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

|  | o | REPORT                UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
|--|---|---------------------------------------------------------------------|

**PEOPLES-SIDNEY      FINANCIAL CORPORATION**

| Delaware                                       | 31-1499862                         |
|------------------------------------------------|------------------------------------|
| (State                or other jurisdiction of | (IRS                Employer       |
| incorporation                or organization)  | Identification                No.) |

----

INDEX

|                                          |                                                                                                     |   | Page   |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------------|--------|--------|
|                                          |                                                                                                     |   |   |
|                                          |                                                                                                     |   |   |
| PART                I - FINANCIAL INFORMATION |                                                                                                     |
|                                          |                                                                                                     |   |   |
|   Item                1.            | Financial                Statements (Unaudited)                                                          |   |   |
|                                          |                                                                                                     |   |   |
|                                          | Consolidated                Balance Sheets                                                               |   | 3      |
|                                          |                                                                                                     |   |   |
|                                          | Consolidated                Statements of Income                                                         |   | 4      |
|                                          |                                                                                                     |   |   |
|                                          | Consolidated                Statements of Comprehensive                Income                            |   | 5      |
|                                          |                                                                                                     |   |   |
|                                          | Condensed                Consolidated Statements of Changes in                Shareholders’ Equity |   | 6      |
|                                          |                                                                                                     |   |   |
|                                          | Consolidated                Statements of Cash Flows                                                     |   | 7      |
|                                          |                                                                                                     |   |   |
|                                          | Notes                to Consolidated Financial Statements                                                |   | 8      |
|                                          |                                                                                                     |   |   |
|   Item                2.            | Management’s                Discussion and Analysis                                                |   | 15     |
|                                          |                                                                                                     |   |   |
|   Item                3.            | Controls                and Procedures                                                                   |   | 21     |
|                                          |                                                                                                     |   |   |
|                                          |                                                                                                     |   |   |
| PART                II - OTHER INFORMATION    |                                                                                                     |
|                                          |                                                                                                     |   |   |
|   Item                1.            | Legal                Proceedings                                                                         |   | 22     |
|                                          |                                                                                                     |   |   |
|   Item                2.            | Unregistered                Sales of Equity Securities and Use of                Proceeds                |   | 22     |
|                                          |                                                                                                     |   |   |
|   Item                3.            | Defaults                Upon Senior Securities                                                           |   | 22     |
|                                          |                                                                                                     |   |   |
|   Item                4.            | Submission                of Matters to a Vote of Security                Holders                        |   | 22     |
|                                          |                                                                                                     |   |   |
|   Item                5.            | Other                Information                                                                         |   | 22     |
|                                          |                                                                                                     |   |   |
|   Item                6.            | Exhibits                                                                                                 |   | 22     |
|                                          |                                                                                                     |   |   |
|                                          |                                                                                                     |   |   |
| SIGNATURES                                    |                                                                                                     | 23     |
|                                          |                                                                                                     |   |   |
| INDEX                TO EXHIBITS              |                                                                                                     | 24     |

----

CONSOLIDATED      BALANCE SHEETS

----

|                                                                           |   | September                30, |        | June                30, |   |
|--------------------------------------------------------------------------------|--------|------------------------------|-------------|-------------------------|--------|
|                                                                           |   | 2006                         |        | 2006                    |   |
|                                                                           |   | (Unaudited)                  |        |                    |   |
| **ASSETS**                                                                     |   |                         |        |                    |   |   |   |
| Cash                and due from financial institutions                        |   | $                            | 1,094,832   |                    | $      | 899,313 |   |
| Interest-bearing                deposits in other financial institutions       |   |                         | 4,347,266   |                    |   | 3,815,616 |   |
| Total                cash and cash equivalents                                 |   |                         | 5,442,098   |                    |   | 4,714,929 |   |
| Securities                available for sale                                   |   |                         | 5,345,325   |                    |   | 5,250,170 |   |
| Federal                Home Loan Bank stock                                    |   |                         | 1,793,700   |                    |   | 1,768,100 |   |
| Loans,                net of allowance of $840,000 and $893,600                |   |                         | 124,245,432 |                    |   | 124,171,193 |   |
| Accrued                interest receivable                                |   |                         | 844,710     |                    |   | 827,725 |   |
| Premises                and equipment, net                                     |   |                         | 1,938,444   |                    |   | 1,974,672 |   |
| Other                real estate owned                                         |   |                         | --          |                    |   | 100,421 |   |
| Other                assets                                                    |   |                         | 131,216     |                    |   | 240,258 |   |
|                                                                           |   |                         |        |                    |   |   |   |
| Total                assets                                                    |   | $                            | 139,740,925 |                    | $      | 139,047,468 |   |
|                                                                           |   |                         |        |                    |   |   |   |
|                                                                           |   |                         |        |                    |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                  |   |                         |        |                    |   |   |   |
| Deposits                                                                       |   | $                            | 80,648,432  |                    | $      | 82,819,038 |   |
| Borrowed                funds                                        |   |                         | 41,382,518  |                    |   | 38,511,268 |   |
| Accrued                interest payable and other liabilities                  |   |                         | 404,091     |                    |   | 460,821 |   |
| Total                liabilities                                               |   |                         | 122,435,041 |                    |   | 121,791,127 |   |
|                                                                           |   |                         |        |                    |   |   |   |
| Common                stock in ESOP subject to repurchase obligation      |   |                         | 1,768,620   |                    |   | 1,756,829 |   |
|                                                                           |   |                         |        |                    |   |   |   |
| Preferred                stock, $.01 par value, 500,000 shares                 |   |                         |        |                    |   |   |   |
|   authorized,                none issued and outstanding             |   |                         | --          |                    |   | -- |   |
| Common                stock, $.01 par value, 3,500,000 shares                  |   |                         |        |                    |   |   |   |
|   authorized,                1,785,375 shares issued                 |   |                         | 16,675      |                    |   | 16,675 |   |
| Additional                paid-in capital                                 |   |                         | 9,061,824   |                    |   | 9,065,163 |   |
| Retained                earnings                                          |   |                         | 11,837,021  |                    |   | 11,764,118 |   |
| Treasury                stock, 401,107 and 392,727 shares, at cost   |   |                         | (4,850,978  | )                       |   | (4,725,278 | ) |
| Unearned                employee stock ownership plan shares         |   |                         | (426,457    | )                       |   | (457,602 | ) |
| Accumulated                other comprehensive loss                            |   |                         | (100,821    | )                       |   | (163,564 | ) |
| Total                shareholders’ equity                                |   |                         | 15,537,264  |                    |   | 15,499,512 |   |
|                                                                           |   |                         |        |                    |   |   |   |
| Total                liabilities and shareholders’ equity                |   | $                            | 139,740,925 |                    | $      | 139,047,468 |   |

----

*Index*

----

CONSOLIDATED      STATEMENTS OF INCOME

----

|                                                               |   | Three                Months Ended |      |
|--------------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                               |   | September                30,      |      |
|                                                               |   | 2006                              |      | 2005 |   |
|                                                               |   |                              |      |   |   |
| Interest                income                                     |   |                              |      |   |   |   |   |
| Loans,                including fees                               |   | $                                 | 2,100,108 |   | $ | 1,947,843 |   |
| Securities                                                         |   |                              | 55,590    |   |   | 53,034 |   |
| Demand,                time and overnight deposits                 |   |                              | 27,808    |   |   | 25,222 |   |
| Dividends                on Federal Home Loan Bank Stock           |   |                              | 25,625    |   |   | 20,568 |   |
| Total                interest income                               |   |                              | 2,209,131 |   |   | 2,046,667 |   |
|                                                               |   |                              |      |   |   |   |   |
| Interest                expense                                    |   |                              |      |   |   |   |   |
| Deposits                                                           |   |                              | 495,019   |   |   | 433,651 |   |
| Borrowed                funds                                      |   |                              | 530,833   |   |   | 433,122 |   |
| Total                interest expense                              |   |                              | 1,025,852 |   |   | 866,773 |   |
|                                                               |   |                              |      |   |   |   |   |
| Net                interest income                                 |   |                              | 1,183,279 |   |   | 1,179,894 |   |
|                                                               |   |                              |      |   |   |   |   |
| Provision                for loan losses                           |   |                              | (47,952   | ) |   | 16,914 |   |
|                                                               |   |                              |      |   |   |   |   |
| Net                interest income after provision for loan losses |   |                              | 1,231,231 |   |   | 1,162,980 |   |
|                                                               |   |                              |      |   |   |   |   |
| Noninterest                income                                  |   |                              |      |   |   |   |   |
| Service                fees and other charges                      |   |                              | 32,361    |   |   | 34,650 |   |
| Gain                (loss) on sale of real estate owned            |   |                              | (120      | ) |   | 657 |   |
| Total                noninterest income                            |   |                              | 32,241    |   |   | 35,307 |   |
|                                                               |   |                              |      |   |   |   |   |
|                                                               |   |                              |      |   |   |   |   |
| Noninterest                expense                                 |   |                              |      |   |   |   |   |
| Compensation                and benefits                           |   |                              | 436,091   |   |   | 427,819 |   |
| Director                fees                                       |   |                              | 24,300    |   |   | 24,300 |   |
| Occupancy                and equipment                             |   |                              | 89,051    |   |   | 101,018 |   |
| Computer                processing                                 |   |                              | 90,997    |   |   | 86,768 |   |
| Professional                fees                                   |   |                              | 44,208    |   |   | 53,224 |   |
| State                franchise taxes                               |   |                              | 54,450    |   |   | 49,763 |   |
| Other                                                              |   |                              | 77,388    |   |   | 80,427 |   |
| Total                noninterest expense                           |   |                              | 816,485   |   |   | 823,319 |   |
|                                                               |   |                              |      |   |   |   |   |
| Income                before income taxes                          |   |                              | 446,987   |   |   | 374,968 |   |
|                                                               |   |                              |      |   |   |   |   |
| Income                tax expense                                  |   |                              | 157,500   |   |   | 135,400 |   |
|                                                               |   |                              |      |   |   |   |   |
| Net                income                                          |   | $                                 | 289,487   |   | $ | 239,568 |   |
|                                                               |   |                              |      |   |   |   |   |
| Earnings                per common share - basic                   |   | $                                 | 0.21      |   | $ | 0.17 |   |
|                                                               |   |                              |      |   |   |   |   |
| Earnings                per common share - diluted                 |   | $                                 | 0.21      |   | $ | 0.17 |   |

----

*Index*

----

CONSOLIDATED      STATEMENTS 

----

|                                                     |   | Three                Months Ended |    |
|----------------------------------------------------------|--------|-----------------------------------|---------|
|                                                     |   | September                30,      |    |
|                                                     |   | 2006                              |    | 2005 |   |
|                                                     |   |                              |    |   |   |
|                                                     |   |                              |    |   |   |
| Net                income                                |   | $                                 | 289,487 |   | $ | 239,568 |   |
|                                                     |   |                              |    |   |   |   |   |
| Other                comprehensive income (loss)         |   |                              |    |   |   |   |   |
| Unrealized                holding gains and (losses) on  |   |                              |    |   |   |   |   |
|   available-for-sale                securities |   |                              | 95,065  |   |   | (73,530 | ) |
| Tax                effect                                |   |                              | (32,322 | ) |   | 25,000 |   |
| Other                comprehensive income (loss)         |   |                              | 62,743  |   |   | (48,530 | ) |
|                                                     |   |                              |    |   |   |   |   |
| Comprehensive                income                      |   | $                                 | 352,230 |   | $ | 191,038 |   |
|                                                     |   |                              |    |   |   |   |   |

----

*Index*

----

CONSOLIDATED STATEMENTS 

----

|                                                                       |   | Three                Months Ended |       |
|----------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                       |   | September                30,      |       |
|                                                                       |   | 2006                              |       | 2005 |   |
|                                                                       |   |                              |       |   |   |
|                                                                       |   |                              |       |   |   |
| Balance,                beginning of period                                |   | $                                 | 15,499,512 |   | $ | 17,761,391 |   |
|                                                                       |   |                              |       |   |   |   |   |
| Net                income for period                                       |   |                              | 289,487    |   |   | 239,568 |   |
|                                                                       |   |                              |       |   |   |   |   |
| Cash                dividends, $.16 and $.15 per share for                 |   |                              |       |   |   |   |   |
|   the                three months ended September 30, 2006       |   |                              |       |   |   |   |   |
|   and                2005.                                       |   |                              | (216,584   | ) |   | (206,244 | ) |
|                                                                       |   |                              |       |   |   |   |   |
| Purchase                of 8,380 and 7,500 shares of                       |   |                              |       |   |   |   |   |
|   treasury                stock for the three months             |   |                              |       |   |   |   |   |
|   ended                September 30, 2006 and 2005, at cost      |   |                              | (125,700   | ) |   | (104,062 | ) |
|                                                                       |   |                              |       |   |   |   |   |
| Commitment                to release 2,654 and 2,799                       |   |                              |       |   |   |   |   |
|   employee                stock ownership plan shares for the    |   |                              |       |   |   |   |   |
|   three                months ended September 30, 2006 and 2005, |   |                              |       |   |   |   |   |
|   at                fair value                                   |   |                              | 39,597     |   |   | 40,344 |   |
|                                                                       |   |                              |       |   |   |   |   |
| Change                in fair value of common stock subject                |   |                              |       |   |   |   |   |
|   to                repurchase obligation                        |   |                              | (11,791    | ) |   | -- |   |
|                                                                       |   |                              |       |   |   |   |   |
| Change                in fair value on securities available for            |   |                              |       |   |   |   |   |
|   sale,                net of tax                                |   |                              | 62,743     |   |   | (48,530 | ) |
|                                                                       |   |                              |       |   |   |   |   |
| Balance,                end of period                                      |   | $                                 | 15,537,264 |   | $ | 17,682,467 |   |

----

*Index*

----

      STATEMENTS 

----

|                                                                |   | Three                Months Ended |       |
|---------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                |   | September                30,      |       |
|                                                                |   | 2006                              |       | 2005 |   |
| Cash                flows from operating activities                 |   |                              |       |   |   |   |   |
| Net                income                                           |   | $                                 | 289,487    |   | $ | 239,568 |   |
| Adjustments                to reconcile net income to net cash from |   |                              |       |   |   |   |   |
|   operating                activities                     |   |                              |       |   |   |   |   |
| Depreciation                                                        |   |                              | 40,438     |   |   | 45,447 |   |
| Provision                for loan losses                            |   |                              | (47,952    | ) |   | 16,914 |   |
| Net                accretion on securities                          |   |                              | (90        | ) |   | (90 | ) |
| (Gain)                loss on sale of real estate owned             |   |                              | 120        |   |   | (657 | ) |
| FHLB                stock dividends                                 |   |                              | (25,600    | ) |   | (20,500 | ) |
| Compensation                expense for ESOP shares                 |   |                              | 39,597     |   |   | 40,344 |   |
| Change                in:                                           |   |                              |       |   |   |   |   |
| Accrued                interest receivable and other assets         |   |                              | 92,057     |   |   | 60,612 |   |
| Accrued                expense and other liabilities                |   |                              | (89,052    | ) |   | (54,804 | ) |
| Deferred                loan fees                                   |   |                              | (12,867    | ) |   | 8,211 |   |
| Net                cash from operating activities                   |   |                              | 286,138    |   |   | 335,045 |   |
|                                                                |   |                              |       |   |   |   |   |
| Cash                flows from investing activities                 |   |                              |       |   |   |   |   |
| Net                change in loans                                  |   |                              | (13,420    | ) |   | (1,184,634 | ) |
| Premises                and equipment expenditures                  |   |                              | (4,210     | ) |   | (3,411 | ) |
| Proceeds                from sale of real estate owned              |   |                              | 100,301    |   |   | 49,940 |   |
| Net                cash from investing activities                   |   |                              | 82,671     |   |   | (1,138,105 | ) |
|                                                                |   |                              |       |   |   |   |   |
| Cash                flows from financing activities                 |   |                              |       |   |   |   |   |
| Net                change in deposits                     |   |                              | (2,170,606 | ) |   | (420,863 | ) |
| Net                change in short-term FHLB advances     |   |                              | 3,250,000  |   |   | -- |   |
| Repayments                of long-term FHLB advances           |   |                              | (378,750   | ) |   | (435,205 | ) |
| Proceeds                from long-term FHLB advances                |   |                              | --         |   |   | 2,000,000 |   |
| Cash                dividends paid                                  |   |                              | (216,584   | ) |   | (206,244 | ) |
| Purchase                of treasury stock                           |   |                              | (125,700   | ) |   | (104,062 | ) |
| Net                cash from financing activities                   |   |                              | 358,360    |   |   | 833,626 |   |
|                                                                |   |                              |       |   |   |   |   |
| Net                change in cash and cash equivalents              |   |                              | 727,169    |   |   | 30,566 |   |
|                                                                |   |                              |       |   |   |   |   |
| Cash                and cash equivalents at beginning of period     |   |                              | 4,714,929  |   |   | 5,321,196 |   |
|                                                                |   |                              |       |   |   |   |   |
| Cash                and cash equivalents at end of period           |   | $                                 | 5,442,098  |   | $ | 5,351,762 |   |
|                                                                |   |                              |       |   |   |   |   |
| Supplemental                disclosures of cash flow information    |   |                              |       |   |   |   |   |
| Cash                paid during the period for                      |   |                              |       |   |   |   |   |
| Interest                                                            |   | $                                 | 1,009,129  |   | $ | 862,997 |   |
| Income                taxes                                         |   |                              | 65,000     |   |   | -- |   |
|                                                                |   |                              |       |   |   |   |   |
| Noncash                transactions                                 |   |                              |       |   |   |   |   |
| Transfer                from loans to other real estate owned       |   | $                                 | --         |   | $ | 49,283 |   |

----

*Index*

----

LIDATED

----

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

----

*Index*

----

----

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES **

*Share      Based Payment*

**NOTE      2 - SECURITIES AVAILABLE FOR SALE**

|                                          |   |   |      | Gross      |   | Gross      |   |
|-----------------------------------------------|--------|--------|-----------|------------|--------|------------|--------|
|                                          |   | Fair   |      | Unrealized |   | Unrealized |   |
|                                          |   | Value  |      | Gains      |   | Losses     |   |
| September                30, 2006             |   |   |      |       |   |       |   |   |   |   |
| U.S.                Government agencies       |   | $      | 5,345,325 |       | $      | --         |   | $ | (152,759 | ) |
|                                          |   |   |      |       |   |       |   |   |   |   |
| June                30, 2006                  |   |   |      |       |   |       |   |   |   |   |
|  U.S.                Government agencies |   | $      | 5,250,170 |       | $      | --         |   | $ | (247,824 | ) |

|                                                  |   | Fair   |      |
|-------------------------------------------------------|--------|--------|-----------|
|                                                  |   | Value  |      |
|                                                  |   |   |      |
| Due                in one year or less                |   | $      | 499,375   |   |
| Due                after one year through five years  |   |   | 2,962,190 |   |
| Due                after five years through ten years |   |   | 1,883,760 |   |
|                                                  |   |   |      |   |
|                                                  |   | $      | 5,345,325 |   |

----

*Index*

----

----

**NOTE      2 - SECURITIES AVAILABLE FOR      SALE**
**)**

|                                     |   | Less                than 12 Months |    | 12                  Months or More |   |                Total |   |
|------------------------------------------|--------|------------------------------------|---------|------------------------------------|--------|---------------------------|--------|
|                                     |   | Fair                               |    | Unrealized                         |   | Fair                      |   | Unrealized |   | Fair |   | Unrealized |   |
| Description                of Securities |   | Value                              |    | Loss                               |   | Value                     |   | Loss |   | Value |   | Loss |   |
|                                     |   |                               |    |                               |   |                      |   |   |   |   |   |   |   |
| September                30, 2006        |   |                               |    |                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |                               |    |                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                Government agencies  |   | $                                  | 499,375 |                               | $      | (625                      | )      | $ | 4,845,950 |   | $ | (152,134 | ) | $ | 5,345,325 |   | $ | (152,759 | ) |
|                                     |   |                               |    |                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June                30, 2006             |   |                               |    |                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |                               |    |                               |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                Government agencies  |   | $                                  | 497,970 |                               | $      | (2,030                    | )      | $ | 4,752,200 |   | $ | (245,794 | ) | $ | 5,250,170 |   | $ | (247,824 | ) |

**NOTE      3 - LOANS**

|                                        |   | September                30, |        | June                30, |   |
|---------------------------------------------|--------|------------------------------|-------------|-------------------------|--------|
|                                        |   | 2006                         |        | 2006                    |   |
| Mortgage                loans:              |   |                         |        |                    |   |   |   |
| 1-4                family residential       |   | $                            | 90,317,180  |                    | $      | 90,115,467 |   |
| Multi-family                residential     |   |                         | 3,005,714   |                    |   | 2,861,027 |   |
| Commercial                real estate       |   |                         | 13,048,134  |                    |   | 12,972,451 |   |
| Real                estate construction and |   |                         |        |                    |   |   |   |
|   development                     |   |                         | 2,165,907   |                    |   | 2,982,155 |   |
| Land                                   |   |                         | 2,655,717   |                    |   | 2,362,925 |   |
| Total                mortgage loans         |   |                         | 111,192,652 |                    |   | 111,294,025 |   |
| Consumer                loans               |   |                         | 5,754,661   |                    |   | 6,402,995 |   |
| Commercial                loans             |   |                         | 8,510,607   |                    |   | 7,753,128 |   |
| Total                loans                  |   |                         | 125,457,920 |                    |   | 125,450,148 |   |
| Less:                                       |   |                         |        |                    |   |   |   |
| Allowance                for loan losses    |   |                         | (840,000    | )                       |   | (893,600 | ) |
| Deferred                loan fees           |   |                         | (372,488    | )                       |   | (385,355 | ) |
|                                        |   |                         |        |                    |   |   |   |
|                                        |   | $                            | 124,245,432 |                    | $      | 124,171,193 |   |
|                                        |   |                         |        |                    |   |   |   |

----

*Index*

----

----

**NOTE      3 - LOANS **

|                                          |   | Three                Months Ended |    |
|-----------------------------------------------|--------|-----------------------------------|---------|
|                                          |   | September                30,      |    |
|                                          |   | 2006                              |    | 2005 |   |
|                                          |   |                              |    |   |   |
|                                          |   |                              |    |   |   |
| Balance                at beginning of period |   | $                                 | 893,600 |   | $ | 835,500 |   |
| Provision                for losses           |   |                              | (47,952 | ) |   | 16,914 |   |
| Charge-offs                                   |   |                              | (6,000  | ) |   | (111 | ) |
| Recoveries                                    |   |                              | 352     |   |   | 97 |   |
|                                          |   |                              |    |   |   |   |   |
| Balance                at end of period       |   | $                                 | 840,000 |   | $ | 852,400 |   |

|                                                                                 |   | September                30, |    | June                30, |   |
|--------------------------------------------------------------------------------------|--------|------------------------------|---------|-------------------------|--------|
|                                                                                 |   | 2006                         |    | 2006                    |   |
|                                                                                 |   |                         |    |                    |   |
| Period-end                impaired loans with no allowance for loan losses allocated |   | $                            | --      |                    | $      | -- |   |
| Period-end                impaired loans with allowance for loan losses allocated    |   |                         | 161,000 |                    |   | 232,000 |   |
| Amount                of the allowance allocated to impaired loans                   |   |                         | 135,000 |                    |   | 209,000 |   |
|                                                                                 |   |                         |    |                    |   |   |   |

|                                                        |   | Three                Months Ended |    |
|-------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                        |   | September                30,      |    |
|                                                        |   | 2006                              |    | 2005 |   |
|                                                        |   |                              |    |   |   |
|                                                        |   |                              |    |   |   |
| Average                of impaired loans during the period  |   | $                                 | 167,000 |   | $ | 186,000 |   |
| Interest                income recognized during the period |   |                              | 1,699   |   |   | 3,274 |   |
| Cash-basis                interest income recognized        |   |                              | 1,699   |   |   | 1,126 |   |

|                                                        |   | September                30, |      | June                30, |   |
|-------------------------------------------------------------|--------|------------------------------|-----------|-------------------------|--------|
|                                                        |   | 2006                         |      | 2006                    |   |
|                                                        |   |                         |      |                    |   |
| Loans                past due over 90 days still on accrual |   | $                            | 138,000   |                    | $      | 375,000 |   |
| Nonaccrual                loans                             |   |                         | 1,729,000 |                    |   | 1,525,000 |   |

----

*Index*

----

----

**NOTE      4 - BORROWED FUNDS**

|                                                                        |   | September                30, |       | June                30, |   |
|-----------------------------------------------------------------------------|--------|------------------------------|------------|-------------------------|--------|
|                                                                        |   | 2006                         |       | 2006                    |   |
|                                                                        |   |                         |       |                    |   |
| Cash                management advance, variable rate 5.50%                 |   |                         |       |                    |   |   |   |
|   at                September 30, 2006 and 5.43% at June 30, 2006 |   | $                            | 6,750,000  |                    | $      | 3,500,000 |   |
| 4.88%                FHLB fixed-rate advance, due January 25, 2008          |   |                         | 2,000,000  |                    |   | 2,000,000 |   |
| 6.13%                FHLB fixed-rate advance, due June 25, 2008             |   |                         | 7,000,000  |                    |   | 7,000,000 |   |
| 5.16%                FHLB fixed-rate advance, due March 13, 2009            |   |                         | 3,000,000  |                    |   | 3,000,000 |   |
| 6.00%                FHLB convertible advance, fixed-rate until             |   |                         |       |                    |   |   |   |
|   December                2006, due June 11, 2009                 |   |                         | 5,000,000  |                    |   | 5,000,000 |   |
| 4.42%                FHLB fixed-rate advance, due July 9, 2010              |   |                         | 2,000,000  |                    |   | 2,000,000 |   |
| 6.27%                FHLB convertible advance, fixed-rate until             |   |                         |       |                    |   |   |   |
|   December                2006, due September 8, 2010             |   |                         | 5,000,000  |                    |   | 5,000,000 |   |
| 5.30%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                May 1, 2011                             |   |                         | 628,850    |                    |   | 658,357 |   |
| 5.35%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                July 1, 2011                            |   |                         | 1,298,580  |                    |   | 1,507,849 |   |
| 3.92%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                November 1, 2012                        |   |                         | 567,654    |                    |   | 587,902 |   |
| 3.55%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                March 1, 2013                           |   |                         | 689,513    |                    |   | 712,991 |   |
| 4.10%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                March 1, 2015                           |   |                         | 699,844    |                    |   | 716,967 |   |
| 4.09%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                November 1, 2017                        |   |                         | 582,822    |                    |   | 593,068 |   |
| 3.31%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                April 1, 2019                           |   |                         | 628,890    |                    |   | 638,925 |   |
| 4.72%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                November 1, 2022                        |   |                         | 2,246,955  |                    |   | 2,269,998 |   |
| 4.38%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                December 1, 2022                        |   |                         | 748,071    |                    |   | 755,928 |   |
| 3.92%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                December 1, 2022                        |   |                         | 631,951    |                    |   | 638,874 |   |
| 3.64%                select pay mortgage-matched advance, final             |   |                         |       |                    |   |   |   |
|   maturity                March 1, 2023                           |   |                         | 1,909,388  |                    |   | 1,930,409 |   |
|                                                                        |   |                         |       |                    |   |   |   |
|                                                                        |   | $                            | 41,382,518 |                    | $      | 38,511,268 |   |

----

*Index*

----

----

**NOTE      4 - BORROWED FUNDS **

| Year                ended September 30, |   |   |       |
|-----------------------------------------|--------|--------|------------|
| 2007                                    |   | $      | 8,522,709  |   |
| 2008                                    |   |   | 10,560,361 |   |
| 2009                                    |   |   | 9,378,268  |   |
| 2010                                    |   |   | 8,221,737  |   |
| 2011                                    |   |   | 1,026,558  |   |
| Thereafter                              |   |   | 3,672,885  |   |
|                                    |   |   |       |   |
|                                    |   | $      | 41,382,518 |   |

**NOTE      5 - OFF-BALANCE-SHEET ACTIVITIES**

|                                                              |   | September                30, |      | June                30, |   |
|-------------------------------------------------------------------|--------|------------------------------|-----------|-------------------------|--------|
|                                                              |   | 2006                         |      | 2006                    |   |
|                                                              |   |                         |      |                    |   |
| 1-4                family residential real estate - fixed rate    |   | $                            | 162,000   |                    | $      | 239,000 |   |
| 1-4                family residential real estate - variable rate |   |                         | 189,000   |                    |   | 448,000 |   |
| Commercial                lines of credit - variable rate         |   |                         | 4,577,000 |                    |   | 4,213,000 |   |
| Home                equity lines of credit - variable rate        |   |                         | 966,000   |                    |   | 913,000 |   |

----

*Index*

----

----

**NOTE      5 - OFF-BALANCE-SHEET ACTIVITIES **

**NOTE      6 - EARNINGS PER SHARE**

|                                                       |   | Three                Months Ended |      |
|------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                       |   | September                30,      |      |
|                                                       |   | 2006                              |      | 2005 |   |
| Basic                Earnings Per Common Share             |   |                              |      |   |   |   |   |
|                                                       |   |                              |      |   |   |   |   |
| Net                income                                  |   | $                                 | 289,487   |   | $ | 239,568 |   |
|                                                       |   |                              |      |   |   |   |   |
| Weighted                average common shares              |   |                              |      |   |   |   |   |
|   outstanding                                    |   |                              | 1,386,636 |   |   | 1,427,349 |   |
| Less:                Average unallocated ESOP shares       |   |                              | (37,669   | ) |   | (48,791 | ) |
| Weighted                average common shares              |   |                              |      |   |   |   |   |
|   outstanding                for basic earnings  |   |                              |      |   |   |   |   |
|   per                common share                |   |                              | 1,348,967 |   |   | 1,378,558 |   |
|                                                       |   |                              |      |   |   |   |   |
| Basic                earnings per common share             |   | $                                 | 0.21      |   | $ | 0.17 |   |
|                                                       |   |                              |      |   |   |   |   |
| Diluted                Earnings Per Common Share           |   |                              |      |   |   |   |   |
|                                                       |   |                              |      |   |   |   |   |
| Net                income                                  |   | $                                 | 289,487   |   | $ | 239,568 |   |
|                                                       |   |                              |      |   |   |   |   |
| Weighted                average common shares              |   |                              |      |   |   |   |   |
|   outstanding                for basic earnings  |   |                              |      |   |   |   |   |
|   per                common share                |   |                              | 1,348,967 |   |   | 1,378,558 |   |
| Add:                Dilutive effects of assumed            |   |                              |      |   |   |   |   |
|                   exercises of stock options     |   |                              | --        |   |   | -- |   |
| Weighted                average common shares              |   |                              |      |   |   |   |   |
|                   and dilutive potential common  |   |                              |      |   |   |   |   |
|   shares                outstanding              |   |                              | 1,348,967 |   |   | 1,378,558 |   |
|                                                       |   |                              |      |   |   |   |   |
| Diluted                earnings per common share           |   | $                                 | 0.21      |   | $ | 0.17 |   |
|                                                       |   |                              |      |   |   |   |   |
| Stock                options not considered in calculation |   |                              |      |   |   |   |   |
|   because                they were not dilutive  |   |                              | 128,898   |   |   | 128,898 |   |

----

*Index*

----

MANAGEMENT’S        DISCUSSION 

----

**Introduction**

**Overview      and Outlook**

**Forward-Looking      Statements**

**Financial      Condition**

----

*Index*

----

----

**Results      of Operations**

----

*Index*

----

----

**Three      Months Ended September 30, 2006 Compared to the Three Months Ended September      30,      2005**

**Net      Income.**

**Net      Interest Income.**

----

*Index*

----

----

**Provision      for Loan Losses.**

**Noninterest      income.**

**Noninterest      expense.**

**Income      Tax Expense.**

----

*Index*

----

----

**Liquidity      and Capital Resources**

|                                                                |   | Three                Months           |   |
|---------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                |   | Ended                September 30,    |   |
|                                                                |   | 2006                                  |   | 2005 |   |
|                                                                |   | (Dollars                in thousands) |   |
|                                                                |   |                                  |   |   |   |
| Net                income                                           |   | $                                     | 289    |   | $ | 240 |   |
| Adjustments                to reconcile net income to net cash from |   |                                  |   |   |   |   |   |
|   operating                activities                     |   |                                  | (3     | ) |   | 95 |   |
| Net                cash from operating activities                   |   |                                  | 286    |   |   | 335 |   |
| Net                cash from investing activities                   |   |                                  | 83     |   |   | (1,138 | ) |
| Net                cash from financing activities                   |   |                                  | 358    |   |   | 834 |   |
| Net                change in cash and cash equivalents              |   |                                  | 727    |   |   | 31 |   |
| Cash                and cash equivalents at beginning of period     |   |                                  | 4,715  |   |   | 5,321 |   |
|                                                                |   |                                  |   |   |   |   |   |
| Cash                and cash equivalents at end of period           |   | $                                     | 5,442  |   | $ | 5,352 |   |

----

*Index*

----

----

|                                              |   |                                  |   |                             |   |                              |   |                                   |   | To                Be |   |
|---------------------------------------------------|--------|---------------------------------------|--------|----------------------------------|--------|-----------------------------------|--------|----------------------------------------|--------|----------------------|--------|
|                                              |   |                                  |   |                             |   |                              |   |                                   |   | Well-Capitalized     |   |
|                                              |   |                                  |   |                             |   | For                Capital        |   | Under                Prompt Corrective |   |
|                                              |   | Actual                                |   | Adequacy                Purposes |   | Action                Regulations |   |
|                                              |   | Amount                                |   | Ratio                            |   | Amount                            |   | Ratio                                  |   | Amount               |   | Ratio |   |
|                                              |   | (Dollars                in Thousands) |   |
| September                30, 2006                 |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
| Total                capital (to risk-            |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   weighted                assets)       |   | $                                     | 16,432 |                             |   | 18.8                              | %      | $                                      | 6,988  |                 |   | 8.0 | % | $ | 8,735 |   |   | 10.0 | % |
| Tier                1 (core) capital (to          |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   risk-weighted                assets)  |   |                                  | 15,716 |                             |   | 18.0                              |   |                                   | 3,494  |                 |   | 4.0 |   |   | 5,241 |   |   | 6.0 |   |
| Tier                1 (core) capital (to          |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   adjusted                total assets) |   |                                  | 15,716 |                             |   | 11.2                              |   |                                   | 5,603  |                 |   | 4.0 |   |   | 7,004 |   |   | 5.0 |   |
| Tangible                capital (to               |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   adjusted                total assets) |   |                                  | 15,716 |                             |   | 11.2                              |   |                                   | 2,101  |                 |   | 1.5 |   |   | N/A |   |   |   |   |
|                                              |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
| June                30, 2006                      |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
| Total                capital (to risk-            |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   weighted                assets)       |   | $                                     | 16,048 |                             |   | 18.9                              | %      | $                                      | 6,779  |                 |   | 8.0 | % | $ | 8,473 |   |   | 10.0 | % |
| Tier                1 (core) capital (to          |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   risk-weighted                assets)  |   |                                  | 15,368 |                             |   | 18.1                              |   |                                   | 3,389  |                 |   | 4.0 |   |   | 5,084 |   |   | 6.0 |   |
| Tier                1 (core) capital (to          |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   adjusted                total assets) |   |                                  | 15,368 |                             |   | 11.0                              |   |                                   | 5,576  |                 |   | 4.0 |   |   | 6,970 |   |   | 5.0 |   |
| Tangible                capital (to               |   |                                  |   |                             |   |                              |   |                                   |   |                 |   |   |   |   |   |   |   |   |   |
|   adjusted                total assets) |   |                                  | 15,368 |                             |   | 11.0                              |   |                                   | 2,091  |                 |   | 1.5 |   |   | N/A |   |   |   |   |

----

*Index*

----

CONTROLS        AND 

----

**Disclosure      Controls**

----

*Index*

----

SIDNEY        FINANCIAL 

----

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

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

|   | The                following table illustrates the repurchase of the Corporation’s common                stock during the period ended September 30,                2006. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     Period                                          |    Total                  Number ofSharesPurchased |    Average                  PricePaidPer                  Share | Total                  Number ofShares                  PurchasedAs                  Part ofPubliclyAnnounced                  PlansOr                  programs | MaximumNumber                  of SharesThat                  May Yet BePurchased                  UnderThe                  Plan or Programs |
|-------------------------------------------------------------------------|-------------------------------------------------------------------|--------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| July                  1, 2006 -July                  31, 2006           |  8,380                                                       |  $15.00                                                                   |  8,380                                                                                                                                                      |  23,220                                                                                                                                  |
| August                  l, 2006 -August                  31, 2006       |                                                              |                                                                           |                                                                                                                                                             |                                                                                                                                          |
| September                  1, 2006 -September                  30, 2006 |                                                              |                                                                           |                                                                                                                                                             |                                                                                                                                          |
| Total                                                                   | 8,380                                                             | $15.00                                                                         | 8,380                                                                                                                                                            | 23,220                                                                                                                                        |

|   | On                April 19, 2005, the registrant announced that its Board of Directors                had                authorized management to repurchase up to 5% of the Registrant’s common                stock both through the open market and through unsolicited negotiated                transactions. The authorization, which is for 71,600 shares, may                be                suspended or discontinued at any                time. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item                3. | Defaults                Upon SeniorSecurities |
|------------------------|-----------------------------------------------|

|   | Not                applicable. |
|--------|--------------------------------|

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

| Item                5. | Other                Information |
|------------------------|----------------------------------|

|   | None. |
|--------|-------|

hib

----

*Index*

----

SIDNEY      FINANCIAL 

----

| Date:  | November                14, 2006 |   | /s/                Douglas Stewart                   |
|--------|----------------------------------|--------|------------------------------------------------------|
|   |                             |   | Douglas                Stewart                       |
|   |                             |   | President                and Chief Executive Officer |
|   |                             |   |                                                 |
|   |                             |   |                                                 |
|   |                             |   |                                                 |
|   |                             |   |                                                 |
|   |                             |   |                                                 |
| Date:  | November                14, 2006 |   | /s/                Debra Geuy                        |
|   |                             |   | Debra                Geuy                            |
|   |                             |   | Chief                Financial Officer               |
|   |                             |   |                                                 |
|   |                             |   |                                                 |

----

*Index*

----

TO      EXHIBITS

| EXHIBITNUMBER |   |  DESCRIPTION                                                                                                                                                                    |   |                                                                                                                                                                                                                                                                                                        |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1           |   | Articles                of Incorporation ofPeoples-Sidney                Financial Corporation                                                                                       |   | Incorporated                by reference to the Registration Statement on Form S-1 filed by                Peoples-Sidney Financial Corporation on January 27, 1997 (the “S-1”) with                the Securities and Exchange Commission (the “SEC”), Exhibit                3.1. |
| 3.2           |   | Bylaws                of Peoples-Sidney Financial Corporation                                                                                                                        |   | Incorporated                by reference to the S-1, Exhibit 3.2.                                                                                                                                                                                                                                           |
| 10.1          |   | Employee                Stock Ownership Plan                                                                                                                                         |   | Incorporated                by reference to the S-1, Exhibit 10.1                                                                                                                                                                                                                                           |
| 10.2          |   | Form                of Employment Agreement with Douglas Stewart                                                                                                                     |   | Incorporated                by Pre-Effective Amendment No. 1 to the S-1 filed with the SEC on                March                12, 1997, Exhibit 10.2                                                                                                                                                    |
| 10.3          |   | Form                of Employment Agreements with David R. Fogt, Gary N. Fullenkamp and                Debra                A. Geuy                                                  |   | Incorporated                by Pre-Effective Amendment No. 1 to the S-1 filed with the SEC on                March                12, 1997, Exhibit 10.3                                                                                                                                                    |
| 10.4          |   | Form                of Severance Agreement with Steve Goins                                                                                                                          |   | Incorporated                by Pre-Effective Amendment No. 1 to the S-1 filed with the SEC on                March                12, 1997, Exhibit 10.4                                                                                                                                                    |
| 10.5          |   | 401                (k) Plan                                                                                                                                                          |   | Incorporated                by Pre-Effective Amendment No. 1 to the S-1 filed with the SEC on                March                12, 1997, Exhibit 10.5                                                                                                                                                    |
| 10.6          |   | Peoples-Sidney                Financial Corporation Amended and Restated 1998 Stock Option and                Incentive                Plan                                          |   | Filed                as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the                fiscal year ended June 30, 1999 (File No. 0-22223) and incorporate                herein                by reference.                                                                      |
| 10.7          |   | Peoples-Sidney                Financial Corporation Amended and Restated 1998 Management Recognition                Plan                                                             |   | Filed                as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the                fiscal year ended June 30, 1999 (File No. 0-22223) and incorporate                herein                by reference.                                                                      |
| 11            |   | Statement                Regarding                Computation of Earnings per Share                                                                                                  |   | See                Notes 1 and 6 to the consolidated financial statements, which are                incorporated herein by reference.                                                                                                                                                                       |
| 31.1          |   | Certification                of Principal Executive Officer Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                 |   |                                                                                                                                                                                                                                                                                                        |
| 31.2          |   | Certification                of Principal Financial Officer Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                 |   |                                                                                                                                                                                                                                                                                                        |
| 32            |   | Certifications                of the Chief Executive Officer and the Chief Financial Officer Pursuant                to                Section 906 of the Sarbanes-Oxley Act of 2002 |   |                                                                                                                                                                                                                                                                                                        |

----

*Index*