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 March 31, 2006

[_]      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 April 28,  2006,  the latest  practicable  date,  1,392,648  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>

                           PEOPLES-SIDNEY FINANCIAL CORPORATION

                                          INDEX
<TABLE>
<CAPTION>


                                                                                       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......................................................  24

  Item 6.     Exhibits...............................................................  24


SIGNATURES ..........................................................................  25

INDEX TO EXHIBITS....................................................................  26

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

                                                                                       2.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               PEOPLES-SIDNEY FINANCIAL CORPORATION
                                    CONSOLIDATED BALANCE SHEETS

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

Item 1.  Financial Statements
                                                                 March 31,            June 30,
                                                                   2006                 2005
                                                                   ----                 ----
<S>                                                                 <C>                 <C>
                                                                 (Unaudited)
ASSETS
Cash and due from financial institutions                      $     1,010,749    $      1,366,825
Interest-bearing deposits in other financial institutions           3,958,639           3,954,371
                                                              ---------------    ----------------
     Total cash and cash equivalents                                4,969,388           5,321,196
Securities available for sale                                       5,289,215           5,433,915
Federal Home Loan Bank stock                                        1,743,200           1,673,900
Loans, net of allowance of $867,800 and $835,500                  122,508,728         121,110,189
Accrued interest receivable                                           894,237             745,534
Premises and equipment, net                                         2,006,530           2,095,691
Real estate owned                                                     100,421                  --
Other assets                                                          270,725             314,841
                                                              ---------------    ----------------

     Total assets                                             $   137,782,444    $    136,695,266
                                                              ===============    ================


LIABILITIES
Deposits                                                      $    83,694,370    $     85,930,737
Borrowed funds                                                     36,433,998          32,588,719
Accrued interest payable and other liabilities                        357,734             414,419
                                                              ---------------    ----------------
     Total liabilities                                            120,486,102         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                                         10,811,770          10,785,770
Retained earnings                                                  11,707,665          11,702,497
Treasury stock, 385,227 and 352,727 shares, at cost                (4,612,778)         (4,113,716)
Unearned employee stock ownership plan shares                        (490,433)           (588,958)
Accumulated other comprehensive loss                                 (137,736)            (42,056)
                                                              ---------------    ----------------
     Total shareholders' equity                                    17,296,342          17,761,391
                                                              ---------------    ----------------

     Total liabilities and shareholders' equity               $   137,782,444    $    136,695,266
                                                              ===============    ================


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

                   See accompanying notes to consolidated financial statements.
                                                                                                3.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                      CONSOLIDATED STATEMENTS OF INCOME
                                                 (Unaudited)

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

                                                          Three Months Ended             Nine Months Ended
                                                               March 31,                     March 31,
                                                               --------                      ---------
                                                          2006          2005          2006           2005
                                                          ----          ----          ----           ----
<S>                                                        <C>           <C>            <C>           <C>

Interest income
     Loans, including fees                            $ 1,996,720   $ 1,895,017    $ 5,929,691   $ 5,568,223
     Securities                                            52,465        48,506        157,964       144,964
     Demand, time and overnight deposits                   32,954        14,802         88,523        44,101
     Dividends on FHLB Stock                               24,371        18,150         69,496        52,548
                                                      -----------   -----------    -----------   -----------
         Total interest income                          2,106,510     1,976,475      6,245,674     5,809,836

Interest expense
     Deposits                                             435,143       390,888      1,298,832     1,139,381
     Borrowed funds                                       478,094       404,888      1,362,668     1,221,717
                                                      -----------   -----------    -----------   -----------
         Total interest expense                           913,237       795,776      2,661,500     2,361,098
                                                      -----------   -----------    -----------   -----------

Net interest income                                     1,193,273     1,180,699      3,584,174     3,448,738

Provision for loan losses                                  29,787        30,278         47,563        57,747
                                                      -----------   -----------    -----------   -----------

Net interest income after provision for loan losses     1,163,486     1,150,421      3,536,611     3,390,991

Noninterest income
     Service fees and other charges                        29,581        30,612         97,734        95,284
     Gain (loss) on sale of real estate owned               2,255        (1,272)         2,912       (24,600)
                                                      -----------   -----------    -----------   -----------
         Total noninterest income                          31,836        29,340        100,646        70,684


Noninterest expense
     Compensation and benefits                            434,684       402,120      1,284,519     1,201,078
     Director fees                                         24,300        24,300         72,900        72,900
     Occupancy and equipment                               98,711       107,188        289,035       303,816
     Computer processing                                   84,041        64,369        250,284       185,089
     Professional fees                                     34,800        23,319        137,297        87,822
     State franchise taxes                                 54,451        49,763        153,975       155,610
     Other                                                 85,873        85,874        249,503       260,209
                                                      -----------   -----------    -----------   -----------
         Total noninterest expense                        816,860       756,933      2,437,513     2,266,524
                                                      -----------   -----------    -----------   -----------

Income before income taxes                                378,462       422,828      1,199,744     1,195,151

Income tax expense                                        136,400       152,500        432,800       431,000
                                                      -----------   -----------    -----------   -----------

Net income                                            $   242,062   $   270,328    $   766,944   $   764,151
                                                      ===========   ===========    ===========   ===========

Earnings per common share - basic                     $      0.18   $      0.20    $      0.56   $      0.56
                                                      ===========   ===========    ===========   ===========

Earnings per common share - diluted                   $      0.18   $      0.20    $      0.56   $      0.56
                                                      ===========   ===========    ===========   ===========

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

                         See accompanying notes to consolidated financial statements.

                                                                                                           4.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                     (Unaudited)

-------------------------------------------------------------------------------------------------------------------
                                                          Three Months Ended                Nine Months Ended
                                                               March 31,                        March 31,
                                                               ---------                        ---------
                                                          2006            2005             2006            2005
                                                          ----            ----             ----            ----
<S>                                                       <C>              <C>            <C>                <C>
Net income                                          $     242,062    $     270,328   $     766,944   $      764,151

Other comprehensive income (loss)
     Unrealized holding gains and (losses) on
       available-for-sale securities                      (47,900)         (66,820)       (144,970)          53,941
     Tax effect                                            16,286           22,718          49,290          (18,341)
                                                    -------------    -------------   -------------   --------------
         Other comprehensive income (loss)                (31,614)         (44,102)        (95,680)          35,600
                                                    -------------    -------------   -------------   --------------

Comprehensive income                                $     210,448    $     226,226   $     671,264   $      799,751
                                                    =============    =============   =============   ==============

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

                            See accompanying notes to consolidated financial statements.

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

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

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

                                                          Three Months Ended                Nine Months Ended
                                                               March 31,                        March 31,
                                                               ---------                        ---------
                                                          2006            2005             2006            2005
                                                          ----            ----             ----            ----
<S>                                                       <C>              <C>             <C>              <C>
Balance, beginning of period                        $  17,336,153    $  17,574,556   $  17,761,391   $   17,430,913

Net income for period                                     242,062          270,328         766,944          764,151

Cash  dividends,  $.16 and $.14 per share
  for the three months ended March 31, 2006
  and 2005, $.56 and $.52 per share for the nine
  months ended March 31, 2006 and 2005                   (216,793)        (191,896)       (761,776)        (712,755)

Purchase of 5,000 and 32,500 shares of
  treasury stock for the three and nine months
  ended March 31, 2006, at cost                           (75,000)              --        (499,062)              --

Commitment to release 2,799 and 2,944
  employee  stock  ownership plan shares for
  the three  months  ended March 31, 2006 and 2005
  and 8,397 and 8,831  employe stock
  ownership plan shares for the nine months
  ended March 31, 2006 and 2005, at fair value             41,534           42,567         124,525          133,544

Change in fair value on securities available for
  sale, net of tax                                        (31,614)         (44,102)        (95,680)          35,600
                                                    -------------    -------------   -------------   --------------

Balance, end of period                              $  17,296,342    $  17,651,453   $  17,296,342   $   17,651,453
                                                    =============    =============   =============   ==============

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

                            See accompanying notes to consolidated financial statements.

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

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

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

                                                                                          Nine Months Ended
                                                                                              March 31,
                                                                                       2006               2005
                                                                                       ----               ----
<S>                                                                                 <C>                <C>
Cash flows from operating activities
     Net income                                                                   $      766,944    $       764,151
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation                                                                    137,335            139,593
         Provision for loan losses                                                        47,563             57,747
         Net accretion on securities                                                        (270)              (269)
         (Gain) loss on sale of real estate owned                                         (2,912)            24,600
         FHLB stock dividends                                                            (69,300)           (52,400)
         Compensation expense for ESOP shares                                            124,525            133,544
         Change in:
              Accrued interest receivable and other assets                              (104,587)           (98,774)
              Accrued expense and other liabilities                                       (7,395)          (173,816)
              Deferred loan fees                                                           4,219              2,526
                                                                                  --------------    ---------------
                  Net cash from operating activities                                     896,122            796,902

Cash flows from investing activities
     Net change in loans                                                              (1,637,533)        (5,212,315)
     Premises and equipment expenditures                                                 (48,174)          (112,926)
     Proceeds from sale of real estate owned                                              89,703            184,128
                                                                                  --------------    ---------------
         Net cash from investing activities                                           (1,596,004)        (5,141,113)

Cash flows from financing activities
     Net change in deposits                                                           (2,236,367)           344,450
     Net change in short-term FHLB advances                                           (1,500,000)           500,000
     Repayments of long-term FHLB advances                                            (1,654,721)        (1,566,259)
     Proceeds from long-term FHLB advances                                             7,000,000          1,000,000
     Cash dividends paid                                                                (761,776)          (712,755)
     Purchase of treasury stock                                                         (499,062)                --
                                                                                  --------------    ---------------
         Net cash from financing activities                                              348,074           (434,564)
                                                                                  --------------    ----------------

Net change in cash and cash equivalents                                                 (351,808)        (4,778,775)

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

Cash and cash equivalents at end of period                                        $    4,969,388    $     5,254,913
                                                                                  ==============    ===============

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                                 $    2,634,351    $     2,350,950
         Income taxes                                                                    315,000            425,000

Noncash transactions
     Transfer from loans to other real estate owned                               $      187,212    $       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 March 31, 2006 and
its results of  operations  and cash flows for the periods  presented.  All such
adjustments are normal and recurring in nature.  The  accompanying  consolidated
financial  statements have been prepared in accordance with the instructions for
Form  10-QSB  and,  therefore,  do not  purport  to  contain  all the  necessary
financial  disclosures required by U.S. generally accepted accounting principles
that might  otherwise be necessary in the  circumstances,  and should be read in
conjunction with the consolidated  financial statements and notes thereto of the
Corporation  for  the  fiscal  year  ended  June  30,  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 U.S.
-----------------
generally  accepted  accounting  principles,   management  makes  estimates  and
assumptions  based on available  information.  These  estimates and  assumptions
affect  the  amounts  reported  in  the  financial  statements  and  disclosures
provided,  and actual  results could  differ.  The allowance for loan losses and
fair values of financial instruments are particularly subject to change.

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

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

                                  (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") is net income
-------------------------
divided by the weighted average number of common shares  outstanding  during the
period. Employee stock ownership plan ("ESOP") shares are considered outstanding
for this calculation  unless unearned.  Diluted EPS shows the dilutive effect of
additional common shares upon exercise of stock options.

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
nine months ended March 31, 2006, 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>
March 31, 2006
--------------
    U.S. Government agencies                      $   5,289,215      $         --     $    (208,689)
                                                  =============      ============     =============

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

Contractual  maturities of securities  available for sale at March 31, 2006 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                          $      497,655
        Due after one year through five years                 1,966,250
        Due after five years through ten years                2,825,310
                                                         --------------

                                                         $    5,289,215
                                                         ==============

There were no sales of  securities  available  for sale during the three or nine
months ended March 31, 2006 or 2005. No securities were pledged as collateral at
March 31, 2006 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 March  31,  2006  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>
March 31, 2006
--------------

U.S. Government agencies        $    497,655   $  (2,345)    $  4,791,560  $  (206,344)  $  5,289,215   $  (208,689)
                                ============   =========     ============  ===========   ============   ===========

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.

                                                 March 31,         June 30,
                                                   2006              2005
                                                   ----              ----
     Mortgage loans:
          1-4 family residential             $    92,523,753   $     93,792,635
          Multi-family residential                 1,388,869          1,297,418
          Commercial real estate                  12,742,580         12,612,885
          Real estate construction and
            development                            2,767,063          1,441,815
          Land                                     3,300,423          2,939,109
                                             ---------------   ----------------
              Total mortgage loans               112,722,688        112,083,862
     Consumer loans                                5,489,573          5,056,291
     Commercial loans                              5,547,618          5,184,668
                                             ---------------   ----------------
              Total loans                        123,759,879        122,324,821
     Less:
          Allowance for loan losses                 (867,800)          (835,500)
          Deferred loan fees                        (383,351)          (379,132)
                                             ---------------   ----------------

                                             $   122,508,728   $    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                Nine Months Ended
                                                               March 31,                        March 31,
                                                               ---------                        ---------
                                                          2006            2005             2006            2005
                                                          ----            ----             ----            ----
<S>                                                        <C>              <C>             <C>              <C>
Balance at beginning of period                      $     839,000    $     777,700   $     835,500   $      752,900
Provision for losses                                       29,787           30,278          47,563           57,747
Charge-offs                                                (2,057)              --         (16,674)          (2,669)
Recoveries                                                  1,070               22           1,411               22
                                                    -------------    -------------   -------------   --------------

Balance at end of period                            $     867,800    $     808,000   $     867,800   $      808,000
                                                    =============    =============   =============   ==============
<CAPTION>

Impaired loans were as follows.

                                                                                March 31,         June 30,
                                                                                   2006             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                 234,000           161,000
Amount of the allowance allocated to impaired loans                                195,000           134,000

<CAPTION>

                                                          Three Months Ended                Nine Months Ended
                                                               March 31,                        March 31,
                                                               ---------                        ---------
                                                          2006            2005             2006            2005
                                                          ----            ----             ----            ----
<S>                                                 <C>              <C>             <C>             <C>
Average of impaired loans during the period         $     234,000    $     141,000   $     208,000   $      153,000
Interest income recognized during the period                4,085            1,550          11,094            6,926
Cash-basis interest income recognized                         730              566           2,761            1,635

</TABLE>

Nonperforming loans were as follows.

                                                       March 31,      June 30,
                                                         2006           2005
                                                         ----           ----

Loans past due over 90 days still on accrual         $    401,000  $    349,000
Nonaccrual loans                                        1,273,000     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 March 31, 2006 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  $1,000,000  at  March  31,  2006 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 million  including the cash  management
line of credit. Advances from the Federal Home Loan Bank were as follows.

<TABLE>
<CAPTION>

                                                            March 31,       June 30,
                                                              2006            2005
                                                              ----            ----
<S>                                                         <C>              <C>
Cash management advance, variable rate 5.00 %
  at March 31, 2006 and 3.53% at June 30, 2005           $   1,000,000    $   2,500,000
4.88% FHLB fixed-rate advance, due January 25, 2008          2,000,000               --
6.13% FHLB fixed-rate advance, due June 25, 2008             7,000,000        7,000,000
5.16% FHLB fixed-rate advance, due March 13, 2009            3,000,000               --
4.42% FHLB fixed-rate advance, due July 9, 2010              2,000,000               --
6.00% FHLB convertible advance, fixed-rate until
  June 2006, due June 11, 2009                               5,000,000        5,000,000
6.27% FHLB convertible advance, fixed-rate until
  June 2006, due September 8, 2010                           5,000,000        5,000,000
5.30% select pay mortgage-matched advance, final
  maturity May 1, 2011                                         763,862          858,399
5.35% select pay mortgage-matched advance, final
  maturity July 1, 2011                                      1,571,970        1,954,752
3.92% select pay mortgage-matched advance, final
  maturity November 1, 2012                                    607,953          702,046
3.55% select pay mortgage-matched advance, final
  maturity March 1, 2013                                       736,262          804,848
4.10% select pay mortgage-matched advance, final
  maturity March 1, 2015                                       733,915          979,664
4.09% select pay mortgage-matched advance, final
  maturity November 1, 2017                                    603,211          703,360
3.31% select pay mortgage-matched advance, final
  maturity April 1, 2019                                       763,384          797,932
4.72% select pay mortgage-matched advance, final
  maturity November 1, 2022                                  2,292,771        2,483,689
4.38% select pay mortgage-matched advance, final
  maturity December 1, 2022                                    763,701          827,909
3.92% select pay mortgage-matched advance, final
  maturity December 1, 2022                                    645,728          739,884
3.64% select pay mortgage-matched advance, final
  maturity March 1, 2023                                     1,951,241        2,236,236
                                                         -------------    -------------

                                                         $  36,433,998    $  32,588,719
                                                         =============    =============
</TABLE>

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 March 31,
                      2007                         $    2,875,767
                      2008                              3,649,439
                      2009                             11,455,183
                      2010                              6,288,063
                      2011                              8,143,987
                   Thereafter                           4,021,559
                                                   --------------

                                                   $   36,433,998
                                                   ==============

NOTE 5 - OFF-BALANCE-SHEET ACTIVITIES

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

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

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

                                                         March 31,     June 30,
                                                           2006          2005
                                                           ----          ----

1-4 family residential real estate - fixed rate        $    461,000  $   407,000
1-4 family residential real estate - variable rate          625,000      695,000
Commercial lines of credit                                4,648,000    2,592,000
Home equity lines of credit                                 922,000      709,000

The interest rate on fixed-rate  commitments ranged from 6.13% to 7.75% at March
31,  2006 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 March 31,  2006 and June 30,  2005,  the  Corporation  was  required  to have
$137,000 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             Nine Months Ended
                                                                   March 31,                     March 31,
                                                                   ---------                     ---------
                                                             2006           2005            2006           2005
                                                             ----           ----            ----           ----
<S>                                                         <C>            <C>            <C>             <C>
     Basic Earnings Per Common Share

           Net income                                     $   242,062    $   270,328    $   766,944     $   764,151
                                                          ===========    ===========    ===========     ===========

           Weighted average common shares
             outstanding                                    1,402,592      1,432,648      1,413,433       1,432,648
           Less:  Average unallocated ESOP shares             (43,194)       (54,607)       (45,993)        (57,551)
                                                          -----------    -----------    -----------     -----------
           Weighted average common shares
             outstanding for basic earnings
             per common share                               1,359,398      1,378,041      1,367,440       1,375,097
                                                          ===========    ===========    ===========     ===========

           Basic earnings per common share                $     0.18     $      0.20    $      0.56     $     0.56
                                                          ==========     ===========    ===========     ==========

     Diluted Earnings Per Common Share

           Net income                                     $   242,062    $   270,328    $   766,944     $   764,151
                                                          ===========    ===========    ===========     ===========

           Weighted average common shares
             outstanding for basic earnings
             per common share                               1,359,398      1,378,041      1,367,440       1,375,097
           Add:  Dilutive effects of assumed
              exercises of stock options                           --             --             --             122
                                                          -----------    -----------    -----------     -----------
           Weighted average common shares
              and dilutive potential common
             shares outstanding                             1,359,398      1,378,041      1,367,440       1,375,219
                                                          ===========    ===========    ===========     ===========

           Diluted earnings per common share              $     0.18     $      0.20    $      0.56     $     0.56
                                                          ==========     ===========    ===========     ==========

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 March 31, 2006,  compared to June
30, 2005,  and results of  operations  for the three and nine months ended March
31, 2006, compared with the same periods in 2005. 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

While the Federal Reserve Market Committee  continues to raise interest rates to
control  inflationary  pressures,  borrowers continue to look at adjustable rate
mortgages  versus the traditional  fixed rate loans which are now bearing higher
rates.  We also note that mortgage  refinancing  trends have eased as rates have
increased.  Our current outlook through the remaining quarter of our fiscal year
is that rates will  continue in the current  range and that demand for  mortgage
loans will increase  slightly through the late spring and summer months. We plan
to add a new mortgage  product during the fourth  quarter of fiscal 2006,  which
will enable us to compete more  effectively with secondary market rate products.
We also hope to provide an additional product during the first quarter of fiscal
2007, giving our customers more choices in our array of mortgage products.

On the savings side,  overall  deposits have  decreased for a variety of causes,
such as local competition, renewed attractiveness of the stock market as well as
economical  demands for our customers'  available  funds. The result has been an
overall decrease in savings and certificate of deposit accounts partially offset
by smaller increases in money fund accounts and commercial and NOW accounts.  We
continue to see our  customers  move dollars in search of higher  interest  rate
accounts as the rate structures of product  offerings have increased.  We expect
interest rates to continue to increase during our fourth fiscal quarter and then
remain stable  throughout  the remaining of the summer months.  Management  will
continue  to watch the  movement  of rates as well as the make up of our deposit
portfolio to remain competitive.

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.

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


                                                                             15.
<PAGE>

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

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

Financial Condition

Total assets at March 31, 2006 were $137.8 million compared to $136.7 million at
June 30,  2005,  an increase of $1.1  million.  The increase in total assets was
primarily due to an increase in loans of $1.4 million, funded by borrowed funds,
which increased by $3.8 million.

Cash and cash equivalents decreased $352,000 from $5,321,000 at June 30, 2005 to
$4,969,000 at March 31, 2006.

The securities  portfolio,  which is classified as available for sale, decreased
$145,000,  from $5,434,000 at June 30, 2005 to $5,289,000 at March 31, 2006. 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  $69,000 from $1,674,000 at June 30, 2005
to $1,743,000 at March 31, 2006 as a result of normal dividend payments received
in the form of additional stock.

Loans  increased  $1.4  million  from $121.1  million at June 30, 2005 to $122.5
million at March 31,  2006.  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  March  31,  2006  and  one-to
four-family residential loans which decreased $1.3 million from $93.8 million at
June 30, 2005 to $92.5  million at March 31,  2006.  Land loans  increased  $0.4
million from June 30, 2005 to March 31, 2006. 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  increases to the loan
portfolio with growth of $0.4 million each from June 30, 2005 to March 31, 2006.
Other loan categories had nominal changes, that combined, totaled an increase of
$0.2  million  for the  current  period.  See Note 3 of  Notes  to  Consolidated
Financial Statements.

Premises and  equipment  decreased  $89,000 from  $2,096,000 at June 30, 2005 to
$2,007,000 at March 31, 2006. This decrease resulted from normal depreciation of
existing assets partially offset by equipment purchases and routine improvements
to the office building.

Total  deposits  decreased  $2.2 million from $85.9  million at June 30, 2005 to
$83.7 million at March 31, 2006  primarily due to a decrease of $1.8 million and
$1.6 million in certificates of deposit and savings  accounts  respectively.  We
attribute these decreases to local  competition,  the renewed  attractiveness of
the stock market as well as economic  demands on the cash flow of our  depositor
base.  These  decreases  were  partially  offset by increases of $0.6 million in
money  market  accounts  $0.3  million in  commercial  checking  accounts and an
increase of $0.2  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  $3.8 million from $32.6  million at June 30, 2005 to
$36.4 million at March 31, 2006. This increase was the result of the addition of
$7.0 million in FHLB fixed-rate advances offset by a decrease of $1.5 million in
variable-rate  cash  management   advances  and  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

Our operating results are affected by general economic conditions,  monetary and
fiscal  policies of federal  agencies and  regulatory  policies of agencies that
regulate  financial  institutions.  Our cost of funds is  influenced by interest
rates on competing investments and general market rates of interest.  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.

Our 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 March 31, 2006  Compared to the Three Months Ended March 31,
2005

Net Income.  We earned net income of $242,000  for the three  months ended March
31, 2006  compared to $270,000 for the three  months  ended March 31, 2005.  The
most  significant  changes  occurred in noninterest  expense,  which  increased,
partially  offset by an increase in net interest income and a decrease in income
tax expense.

Net Interest Income. Net interest income totaled $1,193,000 for the three months
ended March 31, 2006 compared to $1,181,000 for the three months ended March 31,
2005,  representing  an increase of $12,000.  The  increase was the result of an
increase in the total of net earning  assets  partially  offset by a decrease in
the net  interest  rate spread  between  interest  earning  assets and  interest
bearing liabilities during the current period.

Interest and fees on loans  increased  $102,000  from  $1,895,000  for the three
months ended March 31, 2005 to  $1,997,000  for the three months ended March 31,
2006.  The increase in interest  income was due  primarily  to a higher  average
balance of loans  coupled  with an  increase in the average  yield  earned.  The
average  balance of loans  increased to $122.9  million with an average yield of
6.50% for the three months ended March 31, 2006  compared to an average  balance
of $119.7 million with an average yield of 6.33% for the same three month period
last year.

Interest on securities  increased $4,000 due to an increase in the average yield
earned  during  the  current  period.  Interest  on demand,  time and  overnight
deposits  increased $18,000 to $33,000 for the three months ended March 31, 2006
as compared to $15,000 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  $44,000 from $391,000 for the three months
ended March 31, 2005 to $435,000 for the three months ended March 31, 2006.  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 March 31, 2006 was $82.0  million
at an average cost of 2.15%  compared to an average  balance of $85.6 million at
an average cost of 1.85% for the three months ended March 31, 2005.

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

                                                                             17.
<PAGE>

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

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

Interest  paid on borrowed  funds  totaled  $478,000  for the three months ended
March 31, 2006  compared to $405,000  for the three months ended March 31, 2005.
The increase of $73,000 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  $30,000 for both the three months ended
March  31,  2006 and March  31,  2005.  The  Corporation  experienced  $2,000 in
charge-offs  during the  current  period.  The  primary  reason for the  $30,000
provision for loan losses in the three months ended March 31, 2006 was due to an
increase in specific  allocations  on impaired  loans.  The  allowance  for loan
losses totaled $868,000, or 0.70% of gross loans receivable net of deferred loan
origination fees and 51.8% of total  nonperforming loans at March 31, 2006. This
compares to $808,000,  or 0.67% of gross loans receivable,  net of deferred loan
origination  fees and  51.4% of total  nonperforming  loans at March  31,  2005.
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  $3,000  from  $29,000  for the three  months  ended March 31, 2005 to
$32,000 for the three months ended March 31,  2006.  This is primarily  due to a
$2,000 gain on the sale of real  estate  owned  during the  current  three-month
period as compared to a $1,000 loss on the sale of real estate owned recorded in
the prior period.

Noninterest  expense.  Noninterest expense totaled $817,000 for the three months
ended March 31, 2006  compared to $757,000  for the three months ended March 31,
2005,  an increase of  $60,000.  Compensation  and  benefits  expense  increased
$33,000 resulting from normal salary and benefit increases.  Computer processing
increased  $20,000  due to the  Corporation's  upgrade to a new data  processing
system.  Professional  fees also increased $11,000 as a result of new government
regulations and requirements.

Income Tax  Expense.  Income tax expense  totaled  $136,000  for the three month
period  ended March 31, 2006 and $153,000 for the three month period ended March
31,  2005.  The  decrease  in income tax is  reflective  of a decrease in income
before income taxes for the current period. The effective tax rate was 36.0% and
36.1% for the three months ended March 31, 2006 and 2005.

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

                                                                             18.
<PAGE>

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

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

Nine Months  Ended March 31,  2006  Compared to the Nine Months  Ended March 31,
2005

Net Income.  The  Corporation  earned net income of $767,000 for the nine months
ended March 31, 2006  compared to $764,000  for the nine months  ended March 31,
2005,  representing  an increase of $3,000.  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 during
the current nine-month period.

Net Interest Income.  Net interest income totaled $3,584,000 for the nine months
ended March 31, 2006 compared to $3,449,000  for the nine months ended March 31,
2005, an increase of $135,000.  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  $362,000,  or 6.5% from $5,568,000 for the
nine months ended March 31, 2005 to  $5,930,000  for the nine months ended March
31, 2006. 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 $122.2 million with an average yield of 6.47% for the nine months ended March
31, 2006 compared to an average  balance of $117.9 million with an average yield
of 6.30% for the same nine month period last year.

Interest on securities increased $13,000 from $145,000 for the nine months ended
March 31,  2005 to  $158,000  for the nine  months  ended  March 31,  2006.  The
increase  resulted from an improvement  in the average  interest rate during the
current period as compared to last year.

Interest on demand, time and overnight deposits increased $45,000 to $89,000 for
the nine months  ended March 31, 2006 as compared to $44,000 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  $17,000  due to an  increase in the average
dividend rate from 4.32% to 5.46% over the  comparable  periods  coupled with an
increase in the average balance of FHLB stock.

Interest paid on deposits increased  $160,000,  or 14.0% from $1,139,000 for the
nine months ended March 31, 2005 to  $1,299,000  for the nine months ended March
31, 2006. The increase  resulted from a higher average interest rate offset by a
lower average balance of deposits.  The average balance of deposits for the nine
months  ended  March 31,  2006 was $83.5  million  at an  average  cost of 2.07%
compared to an average  balance of $85.4 million at an average cost of 1.77% for
the nine months ended March 31, 2005.

Interest  paid on borrowed  funds totaled  $1,363,000  for the nine months ended
March 31, 2006 compared to $1,222,000  for the nine months ended March 31, 2005.
The increase of $141,000 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.  The average
balance of  borrowed  funds for the nine  months  ended March 31, 2006 was $35.2
million  at an average  cost of 5.16%  compared  to an average  balance of $30.6
million at an average cost of 5.29% for the nine months ended March 31, 2005.

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

                                                                             19.
<PAGE>

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

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

Provision for Loan Losses.  The provision for loan losses decreased $10,000 from
$58,000 for the nine months  ended March 31, 2005 to $48,000 for the nine months
ended March 31, 2006.  Nonperforming loans increased slightly to $1.7 million at
March 31, 2006  compared to $1.6  million at March 31, 2005 and the  Corporation
also  experienced  $17,000 in charge-offs  relating to consumer loans during the
current  nine-month  period compared to $3,000 in the prior  nine-month  period.
However,  loan  growth  was  slower in the  current  nine-month  period as loans
increased by 1.2% compared to 4.4% in the prior  nine-month  period.  The slower
loan growth more than offset the previously mentioned negative trends.

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 $30,000 from $71,000 for the nine months ended March 31, 2005
to $101,000  for the nine months ended March 31, 2006.  This  increase  resulted
primarily  from a pre-tax loss of $25,000  related to sales of real estate owned
during the prior  nine-month  period  compared  to a $3,000  gain in the current
nine-month period.

Noninterest expense.  Noninterest expense totaled $2,438,000 for the nine months
ended March 31, 2006 compared to $2,267,000  for the nine months ended March 31,
2005, an increase of $171,000.  The significant  changes in noninterest  expense
occurred in  compensation  and benefits  expense  which  increased  $83,000 as a
result of normal  increases in salary along with increases in benefit  premiums,
an increase of $65,000 in computer  processing expense relating to an upgrade in
the data  processing  system,  and an increase in  professional  fees of $49,000
resulting from new government regulations and requirements. These increases were
partially  offset by a combined  reduction of noninterest  expense of $27,000 in
occupancy and equipment, state franchise tax and other expenses.

Income Tax  Expense.  Income tax expense  totaled  $433,000  for the nine months
ended March 31, 2006  compared to $431,000  for the nine months  ended March 31,
2005,  representing an increase of $2,000. The increase in income tax expense is
reflective of an increase in income before tax. The effective tax rate was 36.1%
for the nine months ended March 31, 2006 and 2005.

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


                                                                             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 nine months ended March 31, 2006 and 2005.

<TABLE>
<CAPTION>
                                                                     Nine Months
                                                                   Ended March 31,
                                                                2006             2005
                                                                ----             ----
<S>                                                                 <C>            <C>
                                                               (Dollars in thousands)

Net income                                                  $        767     $        764
Adjustments to reconcile net income to net cash from
  operating activities                                               129               33
                                                            ------------     ------------
Net cash from operating activities                                   896              797
Net cash from investing activities                                (1,596)          (5,141)
Net cash from financing activities                                   348             (435)
                                                            ------------     ------------
Net change in cash and cash equivalents                             (352)          (4,779)
Cash and cash equivalents at beginning of period                   5,321           10,034
                                                            ------------     ------------

Cash and cash equivalents at end of period                  $      4,969     $      5,255
                                                            ============     ============
</TABLE>

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 million including the cash management line of credit. See Note 4 of
the Notes to Consolidated Financial Statements for a detail of the Corporation's
borrowings from the FHLB at March 31, 2006.

At March 31, 2006, the Corporation had commitments to originate fixed-rate loans
totaling $461,000 and variable-rate  loans totaling  $625,000.  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 March 31, 2006.
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 March  31,  2006  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 March 31, 2006 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 March 31, 2006 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)
March 31, 2006
--------------
Total capital (to risk-
  weighted assets)             $  15,753         19.0%    $  6,639          8.0%     $    8,299          10.0%
Tier 1 (core) capital (to
  risk-weighted assets)           15,036         18.1        3,320          4.0           4,979           6.0
Tier 1 (core) capital (to
  adjusted total assets)          15,036         10.9        5,523          4.0           6,904           5.0
Tangible capital (to
  adjusted total assets)          15,036         10.9        2,071          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  March  31,  2006  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 March 31, 2006.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                           Total Number of             Maximum
                                                                           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>
January 1, 2006 -
January 31, 2006
------------------------------------------------------------------------------------------------------------------
February l, 2006 -
February 28, 2006                   5,000                  $15.00                  5,000                 39,100
------------------------------------------------------------------------------------------------------------------
March 1, 2006 -
March 31, 2006
------------------------------------------------------------------------------------------------------------------
Total                               5,000                  $15.00                  5,000                 39,100
------------------------------------------------------------------------------------------------------------------
</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
           ---------------------------------------------------
           None

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

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


                                                                             24.
<PAGE>


                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                   SIGNATURES

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


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




Date:    May 15, 2006                    /s/ Douglas Stewart
       ---------------------------       -------------------------------------
                                         Douglas Stewart
                                         President and Chief Executive Officer





Date:    May 15, 2006                    /s/ Debra Geuy
       ---------------------------       -------------------------------------
                                         Debra Geuy
                                         Chief Financial Officer


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


                                                                             25.
<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

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


                                                                                                                   26.
</TABLE>