UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

For the quarterly period ended December 31, 2005

[_]      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                             (IRS Employer
  incorporation or organization)                          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     [X]             No      [_]

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

Yes     [_]             No      [X]

As of February 3, 2006, the latest  practicable  date,  1,405,148  shares of the
issuer's common shares, $.01 par value, were issued and outstanding.

Transitional Small Business Disclosure Format (Check One):
Yes     [_]             No      [X]

--------------------------------------------------------------------------------
                                                                              1.
<PAGE>
<TABLE>
<CAPTION>

                            PEOPLES-SIDNEY FINANCIAL CORPORATION

                                           INDEX

                                                                                       Page
                                                                                       ----
<S>                                                                                     <C>

PART I - FINANCIAL INFORMATION

  Item 1.     Financial Statements (Unaudited)

              Consolidated Balance Sheets............................................   3

              Consolidated Statements of Income .....................................   4

              Consolidated Statements of Comprehensive Income........................   5

              Condensed Consolidated Statements of Changes in Shareholders' Equity...   6

              Consolidated Statements of Cash Flows .................................   7

              Notes to Consolidated Financial Statements ............................   8

  Item 2.     Management's Discussion and Analysis...................................  15

  Item 3.     Controls and Procedures................................................  23


PART II - OTHER INFORMATION

  Item 1.     Legal Proceedings......................................................  24

  Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds............  24

  Item 3.     Defaults Upon Senior Securities........................................  24

  Item 4.     Submission of Matters to a Vote of Security Holders....................  24

  Item 5.     Other Information......................................................  25

  Item 6.     Exhibits...............................................................  25


SIGNATURES ..........................................................................  26

INDEX TO EXHIBITS....................................................................  27


-------------------------------------------------------------------------------------------

                                                                                         2.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                            PEOPLES-SIDNEY FINANCIAL CORPORATION

                                CONSOLIDATED BALANCE SHEETS

-------------------------------------------------------------------------------------------

Item 1.  Financial Statements
         --------------------
                                                             December 31,       June 30,
                                                                 2005             2005
                                                                 ----             ----
<S>                                                         <C>              <C>
                                                             (Unaudited)
ASSETS
Cash and due from financial institutions                    $     966,125    $   1,366,825
Interest-bearing deposits in other financial institutions       4,332,534        3,954,371
                                                            -------------    -------------
     Total cash and cash equivalents                            5,298,659        5,321,196
Securities available for sale                                   5,337,025        5,433,915
Federal Home Loan Bank stock                                    1,718,900        1,673,900
Loans, net of allowance of $839,000 and $835,500              122,635,587      121,110,189
Accrued interest receivable                                       793,659          745,534
Premises and equipment, net                                     2,040,072        2,095,691
Other assets                                                      112,956          314,841
                                                            -------------    -------------

     Total assets                                           $ 137,936,858    $ 136,695,266
                                                            =============    =============


LIABILITIES
Deposits                                                    $  83,596,654    $  85,930,737
Borrowed funds                                                 36,574,943       32,588,719
Accrued interest payable and other liabilities                    429,108          414,419
                                                            -------------    -------------
     Total liabilities                                        120,600,705      118,933,875

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares
  authorized, none issued and outstanding                              --               --
Common stock, $.01 par value, 3,500,000 shares
  authorized, 1,785,375 shares issued                              17,854           17,854
Additional paid-in capital                                     10,803,078       10,785,770
Retained earnings                                              11,682,396       11,702,497
Treasury stock, 380,227 and 352,727 shares, at cost            (4,537,778)      (4,113,716)
Unearned employee stock ownership plan shares                    (523,275)        (588,958)
Accumulated other comprehensive loss                             (106,122)         (42,056)
                                                            -------------    -------------
     Total shareholders' equity                                17,336,153       17,761,391
                                                            -------------    -------------

     Total liabilities and shareholders' equity             $ 137,936,858    $ 136,695,266
                                                            =============    =============


-------------------------------------------------------------------------------------------

               See accompanying notes to consolidated financial statements.

                                                                                         3.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                    PEOPLES-SIDNEY FINANCIAL CORPORATION
                                      CONSOLIDATED STATEMENTS OF INCOME
                                                 (Unaudited)

------------------------------------------------------------------------------------------------------------

                                                          Three Months Ended            Six Months Ended
                                                             December 31,                 December 31,
                                                             ------------                 ------------
                                                          2005          2004           2005          2004
                                                          ----          ----           ----          ----
<S>                                                   <C>           <C>            <C>           <C>
Interest income
     Loans, including fees                            $ 1,985,128   $ 1,835,396    $ 3,932,971   $ 3,673,206
     Securities                                            52,465        50,868        105,499        96,458
     Demand, time and overnight deposits                   30,347        18,416         55,569        29,299
     Dividends on FHLB Stock                               24,557        17,290         45,125        34,398
                                                      -----------   -----------    -----------   -----------
         Total interest income                          2,092,497     1,921,970      4,139,164     3,833,361

Interest expense
     Deposits                                             430,038       378,596        863,689       748,493
     Borrowed funds                                       451,452       405,966        884,574       816,829
                                                      -----------   -----------    -----------   -----------
         Total interest expense                           881,490       784,562      1,748,263     1,565,322
                                                      -----------   -----------    -----------   -----------

Net interest income                                     1,211,007     1,137,408      2,390,901     2,268,039

Provision for loan losses                                     862           700         17,776        27,469
                                                      -----------   -----------    -----------   -----------

Net interest income after provision for loan losses     1,210,145     1,136,708      2,373,125     2,240,570

Noninterest income
     Service fees and other charges                        33,503        32,995         68,153        64,672
     Gain (loss) on sale of real estate owned                  --       (23,328)           657       (23,328)
                                                      -----------   -----------    -----------   -----------
         Total noninterest income                          33,503         9,667         68,810        41,344


Noninterest expense
     Compensation and benefits                            422,016       389,221        849,835       798,958
     Director fees                                         24,300        24,300         48,600        48,600
     Occupancy and equipment                               89,306        94,012        190,324       196,628
     Computer processing                                   79,475        61,778        166,243       120,720
     Professional fees                                     49,273        36,109        102,497        64,503
     State franchise taxes                                 49,761        53,049         99,524       105,847
     Other                                                 83,203        90,757        163,630       174,335
                                                      -----------   -----------    -----------   -----------
         Total noninterest expense                        797,334       749,226      1,620,653     1,509,591
                                                      -----------   -----------    -----------   -----------

Income before income taxes                                446,314       397,149        821,282       772,323

Income tax expense                                        161,000       143,200        296,400       278,500
                                                      -----------   -----------    -----------   -----------

Net income                                            $   285,314   $   253,949    $   524,882   $   493,823
                                                      ===========   ===========    ===========   ===========

Earnings per common share - basic                     $      0.21   $      0.18    $      0.38   $      0.36
                                                      ===========   ===========    ===========   ===========

Earnings per common share - diluted                   $      0.21   $      0.18    $      0.38   $      0.36
                                                      ===========   ===========    ===========   ===========


------------------------------------------------------------------------------------------------------------

                        See accompanying notes to consolidated financial statements.

                                                                                                          4.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               PEOPLES-SIDNEY FINANCIAL CORPORATION
                         CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                           (Unaudited)

-------------------------------------------------------------------------------------------------


                                                   Three Months Ended         Six Months Ended
                                                     December 31,              December 31,
                                                     ------------              ------------
                                                   2005         2004         2005         2004
                                                   ----         ----         ----         ----
<S>                                             <C>          <C>          <C>          <C>
Net income                                      $ 285,314    $ 253,949    $ 524,882    $ 493,823

Other comprehensive income (loss)
     Unrealized holding gains and (losses) on
       available-for-sale securities              (23,540)         (84)     (97,070)     120,761
     Tax effect                                     8,004           28       33,004      (41,059)
                                                ---------    ---------    ---------    ---------
         Other comprehensive income (loss)        (15,536)         (56)     (64,066)      79,702
                                                ---------    ---------    ---------    ---------

Comprehensive income                            $ 269,778    $ 253,893    $ 460,816    $ 573,525
                                                =========    =========    =========    =========



-------------------------------------------------------------------------------------------------

                  See accompanying notes to consolidated financial statements.


                                                                                               5.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                  CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                                               SHAREHOLDERS' EQUITY
                                                    (Unaudited)

------------------------------------------------------------------------------------------------------------------

                                                          Three Months Ended                Six Months Ended
                                                             December 31,                     December 31,
                                                             ------------                     ------------
                                                          2005            2004             2005            2004
                                                          ----            ----             ----            ----
<S>                                                   <C>             <C>             <C>             <C>
Balance, beginning of period                          $ 17,682,467    $ 17,605,981    $ 17,761,391    $ 17,430,913

Net income for period                                      285,314         253,949         524,882         493,823

Cash dividends,  $.25 and $.24 per share for
  the three months ended December 31, 2005
  and 2004, $.40 and $.38 per share for the six
  months ended December 31, 2005 and 2004                 (338,739)       (328,964)       (544,983)       (520,859)

Purchase of 20,000 and 27,500 shares of
  treasury stock for the three and six months
  ended December 31, 2005, at cost                        (320,000)             --        (424,062)             --

Commitment to release 2,799 and 2,943
  employee  stock  ownership plan shares for
  the three months ended December 31, 2005 and 2004
  and 5,598 and 5,887 employee stock
  ownership plan shares for the six months
  ended December 31, 2005 and 2004, at fair value           42,647          43,646          82,991          90,977

Change in fair value on securities available for
  sale, net of tax                                         (15,536)            (56)        (64,066)         79,702
                                                      ------------    ------------    ------------    ------------

Balance, end of period                                $ 17,336,153    $ 17,574,556    $ 17,336,153    $ 17,574,556
                                                      ============    ============    ============    ============
------------------------------------------------------------------------------------------------------------------

                           See accompanying notes to consolidated financial statements.

                                                                                                                6.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                           PEOPLES-SIDNEY FINANCIAL CORPORATION
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Unaudited)


-----------------------------------------------------------------------------------------

                                                                  Six Months Ended
                                                                     December 31,
                                                                 2005             2004
                                                                 ----             ----
<S>                                                          <C>             <C>
Cash flows from operating activities
     Net income                                              $    524,882    $    493,823
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation                                              91,167          89,054
         Provision for loan losses                                 17,776          27,469
         Net accretion on securities                                 (180)           (179)
         (Gain) loss on sale of real estate owned                    (657)         23,328
         FHLB stock dividends                                     (45,000)        (34,300)
         Compensation expense for ESOP shares                      82,991          90,977
         Change in:
              Accrued interest receivable and other assets        153,760          68,328
              Accrued expense and other liabilities                47,693        (105,105)
              Deferred loan fees                                    9,513           1,526
                                                             ------------    ------------
                  Net cash from operating activities              881,945         654,921

Cash flows from investing activities
     Net change in loans                                       (1,601,970)     (3,127,045)
     Premises and equipment expenditures                          (35,548)        (73,796)
     Proceeds from sale of real estate owned                       49,940              --
                                                             ------------    ------------
         Net cash from investing activities                    (1,587,578)     (3,200,841)

Cash flows from financing activities
     Net change in deposits                                    (2,334,083)        615,634
     Net change in short-term FHLB advances                     3,000,000              --
     Repayments of long-term FHLB advances                     (1,013,776)     (1,086,550)
     Proceeds from long-term FHLB advances                      2,000,000              --
     Cash dividends paid                                         (544,983)       (520,859)
     Purchase of treasury stock                                  (424,062)             --
                                                             ------------    ------------
         Net cash from financing activities                       683,096        (991,775)
                                                             ------------    ------------

Net change in cash and cash equivalents                           (22,537)     (3,537,695)

Cash and cash equivalents at beginning of period                5,321,196      10,033,688
                                                             ------------    ------------

Cash and cash equivalents at end of period                   $  5,298,659    $  6,495,993
                                                             ============    ============

Supplemental disclosures of cash flow information
         Interest paid                                       $  1,731,020    $  1,563,685
         Income taxes paid                                        170,000         295,000

Noncash transactions
         Transfer from loans to other real estate owned      $     49,283    $    109,643

-----------------------------------------------------------------------------------------

              See accompanying notes to consolidated financial statements.

                                                                                       7.
</TABLE>
<PAGE>


                      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 December 31, 2005
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 accounting  principles generally accepted in
the  United  States  of  America  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, 2005,  included in the  Corporation's  2005 Annual Report on Form 10-KSB for
the  fiscal  year  ended  June 30,  2005.  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.  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 accounting
----------------
principles generally accepted in the United States of America,  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.

--------------------------------------------------------------------------------

                                  (Continued)

                                                                              8.
<PAGE>

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

--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common  Share:  Basic  earnings  per common  share  ("EPS") are 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.

Stock - Based Compensation: Employee compensation expense under stock options is
--------------------------
reported  using the fair value  recognition  provisions  of FASB  Statement  123
(revised 2004) (FAS 123R), Share Based Payment.  The Corporation has adopted FAS
123R using the modified  prospective  method.  Under this  method,  compensation
expense will be recognized for the unvested portion of previously  issued awards
that remained  outstanding as of July 1, 2005 and for any future  awards.  Prior
interim periods and fiscal year results will not be restated.  For the three and
six months ended  December 31, 2005, no  compensation  expense was recognized in
the income statement as all outstanding  options were fully vested prior to June
30, 2005.


NOTE 2 - SECURITIES AVAILABLE FOR SALE

Securities available for sale were as follows.

<TABLE>
<CAPTION>

                                                           Gross            Gross
                                        Fair            Unrealized       Unrealized
                                        Value              Gains           Losses
                                        -----              -----           ------
<S>                                 <C>                <C>              <C>
December 31, 2005
-----------------
    U.S. Government agencies        $   5,337,025      $         --     $    (160,789)
                                    =============      ============     =============

June 30, 2005
-------------
    U.S. Government agencies        $   5,433,915      $      3,905     $     (67,624)
                                    =============      ============     =============
</TABLE>

Contractual  maturities  of  securities  available for sale at December 31, 2005
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.

                                                                      Fair
                                                                      Value

           Due in one year or less                                $    498,595
           Due after one year through five years                     1,968,750
           Due after five years through ten years                    2,869,680
                                                                  ------------

                                                                  $  5,337,025
                                                                  ============

There were no sales of  securities  available  for sale  during the three or six
months ended December 31, 2005 or 2004. No securities were pledged as collateral
at December 31, 2005 or June 30, 2005.

--------------------------------------------------------------------------------

                                  (Continued)

                                                                              9.
<PAGE>

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

--------------------------------------------------------------------------------

NOTE 2 - SECURITIES AVAILABLE FOR SALE (Continued)

Securities  with  unrealized  losses at  December  31,  2005 and June 30,  2005,
aggregated by investment category and length of time that individual  securities
have been in a continuous unrealized loss position, are as follows.

<TABLE>
<CAPTION>
                             Less than 12 Months          12 Months or More             Total
                             -------------------          -----------------             -----
                              Fair      Unrealized      Fair       Unrealized      Fair       Unrealized
Description of Securities     Value        Loss         Value         Loss         Value         Loss
-------------------------     -----        ----         -----         ----         -----         ----
<S>                        <C>          <C>           <C>          <C>           <C>          <C>
December 31, 2005
-----------------

U.S. Government agencies   $  498,595   $   (1,405)   $4,838,430   $ (159,384)   $5,337,025   $ (160,789)
                           ==========   ==========    ==========   ==========    ==========   ==========

June 30, 2005
-------------

U.S. Government agencies   $1,990,000   $   (9,602)   $2,940,010   $  (58,022)   $4,930,010   $  (67,624)
                           ==========   ==========    ==========   ==========    ==========   ==========
</TABLE>

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.

NOTE 3 - LOANS

Loans were as follows.

                                           December 31,       June 30,
                                              2005              2005
                                              ----              ----
      Mortgage loans:
           1-4 family residential         $  92,776,726    $  93,792,635
           Multi-family residential           1,399,155        1,297,418
           Commercial real estate            12,814,247       12,612,885
           Real estate construction and
             development                      2,738,441        1,441,815
           Land                               3,439,218        2,939,109
                                          -------------    -------------
               Total mortgage loans         113,167,787      112,083,862
      Consumer loans                          5,315,184        5,056,291
      Commercial loans                        5,380,261        5,184,668
                                          -------------    -------------
               Total loans                  123,863,232      122,324,821
      Less:
           Allowance for loan losses           (839,000)        (835,500)
           Deferred loan fees                  (388,645)        (379,132)
                                          -------------    -------------

                                          $ 122,635,587    $ 121,110,189
                                          =============    =============

--------------------------------------------------------------------------------

                                  (Continued)

                                                                             10.
<PAGE>

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

--------------------------------------------------------------------------------

NOTE 3 - LOANS (Continued)

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

<TABLE>
<CAPTION>
                                   Three Months Ended        Six Months Ended
                                      December 31,             December 31,
                                      ------------             ------------
                                    2005         2004        2005         2004
                                    ----         ----        ----         ----
<S>                              <C>          <C>         <C>          <C>
Balance at beginning of period   $ 852,400    $ 777,000   $ 835,500    $ 752,900
Provision for losses                   862          700      17,776       27,469
Charge-offs                        (14,506)          --     (14,617)      (2,669)
Recoveries                             244           --         341           --
                                 ---------    ---------   ---------    ---------

Balance at end of period         $ 839,000    $ 777,700   $ 839,000    $ 777,700
                                 =========    =========   =========    =========
</TABLE>

Impaired loans were as follows.

<TABLE>
<CAPTION>
                                                                       December 31,  June 30,
                                                                           2005        2005
                                                                           ----        ----
<S>                                                                     <C>         <C>
Period-end impaired loans with no allowance for loan losses allocated   $     --    $     --
Period-end impaired loans with allowance for loan losses allocated       270,000     161,000
Amount of the allowance allocated to impaired loans                      141,000     134,000
</TABLE>

<TABLE>
<CAPTION>

                                                Three Months Ended     Six Months Ended
                                                   December 31,          December 31,
                                                   ------------          ------------
                                                 2005       2004        2005       2004
                                                 ----       ----        ----       ----
<S>                                            <C>        <C>        <C>        <C>
Average of impaired loans during the period    $205,000   $190,000   $195,000   $159,000
Interest income recognized during the period      3,735      2,194      7,009      5,376
Cash-basis interest income recognized               905        539      2,031      1,069
</TABLE>


Nonperforming loans were as follows.

                                                      December 31,     June 30,
                                                          2005           2005
                                                          ----           ----

Loans past due over 90 days still on accrual           $  311,000    $  349,000
Nonaccrual loans                                        1,309,000     1,318,000

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.

--------------------------------------------------------------------------------

                                  (Continued)

                                                                             11.
<PAGE>

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

--------------------------------------------------------------------------------

NOTE 4 - BORROWED FUNDS

At December 31, 2005 and June 30, 2005, 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").  All cash  management  advances  have an original
maturity  of 90 days.  The line of credit  must be renewed  on an annual  basis.
Outstanding  borrowings  on this line of credit were  $5,500,000 at December 31,
2005 and $2,500,000 at June 30, 2005.

As a member  of the FHLB  system,  the  Association  has the  ability  to obtain
borrowings up to a maximum total of $68.3 million  including the cash management
line of credit. Advances from the Federal Home Loan Bank were as follows.

                                                    December 31,    June 30,
                                                       2005           2005
                                                       ----           ----

Cash management advance, variable rate 4.33%
  at December 31, 2005 and 3.53% at June 30, 2005   $ 5,500,000   $ 2,500,000
6.13% FHLB fixed-rate advance, due June 25, 2008      7,000,000     7,000,000
4.42% FHLB fixed-rate advance, due July 9, 2010       2,000,000            --
6.00% FHLB convertible advance, fixed-rate until
  March 2006, due June 11, 2009                       5,000,000     5,000,000
6.27% FHLB convertible advance, fixed-rate until
  March 2006, due September 8, 2010                   5,000,000     5,000,000
5.30% select pay mortgage-matched advance, final
  maturity May 1, 2011                                  795,792       858,399
5.35% select pay mortgage-matched advance, final
  maturity July 1, 2011                               1,635,241     1,954,752
3.92% select pay mortgage-matched advance, final
  maturity November 1, 2012                             627,809       702,046
3.55% select pay mortgage-matched advance, final
  maturity March 1, 2013                                759,327       804,848
4.10% select pay mortgage-matched advance, final
  maturity March 1, 2015                                938,364       979,664
4.09% select pay mortgage-matched advance, final
  maturity November 1, 2017                             613,250       703,360
3.31% select pay mortgage-matched advance, final
  maturity April 1, 2019                                774,995       797,932
4.72% select pay mortgage-matched advance, final
  maturity November 1, 2022                           2,315,278     2,483,689
4.38% select pay mortgage-matched advance, final
  maturity December 1, 2022                             771,388       827,909
3.92% select pay mortgage-matched advance, final
  maturity December 1, 2022                             652,517       739,884
3.64% select pay mortgage-matched advance, final
  maturity March 1, 2023                              2,190,982     2,236,236
                                                    -----------   -----------

                                                    $36,574,943   $32,588,719
                                                    ===========   ===========

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

--------------------------------------------------------------------------------

                                  (Continued)

                                                                             12.
<PAGE>

                      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 December 31,
                     2006                           $  7,468,252
                     2007                              1,724,760
                     2008                              8,516,733
                     2009                              6,338,541
                     2010                              8,185,537
                  Thereafter                           4,341,120
                                                    ------------

                                                    $ 36,574,943
                                                    ============

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.

                                                     December 31,   June 30,
                                                         2005         2005
                                                         ----         ----

1-4 family residential real estate - fixed rate      $  164,000   $  407,000
1-4 family residential real estate - variable rate      619,000      695,000
Commercial lines of credit                            4,277,000    2,592,000
Home equity lines of credit                             863,000      709,000

The  interest  rate on  fixed-rate  commitments  ranged  from  7.38% to 7.63% at
December 31, 2005 and 5.75% to 7.00% at June 30, 2005. 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 December 31, 2005 and June 30,  2005,  the  Corporation  was required to have
$279,000 and $325,000 on deposit with its correspondent  banks as a compensating
clearing requirement.

--------------------------------------------------------------------------------

                                  (Continued)

                                                                             13.
<PAGE>

                      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 lease for a branch in the  Super  Wal-Mart  in
Sidney that  commenced  in June 2002.  The lease term is for five years with two
five-year renewal options. On December 9, 2005 the Association renewed the terms
of the lease for an additional five-year period. The option period will begin on
July 1, 2006 and will  expire on June 30, 2011 with rent  payments of  $3,312.50
per month.

NOTE 6 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow.

<TABLE>
<CAPTION>
                                                         Three Months Ended             Six Months Ended
                                                            December 31,                  December 31,
                                                            ------------                  ------------
                                                        2005           2004           2005           2004
                                                        ----           ----           ----           ----
<S>                                                 <C>            <C>            <C>            <C>
     Basic Earnings Per Common Share

           Net income                               $   285,314    $   253,949    $   524,882    $   493,823
                                                    ===========    ===========    ===========    ===========

           Weighted average common shares
             outstanding                              1,410,365      1,432,648      1,418,735      1,432,648
           Less:  Average unallocated ESOP shares       (45,992)       (57,550)       (47,392)       (59,022)
                                                    -----------    -----------    -----------    -----------
           Weighted average common shares
             outstanding for basic earnings
             per common share                         1,364,373      1,375,098      1,371,343      1,373,626
                                                    ===========    ===========    ===========    ===========

           Basic earnings per common share          $      0.21    $      0.18    $      0.38    $      0.36
                                                    ===========    ===========    ===========    ===========

     Diluted Earnings Per Common Share

           Net income                               $   285,314    $   253,949    $   524,882    $   493,823
                                                    ===========    ===========    ===========    ===========

           Weighted average common shares
             outstanding for basic earnings
             per common share                         1,364,373      1,375,098      1,371,343      1,373,626
           Add:  Dilutive effects of assumed
              exercises of stock options                     --             --             --            183
                                                    -----------    -----------    -----------    -----------
           Weighted average common shares
              and dilutive potential common
             shares outstanding                       1,364,373      1,375,098      1,371,343      1,373,809
                                                    ===========    ===========    ===========    ===========

           Diluted earnings per common share        $      0.21    $      0.18    $      0.38    $      0.36
                                                    ===========    ===========    ===========    ===========

Stock options not considered in calculation
  because they were not dilutive                        140,824        140,824        140,824          1,245
</TABLE>

--------------------------------------------------------------------------------

                                  (Continued)

                                                                             14.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (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 December 31, 2005, compared to June
30, 2005,  and results of operations for the three and six months ended December
31, 2005, compared with the same periods in 2004. 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 financial  statements  alone.
This  analysis  should  be  read  in  conjunction  with  the  interim  financial
statements and related footnotes included herein.

Overview and Outlook

As the Federal Reserve Board continues to analyze market adjustments in interest
rates to control inflationary pressures, depositors and borrowers alike continue
to make a shift  in the  type of  instrument  that  suits  their  immediate  and
long-term  needs.  We are  currently  seeing  increases  in money market and NOW
accounts and decreases in savings as well as certificate of deposit accounts. As
certificates  mature,  customers  are  repositioning  deposits  into liquid type
accounts to take advantage of future  increasing  interest rates. On the lending
side, many borrowers are again  considering  adjustable rate mortgages as market
interest  rates have pushed  fixed rate  mortgages to higher  levels.  We expect
rates to continue to increase as our fiscal year progresses,  subject of course,
to changes in the Federal Reserve Board policy.

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   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 December 31, 2005 were $137.9 million compared to $136.7 million
at June 30, 2005, an increase of $1.2 million.  The increase in total assets was
primarily due to an increase in loans of $1.5 million, funded by borrowed funds,
which increased by $4.0 million.

Cash and cash equivalents  decreased $22,000 from $5,321,000 at June 30, 2005 to
$5,299,000 at December 31, 2005.

--------------------------------------------------------------------------------

                                                                             15.
<PAGE>

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

--------------------------------------------------------------------------------

The securities  portfolio,  which is classified as available for sale, decreased
$97,000,  from  $5,434,000  at June 30, 2005 to $5,337,000 at December 31, 2005.
The decrease is related to a decrease in the fair value of the securities during
the reporting period as no securities transactions occurred. See Note 2 of Notes
to Consolidated Financial Statements.

Federal Home Loan Bank stock increased  $45,000 from $1,674,000 at June 30, 2005
to $1,719,000 at December 31, 2005 as a result of normal dividend payments.

Loans  increased  $1.5  million  from $121.1  million at June 30, 2005 to $122.6
million at December 31, 2005. The most  significant  changes were in real estate
construction  and  development  loans,  which  increased  $1.3 million from $1.4
million  at June 30,  2005 to $2.7  million  at  December  31,  2005 and  one-to
four-family residential loans which decreased $1.0 million from $93.8 million at
June 30, 2005 to $92.8 million at December 31, 2005.  Land loans  increased $0.5
million from June 30, 2005 to December 31, 2005. The primary factor contributing
to the  increases  in the loan  portfolio  resulted  from loans  relating to the
opening of a new  section in an  existing  subdivision.  The  decrease in one-to
four-family  residential  loans  is  consistent  with  the  effects  of a rising
interest  rate  environment.  Consumer  and  commercial  loans also  provided an
increase to the loan  portfolio  with growth of $0.3  million and $0.2  million,
respectively  from June 30, 2005 to December 31, 2005. Other loan categories had
nominal  changes,  that  combined,  totaled a decrease  of $0.3  million for the
current period. See Note 3 of Notes to Consolidated Financial Statements.

Premises and  equipment  decreased  $56,000 from  $2,096,000 at June 30, 2005 to
$2,040,000 at December 31, 2005. This decrease resulted from normal depreciation
of  existing  assets  partially  offset  by  equipment   purchases  and  routine
improvements to the office building.

Total  deposits  decreased  $2.3 million from $85.9  million at June 30, 2005 to
$83.6  million at December 31, 2005  primarily due to a decrease of $2.5 million
in  certificates  of deposit.  Savings  accounts also decreased $1.0 million and
commercial checking accounts decreased $52,000. The Corporation attributes these
decreases  to local  competition  and the  renewed  attractiveness  of the stock
market.  These decreases were partially offset by an increase of $0.7 million in
money market  accounts and an increase of $0.5  million in NOW  accounts.  These
increases have occurred as customers reposition maturing certificates of deposit
into liquid type accounts to take advantage of future increasing interest rates.

Borrowed  funds  increased  $4.0 million from $32.6  million at June 30, 2005 to
$36.6 million at December 31, 2005. This increase was the result of the addition
of a $2.0  million  FHLB  fixed-rate  advance  coupled  with an increase of $3.0
million in variable-rate cash management advances, which was partially offset by
the scheduled  repayments  of  mortgage-matched  advances.  The increase in FHLB
advances  was used to fund the  increase  in loans and  offset the  decrease  in
deposits. See Note 4 of Notes to Consolidated Financial Statements.

--------------------------------------------------------------------------------

                                                                             16.
<PAGE>

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

--------------------------------------------------------------------------------

Results of Operations

The  operating  results of the  Corporation  are  affected  by general  economic
conditions,  monetary and fiscal  policies of federal  agencies  and  regulatory
policies of agencies that regulate  financial  institutions.  The  Corporation's
cost of funds is  influenced  by interest  rates on  competing  investments  and
general  market rates of interest.  Demand for real estate loans and other types
of loans  influence  lending  activities,  which in turn is affected by interest
rates at which such loans are made, general economic conditions and availability
of funds for lending activities.

The Corporation's net income primarily depends on its 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 December 31, 2005 Compared to the Three Months Ended December
31, 2004

Net Income.  The Corporation  earned net income of $285,000 for the three months
ended December 31, 2005 compared to $254,000 for the three months ended December
31, 2004. The most significant  changes  occurred in net interest income,  which
increased,  coupled with an increase in noninterest income offset by an increase
in noninterest expense and income taxes.

Net Interest Income. Net interest income totaled $1,211,000 for the three months
ended  December  31, 2005  compared to  $1,137,000  for the three  months  ended
December 31,  2004,  representing  an increase of $74,000.  The increase was the
result of an  improvement  in the net  interest  rate  spread  between  interest
earning assets and interest bearing liabilities during the current period.

Interest and fees on loans  increased  $150,000  from  $1,835,000  for the three
months ended December 31, 2004 to $1,985,000 for the three months ended December
31, 2005. The increase in interest  income was due primarily to a higher average
balance of loans and, to a lesser  extent,  an  increase  in the  average  yield
earned. The average balance of loans increased to $122.2 million with an average
yield of 6.50% for the three  months  ended  December  31,  2005  compared to an
average  balance of $117.4  million with an average  yield of 6.25% for the same
three month period last year.

Interest on securities  increased $1,000 due to an increase in the average yield
earned  during  the  current  period.  Interest  on demand,  time and  overnight
deposits  increased  $12,000 to $30,000 for the three months ended  December 31,
2005 as  compared to $18,000  for the same  period  last year.  The  increase in
interest earned on deposits with other financial  institutions was the result of
a higher average yield earned on such deposits partially offset by a decrease in
the average balance.

Dividends on FHLB stock increased over the comparable  period due to an increase
in the dividend rate paid by the FHLB coupled with a higher average balance.

Interest paid on deposits  increased  $51,000 from $379,000 for the three months
ended  December 31, 2004 to $430,000  for the three  months  ended  December 31,
2005. The increase  resulted from an increase in the average  interest rate paid
on deposits  partially  offset by a decrease in the average balance of deposits.
The average balance of deposits for the three months ended December 31, 2005 was
$83.9  million at an average  cost of 2.03%  compared  to an average  balance of
$85.5  million at an average cost of 1.76% for the three  months ended  December
31, 2004.

--------------------------------------------------------------------------------

                                                                             17.
<PAGE>

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

--------------------------------------------------------------------------------

Interest  paid on borrowed  funds  totaled  $451,000  for the three months ended
December 31, 2005  compared to $406,000 for the three months ended  December 31,
2004.  The increase of $45,000 in interest  expense on borrowed  funds  resulted
from an increase in the average balance of borrowed funds partially  offset by a
decrease in the average cost of these borrowings.

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  totaled  $1,000 for both the three months ended
December 31, 2005 and December 31, 2004. The Corporation  experienced $15,000 in
charge-offs during the current period.  However, the provisions for these losses
were already established during prior periods thus not requiring the recognition
of any  additional  expense  for  these  charge-offs  when  they  occurred.  The
allowance for loan losses totaled  $839,000,  or 0.68% of gross loans receivable
net of deferred loan origination fees and 51.8% of total  nonperforming loans at
December  31,  2005.  This  compares  to  $778,000,  or  0.65%  of  gross  loans
receivable,   net  of  deferred  loan   origination  fees  and  32.5%  of  total
nonperforming loans at December 31, 2004. Overall, the Corporation's  charge-off
history  remains  very  modest  and is the  product  of a  variety  of  factors,
including the Corporation's  underwriting guidelines,  which generally require a
loan-to-value  or  projected  completed  value  ratio  of 80%  for  purchase  or
construction  of  one-  to  four-family   residential  properties  and  75%  for
commercial  real  estate and land  loans,  established  income  information  and
defined ratios of debt to income.

Noninterest  income.  Noninterest  income,  which includes  service fees,  other
miscellaneous  income and the net gain or loss on the sale of real estate owned,
increased  $24,000 from $10,000 for the three months ended  December 31, 2004 to
$34,000 for the three months ended December 31, 2005. This is primarily due to a
pre-tax  loss of $23,000 on a real estate owned  property  recorded in the prior
three-month period.

Noninterest  expense.  Noninterest expense totaled $797,000 for the three months
ended December 31, 2005 compared to $749,000 for the three months ended December
31, 2004, an increase of $48,000.  Compensation and benefits  expense  increased
$33,000 resulting from normal salary and benefit increases.  Computer processing
increased  $17,000  due to the  Corporation's  upgrade to a new data  processing
system.  Professional  fees also increased $13,000 as a result of new government
regulations and requirements.

Income Tax  Expense.  Income tax expense  totaled  $161,000  for the three month
period  ended  December  31, 2005 and  $143,000 for the three month period ended
December 31, 2004.  The increase in income tax is  reflective  of an increase in
income  before income taxes for the current  period.  The effective tax rate was
36.1% for both the three months ended December 31, 2005 and 2004.

--------------------------------------------------------------------------------

                                                                             18.
<PAGE>

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

--------------------------------------------------------------------------------

Six Months Ended December 31, 2005 Compared to the Six Months Ended December 31,
2004

Net Income.  The  Corporation  earned net income of $525,000  for the six months
ended  December 31, 2005 compared to $494,000 for the six months ended  December
31,  2004,  representing  an increase of  $31,000.  An increase in net  interest
income  coupled  with an  increase  in  noninterest  income  and a  decrease  in
provision  for loan losses was  partially  offset by an increase in  noninterest
expense  and an increase  in income tax  expense  during the  current  six-month
period.

Net Interest Income.  Net interest income totaled  $2,391,000 for the six months
ended December 31, 2005 compared to $2,268,000 for the six months ended December
31, 2004, an increase of $123,000. The increase was the result of an improvement
in the net interest rate spread  between  interest  earning  assets and interest
bearing liabilities during the current period. This equates to a larger increase
in interest income on loans and other sources of interest income compared to the
increased expense on deposits and borrowed money.

Interest and fees on loans increased  $260,000,  or 7.0% from $3,673,000 for the
six months  ended  December  31,  2004 to  $3,933,000  for the six months  ended
December 31, 2005. The increase in interest income was due primarily to a higher
average yield earned on loans due to the  increasing  interest rate  environment
coupled with an increase in the average  balance.  The average  balance of loans
increased to $121.8  million  with an average  yield of 6.46% for the six months
ended December 31, 2005 compared to an average balance of $117.0 million with an
average yield of 6.28% for the same six month period last year.

Interest on  securities  increased  $9,000 from $96,000 for the six months ended
December 31, 2004 to $105,000 for the six months  ended  December 31, 2005.  The
increase  resulted from an improvement  in the average  interest rate during the
current period as compared to last year.

Interest paid on deposits increased $115,000, or 15.0% from $749,000 for the six
months ended December 31, 2004 to $864,000 for the six months ended December 31,
2005.  The increase  resulted  from a higher  average  interest rate offset by a
lower average  balance of deposits.  The average balance of deposits for the six
months  ended  December  31, 2005 was $84.2  million at an average cost of 2.03%
compared to an average  balance of $85.3 million at an average cost of 1.74% for
the six months ended December 31, 2004.

Interest  paid on  borrowed  funds  totaled  $885,000  for the six months  ended
December 31, 2005  compared to $817,000  for the six months  ended  December 31,
2004.  The increase of $68,000 in interest  expense on borrowed  funds  resulted
from an increase in the average balance of borrowed funds partially  offset by a
decrease in the average cost of these borrowings for the current period.

Provision  for Loan  Losses.  The  provision  for loan losses for the six months
ended December 31, 2005 totaled  $18,000  compared to $27,000 for the six months
ended  December 31, 2004. The decrease of $9,000 in the provision for losses was
due to a decrease in the total nonperforming balance of loans during the current
six-month  period  compared to the same period a year ago.  Nonperforming  loans
totaled $2.4  million at December 31, 2004  compared to $1.6 million at December
31, 2005.

Noninterest   income.   Noninterest   income   includes   service  fees,   other
miscellaneous  income and the gain or loss  realized  on the sale of real estate
owed and  increased  $28,000 from $41,000 for the six months ended  December 31,
2004 to $69,000  for the six months  ended  December  31,  2005.  This  increase
resulted  primarily  from a pre-tax  loss of  $23,000  relating  to a  valuation
adjustment  on a property  held in real estate owned during the prior  six-month
period.

--------------------------------------------------------------------------------
                                                                             19.
<PAGE>

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

--------------------------------------------------------------------------------

Noninterest  expense.  Noninterest expense totaled $1,621,000 for the six months
ended December 31, 2005 compared to $1,510,000 for the six months ended December
31,  2004,  an increase of  $111,000.  The  significant  changes in  noninterest
expense occurred in compensation and benefits expense which increased $51,000 as
a result of normal increases in salary along with increases in benefit premiums,
an increase of $46,000 in computer  processing expense relating to an upgrade in
the data  processing  system,  and an increase in  professional  fees of $38,000
resulting from new government regulations and requirements. These increases were
partially  offset by a combined  reduction of noninterest  expense of $23,000 in
occupancy and equipment, state franchise tax and other expenses.

Income Tax Expense. Income tax expense totaled $296,000 for the six months ended
December 31, 2005  compared to $279,000  for the six months  ended  December 31,
2004, representing an increase of $17,000. The increase in income tax expense is
reflective of an increase in income before tax. The effective tax rate was 36.1%
for both the six months ended December 31, 2005 and 2004.

--------------------------------------------------------------------------------

                                                                             20.
<PAGE>


                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (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 six months ended December 31, 2005 and 2004.

                                                                Six Months
                                                             Ended December 31,
                                                             2005         2004
                                                             ----         ----
                                                          (Dollars in thousands)

Net income                                                 $    525    $    494
Adjustments to reconcile net income to net cash from
  operating activities                                          357         161
                                                           --------    --------
Net cash from operating activities                              882         655
Net cash from investing activities                           (1,587)     (3,201)
Net cash from financing activities                              683        (992)
                                                           --------    --------
Net change in cash and cash equivalents                         (22)     (3,538)
Cash and cash equivalents at beginning of period              5,321      10,034
                                                           --------    --------

Cash and cash equivalents at end of period                 $  5,299    $  6,496
                                                           ========    ========

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 more  influenced by
interest rates,  general economic  conditions and  competition.  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 $68.3 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 December 31, 2005.

At December 31, 2005, the Corporation  had  commitments to originate  fixed-rate
loans  totaling  $164,000  and  variable-rate  loans  totaling  $619,000.   Loan
commitments  are generally for 30 days. See Note 5 of the Notes to  Consolidated
Financial  Statements  for a detail of the  Corporation's  loan  commitments  at
December  31, 2005.  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 and capital reserves sufficient
to meet its  outstanding  short  and  long-term  needs,  and  believes  it is in
compliance with regulatory requirements.

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.

--------------------------------------------------------------------------------

                                                                             21.
<PAGE>

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

--------------------------------------------------------------------------------

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 December 31, 2005 and June 30,  2005,  management  believes  the  Association
complies with all regulatory  capital  requirements.  Based on the Association's
computed   regulatory   capital  ratios,  the  Association  is  considered  well
capitalized  under the Federal  Deposit  Insurance  Act at December 31, 2005 and
June 30, 2005.  No  conditions  or events have  occurred  subsequent to the last
notification  by  regulators  that  management  believes  would have changed the
Association's category.

At December 31, 2005 and June 30, 2005, the Association's actual capital levels,
minimum required levels and levels to be considered "well  capitalized"  were as
follows.

<TABLE>
<CAPTION>
                                                                                       To Be
                                                                                  Well Capitalized
                                                            For Capital       Under Prompt Corrective
                                     Actual              Adequacy Purposes       Action Regulations
                                     ------              -----------------       ------------------
                               Amount       Ratio       Amount       Ratio       Amount        Ratio
                               ------       -----       ------       -----       ------        -----
<S>                           <C>            <C>       <C>             <C>      <C>            <C>
                                                           (Dollars in Thousands)
                                                           ----------------------
December 31, 2005
-----------------
Total capital (to risk-
  weighted assets)            $17,551        21.2%     $ 6,620         8.0%     $ 8,275        10.0%
Tier 1 (core) capital (to
  risk-weighted assets)        16,734        20.2        3,310         4.0        4,965         6.0
Tier 1 (core) capital (to
  adjusted total assets)       16,734        12.1        5,528         4.0        6,910         5.0
Tangible capital (to
  adjusted total assets)       16,734        12.1        2,073         1.5          N/A

June 30, 2005
-------------
Total capital (to risk-
  weighted assets)            $16,909        20.7%     $ 6,550         8.0%     $ 8,188        10.0%
Tier 1 (core) capital (to
  risk-weighted assets)        16,083        19.6        3,275         4.0        4,913         6.0
Tier 1 (core) capital (to
  adjusted total assets)       16,083        11.8        5,471         4.0        6,838         5.0
Tangible capital (to
  adjusted total assets)       16,083        11.8        2,052         1.5          N/A
</TABLE>

--------------------------------------------------------------------------------

                                                                             22.
<PAGE>

                      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 December  31, 2005 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.

--------------------------------------------------------------------------------

                                                                             23.
<PAGE>

                      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
           -----------------------------------------------------------
           The following table  illustrates the repurchase of the  Corporation's
           common stock during the period ended December 31, 2005.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                       Shares Purchased      Number of Shares
                                                                          As Part of          That May Yet Be
                            Total Number of        Average Price           Publicly           Purchased Under
                                 Shares                Paid            Announced plans          The Plan or
         Period                Purchased             Per Share           Or programs             Programs
--------------------------------------------------------------------------------------------------------------
<S>                             <C>                    <C>                  <C>                   <C>
October l, 2005 -
October 31, 2005                20,000                 $16.00               20,000                44,100
--------------------------------------------------------------------------------------------------------------
November l, 2005 -
November 30, 2005
--------------------------------------------------------------------------------------------------------------
December 1, 2005 -
December 31, 2005
--------------------------------------------------------------------------------------------------------------
Total                           20,000                 $16.00               20,000                44,100
--------------------------------------------------------------------------------------------------------------
</TABLE>

           On April  19,  2005,  the  registrant  announced  that  its  Board of
           Directors  had  authorized  management  to repurchase up to 5% of the
           Registrant's  common  stock both  through the open market and through
           unsolicited negotiated transactions. The authorization,  which is for
           71,600 shares,  will continue for a twelve-month period and expire in
           April 2006, if not renewed.

Item 3.    Defaults Upon Senior Securities
           -------------------------------
           Not applicable.

Item 4.    Submission of Matters to a Vote of Security Holders
           ---------------------------------------------------
           On  October  14,  2005 the  Annual  Meeting  of  Shareholders  of the
           Corporation was held. The following  member of the Board of Directors
           of the  Corporation  was  re-elected by the votes set forth below for
           the term expiring in 2008.

           Richard T. Martin              FOR:  1,151,953      WITHHELD:  7,600

           The following members of the Board of  Directors  of the  Corporation
           continued in office.

                                          Term Expires
           Harry N. Faulkner                   2006
           John T. Sargeant                    2006
           James W. Kerber                     2007
           Douglas Stewart                     2007

           One other matter  was submitted  to the  Shareholders,  for which the
           following votes were cast:

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

           FOR:  1,148,868            AGAINST:  100             ABSTAIN:  10,585

--------------------------------------------------------------------------------

                                                                             24.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     PART II - OTHER INFORMATION (Continued)

--------------------------------------------------------------------------------


Item 5.    Other Information
           None.

Item 6.    Exhibits
           (a) (1) Exhibit 11: Computation of Earnings per Share
           (2) Exhibits 31.1 and 31.2: Section 302 Certifications
           (3) Exhibit 32: Section 906 Certifications
           All other Exhibits previously filed


--------------------------------------------------------------------------------

                                                                             25.
<PAGE>

                                   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:  February 14, 2006             /s/ Douglas Stewart
       -----------------             ------------------------------------------
                                     Douglas Stewart
                                     President and Chief Executive Officer





Date:  February 14, 2006             /s/ Debra Geuy
       -----------------             ------------------------------------------
                                     Debra Geuy
                                     Chief Financial Officer

--------------------------------------------------------------------------------

                                                                             26.
<PAGE>
<TABLE>
<CAPTION>

                                       PEOPLES-SIDNEY FINANCIAL CORPORATION
                                                 INDEX TO EXHIBITS

    EXHIBIT
    NUMBER          DESCRIPTION
<S>                 <C>                                     <C>
     3.1            Articles of Incorporation of            Incorporated by reference to the Registration Statement
                    Peoples-Sidney Financial                on Form S-1 filed by Peoples-Sidney Financial Corporation
                    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      Incorporated by reference to the S-1, Exhibit 3.2.
                    Corporation

     10.1           Employee Stock Ownership Plan           Incorporated by reference to the S-1, Exhibit 10.1

     10.2           Form of Employment Agreement with       Incorporated by Pre-Effective Amendment No. 1 to the S-1
                    Douglas Stewart                         filed with the SEC on March 12, 1997, Exhibit 10.2

     10.3           Form of Employment Agreements with      Incorporated by Pre-Effective Amendment No. 1 to the S-1
                    David R. Fogt, Gary N. Fullenkamp and   filed with the SEC on March 12, 1997, Exhibit 10.3
                    Debra A. Geuy
     10.4           Form of Severance Agreement with        Incorporated by Pre-Effective Amendment No. 1 to the S-1
                    Steve Goins                             filed with the SEC on March 12, 1997, Exhibit 10.4

     10.5           401 (k) Plan                            Incorporated by Pre-Effective Amendment No. 1 to the S-1
                                                            filed with the SEC on March 12, 1997, Exhibit 10.5

     10.6           Peoples-Sidney Financial Corporation    Filed as an exhibit to the Registrant's Annual Report on
                    Amended and Restated 1998 Stock         Form 10-KSB for the fiscal year ended June 30, 1999 (File
                    Option and Incentive Plan               No. 0-22223) and incorporate herein by reference.

     10.7           Peoples-Sidney Financial Corporation    Filed as an exhibit to the Registrant's Annual Report on
                    Amended and Restated 1998 Management    Form 10-KSB for the fiscal year ended June 30, 1999 (File
                    Recognition Plan                        No. 0-22223) and incorporate herein by reference.

     11             Statement Regarding Computation of      See Notes 1 and 6 to the consolidated financial
                    Earnings per Share                      statements, which are incorporated herein by reference.

     31.1           Certification of Principal Executive
                    Officer Pursuant to Section 302 of
                    the Sarbanes-Oxley Act of 2002

     31.2           Certification of Principal Financial
                    Officer Pursuant to Section 302 of
                    the Sarbanes-Oxley Act of 2002

     32             Certifications of the Chief Executive
                    Officer and the Chief Financial
                    Officer Pursuant to Section 906 of
                    the Sarbanes-Oxley Act of 2002

----------------------------------------------------------------------------------------------------------------------

                                                                                                                   27.
</TABLE>