UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-QSB





(Mark
One)





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





For the
quarterly period ended March 31, 2008





£
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT





For the
transition period from __________ to ____________.





Commission
File Number 0-22223





PEOPLES-SIDNEY
FINANCIAL CORPORATION


(Exact
name of small business issuer as specified in its charter)





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





101 E. Court Street, Sidney,
Ohio  45365


(Address
of principal executive offices)





(937)
492-6129


(Issuer’s
telephone number)








Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months, and (2) has been subject to
such filing requirements for the past 90 days.


Yes 
      T
            
            No 
      £





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes 
      £
            
            No 
      T





As of May
12, 2008 the latest practicable date, 1,361,048 shares of the issuer’s common
shares, $.01 par value, were issued and outstanding.





Transitional
Small Business Disclosure Format (Check One):


Yes 
      £
            
            No  T







1.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


INDEX








PagePART
      I - FINANCIAL INFORMATIONItem
      1.
            
            Financial
      Statements (Unaudited)Consolidated
      Balance Sheets
            
            3Consolidated
      Statements of Income
            
            4Consolidated
      Statements of Comprehensive Income
            
            5Condensed
      Consolidated Statements of Changes in Shareholders’ Equity
            
            6Consolidated
      Statements of Cash Flows
            
            7Notes
      to Consolidated Financial Statements
            
            8Item
      2.
            
            Management’s
      Discussion and Analysis
            
            16Item
      3.
            
            Controls
      and Procedures
            
            24PART
      II - OTHER INFORMATIONItem
      1.
            
            Legal
      Proceedings
            
            25Item
      2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            25Item
      3.
            
            Defaults
      Upon Senior Securities
            
            25Item
      4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            25Item
      5.
            
            Other
      Information
            
            25Item
      6.
            
            Exhibits
            
            25SIGNATURES
            
            26INDEX
      TO EXHIBITS
            
            27





2.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


CONSOLIDATED
BALANCE SHEETS


MARCH 31,
2008 AND JUNE 30, 2007










Item
1.  Financial
Statements


March
      31,
            
            
            June
      30,2008
            
            
            2007(Unaudited)ASSETSCash
      and due from financial institutions
            
            $
            1,541,809
            
            
            $
            1,065,054Interest-bearing
      deposits in other financial institutions
            
            
            4,610,133
            
            
            
            4,117,144Overnight
      deposits
            
            
            2,200,000
            
            
            
            2,000,000Total
      cash and cash equivalents
            
            
            8,351,942
            
            
            
            7,182,198Time
      deposits
            
            
            1,000,000
            
            
            
            --Securities
      available for sale
            
            
            2,056,260
            
            
            
            4,847,820Federal
      Home Loan Bank stock
            
            
            1,844,500
            
            
            
            1,820,800Loans,
      net of allowance of $603,100 and $664,800
            
            
            120,249,845
            
            
            
            121,487,075Accrued
      interest receivable
            
            
            937,546
            
            
            
            795,326Premises
      and equipment, net
            
            
            1,803,658
            
            
            
            1,864,053Other
      real estate owned and repossessions
            
            
            438,463
            
            
            
            143,482Other
      assets
            
            
            161,237
            
            
            
            167,540Total
      assets
            
            $
            136,843,451
            
            
            $
            138,308,294LIABILITIES
      AND SHAREHOLDERS’ EQUITYDeposits
            
            $
            82,327,778
            
            
            $
            82,479,470Borrowed
      funds
            
            
            36,908,791
            
            
            
            38,189,030Accrued
      interest payable and other liabilities
            
            
            591,913
            
            
            
            704,238Total
      liabilities
            
            
            119,828,482
            
            
            
            121,372,738Common
      stock in ESOP subject to repurchase obligation
            
            
            1,542,288
            
            
            
            1,677,238Preferred
      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
            
            
            16,569
            
            
            
            16,569Additional
      paid-in capital
            
            
            9,306,291
            
            
            
            9,169,858Retained
      earnings
            
            
            11,554,822
            
            
            
            11,702,607Treasury
      stock, 424,327 shares, at cost
            
            
            (5,198,322
            )
            
            
            (5,198,322
            )Unearned
      employee stock ownership plan shares
            
            
            (244,666
            )
            
            
            (333,042
            )Accumulated
      other comprehensive loss
            
            
            37,987
            
            
            
            (99,352
            )Total
      shareholders’ equity
            
            
            15,472,681
            
            
            
            15,258,318Total
      liabilities and shareholders’ equity
            
            $
            136,843,451
            
            
            $
            138,308,294




3.


PEOPLES-SIDNEY
FINANCIAL CORPORATION


CONSOLIDATED
STATEMENTS OF INCOME


THREE AND
NINE MONTHS ENDED MARCH 31, 2008 AND 2007


(Unaudited)












Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Interest
      incomeLoans,
      including fees
            
            $
            2,133,826
            
            
            $
            2,146,657
            
            
            $
            6,417,947
            
            
            $
            6,384,618Securities
            
            
            32,562
            
            
            
            50,089
            
            
            
            140,911
            
            
            
            158,825Demand,
      time and overnight deposits
            
            
            42,382
            
            
            
            37,938
            
            
            
            141,377
            
            
            
            96,959Dividends
      on Federal Home Loan Bank stock
            
            
            23,767
            
            
            
            28,621
            
            
            
            85,724
            
            
            
            81,373Total
      interest income
            
            
            2,232,537
            
            
            
            2,263,305
            
            
            
            6,785,959
            
            
            
            6,721,775Interest
      expenseDeposits
            
            
            592,206
            
            
            
            545,128
            
            
            
            1,778,726
            
            
            
            1,558,338Borrowed
      funds
            
            
            488,080
            
            
            
            510,693
            
            
            
            1,501,412
            
            
            
            1,586,333Total
      interest expense
            
            
            1,080,286
            
            
            
            1,055,821
            
            
            
            3,280,138
            
            
            
            3,144,671Net
      interest income
            
            
            1,152,251
            
            
            
            1,207,484
            
            
            
            3,505,821
            
            
            
            3,577,104Provision
      for loan losses
            
            
            10,501
            
            
            
            210
            
            
            
            93,770
            
            
            
            (68,887
            )Net
      interest income after provision for loan losses
            
            
            1,141,750
            
            
            
            1,207,274
            
            
            
            3,412,051
            
            
            
            3,645,991Noninterest
      incomeService
      fees and other charges
            
            
            26,882
            
            
            
            29,360
            
            
            
            81,902
            
            
            
            94,292Gain
      (loss) on sale of REO and repossessions
            
            
            2,316
            
            
            
            816
            
            
            
            6,870
            
            
            
            696Mortgage
      banking income
            
            
            45
            
            
            
            2,346
            
            
            
            9,677
            
            
            
            2,346Total
      noninterest income
            
            
            29,243
            
            
            
            32,522
            
            
            
            98,449
            
            
            
            97,334Noninterest
      expenseCompensation
      and benefits
            
            
            436,935
            
            
            
            439,936
            
            
            
            1,298,490
            
            
            
            1,303,476Director
      fees
            
            
            24,300
            
            
            
            24,300
            
            
            
            72,900
            
            
            
            72,900Occupancy
      and equipment
            
            
            98,345
            
            
            
            103,529
            
            
            
            289,899
            
            
            
            280,825Computer
      processing
            
            
            98,172
            
            
            
            89,473
            
            
            
            290,519
            
            
            
            272,160Professional
      services
            
            
            81,551
            
            
            
            47,247
            
            
            
            180,690
            
            
            
            129,460State
      franchise taxes
            
            
            46,185
            
            
            
            51,194
            
            
            
            149,021
            
            
            
            160,094Other
            
            
            83,079
            
            
            
            86,874
            
            
            
            254,417
            
            
            
            245,388Total
      noninterest expense
            
            
            868,567
            
            
            
            842,553
            
            
            
            2,535,936
            
            
            
            2,464,303Income
      before income taxes
            
            
            302,426
            
            
            
            397,243
            
            
            
            974,564
            
            
            
            1,279,022Income
      tax expense
            
            
            108,800
            
            
            
            142,000
            
            
            
            349,400
            
            
            
            454,300Net
      income
            
            $
            193,626
            
            
            $
            255,243
            
            
            $
            625,164
            
            
            $
            824,722Earnings
      per common share - basic
            
            $
            0.14
            
            
            $
            0.19
            
            
            $
            0.47
            
            
            $
            0.62Earnings
      per common share - diluted
            
            $
            0.14
            
            
            $
            0.19
            
            
            $
            0.47
            
            
            $
            0.62










4.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME


THREE AND
NINE MONTHS ENDED MARCH 31, 2008 AND 2007


(Unaudited)











Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      income
            
            $
            193,626
            
            
            $
            255,243
            
            
            $
            625,164
            
            
            $
            824,722Other
      comprehensive incomeUnrealized
      holding gains on available-for-sale securities
            
            
            54,629
            
            
            
            35,210
            
            
            
            208,086
            
            
            
            138,000Tax
      effect
            
            
            (18,573
            )
            
            
            (11,972
            )
            
            
            (70,747
            )
            
            
            (46,920
            )Other
      comprehensive income
            
            
            36,056
            
            
            
            23,238
            
            
            
            137,339
            
            
            
            91,080Comprehensive
      income
            
            $
            229,682
            
            
            $
            278,481
            
            
            $
            762,503
            
            
            $
            915,802









5.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN


SHAREHOLDERS’
EQUITY


THREE AND
NINE MONTHS ENDED MARCH 31, 2008 AND 2007


(Unaudited)












Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Balance,
      beginning of period
            
            $
            15,581,632
            
            
            $
            15,261,059
            
            
            $
            15,258,318
            
            
            $
            15,499,512Net
      income for period
            
            
            193,626
            
            
            
            255,243
            
            
            
            625,164
            
            
            
            824,722Cash
      dividends, $.16 per share for the three months ended March 31, 2008and
      2007, $.58 per share for the nine months ended March 31, 2008 and
      2007
            
            
            (213,227
            )
            
            
            (211,528
            )
            
            
            (772,949
            )
            
            
            (777,883
            )Purchase
      of 31,600 shares of treasury stock for the nine months ended March 31,
      2007, at cost
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (473,044
            )Commitment
      to release 2,512 and 2,654 employee stock ownership plan shares for the
      three months ended March 31, 2008 and 2007, and 7,532 and 7,962 employee
      stock ownership plan shares for the nine month sended March 31, 2008 and
      2007, at fair value
            
            
            28,823
            
            
            
            36,277
            
            
            
            89,859
            
            
            
            115,008Change
      in fair value of common stock subject to repurchase obligation for the
      three and nine months ended March 31, 2008 and 2007
            
            
            (154,229
            )
            
            
            109,654
            
            
            
            134,950
            
            
            
            194,548Change
      in fair value on securities available for sale, net of tax
            
            
            36,056
            
            
            
            23,238
            
            
            
            137,339
            
            
            
            91,080Balance,
      end of period
            
            $
            15,472,681
            
            
            $
            15,473,943
            
            
            $
            15,472,681
            
            
            $
            15,473,943









6.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS


NINE
MONTHS ENDED MARCH 31, 2008 AND 2007


(Unaudited)













Nine
      Months Ended March 31,2008
            
            
            2007Cash
      flows from operating activitiesNet
      income
            
            $
            625,164
            
            
            $
            824,722Adjustments
      to reconcile net income to net cash from operating
    activitiesDepreciation
            
            
            126,842
            
            
            
            121,945Provision
      for loan losses
            
            
            93,770
            
            
            
            (68,887
            )Net
      accretion on securities
            
            
            (354
            )
            
            
            (270
            )Proceeds
      from sale of loans in secondary market
            
            
            351,993
            
            
            
            82,356Loans
      disbursed for sale in secondary market
            
            
            (347,404
            )
            
            
            (81,851
            )Gain
      on sale of loans
            
            
            (9,671
            )
            
            
            (1,989
            )Amortization
      of mortgage servicing rights
            
            
            504
            
            
            
            28Gain
      on sale of REO and repossessions
            
            
            (6,870
            )
            
            
            (696
            )FHLB
      stock dividends
            
            
            (23,700
            )
            
            
            (52,700
            )Compensation
      expense for ESOP shares
            
            
            89,859
            
            
            
            115,008Change
      in:Accrued
      interest receivable and other assets
            
            
            (131,339
            )
            
            
            (17,257
            )Accrued
      expense and other liabilities
            
            
            (183,072
            )
            
            
            (26,399
            )Deferred
      loan fees
            
            
            (31,007
            )
            
            
            (21,321
            )Net
      cash from operating activities
            
            
            554,715
            
            
            
            872,689Cash
      flows from investing activitiesPurchase
      of time deposit
            
            
            (1,000,000
            )
            
            
            --Proceeds
      from maturities of available for sale securities
            
            
            3,000,000
            
            
            
            500,000Net
      change in loans
            
            
            647,804
            
            
            
            1,364,542Premises
      and equipment expenditures
            
            
            (66,447
            )
            
            
            (26,928
            )Proceeds
      from sale REO and repossessions
            
            
            238,552
            
            
            
            109,117Net
      cash from investing activities
            
            
            2,819,909
            
            
            
            1,946,731Cash
      flows from financing activitiesNet
      change in deposits
            
            
            (151,692
            )
            
            
            (119,594
            )Net
      change in short-term FHLB advances
            
            
            2,000,000
            
            
            
            (3,500,000
            )Repayments
      of long-term FHLB advances
            
            
            (3,280,239
            )
            
            
            (1,453,038
            )Proceeds
      from long-term FHLB advances
            
            
            --
            
            
            
            5,000,000Cash
      dividends paid
            
            
            (772,949
            )
            
            
            (777,883
            )Purchase
      of treasury stock
            
            
            --
            
            
            
            (473,044
            )Net
      cash from financing activities
            
            
            (2,204,880
            )
            
            
            (1,323,559
            )Net
      change in cash and cash equivalents
            
            
            1,169,744
            
            
            
            1,495,861Cash
      and cash equivalents at beginning of period
            
            
            7,182,198
            
            
            
            4,714,929Cash
      and cash equivalents at end of period
            
            $
            8,351,942
            
            
            $
            6,210,790Supplemental
      disclosures of cash flow informationCash
      paid during the period forInterest
            
            $
            3,264,763
            
            
            $
            3,125,613Income
      taxes
            
            
            355,000
            
            
            
            395,000Noncash
      transactionsTransfer
      from loans to other real estate owned
            
            $
            526,663
            
            
            $
            262,341









7.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)












NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles of
Consolidation:  The accompanying consolidated financial
statements include accounts of Peoples-Sidney Financial Corporation (“Peoples”)
and its wholly-owned subsidiary, Peoples Federal Savings and Loan Association
(“Association”), a federal stock savings and loan association, together referred
to as the Corporation.  All significant intercompany transactions and
balances have been eliminated.





These
interim consolidated financial statements are prepared without audit and reflect
all adjustments which, in the opinion of management, are necessary to present
fairly the financial position of the Corporation at March 31, 2008 and its
results of operations and cash flows for the periods presented.  All
such adjustments are normal and recurring in nature.  The accompanying
consolidated financial statements have been prepared in accordance with the
instructions for Form 10-QSB and, therefore, do not purport to contain all the
necessary financial disclosures required by U.S. generally accepted accounting
principles that might otherwise be necessary in the circumstances, and should be
read in conjunction with the consolidated financial statements and notes thereto
of the Corporation for the fiscal year ended June 30, 2007, included in the
Corporation’s 2007 Annual Report on Form 10-KSB for the fiscal year ended June
30, 2007.  Reference is made to the accounting policies of the
Corporation described in the notes to consolidated financial statements
contained in such report.  The Corporation has consistently followed
these policies in preparing this Form 10-QSB.





Nature of
Operations:  The Corporation provides financial services
through its main office in Sidney, Ohio, and branch offices in Sidney, Anna and
Jackson Center, Ohio.  Its primary deposit products are checking,
savings and term certificate accounts, and its primary lending products are
residential mortgage, commercial and installment loans.  Substantially
all loans are secured by specific items of collateral including business assets,
consumer assets and commercial and residential real estate. Commercial loans are
expected to be repaid from cash flow from operations of
businesses.  There are no significant concentrations of loans to any
one industry or customer.  However, the customers’ ability to repay
their loans is dependent on the real estate and general economic conditions in
the area. Substantially all revenues and services are derived from financial
institution products and services in Shelby County and contiguous
counties.  Management considers the Corporation to operate primarily
in one segment, banking.





Use of
Estimates:  To prepare financial statements in conformity with
U.S. generally accepted accounting principles, management makes estimates and
assumptions based on available information.  These estimates and
assumptions affect the amounts reported in the financial statements and
disclosures provided, and actual results could differ.  The allowance
for loan losses and fair values of financial instruments are particularly
subject to change.





Income
Taxes:  Income tax expense is based on the effective tax rate
expected to be applicable for the entire year.  Income tax expense is
the total of the current year income tax due or refundable and the change in
deferred tax assets and liabilities.  Deferred tax assets and
liabilities are the expected future tax amounts for the temporary differences
between the carrying amounts and tax basis of assets and liabilities, computed
using enacted tax rates.  A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.





Earnings Per Common
Share:  Basic earnings per common share (“EPS”) is net income
divided by the weighted average number of common shares outstanding during the
period.  Employee stock ownership plan (“ESOP”) shares are considered
outstanding for this calculation unless unearned.  Diluted EPS shows
the dilutive effect of additional common shares upon exercise of stock
options.












8.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)
















NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES(Continued)





Adoption of New Accounting
Standards:  In February, 2006, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 155,
“Accounting for Certain Hybrid Financial Instruments”.  This statement
clarifies the treatment of derivatives that are freestanding or embedded as part
of a beneficial interest in a securitized financial asset.  This
statement was effective July 1, 2007.  The adoption of this
pronouncement did not have a material impact on the consolidated financial
statements.





In March,
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 156, “Accounting for Servicing of Financial
Assets”.  This statement allows the entity to choose the amortization
method or the fair value method to account for each separately recognized
servicing asset or liability.  This statement was effective July 1,
2007.  The adoption of this pronouncement did not have a material
impact on the consolidated financial statements.





In June
2006, the FASB issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty
in Income Taxes – an Interpretation of FASB Statement No. 109”, which clarifies
the accounting for uncertainty in income taxes recognized in a company’s
financial statements in accordance with SFAS 109, Accounting for Income
Taxes.  FIN 48 prescribes a recognition and measurement threshold for
a tax position taken or expected to be taken in a tax return.  FIN 48
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition.  FIN 48 was
effective July 1, 2007.  The impact of adopting FIN 48 was not
material to the consolidated financial statements.





The
Corporation and its subsidiary are subject to U.S. federal income
tax.  The Corporation is no longer subject to examination by taxing
authorities for fiscal years prior to June 30, 2003.  The Corporation
does not expect the total amount of unrecognized tax benefit to significantly
increase in the next twelve months.





The
Corporation recognizes interest related to income tax matters as interest
expense and penalties related in income tax matters as other
expense.  The Corporation did not have any amounts accrued for
interest and penalties at either July 1, 2007 or March 31, 2008.





Effect of Newly Issued But
Not Yet Effective Accounting Standards:  In September 2006,
FASB issued SFAS Statement No. 157, Fair Value Measurement (“SFAS No.
157”).  SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements.  SFAS No. 157 does not
require any new fair value measurements.  This statement is effective
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years.  The Corporation has not yet determined the
effect, if any, that the application of SFAS No. 157 will have on its
consolidated financial statements.





In
February 2007, the FASB issued SFAS Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115, (“SFAS No. 159”).  SFAS No. 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value at specified election dates.  If the fair value option is
elected, a business entity shall report unrealized gains and losses on elected
items in earnings at each subsequent reporting date.  Upon initial
adoption of this Statement, an entity is permitted to elect the fair value
option for available-for-sale and held-to-maturity securities previously
accounted for under SFAS Statement No. 115, Accounting for Certain Investments
in Debt and Equity Securities (“SFAS No. 115”).  The effect of
reclassifying those securities into the trading category should be included in a
cumulative-effect adjustment of retained earnings and not in current-period
earnings and should be separately disclosed.  SFAS No. 159 is
effective as of the beginning of the first fiscal year that begins after
November 15, 2007.  The Corporation has not yet determined the effect,
if any, that the application of SFAS No. 159 will have on its consolidated
financial statements.









9.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)










NOTE
2 – SECURITIES AVAILABLE FOR SALE





Securities
available for sale were as follows.





Gross
            
            
            GrossFair
            
            
            Unrealized
            
            
            UnrealizedValue
            
            
            Gains
            
            
            LossesMarch 31,
      2008U.S.
      Government agencies
            
            $
            2,056,260
            
            
            $
            57,552
            
            
            $
            --June 30,
      2007U.S.
      Government agencies
            
            $
            4,847,820
            
            
            $
            --
            
            
            $
            (150,534
            )





Contractual
maturities of securities available for sale at March 31, 2008 were as
follows.  Actual maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.





FairValueDue
      in less than one year
            
            $
            --Due
      after one year through five years
            
            
            --Due
      after five years through ten years
            
            
            2,056,260$
            2,056,260





A
security pledged to secure public deposits and repurchase agreements had a
carrying amount of $2,056,000 at March 31, 2008 and $1,863,000 at June 30,
2007.  There were no sales of securities available for sale during the
nine months ended March 31, 2008 or 2007.





No
securities at March 31, 2008 were in an unrealized loss
position.  Securities with unrealized losses at June 30, 2007,
aggregated by investment category and length of time that individual securities
have been in a continuous unrealized loss position, are as follows.




Less
      than 12 Months
              
              
              12
      Months or More
              
              
              TotalFair
              
              
              Unrealized
              
              
              Fair
              
              
              Unrealized
              
              
              Fair
              
              
              UnrealizedDescription
      of Securities
              
              Value
              
              
              Loss
              
              
              Value
              
              
              Loss
              
              
              Value
              
              
              LossJune
      30, 2007U.S.
      Government agencies
              
              $
              --
              
              
              $
              --
              
              
              $
              4,847,820
              
              
              $
              (150,534
              )
              
              $
              4,847,820
              
              
              $
              (150,534
              )





Unrealized
losses on the investment securities have not been recognized into income because
the securities are of high credit quality, management has the intent and ability
to hold for the foreseeable future, and the decline in fair value is largely due
to changes in interest rates.  The fair value is expected to recover
as the securities approach their maturity date or reset date.









10.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE
3 - LOANS





Loans
were as follows.





March
      31,
            
            
            June
      30,2008
            
            
            2007Mortgage
      loans:1-4
      family residential
            
            $
            84,645,904
            
            
            $
            86,555,451Multi-family
      residential
            
            
            4,545,338
            
            
            
            4,232,326Commercial
      real estate
            
            
            14,912,222
            
            
            
            13,893,048Real
      estate construction and development
            
            
            497,701
            
            
            
            1,522,448Land
            
            
            2,781,030
            
            
            
            2,891,359Total
      mortgage loans
            
            
            107,382,195
            
            
            
            109,094,632Consumer
      loans
            
            
            4,950,882
            
            
            
            5,357,102Commercial
      loans
            
            
            8,837,859
            
            
            
            8,049,139Total
      loans
            
            
            121,170,936
            
            
            
            122,500,873Less:Allowance
      for loan losses
            
            
            (603,100
            )
            
            
            (664,800
            )Deferred
      loan fees
            
            
            (317,991
            )
            
            
            (348,998
            )$
            120,249,845
            
            
            $
            121,487,075








At March
31, 2008 and June 30, 2007, there were no loans held for
sale.  Mortgage loans serviced for others are not reported as
assets.  The principal balance of these loans was $502,465 at March
31, 2008 and $159,819 at June 30, 2007.  Servicing rights associated
with the serviced loans totaled $6,723 at March 31, 2008 and $2,145 at June 30,
2007.





Activity
in the allowance for loan losses is summarized as follows.





Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Balance
      at beginning of period
            
            $
            737,900
            
            
            $
            696,000
            
            
            $
            664,800
            
            
            $
            893,600Provision
      for losses
            
            
            10,501
            
            
            
            210
            
            
            
            93,770
            
            
            
            (68,887
            )Charge-offs
            
            
            (153,638
            )
            
            
            (70,596
            )
            
            
            (169,447
            )
            
            
            (200,307
            )Recoveries
            
            
            8,337
            
            
            
            2,386
            
            
            
            13,977
            
            
            
            3,594Balance
      at end of period
            
            $
            603,100
            
            
            $
            628,000
            
            
            $
            603,100
            
            
            $
            628,000









11.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE 3 – LOANS(Continued)





Impaired
loans were as follows.


March
      31,
            
            
            June
      30,2008
            
            
            2007Period-end
      impaired loans with no allowance for loan losses allocated
            
            $
            --
            
            
            $
            --Period-end
      impaired loans with allowance for loan losses allocated
            
            
            78,000
            
            
            
            246,000Amount
      of the allowance allocated to impaired loans
            
            
            10,000
            
            
            
            35,000








Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Average
      of impaired loans during the period
            
            $
            40,000
            
            
            $
            70,000
            
            
            $
            274,000
            
            
            $
            90,000Interest
      income recognized during the period
            
            
            440
            
            
            
            335
            
            
            
            15,760
            
            
            
            2,206Cash-basis
      interest income recognized
            
            
            440
            
            
            
            335
            
            
            
            15,760
            
            
            
            2,206








Nonperforming
loans were as follows.





March
      31,
            
            
            June
      30,2008
            
            
            2007Loans
      past due over 90 days still on accrual
            
            $
            961,000
            
            
            $
            69,000Nonaccrual
      loans
            
            
            877,000
            
            
            
            1,772,000





Nonperforming
loans include smaller balance homogeneous loans, such as residential mortgage
and consumer loans that are collectively evaluated for impairment and
individually classified impaired loans.









12.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE
4 - BORROWED FUNDS





At March
31, 2008 and June 30, 2007, the Association had a cash management line of credit
enabling it to borrow up to $8,000,000 from the Federal Home Loan Bank of
Cincinnati (“FHLB”).  The Association has the option of selecting a
variable rate of interest for up to 90 days or a fixed rate for a maximum of 30
days on the cash management advances.  The line of credit must be
renewed on an annual basis.  There were no outstanding borrowings on
this line of credit at June 30, 2007 and $2,000,000 outstanding at March 31,
2008.





As a
member of the FHLB system, the Association has the ability to obtain borrowings
up to a maximum total of $58.1 million including the cash management line of
credit as of March 31, 2008.  Advances from the Federal Home Loan Bank
were as follows.





March
      31,
            
            
            June
      30,2008
            
            
            2007Cash
      management advance, variable rate 2.40%
            
            $
            2,000,000
            
            
            $
            --4.88%
      FHLB fixed-rate advance, due January 25, 2008
            
            
            --
            
            
            
            2,000,0006.13%
      FHLB fixed-rate advance, due June 25, 2008
            
            
            7,000,000
            
            
            
            7,000,0005.16%
      FHLB fixed-rate advance, due March 13, 2009
            
            
            3,000,000
            
            
            
            3,000,0006.00%
      FHLB convertible advance, fixed-rate until March 2008, due June 11,
      2009
            
            
            5,000,000
            
            
            
            5,000,0004.42%
      FHLB fixed-rate advance, due July 9, 2010
            
            
            2,000,000
            
            
            
            2,000,0006.27%
      FHLB convertible advance, fixed-rate until March 2008, due September 8,
      2010
            
            
            5,000,000
            
            
            
            5,000,0005.12%
      FHLB fixed-rate advance, due October 31, 2011
            
            
            5,000,000
            
            
            
            5,000,0005.30%
      select pay mortgage-matched advance, final maturity May 1,
      2011
            
            
            399,040
            
            
            
            484,1575.35%
      select pay mortgage-matched advance, final maturity July 1,
      2011
            
            
            837,721
            
            
            
            1,118,3713.92%
      select pay mortgage-matched advance, final maturity November 1,
      2012
            
            
            398,827
            
            
            
            480,4213.55%
      select pay mortgage-matched advance, final maturity March 1,
      2013
            
            
            544,193
            
            
            
            617,8194.10%
      select pay mortgage-matched advance, final maturity March 1,
      2015
            
            
            379,742
            
            
            
            517,9304.09%
      select pay mortgage-matched advance, final maturity November 1,
      2017
            
            
            420,468
            
            
            
            496,3023.31%
      select pay mortgage-matched advance, final maturity April 1,
      2019
            
            
            481,876
            
            
            
            508,5434.72%
      select pay mortgage-matched advance, final maturity November 1,
      2022
            
            
            1,897,821
            
            
            
            2,067,3664.38%
      select pay mortgage-matched advance, final maturity December 1,
      2022
            
            
            630,918
            
            
            
            687,7773.92%
      select pay mortgage-matched advance, final maturity December 1,
      2022
            
            
            477,061
            
            
            
            549,6963.64%
      select pay mortgage-matched advance, final maturity March 1,
      2023
            
            
            1,441,124
            
            
            
            1,660,648$
            36,908,791
            
            
            $
            38,189,030





Advances
under the borrowing agreements are collateralized by a blanket pledge of the
Association’s residential mortgage loan portfolio and its FHLB
stock.









13.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE 4 - BORROWED FUNDS(Continued)





The
interest rates on the convertible advances are fixed for a specified number of
years, then convertible to a variable rate at the option of the
FHLB.  If the convertible option is exercised, the advance may be
prepaid without prepayment fee.  The select pay mortgage-matched
advances require monthly principal and interest payments and annual additional
principal payments.





Maturities
of FHLB advances for the next five years and thereafter were as
follows.





Year
      ended March 31,2009
            
            $
            13,455,1832010
            
            
            6,288,0632011
            
            
            8,143,9872012
            
            
            5,820,8922013
            
            
            648,344Thereafter
            
            
            2,552,322$
            36,908,791








NOTE
5 - OFF-BALANCE-SHEET ACTIVITIES





Loss
contingencies, including claims and legal actions arising in the ordinary course
of business, are recorded as liabilities when the likelihood of loss is probable
and an amount or range of loss can be reasonably
estimated.  Management does not believe there now are such matters
that will have a material effect on the financial statements.





Some
financial instruments, such as loan commitments, credit lines, letters of credit
and overdraft protection, are issued to meet customer financing
needs.  These are agreements to provide credit or to support the
credit of others, as long as conditions established in the contract are met, and
usually have expiration dates.  Commitments may expire without being
used.  Off-balance-sheet risk of credit loss exists up to the face
amount of these instruments, although material losses are not
anticipated.  The same credit policies are used to make such
commitments as are used for loans, including obtaining collateral at exercise of
the commitment.





The
contractual amount of financial instruments with off-balance-sheet risk was as
follows.





March
      31,
            
            
            June
      30,2008
            
            
            20071-4
      family residential real estate – fixed rate
            
            $
            687,000
            
            
            $
            219,0001-4
      family residential real estate – variable rate
            
            
            375,000
            
            
            
            366,000Commercial
      real estate – fixed rate
            
            
            51,000
            
            
            
            232,000Commercial
      real estate–variable rate
            
            
            342,000
            
            
            
            --Commercial
      lines of credit – variable rate
            
            
            3,828,000
            
            
            
            5,324,000Home
      equity lines of credit – variable rate
            
            
            893,000
            
            
            
            974,000





The
interest rate on fixed-rate commitments were 5.88% to 7.00% at March 31, 2008
and 7.25% to 8.13% at June 30, 2007.  Commitments to make loans are
generally made for a period of 30 days or less.  The maximum maturity
for fixed-rate commitments range from 10 years to 20 years.





At March
31, 2008 and June 30, 2007, the Corporation was required to have $251,000 and
$295,000 on deposit with its correspondent banks as a compensating clearing
requirement.









14.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE 5 - OFF-BALANCE-SHEET ACTIVITIES(Continued)





The
Corporation entered into employment agreements with certain of its
officers.  The agreements provide for a term of one to three years and
a salary and performance review by the Board of Directors not less often than
annually, as well as inclusion of the employee in any formally established
employee benefit, bonus, pension and profit-sharing plans for which management
personnel are eligible.  The agreements provide for extensions for a
period of one year on each annual anniversary date, subject to review and
approval of the extension by disinterested members of the Board of Directors of
the Association.  The employment agreements also provide for vacation
and sick leave.





The
Association entered into a five-year lease for a branch in the Super Wal-Mart in
Sidney that commenced in June 2001.  The lease term was renewed in
June 2006 for five years at $39,750 annually.  The lease has another
five-year renewal option at $49,688 annually.








NOTE
6 – EARNINGS PER SHARE





The
factors used in the earnings per share computation follow.





Three
      Months Ended
            
            
            Nine
      Months EndedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Basic
      Earnings Per Common ShareNet
      income
            
            $
            193,626
            
            
            $
            255,243
            
            
            $
            625,164
            
            
            $
            824,722Weighted
      average common shares outstanding
            
            
            1,361,048
            
            
            
            1,361,048
            
            
            
            1,361,048
            
            
            
            1,372,877Less:  Average
      unallocated ESOP shares
            
            
            (22,104
            )
            
            
            (32,361
            )
            
            
            (24,614
            )
            
            
            (35,015
            )Weighted
      average common shares outstanding for basic earnings per common
      share
            
            
            1,338,944
            
            
            
            1,328,687
            
            
            
            1,336,434
            
            
            
            1,337,862Basic
      earnings per common share
            
            $
            0.14
            
            
            $
            0.19
            
            
            $
            0.47
            
            
            $
            0.62Diluted
      Earnings Per Common ShareNet
      income
            
            $
            193,626
            
            
            $
            255,243
            
            
            $
            625,164
            
            
            $
            824,722Weighted
      average common shares outstanding for basic earnings per common
      share
            
            
            1,338,944
            
            
            
            1,328,687
            
            
            
            1,336,434
            
            
            
            1,337,862Add:  Dilutive
      effects of assumed exercises of stock options
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Weighted
      average common shares and dilutive potential common shares
      outstanding
            
            
            1,338,944
            
            
            
            1,328,687
            
            
            
            1,336,434
            
            
            
            1,337,862Diluted
      earnings per common share
            
            $
            0.14
            
            
            $
            0.19
            
            
            $
            0.47
            
            
            $
            0.62Average
      stock options not considered in calculation because they were not
      dilutive
            
            
            119,972
            
            
            
            121,063
            
            
            
            119,972
            
            
            
            126,324









15.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)
 
 Item
2.  Management’s Discussion and
Analysis





Introduction





In the
following pages, management presents an analysis of the consolidated financial
condition of the Corporation as of March 31, 2008, compared to June 30, 2007,
and results of operations for the three and nine months ended March 31, 2008,
compared with the same periods in 2007.  This discussion is designed
to provide a more comprehensive review of operating results and financial
position than could be obtained from an examination of the consolidated
financial statements alone.  This analysis should be read in
conjunction with the interim consolidated financial statements and related
footnotes included herein.





Overview
and Outlook





The
current local housing market and the economy in general remain
depressed.  Houses are taking longer periods to sell.  Our
county unemployment rate, however, remains stable at 5.2%.  Even with
the recent interest rate cuts, we are seeing limited housing activity in all
price ranges.  Foreclosures have declined, however, many foreclosed
properties remain vacant and are listed for sale.  Typically,
purchasers of properties have very little cash to use for major purchases and
disposable income continues to narrow as everyday consumer costs continue to
increase.





Lower
interest rates also compound the problem of attracting retail
deposits.  We continue to compare wholesale advance rates verses
retail deposit rates to attract funds at the lowest cost reasonably
attainable.  We expect these trends to continue during the balance of
2008.





Forward-Looking
Statements





When used
in this filing or future filings by the Corporation with the Securities and
Exchange Commission, or other public or shareholder communications, or in oral
statements made with the approval of an authorized executive officer, the words
or phrases “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “estimate,” “project,” “believe” or similar expressions are
intended to identify “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995.  The Corporation
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including but not limited to regional and national
economic conditions, changes in levels of market interest rates, credit risks of
lending activities and competitive and regulatory factors, could affect the
Corporation’s financial performance and could cause the Corporation’s actual
results for future periods to differ materially from those anticipated or
projected.





The
Corporation does not undertake, and specifically disclaims, any obligation to
publicly release the result of any revisions that may be made to any
forward-looking statements to reflect occurrence of anticipated or unanticipated
events or circumstances after the date of such statements.





Financial
Condition





Total
assets at March 31, 2008 were $136.8 million compared to $138.3 million at June
30, 2007, a decrease of $1.5 million.  The decrease in total assets
was primarily due to a decrease in loans of $1.2 million.  Securities
available for sale also decreased $2.8 million partially offset by increases in
cash and cash equivalents and time deposits of $1.2 million and $1.0 million
respectively.





Cash and
cash equivalents increased $1.2 million from $7.2 million at June 30, 2007 to
$8.4 million at March 31, 2008.  The increase in cash and equivalents
resulted from a decrease in securities. The securities portfolio, which is
classified as available for sale, decreased $2.8 million from $4.8 million at
June 30, 2007 to $2.0 million at March 31, 2008.  The decrease was due
to calls by the issuers of $3.0 million in securities, in accordance with their
terms,









16.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


partially
offset by an increase in the fair value of the remaining security during the
reporting period.  See Note 2 of Notes to Consolidated Financial
Statements.





Time
deposits increased $1.0 million resulting from the partial reinvestment of the
proceeds from the security calls during the period.





Total
loans decreased $1.2 million from $121.5 million at June 30, 2007 to $120.3
million at March 31, 2008.  The most significant changes occurred in
one- to four-family residential loans and real estate construction and
development loans, which decreased $1.9 million and $1.0 million respectively,
partially offset by an increase of $1.0 million in commercial real estate
loans.  Non-mortgage loans provided a net increase of $0.4 million
with an increase of $0.8 million in commercial non-mortgage loans partially
offset by a $0.4 million decrease in consumer loans.  The remaining
loan categories had nominal changes that combined for a net increase of $0.2
million.  The decrease in the loan portfolio resulted primarily from
the general slow down in the residential housing market.  The increase
in commercial lending resulted primarily from increased activity in agricultural
farm loans and commercial business loans.  See Note 3 of Notes to
Consolidated Financial Statements.





Premises
and equipment decreased $60,000 from $1,864,000 at June 30, 2007 to $1,804,000
at March 31, 2008.  This decrease resulted from normal depreciation of
existing assets partially offset by equipment purchases and routine improvements
to the office building.





Other
real estate owned increased $295,000 to $438,000 at March 31, 2008 as a result
of the addition of four one- to four-family residential properties totaling
$527,000 acquired through deed-in-lieu of foreclosure since June 30,
2007.  Three properties were sold during the nine months ended March
31, 2008 generating total proceeds of $239,000 and net gains of
$6,900.





Total
deposits decreased $0.2 million from $82.5 million at June 30, 2007 to $82.3
million at March 31, 2008.  The most significant changes occurred in
certificate accounts, which increased $1.4 million.  However, money
market and savings accounts decreased $0.6 million and $0.4 million,
respectively and NOW and commercial checking accounts also decreased $0.3
million and $0.2 million respectively.  Local competition and economic
demands continue to limit the availability of deposit funds.





Borrowed
funds decreased $1.3 million from $38.2 million at June 30, 2007 to $36.9
million at March 31, 2008.  This decrease was the result of scheduled
repayments of mortgage-matched advances and a maturity of a $2.0 million
fixed-rate advance partially offset by a $2.0 net increase in cash management
advances.  Borrowed funds represent a significant portion of our
liabilities, and we expect this mix of deposits and borrowed funds will continue
for the foreseeable future.  See Note 5 of Notes to Consolidated
Financial Statements.









17.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


Results
of Operations





Our
operating results are affected by general economic conditions, monetary and
fiscal policies of federal agencies and regulatory policies of agencies that
regulate financial institutions.  Our cost of funds is influenced by
interest rates on competing investments and general market rates of
interest.  All these factors affect the demand for real estate loans
and other types of loans, which directly influence the volume of our lending
activities.





Our net
income is dependent on net interest income, which is the difference between
interest income earned on interest-earning assets, such as loans and securities
and interest expense incurred on interest-bearing liabilities, such as deposits
and borrowings.  The level of net interest income is dependent on the
interest rate environment and volume and composition of interest-earning assets
and interest-bearing liabilities.  Net income is also affected by
provisions for loan losses, service charges, gains on the sale of assets and
other income, noninterest expense and income taxes.





Three
Months Ended March 31, 2008 Compared to the Three Months Ended March 31,
2007





Net Income.  The
Corporation earned net income of $194,000 for the three months ended March 31,
2008 compared to $255,000 for the three months ended March 31,
2007.  The most significant changes occurred in net interest income,
which decreased $55,000 coupled with an increase of $26,000 in noninterest
expense.  These decreases to net income were partially offset by a
decrease of $33,000 in income tax expense.  Various components of our
income statement are discussed as follows.





Net Interest
Income.  Net interest income totaled $1,152,000 for the three
months ended March 31, 2008 compared to $1,207,000 for the three months ended
March 31, 2007, representing a decrease of $55,000.  The decrease was
the result of a decrease in the total of average net earning assets coupled with
a decrease in the net interest margin during the current period.  This
resulted in a decrease in total interest income and an increase in total
interest expense as compared to a year ago.





Interest
and fees on loans decreased $13,000 from $2,147,000 for the three months ended
March 31, 2007 to $2,134,000 for the three months ended March 31,
2008.  The decrease in interest income was due primarily to a decrease
in the average balance of loans partially offset by a higher average yield
earned.  The average balance of loans decreased to $120.8 million with
an average yield of 7.07% for the three months ended March 31, 2008 compared to
an average balance of $123.0 million with an average yield of 6.98% for the same
three month period last year.





Interest
on securities decreased $18,000 due to a decrease in the average balance
partially offset by an increase in the average yield earned during the current
period.  Interest on demand, time and overnight deposits increased
$4,000 to $42,000 for the three months ended March 31, 2008 as compared to
$38,000 for the same period last year.  The increase in interest
earned on deposits with other financial institutions was the result of an
increase in the average balance partially offset by a lower average yield earned
on such deposits.





Dividends
on FHLB stock decreased $5,000 over the comparable period due to an decrease in
the dividend rate paid by the FHLB partially offset by a higher average
balance.





Interest
paid on deposits increased $47,000 from $545,000 for the three months ended
March 31, 2007 to $592,000 for the three months ended March 31,
2008.  The increase resulted from an increase in the average interest
rate paid on deposits coupled with an increase in the average balance of
deposits.  The average balance of deposits for the three months ended
March 31, 2008 was $80.8 million at an average cost of 2.95% compared to an
average balance of $80.4 million at an average cost of 2.75% for the three
months ended March 31, 2007.









18.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


Interest
paid on borrowed funds totaled $488,000 for the three months ended March 31,
2008 compared to $511,000 for the three months ended March 31,
2007.  The decrease of $23,000 in interest expense on borrowed funds
resulted from a decrease in the average balance of borrowed funds partially
coupled with a decrease in the average rate.  The average balance of
borrowed funds for the three months ended March 31, 2008 was $37.1 million at an
average cost of 5.28% compared to an average balance of $38.9 million at an
average cost of 5.32% for the three months ended March 31, 2007.





Provision for Loan
Losses.  The Corporation maintains an allowance for loan losses
in an amount that, in management’s judgment, is adequate to absorb probable
losses in the loan portfolio.  While management utilizes its best
judgment and information available, the ultimate adequacy of the allowance is
dependent upon a variety of factors, including the performance of the
Corporation’s loan portfolio, the economy, changes in real estate values and
interest rates and the view of the regulatory authorities toward loan
classifications.  The provision for loan losses is determined by
management as the amount to be added to the allowance for loan losses after net
charge-offs have been deducted to bring the allowance to a level that is
considered adequate to absorb probable incurred losses in the loan
portfolio.  The amount of the provision is based on management’s
monthly review of the loan portfolio and consideration of such factors as
historical loss experience, general prevailing economic conditions, changes in
the size and composition of the loan portfolio and specific borrower
considerations, including the ability of the borrower to repay the loan and the
estimated value of the underlying collateral.





The
provision for loan losses increased $10,000 from a provision of $210 for the
three months ended March 31, 2007 to a provision of $10,000 for the three months
ended March 31, 2008.  The provision for loan losses of $10,000 during
the current three-month period is due to an increase in nonperforming loans and
related provisions on current impaired loans.  Nonperforming loans
increased from $1.5 million at December 31, 2007 to $1.8 million at March 31,
2008. The Corporation realized charge offs of $154,000 in impaired loans during
the current three-month period.  However, this probable loss had
already been included in the allowance for loan losses at 100% of its
outstanding balance during prior periods.  Therefore the charge off
had no affect on the provision for loan losses during the March 2008
quarter.  Additional provisions of $8,000 were required for the
remaining as well as newly identified impaired loans during the current
period.  Impaired loans were $293,000 with $165,000 in related
provisions at December 31, 2007 and $78,000 with $10,000 in related provisions
at March 31, 2008.  During the prior year three-month period the
Corporation experienced charges offs of $68,000 in commercial and consumer
loans.  However, decreases in the total loan portfolio and decreases
in total nonperforming and classified loans offset the additional provisions
associated with these loans during the period.  Also, as a result of
the charge offs the allowance allocated to impaired loans actually decreased
$9,000.  Impaired loans were $28,000 with loan loss reserves of
$12,000 at March 31, 2007 compared to impaired loans of $33,000 with loan loss
reserves of $21,000 at December 31, 2006.





The
allowance for loan losses totaled $603,000, or 0.50% of gross loans receivable
net of deferred loan origination fees and 32.8% of total nonperforming loans at
March 31, 2008.  This compares to $628,000, or 0.51% of gross loans
receivable, net of deferred loan origination fees and 62.7% of total
nonperforming loans at March 31, 2007.





Noninterest
income.  Noninterest income, which includes service fees, other
miscellaneous income, the net gain or loss on the sale of real estate owned and
mortgage banking income, decreased $4,000 from $33,000 for the three months
ended March 31, 2007 to $29,000 for the three months ended March 31,
2008.  This is primarily due to a decrease in fee income on NOW
accounts resulting from a decrease in the average balance as compared to last
year.









19.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


Noninterest
expense.  Noninterest expense totaled $869,000 for the three
months ended March 31, 2008 compared to $843,000 for the three months ended
March 31, 2007, an increase of $26,000.  The most significant changes
occurred in professional services, which increased $34,000 and computer
processing expense, which increased $9,000.  The increase in
professional services is related to cost associated with the going private
transaction which was announced in a press release dated April 14,
2008.  The increase in computer processing expense resulted from the
processing cost associated with the addition of internet
banking.  Other categories of noninterest expense combined for a
decrease of $17,000.





Income Tax
Expense.  Income tax expense totaled $109,000 for the
three-month period ended March 31, 2008 and $142,000 for the three-month period
ended March 31, 2007.  The decrease in income tax is reflective of a
decrease in income before income taxes for the current period.  The
effective tax rate was 36.0% and 35.7% for the three months ended March 31, 2008
and 2007.








Nine
Months Ended March 31, 2008 Compared to the Nine Months Ended March 31,
2007





Net Income.  The
Corporation earned net income of $625,000 for the nine months ended March 31,
2008 compared to $825,000 for the nine months ended March 31, 2007, representing
a decrease of $200,000. The most significant factor contributing to the decrease
in net income for the current nine-month period was an increase in provision for
loan losses and a decrease in net interest income, which was partially offset by
a decrease in income tax expense.





Net Interest
Income.  Net interest income totaled $3,506,000 for the nine
months ended March 31, 2008 compared to $3,577,000 for the nine months ended
March 31, 2007, a decrease of $71,000.  The decrease was the result of
a decline in the total of average net earning assets.  This equates to
a smaller increase in interest income on loans and other sources of interest
income compared to the increase in expense on deposits and borrowed
money.





Interest
and fees on loans increased $33,000, or 0.5% from $6,385,000 for the nine months
ended March 31, 2007 to $6,418,000 for the nine months ended March 31,
2008.  The increase in interest income was due primarily to a higher
average yield earned on loans due to the increasing interest rate environment
during the majority of the current nine-month period offset by a decrease in the
average balance.  The average balance of loans decreased to $121.0
million with an average yield of 7.07% for the nine months ended March 31, 2008
compared to an average balance of $123.6 million with an average yield of 6.88%
for the same nine month period last year.





Interest
on securities decreased $18,000 from $159,000 for the nine months ended March
31, 2007 to $141,000 for the nine months ended March 31, 2008.  The
decrease resulted from a decrease in the average balance partially offset by an
increase in the interest rate during the current period as compared to last
year.





Interest
on demand, time and overnight deposits increased $44,000 from $97,000 for the
nine months ended March 31, 2007 to $141,000 for the nine months ended March 31,
2008.  The increase resulted from an increase in the average balance
of these deposits partially offset by a decrease in the average
rate.





Dividends
on FHLB stock increased $4,000 as compared to the same period a year ago due to
an increase in the dividend rate paid by the FHLB coupled with a higher average
balance.





Interest
paid on deposits increased $221,000, or 14.2% from $1,558,000 for the nine
months ended March 31, 2007 to $1,779,000 for the nine months ended March 31,
2008.  The increase resulted from a higher average interest rate
coupled with a higher average balance of deposits. The average balance of
deposits for the nine months ended March 31, 2008 was $80.6 million at an
average cost of 2.94% compared to an average balance of $79.7 million at an
average cost of 2.60% for the nine months ended March 31, 2007.









20.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


Interest
paid on borrowed funds totaled $1,501,000 for the nine months ended March 31,
2008 compared to $1,586,000 for the nine months ended March 31,
2007.  The decrease of $85,000 in interest expense on borrowed funds
resulted from a decrease in the average balance of borrowed
funds.  The average balance of borrowings for the nine months ended
March 31, 2008 was $37.6 million compared to an average balance of $39.7 million
for the nine months ended March 31, 2007.  The average cost of these
borrowings remained the same for both the current and prior period at
5.32%.





Provision for Loan
Losses.  The provision for loan losses for the nine months
ended March 31, 2008 totaled $94,000 compared to a negative provision of $69,000
for the nine months ended March 31, 2007.  The increase of $163,000 in
the provision for losses was due primarily to an increase in the allowance
allocation for probable losses on impaired loans during the current nine-month
period.  Impaired loans increased during the current nine months to a
high of $293,000 at December 31, 2007 from $246,000 at June 30, 2007 to an
ending balance at March 31, 2008 of $78,000.  The resulting provision
for loan losses on impaired loans increased $138,000 for the nine months ended
March 31, 2008.  Also during this period the Corporation charged off
$167,000 in impaired loans.  This increase to provision for loan
losses was partially offset by a decrease in total classified loans coupled with
an overall decrease in the loan portfolio balance since June 30,
2007.  Classified loans totaled $1.8 million at June 30, 2007 compared
to $1.2 million at March 31, 2008.  The negative provision of $69,000
that occurred during the nine months ended March 31, 2008 was primarily the
result of the positive resolution of a commercial loan that had a specific loss
allocation of $80,000 at June 30, 2006.  Additionally, the Corporation
had a decline in the loan portfolio balance during the nine-month period a year
ago.





Noninterest
income.  Noninterest income includes service fees, other
miscellaneous income, the gain or loss realized on the sale of real estate owed
and mortgage banking income increased $1,000 from $97,000 for the nine months
ended March 31, 2007 to $98,000 for the nine months ended March 31,
2008.  This is primarily due to a $6,000 increase in the gain on the
sale of REO during the current nine-month period.  A $12,000 decrease
in service fees was offset by an increase of $7,000 in mortgage banking income
for the comparable period.





Noninterest expense.Noninterest expense
totaled $2,536,000 for the nine months ended March 31, 2008 compared to
$2,464,000 for the nine months ended March 31, 2007, an increase of
$72,000.  Professional fees increased $51,000 resulting from expenses
incurred relating to the going private transaction.  Computer
processing expense increased $18,000, occupancy and equipment expense increased
$9,000, and other expenses increased $9,000.  Other than the increase
in computer processing expense relating to the preparation costs associated with
the addition of internet banking there were no other individual significant
items that contributed to the increases in occupancy and equipment and other
expenses.  State franchise tax decreased $11,000 resulting from the
tax savings associated with the payment of dividends by the Association to the
Corporation.





Income Tax
Expense.  Income tax expense totaled $349,000 for the nine
months ended March 31, 2008 compared to $454,000 for the nine months ended March
31, 2007, representing a decrease of $105,000.  The decrease in income
tax expense is reflective of a decrease in income before tax.  The
effective tax rate was 35.9% and 35.5% for the nine months ended March 31, 2008
and 2007.









21.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


Liquidity
and Capital Resources





The
Corporation’s liquidity, primarily represented by cash and cash equivalents, is
a result of operating, investing and financing activities.  These
activities are summarized below for the nine months ended March 31, 2008 and
2007.





Nine
      Months EndedMarch 31,2008
            
            
            2007(Dollars
      in thousands)Net
      income
            
            $
            625
            
            
            $
            825Adjustments
      to reconcile net income to net cash from operating
    activities
            
            
            (70
            )
            
            
            48Net
      cash from operating activities
            
            
            555
            
            
            
            873Net
      cash from investing activities
            
            
            2,820
            
            
            
            1,947Net
      cash from financing activities
            
            
            (2,205
            )
            
            
            (1,324
            )Net
      change in cash and cash equivalents
            
            
            1,170
            
            
            
            1,496Cash
      and cash equivalents at beginning of period
            
            
            7,182
            
            
            
            4,715Cash
      and cash equivalents at end of period
            
            $
            8,352
            
            
            $
            6,211





The
Corporation’s principal sources of funds are deposits, borrowings, loan
repayments, maturities of securities and other funds provided by
operations.  While scheduled loan repayments and maturing investments
are relatively predictable, deposit flows and early loan prepayments are
influenced by interest rates, general economic conditions and competition and
therefore are somewhat less predictable.  The Corporation maintains
investments in liquid assets based on management’s assessment of the (1) need
for funds, (2) expected deposit flows, (3) yields available on short-term
liquid assets and (4) objectives of the asset/liability management
program.  Management believes that loan repayments and other sources
of funds will be adequate to meet the Corporation’s foreseeable liquidity
needs.





The
Corporation also has the ability to borrow from the FHLB up to a maximum total
of $58.1 million including the cash management line of credit.  See
Note 4 of the Notes to Consolidated Financial Statements for a detail of the
Corporation’s borrowings from the FHLB at March 31, 2008.





At March
31, 2008, the Corporation had commitments to originate fixed-rate loans totaling
$738,000 and variable-rate loans totaling $717,000.  Loan commitments
are generally extended for 30 days.  See Note 5 of the Notes to
Consolidated Financial Statements for a detail of the Corporation’s loan
commitments at March 31, 2008.  The Office of Thrift Supervision
regulations require the Corporation’s insured subsidiary to maintain a safe and
sound level of liquid assets.  The Corporation considers its liquidity
sufficient to meet its outstanding short and long-term needs.









22.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 MANAGEMENT’S
DISCUSSION AND ANALYSIS
 (Unaudited)


The
Association is subject to various regulatory capital requirements administered
by the federal regulatory agencies.  Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Association must
meet specific capital guidelines that involve quantitative measures of the
Association’s assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices.  Capital amounts and
classifications are also subject to qualitative judgments by the
regulators.  Failure to meet minimum capital requirements can result
in regulatory action.





Prompt
corrective action regulations provide five classifications: well-capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized, although these terms are not used to represent
overall financial condition.  If adequately capitalized, regulatory
approval is required to accept brokered deposits.  If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required.





At March
31, 2008 and June 30, 2007, management believes the Association complies with
all regulatory capital requirements, and is considered well-capitalized under
the Federal Deposit Insurance Act.  To the best of management’s
knowledge, no conditions or events have occurred subsequent to the last
notification by regulators that management believes would have changed the
Association’s category.





At March
31, 2008 and June 30, 2007, the Association’s actual capital levels, minimum
required levels and levels to be considered “well-capitalized” were as
follows.





Actual
            
            
            For
      CapitalAdequacy
    Purposes
            
            
            To
      Be Well-Capitalized Under Prompt CorrectiveAction RegulationsAmount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio(Dollars in Thousands)March 31,
      2008Total
      capital to risk-weighted assets
            
            $
            14,941
            
            
            
            17.2
            %
            
            $
            6,965
            
            
            
            8.0
            %
            
            $
            8,706
            
            
            
            10.0
            %Tier
      1 (core) capital to risk-weighted assets
            
            
            14,348
            
            
            
            16.5
            
            
            
            3,482
            
            
            
            4.0
            
            
            
            5,223
            
            
            
            6.0Tier
      1 (core) capital to adjusted total assets
            
            
            14,348
            
            
            
            10.5
            
            
            
            5,471
            
            
            
            4.0
            
            
            
            6,839
            
            
            
            5.0Tangible
      capital to adjusted total assets
            
            
            14,348
            
            
            
            10.5
            
            
            
            2,052
            
            
            
            1.5
            
            
            
            N/AJune 30,
      2007Total
      capital to risk-weighted assets
            
            $
            13,989
            
            
            
            16.1
            %
            
            $
            6,930
            
            
            
            8.0
            %
            
            $
            8,663
            
            
            
            10.0
            %Tier
      1 (core) capital to risk-weighted assets
            
            
            13,572
            
            
            
            15.7
            
            
            
            3,465
            
            
            
            4.0
            
            
            
            5,198
            
            
            
            6.0Tier
      1 (core) capital to adjusted total assets
            
            
            13,572
            
            
            
            9.8
            
            
            
            5,541
            
            
            
            4.0
            
            
            
            6,926
            
            
            
            5.0Tangible
      capital to adjusted total assets
            
            
            13,572
            
            
            
            9.8
            
            
            
            2,078
            
            
            
            1.5
            
            
            
            N/A









23.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 CONTROLS
AND PROCEDURES


Item
3.  Controls
and Procedures





Any
control system, no matter how well designed and operated, can provide only
reasonable (not absolute) assurance that its objectives will be
met.  Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.





Disclosure
Controls





The
Company’s management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures, as such term is defined in Rules
13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934 (Exchange
Act) as of the end of the period covered by the report.





Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that as of March 31, 2008 our disclosure controls and procedures were
effective to provide reasonable assurance that (i) the information required
to be disclosed by us in this Report was recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
(ii) information required to be disclosed by us in our reports that we file
or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.









24.




PEOPLES-SIDNEY
FINANCIAL CORPORATION
 PART II -
OTHER INFORMATION








Item
      1.
            Legal
      Proceedings


The
Company is not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business, which, in the
aggregate, involved amounts which are believed to be immaterial to the
consolidated financial condition and operations of the Company.





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


None





Item
      3.
            Defaults Upon Senior
      Securities


Not
applicable.





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


None





Item
      5.
            Other
      Information


None.





Item
      6.
            Exhibits


(a)
              (1)
      Exhibit 11: Computation of Earnings per Share included in Note 6 to the
      consolidated financial statements.
 (2)
              Exhibits
      31.1 and 31.2: Section 302
Certifications
 (3)
              Exhibit
      32: Section 906 Certifications
 All
      other Exhibits previously
filed







25.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


SIGNATURES










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








Date:
            
            May 15, 2008
            
            /s/ Douglas StewartDouglas
      StewartPresident
      and Chief Executive OfficerDate:
            
            May 15, 2008
            
            /s/ Debra GeuyDebra
      GeuyChief
      Financial Officer









26.





PEOPLES-SIDNEY
FINANCIAL CORPORATION


INDEX TO
EXHIBITS








EXHIBIT NUMBER
            
            DESCRIPTION3.1
            
            Articles
      of Incorporation of Peoples-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 10.110.2
            
            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 10.210.3
            
            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 10.310.4
            
            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 10.410.5
            
            401
      (k) Plan
            
            Incorporated
      by Pre-Effective Amendment No. 1 to the S-1 filed with the SEC on March
      12, 1997, Exhibit 10.510.6
            
            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 200231.2
            
            Certification
      of Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
            
            Certifications
      of the Chief Executive Officer and the Chief Financial Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002













27.