0 million, or 116.8%, in the quarter

ended September 30, 2005 primarily as a result of our investing $60.0 million in municipal deposits. In the years

ended June 30, 2005 and June 30, 2004, our securities decreased $18.1 million and $35.7 million, respectively,

primarily as a result of our efforts to increase our loan portfolios. Our callable securities consist of U.S.

government agency bonds which contain either a one-time call option or may be callable anytime during the life of

the security.

The following table sets forth the amortized cost and fair values of our securities portfolio at the dates
indicated.


	At September 30, 2005				At June 30,
	At September 30, 2005				2005				2004				2003
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Securities available-for-sale:
U.S. League intermediate term portfolio	$	1,910	$	1,871	$	1,892	$	1,863	$	1,838	$	1,823	$	1,797	$	1,808
Callable agency bonds		27,505		27,312		5,084		5,002		7,435		7,198		19,361		19,663
Corporate debt securities		—		—		—		—		2,810		2,860		7,792		8,337
Freddie Mac common stock		27		1,572		27		1,816		27		1,762		27		1,413
Corporate common stock		—		—		—		—		165		535		—		—
Municipal bonds		960		949		1,260		1,256		1,860		1,848		955		977
Mortgage-backed securities		49,494		48,592		28,595		28,199		40,872		40,082		60,781		60,943

Total	$	79,896	$	80,296	$	36,858	$	38,136	$	55,007	$	56,108	$	90,713	$	93,141

Securities held-to-maturity:
Municipal bonds	$	265	$	265	$	265	$	265	$	669	$	669	$	761	$	761

At June 30, 2005, we had no investments in a single company or entity (other than U.S. Government-
sponsored entity securities) that had an aggregate book value in excess of 10% of our equity at June 30, 2005.

The following table sets forth the stated maturities and weighted average yields of investment securities at September 30, 2005. Weighted average
yields on tax-exempt securities are not presented on a tax equivalent basis as the amount would be immaterial. Certain mortgage-backed securities have
adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below.


	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
	(Dollars in thousands)
Securities available-for-sale:
U.S. League intermediate term portfolio	$	1,871	3.36	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,871	3.36	%
Callable agency bonds		19,856	3.85			6,725	3.84			731	3.37			—	—			27,312	3.83
Corporate debt securities
Freddie Mac common stock		1,572	2.57			—	—			—	—			—	—			1,572	2.57
Municipal bonds		409	2.50			540	3.07			—	3.43			—	—			949	2.21
Mortgage-backed securities		—	—			750	3.31			18,300	4.63			29,542	3.43			48,592	3.88

Total	$	23,708			$	8,015			$	19,031			$	29,542			$	80,296

Securities held-to-maturity:
Municipal bonds	$	—	—	%	$	—	—	%	$	265	5.86	%	$	—	—	%	$	265	5.86	%

Deposits. Our primary source of funds is our deposit accounts, which are comprised of noninterest-
bearing accounts, interest-bearing NOW accounts, money market accounts, savings accounts and certificates of
deposit. These deposits are provided primarily by individuals within our market areas. However in recent years, we
have increased our municipal deposits significantly. Deposits decreased $10.2 million, or 3.4%, for the quarter
ended September 30, 2005 primarily as a result of municipal deposit withdrawals. During the year ended June 30,
2005, our deposits increased by $71.4 million, or 31.3%, primarily as a result of increased municipal deposits
which exceeded the decrease in certificates of deposit. The increase in municipal deposits is primarily attributable
to $60.0 million in deposits received from a local municipality. Deposits decreased in the year ended June 30,
2004 by $10.0 million, or 4.2%. This decrease was primarily the result of reductions in certificates of deposit.

The following table sets forth the balances of our deposit products at the dates indicated.


	At September 30, 2005			At June 30,
	At September 30, 2005			2005			2004			2003
	(In thousands)
NOW accounts	$	131,275		$	138,742		$	48,941		$	49,474
Passbook accounts		44,827			47,294			56,845			57,013
Money market deposit accounts		8,468			8,729			6,784			6,824
Certificates of deposit		104,564			104,564			115,369			124.613

Total	$	289,134	⁽¹⁾	$	299,379	⁽²⁾	$	227,939	⁽³⁾	$	237,924	⁽⁴⁾

(1)	Includes $135.0 million in municipal deposits.

(2)	Includes $139.1 million in municipal deposits.

(3)	Includes $82.5 million in municipal deposits.

(4)	Includes $83.9 million in municipal deposits.

The following table indicates the amount of jumbo certificates of deposit by time remaining until maturity as of September 30, 2005 and June 30, 2005. Jumbo certificates of deposit require minimum deposits of $100,000.


Maturity Period	Certificates of Deposits
	(In thousands)
At September 30, 2005
Three months or less	$	9,179
Over three through six months		9,087
Over six through twelve months		19,035
Over twelve months		14,133

Total	$	51,434

At June 30, 2005
Three months or less	$	5,571
Over three through six months		8,603
Over six through twelve months		16,256
Over twelve months		20,640

Total	$	51,070

The following table sets forth the time deposits classified by rates at the dates indicated.


	At September 30, 2005		At June 30,
	At September 30, 2005		2005		2004		2003
	(In thousands)
0.00 - 1.00%	$	157	$	867	$	1,848	$	724
1.01 - 2.00%		9,899		13,739		58,115		11,017
2.01 - 3.00%		53,435		60,849		38,357		67,034
3.01 - 4.00%		32,069		20,938		9,561		24,095
4.01 - 5.00%		8,259		6,648		1,200		3,127
5.01 - 6.00%		359		377		4,086		6,878
6.01 - 7.00%		286		283		899		8,233
Over 7.00%		100		913		1,303		3,505

Total	$	104,564	$	104,614	$	115,369	$	124,613

The following table sets forth the amount and maturities of time deposits classified by rates at September
30, 2005.


	Amount Due										Total		Percent of Total Deposit Accounts
	Less Than One Year		More Than One Year to Two Years		More Than Two Years to Three Years		More Than Three Years to Four Years		More Than Four Years		Total		Percent of Total Deposit Accounts
	(Dollars in thousands)
0.00 - 1.00%	$	125	$	26	$	6	$	—	$	—	$	157	0.05	%
1.01 - 2.00%		9,108		750		38		2		—		9,898	3.42
2.01 - 3.00%		46,507		6,293		461		171		3		53,435	18.48
3.01 - 4.00%		20,022		7,401		4,320		144		182		32,069	11.09
4.01 - 5.00%		406		775		3,637		324		3,117		8,259	2.86
5.01 - 6.00%		282		1		75		—		2		360	0.12
6.01 - 7.00%		146		17		6		—		117		286	0.10
Over 7.00%		100		—		—		—		—		100	0.03

Total	$	76,696	$	15,263	$	8,543	$	641	$	3,421	$	104,564	36.15	%

The following table sets forth deposit activity for the periods indicated.


	Three Months Ended September 30,					Year Ended June 30,
	2005			2004		2005		2004			2003
	(In thousands)
Beginning balance	$	299,379		$	227,939	$	227,939	$	237,924		$	206,861
Increase (decrease) before interest credited		(12,064	)		10,572		66,854		(14,142	)		25,004
Interest credited		1,819			1,000		4,586		4,114			6,059
Net increase (decrease) in deposits		(10,246	)		11,572		71,440		(10,028	)		31,063

Ending balance	$	289,134		$	239,511	$	299,379	$	227,939		$	237,924

Borrowings. We utilize borrowings from the Federal Home Loan Bank of Indianapolis to supplement
our supply of funds for loans and investments.


	Three Months Ended September 30,		Year Ended June 30,
	2005	2004	2005			2004			2003
	(Dollars in thousands)
Maximum amount of advances outstanding at any month end during the period:
FHLB advances	—	—	$	10,250		$	328		$	6,394
Average advances outstanding during the period:
FHLB advances	—	—		2,979			246			1,024
Weighted average interest rate during the period:
FHLB advances	—	—		2.39	%		6.86	%		3.48	%
Balance outstanding at end of period:
FHLB advances	—	—	$	—		$	—		$	328
Weighted average interest rate at end of period:
FHLB advances	—	—		—	%		—	%		6.86	%

Results of Operations for the Three Months Ended September 30, 2005 and 2004

Overview.


	2005			2004			% Change
	(Dollars in thousands)
Net income	$	561		$	530		5.85	%
Return on average assets		0.69	%		0.80	%	(13.75	)
Return on average equity		7.50	%		7.52	%	(0.27	)
Average equity to average assets		9.26	%		10.28	%	(9.92	)

Net income increased $31,000, or 5.8%, for the quarter ended September 30, 2005 compared to the

quarter ended September 30, 2004. Factors that contributed to the increase in net income were an increase in net

interest income of $100,000 due primarily to an increase in interest earning assets of $57.3 million from $249.9

million in September 2004 to $307.3 million in 2005, as compared to an increase in interest-bearing liabilities of

$46.9 million from $243,880 in September 2004 to $290,825 in September 2005, an increase in other income in

the amount of $40,000 and an increase in other expenses in the amount of $67,000.

Net Interest Income.

Net interest income increased $100,000, or 4.5%, to $2.3 million for the quarter ended September 30,

2005. Total interest income increased $920,000, or 28.7%, to $4.1 million for the quarter ended September 30,

2005, as both interest income on loans increased and interest income on securities and other interest-earning assets

increased. Interest income on loans increased 16.6% to $3.2 million between the periods nonwithstanding a slight

decrease in the average yield on the loan portfolio due to an increase in the average balance of loans in the quarter.

The average yield on the loan portfolio decreased as a result of the continuation of the low interest rate

environment that began in 2001. Interest income on securities and other interest-earning assets increased 94.2% to

$1.0 million, as both average balances and average yields increased.

Total interest expense increased $820,000, or 82.1%, to $1.8 million for the quarter ended September 30,

2005 due to an 86 basis point increase in average deposit costs and a $46.9 million increase in average balances.

The average balance of interest-bearing deposits increased 19.2 % to $290.8 million, primarily as a result of an

increase in municipal deposits.

Average Balance and Yields. The following table presents information regarding average balances of

assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning

assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average

yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the

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. 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.


	At September 30, 2005		Three Months Ended September 30,
	At September 30, 2005		2005						2004
	Yield/ Cost		Average Balance		Interest and Dividends		Yield/ Cost		Average Balance		Interest and Dividends		Yield/ Cost
			(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	6.06	%	$	203,655	$	3,159	6.20	%	$	174,076	$	2,710	6.23	%
Investment securities	3.84			75,917		645	3.40			66,765		466	2.79
Other interest-earning assets	3.65			27,679		326	4.71			9,079		34	1.50

Total interest-earning assets	5.29			307,251		4,130	5.38			249,920		3,210	5.14
Noninterest-earning assets				15,710						24,395

Total assets			$	322,961					$	274,315

Liabilities and equity:
Interest-bearing liabilities:
NOW and money market deposit accounts	2.43		$	140,978		868	2.46		$	70,162		191	1.09
Passbook accounts	0.74			45,531		199	1.75			58,980		138	0.94
Certificates of deposit	2.96			104,316		752	2.88			114,738		670	2.34

Total interest-bearing deposits	2.35			290,825		1,819	2.50			243,880		999	1.64

FHLB advances				—		—	—			—		—	—

Total interest-bearing liabilities				—		—	—			—		—	—

Noninterest-bearing liabilities				2,203						2,237

Total liabilities				293,028						246,117
Retained earnings				29,339						27,291
Accumulated comprehensive income				594						907

Total equity				29,933						28,198

Total liabilities and retained earnings			$	322,961					$	274,315

Net interest income					$	2,311					$	2,211

Interest rate spread	2.94	%					2.88	%					3.50	%
Net interest margin							3.01	%					3.54	%
Average interest-earning assets to average interest-bearing liabilities							105.65	%					102.48	%

Rate/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.


	Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
	Increase (Decrease) Due to
	Volume		Rate			Net
	(In thousands)
Interest and dividend income:
Loans receivable	$	458	$	(9	)	$	449
Investment securities		69		110			179
Other interest-earning assets		246		46			292

Total interest-earning assets		773		147			920
Interest expense:
Deposits		220		600			820
FHLB advances		—		—			—

Total interest-bearing liabilities		220		600			820

Net change in interest income	$	553	$	(453	)	$	100

Provision for Loan Losses. The provision for loan losses was $30,000 for the three months ended

September 30, 2005 and September 30, 2004.

Noninterest Income. The following table shows the components of noninterest income for the three

months ended September 30, 2005 and 2004.


	Three Months Ended September 30,				% Change
	2005		2004		% Change
	(Dollars in thousands)
Service charges	$	228	$	200	14.0	%
Gain on sale of loans		17		9	88.9
Gain on sale of investments		—		16	(100.0	)
Income from Bank Owned Life Insurance		56		56	—
Other		59		39	51.3

Total	$	360	$	320	12.5	%

Noninterest income increased 12.5% to $360,000 in the quarter ended September 30, 2005 as compared to

the same quarter in 2004 due primarily to increases in income from service charges, gain on the sale of loans and

investments and other noninterest income.

Noninterest Expense. The following table shows the components of noninterest expense and the

percentage changes for the three months ended September 30, 2005 and 2004.


	Three Months Ended September 30,
	2005		2004		% Change
	(Dollars in thousands)
Compensation and employee benefits	$	1,014	$	1,035	(2.0	)%
Premises and occupancy expense		268		237	13.1
Deposit insurance premium		7		8	(12.5	)
Advertising expense		87		56	37.5
Data processing expense		61		77	(20.8	)
ATM service fees		73		58	1.7
Other operating expenses		247		219	12.3

Total	$	1,757	$	1,690	4.0

Total noninterest expense increased by 4.0% to $1.8 million in the quarter ended September 30, 2005 due

primarily to increased premises and occupancy costs associated with the planned new branches, advertising

expense and other noninterest expenses. Advertising expenses increased primarily due to an advertising campaign

relating to our home equity line of credit products.

Income Taxes. Income tax expense for the quarter ended September 30, 2005 was $281,000 compared

to $358,000 for the quarter ended September 30, 2004 due to the decrease in income before taxes.

Results of Operations for the Years Ended June 30, 2005, 2004 and 2003

Overview.


	2005			2004			2003			% Change 2005/2004		% Change 2004/2003
	(Dollars in thousands)
Net income	$	2,045		$	2,156		$	2,815		(5.2	)%	(23.4	)%
Return on average assets		0.75	%		0.82	%		1.12	%	(8.5	)	(26.8	)
Return on average equity		7.02	%		7.99	%		11.42	%	(12.1	)	(30.0	)
Average equity to average assets		10.64	%		10.31	%		9.83	%	3.2		4.9

2005 v. 2004. Net income decreased $111,000, or 5.1%, for the year ended June 30, 2005 compared to

the year ended June 30, 2004. Net interest income increased and was offset by the increase in provision for loan

losses from $120,000 in 2004 to $857,000 in 2005.

2004 v. 2003. Net income decreased $659,000, or 23.4%, for the year ended June 30, 2004 compared to

the year ended June 30, 2003. The decrease in net income was primarily the result of the pre-tax gain of $1.2

million realized from the sale of the Bank’s former main office in 2003.

Net Interest Income.

2005 v. 2004. Net interest income increased by $461,000, or 5.5%, to $8.8 million in the year ended June

30, 2005. Total interest income increased $982,000, or 7.9%, to $13.5 million for the year ended June 30, 2005, as

interest income on loans increased while interest income on securities decreased and interest income on other

assets increased. Interest income on loans increased 18.1% to $11.5 million between the periods due to an increase

in average balances while average yields remained nearly the same. Interest income on securities decreased 28.6%

to $2.0 million between the periods due to a decrease in average yield and a decrease in average balance as funds

were deployed into the loan portfolio.

Total interest expense increased $521,000 or 12.6% to $4.7 million for the year ended June 30, 2005, due

primarily to a 14 basis point increase in average deposit costs and a $10.9 million increase in average balances.

The increase in average balances was caused by a $15.1 million increase in municipal deposits and a $9.3 million

decrease in certificates of deposit.

2004 v. 2003. Net interest income increased by $434,000, or 5.5%, to $8.4 million in the year ended June

30, 2004. Total interest income decreased $1.5 million, or 10.9%, to $12.5 million for the year ended June 30,

2003 due to a decrease in interest income on loans. Interest income on loans decreased 10.6% to $9.4 million and

interest income on securities decreased 11.9% to $2.7 million between the periods as decreases in yields more than

offset the increases in both portfolio balances. Total interest expense decreased $2.0 million, or 32.1%, to $4.2

million for the year ended June 30, 2004 due primarily to a reduction in interest rates that more than offset the

growth in deposits. During this period, our certificates of deposit, NOW and money market deposit accounts and

passbook accounts experienced decreases in average costs by 1.10%, 0.40% and 0.74%, respectively.

Average Balances and Yields. The following table presents information regarding average balances

of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning

assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting

annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income

or expense by the 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. 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.


	Year Ended June 30,
	2005						2004						2003
	Average Balance		Interest and Dividends		Yield/ Cost		Average Balance		Interest and Dividends		Yield/ Cost		Average Balance		Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans	$	188,735	$	11,507	6.10	%	$	159,524	$	9,740	6.11	%	$	154,307	$	10,891	7.06	%
Investment securities		49,041		1,483	3.03			81,279		2,643	3.25			73,282		2,943	4.02
Other interest-earning assets		18,614		480	3.77			8,258		105	1.27			11,484		177	1.54

Total interest-earning assets		256,390		13,470	5.25			249,061	$	12,488	5.01			239,073		14,011	5.86

Noninterest-earning assets		17,345						12,513						11,456

Total assets	$	273,735					$	261,574					$	260,529

Liabilities and equity:
Interest-bearing liabilities:
NOW and money market deposit accounts	$	71,541		1,078	1.51		$	56,473		440	0.78			43,966		517	1.18
Passbook accounts		57,957		774	1.34			55,443		468	0.84			54,160		856	1.58
Certificates of deposit		110,232		2,733	2.48			119,607		3,207	2.68			123,871		4,686	3.78

Total interest-bearing deposits		239,730		4,585	1.91			231,523		4,115	1.78			221,997		6,059	2.73

FHLB advances		2,979		70	2.35			246		19	7.72			1,040		32	3.08

Total interest-bearing liabilities		242,709		4,655	1.92			231,769		4,134	1.78			223,037		6,091	2.73

Noninterest-bearing liabilities		1,896						2,835						2,856

Total liabilities		244,605						234,604						225,893
Retained earnings		28,024						25,793						23,179
Accumulated comprehensive income		1,106						1,177						1,457

Total equity	$	29,130					$	26,970					$	24,636

Total liabilities and equity	$	273,735					$	261,574					$	250,529

Net interest income			$	8,815					$	8,354					$	7,920

Interest rate spread					3.33	%					3.23	%					3.13
Net interest margin					3.44	%					3.35	%					3.31
Average interest-earning assets to average interest-bearing liabilities					105.64	%					107.46	%					107.19	%

Rate/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.


	Year Ended June 30, 2005 Compared to 2004
	Increase (Decrease) Due to						Net
	Volume			Rate			Net
	(In thousands)
Interest and dividend income:
Loans	$	1,781		$	(14	)	$	1,767
Investment securities		(986	)		(174	)		(1,160	)
Other interest-earning assets		206			169			375

Total interest-earning assets		1,001			(19	)		982

Interest expense:
Deposits		148			322			470
FHLB advances		54			(3	)		51

Total interest-bearing liabilities		202			319			521

Net change in interest income	$	799		$	(338	)	$	461

Provision for Loan Losses.

2005 v. 2004. The provision for loan losses was $857,000 in 2005 compared to $120,000 in 2004. The

provision for loan losses increased in 2005 primarily as a result of increases in the portfolios of nonresidential real

estate and land loans, multi-family loans, construction loans, commercial business loans and consumer loans, all of

which are generally considered to have greater inherent credit risk than one- to four-family mortgage loans. As a

result of the increases in these portfolios, one- to four-family mortgage loans to as a percentage of total loans

decreased. Increases in non-performing loans and net charge-offs during 2005 also contributed to the increase in

the provision for loan losses.

2004 v. 2003. The provision for loan losses was $120,000 in 2004 compared to $620,000 in 2003. The

provision for loan losses in 2004 decreased due to lower net charge-offs in 2004 compared to 2003.

An analysis of the changes in the allowance for loan losses is presented under “Risk

Management—Analysis and Determination of the Allowance for Loan Losses.”

NonInterest Income. The following table shows the components of noninterest income for the years

ended June 30, 2005, 2004 and 2003.


	Year Ended June 30,
	2005		2004		2003
	(In thousands)
Service charges	$	795	$	742	$	666
Gain on sale of loans		44		90		853
Gain on sale of property and equipment		—		—		1,207
Gain (loss) on sale of investments		312		121		(229	)
Income from Bank Owned Life Insurance		222		248		270
Other		335		172		166

Total	$	1,708	$	1,373	$	2,933

During the year ended June 30, 2005, noninterest income increased $335,000, or 24.4%, due primarily to

increases in service charges, gain on the sale of investments and other noninterest income.

NonInterest Expense. The following table shows the components of noninterest expense and the

percentage changes for the years ended June 30, 2005, 2004 and 2003.


	2005		2004		2003		% Change 2005/2004		% Change 2004/2003
	(Dollars in thousands)
Compensation and employee benefits	$	4,236	$	3,833	$	3,550	10.5	%	8.0	%
Premises and occupancy expense		1,009		974		780	3.6		24.9
Deposit insurance premium		33		36		35	(8.3	)	2.9
Advertising expense		258		179		162	44.1		10.5
Data processing expense		277		249		282	11.2		(11.7	)
ATM service fees		260		205		183	26.8		12.0
Other operating expenses		905		776		768	16.6		1.0

Total	$	6,978	$	6,252	$	5,760	11.6		8.5

2005 v. 2004. In the year ended June 30, 2005, noninterest expenses increased by 11.6%, to $7.0 million,

due primarily to increases in compensation and employee benefits, premises and occupancy expense, advertising

expense, data processing expense, ATM service fees and other operating expense. The largest increase was in

salaries and employee benefits as a result of the increase in employees due to our branch expansion and market rate

adjustments.

2004 v. 2003. In the year ended June 30, 2004, noninterest expenses increased by 8.5%, to $6.3 million,

due primarily to increases in compensation and employee benefits, premises and occupancy expense, advertising

expense, data processing expense, ATM service fees and other operating expense. The largest increase was in

salaries and employee benefits as a result of the increase in employees due to an increase in deposit and lending

relationships and market rate adjustments.

Income Taxes.

2005 v. 2004. Income tax expense for the year ended June 30, 2005 was $643,000 compared to $1.2

million for the year ended June 30, 2004. Income taxes decreased due to the decrease in income before taxes and

the utilization of an Historic Tax Credit on our main office building.

2004 v. 2003. Income tax expense for the year ended June 30, 2004 was $1.2 million as compared to $1.7

million for the year ended June 30, 2003. Income taxes decreased due to the decrease in income before taxes.

Risk Management

Overview. Managing risk is an essential part of successfully managing a financial institution. Our most

prominent risk exposures are credit risk, interest rate risk and market risk. Credit risk is the risk of not collecting

the interest and/or the principal balance of a loan or investment when it is due. Interest rate risk is the potential

reduction of net interest income as a result of changes in interest rates. Market risk arises from fluctuations in

interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities,

that are accounted for on a mark-to-market basis. Other risks that we face are operational risks, liquidity risks and

reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors,

technology and disaster recovery. Liquidity risk is the possible inability to fund obligations to depositors, lenders or

borrowers. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in

our customer base or revenue.

Credit Risk Management. Our strategy for credit risk management focuses on having well-defined

credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. This

strategy also emphasizes the origination of one- to four-family mortgage loans, which typically have lower default

rates than other types of loans and are secured by collateral that generally tends to appreciate in value.

When a borrower fails to make a required loan payment, we take a number of steps to attempt to have the

borrower cure the delinquency and restore the loan to current status. When the loan becomes 15 days past due, a

late charge notice is generated and sent to the borrower and phone calls are made. If payment is not then received

by the 30th day of delinquency, a further notification is sent to the borrower. If no successful workout can be

achieved, after a loan becomes 90 days delinquent, we may commence foreclosure or other legal proceedings. If a

foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure

sale, the real property securing the loan generally is sold at foreclosure. We may consider loan workout

arrangements with certain borrowers under certain circumstances.

Management reports to the Board of Directors monthly regarding the amount of loans delinquent more

than 30 days, all loans in foreclosure and all foreclosed and repossessed property that we own.

Analysis of Nonperforming and Classified Assets. We consider repossessed assets and loans that

are 90 days or more past due to be nonperforming assets. Loans are generally placed on nonaccrual status when

they become 90 days delinquent at which time the accrual of interest ceases and the allowance for any uncollectible

accrued interest is established and charged against operations. Typically, payments received on a nonaccrual loan

are applied to the outstanding principal and interest as determined at the time of collection of the loan.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as

foreclosed assets until it is sold. When property is acquired, it is initially recorded at the lower of its cost, or

market, less estimate selling expenses. Holding costs and declines in fair value after acquisition of the property

result in charges against income.

The following table provides information with respect to our nonperforming assets at the dates indicated.

We did not have any troubled debt restructurings at the dates presented.


	At September 30, 2005			At June 30,
	At September 30, 2005			2005			2004			2003			2002			2001
	(Dollars in thousands)
Nonaccrual loans:
Residential real estate:
One- to four-family	$	841		$	597		$	891		$	648		$	517		$	770
Nonresidential real estate and land		550			532			159			—			—			—
Consumer and other loans		137			350			72			44			66			39

Total		1,528			1,479			1,122			692			583			809

Accruing loans past due 90 days or more:
Residential real estate:
One- to four-family		—			—			—			15			224			185
Nonresidential real estate and land		—			—			—			—			—			365

Total		—			—			—			15			224			550

Total of nonaccrual loans and accruing loans 90 days or more past due		1,528			1,479			1,122			707			807			1,359

Real estate owned		13			80			80			—			—			33
Other nonperforming assets		—			—			165			165			150			208

Total nonperforming assets	$	1,541		$	1,559		$	1,367		$	872		$	957		$	1,600

Total nonperforming loans to total loans		0.73	%		0.72	%		0.61	%		0.47	%		0.36	%		0.49	%
Total nonperforming loans to total assets		0.48			0.45			0.44			0.26			0.25			0.38
Total nonperforming assets to total assets		0.48			0.47			0.53			0.33			0.41			0.75

Interest income that would have been recorded for the quarter ended September 30, 2005 and for the year

ended June 30, 2005 had nonaccruing loans been current according to their original terms was, in each case, not

material. No interest related to nonaccrual loans was included in interest income for the quarter ended September

30, 2005 and for the year ended June 30, 2005.

Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office

of Thrift Supervision has the authority to identify problem assets and, if appropriate, require them to be classified.

There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have

one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if

the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional

characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts,

conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered

uncollectible and of such little value that continuance as an asset of the institution is not warranted. The

regulations also provide for a “special mention” category, described as assets which do not currently expose us to a

sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses

deserving our close attention. When we classify an asset as special mention, substandard or doubtful, we establish a

specific allowance for loan losses. If we classify an asset as loss, we allocate an amount equal to 100% of the portion of the

asset classified loss.

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


	At September 30, 2005		At June 30,
	At September 30, 2005		2005		2004
	(In thousands)
Special mention assets	$	1,425	$	1,353	$	3,411
Substandard assets		2,969		3,976		4,234
Doubtful assets		7		13		16
Loss assets		421		280		75

Total classified assets	$	4,822	$	5,622	$	7,736

Other than disclosed in the above tables, there are no other loans at September 30, 2005 that management

has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

Delinquencies. The following table provides information about delinquencies in our loan portfolio at

the dates indicated.


	At September 30, 2005				At June 30,
	At September 30, 2005				2005				2004				2003
	30-59 Days Past Due		60-89 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		30-59 Days Past Due		60-89 Days Past Due
	(In thousands)
Residential real estate:
One- to four-family	$	977	$	776	$	983	$	860	$	695	$	399	$	703	$	725
Multi-family		—		—		66		—		—		—		—		73
Nonresidential real estate and land		113		52		168		15		736		129		—		—
Consumer and other loans		288		26		704		49		124		73		47		40

Total	$	1,378	$	854	$	1,921	$	924	$	1,555	$	601	$	750	$	838

Analysis and Determination of the Allowance for Loan Losses. The allowance for loan losses

is a valuation allowance for probable credit losses in the loan portfolio. We evaluate the need to establish

allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for

loan losses is charged to earnings. The recommendations for increases or decreases to the allowance are presented

by management to the Board of Directors.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a

specific allowance on identified problem loans; and (2) a general valuation allowance on the remainder of the loan

portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for

loan losses is available for the entire portfolio.

Specific Allowance Required for Identified Problem Loans. We establish an allowance on

certain identified problem loans based on such factors as: (1) the strength of the customer’s personal or business

cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value

of collateral; (5) the strength of our collateral position; (6) the estimated cost to sell the collateral; and (7) the

borrower’s effort to cure the delinquency.

General Valuation Allowance on the Remainder of the Loan Portfolio. We establish a general

allowance for loans that are not delinquent to recognize the inherent losses associated with lending activities. This

general valuation allowance is determined by segregating the loans by loan category and assigning percentages to

each category. The percentages are adjusted for significant factors that, in management’s judgment, affect the

collectibility of the portfolio as of the evaluation date. These significant factors may include changes in existing

general economic and business conditions affecting our primary lending areas and the national economy, staff

lending experience, recent loss experience in particular segments of the portfolio, specific reserve and classified

asset trends, delinquency trends and risk rating trends. These loss factors are subject to ongoing evaluation to

ensure their relevance in the current economic environment.

As a result of our systematic analysis of the adequacy of the allowance for loan losses, the loss factors we

presently use to determine the reserve level were updated in 2005 based on various risk factors such as trends in

underperforming loans, trends and concentrations in loans and loan volume, economic trends in our market area,

particularly the impact of the gaming and tourism industry on the economy of our market area, the effect of which

has become significant in recent periods. In order to reflect trends in the composition of our loan portfolio and in

our recent historical loan loss experience, we increased the allowance percentage on certain loan categories which

demonstrated a higher risk of loss and decreased the allowance percentage on certain loan categories which

demonstrated a lower risk of loss. The update to the allowance percentages resulted in a decrease in the amount of

the allowance allocated to loans secured by one- to four-family residential properties and an increase in the amount

of the allowance allocated to loans secured by multi-family real estate, nonresidential real estate and loans,

commercial business loans and consumer loans.

We also identify loans that may need to be charged off as a loss by reviewing all delinquent loans,

classified loans and other loans that management may have concerns about collectibility. For individually

reviewed loans, the borrower’s inability to make payments under the terms of the loan or a shortfall in collateral

value would result in our allocating a portion of the allowance to the loan that was impaired.

At September 30, 2005, our allowance for loan losses represented 1.09% of total gross loans and 150.1%

of nonperforming loans. At September 30, 2005 and June 30, 2005, the allowance for loan losses was $2.3

million.

At June 30, 2005, our allowance for loan losses represented 1.10% of total gross loans and 153.2% of

nonperforming loans. The allowance for loan losses increased $716,000 to $2.3 million at June 30, 2005 from

$1.6 million at June 30, 2004 due to the provision for loan losses of $857,000, partially offset by net charge-offs of

$141,000. The provision for loan losses in 2005 primarily reflects the application of the updated allowance factor

percentages to the increases in the portfolios of nonresidential real estate and land loans, commercial business

loans, construction loans and multi-family real estate loans, all of which have an inherently higher risk of loss

compared to one- to four-family mortgage loans.

At June 30, 2004, our allowance for loan losses represented 0.85% of total gross loans and 138.15% of

nonperforming loans. The allowance for loan losses increased from $1.5 million at June 30, 2003 to $1.6 million

at June 30, 2004 due to the provision for loan losses of $120,000, partially offset by net charge-offs of $54,000.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates

indicated.


	At September 30,						At June 30,
	2005						2005						2004
	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		Amount		% of Allowance to Total Allowance		% of Loans in Category to Total Loans
	(Dollars in thousands)
Residential real estate	$	931	40.58	%	59.4	%	$	841	37.11	%	59.6	%	$	996	64.26	%	64.9	%
Nonresidential real estate and land		1,101	48.00		28.2			1,102	48.63		28.9			344	22.19		26.4
Commercial		52	2.27		1.8			52	2.30		2.4			22	1.42		1.1
Consumer		210	9.15		8.5			271	11.96		6.2			188	12.13		6.9
Construction		—	—		2.1			—	—		2.9			—	—		0.7

Total allowance for loan losses		2,294	100.00	%	100.0	%		2,266	100.00	%	100.0	%		1,550	100.00	%	100.0	%

Total loans	$	209,814					$	205,514					$	182,581


	At June 30,
	2003						2002						2001
	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		Amount		% of Allowance to Total Allowance		% of Loans in Category to Total Loans
	(Dollars in thousands)
Residential real estate	$	997	67.18	%	69.9	%	$	532	54.62	%	72.9	%	$	689	63.15	%	76.2	%
Nonresidential real estate and land		274	18.46		20.5			246	25.26		16.8			199	18.24		14.7
Commercial		21	1.42		1.4			21	2.16		1.3			22	2.02		1.4
Consumer		192	12.94		7.1			175	17.97		6.3			181	16.59		6.5
Construction		—	—		1.1			—	—		2.7			—	—		1.2

Total allowance for loan losses		1,484	100.00	%	100.0	%		974	100.00	%	100.0	%		1,091	100.00	%	100.0	%

Total loans	$	147,989					$	162,935					$	165,529

Although we believe that we use the best information available to establish the allowance for loan losses,

future adjustments to the allowance for loan losses may be necessary and our results of operations could be

adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

Furthermore, while we believe we have established our allowance for loan losses in conformity with U.S. generally

accepted accounting principles, there can be no assurance that the Office of Thrift Supervision, in reviewing our

loan portfolio, will not request us to increase our allowance for loan losses. The Office of Thrift Supervision may

require us to increase our allowance for loan losses based on judgments different from ours. In addition, because

future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that

increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above.

Any material increase in the allowance for loan losses may adversely affect our financial condition and results of

operations.

Analysis of Loan Loss Experience. The following table sets forth an analysis of the allowance for

loan losses for the periods indicated.


	Three Months Ended September 30,						Year Ended June 30,
	2005			2004			2005			2004			2003			2002			2001
	(Dollars in thousands)
Allowance at beginning of period	$	2,266		$	1,550		$	1,550		$	1,484		$	974		$	1,051		$	1,112
Provision for loan losses		30			30			857			120			620			—			—
Charge offs:
Real estate		13			—			47			42			71			30			17
Nonresidential real estate and land		—			—			1			—			—			76			—
Consumer and other loans		9			40			128			34			42			31			20

Total charge-offs		22			40			176			76			113			137			37

Recoveries:
Real estate		9			11			—			14			—			25			—
Consumer and other loans		11			6			35			8			3			34			16

Total recoveries		20			17			35			22			3			59			16

Net charge-offs		(2	)		(23	)		(141	)		(54	)		(110	)		(78	)		(21	)

Allowance at end of period	$	2,294		$	1,557		$	2,266		$	1,550		$	1,484		$	973		$	1,091

Allowance to nonperforming loans		150.13	%		102.03	%		153.21	%		138.15	%		209.90	%		120.57	%		77.34	%
Allowance to total loans outstanding at the end of the period		1.09	%		0.82	%		1.10	%		0.85	%		1.00	%		0.60	%		0.63	%
Net charge-offs (recoveries) to average loans outstanding during the period		—	%		0.01	%		0.07	%		0.03	%		0.07	%		0.05	%		0.04	%

Interest Rate Risk Management. We manage the interest rate sensitivity of our interest-bearing

liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate

environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans

because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our

earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of

our earnings, we have sought to improve the match between asset and liability maturities and rates, while

maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes: adjusting

the maturities of borrowings; adjusting the investment portfolio mix and duration; and generally selling in the

secondary market newly originated conforming fixed-rate 15-, 20- and 30-year one- to four-family residential real

estate loans and available-for-sale securities. We currently do not participate in hedging programs, interest rate

swaps or other activities involving the use of derivative financial instruments.

We have an Asset/Liability Committee, which includes members of management and Board members, to

communicate, coordinate and control all aspects involving asset/liability management. The committee establishes

and monitors 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.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on

net interest income and net income.

Net Portfolio Value Analysis. We use a net portfolio value analyses prepared by the Office of Thrift

Supervision 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. 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.

The following table, which is based on information that we provide to the Office of Thrift Supervision,

presents the change in our net portfolio value at September 30, 2005 that would occur in the event of an immediate

change in interest rates based on Office of Thrift Supervision assumptions, with no effect given to any steps that we

might take to counteract that change.


	Net Portfolio Value (Dollars in thousands)							Net Portfolio Value as % of Portfolio Value of Assets
Basis Point (“bp”) Change in Rates	Amount		Change			% Change		NPV Ratio		Change (bp)
300	$	32,168	$	(10,991	)	(25.0	)%	9.89	%	(289	)bp
200		36,223		(6,935	)	(16.0	)	10.98		(180	)
100		39,930		(3,228	)	(7.0	)	11.96		(82	)
0		43,159		—		—		12.78		—
(100)		45,346		2,187		5.0		13.32		54
(200)		45,850		2,691		6.0		13.41		63

The Office of Thrift Supervision 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.

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.

We regularly adjust our investments in liquid assets based upon our assessment of: (1) expected loan

demands; (2) expected deposit flows, in particular municipal deposit flows; (3) yields available on interest-earning

deposits and securities; and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating,

financing, lending and investing activities during any given period. Cash and cash equivalents totaled $18.3

million and $76.3 million at September 30, 2005 and June 30, 2005, respectively. Securities classified as available-

for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $2.8 million

and $6.1 million at September 30, 2005 and June 30, 2005, respectively. Total securities classified as available-for-

sale were $80.3 million and $38.1 million at September 30, 2005 and June 30, 2005, respectively. In addition, at

June 30, 2005, we had the ability to borrow a total of approximately $85 million from the Federal Home Loan

Bank of Indianapolis.

At September 30, 2005 and June 30, 2005, we had $23.8 million and $19.9 million in loan commitments

outstanding, respectively. At September 30, 2005, this consisted of $9.7 million of mortgage loan commitments,

$12.9 million in unused home equity lines of credit and $1.2 million in commercial lines of credit. At September

30, 2005 we also had $3.2 million of letters of credit outstanding compared to $2.0 million at June 30, 2005. At

June 30, 2005, we had $6.7 million in mortgage loan commitments, $12.1 million in unused home equity lines of

credit and $1.1 million in commercial lines of credit. Certificates of deposit due within one year of September 30,

2005 and June 30, 2005 totaled $76.7 million and $69.3 million, respectively. This represented 73.3% and 66.3%

of certificates of deposit at September 30, 2005 and June 30, 2005, respectively. We believe the large percentage of

certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long

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 funds, including other certificates 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 certificates of deposit due on or before June 30, 2006. We believe, however, based on past experience,

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.

The following table presents certain of our contractual obligations as of September 30, 2005 and June 30,

2005.


			Payments Due by period
Contractual Obligations	Total		Less than One Year		One to Three Years		Three to Five Years		More Than 5 Years
	(In thousands)
At September 30, 2005
Long-term debt obligations	$	—	$	—	$	—	$	—	$	—
Operating lease obligations		77,203		45,040		32,163		—		—
Other long-term liabilities reflected on the balance sheet		—		—		—		—		—

Total	$	77,203	$	45,040	$	32,163	$	—	$	—

At June 30, 2005
Long-term debt obligations	$	—	$	—	$	—	$	—	$	—
Operating lease obligations		62,313		24,120		38,193		—		—
Other long-term liabilities reflected on the balance sheet		—		—		—		—		—

Total	$	62,313	$	24,120	$	38,193	$	—	$	—

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.

The following table presents our primary investing and financing activities during the periods indicated.


	Three Months Ended September 30, 2005			Year Ended June 30,
	Three Months Ended September 30, 2005			2005			2004
	(In thousands)
Investing activities:
Loans disbursed or closed	$	(20,699	)	$	(76,728	)	$	(94,690	)
Loan principal repayments		15,443			51,906			55,872
Proceeds from maturities and principal repayments of securities		4,096			11,711			26,233
Proceeds from sales of securities available- for-sale		—			6,911			18,760
Purchases of securities		(47,158	)		(128	)		(4,145	)
Financing activities:
Increase (decrease) in deposits		(10,245	)		71,440			(9,969	)
Increase (decrease) in FHLB advances		—			—			(328	)

Capital Management. As a mutual savings bank, we have managed our capital to maintain strong

protection for depositors and creditors. We are subject to various regulatory capital requirements administered by

the Office of Thrift Supervision, 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, 2005 and June 30, 2005, 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,” “Regulatory

Capital Compliance” and the notes to the consolidated financial statements included in this prospectus.

This offering is expected to increase our consolidated equity by $26.4 million to $56.1 million at the

maximum of the offering. See “Capitalization.” Following completion of this offering, we also will manage our

capital for maximum stockholder benefit. The capital from the offering will significantly increase our liquidity and

capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are

used for general corporate purposes, including the funding of lending activities. Our financial condition and results

of operations are expected to be enhanced by the capital from the offering, resulting in increased net interest-

earning assets and net income. However, the large increase in equity resulting from the capital raised in the

offering will, initially, have an adverse impact on our return on equity. Following the offering, we may use capital

management tools such as cash dividends and common share repurchases. However, under Office of Thrift

Supervision regulations, we will not be allowed to repurchase any shares during the first year following the

offering, except to fund the restricted stock awards under the equity incentive plan, unless extraordinary

circumstances exist and we receive regulatory approval.

Off-Balance Sheet Arrangements. In the 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. For information about our loan commitments and unused

lines of credit, see note 11 of the notes to the consolidated financial statements. We currently have no plans to

engage in hedging activities in the future.

For the years ended June 30, 2005 and June 30, 2004 and as of the three months ended September 30,

2005, 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.

Impact of Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R,

“Share-Based Payment,” which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” and

supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This statement will require that all

share-based payments to employees, including grants of employee stock options, be recognized as compensation

costs in the financial statements based on their fair values. The effective date of this statement was delayed until

fiscal years beginning after June 15, 2005. We will adopt this standard as required, and management has not

calculated the effect on our financial statements as we have not adopted the employee stock ownership plan.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets, an amendment of

APB Opinion No. 29,” which eliminates the exception from fair value measurement for non-monetary exchanges

of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do

not have commercial substance. The statement defines a non-monetary exchange with commercial substance as one

in which the future cash flows of an entity are expected to change significantly as a result of the exchange. SFAS

No. 153 is effective for fiscal years beginning after June 15, 2005. The Bank will adopt this statement as required,

and management does not believe the adoption will have a material effect on its results of operations or financial

position.

In March 2005, the FASB issued FASB Staff Position (“FSP”) FIN 46(R)-5 “Implicit Variable Interests

under FASB Interpretation No. 46, Consolidation of Variable Interest Entities.” FSP FIN 46(R)-5 provides

guidance for a reporting enterprise that holds an implicit variable interest in a variable interest entity (“VIE”) and

is also a related party to other variable interest holders. This guidance requires that if the aggregate variable

interests held by the reporting enterprise and its related parties would, if held by a single party, identify that party

as the primary beneficiary, then the party within the related party group that is most closely associated with the

VIE is the primary beneficiary. The effective date of FSP FIN 46(R)-5 is the first reporting period ending after

December 15, 2005 with early application permitted for periods for which financial statements have not been

issued. The Bank does not believe that implementation of this FSP will have a material effect on its results of

operations or financial position as it does not have any Variable Interest Entities.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” which

establishes, unless impracticable, retrospective application as the required method for reporting a change in

accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting

principle. The statement provides guidance for determining whether retrospective application of a change in

accounting principle is impracticable. The statement also addresses the reporting of a correction of error by

restating previously issued financial statements. SFAS No. 154 is effective for accounting changes and corrections

of errors made in fiscal years beginning after December 15, 2005. The Bank will adopt this statement as required,

and management does not believe the adoption will have a material effect on its results of operations or financial

position.

Effect of Inflation and Changing Prices

The financial statements and related financial data presented in this prospectus have been prepared in

accordance with U.S. generally accepted accounting principles, which require the measurement of financial

position and operating results in terms of historical dollars without considering the change in the relative

purchasing power of money over time due to inflation. The primary impact of inflation on our operations is

reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a

financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on

a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in

the same direction or to the same extent as the prices of goods and services.

Our Management

Directors

The initial Board of Directors of United Community Bancorp and United Community MHC will consist of

the directors of United Community Bank who adopted the plan of reorganization and stock issuance and who

continue to be directors of United Community Bank at the time of the reorganization. The Board of Directors of

United Community Bancorp and United Community MHC will be elected to terms of three years, one-third of

whom will be elected annually.

The Board of Directors of United Community Bank is presently composed of thirteen members who are

elected for terms of three years, approximately one-third of whom are elected annually. Messrs. Gehring,

Strzynski, Meyer, Sprecher, Weismiller, Miller, Nanz, Hacker, Eugene Seitz and George Seitz are independent

under the current listing standards of the Nasdaq Stock Market. Information regarding the directors is provided

below. Unless otherwise stated, each person has held his or her current occupation for the last five years. Ages

presented are as of September 30, 2005.

The following directors have terms ending in 2006:

William S. Gehring is a retired postmaster in Lawrenceburg, Indiana where he resides. Age 77. Director

since 1981 (including term as a director of Perpetual Federal Savings and Loan Association).

Jerry W. Hacker has served as the owner and President of Dee’s Delights, Inc., a miniatures wholesaling

company, since 1983. Age 62. Director since 1987 (including term as a director of Perpetual Federal Savings and

Loan Association).

Anthony C. Meyer has been a senior judge for the State of Indiana since 1999. Age 72. Director since

1987 (including term as a director of Progressive Federal Savings Bank).

Ralph B. Sprecher is Chairman of the Board. He previously was the Vice President of Midwest

Operations for Joseph E. Seagram, a beverage distribution company, and is now retired. Age 64. Director since

1993 (including term as a director of Perpetual Federal Savings and Loan Association).

Frank E. Weismiller, Jr. is Vice-Chairman of the Board and was the Chairman of Dearborn Gravel

Company, Inc., a concrete, sand and gravel distribution company, and is now retired. Age 77. Director since 1969

(including term as a director of Progressive Federal Savings Bank).

The following directors have terms ending in 2007:

Eugene B. Seitz, II, is an officer and co-owner of Seitz Agency, Inc., an insurance agency. Mr. Seitz also

serves as Assistant Secretary of the Board of Directors. Mr. Seitz’s brother, George M. Seitz, also serves on the

Board of Directors. Age 49. Director since 1995 (including term as a director of Perpetual Federal Savings and

Loan Association).

George M. Seitz is an officer and co-owner of Seitz Agency, Inc., an insurance agency. Mr. Seitz also

serves as Secretary of the Board of Directors. Mr. Seitz’s brother, Eugene B. Seitz, also serves on the Board of

Directors. Age 58. Director since 1971 (including term as a director of Progressive Federal Savings Bank).

Elmer G. McLaughlin has served as Executive Vice President and Chief Operating Officer of United

Community Bank since the merger of Perpetual Federal and Progressive Federal to form United Community Bank

on April 12, 1999. Prior to the merger, Mr. McLaughlin served for nine years as President, and 19 years as a

director, of Perpetual Federal Savings and Loan Association, and was Executive Vice President and head of

operations and senior loan officer of Perpetual Federal from 1978 until 1990. Mr. McLaughlin is the brother of W.

Michael McLauglin, a senior Vice President of United Community Bank. Age 53. Director since 1980 (including

term as a director of Perpetual Federal Savings and Loan Association).

Richard C. Strzynski has been a self-employed certified public accountant in Aurora, Indiana since 1979.

Age 57. Director since 1993 (including term as a director of Progressive Federal Savings Bank).

The following directors have terms ending in 2008:

William F. Ritzmann has served as President and Chief Executive Officer of United Community Bank

since the merger of Perpetual Federal and Progressive Federal to form United Community Bank on April 12, 1999.

Prior to the merger, Mr. Ritzmann served for 23 years as director, President and Managing Officer of Progressive

Federal Savings Bank. Age 57. Director since 1975 (including term as a director of Progressive Federal Savings

Bank).

Robert J. Ewbank has been a partner in the Lawrenceburg, Indiana law firm of Ewbank, Kramer &

Dornette LLP since 1978. Age 56. Director since 1984 (including term as a director of Progressive Federal

Savings Bank).

Larry L. Miller is a retired pharmacist and independent drug store owner. Age 73. Director since 1969

(including term as a director of Perpetual Federal Savings and Loan Association).

Henry G. Nanz has been a partner in SPARC Realty, a real estate development company, in Greensdale,

Indiana since 1991. Mr. Nanz is also the former owner of Trade & Industrial Supply, Inc., a wholesale industrial

supply and equipment company. Age 79. Director since 1969 (including term as a director of Perpetual Federal

Savings and Loan Association).

Executive Officers of United Community MHC

The executive officers of United Community MHC will be elected annually by United Community MHC’s

Board of Directors and serve at such Board’s discretion. The executive officers of United Community MHC will

be:


William F. Ritzmann		President and Chief Executive Officer

Elmer G. McLaughlin		Executive Vice President, Chief Operating Officer and Corporate Secretary

Vicki A. March, CPA		Senior Vice President, Chief Financial Officer and Treasurer

James W. Kittle		Senior Vice President

William T. Bird		Senior Vice President

W. Michael McLaughlin		Senior Vice President

Executive Officers of United Community Bancorp

The executive officers of United Community Bancorp will be elected annually by United Community

Bancorp’s Board of Directors and serve at such Board’s discretion. The executive officers of United Community

Bancorp will be:


William F. Ritzmann		President and Chief Executive Officer



Elmer G. McLaughlin		Executive Vice President, Chief Operating Officer and Corporate Secretary

Vicki A. March, CPA		Senior Vice President, Chief Financial Officer and Treasurer

James W. Kittle		Senior Vice President

William T. Bird		Senior Vice President

W. Michael McLaughlin		Senior Vice President

Executive Officers of United Community Bank

The executive officers of United Community Bank are elected annually by the Board of Directors and

serve at such Board’s discretion. The executive officers of United Community Bank are:


William F. Ritzmann		President and Chief Executive Officer

Elmer G. McLaughlin		Executive Vice President, Chief Operating Officer and Corporate Secretary

Vicki A. March, CPA		Senior Vice President, Chief Financial Officer and Treasurer

James W. Kittle		Senior Vice President, Lending

William T. Bird		Senior Vice President, Investments, Asset Liability Management and Commercial Lending

W. Michael McLaughlin		Senior Vice President, Operations

Below is information regarding our executive officers who are not also directors. Unless otherwise stated,

each executive officer has held his or her current position for at least the last five years. The indication of the

period for service with United Community Bank includes service as an officer with either Progressive Federal

Savings Bank or Perpetual Federal Savings and Loan Association, as the case may be, before the merger on April

12, 1999. Ages presented are as of September 30, 2005.

Vicki A. March has served as Chief Financial Officer, Treasurer and Senior Vice President, Finance, since

1999. Ms. March previously served as Treasurer from 1980 to 1999. Age 50.

James W. Kittle has served as Senior Vice President, Lending since 1980. Age 47.

William T. Bird has served as Senior Vice President, Investments, Asset Liability Management since 1997

and Commercial Lending since 2004. Previously Mr. Bird served as Chief Financial Officer and Treasurer of

Lenox Bancorp, Inc. from 1994 to 1996, and as an asset liability and business planning manager of Sendero

Corporation from 1992 to 1994. Age 44.

W. Michael McLaughlin has served as Senior Vice President, Operations since 1983. Mr. McLaughlin is

the brother of E.G. McLaughlin, Executive Vice President of United Community Bank. Age 46.

Meetings and Committees of the Board of Directors of United Community Bank

We conduct business through meetings of our board of directors and its committees. During the year

ended

June 30, 2005, the Board of Directors of United Community Bank held 25 regular and special meetings.

Our Board of Directors has standing Audit and Compensation Committees, among others.

The Audit Committee, currently consisting of Messrs. Sprecher (Chairman), Ewbank, Miller, Nanz,

Strzynski and Weismiller is responsible for developing and monitoring internal audit and compliance programs.

The committee also receives and reviews all the reports and findings and other information presented to them by

United Community Bank’s officers regarding financial reporting policies and practices. This committee met three

time(s) during the year ended June 30, 2005.

The Compensation Committee, currently consisting of Messrs. Meyer (Chairman), Ewbank, Nanz, E.

Seitz, M. Seitz, Sprecher and Weismiller, determines annual grade and salary levels for employees and establishes

personnel policies. This committee met two time(s) during the year ended June 30, 2005.

The Board of Directors also has the following standing committees: Appraisal, Asset/Liability, Budget,

Building, Compliance, Consumer Loan, Human Resources, Insurance and Risk Management, Internal Asset

Review, Investment, Marketing, Mortgage Loan, and Management.

Committees of the Board of Directorsof United Community Bancorp

In connection with the formation of United Community Bancorp, the Board of Directors will establish

Audit, Compensation and Nominating and Governance Committees.

The Audit Committee, consisting of Messrs. Sprecher, Nanz, Strzynski and Weismiller will meet

periodically with the independent auditors and management to review accounting, auditing, internal control

structure and financial reporting matters. Each member of the Audit Committee is independent under the

definition contained in the listing standards of The Nasdaq Stock Market. The Board has determined that Mr.

Strzynski is an “Audit Committee financial expert” as such term is defined by the rules and regulators of the

Securities and Exchange Commission.

The Compensation Committee, consisting of Messrs. Meyer, Nanz, E. Seitz, M. Seitz, Sprecher and

Weismiller, will be responsible for determining annual grade and salary levels for employees and establishing

personnel policies. Each member of the Compensation Committee is independent under the definition contained

in the listing standards of the Nasdaq Stock Market.

The Nominating and Governance Committee, consisting of Messrs. Hacker, Gehring and Miller, will be

responsible for the annual selection of management’s nominees for election as directors and developing and

implementing policies and practices relating to corporate governance, including implementation of and monitoring

adherence to United Community Bancorp’s corporate governance policy. Each member of the Nominating and

Governance Committee is independent under the definition contained in the listing standards of the Nasdaq Stock

Market.

Each of the committees listed above will operate under a written charter, which will govern its

composition, responsibilities and operations.

Corporate Governance Policies and Procedures

In addition to establishing committees of the Board of Directors, United Community Bancorp will also

adopt several policies to govern the activities of both United Community Bancorp and United Community Bank,

including a corporate governance policy and a code of business conduct and ethics. The corporate governance

policy will set forth:

•

the duties and responsibilities of each director;

•

the composition, responsibilities and operation of the Board of Directors;

•

the establishment and operation of board committees;

•

succession planning;

•

appointing an independent lead director and convening executive sessions of independent directors;

•

the Board of Directors’ interaction with management and third parties; and

•

the evaluation of the performance of the Board of Directors and the chief executive officer.

The code of business conduct and ethics, which will apply to all employees and directors, will address

conflicts of interest, the treatment of confidential information, general employee conduct and compliance with

applicable laws, rules and regulations. In addition, the code of business conduct and ethics will be designed to

deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and

accurate disclosure and compliance with all applicable laws, rules and regulations.

Directors’ Compensation

Fees. Each non-employee director of United Community Bank receives $14,800 annually for service on

the Board and $5,200 for service on committees of the Board. Additionally, Messrs. Sprecher and Nanz each

receive $4,900 annually for service as Chairman and Immediate Past Chairman of the Board, respectively, Mr.

Weismiller receives $4,000 annually for service as Vice Chairman of the Board, Mr. Michael Seitz receives $3,500

annually for service as Secretary of the Board and Mr. Eugene Seitz receives $1,250 annually for service as

Assistant Secretary of the Board. Non-employee directors will receive a $5,000 annual retainer for their service on

the board of directors of United Community Bancorp. Directors will not receive any fees for their service on the

board of directors of United Community MHC.

Executive Compensation

Summary Compensation Table. The following information is provided for our President and Chief

Executive Officer and other executive officers of United Community Bank who received a salary and bonus of

$100,000 or more during the year ended June 30, 2005.


	Annual Compensation (1)
Name and Position	Year	Salary		Bonus		All Other Compensation (2)
William F. Ritzmann President and Chief Executive Officer	2005 2004 2003	$	123,301 119,710 116,223	$	18,381 14,332 12,267	$	72,775 66,781 59,704

Elmer G. McLaughlin Executive Vice President and Chief Operating Officer	2005 2004 2003	$	111,371 108,127 104,978	$	16,602 12,946 10,942	$	45,962 42,942 38,586

James W. Kittle Senior Vice President, Lending	2005 2004 2003	$	89,407 86,803 84,275	$	13,328 15,320 8,662	$	25,267 24,573 20,938

(1)	Does not include the aggregate amount of perquisites or other personal benefits, which was less than $50,000 or 10% of the total annual salary and bonus reported.

(2)	For Messrs. Ritzmann, McLaughlin and Kittle, the 2005 amount consists of supplemental executive retirement

plan contributions of $56,151, $30,318 and $12,070, respectively, and employer profit-sharing and matching

contributions under United Community Bank’s 401(k) plan of $16,624, $15,644 and $13,197, respectively.

Current Agreements

Employment Agreements. United Community Bank currently maintains employment agreements,

each dated as of July 1, 2005, with the following officers: William F. Ritzmann, President and Chief Executive

Officer, E.G. McLaughlin, Executive Vice President and Chief Operating Officer, and James W. Kittle, Senior

Vice President of Lending (collectively referred to as the “executive” or “executives,” as appropriate, in the

following paragraphs). The Bank also maintains similar employment agreements with additional executive

officers. The agreements with William Ritzmann and E.G. McLaughlin each provide for a three-year term, subject

to annual renewal by the board of directors for an additional year beyond the then current expiration date. The

agreement with Mr. Kittle has a two-year term, subject to annual renewal for an additional year.

The initial base salaries under the employment agreements are as follows: $123,301 for Mr. Ritzmann,

$111,371 for Mr. McLaughlin and $89,407 for Mr. Kittle. The agreements also provide for participation in

employee benefit plans and programs maintained by the Bank for the benefit of senior management personnel.

Upon a termination of an executive’s employment by United Community Bank for cause, as defined in the

agreement, the executive receives no further compensation or benefits under the agreement.

Upon termination by United Community Bank within one year of a change in control, as defined in the

agreement, or termination by the executive under circumstances constituting “good reason” for termination, as

outlined in the agreement, the Bank agrees to pay each executive an amount equal to the product of 2.99 and the

employee’s “base amount” as defined under Section 280G of the Internal Revenue Code of 1986, as amended (the

“Code”). Under Section 280G of the Code, the base amount equals the executive’s average annual taxable

compensation over the five years preceding termination of employment (or years of employment, if the executive is

employed for a lesser period of time). The Executive also receives continued coverage under all health, life,

disability and other benefit plans until the earlier of the expiration of the agreement term or the date the executive

becomes covered under another employer’s benefit plans. The agreements provide, however, that a mutual holding

company reorganization is not a change in control for purposes of the agreement.

If United Community Bank terminates the executive’s employment for reasons other than death, cause, or

upon a change in control, the executive receives base salary for the remaining term of the agreement, plus a cash

bonus equal to the cash bonus paid by the Bank during the 12-month period preceding the executive’s termination

of employment. United Community Bank also continues health, life, disability and other benefits through the

earlier of the agreement expiration date or coverage by another employer. Upon the death of the executive, the

agreement automatically expires and the executive’s estate receives an amount equal to three months of continued

base salary.

The agreements provide for the reduction of change in control payments to the executive to the extent

necessary to ensure that the executive would not receive an “excess parachute payment” under Section 280G of the

Code that would result in the imposition of a 20% excise tax under Section 4999 of the Code. Upon an

executive’s voluntary termination of employment (other than for “good reason” in connection with a change in

control), the executive agrees not to engage in competitive business activities within Dearborn County, Indiana or

within thirty (30) miles of United Community Bank’s principal business office for the remaining term of the

agreement.

Proposed Company Employment Agreements. Upon completion of the offering, United

Community Bancorp will enter into employment agreements similar to the Bank’s existing agreements with

Messrs Ritzmann and McLaughlin and Ms. March. Ms. March has an employment agreement with a two-year

term, and an initial base salary of $86,451; the remaining provisions of her employment agreement are identical to

the agreements with Messrs. Ritzmann, McLaughlin and Kittle, as described above. These employment

agreements are intended to maintain a stable and competent management base after the offering, as the continued

success of United Community Bancorp and United Community Bank depends to a significant degree on the skills

and competence of these individuals. Under the employment agreements, United Community Bancorp will agree

to make any payments not made by the Bank under its employment agreements with the executives, but the

executives will not receive any duplicative payments.

Each employment agreement between United Community Bancorp and the executives will provide for the

same term lengths, annual renewal provisions and base salaries as the Bank agreements described above. The

agreements will also provide for, among other things, participation in stock-based benefit plans and fringe benefits.

As under the Bank agreements, each United Community Bancorp employment agreement will provide

that United Community Bancorp may terminate an executive’s employment for cause (as described in the

agreements) at any time, with no further benefits payable under the agreement following such termination. If

United Community Bancorp terminates the executive’s employment other than for cause or upon a change in

control, the executive or, upon his death, his beneficiary, will receive a payment equivalent to the executive’s base

salary for the remaining term of the agreement, plus the value of the cash bonus paid to the executive during the

12-month period preceding termination of employment. United Community Bancorp will also continue health,

life, disability and other benefits through the earlier of the agreement expiration date or coverage by another

employer. Upon the executive’s death during the agreement term, the agreement will automatically expire and the

executive’s estate will receive a payment equivalent to three months’ continued base salary.

Upon the executive’s involuntary termination or constructive termination (a termination with “good

reason” under circumstances outlined in the agreement) within one year of a change in control, under

circumstances identical to those discussed above in the Bank agreement, the Company will pay to each executive

an amount equal to the product of 2.99 and the executive’s “base amount” under Section 280G of the Code and

continue to cover the executive under all health and welfare benefit plans in which the executive participated prior

to termination, until the earlier of the expiration of the agreement term of the date of coverage by another

employer.

Each agreement will limit payments made to the executive in connection with a change in control to

amounts that will not exceed the requirements imposed by Section 280G of the Code, as discussed above. In

addition, the executive will agree not to compete with United Community Bank of United Community Bancorp for

the remaining term of the agreement following termination of employment (other than in connection with a change

in control). The agreements will become effective on the closing date of the offering.

Directors Retirement Plan. United Community Bank currently sponsors a Directors Retirement Plan.

Directors Nanz, Weismiller, G. Michael Seitz, Gehring, Miller, Meyer, Sprecher, Hacker, Strzynski, Ewbank, and

E.B. Seitz currently participate in the plan. Under the plan, a director who has completed at least three years of

service and has attained the “benefit age” (ranging from age 72 to age 80 years and 9 months) set forth in an

individual agreement under the plan is eligible to receive a retirement benefit of $20,000 per year for ten years,

payable in monthly installments for a total of 120 months. A participating director may also receive an early

retirement benefit upon termination of service after the completion of at least three years of service and attainment

of age 65. The early retirement benefit equals $10,000 per year for ten years upon retirement after age 65 but prior

to age 68, or $15,000 per year for ten years upon retirement after age 68 but prior to the designated benefit age.

Upon the death of a participating director prior to the completion of the applicable retirement benefit payments, the

Bank will pay any remaining benefits to the director’s designated beneficiary. Upon a termination of service in

connection with a change in control, a participating director becomes entitled to the same retirement benefits the

director would have received if he has remained in service until reaching the benefit age, payable over a ten-year

period. The plan also provides that the Board of Directors may approve a disability benefit equal to the actuarially-

determined annuitized value of a director’s benefit under the plan upon a termination of service due to disability.

In addition to the above benefits, the plan provides the director’s beneficiary with a separate lump sum death

benefit of $10,000 for the payment of funeral expenses. In consideration for the benefits provided under the plan

and outlined above, a participating director agrees not to engage in certain competitive business activities while

serving as a director or following a termination of service for reasons other than a change in control. No benefits

are payable under the plan upon a termination of service for cause.

Director Emeritus Designation. The board of directors of United Community Bank, by resolution

dated April 11, 2002, provided that a director may be designated by the board as a director emeritus upon

termination of service (other than for cause), attainment of age 72, and upon the director’s agreement to provide

advisory services and attend a minimum of three board meetings per year. Provided the director emeritus is not

receiving a retirement benefit under the Directors Retirement Plan outlined above, he or she is entitled to a

$20,000 annual fee. Directors emeriti may also participate in the medical and health benefit coverage provided to

non-employee directors of the Bank. Upon the death of a director emeritus, the surviving spouse may also continue

to receive such benefits by providing reimbursement to United Community Bank for the coverage costs until the

earliest of the termination of such insurance plan by the Bank, eligibility for benefits under another group

insurance plan, or remarriage. No directors currently serve in a director emeritus capacity.

Executive Supplemental Retirement Income Agreements. United Community Bank has entered

in Executive Supplemental Retirement Income Agreements (SERPs) with Messrs. Ritzmann, E.G. McLaughlin

and Kittle, as well as with certain other members of management. Benefits contemplated by the agreements may

be funded through the secular grantor trust agreements (see below under “Grantor Trust Agreements” or through

the “rabbi” trust (see below under “Rabbi Trust Agreement”) that have been established by United Community

Bank. The Bank makes contributions annually to the secular grantor trust on behalf of SERP participants. After

withholding taxes on these contributions, the remaining amounts are used to purchase life insurance or other

investment vehicles to fund the payment of the applicable SERP benefits. If a participant exercises withdrawal

rights with respect to the United Community Bank contributions made to the secular grantor trust, the Bank

continues to accrue “phantom” contributions to the grantor trust, but makes no further contributions to the secular

trust on the participant’s behalf. Upon termination of employment after age 65, SERP participants receive an

annual supplemental retirement benefit. The annual benefit amounts are $65,908 for Mr. Ritzmann, $62,585 for

E.G. McLaughlin and $52,076 for Mr. Kittle, payable over a period of 180 months. Upon termination of

employment following a change in control (regardless of age), participants become entitled to the full supplemental

retirement benefit, commencing at age 65 and payable for 180 months. Upon termination due to disability,

participants receive the accrued balance of the grantor trust as of their termination date in a lump sum payment.

Upon voluntary termination, United Community Bank makes no further contributions to the grantor trust, and the

participant receives the accrued balance of the grantor trust as of termination over the payout period of 180

months, beginning at age 65. In the event of the participant’s death, the designated beneficiary receives the

supplemental retirement benefit (or any remaining payments) as well as an additional lump sum benefit of $10,000

for the payment of funeral expenses. Upon termination for cause, United Community Bank makes no further

contributions to the grantor trust, and the participant receives the accrued balance held in the grantor trust upon

the earlier of death or age 65. In consideration for the payments described above, participants agree not to engage

in certain competitive business activities during and after their employment with United Community Bank (except

following termination in connection with a change in control).

Grantor Trust Agreements. In connection with the SERP, United Community Bank and participants

in the SERP discussed above have entered into secular Grantor Trust Agreements with an independent trustee.

Under each trust agreement, United Community Bank and the participant may make contributions to the trust for

the purpose of funding benefits payable under the SERP. Contributions made by United Community Bank are

taxable to the participants, who maintain certain withdrawal rights under the agreements. Exercise of withdrawal

rights, however, terminates United Community Bank’s obligation to make future contributions to the trust,

although the Bank will continue to accrue “phantom” contributions. Participants may also direct the investment of

contributions made to the trust on their behalf. Payments from the trust are made in accordance with the terms of

the SERPs described above.

Rabbi Trust. United Community Bank entered into a grantor or “rabbi” trust agreement with an

independent trustee effective as of April 1, 2002. The grantor trust has been established to hold assets that the

Bank may contribute for the purpose of making benefit payments under the Directors Retirement Plan and the

Executive Supplemental Retirement Income Agreements described above. Funds held in the trust remain at all

times subject to the claims of United Community Bank’s creditors in the event of the Bank’s insolvency.

Benefit Plans

401(k) Plan. We maintain the United Community Bank 401(k) Profit Sharing Plan, a tax-qualified

defined contribution plan, for all employees of United Community Bank who have satisfied the plan eligibility

requirements. Participants become eligible to participate in the plan on the January 1^st or July 1^st following their

attainment of age 18 and completion of one year of service. Eligible employees may contribute up to 100% of their

compensation to the plan on a pre-tax basis, subject to limitations imposed by the Internal Revenue Code of 1986,

as amended. For 2005, the limit is $14,000; provided, however, that participants over age 50 may contribute an

additional $4,000 to the plan. Under the plan, the Bank makes matching contributions equal to 50% of a

participant’s deferral contributions up to a maximum of 10% of annual compensation, as well as additional

discretionary profit-sharing contributions, to the accounts of participants who have completed 500 hours of service

during the plan year. Participants are always 100% vested in their salary deferrals. Participants are 0% vested in

the Bank’s discretionary matching contributions until they have completed three years of service, at which time

they become 100% vested in those contributions.

Participants have individual accounts under the plan and may direct the investment of their accounts

among a variety of investment funds. In connection with the offering, the plan will add another investment

alternative, the United Community Bancorp Stock Fund. The stock fund will permit participants to invest up to

100% of their 401(k) plan funds in United Community Bancorp common stock. A participant who elects to

purchase common stock in the offering through the plan will receive the same subscription priority, and be subject

to the same individual purchase limitations, as if the participant had elected to purchase the common stock using

other funds. See “The Reorganization and the Stock Offering – Subscription Offering and Subscription Rights”

and “—Limitations on Purchases of Shares.” An independent trustee will purchase common stock in the offering

on behalf of plan participants, to the extent that shares are available. Participants will direct the trustee regarding

the voting of shares purchased for their plan accounts.

Employee Stock Ownership Plan. In connection with the reorganization, the Bank intends to adopt

an employee stock ownership plan for eligible employees. Eligible employees who have attained age 18 and are

employed by United Community Bank on the closing date of the offering will participate in the Plan as of the

closing date. Thereafter, new employees of United Community Bank will be eligible to participate in the employee

stock ownership plan upon the attainment of age 18 and the completion of one year of service.

We expect to engage a third party trustee to purchase, on behalf of the employee stock ownership plan,

3.92% of the total number of shares of United Community Bancorp common stock issued in the reorganization,

including shares issued to United Community MHC and contributed to the charitable foundation (21,320, 25,090,

28,850 and 33,180 at the minimum, midpoint, maximum and adjusted maximum of the offering range,

respectively). We anticipate that the employee stock ownership plan will fund its purchase in the offering through

a loan from United Community Bancorp. The loan amount will equal 100% of the aggregate purchase price of the

common stock, and will be repaid principally through United Community Bank’s contributions to the employee

stock ownership plan and dividends payable on common stock held by the plan over the anticipated 15-year term of

the loan. The interest rate for the employee stock ownership plan loan is expected to be the prime rate, as

published in The Wall Street Journal on the closing date of the offering. See “Pro Forma Data.”

The trustee will hold the shares purchased by the employee stock ownership plan in a loan suspense

account. Shares will be released from the suspense account on a pro rata basis as the Bank repays the employee

stock ownership plan loan. The trustee will allocate the shares released among participants on the basis of each

participant’s proportional share of compensation. Participant will vest 100% in their employee stock ownership

plan benefits upon the completion of three years of service. Participants also will become fully vested upon

retirement, death or disability, a change in control, or the termination of the plan. Participants will generally

receive distributions from the plan upon separation from service. Any unvested shares forfeited upon a

participant’s termination of employment will be reallocated among remaining participants, in accordance with the

terms of the plan.

Participants may direct the trustee regarding the voting of common stock credited to their employee stock

ownership plan accounts. The trustee will vote all allocated shares held in the plan as instructed by participants.

The trustee will vote unallocated shares, as well as allocated shares for which no participant instructions are

received, in the same ratio as those shares for which participants provide instructions, subject to the fiduciary

responsibilities of the trustee.

Under applicable accounting requirements, the Bank will record compensation expense for the leveraged

employee stock ownership plan at the fair market value of the shares when committed for release to participant

accounts. See “Pro Forma Data.”

The employee stock ownership plan must meet certain requirements of the Code and the Employee

Retirement Income Security Act of 1974, as amended (ERISA). We intend to request a favorable determination

letter from the Internal Revenue Service regarding the tax-qualified status of the plan. We expect, but cannot

guarantee, the receipt of a favorable determination letter for the plan.

Employee Severance Compensation Plan. United Community Bank expects to adopt the United

Community Bank Employee Severance Compensation Plan in connection with the offering. The plan will provide

severance benefits to eligible employees who terminate employment in connection with a change in control of

United Community Bank or United Community Bancorp. Employees will be eligible for severance benefits under

the plan if they have a minimum of one year of service with United Community Bank and have not entered into an

employment or change in control agreement with United Community Bank or United Community Bancorp. Under

the severance plan, if, within 12 months of a change in control, United Community Bank or United Community

Bancorp or their successors terminate an employee’s employment or if the individual voluntarily terminates

employment upon the occurrence of events specified in the severance plan, the employee will receive a severance

payment equal to one month’s compensation for each year of service, up to a maximum payment of 199% of the

employee’s base compensation. Based solely on compensation levels as of December 31, 2004 and years of service

at September 30, 2005, and assuming that a change in control occurred on such date, and all eligible employees

became entitled to receive severance payments, the aggregate payments due under the severance plan would equal

approximately $1,451,455.45.

Supplemental Executive Retirement Plan. In connection with the reorganization, United

Community Bank will establish a new supplemental executive retirement plan to provide certain supplemental

retirement benefits with respect to the employee stock ownership plan and the 401(k) plan. The plan will provide

participating executives with benefits that would otherwise be limited by certain provisions of the Code or the

terms of the employee stock ownership plan loan. Specifically, the plan will provide benefits to eligible officers

(those designated by the board of directors of United Community Bank) that cannot be provided under the 401(k)

plan or employee stock ownership plan, but for the Code limitations. In addition to providing benefits that would

otherwise be lost under the tax-qualified plans because of the Code limitations, the new plan will also provide

supplemental benefits upon a change in control prior to the scheduled repayment of the employee stock ownership

plan loan. Generally, upon a change in control, the supplemental executive retirement plan will provide

participants with a benefit equal to what they would have received under the employee stock ownership plan, had

they remained employed through the term of the loan, less the benefits actually provided to the participant under

the plan. United Community Bank anticipates that the board of directors will designate William F. Ritzmann and

E.G. McLaughlin as initial participants in the supplemental executive retirement plan. The board may designate

other individuals as participants in the future.

United Community Bank may also utilize a grantor trust in connection with the supplemental executive

retirement plan, as a means to set aside funds for the payment of benefits under the plan. Until paid to plan

participants, the assets of the grantor trust would remain subject to the claims of United Community Bank’s

creditors in the event of its insolvency.

Future Equity Incentive Plan. Following the reorganization, we may adopt an equity incentive plan

that will provide for grants of stock options and restricted stock. In accordance with applicable regulations, we

anticipate that the plan will authorize a number of stock options equal to 4.9% of the total shares issued in the

reorganization, including shares issued to United Community MHC and contributed to the charitable foundation,

and shares of restricted stock equal to 1.96% of the total shares issued in the reorganization. Therefore, the

number of shares reserved under the plan will range from 10,660 shares, assuming 2,344,640 shares are sold in the

offering, to 14,430 shares, assuming 3,172,160 shares are sold in the offering.

We may fund the equity incentive plan through the purchase of United Community Bancorp common

stock in the open market by a trust established in connection with the plan or from authorized, but unissued, shares

of common stock. The acquisition of additional authorized, but unissued, shares by the equity incentive plan after

the offering would dilute the interests of existing stockholders. See “Pro Forma Data.”

We will grant all stock options at an exercise price equal to 100% of the fair market value of the stock on

the grant date. We will grant restricted stock awards at no cost to recipients. Restricted stock awards and stock

options will generally vest ratably over a five-year period, or as otherwise permitted by the Office of Thrift

Supervision (OTS), but United Community Bancorp may also make vesting contingent upon the satisfaction of

performance goals established by the board of directors or the committee charged with administering the plan. All

outstanding awards will accelerate and become fully vested upon a change in control of United Community

Bancorp.

The equity incentive plan will comply with all applicable OTS regulations. We will submit the equity

incentive plan to stockholders for approval, at which time we will provide stockholders with detailed information

about the plan. Under current OTS regulations, the plan must be approved by a majority of the total votes eligible

to be cast by our stockholders, other than United Community MHC, unless we obtain a waiver that allows approval

by a different vote standard.

Transactions with United Community Bank

Loans and Extensions of Credit. The Sarbanes-Oxley Act generally prohibits loans by United

Community Bank to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific

exemption from such prohibition for loans by United Community Bank to its executive officers and directors in

compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to

executive officers and directors of insured institutions must be made on substantially the same terms, including

interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and

must not involve more than the normal risk of repayment or present other unfavorable features. United

Community Bank is therefore prohibited from making any new loans or extensions of credit to executive officers

and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal

regulations permit United Community Bank to make loans to executive officers and directors at reduced interest

rates if the loan is made under a benefit program generally available to all other employees and does not give

preference to any executive officer or director over any other employee.

In addition, loans made to a director or executive officer in an amount that, when aggregated with the

amount of all other loans to the person and his or her related interests, are in excess of the greater of $25,000 or

5% of United Community Bank’s capital and surplus, up to a maximum of $500,000, must be approved in advance

by a majority of the disinterested members of the Board of Directors. See “Regulation and

Supervision—Regulation of Federal Savings Associations—Transactions with Related Parties.”

The aggregate amount of loans by United Community Bank to its executive officers and directors was $3.3

million at September 30, 2005, or approximately 6.0% of pro forma stockholders’ equity, assuming that 3,172,160

shares are sold in the offering. These loans were performing according to their original terms at September 30,

2005.

Other Transactions

Ewbank Kramer & Dornette LLP of Lawrenceburg, Indiana, of which Robert J. Ewbank is a partner,

performs legal services for United Community Bank. Mr. Ewbank is also President and owner of Ewbank Land

Title, Inc., which performs title searches and provides title insurance for United Community Bank loans. In fiscal

2005, United Community Bank paid a total of $48,000 in legal fees to Ewbank Kramer & Dornette LLP and

$228,000 to Ewbank Land Title, Inc. for title searches and title insurance. George M. Seitz and Eugene B. Seitz

are officers and co-owners of Seitz Insurance Agency, Inc., an insurance agency to which United Community Bank

paid $120,000 in insurance premiums in fiscal 2005. There are no other transactions or series of similar

transactions between United Community Bank and any director or executive officer in which the amount involved

exceeds $60,000 since the beginning of United Community Bank’s last fiscal year, or which are currently

proposed.

Indemnification for Directors and Officers

United Community Bancorp’s bylaws provide that United Community Bancorp shall indemnify all

officers, directors and employees of United Community Bancorp to the fullest extent permitted under federal law

against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit

or proceeding in which they may be involved by reason of their having been a director or officer of United

Community Bancorp. Such indemnification may include the advancement of funds to pay for or reimburse

reasonable expenses incurred by an indemnified party to the fullest extent permitted under federal law. Insofar as

indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and

controlling persons of United Community Bancorp pursuant to its bylaws or otherwise, United Community

Bancorp has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is

against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

Subscriptions by Executive Officers and Directors

The following table presents certain information as to the approximate anticipated purchases of common

stock by our directors and executive officers, including their associates, as defined by applicable regulations. No

individual has entered into a binding agreement to purchase these shares and, therefore, actual purchases could be

more or less than indicated. Directors and executive officers and their associates may not purchase more than 29%

of the shares sold in the reorganization to persons other than United Community MHC. For purposes of the

following table, sufficient shares are assumed to be available to satisfy subscriptions in all categories.


	Proposed Purchases of Stock in the Offering			Percent of Shares at Minimum of Offering Range		Percent of Shares at Maximum of Offering Range
Name	Number of Shares	Dollar Amount		Percent of Shares at Minimum of Offering Range		Percent of Shares at Maximum of Offering Range
William F. Ritzmann	40,000	$	400,000	1.7	%	1.3	%
Ralph B. Sprecher	27,000		270,000	1.2		0.9
Robert J. Ewbank	50,000		500,000	2.1		1.6
William S. Gehring	10,000		100,000	0.4		0.3
Jerry W. Hacker	30,000		300,000	1.3		1.0
Elmer G. McLaughlin	30,000		300,000	1.3		1.0
Anthony C. Meyer	10,000		100,000	0.4		0.3
Larry L. Miller	10,000		100,000	1.3		1.0
Henry G. Nanz	30,000		300,000	1.3		1.0
George M. Seitz	35,000		350,000	1.5		1.1
Eugene B. Seitz, II	30,000		300,000	1.3		1.0
Richard C. Strzynski	30,000		300,000	1.3		1.0
Frank E. Weismiller, Jr.	60,000		600,000	2.6		2.0
Vicki A. March	25,000		250,000	1.1		0.8
James W. Kittle	25,500		255,000	1.1		0.8
W. Michael McLaughlin	25,000		250,000	1.1		0.8


William T. Bird	15,000		150,000	0.6		0.5

All directors and executive officers as a group (17 persons)	482,500	$	4,825,000	20.6	%	15.2	%

(1)	Based on qualifying deposit account balances as of the eligibility record rate. See “The Reorganization and the Stock Offering–Subscription Offering and Subscription Rights–Category 1: Eligible Account Holders.”

Regulation and Supervision

General

United Community Bank is subject to extensive regulation, examination and supervision by the Office of

Thrift Supervision, as its primary federal regulator, and the Federal Deposit Insurance Corporation, as its deposits

insurer. United Community Bank is a member of the Federal Home Loan Bank System and its deposit accounts

are insured up to applicable limits by the Savings Association Insurance Fund managed by the Federal Deposit

Insurance Corporation. United Community Bank must file reports with the Office of Thrift Supervision and the

Federal Deposit Insurance Corporation concerning its activities and financial condition in addition to obtaining

regulatory approvals before entering into certain transactions such as mergers with, or acquisitions of, other

financial institutions. There are periodic examinations by the Office of Thrift Supervision and, under certain

circumstances, the Federal Deposit Insurance Corporation to evaluate United Community Bank’s safety and

soundness and compliance with various regulatory requirements. This regulatory structure is intended primarily

for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory

authorities extensive discretion in connection with their supervisory and enforcement activities and examination

policies, including policies with respect to the classification of assets and the establishment of adequate loan loss

reserves for regulatory purposes. Any change in such policies, whether by the Office of Thrift Supervision, the

Federal Deposit Insurance Corporation or Congress, could have a material adverse impact on United Community

Bancorp, United Community MHC and United Community Bank and their operations. United Community

Bancorp and United Community MHC, as savings and loan holding companies, will be required to file certain

reports with, will be subject to examination by, and otherwise must comply with the rules and regulations of the

Office of Thrift Supervision. United Community Bancorp will also be subject to the rules and regulations of the

Securities and Exchange Commission under the federal securities laws.

Certain of the regulatory requirements that are or will be applicable to United Community Bank, United

Community Bancorp and United Community MHC are described below. This description of statutes and

regulations is not intended to be a complete explanation of such statutes and regulations and their effects on United

Community Bank, United Community Bancorp and United Community MHC and is qualified in its entirety by

reference to the actual statutes and regulations.

Regulation

of Federal Savings Associations

Business Activities. Federal law and regulations, primarily the Home Owners’ Loan Act and the

regulations of the Office of Thrift Supervision, govern the activities of federal savings banks, such as United

Community Bank. These laws and regulations delineate the nature and extent of the activities in which federal

savings banks may engage. In particular, certain lending authority for federal savings banks, e.g., commercial,

nonresidential real property loans and consumer loans, is limited to a specified percentage of the institution’s

capital or assets.

Branching. Federal savings banks are generally authorized to establish branch offices in any state or

states of the United States and its territories, subject to applicable notice or application requirements of the Office

of Thrift Supervision.

Capital Requirements. The Office of Thrift Supervision’s capital regulations require federal savings

institutions to meet three minimum capital standards: a 1.5% tangible capital to total assets ratio; a 4% leverage

ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system); and an 8%

risk-based capital ratio. In addition, the prompt corrective action standards discussed below also establish, in

effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest

rating on the CAMELS system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based

capital standard. The Office of Thrift Supervision regulations also require that, in meeting the tangible, leverage

and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries

engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard requires federal savings institutions to maintain Tier 1 (core) and total

capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%,

respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet

assets, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of

0% to 100%, assigned by the Office of Thrift Supervision capital regulation based on the risks believed inherent in

the type of asset. Core (Tier 1) capital is defined as common stockholders’ equity (including retained earnings),

certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of

consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card

relationships. The components of supplementary capital currently include cumulative preferred stock, long-term

perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the

allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45.0% of

unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the

amount of supplementary capital included as part of total capital cannot exceed 100.0% of core capital.

The Office of Thrift Supervision also has authority to establish individual minimum capital requirements

in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of

the particular circumstances. At September 30, 2005, United Community Bank met each of these capital

requirements.

Prompt Corrective Regulatory Action. The Office of Thrift Supervision is required to take certain

supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s

degree of undercapitalization. Generally, a savings institution that has a ratio of total capital to risk weighted

assets of less than 8.0%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4.0% or a ratio of core

capital to total assets of less than 4.0% (3.0% or less for institutions with the highest examination rating) is

considered to be “undercapitalized.” A savings institution that has a total risk-based capital ratio of less than

6.0%, a Tier 1 capital ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be

“significantly undercapitalized” and a savings institution that has a tangible capital to assets ratio equal to or less

than 2.0% is deemed to be “critically undercapitalized.” Subject to a narrow exception, the Office of Thrift

Supervision is required to appoint a receiver or conservator within specified time frames for an institution that is

“critically undercapitalized.” An institution must file a capital restoration plan with the Office of Thrift

Supervision within 45 days of the date it receives notice that it is “undercapitalized,” “significantly

undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent

holding company. In addition, numerous mandatory supervisory actions become immediately applicable to an

undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on

growth, capital distributions and expansion. “Significantly undercapitalized” and “critically undercapitalized”

institutions are subject to more extensive mandatory regulatory actions. The Office of Thrift Supervision could

also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and

the replacement of senior executive officers and directors.

Loans to One Borrower. Federal law provides that savings institutions are generally subject to the

limits on loans to one borrower applicable to national banks. A savings institution may not make a loan or extend

credit to a single or related group of borrowers in excess of 15.0% of its unimpaired capital and surplus. An

additional amount may be lent, equal to 10.0% of unimpaired capital and surplus, if secured by specified

readily-marketable collateral.

Standards for Safety and Soundness. As required by statute, the federal banking agencies have

adopted Interagency Guidelines Prescribing Standards for Safety and Soundness. The guidelines set forth the

safety and soundness standards that the federal banking agencies use to identify and address problems at insured

depository institutions before capital becomes impaired. If the Office of Thrift Supervision determines that a

savings institution fails to meet any standard prescribed by the guidelines, the Office of Thrift Supervision may

require the institution to submit an acceptable plan to achieve compliance with the standard.

Limitation on Capital Distributions. Office of Thrift Supervision regulations impose limitations

upon all capital distributions by a savings institution, including cash dividends, payments to repurchase its shares

and payments to stockholders of another institution in a cash-out merger. Under the regulations, an application to

and the prior approval of the Office of Thrift Supervision are required before any capital distribution if the

institution does not meet the criteria for “expedited treatment” of applications under Office of Thrift Supervision

regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the

total capital distributions for the calendar year exceed net income for that year plus the amount of retained net

income for the preceding two years, the institution would be undercapitalized following the distribution or the

distribution would otherwise be contrary to a statute, regulation or agreement with the Office of Thrift Supervision.

If an application is not required, the institution must still provide prior notice to the Office of Thrift Supervision of

the capital distribution if, like United Community Bank, it is a subsidiary of a holding company. If United

Community Bank’s capital were ever to fall below its regulatory requirements or the Office of Thrift Supervision

notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted.

In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution that would otherwise be

permitted by the regulation, if the agency determines that such distribution would constitute an unsafe or unsound

practice.

Qualified Thrift Lender Test. Federal law requires savings institutions to meet a qualified thrift

lender test. Under the test, a savings association is required to either qualify as a “domestic building and loan

association” under the Internal Revenue Code or maintain at least 65.0% of its “portfolio assets” (total assets less:

(i) specified liquid assets up to 20.0% of total assets; (ii) intangibles, including goodwill; and (iii) the value of

property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and

related investments, including certain mortgage-backed securities) in at least 9 months out of each 12 month period.

A savings institution that fails the qualified thrift lender test is subject to certain operating restrictions and

may be required to convert to a bank charter. Recent legislation has expanded the extent to which education loans,

credit card loans and small business loans may be considered “qualified thrift investments.” As of September 30,

2005, United Community Bank maintained 94.6% of its portfolio assets in qualified thrift investments and,

therefore, met the qualified thrift lender test.

Transactions with Related Parties. United Community Bank’s authority to engage in transactions

with “affiliates” is limited by Office of Thrift Supervision regulations and by Sections 23A and 23B of the Federal

Reserve Act as implemented by the Federal Reserve Board’s Regulation W. The term “affiliates” for these

purposes generally means any company that controls or is under common control with an institution. United

Community Bancorp, United Community MHC and their non-savings institution subsidiaries will be affiliates of

United Community Bank. In general, transactions with affiliates must be on terms that are as favorable to the

institution as comparable transactions with non-affiliates. In addition, certain types of transactions are restricted to

an aggregate percentage of the institution’s capital. Collateral in specified amounts must usually be provided by

affiliates in order to receive loans from an institution. In addition, savings institutions are prohibited from lending

to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings

institution may purchase the securities of any affiliate other than a subsidiary.

The Sarbanes-Oxley Act of 2002 generally prohibits a company from making loans to its executive

officers and directors. However, that act contains a specific exception for loans by a depository institution to its

executive officers and directors in compliance with federal banking laws. Under such laws, United Community

Bank’s authority to extend credit to executive officers, directors and 10.0% stockholders (“insiders”), as well as

entities such persons control, is limited. The law restricts both the individual and aggregate amount of loans

United Community Bank may make to insiders based, in part, on United Community Bank’s capital position and

requires certain board approval procedures to be followed. Such loans must be made on terms substantially the

same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is

an exception for loans made pursuant to a benefit or compensation program that is widely available to all

employees of the institution and does not give preference to insiders over other employees. There are additional

restrictions applicable to loans to executive officers.

Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over federal

savings institutions and has the authority to bring actions against the institution and all institution-affiliated

parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly

participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action

may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors

to institution of receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide

range of violations and can amount to $25,000 per day, or even $1.0 million per day in especially egregious cases.

The Federal Deposit Insurance Corporation has authority to recommend to the Director of the Office of Thrift

Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken

by the Director, the Federal Deposit Insurance Corporation has authority to take such action under certain

circumstances. Federal law also establishes criminal penalties for certain violations.

Assessments. Federal savings banks are required to pay assessments to the Office of Thrift Supervision

to fund its operations. The general assessments, paid on a semi-annual basis, are based upon the savings

institution’s total assets, including consolidated subsidiaries, as reported in the institution’s latest quarterly thrift

financial report.

Insurance of Deposit Accounts. United Community Bank is a member of the Savings Association

Insurance Fund. The Federal Deposit Insurance Corporation maintains a risk-based assessment system by which

institutions are assigned to one of three categories based on their capitalization and one of three subcategories

based on examination ratings and other supervisory information. An institution’s assessment rate depends upon

the categories to which it is assigned. Assessment rates for Savings Association Insurance Fund member

institutions are determined semi-annually by the Federal Deposit Insurance Corporation and currently range from

zero basis points of assessable deposits for the healthiest institutions to 27.00 basis points of assessable deposits for

the riskiest.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments. A material

increase in Savings Association Insurance Fund insurance premiums would likely have an adverse effect on the

operating expenses and results of operations of United Community Bank. Management cannot predict what

insurance assessment rates will be in the future.

In addition to the assessment for deposit insurance, institutions are required to make payments on bonds

issued in the late 1980s by the Financing Corporation to recapitalize the predecessor to the Savings Association

Insurance Fund. During the four quarters ended September 30, 2005, Financing Corporation payments for Savings

Association Insurance Fund members averaged 1.42 basis points of assessable deposits.

The Federal Deposit Insurance Corporation may terminate an institution’s insurance of deposits upon a

finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to

continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal

Deposit Insurance Corporation or the Office of Thrift Supervision. The management of United Community Bank

does not know of any practice, condition or violation that might lead to termination of deposit insurance.

Federal Home Loan Bank System. United Community Bank is a member of the Federal Home Loan

Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a

central credit facility primarily for member institutions. United Community Bank, as a member of the Federal

Home Loan Bank of Indianapolis, is required to acquire and hold shares of capital stock in that Federal Home Loan

Bank. United Community Bank was in compliance with this requirement with an investment in Federal Home

Loan Bank stock at September 30, 2005 of $1.7 million.

The Federal Home Loan Banks are required to provide funds for the resolution of insolvent thrifts in the

late 1980s and to contribute funds for affordable housing programs. These requirements could reduce the amount

of dividends that the Federal Home Loan Banks pay to their members and could also result in the Federal Home

Loan Banks imposing a higher rate of interest on advances to their members. If dividends were reduced, or

interest on future Federal Home Loan Bank advances increased, our net interest income would likely also be

reduced.

Community Reinvestment Act. Under the Community Reinvestment Act, as implemented by Office

of Thrift Supervision regulations, a savings association has a continuing and affirmative obligation consistent with

its safe and sound operation to help meet the credit needs of its entire community, including low and moderate

income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or

programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and

services that it believes are best suited to its particular community, consistent with the Community Reinvestment

Act. The Community Reinvestment Act requires the Office of Thrift Supervision, in connection with its

examination of a savings association, to assess the institution’s record of meeting the credit needs of its community

and to take such record into account in its evaluation of certain applications by such institution.

The Community Reinvestment Act requires public disclosure of an institution’s rating and requires the

Office of Thrift Supervision to provide a written evaluation of an association’s Community Reinvestment Act

performance utilizing a four-tiered descriptive rating system.

United Community Bank received a “satisfactory” rating as a result of its most recent Community

Reinvestment Act assessment.

Privacy Requirements of the GLBA

The Gramm-Leach-Bliley Act of 1999 provides for sweeping financial modernization for commercial

banks, savings banks, securities firms, insurance companies and other financial institutions operating in the United

States. Among other provisions, the Gramm-Leach-Bliley Act places limitations on the sharing of consumer

financial information with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all

financial institutions offering financial products or services to retail customers to provide such customers with the

financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of

personal financial information with unaffiliated third parties.

Anti-Money Laundering

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and

Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”) significantly expands the responsibilities

of financial institutions, including savings and loan associations, in preventing the use of the U.S. financial system

to fund terrorist activities. Title III of the USA PATRIOT Act provides for a significant overhaul of the U.S. anti-

money laundering regime. Among other provisions, Title III of the USA PATRIOT Act and the related regulations

of the Office of Thrift Supervision require financial institutions operating in the United States to develop new anti-

money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting

of money laundering. Such required compliance programs are intended to supplement existing compliance

requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets

Control Regulations.

Other Regulations

Interest and other charges collected or contracted for by United Community Bank are subject to state usury

laws and federal laws concerning interest rates. United Community Bank’s loan operations are also subject to

federal laws applicable to credit transactions, such as the:

•

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

•

Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to
enable the public and public officials to determine whether a financial institution is fulfilling its
obligation to help meet the housing needs of the community it serves;

•

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit;

•

Fair Credit Reporting Act of 1978, governing the use and provision of information to credit
reporting agencies;

•

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by
collection agencies; and

•

rules and regulations of the various federal agencies charged with the responsibility of
implementing such federal laws.

The deposit operations of United Community Bank also are subject to the:

•

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative subpoenas of
financial records;

•

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern
automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities
arising from the use of automated teller machines and other electronic banking services; and

•

Check Clearing for the 21^st Century Act (also known as “Check 21”), which gives “substitute
checks,” such as digital check images and copies made from that image, the same legal standing
as the original paper check.

Holding Company Regulation

General. United Community Bancorp and United Community MHC will be savings and loan holding

companies within the meaning of federal law. As such, they will be registered with the Office of Thrift

Supervision and will be subject to Office of Thrift Supervision regulations, examinations, supervision, reporting

requirements and regulations concerning corporate governance and activities. In addition, the Office of Thrift

Supervision will have enforcement authority over United Community Bancorp and United Community MHC and

their non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift

Supervision to restrict or prohibit activities that are determined to be a serious risk to United Community Bank.

Restrictions Applicable to Mutual Holding Companies. According to federal law and Office of

Thrift Supervision regulations, a mutual holding company, such as United Community MHC, may generally

engage in the following activities: (1) investing in the stock of a savings association; (2) acquiring a mutual

association through the merger of such association into a savings association subsidiary of such holding company

or an interim savings association subsidiary of such holding company; (3) merging with or acquiring another

holding company, one of whose subsidiaries is a savings association; and (4) any activity approved by the Federal

Reserve Board for a bank holding company or financial holding company or previously approved by the Office of

Thrift Supervision for multiple savings and loan holding companies. Recent legislation, which authorized mutual

holding companies to engage in activities permitted for financial holding companies, expanded the authorized

activities. Financial holding companies may engage in a broad array of financial service activities including

insurance and securities.

Federal law prohibits a savings and loan holding company, including a federal mutual holding company,

from directly or indirectly, or through one or more subsidiaries, acquiring more than 5.0% of the voting stock of

another savings institution, or its holding company, without prior written approval of the Office of Thrift

Supervision. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift

Supervision must consider the financial and managerial resources and future prospects of the company and

institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of

the community and competitive factors. Federal law also prohibits a savings and loan holding company from

acquiring more than 5.0% of a company engaged in activities other than those authorized for savings and loan

holding companies by federal law; or acquiring or retaining control of a depository institution that is not insured by

the Federal Deposit Insurance Corporation.

The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a

multiple savings and loan holding company controlling savings institutions in more than one state, except: (1) the

approval of interstate supervisory acquisitions by savings and loan holding companies; and (2) the acquisition of a

savings institution in another state if the laws of the state of the target savings institution specifically permit such

acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company

acquisitions. This limitation would not prohibit an interstate merger of the subsidiary savings association.

If the savings institution subsidiary of a savings and loan holding company fails to meet the qualified

thrift lender test, the holding company must register with the Federal Reserve Board as a bank holding company

within one year of the savings institution’s failure to so qualify.

Stock Holding Company Subsidiary Regulation. The Office of Thrift Supervision has adopted

regulations governing the two-tier mutual holding company form of organization and subsidiary stock holding

companies that are controlled by mutual holding companies. United Community Bancorp will be the stock holding

company subsidiary of United Community MHC. United Community Bancorp will be permitted to engage in

activities that are permitted for United Community MHC subject to the same restrictions and conditions.

Waivers of Dividends by United Community MHC. Office of Thrift Supervision regulations

require United Community MHC to notify the Office of Thrift Supervision if it proposes to waive receipt of

dividends from United Community Bancorp. The Office of Thrift Supervision reviews dividend waiver notices on

a case-by-case basis, and, in general, does not object to a waiver if: (i) the waiver would not be detrimental to the

safe and sound operation of the savings association; and (ii) the mutual holding company’s board of directors

determines that such waiver is consistent with such directors’ fiduciary duties to the mutual holding company’s

members. We anticipate that United Community MHC will waive dividends that United Community Bancorp may

pay, if any.

Conversion of United Community MHC to Stock Form. Office of Thrift Supervision regulations

permit United Community MHC to convert from the mutual form of organization to the capital stock form of

organization. There can be no assurance when, if ever, a conversion transaction will occur, and the Board of

Directors has no current intention or plan to undertake a conversion transaction. In a conversion transaction, a

new holding company would be formed as the successor to United Community Bancorp, United Community

MHC’s corporate existence would end, and certain depositors of United Community Bank would receive the right

to subscribe for additional shares of the new holding company. In a conversion transaction, each share of common

stock held by stockholders other than United Community MHC would be automatically converted into a number of

shares of common stock of the new holding company based on an exchange ratio determined at the time of

conversion that ensures that stockholders other than United Community MHC own the same percentage of

common stock in the new holding company as they owned in United Community Bancorp immediately before

conversion. The total number of shares held by stockholders other than United Community MHC after a

conversion transaction would be increased by any purchases by such stockholders in the stock offering conducted

as part of the conversion transaction.

Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to

the Office of Thrift Supervision if any person (including a company), or group acting in concert, seeks to acquire

“control” of a savings and loan holding company or savings association. An acquisition of “control” can occur

upon the acquisition of 10.0% or more of the voting stock of a savings and loan holding company or savings

institution or as otherwise defined by the Office of Thrift Supervision. Under the Change in Bank Control Act, the

Office of Thrift Supervision has 60 days from the filing of a complete notice to act, taking into consideration

certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the

acquisition. Any company that so acquires control would then be subject to regulation as a savings and loan

holding company.

Federal Securities Laws

United Community Bancorp has filed with the Securities and Exchange Commission a registration

statement under the Securities Act of 1933 for the registration of the common stock to be issued by means of this

prospectus. Upon completion of the offering, United Community Bancorp common stock will also be registered

with the Securities and Exchange Commission under the Securities Exchange Act of 1934. United Community

Bancorp will be subject to the information, proxy solicitation, insider trading restrictions and other requirements

under the Securities Exchange Act of 1934.

The registration, under the Securities Act of 1933, of the shares of common stock to be issued in the

offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not

affiliates of United Community Bancorp may be resold without registration. Shares purchased by an affiliate of

United Community Bancorp will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933.

If United Community Bancorp meets the current public information requirements of Rule 144, each affiliate of

United Community Bancorp that complies with the other conditions of Rule 144, including those that require the

affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without

registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding

shares of United Community Bancorp, or the average weekly volume of trading in the shares during the preceding

four calendar weeks. In the future, United Community Bancorp may permit affiliates to have their shares

registered for sale under the Securities Act of 1933.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and

accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by

the Sarbanes-Oxley Act of 2002, United Community Bancorp’s Chief Executive Officer and Chief Financial

Officer each will be required to certify that United Community Bancorp’s quarterly and annual reports do not

contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission

under the Sarbanes-Oxley Act of 2002 have several requirements, including having these officers certify that: they

are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls;

they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our

internal controls; and they have included information in our quarterly and annual reports about their evaluation

and whether there have been significant changes in our internal controls or in other factors that could significantly

affect internal controls. United Community Bancorp will be subject to further reporting and audit requirements

beginning with the year ending June 30, 2007 under the requirements of the Sarbanes-Oxley Act. United

Community Bancorp will prepare policies, procedures and systems designed to comply with these regulations to

ensure compliance with these regulations.

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Federal and State Taxation

Federal Income Taxation

General. United Community Bank reports its income on a fiscal year basis using the accrual method of

accounting. The federal income tax laws apply to United Community Bank in the same manner as to other

corporations with some exceptions, including the reserve for bad debts discussed below. The following discussion

of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax

rules applicable to United Community Bank. United Community Bank’s federal income tax returns have been

either audited or closed under the statute of limitations through June 30, 2002. For its 2005 tax year, United

Community Bank’s maximum federal income tax rate was 35.0%.

Bad Debt Reserves. For fiscal years beginning before June 30, 1996, thrift institutions that qualified

under certain definitional tests and other conditions of the Internal Revenue Code were permitted to use certain

favorable provisions to calculate their deductions from taxable income for annual additions to their bad debt

reserve. A reserve could be established for bad debts on qualifying real property loans, generally secured by

interests in real property improved or to be improved, under the percentage of taxable income method or the

experience method. The reserve for nonqualifying loans was computed using the experience method. Federal

legislation enacted in 1996 repealed the reserve method of accounting for bad debts and the percentage of taxable

income method for tax years beginning after 1995 and require savings institutions to recapture or take into income

certain portions of their accumulated bad debt reserves. Approximately $748,000 of United Community Bank’s

accumulated bad debt reserves would not be recaptured into taxable income unless United Community Bank makes

a “non-dividend distribution” to United Community Bancorp as described below.

Distributions. If United Community Bank makes “non_dividend distributions” to United Community

Bancorp, the distributions will be considered to have been made from United Community Bank’s unrecaptured tax

bad debt reserves, including the balance of its reserves as of December 31, 1987, to the extent of the “non-dividend

distributions,” and then from United Community Bank’s supplemental reserve for losses on loans, to the extent of

those reserves, and an amount based on the amount distributed, but not more than the amount of those reserves,

will be included in United Community Bank’s taxable income. Non-dividend distributions include distributions in

excess of United Community Bank’s current and accumulated earnings and profits, as calculated for federal

income tax purposes, distributions in redemption of stock and distributions in partial or complete liquidation.

Dividends paid out of United Community Bank’s current or accumulated earnings and profits will not be so

included in United Community Bank’s taxable income.

The amount of additional taxable income triggered by a non-dividend is an amount that, when reduced by

the tax attributable to the income, is equal to the amount of the distribution. Therefore, if United Community Bank

makes a non-dividend distribution to United Community Bancorp, approximately one and one-half times the

amount of the distribution not in excess of the amount of the reserves would be includable in income for federal

income tax purposes, assuming a 34.0% federal corporate income tax rate. United Community Bank does not

intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

State Taxation

Indiana Taxation. Indiana imposes an 8.5% franchise tax based on a financial institution’s adjusted

gross income as defined by statute. In computing adjusted gross income, deductions for municipal interest, U.S.

Government interest, the bad debt deduction computed using the reserve method and pre-1990 net operating losses

are disallowed. United Community Bank’s state franchise tax returns have not been audited for the past five tax

years.

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The Reorganization and Stock Offering

The Board of Directors of United Community Bank has approved the plan of reorganization and

stock issuance. The plan of reorganization and stock issuance also must be approved by the members of

United Community Bank. A special meeting of members has been called for this purpose. The Office of

Thrift Supervision also has conditionally approved the plan of reorganization and stock issuance; however,

such approval does not constitute a recommendation or endorsement of the plan of reorganization and stock

issuance by such agency.

General

On September 22, 2005, the Board of Directors of United Community Bank unanimously adopted, and on

December 8, 2005 unanimously amended and restated, the plan of reorganization and stock issuance by which

United Community Bank will reorganize into a two-tiered mutual holding company. This structure is called a two-

tier structure because it will have two levels of holding companies. After the reorganization, United Community

Bancorp will be the mid-tier stock holding company and United Community MHC will be the top-tier mutual

holding company. Under the terms of the plan of reorganization and stock issuance, United Community Bancorp

will own all of the stock of United Community Bank and United Community MHC will own at least a majority of

United Community Bancorp.

The reorganization also includes the offering by United Community Bancorp of 43.1% of its common

stock to qualifying depositors and borrowers of United Community Bank in a subscription offering and, if

necessary, to members of the general public through a community offering and/or a syndicate of registered broker-

dealers. The completion of the offering depends on market conditions and other factors beyond our control.

United Community Bank can give no assurance as to the length of time that will be required to complete the sale of

the common stock. If there are any delays, significant changes may occur in the appraisal of United Community

Bancorp and United Community Bank as reorganized, which would require a change in the offering range. A

change in the offering range would result in a change in the net proceeds realized by United Community Bancorp

from the sale of the common stock. If the reorganization is terminated, United Community Bank would be

required to charge all reorganization expenses against current income.

The Office of Thrift Supervision has approved our plan of reorganization and stock issuance, subject to,

among other things, approval of the plan of reorganization and stock issuance by United Community Bank’s

members. The plan of reorganization and stock issuance also provides for the establishment of the United

Community Bank Charitable Foundation and our funding of the foundation with 1.9% of the shares of our

common stock issued in the reorganization. The establishment of the United Community Bank Charitable

Foundation is subject to a separate vote of United Community Bank’s members. The special meeting of United

Community Bank’s members has been called for this purpose on , 2006.

The following is a brief summary of the pertinent aspects of the reorganization. A copy of the plan of

reorganization and stock issuance is available from United Community Bank upon request and is available for

inspection at the offices of United Community Bank and at the Office of Thrift Supervision. The plan of

reorganization and stock issuance is also filed as an exhibit to the registration statement, of which this prospectus

forms a part, that United Community Bancorp has filed with the Securities and Exchange Commission. See

“Where You Can Find More Information.”

Reasons for the Reorganization

After considering the advantages and disadvantages of the reorganization, the Board of Directors of

United Community Bank unanimously approved the reorganization as being in the best interests of United

Community Bank and its members. The Board of Directors concluded that the reorganization offers a number of

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advantages that will be important to United Community Bank’s future growth and performance and that outweigh

the disadvantages of the reorganization.

The reorganization will result in the raising of additional capital for United Community Bancorp and

United Community Bank, which will support United Community Bank’s future lending and operational growth

and may also support possible future branching activities or the acquisition of other financial institutions or

financial service companies or their assets. As a subsidiary of a mutual holding company with a mid-tier stock

holding company, United Community Bank will have greater flexibility in structuring mergers and acquisitions,

including the form of consideration paid in a transaction. The current mutual structure, by its nature, limits any

ability to offer any common stock as consideration in a merger or acquisition. The new mutual holding company

structure will enhance United Community Bank’s ability to compete with other bidders when acquisition

opportunities arise by better enabling it to offer stock or cash consideration, or a combination of the two. Since

United Community Bancorp will not be offering all of its common stock for sale in the offering, the reorganization

will result in less capital raised in comparison to a standard mutual-to-stock conversion. Therefore, the

reorganization permits United Community Bank to control the amount of capital being raised, while at the same

time enabling United Community Bank to continue to grow its lending and investment activities. United

Community Bank will be able to raise additional capital in the future should United Community MHC consummate

a “second-step” conversion to stock form.

The reorganization will afford United Community Bank’s officers and employees the opportunity to

become stockholders, which United Community Bank believes to be an effective performance incentive and an

effective means of attracting and retaining qualified personnel. The reorganization also will provide United

Community Bank’s customers and local community members with an opportunity to acquire United Community

Bancorp’s common stock.

The disadvantages of the reorganization considered by United Community Bank’s Board of Directors are

the additional expense and effort of operating as a public company, the inability of stockholders other than United

Community MHC to obtain majority ownership of United Community Bancorp and United Community Bank,

which may result in the perpetuation of our management and board of directors, and the corporate ownership and

regulatory policies relating to the mutual holding company structure that may be adopted from time to time that

may have an adverse impact on stockholders other than United Community MHC. A majority of our voting stock

will be owned by United Community MHC, which will be controlled by its board of directors. While this structure

will permit management to focus on our long-term business strategy for growth and capital deployment without

undue pressure from stockholders, it will also serve to perpetuate our existing management and directors. United

Community MHC will be able to elect all the members of United Community Bancorp’s board of directors, and

will be able to control the outcome of most matters presented to our stockholders for resolution by vote. The

matters as to which stockholders other than United Community MHC will be able to exercise voting control are

limited and include any proposal to implement an equity incentive plan. No assurance can be given that United

Community MHC will not take action adverse to the interests of other stockholders. For example, United

Community MHC could prevent the sale of control of United Community Bancorp, or defeat a candidate for the

board of directors of United Community Bancorp or other proposals put forth by stockholders.

The reorganization does not preclude the conversion of United Community MHC from the mutual to stock

form of organization in the future. No assurance can be given when, if ever, United Community MHC will convert

to stock form or what conditions the Office of Thrift Supervision or other regulatory agencies may impose on such

a transaction. See “Risk Factors” and “Summary — Possible Conversion of United Community MHC to Stock

Form.”

Description of the Plan of Reorganization and Stock Issuance

Following receipt of all required regulatory approvals and approval of the plan of reorganization and stock

issuance by United Community Bank’s members, the reorganization will be effected as follows or in any other

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manner approved by the Office of Thrift Supervision that is consistent with the purposes of the plan of

reorganization and stock issuance and applicable laws and regulations:

•

United Community Bank will organize an interim federal stock savings bank as a wholly owned

subsidiary (“Interim One”);

•

Interim One will organize United Community Bancorp, a federal stock corporation, as a wholly

owned subsidiary;

•

Interim One will then organize an interim federal savings bank as a wholly owned subsidiary

(“Interim Two”);

•

United Community Bank will exchange its charter to a federal stock savings bank charter and

Interim One will exchange its charter for a federal mutual holding company charter to become

United Community MHC;

•

Interim Two will merge with and into United Community Bank with United Community Bank in

stock form surviving as a subsidiary of United Community MHC;

•

former members of United Community Bank will become members of United Community MHC;

•

United Community MHC will contribute 100.0% of the issued common stock of United

Community Bank to United Community Bancorp; and

•

the shares of United Community Bancorp common stock issued to United Community MHC

under step (2) will be cancelled and United Community Bancorp will issue a majority of its

common stock to United Community MHC.

Concurrently with the reorganization, United Community Bancorp will sell up to 43.1% of its common

stock representing up to 43.1% of the pro forma market value of United Community Bank on a fully converted

basis. United Community Bank intends to capitalize United Community MHC with $100,000 in cash.

As a result of the reorganization, United Community Bank will be organized in stock form and will be

wholly owned by United Community Bancorp. The legal existence of United Community Bank will not terminate

as a result of the reorganization. Instead, United Community Bank in stock form will be a continuation of United

Community Bank in mutual form. All property of United Community Bank, including its right, title and interest

in all property of any kind and nature, interest and asset of every conceivable value or benefit then existing or

pertaining to United Community Bank, or which would inure to United Community Bank immediately by

operation of law and without the necessity of any conveyance or transfer and without any further act or deed, will

vest in United Community Bank in stock form. United Community Bank in stock form will have, hold and enjoy

the same in its right and fully and to the same extent as the same was possessed, held and enjoyed by United

Community Bank in the mutual form. United Community Bank in stock form will continue to have, succeed to

and be responsible for all the rights, liabilities and obligations of United Community Bank in the mutual form and

will maintain its headquarters and operations at United Community Bank’s present locations.

Effects of Reorganization on Deposits, Borrowers and Members

Continuity. During the reorganization process, the normal business of United Community Bank will

continue without interruption, including continued regulation by the Office of Thrift Supervision and the Federal

Deposit Insurance Corporation. After reorganization, United Community Bank will continue to provide services

for depositors and borrowers under current policies by its present management and staff.

The directors of United Community Bank who adopted the plan of reorganization and stock issuance and

who continue to be directors of United Community Bank at the time of reorganization will serve as directors of

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United Community Bank after the reorganization. The Board of Directors of United Community Bancorp and

United Community MHC will be composed solely of the individuals who serve on the Board of Directors of United

Community Bank. All officers of United Community Bank at the time of reorganization will retain their positions

after the reorganization.

Deposit Accounts and Loans. The reorganization will not affect any deposit accounts or borrower

relationships with United Community Bank. All deposit accounts in United Community Bank after the

reorganization will continue to be insured up to the legal maximum by the Federal Deposit Insurance Corporation

in the same manner as such deposit accounts were insured immediately before the reorganization. The

reorganization will not change the interest rate or the maturity of deposits at United Community Bank.

After the reorganization, each depositor of United Community Bank will have both a deposit account in

United Community Bank and a pro rata ownership interest in the equity of United Community MHC based upon

the balance in the depositor’s account. This ownership interest is tied to the depositor’s account, has no tangible

market value separate from the deposit account and may only be realized in the event of a liquidation of United

Community MHC. Any depositor who opens a deposit account obtains a pro rata ownership interest in the equity

of United Community MHC without any additional payment beyond the amount of the deposit. A depositor who

reduces or closes his or her account receives the balance in the account but receives nothing for his or her

ownership interest in the equity of United Community MHC, which is lost to the extent that the balance in the

account is reduced. Consequently, depositors of United Community MHC have no way to realize the value of their

ownership interest in United Community MHC, except in the unlikely event that United Community MHC is

liquidated.

After the reorganization, all loans of United Community Bank will retain the same status that they had

before the reorganization. The amount, interest rate, maturity and security for each loan will remain as they were

contractually fixed prior to the reorganization.

Effect on Voting Rights of Members. After the reorganization, the direction of United Community

Bank will continue to be under the control of its board of directors. United Community Bancorp, as the holder of

all of the outstanding common stock of United Community Bank, will have exclusive voting rights with respect to

any matters concerning United Community Bank requiring stockholder approval, including the election of

directors.

After the reorganization, stockholders of United Community Bancorp will have exclusive voting rights

with respect to any matters concerning United Community Bancorp requiring stockholder approval. By virtue of

its ownership of a majority of the outstanding shares of common stock of United Community Bancorp, United

Community MHC will be able to control the outcome of most matters presented to the stockholders for resolution

by vote. However, United Community MHC will not be able to control the vote for merger and sale transactions,

second-step transactions and implementation of equity incentive plans, all of which would require the approval by

the stockholders other than United Community MHC.

As a federally chartered mutual holding company, United Community MHC will have no authorized

capital stock and, thus, no stockholders. Holders of deposit accounts of United Community Bank will become

members of United Community MHC. Such persons will be entitled to vote on all questions requiring action by

the members of United Community MHC, including the election of directors of United Community MHC. In

addition, all persons who become depositors of United Community Bank following the reorganization will have

membership rights with respect to United Community MHC. Borrowers of United Community Bank who were

borrower members of United Community Bank at the time of the reorganization will not become members of

United Community MHC. Borrowers will not receive membership rights in connection with any new borrowings

made after the reorganization.

Effect on Liquidation Rights. In the unlikely event of a complete liquidation of United Community

Bank before the completion of the reorganization, each depositor would receive a pro rata share of any assets of

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United Community Bank remaining after payment of expenses and satisfaction of claims of all creditors. Each

depositor’s pro rata share of such liquidating distribution would be in the same proportion as the value of such

depositor’s deposit account was to the total value of all deposit accounts in United Community Bank at the time of

liquidation.

In the unlikely event of a complete liquidation of United Community Bank after the reorganization, each

depositor would have a claim as a creditor of the same general priority as the claims of all other general creditors

of United Community Bank. Except as described below, a depositor’s claim would be solely for the amount of the

balance in such depositor’s deposit account plus accrued interest. Such depositor would not have an interest in the

value or assets of United Community Bank above that amount. Instead, the holder of United Community Bank’s

common stock (i.e., United Community Bancorp) would be entitled to any assets remaining upon a liquidation of

United Community Bank.

In the unlikely event of a complete liquidation of United Community Bancorp after the reorganization, the

stockholders of United Community Bancorp, including United Community MHC, would be entitled to receive the

remaining assets of United Community Bancorp, following payment of all debts, liabilities and claims of greater

priority of or against United Community Bancorp.

In the unlikely event of a complete liquidation of United Community MHC after the reorganization, all

depositors of United Community Bank at that time will be entitled, pro rata to the value of their deposit accounts,

to a distribution of any assets of United Community MHC remaining after payment of all debts and claims of

creditors. Any “second step” conversion of United Community MHC to stock form would not be considered a

liquidation.

There are no plans to liquidate United Community Bank, United Community Bancorp or United

Community MHC in the future.

Material Income Tax Consequences

Although the reorganization may be effected in any manner approved by the Office of Thrift Supervision

that is consistent with the purposes of the plan of reorganization and stock issuance and applicable law, regulations

and policies, it is intended that the reorganization will be effected through a merger. Completion of the

reorganization is conditioned upon prior receipt of either a ruling or an opinion of counsel with respect to federal

tax laws, and either a ruling or an opinion with respect to Indiana tax laws, that no gain or loss will be recognized

by United Community Bank, United Community Bancorp or United Community MHC as a result of the

reorganization or by account holders receiving subscription rights, except to the extent, if any, that subscription

rights are deemed to have fair market value on the date such rights are issued. United Community Bank believes

that the tax opinions summarized below address all material federal income tax consequences that are generally

applicable to United Community Bank, United Community Bancorp and United Community MHC and persons

receiving subscription rights.

Muldoon Murphy & Aguggia LLP has issued an opinion to United Community Bank that, for federal

income tax purposes, concludes that:

•

the reorganization will constitute a reorganization under Internal Revenue Code section

368(a)(1)(F), and United Community Bank (in either its mutual form (the “Mutual Bank”) or its

stock form (the “Stock Bank”) will recognize no gain or loss as a result of the reorganization;

•

the basis of each asset of the Mutual Bank received by the Stock Bank in the reorganization will

be the same as the Mutual Bank’s basis for such asset immediately before the reorganization;

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•

the holding period of each asset of the Mutual Bank received by the Stock Bank in the
reorganization will include the period during which such asset was held by the Mutual Bank

before the reorganization;

•

for purposes of Internal Revenue Code section 381(b), the Stock Bank will be treated as if there
had been no reorganization and, accordingly, the taxable year of the Mutual Bank will not end on

the effective date of the reorganization and the tax attributes of the Mutual Bank (subject to

application of Internal Revenue Code sections 381, 382 and 384) will be taken into account by

the Stock Bank as if the reorganization had not occurred;

•

the Mutual Bank’s members will recognize no gain or loss upon their constructive receipt of
shares of the Stock Bank common stock solely in exchange for their mutual ownership interest in

the Mutual Bank;

•

no gain or loss will be recognized by members of the Mutual Bank upon the issuance to them of
deposits in the Stock Bank in the same dollar amount as their deposits in the Mutual Bank;

•

with respect to the members of the Mutual Bank’s exchange of the stock of the Stock Bank
constructively received for the mutual ownership interests in United Community MHC, the

exchange will qualify as an exchange of property for stock under Internal Revenue Code Section

351, the initial stockholders of the Stock Bank will recognize no gain or loss upon the

constructive transfer to United Community MHC of the shares of the Stock Bank they

constructively received and United Community MHC will recognize no gain or loss upon its

receipt of the common stock of the Stock Bank in exchange for mutual ownership interests in the

Mutual Bank;

•

with respect to United Community MHC’s transfer of 100.0% of the common stock of the Stock
Bank to United Community Bancorp, United Community Bancorp will recognize no gain or loss

upon its transfer of 100.0% of the common stock of the Stock Bank from United Community

MHC and United Community MHC will recognize no gain or loss upon its transfer of 100.0% of

the common stock of the Stock Bank from United Community MHC to United Community

Bancorp;

•

it is more likely than not that the fair market value of the non-transferable subscription rights to
purchase shares of common stock of United Community Bancorp to be issued to eligible account

holders, supplemental eligible account holders and other members is zero and, accordingly, that

no income will be realized by eligible account holders, supplemental eligible account holders and

other members upon the issuance to them of the subscription rights or upon the exercise of the

subscription rights;

•

it is more likely than not that the tax basis to the holders of shares of common stock purchased in
the reorganization pursuant to the exercise of the subscription rights will be the amount paid

therefor, and that the holding period for such shares of common stock will begin on the date of

completion of the reorganization; and

•

the holding period for shares of common stock purchased in the community offering or
syndicated community offering will begin on the day after the date of the purchase.

The opinions set forth in the 9^th and 10^th bullet points above are based on the position that the subscription

rights do not have any market value at the time of distribution or at the time they are exercised. Whether

subscription rights have a market value for federal income tax purposes is a question of fact, depending upon all

relevant facts and circumstances. According to our counsel, the Internal Revenue Service will not issue rulings on

whether subscription rights have a market value. Counsel has also advised us that they are unaware of any

instance in which the Internal Revenue Service has taken the position that nontransferable subscription rights

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issued by a converting financial institution have a market value. Counsel also noted that the subscription rights

will be granted at no cost to the recipients, will be nontransferable and of short duration, and will afford the

recipients the right only to purchase United Community Bancorp common stock at a price equal to its estimated

fair market value, which will be the same price as the purchase price for the unsubscribed shares of common stock.

Unlike a private letter ruling issued by the Internal Revenue Service, an opinion of counsel is not binding

on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached in

the opinion. If there is a disagreement, no assurance can be given that the conclusions reached in an opinion of

counsel would be sustained by a court if contested by the Internal Revenue Service.

United Community Bank has also received an opinion from Clark, Schaefer, Hackett & Co., Cincinnati,

Ohio, that, assuming the reorganization does not result in any federal income tax liability to United Community

Bank, its account holders, or United Community Bancorp, implementation of the plan of reorganization and stock

issuance will not result in any Indiana income tax liability to those entities or persons.

The opinions of Muldoon Murphy & Aguggia LLP and Clark, Schaefer, Hackett & Co., are filed as

exhibits to the registration statement that United Community Bancorp has filed with the Securities and Exchange

Commission. See “Where You Can Find More Information.”

Subscription Offering and Subscription Rights

Under the plan of reorganization and stock issuance, United Community Bank has granted rights to

subscribe for United Community Bancorp common stock to the following persons in the following order of priority:

•

Persons with deposits in United Community Bank with balances aggregating $50 or more

(“qualifying deposits”) as of August 31, 2004 (“eligible account holders”). For this purpose,

deposit accounts include all savings, time and demand accounts.

•

United Community Bank’s employee stock ownership plan.

•

Persons with qualifying deposits in United Community Bank as of December 31, 2005

(“supplemental eligible account holders”).

•

Depositors of United Community Bank as of , 2006 (“other members”).

The amount of common stock that any person may purchase will depend on the availability of the

common stock after satisfaction of all subscriptions having prior rights in the subscription offering and to the

maximum and minimum purchase limitations set forth in the plan of reorganization and stock issuance. See

“—Limitations on Purchases of Shares.” All persons on a joint account will be counted as a single depositor for

purposes of determining the maximum amount that may be subscribed for by owners of a joint account.

Category 1: Eligible Account Holders. Subject to the purchase limitation described below under

“—Limitations on Purchases of Shares,” each eligible account holder has the right to subscribe for up to the greater

of:

•

$150,000 of common stock (which equals 15,000 shares);

•

one-tenth of 1% of the total offering of common stock to persons other than United Community

MHC; or

•

15 times the product, rounded down to the next whole number, obtained by multiplying the total

number of shares of common stock to be sold by a fraction of which the numerator is the amount

of qualifying deposits of the eligible account holder and the denominator is the total amount of

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qualifying deposits of all eligible account holders. The balance of qualifying deposits of all

eligible account holders was $ million.

If there are insufficient shares to satisfy all subscriptions by eligible account holders, shares first will be

allocated so as to permit each subscribing eligible account holder, if possible, to purchase a number of shares

sufficient to make the person’s total allocation equal to 100 shares or the number of shares actually subscribed for,

whichever is less. After that, unallocated shares will be allocated among the remaining subscribing eligible

account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective

qualifying deposits bear to the total qualifying deposits of all remaining eligible account holders whose

subscriptions remain unfilled. Subscription rights of eligible account holders who are also executive officers or

directors of United Community Bancorp or United Community Bank or their associates will be subordinated to the

subscription rights of other eligible account holders to the extent attributable to increased deposits in United

Community Bank in the one year period preceding August 31, 2004.

To ensure a proper allocation of stock, each eligible account holder must list on his or her stock order and

certification form all deposit accounts in which such eligible account holder had an ownership interest at August

31, 2004. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a

subscriber’s stock allocation.

United Community Bank will strive to identify a subscriber’s ownership in all accounts, but cannot

guarantee that it will identify all accounts in which a subscriber may have an ownership interest.

Category 2: Tax-Qualified Employee Stock Benefit Plans. United Community Bank’s tax-

qualified employee benefit plans have the right to purchase up to 10.0% of the shares of common stock issued in

the reorganization to persons other than United Community MHC. As a tax-qualified employee benefit plan, the

employee stock ownership plan intends to purchase 3.92% of the shares issued in the reorganization, including

shares issued to United Community MHC and contributed to United Community Bank Charitable Foundation.

Subscriptions by the employee stock ownership plan will not be aggregated with shares of common stock purchased

by any other participants in the reorganization, including subscriptions by United Community Bank’s officers and

directors, for the purpose of applying the purchase limitations in the plan of reorganization. If eligible account

holders subscribe for all of the shares being sold, no shares will be available for our tax-qualified employee benefit

plans. However, if the number of shares offered for sale are increased above the maximum of the offering range,

the employee stock ownership plan will have a first priority right to purchase any shares exceeding that amount up

to 10% of the common stock issued in the reorganization to persons other than United Community MHC. If the

employee stock ownership plan’s subscription is not filled in its entirety, the employee stock ownership plan may

purchase shares in the open market or may purchase shares directly from United Community Bancorp with the

approval of the Office of Thrift Supervision.

Category 3: Supplemental Eligible Account Holders. Subject to the purchase limitation described

below under “—Limitations on Purchases of Shares,” each supplemental eligible account holder has the right to

subscribe for up to the greater of:

•

$150,000 of common stock (which equals 15,000 shares);

•

one-tenth of 1.0% of the total offering of common stock to persons other than United Community

MHC; or

•

15 times the product, rounded down to the next whole number, obtained by multiplying the total

number of shares of common stock to be sold by a fraction of which the numerator is the amount

of qualifying deposits of the supplemental eligible account holder and the denominator is the

total amount of qualifying deposits of all supplemental eligible account holders. The balance of

qualifying deposits of all supplemental eligible account holders was $ million.

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If eligible account holders and United Community Bank’s employee stock ownership plan subscribe for all

of the shares being sold by United Community Bancorp, no shares will be available for supplemental eligible

account holders. If shares are available for supplemental eligible account holders but there are insufficient shares

to satisfy all subscriptions by supplemental eligible account holders, shares first will be allocated so as to permit

each subscribing supplemental eligible account holder, if possible, to purchase a number of shares sufficient to

make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is

less. After that, unallocated shares will be allocated among the remaining subscribing supplemental eligible

account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective

qualifying deposits bear to the total qualifying deposits of all remaining supplemental eligible account holders

whose subscriptions remain unfilled.

To ensure a proper allocation of stock, each supplemental eligible account holder must list on his or her

stock order and certification form all deposit accounts in which such supplemental eligible account holder had an

ownership interest at December 31, 2005. Failure to list an account, or providing incorrect information, could

result in the loss of all or part of a subscriber’s stock allocation.

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Category 4: Other Members. Subject to the purchase limitations as described below under

“–Limitations on Purchases of Shares,” each other member of United Community Bank has the right to purchase

up to the greater of $150,000 of common stock (which equals 15,000 shares) or one-tenth of 1.0% of the total

offering of common stock issued to persons other than United Community MHC. If eligible account holders, the

employee stock ownership plan and supplemental eligible account holders subscribe for all of the shares being sold,

no shares will be available for other members. If shares are available for other members but there are not sufficient

shares to satisfy all subscriptions by other members, shares first will be allocated so as to permit each subscribing

other member, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100

shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be

allocated among the remaining subscribing other members in the proportion that each other member’s subscription

bears to the total subscriptions of all such subscribing other members whose subscriptions remain unfilled.

To ensure a proper allocation of stock, each other member must list on his or her stock order and

certification form all deposit accounts in which such other member had an ownership interest at ,

2006. Failure to list an account or loan, or providing incorrect information, could result in the loss of all or part of

a subscriber’s stock allocation.

Expiration Date for the Subscription Offering. The subscription offering and all subscription

rights under the plan of reorganization and stock issuance is expected to terminate at 12:00 noon, Eastern time, on

[Expiration Date]. We will not accept orders for common stock in the subscription offering received after

that time. We will make reasonable attempts to provide a prospectus and related offering materials to holders of

subscription rights; however, all subscription rights will expire on the expiration date whether or not we have been

able to locate each person entitled to subscription rights.

Office of Thrift Supervision regulations require that we complete the sale of common stock within 45 days

after the close of the subscription offering. If the sale of the common stock is not completed within that period, all

funds received will be returned promptly with interest, at United Community Bank’s statement savings rate and all

withdrawal authorizations will be canceled unless we receive approval of the Office of Thrift Supervision to extend

the time for completing the offering. If regulatory approval of an extension of the time period has been granted, we

will notify all subscribers of the extension and of the duration of any extension that has been granted, and

subscribers will have the right to modify or rescind their purchase orders. If we do not receive an affirmative

response from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will

be returned promptly with interest, or withdrawal authorizations will be canceled. No single extension can exceed

90 days, and all extensions in the aggregate may not last beyond [Expiration Date #2].

Persons in Non-Qualified States. We will make reasonable efforts to comply with the securities laws

of all states in the United States in which persons entitled to subscribe for stock under the plan of reorganization

and stock issuance reside. However, we are not required to offer stock in the subscription offering to any person

who resides in a foreign country or who resides in a state of the United States in which (1) only a small number of

persons otherwise eligible to subscribe for shares of common stock reside; (2) the granting of subscription rights or

the offer or sale of shares to such person would require that we or our officers or directors register as a broker,

dealer, salesman or selling agent under the securities laws of the state, or register or otherwise qualify the

subscription rights or common stock for sale or qualify as a foreign corporation or file a consent to service of

process; or (3) we determine that compliance with that state’s securities laws would be impracticable for reasons of

cost or otherwise.

Restrictions on Transfer of Subscription Rights and Shares. Subscription rights are

nontransferable. You may not transfer, or enter into any agreement or understanding to transfer, the legal or

beneficial ownership of your subscription rights issued under the plan of reorganization and stock issuance or the

shares of common stock to be issued upon exercise of your subscription rights. Your subscription rights may be

exercised only by you and only for your own account. If you exercise your subscription rights, you will be required

to certify that you are purchasing shares solely for your own account and that you have no agreement or

understanding regarding the sale or transfer of such shares. Federal regulations also prohibit any person from

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offering, or making an announcement of an offer or intent to make an offer, to purchase such subscription rights or

shares of common stock before the completion of the reorganization.

If you sell or otherwise transfer your rights to subscribe for common stock in the subscription offering or

subscribe for common stock on behalf of another person, you may forfeit those rights and face possible further

sanctions and penalties imposed by the Office of Thrift Supervision or another agency of the U.S. Government.

We will pursue any and all legal and equitable remedies in the event we become aware of the transfer of

subscription rights and will not honor orders known by us to involve the transfer of such rights.

Community Offering

To the extent that shares remain available for purchase after satisfaction of all subscriptions received in

the subscription offering, we may offer shares pursuant to the plan of reorganization and stock issuance in a

community offering to the following persons in the following order of priority:

•

Natural persons and trusts of natural persons who are residents of Dearborn County, Indiana; and

•

Other persons to whom United Community Bank delivers a prospectus.

We will consider persons to be residing in Dearborn County, Indiana, if they occupy a dwelling in the

county and establish a physical presence in the county that is not merely transitory in nature. We may utilize

depositor or loan records or other evidence provided to us to make a determination as to whether a person is a

resident in one of the specified counties. In all cases, the determination of residence status will be made by us in

our sole discretion.

Purchasers in the community offering are eligible to purchase up to $150,000 of common stock (which

equals 15,000 shares). To the extent practicable, and subject to the preferred subscriber preference and various

purchase limitations, orders for the common stock in the community offering shall first be filled to a maximum of

2.0% of the total number of shares of common stock sold in the offering, and thereafter any remaining shares shall

be allocated on an equal number of shares basis per order until all orders have been filled. If shares are available

for preferred subscribers in the community offering but there are insufficient shares to satisfy all orders, the

available shares will be allocated first to each preferred subscriber whose order we accept in an amount equal to the

lesser of 100 shares or the number of shares ordered by each such subscriber, if possible. After that, unallocated

shares will be allocated among the remaining preferred subscribers whose orders remain unsatisfied in the same

proportion that the unfilled order of each such subscriber bears to the total unfilled orders of all such subscribers.

If, after filling the orders of preferred subscribers in the community offering, shares are available for other

subscribers in the community offering but there are insufficient shares to satisfy all orders, shares will be allocated

in the same manner as for preferred subscribers.

The community offering, if held, may commence concurrently with, during or after, the subscription

offering and will terminate no later than 45 days after the close of the subscription offering unless extended by us,

with the approval of the Office of Thrift Supervision. If we receive regulatory approval for an extension, all

subscribers will be notified of the extension and of the duration of any extension that has been granted, and will

have the right to confirm, increase, decrease or rescind their orders. If we do not receive an affirmative response

from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will be

returned promptly with interest.

The opportunity to subscribe for shares of common stock in the community offering is subject to our

right in our sole discretion to reject orders, in whole or part, either at the time of receipt of an order or as

soon as practicable following the expiration date of the offering. If your order is rejected in part, you will

not have the right to cancel the remainder of your order.

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Syndicated Community or Underwritten Public Offering

The plan of reorganization and stock issuance provides that, if necessary, all shares of common stock not

purchased in the subscription offering and community offering may be offered for sale to the general public in a

syndicated community offering to be managed by Keefe, Bruyette & Woods, Inc., acting as our agent. In such

capacity, Keefe, Bruyette & Woods, Inc. may form a syndicate of broker-dealers. Alternatively, we may sell any

remaining shares in an underwritten public offering. However, we retain the right to accept or reject, in whole or

in part, any orders in the syndicated community offering or underwritten public offering. Neither Keefe, Bruyette

& Woods, Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the

common stock in the syndicated community offering; however, Keefe, Bruyette & Woods, Inc. has agreed to use its

best efforts in the sale of shares in any syndicated community offering. The syndicated community offering would

terminate no later than 45 days after the expiration of the subscription offering, unless extended by us, with

approval of the Office of Thrift Supervision. See “—Community Offering” above for a discussion of rights of

subscribers in the event an extension is granted.

Common stock sold in the syndicated community offering also will be sold at the $10.00 per share

purchase price. Purchasers in the syndicated community offering are eligible to purchase up to $150,000 of

common stock (which equals 15,000 shares). Orders for common stock in the syndicated community offering will

be filled first to a maximum of 2.0% of the total number of shares sold in the offering and thereafter any remaining

shares will be allocated on an equal number of shares basis per order until all orders have been filled. However, no

fractional shares will be issued. We may begin the syndicated community offering or underwritten public offering

at any time following the commencement of the subscription offering.

The opportunity to subscribe for shares of common stock in the syndicated community offering or

underwritten public offering is subject to our right in our sole discretion to accept or reject orders, in whole

or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the

offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.

If we are unable to find purchasers from the general public for all unsubscribed shares, we will make other

purchase arrangements, if feasible. Other purchase arrangements must be approved by the Office of Thrift

Supervision and may provide for purchases by directors, officers, their associates and other persons in excess of the

limitations provided in the plan of reorganization and stock issuance and in excess of the proposed director

purchases discussed earlier, although no purchases are currently intended. If other purchase arrangements cannot

be made, we may either: terminate the stock offering and promptly return all funds; set a new offering range,

notify all subscribers and give them the opportunity to place a new order for shares of United Community Bancorp

common stock; or take such other actions as may be permitted by the Office of Thrift Supervision.

Limitations on Purchases of Shares

The plan of reorganization and stock issuance imposes limitations upon the purchase of common stock by

eligible subscribers and others in the reorganization. In addition to the purchase limitations described above under

“—Subscription Offering and Subscription Rights,” “—Community Offering” and “—Syndicated Community

Offering,” the plan of reorganization and stock issuance provides for the following purchase limitations:

•

The aggregate amount of our outstanding common stock owned or controlled by persons other
than United Community MHC at the close of the offering shall be less than 50.0% of our total

outstanding common stock.

•

Except for our tax-qualified employee stock benefit plans, no person, either alone or together
with associates of or persons acting in concert with such person, may purchase in the aggregate

more than $650,000 of the common stock (which equals 65,000 shares), subject to increase as described below.

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•

Each subscriber must subscribe for a minimum of 25 shares.

•

The aggregate amount of common stock acquired in the offering by any non-tax-qualified
employee stock benefit plan or any management person and his or her associates, shall not

exceed 4.9% of the (i) outstanding shares of common stock at the conclusion of the offering; or

(ii) the stockholders’ equity of United Community Bancorp at the conclusion of the offering. In

calculating the number of shares held by management persons and their associates, shares held

by any tax-qualified or non-tax-qualified employee stock benefit plan that are attributable to such

person will not be counted.

•

The aggregate amount of common stock acquired in the offering by any one or more tax-qualified
employee stock benefit plans, exclusive of any shares of United Community Bancorp common

stock acquired by such plans in the secondary market, shall not exceed 4.9% of (i) the

outstanding shares of United Community Bancorp common stock at the conclusion of the

offering; or (ii) the stockholders’ equity of United Community Bancorp at the conclusion of the

offering.

•

The aggregate amount of common stock acquired in the offering by all of our stock benefit plans,
other than employee stock ownership plans, shall not exceed 25.0% of the outstanding common

stock held by persons other than United Community MHC.

•

The aggregate amount of common stock acquired in the offering by all non-tax-qualified
employee stock benefit plans or management persons and their associates, exclusive of any

common stock acquired by such plans or management persons and their associates in the

secondary market, shall not exceed 29.0% of (i) the outstanding shares of United Community

Bancorp common stock held by persons other than United Community MHC at the conclusion of

the offering; or (ii) the stockholders’ equity of United Community Bancorp held by persons other

than United Community MHC at the conclusion of the offering. In calculating the number of

shares held by management persons and their associates, shares held by any tax-qualified or non-

tax-qualified employee stock benefit plan that are attributable to such person will not be counted.

We may, in our sole discretion, increase the individual or aggregate purchase limitation to up to 5.0% of

the shares of common stock sold in the offering to persons other than United Community MHC. We do not intend

to increase the maximum purchase limitation unless market conditions warrant an increase in the maximum

purchase limitation and we do not sell shares in excess of the minimum of the offering range. If we decide to

increase the purchase limitations, persons who subscribed for the maximum number of shares of common stock

will be given the opportunity to increase their subscriptions accordingly, subject to the rights and preferences of

any person who has priority subscription rights. If we increase the maximum purchase limitation to 5.0% of the

shares of common stock sold in the offering to persons other than United Community MHC, we may in our

discretion further increase this limitation to 9.99% provided that orders for common stock exceeding 5.0% shall

not exceed in the aggregate 10.0% of the shares of common stock sold in the offering to persons other than United

Community MHC.

The plan of reorganization and stock issuance defines “acting in concert” to mean knowing participation

in a joint activity or interdependent conscious parallel action towards a common goal whether or not by an express

agreement or understanding; or a combination or pooling of voting or other interests in the securities of an issuer

for a common purpose under any contract, understanding, relationship, agreement or other arrangement, whether

written or otherwise. In general, a person or company that acts in concert with another party will also be deemed

to be acting in concert with any person who is also acting in concert with that other party. We may presume that

certain persons are acting in concert based upon, among other things, joint account relationships and the fact that

persons may have filed joint Schedules 13D or 13G with the Securities and Exchange Commission with respect to

other companies. For purposes of the plan of reorganization and stock issuance, our directors are not deemed to be

acting in concert solely by reason of their Board membership.

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The plan of reorganization and stock issuance defines “associate,” with respect to a particular person, to

mean:

•

a corporation or organization other than United Community MHC, United Community Bancorp or

United Community Bank or a majority-owned subsidiary of United Community MHC, United

Community Bancorp or United Community Bank of which a person is a senior officer or partner

or is, directly or indirectly, the beneficial owner of 10.0% or more of any class of equity securities

of such corporation or organization;

•

a trust or other estate in which a person has a substantial beneficial interest or as to which a
person serves as trustee or in a similar fiduciary capacity; and

•

a relative or spouse of a person, or any relative of a spouse, who either has the same home as a
person or who is a director or officer of United Community MHC, United Community Bancorp or

United Community Bank or any of their subsidiaries.

For example, a corporation of which a person serves as a senior officer would be an associate of that

person and, therefore, all shares purchased by the corporation would be included with the number of shares that the

person could purchase individually under the purchase limitations described above. We have the right in our sole

discretion to reject any order submitted by a person whose representations we believe to be false or who we

otherwise believe, either alone or acting in concert with others, is violating or circumventing, or intends to violate

or circumvent, the terms and conditions of the plan of reorganization and stock issuance. Directors and officers

are not treated as associates of each other solely by virtue of holding such positions. We have the sole discretion to

determine whether prospective purchasers are “associates” or “acting in concert.”

Marketing Arrangements

We have retained Keefe, Bruyette & Woods, Inc. to consult with and advise and assist us, on a best efforts

basis, in the distribution of shares in the offering. Keefe, Bruyette & Woods, Inc. is a broker-dealer registered with

the Securities and Exchange Commission and a member of the National Association of Securities Dealers, Inc.

Keefe, Bruyette & Woods, Inc. will assist us in the reorganization by acting as marketing advisor with respect to

the subscription offering and will represent us as placement agent on a best efforts basis in the sale of the common

stock in the community offering if one is held. The services that Keefe, Bruyette & Woods, Inc. will provide

include, but are not limited to:

•

training our employees who will perform ministerial functions in the subscription offering and

community offering regarding the mechanics and regulatory requirements of the stock offering

process;

•

managing the stock information center by assisting interested stock subscribers and by keeping

records of all stock orders;

•

preparing marketing materials; and

•

assisting in the solicitation of proxies from United Community Bank’s members for use at the

special meeting (Keefe, Bruyette & Woods, Inc. may hire a separate proxy solicitor to assist in

the solicitation of proxies).

For these services, Keefe, Bruyette & Woods, Inc. will receive a fee of 1.5% of the aggregate dollar

amount of the common stock sold in the subscription and community offerings to persons other than the employee

stock ownership plan and directors, officers and employees of United Community Bank or their immediate

families. Keefe, Bruyette & Woods, Inc. will also not receive any fee on the aggregate dollar amount of the

common stock contributed to the charitable foundation. We have made an advance payment of $50,000 to Keefe,

Bruyette & Woods, Inc. for expenses. We will also reimburse Keefe, Bruyette & Woods, Inc. for its legal fees and

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expenses associated with its marketing effort, up to a maximum of $50,000. If there is a syndicated community

offering, the total fees paid to Keefe, Bruyette & Woods, Inc. and other NASD member firms in the syndicated

community offering will not exceed 5.5% of the aggregate dollar amount of the common stock sold in the

syndicated community offering.

Keefe, Bruyette & Woods, Inc. has not prepared any report or opinion constituting a recommendation or

advice to us or to persons who subscribe for stock, nor has it prepared an opinion as to the fairness to us of the

purchase price or the terms of the stock to be sold. Keefe, Bruyette & Woods, Inc. expresses no opinion as to the

prices at which common stock to be issued may trade. Keefe, Bruyette & Woods, Inc. and selected dealers

participating in the syndicated community offering may receive a commission in the syndicated community

offering in a maximum amount to be agreed upon by us to reflect market requirements at the time of the allocation

of shares in the syndicated community offering.

We have also agreed to indemnify Keefe, Bruyette & Woods, Inc. against liabilities and expenses,

including legal fees, incurred in connection with certain claims or litigation arising out of or based upon untrue

statements or omissions contained in the offering materials for the common stock, including liabilities under the

Securities Act of 1933 and the performance of Keefe, Bruyette & Woods, Inc. of its services in connection with the

reorganization.

Description of Sales Activities

United Community Bancorp will offer the common stock in the subscription offering and community

offering principally by the distribution of this prospectus and through activities conducted at our stock information

center. The stock information center is expected to operate during normal business hours throughout the

subscription offering and community offering. It is expected that at any particular time one or more Keefe,

Bruyette & Woods, Inc. employees will be working at the stock information center. Employees of Keefe, Bruyette

& Woods, Inc. will be responsible for mailing materials relating to the offering, responding to questions regarding

the reorganization and the offering and processing stock orders.

Sales of common stock will be made by registered representatives affiliated with Keefe, Bruyette &

Woods, Inc. or by the selected dealers managed by Keefe, Bruyette & Woods, Inc. United Community Bank’s

officers and employees may participate in the offering in clerical capacities, providing administrative support in

effecting sales transactions or, when permitted by state securities laws, answering questions of a mechanical nature

relating to the proper execution of the order form. United Community Bank’s officers may answer questions

regarding our business when permitted by state securities laws. Other questions of prospective purchasers,

including questions as to the advisability or nature of the investment, will be directed to registered representatives.

United Community Bank’s officers and employees have been instructed not to solicit offers to purchase common

stock or provide advice regarding the purchase of common stock.

None of United Community Bank’s officers, directors or employees will be compensated, directly or

indirectly, for any activities in connection with the offer or sale of securities issued in the reorganization.

None of United Community Bank’s personnel participating in the offering is registered or licensed as a

broker or dealer or an agent of a broker or dealer. United Community Bank’s personnel will assist in the above-

described sales activities under an exemption from registration as a broker or dealer provided by Rule 3a4-1

promulgated under the Securities Exchange Act of 1934. Rule 3a4-1 generally provides that an “associated person

of an issuer” of securities will not be deemed a broker solely by reason of participation in the sale of securities of

the issuer if the associated person meets certain conditions. These conditions include, but are not limited to, that

the associated person participating in the sale of an issuer’s securities not be compensated in connection with the

offering at the time of participation, that the person not be associated with a broker or dealer and that the person

observe certain limitations on his or her participation in the sale of securities. For purposes of this exemption,

“associated person of an issuer” is defined to include any person who is a director, officer or employee of the issuer

or a company that controls, is controlled by or is under common control with the issuer.

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Procedure for Purchasing Shares in the Subscription and Community Offerings

Use of Order Forms. To purchase shares in the subscription offering, you must submit a properly

completed and executed order form to United Community Bank by 12:00 noon, Eastern time, on [Expiration

Date]. Your order form must be accompanied by full payment for all of the shares subscribed for or include

appropriate authorization in the space provided on the order form for withdrawal of full payment from a deposit

account with United Community Bank. To purchase shares in the community offering, you must submit a properly

completed and executed order form to United Community Bank, accompanied by the required payment for each

share subscribed for, before the community offering terminates, which may be on, or at any time after, the end of

the subscription offering. We may, in our sole discretion, permit institutional investors to submit irrevocable

orders together with the legally binding commitment for payment and to thereafter pay for such shares of common

stock for which they subscribe in the community offering at any time before the 48 hours before the completion of

the reorganization. This payment may be made by wire transfer. Our interpretation of the terms and conditions of

the plan of reorganization and stock issuance and of the acceptability of the order forms will be final.

To ensure that your stock purchase eligibility and priority are properly identified, you must list all

accounts on the order form, giving all names in each account and the account number. We will strive to identify

your ownership in all accounts, but cannot guarantee we will identify all accounts in which you have ownership

interest.

We need not accept order forms that are received after the expiration of the subscription offering or

community offering, as the case may be, or that are executed defectively or that are received without full payment

or without appropriate withdrawal instructions. In addition, we are not obligated to accept orders submitted on

photocopied or facsimilied stock order and certification forms. We have the right to waive or permit the correction

of incomplete or improperly executed order forms, but do not represent that we will do so. Under the plan of

reorganization and stock issuance, our interpretation of the terms and conditions of the plan of reorganization and

stock issuance and of the order form will be final. Once received, an executed order form may not be modified,

amended or rescinded without our consent unless the reorganization has not been completed within 45 days after

the end of the subscription offering.

The reverse side of the order form contains a regulatorily mandated certification form. We will not accept

order forms on which the certification form is not executed. By executing and returning the certification form, you

will be certifying that you received this prospectus and acknowledging that the common stock is not a deposit

account and is not insured or guaranteed by the federal government. You also will be acknowledging that you

received disclosure concerning the risks involved in this offering. The certification form could be used as support

to show that you understand the nature of this investment.

To ensure that each purchaser in the subscription and community offerings receives a prospectus at least

48 hours before the end of the subscription and community offerings, as required by Rule 15c2-8 under the

Securities Exchange Act of 1934, no prospectus will be mailed any later than five days before that date or hand

delivered any later than two days before that date. Execution of the order form will confirm receipt or delivery

under Rule 15c2-8. Order forms will be distributed only when preceded or accompanied by a prospectus.

Payment for Shares. Payment for subscriptions may be made by check, bank draft or money order, or

by authorization of withdrawal from deposit accounts maintained with United Community Bank. Subscription

funds will be held by United Community Bank or, at our discretion, in an escrow account at an independent

insured depository institution. Appropriate means by which withdrawals may be authorized are provided on the

order form. No wire transfers or third party checks will be accepted. Interest will be paid on payments made by

check or money order at our statement savings rate from the date payment is received at the stock information

center until the completion or termination of the reorganization. If payment is made by authorization of

withdrawal from deposit accounts, the funds authorized to be withdrawn from a deposit account will continue to

accrue interest at the contractual rates until completion or termination of the reorganization, unless the certificate

matures after the date of receipt of the order form but before closing, in which case funds will earn interest at the

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statement savings rate from the date of maturity until the reorganization is completed or terminated, but a hold will

be placed on the funds, making them unavailable to the depositor until completion or termination of the

reorganization. When the reorganization is completed, the funds received in the offering will be used to purchase

the shares of common stock ordered. The shares of common stock issued in the reorganization cannot and will

not be insured by the Federal Deposit Insurance Corporation or any other government agency. If the

reorganization is not consummated for any reason, all funds submitted will be refunded promptly with interest, as

described above.

If a subscriber authorizes us to withdraw the amount of the purchase price from his or her deposit account,

we will do so as of the effective date of reorganization, though the account must contain the full amount necessary

for payment at the time the subscription order is received. We will waive any applicable penalties for early

withdrawal from certificate accounts. If the remaining balance in a certificate account is reduced below the

applicable minimum balance requirement at the time funds are actually transferred under the authorization, the

certificate will be canceled at the time of the withdrawal, without penalty, and the remaining balance will earn

interest at our statement savings rate.

We may, in our sole discretion, permit institutional investors to submit irrevocable orders together with

the legally binding commitment for payment and to thereafter pay for such shares of common stock for which they

subscribe in the community offering at any time before the 48 hours before the completion of the reorganization.

This payment may be made by wire transfer.

The employee stock ownership plan will not be required to pay for the shares subscribed for at the time it

subscribes, but rather may pay for shares of common stock subscribed for upon the completion of the

reorganization; provided that there is in force from the time of its subscription until that time, a loan commitment

from an unrelated financial institution or United Community Bancorp to lend to the employee stock ownership

plan, at that time, the aggregate purchase price of the shares for which it subscribed.

Individual retirement accounts maintained at United Community Bank do not permit investment in the

common stock. A depositor interested in using his or her individual retirement account funds to purchase common

stock must do so through a self-directed individual retirement account. Since we do not offer those accounts, we

will allow a depositor to make a trustee-to-trustee transfer of the individual retirement account funds to a trustee

offering a self-directed individual retirement account program with the agreement that the funds will be used to

purchase United Community Bancorp’s common stock in the offering. There will be no early withdrawal or

Internal Revenue Service interest penalties for transfers. The new trustee would hold the common stock in a self-

directed account in the same manner as United Community Bank now holds the depositor’s individual retirement

account funds. An annual administrative fee may be payable to the new trustee. Depositors interested in using

funds in an individual retirement account at United Community Bank to purchase common stock should contact

the stock information center as soon as possible so that the necessary forms may be forwarded for execution and

returned before the subscription offering ends. In addition, federal laws and regulations require that officers,

directors and 10% stockholders who use self-directed individual retirement account funds to purchase shares of

common stock in the subscription offering, make purchases for the exclusive benefit of individual retirement

accounts.

How We Determined the Offering Range and the $10.00 Purchase Price

Federal regulations require that the aggregate purchase price of the securities sold in connection with the

reorganization be based upon an estimated pro forma value of United Community Bancorp and United Community

Bank on a fully converted basis as determined by an independent appraisal. The term “fully converted” means that

the appraiser assumed that 100.0% of our stock had been sold to the public. We have retained Keller & Company,

Inc. which is experienced in the evaluation and appraisal of business entities, to prepare the independent appraisal.

Keller & Company will receive fees totaling $37,000 for its appraisal services, plus reasonable out-of-pocket

expenses not to exceed $800. We have agreed to indemnify Keller & Company under certain circumstances

against liabilities and expenses, including legal fees, arising out of, related to, or based upon the reorganization.

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Keller & Company prepared the appraisal taking into account the pro forma impact of the offering. For

its analysis, Keller & Company undertook substantial investigations to learn about our business and operations. We

supplied financial information, including annual financial statements, information on the composition of assets

and liabilities, and other financial schedules. In addition to this information, Keller & Company reviewed United

Community Bank’s reorganization and stock issuance applications as filed with the Office of Thrift Supervision

and United Community Bancorp’s registration statement as filed with the Securities and Exchange Commission.

Furthermore, Keller & Company visited our facilities and had discussions with our management. Keller &

Company did not perform a detailed individual analysis of the separate components of our assets and liabilities.

We did not impose any limitations on Keller & Company in connection with its appraisal.

In connection with its appraisal, Keller & Company reviewed the following factors, among others:

•

the economic make-up of our primary market areas;

•

our financial performance and condition in relation to publicly traded savings associations and

savings association holding companies that Keller & Company deemed comparable to United

Community Bank;

•

the specific terms of the offering of United Community Bancorp’s common stock;

•

the pro forma impact of the additional capital raised in the reorganization;

•

our proposed dividend policy;

•

conditions of securities markets in general; and

•

the market for thrift institution common stock in particular.

Consistent with Office of Thrift Supervision appraisal guidelines, Keller & Company’s analysis utilized

three selected valuation procedures, the price/tangible book method, the price/core earnings method and the

price/assets method, all of which are described in its report. Keller & Company’s appraisal report is filed as an

exhibit to the registration statement we filed with the Securities and Exchange Commission. See “Where You Can

Find More Information.” Keller & Company placed the greatest emphasis on the price/core earnings and

price/tangible book methods in estimating pro forma market value. Keller & Company compared the pro forma

price/tangible book and price/core earnings ratios for United Community Bancorp to the same ratios for a peer

group of comparable companies. The peer group consisted of 10 publicly traded savings associations and savings

association holding companies. The peer group included companies with:

•

average assets of $449.3 million;

•

average nonperforming assets of 0.66% of total assets;

•

average net loans of 64.12% of total assets;

•

average equity of 10.25% of total assets; and

•

average net income of 0.83% of average assets.

On the basis of the analysis in its report, Keller & Company has advised us that, in its opinion, as of

November 14, 2005, the estimated pro forma market value of United Community Bancorp and United Community

Bank, on a fully converted basis, was within the valuation range of $54.4 million and $84.6 million with a

midpoint of $64.0 million.

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The following table presents a summary of selected pricing ratios for United Community Bank on a fully-

converted basis, for the peer group companies and for all publicly traded thrifts. Compared to the average pricing

ratios of the peer group, United Community Bank’s pro forma pricing ratios at the maximum of the offering range

indicated a premium of 18.42% on a price-to-core earnings basis and a discount of 35.17% on a price-to-book

value basis.


	Price to Core Earnings Multiple (1)		Price to Book Value Ratio (2)		Price to Tangible Book Value Ratio (2)
United Community Bank (pro forma):
Minimum	16.39	x	68.84	%	69.05	%
Midpoint	18.15		72.79		72.99
Maximum	19.66		76.08		76.27
Maximum, as adjusted	21.23		79.16		79.34
Peer Group (on a fully-converted basis):
Average	16.61	x	117.35	%	126.72	%
Median	13.66		123.52		127.64
All fully-converted, publicly-traded thrifts:
Average	21.24	x	137.79	%	154.84	%
Median	16.97		123.82		137.32

(1)	Ratios are based on earnings for the 12 months ended September 30, 2005 and share prices as of November 14,

2005.

(2)	Ratios are based on book value as of September 30, 2005 and share prices as of November 14, 2005.

The price-to-earnings multiples set forth in the above table do not reflect the recognition of compensation

expense in connection with stock options. Recent accounting guidance issued by the Financial Accounting

Standards Board requires the recognition of compensation expense related to stock options outstanding based upon

the fair value of such awards at the date of grant over the period that such awards are earned. The implementation

of this accounting guidance will have a significant impact on pricing ratios of United Community Bank once

United Community Bancorp adopts a stock option plan and issues stock options and will likely have a significant

impact on the peer group companies as well. The pro forma information presented under “Pro Forma Data”

reflects an estimated expense for the stock option plan that may be adopted by United Community Bancorp and the

resulting effect on the pro forma price-to-earnings multiples for United Community Bancorp.

Our board of directors reviewed Keller & Company’s appraisal report, including the methodology and the

assumptions used by Keller & Company, and determined that the valuation range was reasonable and adequate.

Our board of directors determined that 43.1% of the shares of our common stock should be sold in the offering at a

purchase price of $10.00 per share. Multiplying this percentage by Keller & Company’s valuation range yielded

an offering range of $23,446,400 to $36,479,840, with a midpoint of $27,584,000. Dividing these dollar amounts

by the purchase price resulted in an offering range of between 2,344,640 and 3,647,984 shares, with a midpoint of

2,758,400 shares. The purchase price of $10.00 per share was determined by us, taking into account, among other

factors, the requirement under Office of Thrift Supervision regulations that the common stock be offered in a

manner that will achieve the widest distribution of the stock and desired liquidity in the common stock after the

offering.

Since the outcome of the offering relates in large measure to market conditions at the time of sale, it is not

possible to determine the exact number of shares that will be issued by United Community Bancorp at this time.

The offering range may be amended, with the approval of the Office of Thrift Supervision, if necessitated by

developments following the date of the appraisal in, among other things, market conditions, our financial condition

or operating results, regulatory guidelines or national or local economic conditions.

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If, upon completion of the subscription offering, at least the minimum number of shares are subscribed

for, Keller & Company, after taking into account factors similar to those involved in its prior appraisal, will

determine its estimate of our pro forma market value as of the close of the subscription offering. If, as a result of

regulatory considerations, demand for the shares or changes in market conditions, Keller & Company determines

that our pro forma market value has increased, we may sell up to 3,647,984 shares without any further notice to

you.

No shares will be sold unless Keller & Company confirms that, to the best of its knowledge and judgment,

nothing of a material nature has occurred that would cause it to conclude that the actual total purchase price of the

shares on an aggregate basis was materially incompatible with its appraisal. If, however, the facts do not justify

that statement, the offering may be canceled, a new offering range and price per share set and new subscription,

community and syndicated community offerings held. Under those circumstances, all funds would be promptly

returned and all subscribers would be given the opportunity to place a new order. If the offering is terminated, all

subscriptions will be cancelled and subscription funds will be returned promptly with interest, and holds on funds

authorized for withdrawal from deposit accounts will be released or reduced. If Keller & Company establishes a

new valuation range, it must be approved by the Office of Thrift Supervision.

In formulating its appraisal, Keller & Company relied upon the truthfulness, accuracy and completeness

of all documents we furnished to it. Keller & Company also considered financial and other information from

regulatory agencies, other financial institutions and other public sources, as appropriate. While Keller & Company

believes this information to be reliable, Keller & Company does not guarantee the accuracy or completeness of the

information and did not independently verify the financial statements and other data provided by us or

independently value our assets or liabilities. The appraisal is not intended to be, and must not be interpreted

as, a recommendation of any kind as to the advisability of voting to approve the plan of reorganization and

stock issuance or of purchasing shares of common stock. Moreover, because the appraisal must be based on

many factors that change periodically, there is no assurance that purchasers of shares in the reorganization

will be able to sell shares after the reorganization at prices at or above the purchase price.

Copies of the appraisal report of Keller & Company, including any amendments to the report, and the

detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available

for inspection at the main office of United Community Bank and the other locations specified under “Where You

Can Find More Information.”

Delivery of Certificates

Certificates representing the common stock sold in the offering will be mailed by our transfer agent to the

persons whose subscriptions or orders are filled at the addresses of such persons appearing on the stock order and

certification form as soon as practicable following completion of the reorganization. We will hold certificates

returned as undeliverable until claimed by the persons legally entitled to the certificates or otherwise disposed of in

accordance with applicable law. Until certificates for common stock are available and delivered to subscribers,

subscribers may not be able to sell their shares, even though trading of the common stock may have commenced.

Restrictions on Repurchase of Stock

Under Office of Thrift Supervision regulations, we may not, for a period of one year from the date of the

completion of the reorganization, repurchase any of our common stock from any person, except (1) in an offer

made to all stockholders to repurchase the common stock on a pro rata basis, approved by the Office of Thrift

Supervision, (2) the repurchase of qualifying shares of a director, or (3) repurchases to fund restricted stock plans

or tax-qualified employee stock benefit plans. Where extraordinary circumstances exist, the Office of Thrift

Supervision may approve the open market repurchase of up to 5% of our common stock during the first year

following the reorganization. To receive such approval, we must establish compelling and valid business purposes

for the repurchase to the satisfaction of the Office of Thrift Supervision. Furthermore, repurchases of any common

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stock are prohibited if they would cause United Community Bank’s regulatory capital to be reduced below the

amount required under the regulatory capital requirements imposed by the Office of Thrift Supervision.

Restrictions on Transfer of Shares After the Reorganization Applicable to Officers and Directors

Common stock purchased in the reorganization will be freely transferable, except for shares purchased by

our directors and executive officers.

Shares of common stock purchased by our directors and executive officers may not be sold for a period of

one year following the reorganization, except upon the death of the stockholder or unless approved by the Office of

Thrift Supervision. Shares purchased by these persons in the open market after the reorganization will be free of

this restriction. Shares of common stock issued to directors and executive officers will bear a legend giving

appropriate notice of the restriction and, in addition, we will give appropriate instructions to our transfer agent

with respect to the restriction on transfers. Any shares issued to directors and executive officers as a stock

dividend, stock split or otherwise with respect to restricted common stock will be similarly restricted.

Persons affiliated with United Community Bank, including our directors and executive officers, received

subscription rights based only on their deposits with United Community Bank as account holders. Any purchases

made by persons affiliated with United Community Bank for the explicit purpose of meeting the minimum of the

offering must be made for investment purposes only, and not with a view towards redistribution. Furthermore, as

set forth above, Office of Thrift Supervision regulations restrict sales of common stock purchased in the offering by

directors and executive officers for a period of one year following the reorganization.

Purchases of outstanding shares of United Community Bancorp common stock by directors, officers, or

any person who becomes an executive officer or director of United Community Bank after adoption of the plan of

reorganization and stock issuance, and their associates, during the three-year period following the reorganization

may be made only through a broker or dealer registered with the Securities and Exchange Commission, except

with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to

negotiated transactions involving more than 1% of United Community Bancorp’s outstanding common stock or to

the purchase of stock under stock benefit plans.

United Community Bancorp has filed a registration statement with the Securities and Exchange

Commission under the Securities Act of 1933 for the registration of the common stock to be sold in the offering

and contributed to the charitable foundation. This registration does not cover the resale of the shares. Shares of

common stock purchased by persons who are not affiliates of United Community Bancorp may be resold without

registration. Shares purchased by an affiliate of United Community Bancorp will have resale restrictions under

Rule 144 of the Securities Act. If United Community Bancorp meets the current public information requirements

of Rule 144, each affiliate of United Community Bancorp who complies with the other conditions of Rule 144,

including those that require the affiliate’s sale to be aggregated with those of certain other persons, would be able

to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the

greater of 1.0% of the outstanding shares of United Community Bancorp or the average weekly volume of trading

in the shares during the preceding four calendar weeks. United Community Bancorp may make future provision to

permit affiliates to have their shares registered for sale under the Securities Act under certain circumstances.

Interpretation, Amendment and Termination

To the extent permitted by law, all interpretations by us of the plan of reorganization and stock issuance

will be final; however, such interpretations have no binding effect on the Office of Thrift Supervision. The plan of

reorganization and stock issuance provides that, if deemed necessary or desirable, we may substantively amend the

plan of reorganization and stock issuance as a result of comments from regulatory authorities or otherwise.

Completion of the reorganization requires the sale of all shares of the common stock within 90 days

following approval of the plan of reorganization and stock issuance by the Office of Thrift Supervision, unless an

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extension is granted by the Office of Thrift Supervision. If this condition is not satisfied, the plan of reorganization

and stock issuance will be terminated and United Community Bank will continue its business in the mutual form of

organization. We may terminate the plan of reorganization and stock issuance at any time.

United Community Bank Charitable Foundation

General

In furtherance of our commitment to our local community, the plan of reorganization provides that we

will establish a charitable foundation in connection with the reorganization. We have established United

Community Bank Charitable Foundation as a nonstock Delaware corporation to serve as the charitable foundation.

The foundation will be funded with United Community Bancorp common stock as described below. By further

enhancing our visibility and reputation in our local community, we believe that the foundation will enhance the

long-term value of our community banking franchise. We believe the reorganization presents us with a unique

opportunity to provide a substantial and continuing benefit to our community and to receive the associated tax

benefits, without any significant cash outlay by us.

Purpose of the Charitable Foundation

We emphasize community lending and community activities. United Community Bank Charitable

Foundation is being formed to complement, not to replace, our existing community activities. Although we intend

to continue to emphasize community lending and community activities following the reorganization, such activities

are not our sole corporate purpose. United Community Bank Charitable Foundation will be dedicated completely

to community activities and the promotion of charitable causes, and may be able to support such activities in

manners that are not presently available to us. We believe that United Community Bank Charitable Foundation

will enable us to assist the communities within our market areas in areas beyond community development and

lending and will enhance our current activities under the Community Reinvestment Act.

We further believe that the funding of United Community Bank Charitable Foundation with our common

stock will allow our community to share in our potential growth and success long after the reorganization. United

Community Bank Charitable Foundation will accomplish that goal by providing for continued ties between our

community and us, thereby forming a partnership within the communities in which we operate.

We do not expect the contribution to United Community Bank Charitable Foundation to take the place of

our traditional community lending and charitable activities. For the years ended June 30, 2005 and June 30, 2004,

we contributed $12,142 and $12,378, respectively, to community organizations. We expect to continue making

charitable contributions and donations within our community. In connection with the closing of the offering, we

intend to contribute to United Community Bank Charitable Foundation a number of shares of our common stock

that will result in the foundation owning 1.9% of our outstanding shares of common stock. At the midpoint of the

offering range we would contribute 121,600 shares of United Community Bancorp common stock.

Structure of the Charitable Foundation

United Community Bank Charitable Foundation will be incorporated under Delaware law as a non-stock

corporation. The Certificate of Incorporation of United Community Bank Charitable Foundation will provide that

United Community Bank Charitable Foundation is organized exclusively for charitable purposes as set forth in

Section 501(c)(3) of the Internal Revenue Code. The Certificate of Incorporation will further provide that no part

of the net earnings of the foundation will inure to the benefit of, or be distributable to, its directors, officers or

members.

We have selected two of our employee directors and three of our non-employee directors to serve on the

initial board of directors of the foundation. The employee directors who will serve as directors of the foundation

are William F. Ritzmann and Elmer G. McLaughlin and the non-employee directors are Robert J. Ewbank, Jerry

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W. Hacker and Eugene B. Seitz, II. We also will select one additional person to serve on the foundation’s board of

directors who will not be one of our officers or directors. As required by Office of Thrift Supervision regulations,

this other director will have experience with local charitable organizations and grant making. While there are no

plans to change the size of the initial board of directors during the year following the completion of the

reorganization, following the first anniversary of the reorganization, the foundation may alter the size and

composition of its board of directors. For five years after the reorganization, one seat on the foundation’s board of

directors will be reserved for a person from our local community who has experience with local community

charitable organizations and grant making and who is not one of our officers, directors or employees, and one seat

on the foundation’s board of directors will be reserved for one of our directors. It is currently not anticipated that

directors of the foundation will receive compensation for their service.

The board of directors of United Community Bank Charitable Foundation will be responsible for

establishing its grant and donation policies, consistent with the purposes for which it was established. As directors

of a nonprofit corporation, directors of United Community Bank Charitable Foundation will always be bound by

their fiduciary duty to advance the foundation’s charitable goals, to protect its assets and to act in a manner

consistent with the charitable purposes for which the foundation is established. The directors of United

Community Bank Charitable Foundation also will be responsible for directing the activities of the foundation,

including the management and voting of our common stock held by the foundation. However, as required by

Office of Thrift Supervision regulations, all shares of common stock held by United Community Bank Charitable

Foundation must be voted in the same ratio as all other shares of the common stock on all proposals considered by

our stockholders.

United Community Bank Charitable Foundation’s place of business will be located at our administrative

offices. The board of directors of United Community Bank Charitable Foundation will appoint such officers and

employees as may be necessary to manage its operations, although no employees are expected to be hired. To the

extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal

Reserve Act and the Office of Thrift Supervision regulations governing transactions between us and the

foundation.

United Community Bank Charitable Foundation will receive working capital from: (1) any dividends that

may be paid on our common stock in the future; (2) within the limits of applicable federal and state laws, loans

collateralized by the common stock; or (3) the proceeds of the sale of any of the common stock in the open market

from time to time. As a private foundation under Section 501(c)(3) of the Internal Revenue Code, United

Community Bank Charitable Foundation will be required to distribute annually in grants or donations a minimum

of 5% of the average fair market value of its net investment assets. One of the conditions imposed on the gift of

common stock by us is that the amount of common stock that may be sold by United Community Bank Charitable

Foundation in any one year shall not exceed 5% of the average market value of the assets held by United

Community Bank Charitable Foundation, except where the board of directors of the foundation determines that the

failure to sell an amount of common stock greater than such amount would result in a long-term reduction of the

value of its assets and/or would otherwise jeopardize its capacity to carry out its charitable purposes.

Tax Considerations

Our independent tax advisor has advised us that an organization created for the above purposes should

qualify as a Section 501(c)(3) exempt organization under the Internal Revenue Code and should be classified as a

private foundation. United Community Bank Charitable Foundation will submit a timely request to the Internal

Revenue Service to be recognized as an exempt organization. As long as United Community Bank Charitable

Foundation files its application for tax-exempt status within 15 months from the date of its organization, and

provided the Internal Revenue Service approves the application, its effective date as a Section 501(c)(3)

organization will be the date of its organization. Our independent tax advisor, however, has not rendered any

advice on whether United Community Bank Charitable Foundation’s tax exempt status will be affected by the

regulatory requirement that all shares of our common stock held by United Community Bank Charitable

Foundation must be voted in the same ratio as all other outstanding shares of common stock on all proposals

considered by our stockholders.

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We are authorized under federal law to make charitable contributions. We believe that the reorganization

presents a unique opportunity to establish and fund a charitable foundation given the substantial amount of

additional capital being raised. In making such a determination, we considered the dilutive impact of the

contribution of common stock to United Community Bank Charitable Foundation on the amount of common stock

to be sold in the reorganization. See “Capitalization,” “Regulatory Capital Compliance,” and “Comparison of

Independent Valuation and Pro Forma Financial Information With and Without the Foundation.” The amount of

the contribution will not adversely impact our financial condition. We therefore believe that the amount of the

charitable contribution is reasonable given our pro forma capital position and does not raise safety and soundness

concerns.

We have received an opinion from our independent tax advisor that our contribution of our stock to

United Community Bank Charitable Foundation should not constitute an act of self-dealing and that we should be

entitled to a deduction under federal law in the amount of the fair market value of the stock at the time of the

contribution less the nominal amount that United Community Bank Charitable Foundation is required to pay us for

such stock. Under the Internal Revenue Code, we are permitted to deduct only an amount equal to 10% of our

annual taxable income in any one year. We are permitted under the Internal Revenue Code to carry the excess

contribution over the five year period following the contribution to United Community Bank Charitable

Foundation. We estimate that substantially all of the contribution should be deductible under federal law over the

six-year period. Indiana law does not provide a similar deduction. However, we do not have any assurance that

the Internal Revenue Service will grant tax-exempt status to the foundation. Furthermore, even if the contribution

is deductible under federal law, we may not have sufficient earnings to be able to use the deduction in full. We do

not expect to make any further contributions to United Community Bank Charitable Foundation within the first

five years following the initial contribution, unless such contributions would be deductible under the Internal

Revenue Code. Any such decisions would be based on an assessment of, among other factors, our financial

condition at that time, the interests of our stockholders and depositors, and the financial condition and operations

of the foundation.

Although we have received an opinion from our independent tax advisor that we should be entitled to a

deduction under federal law for the charitable contribution, there can be no assurances that the Internal Revenue

Service will recognize United Community Bank Charitable Foundation as a Section 501(c)(3) exempt organization

or that the deduction will be permitted. In such event, our contribution to United Community Bank Charitable

Foundation would be expensed without tax benefit, resulting in a reduction in earnings in the year in which the

Internal Revenue Service makes such a determination. See “Risk Factors — Risks Related to the Formation of the

Charitable Foundation — Our Contribution to United Community Bank Foundation may not be tax deductible,

which could hurt our profits.”

As a private foundation, earnings and gains, if any, from the sale of common stock or other assets are

exempt from federal and state income taxation. However, investment income, such as interest, dividends and

capital gains, is generally taxed at a rate of 2.0%. United Community Bank Charitable Foundation will be required

to file an annual return with the Internal Revenue Service within four and one-half months after the close of its

fiscal year. United Community Bank Charitable Foundation will be required to make its annual return available

for public inspection. The annual return for a private foundation includes, among other things, an itemized list of

all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant

recipient and the foundation’s managers and a concise statement of the purpose of each grant.

Regulatory Conditions Imposed on the Charitable Foundation

Office of Thrift Supervision regulations will impose the following conditions on the establishment of

United Community Bank Charitable Foundation:

•

the Office of Thrift Supervision can examine the foundation;

125

•

the foundation must comply with all supervisory directives imposed by the Office of Thrift

Supervision;

•

the foundation must provide annually to the Office of Thrift Supervision a copy of the annual

report that the foundation submits to the IRS;

•

the foundation must operate according to written policies adopted by its board of directors,

including a conflict of interest policy;

•

the foundation may not engage in self-dealing and must comply with all laws necessary to

maintain its tax-exempt status under the Internal Revenue Code; and

•

the foundation must vote its shares in the same ratio as all of the other shares voted on each

proposal considered by our stockholders.

In addition, within six months of completing the reorganization, United Community Bank Charitable

Foundation must submit to the Office of Thrift Supervision a three-year operating plan.

Restrictions on Acquisition of United Community Bancorp

and United Community Bank

General

The plan of reorganization and stock issuance provides that United Community Bank will reorganize from

a federally chartered savings bank into a federal mutual holding company structure and includes the adoption of a

federal stock charter and bylaws for United Community Bancorp. Certain provisions in the federal stock charter

and bylaws of United Community Bancorp may have anti-takeover effects. In addition, provisions in United

Community Bank’s charter and bylaws may also have anti-takeover effects. Finally, regulatory restrictions may

also make it more difficult for persons or companies to acquire control of United Community Bancorp and United

Community Bank.

Mutual Holding Company Structure

Following the reorganization, all of the issued and outstanding common stock of United Community Bank

will be owned by United Community Bancorp. A majority of the issued and outstanding common stock of United

Community Bancorp will be owned by United Community MHC. As a result, management of United Community

MHC will be able to exert voting control over United Community Bancorp and United Community Bank and will

restrict the ability of the minority stockholders of United Community Bancorp to effect a change of control of

management. United Community MHC, as long as it remains in the mutual form of organization, will control a

majority of the voting stock of United Community Bancorp.

The Stock Charter and Bylaws of United Community Bancorp

Although the Board of Directors of United Community Bancorp is not aware of any effort that might be

made to obtain control of United Community Bancorp after the reorganization, the Board of Directors believes it is

appropriate to adopt certain provisions permitted by federal regulations that may have the effect of deterring a

future takeover attempt that is not approved by United Community Bancorp’s Board of Directors. The following

description of these provisions is only a summary and does not provide all of the information contained in United

Community Bancorp’s charter and bylaws. See “Additional Information” for where to obtain a copy of these

documents.

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Beneficial Ownership Limitation. United Community Bancorp’s charter provides that, for a period

of five years from the date of the reorganization, no person, other than United Community MHC may acquire

directly or indirectly the beneficial ownership of more than 10.0% of any class of any equity security of United

Community Bancorp. In the event a person acquires shares in violation of this provision, all shares beneficially

owned by such person in excess of 10.0% will be considered “excess shares” and will not be counted as shares

entitled to vote or counted as voting shares in connection with any matters submitted to the stockholders for a vote.

This provision does not apply to a transaction in which United Community Bancorp fully converts from the mutual

holding company form of organization.

Board of Directors.

Classified Board. United Community Bancorp’s board of directors is divided into three classes as

nearly as equal in number as possible. The stockholders elect one class of directors each year for a term of three

years. The classified board makes it more difficult and time consuming for a stockholder group to fully use its

voting power to gain control of the board of directors without the consent of the incumbent board of directors of

United Community Bancorp.

Filling of Vacancies; Removal. The bylaws provide that any vacancy occurring in the board of

directors, including a vacancy created by an increase in the number of directors, may be filled by a vote of a

majority of the remaining directors although less than a quorum of the board of directors then in office. A person

elected to fill a vacancy on the board of directors will serve until the next election of directors by the stockholders.

Our bylaws provide that a director may be removed from the board of directors prior to the expiration of his or her

term only for cause and only upon the vote of a majority of the outstanding shares of voting stock. These

provisions make it more difficult for stockholders to remove directors and replace them with their own nominees.

Elimination of Cumulative Voting. The charter of United Community Bancorp provides that no

shares will be entitled to cumulative voting. The elimination of cumulative voting makes it more difficult for a

stockholder group to elect a director nominee.

Stockholder Action by Written Consent; Special Meetings of Stockholders. United Community Bancorp’s

stockholders must act only through an annual or special meeting or by unanimous written consent. The bylaws

provide that the chairman of the board of directors, the president or a majority of the board of directors or holders

of 10% or more of our outstanding shares may request the calling of a special meeting. The provisions of our

charter and bylaws limiting stockholder action by written consent and calling of special meetings of stockholders

may have the effect of delaying consideration of a stockholder proposal until the next annual meeting, unless a

special meeting is called in accordance with the provisions of the bylaws. These provisions also would prevent the

holders of a majority of common stock from unilaterally using the written consent procedure to take stockholder

action.

Advance Notice Provisions for Stockholder Nominations and Proposals. United Community

Bancorp’s bylaws establish an advance notice procedure for stockholders to nominate directors or bring other

business before an annual meeting of stockholders. Advance notice of nominations or proposed business by

stockholders gives the board of directors time to consider the qualifications of the proposed nominees, the merits of

the proposals and, to the extent deemed necessary or desirable by the board of directors, to inform stockholders and

make recommendations about those matters.

Stockholder Nominations. A person may not be nominated for election as a director unless that

person is nominated by or at the direction of the board of directors or by a stockholder who has given appropriate

notice to United Community Bancorp before the meeting. Stockholder nominations must be in writing and

delivered to the Secretary of United Community Bancorp at least 30 days before the date of the annual meeting,

provided however, that if less than 40 days notice or prior public disclosure of the date of the meeting is given or

made, notice by a stockholder of his or her intention to nominate a director must be received not later than the

127

close of business on the 10^th day following the day on which notice of the date of the annual meeting was mailed or

such public disclosure of the annual meeting was made.

Stockholder Proposals. A stockholder may not bring new business before an annual meeting unless

the stockholder has given United Community Bancorp appropriate notice of its intention to bring that business

before the meeting. A stockholder may propose new business at an annual meeting or special meeting, however,

such business must be approved by the board of directors and stated in writing and filed with United Community

Bancorp’s Secretary at least 30 days before the date of the annual meeting, provided however, that when public

notice of the date of the annual meeting is less than 40 days, notice by the stockholder of a proposal must not be

received later than the close of business on the 10^th day following the day on which notice of the date of the annual

meeting was made to the public. Additionally, if such proposal is not presented, in writing, to United Community

Bancorp’s Secretary at least 30 days before such meeting, such nomination or proposal shall be laid over for action

at an adjourned, special or annual meeting taking place 30 days or more thereafter. A stockholder who desires to

raise new business must provide certain information to United Community Bancorp concerning the nature of the

new business, the stockholder and the stockholder’s interest in the business matter.

Authorized but Unissued Shares of Capital Stock. Following the reorganization, we will have

authorized but unissued shares of common and preferred stock. United Community Bancorp’s charter authorizes

the board of directors to establish one or more series of preferred stock and, for any series of preferred stock, to

determine the terms and rights of the series, including voting rights, conversion rates, and liquidation preferences.

Although such shares of common and preferred stock could be issued by the board of directors to render more

difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or

otherwise, it is anticipated that such uses will be unlikely given that United Community MHC must always own a

majority of our common stock.

Regulatory

Restrictions

Office of Thrift Supervision Regulations. Office of Thrift Supervision regulations provide that for

a period of three years following the date of the completion of the reorganization, no person, acting singly or

together with associates in a group of persons acting in concert, will directly or indirectly offer to acquire or

acquire the beneficial ownership of more than 10% of a class of our equity securities without the prior written

approval of the Office of Thrift Supervision. Where any person, directly or indirectly, acquires beneficial

ownership of more than 10% of a class of United Community Bancorp’s equity securities without the prior written

approval of the Office of Thrift Supervision, the securities beneficially owned by such person in excess of 10.0%

will not be voted by any person or counted as voting shares in connection with any matter submitted to the

stockholders for a vote, and will not be counted as outstanding for purposes of determining the affirmative vote

necessary to approve any matter submitted to the stockholders for a vote.

Restrictions on Remutualization Transactions. Current Office of Thrift Supervision regulations

permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction.

However, in June 2003 the Office of Thrift Supervision issued a policy statement indicating that it views

remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders

and mutual members of the target entity and raising issues concerning the effect on the mutual members of the

acquiring entity. Under certain circumstances, the Office of Thrift Supervision intends to give these issues special

scrutiny and reject applications providing for the remutualization of a mutual holding company unless the

applicant can clearly demonstrate that the Office of Thrift Supervision’s concerns are not warranted in the

particular case. The Office of Thrift Supervision will require empirical data that demonstrates that the minority

stockholders are receiving a reasonable value in proportion to their interest in the company. If any of the pricing

parameters specified by the Office of Thrift Supervision are exceeded, the Office of Thrift Supervision will

consider requiring that the transaction be approved by a majority of the votes eligible to be cast by the members of

the acquiring mutual and the target mutual holding company without the use of running proxies.

128

Since the Office of Thrift Supervision policy on remutualization transactions was issued, there has been

only one such transaction announced. It is likely that the pricing parameters imposed by the Office of Thrift

Supervision policy will make remutualization transactions less attractive to mutual holding companies.

Change in Bank Control Act. The acquisition of 10.0% or more of our outstanding common stock

may trigger the provisions of the Change in Bank Control Act. The Office of Thrift Supervision has also adopted a

regulation under the Change in Bank Control Act which generally requires persons who at any time intend to

acquire control of a federally chartered savings association or its holding company to provide 60 days prior written

notice and certain financial and other information to the Office of Thrift Supervision.

The 60-day notice period does not commence until the information is deemed to be substantially complete.

Control for these purposes exists in situations in which the acquiring party has voting control of at least 25.0% of

any class of our voting stock or the power to direct our management or policies. However, under Office of Thrift

Supervision regulations, control is presumed to exist where the acquiring party has voting control of at least 10.0%

of any class of our voting securities if specified “control factors” are present. The statute and underlying

regulations authorize the Office of Thrift Supervision to disapprove a proposed acquisition on certain specified

grounds.

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Description of United Community Bancorp Capital Stock

The common stock of United Community Bancorp will represent nonwithdrawable

capital, will not be an account of any type, and will not be insured by the Federal Deposit

Insurance Corporation or any other government agency.

General

United Community Bancorp is authorized to issue 19,000,000 shares of common stock having a par value

of $.01 per share and 1,000,000 shares of preferred stock having a par value of $.01 per share. Each share of

United Community Bancorp’s common stock will have the same relative rights as, and will be identical in all

respects with, each other share of common stock. Upon payment of the purchase price for the common stock, as

required by the plan of reorganization and stock issuance, all stock will be duly authorized, fully paid and

nonassessable. United Community Bancorp will not issue any shares of preferred stock in the reorganization.

Common Stock

Dividends. United Community Bancorp can pay dividends if, as and when declared by its Board of

Directors. The payment of dividends by United Community Bancorp is limited by law and applicable regulation.

See “Our Dividend Policy.” The holders of common stock of United Community Bancorp will be entitled to

receive and share equally in dividends declared by the Board of Directors of United Community Bancorp. If

United Community Bancorp issues preferred stock, the holders of the preferred stock may have a priority over the

holders of the common stock with respect to dividends.

Voting Rights. After the reorganization, the holders of common stock of United Community Bancorp

will possess exclusive voting rights in United Community Bancorp. They will elect United Community Bancorp’s

Board of Directors and act on other matters as are required to be presented to them under federal law or as are

otherwise presented to them by the Board of Directors. Except as discussed in “Restrictions on Acquisition of

United Community Bancorp and United Community Bank,” each holder of common stock will be entitled to one

vote per share and will not have any right to cumulate votes in the election of directors. If United Community

Bancorp issues preferred stock, holders of United Community Bancorp preferred stock may also possess voting

rights.

Liquidation. In the unlikely event of any liquidation, dissolution or winding up of United Community

Bank, United Community Bancorp, as the sole holder of United Community Bank’s capital stock, would be entitled

to receive all of United Community Bank’s assets available for distribution after payment or provision for payment

of all debts and liabilities of United Community Bank, including all deposit accounts and accrued interest. Upon

liquidation, dissolution or winding up of United Community Bancorp, the holders of its common stock would be

entitled to receive all of the assets of United Community Bancorp available for distribution after payment or

provision for payment of all its debts and liabilities. If United Community Bancorp issues preferred stock, the

preferred stock holders may have a priority over the holders of the common stock upon liquidation or dissolution.

Preemptive Rights; Redemption. Holders of the common stock of United Community Bancorp will

not be entitled to preemptive rights with respect to any shares that may be issued. The common stock cannot be

redeemed.

Preferred Stock

United Community Bancorp will not issue any preferred stock in the reorganization and it has no current

plans to issue any preferred stock after the reorganization. Preferred stock may be issued with designations,

powers, preferences and rights as the Board of Directors may from time to time determine. The Board of Directors

130

can, without stockholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights

that could dilute the voting strength of the holders of the common stock and may assist management in impeding

an unfriendly takeover or attempted change in control.

Transfer Agent and Registrar

The transfer agent and registrar for United Community Bancorp’s common stock will be

, .

Registration Requirements

United Community Bancorp has registered its common stock with the Securities and Exchange

Commission under Section 12(g) of the Securities Exchange Act of 1934, as amended, and will not deregister its

common stock for a period of at least three years following the reorganization. As a result of registration, the

proxy and tender offer rules, insider trading reporting and restrictions, annual and periodic reporting and other

requirements of that statute will apply.

Legal and Tax Opinions

The legality of the common stock has been passed upon for us by Muldoon Murphy & Aguggia LLP,

Washington, DC. The federal tax consequences of the reorganization have been opined upon by Muldoon Murphy

& Aguggia LLP and the state tax consequences of the reorganization have been opined upon by Clark, Schaefer,

Hackett & Co., Cincinnati, Ohio. Muldoon Murphy & Aguggia LLP and Clark, Schaefer, Hackett & Co. have

consented to the references to their opinions in this prospectus. Certain legal matters will be passed upon for

Keefe, Bruyette & Woods, Inc. by Barnes & Thornburg LLP, Indianapolis, Indiana.

Experts

The consolidated financial statements of United Community Bank at June 30, 2005 and 2004 and for the

three years in the period ended June 30, 2005 appearing in this prospectus and in the registration statement have

been audited by Clark, Schaefer, Hackett & Co., an independent registered public accounting firm, as set forth in

its report appearing elsewhere in this prospectus and elsewhere in the registration statement and are included in

reliance upon such report given upon the authority of such firm as experts in accounting and auditing.

Keller & Company, Inc. has consented to the summary in this prospectus of its report to United

Community Bank setting forth its opinion as to the estimated pro forma market value of United Community

Bancorp and United Community Bank, as converted, and to the use of its name and statements with respect to it

appearing in this prospectus.

131

Where You Can Find More Information

United Community Bancorp has filed with the Securities and Exchange Commission a registration

statement under the Securities Act of 1933, as amended, that registers the common stock offered in the

reorganization, including the shares to be contributed to United Community Bank Charitable Foundation. The

registration statement, including the exhibits, contains additional relevant information about us and our common

stock. The rules and regulations of the Securities and Exchange Commission allow us to omit certain information

included in the registration statement from this prospectus. You may read and copy the registration statement at

the Securities and Exchange Commission public reference room at 100 F Street, NE, Room 1580, Washington, DC

20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the

Securities and Exchange Commission’s public reference rooms. The registration statement also is available to the

public from commercial document retrieval services and at the Internet World Wide Website maintained by the

Securities and Exchange Commission at “http://www.sec.gov.”

United Community Bank has filed applications for approval of the mutual holding company

reorganization and the stock issuance with the Office of Thrift Supervision, which includes proxy materials for

United Community Bank’s special meeting of members and certain other information. This prospectus omits

certain information contained in the applications. The applications may be inspected, without charge, at the offices

of the Office of Thrift Supervision, 1700 G Street, NW, Washington, DC 20552 and at the offices of the Regional

Director of the Office of Thrift Supervision at the Southeast Regional Office of the Office of Thrift Supervision,

1475 Peachtree Street, NE, Atlanta, Georgia 30309.

A copy of the plan of reorganization and stock issuance and United Community Bancorp’s charter and

bylaws are available without charge from United Community Bank.

132

Index to Consolidated Financial Statements of

United Community Bank


		Page
Report of Independent Registered Public Accounting Firm		F-1

Consolidated Statements of Financial Condition as of September 30, 2005 (unaudited) and June 30, 2005 and 2004		F-2

Consolidated Statements of Income for the Three Months Ended September 30, 2005 and 2004 (unaudited) and for the Years Ended June 30, 2005, 2004 and 2003		F-3

Consolidated Statements of Members’ Equity for the Three Months Ended September 30, 2005 and 2004 (unaudited) and for the Years Ended June 30, 2005, 2004 and 2003		F-5

Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2005 and 2004 (unaudited) and for the Years Ended June 30, 2005, 2004 and 2003		F-6

Notes to Consolidated Financial Statements		F-7

* * *

All schedules are omitted as the required information either is not applicable or is included in the financial

statements or related notes.

Separate financial statements for United Community Bancorp have not been included in this prospectus because

United Community Bancorp, which has engaged only in organizational activities to date, has no significant assets,

contingent or other liabilities, revenues or expenses.

133

Report of Independent Registered

Public Accounting Firm

To The Board of Directors

United Community Bank:

We have audited the consolidated balance sheets of United Community Bank as of June 30, 2005

and 2004, and the related consolidated statements of income, comprehensive income, equity, and

cash flows for each of the three years in the period ended June 30, 2005. These financial

statements are the responsibility of the Bank’s management. Our responsibility is to express an

opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting

Oversight Board (United States). Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting principles

used and significant estimates made by management, as well as evaluating the overall financial

statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,

the consolidated financial position of United Community Bank at June 30, 2005 and 2004, and the

consolidated results of its operations and its cash flows for each of the three years in the period

ended June 30, 2005 in conformity with accounting principles generally accepted in the United

States of America.

LOGO

Cincinnati, Ohio

October 31, 2005

F - 1

UNITED COMMUNITY BANK

Consolidated Balance Sheets

September 30, 2005 and

June 30, 2005 and 2004


Assets
	(Unaudited) September 30, 2005		2005	2004
Cash and cash equivalents (including commercial paper of $0, $0, and $999,744 at September 30, 2005, June 30, 2005 and June 30, 2004, respectively)	$	18,345,443	76,263,453	6,681,444
Investment securities:
Securities available for sale - at estimated market value		31,704,382	9,936,722	16,025,125
Securities held to maturity - at amortized cost (market approximates cost)		265,000	265,000	668,609
Mortgage-backed securities available for sale - at estimated market value		48,591,583	28,198,818	40,081,804
Loans receivable, net		206,022,421	200,878,016	179,257,392
Property and equipment, net		5,270,294	5,222,124	4,657,963
Federal Home Loan Bank stock, at cost		1,686,700	1,686,700	1,616,300
Accrued interest receivable:
Loans		1,075,309	1,083,093	875,570
Investments and mortgage-backed securities		515,313	371,066	360,840
Other real estate owned, net		12,500	65,000	80,000
Cash surrender value of life insurance policies		5,955,116	5,898,842	5,676,770
Deferred income taxes		978,117	619,709	264,464
Prepaid expenses and other assets		892,713	1,016,951	898,593

	$	321,314,891	331,505,494	257,144,874

Liabilities and Equity
Deposits	$	289,133,865	299,378,997	227,939,124
Accrued interest on deposits		98,677	62,421	115,120
Advances from borrowers for payment of insurance and taxes		372,425	273,410	107,717
Accrued expenses and other liabilities		1,944,539	2,054,655	1,399,110

		291,549,506	301,769,483	229,561,071

Commitments

Retained earnings		29,525,404	28,964,844	26,920,033
Accumulated other comprehensive income:
Unrealized gain on securities available for sale, net of income taxes		239,981	771,167	663,770

		29,765,385	29,736,011	27,583,803

	$	321,314,891	331,505,494	257,144,874

See accompanying notes to financial statements.

F - 2

UNITED COMMUNITY BANK

Consolidated Statements of Income


	(Unaudited) Three Months Ended September 30,					Years Ended June 30,
	2005			2004		2005		2004		2003
Interest income:
Loans	$	3,158,956		2,709,466		11,507,166		9,740,251		10,891,384
Investments and mortgage - backed securities		970,567		500,476		1,963,640		2,747,959		3,120,037

		4,129,523		3,209,942		13,470,806		12,488,210		14,011,421

Interest expense:
Deposits		1,819,320		999,564		4,585,690		4,114,482		6,059,185
Borrowed funds		—		320		69,753		19,143		31,774

		1,819,320		999,884		4,655,443		4,133,625		6,090,959

Net interest income		2,310,203		2,210,058		8,815,363		8,354,585		7,920,462

Provision for loan losses		30,000		30,000		857,372		120,000		620,000

Net interest income after provision for loan losses		2,280,203		2,180,058		7,957,991		8,234,585		7,300,462

Other income (loss):
Service charges		228,400		199,996		795,401		742,166		666,743
Gain on sale of loans		16,729		9,887		43,862		90,211		852,814
Gain on sale of property and equipment		—		—		—		—		1,206,865
Gain (loss) on sale of investments		—		15,688		311,608		120,401		(228,847	)
Income from Bank Owned Life Insurance		56,274		55,669		222,072		247,877		269,651
Other		58,912		38,845		335,015		171,720		165,921

		360,315		320,085		1,707,958		1,372,375		2,933,147

Other expense:
Compensation and employee benefits		1,014,012		1,035,344		4,235,673		3,833,439		3,549,612
Premises and occupancy expense		267,541		237,231		1,009,634		974,399		779,626
Deposit insurance premium		7,332		8,336		32,734		36,193		34,872
Advertising expense		87,182		55,447		258,221		178,002		161,936
Data processing expense		60,621		76,571		276,876		248,903		282,103
ATM service fees		72,803		57,546		259,950		204,958		183,319
Other operating expenses		247,434		219,191		905,392		775,981		767,950

		1,756,925		1,689,666		6,978,480		6,251,875		5,759,418

Income before income taxes		883,593		810,477		2,687,469		3,355,085		4,474,191

Provision for income taxes:
Current federal		255,305		247,172		861,584		1,099,096		1,459,911
Current state		80,400		74,166		206,728		300,700		404,400

		335,705		321,338		1,068,312		1,399,796		1,864,311
Deferred		(12,672	)	(40,526	)	(425,654	)	(201,080	)	(204,757	)

		323,033		280,812		642,658		1,198,716		1,659,554

Net income	$	560,560		529,665		2,044,811		2,156,369		2,814,637

See accompanying notes to financial statements.

F - 3

UNITED COMMUNITY BANK

Consolidated Statements of Comprehensive Income


	Years Ended June 30,							(Unaudited) Three Months Ended September 30,
	2005			2004		2003		2005
Net income	$	2,044,811		2,156,369		2,814,637		560,560
Other comprehensive income, net of tax
Unrealized gain (loss) on available for sale securities during the period		313,058		(723,195	)	(268,939	)	(531,186	)
Less reclassification adjustment for (gains) losses on available for sale securities included in income		(205,661	)	(79,465	)	151,039		—

Total comprehensive income	$	2,152,208		1,353,709		2,696,737		29,374

See accompanying notes to financial statements.

F - 4

UNITED COMMUNITY BANK

Consolidated Statements of Equity


	Retained Earnings		Unrealized Gain (Loss) on Securities Available for Sale		Total
Balance at June 30, 2002	$	21,949,027	1,584,330		23,533,357
Net income - June 30, 2003		2,814,637	—		2,814,637
Net change during the year, net of deferred taxes of $(77,298)		—	(117,900	)	(117,900	)

Balance at June 30, 2003	$	24,763,664	1,466,430		26,230,094
Net income - June 30, 2004		2,156,369	—		2,156,369
Net change during the year, net of deferred taxes of $(526,249)		—	(802,660	)	(802,660	)

Balance at June 30, 2004	$	26,920,033	663,770		27,583,803
Net income - June 30, 2005		2,044,811	—		2,044,811
Net change during the year, net of deferred taxes of $70,410		—	107,397		107,397

Balance at June 30, 2005	$	28,964,844	771,167		29,736,011

(Unaudited)
Net income - September 30, 2005		560,560	—		560,560
Net change during three months, net of deferred taxes of $(309,015)		—	(531,186	)	(531,186	)

Balance at September 30, 2005	$	29,525,404	239,981		29,765,385

See accompanying notes to financial statements.

F - 5

UNITED COMMUNITY BANK

Consolidated Statements of Cash Flows


	(Unaudited) Three Months Ended September 30,					Years Ended June 30,
	2005			2004		2005		2004		2003
Operating activities:
Net income	$	560,560		529,665		2,044,811		2,156,369		2,814,637
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		102,732		94,497		416,999		256,914		285,200
Provision for loan losses		30,000		30,000		857,372		120,000		620,000
Deferred loan origination fees		(41,428	)	(74,097	)	(74,097	)	34,754		(28,466	)
Amortization of premium and discounts on investments		24,864		95,187		300,320		674,324		417,069
Proceeds from sale of loans		961,182		308,772		1,915,960		4,278,276		28,647,304
Loans disbursed for sale in the secondary market		(953,000	)	(302,000	)	(1,889,100	)	(4,226,100	)	(28,048,900	)
Gain on sale of loans		(16,729	)	(9,887	)	(43,862	)	(90,211	)	(852,814	)
Loss (gain) on sale of investments		—		(15,688	)	(311,608	)	(120,401	)	228,847
Gain on disposal of property and equipment		—		—		—		—		(1,206,865	)
Deferred income taxes		(12,672	)	(40,526	)	(425,654	)	(201,080	)	(204,757	)
Effects of change in operating assets and liabilities:
Accrued interest receivable		(136,463	)	(22,336	)	(217,749	)	165,737		63,328
Prepaid expenses and other assets		124,236		207,468		(118,363	)	(1,610	)	(178,460	)
Accrued interest on deposits		36,256		51,826		(52,699	)	(173,638	)	57,198
Income taxes payable		(114,300	)	68,800		217,546		(290,749	)	214,311
Accrued expenses and other		4,184		841,668		437,999		(86,757	)	700,300

Net cash provided by operating activities		569,422		1,763,349		3,057,875		2,495,828		3,527,932

Investing activities:
Proceeds from maturity of available for sale investment securities		—		750,000		—		6,186,296		8,995,000
Proceeds from maturity of held to maturity investment securities		—		20,008		408,184		93,562		86,432
Proceeds from repayment of mortgage-backed securities available for sale		4,095,791		3,465,510		11,303,380		19,952,555		10,894,445
Proceeds from sale of other real estate owned		—		—		—		300,000		—
Proceeds from sale of available for sale investment securities		—		3,483,242		6,910,652		18,759,571		8,542,356
Proceeds from sale of property and equipment		—		—		—		—		2,808,420
Purchases of mortgage-backed securities available for sale		(20,704,333	)	—		—		(5,710,119	)	(54,000,398	)
Purchases of available for sale investment securities		(26,453,667	)	(750,000	)	(58,119	)	(4,037,400	)	(18,116,063	)
Purchase of Federal Home Loan Bank stock		—		(18,000	)	(70,400	)	(107,700	)	(149,400	)
Net (increase) decrease in loans		(5,071,930	)	(8,953,307	)	(22,371,897	)	(33,701,370	)	14,024,842
Increase in cash surrender value of life insurance		(56,274	)	(55,669	)	(222,072	)	(247,877	)	(157,528	)
Capital expenditures		(150,902	)	(609,612	)	(981,160	)	(2,778,777	)	(504,749	)

Net cash used by investing activities		(48,341,315	)	(2,667,828	)	(5,081,432	)	(1,291,259	)	(27,576,643	)

Financing activities:
Net increase (decrease) in deposits		(10,245,132	)	11,571,497		71,439,873		(9,969,105	)	31,097,377
Net decrease in advances from FHLB		—		—		—		(328,428	)	(265,830	)
Net increase (decrease) in advances from borrowers for payment of insurance and taxes		99,015		247,088		165,693		(26,565	)	20,088

Net cash (used) provided by financing activities		(10,146,117	)	11,818,585		71,605,566		(10,324,098	)	30,851,635


Net increase (decrease) in cash and cash equivalents		(57,918,010	)	10,914,106		69,582,009		(9,119,529	)	6,802,924

Cash and cash equivalents at beginning of year		76,263,453		6,681,444		6,681,444		15,800,973		8,998,049


Cash and cash equivalents at end of year	$	18,345,443		17,595,550		76,263,453		6,681,444		15,800,973

See accompanying notes to financial statements.

F - 6

UNITED COMMUNITY BANK

Notes to Consolidated Financial Statements

1.	Organization and Summary of Significant Accounting Policies:

The following describes the organization and the significant accounting policies followed in

the preparation of these financial statements.

Nature of operations

United Community Bank (the “Bank”) is a federal chartered savings bank and a

member of the Federal Home Loan Bank system (FHLB) subject to regulation

by the Office of Thrift Supervision (OTS), an office of the U.S. Department of

Treasury. The Bank was formed as a result of a merger of Perpetual Federal

Savings and Loan Association into Progressive Federal Savings Bank and the

immediate change of name to United Community Bank which occurred April 12,

1999. As a member of the FHLB system, United Community Bank maintains a

required investment in capital stock of the Federal Home Loan Bank of

Indianapolis.

The Bank’s business consists of attracting deposits from the general public and

applying those funds in the origination of residential, consumer and

nonresidential loans. The Company’s profitability is significantly dependent on

its net interest income, which is the difference between interest income generated

from interest-earning assets (i.e. loans and investments) and the interest expense

paid on interest-bearing liabilities (i.e. customer deposits and borrowed funds).

Net interest income is affected by the relative amount of interest-earning assets

and interest-bearing liabilities and the interest received or paid on these balances.

The level of interest rates paid or received by United Community Bank can be

significantly influenced by a number of environmental factors, such as

governmental monetary policy, that are outside of management’s control.

Savings accounts are insured by the Savings Bank Insurance Fund (SAIF), a

division of the Federal Deposit Insurance Corporation (FDIC), within certain

limitations. Semi-annual premiums are required by the SAIF for the insurance of

such savings accounts.

The accompanying financial statements and related selected footnote data as of

September 30, 2005 and for the three months ended September 30, 2005 and

2004, are unaudited, but in the opinion of management include all adjustments

(consisting only of normal recurring adjustments) necessary for a fair

presentation thereof. The results of operations for the three months ended

September 30, 2005 and 2004, are not necessarily indicative of the results for the

full year.

F - 7

Principles of consolidation

The consolidated financial statements include the accounts of the Bank and its

wholly owned service corporation, United Community Service Corp. Total

assets of the service corporation consist of cash of $119,561, $110,736 and

$59,093 at September 30, 2005 and June 30, 2005 and 2004, respectively. All

intercompany transactions have been eliminated in consolidation.

Cash equivalents

For purposes of the consolidated statements of cash flows, the Bank considers all

highly liquid debt instruments with original maturities when purchased of three

months or less to be cash equivalents. Cash and cash equivalents include cash

and Federal Home Loan Bank time deposit, demand deposit accounts, and

commercial paper.

Investment securities

Investments and mortgage-backed securities are classified upon acquisition into

one of three categories, held to maturity, trading, and available for sale. Debt

securities that the Bank has the positive intent and ability to hold to maturity are

classified as held to maturity securities and reported at amortized cost. Debt and

equity securities that are bought and held principally for the purpose of selling in

the near-term are classified as trading securities and reported at fair value, with

unrealized gains and losses included in earnings. The Bank has no trading

securities. Debt and equity securities not classified as either held to maturity

securities or trading securities are classified as available for sale securities and

reported at fair value, with unrealized gains or losses excluded from earnings and

reported as a separate component of equity, net of deferred taxes.

Securities are recorded net of applicable premium or discount with the premium or

discount being amortized on the straight line or interest method over the estimated

average life of the investment.

The Bank designates its investment in U. S. League Intermediate-Term Portfolio,

Federal Home Loan Mortgage Corporation Common Stock and corporate bonds

as available for sale as well as certain mortgage-backed securities.

Gains and losses realized on the sale of investment securities are accounted for on

the trade date using the specific identification method.

Loans receivable

Loans receivable that management has the intent and ability to hold for the

foreseeable future or until maturity or payoff are reported at their outstanding

unpaid principal balances reduced by any charge-offs or specific valuation accounts

and net of any deferred fees or costs on originated loans, or unamortized premiums

or discounts on purchased loans. Interest on loans is calculated by using the

F - 8

simple interest method on daily balances of the principal amount outstanding.

Loans held for sale are recorded at lower of cost or market determined in the

aggregate. The Bank had no loans designated as held for sale at September 30,

2005, June 30, 2005 and 2004.

Loan origination fees and certain direct origination costs are capitalized and

recognized as an adjustment of the yield on the related loan.

The Bank retains the servicing on loans sold and agrees to remit to the investor

loan principal and interest at agreed-upon rates. These rates can differ from the

loan’s contractual interest rate resulting in a “yield differential”. In addition to

previously deferred loan origination fees and cash gains, gains on sale of loans can

represent the present value of the future yield differential less normal servicing

fees, capitalized over the estimated life of the loans sold. Normal servicing fees are

determined by reference to the stipulated minimum servicing fee set forth by the

government agencies to whom the loans are sold. Such servicing fees are

amortized to operations over the life of the loans using the interest method. If

prepayments are higher than expected, an immediate charge to operations is made.

If prepayments are lower than original estimates, then the related adjustments are

made prospectively.

The mortgage servicing rights, recorded by the Bank, were segregated into pools

for valuation purposes using as pooling criteria the loan term and coupon rate.

Once pooled, each grouping of loans was evaluated on a discounted earnings basis

to determine the present value of the future earnings that a purchaser could expect

to realize from each portfolio. Earnings were projected from a variety of sources

including loan-servicing fees, interest earned on float, net interest earned on

escrows, miscellaneous income and costs to service the loans. The present value

of future earnings is the “economic” value for the pool.

The allowance for loan and real estate losses is increased by charges to income and

decreased by charge-offs (net of recoveries). Management’s periodic evaluation of

the adequacy of the allowance is based on the Bank’s past loan loss experience,

known and inherent risks in the portfolio, adverse situations that may affect the

borrower’s ability to repay, the estimated value of any underlying collateral, and

current economic conditions. In addition, various regulatory agencies, as an

integral part of their examination process, periodically review the Bank’s allowance

for loan losses. Such agencies may require the Bank to recognize additions to the

allowance based on judgments different from those of management.

Although management uses the best information available to make these estimates,

future adjustments to the allowance may be necessary due to economic, operating,

regulatory and other conditions that may be beyond the Bank’s control.

The internal asset review committee reviews each loan delinquent three payments

or more, that is ninety days or more, and decides on whether the circumstances

involved, give reason to placing the loan on non-accrual status. The Board of

F - 9

Directors reviews this information as determined by the internal asset review

committee each month.

Loans may be returned to accrual status when all principal and interest amounts

contractually due (including arrearages) are reasonably assured of repayment

within an acceptable period of time, and there is a sustained period of repayment

performance by the borrower, in accordance with the contractual terms of interest

and principal. While a loan is classified as non-accrual, interest income is generally

recognized on a cash basis.

A loan is defined as impaired when, based on current information and events, it is

probable that a creditor will be unable to collect all amounts due according to the

contractual terms of the loan agreement. The Bank considers its investment in

one-to-four family residential loans and consumer installment loans to be

homogeneous and therefore excluded from separate identification for evaluation of

impairment. With respect to the Bank’s investment in multi-family and

nonresidential loans, such loans are collateral dependent and, as a practical

expedient, are carried at the lower of cost or fair value. Collateral dependent loans

which are more than ninety days delinquent are considered to constitute more than

a minimum delay in repayment and are evaluated for impairment at that time.

Concentration of credit risk

The Bank grants primarily residential loans to customers in local counties in South

Eastern Indiana. Although the Bank has a diversified loan portfolio, a substantial

portion of its debtors’ ability to honor their contracts is dependent upon the local

economy.

Management may, at times, maintain deposit accounts with financial institutions in

excess of federal deposit insurance limits. The Company has not experienced any

losses in such accounts. The Company believes it is not exposed to any significant

credit risk on cash and cash equivalents.

Use of estimates

The preparation of financial statements in conformity with generally accepted

accounting principles requires management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting period. Estimates

used in the preparation of the financial statements are based on various factors

including the current interest rate environment and the general strength of the local

economy. Changes in the overall interest rate environment can significantly affect

the Company’s net interest income and the value of its recorded assets and

liabilities. Actual results could differ from those estimates used in the preparation

of the financial statements.

Other real estate owned

F - 10

Real estate properties acquired through or in lieu of, loan foreclosure are initially

recorded at fair value at the date of foreclosure. Holding costs are expensed when

incurred. Valuations are periodically performed by management, and an allowance

for losses is established by a charge to operations if the carrying value of a

property exceeds its estimated net realizable value.

Property and equipment

The Bank carries property and equipment at cost. Depreciation is provided on the

straight-line method over the estimated useful lives of the assets.

Income taxes

Deferred tax assets are recorded only to the extent that the amount of net

deductible or taxable temporary differences or carry forward attributes may be

utilized against current period earnings, carried back against prior years’ earnings,

offset against taxable temporary differences reversing in future periods, or utilized

to the extent of management’s estimate of future taxable income. A valuation

allowance is provided for deferred tax assets to the extent that the value of net

deductible temporary differences and carry forward attributes exceeds

managements’ estimates of taxes payable on future taxable income. Deferred tax

liabilities are provided on the total amount of net temporary differences taxable in

the future.

The Bank’s principal temporary differences between pretax financial income and

taxable income result primarily from the different methods of accounting for

deferred loan origination fees, Federal Home Loan Bank stock dividends, certain

components of retirement and post-retirement expense and book and tax bad debt

deductions. Additional temporary differences result from depreciation expense

computed utilizing accelerated methods for federal income tax purposes.

Advertising

The Bank expenses advertising costs as incurred. Advertising costs consist

primarily of television, radio, newspaper and billboard advertising.

Reclassification

Certain amounts in the 2004 and 2003 Consolidated Financial Statements have

been reclassified to conform to the current year presentation. This has resulted in

no change to net income, or retained earnings of the Company.

F - 11

2.	Cash and cash equivalents:


	At June 30,			(Unaudited) September 30, 2005
	2005		2004	(Unaudited) September 30, 2005
Interest bearing deposits in other financial institutions	$	74,655,340	4,259,597	17,343,049
Commercial paper		—	999,744	—
Other cash and cash equivalents		1,608,113	1,422,103	1,002,394

		$76,263,453	6,681,444	18,345,443

FHLB deposits totaled approximately $15,000,000 and $68,500,000 at September 30, 2005

and June 30, 2005, respectively.

3.	Investment Securities:

Investment securities available for sale at September 30, 2005, consist of the following:


			(Unaudited)
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
	(amounts in thousands)
U.S. League
Intermediate - Term Portfolio	$	1,910	—	39	1,871
Callable bonds-U.S. Government corporations and agencies		27,505	—	193	27,312
Federal Home Loan Mortgage Corporation Common Stock		27	1,545	—	1,572
Municipal bonds		960	—	11	949

	$	30,402	1,545	243	31,704

Investment securities held to maturity at September 30, 2005, consist of the following:


			(Unaudited)
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
	(amounts in thousands)
Municipal bonds	$	265	—	—	265

F - 12

Investment securities available for sale at June 30, 2005, consist of the following:


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
	(amounts in thousands)
U.S. League
Intermediate -
Term Portfolio	$	1,892	—	29	1,863
Callable bonds-U.S. Government corporations and agencies		5,084	—	82	5,002
Federal Home Loan Mortgage Corporation Common Stock		27	1,789	—	1,816
Municipal bonds		1,260	—	4	1,256

	$	8,263	1,789	115	9,937

Investment securities held to maturity at June 30, 2005, consist of the following:


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
	(amounts in thousands)
Municipal bonds	$	265	—	—	265

The callable bonds, corporate debt securities, and municipal bonds available for sale have

the following maturity:


	Amortized cost		Estimated market value
	(amounts in thousands)
Due or callable in one year or less	$	5,384	5,302
Due or callable in 1 - 5 years		960	956

	$	6,344	6,258

All of the other securities at June 30, 2005 are due, callable or saleable within one year.

F - 13

Investment securities available for sale at June 30, 2004, consist of the following:


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
	(amounts in thousands)
U.S. League
Intermediate - Term Portfolio	$	1,838	1	16	1,823
Callable bonds-US Government corporations and agencies		7,435	7	245	7,197
Corporate debt securities		2,810	50	—	2,860
Federal Home Loan Mortgage Corporation Common Stock		27	1,735	—	1,762
Corporate Stocks		165	370	—	535
Municipal bonds		1,860	—	12	1,848

	$	14,135	2,163	273	16,025

Investment securities held to maturity at June 30, 2004, consist of the following:


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
	(amounts in thousands)
Municipal bonds	$	669	—	—	669

Gross proceeds on sale of investments were $0, $3,483,242, $6,910,652, $18,759,571 and

$8,542,356 for the years ended September 30, 2005, 2004 and June 30, 2005, 2004 and

2003, respectively. Gross realized gains for the three months ended September 30, 2005

and 2004 and the years ended June 30, 2005, 2004 and 2003 were $0, $20,868, $320,272,

$219,365 and $1,452,582, respectively. Gross realized losses for the three months ended

September 30, 2005 and 2004 and the years ended June 30, 2005, 2004 and 2003 were $0,

$5,180, $8,664, $98,964 and $1,681,429, respectively.

During 2004, the bank received corporate stock from the conversion of the Conseco bonds

to stock arising out of the bankruptcy settlement. In 2003 the bonds were written down to

the approximate fair market value of the Conseco stock to be received by writing off

$800,925 to a value of $165,000 as a permanent impairment. The stock was sold in 2005

for $448,958.

The table below indicates the length of time individual investment securities and mortgage-

backed securities have been in a continuous loss position at June 30, 2005.

F - 14


	Less than 12 Months			12 Months or Longer		Total
	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
US League-Intermediate Term Portfolio & Callable Government agencies	$	431,525	661	6,433,777	110,149	6,865,302	110,810
Municipal bonds		299,994	6	565,651	4,349	865,645	4,355
Mortgage-backed Securities		1,326,658	16,442	22,954,717	409,530	24,281,375	425,972

	$	2,058,177	17,109	29,954,145	524,028	32,012,322	541,137

Number of Investments		3		62		65

Management has the intent to hold these securities for the foreseeable future and the decline

in market value is due to an increase in market interest rates. The fair values are expected to

recover as securities approach maturity dates.

The detail of interest and dividends on investment securities is as follows for the three

months ended September 30 (unaudited):


	2005		2004
Taxable interest income	$	950,271	477,829
Nontaxable interest income		10,553	14,296
Dividends		9,743	8,351

	$	970,567	500,476

The detail of interest and dividends on investment securities is as follows for June 30:


	2005		2004	2003
Taxable interest income	$	1,874,967	2,661,951	3,064,797
Nontaxable interest income		52,484	54,829	20,681
Dividends		36,189	31,179	34,559

	$	1,963,640	2,747,959	3,120,037

F - 15

4.	Mortgage-backed securities:

Mortgage-backed securities available for sale at September 30, 2005 consist of the

following:


			(Unaudited)
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Market Value
Estimated
FNMA	$	32,559,148	15,270	547,716	32,026,702
FHLMC		14,594,443	—	334,531	14,259,912
GNMA		2,339,992	—	35,023	2,304,969

	$	49,493,583	15,270	917,270	48,591,583

Mortgage-backed securities available for sale at June 30, 2005 consist of the following:


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Market Value
FNMA	$	19,294,795	24,770	250,840	19,068,725
FHLMC		6,614,320	4,494	156,071	6,462,743
GNMA		2,686,256	155	19,061	2,667,350

	$	28,595,371	29,419	425,972	28,198,818

Mortgage-backed securities available for sale at June 30, 2004 consist of the following:


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Market Value
Estimated
FNMA	$	28,331,035	29,988	491,915	27,869,108
FHLMC		7,349,800	—	184,372	7,165,428
GNMA		5,191,479	—	144,211	5,047,268

	$	40,872,314	29,988	820,498	40,081,804

F - 16

The maturity of the mortgage-backed securities is based on the repayment of the underlying

mortgages.

5.	Loans Receivable:

Loans receivable at September 30, 2005 and June 30, 2005 and 2004, consist of the

following:


	June 30,					(Unaudited) September 30,
	2005			2004		2005
	(in thousands)			(in thousands)		(in thousands)
Residential real estate One-to-four family	$	109,325		107,589		111,503
Multi family		13,194		10,932		13,268
Construction		5,899		1,186		4,365
Nonresidential real estate and land		59,263		48,237		59,217
Consumer and other loans		17,833		14,637		21,461

		205,514		182,581		209,814
Less:
Allowance for losses		2,266		1,550		2,294
Undisbursed portion of loans in process		2,543		1,887		1,714
Deferred loan fees		(173	)	(113	)	(216	)

	$	200,878		179,257		206,022

As of September 30, 2005, June 30, 2005 and 2004 , the Bank was servicing for the benefit

of others, $29,842,136, $30,352,234 and $33,470,742, respectively. The Bank recognized

$8,577, $2,714, $17,002, $38,035, $252,440 of pre-tax gains on sale of loans related to

capitalized mortgage servicing rights during the three months ended September 30, 2005

and 2004 and the years ended June 30, 2005, 2004 and 2003 respectively. The fair value of

mortgage servicing rights approximated $263,000, $267,063, $292,571 and $338,905 as of

September 30, 2005, June 30, 2005, 2004 and 2003, respectively.

The amount of loans classified as nonaccrual totaled approximately, $1,528,000, $1,479,000

and $1,122,000 at September 30, 2005, June 30, 2005 and 2004, respectively. Interest

income from these nonaccrual loans during the three months ended September 30, 2005 and

the fiscal years 2005 and 2004 was immaterial. All loans classified as nonaccrual had

allowances determined in accordance with SFAS No. 114 and No. 118. At September 30,

F - 17

2005 and at June 30, 2005 and 2004 the recorded investment in loans for which impairment

has been recognized was approximately $733,701, $920,213 and $604,630, respectively,

with related reserves of $383,364, $298,800 and $90,100, respectively. The average

balance of impaired loans was approximately $827,000, $825,000, $590,000 and $637,000

for the three months ended September 30, 2005 and the years ended June 30, 2005, 2004

and 2003, respectively. Interest received on impaired loans for the three months ended

September 30, 2005 and the years ended June 30, 2005, 2004 and 2003 was immaterial.

The amount of loans over 90 days past due totaled $1,525,400, $1,500,600 and $1,122,000

at September 30, 2005 and June 30, 2005 and 2004, respectively. The Bank has no

commitments to loan additional funds to these borrowers.

The Company sells loans in the secondary market. Mortgage loan sales totaled $1,889,100,

$4,226,100 and $28,048,900 during 2005, 2004 and 2003. Mortgage loans sales totaled

$961,200 and $308,800 for the three months ended September 30, 2005 and 2004. The

Bank had no loans designated as held for sale at September 30, 2005, September 30 2004,

June 30, 2005 and 2004. It is generally management’s intention to hold all other loans

originated to maturity or earlier repayment.

Changes in the allowance for losses on loans for the year ended June 30, are as follows:


	2005 (in thousands)			2004 (in thousands)		2003 (in thousands)
Balance at beginning of year	$	1,550		1,484		974
Provisions charged to income		857		120		620
Charge-offs		(156	)	(76	)	(113	)
Recoveries		35		22		3
Transfers to allowance for losses on other real estate owned		(20	)	—		—

Balance at end of year	$	2,266		1,550		1,484

Changes in the allowance for losses on loan for the three months ended September 30,

2005, are as follows:


Balance at beginning of period	$	2,266
Provision charged to income		30
Charge offs		(22	)
Recoveries		20

Balance at end of period	$	2,294

6.	Other Real Estate Owned:

Other real estate owned consists of the following:


	2005		2004	(Unaudited) Three months ended September 30, 2005
One-to-four family	$	80,000	80,000	12,500
Vehicle		5,000	—	—
Less valuation allowance		20,000	—	—

	$	65,000	80,000	12,500

F - 18

Activity in the allowance for losses on real estate owned is as follows for years ended June

30,:


	2005		2004	2003
Balance, beginning of year	$	—	—	—
Transfers from allowance for loan losses		20,000	—	—

Balance, end of year	$	20,000	—	—

Activity in the allowance for loan losses on real estate owned is as follows for the three

months ended September 30, 2005 (unaudited):


Balance, beginning of period	$	20,000
Recoveries		(20,000	)

Balance, end of period		—

7.	Property and Equipment:

Property and equipment at June 30, 2005 and 2004 are summarized as follows:


	2005		2004	(Unaudited) September 30, 2005
Land and land improvements	$	3,093,998	3,206,259	3,151,937
Buildings		2,032,220	1,645,818	2,020,670
Furniture and equipment		1,495,572	2,394,730	1,600,186

		6,621,790	7,246,807	6,772,793
Less:
Accumulated depreciation		1,399,666	2,588,844	1,502,499

	$	5,222,124	4,657,963	5,270,294

F - 19

Deposits:

Deposits at June 30, 2005 and 2004 consist of the following:


	2005				2004
	Weighted Average Rate		Balance		Weighted Average Rate		Balance
NOW accounts	2.13	%	$	138,742,332	0.63	%	$	48,941,227
Passbook	1.36	%		47,294,122	0.73	%		56,845,225
Money market deposit accounts	3.00	%		8,729,096	1.50	%		6,783,505

Total demand and passbook deposits				194,765,550				112,569,957


Certificate of deposits:

Less than 12 months	2.57	%		50,945,049	1.03	%		81,694,086
12 months to 24 months	2.91	%		17,267,007	1.90	%		662,845
30 months to 36 months	2.86	%		10,266,571	2.47	%		3,022,620
More than 36 months	4.20	%		3,749,768	5.12	%		6,963,814
Individual retirement accounts	2.98	%		22,385,052	2.71	%		23,025,802

Total certificates of deposit				104,613,447				115,369,167

Total deposit accounts			$	299,378,997			$	227,939,124

Deposits at September 30, 2005 consist of the following (unaudited):


			2005
	Weighted Average Rate		Balance
Demand deposit accounts	2.46	%	$	131,275,537
Passbook	1.36	%		44,826,294
Money market deposit accounts	3.56	%		8,467,733

Total demand and passbook deposits				184,569,564


Certificate of deposits:

Less than 12 months	2.84	%		51,125,844
12 months to 24 months	2.92	%		19,361,240
30 months to 36 months	2.84	%		8,261,999
More than 36 months	3.80	%		3,551,273
Individual retirement accounts	3.14	%		22,263,945

Total certificates of deposit				104,564,301

Total deposit accounts			$	289,133,865

F - 20

Interest paid and accrued on deposits are as follows:


	For the years ended June 30
	2005		2004	2003
NOW and money market accounts	$	1,079,107	440,363	516,909
Savings		773,566	467,442	855,914
Certificate of deposits		2,733,017	3,206,677	4,686,362

	$	4,585,690	4,114,482	6,059,185


	(Unaudited) Three months ended September 30
	2005		2004
NOW and money market accounts	$	867,685	192,137
Savings		199,198	137,547
Certificate of deposits		752,437	669,880

	$	1,819,320	999,884

The aggregate amount of time deposits with a minimum denomination of $100,000 was

approximately $51,434,000, $51,070,000 and $58,566,000 at September 30, 2005 and June

30, 2005 and 2004, respectively. Individual deposits with denominations of more than

$100,000 are not federally insured.

Total non-interest bearing deposits were $9,626,314, $8,953,612 and $8,613,119 at

September 30, 2005 and June 30, 2005 and 2004, respectively. Municipal deposits totaled

$139,209,250, $142,756,931 and $82,511,288 at September 30, 2005 and June 30, 2005

and 2004, respectively.

Maturities of certificate accounts after September 30, 2005 and June 30, 2005, are

approximately as follows:


	September 30, 2005 (In Thousands)		June 30, 2005 (In Thousands)
One year or less	$	76,696	69,307
1 - 2 years		15,263	22,550
2 - 3 years		8,543	9,803
3 - 4 years		641	428
4 - 5 years		3,302	2,407
Over 5 years		119	118

	$	104,564	104,613

F - 21

9.	Financial Instruments:

The following methods and assumptions were used in estimating the fair values of financial

instruments, cash, interest bearing deposits and investment in FHLB stock. The carrying

value of cash and interest bearing deposits approximates those assets’ 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.

Deposits

The fair values of passbook accounts, NOW accounts, and money market savings

and demand deposits approximates their carrying values. The fair value of fixed

maturity certificates of deposit is estimated using a discounted cash flow

F - 22

calculation that applies interest rates currently offered for deposits of similar

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 Bank’s financial instruments at June 30, 2005 and 2004 are as

follows:


	2005			2004
	Carrying Amounts		Fair Value	Carrying Amounts	Fair Value
	(All numbers in thousands)
Financial assets:
Cash and interest bearing deposits	$	76,263	76,263	6,681	6,681
Investment securities available for sale		9,937	9,937	16,025	16,025
Investment securities held to maturity		265	265	669	669
Mortgage-backed securities		28,199	28,199	40,082	40,082
Loans receivable		200,878	203,377	179,257	181,532
Accrued interest receivable		1,459	1,459	1,236	1,236
Investment in FHLB stock		1,687	1,687	1,616	1,616
Financial liabilities:
Deposits	$	299,490	302,737	227,998	230,347
Off-balance sheet items		—	—	—	—

The estimated fair values of the Bank’s financial instruments at September 30, 2005 are as

follows:


	Carrying Amounts		Fair Value
	(All numbers in thousands)
Financial assets:
Cash and interest bearing deposits	$	18,345	18,345
Investment securities available for sale		31,704	31,704
Investment securities held to maturity		265	265
Mortgage-backed securities		48,592	48,592
Loans receivable		206,022	207,464
Accrued interest receivable		1,590	1,590
Investment in FHLB stock		1,687	1,687
Financial liabilities:
Deposits	$	289,134	292,270
Off-balance sheet items		—	—

F - 23

10.	Borrowed Funds:

Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB), advances are

secured by all stock in the FHLB and a blanket pledge agreement for qualifying first

mortgage loans. During 2005 and 2004 the amount advanced from the FHLB was paid in

full by June 30, 2005 and 2004. No amounts have been advanced during the three months

ended September 30, 2005.

11.	401(k) Profit Sharing Plan:

The Bank has a standard 401(k) profit sharing plan. Eligible participants must be at least 18

years of age and have one year of service. The Bank makes matching contributions based

on each employee’s deferral contribution. Total expense under the plan for the three

months ended September 30, 2005 and 2004 was $21,641 and $21,032, respectively and

the for years ended June 30, 2005, 2004 and 2003 the expense totaled $89,672, $75,985

and $71,744, respectively.

12.	Supplemental Cash Flow Information:

The Bank paid $437,333 and $289,432 in income taxes for the three months ended

September 30, 2005 and 2004 and paid $850,766, $1,690,545 and $1,650,000 in income

taxes for the years ended June 30, 2005, 2004 and 2003. The Bank paid interest of

$1,783,064 and $948,058 for the three months ended September 30, 2005 and 2004, and

paid interest of $4,706,342, $4,308,125 and $6,034,073 for the years ended June 30, 2005,

2004 and 2003, respectively. The Bank had $(531,186), 739,892, $107,397, $(802,660)

and $(117,900) of unrealized gains (losses) on securities designated as available for sale, net

of taxes for the three months ended September 30, 2005 and 2004 and the years ended June

30, 2005, 2004 and 2003, respectively. During 2004 the Bank transferred $80,000 from

loans to other real estate owned.

13.	Related Party Transactions:

Loans to executive officers, directors, employees and their affiliated companies aggregated

approximately $8,485,202 and $7,924,921 at June 30, 2005 and 2004, respectively.

F - 24

The activity in loans to related parties for June 30, 2005 and 2004 is as follows:


	2005			2004
Beginning balance	$	7,924,921		7,329,865
New loans		2,031,903		2,037,541
Payments on loans		(1,471,622	)	(1,442,485	)

Ending balance	$	8,485,202		7,924,921

The activity in loans to related parties for the three months ended September 30, 2005 is as

follows (unaudited):


Beginning balance	$	8,485,202
New loans		1,022,870
Payments on loans		(1,275,123	)

Ending balance	$	8,232,949

Deposits from employees and directors totaled $5,426,989, $5,188,477 and $5,480,078 at

September 30, 2005 and June 30, 2005 and 2004, respectively.

14.	Capital Requirements:

Under current regulations, the Bank is required to meet certain core and risk-based capital

requirements. Core capital generally consists of retained earnings minus certain intangible

assets plus qualifying supervisory goodwill. The risk-based capital requirements presently

address credit risk related to both recorded assets and off-balance sheet commitments and

obligations.

Reconciliation of GAAP retained earnings to regulatory retained earnings:


	2005		2004
	(In thousands)
GAAP retained earnings	$	28,965	26,921
Adjustments:
Audit		165	(7	)
Other		—	(159	)

Regulatory retained earnings	$	29,130	26,755

F - 25

The following tables summarize the Bank’s capital amounts and the ratios required at September 30, 2005.


	(In thousands)
	Actual Amount		Required Amount	Actual Excess	Ratio		Required Ratio
Tier 1 capital	$	29,500	12,842	16,506	9.20	%	4.00	%
Risk-based capital		31,483	15,704	15,779	16.04	%	8.00	%

The following tables summarize the Bank’s capital amounts and the ratios required at June

30, 2005 and 2004:


	2005 (In thousands)

	Actual Amount		Required Amount	Actual Excess	Ratio		Required Ratio
Tier 1 capital	$	29,130	13,242	15,888	8.80	%	4.00	%
Risk-based capital		31,790	15,734	16,056	16.16	%	8.00	%

	2004 (In thousands)
	Actual Amount		Required Amount	Actual Excess	Ratio		Required Ratio

Tier 1 capital	$	26,755	10,235	16,520	10.46	%	4.00	%
Risk-based capital		28,762	13,328	15,434	17.26	%	8.00	%

15.	Federal Income Taxes:

The tax effect of temporary differences that give rise to significant portions of deferred tax

assets and deferred tax liabilities at June 30, 2005 and 2004 are as follows:


	2005			2004
Deferred tax assets arising from:
Loan loss reserve	$	866,348		590,685
Vacation and bonus accrual		159,269		104,789
Supplemental retirement		330,858		232,804
Post-retirement health care benefits		55,806		55,806

		1,412,281		984,084

Deferred tax liabilities arising from:
Unrealized gain on securities available for sale		(505,648	)	(435,239	)
Deferred loan costs		(991	)	(1,269	)
Mortgage servicing rights		(105,757	)	(115,858	)
Other		(27,669	)	(27,669	)
Depreciation		(152,507	)	(96,484	)
Reserve for bad debts		—		(43,101	)

Total deferred tax liabilities		(792,572	)	(719,620	)

Net deferred tax asset (liability)	$	619,709		264,464

F - 26

The Bank has not recorded a valuation allowance, as the deferred tax assets are presently

considered to be realizable based on the level of anticipated future taxable income. Net

deferred tax liabilities and federal income tax expense in future years can be significantly

affected by changes in enacted tax rates.

In 2005, the Bank qualified for the federal rehabilitation tax credit for its improvements to a

historical building located in Southwestern Indiana. The credit of approximately $231,000

reduces federal income tax expense for the year ended June 30, 2005.

The rate reconciliation for years ended June 30, 2005, 2004 and 2003 is as follows:


	2005		2004		2003
Tax at statutory rates	34.0	%	34.0	%	34.0	%
Historical rehab credit	(8.5	)	—		—
Other permanent differences	(1.6	)	1.7		3.1

	23.9	%	35.7	%	37.1	%

The components of deferred income tax credit are as follows:


	2005			2004		2003
Loan origination fees	$	(279	)	111		(45,891	)
Deferred compensation		(98,054	)	(122,408	)	(66,709	)
Mortgage servicing rights		(10,101	)	(18,348	)	51,767
Depreciation		56,024		20,960		115,159
Bad debt reserves and other		(373,244	)	(81,395	)	(259,083	)

	$	(425,654	)	(201,080	)	(204,757	)

16.	Bad Debt Reserve Recapture:

A bill repealing the thrift bad debt reserve has been signed into law and is effective for

taxable years beginning after December 31, 1995. All savings banks and thrifts were

required to account for tax reserves for bad debts in the same manner as banks. Such

entities with assets less than $500 million will be required to maintain a moving average

expense based reserve and no longer will be able to calculate a reserve based on a

percentage of taxable income.

F - 27

Tax reserves accumulated after 1987 will automatically be subject to recapture. The

recapture will occur in equal amounts over six years beginning in 1997 and can be deferred

up to two years, depending on the level of loans originated.

As a result of the tax law change, the Bank is expected to ultimately recapture $748,478 of

tax reserves accumulated after 1987, resulting in additional tax payments of $255,000. The

recapture of these reserves will not result in any significant income statement effect to the Bank.

Pre-1988 tax reserves will not have to be recaptured unless the Bank or successor

institution liquidates, redeems shares or pays a dividend in excess of earnings and profits.

17.	Deferred Compensation:

In March 2002 the Bank adopted a supplemental retirement income program with selected

officers and board members. To fund this plan, the Bank purchased single-premium life

insurance policies on each officer and director, at a cumulative total cost of $5,100,000.

The cash surrender value of these policies was $5,955,116, $5,898,842 and $5,676,770 at

September 30, 2005 and June 30, 2005 and 2004, respectively. The directors’ liability is

accrued based on life expectancies, return on investment and a discount rate. For the

officers, an annual contribution based on actuarial assumptions, is made to a secular trust

with the employee as beneficiary. Deferred compensation payments will be funded out of

accumulated assets of the secular trust at age 65. If the officer leaves employment of the

bank before age 65, deferred compensation payments are funded by available assets in the

secular trust. No further funding is required by the Bank, with the exception that upon a

change in control of the Bank, the plan provides for full supplemental benefits which would

have occurred at age 65.

Future expected contributions for the funding of officers’ deferred compensation is as

follows:


2006	$	128,603
2007		273,128
2008		273,128
2009		273,128
2010		273,128
2011 and thereafter		2,160,509

	$	3,381,624

At September 30, 2005 and June 30, 2005 and 2004 the Bank has accrued directors

supplemental retirement expense of $964,360, $932,679 and $641,559, respectively, and

expensed $63,970, $408,605, $419,515 and $353,629 for officers and directors

supplemental retirement expense for the three months ended September 30, 2005 and the

years ended June 30, 2005, 2004 and 2003, respectively.

F - 28

18.

Leases:

During 2003 the bank entered into a lease agreement with the City of Lawrenceburg, to

lease the Walnut St. branch for fifteen months. During 2004 this lease was extended for one

month. Lease expense for June 30, 2005, 2004 and 2003 was $16,492, $197,904 and

$49,476, respectively.

The Bank has a three-year operating lease for one of its branches. Lease expense for the

three months ended September 30, 2005 and 2004 and the years ended June 30, 2005, 2004

and 2003 was $6,268, $6,728, $25,829, $26,310 and $24,518, respectively. Future

minimum lease payments under this lease agreement are as follows as of September 30,

2005:


2006	$	18,090
2007		24,120
2008		14,073

	$	56,283

The Bank entered into lease agreements with various tenants who lease space from the Bank

in a strip mall where the Bank has a branch. Revenue from these leases for the three months

ended September 30, 2005 and 2004 and the years ended June 30, 2005, 2004 and 2003

was $12,862, $10,424 $52,825, $52,449 and $49,575, respectively.

Future minimum lease revenue to be received on these leases is as follows:


2006	$	13,557

19.	Loan Commitments:

In the ordinary course of business, the Company has various outstanding commitments to

extend credit that are not reflected in the accompanying consolidated financial statements.

These commitments involve elements of credit risk in excess of the amount recognized in

the balance sheet.

The Company uses the same credit policies in making commitments for loans as it does for

loans that have been disbursed and recorded in the consolidated balance sheet. The

Company generally requires collateral when it makes loan commitments, which generally

consists of the right to receive first mortgages on improved or unimproved real estate when

performance under the contract occurs.

Commitments to extend credit are agreements to lend to a customer as long as there is no

violation of any condition established in the contract. Commitments generally have fixed

expiration dates or other termination clauses and may require payment of a fee. Since some

portion of the commitments are expected to expire without being drawn upon, the total

commitment amounts do not necessarily represent future cash requirements. Certain of

these commitments are for fixed rate loans, and, therefore, their value is subject to market

risk as well as credit risk.

F - 29

At September 30, 2005 and June 30, 2005, the Company’s total commitment to extend

credit was approximately $23,800,000 and $19,900,000, respectively.

20.	United Community Service Corp.

The following condensed balance sheet as of June 30, 2005 and 2004 and condensed

statement of income for each of the three years ended June 30, 2005, 2004 and 2003 should

be read in conjunction with the consolidated financial statements and notes thereto.

CONDENSED BALANCE SHEET

June 30, 2005 and 2004


Assets
	2005		2004
Cash in bank	$	110,736	59,093

Liabilities and Equity
Retained earnings	$	110,736	59,093

CONDENSED STATEMENT OF INCOME

Years Ended June 30,


	2005		2004	2003
Fee income	$	51,642	16,276	34,134

Net income	$	51,642	16,276	34,134

CONDENSED BALANCE SHEET – (UNAUDITED)

September 30, 2005


Assets
Cash in bank	$	119,561

Liabilities and Equity
Retained earnings	$	119,561

F - 30

CONDENSED STATEMENT OF INCOME – (UNAUDITED)

Three months ended September 30, 2005


Fee income	$	8,826
Net income	$	8,826

21.	Plan of Reorganization and Stock Issuance

On September 22, 2005, the Bank’s Board of Directors adopted a Plan of Reorganization

and Stock Issuance pursuant to which the Bank will: (i) convert to a stock savings bank

(“Stock Bank”), (ii) organize a stock holding company (“Stock Holding Company”) as a

federally chartered corporation that will own 100% of the issued and outstanding common

stock of the Stock Bank, and (iii) organize a mutual holding company (“MHC”) as a

federally chartered mutual holding company that will own at least 51% of the issued and

outstanding common stock of the Stock Holding Company so long as the MHC remains in

existence. The Stock Bank will succeed to the business and operation of the Bank in mutual

form and the Stock Holding Company will sell a minority interest in its common stock in a

public stock offering in accordance with the terms of the Plan of Reorganization and Stock

Issuance. The Bank also intends to establish a charitable foundation in connection with the

reorganization and minority stock offering.

The Plan of Reorganization and Stock Issuance must be approved by the Office of Thrift

Supervision and by the Bank’s depositors. The Stock Holding Company’s registration

statement for the common stock to be issued in the minority stock offering must be declared

effective by the Securities and Exchange Commission. The Stock Holding Company plans

to offer to the public shares of common stock representing a minority ownership interest

based on the estimated pro forma market value of the Bank as determined by an independent

appraisal.

Following completion of the reorganization, all depositors who had membership or

liquidation rights with respect to the Bank as of the effective date of the reorganization will

continue to have such rights with respect to the MHC so long as they continue to hold

deposit accounts with the Bank. In addition, all persons who become depositors of the

Bank after the reorganization will have such membership and liquidation rights with respect

to the MHC.

Reorganization costs of approximately $52,000 and $0 have been incurred as of September

30, 2005 and June 30, 2005, respectively. If the reorganization is ultimately successful,

reorganization costs will be accounted for as a reduction of the stock proceeds. If the

reorganization is unsuccessful, reorganization costs will be charged to the Bank’s

operations.

F - 31

22.	Future Accounting Issues:

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS

No. 123R, “Share-Based Payment,” which replaces SFAS No. 123, “Accounting for Stock-

Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued

to Employees.” This statement will require that all share-based payments to employees,

including grants of employee stock options, be recognized as compensation costs in the

financial statements based on their fair values. The effective date of this Statement was

delayed until fiscal years beginning after June 15, 2005. The Bank anticipates adopting this

standard as required, upon approval of the stock option plan after conversion.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets,

an amendment of APB Opinion No. 29,” which eliminates the exception from fair value

measurement for non-monetary exchanges of similar productive assets and replaces it with a

general exception for exchanges of non-monetary assets that do not have commercial

substance. The statement defines a non-monetary exchange with commercial substance as

one in which the future cash flows of an entity are expected to change significantly as a

result of the exchange. SFAS No. 153 is effective for fiscal years beginning after June 15,

2005. The Bank will adopt this statement as required, and management does not believe the

adoption will have a material effect on its results of operations or financial position.

In March 2005, the FASB issued FASB Staff Position (“FSP”) FIN 46(R)-5 “Implicit

Variable Interests under FASB Interpretation No. 46, Consolidation of Variable Interest

Entities.” FSP FIN 46(R)-5 provides guidance for a reporting enterprise that holds an

implicit variable interest in a variable interest entity (“VIE”) and is also a related party to

other variable interest holders. This guidance requires that if the aggregate variable interests

held by the reporting enterprise and its related parties would, if held by a single party,

identify that party as the primary beneficiary, then the party within the related party group

that is most closely associated with the VIE is the primary beneficiary. The effective date of

FSP FIN 46(R)-5 is the first reporting period ending after December 15, 2005 with early

application permitted for periods for which financial statements have not been issued. The

Bank does not believe that implementation of this FSP will have a material effect on its

results of operations or financial position as it does not have any Variable Interest Entities.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error

Corrections,” which establishes, unless impracticable, retrospective application as the

required method for reporting a change in accounting principle in the absence of explicit

transition requirements specific to the newly adopted accounting principle. The statement

provides guidance for determining whether retrospective application of a change in

accounting principle is impracticable. The statement also addresses the reporting of a

correction of error by restating previously issued financial statements. SFAS No. 154 is

effective for accounting changes and corrections of errors made in fiscal years beginning

after December 15, 2005. The Bank will adopt this statement as required, and management

does not believe the adoption will have a material effect on its results of operations or

financial position.

F - 32

You should rely only on the information contained in this prospectus. Neither United Community Bancorp nor

United Community Bank has authorized anyone to provide you with different information. This prospectus

does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered by this

prospectus to any person or in any jurisdiction in which an offer or solicitation is not authorized or in which the

person making an offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make

an offer or solicitation in those jurisdictions. The information contained in this prospectus is accurate only as of

the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the United

Community Bancorp common stock.

[LOGO]

(Proposed Holding Company for United Community Bank)

3,172,160 Shares

(Anticipated Maximum, Subject to Increase)

COMMON STOCK

PROSPECTUS

Keefe, Bruyette & Woods

, 2006

Until , 2006, or 25 days after commencement of the syndicated community offering, if any,

whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in

this distribution, may be required to deliver a prospectus when acting as underwriters and with respect to their

unsold allotments of subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution.


SEC filing fee (1)	$	4,076
OTS filing fee		14,400
NASD filing fee (1)		4,309
Nasdaq Stock Market listing fee		100,000
Blue Sky fees and expenses		5,000
EDGAR, printing, postage and mailing		125,000
Legal fees and expenses		340,000
Accounting fees and expenses		75,000
Appraiser’s fees and expenses		40,000
Business Plan fees and expenses		40,000
Marketing firm expenses (including marketing firm’s counsel fees) (1) (2)		475,500
Reorganization agent fees and expenses		27,000
Transfer agent and registrar fees and expenses		7,500
Certificate printing		2,500
Miscellaneous		15,000

Total	$	1,275,285

(1)	Estimated expenses based on the registration of 3,808,800 shares at $10.00 per share.

(2)

Keefe, Bruyette & Woods, Inc. will receive a fee equal to 1.5% of the aggregate purchase price of shares sold in the subscription offering and the community offering, excluding shares purchased by the employee stock ownership plan, the foundation and by officers, directors and employees of United Community Bank and members of their immediate families.

Item 14.

Indemnification of Directors and Officers.

Article XII of the Registrant’s Bylaws provides:

The Subsidiary Holding Company shall indemnify all officers, directors and employees of the Subsidiary Holding Company, and their heirs, executors and administrators, to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of the Subsidiary Holding Company, whether or not they continue to be a director or officer at the time of incurring such expenses or liabilities, such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements.

Generally, federal law provides indemnity coverage for:

(a) Any person against whom any action is brought or threatened because that person is or was a director or officer of the association, for:

(i) Any amount for which that person becomes liable under a judgment in such action; and

(ii) Reasonable costs and expenses, including reasonable attorneys’ fees, actually paid or incurred by that person in defending or settling such action, or in enforcing his or her rights under this section if he or she attains a favorable judgment in such enforcement action.

(b) Indemnification shall be made to such person only if:

(i) Final judgment on the merits is in his or her favor; or

(ii) In case of:

Settlement;

Final judgment against him or her; or

Final judgment in his or her favor, other than on the merits, if a majority of the disinterested directors of the savings association determine that he or she was acting in good faith within the scope of his or her employment or authority as he or she could reasonably have perceived it under the circumstances and for a purpose he or she could reasonably have believed under the circumstances was in the best interests of the savings association or its members.

However, no indemnification shall be made unless the association gives the Office of Thrift Supervision at least 60 days’ notice of its intention to make such indemnification. No such indemnification shall be made if the Office of Thrift Supervision advises the association in writing, within such notice period, of its objection thereto.

(i)

“Action” means any judicial or administrative proceeding, or threatened proceeding, whether civil, criminal, or otherwise, including any appeal or other proceeding for review.

(ii)

“Court” includes, without limitation, any court to which or in which any appeal or any proceeding for review is brought.

(iii)

“Final judgment” means a judgment, decree or order which is not appealable or as to which the period for appeal has expired with no appeal taken.

(iv)

“Settlement” includes the entry of a judgment by consent or confession or a plea of guilty or of nolo contendere.

Item 15.

Recent Sales of Unregistered Securities.

None.

Item 16.

Exhibits and Financial Statement Schedules.

The exhibits and financial statement schedules filed as a part of this registration statement are as follows:

(a) List of Exhibits (filed herewith unless otherwise noted)



1.1		Engagement Letter between United Community Bank and Keefe, Bruyette & Woods, Inc.

1.2		Draft Agency Agreement*

2.1		Amended and Restated Plan of Reorganization and Stock Issuance

3.1		Charter of United Community Bancorp

3.2		Bylaws of United Community Bancorp

4.1		Specimen Stock Certificate of United Community Bancorp

5.1		Form of Opinion of Muldoon Murphy & Aguggia LLP re: Legality

8.1		Form of Opinion of Muldoon Murphy & Aguggia LLP re: Federal Tax Matters

8.2		Form of Opinion of Clark, Schaefer, Hackett & Co. re: State Tax Matters

10.1		Form of United Community Bank Employee Stock Ownership Plan and Trust Agreement

10.2		Form of ESOP Loan Documents

10.3		United Community Bank 401(k) Profit Sharing Plan and Trust*

10.4		Form of United Community Bank Employee Severance Compensation Plan

10.5		Form of United Community Bank Supplemental Executive Retirement Plan

10.6		Form of United Community Bancorp Employment Agreement



10.7		Employment Agreement between United Community Bank and William F. Ritzmann

10.8		Employment Agreement between United Community Bank and Elmer G. McLaughlin

10.9		Employment Agreement between United Community Bank and James W. Kittle

10.10		United Community Bank Directors Retirement Plan

10.11		Executive Supplemental Retirement Income Agreements between United Community Bank and William F. Ritzmann, Elmer G. McLaughlin and James W. Kittle and Grantor Trust Agreements thereto

10.12		Rabbi Trust related to Directors Retirement Plan and Executive Supplemental Retirement Income Agreements

23.1		Consent of Muldoon Murphy & Aguggia LLP (included in Exhibits 5.1 and 8.1 filed herewith)

23.2		Consent of Clark, Schaefer, Hackett & Co.

23.3		Consent of Keller & Company, Inc.

23.4		Consent of Robert J. Ewbank to be identified as a proposed director

23.5		Consent of William S. Gehring to be identified as a proposed director

23.6		Consent of Jerry W. Hacker to be identified as a proposed director

23.7		Consent of Elmer G. McLaughlin to be identified as a proposed director

23.8		Consent of Anthony C. Meyer to be identified as a proposed director

23.9		Consent of Larry L. Miller to be identified as a proposed director

23.10		Consent of Henry G. Nanz to be identified as a proposed director

23.11		Consent of William F. Ritzmann to be identified as a proposed director

23.12		Consent of Eugene B. Seitz, II to be identified as a proposed director

23.13		Consent of George M. Seitz to be identified as a proposed director

23.14		Consent of Ralph B. Sprecher to be identified as a proposed director

23.15		Consent of Richard C. Strzynski to be identified as a proposed director

23.16		Consent of Frank E. Weismiller, Jr. to be identified as a proposed director

24.1		Powers of Attorney

99.1		Appraisal Report of Keller & Company, Inc. (P)

99.2		Draft Marketing Materials

99.3		Form of Subscription Order Form and Instructions

99.4		Form of United Community Bank Charitable Foundation Gift Instrument

(P)	The supporting financial schedules are filed in paper pursuant to Rule 202 of Regulation S-T.

*	To be filed by amendment.

(b) Financial Statement Schedules

All schedules have been omitted as not applicable or not required under the rules of Regulation S-X.

Item 17.

Undertakings.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(5) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.:

(6) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv)

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lawrenceburg, State of Indiana on December 13, 2005.


United Community Bancorp (in organization)

By:		/s/ WILLIAM F. RITZMANN
		William F. Ritzmann
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.


Name	Title	Date

/s/ WILLIAM F. RITZMANN William F. Ritzmann	President, Chief Executive Officer and Director (principal executive officer)	December 13, 2005

/s/ VICKI A. MARCH Vicki A. March	Senior Vice President, Chief Financial Officer and Treasurer (principal accounting and financial officer)	December 13, 2005

/s/ RALPH B. SPRECHER Ralph B. Sprecher	Chairman of the Board	December 13, 2005

/s/ ROBERT J. EWBANK Robert J. Ewbank	Director	December 13, 2005

/s/ WILLIAM S. GEHRING William S. Gehring	Director	December 13, 2005

/s/ JERRY W. HACKER Jerry W. Hacker	Director	December 13, 2005

/s/ ELMER G. MCLAUGHLIN Elmer G. McLaughlin	Executive Vice President, Chief Operating Officer, Corporate Secretary and Director	December 13, 2005

/s/ ANTHONY C. MEYER Anthony C. Meyer	Director	December 13, 2005



/s/ LARRY L. MILLER Larry L. Miller	Director	December 13, 2005

/s/ HENRY G. NANZ Henry G. Nanz	Director	December 13, 2005

/s/ GEORGE M. SEITZ George M. Seitz	Director	December 13, 2005

/s/ EUGENE B. SEITZ, II Eugene B. Seitz, II	Director	December 13, 2005

/s/ RICHARD C. STRZYNSKI Richard C. Strzynski	Director	December 13, 2005

/s/ FRANK E. WEISMILLER, JR. Frank E. Weismiller, Jr.	Director	December 13, 2005