##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission File Number: 0-21809
 HOME CITY FINANCIAL CORPORATION
  OHIO
    
    34-1839475(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
  
   
   
   þ o
  o þ
    o þ




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##### 



HOME CITY FINANCIAL CORPORATION
 FORM 10-QSB
INDEX
 Page NumberPART I FINANCIAL INFORMATIONITEM 1. Financial StatementsCondensed consolidated balance sheets 
September 30, 2006, and December 31, 2005
    
    
    3Condensed consolidated statements of income  Nine months
and three months ended September 30, 2006 and 2005
    
    
    4Condensed consolidated statement of changes in
shareholders equity Nine months ended September 30, 2006
    
    
    5Condensed consolidated statements of cash flows 
Nine months ended September 30, 2006 and 2005
    
    
    6Notes to condensed consolidated financial statements
    
    
    72. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    133. Controls and Procedures
    
    
    19PART II OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    202. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    203. Defaults upon Senior Securities
    
    
    204. Submission of Matters to a Vote of Security Holders
    
    
    205. Other Information
    
    
    206. Exhibits
    
    
    20Signatures
    
    
    21Certifications
    
    
    22 - 24EX-31.1EX-31.2EX-32EX-99.1
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
Item 1. Financial Statements
HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)(Unaudited)At September
    
    
    At December30, 2006
    
    
    31,2005ASSETSCash and cash equivalentsCash and due from banks
    
    $
    3,036
    
    
    $
    2,397Interest-bearing demand deposits
    
    
    40
    
    
    
    4,006Federal funds sold
    
    
    10,177
    
    
    
    443Cash and cash equivalents
    
    
    13,253
    
    
    
    6,846Available-for-sale securities
    
    
    1,576
    
    
    
    5,261Loans held for sale
    
    
    248
    
    
    
    -0-Loans, net of allowance for loan losses of $1,422 and $1,377
at September 30, 2006 and December 31, 2005
    
    
    123,948
    
    
    
    127,409Premises and equipment
    
    
    3,235
    
    
    
    3,398Federal Home Loan Bank stock
    
    
    2,588
    
    
    
    2,480Interest receivable
    
    
    605
    
    
    
    559Cash surrender value of life insurance
    
    
    3,279
    
    
    
    3,197Other
    
    
    496
    
    
    
    403TOTAL ASSETS
    
    $
    149,228
    
    
    $
    149,553LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDeposits
Demand
    
    $
    6,392
    
    
    $
    5,763Savings, NOW and money market
    
    
    26,786
    
    
    
    32,980Time
    
    
    65,509
    
    
    
    59,712Total Deposits
    
    
    98,687
    
    
    
    98,455Federal Home Loan Bank advances
    
    
    35,339
    
    
    
    36,337Interest payable and other liabilities
    
    
    1,330
    
    
    
    1,355TOTAL LIABILITIES
    
    
    135,356
    
    
    
    136,147Commitments and contingent liabilitiesShareholders equityPreferred shares, no par value: authorized 1,000,000 shares; none issued
    
    
    -0-
    
    
    
    -0-Common shares, no par value: authorized 5,000,000 shares;
shares issued - 981,913
    
    
    -0-
    
    
    
    -0-Additional paid-in capital
    
    
    6,356
    
    
    
    6,366Retained earnings
    
    
    9,655
    
    
    
    9,337Unearned Recognition and Retention Plan (RRP) shares
    
    
    -0-
    
    
    
    (41
    )Unearned Employee Stock Ownership Plan (ESOP) shares
    
    
    (28
    )
    
    
    (111
    )Accumulated other comprehensive loss
    
    
    (121
    )
    
    
    (155
    )Treasury shares, at cost; 146,223 shares
    
    
    (1,990
    )
    
    
    (1,990
    )TOTAL SHAREHOLDERS EQUITY
    
    
    13,872
    
    
    
    13,406TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    149,228
    
    
    $
    149,553
  3




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HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Dollars
in thousands except per share amounts)(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)3 Months Ended
    
    
    3 Months Ended
    
    
    9 Months Ended
    
    
    9 Months EndedSept. 30, 2006
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2006
    
    
    Sept. 30, 2005INTEREST INCOMELoans
    
    $
    2,237
    
    
    $
    2,196
    
    
    $
    6,630
    
    
    $
    6,530Securities
    
    
    17
    
    
    
    22
    
    
    
    55
    
    
    
    81Federal funds sold
    
    
    38
    
    
    
    8
    
    
    
    83
    
    
    
    16Dividends on Federal Home Loan Bank stock
    
    
    37
    
    
    
    30
    
    
    
    108
    
    
    
    85Deposits with financial institutions
    
    
    1
    
    
    
    37
    
    
    
    44
    
    
    
    98TOTAL INTEREST INCOME
    
    
    2,330
    
    
    
    2,293
    
    
    
    6,920
    
    
    
    6,810INTEREST EXPENSEDeposits
    
    
    741
    
    
    
    623
    
    
    
    2,101
    
    
    
    1,826Borrowings
    
    
    459
    
    
    
    490
    
    
    
    1,430
    
    
    
    1,439TOTAL INTEREST EXPENSE
    
    
    1,200
    
    
    
    1,113
    
    
    
    3,531
    
    
    
    3,265NET INTEREST INCOME
    
    
    1,130
    
    
    
    1,180
    
    
    
    3,389
    
    
    
    3,545Provision for loan losses
    
    
    37
    
    
    
    80
    
    
    
    118
    
    
    
    635NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    1,093
    
    
    
    1,100
    
    
    
    3,271
    
    
    
    2,910NONINTEREST INCOMEService charges on deposits
    
    
    11
    
    
    
    11
    
    
    
    31
    
    
    
    31Gain on redemption of Intrieve Incorporated
stock
    
    
    -0-
    
    
    
    16
    
    
    
    -0-
    
    
    
    345Life insurance
    
    
    35
    
    
    
    57
    
    
    
    105
    
    
    
    127Other
    
    
    11
    
    
    
    32
    
    
    
    55
    
    
    
    68TOTAL NONINTEREST INCOME
    
    
    57
    
    
    
    116
    
    
    
    191
    
    
    
    571NONINTEREST EXPENSESalaries and employee benefits
    
    
    448
    
    
    
    452
    
    
    
    1,354
    
    
    
    1,350Net occupancy expense
    
    
    64
    
    
    
    67
    
    
    
    198
    
    
    
    201Equipment expense
    
    
    45
    
    
    
    52
    
    
    
    150
    
    
    
    161Data processing fees
    
    
    59
    
    
    
    52
    
    
    
    176
    
    
    
    181Professional fees
    
    
    111
    
    
    
    85
    
    
    
    301
    
    
    
    231Franchise taxes
    
    
    48
    
    
    
    41
    
    
    
    145
    
    
    
    122Other
    
    
    103
    
    
    
    106
    
    
    
    287
    
    
    
    291TOTAL NONINTEREST EXPENSE
    
    
    878
    
    
    
    855
    
    
    
    2,611
    
    
    
    2,537NET INCOME BEFORE FEDERAL
INCOME TAX EXPENSE
    
    
    272
    
    
    
    361
    
    
    
    851
    
    
    
    944Provision for income tax expense
    
    
    82
    
    
    
    115
    
    
    
    258
    
    
    
    301NET INCOME
    
    $
    190
    
    
    $
    246
    
    
    $
    593
    
    
    $
    643Earnings per common share  basic
    
    $
    0.23
    
    
    $
    0.30
    
    
    $
    0.72
    
    
    $
    0.79Earnings per common share  diluted
    
    $
    0.23
    
    
    $
    0.30
    
    
    $
    0.71
    
    
    $
    0.78Dividends declared per share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.33
    
    
    $
    0.33
  4




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Home City Financial Corporation
SPRINGFIELD, OHIO
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
(Dollars in thousands)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    OtherPaid-in
    
    
    Retained
    
    
    Unearned
    
    
    ESOP
    
    
    Comprehensive
    
    
    TreasuryShares
    
    
    Capital
    
    
    Earnings
    
    
    Compensation
    
    
    Shares
    
    
    Loss
    
    
    Shares
    
    
    TotalBalance, January 1, 2006
    
    
    981,913
    
    
    $
    6,366
    
    
    $
    9,337
    
    
    $
    (41
    )
    
    $
    (111
    )
    
    $
    (155
    )
    
    $
    (1,990
    )
    
    $
    13,406Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    593Change in unrealized
gain (loss) on securities
available for sale, net
of reclassification
adjustment and tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    34Total
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627Reclassification due to
adoption of SFAS
123(R)
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    41Amortization of unearned
compensation expense
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28ESOP shares earned
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    86Dividends on common
shares, $.33 per share
    
    
    
    
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Balance, September 30, 2006
    
    
    981,913
    
    
    $
    6,356
    
    
    $
    9,655
    
    
    $
    -0-
    
    
    $
    (28
    )
    
    $
    (121
    )
    
    $
    (1,990
    )
    
    $
    13,872
  5




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HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)(Unaudited)
    
    
    (Unaudited)9 Months ended
    
    

9 Months endedSeptember 30, 2006
    
    
    September 30, 2005OPERATING ACTIVITIESNet income
    
    $
    593
    
    
    $
    643Items not requiring (providing) cashDepreciation and amortization
    
    
    164
    
    
    
    174Provision for loan losses
    
    
    118
    
    
    
    635Amortization of premiums and discounts on securities
    
    
    (13
    )
    
    
    21Deferred income taxes
    
    
    (9
    )
    
    
    (419
    )Increase in cash surrender value of life insurance
    
    
    (82
    )
    
    
    (104
    )Employees Stock Ownership Plan compensation expense
    
    
    86
    
    
    
    113Recognition and Retention Plan compensation expense
    
    
    28
    
    
    
    28Gain on redemption of Intrieve Incorporated stock
    
    
    -0-
    
    
    
    (345
    )Gain on sale of real estate owned
    
    
    -0-
    
    
    
    (58
    )FHLB stock dividends
    
    
    (108
    )
    
    
    (85
    )Proceeds from sale of loans held for sale
    
    
    1,325
    
    
    
    1,782Originations of loans held for sale
    
    
    (1,292
    )

    
    
    (2,019
    )Gain on sale of loans
    
    
    (33
    )

    
    
    (36
    )Changes inInterest receivable
    
    
    (46
    )
    
    
    (3
    )Other assets
    
    
    (332
    )
    
    
    557Interest payable and other liabilities
    
    
    44
    
    
    
    122Net cash provided by operating activities
    
    
    443
    
    
    
    1,006INVESTING ACTIVITIESPurchase of available-for-sale securities
    
    
    (5,996
    )
    
    
    (14,986
    )Proceeds from payments and maturities of securities available-for-sale
    
    
    9,745
    
    
    
    13,870Proceeds from redemption of Intrieve Incorporated stock
    
    
    -0-
    
    
    
    360Net change in loans
    
    
    3,343
    
    
    
    2,137Purchases of premises and equipment
    
    
    (1
    )
    
    
    (23
    )Net cash provided by investing activities
    
    
    7,091
    
    
    
    1,358FINANCING ACTIVITIESNet decrease in demand deposits, money market, NOW and
savings accounts
    
    
    (5,565
    )
    
    
    (13,497
    )Net increase in certificates of deposit
    
    
    5,797
    
    
    
    5,375Proceeds from Federal Home Loan Bank advances
    
    
    14,300
    
    
    
    8,000Repayment of Federal Home Loan Bank advances
    
    
    (15,298
    )
    
    
    (5,815
    )Dividends paid
    
    
    (275
    )
    
    
    (276
    )Net decrease in advances from borrowers for taxes and insurance
    
    
    (86
    )
    
    
    (69
    )Net cash used in financing activities
    
    
    (1,127
    )
    
    
    (6,282
    )INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    6,407
    
    
    
    (3,918
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    6,846
    
    
    
    9,595CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    13,253
    
    
    $
    5,677
  6




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HOME CITY FINANCIAL CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
 (Unaudited)
 NOTE 1. BASIS OF PRESENTATION
  NOTE 2. ALLOWANCE FOR LOAN LOSSES
  (Dollars in thousands)Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance, beginning of
period
    
    $
    1,407
    
    
    $
    1,286
    
    
    $
    1,377
    
    
    $
    760Provision for loan losses
    
    
    37
    
    
    
    80
    
    
    
    118
    
    
    
    635Charge-offs
    
    
    (78
    )
    
    
    -0-
    
    
    
    (134
    )
    
    
    (35
    )Recoveries
    
    
    56
    
    
    
    2
    
    
    
    61
    
    
    
    8Balance, end of period
    
    $
    1,422
    
    
    $
    1,368
    
    
    $
    1,422
    
    
    $
    1,368
 NOTE 3. ADVANCES FROM FEDERAL HOME LOAN BANK
 7




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(Dollars in thousands)At September 30, 2006
    
    At December 31, 2005Range of
    
    Weighted-
    
    
    
    
    
    Range of
    
    Weighted-interest
    
    average
    
    
    
    
    
    interest
    
    averageAmount
    
    rates
    
    interest rate
    
    Amount
    
    rates
    
    interest rateDue within
one year
    
    $
    8,108
    
    
    
    3.30%-
    7.28%
    
    
    5.81%
    
    
    $
    3,723
    
    
    
    3.30%-6.81
    %
    
    
    5.23
    %After one but
within five
years
    
    $
    27,231
    
    
    
    3.05%-
    6.84%
    
    
    5.63%
    
    
    $
    21,614
    
    
    
    3.05%-7.28
    %
    
    
    5.84
    %After five
years
    
    $
    -0-
    
    
    
    %
    
    
    %
    
    
    $
    11,000
    
    
    
    3.30%-5.33
    %
    
    
    5.02
    %
 NOTE 4. CHANGE IN ACCOUNTING PRINCIPLE
   Accounting for Stock Issued to Employees,
 8




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Accounting for Stock-Based Compensation
 (Dollars in thousands except per share amounts )For the Three Months
    
    
    For the Nine Monthsended September 30
    
    
    ended September 302005
    
    
    2005Net income, as reported
    
    $
    246
    
    
    $
    643Less: Total stock-based employee compensation
cost determined under the fair value based
method net of income taxes
    
    
    (2
    )
    
    
    (7
    )Pro forma net income
    
    $
    244
    
    
    $
    636Earnings per share:Basic  as reported
    
    $
    0.30
    
    
    $
    0.79Basic  pro forma
    
    $
    0.30
    
    
    $
    0.78Diluted  as reported
    
    $
    0.30
    
    
    $
    0.78Diluted  pro forma
    
    $
    0.30
    
    
    $
    0.77
 NOTE 5. REGULATORY CAPITAL
  (Dollars in thousands)To beCategorized as WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal Risk-Based Capital
(To Risk-Weighted Assets)
    
    $
    14,312
    
    
    
    13.3
    %
    
    $
    8,638
    
    
    
    8.0
    %
    
    $
    10,797
    
    
    
    10.0
    %Tier I Capital
(To Risk-Weighted Assets)
    
    $
    12,963
    
    
    
    12.0
    %
    
    
    N/A
    
    
    
    N/A
    
    
    $
    6,478
    
    
    
    6.0
    %Tier I Capital
(To Total Assets)
    
    $
    12,963
    
    
    
    8.7
    %
    
    $
    5,962
    
    
    
    4.0%
    *
    
    $
    7,452
    
    
    
    5.0
    %Tangible Capital
(To Total Assets)
    
    $
    12,963
    
    
    
    8.7
    %
    
    $
    2,236
    
    
    
    1.5
    %
    
    
    N/A
    
    
    
    N/A
 
 *
    
    Although the general required minimum is 4%, savings associations that meet certain requirements
may be
permitted to maintain minimum tier I capital to adjusted total assets of 3%. 9




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NOTE 6. EARNINGS PER SHARE
  For the Three Months EndedSeptember 30, 2006Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    190,057
    
    
    
    826,815
    
    
    $
    0.23Effective of dilutive securities
Stock options and RRP shares
    
    
    0
    
    
    
    9,728Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    190,057
    
    
    
    836,543
    
    
    $
    0.23
 For the Three Months EndedSeptember 30, 2005Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    246,400
    
    
    
    816,916
    
    
    $
    0.30Effective of dilutive securities
Stock options and RRP shares
    
    
    0
    
    
    
    10,598Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    246,400
    
    
    
    827,514
    
    
    $
    0.30
 10




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For the Nine Months EndedSeptember 30, 2006Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    593,483
    
    
    
    826,070
    
    
    $
    0.72Effective of dilutive securities
Stock options and RRP shares
    
    
    0
    
    
    
    9,348Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    593,483
    
    
    
    835,418
    
    
    $
    0.71
 For the Nine Months EndedSeptember 30, 2005Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    643,175
    
    
    
    816,304
    
    
    $
    0.79Effective of dilutive securities
Stock options and RRP shares
    
    
    0
    
    
    
    10,086Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    643,175
    
    
    
    826,390
    
    
    $
    0.78
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##### Table of Contents



NOTE 7: REGULATORY MATTERS
  NOTE 8: GOING PRIVATE TRANSACTION
    12




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Safe Harbor Clause
  General
    13




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##### Table of Contents



Critical Accounting Policies
     Changes in Financial Condition
  14




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##### Table of Contents



15




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##### Table of Contents



Results of Operations
 Comparison of Three Months Ended September 30, 2006 and 2005
 General.
 Interest
Income.
 Interest Expense. ,
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
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##### Table of Contents



Income Taxes.
 Comparison of Nine Months Ended September 30, 2006 and 2005
 General.
 Interest
Income.
 Interest Expense.
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
 17




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Income Taxes.
 18




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ITEM 3.
 Controls and Procedures
  19




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1. Exhibit 31.1:
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.2. Exhibit 31.2:
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.3. Exhibit 32:
    
    Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.4. Exhibit 99.1:
    
    Safe Harbor Under the Private Securities
Litigation Reform Act of 1995.
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##### Table of Contents



SIGNATURES
  HOME CITY FINANCIAL CORPORATIONDate:
    November 10, 2006
    
    /s/J. William StapletonJ. William Stapleton, President, Chief
Executive Officer and Chief Operating OfficerDate:
    November 10, 2006
    
    /s/Charles A. MihalCharles A. Mihal
Secretary, Treasurer and Chief Financial Officer
 21