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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended September 30, 2006



| ̈ | 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



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FIRST PLACE FINANCIAL CORP.

(Exact name of registrant as specified in its charter)



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|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|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)



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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, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Securities Exchange Act.



|                         |  |                      |  |                       
|------------------------ |  | -------------------- |  | ----------------------
|Large accelerated filer ̈ |  | Accelerated filer  x |  | Non-accelerated filer ̈

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.

17,461,585 shares of common stock as of
October 31, 2006



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                                             |  |            
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | -----------
|                              |  |                                                                                                                             |  | Page Number
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                                                            
|                              |  |                                                                                                                            
|Item 1.                       |  | Financial Statements                                                                                                        |  |            
|                              |  |                                                                                                                            
|                              |  | Condensed Consolidated Statements of Financial Condition as of September 30, 2006 and June 30, 2006                         |  | 3          
|                              |  |                                                                                                                            
|                              |  | Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2006 and 2005                          |  | 4          
|                              |  |                                                                                                                            
|                              |  | Condensed Consolidated Statements of Changes in Shareholders Equity For the Three Months Ended September 30, 2006 and 2005 |  | 5          
|                              |  |                                                                                                                            
|                              |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2006 and 2005                      |  | 6          
|                              |  |                                                                                                                            
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                        |  | 7-13       
|                              |  |                                                                                                                            
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                       |  | 13-22      
|                              |  |                                                                                                                            
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                  |  | 22-23      
|                              |  |                                                                                                                            
|Item 4.                       |  | Controls and Procedures                                                                                                     |  | 23-24      
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                            
|                              |  |                                                                                                                            
|Item 1.                       |  | Legal Proceedings                                                                                                           |  | 24         
|                              |  |                                                                                                                            
|Item 1A.                      |  | Risk Factors                                                                                                                |  | 24         
|                              |  |                                                                                                                            
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 24         
|                              |  |                                                                                                                            
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                             |  | 24         
|                              |  |                                                                                                                            
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                         |  | 24         
|                              |  |                                                                                                                            
|Item 5.                       |  | Other Information                                                                                                           |  | 24         
|                              |  |                                                                                                                            
|Item 6.                       |  | Exhibits                                                                                                                    |  | 24         
|                              | 
|SIGNATURES                    |  | 25                                                                                                                         



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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)



|                                                                                                  |  |                    |           |   |               |   |           |  
|------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ------------- | - | --------- | -
|                                                                                                  |  | September 30, 2006 |           |   | June 30, 2006 |  
|                                                                                                  |  | (Unaudited)        |           |   |               |  
|ASSETS                                                                                            |  |                    |           |   |               |   |           |  
|Cash and due from banks                                                                           |  | $                  | 73,736    |   |               | $ | 72,906    |  
|Interest-bearing deposits in other banks                                                          |  |                    | 79        |   |               |   | 4,605     |  
|Securities available for sale                                                                     |  |                    | 271,506   |   |               |   | 302,994   |  
|Loans held for sale                                                                               |  |                    | 76,541    |   |               |   | 154,799   |  
|Loans:                                                                                            |  |                    |           |   |               |   |           |  
|Mortgage and construction                                                                         |  |                    | 1,112,827 |   |               |   | 1,123,911 |  
|Commercial                                                                                        |  |                    | 887,183   |   |               |   | 856,129   |  
|Consumer                                                                                          |  |                    | 360,157   |   |               |   | 370,744   |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|Total loans                                                                                       |  |                    | 2,360,167 |   |               |   | 2,350,784 |  
|Less allowance for loan losses                                                                    |  |                    | 22,819    |   |               |   | 22,319    |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|Loans, net                                                                                        |  |                    | 2,337,348 |   |               |   | 2,328,465 |  
|Federal Home Loan Bank stock                                                                      |  |                    | 32,946    |   |               |   | 32,616    |  
|Premises and equipment, net                                                                       |  |                    | 37,498    |   |               |   | 35,485    |  
|Goodwill                                                                                          |  |                    | 88,046    |   |               |   | 88,009    |  
|Core deposit and other intangibles                                                                |  |                    | 16,323    |   |               |   | 17,405    |  
|Other assets                                                                                      |  |                    | 78,209    |   |               |   | 75,926    |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|Total assets                                                                                      |  | $                  | 3,012,232 |   |               | $ | 3,113,210 |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|LIABILITIES                                                                                       |  |                    |           |   |               |   |           |  
|Deposits:                                                                                         |  |                    |           |   |               |   |           |  
|Noninterest-bearing checking                                                                      |  | $                  | 214,067   |   |               | $ | 224,738   |  
|Interest-bearing checking                                                                         |  |                    | 136,063   |   |               |   | 140,752   |  
|Savings                                                                                           |  |                    | 274,547   |   |               |   | 242,178   |  
|Money market                                                                                      |  |                    | 465,898   |   |               |   | 511,482   |  
|Certificates of deposit                                                                           |  |                    | 986,350   |   |               |   | 941,597   |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|Total deposits                                                                                    |  |                    | 2,076,925 |   |               |   | 2,060,747 |  
|Short-term borrowings                                                                             |  |                    | 269,858   |   |               |   | 384,187   |  
|Long-term borrowings                                                                              |  |                    | 310,165   |   |               |   | 325,589   |  
|Other liabilities                                                                                 |  |                    | 36,228    |   |               |   | 31,113    |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|Total liabilities                                                                                 |  |                    | 2,693,176 |   |               |   | 2,801,636 |  
|                                                                                                  |  |                   
|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                                                                        |  |                    | 214,509   |   |               |   | 214,243   |  
|Retained earnings                                                                                 |  |                    | 121,302   |   |               |   | 116,757   |  
|Unearned employee stock ownership plan shares                                                     |  |                    | (4,303    | ) |               |   | (4,452    | )
|Treasury stock, at cost: 658,438 shares at September 30, 2006 and 681,228 shares at June 30, 2006 |  |                    | (9,766    | ) |               |   | (10,096   | )
|Accumulated other comprehensive loss, net                                                         |  |                    | (2,867    | ) |               |   | (5,059    | )
|                                                                                                  |  |                    |           |   |               |   |           |  
|Total shareholders equity                                                                        |  |                    | 319,056   |   |               |   | 311,574   |  
|                                                                                                  |  |                    |           |   |               |   |           |  
|Total liabilities and shareholders equity                                                        |  | $                  | 3,012,232 |   |               | $ | 3,113,210 |  
|                                                                                                  |  |                    |           |   |               |   |           |  

See accompanying notes to condensed consolidated financial statements.



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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(Dollars in thousands, except per share data)



|                                                    |  |                                  |        |      |   |       
|--------------------------------------------------- |  | -------------------------------- | ------ | ---- | - | ------
|                                                    |  | Three months ended September 30,
|                                                    |  | 2006                             |        | 2005
|INTEREST INCOME                                     |  |                                  |        |      |   |       
|Loans, including fees                               |  | $                                | 42,823 |      | $ | 31,450
|Securities and interest-bearing deposits            |  |                                  |        |      |   |       
|Taxable                                             |  |                                  | 3,243  |      |   | 2,936 
|Tax-exempt                                          |  |                                  | 688    |      |   | 405   
|                                                    |  |                                  |        |      |   |       
|TOTAL INTEREST INCOME                               |  |                                  | 46,754 |      |   | 34,791
|                                                    |  |                                 
|INTEREST EXPENSE                                    |  |                                  |        |      |   |       
|Deposits                                            |  |                                  | 16,210 |      |   | 9,818 
|Short-term borrowings                               |  |                                  | 4,487  |      |   | 2,325 
|Long-term borrowings                                |  |                                  | 3,325  |      |   | 3,217 
|                                                    |  |                                  |        |      |   |       
|TOTAL INTEREST EXPENSE                              |  |                                  | 24,022 |      |   | 15,360
|                                                    |  |                                  |        |      |   |       
|NET INTEREST INCOME                                 |  |                                  | 22,732 |      |   | 19,431
|PROVISION FOR LOAN LOSSES                           |  |                                  | 1,380  |      |   | 1,355 
|                                                    |  |                                  |        |      |   |       
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                  | 21,352 |      |   | 18,076
|NONINTEREST INCOME                                  |  |                                  |        |      |   |       
|                                                    |  |                                 
|Service charges and fees on deposit accounts        |  |                                  | 1,547  |      |   | 1,368 
|Net gains on sale of securities                     |  |                                  | 82     |      |   |      
|Net gains on sale of loans                          |  |                                  | 2,107  |      |   | 1,883 
|Loan servicing income                               |  |                                  | 223    |      |   | 166   
|Other income - bank                                 |  |                                  | 1,895  |      |   | 1,769 
|Other income - nonbank subsidiaries                 |  |                                  | 2,054  |      |   | 1,716 
|                                                    |  |                                  |        |      |   |       
|TOTAL NONINTEREST INCOME                            |  |                                  | 7,908  |      |   | 6,902 
|                                                    |  |                                 
|NONINTEREST EXPENSE                                 |  |                                  |        |      |   |       
|Salaries and employee benefits                      |  |                                  | 9,749  |      |   | 7,796 
|Occupancy and equipment                             |  |                                  | 2,881  |      |   | 2,418 
|Professional fees                                   |  |                                  | 672    |      |   | 818   
|Loan expenses                                       |  |                                  | 783    |      |   | 655   
|Marketing                                           |  |                                  | 630    |      |   | 624   
|Franchise taxes                                     |  |                                  | 160    |      |   | 91    
|Amortization of intangible assets                   |  |                                  | 1,082  |      |   | 944   
|Other                                               |  |                                  | 2,976  |      |   | 2,720 
|                                                    |  |                                  |        |      |   |       
|TOTAL NONINTEREST EXPENSE                           |  |                                  | 18,933 |      |   | 16,066
|                                                    |  |                                  |        |      |   |       
|INCOME BEFORE INCOME TAXES                          |  |                                  | 10,327 |      |   | 8,912 
|Provision for income tax                            |  |                                  | 3,325  |      |   | 2,745 
|                                                    |  |                                  |        |      |   |       
|NET INCOME                                          |  | $                                | 7,002  |      | $ | 6,167 
|                                                    |  |                                  |        |      |   |       
|Basic earnings per share                            |  | $                                | 0.41   |      | $ | 0.43  
|                                                    |  |                                  |        |      |   |       
|Diluted earnings per share                          |  | $                                | 0.41   |      | $ | 0.42  
|                                                    |  |                                  |        |      |   |       

See accompanying notes to condensed consolidated financial statements.



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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(Unaudited)

(Dollars in thousands, except per share data)



|                                                                                                           |  |                                  |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                           |  | Three months ended September 30, |        
|                                                                                                           |  | 2006                             |         |   | 2005 |  
|Balance at beginning of period                                                                             |  | $                                | 311,574 |   |      | $ | 236,656 |  
|Comprehensive income:                                                                                      |  |                                  |         |   |      |   |         |  
|Net income                                                                                                 |  |                                  | 7,002   |   |      |   | 6,167   |  
|Loss on termination of interest rate swaps reclassified into income, net of tax                            |  |                                  | 156     |   |      |   | 335     |  
|Change in unrealized gain (loss) on securities available for sale, net of reclassification and tax effects |  |                                  | 2,036   |   |      |   | (760    | )
|                                                                                                           |  |                                  |         |   |      |   |         |  
|Total comprehensive income                                                                                 |  |                                  | 9,194   |   |      |   | 5,742   |  
|Cash dividends declared and paid                                                                           |  |                                  | (2,457  | ) |      |   | (2,038  | )
|Commitment to release employee stock ownership plan shares                                                 |  |                                  | 344     |   |      |   | 324     |  
|Commitment to release recognition and retention plan shares                                                |  |                                  | 17      |   |      |   | 12      |  
|Stock options exercised                                                                                    |  |                                  | 287     |   |      |   | 628     |  
|Tax benefit related to exercise of stock options                                                           |  |                                  | 42      |   |      |   | 119     |  
|Issuance of stock option recognized                                                                        |  |                                  | 55      |   |      |   | 26      |  
|                                                                                                           |  |                                  |         |   |      |   |         |  
|Balance at end of period                                                                                   |  | $                                | 319,056 |   |      | $ | 241,469 |  
|                                                                                                           |  |                                  |         |   |      |   |         |  
|Cash dividends declared and paid per share                                                                 |  | $                                | 0.14    |   |      | $ | 0.14    |  
|                                                                                                           |  |                                  |         |   |      |   |         |  

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)

(Dollars in thousands)



|                                                           |  |                                 |          |   |      |   |         |  
|---------------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | ------- | -
|                                                           |  | Three months endedSeptember 30, |         
|                                                           |  | 2006                            |          |   | 2005 |  
|Cash flows from operating activities:                      |  |                                 |          |   |      |   |         |  
|Net cash from operating activities                         |  | $                               | 88,937   |   |      | $ | 4,315   |  
|                                                           |  |                                
|Cash flows from investing activities:                      |  |                                 |          |   |      |   |         |  
|Securities available for sale                              |  |                                 |          |   |      |   |         |  
|Proceeds from sales                                        |  |                                 | 17,146   |   |      |   |        |  
|Proceeds from maturities, calls and principal paydowns     |  |                                 | 17,283   |   |      |   | 24,191  |  
|Purchases                                                  |  |                                 | (1,707   | ) |      |   | (23,828 | )
|Net change in interest-bearing deposits in other banks     |  |                                 | 4,526    |   |      |   |        |  
|Net change in loans                                        |  |                                 | (7,994   | ) |      |   | (43,074 | )
|Proceeds from sale of loans                                |  |                                 | 254      |   |      |   |        |  
|Premises and equipment expenditures, net                   |  |                                 | (2,788   | ) |      |   | (1,756  | )
|Investment in nonbank affiliates                           |  |                                 | (37      | ) |      |   | (96     | )
|                                                           |  |                                 |          |   |      |   |         |  
|Net cash from investing activities                         |  |                                 | 26,683   |   |      |   | (44,563 | )
|                                                           |  |                                
|Cash flows from financing activities:                      |  |                                 |          |   |      |   |         |  
|Net change in deposits                                     |  |                                 | 16,178   |   |      |   | 45,566  |  
|Net change in short-term borrowings                        |  |                                 | (114,329 | ) |      |   | (4,741  | )
|Repayment of long-term borrowings                          |  |                                 | (29,543  | ) |      |   | (18,004 | )
|Proceeds from long-term borrowings                         |  |                                 | 15,032   |   |      |   |        |  
|Net proceeds from issuance of subordinated debt securities |  |                                 |         |   |      |   | 30,928  |  
|Cash dividends paid                                        |  |                                 | (2,457   | ) |      |   | (2,038  | )
|Proceeds from stock options exercised                      |  |                                 | 287      |   |      |   | 628     |  
|Tax benefit from stock options exercised                   |  |                                 | 42       |   |      |   | 119     |  
|                                                           |  |                                 |          |   |      |   |         |  
|Net cash from financing activities                         |  |                                 | (114,790 | ) |      |   | 52,458  |  
|                                                           |  |                                 |          |   |      |   |         |  
|Net change in cash and cash equivalents                    |  |                                 | 830      |   |      |   | 12,210  |  
|                                                           |  |                                
|Cash and cash equivalents at beginning of period           |  |                                 | 72,906   |   |      |   | 52,549  |  
|                                                           |  |                                 |          |   |      |   |         |  
|Cash and cash equivalents at end of period                 |  | $                               | 73,736   |   |      | $ | 64,759  |  
|                                                           |  |                                 |          |   |      |   |         |  
|Supplemental cash flow information:                        |  |                                 |          |   |      |   |         |  
|Cash payments of interest expense                          |  | $                               | 23,904   |   |      | $ | 14,278  |  
|Cash payments of income taxes                              |  | $                               |         |   |      | $ | 500     |  
|Supplemental non-cash disclosures:                         |  |                                 |          |   |      |   |         |  
|Loans securitized                                          |  | $                               | 3,532    |   |      | $ | 44,282  |  
|Transfer of loans from held-for-sale to portfolio          |  | $                               | 3,729    |   |      | $ | 7,018   |  
|Transfer of loans to other real estate                     |  | $                               | 1,191    |   |      | $ | 445     |  
|Transfer from long-term to short-term borrowings           |  | $                               | 7,500    |   |      | $ | 8,250   |  

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, except per share data.)

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 (US GAAP) 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. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in First Place Financial Corp.s Annual Report on Form 10-K for the year ended June 30, 2006.
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 position and results
of operations for the periods presented. The results of operations for the interim periods disclosed herein 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 First Place Financial Corp. (the Company)
and its wholly owned subsidiaries, First Place Bank, The Northern Savings & Loan Company (Northern) and First Place Holdings, Inc. (Holdings). Northern and First Place Bank merged into a single federal savings association, effective July 25,
2006, with the resulting institution having the name First Place Bank. Subsidiaries of Holdings 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
connection with the consolidation.

Use of Estimates.The preparation of the financial statements in conformity with US GAAP 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, useful life and impairment of premises and equipment, the carrying value of goodwill and the amortization and valuation of mortgage servicing assets. 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, except per share data.)

In May 2005, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 154, Accounting Changes and Error Corrections. This statement changes the requirements for the accounting for and reporting of a change in accounting principle. It is effective for fiscal years beginning after
December 15, 2005 and applies to the Company effective July 1, 2006. The adoption of this pronouncement did not have a material impact on the Companys consolidated financial statements.

In February, 2006, the FASB issued Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments. This statement
clarifies the treatment of derivatives that are freestanding or embedded as part of a beneficial interest in a securitized financial asset. This statement will be effective July 1, 2007. The adoption of this pronouncement is not expected to
have a material impact on the Companys consolidated financial statements.



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In March, 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of
Financial Assets. This statement allows the entity to choose the amortization method or the fair value method to account for each separately recognized servicing asset or liability. This statement will be effective July 1, 2007. If the company
adopts this pronouncement and elects to account for all servicing assets and liabilities according to the amortization method, it would not change the current treatment of accounting for servicing rights and therefore would have no impact on the
consolidated financial statements. At the present time, the Company has not determined if it would apply the fair value method of accounting and what impact the fair value method of accounting would have on the Companys consolidated financial
statements.

In June 2006, the FASB issued Interpretation No.48, Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement
No. 106 (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements in accordance with SFAS 109, Accounting for Income Taxes. FIN 48 prescribes a recognition and measurement
threshold for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 will be effective
July 1, 2007. The Company has not completed its evaluation of the impact of the adoption of FIN 48.

In July 2006, the FASB issued FASB Staff
Position (FSP) 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction. This FSP amends SFAS 13, Accounting for Leases, to require a lessor in a leveraged
lease transaction to recalculate the leveraged lease for the effects of a change or projected change in the timing of cash flows relating to income taxes that are generated by the leveraged lease. The guidance in FSP 13-2 is required to be applied
to fiscal years beginning after December 15, 2006. The adoption of this FSP is not expected to have a material impact on the Companys consolidated financial statements.

In September, 2006, the FASB issued Statement of Financial Accounting Standards 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. It is effective for fiscal years beginning after November 15, 2007 and will apply to the Company effective July 1, 2008 unless the Company elects early
adoption in which case it would be effective July 1, 2007. At the present time, the Company has not determined if it will elect early adoption, if it would apply the provisions of the statement and what impact it would have on the
Companys consolidated financial statements.

In September, 2006, the FASB issued Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  An Amendment of FASB Statements No. 87, 88, 106, and 123(R). This statement requires an employer to recognize the overfunded or underfunded status of a
defined benefit postretirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income
of a business entity or changes in unrestricted net assets of a not-for-profit organization. It is effective as of the end of the fiscal year ending after December 15, 2006 and will apply to the Company effective July 1, 2007. The adoption
of this pronouncement will not have a material impact on the Companys consolidated financial statements.

3. Business Combinations

(Dollars in thousands, except per share data.)



On June 27, 2006, the Company completed the acquisition of Northern. On June 28, 2006, Northern converted from an Ohio chartered stock savings association to a federally
chartered stock savings association. At the time of the merger, Northern had total assets of approximately $360,000. On July 25, 2006, the Companys two federally chartered savings association subsidiaries, Northern and First Place Bank merged
into a single federal savings association with the name First Place Bank. The banking offices that were part of Northern will continue to operate as the Northern Savings Division of First Place Bank until the first quarter of calendar 2007 when the
data processing systems and signage will be converted to the name First Place Bank.

4. Mortgage Servicing Assets

(Dollars in thousands, except per share data.)

Following is a summary of mortgage servicing assets:



|                                           |  |                                 |        |   |      |   |        |  
|------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | ------ | -
|                                           |  | Three months endedSeptember 30, |       
|                                           |  | 2006                            |        |   | 2005 |  
|Servicing rights:                          |  |                                 |        |   |      |   |        |  
|Beginning of period                        |  | $                               | 16,167 |   |      | $ | 21,013 |  
|Additions                                  |  |                                 | 3,626  |   |      |   | 3,604  |  
|(Increase) decrease in valuation allowance |  |                                 | 20     |   |      |   | 247    |  
|Amortized to expense                       |  |                                 | (931   | ) |      |   | (1,614 | )
|                                           |  |                                 |        |   |      |   |        |  
|End of period                              |  | $                               | 18,882 |   |      | $ | 23,250 |  
|                                           |  |                                 |        |   |      |   |        |  



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##### Table of Contents

The fair value of mortgage servicing assets was $20,317 at September 30, 2006 and $19,986 at June 30, 2006.
Noninterest-bearing deposits included $13,489 and $16,528 of custodial account deposits related to loans serviced for others as of September 30, 2006 and June 30, 2006, respectively.

5. Short-term and Long-term Borrowings

(Dollars in thousands,
except per share data.)



|                                                                        |  |                   |         |              |   |        
|----------------------------------------------------------------------- |  | ----------------- | ------- | ------------ | - | -------
|                                                                        |  | September 30,2006 |         | June 30,2006
|Short-term borrowings:                                                  |  |                   |         |              |   |        
|Federal Home Loan Bank advances                                         |  | $                 | 235,325 |              | $ | 354,674
|Securities sold under agreement to repurchase                           |  |                   | 34,533  |              |   | 29,513 
|                                                                        |  |                   |         |              |   |        
|Total                                                                   |  | $                 | 269,858 |              | $ | 384,187
|                                                                        |  |                   |         |              |   |        
|Long-term borrowings:                                                   |  |                   |         |              |   |        
|Federal Home Loan Bank advances                                         |  | $                 | 231,308 |              | $ | 249,232
|Securities sold under agreement to repurchase                           |  |                   | 17,000  |              |   | 14,500 
|Junior subordinated debentures owed to unconsolidated subsidiary trusts |  |                   | 61,857  |              |   | 61,857 
|                                                                        |  |                   |         |              |   |        
|Total                                                                   |  | $                 | 310,165 |              | $ | 325,589
|                                                                        |  |                   |         |              |   |        

6. Stock Compensation Plans

(Dollars in thousands, except per share data.)

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



|                                               |  |                                      |   |                                      |                                       |       |        |         |   |                                       |   |      
|---------------------------------------------- |  | ------------------------------------ | - | ------------------------------------ | ------------------------------------- | ----- | ------ | ------- | - | ------------------------------------- | - | -----
|                                               |  | Total stock options outstanding     
|                                               |  | Three months endedSeptember 30, 2006 |   | Three months endedSeptember 30, 2005
|                                               |  | Shares                               |   |                                      | WeightedAverageExercisePricePer Share |       | Shares |         |   | WeightedAverageExercisePricePer Share
|Stock options outstanding, beginning of period |  | 764,084                              |   |                                      | $                                     | 13.47 |        | 859,554 |   |                                       | $ | 13.28
|Forfeited                                      |  |                                     |   |                                      |                                       |      |        |        |   |                                       |   |     
|Exercised                                      |  | (22,790                              | ) |                                      | $                                     | 12.91 |        | (51,435 | ) |                                       | $ | 12.22
|Granted                                        |  | 92,014                               |   |                                      | $                                     | 21.86 |        | 2,000   |   |                                       | $ | 20.98
|                                               |  |                                      |   |                                      |                                       |       |        |         |   |                                       |   |      
|Stock options outstanding, end of period       |  | 833,308                              |   |                                      | $                                     | 14.42 |        | 810,119 |   |                                       | $ | 13.37
|                                               |  |                                      |   |                                      |                                       |       |        |         |   |                                       |   |      
|Stock options exercisable, end of period       |  | 676,293                              |   |                                      | $                                     | 12.95 |        | 719,336 |   |                                       | $ | 12.64

The aggregate intrinsic value of all stock options outstanding at September 30, 2006 was $6,845. The
aggregate intrinsic value of all stock options that were exercisable at September 30, 2006 was $6,546.



|                                            |  |                                      |   |                                      |                               |      |        |         |   |                               |   |     
|------------------------------------------- |  | ------------------------------------ | - | ------------------------------------ | ----------------------------- | ---- | ------ | ------- | - | ----------------------------- | - | ----
|                                            |  | Total unvested stock options        
|                                            |  | Three months endedSeptember 30, 2006 |   | Three months endedSeptember 30, 2005
|                                            |  | Shares                               |   |                                      | WeightedAveragePer ShareValue |      | Shares |         |   | WeightedAveragePer ShareValue
|Unvested stock options, beginning of period |  | 84,783                               |   |                                      | $                             | 4.44 |        | 137,163 |   |                               | $ | 4.04
|Vested                                      |  | (19,782                              | ) |                                      | $                             | 2.74 |        | (48,380 | ) |                               | $ | 3.27
|Granted                                     |  | 92,014                               |   |                                      | $                             | 5.46 |        | 2,000   |   |                               | $ | 4.51
|                                            |  |                                      |   |                                      |                               |      |        |         |   |                               |   |     
|Unvested stock options, end of period       |  | 157,015                              |   |                                      | $                             | 5.25 |        | 90,783  |   |                               | $ | 4.46
|                                            |  |                                      |   |                                      |                               |      |        |         |   |                               |   |     



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##### Table of Contents

Proceeds, related tax benefits realized from options exercised and intrinsic value of stock options exercised were as
follows:



|                                           |  |                                 |     |      |   |    
|------------------------------------------ |  | ------------------------------- | --- | ---- | - | ---
|                                           |  | Three months endedSeptember 30,
|                                           |  | 2006                            |     | 2005
|Proceeds of stock options exercised        |  | $                               | 287 |      | $ | 628
|Related tax benefit recognized             |  | $                               | 42  |      | $ | 119
|Intrinsic value of stock options exercised |  | $                               | 241 |      | $ | 461

Stock options outstanding at September 30, 2006 were as follows:



|                          |  |             |  |                                         |  |         |  |                                       |      
|------------------------- |  | ----------- |  | --------------------------------------- |  | ------- |  | ------------------------------------- | -----
|                          |  | Outstanding |  | Exercisable                            
|                          |  | Shares      |  | WeightedAverageRemainingContractualLife |  | Shares  |  | WeightedAverageExercisePricePer Share
|$9.54-$12.00              |  | 90,415      |  | 3.8                                     |  | 90,415  |  | $                                     | 11.09
|$12.01-$14.00             |  | 503,081     |  | 2.7                                     |  | 503,081 |  | $                                     | 12.33
|$14.01-$20.98             |  | 147,798     |  | 6.9                                     |  | 82,797  |  | $                                     | 18.72
|$20.99-$21.86             |  | 92,014      |  | 9.9                                     |  |        |  | $                                     |     
|                          |  |             |  |                                         |  |         |  |                                       |      
|Outstanding at period end |  | 833,308     |  | 4.4                                     |  | 676,293 |  | $                                     | 12.95
|                          |  |             |  |                                         |  |         |  |                                       |      

The fair value of stock options granted during the three months ended September 30, 2006 was determined at
the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:



|                                         |  |       |  
|---------------------------------------- |  | ----- | -
|Expected average risk-free interest rate |  | 4.88  | %
|Expected average life (in years)         |  | 6.00  |  
|Expected volatility                      |  | 24.50 | %
|Expected dividend yield                  |  | 2.56  | %



10



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##### Table of Contents

Recognition and Retention Plan

Activity in issued but unvested stock grants during the three months ended September 30, 2006 was as follows:



|                                             |  |        |   |  |                               |      
|-------------------------------------------- |  | ------ | - |  | ----------------------------- | -----
|                                             |  | Shares |   |  | WeightedAveragePer ShareValue
|Issued and unvested as of June 30, 2006      |  | 1,855  |   |  | $                             | 19.42
|Shares granted during the period             |  | 11,232 |   |  |                               | 21.86
|Shares vested during the period              |  | (45    | ) |  | $                             | 19.58
|                                             |  |        |   |  |                               |      
|Issued and unvested as of September 30, 2006 |  | 13,042 |   |  | $                             | 21.52
|                                             |  |        |   |  |                               |      

The intrinsic value of unvested stock grants at September 30, 2006 was $295.

Compensation costs for all share-based plans were as follows:



|                                       |  |                                  |    |             |   |              |  |             |    |  |   |   
|-------------------------------------- |  | -------------------------------- | -- | ----------- | - | ------------ |  | ----------- | -- |  | - | --
|                                       |  | Three months ended September 30,
|                                       |  | 2006                             |    | 2005       
|                                       |  | StockOptions                     |    | StockGrants |   | StockOptions |  | StockGrants
|Compensation cost recognized in income |  | $                                | 55 |             | $ | 17           |  | $           | 26 |  | $ | 12
|Related tax benefit recognized         |  | $                                |   |             | $ | 6            |  | $           | 2  |  | $ | 4 

The compensation cost yet to be recognized for stock-based awards that have been awarded but not vested is as
follows:



|                  |  |              |     |             |   |             |  |   |    
|----------------- |  | ------------ | --- | ----------- | - | ----------- |  | - | ---
|                  |  | StockOptions |     | StockGrants |   | TotalAwards
|Remainder of 2007 |  | $            | 164 |             | $ | 49          |  | $ | 213
|2008              |  |              | 219 |             |   | 65          |  |   | 284
|2009              |  |              | 176 |             |   | 65          |  |   | 241
|2010              |  |              | 138 |             |   | 62          |  |   | 200
|                  |  |              |     |             |   |             |  |   |    
|Total             |  | $            | 697 |             | $ | 241         |  | $ | 938
|                  |  |              |     |             |   |             |  |   |    

Weighted average life in years 2.2



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##### Table of Contents

7. Commitments, Contingencies and Guarantees

(Dollars in thousands, except per share data.)

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, 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 September 30, 2006 are shown below.



|                                                |  |              |         |                                  |   |      |  
|----------------------------------------------- |  | ------------ | ------- | -------------------------------- | - | ---- | -
|                                                |  | Nominalvalue |         | Current asset /(liability) value |  
|GUARANTEE OBLIGATIONS                           |  |              |         |                                  |   |      |  
|Loans sold with recourse                        |  | $            | 299,078 |                                  | $ | (292 | )
|Standby letters of credit                       |  |              | 1,407   |                                  |   |     |  
|                                                |  |             
|OTHER OBLIGATIONS                               |  |              |         |                                  |   |      |  
|Commitments to disburse construction loan funds |  | $            | 191,063 |                                  |   |      |  
|Commitments to originate or purchase loans      |  |              | 185,325 |                                  |   |      |  
|Commitments to sell loans                       |  |              | 6,132   |                                  |   |      |  
|Unused lines of credit                          |  |              | 244,762 |                                  |   |      |  
|Commercial letters of credit                    |  |              | 60,463  |                                  |   |      |  

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.

8. Earnings per Share

(Dollars in
thousands, except per share data.)

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



|                                                                 |  |                                 |            |   |      |   |            |  
|---------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | Three months endedSeptember 30, |           
|                                                                 |  | 2006                            |            |   | 2005 |  
|Basic earnings per share computation:                            |  |                                 |            |   |      |   |            |  
|Net Income                                                       |  | $                               | 7,002      |   |      | $ | 6,167      |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Gross weighted average shares outstanding                        |  |                                 | 17,443,367 |   |      |   | 15,058,166 |  
|Less: Average unearned ESOP shares                               |  |                                 | (440,113   | ) |      |   | (499,465   | )
|Less: Average unearned RRP shares                                |  |                                 | (82,434    | ) |      |   | (85,417    | )
|                                                                 |  |                                 |            |   |      |   |            |  
|Net weighted average shares outstanding                          |  |                                 | 16,920,820 |   |      |   | 14,473,284 |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Basic earnings per share                                         |  | $                               | 0.41       |   |      | $ | 0.43       |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Diluted earnings per share computation:                          |  |                                 |            |   |      |   |            |  
|Net Income                                                       |  | $                               | 7,002      |   |      | $ | 6,167      |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Weighted average shares outstanding for basic earnings per share |  |                                 | 16,920,820 |   |      |   | 14,473,284 |  
|Add: Dilutive effects of assumed exercises of stock options      |  |                                 | 240,309    |   |      |   | 236,097    |  
|Add: Dilutive effects of unearned                                |  |                                 |            |   |      |   |            |  
|Recognition and Retention Plan shares                            |  |                                 | 1,488      |   |      |   | 341        |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Weighted average shares and potentially dilutive shares          |  |                                 | 17,162,617 |   |      |   | 14,709,722 |  
|                                                                 |  |                                 |            |   |      |   |            |  
|Diluted earnings per share                                       |  | $                               | 0.41       |   |      | $ | 0.42       |  
|                                                                 |  |                                 |            |   |      |   |            |  



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##### Table of Contents

There were no stock options that were antidilutive for the three month period ending September 30, 2006 and for the
three month period ending September 30, 2005. Therefore, all stock options were considered in computing diluted earnings per share.

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

The following analysis
discusses changes in the Companys 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, in press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases will likely
result, are expected to, will continue, is anticipated, estimate, project 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, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for loans in the market areas the Company conducts business, and competition, which 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.First Place Financial Corp.
(Company) is a unitary savings and loan holding company formed as a result of 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. In December 2000, the Company
completed a merger of equals with FFY Financial Corp. In May 2004, the Company acquired Franklin Bancorp Inc.

On June 27, 2006, the Company acquired
The Northern Savings & Loan Company of Elyria, Ohio (Northern). On June 28, 2006, Northern converted from an Ohio chartered stock savings association to a federally chartered stock savings association. At the time of the merger,
Northern had total assets of $360 million. On July 25, 2006, the Companys two federally chartered savings association subsidiaries, Northern and First Place Bank merged into a single federal savings association with the name First Place
Bank. The banking offices that were part of Northern will continue to operate as the Northern Savings Division of First Place Bank until the first quarter of calendar 2007 when the data processing systems and signage will be converted to the name
First Place Bank. Management believes that this acquisition will represent a significant step in the Companys strategic vision to expand the franchise across Ohio. It is a natural progression west from several Cleveland markets where the
Company has experienced exceptional historical growth and it fills in some of the areas between the Mahoning Valley in Ohio and its operations in Southern Michigan.

The Company is a community oriented financial institution engaged primarily in the gathering of deposits to originate residential, 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. In addition, the Company, through its subsidiaries, owns affiliates that operate in the following industries: real estate brokerage, title
insurance, investment brokerage and general insurance. The Company also operates loan production offices in various cities in Ohio, Michigan and Indiana. As of September 30, 2006, the Company had $3.0 billion in assets and was the largest
publicly traded thrift institution in Ohio.



13



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##### Table of Contents

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, expanding into new markets in the Midwest by opening de novo banking offices and new loan production offices as well as through acquisitions of other financial institutions. The Company
evaluates acquisition targets based on the economic viability of the markets they are in, the degree to which they can be efficiently integrated into current operations and the degree to which they are accretive to earnings, initially and over time.

The Company provides a return to its shareholders by taking on various levels of credit risk, interest rate risk, liquidity risk and capital risk in order
to achieve profits. The Companys goal of achieving high levels of profitability on a consistent basis is balanced with what Management believes are acceptable levels of risk in each area. The Company uses certain financial ratios and other
financial measures to monitor profitability and to monitor the levels of risk.

Results of Operations

Comparison of the Three Months Ended September 30, 2006 and 2005

Selected Financial Ratios and Other Measures

(Dollars in thousands)



|                                                   |  |                                 |           |   |                     |   |           |        |  |   |         |   |  |       |   
|-------------------------------------------------- |  | ------------------------------- | --------- | - | ------------------- | - | --------- | ------ |  | - | ------- | - |  | ----- | --
|                                                   |  | Three Months EndedSeptember 30, |           |   | Increase (Decrease) |  
|                                                   |  | 2006                            |           |   | 2005                |   |           | Amount |  |   | Percent |  
|Total assets                                       |  | $                               | 3,012,232 |   |                     | $ | 2,560,292 |        |  | $ | 451,940 |   |  | 17.7  | % 
|Net income                                         |  | $                               | 7,002     |   |                     | $ | 6,167     |        |  | $ | 835     |   |  | 13.5  | % 
|Diluted earnings per share                         |  | $                               | 0.41      |   |                     | $ | 0.42      |        |  | $ | (0.01   | ) |  | (2.4  | )%
|Return on average equity                           |  |                                 | 8.78      | % |                     |   | 10.23     | %      |  |   |         |   |  | (1.45 | )%
|Return on average assets                           |  |                                 | 0.90      | % |                     |   | 0.96      | %      |  |   |         |   |  | (0.06 | )%
|Net interest margin                                |  |                                 | 3.24      | % |                     |   | 3.35      | %      |  |   |         |   |  | (0.09 | )%
|Efficiency ratio                                   |  |                                 | 61.08     | % |                     |   | 60.51     | %      |  |   |         |   |  | 0.57  | % 
|Noninterest expense as a percent of average assets |  |                                 | 2.42      | % |                     |   | 2.51      | %      |  |   |         |   |  | (0.09 | )%
|Non-performing assets to total assets              |  |                                 | 0.87      | % |                     |   | 0.72      | %      |  |   |         |   |  | 0.15  | % 
|Tangible equity to tangible assets                 |  |                                 | 7.38      | % |                     |   | 6.90      | %      |  |   |         |   |  | 0.48  | % 

Summary. Net income of $7.0 million for the quarter ended September 30, 2006 was an increase of $0.8
million or 13.5% from net income of $6.2 million for the quarter ended September 30, 2005. Diluted earnings per share were $0.41 for the quarter compared with $0.42 for the prior-year period, a decrease of 2.4%. Return on average equity for the
current quarter was 8.78% compared with 10.23% for the same quarter in the prior year. Total assets increased $452 million to $3.012 billion at September 30, 2006 from $2.560 billion at September 30, 2005. The increase in total assets and
net income were primarily due to the acquisition of Northern. Earnings per share decreased because the Company issued approximately 2.3 million shares of common stock as part of the consideration paid to acquire Northern. The increase in net
income was primarily due to increases of $3.3 million in net interest income, $0.2 million in net gain on sale of loans and $0.3 million in other income  non-bank subsidiaries, partially offset by an increase of $2.8 million in noninterest
expense. The increase in net interest income was primarily due to an increase in average interest-earning assets, partially offset by a decline in the net interest margin. The increase in noninterest expense was primarily caused by an increase in
salaries and employee benefits due to additional compensation and benefit costs of the new banking offices in Lorain County acquired in the acquisition of Northern. Even though non-interest expense increased, the ratio of noninterest expense to
average assets decreased to 2.42% for the current quarter compared with 2.51% for the prior year quarter. Non-performing assets as a percent of total assets increased to 0.87% from 0.72% a year earlier.

Net Interest Income.Net interest income for the quarter ended September 30, 2006, totaled $22.7 million, an increase of $3.3 million or 17.0% from $19.4
million for the quarter ended September 30, 2005. The increase in net interest income resulted from an increase of $508 million or 21.7% in average interest-earning assets compared to the same quarter a year ago, partially offset by a decline
in the net interest margin to 3.24%, down from 3.35% in the prior year quarter. Net interest margin in the current quarter benefited from the recognition of $0.9 million which represented the unamortized balance of a purchase accounting premium on a
Federal Home Loan Bank advance that was called. In



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spite of this benefit, net interest margin decreased as liability costs grew faster than asset yields. This decrease was due to the inversion of the yield
curve from a positive slope during the first quarter of fiscal 2006 to a slight negative slope during the first quarter of fiscal 2007.

The average yield
on interest-earning assets was 6.60% for the quarter ended September 30, 2006, an increase of 63 basis points from 5.97% for the same quarter in the prior year. The increase was due to increases in the yields on loans, securities and Federal
Home Loan Bank stock. In addition, an increase in the average balance of loans and a decrease in the average balance of securities shifted the mix of interest-earning assets to include a greater percentage of loans, which also contributed to the
increase in the overall yield on interest-earning assets. The average rate paid on interest-bearing liabilities was 3.81% for the quarter ended September 30, 2006 compared to 3.01% for the prior year quarter, an increase of 80 basis points.
This increase was due to increases in the rates paid on short-term borrowings, certificates of deposit, savings and money market accounts, partially offset by a decrease in the rate paid on long-term borrowings. In addition, the mix of deposits
changed to include relatively less savings and money markets and relatively more certificate of deposit accounts, which contributed to the increase in the rate paid on interest-bearing liabilities.

The following schedule details the various components of net interest income for the quarters indicated. All asset yields are calculated on tax-equivalent basis where
applicable. Security yields are based on amortized historic cost.



15



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##### Table of Contents

Average Balances, Interest Rates and Yields

(Dollars in thousands)



|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|----------------------------------------------------------------------- |  | ------------------------------------- | --------- | - | ------------------------------------- | - | ----------------- |  | ------ | -------------- |  | - | --------- | - | ----------------- | - | ------ |  | ------ | -
|                                                                        |  | Three Months Ended September 30, 2006 |           |   | Three Months Ended September 30, 2005 |  
|                                                                        |  | AverageBalance                        |           |   | Interest                              |   | AverageYield/cost |  |        | AverageBalance |  |   | Interest  |   | AverageYield/cost |  
|ASSETS                                                                  |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-earning assets                                                 |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Loans and loans held for sale                                           |  | $                                     | 2,540,589 |   |                                       | $ | 42,864            |  | 6.75   | %              |  | $ | 2,021,363 |   |                   |   | 31,482 |  | 6.23   | %
|Securities and interest-bearing deposits                                |  |                                       | 280,583   |   |                                       |   | 3,784             |  | 5.40   | %              |  |   | 293,378   |   |                   |   | 3,160  |  | 4.31   | %
|Federal Home Loan Bank stock                                            |  |                                       | 32,527    |   |                                       |   | 463               |  | 5.70   | %              |  |   | 30,624    |   |                   |   | 368    |  | 4.82   | %
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-earning assets                                           |  |                                       | 2,853,699 |   |                                       |   | 47,111            |  | 6.60   | %              |  |   | 2,345,365 |   |                   |   | 35,010 |  | 5.97   | %
|Noninterest-earning assets                                              |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Cash and due from banks                                                 |  |                                       | 61,052    |   |                                       |   |                   |  |        |                |  |   | 51,078    |   |                   |   |        |  |        |  
|Allowance for loan losses                                               |  |                                       | (22,561   | ) |                                       |   |                   |  |        |                |  |   | (18,728   | ) |                   |   |        |  |        |  
|Other assets                                                            |  |                                       | 205,667   |   |                                       |   |                   |  |        |                |  |   | 159,004   |   |                   |   |        |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total assets                                                            |  | $                                     | 3,097,857 |   |                                       |   |                   |  |        |                |  | $ | 2,536,719 |   |                   |   |        |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|LIABILITIES                                                             |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing liabilities                                            |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Deposits                                                                |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Checking accounts                                                       |  | $                                     | 137,863   |   |                                       |   | 168               |  | 0.48   | %              |  | $ | 116,071   |   |                   |   | 137    |  | 0.47   | %
|Savings and money market accounts                                       |  |                                       | 743,569   |   |                                       |   | 5,133             |  | 2.74   | %              |  |   | 646,126   |   |                   |   | 3,185  |  | 1.96   | %
|Certificates of deposit                                                 |  |                                       | 954,031   |   |                                       |   | 10,909            |  | 4.54   | %              |  |   | 742,802   |   |                   |   | 6,496  |  | 3.47   | %
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total deposits                                                          |  |                                       | 1,835,463 |   |                                       |   | 16,210            |  | 3.50   | %              |  |   | 1,504,999 |   |                   |   | 9,818  |  | 2.59   | %
|Borrowings                                                              |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Short-term                                                              |  |                                       | 351,847   |   |                                       |   | 4,487             |  | 5.06   | %              |  |   | 270,658   |   |                   |   | 2,325  |  | 3.41   | %
|Long-term                                                               |  |                                       | 313,163   |   |                                       |   | 3,325             |  | 4.21   | %              |  |   | 252,126   |   |                   |   | 3,217  |  | 5.06   | %
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-bearing liabilities                                      |  |                                       | 2,500,473 |   |                                       |   | 24,022            |  | 3.81   | %              |  |   | 2,027,783 |   |                   |   | 15,360 |  | 3.01   | %
|Noninterest-bearing liabilities                                         |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Noninterest-bearing checking accounts                                   |  |                                       | 228,074   |   |                                       |   |                   |  |        |                |  |   | 232,769   |   |                   |   |        |  |        |  
|Other liabilities                                                       |  |                                       | 52,855    |   |                                       |   |                   |  |        |                |  |   | 36,985    |   |                   |   |        |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities                                                       |  |                                       | 2,781,402 |   |                                       |   |                   |  |        |                |  |   | 2,297,537 |   |                   |   |        |  |        |  
|Shareholders equity                                                    |  |                                       | 316,455   |   |                                       |   |                   |  |        |                |  |   | 239,182   |   |                   |   |        |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities and shareholders equity                               |  | $                                     | 3,097,857 |   |                                       |   |                   |  |        |                |  | $ | 2,536,719 |   |                   |   |        |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Fully tax-equivalent net interest income                                |  |                                       |           |   |                                       |   | 23,089            |  |        |                |  |   |           |   |                   |   | 19,650 |  |        |  
|Interest rate spread                                                    |  |                                       |           |   |                                       |   |                   |  | 2.79   | %              |  |   |           |   |                   |   |        |  | 2.96   | %
|Net interest margin                                                     |  |                                       |           |   |                                       |   |                   |  | 3.24   | %              |  |   |           |   |                   |   |        |  | 3.35   | %
|Average interest-earning assets to average interest-bearing liabilities |  |                                       |           |   |                                       |   |                   |  | 114.13 | %              |  |   |           |   |                   |   |        |  | 115.66 | %
|Tax-equivalent adjustment                                               |  |                                       |           |   |                                       |   | 357               |  |        |                |  |   |           |   |                   |   | 219    |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Net interest income                                                     |  |                                       |           |   |                                       | $ | 22,732            |  |        |                |  |   |           |   |                   | $ | 19,431 |  |        |  
|                                                                        |  |                                       |           |   |                                       |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  

Provision for Loan Losses. The provision for loan losses was $1.4 million for the quarters ended
September 30, 2006 and September 30, 2005. Non-performing loans were $22.3 million at September 30, 2006 compared with $15.3 million at September 30, 2005. Net charge-offs for the quarter ended September 30, 2006 were $0.9
million compared with $0.4 million for the quarter ended September 30, 2005. Total loans were $2.360 billion at September 30, 2006 compared with $1.880 billion at September 30, 2005. The amount of the provision in the current quarter
compared with the prior year quarter is consistent with the increase total loans and in non-performing loans.



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##### Table of Contents

Noninterest Income. Noninterest income totaled $7.9 million for the quarter ended September 30, 2006, an
increase of $1.0 million or 14.6% from $6.9 million in the prior year quarter. The increase in noninterest income was due to increases in service charges, net gains on sale of loans, and other income  nonbank.

Service charges increased $0.2 million for the quarter ended September 30, 2006, as compared with the same period in the prior year. The increase was due to
additional deposit accounts from the Northern acquisition. The growth in non-bank income was due to growth in commission income in the Companys insurance, real estate and brokerage affiliates.

Net gain on the sale of loans for the three months ended September 30, 2006, was $2.1 million compared with $1.9 million for the three months ended
September 30, 2005. The gain on sale of loans remained constant as the volume of loans sold during the current quarter was $320 million compared with $321 million in the prior year quarter. The Companys normal volume of loan sales was
supplemented this quarter by $98 million of loans that were classified as held for sale when they were acquired as part of the Northern acquisition. While those loans would have provided additional current income, they were all fixed rate loans and
holding them would have increased the Companys exposure to declining net interest income if interest rates remained at current levels or increased. Therefore, the Company elected to sell the loans to maintain an interest rate risk profile near
the level it stood prior to the Northern acquisition. The Company realized $1.5 million on the sale of the $98 million in loans acquired through the Northern acquisition and held for sale. The remaining gains on sale of loans from current activity
were $0.6 million on sales of $222 million of loans. This represents a significant decline in volume and margin from the same quarter in the prior year. The decline in volume was due to a decline in the market for mortgage loans due to an increase
in short-term and long-term interest rates from the prior year quarter. The decline in the margin from the prior year resulted from losses on derivatives used to hedge the value of mortgage loans during the current quarter which were not offset by
increases in the value of loans held for sale since those loans remain on the books at historical cost.

Loan servicing income is composed of the current
fees generated from the servicing of sold loans less the current amortization of loan servicing rights and the adjustment for any change in the allowance for impairment of loan servicing rights, which are valued at the lower of cost or market. Both
the amortization and the valuation of loan servicing rights 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. While long-term interest rates have risen significantly over the past three
years, there have been both periods of rising rates and periods of falling rates. As a result, increases in impairment and reversals of impairment of loan servicing rights have often been the most significant component of loan servicing income. The
table below shows how the change in the impairment of loan servicing rights has affected loan servicing income.



|                                            |  |                                 |     |      |   |     |  
|------------------------------------------- |  | ------------------------------- | --- | ---- | - | --- | -
|                                            |  | Three months endedSeptember 30, |    
|                                            |  | 2006                            |     | 2005 |  
|                                            |  | (Dollars in thousands)          |    
|Loan servicing income (loss)                |  |                                 |     |      |   |     |  
|Loan servicing revenue, net of amortization |  | $                               | 203 |      | $ | (81 | )
|Change in impairment                        |  |                                 | 20  |      |   | 247 |  
|                                            |  |                                 |     |      |   |     |  
|Total loan servicing income                 |  | $                               | 223 |      | $ | 166 |  
|                                            |  |                                 |     |      |   |     |  

The increase in total loan servicing income in the current quarter compared to the prior year quarter was
primarily due to an increase in net loan servicing revenue for the current quarter. This increase was partially offset by a smaller reduction of impairment charges in the current year quarter compared to the prior year quarter.

The process used to arrive at the estimated aggregate fair value of the Companys loan servicing rights is a material estimate that is particularly susceptible to
significant changes in the near term as interest rates and other factors change. The value of the loan servicing rights portfolio is analyzed quarterly by considering critical assumptions for prepayment speeds, the targeted investor yield to a buyer
of loan servicing rights, and float on escrows. While the Company obtains an outside independent expert evaluation of loan servicing rights each quarter, in order to make the process as accurate as possible, the process is still driven by
assumptions about future market activity. Market interest rates are an external factor that has a material influence on this valuation process because interest rates influence prepayment speeds and targeted investor yield.



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##### Table of Contents

Over the past several years, the volume and dollar value of loan servicing rights has been growing more rapidly than
total assets on a percentage basis. As a result, the Companys exposure to volatility in mortgage banking revenue has also increased. In order to reduce exposure to volatility due to rapid payoffs or impairment, the Company sold approximately
43% of its loan servicing rights during March 2006. Management plans to consider additional sales of loan servicing rights in the future depending on size of the servicing asset relative to total assets and based on the current market for the sale
of these servicing rights.

Noninterest Expense.Noninterest expense increased $2.9 million or 17.8% to $18.9 million for the three months ended
September 30, 2006, compared with the same quarter in the prior year. Annualized noninterest expense as a percent of average assets was 2.42% for the quarter ended September 30, 2006 compared to 2.51% for the prior year quarter. The
efficiency ratio for the three months ended September 30, 2006, was 61.1% compared with 60.5% for the same period in the prior year. The increase in noninterest expense was primarily due to increases in salaries and employee benefits and in
occupancy and equipment. Salaries and employee benefits increased $1.9 million or 25.1% in the current quarter compared to the same quarter in the prior year. Occupancy and equipment increased $0.5 million or 19.1% in the current quarter compared to
the same quarter in the prior year. The primary reason for the increases were the addition of compensation, benefits, intangible amortization and occupancy costs of the new banking offices in Lorain County acquired in the acquisition of Northern. In
order to ensure a smooth transition for Northern customers the Company has scheduled the conversion of the core processing systems at the Northern offices for the third quarter of fiscal 2007. While this will delay some of the cost savings
anticipated as part of the acquisition until the fourth quarter of fiscal 2007, the Company believes that the timing of the conversion represents the best solution for delivering high quality service to Lorain County customers.

Income Taxes. Income tax expense was $3.3 million for the three months ended September 30, 2006, compared with $2.7 million for the prior year period. The
effective tax rate was 32.2% for the three months ended September 30, 2006 compared with 30.8% for the same period in the prior year.

Financial
Condition

General. Assets totaled $3.012 billion at September 30, 2006, a decrease of $101 million or 3.2% from June 30, 2006. This
decrease was primarily due to the Companys sale of $98 million in loans held for sale and $17 million in securities available for sale that were existing assets of Northern as of the acquisition date. All of these assets were fixed rate assets
and were sold primarily to achieve managements interest rate risk objectives. Capital ratios increased with the ratio of equity to total assets at September 30, 2006 of 10.59% as compared with 10.01% at June 30, 2006.

Securities. Securities available for sale totaled $272 million at September 30, 2006, compared to $303 million at June 30, 2006, a decrease of $31
million or 10.2%. During the first quarter of 2007, the Company continued an investment portfolio restructuring program, which resulted in the sale of $17 million of securities that were existing assets of Northern as of the acquisition date. Funds
from the sale of securities available for sale were used to reduce overnight borrowings at the Federal Home Loan Bank in order to counteract the impact of the current inverted yield curve.

Loans Held for Sale.Loans held for sale totaled $77 million at September 30, 2006, compared to $155 million at June 30, 2006, a decrease of $78 million
or 50.3%. The decrease was due to the Companys sale of $98 million in loans held for sale that were existing assets of Northern as of the acquisition date and a continued slowdown in mortgage banking activity. Funds from the sale of loans held
for sale were used to reduce overnight borrowings at the Federal Home Loan Bank.



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##### Table of Contents

Loans. The loan portfolio totaled $2.360 billion at September 30, 2006, an increase of $9 million, or 0.1%
from $2.351 billion at June 30, 2006. The increase in the loan portfolio was due to an increase of $31 million, 14.5% annualized, in commercial loans, offset by decreases of $11 million in mortgage and construction loans and $11 million in
consumer loans. At September 30, 2006, commercial loans accounted for 37.6% of the loan portfolio, which is up from 36.4% at June 30, 2006.



|                          |  |                         |           |         |                     |   |        |   |           |  |       |  
|------------------------- |  | ----------------------- | --------- | ------- | ------------------- | - | ------ | - | --------- |  | ----- | -
|                          |  | As of September 30,2006 |           |         | As of June 30, 2006 |  
|                          |  | Amount                  |           | Percent |                     |   | Amount |   | Percent   | 
|                          |  | (Dollars in thousands)  |          
|Mortgage and construction |  | $                       | 1,112,827 |         | 47.2                | % |        | $ | 1,123,911 |  | 47.8  | %
|Commercial                |  |                         | 887,183   |         | 37.6                | % |        |   | 856,129   |  | 36.4  | %
|Consumer                  |  |                         | 360,157   |         | 15.2                | % |        |   | 370,744   |  | 15.8  | %
|                          |  |                         |           |         |                     |   |        |   |           |  |       |  
|Total loans               |  | $                       | 2,360,167 |         | 100.0               | % |        | $ | 2,350,784 |  | 100.0 | %
|                          |  |                         |           |         |                     |   |        |   |           |  |       |  

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

Asset Quality History

(Dollars in thousands)



|                                                         |  |         |        |   |         |   |        |         |  |   |          |   |  |         |        |   |  |   |        |  
|-------------------------------------------------------- |  | ------- | ------ | - | ------- | - | ------ | ------- |  | - | -------- | - |  | ------- | ------ | - |  | - | ------ | -
|                                                         |  | 9/30/06 |        |   | 6/30/06 |   |        | 3/31/06 |  |   | 12/31/05 |   |  | 9/30/05 |       
|Non-performing assets                                    |  | $       | 26,184 |   |         | $ | 20,695 |         |  | $ | 19,940   |   |  | $       | 16,294 |   |  | $ | 18,443 |  
|Non-performing assets as a % of total assets             |  |         | 0.87   | % |         |   | 0.66   | %       |  |   | 0.75     | % |  |         | 0.62   | % |  |   | 0.72   | %
|Non-performing loans                                     |  | $       | 22,284 |   |         | $ | 16,771 |         |  | $ | 16,117   |   |  | $       | 13,419 |   |  | $ | 15,326 |  
|Non-performing loans as a % of total loans               |  |         | 0.94   | % |         |   | 0.71   | %       |  |   | 0.78     | % |  |         | 0.67   | % |  |   | 0.82   | %
|Delinquent loans                                         |  | $       | 35,687 |   |         | $ | 26,537 |         |  | $ | 23,673   |   |  | $       | 27,837 |   |  | $ | 24,795 |  
|Delinquent loans as a % of total loans                   |  |         | 1.51   | % |         |   | 1.13   | %       |  |   | 1.15     | % |  |         | 1.39   | % |  |   | 1.32   | %
|Allowance for loan losses                                |  | $       | 22,819 |   |         | $ | 22,319 |         |  | $ | 20,170   |   |  | $       | 19,617 |   |  | $ | 19,194 |  
|Allowance for loan losses as a % of loans                |  |         | 0.97   | % |         |   | 0.95   | %       |  |   | 0.98     | % |  |         | 0.98   | % |  |   | 1.02   | %
|Allowance for loan losses as a % of non-performing loans |  |         | 102.40 | % |         |   | 133.08 | %       |  |   | 125.15   | % |  |         | 146.19 | % |  |   | 125.24 | %

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, changes in the composition of the loan portfolio, and trends in past due and non-performing loans. The allowance for
loan losses is a significant estimate that is particularly susceptible to changes in the near term and is established through a provision for loan losses based on managements evaluation of the risk in the Companys loan portfolio and the
general economy. This evaluation, which includes a review of all loans for which full collectibility may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral, economic conditions, historical
loan loss experience and other factors that warrant recognition in providing for an adequate loan loss allowance. Future additions to the allowance for loan losses will be dependent on these factors. The Company maintains an allowance for loan
losses at a level adequate to absorb managements estimate of probable losses in the loan portfolio.

Non-performing assets at September 30,
2006, were $26.2 million or 0.87% of total assets, up $5.5 million from $20.7 million or 0.66% of total assets at June 30, 2006. The change in non-performing assets was primarily related to the increase in non-performing loans. Non-performing
loans were $22.3 million at September 30, 2006, up $5.5 million from $16.8 million at June 30, 2006. Nonperforming mortgage and construction loans increased $4.0 million during the quarter accounting for the majority of the increase.
Mortgage and construction loans are generally well secured and if these loans do default, the actual losses are often only a fraction of the total loan amount. Delinquent loans were $35.7 million and $26.5 million at September 30, 2006 and
June 30, 2006, respectively. The allowance for loan losses increased during the quarter to $22.8 million at September 30, 2006, up $0.5 million from $22.3 million at June 30, 2006. The ratio for the allowance for loan losses as a
percent of total loans was 0.97% as of September 30, 2006 and 0.95% as of June 30, 2006. The increase in the provision and the allowance over prior periods are consistent with increases in nonperforming loans. It is important to note that
more than 50% of non-performing loans are secured by 1-4 family residences, and the majority of the remaining loans are secured by commercial real estate. As a result, if the borrower ultimately defaults on the loan, the Company is often able to
recover a substantial portion of the loan balance through the sale of the related real estate.



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Other Assets. Other assets increased $2 million to $78 million at September 30, 2006, compared with $76
million at June 30, 2006. One of the components of other assets is loan servicing rights. Loan servicing rights increased $2.7 million to $18.9 million from $16.2 million as of September 30, 2006 and June 30, 2006, respectively. The
Company has an equity investment in a low-income housing project of $0.6 million that is also included in other assets. During September, 2006, the investment was restructured and recapitalized by another financial institution. As a result, the
investment is considered realizable and has been removed from classification as special mention.

Deposits.Deposits increased $16 million, or 0.1%
during the first three months of fiscal 2007 and totaled $2.077 billion at September 30, 2006, compared to $2.061 billion at June 30, 2006. This increase was composed of an increase of $36 million in retail deposits, offset by a decrease
of $20 million of brokered certificates of deposit. The Company has chosen not to renew brokered deposits due to the success of the branches in raising retail deposits. At September 30, 2006, the Company had $58 million in brokered deposits
compared to $78 million at June 30, 2006. The Company considers these brokered deposits to be an element of a diversified funding strategy and an alternative to borrowings. Management regularly compares rates to determine the most economical
source of funding. The Company anticipates that they will continue to use brokered funds as a funding alternative in the future, but not as the primary source of funding to support growth.

Borrowings. During the first quarter of fiscal year 2007, long-term borrowings showed a net decrease of $13 million as a result of a net decrease of $8 million in
long-term borrowings and an $8 million reclassification of borrowings from long-term to short-term, partially offset by an increase of $3 million in long-term securities sold under agreements to repurchase. The Company borrowed $5 million in the
form of a long-term fixed-rate advance from the Federal Home Loan Bank with an original maturity of thirty-six months at a rate of 5.25%. The Company also sold $10 million in securities under agreements to repurchase with original maturity dates
through May, 2010 at a rate of 4.19%. During the first quarter of fiscal year 2007, short-term borrowings showed a net decrease of $116 million consisting of a decrease of $129 million in short-term borrowings, partially offset by an increase of $5
million in short-term securities sold under agreements to repurchase and an $8 million reclassification of borrowings from long-term to short-term. At September 30, 2006, $240 million of the $275 million of short-term borrowings were in the
form of overnight borrowings from the Federal Home Loan Bank. The rate on the daily borrowings generally approximates the Federal Funds rate. At the end of September 2006, the rate was approximately 5.25%, up 25 basis points from June 30, 2006,
due to a 25 basis point rate increase in the discount rate by the Federal Reserve Board. If the Federal Reserve Board increases the discount rate over the remainder of the fiscal year, overnight borrowing costs would increase immediately. However,
the impact on net interest income would be mitigated by increases the Company would anticipate on loans in the portfolio that are indexed to the prime rate. The Company presently has $493 million of loans that are indexed to the prime rate that
re-price at least monthly compared to $240 million of overnight borrowings.

Capital Resources. Total shareholders equity increased $7.5
million, or 2.4% during the three months ended September 30, 2006, and totaled $319 million. The primary components of the increase in shareholders equity were net income of $7.0 million and a $2.0 million increase from the change in
unrealized gain on available for sale securities. These increases were offset by dividends declared on the Companys common stock totaling $2.5 million. During March 2006, the Companys board of directors authorized the purchase of up to
500,000 shares of issued and outstanding stock over the following 12 month period. The stock repurchase program is a component of the Companys strategy to invest or reduce excess capital after consideration of market and economic factors, the
effect on shareholder dilution, adequacy of capital and the effect on liquidity. The shares of common stock repurchased will be held as treasury shares and may be used by the Company in its dividend reinvestment plan, its stock option plan, as
consideration in an acquisition transaction or for general corporate purposes. There were no repurchases of common stock during the first three months of fiscal year 2007.

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. A comparison of First Place Banks actual capital ratios to ratios required
to be well capitalized under OTS regulations at September 30, 2006 follows:



|                                               |  |             |   |  |                       |  
|---------------------------------------------- |  | ----------- | - |  | --------------------- | -
|                                               |  | Actualratio |   |  | Well-capitalizedratio |  
|Total capital to risk-weighted assets          |  | 11.62       | % |  | 10.00                 | %
|Tier 1 (core) capital to risk-weighted assets  |  | 10.58       | % |  | 6.00                  | %
|Tier 1 (core) capital to adjusted total assets |  | 8.02        | % |  | 5.00                  | %



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Critical Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with GAAP and conform to general practices within First Place 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 and the valuation of the mortgage servicing rights. 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 portfolio at each balance sheet date. 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. 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 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.

Mortgage Servicing Rights. When the Company sells a mortgage loan and retains the rights to service that loan, the amortized cost of the loan is allocated between
the loan sold and the mortgage servicing right retained. 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 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.



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Loan prepayment speeds have varied significantly over the past three 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.

Liquidity and Cash Flows

Liquidity is a measurement of 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.

At September 30, 2006, the Company had $148 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 $178 million from the Federal Home Loan Bank based on loans currently pledged under blanket pledge agreements and $10 million on an unsecured commercial bank line of credit. This is compared to $167
million of cash and unpledged securities, Federal Home Loan Bank availability of $131 million and $10 million of availability in an unsecured commercial bank line of credit at June 30, 2006. Potential cash available as measured by liquid assets
and borrowing capacity has increased $28 million through September 30, 2006 due to the sale of loans and of securities acquired as part of the Northern acquisition and sold during the current quarter, partially offset by growth in the loan
portfolio. 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 additional loans currently held in the loan portfolio. Management believes that the current and potential resources mentioned are adequate to meet liquidity
needs in the foreseeable future.

The Company, as a 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 First Place Bank. 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 to fund operating expenses. At September 30, 2006, the holding company had cash and unpledged securities of $33 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.
At the present time, First Place Bank could pay approximately $19 million of dividends without OTS approval. Future dividend payments by First Place Bank beyond the $19 million currently available would be based upon future earnings or the approval
of the OTS.

Off-balance sheet arrangements

See Note
6, Commitments, Contingencies and Guarantees, of 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, with credit risk and interest rate risk being the most significant. 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-bearing assets and interest-bearing liabilities mature at different intervals and reprice at different times.



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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 60 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. 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, magnitude and frequency of interest rate changes as well as differences in how interest rates change at various points along the yield curve.

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 table below indicates a comparison of the projected NPV for various changes in interest rates as of the end of the most recent
quarter compared with the end of the previous fiscal year. The projections are based on an instantaneous change in interest rates and the assumption that short-term and long-term interest rates change by the same magnitude and in the same direction.



|                            |  |                             |   |  |                        |  
|--------------------------- |  | --------------------------- | - |  | ---------------------- | -
|Basis point change in rates |  | NPV ratioSeptember 30, 2006 |   |  | NPV ratioJune 30, 2006 |  
|Up 200                      |  | 9.02                        | % |  | 8.57                   | %
|Up 100                      |  | 10.29                       | % |  | 10.09                  | %
|No change                   |  | 11.31                       | % |  | 11.24                  | %
|Down 100                    |  | 12.05                       | % |  | 12.12                  | %
|Down 200                    |  | 12.67                       | % |  | 12.85                  | %

The NPV projections indicate that the Company has experienced small decreases in its exposure to rising interest
rates and in its potential benefit from falling interest rates during the three months ended September 30, 2006. The NPV ratio for no change in rates has increased 7 basis points. This model indicates what would be likely to happen given no
change in the shape of the yield curve. The Company also has exposure to changes in the shape of the yield curve.

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, loan servicing rights act as an economic hedge against rising rates, as they become more valuable in a rising rate environment, often offsetting part or all of the decline in the value of loan commitments or loans held for
sale in a rising rate environment.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, the Company carried out an
evaluation, under the supervision and with the participation of the Companys management, including the Companys 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, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective to reasonably ensure that the
financial and non-financial information required to be disclosed by the Company in the reports that it files or submits under the



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Securities Exchange Act of 1934, including this Form 10-Q for the period ended September 30, 2006, is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions rules and forms.

There were no changes in the Companys internal
control over financial reporting that occurred during the Companys most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. As a
result, no corrective actions were taken.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor First Place Bank is involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company and First Place Bank.

Item 1A. Risk Factors

There were no material changes from the risk factors as previously disclosed in Part I,
Item 1A of the Companys Annual Report on Form 10-K for the year ended June 30, 2006.

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

On March 21, 2006, the Companys board of
directors publicly announced that it had approved a new buy-back program authorizing the repurchase of up to 500,000 shares of the Companys common stock. There were no repurchases of common stock during the three months ended
September 30, 2006. There are 500,000 shares remaining that may be repurchased under the March 2006 authorization. The authorization is in force through March 21, 2007.

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



|             |  |                                                                            
|------------ |  | ---------------------------------------------------------------------------
|Exhibit 31.1 |  | CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 31.2 |  | CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 32.1 |  | CEO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 32.2 |  | CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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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: November 7, 2006      |  | /s/ Steven R. Lewis                   |  |  |  | /s/ Paul S. Musgrove   
|                            |  | Steven R. Lewis                       |  |  |  | Paul S. Musgrove       
|                            |  | President and Chief Executive Officer |  |  |  | Chief Financial Officer



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