##### Table of Contents



U. S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT of 1934
 For the fiscal year ended December 31, 2005
Commission File Number 0-21809
 
 HOME CITY FINANCIAL CORPORATION
  Ohio
    
    34-1839475(State or other Jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification Number)2454 North Limestone Street
    
    45503(Address of principal executive offices)
    
    (zip code)
   not applicable
   o
 YES þ NO o
 þ
  o þ
   Documents Incorporated by Reference
  1.
    
    Election of Directors2.
    
    Compensation of Directors and Executive Officers3.
    
    Voting Securities and Ownership of Certain Beneficial Owners and Management4.
    
    Section 16(a) Beneficial Ownership Reporting Compliance
 YES o NO þ




---



##### Table of Contents



PAGE NUMBERPART IITEM 1.
    
    Description of Business
    
    2ITEM 2.
    
    Description of Property
    
    27ITEM 3.
    
    Legal Proceedings
    
    28ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    28PART IIITEM 5.
    
    Market for Common
Equity, Related Shareholder Matters and Small BusinessIssuers
Purchase of Equity Securities
    
    28ITEM 6.
    
    Managements Discussion and Analysis or Plan of Operation
    
    29ITEM 7.
    
    Financial Statements
    
    40Report of Independent Registered Public Accounting FirmConsolidated balance sheetsDecember 31, 2005 and 2004Consolidated statements of incomeYears ended December 31, 2005 and 2004Consolidated
statements of shareholders equityYears ended December 31 2005 and 2004Consolidated statements of cash flowsYears ended December 31, 2005 and 2004Notes to consolidated financial statementsDecember 31, 2005 and 2004ITEM 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    69ITEM 8A.
    
    Controls and Procedures
    
    69ITEM 8B.
    
    Other Information
    
    69PART IIIITEM 9.
    
    Directors, Executive Officers, Promoters and Control Persons; Compliance withSection 16(a) of the  Exchange Act of the Registrant
    
    70ITEM 10.
    
    Executive Compensation
    
    70ITEM 11.
    
    Security Ownership
of Certain Beneficial Owners and Management and RelatedStockholder
Matters
    
    70ITEM 12.
    
    Certain Relationships and Related Transactions
    
    71




---



##### Table of Contents



PAGE NUMBERITEM 13.
    
    Exhibits
    
    71ITEM 14.
    
    Principal Accountant Fees and Services
    
    72SIGNATURES
    
    73INDEX TO EXHIBITS
    
    74Exhibit
    
    14Exhibit
    
    21Exhibit
    
    23Exhibit
    
    31.1Exhibit
    
    31.2Exhibit
    
    32Exhibit
    
    99.1EX-14EX-21EX-23EX-31.1EX-31.2EX-32EX-99.1




---



##### Table of Contents



PART I
 
 ITEM 1. Description of Business
 General
    Market Area
  Forward-Looking Statements
  -2-




---



##### Table of Contents



1.
    
    Financial Condition. Managements statements regarding the amount and
adequacy of the allowance for loan losses at December 31, 2005.2.
    
    Comparison of Results of Operations for the Fiscal Years Ended December 31,
2005 and 2004  Provision for Loan Losses. Managements statements regarding the
adequacy of the allowance for loan losses at December 31, 2005.3.
    
    Liquidity and Capital Resources. Managements belief that liquidity and
capital reserves are sufficient to meet its outstanding short- and long-term needs.
  Lending Activities
 General.
 -3-




---



##### Table of Contents



Loan Portfolio Composition.
 At December 31,2005
    
    
    2004(Dollars in thousands)Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    total loans
    
    
    Amount
    
    
    total loansResidential real estate loans:One- to four-family (first mortgage)
    
    $
    61,548
    
    
    
    47.79
    %
    
    $
    64,288
    
    
    
    49.14
    %Multifamily
    
    
    9,939
    
    
    
    7.72
    
    
    
    9,208
    
    
    
    7.04Home equity (second mortgage)
    
    
    3,494
    
    
    
    2.71
    
    
    
    3,906
    
    
    
    2.99Nonresidential real estate loans
    
    
    32,514
    
    
    
    25.25
    
    
    
    30,930
    
    
    
    23.64Land loans
    
    
    1,849
    
    
    
    1.43
    
    
    
    1,373
    
    
    
    1.05Construction loans
    
    
    2,005
    
    
    
    1.56
    
    
    
    3,350
    
    
    
    2.56Total real estate loans
    
    
    111,349
    
    
    
    86.46
    
    
    
    113,055
    
    
    
    86.42Commercial loans:Secured, other than by real estate
    
    
    13,667
    
    
    
    10.61
    
    
    
    12,434
    
    
    
    9.50Other, unsecured
    
    
    2,718
    
    
    
    2,11
    
    
    
    2,625
    
    
    
    2.01Total commercial loans
    
    
    16,385
    
    
    
    12.72
    
    
    
    15,059
    
    
    
    11.51Consumer loans:Loans on deposits
    
    
    68
    
    
    
    0.05
    
    
    
    75
    
    
    
    0.06Other consumer loans
    
    
    984
    
    
    
    0.77
    
    
    
    2,638
    
    
    
    2.01Total consumer loans
    
    
    1,052
    
    
    
    0.82
    
    
    
    2,713
    
    
    
    2.07Total loans
    
    
    128,786
    
    
    
    100.00
    %
    
    
    130,827
    
    
    
    100.00
    %Less:Allowance for loan losses
    
    
    (1,377
    )
    
    
    
    
    
    
    (760
    )Net loans
    
    $
    127,409
    
    
    
    
    
    
    $
    130,067
 Loan Maturity Schedule.
 Due moreDue during the
    
    
    Due 4-5
    
    
    Due 6-10
    
    
    Due 11-15
    
    
    than 15year ending December 31,
    
    
    years after
    
    
    years after
    
    
    years after
    
    
    years after2006
    
    
    2007
    
    
    2008
    
    
    12/31/05
    
    
    12/31/05
    
    
    12/31/05
    
    
    12/31/05
    
    
    Total(Dollars in thousands)Mortgage loans:Residential
    
    $
    3,782
    
    
    $
    1,148
    
    
    $
    5,067
    
    
    $
    4,233
    
    
    $
    14,721
    
    
    $
    26,911
    
    
    $
    19,119
    
    
    $
    74,981Nonresidential
    
    
    442
    
    
    
    1,580
    
    
    
    3,132
    
    
    
    5,206
    
    
    
    9,436
    
    
    
    6,850
    
    
    
    9,722
    
    
    
    36,368Consumer loans
    
    
    152
    
    
    
    100
    
    
    
    119
    
    
    
    276
    
    
    
    242
    
    
    
    163
    
    
    
    0
    
    
    
    1,052Commercial loans
    
    
    6,326
    
    
    
    1,970
    
    
    
    1,353
    
    
    
    5,607
    
    
    
    1,129
    
    
    
    0
    
    
    
    0
    
    
    
    16,385Total loans
    
    $
    10,702
    
    
    $
    4,798
    
    
    $
    9,671
    
    
    $
    15,322
    
    
    $
    25,528
    
    
    $
    33,924
    
    
    $
    28,841
    
    
    $
    128,786
  -4-




---



##### Table of Contents



One- to Four-family Residential Real Estate Loans.
    Multifamily Residential Real Estate Loans
  -5-




---



##### Table of Contents



Home Equity Loans.
  Nonresidential Real Estate Loans.
    -6-




---



##### Table of Contents



Land Loans.
  Construction Loans
   Commercial Loans.
  -7-




---



##### Table of Contents



Consumer Loans.
   Loan Solicitation and Processing.
  -8-




---



##### Table of Contents



Loan Originations, Purchases and Sales.
 -9-




---



##### Table of Contents



December 31,2005
    
    
    2004(Dollars in thousands)Loans originated:One- to four-family residential real estate (1)
    
    $
    17,105
    
    
    $
    16,960Multifamily residential real estate
    
    
    1,424
    
    
    
    1,076Nonresidential real estate
    
    
    3,649
    
    
    
    6,364Commercial
    
    
    7,083
    
    
    
    12,994Consumer
    
    
    2,743
    
    
    
    2,342Total loans originated
    
    $
    32,004
    
    
    $
    39,736Loans purchased
    
    
    0
    
    
    
    0Reductions:Principal repayments
    
    
    (29,145
    )
    
    
    (34,937
    )Sales of loans
    
    
    (2,966
    )
    
    
    (117
    )Increase (decrease) in other items, net (2)
    
    
    (2,551
    )
    
    
    (1,127
    )Net increase (decrease)
    
    $
    (2,658
    )
    
    $
    3,555
 
 (1)
    
    Includes construction loans.(2)
    
    Consists of unearned and deferred fees, costs and the allowance for loan losses.    Delinquent Loans, Non-performing Assets and Classified Assets.
 -10-




---



##### Table of Contents



December 31, 2005
    
    
    December 31, 2004Percent
    
    
    
    
    
    
    
    
    
    
    Percentof total
    
    
    
    
    
    
    
    
    
    
    of totalNumber
    
    
    Amount
    
    
    loans
    
    
    Number
    
    
    Amount
    
    
    loans(Dollars in thousands)Loans delinquent for (1):30-59 days
    
    
    12
    
    
    $
    606
    
    
    
    0.47
    %
    
    
    16
    
    
    $
    724
    
    
    
    0.55
    %60-89 days
    
    
    4
    
    
    
    212
    
    
    
    0.16
    
    
    
    9
    
    
    
    720
    
    
    
    0.5590 days and over
    
    
    11
    
    
    
    869
    
    
    
    0.68
    
    
    
    4
    
    
    
    195
    
    
    
    0.15Total delinquent loans
    
    
    27
    
    
    $
    1,687
    
    
    
    1.31
    %
    
    
    29
    
    
    $
    1,639
    
    
    
    1.25
    %
 
 (1)
    
    The number of days a loan is delinquent is measured from the day the payment was due under the
terms of the loan agreement. -11-




---



##### Table of Contents



December 31,2005
    
    
    2004
    
    
    2003(Dollars in thousands)Loans accounted for on a nonaccrual basis:Real estate:Residential
    
    $
    206
    
    
    $
    195
    
    
    $
    170Nonresidential
    
    
    315
    
    
    
    0
    
    
    
    0Commercial
    
    
    305
    
    
    
    0
    
    
    
    27Home Equity
    
    
    20
    
    
    
    0
    
    
    
    0Subtotal non-accrual loans
    
    $
    846
    
    
    $
    195
    
    
    $
    197Loans 90 days or more past due and still accruing
    
    
    23
    
    
    
    0
    
    
    
    346Total non-performing loans
    
    $
    869
    
    
    $
    195
    
    
    $
    543Real estate owned
    
    
    16
    
    
    
    250
    
    
    
    31Total non-performing assets
    
    $
    885
    
    
    $
    445
    
    
    $
    574Total loan loss allowance
    
    $
    1,377
    
    
    $
    760
    
    
    $
    995Total non-performing assets as
a percentage of total assets
    
    
    0.59
    %
    
    
    0.28
    %
    
    
    0.38
    %Loan loss allowance as a percent
of non-performing loans
    
    
    158.46
    %
    
    
    389.74
    %
    
    
    183.24
    %
    -12-




---



##### Table of Contents



December 31,2005
    
    
    2004
    
    
    2003(Dollars in thousands)Classified assets:Substandard
    
    $
    3,579
    
    
    $
    1,780
    
    
    $
    3,044Doubtful
    
    
    271
    
    
    
    243
    
    
    
    216Total classified assets
    
    $
    3,850
    
    
    $
    2,023
    
    
    $
    3,260
   Allowance for Loan Losses.
    -13-




---



##### Table of Contents



(Dollars in thousands)2005
    
    
    2004Balance at beginning of year
    
    $
    760
    
    
    $
    995Charge-offs:Residential loans
    
    $
    (35
    )
    
    $
    (385
    )Consumer loans
    
    
    (52
    )
    
    
    (56
    )Commercial loans
    
    
    (11
    )
    
    
    0Subtotal charge-offs
    
    $
    (98
    )
    
    
    (441
    )Recoveries
    
    
    10
    
    
    
    6Net charge-offs
    
    $
    (88
    )
    
    $
    (435
    )Provision for loan losses (charged to operations)
    
    
    705
    
    
    
    200Balance at end of year
    
    $
    1,377
    
    
    $
    760Ratio of net charge-offs to average net
loans outstanding during the year
    
    
    0.07
    %
    
    
    0.34
    %Ratio of allowance for loan losses to total loans
    
    
    1.07
    %
    
    
    0.58
    %
  December 31,(Dollars in thousands)2005
    
    
    2004Allowance for loan losses:Residential loans
    
    $
    755
    
    
    $
    301Consumer loans
    
    
    30
    
    
    
    25Commercial loans
    
    
    592
    
    
    
    4341,377
    
    
    
    760Unallocated
    
    
    0
    
    
    
    0Total allowance for loan losses
    
    $
    1,377
    
    
    $
    760
 Mortgage-Backed Securities
  -14-




---



##### Table of Contents



December 31, 2005
    
    
    December 31, 2004(Dollars in thousands)Amortized
    
    Fair
    
    Amortized
    
    FairCost
    
    value
    
    cost
    
    valueGNMA, FHLMC and FNMA
certificates
    
    $
    1,053
    
    
    $
    1,053
    
    
    $
    1,705
    
    
    $
    1,705Total mortgage-backed
securities
    
    $
    1,053
    
    
    $
    1,053
    
    
    $
    1,705
    
    
    $
    1,705
  At December 31, 2005After one to
    
    
    After five to
    
    
    
    
    
    
    
    
    
    
    Total mortgage-backedOne year or less
    
    
    five years
    
    
    ten years
    
    
    After ten years
    
    
    securities portfolioCarrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Market
    
    
    Averagevalue
    
    
    yield
    
    
    value
    
    
    yield
    
    
    value
    
    
    yield
    
    
    value
    
    
    yield
    
    
    value
    
    
    value
    
    
    yield(Dollars in thousands)GNMA,
FHLMC & FNMA
certificates
    
    $
    10
    
    
    
    2.07
    %
    
    $
    568
    
    
    
    4.31
    %
    
    $
    0
    
    
    
    0
    %
    
    $
    475
    
    
    
    3.94
    %
    
    $
    1,053
    
    
    $
    1,053
    
    
    
    4.12
    %Total
    
    $
    10
    
    
    
    2.07
    %
    
    $
    568
    
    
    
    4.31
    %
    
    $
    0
    
    
    
    0
    %
    
    $
    475
    
    
    
    3.94
    %
    
    $
    1,053
    
    
    $
    1,053
    
    
    
    4.12
    %
  Investment Activities
  -15-




---



##### Table of Contents



At December 31,
    
    
    At December 31,2005
    
    
    2004Carrying
    
    
    % of
    
    
    Market
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Market
    
    
    % ofvalue
    
    
    total
    
    
    value
    
    
    total
    
    
    value
    
    
    total
    
    
    value
    
    
    total(Dollars in thousands)Interest-bearing demand
deposits in other
financial institutions
    
    $
    4,006
    
    
    
    35.97
    %
    
    $
    4,006
    
    
    
    35.97
    %
    
    $
    6,529
    
    
    
    41.26
    %
    
    $
    6,529
    
    
    
    41.26
    %Federal funds sold
    
    
    443
    
    
    
    3.98
    
    
    
    443
    
    
    
    3.98
    
    
    
    2,207
    
    
    
    13.95
    
    
    
    2,207
    
    
    
    13.95Investment securities:U.S. Treasury and
government agencies
    
    
    3,246
    
    
    
    29.14
    
    
    
    3,246
    
    
    
    29.14
    
    
    
    3,595
    
    
    
    22.72
    
    
    
    3,595
    
    
    
    22.72Other asset-backed
securities
    
    
    267
    
    
    
    2.40
    
    
    
    267
    
    
    
    2.40
    
    
    
    476
    
    
    
    3.01
    
    
    
    476
    
    
    
    3.01Equity securities:FHLB stock
    
    
    2,480
    
    
    
    22.27
    
    
    
    2,480
    
    
    
    22.27
    
    
    
    2,360
    
    
    
    14.91
    
    
    
    2,360
    
    
    
    14.91FNMA preferred stock
    
    
    695
    
    
    
    6.24
    
    
    
    695
    
    
    
    6.24
    
    
    
    656
    
    
    
    4.15
    
    
    
    656
    
    
    
    4.15Total investments
    
    $
    11,137
    
    
    
    100.00
    %
    
    $
    11.137
    
    
    
    100.00
    %
    
    $
    15,823
    
    
    
    100.00
    %
    
    $
    15,823
    
    
    
    100.00
    %
  At December 31, 2005One year or less
    
    
    After one to five years
    
    
    After five yearsCarrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Averagevalue
    
    
    yield
    
    
    value
    
    
    yield
    
    
    value
    
    
    yield(Dollars in thousands)Investment securities:U.S. Treasury and
government
agencies
    
    $
    3,246
    
    
    
    3.93
    %
    
    $
    0
    
    
    
    0
    %
    
    $
    0
    
    
    
    0Other asset-backed
securities
    
    
    0
    
    
    
    0
    
    
    
    182
    
    
    
    4.36
    %
    
    
    85
    
    
    
    4.81
    %Equity securities: (1)
FNMA preferred stock
    
    
    695
    
    
    
    2.40
    %
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total investments
    
    $
    3,941
    
    
    
    3.66
    %
    
    $
    182
    
    
    
    4.36
    %
    
    $
    85
    
    
    
    4.81
    %
 
 (1)
    
    By their nature, equity securities have no maturity date. -16-




---



##### Table of Contents



At December 31, 2005Average
    
    
    
    
    
    
    
    
    
    
    Weighted-life
    
    
    Carrying
    
    
    Market
    
    
    averagein years
    
    
    value
    
    
    value
    
    
    yield(Dollars in thousands)Investment securities:U.S. Treasury and government
agencies
    
    
    0.04
    
    
    $
    3,246
    
    
    $
    3,246
    
    
    
    3.93
    %Other asset-backed securities
    
    
    1.50
    
    
    
    267
    
    
    
    267
    
    
    
    4.50
    %Equity securities (1)
    
    
    
    
    
    
    695
    
    
    
    695
    
    
    
    2.40
    %Total
    
    
    
    
    
    $
    4,208
    
    
    $
    4,208
    
    
    
    3.71
    %
 
 (1)
    
    By their nature, equity securities have no maturity date. Deposits and Borrowings
 General.
 Deposits.
  -17-




---



##### Table of Contents



At December 31,2005
    
    
    2004Percent
    
    
    
    
    
    
    Percentof total
    
    
    
    
    
    
    of totalAmount
    
    
    deposits
    
    
    Amount
    
    
    deposits(Dollars in thousands)Transaction accounts:Demand
    
    $
    5,763
    
    
    
    5.85
    %
    
    $
    5,235
    
    
    
    4.89
    %NOW accounts (1)
    
    
    5,373
    
    
    
    5.46
    
    
    
    4,344
    
    
    
    4.05Passbook/statement savings accounts (2)
    
    
    27,607
    
    
    
    28.04
    
    
    
    46,829
    
    
    
    43.68Total transaction accounts
    
    
    38,743
    
    
    
    39.35
    
    
    
    56,408
    
    
    
    52.62Certificates of deposit:1.01  2.00%
    
    
    823
    
    
    
    0.84
    
    
    
    4,592
    
    
    
    4.282.01  4.00%
    
    
    43,761
    
    
    
    44.45
    
    
    
    33,723
    
    
    
    31.464.01  6.00%
    
    
    15,010
    
    
    
    15.25
    
    
    
    12,214
    
    
    
    11.396.01  8.00%
    
    
    118
    
    
    
    0.11
    
    
    
    267
    
    
    
    0.25Total certificates of deposit
    
    
    59,712
    
    
    
    60.65
    
    
    
    50,796
    
    
    
    47.38Total deposits (3)
    
    $
    98,455
    
    
    
    100.00
    %
    
    $
    107,204
    
    
    
    100.00
    %
 
 (1)
    
    Home Citys weighted-average interest rate paid on NOW accounts fluctuates with the general
movement of interest rates. At December 31, 2005 and 2004, the weighted-average rates on NOW
accounts were 0.35% and 0.39%, respectively.(2)
    
    Home Citys weighted-average rate on passbook/statement savings accounts fluctuates with the
general movement of interest rates. The weighted-average interest rate on passbook/statement
savings accounts was 1.58% and 1.63% at December 31, 2005 and 2004, respectively.(3)
    
    Retirement accounts are included in the various certificates of deposit balances. Retirement
accounts totaled $8.6 million and $8.2 million as of December 31, 2005 and 2004,
respectively.  Amount DueOver
    
    
    OverUp to
    
    
    1 year to
    
    
    2 years to
    
    
    OverRate
    
    1 year
    
    
    2 years
    
    
    3 years
    
    
    3 years
    
    
    Total(Dollars in thousands)1.01  2.00%
    
    $
    823
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    8232.01  4.00%
    
    
    23,020
    
    
    
    17,078
    
    
    
    2,701
    
    
    
    962
    
    
    
    43,7614.01  6.00%
    
    
    10,786
    
    
    
    2,750
    
    
    
    600
    
    
    
    874
    
    
    
    15,0106.01  8.00%
    
    
    118
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    118Total certificates of deposit
    
    $
    34,747
    
    
    $
    19,828
    
    
    $
    3,301
    
    
    $
    1,836
    
    
    $
    59,712
 -18-




---



##### Table of Contents



Maturity
    
    Amount(Dollars in thousands)Three months or less
    
    $
    4,840Over 3 months to 6 months
    
    
    2,016Over 6 months to 12 months
    
    
    5,810Over 12 months
    
    
    10,663Total
    
    $
    23,329
  Year ended December 31,2005
    
    
    2004(Dollars in thousands)Beginning balance
    
    $
    107,204
    
    
    $
    103,922New deposits received less withdrawals
    
    
    (10,925
    )
    
    
    1,215Interest credited
    
    
    2,176
    
    
    
    2,067Ending balance
    
    $
    98,455
    
    
    $
    107,204Net increase (decrease)
    
    $
    (8,749
    )
    
    $
    3,282Percentage increase (decrease)
    
    
    (8.16
    )%
    
    
    3.16
    %
 Borrowings.
 -19-




---



##### Table of Contents



Year ended December 31,2005
    
    2004(Dollars in thousands)Average balance outstanding
    
    $
    34,862
    
    
    $
    34,557Maximum amount outstanding at any month end
during the year
    
    $
    37,327
    
    
    $
    36,722Balance outstanding at end of year
    
    $
    36,337
    
    
    $
    35,120Weighted-average interest rate during the year
    
    
    5.56
    %
    
    
    5.60
    %Weighted-average interest rate at end of year
    
    
    5.65
    %
    
    
    5.57
    %
  Subsidiaries
  Competition
  Personnel
  -20-




---



##### Table of Contents



Regulation
 General
   Regulatory Capital Requirements
   -21-




---



##### Table of Contents



Limitations on Capital Distributions
  Qualified Thrift Lender Tests
 Transactions with Insiders and Affiliates
  -22-




---



##### Table of Contents



Holding Company Regulation
  Deposit Insurance
    
    
    increasing the deposit insurance limit for retirement accounts from $100,000 to
$250,000;
    
    adjusting the deposit insurance limits (currently $100,000 for most accounts) every
five years based on an inflation index, with the first adjustment to be effective on
January 1, 2011;
 -23-




---



##### Table of Contents




    
    providing pass-through deposit insurance for the deposits of employees benefit plans
(but prohibiting undercapitalized depository institutions from accepting employee benefit
plan deposits);
    
    allocating an aggregate of $4.7 billion of one-time credits to offset the premiums of
depository institutions based on their assessment bases at the end of 1996;
    
    establishing rules for awarding cash dividends to depository institutions, based on
their relative contributions to the DIF and its predecessor funds, when the DIF reserve
ratio reaches certain levels; and
    
    revising the rules and procedures for risk-based premium assessments.
  -24-




---



##### Table of Contents



Reserve Requirements
 Federal Home Loan Banks.
    Taxation
 Federal Taxation
 -25-




---



##### Table of Contents



Ohio Taxation.
 -26-




---



##### Table of Contents



Recently Issued Accounting Pronouncements
  Impact of Inflation and Changing Prices
   
 ITEM 2. Description of Property
   Year
    
    Square
    
    NetLocation
    
    acquired
    
    footage
    
    book value (1)63 West Main Street, Springfield, Ohio 45502
    
    
    1975
    
    
    
    5,839
    
    
    $
    277,0002454 North Limestone Street, Springfield, Ohio 45503
    
    
    1999
    
    
    
    13,000
    
    
    $
    2,463,000
 
 (1)
    
    At December 31, 2005, Home Citys properties and equipment had a total net book value of
$3,398,000.(2)
    
    For additional information regarding Home Citys properties and equipment, see Notes 1 and 4
of Notes to Consolidated Financial Statements. -27-




---



##### Table of Contents



ITEM 3. Legal Proceedings
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 ITEM 5. Market for Common Equity, Related Shareholder Matters and Small Business Issuer
Purchase of Equity Securities
  March 31, 2005
    
    June 30, 2005
    
    September 30, 2005
    
    December 31, 2005High
    
    $
    16.000
    
    
    $
    16.000
    
    
    $
    16.650
    
    
    $
    16.300Low
    
    $
    15.000
    
    
    $
    14.950
    
    
    $
    15.150
    
    
    $
    14.400Dividend
declared
    
    $
    0.110
    
    
    $
    0.110
    
    
    $
    0.110
    
    
    $
    0.110
 March 31, 2004
    
    June 30, 2004
    
    September 30, 2004
    
    December 31, 2004High
    
    $
    17.000
    
    
    $
    18.250
    
    
    $
    17.650
    
    
    $
    16.470Low
    
    $
    15.500
    
    
    $
    16.270
    
    
    $
    14.550
    
    
    $
    15.010Dividend
declared
    
    $
    0.110
    
    
    $
    0.110
    
    
    $
    0.110
    
    
    $
    0.110
    -28-




---



##### Table of Contents



ITEM 6. Managements Discussion and Analysis or Plan of Operation
 General
   Forward-Looking Statements
   1.
    
    Financial Condition: Managements statements regarding the amount and
adequacy of the allowance for loan losses at December 31, 2005.2.
    
    Comparison of Results of Operations for the Fiscal Years Ended December 31,
2005 and 2004. Provision for Loan Losses: Managements statements regarding the
adequacy of the allowance for loan losses at December 31, 2005.3.
    
    Liquidity and Capital Resources: Managements belief that liquidity and
capital reserves are sufficient to meet its outstanding short- and long-term needs.
 -29-




---



##### Table of Contents



Selected Financial Data and Ratios
  At December 31,2005
    
    2004
    
    2003(Dollars in thousands)Assets
    
    $
    149,553
    
    
    $
    156,224
    
    
    $
    151,784Cash and cash equivalents (1)
    
    
    6,846
    
    
    
    9,595
    
    
    
    10,473Available-for-sale securities
    
    
    5,261
    
    
    
    6,432
    
    
    
    5,089Federal Home Loan Bank stock
    
    
    2,480
    
    
    
    2,360
    
    
    
    2,265Loans, net
    
    
    127,409
    
    
    
    130,067
    
    
    
    126,512Deposits
    
    
    98,455
    
    
    
    107,204
    
    
    
    103,922Federal Home Loan Bank advances
    
    
    36,337
    
    
    
    35,120
    
    
    
    34,764Shareholders equity
    
    
    13,406
    
    
    
    12,735
    
    
    
    11,907
  At or for the year ended December 31,2005
    
    2004
    
    2003Return on assets (2)
    
    
    0.55
    %
    
    
    0.44
    %
    
    
    0.43
    %Return on equity (3)
    
    
    6.41
    
    
    
    5.52
    
    
    
    5.55Interest rate spread (4)
    
    
    3.02
    
    
    
    2.74
    
    
    
    2.95Net interest margin (5)
    
    
    3.29
    
    
    
    3.00
    
    
    
    3.20Noninterest expense to average assets (6)
    
    
    2.25
    
    
    
    2.23
    
    
    
    2.24Average equity to average assets
    
    
    8.59
    
    
    
    7.98
    
    
    
    7.78Equity to assets at year end
    
    
    8.96
    
    
    
    8.15
    
    
    
    7.84Non-performing loans to total loans
    
    
    0.68
    
    
    
    0.15
    
    
    
    043Non-performing assets to total assets (7)
    
    
    0.59
    
    
    
    0.28
    
    
    
    0.38Allowance for loan losses to total loans
    
    
    1.07
    
    
    
    0.58
    
    
    
    0.78Allowance for loan losses to
non-performing loans
    
    
    158.46
    
    
    
    389.74
    
    
    
    183.24Net charge-offs (recoveries) to average loans
    
    
    0.07
    
    
    
    0.34
    
    
    
    0.01Dividend payout ratio (8)
    
    
    43.14
    
    
    
    51.16
    
    
    
    50.57
 
 (1)
    
    Includes cash and amounts due from depository institutions and interest-earning deposits
in other financial institutions.(2)
    
    Net income divided by average total assets.(3)
    
    Net income divided by average total equity.(4)
    
    Average yield on interest-earning assets less average cost of interest-bearing
liabilities.(5)
    
    Net interest income as a percentage of average interest-earning assets.(6)
    
    Noninterest expense divided by average total assets.(7)
    
    Non-performing assets consist of nonaccruing loans, accruing loans 90 days or more past
due and real estate acquired (or deemed acquired) in foreclosure proceedings or in lieu thereof.(8)
    
    Dividends declared per share divided by basic earnings per share. -30-




---



##### Table of Contents



Financial Condition
        -31-




---



##### Table of Contents



Comparison of Results of Operations for the Fiscal Years Ended December 31, 2005 and 2004
 General
 Net Interest Income.
   Provision for Loan Losses.
  -32-




---



##### Table of Contents



Noninterest Income.
 Noninterest Expense
 Federal Income Taxes.
 Critical Accounting Policies.
  -33-




---



##### Table of Contents



-34-




---



##### Table of Contents



Yields Earned and Rates Paid
  Year ended December 31,2005
    
    
    2004Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interestoutstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rate(Dollars in thousands)Interest-earning assets:Interest-earning demand deposits
    
    $
    3,292
    
    
    $
    77
    
    
    
    2.33
    %
    
    $
    3,845
    
    
    $
    26
    
    
    
    0.70
    %Federal funds sold
    
    
    624
    
    
    
    18
    
    
    
    2.95
    
    
    
    4,495
    
    
    
    47
    
    
    
    1.05Time deposits
    
    
    2,511
    
    
    
    68
    
    
    
    2.71
    
    
    
    0
    
    
    
    0
    
    
    
    0.00Investment securities (1)
    
    
    4,159
    
    
    
    103
    
    
    
    2.46
    
    
    
    8,112
    
    
    
    178
    
    
    
    2.19Federal Home Loan Bank Stock
    
    
    2,402
    
    
    
    120
    
    
    
    5.01
    
    
    
    2,300
    
    
    
    95
    
    
    
    4.13Loans receivable (2)
    
    
    129,857
    
    
    
    8,725
    
    
    
    6.72
    
    
    
    127,826
    
    
    
    8,426
    
    
    
    6.59Total interest-earning assets (3)
    
    
    142,845
    
    
    
    9,111
    
    
    
    6.38
    
    
    
    146,578
    
    
    
    8,772
    
    
    
    5.98Non-interest-earning assets:Other non-earning assets
    
    
    10,439
    
    
    
    
    
    
    
    
    
    
    
    9,050Less: Allow for loan losses
    
    
    (1,141
    )
    
    
    
    
    
    
    
    
    
    
    (760
    )Total assets
    
    $
    152,143
    
    
    
    
    
    
    
    
    
    
    $
    154,868Interest-bearing liabilities:NOW accounts
    
    $
    4,112
    
    
    $
    14
    
    
    
    0.35
    %
    
    $
    3,419
    
    
    $
    13
    
    
    
    0.39
    %Money market accounts
    
    
    1,046
    
    
    
    18
    
    
    
    1.67
    
    
    
    644
    
    
    
    3
    
    
    
    0.41Passbook accounts
    
    
    36,297
    
    
    
    574
    
    
    
    1.58
    
    
    
    45,302
    
    
    
    740
    
    
    
    1.63Certificates of deposit
    
    
    54,790
    
    
    
    1,864
    
    
    
    3.40
    
    
    
    51,045
    
    
    
    1,679
    
    
    
    3.29Total deposits
    
    
    96,245
    
    
    
    2,470
    
    
    
    2.57
    
    
    
    100,410
    
    
    
    2,435
    
    
    
    2.43FHLB advances
    
    
    34,862
    
    
    
    1,937
    
    
    
    5.56
    
    
    
    34,557
    
    
    
    1,935
    
    
    
    5.60Total interest-bearing liabilities
    
    
    131,107
    
    
    
    4,407
    
    
    
    3.36
    
    
    
    134,967
    
    
    
    4,370
    
    
    
    3.24Non-interest-bearing liabilities
    
    
    7,973
    
    
    
    
    
    
    
    
    
    
    
    7,539Total liabilities
    
    
    139,080
    
    
    
    
    
    
    
    
    
    
    
    142,506Total shareholders equity
    
    
    13,063
    
    
    
    
    
    
    
    
    
    
    
    12,362Total liabilities and shareholders equity
    
    $
    152,143
    
    
    
    
    
    
    
    
    
    
    $
    154,868Net interest income; net interest rate spread
    
    
    
    
    
    $
    4,704
    
    
    
    3.02
    %
    
    
    
    
    
    $
    4,402
    
    
    
    2.74
    %Net interest margin (net interest income as a
percent of average interest-earning assets)
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.00
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    108.95
    %
    
    
    
    
    
    
    
    
    
    
    108.60
    %
 
 (1)
    
    Includes $0 and $10,000 of nontaxable municipal income recorded in 2005 and 2004,
respectively. The tax-equivalent yield on investments is 2.19% and 2.26 % for 2005 and
2004, respectively.(2)
    
    Calculated net of deferred loan fees, loan discounts, loans in process and allowance for
loan losses.(3)
    
    Tax-equivalent yield on interest-earning assets is 6.38% and 5.99% for 2005 and 2004,
respectively. -35-




---



##### Table of Contents



Year ended December 31,2005 vs. 2004
    
    
    2004 vs. 2003Increase
    
    
    Increase(decrease)
    
    
    (decrease)due to
    
    
    due toVolume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest income attributable to:Interest-earning demand deposits
    
    $
    (3
    )
    
    $
    54
    
    
    $
    51
    
    
    $
    24
    
    
    $
    1
    
    
    $
    25Federal funds sold
    
    
    (41
    )
    
    
    12
    
    
    
    (29
    )
    
    
    14
    
    
    
    3
    
    
    
    17Time deposits
    
    
    0
    
    
    
    68
    
    
    
    68
    
    
    
    0
    
    
    
    0
    
    
    
    0Investment securities
    
    
    (87
    )
    
    
    12
    
    
    
    (75
    )
    
    
    10
    
    
    
    25
    
    
    
    35Federal Home Loan Bank stock
    
    
    4
    
    
    
    21
    
    
    
    25
    
    
    
    4
    
    
    
    3
    
    
    
    7Loans receivable
    
    
    135
    
    
    
    164
    
    
    
    299
    
    
    
    (10
    )
    
    
    (473
    )
    
    
    (483
    )Total interest income
    
    
    8
    
    
    
    331
    
    
    
    339
    
    
    
    42
    
    
    
    (441
    )
    
    
    (399
    )Interest expenses attributable to:NOW accounts
    
    
    3
    
    
    
    (2
    )
    
    
    1
    
    
    
    1
    
    
    
    (14
    )
    
    
    (13
    )Money market accounts
    
    
    2
    
    
    
    13
    
    
    
    15
    
    
    
    0
    
    
    
    (5
    )
    
    
    (5
    )Passbook savings accounts
    
    
    (147
    )
    
    
    (19
    )
    
    
    (166
    )
    
    
    116
    
    
    
    (116
    )
    
    
    0Certificates of deposit
    
    
    123
    
    
    
    62
    
    
    
    185
    
    
    
    (18
    )
    
    
    (188
    )
    
    
    (206
    )Federal Home Loan Bank advances
    
    
    17
    
    
    
    (15
    )
    
    
    2
    
    
    
    (98
    )
    
    
    38
    
    
    
    (60
    )Total interest expense
    
    
    (2
    )
    
    
    39
    
    
    
    37
    
    
    
    1
    
    
    
    (285
    )
    
    
    (284
    )Increase (decrease) in net interest income
    
    $
    10
    
    
    $
    292
    
    
    $
    302
    
    
    $
    41
    
    
    $
    (156
    )
    
    $
    (115
    )
 Asset and Liability Management
    -36-




---



##### Table of Contents



At December 31, 2005Change in interestrate
    
    Board limit
    
    $ change
    
    % change(basis points)
    
    % change
    
    in NPV
    
    in NPV(Dollars in thousands)+300
    
    
    (55
    )%
    
    $
    (1,408
    )
    
    
    (8
    )%+200
    
    
    (35
    )
    
    
    (402
    )
    
    
    (2
    )+100
    
    
    (20
    )
    
    
    137
    
    
    
    10
    
    

0
    
    
    
    0
    
    
    
    0-100
    
    
    (20
    )
    
    
    (478
    )
    
    
    (3
    )-200
    
    
    (35
    )
    
    
    (1,786
    )
    
    
    (10
    )-300
    
    
    (55
    )
    
    
    
    (1)
    
    
    
    (1)
 
 (1)
    
    As a result of the low interest rate environment at December 31, 2005, the OTS NPV
Model did not produce results for the minus 300 basis point scenario.    -37-




---



##### Table of Contents



Liquidity and Capital Resources
  Year ended December 31,2005
    
    
    2004(Dollars in thousands)Net income
    
    $
    837
    
    
    $
    682Adjustments to reconcile net income to net cash
from operating activities
    
    
    1,024
    
    
    
    (9
    )Net cash provided by operating activities
    
    
    1,861
    
    
    
    673Net cash provided by (used in) investing activities
    
    
    3,499
    
    
    
    (5,209
    )Net cash provided by (used in) financing
activities
    
    
    (8,109
    )
    
    
    3,658Net change in cash and cash equivalents
    
    
    (2,749
    )
    
    
    (878
    )Cash and cash equivalents at beginning of year
    
    
    9,595
    
    
    
    10,473Cash and cash equivalents at end of year
    
    $
    6,846
    
    
    $
    9,595
    -38-




---



##### Table of Contents



Excess of actualcapital over currentActual capital
    
    
    Current requirement
    
    
    requirement
    
    
    ApplicableAmount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    asset total(Dollars in thousands)Tangible capital
    
    $
    13,119
    
    
    
    8.8
    %
    
    $
    2,241
    
    
    
    1.5
    %
    
    $
    10,878
    
    
    
    7.3
    %
    
    $
    149,426Core capital
    
    
    13,119
    
    
    
    8.8
    
    
    
    5,977
    
    
    
    4.0
    
    
    
    7,142
    
    
    
    4.8
    
    
    
    149,426Risk-based capital
    
    
    14,483
    
    
    
    13.3
    
    
    
    8,730
    
    
    
    8.0
    
    
    
    5,753
    
    
    
    5.3
    
    
    
    109,125
 Impact of Inflation and Changing Prices
   -39-




---



##### Table of Contents



ITEM 7. Financial Statements
 
 Report of Independent Registered Public Accounting Firm




---



##### Table of Contents



Home City Financial Corporation
 
 Consolidated Balance Sheets
 December 31, 2005 and 2004
 (Dollars in thousands)
 2005
    
    
    2004AssetsCash and due from banks
    
    $
    2,397
    
    
    $
    859Interest-bearing demand deposits
    
    
    4,006
    
    
    
    6,529Federal funds sold
    
    
    443
    
    
    
    2,207Cash and cash equivalents
    
    
    6,846
    
    
    
    9,595Available-for-sale securities
    
    
    5,261
    
    
    
    6,432Loans, net of allowance for loan
losses of $1,377 and $760 at December
31, 2005 and 2004
    
    
    127,409
    
    
    
    130,067Premises and equipment
    
    
    3,398
    
    
    
    3,602Federal Home Loan Bank stock
    
    
    2,480
    
    
    
    2,360Interest receivable
    
    
    559
    
    
    
    544Cash surrender value of life insurance
    
    
    3,197
    
    
    
    3,067Other
    
    
    403
    
    
    
    557Total assets
    
    $
    149,553
    
    
    $
    156,224Liabilities and Shareholders EquityLiabilitiesDepositsDemand
    
    $
    5,763
    
    
    $
    5,235Savings, NOW and money market
    
    
    32,980
    
    
    
    51,173Time
    
    
    59,712
    
    
    
    50,796Total deposits
    
    
    98,455
    
    
    
    107,204Federal Home Loan Bank advances
    
    
    36,337
    
    
    
    35,120Interest payable and other liabilities
    
    
    1,355
    
    
    
    1,165Total liabilities
    
    
    136,147
    
    
    
    143,489Shareholders EquityPreferred stock, no par value, authorized 1,000,000 shares; none issuedCommon stock, no par value; authorized 5,000,000 shares; issued  981,913 sharesAdditional paid-in capital
    
    
    6,366
    
    
    
    6,325Retained earnings
    
    
    9,337
    
    
    
    8,868Unearned recognition and retention plan (RRP) shares
    
    
    (41
    )
    
    
    (69
    )Unearned employee stock ownership plan (ESOP) shares
    
    
    (111
    )
    
    
    (221
    )Accumulated other comprehensive loss
    
    
    (155
    )
    
    
    (178
    )Treasury stock, at cost, 146,223 shares
    
    
    (1,990
    )
    
    
    (1,990
    )Total shareholders equity
    
    
    13,406
    
    
    
    12,735Total liabilities and shareholders equity
    
    $
    149,553
    
    
    $
    156,224
  -41-




---



##### Table of Contents



Home City Financial Corporation
 
 Consolidated Statements of Income
 Years Ended December 31, 2005 and 2004
 (Dollars in thousands, except per share amounts)
 2005
    
    
    2004Interest and Dividend IncomeLoans
    
    $
    8,725
    
    
    $
    8,426Securities
    
    
    103
    
    
    
    178Federal funds sold
    
    
    18
    
    
    
    47Dividends on Federal Home Loan Bank stock
    
    
    120
    
    
    
    95Deposits with financial institutions
    
    
    145
    
    
    
    26Total interest and dividend income
    
    
    9,111
    
    
    
    8,772Interest ExpenseDeposits
    
    
    2,470
    
    
    
    2,435Borrowings
    
    
    1,937
    
    
    
    1,935Total interest expense
    
    
    4,407
    
    
    
    4,370Net Interest Income
    
    
    4,704
    
    
    
    4,402Provision for Loan Losses
    
    
    705
    
    
    
    200Net Interest Income After Provision for Loan Losses
    
    
    3,999
    
    
    
    4,202Noninterest IncomeService charges on deposits
    
    
    41
    
    
    
    39Net realized gains on sales of available-for-sale securities
    
    
    0
    
    
    
    6Gain on redemption of Intrieve Incorporated stock
    
    
    345
    
    
    
    0Life insurance
    
    
    162
    
    
    
    142Other
    
    
    87
    
    
    
    52Total noninterest income
    
    
    635
    
    
    
    239Noninterest ExpenseSalaries and employee benefits
    
    
    1,788
    
    
    
    1,868Net occupancy expense
    
    
    267
    
    
    
    282Equipment expense
    
    
    215
    
    
    
    222Data processing fees
    
    
    244
    
    
    
    232Professional fees
    
    
    344
    
    
    
    252Franchise taxes
    
    
    162
    
    
    
    150Other
    
    
    396
    
    
    
    446Total noninterest expense
    
    
    3,416
    
    
    
    3,452
  -42-




---



##### Table of Contents



2005
    
    
    2004Income Before Income Tax
    
    $
    1,218
    
    
    $
    989Provision for Income Taxes
    
    
    381
    
    
    
    307Net Income
    
    $
    837
    
    
    $
    682Earnings Per ShareBasic
    
    $
    1.02
    
    
    $
    0.86Diluted
    
    $
    1.01
    
    
    $
    0.84
 -43-




---



##### Table of Contents



Home City Financial Corporation
 
 Consolidated Statements of Shareholders Equity
 Years Ended December 31, 2005 and 2004
 (Dollars in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    OtherPaid-in
    
    
    Retained
    
    
    Unearned
    
    
    ESOP
    
    
    Comprehensive
    
    
    TreasuryShares
    
    
    Capital
    
    
    Earnings
    
    
    Compensation
    
    
    Shares
    
    
    Income (Loss)
    
    
    Shares
    
    
    TotalBalance, January 1, 2004
    
    
    962,200
    
    
    $
    6,130
    
    
    $
    8,549
    
    
    $
    (185
    )
    
    $
    (229
    )
    
    $
    (92
    )
    
    $
    (2,266
    )
    
    $
    11,907Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    682Change in unrealized
gain (loss) on
securities available
for sale, net of
reclassification
adjustment and tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86
    )
    
    
    
    
    
    
    (86
    )Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596Purchase of treasury shares
(24,420)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (411
    )
    
    
    (411
    )Stock options exercised:From treasury (45,997)
    
    
    
    
    
    
    (149
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    687
    
    
    
    538New issue
    
    
    19,713
    
    
    
    231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Dividends on common stock,
$.44 per share
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363
    )Amortization of unearned
compensation expense
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15ESOP shares earned
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    222Balance, December 31, 2004
    
    
    981,913
    
    
    
    6,325
    
    
    
    8,868
    
    
    
    (69
    )
    
    
    (221
    )
    
    
    (178
    )
    
    
    (1,990
    )
    
    
    12,735Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    837
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    837Change in unrealized
gain (loss) on
securities available
for sale, net of
reclassification
adjustment and tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    860Dividends on common stock,
$.44 per share
    
    
    
    
    
    
    
    
    
    
    (368
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (368
    )Amortization of unearned
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28ESOP shares earned
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    151Balance, December 31, 2005
    
    
    981,913
    
    
    $
    6,366
    
    
    $
    9,337
    
    
    $
    (41
    )
    
    $
    (111
    )
    
    $
    (155
    )
    
    $
    (1,990
    )
    
    $
    13,406
  -44-




---



##### Table of Contents



Home City Financial Corporation
 
 Consolidated Statements of Cash Flows
 Years Ended December 31, 2005 and 2004
 (Dollars in thousands)
 2005
    
    
    2004Operating ActivitiesNet income
    
    $
    837
    
    
    $
    682Items not requiring (providing) cashDepreciation and amortization
    
    
    231
    
    
    
    237Provision for loan losses
    
    
    705
    
    
    
    200Amortization of premiums and discounts on securities
    
    
    28
    
    
    
    4Deferred income taxes
    
    
    (214
    )
    
    
    95Increase in cash surrender balance of life insurance
    
    
    (130
    )
    
    
    (115
    )Employee Stock Ownership Plan compensation expense
    
    
    151
    
    
    
    222Recognition and Retention Plan compensation expense
    
    
    28
    
    
    
    15Net realized gains on available-for-sale securities
    
    
    0
    
    
    
    (6
    )Gain on redemption of Intrieve Incorporated stock
    
    
    (345
    )
    
    
    0Gain on sale of real estate owned
    
    
    (73
    )
    
    
    (58
    )FHLB stock dividends
    
    
    (120
    )
    
    
    (95
    )Proceeds from sale of loans held for sale
    
    
    2,282
    
    
    
    0Originations of loans held for sale
    
    
    (2,234
    )
    
    
    0Gain on sale of loans
    
    
    (48
    )
    
    
    0Changes inInterest receivable
    
    
    (15
    )
    
    
    34Other assets
    
    
    379
    
    
    
    (491
    )Interest payable and other liabilities
    
    
    399
    
    
    
    (51
    )Net cash provided by operating activities
    
    
    1,861
    
    
    
    673Investing ActivitiesPurchases of available-for-sale securities
    
    
    (17,985
    )
    
    
    (9,968
    )Proceeds from maturities of available-for-sale securities
    
    
    19,151
    
    
    
    7,986Proceeds from redemption of Intrieve Incorporated stock
    
    
    360
    
    
    
    0Proceeds from the sales of available-for-sale securities
    
    
    0
    
    
    
    555Net change in loans
    
    
    2,000
    
    
    
    (3,755
    )Purchase of premises and equipment
    
    
    (27
    )
    
    
    (27
    )Net cash provided by (used in) investing activities
    
    
    3,499
    
    
    
    (5,209
    )
 -45-




---



##### Table of Contents



2005
    
    
    2004Financing ActivitiesNet increase (decrease) in demand deposits, money market, NOW
and savings accounts
    
    $
    (17,665
    )
    
    $
    3,701Net increase (decrease) in certificates of deposit
    
    
    8,916
    
    
    
    (419
    )Proceeds from Federal Home Loan Bank advances
    
    
    10,800
    
    
    
    4,500Repayment of Federal Home Loan Bank advances
    
    
    (9,583
    )
    
    
    (4,144
    )Proceeds from stock options exercised
    
    
    0
    
    
    
    769Dividends paid
    
    
    (368
    )
    
    
    (363
    )Purchase of Treasury Stock
    
    
    0
    
    
    
    (411
    )Net increases (decrease) in advances from borrowers for taxes
and insurance
    
    
    (209
    )
    
    
    25Net cash provided by (used in) financing activities
    
    
    (8,109
    )
    
    
    3,658Decrease in Cash and Cash Equivalents
    
    
    (2,749
    )
    
    
    (878
    )Cash and Cash Equivalents, Beginning of Year
    
    
    9,595
    
    
    
    10,473Cash and Cash Equivalents, End of Year
    
    $
    6,846
    
    
    $
    9,595Supplemental Cash Flows InformationInterest paid
    
    $
    4,394
    
    
    $
    4,371Income taxes paid (net of refunds)
    
    $
    590
    
    
    $
    441
 -46-




---



##### Table of Contents



Home City Financial Corporation
 
 Notes to Consolidated Financial Statements
 December 31, 2005 and 2004
 (Table Dollar Amounts in Thousands)
 Note 1: Nature of Operations and Summary of Significant Accounting Policies
 Nature of Operations
  Principles of Consolidation
  Use of Estimates
   Cash Equivalents
  -47-




---



##### Table of Contents



Securities
    Loans
  Allowance for Loan Losses
    -48-




---



##### Table of Contents



Premises and Equipment
  Federal Home Loan Bank Stock
  Foreclosed Assets Held for Sale
  Treasury Shares
  -49-




---



##### Table of Contents



Stock Options
 Accounting
for Stock Issued to Employees
 Year Ended December 312005
    
    
    2004Net income, as reported
    
    $
    837
    
    
    $
    682Less: Total stock-based
employee compensation
cost determined under the
fair value based method,
net of income taxes
    
    
    9
    
    
    
    9Pro forma net income
    
    $
    828
    
    
    $
    673Earnings per share:Basic  as reported
    
    $
    1.02
    
    
    $
    .86Basic  pro forma
    
    $
    1.01
    
    
    $
    .85Diluted  as reported
    
    $
    1.01
    
    
    $
    .84Diluted  pro forma
    
    $
    1.00
    
    
    $
    .83
 Income Taxes
  Earnings Per Share
  -50-




---



##### Table of Contents



Note 2: Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-Sale Securities:December 31, 2005:U.S. Treasury and
government agencies
    
    $
    3,249
    
    
    $
    0
    
    
    $
    (3
    )
    
    $
    3,246Mortgage-backed
securities
    
    
    1,066
    
    
    
    1
    
    
    
    (14
    )
    
    
    1,053Other asset-backed
securities
    
    
    271
    
    
    
    0
    
    
    
    (3
    )
    
    
    268Equity securities
    
    
    909
    
    
    
    0
    
    
    
    (215
    )
    
    
    694$
    5,495
    
    
    $
    1
    
    
    $
    (235
    )
    
    $
    5,261December 31, 2004:U.S. Treasury and
government agencies
    
    $
    3,604
    
    
    $
    0
    
    
    $
    (9
    )
    
    $
    3,595Mortgage-backed
securities
    
    
    1,705
    
    
    
    11
    
    
    
    (11
    )
    
    
    1,705Other asset-backed
securities
    
    
    483
    
    
    
    1
    
    
    
    (8
    )
    
    
    476Equity securities
    
    
    909
    
    
    
    0
    
    
    
    (253
    )
    
    
    656$
    6,701
    
    
    $
    12
    
    
    $
    (281
    )
    
    $
    6,432
 -51-




---



##### Table of Contents



Available for SaleAmortized
    
    
    FairCost
    
    
    ValueU.S. Treasury and
government agenciesWithin one year
    
    $
    3,249
    
    
    $
    3,2463,249
    
    
    
    3,246Mortgage-backed securities
    
    
    1,066
    
    
    
    1,053Other asset-backed securities
    
    
    271
    
    
    
    268Equity securities
    
    
    909
    
    
    
    694Totals
    
    $
    5,495
    
    
    $
    5,261
      -52-




---



##### Table of Contents



Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesAvailable-for-Sale Securities:December 31, 2005:U.S. Treasury and
government agencies
    
    $
    2,998
    
    
    $
    1
    
    
    $
    248
    
    
    $
    2
    
    
    $
    3,246
    
    
    $
    3Mortgage-backed securities
    
    
    236
    
    
    
    3
    
    
    
    747
    
    
    
    11
    
    
    
    983
    
    
    
    14Other asset-backed securities
    
    
    86
    
    
    
    1
    
    
    
    182
    
    
    
    2
    
    
    
    268
    
    
    
    3Equity securities
    
    
    0
    
    
    
    0
    
    
    
    694
    
    
    
    215
    
    
    
    694
    
    
    
    215$
    3,320
    
    
    $
    5
    
    
    $
    1,871
    
    
    $
    230
    
    
    $
    5,191
    
    
    $
    235December 31, 2004:U.S. Treasury and
government agencies
    
    $
    3,595
    
    
    $
    9
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3,595
    
    
    $
    9Mortgage-backed securities
    
    
    333
    
    
    
    3
    
    
    
    823
    
    
    
    8
    
    
    
    1,156
    
    
    
    11Other asset-backed securities
    
    
    0
    
    
    
    0
    
    
    
    296
    
    
    
    8
    
    
    
    296
    
    
    
    8Equity securities
    
    
    0
    
    
    
    0
    
    
    
    656
    
    
    
    253
    
    
    
    656
    
    
    
    253$
    3,928
    
    
    $
    12
    
    
    $
    1,775
    
    
    $
    269
    
    
    $
    5,703
    
    
    $
    281
 Note 3: Loans and Allowance for Loan Losses
  2005
    
    
    2004Residential real estateOne-to-four family residential
    
    $
    61,896
    
    
    $
    64,663Multi-family residential
    
    
    9,939
    
    
    
    9,208Construction
    
    
    3,242
    
    
    
    4,678Nonresidential real estate and land
    
    
    34,363
    
    
    
    32,303Commercial
    
    
    16,385
    
    
    
    15,059Consumer and other
    
    
    4,546
    
    
    
    6,619Total loans
    
    
    130,371
    
    
    
    132,530LessDeferred loan fees
    
    
    (348
    )
    
    
    (375
    )Undisbursed portion of loans
    
    
    (1,237
    )
    
    
    (1,328
    )Allowance for loan losses
    
    
    (1,377
    )
    
    
    (760
    )Net loans
    
    $
    127,409
    
    
    $
    130,067
 -53-




---



##### Table of Contents



2005
    
    
    2004Balance, beginning of year
    
    $
    760
    
    
    $
    995Provision charged to expense
    
    
    705
    
    
    
    200Losses charged off, net of
recoveries of $10,000 for
2005, and $6,000 for 2004
    
    
    (88
    )
    
    
    (435
    )Balance, end of year
    
    $
    1,377
    
    
    $
    760
    Note 4: Premises and Equipment
  2005
    
    
    2004Land
    
    $
    806
    
    
    $
    806Buildings and improvements
    
    
    2,493
    
    
    
    2,489Equipment
    
    
    1,656
    
    
    
    1,6394,955
    
    
    
    4,934Less accumulated depreciation
    
    
    (1,557
    )
    
    
    (1,332
    )Net premises and equipment
    
    $
    3,398
    
    
    $
    3,602
 -54-




---



##### Table of Contents



Note 5: Interest-Bearing Deposits
   2006
    
    $
    34,7472007
    
    
    19,8282008
    
    
    3,3012009
    
    
    7302010
    
    
    1,106$
    59,712
 Note 6: Federal Home Loan Bank Advances
  2006
    
    $
    3,7232007
    
    
    1,8942008
    
    
    1,8582009
    
    
    9,5232010
    
    
    8,339Thereafter
    
    
    11,000$
    36,337
   -55-




---



##### Table of Contents



Note 7: Income Taxes
  2005
    
    
    2004Taxes currently payable
    
    $
    595
    
    
    $
    212Deferred income taxes (credit)
    
    
    (214
    )
    
    
    95Income tax expense
    
    $
    381
    
    
    $
    307
  2005
    
    
    2004Computed at the statutory rate (34%)
    
    $
    414
    
    
    $
    336Increase (decrease) resulting from:Tax exempt interest
    
    
    0
    
    
    
    (3
    )Cash surrender value of life insurance
    
    
    (44
    )
    
    
    (39
    )Nondeductible expenses
    
    
    6
    
    
    
    4Other
    
    
    5
    
    
    
    9Actual tax expense from continuing operations
    
    $
    381
    
    
    $
    307
  2005
    
    
    2004Deferred tax assetsAllowance for loan losses
    
    $
    468
    
    
    $
    258Employee benefits
    
    
    216
    
    
    
    185Nonaccrual loan interest
    
    
    6
    
    
    
    0Other
    
    
    31
    
    
    
    29Unrealized losses on available-for-sale securities
    
    
    80
    
    
    
    92801
    
    
    
    564Deferred tax liabilitiesDepreciation
    
    
    (102
    )
    
    
    (104
    )Federal Home Loan Bank stock dividend
    
    
    (311
    )
    
    
    (271
    )Deferred loan fees
    
    
    (47
    )
    
    
    (50
    )(460
    )
    
    
    (425
    )Net deferred tax asset
    
    $
    341
    
    
    $
    139
 -56-




---



##### Table of Contents



Note 8: Other Comprehensive Income (Loss)
  2005
    
    
    2004Unrealized gains (losses) on securities available for sale
    
    $
    35
    
    
    $
    (125
    )Reclassification for realized amount included in income
    
    
    0
    
    
    
    6Other comprehensive income (loss) before tax
effect
    
    
    35
    
    
    
    (131
    )Tax benefit (expense)
    
    
    (12
    )
    
    
    45Other comprehensive income (loss)
    
    $
    23
    
    
    $
    (86
    )
 Note 9: Regulatory Matters
    -57-




---



##### Table of Contents



To Be Well CapitalizedFor Capital Adequacy
    
    
    Under Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2005Total
risk-based capital

(to risk-weighted assets)
    
    $
    14,483
    
    
    
    13.3
    %
    
    $
    8,730
    
    
    
    8.0
    %
    
    $
    10,913
    
    
    
    10.0
    %Tier I
capital

(to risk-weighted assets)
    
    
    13,119
    
    
    
    12.0
    
    
    
    
    
    
    
    N/A
    
    
    
    6,548
    
    
    
    6.0Tier I
capital

(to adjusted total assets)
    
    
    13,119
    
    
    
    8.8
    
    
    
    5,977
    
    
    
    4.0
    
    
    
    7,471
    
    
    
    5.0Tangible
capital

(to adjusted tangible assets)
    
    
    13,119
    
    
    
    8.8
    
    
    
    2,241
    
    
    
    1.5
    
    
    
    
    
    
    
    N/AAs of December 31, 2004Total
risk-based capital

(to risk-weighted assets)
    
    $
    12,964
    
    
    
    11.6
    %
    
    $
    8,981
    
    
    
    8.0
    %
    
    $
    11,226
    
    
    
    10.0
    %Tier I
capital

(to risk-weighted assets)
    
    
    12,204
    
    
    
    10.9
    
    
    
    
    
    
    
    N/A
    
    
    
    6,736
    
    
    
    6.0Tier I
capital

(to adjusted total assets)
    
    
    12,204
    
    
    
    7.8
    
    
    
    6,245
    
    
    
    4.0
    
    
    
    7,806
    
    
    
    5.0Tangible
capital

(to adjusted tangible assets)
    
    
    12,204
    
    
    
    7.8
    
    
    
    2,342
    
    
    
    1.5
    
    
    
    
    
    
    
    N/A
  -58-




---



##### Table of Contents



Note 10: Related Party Transactions
   Balances, January 1, 2005
    
    $
    3,220New loans, including renewals
    
    
    40Payments, etc., including renewals
    
    
    (1,249
    )Balances, December 31, 2005
    
    $
    2,011
  Note 11: Employee Benefits
    2005
    
    
    2004Allocated shares
    
    
    70,812
    
    
    
    61,363Shares released for allocation
    
    
    9,449
    
    
    
    9,449Unearned shares
    
    
    7,612
    
    
    
    17,061Total ESOP shares
    
    
    87,873
    
    
    
    87,873Fair value of unearned shares at December 31
    
    $
    120,000
    
    
    $
    263,000
 -59-




---



##### Table of Contents



Note 12: Stock Option Plan
   2005
    
    
    2004Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding, beginning
of year
    
    
    53,796
    
    
    $
    12.76
    
    
    
    120,506
    
    
    $
    12.22Granted
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Exercised
    
    
    -0-
    
    
    
    -0-
    
    
    
    (65,710
    )
    
    
    11.70Forfeited
    
    
    -0-
    
    
    
    -0-
    
    
    
    (1,000
    )
    
    
    17.03Expired
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Outstanding, end of year
    
    
    53,796
    
    
    $
    12.76
    
    
    
    53,796
    
    
    $
    12.76Options exercisable,
end of year
    
    
    33,653
    
    
    $
    12.38
    
    
    
    26,939
    
    
    $
    12.12
  -60-




---



##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    

    Weighted-Range of
    
    Number
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    AverageExercise Prices
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$11.70 to $13.175
    

    51,796
    
    
    5.38 years
    
    $
    12.60
    
    
    
    32,853
    
    
    $
    12.27$17.03
    

    2,000
    
    
    7.97 years
    
    $
    17.03
    
    
    
    800
    
    
    $
    17.03
 -61-




---



##### Table of Contents



Note 13: Earnings Per Share
  Year Ended December 31, 2005Weighted-
    
    
    Per ShareIncome
    
    
    Average Shares
    
    
    AmountBasic earnings per shareIncome from continuing
operations available to
common shareholders
    
    $
    837
    
    
    
    820,575
    
    
    $
    1.02Effect of dilutive securitiesStock options and awards
    
    
    
    
    
    
    9,540Diluted earnings per shareIncome from continuing
operations available to
common shareholders and
assumed conversions
    
    $
    837
    
    
    
    830,115
    
    
    $
    1.01
  Year Ended December 31, 2005Weighted-
    
    
    Per ShareIncome
    
    
    Average Shares
    
    
    AmountBasic earnings per shareIncome from continuing
operations available to
common shareholders
    
    $
    682
    
    
    
    793,233
    
    
    $
    0.86Effect of dilutive securitiesStock options and awards
    
    
    
    
    
    
    15,453Diluted earnings per shareIncome from continuing
operations available to
common shareholders and
assumed conversions
    
    $
    682
    
    
    
    808,686
    
    
    $
    0.84
  -62-




---



##### Table of Contents



Note 14: Disclosures about Fair Value of Financial Instruments
  December 31, 2005
    
    
    December 31, 2004Carrying
    
    
    Fair
    
    
    Carrying
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    6,846
    
    
    $
    6,846
    
    
    $
    9,595
    
    
    $
    9,595Available-for-sale securities
    
    
    5,261
    
    
    
    5,261
    
    
    
    6,432
    
    
    
    6,432Loans, net
    
    
    127,409
    
    
    
    129,971
    
    
    
    130,067
    
    
    
    134,468Stock in FHLB
    
    
    2,480
    
    
    
    2,480
    
    
    
    2,360
    
    
    
    2,360Interest receivable
    
    
    559
    
    
    
    559
    
    
    
    544
    
    
    
    544Financial liabilitiesDeposits
    
    
    98,455
    
    
    
    98,105
    
    
    
    107,204
    
    
    
    107,438FHLB advances
    
    
    36,337
    
    
    
    37,423
    
    
    
    35,120
    
    
    
    37,688Interest payable
    
    
    190
    
    
    
    190
    
    
    
    178
    
    
    
    178
 -63-




---



##### Table of Contents



Note 15: Commitments and Credit Risk
      -64-




---



##### Table of Contents



Note 16: Future Change in Accounting Principle
  Note 17: Subsequent Event
   -65-




---



##### Table of Contents



Note 18: Condensed Financial Information (Parent Company Only)
  Condensed Balance Sheets
 2005
    
    
    2004AssetsCash
    
    $
    137
    
    
    $
    260Investment in common stock of subsidiary Bank
    
    
    13,106
    
    
    
    12,232Advances to subsidiary
    
    
    13
    
    
    
    140Other assets
    
    
    150
    
    
    
    103Total assets
    
    $
    13,406
    
    
    $
    12,735Shareholders Equity
    
    $
    13,406
    
    
    $
    12,735
 -66-




---



##### Table of Contents



Condensed Statements of Income
 2005
    
    
    2004IncomeDividends from subsidiary Bank
    
    $
    0
    
    
    $
    0Interest income
    
    
    15
    
    
    
    22Total income
    
    
    15
    
    
    
    22ExpensesOther expenses
    
    
    93
    
    
    
    85Income (Loss) Before Income Tax and Equity
in Undistributed Income of Subsidiary
    
    
    (78
    )
    
    
    (63
    )Income Tax Benefit
    
    
    (26
    )
    
    
    (22
    )Income (Loss) Before Equity in
Undistributed Income of Subsidiary
    
    
    (52
    )
    
    
    (41
    )Equity in Undistributed Income of Subsidiary
    
    
    889
    
    
    
    723Net Income
    
    $
    837
    
    
    $
    682
 Condensed Statements of Cash Flows
 2005
    
    
    2004Operating ActivitiesNet income
    
    $
    837
    
    
    $
    682Items not requiring (providing) cash
    
    
    (719
    )
    
    
    (537
    )Net cash provided by operating activities
    
    
    118
    
    
    
    145Investing Activitiesadvances to subsidiaries
    
    
    127
    
    
    
    (139
    )Financing ActivitiesCash dividends paid
    
    
    (368
    )
    
    
    (363
    )Purchase of treasury shares
    
    
    0
    
    
    
    (411
    )Proceeds from stock options exercised
    
    
    0
    
    
    
    769aaaNet cash used in financing activities
    
    
    (368
    )
    
    
    (5
    )Net Change in Cash and Cash Equivalents
    
    
    (123
    )
    
    
    1Cash and Cash Equivalents at Beginning of Year
    
    
    260
    
    
    
    259Cash and Cash Equivalents at End of Year
    
    $
    137
    
    
    $
    260
 -67-




---



##### Table of Contents



Note 19: Quarterly Financial Data (Unaudited)
  March
    
    June
    
    September
    
    December2005Interest and dividend income
    
    $
    2,227
    
    
    $
    2,290
    
    
    $
    2,293
    
    
    $
    2,301Interest expense
    
    
    1,069
    
    
    
    1,083
    
    
    
    1,113
    
    
    
    1,142Net interest income
    
    
    1,158
    
    
    
    1,207
    
    
    
    1,180
    
    
    
    1,159Provision for loan losses
    
    
    80
    
    
    
    475
    
    
    
    80
    
    
    
    70Noninterest income
    
    
    36
    
    
    
    419
    
    
    
    116
    
    
    
    64Noninterest expense
    
    
    829
    
    
    
    853
    
    
    
    855
    
    
    
    879Income tax expense
    
    
    92
    
    
    
    94
    
    
    
    115
    
    
    
    80Net income
    
    
    193
    
    
    
    204
    
    
    
    246
    
    
    
    194Earnings per shareBasic
    
    
    0.24
    
    
    
    0.25
    
    
    
    0.30
    
    
    
    0.24Diluted
    
    
    0.23
    
    
    
    0.25
    
    
    
    0.30
    
    
    
    0.23Dividends per share
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.112004Interest and dividend income
    
    $
    2,190
    
    
    $
    2,159
    
    
    $
    2,179
    
    
    $
    2,244Interest expense
    
    
    1,094
    
    
    
    1,084
    
    
    
    1,090
    
    
    
    1,102Net interest income
    
    
    1,096
    
    
    
    1,075
    
    
    
    1,089
    
    
    
    1,142Provision for loan losses
    
    
    50
    
    
    
    50
    
    
    
    42
    
    
    
    58Noninterest income
    
    
    52
    
    
    
    49
    
    
    
    57
    
    
    
    81Noninterest expense
    
    
    867
    
    
    
    818
    
    
    
    881
    
    
    
    886Income tax expense
    
    
    63
    
    
    
    75
    
    
    
    72
    
    
    
    97Net income
    
    
    168
    
    
    
    181
    
    
    
    151
    
    
    
    182Earnings per shareBasic
    
    
    0.21
    
    
    
    0.23
    
    
    
    0.19
    
    
    
    0.23Diluted
    
    
    0.21
    
    
    
    0.22
    
    
    
    0.19
    
    
    
    0.22Dividends per share
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.11
 -68-




---



##### Table of Contents



ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 ITEM 8A. Controls and Procedures
  
 ITEM 8B. Other Information
  -69-




---



##### Table of Contents



PART III
 
 ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16
(a) of the Exchange Act of the Registrant
     
 ITEM 10. Executive Compensation
  
 ITEM 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  -70-




---



##### Table of Contents



Number of securitiesremaining available forNumber of securities to be
    
    Weighted-average exercise
    
    future issuance underissued upon exercise of
    
    price of outstanding
    
    equity compensation plansoutstanding options,
    
    options, warrants and
    
    (excluding securitiesPlan category
    
    warrants and rights
    
    rights
    
    reflected in column (a)Equity compensation
plans approved by
security holders
    
    
    53,796
    
    
    $
    12.76
    
    
    
    3,212
    (1)Equity compensation
plans not approved
by security holders
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Total
    
    
    53,796
    
    
    $
    12.76
    
    
    
    3,212
    (1)
 
 Of the 3,212 shares, 1,916 remain available for awards of options and 1,296 remain
available for
awards under the Home City Financial Corporation Recognition and Retention Plan,
which may purchase the shares on the open market rather than from unissued shares of
HCFC. 
 ITEM 12. Certain Relationships and Related Transactions
  
 ITEM 13. Exhibits
 Exhibits3.1
    
    Articles of Incorporation (Incorporated by reference)3.2
    
    Code of Regulations (Incorporated by reference)10.1
    
    Employment Agreement with Mr. Stapleton (Incorporated by reference)10.2
    
    Home City Financial Corporation 1997 Stock Option and
Incentive Plan (Incorporated by reference)10.3
    
    Home City Financial Corporation Recognition and Retention Plan
and Trust Agreement (Incorporated by reference)10.4
    
    Deferred Compensation Plan (Incorporated by reference)14
    
    Code of Ethics20
    
    Proxy Statement (Incorporated by reference)21
    
    Subsidiaries23
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Rule 13a-14(a)/15d-14(a) Certification: CEO31.2
    
    Rule 13a-14(a)/15d-14(a) Certification: CFO32
    
    Section 1350 Certification99.1
    
    Safe Harbor Under the Private Securities Litigation Reform Act of 1995
 -71-




---



##### Table of Contents



ITEM 14. Principal Accountant Fees and Services
  Year ended
    
    Year endedType of fees
    
    December 31, 2005
    
    December 31, 2004Audit fees (1)
    
    $
    66,725
    
    
    $
    60,725Audit related fees (2)
    
    
    4,270
    
    
    
    3,675Tax fees (3)
    
    
    6,710
    
    
    
    7,100All other fees (4)
    
    
    -0-
    
    
    
    -0-
 
 (1)
    
    Consists of fees for professional services for the audit of HCFCs annual financial statements
and review of financial statements included in HCFCs Forms 10-QSB, and services that are normally
provided in connection with statutory or regulatory filings or engagements.(2)
    
    Consists of fees for consultation concerning financial accounting and reporting standards
related to the performance of the audit or review of HCFCs financial statements and ACH audit.(3)
    
    Consists of fees for professional services with respect to tax compliance and tax planning.(4)
    
    Consists of fees for organizational assessment.  -72-




---



##### Table of Contents



SIGNATURES
   /s/ J. William StapletonJ. William StapletonPresident, Chief Executive Officer andChief Operating Officer
  /s/ Glenn W. Collier
    
    /s/ John D. ConroyGlenn W. Collier
    
    John D. ConroyDirector
    
    Chairman of the BoardMarch 30, 2006
    
    March 30, 2006Date
    
    Date/s/ Terry A. HoppesJames M. Foreman
    
    Terry A. HoppesDirector
    
    DirectorMarch 30, 2006Date
    
    Date/s/ J. William Stapleton
    
    /s/ Charles A. MihalJ. William Stapleton
    
    Charles A. MihalDirector
    
    Secretary, Treasurer and Chief Financial OfficerPresident, Chief Executive Officer
    
    (and principal accounting officer)and Chief Operating OfficerMarch 30, 2006
    
    March 30, 2006Date
    
    Date
 -73-




---



##### Table of Contents



INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    Articles of Incorporation
    
    Incorporated by reference to the
Registrants Quarterly Report on Form
10-QSB for the Quarter ended March
31, 1997 (the March 24, 1997,
10-QSB), Exhibit 3(I).3.2
    
    Code of Regulations of
Home City Financial
Corporation
    
    Incorporated by reference to the
definitive proxy statement of the
registrant filed on March 24, 2004,
Exhibit A10.1
    
    Employment Agreement with
Mr. Stapleton
    
    Incorporated by reference to the
December 31, 2004, 10-KSB, Exhibit
10.210.2
    
    Home City Financial
Corporation 1997 Stock
Option and Incentive Plan
    
    Incorporated by reference to the
Registrants 1997 Definitive Proxy
Statement dated September 19, 1997,
Exhibit A10.3
    
    Home City Financial
Corporation Recognition
and Retention Plan and
Trust Agreement
    
    Incorporated by reference to the
Registrants 1997 Definitive Proxy
Statement dated September 19, 1997,
Exhibit B10.4
    
    Deferred Compensation Plan
    
    Incorporated by reference to the
December 31, 2004, 10-KSB, Exhibit
10.514
    
    Code of Ethics20
    
    Proxy Statement
    
    Incorporated by reference to the
definitive Proxy Statement of the
Registrant for the 2006 Annual
Meeting of Shareholders of Home City
Financial Corporation, to be filed with
the Securities and Exchange Commission.21
    
    Subsidiaries23
    
    Consent of Independent
Registered Public
Accounting Firm31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification: CEO31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification: CFO32
    
    Section 1350 Certification99.1
    
    Safe Harbor Under the
Private Securities
Litigation Reform Act of
1995
 -74-