##### Table of Contents

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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 December 31, 2005



| ̈ | 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.



15,095,954 common
shares as of January 31, 2006



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |         |  |                                                                                                                                    |  |      
|----------------------------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                              |  |         |  | PageNumber                                                                                                                        
|                              | 
|PART I. FINANCIAL INFORMATION |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements                                                                                                               |  |      
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Financial Condition as of December 31, 2005 and June 30, 2005                                 |  | 3    
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2005 and 2004                          |  | 4    
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Changes in Shareholders Equity For the Three and Six Months Ended December 31, 2005 and 2004 |  | 5    
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2005 and 2004                                |  | 6    
|                              |  |         | 
|                              |  |         |  | Notes to Condensed Consolidated Financial Statements                                                                               |  | 7-14 
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                              |  | 15-27
|                              |  |         | 
|                              |  | Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk                                                                         |  | 27-28
|                              |  |         | 
|                              |  | Item 4. |  | Controls and Procedures                                                                                                            |  | 28   
|                              | 
|PART II. OTHER INFORMATION    |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Legal Proceedings                                                                                                                  |  | 28   
|                              |  |         | 
|                              |  | Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                        |  | 28   
|                              |  |         | 
|                              |  | Item 3. |  | Defaults Upon Senior Securities                                                                                                    |  | 29   
|                              |  |         | 
|                              |  | Item 4. |  | Submission of Matters to a Vote of Security Holders                                                                                |  | 29   
|                              |  |         | 
|                              |  | Item 5. |  | Other Information                                                                                                                  |  | 29   
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits                                                                                                                           |  | 29   
|                              | 
|SIGNATURES                    |  | 30     



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##### Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements



FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)



|                                                                                                     |  |                  |           |   |              |   |           |  
|---------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | - | ------------ | - | --------- | -
|                                                                                                     |  | December 31,2005 |           |   | June 30,2005 |  
|                                                                                                     |  | (Unaudited)      |           |   |              |  
|ASSETS                                                                                               |  |                  |           |   |              |   |           |  
|Cash and due from banks                                                                              |  | $                | 70,153    |   |              | $ | 52,549    |  
|Securities available for sale                                                                        |  |                  | 286,864   |   |              |   | 296,314   |  
|Loans held for sale                                                                                  |  |                  | 83,754    |   |              |   | 145,053   |  
|Loans                                                                                                |  |                  |           |   |              |   |           |  
|Mortgage and construction                                                                            |  |                  | 884,123   |   |              |   | 806,294   |  
|Commercial                                                                                           |  |                  | 775,782   |   |              |   | 715,903   |  
|Consumer                                                                                             |  |                  | 345,643   |   |              |   | 308,924   |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|Total loans                                                                                          |  |                  | 2,005,548 |   |              |   | 1,831,121 |  
|Less allowance for loan losses                                                                       |  |                  | 19,617    |   |              |   | 18,266    |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|Loans, net                                                                                           |  |                  | 1,985,931 |   |              |   | 1,812,855 |  
|Federal Home Loan Bank stock                                                                         |  |                  | 31,281    |   |              |   | 30,621    |  
|Premises and equipment, net                                                                          |  |                  | 24,128    |   |              |   | 21,367    |  
|Goodwill                                                                                             |  |                  | 55,172    |   |              |   | 55,076    |  
|Core deposit and other intangibles                                                                   |  |                  | 13,413    |   |              |   | 15,282    |  
|Other assets                                                                                         |  |                  | 75,835    |   |              |   | 69,826    |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|Total assets                                                                                         |  | $                | 2,626,531 |   |              | $ | 2,498,943 |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|LIABILITIES                                                                                          |  |                  |           |   |              |   |           |  
|Deposits                                                                                             |  |                  |           |   |              |   |           |  
|Non-interest bearing                                                                                 |  | $                | 251,624   |   |              | $ | 235,840   |  
|Interest bearing checking                                                                            |  |                  | 122,219   |   |              |   | 110,774   |  
|Savings                                                                                              |  |                  | 196,754   |   |              |   | 195,203   |  
|Money market                                                                                         |  |                  | 450,746   |   |              |   | 441,134   |  
|Certificates of deposit                                                                              |  |                  | 743,738   |   |              |   | 726,388   |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|Total deposits                                                                                       |  |                  | 1,765,081 |   |              |   | 1,709,339 |  
|Short-term borrowings                                                                                |  |                  | 248,805   |   |              |   | 262,293   |  
|Long-term borrowings                                                                                 |  |                  | 335,091   |   |              |   | 260,788   |  
|Other liabilities                                                                                    |  |                  | 32,363    |   |              |   | 29,867    |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|Total liabilities                                                                                    |  |                  | 2,381,340 |   |              |   | 2,262,287 |  
|                                                                                                     |  |                 
|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                                                                           |  |                  | 189,361   |   |              |   | 188,931   |  
|Retained earnings                                                                                    |  |                  | 110,029   |   |              |   | 101,878   |  
|Unearned employee stock ownership plan shares                                                        |  |                  | (4,749    | ) |              |   | (5,045    | )
|Unearned recognition and retention plan shares                                                       |  |                  | (1,116    | ) |              |   | (1,134    | )
|Treasury stock, at cost: 3,018,719 shares at December 31, 2005 and 3,088,854 shares at June 30, 2005 |  |                  | (43,624   | ) |              |   | (44,638   | )
|Accumulated other comprehensive loss                                                                 |  |                  | (4,891    | ) |              |   | (3,517    | )
|                                                                                                     |  |                  |           |   |              |   |           |  
|Total shareholders equity                                                                           |  |                  | 245,191   |   |              |   | 236,656   |  
|                                                                                                     |  |                  |           |   |              |   |           |  
|Total liabilities and shareholders equity                                                           |  | $                | 2,626,531 |   |              | $ | 2,498,943 |  
|                                                                                                     |  |                  |           |   |              |   |           |  



See accompanying notes to condensed
consolidated financial statements.



3



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##### Table of Contents

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)



|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|--------------------------------------------------- |  | ------------------------------ | ------ | ---- | ---------------------------- | ------ | ---- |  | ---- | ------ |  | - | ------ | -
|                                                    |  | Three months endedDecember 31, |        |      | Six months endedDecember 31, |       
|                                                    |  | 2005                           |        | 2004 |                              |        | 2005 |  | 2004 |       
|INTEREST INCOME                                     |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Loans, including fees                               |  | $                              | 33,048 |      | $                            | 25,715 |      |  | $    | 64,498 |  | $ | 49,756 |  
|Securities                                          |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Taxable                                             |  |                                | 3,087  |      |                              | 3,173  |      |  |      | 6,023  |  |   | 6,564  |  
|Tax exempt                                          |  |                                | 395    |      |                              | 417    |      |  |      | 800    |  |   | 816    |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|TOTAL INTEREST INCOME                               |  |                                | 36,530 |      |                              | 29,305 |      |  |      | 71,321 |  |   | 57,136 |  
|                                                    |  |                                |        |     
|INTEREST EXPENSE                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Deposits                                            |  |                                | 10,661 |      |                              | 6,942  |      |  |      | 20,479 |  |   | 13,737 |  
|Short-term borrowings                               |  |                                | 2,325  |      |                              | 1,426  |      |  |      | 4,650  |  |   | 2,312  |  
|Long-term borrowings                                |  |                                | 3,892  |      |                              | 3,428  |      |  |      | 7,109  |  |   | 6,814  |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|TOTAL INTEREST EXPENSE                              |  |                                | 16,878 |      |                              | 11,796 |      |  |      | 32,238 |  |   | 22,863 |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|NET INTEREST INCOME                                 |  |                                | 19,652 |      |                              | 17,509 |      |  |      | 39,083 |  |   | 34,273 |  
|PROVISION FOR LOAN LOSSES                           |  |                                | 1,190  |      |                              | 1,371  |      |  |      | 2,545  |  |   | 1,678  |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                | 18,462 |      |                              | 16,138 |      |  |      | 36,538 |  |   | 32,595 |  
|                                                    |  |                                |        |     
|NONINTEREST INCOME                                  |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Service charges and fees on deposit accounts        |  |                                | 1,370  |      |                              | 1,345  |      |  |      | 2,738  |  |   | 2,725  |  
|Net gains on sale of securities                     |  |                                |       |      |                              |       |      |  |      |       |  |   | 304    |  
|Impairment of securities                            |  |                                |       |      |                              | (5,246 | )    |  |      |       |  |   | (5,246 | )
|Net gains on sale of loans                          |  |                                | 1,452  |      |                              | 1,687  |      |  |      | 3,335  |  |   | 2,424  |  
|Loan servicing income                               |  |                                | 192    |      |                              | 88     |      |  |      | 358    |  |   | 67     |  
|Other income  bank                                 |  |                                | 1,853  |      |                              | 1,686  |      |  |      | 3,622  |  |   | 2,931  |  
|Other income - non-bank subsidiaries                |  |                                | 1,940  |      |                              | 1,535  |      |  |      | 3,656  |  |   | 3,202  |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|TOTAL NONINTEREST INCOME                            |  |                                | 6,807  |      |                              | 1,095  |      |  |      | 13,709 |  |   | 6,407  |  
|                                                    |  |                                |        |     
|NONINTEREST EXPENSE                                 |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Salaries and employee benefits                      |  |                                | 8,487  |      |                              | 6,761  |      |  |      | 16,283 |  |   | 13,711 |  
|Occupancy and equipment                             |  |                                | 2,463  |      |                              | 2,395  |      |  |      | 4,881  |  |   | 4,808  |  
|Professional fees                                   |  |                                | 622    |      |                              | 645    |      |  |      | 1,440  |  |   | 1,206  |  
|Loan expenses                                       |  |                                | 597    |      |                              | 498    |      |  |      | 1,252  |  |   | 1,037  |  
|Marketing                                           |  |                                | 538    |      |                              | 563    |      |  |      | 1,162  |  |   | 1,237  |  
|Franchise taxes                                     |  |                                | 237    |      |                              | 524    |      |  |      | 328    |  |   | 1,029  |  
|Amortization of intangible assets                   |  |                                | 925    |      |                              | 986    |      |  |      | 1,869  |  |   | 1,944  |  
|Other                                               |  |                                | 2,666  |      |                              | 2,547  |      |  |      | 5,386  |  |   | 4,790  |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|TOTAL NONINTEREST EXPENSE                           |  |                                | 16,535 |      |                              | 14,919 |      |  |      | 32,601 |  |   | 29,762 |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|INCOME BEFORE INCOME TAXES                          |  |                                | 8,734  |      |                              | 2,314  |      |  |      | 17,646 |  |   | 9,240  |  
|Provision for income tax                            |  |                                | 2,688  |      |                              | 678    |      |  |      | 5,433  |  |   | 2,847  |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|NET INCOME                                          |  | $                              | 6,046  |      | $                            | 1,636  |      |  | $    | 12,213 |  | $ | 6,393  |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Basic earnings per share                            |  | $                              | 0.42   |      | $                            | 0.11   |      |  | $    | 0.84   |  | $ | 0.44   |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  
|Diluted earnings per share                          |  | $                              | 0.41   |      | $                            | 0.11   |      |  | $    | 0.83   |  | $ | 0.44   |  
|                                                    |  |                                |        |      |                              |        |      |  |      |        |  |   |        |  



See accompanying notes to condensed
consolidated financial statements.



4



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##### Table of Contents

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

|(Unaudited) | 
|----------- | 

(Dollars in thousands, except per share data)



|                                                                                                           |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                           |  | Three months endedDecember 31, |         |   | Six months endedDecember 31, |  
|                                                                                                           |  | 2005                           |         |   | 2004                         |   |         | 2005 |  |   | 2004    |  
|Balance at beginning of period                                                                             |  | $                              | 241,469 |   |                              | $ | 225,861 |      |  | $ | 236,656 |   |  | $ | 223,110 |  
|Comprehensive income:                                                                                      |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                                                                 |  |                                | 6,046   |   |                              |   | 1,636   |      |  |   | 12,213  |   |  |   | 6,393   |  
|Loss on termination of interest rate swaps reclassified into income, net of tax                            |  |                                | 158     |   |                              |   | 408     |      |  |   | 493     |   |  |   | 819     |  
|Change in unrealized gain (loss) on securities available for sale, net of reclassification and tax effects |  |                                | (1,107  | ) |                              |   | 1,623   |      |  |   | (1,867  | ) |  |   | 3,760   |  
|                                                                                                           |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                 |  |                                | 5,097   |   |                              |   | 3,667   |      |  |   | 10,839  |   |  |   | 10,972  |  
|Cash dividends declared                                                                                    |  |                                | (2,024  | ) |                              |   | (2,007  | )    |  |   | (4,062  | ) |  |   | (4,049  | )
|Commitment to release employee stock ownership plan shares                                                 |  |                                | 348     |   |                              |   | 320     |      |  |   | 672     |   |  |   | 599     |  
|Commitment to release recognition and retention plan shares                                                |  |                                | 12      |   |                              |   | 10      |      |  |   | 24      |   |  |   | 80      |  
|Treasury shares acquired                                                                                   |  |                                |        |   |                              |   | (290    | )    |  |   |        |   |  |   | (3,381  | )
|Stock options exercised and related tax benefit                                                            |  |                                | 263     |   |                              |   | 274     |      |  |   | 1,010   |   |  |   | 504     |  
|Issuance of stock option recognized                                                                        |  |                                | 26      |   |                              |   |        |      |  |   | 52      |   |  |   |        |  
|                                                                                                           |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Balance at end of period                                                                                   |  | $                              | 245,191 |   |                              | $ | 227,835 |      |  | $ | 245,191 |   |  | $ | 227,835 |  
|                                                                                                           |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Cash dividends declared per share                                                                          |  | $                              | 0.14    |   |                              | $ | 0.14    |      |  | $ | 0.28    |   |  | $ | 0.28    |  
|                                                                                                           |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  



See accompanying notes to condensed
consolidated financial statements.



5



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##### Table of Contents

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



|                                                           |  |                              |          |   |      |   |          |  
|---------------------------------------------------------- |  | ---------------------------- | -------- | - | ---- | - | -------- | -
|                                                           |  | Six months endedDecember 31, |         
|                                                           |  | 2005                         |          |   | 2004 |  
|Cash flows from operating activities:                      |  |                              |          |   |      |   |          |  
|Net cash from operating activities                         |  | $                            | 48,833   |   |      | $ | (3,335   | )
|                                                           |  |                             
|Cash flows from investing activities:                      |  |                              |          |   |      |   |          |  
|Securities available for sale                              |  |                              |          |   |      |   |          |  
|Proceeds from sales                                        |  |                              |         |   |      |   | 17,363   |  
|Proceeds from maturities, calls and principal paydowns     |  |                              | 30,721   |   |      |   | 59,973   |  
|Purchases                                                  |  |                              | (24,142  | ) |      |   | (35,563  | )
|Net change in interest-bearing deposits in other banks     |  |                              |         |   |      |   | 43,901   |  
|Net change in loans                                        |  |                              | (156,215 | ) |      |   | (246,758 | )
|Proceeds from sale of loans                                |  |                              | 9,076    |   |      |   | 12,946   |  
|Premises and equipment expenditures, net                   |  |                              | (4,279   | ) |      |   | (1,422   | )
|Investment in nonbank affiliates                           |  |                              | (96      | ) |      |   | (83      | )
|                                                           |  |                              |          |   |      |   |          |  
|Net cash from investing activities                         |  |                              | (144,935 | ) |      |   | (149,643 | )
|                                                           |  |                             
|Cash flows from financing activities:                      |  |                              |          |   |      |   |          |  
|Net change in deposits                                     |  |                              | 55,742   |   |      |   | 29,648   |  
|Net change in short-term borrowings                        |  |                              | (21,738  | ) |      |   | 65,141   |  
|Repayment of long-term borrowings                          |  |                              | (18,009  | ) |      |   | (8       | )
|Proceeds from long-term borrowings                         |  |                              | 70,000   |   |      |   | 50,000   |  
|Net proceeds from issuance of subordinated debt securities |  |                              | 30,928   |   |      |   |         |  
|Cash dividends paid                                        |  |                              | (4,062   | ) |      |   | (4,049   | )
|Proceeds from stock options exercised                      |  |                              | 845      |   |      |   | 504      |  
|Purchase of treasury stock                                 |  |                              |         |   |      |   | (3,381   | )
|                                                           |  |                              |          |   |      |   |          |  
|Net cash from financing activities                         |  |                              | 113,706  |   |      |   | 137,855  |  
|                                                           |  |                              |          |   |      |   |          |  
|Net change in cash and cash equivalents                    |  |                              | 17,604   |   |      |   | (15,123  | )
|                                                           |  |                             
|Cash and cash equivalents at beginning of period           |  |                              | 52,549   |   |      |   | 67,350   |  
|                                                           |  |                              |          |   |      |   |          |  
|Cash and cash equivalents at end of period                 |  | $                            | 70,153   |   |      | $ | 52,227   |  
|                                                           |  |                              |          |   |      |   |          |  
|Supplemental cash flow information:                        |  |                              |          |   |      |   |          |  
|Cash payments of interest expense                          |  | $                            | 31,076   |   |      | $ | 21,875   |  
|Cash payments of income taxes                              |  | $                            | 5,243    |   |      | $ | 3,780    |  
|                                                           |  |                             
|Supplemental non-cash disclosures:                         |  |                              |          |   |      |   |          |  
|Loans securitized                                          |  | $                            | 69,532   |   |      | $ | 72,123   |  
|Transfer of loans from held-for-sale to portfolio          |  | $                            | 28,839   |   |      | $ |         |  
|Transfer of loans to other real estate                     |  | $                            | 679      |   |      | $ | 3,304    |  
|Transfer from long-term to short-term borrowings           |  | $                            | 8,250    |   |      | $ |         |  



See accompanying notes to condensed
consolidated financial statements.



6



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##### Table of Contents

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)



1. Significant Accounting Policies



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 consolidated financial statements and notes thereto included in First Place Financial Corp.s 2005 Annual Report to Shareholders
included in First Place Financial Corp.s 2005 Annual Report on Form 10-K. 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. (Company) and its wholly owned subsidiaries, First Place Bank (Bank) and First Place Holdings, Inc. The
condensed consolidated financial statements include subsidiaries of First Place Holdings, Inc.First Place Insurance Agency, Ltd., APB Financial Group, Ltd., American Pension Benefits, Inc., TitleWorks Agency, LLC and Coldwell Banker First
Place Real Estate, Ltd. and its subsidiary, First Place Referral Network, Ltd. TitleWorks Agency, LLC is a 75% owned subsidiary of First Place Holdings, Inc. The investments of the Company in First Place Capital Trust, First Place Capital Trust II
and First Place Capital Trust III have been accounted for under the equity method. This accounting treatment is based on the purpose of First Place Capital Trust, First Place Capital Trust II and First Place Capital Trust III as protecting the
interests of the holders of the securities they have issued. All significant intercompany balances and transactions have been eliminated in consolidation. During the second quarter of fiscal 2006, Franklin Safe Deposit Corporation and Franklin
Mortgage Services LLC were merged into First Place Bank. Franklin Safe Deposit Corporation and Franklin Mortgage Services LLC were fully consolidated since being acquired in May 2004, and therefore the merger had no impact on the consolidated
financial statements.



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.
Actual results could differ from those estimates. The allowance for loan losses and the valuation of mortgage servicing rights are particularly subject to change.



Stock Options. Prior to July 1, 2005, the Company accounted for stock-based compensation expense using the intrinsic value
method as required by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. No compensation cost for stock options was reflected in net income for fiscal year 2005, as all options granted had an exercise price equal to the market price of the underlying common stock at date of grant.



On July 1, 2005, the Company adopted SFAS No. 123(R) (revised version of SFAS
No. 123) which requires measurement of compensation cost for all stock-based awards be based on the grant-date fair value and recognition of compensation cost over the service period of stock-based awards, which is usually the same as the
vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Companys valuation methodology previously utilized for options in footnote disclosures required under SFAS
No. 123. The fair value of stock grants will also be determined using the Black-Scholes valuation model. The Company has adopted SFAS No. 123(R) using the modified prospective method, which provides for no retroactive application to prior
periods and no cumulative adjustment to equity accounts. It also provides for expense recognition, for both new and existing stock-based awards, as the required services are rendered. SFAS No. 123(R) also amends SFAS No. 95,
Statement of Cash Flows, and requires tax benefits relating to excess stock-based compensation deductions be presented in the statement of cash flows as financing cash inflows.



On March 29, 2005, the Securities and Exchange Commission (SEC) published Staff
Accounting Bulletin No. 107 (SAB 107), which expressed the views of the Staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provided the Staffs views regarding the valuation of
stock-based payment arrangements for public companies. SAB 107 requires that stock-based compensation be classified in the same expense category as cash compensation. Accordingly, the Company has included stock-based compensation expense in salaries
and employee benefits in the condensed consolidated statements of income.



7



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##### Table of Contents

The adoption of SFAS No. 123(R) had the following impact on reported amounts compared with amounts that would have
been reported using the intrinsic value method under previous accounting.



|                                              |  |                                      |        |                       |   |       |            |  |   |       
|--------------------------------------------- |  | ------------------------------------ | ------ | --------------------- | - | ----- | ---------- |  | - | ------
|                                              |  | Three months ended December 31, 2005
|(Dollars in thousands, except per share data) |  | UsingPreviousAccounting              |        | SFAS123(R)Adjustments |   |       | AsReported
|Income before income taxes                    |  | $                                    | 8,760  |                       | $ | (26   | )          |  | $ | 8,734 
|Income taxes                                  |  |                                      | 2,688  |                       |   |      |            |  |   | 2,688 
|                                              |  |                                      |        |                       |   |       |            |  |   |       
|Net income                                    |  | $                                    | 6,072  |                       | $ | (26   | )          |  | $ | 6,046 
|                                              |  |                                      |        |                       |   |       |            |  |   |       
|Basic earnings per share                      |  | $                                    | 0.42   |                       | $ |      |            |  | $ | 0.42  
|Diluted earnings per share                    |  | $                                    | 0.41   |                       | $ |      |            |  | $ | 0.41  
|                                              |  |                                      |       
|Cash flow from operating activities           |  | $                                    | 37,354 |                       | $ | 26    |            |  | $ | 37,380
|                                              | 
|                                              |  | Six months ended December 31, 2005  
|(Dollars in thousands, except per share data) |  | UsingPreviousAccounting              |        | SFAS123(R)Adjustments |   |       | AsReported
|Income before income taxes                    |  | $                                    | 17,698 |                       | $ | (52   | )          |  | $ | 17,646
|Income taxes                                  |  |                                      | 5,433  |                       |   |      |            |  |   | 5,433 
|                                              |  |                                      |        |                       |   |       |            |  |   |       
|Net income                                    |  | $                                    | 12,265 |                       | $ | (52   | )          |  | $ | 12,213
|                                              |  |                                      |        |                       |   |       |            |  |   |       
|Basic earnings per share                      |  | $                                    | 0.85   |                       | $ | (0.01 | )          |  | $ | 0.84  
|Diluted earnings per share                    |  | $                                    | 0.83   |                       | $ |      |            |  | $ | 0.83  
|                                              |  |                                      |       
|Cash flow from operating activities           |  | $                                    | 48,781 |                       | $ | 52    |            |  | $ | 48,833



The following table illustrates the
effect on net income and earnings per share if expense had been measured using the fair value recognition provisions of SFAS No. 123(R).



|                                              |  |                                      |       |                      |   |     |                                  |  |   |      
|--------------------------------------------- |  | ------------------------------------ | ----- | -------------------- | - | --- | -------------------------------- |  | - | -----
|                                              |  | Three months ended December 31, 2004
|(Dollars in thousands, except per share data) |  | AsReported                           |       | Pro FormaAdjustments |   |     | Pro Forma asIf underSFAS 123 (R)
|Income before income taxes                    |  | $                                    | 2,314 |                      | $ | (43 | )                                |  | $ | 2,271
|Income taxes                                  |  |                                      | 678   |                      |   |    |                                  |  |   | 678  
|                                              |  |                                      |       |                      |   |     |                                  |  |   |      
|Net income                                    |  | $                                    | 1,636 |                      | $ | (43 | )                                |  | $ | 1,593
|                                              |  |                                      |       |                      |   |     |                                  |  |   |      
|Basic earnings per share                      |  | $                                    | 0.11  |                      | $ |    |                                  |  | $ | 0.11 
|Diluted earnings per share as reported        |  | $                                    | 0.11  |                      | $ |    |                                  |  | $ | 0.11 
|Cash flow from operating activities           |  | $                                    | 930   |                      | $ | 43  |                                  |  | $ | 973  



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##### Table of Contents

|                                              |  |                                    |        |   |                      |   |       |                                  |  |   |        |  
|--------------------------------------------- |  | ---------------------------------- | ------ | - | -------------------- | - | ----- | -------------------------------- |  | - | ------ | -
|                                              |  | Six months ended December 31, 2004 |       
|(Dollars in thousands, except per share data) |  | AsReported                         |        |   | Pro FormaAdjustments |   |       | Pro Forma asIf underSFAS 123 (R) | 
|                                              |  |                                    |       
|Income before income taxes                    |  | $                                  | 9,240  |   |                      | $ | (90   | )                                |  | $ | 9,150  |  
|Income taxes                                  |  |                                    | 2,847  |   |                      |   |      |                                  |  |   | 2,847  |  
|                                              |  |                                    |        |   |                      |   |       |                                  |  |   |        |  
|Net income                                    |  | $                                  | 6,393  |   |                      | $ | (90   | )                                |  | $ | 6,303  |  
|                                              |  |                                    |        |   |                      |   |       |                                  |  |   |        |  
|Basic earnings per share                      |  | $                                  | 0.44   |   |                      | $ | (0.01 | )                                |  | $ | 0.43   |  
|Diluted earnings per share as reported        |  | $                                  | 0.44   |   |                      | $ | (0.01 | )                                |  | $ | 0.43   |  
|                                              |  |                                    |       
|Cash flow from operating activities           |  | $                                  | (3,335 | ) |                      | $ | 90    |                                  |  | $ | (3,245 | )



Segment Information.While the
Companys chief decision-makers monitor the revenue streams of the Companys various products and services, the identifiable segments are not material, and operations are managed and financial performance is evaluated on a Company-wide
basis. Accordingly, all of the Companys financial service operations are considered by management to be aggregated in one reportable operating segment, community banking.



Reclassifications. Certain reclassifications have been made to prior periods condensed consolidated financial statements and
related notes in order to conform to the current period presentation.



2.
Stock Compensation Plans



On July 2, 1999, the Companys
shareholders approved and the Board of Directors established the 1999 Incentive Plan (1999 Plan). The 1999 Plan provides the Board with the authority to compensate directors, key employees and individuals performing services as consultants or
independent contractors with stock awards for their services to the Company. The awards authorized include incentive stock options, nonqualified stock options and stock grants. The granting of stock awards is also referred to as the Recognition and
Retention Plan. The 1999 Plan originally authorized 1,124,125 shares of stock for options and 449,650 for grants or a total of 1,573,775. Subsequent to the establishment of the plan, 587,500 shares were added to the shares available for stock
options due to a merger. Stock options and stock grants reduce the shares available for grant while unvested awards that are forfeited increase the shares available for grant. During the six months ended December 31, 2005, the Company issued
2,000 incentive stock options. As of December 31, 2005, there were 2,461 shares available to be awarded as options and 80,780 shares available to be awarded as stock grants.



On October 28, 2004, the shareholders of the Company approved the creation of the 2004 Incentive Plan (2004 Plan). It is similar to the
1999 Plan. It also provides for awards to be issued in the form of incentive stock options, nonqualified stock options and stock awards. A total of 1,000,000 shares may be issued under the 2004 Plan in any combination of the three types of awards.
As of December 31, 2005, no awards have been issued under the 2004 Plan.



Stock Options



The Company can issue incentive stock options
and nonqualified stock options under the 1999 Plan and the 2004 Plan. Existing option awards generally become exercisable at the rate of 20% per year on the first five anniversary dates of the grant. However, the vesting schedule is determined
at the time of each grant and future grants may have different vesting schedules. Generally, the option period expires ten years from the date of grant and the exercise price is the market price at the date of grant.



9



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##### Table of Contents

Following is activity under the plans:



|                                         |  |                                                             |   |  |                              |       |                          |   |     
|---------------------------------------- |  | ----------------------------------------------------------- | - |  | ---------------------------- | ----- | ------------------------ | - | ----
|                                         |  | Six months ended December 31, 2005Total options outstanding
|                                         |  | Shares                                                      |   |  | WeightedAverageExercisePrice |       | WeightedAverageFairValue
|Options outstanding, beginning of period |  | 859,554                                                     |   |  | $                            | 13.28 |                          | $ | 2.82
|Forfeited                                |  |                                                            |   |  |                              |      |                          |   |    
|Exercised                                |  | (70,135                                                     | ) |  | $                            | 12.06 |                          | $ | 2.44
|Granted                                  |  | 2,000                                                       |   |  | $                            | 20.98 |                          | $ | 4.51
|                                         |  |                                                             |   |  |                              |       |                          |   |     
|Options outstanding, end of period       |  | 791,419                                                     |   |  | $                            | 13.41 |                          | $ | 2.73
|                                         |  |                                                             |   |  |                              |       |                          |   |     
|Options exercisable, end of period       |  | 700,636                                                     |   |  | $                            | 12.67 |                          | $ | 2.59



The aggregate intrinsic value of all
options outstanding at December 31, 2005 was $8.42 million. The aggregate intrinsic value of all options that were exercisable at December 31, 2005 was $7.97 million.



|                                      |  |                                                          |   |  |                            |     
|------------------------------------- |  | -------------------------------------------------------- | - |  | -------------------------- | ----
|                                      |  | Six months ended December 31, 2005Total unvested options
|                                      |  | Shares                                                   |   |  | WeightedAverage Fair Value
|Unvested options, beginning of period |  | 137,163                                                  |   |  | $                          | 4.04
|Vested                                |  | (48,380                                                  | ) |  | $                          | 3.27
|Granted                               |  | 2,000                                                    |   |  | $                          | 4.51
|                                      |  |                                                          |   |  |                            |     
|Unvested options, end of period       |  | 90,783                                                   |   |  | $                          | 4.46
|                                      |  |                                                          |   |  |                            |     



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



|                                     |  |                               |     |      |   |    
|------------------------------------ |  | ----------------------------- | --- | ---- | - | ---
|                                     |  | Six months ended December 31,
|                                     |  | 2005                          |     | 2004
|Proceeds of options exercised        |  | $                             | 845 |      | $ | 412
|Related tax benefit recognized       |  | $                             | 222 |      | $ | 92 
|Intrinsic value of options exercised |  | $                             | 664 |      | $ | 281



Options outstanding at December 31, 2005 were as follows:



|                          |  |             |  |                                         |  |         |  |                                |      
|------------------------- |  | ----------- |  | --------------------------------------- |  | ------- |  | ------------------------------ | -----
|                          |  | Outstanding |  | Exercisable                            
|                          |  | Shares      |  | WeightedAverageRemainingContractualLife |  | Shares  |  | WeightedAverage Exercise Price
|$9.54-$12.00              |  | 106,550     |  | 4.4                                     |  | 106,550 |  | $                              | 11.11
|$12.01-$14.00             |  | 534,581     |  | 3.5                                     |  | 534,581 |  | $                              | 12.33
|$14.01-$20.98             |  | 150,288     |  | 7.7                                     |  | 59,505  |  | $                              | 18.50
|                          |  |             |  |                                         |  |         |  |                                |      
|Outstanding at period end |  | 791,419     |  | 4.4                                     |  | 700,636 |  | $                              | 12.67
|                          |  |             |  |                                         |  |         |  |                                |      



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##### Table of Contents

The fair value of stock options granted during the six months ended December 31, 2005, was determined at the date of
grant using a Black-Scholes option-pricing model and the following assumptions:



|                                         |  |       |  
|---------------------------------------- |  | ----- | -
|Expected average risk-free interest rate |  | 4.36  | %
|Expected average life (in years)         |  | 5.06  |  
|Expected volatility                      |  | 24.33 | %
|Expected dividend yield                  |  | 2.79  | %



The expected average risk-free rate is
based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The expected average life represents the weighted average period of time that options granted are expected to be
outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. Expected volatility is based on historical volatilities of the Companys common stock. The expected dividend yield is based on historical
information.



Recognition and Retention Plan



The Company can issue stock grants as a form of compensation to directors and key employees
under the 1999 Plan and the 2004 Plan. Generally, one-fifth of such shares are earned and nonforfeitable on each of the first five anniversaries of the date of the awards. In the event of the death or disability of a participant or a change in
control of the Company, the participants shares will be deemed to be entirely earned and nonforfeitable upon such date. Recipients are entitled to receive dividends on their respective shares but are restricted from selling, transferring, or
assigning their shares until full vesting of such shares has occurred.



Compensation expense for grants prior to July 1, 2005 is based on the cost of the shares, which approximates fair value at the date of grant, and is recognized over the vesting period of the grant. Compensation expense for grants
issued after June 30, 2005 is based on the fair value of the shares at the date of grant. Unearned compensation is reported as a reduction of shareholders equity until earned.



Activity in issued but unvested stock grants during the six months ended December 31, 2005, was as
follows:



|                                            |  |        |   |  |                      |      
|------------------------------------------- |  | ------ | - |  | -------------------- | -----
|                                            |  | Shares |   |  | WeightedAverageValue
|Issued and unvested as of June 30, 2005     |  | 4,875  |   |  | $                    | 18.05
|Shares vested during the period             |  | (1,510 | ) |  | $                    | 17.20
|                                            |  |        |   |  |                      |      
|Issued and unvested as of December 31, 2005 |  | 3,365  |   |  | $                    | 18.42
|                                            |  |        |   |  |                      |      



The
intrinsic value of unvested stock grants at December 31, 2005 was $81.



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



|                                       |  |                               |    |             |   |              |  |             |   |  |   |   
|-------------------------------------- |  | ----------------------------- | -- | ----------- | - | ------------ |  | ----------- | - |  | - | --
|                                       |  | Six months ended December 31,
|                                       |  | 2005                          |    | 2004       
|                                       |  | StockOptions                  |    | StockGrants |   | StockOptions |  | StockGrants
|Compensation cost recognized in income |  | $                             | 52 |             | $ | 24           |  | $           |  |  | $ | 80
|Related tax benefit recognized         |  |                               |   |             |   | 8            |  |             |  |  |   | 28



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##### Table of Contents

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 2006              |  | $            | 52  |             | $ | 24          |  | $ | 76 
|2007                           |  |              | 104 |             |   | 9           |  |   | 113
|2008                           |  |              | 103 |             |   | 9           |  |   | 112
|2009                           |  |              | 31  |             |   | 9           |  |   | 40 
|2010                           |  |              | 28  |             |   | 2           |  |   | 30 
|2011                           |  |              | 2   |             |   |            |  |   | 2  
|                               |  |              |     |             |   |             |  |   |    
|Total                          |  | $            | 320 |             | $ | 53          |  | $ | 373
|                               |  |              |     |             |   |             |  |   |    
|                               |  |              |    
|Weighted average life in years |  |              |     |             |   |             |  |   | 1.8



3. Earnings per Share



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



|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|----------------------------------------------------------------------- | ---- | ------------------------------ | ---------- | ---- | ----------------------------- | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|(Dollars in thousands, except share data)                               |      | Three months endedDecember 31, |            |      | Six months ended December 31, |  
|                                                                        | 2005 |                                |            | 2004 |                               |   | 2005       |   |  | 2004 |           
|Basic earnings per share computation:                                   |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Net Income                                                              |      | $                              | 6,046      |      |                               | $ | 1,636      |   |  | $    | 12,213     |   |  | $ | 6,393      |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Gross weighted average shares outstanding                               |      |                                | 15,088,446 |      |                               |   | 14,981,810 |   |  |      | 15,073,306 |   |  |   | 15,023,513 |  
|Less: Average unearned ESOP shares                                      |      |                                | (484,574   | )    |                               |   | (543,926   | ) |  |      | (492,020   | ) |  |   | (551,371   | )
|Less: Average unearned RRP shares                                       |      |                                | (84,694    | )    |                               |   | (87,540    | ) |  |      | (85,055    | ) |  |   | (88,587    | )
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Net weighted average shares outstanding                                 |      |                                | 14,519,178 |      |                               |   | 14,350,344 |   |  |      | 14,496,231 |   |  |   | 14,383,555 |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Basic earnings per share                                                |      | $                              | 0.42       |      |                               | $ | 0.11       |   |  | $    | 0.84       |   |  | $ | 0.44       |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Diluted earnings per share computation:                                 |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Net Income                                                              |      | $                              | 6,046      |      |                               | $ | 1,636      |   |  | $    | 12,213     |   |  | $ | 6,393      |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Weighted average shares outstanding for basic earnings per share        |      |                                | 14,519,178 |      |                               |   | 14,350,344 |   |  |      | 14,496,231 |   |  |   | 14,383,555 |  
|Add: Dilutive effects of assumed exercises of stock options             |      |                                | 260,409    |      |                               |   | 273,899    |   |  |      | 248,859    |   |  |   | 244,480    |  
|Add: Dilutive effects of unearned Recognition and Retention Plan shares |      |                                | 501        |      |                               |   | 514        |   |  |      | 421        |   |  |   | 413        |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Weighted average shares and potentially dilutive shares                 |      |                                | 14,780,088 |      |                               |   | 14,624,757 |   |  |      | 14,745,511 |   |  |   | 14,628,448 |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  
|Diluted earnings per share                                              |      | $                              | 0.41       |      |                               | $ | 0.11       |   |  | $    | 0.83       |   |  | $ | 0.44       |  
|                                                                        |      |                                |            |      |                               |   |            |   |  |      |            |   |  |   |            |  



There were no stock options that were
antidilutive for the three and six-month periods ended December 31, 2005 and for the three and six-month periods ended December 31, 2004. Therefore, all stock options were considered in computing diluted earnings per share.



12



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##### Table of Contents

4. Junior Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts



In September 2005, the Company formed an affiliated trust, First Place Capital Trust III
(the Trust Affiliate) that issued $30,000 of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with this transaction, the Company issued $30,928 of Junior Subordinated Deferrable Interest Debentures (Junior Debentures)
to the Trust Affiliate. The Company formed the Trust Affiliate for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Junior Debentures of the
Company. The Junior Debentures held by the Trust Affiliate are the sole assets of that trust. Distributions on the Trust Preferred Securities issued by First Place Capital Trust III are payable quarterly at a fixed rate of 5.69% for five years
through September 15, 2010, and a floating rate of interest that resets quarterly to 1.45% above the 3-month Libor rate for the remaining 25 years. The interest rates on the Junior Debentures are identical to the interest rates on the Trust
Preferred Securities.



The Trust Preferred Securities are subject to mandatory
redemption, in whole or part, upon repayment of the Junior Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The issuers may redeem
the Trust Preferred Securities and the Junior Debentures for a premium through September 15, 2010 at the greater of (i) 107.5% of the principal amount of the Junior Debentures or (ii) the sum of the present values of the scheduled
payments of principal during the fixed rate period remaining life of the Debentures discounted to the special redemption date on a quarterly basis at the treasury rate. After September 15, 2010, the issuers may redeem the Trust Preferred
Securities and Junior Debentures at par.



A summary of all junior debentures
issued by the Company to affiliates follows. These amounts represent the par value of the obligations owed to these affiliates, including the Companys equity interest in the trusts. Junior subordinated debentures owed to the following
affiliates were as follows:



|                                                                              |  |                  |        |              |   |       
|----------------------------------------------------------------------------- |  | ---------------- | ------ | ------------ | - | ------
|                                                                              |  | December 31,2005 |        | June 30,2005
|First Place Capital Trust due January 2034                                    |  | $                | 15,465 |              | $ | 15,465
|First Place Capital Trust II due January 2034                                 |  |                  | 15,464 |              |   | 15,464
|First Place Capital Trust III due September 2035                              |  |                  | 30,928 |              |   |      
|                                                                              |  |                  |        |              |   |       
|Total junior subordinated debentures owed to unconsolidated subsidiary trusts |  | $                | 61,857 |              | $ | 30,929
|                                                                              |  |                  |        |              |   |       



The Company has used the proceeds of
the Junior Debentures issued in September 2005 for general corporate purposes. Interest on all three issues of trust preferred securities may be deferred for a period of up to five years at the option of the issuer. The trusts are accounted for
using the equity method of accounting for investments, and therefore have not been included in the consolidated financial statements of the Company.



5. Short-term and Long-term Borrowings



|                                                                        |  |                  |         |              |   |        
|----------------------------------------------------------------------- |  | ---------------- | ------- | ------------ | - | -------
|                                                                        |  | December 31,2005 |         | June 30,2005
|Short-term borrowings                                                   |  |                  |         |              |   |        
|Federal Home Loan Bank advances                                         |  | $                | 224,210 |              | $ | 248,097
|Securities sold under agreement to repurchase                           |  |                  | 24,595  |              |   | 14,196 
|                                                                        |  |                  |         |              |   |        
|Total                                                                   |  | $                | 248,805 |              | $ | 262,293
|                                                                        |  |                  |         |              |   |        
|Long-term borrowings                                                    |  |                  |         |              |   |        
|Federal Home Loan Bank advances                                         |  | $                | 258,734 |              | $ | 207,109
|Securities sold under agreement to repurchase                           |  |                  | 14,500  |              |   | 22,750 
|Junior subordinated debentures owed to unconsolidated subsidiary trusts |  |                  | 61,857  |              |   | 30,929 
|                                                                        |  |                  |         |              |   |        
|Total                                                                   |  | $                | 335,091 |              | $ | 260,788
|                                                                        |  |                  |         |              |   |        



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6. Financial Instruments with Off-Balance-Sheet Risk



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 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 types of transactions as of
December 31, 2005 are shown below. Current values are also indicated for guarantee obligations.



|                                                |  |               |         |                                  |   |        |  
|----------------------------------------------- |  | ------------- | ------- | -------------------------------- | - | ------ | -
|                                                |  | Nominal value |         | Current asset /(liability) value |  
|GUARANTEE OBLIGATIONS                           |  |               |         |                                  |   |        |  
|Loans sold with recourse                        |  | $             | 255,980 |                                  | $ | (1,061 | )
|Standby letters of credit                       |  |               | 4,048   |                                  |   |       |  
|                                                |  |              
|OTHER OBLIGATIONS                               |  |               |         |                                  |   |        |  
|Commitments to disburse construction loan funds |  | $             | 199,325 |                                  |   |        |  
|Commitments to originate or purchase loans      |  |               | 160,718 |                                  |   |        |  
|Commitments to sell loans                       |  |               | 90,340  |                                  |   |        |  
|Unused lines of credit                          |  |               | 202,510 |                                  |   |        |  
|Commercial letters of credit                    |  |               | 55,399  |                                  |   |        |  



The loans sold with recourse were sold
to government-sponsored enterprises beginning in 2001. 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.



7. Recent Accounting Pronouncements



In May 2005, the
Financial Accounting Standards Board 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 will apply to the Company effective July 1, 2006. The adoption of this pronouncement has not had a material impact on the Companys consolidated
financial statements.



8. Subsequent Events



On January 27, 2006, the Company announced that it had entered into an Agreement and
Plan of Merger to acquire The Northern Savings and Loan Company of Elyria, Ohio (Northern). As of December 31, 2005, Northern had total assets of $341 million, deposits of $265 million and shareholders equity of $43 million. Under the
terms of the agreement, Northern shareholders will be entitled to receive for each share of Northern common stock either $29.00 in cash or 1.138 shares of the Companys common stock or any combination thereof, subject to the election and
allocation procedures which are intended to insure that in the aggregate, a minimum of 80% and a maximum of 90% of Northern shares will be exchanged for common stock of the Company. The approximate value of this transaction is $71.5 million. The
merger agreement has been unanimously approved by the Companys and Northerns Board of Directors. The consummation of the merger is subject to the approval of Northerns shareholders, regulatory authorities and other closing
conditions. The acquisition is expected to take place during the second calendar quarter of 2006.



14



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##### Table of Contents

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. 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 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. The Company also
operates loan production offices in various cities in Ohio, Michigan and Indiana. As of December 31, 2005, the Company had $2.6 billion in assets and was the largest publicly traded thrift institution in Ohio.



Strategic Plan. The Company seeks to grow assets and fees in order to grow net income.
Currently, the Company seeks to grow by increasing market share in current markets, expanding into new markets in the Midwest by opening de novo loan production and banking offices and through acquisitions. 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.



On January 27, 2006, the Company announced that it has entered into a Definitive
Agreement to acquire Northern Savings and Loan Company, Elyria, Ohio. This move represents a significant step in our strategic vision to expand our franchise across Ohio. It is a natural progression west from several Cleveland markets where the
Company has experienced exceptional growth and it bridges the geographic gap to our operations in Southern Michigan.



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 goal of achieving high levels of profitability on a consistent basis is balanced with 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. The following section contains a summary of the primary financial measures the Company uses.



15



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##### Table of Contents

Results of Operations



Comparison of the Three Months and Six Months Ended December 31, 2005 and 2004



Selected Financial Ratios and Other Measures



|                                                   |            |                    |           |            |                     |   |           |   |         |   |         |  |       |   
|-------------------------------------------------- | ---------- | ------------------ | --------- | ---------- | ------------------- | - | --------- | - | ------- | - | ------- |  | ----- | --
|(Dollars in thousands except per share amounts)    |            | Three Months Ended |           |            | Increase (Decrease) |  
|                                                   | 12/31/2005 |                    |           | 12/31/2004 |                     |   | Amount    |   | Percent |  
|Total assets                                       |            | $                  | 2,626,531 |            |                     | $ | 2,385,302 |   |         | $ | 241,229 |  | 10.1  | % 
|Net income                                         |            | $                  | 6,046     |            |                     | $ | 1,636     |   |         | $ | 4,410   |  | 269.6 | % 
|Diluted earnings per share                         |            | $                  | 0.41      |            |                     | $ | 0.11      |   |         | $ | 0.30    |  | 272.7 | % 
|Return on average equity                           |            |                    | 9.86      | %          |                     |   | 2.88      | % |         |   |         |  | 7.0   | % 
|Return on average assets                           |            |                    | 0.93      | %          |                     |   | 0.28      | % |         |   |         |  | 0.7   | % 
|Net interest margin                                |            |                    | 3.33      | %          |                     |   | 3.30      | % |         |   |         |  |      |   
|Efficiency ratio                                   |            |                    | 61.97     | %          |                     |   | 79.23     | % |         |   |         |  | (17.3 | )%
|Noninterest expense as a percent of average assets |            |                    | 2.54      | %          |                     |   | 2.52      | % |         |   |         |  |      |   
|Nonperforming assets to total assets               |            |                    | 0.62      | %          |                     |   | 0.61      | % |         |   |         |  |      |   
|Tangible equity to tangible assets                 |            |                    | 6.90      | %          |                     |   | 6.72      | % |         |   |         |  | 0.2   | % 



Summary. Net income of $6.0
million for the quarter ended December 31, 2005 was an increase of $4.4 million or 269.6% over net income of $1.6 million for the quarter ended December 31, 2004. Diluted earnings per share were $0.41 for the quarter compared with $0.11
for the prior-year period, an increase of 272.7%. Return on average equity for the quarter was 9.86% compared with 2.88% for the same quarter in the prior year. These significant increases over the prior year were primarily due to a prior year
pretax charge of $5.2 million to record other-than-temporary impairment on Fannie Mae and Freddie Mac preferred stocks. This charge had an after-tax effect on net income of $3.4 million, or $0.23 per diluted share. The increase in net income was
also due to an increase of $2.2 million in net interest income, partially offset by an increase of $1.6 million in noninterest expense. The increase in net interest income was primarily due to an increase in average interest-earning assets. The
increase in noninterest expense was primarily due to an increase in salaries and employee benefits. This increase was due to additional personnel at new and existing locations and the resulting increases in volume-based commissions, and health
insurance costs. As a result, the ratio of noninterest expense to average assets increased to 2.54% for the current quarter compared with 2.52% for the prior year quarter. Nonperforming assets as a percent of total assets increased slightly to 0.62%
from 0.61% a year earlier.



Selected Financial Ratios and Other
Measures



|                                                   |            |                  |           |            |                     |   |           |   |         |   |         |  |       |   
|-------------------------------------------------- | ---------- | ---------------- | --------- | ---------- | ------------------- | - | --------- | - | ------- | - | ------- |  | ----- | --
|(Dollars in thousands except per share amounts)    |            | Six Months Ended |           |            | Increase (Decrease) |  
|                                                   | 12/31/2005 |                  |           | 12/31/2004 |                     |   | Amount    |   | Percent |  
|Total assets                                       |            | $                | 2,626,531 |            |                     | $ | 2,385,302 |   |         | $ | 241,229 |  | 10.1  | % 
|Net income                                         |            | $                | 12,213    |            |                     | $ | 6,393     |   |         | $ | 5,820   |  | 91.0  | % 
|Diluted earnings per share                         |            | $                | 0.83      |            |                     | $ | 0.44      |   |         | $ | 0.39    |  | 88.6  | % 
|Return on average equity                           |            |                  | 10.05     | %          |                     |   | 5.65      | % |         |   |         |  | 4.4   | % 
|Return on average assets                           |            |                  | 0.95      | %          |                     |   | 0.55      | % |         |   |         |  | 0.4   | % 
|Net interest margin                                |            |                  | 3.34      | %          |                     |   | 3.30      | % |         |   |         |  |      |   
|Efficiency ratio                                   |            |                  | 61.24     | %          |                     |   | 72.37     | % |         |   |         |  | (11.1 | )%
|Noninterest expense as a percent of average assets |            |                  | 2.53      | %          |                     |   | 2.54      | % |         |   |         |  |      |   
|Nonperforming assets to total assets               |            |                  | 0.62      | %          |                     |   | 0.61      | % |         |   |         |  |      |   
|Tangible equity to tangible assets                 |            |                  | 6.90      | %          |                     |   | 6.72      | % |         |   |         |  | 0.2   | % 



Summary. Net income of $12.2
million for the six months ended December 31, 2005 was an increase of $5.8 million or 91.0% over net income of $6.4 million for the six months ended December 31, 2004. Diluted earnings per share were $0.83 for the first six months of
fiscal year 2006 compared with $0.44 for the prior-year period, an increase of 88.6%. Return on average equity for the six months ended December 31, 2005 was 10.05% compared with 5.65% for the same period in the prior year. These significant
increases over the prior year were primarily due to a prior-year pretax charge of $5.2 million to record other-than-temporary impairment on Fannie Mae and Freddie Mac preferred stocks. This



16



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##### Table of Contents

charge had an after-tax effect on net income of $3.4 million, or $0.23 per diluted share. The increase in net income was
also due to an increase of $4.8 million in net interest income, 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. The
increase in noninterest expense was primarily due to an increase in salaries and employee benefits. This increase was due to additional personnel at new and existing locations and the resulting increases in volume-based commissions, and health
insurance costs. Even though average assets increased $239.6 million or 10.3% for the six months ended December 31, 2005 compared to the same period in the prior year, noninterest expense as a percent of average assets remained stable at 2.53%
compared with 2.54% in the prior year.



Explanation of Certain Non-GAAP
Measures.This Form 10-Q contains certain financial information determined by methods other than Generally Accepted Accounting Principles (GAAP). Specifically, the Company has provided financial measures that are based on core earnings rather
than net income. Ratios and other financial measures with the word Core in their title were computed using core earnings rather than net income. Core earnings excludes merger, integration and restructuring expense, extraordinary income or expense,
income or expense from discontinued operations, and income, expense, gains and losses that are not reflective of ongoing operations or that we do not expect to reoccur. Management of the Company believes that this information is useful to both
investors and to management and can aid them in understanding the Companys current performance, performance trends and financial condition. While core earnings can be useful in evaluating current performance and projecting current trends into
the future, management does not believe that core earnings are a substitute for GAAP net income. We encourage investors and others to use core earnings as a supplemental tool for analysis and not as a substitute for GAAP net income. The
Companys non-GAAP measures may not be comparable to the non-GAAP numbers of other companies. In addition, future results of operations may include nonrecurring items that would not be included in core earnings. A reconciliation from GAAP net
income to the non-GAAP measure of core earnings is shown below.



|                                                          |  |                                |       |                              |   |       |  |      |        |  |   |      
|--------------------------------------------------------- |  | ------------------------------ | ----- | ---------------------------- | - | ----- |  | ---- | ------ |  | - | -----
|                                                          |  | Three months endedDecember 31, |       | Six months endedDecember 31,
|(Dollars in thousands)                                    |  | 2005                           |       | 2004                         |   | 2005  |  | 2004
|Reconciliation of GAAP Net Income To Core Earnings        |  |                                |       |                              |   |       |  |      |        |  |   |      
|GAAP Net income                                           |  | $                              | 6,046 |                              | $ | 1,636 |  | $    | 12,213 |  | $ | 6,393
|Other-than-temporary impairment of securities, net of tax |  |                                |      |                              |   | 3,410 |  |      |       |  |   | 3,410
|                                                          |  |                                |       |                              |   |       |  |      |        |  |   |      
|Core earnings                                             |  | $                              | 6,046 |                              | $ | 5,046 |  | $    | 12,213 |  | $ | 9,803
|                                                          |  |                                |       |                              |   |       |  |      |        |  |   |      



Core earnings for the quarter ended
December 31, 2005 were $6.0 million, a 19.8% increase over core earnings of $5.0 million for the same quarter in the prior year. Diluted core earnings per share were $0.41 for the quarter ended December 31, 2005 compared with $0.35 for the
prior year quarter. Core earnings for the six months ended December 31, 2005 were $12.2 million, a 24.6% increase from core earnings of $9.8 million for the same period in the prior year. Diluted core earnings per share were $0.83 for the six
months ended December 31, 2005 compared with $0.67 for the same period in the prior year. The increase in core earnings during the second quarter and first half of the current fiscal year compared with the same periods in the prior year were
primarily due to interest-earning asset growth during the previous twelve months.



Net Interest Income.Net interest income for the quarter ended December 31, 2005 totaled $19.7 million, an increase of $2.2 million, or 12.2% from $17.5 million for the quarter ended December 31, 2004. The increase in net
interest income resulted primarily from an increase of $243 million or 11.3% in average interest-earning assets compared to the same quarter a year ago. The net interest margin for the current quarter was 3.33%, up from 3.30% in the prior year
quarter. The average yield on interest-earning assets was 6.15% for the quarter ended December 31, 2005, an increase of 65 basis points from 5.50% 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 assets. The average rate paid on interest-bearing liabilities was 3.25% for the quarter ended December 31, 2005 compared to 2.53% for the prior year quarter, an increase of 72 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 decreases in the rates paid on long-term borrowings. In addition, the mix of deposits
changed to include relatively less interest-bearing checking accounts and relatively more savings, money market and certificate of deposit accounts. The change in the mix also contributed to the increase in the rate paid on interest-bearing
liabilities.



17



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##### Table of Contents

Net interest income for the six months ended December 31, 2005 totaled $39.1 million, an increase of $4.8 million,
or 14.0% from $34.3 million for the six months ended December 31, 2004. The increase in net interest income resulted from an increase of $265 million or 12.6% in average interest-earning assets compared to the same period a year ago. The net
interest margin for the first half of fiscal year 2006 was 3.34%, up from 3.30% in the prior year. The average yield on interest-earning assets was 6.06% for the six months ended December 31, 2005, an increase of 58 basis points from 5.48% for
the same period 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 assets. The average rate paid on interest-bearing liabilities was 3.16% for the six months ended
December 31, 2005 compared to 2.53% for the prior year, an increase of 63 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 decreases in the rates paid on long-term borrowings and interest-bearing checking accounts. In addition, the mix of deposits changed to include relatively less interest-bearing checking accounts and relatively more savings, money market and
certificate of deposit accounts. The change in the mix also 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.



18



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##### Table of Contents

Average Balances, Interest Rates and Yields

(Dollars in thousands)



|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|----------------------------------------------------------------------- |  | ------------------------------------ | --------- | - | ------------------------------------ | - | ----------------- |  | ------ | -------------- |  | - | --------- | - | ----------------- | - | ------ |  | ------ | -
|                                                                        |  | Three Months Ended December 31, 2005 |           |   | Three Months Ended December 31, 2004 |  
|                                                                        |  | AverageBalance                       |           |   | Interest                             |   | AverageYield/cost |  |        | AverageBalance |  |   | Interest  |   | AverageYield/cost |  
|ASSETS                                                                  |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-earning assets                                                 |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Loans and loans held for sale                                           |  | $                                    | 2,067,683 |   |                                      | $ | 33,088            |  | 6.40   | %              |  | $ | 1,774,322 |   |                   |   | 25,748 |  | 5.80   | %
|Securities and interest-bearing deposits                                |  |                                      | 291,192   |   |                                      |   | 3,250             |  | 4.46   | %              |  |   | 342,684   |   |                   |   | 3,477  |  | 4.06   | %
|Federal Home Loan Bank stock                                            |  |                                      | 30,930    |   |                                      |   | 416               |  | 5.40   | %              |  |   | 29,733    |   |                   |   | 305    |  | 4.07   | %
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-earning assets                                           |  |                                      | 2,389,805 |   |                                      |   | 36,754            |  | 6.15   | %              |  |   | 2,146,739 |   |                   |   | 29,530 |  | 5.50   | %
|Noninterest-earning assets                                              |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Cash and due from banks                                                 |  |                                      | 51,819    |   |                                      |   |                   |  |        |                |  |   | 62,911    |   |                   |   |        |  |        |  
|Allowance for loan losses                                               |  |                                      | (19,582   | ) |                                      |   |                   |  |        |                |  |   | (17,367   | ) |                   |   |        |  |        |  
|Other assets                                                            |  |                                      | 160,160   |   |                                      |   |                   |  |        |                |  |   | 157,972   |   |                   |   |        |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total assets                                                            |  | $                                    | 2,582,202 |   |                                      |   |                   |  |        |                |  | $ | 2,350,255 |   |                   |   |        |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|LIABILITIES                                                             |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing liabilities                                            |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Deposits                                                                |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Checking accounts                                                       |  | $                                    | 119,563   |   |                                      |   | 144               |  | 0.48   | %              |  | $ | 110,666   |   |                   |   | 96     |  | 0.34   | %
|Savings and money market accounts                                       |  |                                      | 647,832   |   |                                      |   | 3,635             |  | 2.23   | %              |  |   | 614,978   |   |                   |   | 1,947  |  | 1.26   | %
|Certificates of deposit                                                 |  |                                      | 754,973   |   |                                      |   | 6,881             |  | 3.62   | %              |  |   | 594,185   |   |                   |   | 4,899  |  | 3.27   | %
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total deposits                                                          |  |                                      | 1,522,368 |   |                                      |   | 10,660            |  | 2.78   | %              |  |   | 1,319,829 |   |                   |   | 6,942  |  | 2.09   | %
|Borrowings                                                              |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Short-term                                                              |  |                                      | 240,015   |   |                                      |   | 2,326             |  | 3.84   | %              |  |   | 284,401   |   |                   |   | 1,426  |  | 1.99   | %
|Long-term                                                               |  |                                      | 300,081   |   |                                      |   | 3,892             |  | 5.15   | %              |  |   | 242,107   |   |                   |   | 3,428  |  | 5.62   | %
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-bearing liabilities                                      |  |                                      | 2,062,464 |   |                                      |   | 16,878            |  | 3.25   | %              |  |   | 1,846,337 |   |                   |   | 11,796 |  | 2.53   | %
|Noninterest-bearing liabilities                                         |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Noninterest-bearing checking accounts                                   |  |                                      | 241,228   |   |                                      |   |                   |  |        |                |  |   | 249,994   |   |                   |   |        |  |        |  
|Other liabilities                                                       |  |                                      | 35,335    |   |                                      |   |                   |  |        |                |  |   | 28,646    |   |                   |   |        |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities                                                       |  |                                      | 2,339,027 |   |                                      |   |                   |  |        |                |  |   | 2,124,977 |   |                   |   |        |  |        |  
|Shareholders equity                                                    |  |                                      | 243,175   |   |                                      |   |                   |  |        |                |  |   | 225,278   |   |                   |   |        |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities and shareholders equity                               |  | $                                    | 2,582,202 |   |                                      |   |                   |  |        |                |  | $ | 2,350,255 |   |                   |   |        |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Fully tax-equivalent net interest income                                |  |                                      |           |   |                                      |   | 19,876            |  |        |                |  |   |           |   |                   |   | 17,734 |  |        |  
|Interest rate spread                                                    |  |                                      |           |   |                                      |   |                   |  | 2.90   | %              |  |   |           |   |                   |   |        |  | 2.97   | %
|Net interest margin                                                     |  |                                      |           |   |                                      |   |                   |  | 3.33   | %              |  |   |           |   |                   |   |        |  | 3.30   | %
|Average interest-earning assets to average interest-bearing liabilities |  |                                      |           |   |                                      |   |                   |  | 115.87 | %              |  |   |           |   |                   |   |        |  | 116.27 | %
|Tax-equivalent adjustment                                               |  |                                      |           |   |                                      |   | 224               |  |        |                |  |   |           |   |                   |   | 225    |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Net interest income                                                     |  |                                      |           |   |                                      | $ | 19,652            |  |        |                |  |   |           |   |                   | $ | 17,509 |  |        |  
|                                                                        |  |                                      |           |   |                                      |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  



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Average Balances, Interest Rates and Yields

(Dollars in thousands)



|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|----------------------------------------------------------------------- |  | ---------------------------------- | --------- | - | ---------------------------------- | - | ----------------- |  | ------ | -------------- |  | - | --------- | - | ----------------- | - | ------ |  | ------ | -
|                                                                        |  | Six Months Ended December 31, 2005 |           |   | Six Months Ended December 31, 2004 |  
|                                                                        |  | AverageBalance                     |           |   | Interest                           |   | AverageYield/cost |  |        | AverageBalance |  |   | Interest  |   | AverageYield/cost |  
|ASSETS                                                                  |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-earning assets                                                 |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Loans and loans held for sale                                           |  | $                                  | 2,044,523 |   |                                    | $ | 64,572            |  | 6.32   | %              |  | $ | 1,712,608 |   |                   | $ | 49,821 |  | 5.82   | %
|Securities and interest-bearing deposits                                |  |                                    | 292,285   |   |                                    |   | 6,408             |  | 4.38   | %              |  |   | 360,818   |   |                   |   | 7,136  |  | 3.95   | %
|Federal Home Loan Bank stock                                            |  |                                    | 30,777    |   |                                    |   | 784               |  | 5.06   | %              |  |   | 29,609    |   |                   |   | 622    |  | 4.17   | %
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-earning assets                                           |  |                                    | 2,367,585 |   |                                    |   | 71,764            |  | 6.06   | %              |  |   | 2,103,035 |   |                   |   | 57,579 |  | 5.48   | %
|Noninterest-earning assets                                              |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Cash and due from banks                                                 |  |                                    | 51,449    |   |                                    |   |                   |  |        |                |  |   | 72,995    |   |                   |   |        |  |        |  
|Allowance for loan losses                                               |  |                                    | (19,155   | ) |                                    |   |                   |  |        |                |  |   | (16,981   | ) |                   |   |        |  |        |  
|Other assets                                                            |  |                                    | 159,582   |   |                                    |   |                   |  |        |                |  |   | 160,803   |   |                   |   |        |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total assets                                                            |  | $                                  | 2,559,461 |   |                                    |   |                   |  |        |                |  | $ | 2,319,852 |   |                   |   |        |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|LIABILITIES                                                             |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Interest-bearing liabilities                                            |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Deposits                                                                |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Checking accounts                                                       |  | $                                  | 117,817   |   |                                    |   | 281               |  | 0.48   | %              |  | $ | 148,001   |   |                   |   | 366    |  | 0.50   | %
|Savings and money market accounts                                       |  |                                    | 646,979   |   |                                    |   | 6,820             |  | 2.11   | %              |  |   | 568,820   |   |                   |   | 3,556  |  | 1.26   | %
|Certificates of deposit                                                 |  |                                    | 748,888   |   |                                    |   | 13,378            |  | 3.58   | %              |  |   | 593,492   |   |                   |   | 9,814  |  | 3.33   | %
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total deposits                                                          |  |                                    | 1,513,684 |   |                                    |   | 20,479            |  | 2.71   | %              |  |   | 1,310,313 |   |                   |   | 13,736 |  | 2.11   | %
|Borrowings                                                              |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Short-term                                                              |  |                                    | 255,337   |   |                                    |   | 4,650             |  | 3.65   | %              |  |   | 263,530   |   |                   |   | 2,312  |  | 1.76   | %
|Long-term                                                               |  |                                    | 276,103   |   |                                    |   | 7,109             |  | 5.16   | %              |  |   | 241,380   |   |                   |   | 6,815  |  | 5.60   | %
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total interest-bearing liabilities                                      |  |                                    | 2,045,124 |   |                                    |   | 32,238            |  | 3.16   | %              |  |   | 1,815,223 |   |                   |   | 22,863 |  | 2.53   | %
|Noninterest-bearing liabilities                                         |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Noninterest-bearing checking accounts                                   |  |                                    | 236,999   |   |                                    |   |                   |  |        |                |  |   | 246,517   |   |                   |   |        |  |        |  
|Other liabilities                                                       |  |                                    | 36,160    |   |                                    |   |                   |  |        |                |  |   | 33,593    |   |                   |   |        |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities                                                       |  |                                    | 2,318,283 |   |                                    |   |                   |  |        |                |  |   | 2,095,333 |   |                   |   |        |  |        |  
|Shareholders equity                                                    |  |                                    | 241,178   |   |                                    |   |                   |  |        |                |  |   | 224,519   |   |                   |   |        |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Total liabilities and shareholders equity                               |  | $                                  | 2,559,461 |   |                                    |   |                   |  |        |                |  | $ | 2,319,852 |   |                   |   |        |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Fully tax-equivalent net interest income                                |  |                                    |           |   |                                    |   | 39,526            |  |        |                |  |   |           |   |                   |   | 34,716 |  |        |  
|Interest rate spread                                                    |  |                                    |           |   |                                    |   |                   |  | 2.90   | %              |  |   |           |   |                   |   |        |  | 2.95   | %
|Net interest margin                                                     |  |                                    |           |   |                                    |   |                   |  | 3.34   | %              |  |   |           |   |                   |   |        |  | 3.30   | %
|Average interest-earning assets to average interest-bearing liabilities |  |                                    |           |   |                                    |   |                   |  | 115.77 | %              |  |   |           |   |                   |   |        |  | 115.86 | %
|Tax-equivalent adjustment                                               |  |                                    |           |   |                                    |   | 443               |  |        |                |  |   |           |   |                   |   | 443    |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  
|Net interest income                                                     |  |                                    |           |   |                                    | $ | 39,083            |  |        |                |  |   |           |   |                   | $ | 34,273 |  |        |  
|                                                                        |  |                                    |           |   |                                    |   |                   |  |        |                |  |   |           |   |                   |   |        |  |        |  



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Provision for Loan Losses. The provision for loan losses was $1.2 million for the quarter ended December 31,
2005 compared with $1.4 million for the quarter ended December 31, 2004. Net charge-offs for the quarter ended December 31, 2005 were $767 thousand compared with $843 thousand for the prior year quarter. The decrease in the provision was
consistent with the decrease in net charge-offs compared to the prior year and in nonperforming loans. Total loans at December 31, 2005 were $2.006 billion, an increase of $274 million from total loans of $1.732 billion at December 31,
2004. The provision for loan losses for the six months ended December 31, 2005 was $2.5 million compared with $1.7 million for the six months ended December 31, 2004. Net charge-offs for the six months ended December 31, 2005 were
$1.2 million compared with $0.6 million for the comparable period in the prior year. The increase in the provision for loan losses for the first half of fiscal year 2006 is consistent with the growth of the loan portfolio and increases in net
charge-offs compared to prior year and nonperforming loans. Nonperforming loans increased to $13.4 million at December 31, 2005 compared with $12.6 million at June 30, 2005.



Noninterest Income. Noninterest income totaled $6.8 million for the quarter ended December 31, 2005, an increase of $5.7 million
or 521.6% from $1.1 million in the prior year quarter. The increase was primarily due to the $5.2 million charge for other-than-temporary impairment of Fannie Mae and Freddie Mac preferred stock recorded in the quarter ended December 31, 2004.
In addition, other income  nonbank increased $0.4 million and other income  bank increased $0.2 million while mortgage banking income, consisting of net gains of sale of loans and loan servicing income, decreased $0.1 million.



Noninterest income totaled $13.7 million for the six months ended
December 31, 2005, an increase of $7.3 million or 114.0% from $6.4 million in the prior year period. The increase was primarily due to the $5.2 million charge for other-than-temporary impairment of Fannie Mae and Freddie Mac preferred stock
recorded in the second quarter of fiscal 2005. In addition, mortgage banking income increased $1.2 million, other income  bank increased $0.7 million and other income  nonbank increased $0.5 million. These increases were partially offset
by a net gain on sale of securities of $0.3 million during the first half of fiscal 2005.



Net gains on sale of loans were $1.5 million for the quarter ended December 31, 2005, a decrease of $0.2 million from $1.7 million in the same quarter in the prior year. The decrease in the net gains on sale of
loans resulted from a decrease in the average profit margin on sales, partially offset by an increase in the volume of loans sold. For the quarter ended December 31, 2005, total residential loan sales were $250 million compared with sales of
$212 million in the same quarter in the prior year. Residential mortgage loan originations were $339 million for the quarter ended December 31, 2005 compared with $334 million for the prior year quarter. Long-term interest rates increased
during the quarter ended December 31, 2005. We expect both a high level of long-term interest rates relative to the past two years and a seasonal decline in the sales of residences to exert downward pressure on the volume of mortgage-banking
activity during the third quarter of fiscal 2006 compared with the first quarter of fiscal 2006.



Net gains on sale of loans were $3.3 million for the six months ended December 31, 2005, an increase of $0.9 million from $2.4 million in the same period in the prior year. The increase in the net gains on sale
of loans resulted from an increase in the volume of loans sold and an increase in the average profit margin on sales. For the six months ended December 31, 2005, total residential loan sales were $571 million compared with sales of $454 million
in the same period in the prior year. Residential mortgage loan originations were $759 million for the six months ended December 31, 2005 compared with $673 million for the prior year period. We expect both a high level of long-term interest
rates relative to the past two years and a seasonal decline in the sales of residences to exert downward pressure on the volume of mortgage-banking activity during the third quarter of fiscal 2006 compared with the first half of fiscal 2006.



Loan servicing income is composed of the current fees generated from the
servicing of sold loans less the current amortization of mortgage servicing rights (MSRs) and the adjustment for any change in the allowance for impairment of MSRs, which are valued at the lower of cost or market. Both the amortization and the
valuation of MSRs are sensitive to movements in interest rates. Both amortization and impairment valuation allowances tend to increase as rates fall and tend to decrease as rates rise. However, the level of amortization is a function of interest
rates over the period while the level of impairment valuation allowances is a function of interest rates at the end of the period. Long-term interest rates have fluctuated significantly over the past three years. As a result, charges for impairment
and reversals of impairment of MSRs have often been the most significant component of loan servicing income. The table below shows how the change in the impairment of MSRs affects loan servicing income.



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|                                            |  |                                |     |                              |   |      |  |      |     |  |   |      |  
|------------------------------------------- |  | ------------------------------ | --- | ---------------------------- | - | ---- |  | ---- | --- |  | - | ---- | -
|                                            |  | Three months endedDecember 31, |     | Six months endedDecember 31, |  
|                                            |  | 2005                           |     | 2004                         |   | 2005 |  | 2004 |    
|Loan servicing income (loss)                |  |                                |     |                              |   |      |  |      |     |  |   |      |  
|Loan servicing revenue, net of amortization |  | $                              | 85  |                              | $ | 49   |  | $    | 4   |  | $ | 210  |  
|Change in impairment of MSRs                |  |                                | 107 |                              |   | 39   |  |      | 354 |  |   | (143 | )
|                                            |  |                                |     |                              |   |      |  |      |     |  |   |      |  
|Total loan servicing income                 |  | $                              | 192 |                              | $ | 88   |  | $    | 358 |  | $ | 67   |  
|                                            |  |                                |     |                              |   |      |  |      |     |  |   |      |  



The increase in total loan servicing
income in the current quarter compared to the prior year quarter was primarily due to the reduction of impairment charges of $0.1 million in the current year quarter compared with the prior year. That improvement was supplemented by an increase in
loan servicing revenue due to an increase in the size of the servicing portfolio. The increase in total loan servicing income for the six months ended December 31, 2005 compared with the same period in the prior year was primarily due to the
reduction of impairment charges of $0.5 million in the first half of fiscal 2006 compared with the same period in the prior year. That improvement was partially offset by a decrease of $0.2 million in loan servicing revenue due to the level of
payoffs of loans serviced for others during the six months ended December 31, 2005. The process used to arrive at the estimated aggregate fair value of the Companys MSRs 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 MSRs 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, as interest rates influence prepayment speeds and targeted investor yield.



Over the past several years the volume and dollar value of MSRs 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 is planning a
sale of mortgage servicing rights during the second half of fiscal 2006. While the results of the sale will depend on the market for MSRs when the sale takes place, no loss in anticipated.



Service charges did not materially change for the quarter ended December 31, 2005, as
compared with the same period in the prior year. Other income  nonbank increased due to year over year increases in revenue in each of the nonbank businesses including insurance commissions, real estate commissions and brokerage commissions.
Other income  bank increased due to increases in revenue from merchant services and ATM activity. Service charges did not materially change for the six months ended December 31, 2005, as compared with the same period in the prior year.
Other income  nonbank increased due to year over year increases in revenue in each of the nonbank businesses including insurance commissions, real estate commissions and brokerage commissions. Other income  bank increased due to
increases in revenue from letters of credit, merchant services and ATM activity.



Noninterest Expense.Noninterest expense increased $1.6 million or 10.8% to $16.5 million for the three months ended December 31, 2005 compared with the same quarter in the prior year. Annualized noninterest expense as a percent
of average assets was 2.54% for the quarter ended December 31, 2005 compared to 2.52% for the prior year quarter. The core efficiency ratio for the quarter ended December 31, 2005 was 62.0%, unchanged from the prior year period. The
increase in noninterest expense was primarily due to an increase of $1.7 million in salaries and employee benefits. The main factor contributing to this growth was additional personnel at new and existing locations and the resulting increases in
volume-based commissions, and health insurance costs. In addition, increases of $0.1 million in loan expenses and $0.1 million other noninterest expense were offset by a decrease of $0.3 million in franchise taxes. The decrease in franchise taxes
for the first six months of fiscal 2006 was primarily due to the Franklin Bank acquisition in the fourth quarter of fiscal 2004. Management is anticipating that franchise taxes will increase in the third quarter of fiscal 2006 by approximately $0.4
million.



Noninterest expense increased $2.8 million or 9.5% to $32.6 million
for the six months ended December 31, 2005 compared with the same period in the prior year. Annualized noninterest expense as a percent of average assets was 2.53% for the six months ended December 31, 2005 compared with 2.54% for the
prior year period. The efficiency ratio for the six months ended December 31, 2005 was 61.2% compared with 72.4% for the prior year period. The core efficiency ratio for the six months ended December 31, 2005 was 61.2% compared with 64.2%
for the prior year period. The increase in noninterest expense was primarily due to an increase of $2.6 million in salaries and employee benefits.



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The main factor contributing to this growth was additional personnel at new and existing locations and the resulting
increases in volume-based commissions, and health insurance costs. In addition, increases of $0.2 million in professional fees, $0.2 million in loan expenses and $0.6 million in other noninterest expense were partially offset by a decrease of $0.7
million in franchise taxes. The decrease in franchise taxes for the first six months of fiscal 2006 was primarily due to the Franklin Bank acquisition in the fourth quarter of fiscal 2004. Management is anticipating that franchise taxes will
increase for the second half of fiscal 2006 by approximately $0.8 million.



Income Taxes. Income tax expense was $2.7 for the three months ended December 31, 2005 compared with $0.7 million for the prior year period. The effective tax rate was 30.8% for the three months ended December 31, 2005
compared with 29.3% for the same period in the prior year. Income tax expense was $5.4 million for the six months ended December 31, 2005 compared with $2.8 million for the prior year period. The effective tax rate was 30.8% for the six months
ended December 31, 2005 compared with 30.8% for the same period in the prior year. The increase in income tax expense for the three and six months ended December 31, 2005 compared with the prior year was primarily due to the lower level of
pretax income in the prior year, due to the impairment of Fannie Mae and Freddie Mac preferred stocks.



Financial Condition



General.
Assets totaled $2.627 billion at December 31, 2005, an increase of $128 million or 5.1% from June 30, 2005. This increase was primarily due to the Companys success in originating new loans in all categories. Capital ratios remain
adequate, with the ratio of equity to total assets at December 31, 2005 of 9.34% as compared to 9.47% at June 30, 2005.



Securities. Securities available for sale decreased $10 million or 3.2% during the first six months of fiscal 2006 and totaled $287 million at December 31,
2005. Maturities and amortization of mortgage-backed securities of $31 million and a decrease of $3 million in the market value of securities were partially offset by purchases of $24 million during the six months ended December 31, 2005. There
were no sales of securities during the first half of fiscal 2006.



Loans
Held for Sale.Loans held for sale totaled $84 million at December 31, 2005 compared to $145 million at June 30, 2005, a decrease of $61 million or 42.1%. The decrease was due to the transfer of $29 million of loans from held for sale
to the loan portfolio and due to a general slowdown in mortgage banking activity during the second quarter of fiscal 2006.



Loans. The loan portfolio totaled $2.006 billion at December 31, 2005, an increase of $175 million, or 9.6% from $1.831 billion at June 30, 2005.
Mortgage and construction loans grew $78 million or 9.7% and now total $884 million, which is 44.1% of the loan portfolio as compared to 44.0% at June 30, 2005. Virtually all fixed-rate residential mortgage loans are originated for sale,
generating substantial noninterest income and minimizing interest rate risk. Commercial loans grew $60 million or 8.4% and now total $776 million, which is 38.7% of the loan portfolio as compared to 39.1% at June 30, 2005. Consumer loans grew
$37 million or 12.0% and now total $346 million, which is 17.2% of the loan portfolio as compared to 16.9% at June 30, 2005. More than 80% of consumer loans are secured by single-family residences. These loans include home equity loans and
lines, and second mortgages.



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



Asset Quality History

(Dollars in thousands)



|                                                        |  |          |        |   |         |   |        |         |  |   |         |   |  |          |        |   |  |   |        |  
|------------------------------------------------------- |  | -------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | -------- | ------ | - |  | - | ------ | -
|                                                        |  | 12/31/05 |        |   | 9/30/05 |   |        | 6/30/05 |  |   | 3/31/05 |   |  | 12/31/04 |       
|Nonperforming loans                                     |  | $        | 13,419 |   |         | $ | 15,326 |         |  | $ | 12,605  |   |  | $        | 12,186 |   |  | $ | 11,644 |  
|Nonperforming loans as a % of total loans               |  |          | 0.67   | % |         |   | 0.82   | %       |  |   | 0.69    | % |  |          | 0.70   | % |  |   | 0.67   | %
|Nonperforming assets                                    |  | $        | 16,294 |   |         | $ | 18,443 |         |  | $ | 15,611  |   |  | $        | 15,052 |   |  | $ | 14,584 |  
|Nonperforming assets as a % of total assets             |  |          | 0.62   | % |         |   | 0.72   | %       |  |   | 0.62    | % |  |          | 0.61   | % |  |   | 0.61   | %
|Delinquent loans                                        |  | $        | 27,837 |   |         | $ | 24,795 |         |  | $ | 19,601  |   |  | $        | 20,308 |   |  | $ | 18,711 |  
|Delinquent loans as a % of total loans                  |  |          | 1.39   | % |         |   | 1.32   | %       |  |   | 1.07    | % |  |          | 1.17   | % |  |   | 1.08   | %
|Allowance for loan losses                               |  | $        | 19,617 |   |         | $ | 19,194 |         |  | $ | 18,266  |   |  | $        | 17,888 |   |  | $ | 17,584 |  
|Allowance for loan losses as a % of loans               |  |          | 0.98   | % |         |   | 1.02   | %       |  |   | 1.00    | % |  |          | 1.03   | % |  |   | 1.02   | %
|Allowance for loan losses as a % of nonperforming loans |  |          | 146.19 | % |         |   | 125.24 | %       |  |   | 144.91  | % |  |          | 146.79 | % |  |   | 151.01 | %



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Management analyzes the adequacy of the allowance for loan losses regularly through reviews of the performance of the
loan portfolio considering economic conditions, changes in interest rates and the effect of such changes on real estate values, changes in the composition of the loan portfolio, and trends in past due and nonperforming 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.



Nonperforming assets at December 31, 2005, were $16.3 million or 0.62% of total assets compared with $18.4 million or 0.72% of total assets at September 30, 2005, and $15.6 million or 0.62% of total assets
at June 30, 2005. The changes in nonperforming assets were primarily related to changes in nonperforming loans which were $13.4 million, $15.3 million and $12.6 million at December 31, September 30, and June 30, 2005,
respectively. At times in the past, and again during the second quarter of fiscal 2006, the Company has sold loans with credit weaknesses. The purpose of these sales is to redeploy nonperforming assets as earning assets where the foreclosure process
can take as long as one to two years, as is often the case in Ohio. During the second quarter of fiscal 2006, the Company sold $7 million of loans with credit weaknesses which included $3.1 million of delinquent loans and $2.1 million of
nonperforming loans. Charge-offs related to this sale were $0.5 million. Therefore, the primary reason for the decrease in nonperforming assets and nonperforming loans from September 30, 2005 to December 31, 2005 was the sale of loans with
credit weaknesses. It is important to note that more than 50% of nonperforming 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. The allowance for loss on loans increased $1.3 million to $19.6 million at December 31, 2005 from
$18.3 million at June 30, 2005. The ratio of the allowance for loan losses to total loans has decreased to 0.98% at December 31, 2005 from 1.00% at June 30, 2005. The reduction of the allowance for loan losses as a percent of total
loans is consistent with the decrease in nonperforming loans due to the loan sale. Nonperforming loans as a percent of total loans were 0.67% at December 31, 2005 compared with 0.69% at June 30, 2005.



Other Assets. Other assets increased $6 million to $76 million at December 31,
2005 compared with $70 million at June 30, 2005. One of the components of other assets is Mortgage Servicing Rights (MSRs). MSRs increased to $24 million at December 31, 2005, from $21 million at June 30, 2005. As of December 31,
2005, the Company serviced $2.447 billion of loans, which carried an average book value equal to 1.00% of the outstanding loan balance. The Company has an equity investment in a low-income housing project of $0.7 million. That investment has been
classified as special mention at December 31, 2005 due to low occupancy, resulting in negative cash flow. Management believes this investment is realizable at December 31, 2005. However, further deterioration could result in partial or
total impairment.



Deposits.Deposits increased $56 million, or 3.3%
during the first six months of fiscal 2005 and totaled $1.765 billion at December 31, 2005 compared to $1.709 billion at June 30, 2005. This increase was composed of a $66 million or 4.0% increase in retail deposits, partially offset by
the runoff of $10 million of brokered certificates of deposit. At December 31, 2005, the Company had $84 million in brokered deposits with original maturities ranging from one to seventy-seven months. The Company considers 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. Long-term borrowings increased $74 million during the first half of fiscal 2006. That increase was composed of a $31 million increase in junior subordinated debentures and a $52 million net increase
in long-term borrowings, partially offset by an $8 million transfer to short-term borrowings. The additional $31 million of junior subordinated debentures carry a fixed rate of 5.69% for five years and a rate that floats with three-month LIBOR for
the remaining 25 years. During the six months ended December 31, 2005, the Company borrowed $70 million in long-term fixed-rate FHLB advances with original maturities ranging from twenty-three to forty months. Short-term borrowings decreased
$13 million. That decrease was composed of a net $21 million repayment and an $8 million increase due to a



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transfer from long-term borrowings that is now due in less than one year. At December 31, 2005, $224 million of the
$249 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 December 2005, the rate was approximately
4.25%, up 100 basis points from June 30, 2005, due to four 25 basis point rate increases 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
$520 million of loans that are indexed to the prime rate that re-price at least monthly compared to $224 million of overnight borrowings.



Capital Resources. Total shareholders equity increased $8 million, or 3.4% during the six months ended December 31, 2005 and totaled $245 million. The
primary components of the change were net income of $12.2 million, dividends declared of $4.1 million, an increase of $1.9 million in unrealized losses on securities and a $1.0 million increase from the exercise of stock options. There were no
purchases of treasury stock during the first six months of fiscal year 2006. During March 2005, the Board of Directors authorized the purchase of up to 500,000 shares of treasury stock over the following 12 months. Under that authorization an
additional 450,912 shares can be purchased between October 1, 2005 and March 16, 2006. 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. Shares repurchased by the Company may be used in its dividend reinvestment plan, its stock option plan, as consideration in an acquisition or for general
corporate purposes.



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 the Banks actual capital ratios to ratios required to be well capitalized under OTS regulations at December 31, 2005 follows:



|                                               |  |             |   |  |                       |  
|---------------------------------------------- |  | ----------- | - |  | --------------------- | -
|                                               |  | Actualratio |   |  | Well-capitalizedratio |  
|Total capital to risk-weighted assets          |  | 11.05       | % |  | 10.00                 | %
|Tier 1 (core) capital to risk-weighted assets  |  | 10.01       | % |  | 6.00                  | %
|Tier 1 (core) capital to adjusted total assets |  | 7.41        | % |  | 5.00                  | %



Critical Accounting Policies



The Company follows financial accounting and reporting policies that are
in accordance with GAAP and conform to general practices within the banking industry. Some of these accounting policies require management to make estimates and judgments about matters that are uncertain. Application of assumptions different from
those used by management could have a material impact on the Companys financial position or results of operations. These policies are considered critical accounting policies. These policies include the policies to determine the adequacy of the
allowance for loan losses 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



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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.



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 December 31, 2005, the Company had $188 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 $77 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 $151 million of cash and unpledged securities and Federal Home Loan Bank availability of $42 million at June 30, 2005. Potential cash available as measured by liquid assets and
borrowing capacity has increased $82 million during fiscal 2006 due to the additional junior subordinated debentures issued during the first quarter of fiscal year 2006, a reduction of securities pledged to secure public funds and a slowdown in
mortgage banking activity. 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.



First Place Financial Corp.,
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 the 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 December 31, 2005, the holding company had cash and
unpledged securities of $43 million available to meet cash needs. This amount increased significantly from June 30, 2005 primarily due to the issuance of $31 million of junior



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subordinated debentures during the first quarter of fiscal 2006. 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, the 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 the Bank would remain well capitalized. At the present time, the Bank could pay
approximately $12 million of dividends without OTS approval. Future dividend payments by the Bank beyond the $12 million currently available would be based upon future earnings or the approval of the OTS.



Off-balance sheet arrangements



See Note 6 to the Notes to the 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. 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 RatioDecember 31, 2005 |   |  | NPV RatioJune 30, 2005 |  
|Up 200                      |  | 8.59                       | % |  | 9.01                   | %
|Up 100                      |  | 9.45                       | % |  | 10.02                  | %
|No Change                   |  | 10.16                      | % |  | 10.76                  | %
|Down 100                    |  | 10.64                      | % |  | 11.10                  | %
|Down 200                    |  | 11.08                      | % |  | 11.49                  | %



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The NPV projections indicate that the Company has experienced a small decrease in its exposure to rising interest rates
and has experienced a small increase in its potential benefit from falling interest rates during the first six months of fiscal 2006. The NPV ratio for no change in rates has declined 60 basis points. This was due to the continued increase in
short-term interest rates during the first half of fiscal 2006 and the continuing flattening of the yield curve. 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, MSRs 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 nonfinancial information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934,
including this Form 10-Q for the period ended December 31, 2005, 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 the 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 the Bank.



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



On March 15, 2005, the Company publicly announced that the Board of Directors had approved a new buy-back program authorizing the purchase of up to 500,000 shares. There were no purchases of treasury stock during
the six months ended December 31, 2005. There are 450,912 shares remaining that could be purchased under the March 2005 authorization. The authorization is in force through March 16, 2006.



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Item 3. Defaults Upon Senior Securities  Not applicable.



Item 4. Submission of Matters to a Vote of Security Holders



The Company held its Annual Meeting of Shareholders on October 27, 2005. The voting results on each issue submitted to the shareholders at that meeting are indicated below.



Election of Directors for a three year term:



|                    |  |            |  |         |  |           |  |        
|------------------- |  | ---------- |  | ------- |  | --------- |  | -------
|                    |  | For        |  | Percent |  | Withheld  |  | Percent
|Donald Cagigas      |  | 13,121,561 |  | 98.6    |  | 190,863   |  | 1.4    
|Steven R. Lewis     |  | 11,473,631 |  | 86.2    |  | 1,838,793 |  | 13.8   
|Samuel A. Roth      |  | 13,166,298 |  | 98.9    |  | 146,126   |  | 1.1    
|Dr. Ronald P. Volpe |  | 13,146,161 |  | 98.8    |  | 166,263   |  | 1.2    



Ratification of the appointment of
Crowe Chizek and Company LLC, as independent auditors of the Company for the fiscal year ending June 30, 2006.



|           |  |         |  |        
|---------- |  | ------- |  | -------
|For        |  | Against |  | Abstain
|13,149,109 |  | 90,764  |  | 72,551 



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: February 9, 2006      |  | /s/ Steven R. Lewis                   |  | /s/ Paul Musgrove      
|                            |  | Steven R. Lewis                       |  | Paul Musgrove          
|                            |  | President and Chief Executive Officer |  | Chief Financial Officer



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