##### Table of Contents



U.S. 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 JUNE 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission file number  0-21809
 HOME
CITY FINANCIAL CORPORATION
 (Exact name of small business issuer as specified in its charter)
 OHIO
    
    34-1839475(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)2454 North Limestone StreetSpringfield, Ohio
    
    45503(Address of principal executive offices)
    
    (Zip Code)
  
 (Issuers telephone number)
  
 (Former address last report)
 þ o
 o þ
   o þ




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##### 



HOME CITY FINANCIAL CORPORATION
 FORM 10-QSB
INDEX
 Page NumberPART I FINANCIAL INFORMATIONITEM1. Financial StatementsCondensed consolidated balance sheets 
June 30, 2006, and December 31, 2005
    
    
    3Condensed consolidated statements of income  Six months
and three months ended June 30, 2006 and 2005
    
    
    4Condensed consolidated statement of changes in
shareholders equity Six months ended June 30, 2006
    
    
    5Condensed consolidated statements of cash flows 
Six months ended June 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
    
    
    18PART II OTHER INFORMATIONITEM1. Legal Proceedings
    
    
    192. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    193. Defaults upon Senior Securities
    
    
    194. Submission of Matters to a Vote of Security Holders
    
    
    195. Other Information
    
    
    196. Exhibits
    
    
    19Signatures
    
    
    20Certifications
    
    
    21 - 25EX-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 June
    
    
    At December30, 2006
    
    
    31, 2005ASSETSCash and cash equivalentsCash and due from banks
    
    $
    2,101
    
    
    $
    2,397Interest-bearing demand deposits
    
    
    234
    
    
    
    4,006Federal funds sold
    
    
    5,982
    
    
    
    443Cash and cash equivalents
    
    
    8,317
    
    
    
    6,846Available-for-sale securities
    
    
    4,737
    
    
    
    5,261Loans, net of allowance for loan losses of $1,407 and $1,377
at June 30, 2006 and December 31, 2005
    
    
    124,926
    
    
    
    127,409Premises and equipment
    
    
    3,284
    
    
    
    3,398Federal Home Loan Bank stock
    
    
    2,551
    
    
    
    2,480Interest receivable
    
    
    576
    
    
    
    559Cash surrender value of life insurance
    
    
    3,251
    
    
    
    3,197Other
    
    
    517
    
    
    
    403TOTAL ASSETS
    
    $
    148,159
    
    
    $
    149,553LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDepositsDemand
    
    $
    5,796
    
    
    $
    5,763Savings, NOW and money market
    
    
    28,538
    
    
    
    32,980Time
    
    
    62,895
    
    
    
    59,712Total Deposits
    
    
    97,229
    
    
    
    98,455Federal Home Loan Bank advances
    
    
    35,906
    
    
    
    36,337Interest payable and other liabilities
    
    
    1,288
    
    
    
    1,355TOTAL LIABILITIES
    
    
    134,423
    
    
    
    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
    
    
    6,344
    
    
    
    6,366Retained earnings
    
    
    9,557
    
    
    
    9,337Unearned Recognition and Retention Plan (RRP) shares
    
    
    -0-
    
    
    
    (41
    )Unearned Employee Stock Ownership Plan (ESOP) shares
    
    
    (55
    )
    
    
    (111
    )Accumulated other comprehensive loss
    
    
    (120
    )
    
    
    (155
    )Treasury shares, at cost; 146,223 shares
    
    
    (1,990
    )
    
    
    (1,990
    )TOTAL SHAREHOLDERS EQUITY
    
    
    13,736
    
    
    
    13,406TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    148,159
    
    
    $
    149,553
  3




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HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
    
    
    (Dollars in thousands)(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)3 Months Ended
    
    
    3 Months Ended
    
    
    6 Months Ended
    
    
    6 Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005INTEREST INCOMELoans
    
    $
    2,210
    
    
    $
    2,202
    
    
    $
    4,393
    
    
    $
    4,334Securities
    
    
    20
    
    
    
    27
    
    
    
    38
    
    
    
    59Federal funds sold
    
    
    32
    
    
    
    2
    
    
    
    45
    
    
    
    8Dividends on Federal Home Loan Bank
stock
    
    
    36
    
    
    
    29
    
    
    
    71
    
    
    
    55Deposits with financial institutions
    
    
    8
    
    
    
    30
    
    
    
    43
    
    
    
    61TOTAL INTEREST INCOME
    
    
    2,306
    
    
    
    2,290
    
    
    
    4,590
    
    
    
    4,517INTEREST EXPENSEDeposits
    
    
    700
    
    
    
    605
    
    
    
    1,360
    
    
    
    1,203Borrowings
    
    
    474
    
    
    
    478
    
    
    
    971
    
    
    
    949TOTAL INTEREST EXPENSE
    
    
    1,174
    
    
    
    1,083
    
    
    
    2,331
    
    
    
    2,152NET INTEREST INCOME
    
    
    1,132
    
    
    
    1,207
    
    
    
    2,259
    
    
    
    2,365Provision for loan losses
    
    
    43
    
    
    
    475
    
    
    
    81
    
    
    
    555NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    1,089
    
    
    
    732
    
    
    
    2,178
    
    
    
    1,810NONINTEREST INCOMEService charges on deposits
    
    
    10
    
    
    
    10
    
    
    
    20
    
    
    
    20Gain on redemption of Intrieve
Incorporated stock
    
    
    -0-
    
    
    
    329
    
    
    
    -0-
    
    
    
    329Life insurance
    
    
    35
    
    
    
    35
    
    
    
    70
    
    
    
    70Other
    
    
    33
    
    
    
    45
    
    
    
    44
    
    
    
    36TOTAL NONINTEREST INCOME
    
    
    78
    
    
    
    419
    
    
    
    134
    
    
    
    455NONINTEREST EXPENSESalaries and employee benefits
    
    
    447
    
    
    
    471
    
    
    
    906
    
    
    
    898Net occupancy expense
    
    
    65
    
    
    
    68
    
    
    
    134
    
    
    
    134Equipment expense
    
    
    53
    
    
    
    55
    
    
    
    105
    
    
    
    109Data processing fees
    
    
    59
    
    
    
    59
    
    
    
    117
    
    
    
    129Professional fees
    
    
    105
    
    
    
    70
    
    
    
    190
    
    
    
    146Franchise taxes
    
    
    47
    
    
    
    40
    
    
    
    97
    
    
    
    81Other
    
    
    93
    
    
    
    90
    
    
    
    184
    
    
    
    185TOTAL NONINTEREST EXPENSE
    
    
    869
    
    
    
    853
    
    
    
    1,733
    
    
    
    1,682NET INCOME BEFORE FEDERAL
INCOME TAX EXPENSE
    
    
    298
    
    
    
    298
    
    
    
    579
    
    
    
    583Provision for income tax expense
    
    
    92
    
    
    
    94
    
    
    
    176
    
    
    
    186NET INCOME
    
    $
    206
    
    
    $
    204
    
    
    $
    403
    
    
    $
    397Earnings per
common share  basic
    
    $
    0.25
    
    
    $
    0.25
    
    
    $
    0.49
    
    
    $
    0.49Earnings per
common share  diluted
    
    $
    0.25
    
    
    $
    0.25
    
    
    $
    0.48
    
    
    $
    0.48Dividends declared per share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.22
    
    
    $
    0.22
  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
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403Change in
unrealized gain (loss)
on securities
available for sale,
net of
reclassification
adjustment and tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438Reclassification due
to adoption of SFAS
123(R)
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    41Amortization of
unearned compensation
expense
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16ESOP shares earned
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    59Dividends on common
shares, $.22 per share
    
    
    
    
    
    
    
    
    
    
    (183
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183
    )Balance, June 30, 2006
    
    
    981,913
    
    
    $
    6,344
    
    
    $
    9,557
    
    
    $
    -0-
    
    
    $
    (55
    )
    
    $
    (120
    )
    
    $
    (1,990
    )
    
    $
    13,736
  5




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HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)(Unaudited)
    
    
    (Unaudited)6 Months ended
    
    
    6 Months endedJune 30, 2006
    
    
    June 30, 2005OPERATING ACTIVITIESNet income
    
    $
    403
    
    
    $
    397Items not requiring (providing) cashDepreciation and amortization
    
    
    114
    
    
    
    117Provision for loan losses
    
    
    81
    
    
    
    555Amortization of premiums and discounts on securities
    
    
    (9
    )
    
    
    17Deferred income taxes
    
    
    12
    
    
    
    (418
    )Increase in cash surrender value of life insurance
    
    
    (38
    )
    
    
    (53
    )Employees Stock Ownership Plan compensation expense
    
    
    59
    
    
    
    73Recognition and Retention Plan compensation expense
    
    
    16
    
    
    
    18Gain on redemption of Intrieve Incorporated stock
    
    
    0
    
    
    
    (329
    )Gain on sale of real estate owned
    
    
    0
    
    
    
    (13
    )FHLB stock dividends
    
    
    (71
    )
    
    
    (55
    )Proceeds from sale of loans held for sale
    
    
    874
    
    
    
    816Originations of loans held for sale
    
    
    (860
    )
    
    
    (1,152
    )Gain on sale of loans
    
    
    (14
    )
    
    
    (17
    )Changes inInterest receivable
    
    
    (17
    )
    
    
    (2
    )Other assets
    
    
    (142
    )
    
    
    469Interest payable and other liabilities
    
    
    92
    
    
    
    139Net cash provided by operating activities
    
    
    500
    
    
    
    562INVESTING ACTIVITIESPurchase of available-for-sale securities
    
    
    (5,996
    )
    
    
    (9,989
    )Proceeds from payments and maturities of securities available-for-sale
    
    
    6,564
    
    
    
    9,653Proceeds from redemption of Intrieve Incorporated stock
    
    
    0
    
    
    
    344Net change in loans
    
    
    2,402
    
    
    
    (707
    )Purchases of premises and equipment
    
    
    0
    
    
    
    (8
    )Net cash provided by (used in) investing activities
    
    
    2,970
    
    
    
    ( 707
    )FINANCING ACTIVITIESNet decrease in demand deposits, money market, NOW and savings accounts
    
    
    (4,409
    )
    
    
    (10,417
    )Net increase in certificates of deposit
    
    
    3,183
    
    
    
    5,555Proceeds from Federal Home Loan Bank advances
    
    
    8,800
    
    
    
    2,500Repayment of Federal Home Loan Bank advances
    
    
    (9,231
    )
    
    
    (3,249
    )Dividends paid
    
    
    ( 183
    )
    
    
    (184
    )Net decrease in advances from borrowers for taxes and insurance
    
    
    (159
    )
    
    
    (208
    )Net cash used in financing activities
    
    
    (1,999
    )
    
    
    (6,003
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    1,471
    
    
    
    (6,148
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    6,846
    
    
    
    9,595CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    8,317
    
    
    $
    3,447
  6




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HOME CITY FINANCIAL CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30, 2006 AND DECEMBER 31, 2005
 (Unaudited)
 NOTE 1. BASIS OF PRESENTATION
  NOTE 2. ALLOWANCE FOR LOAN LOSSES
  (Dollars in thousands)Six
    
    
    SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005Balance, beginning of period
    
    $
    1,377
    
    
    $
    760Provision for loan losses
    
    
    81
    
    
    
    555Charge-offs
    
    
    (56
    )
    
    
    (35
    )Recoveries
    
    
    5
    
    
    
    6Balance, end of period
    
    $
    1,407
    
    
    $
    1,286
 NOTE 3. ADVANCES FROM FEDERAL HOME LOAN BANK
  7




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(Dollars in thousands)At June 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
    
    $
    5,157
    
    
    
    3.30%-7.28
    %
    
    
    6.00
    %
    
    $
    3,723
    
    
    
    3.30%-6.81
    %
    
    
    5.23
    %After one but
within five
years
    
    $
    30,749
    
    
    
    3.05%-6.84
    %
    
    
    5.55
    %
    
    $
    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, Accounting for Stock-Based Compensation
 8




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(Dollars in thousands exceptper share amounts)Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Net income, as reported
    
    $
    204
    
    
    $
    397Less: Total stock-based employee
compensation
cost determined under the
fair value based method,
net of income taxes
    
    
    (2
    )
    
    
    (4
    )Pro forma net income
    
    $
    202
    
    
    $
    393Earnings per share:Basic  as reported
    
    $
    0.25
    
    
    $
    0.49Basic  pro forma
    
    $
    0.25
    
    
    $
    0.48Diluted  as reported
    
    $
    0.25
    
    
    $
    0.49Diluted  pro forma
    
    $
    0.25
    
    
    $
    0.48
 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)
    
    $
    14,098
    
    
    
    13.0
    %
    
    $
    8,702
    
    
    
    8.0
    %
    
    $
    10,881
    
    
    
    10.0
    %Tier I Capital
(To Risk-Weighted Assets)
    
    $
    12,738
    
    
    
    11.7
    %
    
    
    N/A
    
    
    
    N/A
    
    
    $
    6,529
    
    
    
    6.0
    %Tier I Capital
(To Total Assets)
    
    $
    12,738
    
    
    
    8.6
    %
    
    $
    5,918
    
    
    
    4.0%
    *
    
    $
    7,398
    
    
    
    5.0
    %Tangible Capital
(To Total Assets)
    
    $
    12,738
    
    
    
    8.6
    %
    
    $
    2,219
    
    
    
    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 EndedJune 30, 2006Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    206,503
    
    
    
    826,261
    
    
    $
    0.25Effective of dilutive securities
Stock options
    
    
    0
    
    
    
    8,650Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    206,503
    
    
    
    834,911
    
    
    $
    0.25
 For the Three Months EndedJune 30, 2005Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    203,999
    
    
    
    816,461
    
    
    $
    0.25Effective of dilutive securities
Stock options
    
    
    0
    
    
    
    9,721Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    203,999
    
    
    
    826,182
    
    
    $
    0.25
 10




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For the Six Months EndedJune 30, 2006Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    403,426
    
    
    
    825,698
    
    
    $
    0.49Effective of dilutive securities
Stock options
    
    
    0
    
    
    
    9,158Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    403,426
    
    
    
    834,856
    
    
    $
    0.48
 For the Six Months EndedJune 30, 2005Weighted-average
    
    
    PerIncome
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome available to common shareholders
    
    $
    396,775
    
    
    
    815,998
    
    
    $
    0.49Effective of dilutive securities
Stock options
    
    
    0
    
    
    
    9,829Diluted EPSIncome available to common shareholders +
assumed conversions
    
    $
    396,775
    
    
    
    825,827
    
    
    $
    0.48
 11




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




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ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Safe Harbor Clause
  General
    13




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Critical Accounting Policies
     Changes in Financial Condition
  14




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15




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



ITEM 3.
 Controls and Procedures
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HOME CITY FINANCIAL CORPORATION
 
  
   
   
   
   
   
   
 
 
 
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SIGNATURES
  HOME CITY FINANCIAL CORPORATIONDate: August 10, 2006
    
    /s/ J. William Stapleton

J. William Stapleton, President, ChiefExecutive Officer and Chief Operating OfficerDate: August 10, 2006
    
    /s/ Charles A. Mihal

Charles A. MihalSecretary, Treasurer and Chief Financial Officer
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