##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended December 31, 2008



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

For the transition period from  to

Commission File Number 0-25049





FIRST PLACE FINANCIAL CORP.

(Exact name of registrant as specified in its
charter)







|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Delaware                                       |  | 34-1880130                          
|(State or other jurisdiction of incorporation) |  | (IRS Employer Identification Number)

185 E. Market Street, Warren OH 44481

(Address of principal executive offices)

(330) 373-1221

(Registrants telephone number, including area code)

Not Applicable

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





Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.  Yes  x     No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition
of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Securities Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities
Exchange Act).  Yes   ̈    No  x

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

16,973,270 shares of common stock outstanding as of January 31, 2009









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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                                          |  |           
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----------
|                              |  |                                                                                                                          |  | PageNumber
|PART I. FINANCIAL INFORMATION |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Financial Statements (Unaudited)                                                                                         |  |           
|                              |  |                                                                                                                         
|                              |  | Condensed Consolidated Statements of Financial Condition as of December 31, 2008 and June 30, 2008                       |  | 3         
|                              |  |                                                                                                                         
|                              |  | Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2008 and 2007                |  | 4         
|                              |  |                                                                                                                         
|                              |  | Condensed Consolidated Statements of Changes in Shareholders Equity for the Six Months Ended December 31, 2008 and 2007 |  | 5         
|                              |  |                                                                                                                         
|                              |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2008 and 2007                      |  | 6         
|                              |  |                                                                                                                         
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                     |  | 7-17      
|                              |  |                                                                                                                         
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 17-33     
|                              |  |                                                                                                                         
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                               |  | 33-34     
|                              |  |                                                                                                                         
|Item 4.                       |  | Controls and Procedures                                                                                                  |  | 35        
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Legal Proceedings                                                                                                        |  | 35        
|                              |  |                                                                                                                         
|Item 1A.                      |  | Risk Factors                                                                                                             |  | 35-37     
|                              |  |                                                                                                                         
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 38        
|                              |  |                                                                                                                         
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                          |  | 38        
|                              |  |                                                                                                                         
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                      |  | 38        
|                              |  |                                                                                                                         
|Item 5.                       |  | Other Information                                                                                                        |  | 38        
|                              |  |                                                                                                                         
|Item 6.                       |  | Exhibits                                                                                                                 |  | 38        
|                              |  |                                                                                                                         
|SIGNATURES                    |  |                                                                                                                          |  | 39        



2



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##### Table of Contents

Part I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

FIRST PLACE FINANCIAL CORP.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)



|                                                                                               |  |              |           |   |          |   |           |  
|---------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | -------- | - | --------- | -
|                                                                                               |  | December 31, |           |   | June 30, |  
|                                                                                               |  | 2008         |           |   | 2008     |  
|                                                                                               |  | (Unaudited)  |           |   |          |  
|ASSETS                                                                                         |  |              |           |   |          |   |           |  
|Cash and due from banks                                                                        |  | $            | 38,647    |   |          | $ | 59,483    |  
|Interest-bearing deposits in other banks                                                       |  |              | 74,494    |   |          |   | 4,151     |  
|Federal funds sold                                                                             |  |              |          |   |          |   | 5,608     |  
|Securities, at fair value                                                                      |  |              | 283,097   |   |          |   | 284,433   |  
|Loans held for sale, at fair value                                                             |  |              | 96,851    |   |          |   | 72,341    |  
|Loans                                                                                          |  |              | 2,613,455 |   |          |   | 2,648,777 |  
|Less allowance for loan losses                                                                 |  |              | 33,577    |   |          |   | 28,216    |  
|                                                                                               |  |              |           |   |          |   |           |  
|Loans, net                                                                                     |  |              | 2,579,878 |   |          |   | 2,620,561 |  
|Federal Home Loan Bank stock                                                                   |  |              | 36,221    |   |          |   | 35,761    |  
|Premises and equipment, net                                                                    |  |              | 40,454    |   |          |   | 40,089    |  
|Premises held for sale, net                                                                    |  |              | 13,333    |   |          |   | 13,555    |  
|Goodwill                                                                                       |  |              |          |   |          |   | 93,626    |  
|Core deposit and other intangibles                                                             |  |              | 11,979    |   |          |   | 13,573    |  
|Other assets                                                                                   |  |              | 109,328   |   |          |   | 97,865    |  
|                                                                                               |  |              |           |   |          |   |           |  
|Total assets                                                                                   |  | $            | 3,284,282 |   |          | $ | 3,341,046 |  
|                                                                                               |  |              |           |   |          |   |           |  
|                                                                                               |  |             
|LIABILITIES                                                                                    |  |              |           |   |          |   |           |  
|Deposits                                                                                       |  |              |           |   |          |   |           |  
|Noninterest-bearing checking                                                                   |  | $            | 227,434   |   |          | $ | 248,851   |  
|Interest-bearing checking                                                                      |  |              | 160,274   |   |          |   | 159,874   |  
|Savings                                                                                        |  |              | 393,070   |   |          |   | 475,835   |  
|Money markets                                                                                  |  |              | 285,615   |   |          |   | 359,801   |  
|Certificates of deposit                                                                        |  |              | 1,474,557 |   |          |   | 1,124,731 |  
|                                                                                               |  |              |           |   |          |   |           |  
|Total deposits                                                                                 |  |              | 2,540,950 |   |          |   | 2,369,092 |  
|Short-term borrowings                                                                          |  |              | 142,454   |   |          |   | 197,100   |  
|Long-term debt                                                                                 |  |              | 364,269   |   |          |   | 424,374   |  
|Other liabilities                                                                              |  |              | 18,752    |   |          |   | 31,513    |  
|                                                                                               |  |              |           |   |          |   |           |  
|Total liabilities                                                                              |  |              | 3,066,425 |   |          |   | 3,022,079 |  
|                                                                                               |  |             
|SHAREHOLDERS EQUITY                                                                           |  |              |           |   |          |   |           |  
|Preferred stock, $.01 par value: 3,000,000 shares authorized, no shares issued and outstanding |  |              |          |   |          |   |          |  
|Common stock, $.01 par value: 33,000,000 shares authorized, 18,114,673 shares issued           |  |              | 181       |   |          |   | 181       |  
|Additional paid-in capital                                                                     |  |              | 214,358   |   |          |   | 214,216   |  
|Retained earnings                                                                              |  |              | 29,007    |   |          |   | 131,770   |  
|Unearned employee stock ownership plan shares                                                  |  |              | (3,324    | ) |          |   | (3,531    | )
|Treasury stock, at cost: 1,141,403 shares at December 31, 2008 and June 30, 2008               |  |              | (19,274   | ) |          |   | (19,274   | )
|Accumulated other comprehensive loss, net                                                      |  |              | (3,091    | ) |          |   | (4,395    | )
|                                                                                               |  |              |           |   |          |   |           |  
|Total shareholders equity                                                                     |  |              | 217,857   |   |          |   | 318,967   |  
|                                                                                               |  |              |           |   |          |   |           |  
|Total liabilities and shareholders equity                                                     |  | $            | 3,284,282 |   |          | $ | 3,341,046 |  
|                                                                                               |  |              |           |   |          |   |           |  

See accompanying notes to condensed consolidated financial statements.



3



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##### Table of Contents

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)



|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|--------------------------------------------------- |  | ------------------------------ | ------- | - | ---------------------------- | - | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                                                    |  | Three months endedDecember 31, |         |   | Six months endedDecember 31, |  
|                                                    |  | 2008                           |         |   | 2007                         |   |        | 2008 |  |   | 2007     |  
|INTEREST INCOME                                     |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|Loans, including fees                               |  | $                              | 39,540  |   |                              | $ | 44,763 |      |  | $ | 80,101   |   |  | $ | 89,268 |  
|Securities and interest-bearing deposits            |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|Taxable                                             |  |                                | 2,722   |   |                              |   | 2,785  |      |  |   | 5,375    |   |  |   | 5,502  |  
|Tax-exempt                                          |  |                                | 658     |   |                              |   | 490    |      |  |   | 1,320    |   |  |   | 979    |  
|Dividends                                           |  |                                | 577     |   |                              |   | 846    |      |  |   | 1,161    |   |  |   | 1,642  |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|TOTAL INTEREST INCOME                               |  |                                | 43,497  |   |                              |   | 48,884 |      |  |   | 87,957   |   |  |   | 97,391 |  
|INTEREST EXPENSE                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|Deposits                                            |  |                                | 16,199  |   |                              |   | 20,051 |      |  |   | 31,419   |   |  |   | 39,550 |  
|Short-term borrowings                               |  |                                | 1,235   |   |                              |   | 1,829  |      |  |   | 2,701    |   |  |   | 4,238  |  
|Long-term debt                                      |  |                                | 4,760   |   |                              |   | 5,446  |      |  |   | 9,579    |   |  |   | 10,673 |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|TOTAL INTEREST EXPENSE                              |  |                                | 22,194  |   |                              |   | 27,326 |      |  |   | 43,699   |   |  |   | 54,461 |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|NET INTEREST INCOME                                 |  |                                | 21,303  |   |                              |   | 21,558 |      |  |   | 44,258   |   |  |   | 42,930 |  
|Provision for loan losses                           |  |                                | 9,216   |   |                              |   | 5,195  |      |  |   | 16,567   |   |  |   | 7,156  |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                | 12,087  |   |                              |   | 16,363 |      |  |   | 27,691   |   |  |   | 35,774 |  
|                                                    |  |                                |         |  
|NONINTEREST INCOME                                  |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|Service charges and fees on deposit accounts        |  |                                | 2,461   |   |                              |   | 2,064  |      |  |   | 4,603    |   |  |   | 4,061  |  
|Net gains (losses) on sale of securities            |  |                                |        |   |                              |   | (4     | )    |  |   | 319      |   |  |   | 729    |  
|Impairment of securities                            |  |                                |        |   |                              |   | (5,900 | )    |  |   |         |   |  |   | (5,900 | )
|Change in fair value of securities                  |  |                                | (2,544  | ) |                              |   |       |      |  |   | (11,864  | ) |  |   |       |  
|Mortgage banking gains                              |  |                                | 2,106   |   |                              |   | 1,065  |      |  |   | 3,881    |   |  |   | 2,921  |  
|Gain on sale of loan servicing rights               |  |                                |        |   |                              |   |       |      |  |   |         |   |  |   | 1,471  |  
|Loan servicing income (loss)                        |  |                                | (940    | ) |                              |   | (146   | )    |  |   | (984     | ) |  |   | 144    |  
|Other income  bank                                 |  |                                | 1,611   |   |                              |   | 1,627  |      |  |   | 3,300    |   |  |   | 3,345  |  
|Insurance commission income                         |  |                                | 1,051   |   |                              |   | 838    |      |  |   | 1,943    |   |  |   | 1,658  |  
|Other income  nonbank subsidiaries                 |  |                                | 798     |   |                              |   | 1,170  |      |  |   | 1,747    |   |  |   | 2,476  |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|TOTAL NONINTEREST INCOME                            |  |                                | 4,543   |   |                              |   | 714    |      |  |   | 2,945    |   |  |   | 10,905 |  
|                                                    |  |                                |         |  
|NONINTEREST EXPENSE                                 |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|Salaries and employee benefits                      |  |                                | 9,809   |   |                              |   | 10,270 |      |  |   | 20,436   |   |  |   | 20,636 |  
|Occupancy and equipment                             |  |                                | 3,383   |   |                              |   | 3,081  |      |  |   | 6,782    |   |  |   | 6,168  |  
|Professional fees                                   |  |                                | 817     |   |                              |   | 731    |      |  |   | 1,662    |   |  |   | 1,505  |  
|Loan expenses                                       |  |                                | 613     |   |                              |   | 310    |      |  |   | 1,340    |   |  |   | 884    |  
|Marketing                                           |  |                                | 577     |   |                              |   | 877    |      |  |   | 1,155    |   |  |   | 1,673  |  
|Merger, integration and restructuring               |  |                                | 1,064   |   |                              |   | 790    |      |  |   | 1,109    |   |  |   | 790    |  
|Goodwill impairment                                 |  |                                | 93,741  |   |                              |   |       |      |  |   | 93,741   |   |  |   |       |  
|Amortization of intangible assets                   |  |                                | 788     |   |                              |   | 1,102  |      |  |   | 1,594    |   |  |   | 2,223  |  
|Real estate owned expense                           |  |                                | 1,392   |   |                              |   | 1,736  |      |  |   | 2,472    |   |  |   | 2,140  |  
|Other                                               |  |                                | 4,415   |   |                              |   | 3,558  |      |  |   | 7,668    |   |  |   | 6,865  |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|TOTAL NONINTEREST EXPENSE                           |  |                                | 116,599 |   |                              |   | 22,455 |      |  |   | 137,959  |   |  |   | 42,884 |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|                                                    |  |                                |         |  
|INCOME (LOSS) BEFORE INCOME                         |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|TAX EXPENSE (BENEFIT)                               |  |                                | (99,969 | ) |                              |   | (5,378 | )    |  |   | (107,323 | ) |  |   | 3,795  |  
|Income tax expense (benefit)                        |  |                                | (5,872  | ) |                              |   | (2,231 | )    |  |   | (7,067   | ) |  |   | 688    |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|                                                    |  |                                |         |  
|NET INCOME (LOSS)                                   |  | $                              | (94,097 | ) |                              | $ | (3,147 | )    |  | $ | (100,256 | ) |  | $ | 3,107  |  
|                                                    |  |                                |         |   |                              |   |        |      |  |   |          |   |  |   |        |  
|                                                    |  |                                |         |  
|Basic earnings (loss) per share                     |  | $                              | (5.68   | ) |                              | $ | (0.20  | )    |  | $ | (6.06    | ) |  | $ | 0.19   |  
|Diluted earnings (loss) per share                   |  | $                              | (5.68   | ) |                              | $ | (0.20  | )    |  | $ | (6.06    | ) |  | $ | 0.19   |  

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(Unaudited)

(Dollars in thousands, except per share data)



|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|--------------------------------------------------------------------------------------------------- |  | ----------- | --- | ------------------------ | - | ------- | ---------------- |  | - | ------------------ | - |  | ------------- | ------ | - | ------------------------------------------ | - | ------- | ----- |  | - | ------ | - |  | - | -------- | -
|                                                                                                    |  | CommonStock |     | AdditionalPaid-inCapital |   |         | RetainedEarnings |  |   | UnearnedESOPShares |   |  | TreasuryStock |        |   | AccumulatedOtherComprehensiveIncome (Loss) |   |         | Total | 
|Balance at July 1, 2007                                                                             |  | $           | 181 |                          | $ | 215,358 |                  |  | $ | 131,893            |   |  | $             | (3,858 | ) |                                            | $ | (15,040 | )     |  | $ | (2,347 | ) |  | $ | 326,187  |  
|Comprehensive income                                                                                |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|Net income                                                                                          |  |             |     |                          |   |         |                  |  |   | 3,107              |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 3,107    |  
|Change in unrealized gain on securities available for sale, net of reclassification and tax effects |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   | 741    |   |  |   | 741      |  
|Loss on termination of interest rate swaps reclassified into income, net of tax                     |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   | 305    |   |  |   | 305      |  
|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|Total comprehensive income                                                                          |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 4,153    |  
|Cash dividends declared and paid ($0.325 per share)                                                 |  |             |     |                          |   |         |                  |  |   | (5,250             | ) |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | (5,250   | )
|Commitment to release employee stock ownership plan shares (11,872 shares)                          |  |             |     |                          |   | 25      |                  |  |   |                    |   |  |               | 119    |   |                                            |   |         |       |  |   |        |   |  |   | 144      |  
|Commitment to release recognition and retention plan shares (1,528 shares)                          |  |             |     |                          |   | 32      |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 32       |  
|Purchase of 880,086 shares of common stock                                                          |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   | (14,113 | )     |  |   |        |   |  |   | (14,113  | )
|Stock options exercised (60,050 shares)                                                             |  |             |     |                          |   | (280    | )                |  |   |                    |   |  |               |        |   |                                            |   | 1,013   |       |  |   |        |   |  |   | 733      |  
|Stock option expense                                                                                |  |             |     |                          |   | 113     |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 113      |  
|Tax benefit related to exercise of stock options                                                    |  |             |     |                          |   | 90      |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 90       |  
|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|                                                                                                    |  |             |     |                          |   |         |                 
|Balance at December 31, 2007                                                                        |  | $           | 181 |                          | $ | 215,338 |                  |  | $ | 129,750            |   |  | $             | (3,739 | ) |                                            | $ | (28,140 | )     |  | $ | (1,301 | ) |  | $ | 312,089  |  
|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|                                                                                                    |  |             |     |                          |   |         |                 
|Balance at July 1, 2008                                                                             |  | $           | 181 |                          | $ | 214,216 |                  |  | $ | 131,770            |   |  | $             | (3,531 | ) |                                            | $ | (19,274 | )     |  | $ | (4,395 | ) |  | $ | 318,967  |  
|Comprehensive income                                                                                |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|Net (loss)                                                                                          |  |             |     |                          |   |         |                  |  |   | (100,256           | ) |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | (100,256 | )
|Change in unrealized gain on securities available for sale, net of reclassification and tax effects |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   | 1,004  |   |  |   | 1,004    |  
|Loss on termination of interest rate swaps reclassified into income, net of tax                     |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   | 300    |   |  |   | 300      |  
|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|Total comprehensive income                                                                          |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | (98,952  | )
|Adjustment to initially apply SFAS No. 159, net of tax                                              |  |             |     |                          |   |         |                  |  |   | 188                |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 188      |  
|Cash dividends declared and paid ($0.17 per share)                                                  |  |             |     |                          |   |         |                  |  |   | (2,695             | ) |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | (2,695   | )
|Commitment to release employee stock ownership plan shares (20,774 shares)                          |  |             |     |                          |   | (41     | )                |  |   |                    |   |  |               | 207    |   |                                            |   |         |       |  |   |        |   |  |   | 166      |  
|Commitment to release recognition and retention plan shares (1,388 shares)                          |  |             |     |                          |   | 30      |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 30       |  
|Stock option expense                                                                                |  |             |     |                          |   | 153     |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   | 153      |  
|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  
|                                                                                                    |  |             |     |                          |   |         |                 
|Balance at December 31, 2008                                                                        |  | $           | 181 |                          | $ | 214,358 |                  |  | $ | 29,007             |   |  | $             | (3,324 | ) |                                            | $ | (19,274 | )     |  | $ | (3,091 | ) |  | $ | 217,857  |  
|                                                                                                    |  |             |     |                          |   |         |                  |  |   |                    |   |  |               |        |   |                                            |   |         |       |  |   |        |   |  |   |          |  

See accompanying notes to condensed consolidated financial statements.



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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                               |  |                              |          |   |      |   |          |  
|------------------------------------------------------------------------------ |  | ---------------------------- | -------- | - | ---- | - | -------- | -
|                                                                               |  | Six months endedDecember 31, |         
|(Dollars in thousands)                                                         |  | 2008                         |          |   | 2007 |  
|Cash flows from operating activities:                                          |  |                              |          |   |      |   |          |  
|Net cash from operating activities                                             |  | $                            | (8,720   | ) |      | $ | 5,024    |  
|                                                                               |  |                             
|Cash flows from investing activities:                                          |  |                              |          |   |      |   |          |  
|Securities available for sale                                                  |  |                              |          |   |      |   |          |  
|Proceeds from sales                                                            |  |                              | 2,802    |   |      |   | 10,276   |  
|Proceeds from maturities, calls and principal paydowns                         |  |                              | 22,771   |   |      |   | 26,718   |  
|Purchases                                                                      |  |                              | (34,154  | ) |      |   | (22,636  | )
|Net change in interest-bearing deposits in other banks                         |  |                              | (70,343  | ) |      |   | 9,802    |  
|Net change in Federal Funds Sold                                               |  |                              | 5,608    |   |      |   |         |  
|Net change in loans                                                            |  |                              | 815      |   |      |   | (121,365 | )
|Proceeds from sales of loan servicing rights                                   |  |                              |         |   |      |   | 11,928   |  
|Proceeds from sales of real estate owned                                       |  |                              | 8,329    |   |      |   | 1,640    |  
|Premises and equipment expenditures, net                                       |  |                              | (2,506   | ) |      |   | (5,197   | )
|Cash paid for Hicksville Building, Loan and Savings Bank, net of cash received |  |                              |         |   |      |   | (3,885   | )
|Proceeds from sale of premises held for sale                                   |  |                              | 68       |   |      |   |         |  
|Investment in nonbank affiliates                                               |  |                              | (115     | ) |      |   | (31      | )
|                                                                               |  |                              |          |   |      |   |          |  
|Net cash from investing activities                                             |  |                              | (66,725  | ) |      |   | (92,750  | )
|                                                                               |  |                             
|Cash flows from financing activities:                                          |  |                              |          |   |      |   |          |  
|Net change in deposits                                                         |  |                              | 171,873  |   |      |   | 19,655   |  
|Net change in short-term borrowings                                            |  |                              | (114,364 | ) |      |   | (41,153  | )
|Proceeds from long-term debt                                                   |  |                              |         |   |      |   | 100,000  |  
|Repayment of long-term debt                                                    |  |                              | (205     | ) |      |   | (2,194   | )
|Cash dividends paid                                                            |  |                              | (2,695   | ) |      |   | (5,250   | )
|Proceeds from stock options exercised                                          |  |                              |         |   |      |   | 733      |  
|Tax benefit from stock options exercised                                       |  |                              |         |   |      |   | 90       |  
|Purchases of common stock                                                      |  |                              |         |   |      |   | (14,113  | )
|                                                                               |  |                              |          |   |      |   |          |  
|Net cash from financing activities                                             |  |                              | 54,609   |   |      |   | 57,768   |  
|                                                                               |  |                              |          |   |      |   |          |  
|Net change in cash and cash equivalents                                        |  |                              | (20,836  | ) |      |   | (29,958  | )
|                                                                               |  |                             
|Cash and cash equivalents at beginning of period                               |  |                              | 59,483   |   |      |   | 77,226   |  
|                                                                               |  |                              |          |   |      |   |          |  
|                                                                               |  |                             
|Cash and cash equivalents at end of period                                     |  | $                            | 38,647   |   |      | $ | 47,268   |  
|                                                                               |  |                              |          |   |      |   |          |  
|                                                                               |  |                             
|Supplemental cash flow information:                                            |  |                              |          |   |      |   |          |  
|Cash payments of interest expense                                              |  | $                            | 43,420   |   |      | $ | 51,678   |  
|Cash payments of income taxes                                                  |  |                              | 527      |   |      |   | 8,056    |  
|Supplemental noncash disclosures:                                              |  |                              |          |   |      |   |          |  
|Loans securitized                                                              |  |                              | 9,625    |   |      |   | 2,939    |  
|Transfer of loans to real estate owned                                         |  |                              | 20,764   |   |      |   | 6,713    |  
|Transfer from long-term to short-term borrowings                               |  |                              | 59,718   |   |      |   | 68,379   |  
|Allocation of loan basis to mortgage servicing asset                           |  |                              | 2,483    |   |      |   | 3,469    |  
|Adoption of fair value option:                                                 |  |                              |          |   |      |   |          |  
|Loans held for sale transferred to fair value                                  |  |                              | 72,341   |   |      |   |         |  
|Securities available for sale transferred to fair value                        |  |                              | 24,766   |   |      |   |         |  

See accompanying notes to condensed consolidated financial statements.



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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Significant Accounting Policies

(Dollars in thousands)

Basis of Presentation. The interim unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (SEC). The financial statements should be read in conjunction with the audited consolidated
financial statements and related notes included in First Place Financial Corp.s (the Company) Annual Report on Form 10-K for the year ended June 30, 2008. The interim unaudited condensed consolidated financial statements include all
adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the
interim periods included in the interim unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for a full year.

Principles of Consolidation. The interim unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, First Place Bank (the Bank) and First Place
Holdings, Inc. Wholly owned subsidiaries of the Bank include Ardent Service Corporation and Western Reserve Mortgage Corporation (currently inactive). Wholly owned subsidiaries of First Place Holdings, Inc. include First Place Insurance Agency,
Ltd., APB Financial Group, Ltd., American Pension Benefits, Inc., Coldwell Banker First Place Real Estate, Ltd. and its subsidiary, First Place Referral Network, Ltd., and Title Works Agency, LLC, a 75% owned affiliate of First Place Holdings, Inc.
The investments of the Company in its wholly owned subsidiaries, First Place Capital Trust, First Place Capital Trust II and First Place Capital Trust III, have been accounted for using the equity method based on their nature as trusts, which are
special purpose entities. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates.The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported 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. Areas involving the use of managements estimates and assumptions include
the allowance for loan losses, fair values of financial instruments, the realization of deferred tax assets, the identification and carrying value of impaired loans, the carrying value and amortization of intangibles, depreciation of premises and
equipment, the carrying value of goodwill, the determination of other-than-temporary impairment on investments and the valuations of foreclosed assets (REO), mortgage servicing assets, stock options and securitizations. Actual results could differ
from those estimates.

Business Segments.While the Companys chief decision-makers monitor the revenue streams of the various Company
products and services, the segments that could be separated from the Companys primary business of banking are not material. Accordingly, all of the Companys financial service operations are considered by management to be combined in one
reportable operating segment.

Reclassifications. Certain items in the prior year financial statements were reclassified to conform to the current
presentation.

2. Recent Accounting Pronouncements

(Dollars in thousands)

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (SFAS No. 157),
Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement was originally effective
for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position SFAS 157-2, Effective Date of FASB Statement No. 157. This FASB Staff Position, which was effective upon issuance, delayed the
effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008,
and interim periods within those fiscal years. The impact of adoption on July 1, 2008 was not material to the Companys consolidated financial statements.



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In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for
Assets and Financial Liabilities. The objective of this new standard is to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. This
statement allows entities the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities. Subsequent changes in fair value of the financial assets and liabilities would be
recognized in earnings when they occur. This pronouncement also establishes certain additional disclosure requirements. It is effective as of the beginning of the first fiscal year beginning after November 15, 2007 and early adoption was
permitted. The Company did not elect early adoption as of July 1, 2007 and therefore adopted this statement on July 1, 2008. At that time, the Company elected the fair value option for certain investment securities and loans held for sale.
The effect of the adoption of this pronouncement is discussed in Note 7  Fair Value.

In November 2007, the SEC issued Staff Accounting
Bulletin (SAB) No. 109, which expresses the views of the SEC regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. SAB No. 105, Application of Accounting
Principles to Loan Commitments, provided the views of the SEC regarding derivative loan commitments that are accounted for at fair value through earnings pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
SAB No. 109 supersedes SAB No. 105 and expresses the current view of the SEC consistent with SFAS No. 156, Accounting for Servicing of Financial Assets, and SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities, that the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. The Company adopted SAB
No. 109 on January 1, 2008. The adoption of SAB No. 109 resulted in a $1.0 million increase in gains from mortgage banking activity for the quarter ended March 31, 2008 and the year ended June 30, 2008.

In December 2007, the SEC issued SAB No. 110, which expresses the views of the SEC regarding the use of a simplified method, as discussed in SAB
No. 107, in developing an estimate of expected term of plain vanilla share options in accordance with SFAS No. 123(R), Share-Based Payment. The SEC concluded that a company could, under certain circumstances, continue to use
the simplified method for share option grants after December 31, 2007. The Company does not use the simplified method for share options and therefore SAB No. 110 has no impact on the Companys consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R) (revised version of SFAS No. 141), Business
Combinations. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at fair value as of the acquisition date. SFAS No. 141(R) replaces SFAS
No. 141s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS No. 141(R) applies to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. For the Company, it will apply to business combinations where the acquisition date is after
June 30, 2009. Since this pronouncement will be applied prospectively, there will be no impact on the Companys consolidated financial statements upon adoption.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51. SFAS No. 160
amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and
the noncontrolling interest. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008, with early application prohibited. At the present time, the Company has not
determined what impact it would have on the Companys consolidated financial statements.

In March 2008, the FASB issued Statement of Financial
Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133. SFAS No. 161 amends SFAS 133 and is intended to enhance the current disclosure framework in SFAS
133. This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related



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hedged items affect an entitys financial position, financial performance, and cash flows. This Statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. At the present time, the Company has not determined what impact it would have on the Companys consolidated financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles.
This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted
accounting principles in the United States. This Statement is effective 60 days following the SEC approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. Adoption of this Statement will not be a change in the Companys current accounting practices and will have no impact on the Companys consolidated financial statements.

In October 2008, the FASB Staff issued a FASB Staff Position (FSP) related to SFAS No. 157, FSP 157-3, Determining the Fair Value of a Financial Asset When the
Market for That Asset is not Active. The provisions of FSP 157-3 are effective on issuance, or October 10, 2008. FSP 157-3 clarifies the application of SFAS No. 157, in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The issuance of FSP 157-3 and the Companys adoption of FSP 157-3 did not have an effect on the Companys interim
consolidated financial statements. Application issues addressed by the FSP include (a) how managements internal assumptions should be considered when measuring fair value when relevant observable data do not exist, (b) how observable
market information in a market that is not active should be considered when measuring fair value and (c) how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure
fair value.

3. Loans

(Dollars in thousands)



|                                                  |  |              |           |          |   |          
|------------------------------------------------- |  | ------------ | --------- | -------- | - | ---------
|                                                  |  | December 31, |           | June 30,
|                                                  |  | 2008         |           | 2008    
|One-to four-family residential real estate loans: |  |              |           |          |   |          
|Permanent financing                               |  | $            | 892,739   |          | $ | 935,285  
|Construction                                      |  |              | 61,921    |          |   | 79,725   
|                                                  |  |              |           |          |   |          
|Total                                             |  |              | 954,660   |          |   | 1,015,010
|Commercial loans:                                 |  |              |           |          |   |          
|Multifamily real estate                           |  |              | 110,041   |          |   | 103,699  
|Commercial real estate                            |  |              | 870,973   |          |   | 815,384  
|Commercial construction                           |  |              | 82,113    |          |   | 104,275  
|Commercial non real estate                        |  |              | 202,038   |          |   | 210,772  
|                                                  |  |              |           |          |   |          
|Total                                             |  |              | 1,265,165 |          |   | 1,234,130
|Consumer loans:                                   |  |              |           |          |   |          
|Home equity lines of credit                       |  |              | 219,326   |          |   | 212,986  
|Home equity loans                                 |  |              | 139,946   |          |   | 147,008  
|Automobiles and other                             |  |              | 34,358    |          |   | 39,643   
|                                                  |  |              |           |          |   |          
|Total                                             |  |              | 393,630   |          |   | 399,637  
|                                                  |  |              |           |          |   |          
|                                                  |  |             
|Total loans                                       |  | $            | 2,613,455 |          | $ | 2,648,777
|                                                  |  |              |           |          |   |          

Activity in the allowance for loan losses was as follows:



|                          |              |                  |         |   |      |   |        |  
|------------------------- | ------------ | ---------------- | ------- | - | ---- | - | ------ | -
|                          |              | Six months ended |        
|                          | December 31, |                 
|                          |              | 2008             |         |   | 2007 |  
|Beginning of period       |              | $                | 28,216  |   |      | $ | 25,851 |  
|Provision for loan losses |              |                  | 16,567  |   |      |   | 7,156  |  
|Acquired in merger        |              |                  |        |   |      |   | 254    |  
|Loans charged-off         |              |                  | (11,381 | ) |      |   | (7,168 | )
|Recoveries                |              |                  | 175     |   |      |   | 267    |  
|                          |              |                  |         |   |      |   |        |  
|End of period             |              | $                | 33,577  |   |      | $ | 26,360 |  
|                          |              |                  |         |   |      |   |        |  



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Impaired loans were as follows:



|                                                  |  |              |        |          |   |       
|------------------------------------------------- |  | ------------ | ------ | -------- | - | ------
|                                                  |  | December 31, |        | June 30,
|                                                  |  | 2008         |        | 2008    
|Loans with allocated allowance for loan losses    |  | $            | 33,221 |          | $ | 14,065
|Loans with no allocated allowance for loan losses |  |              | 1,469  |          |   |      
|                                                  |  |              |        |          |   |       
|Total                                             |  | $            | 34,690 |          | $ | 14,065
|                                                  |  |              |        |          |   |       
|                                                  |  |             
|Amount of the allowance for loan losses allocated |  | $            | 8,948  |          | $ | 3,663 
|                                                  |  |              |        |          |   |       

Nonperforming loans were as follows:



|                            |  |              |        |          |   |       
|--------------------------- |  | ------------ | ------ | -------- | - | ------
|                            |  | December 31, |        | June 30,
|                            |  | 2008         |        | 2008    
|Nonaccrual loans            |  | $            | 63,945 |          | $ | 49,592
|Troubled debt restructuring |  |              | 3,006  |          |   | 1,130 
|                            |  |              |        |          |   |       
|Total nonperforming loans   |  | $            | 66,951 |          | $ | 50,722
|                            |  |              |        |          |   |       

4. Mortgage Servicing Assets

(Dollars in thousands)

Following is a summary of mortgage servicing assets:



|                                  |              |                  |        |      |  |   |         |  
|--------------------------------- | ------------ | ---------------- | ------ | ---- |  | - | ------- | -
|                                  |              | Six months ended |       
|                                  | December 31, |                 
|                                  | 2008         |                  |        | 2007 | 
|Servicing rights:                 |              |                  |        |      |  |   |         |  
|Beginning of period               |              | $                | 14,272 |      |  | $ | 20,785  |  
|Additions                         |              |                  | 2,483  |      |  |   | 3,469   |  
|Acquired in merger                |              |                  |       |      |  |   | 206     |  
|Sale of servicing assets          |              |                  |       |      |  |   | (10,457 | )
|Net change in valuation allowance |              |                  | (1,363 | )    |  |   | (305    | )
|Amortized to expense              |              |                  | (1,756 | )    |  |   | (1,977  | )
|                                  |              |                  |        |      |  |   |         |  
|                                  |              |                 
|End of period                     |              | $                | 13,636 |      |  | $ | 11,721  |  
|                                  |              |                  |        |      |  |   |         |  

The fair value of mortgage servicing assets was $14,805 at December 31, 2008 and $16,146 at June 30,
2008. Noninterest-bearing deposits included $21,606 and $11,485 of custodial account deposits related to loans serviced for others as of December 31, 2008 and June 30, 2008, respectively. Loans serviced for others, which are not reported
as assets, were $1,549,536 and $1,425,915 at December 31, 2008 and June 30, 2008, respectively.

5. Short-term Borrowings and Long-term Debt

(Dollars in thousands)



|                                                                        |  |              |         |          |   |        
|----------------------------------------------------------------------- |  | ------------ | ------- | -------- | - | -------
|                                                                        |  | December 31, |         | June 30,
|                                                                        |  | 2008         |         | 2008    
|Short-term borrowings:                                                  |  |              |         |          |   |        
|Federal Home Loan Bank advances                                         |  | $            | 111,677 |          | $ | 130,578
|Securities sold under agreement to repurchase                           |  |              | 30,777  |          |   | 37,182 
|Lines of credit with commercial banks                                   |  |              |        |          |   | 29,340 
|                                                                        |  |              |         |          |   |        
|Total                                                                   |  | $            | 142,454 |          | $ | 197,100
|                                                                        |  |              |         |          |   |        
|Long-term debt:                                                         |  |              |         |          |   |        
|Federal Home Loan Bank advances                                         |  | $            | 252,413 |          | $ | 312,518
|Securities sold under agreement to repurchase                           |  |              | 50,000  |          |   | 50,000 
|Junior subordinated debentures owed to unconsolidated subsidiary trusts |  |              | 61,856  |          |   | 61,856 
|                                                                        |  |              |         |          |   |        
|Total                                                                   |  | $            | 364,269 |          | $ | 424,374
|                                                                        |  |              |         |          |   |        



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Based on the Companys existing collateral, the dollar amount of additional Federal Home Loan Bank advance
borrowings available at December 31, 2008 was $11,633. In addition, the Bank has a borrowing capacity of approximately $8,000 with the Federal Reserve Bank through its discount window borrowing program.

6. Stock Compensation Plans

(Dollars in thousands, except per
share data)

Stock Options

The Company can issue
incentive stock options and nonqualified stock options under the 2004 Plan. Option awards become exercisable in accordance with the vesting schedule determined on the grant date of the award. Generally, the option period expires ten years from the
date of grant and the exercise price is the market price at the date of grant.

The following is the stock option activity for the periods indicated:



|                                               |  |                                   |   |                                   |                                       |       |                         |   |        |  |         |                                       |  |                         |       |  |   |    
|---------------------------------------------- |  | --------------------------------- | - | --------------------------------- | ------------------------------------- | ----- | ----------------------- | - | ------ |  | ------- | ------------------------------------- |  | ----------------------- | ----- |  | - | ---
|                                               |  | Total stock options outstanding  
|                                               |  | Six months endedDecember 31, 2008 |   | Six months endedDecember 31, 2007
|                                               |  | Shares                            |   |                                   | WeightedAverageExercisePrice PerShare |       | AggregateIntrinsicValue |   | Shares |  |         | WeightedAverageExercisePrice PerShare |  | AggregateIntrinsicValue
|Stock options outstanding, beginning of period |  | 698,371                           |   |                                   | $                                     | 14.71 |                         |   |        |  | 750,787 |                                       |  | $                       | 14.71 |  |   |    
|Granted                                        |  | 165,068                           |   |                                   |                                       | 12.18 |                         |   |        |  |        |                                       |  |                         |      |  |   |    
|Forfeited                                      |  | (9,694                            | ) |                                   |                                       | 15.45 |                         |   |        |  | (10,378 | )                                     |  |                         | 20.30 |  |   |    
|Exercised                                      |  |                                  |   |                                   |                                       |      |                         |   |        |  | (60,050 | )                                     |  |                         | 12.23 |  |   |    
|                                               |  |                                   |   |                                   |                                       |       |                         |   |        |  |         |                                       |  |                         |       |  |   |    
|Stock options outstanding, end of period       |  | 853,745                           |   |                                   | $                                     | 14.22 |                         | $ |       |  | 680,359 |                                       |  | $                       | 14.84 |  | $ | 833
|                                               |  |                                   |   |                                   |                                       |       |                         |   |        |  |         |                                       |  |                         |       |  |   |    
|Stock option exercisable, end of period        |  | 572,811                           |   |                                   | $                                     | 13.63 |                         | $ |       |  | 544,523 |                                       |  | $                       | 13.34 |  | $ | 833
|                                               |  |                                   |   |                                   |                                       |       |                         |   |        |  |         |                                       |  |                         |       |  |   |    

The weighted average fair value of stock options granted follows:



|                                                     |  |                   |      |                   |   |  
|---------------------------------------------------- |  | ----------------- | ---- | ----------------- | - | -
|                                                     |  | Six months ended  |      | Six months ended 
|                                                     |  | December 31, 2008 |      | December 31, 2007
|Weighted average fair value of stock options granted |  | $                 | 3.28 |                   | $ | 

The weighted average fair value of stock options granted during the six months ended December 31, 2008 was
determined at the date of grant using the Black-Scholes stock option pricing model and the following assumptions:



|                                         |  |                |      
|---------------------------------------- |  | -------------- | -----
|Expected average life (in years)         |  | 6.4 - 6.5      | years
|Expected average risk-free interest rate |  | 3.31% - 3.75   | %    
|Expected dividend yield                  |  | 2.79% - 6.49   | %    
|Expected volatility                      |  | 29.18% - 31.92 | %    



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Recognition and Retention Plan

The Company can issue stock grants as a form of compensation to directors and key employees under the 1999 Plan and the 2004 Plan. Stock grants become vested in accordance with the vesting schedule determined on the
grant date. In the event of the death or disability of a participant or a change in control of the Company, the participants shares will be deemed to be entirely earned and nonforfeitable upon such date. Recipients are entitled to receive
dividends on their respective shares but are restricted from selling, transferring or assigning their shares until full vesting of such shares has occurred.

The following is unvested common stock grant activity for the periods indicated:



|                                         |  |                   |   |                   |                               |       |        |        |   |                               |   |      
|---------------------------------------- |  | ----------------- | - | ----------------- | ----------------------------- | ----- | ------ | ------ | - | ----------------------------- | - | -----
|                                         |  | Six months ended  |   | Six months ended 
|                                         |  | December 31, 2008 |   | December 31, 2007
|                                         |  | Shares            |   |                   | WeightedAverageValuePer share |       | Shares |        |   | WeightedAverageValuePer share
|Issued and unvested, beginning of period |  | 11,472            |   |                   | $                             | 21.57 |        | 12,907 |   |                               | $ | 21.54
|Granted                                  |  |                  |   |                   |                               |      |        |       |   |                               |   |     
|Forfeited                                |  |                  |   |                   |                               |      |        | (1,093 | ) |                               |   | 21.86
|Vested                                   |  | (300              | ) |                   |                               | 19.58 |        | (195   | ) |                               |   | 19.58
|                                         |  |                   |   |                   |                               |       |        |        |   |                               |   |      
|Issued and unvested, end of period       |  | 11,172            |   |                   | $                             | 21.63 |        | 11,619 |   |                               | $ | 21.54
|                                         |  |                   |   |                   |                               |       |        |        |   |                               |   |      

The total fair value of shares vested during the six months ended December 31, 2008 and 2007 was $6 and $4.

7. Fair Value

(Dollars in thousands)

The Company elected to account for certain securities and loans held for sale at fair value effective July 1, 2008 under SFAS 159. The securities
selected for the fair value option include the Companys shares of Fannie Mae perpetual preferred stock, which was completely liquidated in the current quarter, and shares held in a mortgage-backed securities mutual fund. The securities chosen
for the fair value option had no stated maturity and both were negatively impacted by recent turmoil in the credit and housing markets. By electing the fair value option for these securities, the subjectivity of other-than-temporary impairment
analysis is eliminated. The selection of loans held for sale to be accounted for under the fair value option was to achieve a better match with the fair value accounting historically used on the commitments to sell these loans. The following table
summarizes the impact of adopting the fair value option for certain securities and loans held for sale. Amounts shown represent the carrying value of the affected instruments before and after the changes in accounting from the adoption of SFAS 159.



|                                                                           |  |                                               |        |                               |   |      |                                            |  |   |       
|-------------------------------------------------------------------------- |  | --------------------------------------------- | ------ | ----------------------------- | - | ---- | ------------------------------------------ |  | - | ------
|                                                                           |  | Balance Sheet atJuly 1, 2008 priorto adoption |        | Net gain /(loss)upon adoption |   |      | Balance Sheet atJuly 1, 2008after adoption
|Assets:                                                                    |  |                                               |        |                               |   |      |                                            |  |   |       
|Certain securities available for sale                                      |  | $                                             | 24,766 |                               | $ |     |                                            |  | $ | 24,766
|Loans held for sale                                                        |  |                                               | 72,341 |                               |   | 289  |                                            |  |   | 72,630
|                                                                           |  |                                               |        |                               |   |      |                                            |  |   |       
|                                                                           |  |                                               |       
|Cumulative effect of adoption                                              |  |                                               |        |                               |   | 289  |                                            |  |   |       
|Tax effect                                                                 |  |                                               |        |                               |   | (101 | )                                          |  |   |       
|                                                                           |  |                                               |        |                               |   |      |                                            |  |   |       
|                                                                           |  |                                               |       
|Cumulative effect of adoption, net of taxes, increase to retained earnings |  |                                               |        |                               | $ | 188  |                                            |  |   |       
|                                                                           |  |                                               |        |                               |   |      |                                            |  |   |       

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset



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or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market
for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the
market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in
the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Under SFAS
157, the Company groups assets and liabilities recorded at fair value into three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. A financial
instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement (with level 1 considered highest and level 3 considered lowest). A brief description of each level
follows:

Level 1  Valuation is based upon quoted prices for identical instruments in active markets.

Level 2  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3  Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in
pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques.

The following table summarizes the
financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy:



|                                                     |  |       |         |   |                            |   |         |  |   |         |   |  |   |    
|---------------------------------------------------- |  | ----- | ------- | - | -------------------------- | - | ------- |  | - | ------- | - |  | - | ---
|                                                     |  |       |         |   | Fair value measurements at
|                                                     |  |       |         |   | December 31, 2008 using   
|                                                     |  | Total |         |   | Level 1                    |   | Level 2 |  |   | Level 3
|Assets and liabilities measured on a recurring basis |  |       |         |   |                            |   |         |  |   |         |   |  |   |    
|Assets measured at fair value:                       |  |       |         |   |                            |   |         |  |   |         |   |  |   |    
|Trading securities                                   |  | $     | 12,706  |   |                            | $ | 12,706  |  | $ |        |   |  | $ |   
|Securities, available for sale                       |  |       | 270,391 |   |                            |   | 246     |  |   | 269,745 |   |  |   | 400
|Loans held for sale                                  |  |       | 96,851  |   |                            |   |        |  |   | 96,851  |   |  |   |   
|Derivatives, net included in other assets            |  |       | (339    | ) |                            |   |        |  |   | (339    | ) |  |   |   

The following table presents additional information about assets measured at fair value on a recurring basis and
for which the Company has utilized Level 3 inputs to determine fair value:



|                                        |  |                                     |     |                                   |   |    
|--------------------------------------- |  | ----------------------------------- | --- | --------------------------------- | - | ---
|                                        |  | Three months endedDecember 31, 2008 |     | Six months endedDecember 31, 2008
|Balance at beginning of period          |  | $                                   |    |                                   | $ |   
|Transfers in to and/or (out) of Level 3 |  |                                     | 400 |                                   |   | 400
|                                        |  |                                     |     |                                   |   |    
|Balance at December 31, 2008            |  | $                                   | 400 |                                   | $ | 400
|                                        |  |                                     |     |                                   |   |    

The following table summarizes the financial assets and liabilities measured at fair value on a nonrecurring basis
as of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy:



|                                                        |  |        |  |                            |  |         |  |        
|------------------------------------------------------- |  | ------ |  | -------------------------- |  | ------- |  | -------
|                                                        |  |        |  | Fair value measurements at
|                                                        |  |        |  | December 31, 2008 using   
|                                                        |  | Total  |  | Level 1                    |  | Level 2 |  | Level 3
|Assets and liabilities measured on a nonrecurring basis |  |        |  |                            |  |         |  |        
|Assets measured at fair value:                          |  |        |  |                            |  |         |  |        
|Impaired loans                                          |  | 25,742 |  |                           |  |        |  | 25,742 
|Mortgage servicing assets                               |  | 6,808  |  |                           |  |        |  | 6,808  

Securities - Certain securities in the Companys investment portfolio are recorded at
fair value on a recurring basis and classified as trading securities. Fair value measurement is based upon quoted prices for similar assets, if available.



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If quoted prices are not available, fair values are measured using matrix pricing models, or other model-based valuation techniques requiring observable
inputs other than quoted prices such as yield curves, prepayment speeds, and default rates. Recurring Level 1 trading securities include the Companys investment in a mortgage-backed securities mutual fund. The remaining securities in the
Companys investment portfolio are classified as available for sale. Recurring Level 1 available for sale securities include the Companys investment in common stocks. Recurring Level 2 available for sale securities include the
Companys investments in U.S. government agency obligations, obligations of state and political subdivisions, trust preferred securities, mortgage-backed securities and collateralized mortgage obligations.

Loans held for sale - Loans held for sale consist of residential mortgage loans originated for sale and other loans which have been identified for
sale. From time to time, loans held for sale may also include the guaranteed portion of SBA loans. Interest on loans held for sale is recognized according to the contractual terms on the loans and included in interest income on loans. The fair value
of loans held for sale is based on what secondary markets are currently offering for loans with similar characteristics. As such, the Company classifies loans held for sale as recurring Level 2. At December 31, 2008, the fair value of loans
held for sale exceeded the aggregate unpaid principal balance by $2,350. The amount of the adjustment for fair value for the six months ended December 31, 2008 was $1,518 and is included in the Condensed Consolidated Statement of Income under
the caption Mortgage Banking Gains.

Impaired loans - Impaired loans are measured for impairment using the fair value of the
collateral for collateral-dependent loans and had a carrying value of $34,690 with a valuation allowance of $8,948. The Company measures impairment on all nonaccrual loans for which it has established specific reserves as part of the specific
allocated allowance component of the allowance for loan losses. As such, the Company classifies impaired loans as nonrecurring Level 3. During the six months ended December 31, 2008, net nonrecurring fair value losses of $5,285 were recorded
within the provision for loan losses on loans measured for impairment under Statement of Financial Accounting Standards No. 114 using the fair value of the collateral.

Mortgage servicing assets - Mortgage servicing assets of $13,636 represent the value of retained servicing rights on loans sold. Servicing assets
are valued at the lower of cost or fair value and are based upon an independent third party appraisal. Accordingly, the Company classifies the fair value portion of its mortgage servicing assets as nonrecurring Level 3. The fair value of mortgage
servicing assets includes $1,363 in impairment losses for the six months ended December 31, 2008 and the valuation allowance at December 31, 2008 was $1,463. Mortgage servicing assets of $6,695 are valued at amortized cost.

8. Commitments, Contingencies and Guarantees

(Dollars in
thousands)

The Company regularly enters into transactions that generate off-balance sheet risk. These transactions include commitments to originate
loans, commitments to sell loans, loans with future commitments to disburse funds such as construction loans and lines of credit and recourse obligations for loans sold and letters of credit. The Company enters into these transactions to meet
customer needs or to facilitate the sale of assets. These transactions are recorded on the books of the Company based on their estimated fair value. The nominal values of these off-balance sheet transactions as of December 31, 2008 are shown
below.



|                                                        |  |               |         |                                  |   |        |  
|------------------------------------------------------- |  | ------------- | ------- | -------------------------------- | - | ------ | -
|                                                        |  | Nominal value |         | Current asset /(liability) value |  
|GUARANTEE OBLIGATIONS                                   |  |               |         |                                  |   |        |  
|Loans sold with recourse                                |  | $             | 280,267 |                                  | $ | (39    | )
|Standby letters of credit                               |  |               | 4,515   |                                  |   | (21    | )
|                                                        |  |              
|OTHER OBLIGATIONS                                       |  |               |         |                                  |   |        |  
|Commitments to make loans (at market rates)             |  |               | 344,284 |                                  |   | 2,168  |  
|Construction loan funds not yet disbursed               |  |               | 74,360  |                                  |   |       |  
|Commitments to sell loans                               |  |               | 3,254   |                                  |   |       |  
|Unused lines of credit and commercial letters of credit |  |               | 285,721 |                                  |   |       |  
|Mortgage-backed securities sales commitments            |  |               | 262,000 |                                  |   | (2,507 | )

The loans sold with recourse were sold to government-sponsored enterprises and others. This recourse is limited
and is eliminated when the loans reach certain loan to value ratios. The Company is able to estimate credit losses associated with sold loans where recourse currently exists. Therefore, a liability has been established to recognize those credit
losses.



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9. Earnings per Share

(Dollars in thousands, except per share data)

The computation of basic and diluted earnings (loss) per share is shown in the following
table:



|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                            |  | Three months endedDecember 31, |            |   | Six months endedDecember 31, |  
|                                                                            |  | 2008                           |            |   | 2007                         |   |            | 2008 |  |   | 2007       |  
|Basic earnings (loss) per share computation:                                |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|                                                                            |  |                                |            |  
|Net income (loss)                                                           |  | $                              | (94,097    | ) |                              | $ | (3,147     | )    |  | $ | (100,256   | ) |  | $ | 3,107      |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|                                                                            |  |                                |            |  
|Gross weighted average shares outstanding                                   |  |                                | 16,973,270 |   |                              |   | 16,540,250 |      |  |   | 16,973,270 |   |  |   | 16,737,468 |  
|Less: Average unearned ESOP shares                                          |  |                                | (339,207   | ) |                              |   | (366,063   | )    |  |   | (344,419   | ) |  |   | (373,412   | )
|Less: Average unearned RRP shares                                           |  |                                | (75,780    | ) |                              |   | (78,554    | )    |  |   | (76,129    | ) |  |   | (78,937    | )
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|                                                                            |  |                                |            |  
|Net weighted average shares outstanding                                     |  |                                | 16,558,283 |   |                              |   | 16,095,633 |      |  |   | 16,552,722 |   |  |   | 16,285,119 |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|                                                                            |  |                                |            |  
|Basic earnings (loss) per share                                             |  | $                              | (5.68      | ) |                              | $ | (0.20      | )    |  | $ | (6.06      | ) |  | $ | 0.19       |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|                                                                            |  |                                |            |  
|Diluted earnings (loss) per share computation:                              |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|Net income (loss)                                                           |  | $                              | (94,097    | ) |                              | $ | (3,147     | )    |  | $ | (100,256   | ) |  | $ | 3,107      |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|Net weighted average shares outstanding for basic earnings (loss) per share |  |                                | 16,558,283 |   |                              |   | 16,095,633 |      |  |   | 16,552,722 |   |  |   | 16,285,119 |  
|Add: Dilutive effects of assumed exercises of stock options                 |  |                                |           |   |                              |   |           |      |  |   |           |   |  |   | 97,969     |  
|Add: Dilutive effects of unearned Recognition and Retention Plan shares     |  |                                |           |   |                              |   |           |      |  |   |           |   |  |   |           |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|Net weighted average shares and potentially dilutive shares                 |  |                                | 16,558,283 |   |                              |   | 16,095,633 |      |  |   | 16,552,722 |   |  |   | 16,383,088 |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  
|                                                                            |  |                                |            |  
|Diluted earnings (loss) per share                                           |  | $                              | (5.68      | ) |                              | $ | (0.20      | )    |  | $ | (6.06      | ) |  | $ | 0.19       |  
|                                                                            |  |                                |            |   |                              |   |            |      |  |   |            |   |  |   |            |  

Stock options in the amount of 853,745 and 680,359 shares of the Companys common stock were not included in
the computation of earnings (loss) per share during the quarters ended December 31, 2008 and 2007, respectively, because they were antidilutive. Stock options in the amount of 853,745 and 223,862 shares of the Companys common stock were
not included in the computation of earnings (loss) per share during the six months ended December 31, 2008 and 2007, respectively, because they were antidilutive. The exercise prices of these stock options were greater than the average market
price of the Companys common shares or the Company was in a net loss position and, therefore, the effect would be antidilutive to earnings (loss) per share. Stock grants in the amount of 11,172 shares of the Companys common stock were
not included in the computation of earnings (loss) per share during the three and six months ended December 31, 2008 because they were antidilutive. Stock grants in the amount of 11,619 shares of the Companys common stock were not
included in the computation of earnings (loss) per share during the three and six months ended December 31, 2007 because they were antidilutive.

10. Completed acquisition

(Dollars in thousands)

On June 30, 2008, the Company completed its acquisition of OC Financial, Inc. a Dublin, Ohio financial holding company that owned Ohio Central Savings. As of that date, the Company acquired $68,473 in assets,
which included



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$42,186 in loans and $14,520 in securities. The Company also assumed $60,937 in liabilities which included $44,185 in deposits and $9,649 in long-term debt.
Goodwill resulting from this acquisition was $1,648, none of which is deductible for income tax purposes. The acquisition was accounted for as a business combination using the purchase method. On July 11, 2008, the Companys two federally
chartered savings association subsidiaries, Ohio Central Savings and the Bank merged into a single federal savings association with the name First Place Bank.

11. Termination of pending acquisition

On May 7, 2008, the Company announced it had reached a definitive agreement to acquire Camco
Financial Corporation (Camco), a Cambridge, Ohio-based financial holding company, and its subsidiaries Advantage Bank and Camco Title Agency. Effective November 28, 2008, the Company and Camco announced that by mutual consent the definitive
agreement executed on May 7, 2008 for the planned acquisition of Camco by the Company was terminated. Under the terms of the agreement, neither party will incur any termination fees due to the cancellation of the merger and the parties further
agreed to mutually release one another from any claims of liability relating to the merger transaction.

12. Goodwill impairment

(Dollars in thousands, except per share data)

Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (as amended) requires goodwill to be tested for impairment on an annual basis, or more frequently if circumstances indicate that an asset might be impaired, by comparing
the fair value of such goodwill to its recorded or carrying amount. If the carrying amount of the goodwill exceeds the fair value, an impairment charge must be recorded in an amount equal to the excess. The Company typically tests goodwill for
impairment on an annual basis, or more often if events or circumstances indicate there may be impairment.

The impact of deteriorating economic conditions
has significantly impacted the banking industry during 2008 and has impacted the Companys financial results. For the six months ended December 31, 2008, earnings have been negatively impacted by an increase in credit losses in our loan
portfolio, recognition of declines in the fair value of certain securities and impairment of mortgage servicing rights. The market price of the Companys common stock has declined from an average closing price of $12.27 during the fourth
quarter of fiscal 2008 to an average closing price of $5.62 during this second quarter of fiscal 2009, a 54.2% decrease. The closing market value of the Companys stock on December 31, 2008 was $3.83. Book value per share at
December 31, 2008, prior to the goodwill impairment charge, was $18.23 per share. The substantial decline in stock price below book value led to an evaluation for potential goodwill impairment.

The first step, used to identify potential impairment, involves determining and comparing the fair value of the company, including a control premium, with its carrying
value, or shareholders equity. If the fair value of the company exceeds its carrying value, goodwill is not impaired. If the carrying value exceeds fair value, there is an indication of impairment and the second step is performed to determine the
amount of impairment, if any. The second step compares the book value of the company to the aggregate fair values of its individual assets, liabilities and identified intangibles. The fair value determined in the step 1 test was determined based on
the control premium required to realize the full amount of the Companys goodwill. At December 31, 2008, the book value of the Company significantly exceeded the fair value of the Company as a whole. Therefore a step 2 test was
required to determine if there was goodwill impairment and the amount of goodwill that might be impaired.

Our work on the step 2 analysis is not fully
complete. Based on our work to date, we estimated that an impairment exists of $93,741, the entire amount of goodwill, and have recorded that charge within the accompanying financial statements reflecting this estimate. As permitted by SFAS
No. 142, we will complete our analysis and make any required adjustment to this estimate in the third quarter of fiscal 2009.

13. Participation in
the U.S. Treasury Departments Troubled Asset Relief Program

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of
2008, which provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. financial markets. One of the provisions included in the Act is the Troubled Asset Relief
Program, or more specifically, the Capital Purchase Program (CPP), which provides direct equity investment of perpetual preferred stock by the U.S. Department of the Treasury (Treasury) in qualified financial institutions. The program is voluntary
and requires an



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institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of
dividends. The CPP provides for a minimum investment of 1% of risk-weighted assets, with a maximum investment equal to the lesser of 3% of total risk-weighted assets or $25 billion. The perpetual preferred stock investment will have a dividend
rate of 5% per year, until the fifth anniversary of the Treasurys investment, and a dividend rate of 9% thereafter. The CPP also requires the Treasury to receive warrants for common stock equal to 15% of the capital invested by the
Treasury. Participation in the program is not automatic and subject to approval by the Treasury. The Company applied for participation in the CPP during the quarter ended December 31, 2008. On February 3, 2009, Treasury notified the Company
that it received preliminary approval to participate in the program with a preferred stock issuance of $75 million, accompanied by common stock warrants worth $11 million based on the Companys stock price when the preferred stock is issued.
Final approval from Treasury is subject to standard closing conditions, including the execution of definitive agreements. The Company is reviewing the documentation to determine whether or to what level the Company will participate in the program.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following analysis discusses changes in First Place Financial Corp.s (the Company) results of operations and financial condition during the periods included in the Condensed Consolidated Financial
Statements, which are part of this filing.

Forward-Looking Statements

When used in this Form 10-Q, or in future filings with the Securities and Exchange Commission (SEC), in press releases or other public or shareholder communications, or in oral statements made with the approval of an
authorized executive officer, words or phrases will likely result, expect, will continue, anticipate, estimate, project, believe, should,
may, will, plan, or variations of such terms or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Companys actual results to be materially different from those indicated. Such statements are subject to certain risks and
uncertainties including changes in economic conditions in the market areas the Company conducts business, which could materially impact credit quality trends, changes in laws, regulations or policies of regulatory agencies, fluctuations in interest
rates, demand for loans in the market areas the Company conducts business, and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publicly release the result of any revisions that may be made to any forward-looking statements
to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Business
Overview

Background.The Company is a unitary thrift holding company formed from the conversion of First Place Bank (formerly known as First
Federal Savings and Loan Association of Warren) from a federally chartered mutual savings and loan association to a federally chartered stock savings association in December 1998. First Federal Savings and Loan Association of Warren originally
opened for business in 1922. In May 2000, the Company acquired Ravenna Savings Bank of Ravenna, Ohio. In December 2000, the Company completed a merger with FFY Financial Corp. of Youngstown, Ohio. In May 2004, the Company acquired Franklin Bancorp,
Inc. of Southfield, Michigan. In June 2006, the Company acquired The Northern Savings & Loan Company of Elyria, Ohio. In April 2007, the Company acquired seven retail banking offices from Republic Bancorp, Inc. and Citizens Banking
Corporation in the greater Flint, Michigan area.

On October 31, 2007, the Company completed its acquisition of Hicksville Building, Loan and Savings
Bank (HBLS Bank), located in Hicksville, Ohio. As of that date, the Company acquired $53 million in assets, which included $33 million in loans and $15 million in securities and assumed $40 million in deposits and $9 million in long-term debt. On
November 26, 2007, the Companys two federally chartered savings association subsidiaries, HBLS Bank and First Place Bank merged into a single federal savings association with the name First Place Bank.

On June 30, 2008, the Company completed its acquisition of OC Financial Inc. (OC Financial), a Dublin, Ohio financial holding company that owned Ohio Central
Savings. As of that date, the Company acquired $68 million in assets, which included $42 million in loans and $15 million in securities and assumed $44 million in deposits and $10 million in long-term debt. On July 11, 2008, the Companys
two federally chartered savings association subsidiaries, Ohio Central Savings and First Place Bank merged into a single federal savings association with the name First Place Bank.



17



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##### Table of Contents

The Company is a community-oriented financial institution engaged primarily in gathering deposits to originate
one-to-four family residential mortgage loans, commercial and consumer loans. The Company currently operates in Ohio, Michigan, Indiana and Pennsylvania with a concentration of banking offices in Northeast Ohio and Southeast Michigan. The Company
also operates loan production offices in various cities in Ohio, Michigan and Indiana. In addition, the Company owns nonbank subsidiaries that operate in the following industries: real estate brokerage, title insurance, investment brokerage, wealth
management, employee benefits and general insurance. As of December 31, 2008, the Company had $3.378 billion in assets and was the second largest publicly traded thrift institution in Ohio.

Strategic Plan. The Company seeks to grow assets and fees in order to grow net income. Currently, the Company seeks to grow by increasing market share in current
markets and expanding into new markets in the Midwest by opening new banking offices, new loan production offices and acquiring other financial institutions. The Company evaluates acquisition targets based on the economic viability of the markets
they are in, whether they can be efficiently integrated into current operations and whether they are accretive to earnings, initially and over time.

The
Company seeks to provide a return to its shareholders through dividends and appreciation by taking on various levels of credit risk, interest rate risk, liquidity risk and capital risk in order to achieve profits. The goal of achieving high levels
of profitability on a consistent basis is balanced with acceptable levels of risk in each area. The Company monitors a number of financial measures to assess profitability and various types of risk. Those measures include but are not limited to
return on average assets, return on average equity, equity as a percentage of assets, diluted earnings (loss) per share, efficiency ratio, net interest margin, noninterest expense as a percentage of average assets, net portfolio value, nonperforming
assets as a percent of total assets, allowance for loan losses as a percent of total loans, allowance for loan losses as a percent of nonperforming loans and tangible equity to tangible assets.

Results of Operations

Comparison of the Three and Six months
Ended December 31, 2008 and 2007

Following is a summary of selected GAAP financial ratios and other GAAP financial measures as of or for the three
and six months ending December 31, 2008:

Selected GAAP Financial Ratios and Other GAAP Financial Measures

(Dollars in thousands, except per share data)



|                                                   |  |                                                |           |    |                     |   |           |        |  |   |         |   |  |         |   
|-------------------------------------------------- |  | ---------------------------------------------- | --------- | -- | ------------------- | - | --------- | ------ |  | - | ------- | - |  | ------- | --
|                                                   |  | As of or for thethree months endedDecember
31, |           |    | Increase (Decrease) |  
|                                                   |  | 2008                                           |           |    | 2007                |   |           | Amount |  |   | Percent |  
|Total assets                                       |  | $                                              | 3,284,282 |    |                     | $ | 3,304,274 |        |  | $ | (19,992 | ) |  | (0.6    | )%
|Net loss                                           |  | $                                              | (94,097   | )  |                     | $ | (3,147    | )      |  | $ | (90,950 | ) |  | N/M     |   
|Diluted loss per share                             |  | $                                              | (5.68     | )  |                     | $ | (0.20     | )      |  | $ | (5.48   | ) |  | N/M     |   
|Return on average equity                           |  |                                                | (121.96   | )% |                     |   | (3.93     | )%     |  |   |         |   |  | (118.03 | )%
|Return on average assets                           |  |                                                | (11.14    | )% |                     |   | (0.39     | )%     |  |   |         |   |  | (10.75  | )%
|Net interest margin                                |  |                                                | 2.81      | %  |                     |   | 2.92      | %      |  |   |         |   |  | (0.11   | )%
|Efficiency ratio                                   |  |                                                | 444.98    | %  |                     |   | 99.17     | %      |  |   |         |   |  | 345.81  | % 
|Noninterest expense as a percent of average assets |  |                                                | 13.81     | %  |                     |   | 2.76      | %      |  |   |         |   |  | 11.05   | % 
|Nonperforming assets to total assets               |  |                                                | 3.01      | %  |                     |   | 1.69      | %      |  |   |         |   |  | 1.32    | % 
|Allowance for loan losses to total loans           |  |                                                | 1.28      | %  |                     |   | 1.00      | %      |  |   |         |   |  | 0.28    | % 
|Allowance for loan losses to nonperforming loans   |  |                                                | 50.15     | %  |                     |   | 56.91     | %      |  |   |         |   |  | (6.76   | )%
|Equity to total assets                             |  |                                                | 6.63      | %  |                     |   | 9.45      | %      |  |   |         |   |  | (2.82   | )%
|Tangible equity to tangible assets                 |  |                                                | 6.29      | %  |                     |   | 6.42      | %      |  |   |         |   |  | (0.13   | )%



N/M  Result not meaningful



18



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##### Table of Contents

Selected GAAP Financial Ratios and Other GAAP Financial Measures

(Dollars in thousands, except per share data)



|                                                   |  |                                              |           |    |                     |   |           |        |  |   |          |   |  |        |   
|-------------------------------------------------- |  | -------------------------------------------- | --------- | -- | ------------------- | - | --------- | ------ |  | - | -------- | - |  | ------ | --
|                                                   |  | As of or for thesix months endedDecember 31, |           |    | Increase (Decrease) |  
|                                                   |  | 2008                                         |           |    | 2007                |   |           | Amount |  |   | Percent  |  
|Total assets                                       |  | $                                            | 3,284,282 |    |                     | $ | 3,304,274 |        |  | $ | (19,992  | ) |  | (0.6   | )%
|Net income (loss)                                  |  | $                                            | (100,256  | )  |                     | $ | 3,107     |        |  | $ | (103,363 | ) |  | N/M    |   
|Diluted earnings (loss) per share                  |  | $                                            | (6.06     | )  |                     | $ | 0.19      |        |  | $ | (6.25    | ) |  | N/M    |   
|Return on average equity                           |  |                                              | (63.99    | )% |                     |   | 1.93      | %      |  |   |          |   |  | (65.92 | )%
|Return on average assets                           |  |                                              | (5.97     | )% |                     |   | 0.19      | %      |  |   |          |   |  | (6.16  | )%
|Net interest margin                                |  |                                              | 2.94      | %  |                     |   | 2.93      | %      |  |   |          |   |  | 0.01   | % 
|Efficiency ratio                                   |  |                                              | 287.64    | %  |                     |   | 78.57     | %      |  |   |          |   |  | 209.07 | % 
|Noninterest expense as a percent of average assets |  |                                              | 8.22      | %  |                     |   | 2.66      | %      |  |   |          |   |  | 5.56   | % 
|Nonperforming assets to total assets               |  |                                              | 3.01      | %  |                     |   | 1.69      | %      |  |   |          |   |  | 1.32   | % 
|Allowance for loan losses to total loans           |  |                                              | 1.28      | %  |                     |   | 1.00      | %      |  |   |          |   |  | 0.28   | % 
|Allowance for loan losses to nonperforming loans   |  |                                              | 50.15     | %  |                     |   | 56.91     | %      |  |   |          |   |  | (6.76  | )%
|Equity to total assets                             |  |                                              | 6.63      | %  |                     |   | 9.45      | %      |  |   |          |   |  | (2.82  | )%
|Tangible equity to tangible assets                 |  |                                              | 6.29      | %  |                     |   | 6.42      | %      |  |   |          |   |  | (0.13  | )%



N/M  Result not meaningful

Summary. The overriding factor for both the three month and six month periods ended
December 31, 2008 is the goodwill impairment charge of $93.7 million included in noninterest expense. The impairment charge is a noncash, nonoperating charge which had no negative impact on the Companys liquidity or capital ratios. The
accounting adjustment, $92.1 million net of tax, is governed by SFAS No. 142. The Company remains well capitalized by all regulatory measures. No goodwill remains as of December 31, 2008. See the detailed discussion of goodwill impairment
under Critical Accounting Policies below.

The impact of deteriorating economic conditions has significantly impacted the banking industry during 2008 and
has impacted the Companys financial results. Provisions for loan losses increased 77.4% for the quarter and 131.5% for the six months compared to the same periods in 2007 in response to the nonperforming assets ratio reaching 3.01%. The
allowance for loan losses is now 1.28% at quarter end 2008 versus 1.00% at December 31, 2007. Charges relating to investment securities valuation adjustments, although lower for the quarter by $3.4 million, were greater by $6.0 million for the six
month period versus the prior year. The Fannie Mae preferred stock, which primarily drove the investment valuation adjustments, was entirely sold during the recent quarter. The decrease in total assets was primarily due to the goodwill impairment
adjustment, partially offset by growth in interest-bearing deposits in other banks, loans held for sale and commercial loans.

Explanation of Certain
Non-GAAP Measures.This Form 10-Q contains certain financial information determined by methods other than Generally Accepted Accounting Principles (GAAP). Specifically, the Company has provided financial measures that are based on core earnings
rather than net income. Ratios and other financial measures with the word core in their title were computed using core earnings rather than net income. Core earnings excludes merger, integration and restructuring expense, extraordinary income or
expense, income or expense from discontinued operations, and income, expense, gains and losses that are not reflective of ongoing operations or that we do not expect to reoccur. Management of the Company believes that this information is useful to
both investors and to management and can aid them in understanding the Companys current performance, performance trends and financial condition. While core earnings can be useful in evaluating current performance and projecting current trends
into the future, management does not believe that core earnings are a substitute for GAAP net income. We encourage investors and others to use core earnings as a supplemental tool for analysis and not as a substitute for GAAP net income. The
Companys non-GAAP measures may not be comparable to the non-GAAP numbers of other companies. In addition, future results of operations may include nonrecurring items that would not be included in core earnings. The Company incurred merger
related costs in its acquisition of OC Financial on June 30, 2008 and HBLS Bank on October 31, 2007. Accordingly, these costs are excluded from current and prior year periods, respectively. Also, the Companys goodwill impairment
charge during the current quarter is considered unusual and not reflective of ongoing operations. Reconciliation from GAAP net income to the non-GAAP measure of core earnings is shown below.



19



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##### Table of Contents

|                                                                 |  |                        |         |   |                  |   |        |      |  |   |          |   |  |   |      
|---------------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------ | ---- |  | - | -------- | - |  | - | -----
|                                                                 |  | Three months ended     |         |   | Six months ended
|                                                                 |  | December 31,           |         |   | December 31,    
|                                                                 |  | 2008                   |         |   | 2007             |   |        | 2008 |  |   | 2007    
|                                                                 |  | (Dollars in thousands)
|Reconciliation of GAAP net income (loss) to core earnings (loss) |  |                        |         |   |                  |   |        |      |  |   |          |   |  |   |      
|GAAP net income (loss)                                           |  | $                      | (94,097 | ) |                  | $ | (3,147 | )    |  | $ | (100,256 | ) |  | $ | 3,107
|Goodwill impairment, net of tax                                  |  |                        | 92,139  |   |                  |   |       |      |  |   | 92,139   |   |  |   |     
|Merger, integration and restructuring expense, net of tax        |  |                        | 692     |   |                  |   | 514    |      |  |   | 721      |   |  |   | 514  
|                                                                 |  |                        |         |   |                  |   |        |      |  |   |          |   |  |   |      
|Core earnings (loss)                                             |  | $                      | (1,266  | ) |                  | $ | (2,633 | )    |  | $ | (7,396   | ) |  | $ | 3,621
|                                                                 |  |                        |         |   |                  |   |        |      |  |   |          |   |  |   |      

Following is a summary of selected core financial ratios and other core financial measures as of or for the three
and six months ending December 31, 2008:

Selected Core Financial Ratios and Other Core Financial Measures

(Dollars in thousands, except per share data)



|                                                        |  |                                                |        |    |                     |   |        |        |  |         |       |  |        |   
|------------------------------------------------------- |  | ---------------------------------------------- | ------ | -- | ------------------- | - | ------ | ------ |  | ------- | ----- |  | ------ | --
|                                                        |  | As of or for thethree months endedDecember 31, |        |    | Increase (Decrease) |  
|                                                        |  | 2008                                           |        |    | 2007                |   |        | Amount |  | Percent |      
|Core loss                                               |  | $                                              | (1,266 | )  |                     | $ | (2,633 | )      |  | $       | 1,367 |  | 51.9   | % 
|Core diluted loss per share                             |  | $                                              | (0.08  | )  |                     | $ | (0.16  | )      |  | $       | 0.08  |  | 50.0   | % 
|Core return on average equity                           |  |                                                | (1.64  | )% |                     |   | (3.28  | )%     |  |         |       |  | 1.64   | % 
|Core return on average assets                           |  |                                                | (0.15  | )% |                     |   | (0.32  | )%     |  |         |       |  | 0.17   | % 
|Core net interest margin                                |  |                                                | 2.81   | %  |                     |   | 2.92   | %      |  |         |       |  | (0.11  | )%
|Core efficiency ratio                                   |  |                                                | 83.00  | %  |                     |   | 95.68  | %      |  |         |       |  | (12.68 | )%
|Core noninterest expense as a percent of average assets |  |                                                | 2.58   | %  |                     |   | 2.66   | %      |  |         |       |  | (0.08  | )%

Selected Core Financial Ratios and Other Core Financial Measures

(Dollars in thousands, except per share data)



|                                                        |  |                                              |        |    |                     |   |       |        |  |   |         |   |  |        |   
|------------------------------------------------------- |  | -------------------------------------------- | ------ | -- | ------------------- | - | ----- | ------ |  | - | ------- | - |  | ------ | --
|                                                        |  | As of or for thesix months endedDecember 31, |        |    | Increase (Decrease) |  
|                                                        |  | 2008                                         |        |    | 2007                |   |       | Amount |  |   | Percent |  
|Core earnings (loss)                                    |  | $                                            | (7,396 | )  |                     | $ | 3,621 |        |  | $ | (11,017 | ) |  | (304.3 | )%
|Core diluted earnings (loss) per share                  |  | $                                            | (0.45  | )  |                     | $ | 0.22  |        |  | $ | (0.67   | ) |  | (304.5 | )%
|Core return on average equity                           |  |                                              | (4.72  | )% |                     |   | 2.25  | %      |  |   |         |   |  | (6.97  | )%
|Core return on average assets                           |  |                                              | (0.44  | )% |                     |   | 0.22  | %      |  |   |         |   |  | (0.66  | )%
|Core net interest margin                                |  |                                              | 2.94   | %  |                     |   | 2.93  | %      |  |   |         |   |  | 0.01   | % 
|Core efficiency ratio                                   |  |                                              | 89.78  | %  |                     |   | 77.12 | %      |  |   |         |   |  | 12.66  | % 
|Core noninterest expense as a percent of average assets |  |                                              | 2.57   | %  |                     |   | 2.61  | %      |  |   |         |   |  | (0.04  | )%

Core loss for the quarter ended December 31, 2008 was $1.3 million, a 51.9% improvement over the core loss of
$2.6 million for the same quarter in the prior year. Core loss per share was $0.08 for the quarter ended December 31, 2008 compared with core loss per share of $0.16 for the prior year quarter. Core loss for the six months ended
December 31,



20



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##### Table of Contents

2008 was $7.4 million compared to core earnings of $3.6 million for the same period in the prior year. Core loss per share was $0.45 for the six months ended
December 31, 2008 compared with core diluted earnings per share of $0.22 for the same period in the prior year. The decline in core loss for the second quarter of fiscal 2009 compared to the prior year quarter was primarily attributable to
decreases of $5.9 million in impairment of securities and $1.9 million in income tax expense, partially offset by an increase of $4.0 million in the provision for loan losses and a $2.5 million charge for a decline in the fair value of securities.
The decline to a core loss for the first six months of fiscal 2009 compared to core earnings in the prior year period was primarily attributable to an increase of $9.4 million in the provision for loan losses and a $11.9 million charge for a decline
in the fair value of securities, partially offset by decreases of $5.9 million in impairment of securities and $6.0 million in income tax expense.

Net
Interest Income.The following schedules detail the various components of net interest income for the three and six months ended December 31, 2008 and 2007. All asset yields are calculated on a tax-equivalent basis where applicable.
Security yields are based on amortized historic cost.



21



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##### Table of Contents

Average Balances, Interest Rates and Yields

(Dollars in thousands)



|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|----------------------------------------------------------------------- |  | ----------------------------------- | --------- | - | ----------------------------------- | - | ----------------- |  | ------ | -------------- |  | - | --------- | - | ----------------- | - | ------ |  | ------ | -
|                                                                        |  | Three months endedDecember 31, 2008 |           |   | Three months endedDecember 31, 2007 |  
|                                                                        |  | AverageBalance                      |           |   | Interest                            |   | AverageYield/cost |  |        | AverageBalance |  |   | Interest  |   | AverageYield/cost |  
|ASSETS                                                                  |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-earning assets                                                 |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Loans and loans held for sale                                           |  | $                                   | 2,686,814 |   |                                     | $ | 39,572            |  | 5.84   | %              |  | $ | 2,673,547 |   |                   | $ | 44,800 |  | 6.67   | %
|Securities and interest-bearing deposits                                |  |                                     | 340,945   |   |                                     |   | 3,896             |  | 4.57   | %              |  |   | 282,086   |   |                   |   | 3,862  |  | 5.45   | %
|Federal Home Loan Bank stock                                            |  |                                     | 36,221    |   |                                     |   | 438               |  | 4.79   | %              |  |   | 33,809    |   |                   |   | 595    |  | 7.00   | %
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-earning assets                                           |  |                                     | 3,063,980 |   |                                     |   | 43,906            |  | 5.69   | %              |  |   | 2,989,442 |   |                   |   | 49,257 |  | 6.55   | %
|Noninterest-earning assets                                              |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Cash and due from banks                                                 |  |                                     | 41,762    |   |                                     |   |                   |  |        |                |  |   | 48,582    |   |                   |   |        |  |        |  
|Allowance for loan losses                                               |  |                                     | (35,325   | ) |                                     |   |                   |  |        |                |  |   | (27,379   | ) |                   |   |        |  |        |  
|Other assets                                                            |  |                                     | 280,428   |   |                                     |   |                   |  |        |                |  |   | 226,296   |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total assets                                                            |  | $                                   | 3,350,845 |   |                                     |   |                   |  |        |                |  | $ | 3,236,941 |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |  
|LIABILITIES                                                             |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing liabilities                                            |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Deposits                                                                |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing checking accounts                                      |  | $                                   | 158,624   |   |                                     |   | 234               |  | 0.58   | %              |  | $ | 147,575   |   |                   |   | 209    |  | 0.56   | %
|Savings and money market accounts                                       |  |                                     | 701,634   |   |                                     |   | 3,340             |  | 1.89   | %              |  |   | 809,319   |   |                   |   | 6,683  |  | 3.28   | %
|Certificates of deposit                                                 |  |                                     | 1,390,296 |   |                                     |   | 12,625            |  | 3.60   | %              |  |   | 1,080,568 |   |                   |   | 13,159 |  | 4.84   | %
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total deposits                                                          |  |                                     | 2,250,554 |   |                                     |   | 16,199            |  | 2.86   | %              |  |   | 2,037,462 |   |                   |   | 20,051 |  | 3.92   | %
|Borrowings                                                              |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Short-term borrowings                                                   |  |                                     | 121,378   |   |                                     |   | 1,235             |  | 4.04   | %              |  |   | 176,987   |   |                   |   | 1,829  |  | 4.11   | %
|Long-term debt                                                          |  |                                     | 412,712   |   |                                     |   | 4,760             |  | 4.58   | %              |  |   | 416,974   |   |                   |   | 5,446  |  | 5.19   | %
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-bearing liabilities                                      |  |                                     | 2,784,644 |   |                                     |   | 22,194            |  | 3.16   | %              |  |   | 2,631,423 |   |                   |   | 27,326 |  | 4.13   | %
|Noninterest-bearing liabilities                                         |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Noninterest-bearing checking accounts                                   |  |                                     | 232,547   |   |                                     |   |                   |  |        |                |  |   | 242,158   |   |                   |   |        |  |        |  
|Other liabilities                                                       |  |                                     | 27,555    |   |                                     |   |                   |  |        |                |  |   | 44,451    |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities                                                       |  |                                     | 3,044,746 |   |                                     |   |                   |  |        |                |  |   | 2,918,032 |   |                   |   |        |  |        |  
|Shareholders equity                                                    |  |                                     | 306,099   |   |                                     |   |                   |  |        |                |  |   | 318,909   |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities and shareholders equity                              |  | $                                   | 3,350,845 |   |                                     |   |                   |  |        |                |  | $ | 3,236,941 |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|                                                                        |  |                                     |           |   |                                     |  
|Fully tax-equivalent net interest income                                |  |                                     |           |   |                                     |   | 21,712            |  |        |                |  |   |           |   |                   |   | 21,931 |  |        |  
|Interest rate spread                                                    |  |                                     |           |   |                                     |   |                   |  | 2.53   | %              |  |   |           |   |                   |   |        |  | 2.42   | %
|Net interest margin                                                     |  |                                     |           |   |                                     |   |                   |  | 2.81   | %              |  |   |           |   |                   |   |        |  | 2.92   | %
|Average interest-earning assets to average interest-bearing liabilities |  |                                     |           |   |                                     |   |                   |  | 110.03 | %              |  |   |           |   |                   |   |        |  | 113.61 | %
|Tax-equivalent adjustment                                               |  |                                     |           |   |                                     |   | 409               |  |        |                |  |   |           |   |                   |   | 373    |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Net interest income                                                     |  |                                     |           |   |                                     | $ | 21,303            |  |        |                |  |   |           |   |                   | $ | 21,558 |  |        |  
|                                                                        |  |                                     |           |   |                                     |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  



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Average Balances, Interest Rates and Yields

(Dollars in thousands)



|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|----------------------------------------------------------------------- |  | --------------------------------- | --------- | - | --------------------------------- | - | ----------------- |  | ------ | -------------- |  | - | --------- | - | ----------------- | - | ------ |  | ------ | -
|                                                                        |  | Six months endedDecember 31, 2008 |           |   | Six months endedDecember 31, 2007 |  
|                                                                        |  | AverageBalance                    |           |   | Interest                          |   | AverageYield/cost |  |        | AverageBalance |  |   | Interest  |   | AverageYield/cost |  
|ASSETS                                                                  |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-earning assets                                                 |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Loans and loans held for sale                                           |  | $                                 | 2,680,459 |   |                                   | $ | 80,168            |  | 5.93   | %              |  | $ | 2,653,682 |   |                   | $ | 89,342 |  | 6.70   | %
|Securities and interest-bearing deposits                                |  |                                   | 323,846   |   |                                   |   | 7,681             |  | 4.74   | %              |  |   | 281,262   |   |                   |   | 7,666  |  | 5.42   | %
|Federal Home Loan Bank stock                                            |  |                                   | 35,994    |   |                                   |   | 920               |  | 5.07   | %              |  |   | 33,509    |   |                   |   | 1,129  |  | 6.70   | %
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-earning assets                                           |  |                                   | 3,040,299 |   |                                   |   | 88,769            |  | 5.79   | %              |  |   | 2,968,453 |   |                   |   | 98,137 |  | 6.58   | %
|Noninterest-earning assets                                              |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Cash and due from banks                                                 |  |                                   | 42,399    |   |                                   |   |                   |  |        |                |  |   | 49,241    |   |                   |   |        |  |        |  
|Allowance for loan losses                                               |  |                                   | (33,444   | ) |                                   |   |                   |  |        |                |  |   | (26,696   | ) |                   |   |        |  |        |  
|Other assets                                                            |  |                                   | 280,667   |   |                                   |   |                   |  |        |                |  |   | 220,464   |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total assets                                                            |  | $                                 | 3,329,921 |   |                                   |   |                   |  |        |                |  | $ | 3,211,462 |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |  
|LIABILITIES                                                             |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing liabilities                                            |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Deposits                                                                |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing checking accounts                                      |  | $                                 | 159,375   |   |                                   |   | 458               |  | 0.57   | %              |  | $ | 148,681   |   |                   |   | 393    |  | 0.53   | %
|Savings and money market accounts                                       |  |                                   | 740,958   |   |                                   |   | 7,245             |  | 1.94   | %              |  |   | 799,434   |   |                   |   | 13,062 |  | 3.25   | %
|Certificates of deposit                                                 |  |                                   | 1,305,874 |   |                                   |   | 23,716            |  | 3.60   | %              |  |   | 1,065,811 |   |                   |   | 26,095 |  | 4.87   | %
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total deposits                                                          |  |                                   | 2,206,207 |   |                                   |   | 31,419            |  | 2.83   | %              |  |   | 2,013,926 |   |                   |   | 39,550 |  | 3.91   | %
|Borrowings                                                              |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Short-term borrowings                                                   |  |                                   | 135,639   |   |                                   |   | 2,701             |  | 3.96   | %              |  |   | 186,167   |   |                   |   | 4,238  |  | 4.53   | %
|Long-term debt                                                          |  |                                   | 416,726   |   |                                   |   | 9,579             |  | 4.57   | %              |  |   | 409,072   |   |                   |   | 10,673 |  | 5.19   | %
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-bearing liabilities                                      |  |                                   | 2,758,572 |   |                                   |   | 43,699            |  | 3.14   | %              |  |   | 2,609,165 |   |                   |   | 54,461 |  | 4.15   | %
|Noninterest-bearing liabilities                                         |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Noninterest-bearing checking accounts                                   |  |                                   | 232,462   |   |                                   |   |                   |  |        |                |  |   | 238,799   |   |                   |   |        |  |        |  
|Other liabilities                                                       |  |                                   | 28,078    |   |                                   |   |                   |  |        |                |  |   | 42,857    |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities                                                       |  |                                   | 3,019,112 |   |                                   |   |                   |  |        |                |  |   | 2,890,821 |   |                   |   |        |  |        |  
|Shareholders equity                                                    |  |                                   | 310,809   |   |                                   |   |                   |  |        |                |  |   | 320,641   |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities and shareholders equity                              |  | $                                 | 3,329,921 |   |                                   |   |                   |  |        |                |  | $ | 3,211,462 |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|                                                                        |  |                                   |           |   |                                   |  
|Fully tax-equivalent net interest income                                |  |                                   |           |   |                                   |   | 45,070            |  |        |                |  |   |           |   |                   |   | 43,676 |  |        |  
|Interest rate spread                                                    |  |                                   |           |   |                                   |   |                   |  | 2.65   | %              |  |   |           |   |                   |   |        |  | 2.43   | %
|Net interest margin                                                     |  |                                   |           |   |                                   |   |                   |  | 2.94   | %              |  |   |           |   |                   |   |        |  | 2.93   | %
|Average interest-earning assets to average interest-bearing liabilities |  |                                   |           |   |                                   |   |                   |  | 110.21 | %              |  |   |           |   |                   |   |        |  | 113.77 | %
|Tax-equivalent adjustment                                               |  |                                   |           |   |                                   |   | 812               |  |        |                |  |   |           |   |                   |   | 746    |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Net interest income                                                     |  |                                   |           |   |                                   | $ | 44,258            |  |        |                |  |   |           |   |                   | $ | 42,930 |  |        |  
|                                                                        |  |                                   |           |   |                                   |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  



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Net interest income for the quarter ended December 31, 2008, totaled $21.3 million, a decrease of $0.3 million or
1.2% from $21.6 million for the quarter ended December 31, 2007. The decrease in net interest income resulted from a decrease of 11 basis points in the net interest margin to 2.81%, down from 2.92% in the prior year quarter, partially offset by
an increase of $74.5 million or 2.5% in average interest-earning assets compared with the prior year quarter. The average yield on interest-earning assets was 5.69% for the quarter ended December 31, 2008, compared with 6.55% in the same
quarter in the prior year.

Net interest income for the six months ended December 31, 2008, totaled $44.3 million, an increase of $1.3 million or 3.1%
from $42.9 million for the six months ended December 31, 2007. The increase in net interest income resulted from an increase of one basis point in the net interest margin to 2.94%, up from 2.93% in the prior year period and an increase of $71.8
million or 2.4% in average interest-earning assets compared with the prior year period. The average yield on interest-earning assets was 5.79% for the six months ended December 31, 2008, compared with 6.58% in the same period in the prior year.

The overriding factor in the net interest margin arena has been the Federal Reserves response to the national credit crisis  a reduction of
the targeted federal funds rate to zero to 25 basis points. With 88% of our interest-earning assets in loans and 15% of those at variable rates, the yield on interest earning assets declined 86 basis points and 79 basis points for the quarter and
six months ended December 31, 2008, respectively, versus the same periods in the prior year. Growth in interest-earning assets, however, contributed positively to the margin, increasing $74.5 million or 2.5% for the quarter, and $71.8 million
or 2.4% for the six months comparison. We have responded internally to the liquidity crisis by shifting funds into interest-bearing deposits in other banks, the majority of which were moved into accounts at the Federal Reserve Bank and Federal Home
Loan Bank, thus minimizing our reliance on the credit markets. Balances in these accounts increased $68.5 million for the current quarter and $70.3 million for the six month period ended December 31, 2008. With earnings rates well below 50
basis points on these balances, net interest margin was negatively impacted by this flight to safety.

The average rate paid on interest-bearing
liabilities was 3.16% for the quarter ended December 31, 2008 compared to 4.13% for the prior year quarter, a decrease of 97 basis points. The average rate paid on interest-bearing liabilities was 3.14% for the six months ended
December 31, 2008 compared to 4.15% for the same period in the prior year, a decrease of 101 basis points.

The Feds rate reductions also had an
impact on the liability side of the balance sheet. Deposits, which comprise 80% of our interest-bearing liabilities, had cost reductions of 106 basis points and 108 basis points for the current quarter and six month period ended December 31,
2008 compared to the same periods in the prior year. However, the growth in deposit balances of $213 million or 10.5% and $192 million or 9.5% for the respective periods had an offsetting impact to the rate declines. The mix within deposits shifted
to the higher paying certificates of deposits, as customers were unsatisfied with savings and money market rates. As a result of liquidity issues, higher-than-market rates were offered by other financial institutions across the Companys
footprint, thereby keeping our certificate rates somewhat higher. This, in combination with the shift into certificates of deposit, had a negative impact on the net interest margin.

Net interest margin was 2.94% for the six months ended December 31, 2008 and 2.81% for the quarter then ended. We expect with more rational pricing of retail deposits and eventual better deployment of liquid
funds on the asset side, net interest margin will initially level off and then improve over the next few quarters assuming a stable rate scenario over that same period.

Provision for Loan Losses. The provision for loan losses represents the charge to income necessary to adjust the allowance for loan losses to an amount that represents managements assessment of the
estimated probable incurred credit losses inherent in the loan portfolio. Each quarter management performs a review of estimated probable incurred credit losses in the loan portfolio. For a more detailed discussion of managements review of the
allowance for loan losses, see Nonperforming Assets and Allowance for Loan Losses on page 26 of this Form 10-Q. Based on this review, a provision for loan losses of $9.2 million was recorded for the quarter ended December 31, 2008
compared to $5.2 million for the quarter ended December 31, 2007. The provision for loan losses was higher for the current quarter due to increases in net charge-offs, increases in nonperforming and delinquent loans and the current distressed
state of the economy. Nonperforming loans were $67.0 million, or 2.56% of total loans at December 31, 2008 compared with $46.3 million, or 1.75% at December 31, 2007. Net charge-offs were $7.1 million for the quarter ended
December 31, 2008 compared with $5.3 million for the quarter ended December 31, 2007. Total loans were $2.613 billion at December 31, 2008 compared with $2.648 billion at December 31, 2007. The provision for loan losses was $16.6
million for the six months ended December 31, 2008 compared with $7.2 million for the six months ended December 31, 2007. Net charge-offs for the first half of fiscal 2009 were $11.2 million compared with $6.9 million for the same period in the
prior year.



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Noninterest Income. Noninterest income totaled $4.5 million for the quarter ended December 31, 2008, an
increase of $3.8 million or 536.3% from $0.7 million in the same quarter in the prior year. The increase in the current quarter over the prior year quarter was primarily due to a decrease of $5.9 million in impairment of securities and a $1.0
million increase in mortgage banking gains, partially offset by a $2.5 million decrease in the change in fair value of securities and an increase of $0.8 in loan servicing losses. Noninterest income totaled $2.9 million for the six months ended
December 31, 2008, a decrease of $8.0 million or 73.0% from $10.9 million in the same period in the prior year. The decrease in the first six months of fiscal 2009 was primarily due to decreases of $11.8 million in the change in fair value of
securities, $1.5 million in the gain on sale of loan servicing rights, $1.0 in loan servicing income (loss) and $0.7 million other income  nonbank, partially offset by increases of $0.5 million service charges on deposit accounts, $1.0 million
in mortgage banking gains and a decrease of $5.9 million in impairment of securities.

Effective July 1, 2008, the Company elected to account for
Fannie Mae preferred stock and a mutual fund investment at fair value under Statement of Financial Accounting Standard No. 159, The Fair Value Option for Assets and Financial Liabilities (SFAS 159). As a result, the current quarter
decrease and future increases and decreases in the value of these securities will be recorded in earnings. The Company took this action due to the recent volatility in the financial condition of Fannie Mae and volatility in the securities market in
general, the subjective nature of determining other-than-temporary impairment and to more fully reflect both increases and decreases in value through fair value accounting. There was no impact to adopting fair value for these securities as of
July 1, 2008 as the Company had previously recorded them at fair value on June 30, 2008 under the other-than-temporary impairment guidelines. For the quarter ended December 31, 2008, the charge of $2.5 million for the change in the
fair value of securities was due to a decline in the value of a mutual fund investment from $14.2 million at September 30, 2008 to $12.7 million at December 31, 2008 and a decline in the value of Fannie Mae preferred stock that the Company
subsequently sold during the quarter. The $11.9 million decline in the fair value of securities for the first six months of fiscal 2009 was due to a decline in the fair value of a mutual fund investment and a decline in the fair value of Fannie Mae
preferred stock. The decline in the value of the mutual fund investment to $12.7 million at December 31, 2008 from $15.5 million at June 30, 2008 was due to increases in the spreads between the yield of the underlying mortgage-backed
securities and treasury yields. Government actions within the past six months placing Fannie Mae under conservatorship and suspending future dividends caused the decline in value of the Fannie Mae preferred stock.

Securities may be sold to generate changes in liquidity, to impact interest rate risk, to maximize total returns on securities or to minimize losses on securities in
anticipation of changes in interest rates. Gains (losses) on sales of securities for all periods presented had minimal impact on earnings. The Company does not anticipate that gains or losses on the sale of securities will be a major component of
future net income. However, the purchase and sale of securities do play a significant part in managing the overall liquidity, credit and interest rate risk of the Company.

Other income  nonbank subsidiaries decreased $0.4 million to $0.8 million for the quarter ended December 31, 2008 from $1.2 million for the same quarter in the prior year. Other income  nonbank
subsidiaries decreased $0.7 million to $1.7 million for the six months ended December 31, 2008 from $2.4 million for the same period in the prior year. The decreases were primarily due to decreases in investment and real estate commissions
related to the economic slowdown in the Companys market area.

Loan servicing income is composed of the current fees generated from the servicing of
sold loans less the current amortization of mortgage servicing rights (MSRs) and the adjustment for any change in the allowance for impairment of MSRs, which are valued at the lower of cost or market. The valuation of MSRs is a critical accounting
policy and the Company utilizes the services of an independent firm in determining market value. Both the amortization and the valuation of MSRs are sensitive to movements in interest rates. Both amortization and impairment valuation allowances tend
to increase as rates fall and tend to decrease as rates rise. However, the level of amortization is a function of interest rates over the period while the level of impairment valuation allowances is a function of interest rates at the end of the
period. During the past two years, both short-term and long-term interest rates have varied significantly and have not moved in tandem resulting in significant shifts in the shape and slope of the yield curve. The level and variability in interest
rates over that period have resulted in significant variations in loan servicing income, including changes in the level of impairment of MSRs. The table below shows how the change in the impairment of MSRs has affected loan servicing income.



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|                                            |                        |                                |        |      |                              |   |      |   |  |      |        |   |  |   |      |  
|------------------------------------------- | ---------------------- | ------------------------------ | ------ | ---- | ---------------------------- | - | ---- | - |  | ---- | ------ | - |  | - | ---- | -
|                                            |                        | Three months endedDecember 31, |        |      | Six months endedDecember 31, |  
|                                            | 2008                   |                                |        | 2007 |                              |   | 2008 |   |  | 2007 |       
|                                            | (Dollars in thousands) |                               
|Loan servicing income (loss)                |                        |                                |        |      |                              |   |      |   |  |      |        |   |  |   |      |  
|Loan servicing revenue, net of amortization |                        | $                              | 131    |      |                              | $ | 159  |   |  | $    | 379    |   |  | $ | 449  |  
|Change in impairment                        |                        |                                | (1,071 | )    |                              |   | (305 | ) |  |      | (1,363 | ) |  |   | (305 | )
|                                            |                        |                                |        |      |                              |   |      |   |  |      |        |   |  |   |      |  
|Total loan servicing income (loss)          |                        | $                              | (940   | )    |                              | $ | (146 | ) |  | $    | (984   | ) |  | $ | 144  |  
|                                            |                        |                                |        |      |                              |   |      |   |  |      |        |   |  |   |      |  

Increases in impairment charges were the primary determinant for the decline in loan servicing income for the
current quarter and current six month period compared to the same periods in the prior year. The decrease in loan servicing revenue was due to the sale of 50% of the Companys existing loan servicing rights portfolio during the quarter ended
September 30, 2007. At December 31, 2008, there was $1.5 million of allowance for impairment of MSRs.

Net gains from mortgage banking activity
increased $1.0 million for both the quarter and six month period ended December 31, 2008 compared with the same periods in the prior year. The increases in mortgage banking gains were primarily due to higher margins on mortgage banking business
due to the exit or contraction of certain competitors. The volume of loan sales in the current quarter was $243 million, up $1 million from sales of $242 million in the same quarter in the prior year. For the current quarter, 56% of the loans sold
were sold with servicing released compared with 45% for the quarter ended December 31, 2007.

The volume of loan sales in the first six months of
fiscal 2009 was $498 million, down $38 million from sales of $536 million in the same period in the prior year. For the first six months of fiscal 2009, 56% of the loans sold were sold with servicing released compared with 52% for the period ended
December 31, 2007.

Service charges increased $0.4 million, or 19.2% to $2.5 million for the quarter ended December 31, 2008, as compared with
$2.1 million for the prior year quarter. Service charges increased $0.5 million, or 13.4% to $4.6 million for the six months ended December 31, 2008, as compared with $4.1 million for the prior year period. The increases for the current quarter
and six month period were primarily due to the impact of fees generated from a new overdraft program, which began December 1, 2008, and the retail banking offices of HBLS Bank acquired in October 2007 and OC Financial acquired in June 2008.

Noninterest Expense.The goodwill impairment charge of $93.7 million was the primary factor for the increase in noninterest expense for the quarter
and six months ended December 31, 2008. Noninterest expense increased $94.1 million to $116.6 million, compared with $22.5 million for the same quarter in the prior year. Annualized noninterest expense as a percent of average assets was 13.81%
for the quarter ended December 31, 2008 compared to 2.76% for the prior year quarter. Noninterest expense increased $95.1 million to $138.0 million for the six months ended December 31, 2008, compared with $42.9 million for the same period
in the prior year. Annualized noninterest expense as a percent of average assets was 8.22% for the six months ended December 31, 2008 compared to 2.66% for the same period in the prior year. Core noninterest expense was $21.8 million or 2.58%
of average assets for the quarter ended December 31, 2008 compared to $21.7 million or 2.66% of average assets in the prior year quarter. Core noninterest expense was $43.1 million or 2.57% of average assets for the six months ended
December 31, 2008 compared to $42.1 million or 2.61% of average assets in the same period in the prior year.

The increase in noninterest expense was
also partially due to an increase in other expense, which includes FDIC premiums. This increase in FDIC premiums resulted from increases in premium rates and deposit balances, the exhaustion of credits issued in 2006 and adopting a methodology of an
accrued position rather than a prepaid position. Recent economic and credit market conditions have contributed to several failures of FDIC-insured financial institutions, as well as to the FDICs expectations of future failures. As a result, in
October 2008, the FDIC published for comment a proposal (and interim rule) to increase deposit insurance premiums for all FDIC-insured financial institutions, including the Bank, beginning with the Companys second fiscal quarter of 2009. In
addition to an increase in base premium rates, the proposal introduces a number of factors that will adjust the rate paid by a financial institution. We expect FDIC insurance premiums to be in the range of $1.0 million to $1.2 million per quarter
for the remainder of the fiscal year.

Income Taxes. An income tax benefit of $5.9 million was recorded for the quarter ended December 31, 2008
compared with an income tax benefit of $2.2 million for the prior year quarter. The effective tax benefit rate was 5.9% for the quarter ended December 31, 2008 compared with an effective tax benefit rate of 41.5% for the prior year quarter. An



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income tax benefit of $7.1 million was recorded for the six months ended December 31, 2008 compared with income tax expense of $0.7 million for the
prior year period. The effective tax benefit rate was 6.6% for the six months ended December 31, 2008 compared with an effective tax rate of 18.1% for the prior year period. The changes in the effective tax rates were due to varying levels of
pretax income or loss coupled with the goodwill impairment permanent tax adjustment and relatively constant levels of other permanent tax adjustments. In addition, the estimate of the effective tax rate for the current fiscal year changed
significantly between September 30, 2008 and December 31, 2008 from the goodwill impairment charge and the operating loss in the current quarter and their impact on the expected annual results. We anticipate that the effective tax rate
will remain at approximately 6.6% for the remainder of the fiscal year.

Financial Condition

General. Assets totaled $3.284 billion at December 31, 2008, a decrease of $57 million or 1.7% from June 30, 2008. The majority of this decrease was
represented by the goodwill impairment charge in the current quarter, partially offset by an increase in interest-bearing deposits in other banks. The increase in interest-bearing deposits in other banks was funded by an increase in deposits, an
intentional increase in liquidity. Capital ratios decreased as the ratio of equity to total assets decreased at December 31, 2008 to 6.63% compared with 9.55% at June 30, 2008. Tangible equity also decreased to $206 million at
December 31, 2008 compared with $212 million at June 30, 2008.

Securities. Securities totaled $283 million at December 31, 2008,
compared to $284 million at June 30, 2008, a decrease of $1 million or 0.5%. During the first six months of fiscal 2009, the Company received proceeds from sales of securities available for sale of $3 million, proceeds from maturities and calls
of $13 million, principal paydowns of $10 million and recorded a $12 million adjustment for the change in fair value of trading securities, partially offset by purchases of $34 million.

Loans Held for Sale. The Company elected to account for loans held for sale at fair value effective July 1, 2008 under SFAS 159. The adoption of fair value accounting for loans held for sale results in the
consistent use of fair value accounting for commitments to make loans, commitments to sell loans and for loans held for sale. The impact of recording loans held for sale at fair value as of July 1, 2008 was to increase loans held for sale by
$0.3 million, increase beginning retained earnings by $0.2 million and increase the liability for deferred income taxes by $0.1 million. Loans held for sale totaled $97 million at December 31, 2008, compared to $72 million at June 30,
2008, an increase of $25 million or 33.9%.

Loans. The loan portfolio totaled $2.613 billion at December 31, 2008, a decrease of $35 million,
or 1.3% from June 30, 2008. The decrease in the loan portfolio was due to a decrease of $60 million, or 11.9% annualized, in mortgage and construction loans and a decrease of $6 million, or 3.0% annualized, in consumer loans, partially offset
by an increase of $31 million, or 5.0% annualized, in commercial loans. At December 31, 2008, commercial loans accounted for 48.4% of the loan portfolio, which is up from 46.6% at June 30, 2008.



|                          |                        |                         |           |  |                     |        |  |         |           |  |       |  
|------------------------- | ---------------------- | ----------------------- | --------- |  | ------------------- | ------ |  | ------- | --------- |  | ----- | -
|                          |                        | As of December 31, 2008 |           |  | As of June 30, 2008 |       
|                          | Amount                 |                         | Percent   |  |                     | Amount |  | Percent |          
|                          | (Dollars in thousands) |                        
|Mortgage and construction |                        | $                       | 954,660   |  | 36.5                | %      |  | $       | 1,015,010 |  | 38.3  | %
|Commercial                |                        |                         | 1,265,165 |  | 48.4                | %      |  |         | 1,234,130 |  | 46.6  | %
|Consumer                  |                        |                         | 393,630   |  | 15.1                | %      |  |         | 399,637   |  | 15.1  | %
|                          |                        |                         |           |  |                     |        |  |         |           |  |       |  
|                          |                        |                         |           | 
|Total loans               |                        | $                       | 2,613,455 |  | 100.0               | %      |  | $       | 2,648,777 |  | 100.0 | %
|                          |                        |                         |           |  |                     |        |  |         |           |  |       |  

Nonperforming Assets and Allowance for Loan Losses.The following table indicates asset quality data over
the past five quarters.

Asset Quality History

(Dollars in thousands)



|                                                 |  |            |         |   |           |   |        |           |  |   |           |   |  |            |        |   |  |   |        |  
|------------------------------------------------ |  | ---------- | ------- | - | --------- | - | ------ | --------- |  | - | --------- | - |  | ---------- | ------ | - |  | - | ------ | -
|                                                 |  | 12/31/2008 |         |   | 9/30/2008 |   |        | 6/30/2008 |  |   | 3/31/2008 |   |  | 12/31/2007 |       
|Nonperforming loans                              |  | $          | 66,951  |   |           | $ | 62,860 |           |  | $ | 50,722    |   |  | $          | 57,480 |   |  | $ | 46,322 |  
|Real estate owned                                |  |            | 34,801  |   |           |   | 26,573 |           |  |   | 23,695    |   |  |            | 13,212 |   |  |   | 9,592  |  
|                                                 |  |            |         |   |           |   |        |           |  |   |           |   |  |            |        |   |  |   |        |  
|Nonperforming assets                             |  | $          | 101,752 |   |           | $ | 89,433 |           |  | $ | 74,417    |   |  | $          | 70,692 |   |  | $ | 55,914 |  
|                                                 |  |            |         |   |           |   |        |           |  |   |           |   |  |            |        |   |  |   |        |  
|                                                 |  |            |         |   |          
|Delinquent loans                                 |  | $          | 86,920  |   |           | $ | 90,646 |           |  | $ | 84,647    |   |  | $          | 87,715 |   |  | $ | 77,234 |  
|                                                 |  |            |         |   |          
|Allowance for loan losses                        |  | $          | 33,577  |   |           | $ | 31,428 |           |  | $ | 28,216    |   |  | $          | 28,874 |   |  | $ | 26,360 |  
|                                                 |  |            |         |   |          
|Ratios                                           |  |            |         |   |           |   |        |           |  |   |           |   |  |            |        |   |  |   |        |  
|Nonperforming loans to total loans               |  |            | 2.56    | % |           |   | 2.39   | %         |  |   | 1.91      | % |  |            | 2.20   | % |  |   | 1.75   | %
|Nonperforming assets to total assets             |  |            | 3.01    | % |           |   | 2.70   | %         |  |   | 2.23      | % |  |            | 2.15   | % |  |   | 1.69   | %
|Delinquent loans to total loans                  |  |            | 3.33    | % |           |   | 3.45   | %         |  |   | 3.20      | % |  |            | 3.35   | % |  |   | 2.92   | %
|Allowance for loan losses to total loans         |  |            | 1.28    | % |           |   | 1.19   | %         |  |   | 1.07      | % |  |            | 1.10   | % |  |   | 1.00   | %
|Allowance for loan losses to nonperforming loans |  |            | 50.15   | % |           |   | 50.00  | %         |  |   | 55.63     | % |  |            | 50.23  | % |  |   | 56.91  | %



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Management analyzes the adequacy of the allowance for loan losses regularly through reviews of the performance of the
loan portfolio considering economic conditions, changes in interest rates and the effect of such changes on real estate values and changes in the amount and composition of the loan portfolio. The allowance for loan losses is a material estimate that
is particularly susceptible to significant changes in the near term. Such evaluation, which includes a review of all loans for which full collectibility may not be reasonably assured, considers among other matters, historical loan loss experience,
the estimated fair value of the underlying collateral, economic conditions, current interest rates, trends in the borrowers industry and other factors that management believes warrant recognition in providing for an appropriate allowance for
loan losses. Future additions to the allowance for loan losses will be dependent on these factors. Additionally, the Company utilizes an outside party to conduct an independent review of commercial and commercial real estate loans. The Company uses
the results of this review to help determine the effectiveness of the existing policies and procedures, and to provide an independent assessment of the allowance for loan losses allocated to these types of loans. Management believes that the
allowance for loan losses was appropriately stated at December 31, 2008. Based on the variables involved and the fact that management must make judgments about outcomes that are uncertain, the determination of the allowance for loan losses is
considered a critical accounting policy.

Nonperforming assets is comprised of nonperforming loans and real estate owned. The increase in nonperforming
assets has occurred primarily in real estate mortgage loans and real estate owned. Real estate owned was $34.8 million at December 31, 2008, up $11.1 million from $23.7 million at June 30, 2008. The depressed state of the economy and
rising levels of unemployment have contributed to this trend, as well as the decline in the housing market across our geographic footprint that reflected declining home prices and increasing inventories of houses for sale. The Company has been
aggressively pursuing deeds in lieu of foreclosure instead of progressing through the foreclosure process, as this results in possession of the property much earlier and mitigates the deterioration and devaluation that typically occur through
foreclosure. However, with the depressed sales in the housing market, our inventory of properties has been moving much more slowly. Real estate owned is written down to fair value at its initial recording and continually monitored. For a more
detailed discussion of managements review of real estate owned, see Real Estate Ownedbelow.

Net charge-offs were $7.1 million for the
quarter ended December 31, 2008, which represented increases of $3.0 million and $1.8 million from net charge-offs of $4.1 million and $5.3 million for the quarters ending September 30, 2008 and December 31, 2007, respectively. A
major factor in determining the appropriateness of the allowance for loan losses is the type of collateral which secures the loans. Of the total nonperforming loans at December 31, 2008, 98% were secured by real estate. Although this does not
insure against all losses, the real estate provides substantial recovery, even in a distressed-sale and declining-value environment.

In response to the
poor economic conditions which have eroded the performance of the Companys loan portfolio, additional resources have been allocated to the loan workout process. The Companys objective is to work with the borrower to minimize the burden
of the debt service and to minimize the future loss exposure to the Company. From the origination perspective, the Company continues to meet secondary market specifications with regard to loan to value and credit scores. Exposure to building
contractors, a sector hardest hit in the recent housing market downturn, has continued to decline and now comprises 5.5% of total loans at December 31, 2008 compared to 6.9% at June 30, 2008.

Premises and Equipment. Premises and equipment remained level and was $40 million at December 31, 2008 and June 30, 2008. In June 2008, the Company
transferred $14 million of property to premises held for sale representing the amortized cost of land and buildings for 21 retail branch locations. As a result, these assets are no longer being depreciated. The Company is currently pursuing a
contract to sell these assets in a sale-leaseback transaction.



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Goodwill. During the current quarter, the Company incurred a $93.7 million charge for goodwill impairment and
reduced the balance of goodwill to zero at December 31, 2008. The charge was based upon managements evaluation of goodwill under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (as amended).
For a more detailed discussion of managements evaluation of goodwill impairment, see Note 12  Goodwill Impairment and the section entitled Critical Accounting Policies below.

Real Estate Owned.At December 31, 2008, the Company owned 217 repossessed real estate owned properties (REO) with a net book value of $34.8 million.
Single-family residential properties represented $20.0 million of the $34.8 million balance of REO at December 31, 2008. When property is acquired through foreclosure or deed in lieu of foreclosure, it is initially recorded at the fair value of
the related assets at the date of foreclosure, less estimated costs to sell the property. The Company works with borrowers to avoid foreclosure if possible, and if it becomes inevitable that a borrower will not be able to retain ownership of their
property, the Company often seeks a deed in lieu of foreclosure in order to gain control of the property earlier in the recovery process. As a result, real estate owned grew $11.1 million during the period from June 30, 2008 through
December 31, 2008. Over the long term, pursuing deeds in lieu of foreclosure should result in a significant reduction in the holding period for nonperforming assets and reduce economic losses. Any initial loss is recorded as a charge to the
allowance for loan losses before being transferred to REO. Thereafter, if there is a further deterioration in value, a specific valuation allowance is established and charged to operations. The Company reflects costs to carry REO as period costs in
operations when incurred. At December 31, 2008, the Company held $4.5 million in real estate held for investment. The Company considers these properties to be performing assets as they are income producing and therefore are not included in any
nonperforming asset ratios.

Deposits.Deposits increased $172 million or 7.3% during the first six months of fiscal 2009 and totaled $2.541 billion
at December 31, 2008, compared to $2.369 billion at June 30, 2008. The Company experienced an increase of $40 million during the first six months of fiscal year 2009 in deposits generated through its retail branch deposit network and grew
brokered deposits obtained from national brokers by $132 million at rates that were lower than those of local competitors. At December 31, 2008, the Company had $184 million in brokered deposits. The Company considers brokered deposits to be an
element of a diversified funding strategy and an alternative to borrowings. Management regularly compares rates among retail deposits, brokered deposits and other borrowings to determine the most economical source of funding. The Company anticipates
that it will continue to use brokered funds as a funding alternative in the future and as a source of short-term liquidity, but not as the primary source of funding to support growth.

The Company also participates in the CDARS (Certificate of Deposit Account Registry Service) program, a network of financial institutions that exchange funds among members in order to ensure FDIC insurance coverage on
customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution. Included in
certificates of deposit at December 31, 2008 are CDARS balances of $78 million, an increase of $67 million from the $11 million at June 30, 2008. With confidence lacking in most financial markets, customers with funds in excess of the
insured limit of $250 thousand are looking for safer investment alternatives and finding that in the CDARS program.

Short-term Borrowings and Long-term
Debt. During the first six months of fiscal year 2009, long-term debt showed a decrease of $60 million which represented a $60 million reclassification of borrowings from long-term to short-term. During the first six months of fiscal year 2009,
short-term borrowings showed a net decrease of $55 million consisting of a decrease of $115 million in short term borrowings, partially offset by a $60 million reclassification of borrowings from long-term to short-term. At December 31, 2008,
$112 million of the $142 million of short-term borrowings were in the form of overnight borrowings from the Federal Home Loan Bank.

Capital
Resources. Total shareholders equity decreased $101 million, or 31.7% during the six months ended December 31, 2008, and totaled $218 million at December 31, 2008. The primary components of the change in shareholders equity
were the net loss of $100 million and dividends declared on the Companys common stock totaling $3 million, partially offset by the reduction in unrealized losses on securities available for sale of $1 million. Total tangible equity also
decreased to $206 million at December 31, 2008 compared with $212 million at June 30, 2008.



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Office of Thrift Supervision (OTS) regulations require savings institutions to maintain certain minimum levels of
regulatory capital. Additionally, the regulations establish a framework for the classification of savings institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized. The impairment of goodwill in the current quarter did not have any significant impact on capital as all regulatory capital ratios utilize tangible capital as a starting point. A comparison of the Banks actual capital ratios
to ratios required to be well-capitalized under OTS regulations at December 31, 2008 follows:



|                                                              |  |                                  |   |  |                              |   |  |                       |  
|------------------------------------------------------------- |  | -------------------------------- | - |  | ---------------------------- | - |  | --------------------- | -
|                                                              |  | Actual ratioat December 31, 2008 |   |  | Actual ratioat June 30, 2008 |   |  | Well-capitalizedratio |  
|                                                              |  |                                  |  
|Total capital to risk-weighted assets                         |  | 11.08                            | % |  | 11.47                        | % |  | 10.00                 | %
|Tier 1 (core) capital less deductions to risk-weighted assets |  | 10.06                            | % |  | 10.45                        | % |  | 6.00                  | %
|Tier 1 (core) capital to adjusted total assets                |  | 7.44                             | % |  | 7.75                         | % |  | 5.00                  | %

On November 5, 2008, the Companys shareholders approved an amendment to the Companys restated
certificate of incorporation, as amended, to increase the number of authorized shares of common stock from 33,000,000 to 53,000,000. On February 6, 2009, the Company filed its Amended and Restated Certificate of Incorporation with the State of
Delaware. A copy of the Amended and Restated Certificate of Incorporation is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q.

Critical
Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with GAAP and conform to general practices
within the banking industry. Some of these accounting policies require management to make estimates and judgments about matters that are uncertain. Application of assumptions different from those used by management could have a material impact on
the Companys financial position or results of operations. These policies are considered critical accounting policies. These policies include the policies to determine the adequacy of the allowance for loan losses, the valuation of the mortgage
servicing rights and other-than-temporary impairment of securities. These policies, current assumptions and estimates utilized and the related disclosure of this process are determined by management and reviewed periodically with the Audit Committee
of the Board of Directors. Management believes that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time. Details of the policies and
the nature of the estimates follow.

Allowance for Loan Losses. The allowance for loan losses represents managements estimate of probable
incurred credit losses in the loan portfolio at each balance sheet date. Each quarter management analyzes the adequacy of the allowance based on a review of the loans in the portfolio along with an analysis of external factors. Loans are reviewed
individually, or in the case of small homogeneous loans, in the aggregate, by applying a factor based on historical loss experience. An allowance is established for probable credit losses on impaired loans. Nonperforming commercial loans exceeding
policy thresholds are regularly reviewed to identify impairment. A loan is impaired when, based on current information and events, it is probable that the Company will not be able to collect all amounts contractually due. Measuring impairment of a
loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Impairment is measured primarily based upon the fair value of collateral, if the loan is collateral dependent, or alternatively, the present value of
expected future cash flows from the loan discounted at the loans effective rate. When the selected measure is less than the recorded investment in the loans impairment has occurred. This review includes historical data, the ability of the
borrower to meet the terms of the loan, an evaluation of the collateral securing the loan, various collection strategies and other factors relevant to the loan or loans. External factors considered include but are not limited to economic conditions,
current interest rates, trends in the borrowers industry and the market for various types of collateral. In addition, overall information about the loan portfolio or segments of the portfolio is considered, including industry concentrations,
delinquency statistics and workout experience based on factors such as historical loss experience, the nature and volume of the portfolio, loan concentrations, specific problem loans and current economic conditions. As a result, determining the
appropriate level for the allowance for loan losses involves not only evaluating the current financial situation of individual borrowers or groups of borrowers but also current predictions about future cash flows that could change before an actual
loss is determined. Based on the variables involved and the fact that management must make judgments about outcomes that are uncertain, the determination of the allowance for loan losses is considered to be a critical accounting policy.



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One of the tools utilized by management to determine the appropriate level for the allowance for loan losses is the
grading of individual loans according to the severity of the credit issues. An illustration of the sensitivity of this system to changes in conditions or changes in estimates follows. The most serious grading a loan can receive is to be classified
as a loss. A loan classified in the loss grade would be 100% reserved and would be subject to charge-off. The next most serious grade is identified as doubtful. At December 31, 2008, the Company had $19.4 million of loans classified as
doubtful. If all of these loans were to deteriorate and become classified as a loss, the allowance for loan losses would need to increase by approximately $14.1 million.

Mortgage Servicing Assets. Mortgage servicing assets represent the value of retained servicing rights on loans sold. When loans are sold or securitized and the servicing rights are retained, the initial
servicing right is recorded at its fair value. The basis assigned to the mortgage servicing right is amortized in proportion to and over the life of the net revenue anticipated to be received from servicing the loan. Mortgage servicing rights are
valued at the lower of amortized cost or estimated fair value. Fair value is measured by stratifying the portfolio of loan servicing rights into groups of loans with similar risk characteristics. When the amortized cost of a group of loans exceeds
the fair value, an allowance for impairment is recorded to reduce the value of the mortgage servicing rights to fair value. Fair value for each group of loans is determined quarterly by obtaining an appraisal from an independent third party. That
appraisal is based on a modeling process in conjunction with information on recent bulk and flow sales of mortgage servicing rights. Some of the assumptions used in the modeling process are prepayment speeds, delinquency rates, servicing costs,
periods to hold idle cash, returns currently available on idle cash, and a discount rate, which takes into account the current rate of return anticipated by holders of servicing rights. The process of determining the fair value of servicing rights
involves a number of judgments and estimates including the way loans are grouped, the estimation of the various assumptions used by recent buyers and a projection of how those assumptions may change in the future. The most important variable in
valuing servicing rights is the level of interest rates. Long-term interest rates are the primary determinant of prepayment speeds while short-term interest rates determine the return available on idle cash. The process of estimating the value of
loan servicing rights is further complicated by the fact that short-term and long-term interest rates may change in a similar magnitude and direction or may change independent of each other.

Loan prepayment speeds have varied significantly over the past two years and could continue to vary in the future. In addition, any of the other variables mentioned
above could change over time. Therefore, the valuation of mortgage servicing rights is, and is expected to continue to be, a critical accounting policy where the results are based on estimates that are subject to change over time and can have a
significant financial impact on the Company.

Other-than-temporary Impairment of Securities. The Company monitors securities in its portfolio for
other-than-temporary impairment. The Company considers various factors in determining if impairment is other-than-temporary, including but not limited to the length of time and extent the securitys fair value has been less than cost, the
financial condition and external credit ratings of the issuer, the Companys intent and ability to hold the security for a period sufficient to allow for an anticipated recovery in fair value and general market conditions. In determining if
impairment is other-than-temporary in nature, the Company must use certain judgments and assumptions in interpreting market data for the likelihood of recovery in fair value. Securities are written down to fair value when a decline in fair value is
other-than-temporary. Specifically, a review for other-than-temporary impairment was performed as of December 31, 2008 on the $8.7 million portfolio of trust preferred securities, which has declined in value by $4.5 million from a cost basis of
$13.2 million, and a $245 thousand single equity security, which has declined in value by $1.2 million from a cost basis of $1.4 million. The trust preferred portfolio consists of large single issuers with solid credit ratings. Each of the issuers
is a recipient of the U.S. Treasury Departments TARP funding and has not deferred interest on their obligations. As much of their $4.5 million decline over the past several quarters is attributed to the lack of liquidity in the trust preferred
arena and a sector flight from the entire financial institution capital market, there is no undisputable evidence that the decline is other-than-temporary. Upon a return to normalcy in the financial markets within the one-to-two year horizon, this
portfolio is expected to recover. The equity security is a common share position in a small Ohio savings institution. The $1.2 million depreciation in value has occurred over the past seven months and does not appear to be related to any specific
event. The institution is well capitalized under regulatory measures and is not under any formal regulatory enforcement. The institution did agree to be acquired in 2007, but the deal was terminated. Still considering an acquisition as the best
long-term value for their company, we looked to recent price-to-book deals over the past several months as a barometer of values. A price-to-book deal of 120%, well below the average of 178% we noted, would provide us our basis in this holding. Just
as the Companys price declined with the general deterioration of the financial industry, we expect recovery in the value of the institution as government intervention restores investor confidence and the industry in general, in a one to two
year time horizon. Our company has both the intent and ability to hold these securities through their recovery period and thus no other-than-temporary impairment has been recognized in the current quarter or year-to-date period. The Company will
continue to monitor these securities and the events and conditions which have an impact on their values and make impairment decisions as necessary prospectively.



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In the quarter ended December 31, 2007, other-than-temporary impairment of $5.9 million was recorded on the Fannie
Mae preferred stock held at that time. Additional write-downs in the form of other-than-temporary impairment and fair value adjustments (upon the adoption of FAS 159 for this holding) of $9.1 million have been recorded for Fannie Mae preferred stock
since that impairment and prior to its sale in the current quarter.

Goodwill Impairment.In light of the decline in the Companys stock price
in the first six months of this fiscal year, an evaluation for impairment of the $93.7 million recorded goodwill was conducted. Normally an annual process at year-end, the dramatic change in the entire financial sector necessitated an interim
determination. The market price of the Companys common stock has declined from an average closing price of $12.27 during the fourth quarter of fiscal 2008 to average closing price of $5.62 during the second quarter of fiscal 2009, a 54.2%
decrease. The stock price was $3.83 at December 31, 2008. Book value per share at December 31, 2008, prior to the goodwill impairment charge, was $18.23 per share. The substantial decline in stock price below book value led to an
evaluation for potential goodwill impairment.

The first step, used to identify potential impairment, involves determining and comparing the fair value of
the Company, with its carrying value, or shareholders equity. Based upon the December 31, 2008 closing price of $3.83, it was evident that impairment had occurred and therefore a step 2 test was required to determine if there was goodwill
impairment and the amount of goodwill that might be impaired.

Our work on the step 2 analysis is not fully complete. Based on our work to date, we
estimated that an impairment exists of $93.7 million, the entire amount of goodwill, and have recorded that charge within the accompanying financial statements reflecting this estimate. As permitted by SFAS No. 142, we will complete our
analysis and make any required adjustment to this estimate in the third quarter of fiscal 2009.

Liquidity and Cash Flows

Liquidity is the Companys ability to generate adequate cash flows to meet the demands of its customers and provide adequate flexibility for the Company to take
advantage of market opportunities. Cash is used to fund loans, purchase investments, fund the maturity of liabilities, and at times to fund deposit outflows and operating activities. The Companys principal sources of funds are deposits;
amortization, prepayments and sales of loans; maturities, sales and principal receipts from securities; borrowings; the issuance of debt or equity securities and operations. Managing liquidity entails balancing the need for cash or the ability to
borrow against the objectives of maximizing profitability and minimizing interest rate risk. The most liquid types of assets typically carry the lowest yields.

Since the conservatorship of Fannie Mae and Freddie Mac in September 2008 and the series of financial dilemmas at a national level that transpired thereafter, the condition of the financial markets has deteriorated. From a liquidity
standpoint, the governments support of the secondary mortgage market has allowed a primary business function of our organization to continue uninhibitedly. Mortgage originations totaled $556 million for the first half of our year, while loans
sold were $498 million, a 90% turnover rate. With the recent decline in mortgage rates, refinance activity has been robust, and we expect to continue to originate and sell at the 90% or higher level. Should there be any inability to securitize loan
originations resulting from deteriorating market conditions, the Company may opt to curtail originations.

At December 31, 2008, the Company had $146
million of cash and unpledged securities available to meet cash needs. Unpledged securities can be sold or pledged to secure additional borrowings. In addition, the Company had the ability to borrow an additional $12 million from the Federal Home
Loan Bank based on assets pledged under current pledge agreements, $8 million from the Federal Reserve Bank under the discount window program and $10 million on unsecured commercial bank lines of credit. This is compared to $121 million of cash and
unpledged securities, Federal Home Loan Bank availability of $12 million, Federal Reserve Bank availability of $10 million and $35 million of availability in unsecured commercial bank lines of credit at June 30, 2008. Subsequent to
December 31, 2008, the $10 million unsecured commercial bank lines of credit were terminated. Potential cash available as measured by liquid assets and borrowing capacity has decreased $2 million at December 31, 2008 compared to
June 30, 2008. Management receives reports on liquidity on a regular basis and considers the level of liquidity in setting both loan and deposit rates. In addition to the sources of funds listed above, the Company has the ability to raise
additional funds by increasing deposit rates relative to competition in national markets, or to sell loans currently held in the loan portfolio. Deposits raised in national markets include brokered deposits. At December 31, 2008, the Company
had $184 million of brokered deposits. Brokered deposits are a secondary source of liquidity and can be used as an alternative to local



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deposits when national rates are lower than local deposit rates. Under its current liquidity guidelines of limiting total borrowings to 35% of assets, the
company could raise an additional $500 million through any combination of brokered deposits, overnight borrowings or senior unsecured debt issuances guaranteed under the FDICs Temporary Liquidity Guarantee Program. The FDIC created this
program to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts and certain holding companies, and by providing full, unlimited coverage of noninterest-bearing
deposit transaction accounts. Unlike correspondent banking relationships which have tightened in the current market, brokered deposits have continued to offer funds at competitive rates. Management believes that the current and potential resources
mentioned are adequate to meet liquidity needs in the foreseeable future.

On October 3, 2008, Congress passed the Emergency Economic Stabilization
Act of 2008, which provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. financial markets. One of the provisions included in the Act is the Troubled Asset
Relief Program, more specifically the Capital Purchase Program (CPP), which provides direct equity investment of perpetual preferred stock by the U.S. Department of the Treasury (Treasury) in qualified financial institutions. The program is
voluntary and requires an institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of dividends. The CPP provides for a minimum investment of 1% of
risk-weighted assets, with a maximum investment equal to the lesser of 3% of total risk-weighted assets or $25 billion. The perpetual preferred stock investment will have a dividend rate of 5% per year, until the fifth anniversary of the
Treasurys investment, and a dividend of 9% thereafter. The CPP also requires the Treasury to receive warrants for common stock equal to 15% of the capital invested by the Treasury. Participation in the program is not automatic and subject to
approval by the Treasury. The Company applied for participation in the CPP in the current quarter. On February 3, 2009 Treasury notified the Company it has received preliminary approval to participate in the program with a preferred stock
issuance of $75 million, accompanied by common stock warrants worth $11 million based on the Companys stock price when the preferred stock is issued. Final approval from Treasury is subject to standard closing conditions, including the
execution of definitive agreements. The Company is reviewing the details to determine the extent of participation. To the extent the Company participates in this program, it will improve the Companys capital and liquidity positions.

The Company, as a savings and loan holding company, has more limited sources of liquidity. In addition to its existing liquid assets, it can raise funds
in the securities markets through debt or equity offerings or it can receive dividends from its subsidiaries. First Place Bank is the principal subsidiary with the ability to pay significant dividends. Cash can be used by the holding company to make
acquisitions, pay the quarterly interest payments on its Junior Subordinated Debentures, pay dividends to common shareholders and fund operating expenses. At December 31, 2008, the holding company had cash and unpledged securities of $9 million
available to meet cash needs. Annual debt service on the Junior Subordinated Debentures is approximately $4 million. Banking regulations limit the amount of dividends that can be paid to the holding company without prior approval of the OTS.
Generally, First Place Bank may pay dividends without prior approval as long as the dividend is not more than the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends,
and as long as First Place Bank would remain well capitalized. As of December 31, 2008, First Place Bank could pay approximately $3 million of dividends without OTS approval. Future dividend payments by First Place Bank beyond the $3 million
currently available would be based upon future earnings or the approval of the OTS.

Off-balance Sheet Arrangements

See Note 8 - Commitments, Contingencies and Guaranteesin the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of
this Form 10-Q for a discussion of off-balance sheet arrangements.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

The
Company, like other financial institutions, is subject to market risk. Market risk is the type of risk that occurs when a company suffers economic loss due to changes in the market value of various types of assets or liabilities. As a financial
institution, the Company makes a profit by accepting and managing various risks such as credit risk and interest rate risk. Interest rate risk is the Companys primary market risk. It is the risk that occurs when changes in market interest
rates will result in a reduction in net interest income or net interest margin because interest-earning



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assets and interest-bearing liabilities mature at different intervals and reprice at different times. Asset/liability management is the measurement and
analysis of the Companys exposure to changes in net interest income due to changes in interest rates. The objective of the Companys asset/liability management function is to balance the goal of maximizing net interest income with the
control of risks in the areas of liquidity, safety, capital adequacy and earnings volatility. In general, the Companys customers seek loans with long-term fixed rates and deposit products with shorter maturities, which creates a mismatch of
asset and liability maturities. The Companys primary strategy to counteract this mismatch is to sell the majority of long-term fixed-rate loans within 45 days after they are closed. The Company manages this risk and other aspects of interest
rate risk on a continuing basis through a number of functions including review of monthly financial results, rate setting, cash forecasting and planning, budgeting and an Asset/Liability Committee.

On a quarterly basis, the Asset/Liability Committee reviews the results of an interest rate risk model that forecasts changes in net interest income and net portfolio
value (NPV), based on one or more interest rate scenarios. NPV is the market value of financial assets less the market value of financial liabilities. NPV is performed as of a single point in time and does not include estimates of future business
volumes. The model combines detailed information on existing assets and liabilities with an interest rate forecast, loan prepayment speed assumptions and assumptions about how those assets and liabilities will react to changes in interest rates.
These assumptions are inherently uncertain, and as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated
results due to timing, customer product and term selection, magnitude and frequency of interest rate changes as well as differences in how interest rates change at various points along the yield curve.

The results below indicate how NPV would change based on various changes in interest rates. The projections are as of December 31, 2008 and June 30, 2008, and
are based on an instantaneous change in interest rates and assume that short-term and long-term interest rates change by the same magnitude and in the same direction.



|                            |  |                            |   |  |                        |  
|--------------------------- |  | -------------------------- | - |  | ---------------------- | -
|Basis point change in rates |  | NPV ratioDecember 31, 2008 |   |  | NPV ratioJune 30, 2008 |  
|                            | 
|Up 200                      |  | 10.96                      | % |  | 9.65                   | %
|Up 100                      |  | 10.88                      | % |  | 10.27                  | %
|No change                   |  | 10.26                      | % |  | 10.58                  | %
|Down 100                    |  | 9.40                       | % |  | 10.57                  | %
|Down 200                    |  | 8.86                       | % |  | 10.42                  | %

The change in the NPV ratio is a long-term measure of what might happen to the market value of financial assets
and liabilities over time if interest rates changed instantaneously and the Company did not change existing strategies. The actual results could be better or worse based on changes in interest rate risk strategies. The above results at
December 31, 2008 indicate that the Company would benefit in a rising interest rate environment at December 31, 2008 versus a negative impact of such at June 30, 2008. The Company has experienced an increase in its exposure to falling
interest rates for the same comparable periods. Based on the current Federal Funds rate at zero to 25 basis points, a 100 basis point or more decrease in rates is highly unlikely. The NPV ratio for no change in rates has decreased 32 basis points at
December 31, 2008 compared to June 30, 2008. This model indicates what would be likely to happen given various changes in the level of interest rates but no change in the shape of the yield curve. The Company also has exposure to changes
in the shape of the yield curve. The results of the projections are within parameters established by the Board of Directors.

In addition to the risk of
changes in net interest income, the Company is exposed to interest rate risk related to loans held for sale and loan commitments. This is the risk that occurs when changes in interest rates will reduce gains or result in losses on the sale of
residential mortgage loans that the Company has committed to originate but has not yet contracted to sell. The Company hedges this risk by executing commitments to sell loans or mortgage-backed securities based on the volume of committed loans that
are likely to close. Additionally, MSRs act as a hedge against rising rates, as they become more valuable in a rising rate environment, offsetting the decline in the value of loan commitments or loans held for sale in a rising rate environment.



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|Item 4. | Controls and Procedures
|------- | -----------------------

The Companys management is
responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of December 31, 2008, an evaluation was performed under
the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on that
evaluation, management concluded that disclosure controls and procedures were effective as of December 31, 2008. Additionally, there were no changes in the Companys internal control over financial reporting that occurred during the
quarter ended December 31, 2008 that have materially adversely affected, or are reasonably likely to materially adversely affect, the Companys internal control over financial reporting.

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

From time to time, the Company is involved
either as a plaintiff or defendant in various legal proceedings that arise during the normal course of business. Currently, the Company is not involved in any material legal proceedings, the outcome of which would have a material impact on the
financial condition of the Company.



|Item 1A. | Risk Factors
|-------- | ------------

Continuation of the current economic slowdown or
further deterioration of economic conditions in Ohio, Michigan and Indiana could hurt the Companys business

The Company lends
primarily to consumers and businesses in the three primary states where it has banking and loan production offices, Ohio, Michigan and Indiana. Businesses and consumers are affected by economic, regulatory and political trends which all may impact
the borrowers ability to repay loans. In addition, more than 90% of the Companys loans are secured by real estate and changes in the market for real estate can result in inadequate collateral to secure a loan. Over the past two years,
the Company and its customers in Ohio, Michigan and Indiana have been experiencing an economic slowdown and in many locations a decline in real estate values. This has resulted in increases in nonperforming assets and loan charge-offs. If these
economic trends continue or worsen, additional borrowers could default on their loans resulting in higher levels of loan charge-offs and decreased profitability.

The Companys allowance for loan losses may not be adequate to cover actual losses

The Company maintains an allowance
for loan losses to provide for loan defaults and non-performance. The Companys allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect the
Companys operating results. The Companys allowance for loan losses is based on its historical loss experience, as well as an evaluation of the risks associated with its loans held for investment. The amount of future losses is
susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond the Companys control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part
of their examination process, review the Companys loans and allowance for loan losses. While The Company believes that its allowance for loan losses is adequate to cover current losses, the Company could need to increase its allowance for loan
losses or regulators could require it to increase this allowance. Either of these occurrences could materially and adversely affect the Companys earnings and profitability.

The Company may suffer losses in its loan portfolio despite its underwriting practices

The Company
seeks to mitigate the risks inherent in its loan portfolio by adhering to specific underwriting practices. These practices include analysis of a borrowers prior credit history, financial statements, tax returns and cash flow projections,
valuation of collateral based on reports of independent appraisers and verification of liquid assets. Although the Company believes that its underwriting criteria are appropriate for the various kinds of loans it makes, the Company may incur losses
on loans that meet its underwriting criteria, and these losses may exceed the amounts set aside as reserves in its allowance for loan losses.



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The Companys business is subject to interest rate risk and variations in market interest rates may negatively
affect its financial performance

The Company is unable to predict future market interest rates, which are affected by many factors,
including:



| |  |  | inflation;
| | - |  | ----------



| |  |  | recession;
| | - |  | ----------



| |  |  | changes in employment levels;
| | - |  | -----------------------------



| |  |  | changes in the money supply; and
| | - |  | --------------------------------



| |  |  | domestic and international disorder and instability in domestic and foreign financial markets.
| | - |  | ----------------------------------------------------------------------------------------------

Changes in the interest rate environment may reduce the Companys profits. The Company expects that it will continue to realize income from the
differential or spread between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the
difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. In addition, residential mortgage loan volumes are affected by market interest rates on loans; rising interest rates
generally are associated with a lower volume of loan originations while falling interest rates are usually associated with higher loan originations. Conversely, in rising interest rate environments, loan prepayment rates will decline, and in falling
interest rate environments, loan prepayment rates will increase. In addition, an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations, especially
borrowers with loans that have adjustable rates of interest. Changes in interest rates also significantly impact the valuation of our mortgage servicing rights and loans held for sale. Both of these assets are carried at the lower of cost or market.
As interest rates decline and mortgage loans prepay faster, the current market value of mortgage servicing rights will generally decline in value. Changes in mortgage prepayments, interest rates and other factors can cause the value of this asset to
decrease rapidly over a short period of time. Changes in interest rates, prepayment speeds and other factors may also cause the value of the Companys loans held for sale to change. When interest rates rise, the cost of borrowing increases.
Accordingly, changes in levels of market interest rates could materially and adversely affect the Companys net interest spread, loan volume, asset quality, levels of prepayments, value of mortgage servicing rights, loans held for sale and cash
flows as well as the market value of its securities portfolio and overall profitability.

The Company faces strong competition from other financial
institutions, financial service companies and other organizations offering services similar to those offered by it, which could result in the Company not being able to grow its loan and deposit businesses

The Company conducts its business operations primarily in Northeastern Ohio and Southeastern Michigan. Increased competition within these markets may
result in reduced loan originations and deposits. Ultimately, the Company may not be able to compete successfully against current and future competitors. Many competitors offer the types of loans and banking services that the Company offers. These
competitors include other savings associations, national banks, regional banks and other community banks. The Company also faces competition from many other types of financial institutions, including finance companies, brokerage firms, insurance
companies, credit unions, mortgage banks and other financial intermediaries. In particular, the Companys competitors include national banks and major financial companies whose greater resources may afford them a marketplace advantage by
enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.

Additionally, banks and
other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of larger clients. These institutions,
particularly to the extent they are more diversified than the Company, may be able to offer the same loan products and services that the Company offers at more competitive rates and prices. If the Company is unable to attract and retain banking
clients, it may be unable to continue its loan and deposit growth and its business, financial condition and prospects may be negatively affected.



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The Company relies, in part, on external financing to fund its operations and the unavailability of such funds in the
future could adversely impact its growth strategy and prospects

First Place Bank relies on deposits, advances from the Federal Home Loan
Bank of Cincinnati and other borrowings to fund its operations. The Company also has previously issued junior subordinated debentures to raise additional capital to fund its operations. Although the Company considers such sources of funds adequate
for its current capital needs, the Company may seek additional debt or equity capital in the future to achieve its long-term business objectives. The sale of equity or convertible debt securities in the future may be dilutive to the Company
stockholders, and debt refinancing arrangements may require the Company to pledge some of its assets and enter into covenants that would restrict its ability to incur further indebtedness. Additional financing sources, if sought, might be
unavailable to the Company or, if available, could be on terms unfavorable to it. If additional financing sources are unavailable or are not available on reasonable terms, the Companys growth strategy and future prospects could be adversely
impacted.

The Company may have difficulty managing its growth, which may divert resources and limit its ability to expand its operations
successfully

In past years, the Company has incurred substantial expenses to build its management team and personnel, develop its
delivery systems and establish its infrastructure to support its future growth. The Companys future success will depend on the ability of its officers and key employees to continue to implement and improve its operational, financial and
management controls, reporting systems and procedures and manage a growing number of client relationships. The Company may not be able to implement improvements in its management information and control systems in an efficient or timely manner.
Thus, the Companys growth strategy could place a strain on its administrative and operational infrastructure.

In addition, the
Company intends to grow its deposits and expand its retail banking franchise. Further expansion will require additional capital expenditures and the Company may not be successful in expanding its franchise or in attracting or retaining the personnel
it requires. Furthermore, various factors such as economic conditions, regulatory and legislative considerations and competition may impede or limit the Companys growth. If the Company is unable to expand its business as anticipated, the
Company may be unable to realize any benefit from the investments made to support future growth. Alternatively, if the Company is unable to manage future expansion in its operations, the Company may have to incur additional expenditures beyond
current projections to support such growth.

The Company is subject to extensive regulation that could adversely affect it

The Companys operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and
judicial and administrative decisions imposing requirements and restrictions on part or all of its operations. The Company believes that it is in substantial compliance in all material respects with applicable federal, state and local laws, rules
and regulations. Any change in the laws or regulations applicable to the Company, or in banking regulators supervisory policies or examination procedures, whether by the OTS, the FDIC, the Federal Home Loan Bank System, the United States
Congress or other federal or state regulators could have a material adverse effect on the Companys business, financial condition, results of operations and cash flows.

The Companys ability to pay dividends is subject to regulatory limitations which, to the extent the Company requires such dividends in the future, may affect its ability to service its debt and pay
dividends

The Company is a separate legal entity from its subsidiaries and does not have significant operations of its own. Dividends
from the Company Bank provide a significant source of capital for the Company. The availability of dividends from First Place Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of First Place
Bank and other factors, that the OTS, as First Place Banks primary regulator, could assert that the payment of dividends or other payments by First Place Bank are an unsafe or unsound practice. In the event First Place Bank is unable to pay
dividends to the Company, the Company may not be able to service its debt, pay its obligations as they become due, or pay dividends on its common stock. Consequently, the potential inability to receive dividends from First Place Bank could adversely
affect the Companys financial condition, results of operations and prospects.



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

There
were no treasury stock purchases during the current quarter and the board authorizations to purchase treasury stock have expired.



|Item 3. | Defaults Upon Senior Securities  Not applicable.
|------- | -------------------------------------------------



|Item 4. | Submission of Matters to a Vote of Security Holders  Not applicable.
|------- | ---------------------------------------------------------------------



|Item 5. | Other Information  Not applicable.
|------- | -----------------------------------



|Item 6. | Exhibits
|------- | --------

The following exhibits are filed as part of this Form
10-Q, and this list includes the Exhibit Index:



|              |  |                                                                                  |  |                                                         
|------------- |  | -------------------------------------------------------------------------------- |  | --------------------------------------------------------
|ExhibitNumber |  | Document                                                                         |  | Reference toPrior Filingor Exhibit NumberAttached Herein
|3.1           |  | Amended and Restated Certificate of Incorporation of First Place Financial Corp. |  | 3.1                                                     
|              |  |                                                                                 
|31.1          |  | CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002      |  | 31.1                                                    
|              |  |                                                                                 
|31.2          |  | CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002      |  | 31.2                                                    
|              |  |                                                                                 
|32.1          |  | CEO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      |  | 32.1                                                    
|              |  |                                                                                 
|32.2          |  | CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      |  | 32.2                                                    



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST PLACE FINANCIAL CORP.



|      |  |                  |  |  |  |                                       |  |  |  |                        
|----- |  | ---------------- |  |  |  | ------------------------------------- |  |  |  | -----------------------
|Date: |  | February 9, 2009 |  |  |  | /s/ Steven R. Lewis                   |  |  |  | /s/ David W. Gifford   
|      |  |                  |  |  |  | Steven R. Lewis                       |  |  |  | David W. Gifford       
|      |  |                  |  |  |  | President and Chief Executive Officer |  |  |  | Chief Financial Officer



39