First Place Financial 10-Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2007

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number 0-25049

FIRST PLACE FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Delaware	34-1880130
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)

185 E. Market Street, Warren, OH 44481

(Address of principal executive offices)

(330) 373-1221

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if change since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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 large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange Act.

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

16,416,029 shares of common stock as of January 31, 2008

TABLE OF CONTENTS

		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Financial Condition as of December 31, 2007 and June 30, 2007	3
	Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2007 and 2006	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended December 31, 2007 and 2006	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2007 and 2006	6
	Notes to Condensed Consolidated Financial Statements	7-14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28-29
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Submission of Matters to a Vote of Security Holders	30
Item 5.	Other Information	31
Item 6.	Exhibits	31
SIGNATURES		32

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)

	December 31, 2007			June 30, 2007
	(Unaudited)
ASSETS
Cash and due from banks	$	47,268		$	77,226
Interest-bearing deposits in other banks		13,583			9,989
Securities available for sale		267,709			285,242
Loans held for sale		72,547			96,163
Loans		2,648,217			2,507,692
Less allowance for loan losses		26,360			25,851
Loans, net		2,621,857			2,481,841
Federal Home Loan Bank stock		34,100			33,209
Premises and equipment, net		51,568			45,639
Goodwill		91,835			91,692
Core deposit and other intangibles		15,108			16,678
Other assets		88,699			88,534
Total assets	$	3,304,274		$	3,226,213
LIABILITIES
Deposits
Noninterest-bearing checking	$	228,019		$	242,068
Interest-bearing checking		157,742			154,941
Savings		432,644			390,462
Money markets		391,027			404,248
Certificates of deposit		1,090,411			1,048,977
Total deposits		2,299,843			2,240,696
Short-term borrowings		222,471			195,249
Long-term debt		436,518			397,914
Other liabilities		33,353			66,167
Total liabilities		2,992,185			2,900,026
SHAREHOLDERS’ EQUITY
Preferred stock, $.01 par value: 3,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.01 par value: 33,000,000 shares authorized, 18,114,673 shares issued		181			181
Additional paid-in capital		215,338			215,358
Retained earnings		129,750			131,893
Unearned employee stock ownership plan shares		(3,739	)		(3,858	)
Treasury stock, at cost: 1,698,644 shares at December 31, 2007 and 878,608 shares at June 30, 2007		(28,140	)		(15,040	)
Accumulated other comprehensive loss, net		(1,301	)		(2,347	)
Total shareholders’ equity		312,089			326,187
Total liabilities and shareholders’ equity	$	3,304,274		$	3,226,213

See accompanying notes to condensed consolidated financial statements.

3

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

	Three months ended December 31,					Six months ended December 31,
	2007			2006		2007			2006
INTEREST INCOME
Loans, including fees	$	44,763		$	41,689	$	89,268		$	84,512
Securities and interest-bearing deposits
Taxable		2,785			2,637		5,502			5,415
Tax-exempt		490			456		979			902
Dividends		846			783		1,642			1,490
TOTAL INTEREST INCOME		48,884			45,565		97,391			92,319
INTEREST EXPENSE
Deposits		20,051			17,553		39,550			33,763
Short-term borrowings		1,829			2,776		4,238			7,264
Long-term debt		5,446			4,334		10,673			7,658
TOTAL INTEREST EXPENSE		27,326			24,663		54,461			48,685
NET INTEREST INCOME		21,558			20,902		42,930			43,634
Provision for loan losses		5,195			1,410		7,156			2,790
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		16,363			19,492		35,774			40,844
NONINTEREST INCOME
Service charges and fees on deposit accounts		2,064			1,469		4,061			3,016
Net gains (losses) on sale of securities		(4	)		2		729			84
Impairment of securities		(5,900	)		—		(5,900	)		—
Net gains on sale of loans		1,065			1,622		2,921			3,729
Gain on sale of loan servicing rights		—			—		1,471			—
Loan servicing income (loss)		(146	)		248		144			471
Other income – bank		1,627			1,847		3,345			3,742
Insurance commission income		838			870		1,658			1,665
Other income – nonbank subsidiaries		1,170			1,450		2,476			2,709
TOTAL NONINTEREST INCOME		714			7,508		10,905			15,416
NONINTEREST EXPENSE
Salaries and employee benefits		10,270			8,023		20,636			17,772
Occupancy and equipment		3,081			2,861		6,168			5,742
Professional fees		731			773		1,505			1,445
Loan expenses		310			554		884			1,337
Marketing		877			666		1,673			1,296
Merger, integration and restructuring		790			—		790			—
State and local taxes		307			330		531			490
Amortization of intangible assets		1,102			1,063		2,223			2,145
Real estate owned expense		1,736			122		2,140			293
Other		3,251			3,033		6,334			5,838
TOTAL NONINTEREST EXPENSE		22,455			17,425		42,884			36,358
INCOME (LOSS) BEFORE INCOME TAX EXPENSE		(5,378	)		9,575		3,795			19,902
Income tax expense (benefit)		(2,231	)		3,045		688			6,370
NET INCOME (LOSS)	$	(3,147	)	$	6,530	$	3,107		$	13,532
Basic earnings (loss) per share	$	(0.20	)	$	0.39	$	0.19		$	0.80
Diluted earnings (loss) per share	$	(0.20	)	$	0.38	$	0.19		$	0.79

See accompanying notes to condensed consolidated financial statements.

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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share data)

	Common Stock		Additional Paid-in Capital			Retained Earnings			Unearned ESOP Shares			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance at July 1, 2006	$	181	$	214,243		$	116,757		$	(4,452	)	$	(10,096	)	$	(5,059	)	$	311,574
Comprehensive income
Net income							13,532												13,532
Change in unrealized gain on securities available for sale, net of reclassification and tax effects																2,669			2,669
Loss on termination of interest rate swaps reclassified into income, net of tax																311			311
Total comprehensive income																			16,512
Cash dividends declared and paid ($0.295 per share)							(5,073	)											(5,073	)
Commitment to release employee stock ownership plan shares (29,676 shares)				399						297									696
Commitment to release recognition and retention plan shares (1,528 shares)				32															32
Stock options exercised (36,140 shares)				(74	)								522						448
Stock option expense				112															112
Tax benefit related to exercise of stock options				94															94
Balance at December 31, 2006	$	181	$	214,806		$	125,216		$	(4,155	)	$	(9,574	)	$	(2,079	)	$	324,395
Balance at July 1, 2007	$	181	$	215,358		$	131,893		$	(3,858	)	$	(15,040	)	$	(2,347	)	$	326,187
Comprehensive income
Net income							3,107												3,107
Change in unrealized gain on securities available for sale, net of reclassification and tax effects																741			741
Loss on termination of interest rate swaps reclassified into income, net of tax																305			305
Total comprehensive income																			4,153
Cash dividends declared and paid ($0.325 per share)							(5,250	)											(5,250	)
Commitment to release employee stock ownership plan shares (11,872 shares)				25						119									144
Commitment to release recognition and retention plan shares (1,528 shares)				32															32
Purchase of 880,086 shares of common stock													(14,113	)					(14,113	)
Stock options exercised (60,050 shares)				(280	)								1,013						733
Stock option expense				113															113
Tax benefit related to exercise of stock options				90															90
Balance at December 31, 2007	$	181	$	215,338		$	129,750		$	(3,739	)	$	(28,140	)	$	(1,301	)	$	312,089

See accompanying notes to condensed consolidated financial statements.

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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Six months ended December 31,
	2007			2006
Cash flows from operating activities:
Net cash from operating activities	$	6,664		$	97,068
Cash flows from investing activities:
Securities available for sale
Proceeds from sales		10,276			19,533
Proceeds from maturities, calls and principal paydowns		26,718			21,586
Purchases		(22,636	)		(4,201	)
Net change in interest-bearing deposits in other banks		9,802			4,521
Net change in loans		(121,365	)		(74,653	)
Proceeds from sale of loans		—			2,263
Proceeds from sales of loan servicing rights		11,928			—
Premises and equipment expenditures, net		(5,197	)		(4,674	)
Cash paid for Hicksville Building, Loan and Savings
Bank, net of cash received		(3,885	)		—
Investment in nonbank affiliates		(31	)		(37	)
Net cash from investing activities		(94,390	)		(35,662	)
Cash flows from financing activities:
Net change in deposits		19,655			75,338
Net change in short-term borrowings		(41,153	)		(181,987	)
Proceeds from long-term debt		100,000			75,032
Repayment of long-term debt		(2,194	)		(22,218	)
Cash dividends paid		(5,250	)		(5,073	)
Proceeds from stock options exercised		733			448
Tax benefit from stock options exercised		90			94
Purchases of common stock		(14,113	)		—
Net cash from financing activities		57,768			(58,366	)
Net change in cash and cash equivalents		(29,958	)		3,040
Cash and cash equivalents at beginning of period		77,226			72,906
Cash and cash equivalents at end of period	$	47,268		$	75,946
Supplemental cash flow information:
Cash payments of interest expense	$	51,678		$	47,296
Cash payments of income taxes	$	8,056		$	3,370
Supplemental non-cash disclosures:
Loans securitized	$	2,939		$	13,925
Transfer of loans to real estate owned	$	6,713		$	1,933
Transfer of loans from held-for-sale to portfolio	$	—		$	3,729
Transfer from long-term to short-term borrowings	$	68,379		$	7,500
Allocation of loan basis to mortgage servicing asset	$	3,469		$	5,422

See accompanying notes to condensed consolidated financial statements.

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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Significant Accounting Policies

(Dollars in thousands)

Basis of Presentation. The interim unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission. The financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in First Place Financial Corp.’s (the Company) Annual Report on Form 10-K for the year ended June 30, 2007. The interim unaudited condensed consolidated financial statements include all adjustments (consisting of only normal recurring items), which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of operations for the interim periods included in the interim unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for a full year.

Principles of Consolidation. The interim unaudited condensed consolidated financial statements include the accounts of First Place Financial Corp. and its wholly owned subsidiaries, First Place Bank (the Bank) and First Place Holdings, Inc. (Holdings). Wholly owned subsidiaries of Holdings include First Place Insurance Agency, Ltd., APB Financial Group, Ltd., American Pension Benefits, Inc., Coldwell Banker First Place Real Estate, Ltd. and its subsidiary and First Place Referral Network, Ltd. Title Works Agency, LLC is a 75% owned affiliate of First Place Holdings, Inc. The investments of the Company in its wholly owned subsidiaries, First Place Capital Trust, First Place Capital Trust II and First Place Capital Trust III, have been accounted for using the equity method based on their nature as trusts, which are special purpose entities. All significant intercompany balances and transactions have been eliminated in the consolidation.

Use of Estimates. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving the use of management’s estimates and assumptions include the allowance for loan losses, fair values of financial instruments, the realization of deferred tax assets, the identification and carrying value of impaired loans, the carrying value and amortization of intangibles, depreciation of premises and equipment, the carrying value of goodwill, the amortization and valuation of mortgage servicing assets and the valuation of stock options and securitizations. Actual results could differ from those estimates.

Business Segments.While the Company's chief decision-makers monitor the revenue streams of the various Company products and services, the segments that could be separated from the Company’s primary business of banking are not material. Accordingly, all of the Company's financial service operations are considered by management to be combined in one reportable operating segment.

Reclassifications. Certain items in the prior year financial statements were reclassified to conform to the current presentation.

2. Recent Accounting Pronouncements

(Dollars in thousands)

In February, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments. This statement clarifies the treatment of derivatives that are freestanding or embedded as part of a beneficial interest in a securitized financial asset. This statement is effective for fiscal years beginning after September 15, 2006 and applies to the Company effective July 1, 2007. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.

In March, 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets. This statement allows the entity to choose the amortization method or the fair value method to account for each separately

7

recognized servicing asset or liability. This statement is effective for fiscal years beginning after September 15, 2006 and applies to the Company effective July 1, 2007. The Company has adopted this pronouncement and elected to account for all servicing assets and liabilities according to the amortization method. The Company had previously used the amortization method to account for mortgage servicing rights and therefore, the election to continue using this method had no material impact on the Company’s consolidated financial statements.

In July 2006, the FASB issued FASB Staff Position (FSP) 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction. This FSP amends SFAS 13, Accounting for Leases, to require a lessor in a leveraged lease transaction to recalculate the leveraged lease for the effects of a change or projected change in the timing of cash flows relating to income taxes that are generated by the leveraged lease. The guidance in FSP 13-2 is required to be applied to fiscal years beginning after December 15, 2006 and applies to the Company effective July 1, 2007. The adoption of this FSP did not have a material impact on the Company’s consolidated financial statements.

In September, 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. It is effective for fiscal years beginning after November 15, 2007. The Company did not elect early adoption and the pronouncement will apply to the Company effective July 1, 2008. At the present time, the Company has not determined what impact it would have on the Company’s consolidated financial statements.

In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5, Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for Purchases of Life Insurance). This issue requires that a policyholder consider contractual terms of a life insurance policy in determining the amount that could be realized under the insurance contract. It also requires that if the contract provides for a greater surrender value if all individual policies in a group are surrendered at the same time, that the surrender value be determined based on the assumption that policies will be surrendered on an individual basis. Lastly, the issue discusses whether the cash surrender value should be discounted when the policyholder is contractually limited in its ability to surrender a policy. This issue is effective for fiscal years beginning after December 15, 2006 and applies to the Company effective July 1, 2007. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Assets and Financial Liabilities. The objective of this new standard is to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. This statement allows entities the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities. Subsequent changes in fair value of the financial assets and liabilities would be recognized in earnings when they occur. This pronouncement also establishes certain additional disclosure requirements. It is effective as of the beginning of the first fiscal year beginning after November 15, 2007. The Company did not elect early adoption and the pronouncement will apply to the Company effective July 1, 2008. At the present time, the Company has not determined to what assets and liabilities it would apply the provisions of the statement and what impact it would have on the Company’s consolidated financial statements.

Effective July 1, 2007, the Company adopted FASB Interpretation Number 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in the Company’s Consolidated Financial Statements in accordance with FASB Statement 109. Upon adoption of FIN No. 48, no material reserves for uncertain tax positions were recorded. The adoption of this pronouncement had no material effect on the Company’s Consolidated Financial Statements. The Company’s practice is to recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2007, the Company did not record an accrual for either interest or penalties related to unrecognized tax benefits. The Company files U.S. federal and various state income tax returns. Tax years 2004-2006 remain open to examination by major taxing jurisdictions. Certain state tax returns remain open to examination for tax years 2003-2006.

In November 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 109, which expresses the views of the SEC regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. SAB No. 105, Application of Accounting Principles to Loan Commitments, provided the views of the SEC regarding derivative loan commitments that are accounted for at fair value through earnings pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SAB No. 109 supersedes SAB No. 105 and expresses the

8

current view of the SEC that SFAS No. 156, Accounting for Servicing of Financial Assets, and SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. The Company will adopt SAB No. 109 on January 1, 2008. In conjunction with the adoption of SFAS No. 157 and SFAS No. 159, this pronouncement generally will result in higher fair values being recorded upon initial recognition of derivative loan commitments thereby having a favorable impact on the Company’s consolidated financial statements.

In December 2007, the SEC issued SAB No. 110, which expresses the views of the SEC regarding the use of a “simplified” method, as discussed in SAB No. 107, in developing an estimate of expected term of “plain vanilla” share options in accordance with SFAS No. 123(R), Share-Based Payment. The SEC will not expect a company to use the simplified method for share option grants after December 31, 2007. The Company does not use the simplified method for share options and therefore SAB No. 110 has no material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R) (revised version of SFAS No. 141), Business Combinations. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, to be measured at their fair values as of that date. SFAS No. 141(R) replaces SFAS No. 141’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS No. 141(R) applies to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 31, 2008. At the present time, the Company has not determined what impact it would have on the Company’s consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51. SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. At the present time, the Company has not determined what impact it would have on the Company’s consolidated financial statements.

3. Loans

(Dollars in thousands)

	December 31, 2007		June 30, 2007
1-4 family residential real estate loans:
Permanent financing	$	978,442	$	984,135
Construction		103,277		95,653
Total		1,081,719		1,079,788
Commercial loans:
Multifamily real estate		126,345		134,308
Commercial real estate		745,974		565,342
Commercial construction		109,553		96,768
Commercial non real estate		191,243		250,475
Total		1,173,115		1,046,893
Consumer loans		393,383		381,011
Total loans	$	2,648,217	$	2,507,692

Activity in the allowance for loan losses was as follows:

	Six months ended December 31,
	2007			2006
Beginning of period	$	25,851		$	22,319
Provision for loan losses		7,156			2,790
Acquired in merger		254			—
Loans charged-off		(7,168	)		(1,878	)
Recoveries		267			194
End of period	$	26,360		$	23,425

9

	December 31, 2007		June 30, 2007
Loans with no allocated allowance for loan losses	$	—	$	—
Loans with allocated allowance for loan losses		7,186		9,505
Total	$	7,186	$	9,505
Amount of the allowance for loan losses allocated	$	2,615	$	3,255

Nonperforming loans were as follows:

	December 31, 2007		June  30, 2007
Nonaccrual loans	$	46,322	$	33,405
Troubled debt restructuring		—		557
Total nonperforming loans	$	46,322	$	33,962

4. Mortgage Servicing Assets

(Dollars in thousands)

Following is a summary of mortgage servicing assets:

	Six months ended December 31,
	2007			2006
Servicing rights:
Beginning of period	$	20,785		$	16,167
Additions		3,469			5,422
Acquired in merger		206			—
Sale of servicing rights		(10,457	)		—
Increase in valuation allowance		(305	)		(35	)
Amortized to expense		(1,977	)		(2,057	)
End of period	$	11,721		$	19,497

The fair value of mortgage servicing assets was $13,714 at December 31, 2007 and $25,247 at June 30, 2007. Noninterest-bearing deposits included $12,712 and $19,042 of custodial account deposits related to loans serviced for others as of December 31, 2007 and June 30, 2007, respectively. Loans serviced for others, which are not reported as assets, were $1,228,355 and $2,095,607 at December 31, 2007 and June 30, 2007 respectively.

5. Short-term Borrowings and Long-term Debt

(Dollars in thousands)

	December 31, 2007		June  30, 2007
Short-term borrowings:
Federal Home Loan Bank advances	$	177,075	$	156,525
Securities sold under agreement to repurchase		35,396		38,724
Federal funds purchased		10,000		—
Total	$	222,471	$	195,249
Long-term debt:
Federal Home Loan Bank advances	$	324,661	$	279,057
Securities sold under agreement to repurchase		50,000		57,000
Junior subordinated debentures owed to unconsolidated subsidiary trusts		61,857		61,857
Total	$	436,518	$	397,914

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6. Employee Benefit Plans

(Dollars in thousands)

The Company maintains an Employee Stock Ownership Plan (ESOP) for the benefit of employees of the Bank who are 21 and older and who have completed at least one thousand hours of service.

To fund the plan, the ESOP borrowed $8,993 from the Company for the purposes of purchasing 899,300 shares of stock at $10 per share in the conversion from mutual to stock ownership in 1998. Principal and interest payments on the loan are due in annual installments beginning on December 31, 1999 with the final payments of principal and interest being due and payable at maturity on December 31, 2013. The Company amended the agreement and retroactively enacted it on January 1, 2007, whereby the final payments of principal and interest will be due and payable at maturity on December 31, 2016. Interest is payable during the remaining term of the loan at a fixed rate of 5.75% which was 7.75% under the previous agreement. The loan is collateralized by the shares of the Company’s common stock purchased with the proceeds. As the Bank periodically makes contributions to the ESOP to repay the loan, shares are allocated to participants on the basis of the ratio of each year’s principal and interest payments to the total of all principal and interest payments. These contributions to the ESOP plan will be $707 for years 2008 through 2016 and were $1,003 in the years prior to the amendment. The balance of the ESOP loan prior to the amendment was $5,269 at December 31, 2007. After the amendment and the annual principal payment, the balance of the ESOP loan was $4,864. Dividends on allocated shares increase participant accounts and dividends on unallocated shares are used for debt service.

7. Stock Compensation Plans

(Dollars in thousands, except per share data.)

Stock Compensation Plans

On July 2, 1999 the shareholders approved and the Board of Directors established the 1999 Incentive Plan (1999 Plan). The 1999 Plan provided the Board with the authority to compensate directors, key employees and individuals performing services as consultants or independent contractors with stock awards for their services to the Company. The awards authorized included incentive stock options, nonqualified stock options and stock grants. The granting of stock awards is also referred to as the Recognition and Retention Plan. The 1999 Plan originally authorized 1,124,125 shares of stock for options and 449,650 for grants or a total of 1,573,775. Subsequent to the establishment of the plan 587,500 shares were added to the shares available for stock options due to a merger. Stock options and stock grants reduce the shares available for grant while awards which are forfeited increase the shares available for grant. On October 28, 2004, the shareholders of the Company approved the creation of the 2004 Incentive Plan (2004 Plan). Its structure and provisions are similar to the 1999 Plan. It also provides for awards to be issued in the form of incentive stock options, nonqualified stock options and stock awards. A total of 1,000,000 shares may be issued under the 2004 Plan in any combination of the three types of awards.

The following is the stock option activity for the periods indicated:

	Total stock options outstanding
	Six months ended December 31, 2007						Six months ended December 31, 2006
	Shares		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Shares		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Stock options outstanding, beginning of period	750,787		$	14.71			764,084		$	13.47
Forfeited	(10,378	)		20.30			(373	)		16.74
Exercised	(60,050	)		12.23			(36,140	)		12.41
Granted	—			—			98,014			21.88
Stock options outstanding, end of period	680,359		$	14.84	$	833	825,585		$	14.52	$	7,407
Stock option exercisable, end of period	544,523		$	13.34	$	833	662,943		$	12.98	$	6,968

11

The fair value of stock options granted during the six months ended December 31, 2006 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

Expected average risk-free interest rate	4.54% - 4.88%
Expected average life (in years)	6.00 years
Expected volatility	24.03% - 24.50%
Expected dividend yield	2.56% - 2.61%

Recognition and Retention Plan

The Company can issue stock grants as a form of compensation to directors and key employees under the 1999 Plan and the 2004 Plan. Generally, the shares are earned and nonforfeitable either one-fifth on each of the first five anniversaries of the date of the awards or at the end of the fourth anniversary date of the grant. In the event of the death or disability of a participant or a change in control of the Company, the participant’s shares will be deemed to be entirely earned and nonforfeitable upon such date. Recipients are entitled to receive dividends on their respective shares but are restricted from selling, transferring or assigning their shares until full vesting of such shares has occurred.

The following is the unvested common stock grant activity for the periods indicated:

	Six months ended December 31, 2007				Six months ended December 31, 2006
	Shares		Weighted Average Value		Shares		Weighted Average Value
Issued and unvested, beginning of period	12,907		$	21.54	1,855		$	19.42
Forfeited	(1,093	)		21.86	—			—
Granted	—			—	11,232			21.86
Vested	(195	)		19.58	(90	)		19.58
Issued and unvested, end of period	11,619		$	21.54	12,997		$	21.53

The aggregate intrinsic value of unvested stock grants at December 31, 2007 and 2006 was $163 and $305 respectively.

8. Commitments, Contingencies and Guarantees

(Dollars in thousands)

The Company regularly enters into transactions that generate off-balance sheet risk. These transactions include commitments to originate loans, commitments to sell loans, loans with future commitments to disburse funds such as construction loans and lines of credit and recourse obligations for loans sold and letters of credit. The Company enters into these transactions to meet customer needs or to facilitate the sale of assets. These transactions are recorded on the books of the Company based on their estimated fair value. The nominal values of these off-balance sheet transactions as of December 31, 2007 are shown below.

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	Nominal value		Current asset / (liability) value
GUARANTEE OBLIGATIONS
Loans sold with recourse	$	296,166	$	(66	)
Standby letters of credit		2,779		—
OTHER OBLIGATIONS
Commitments to make loans (at market rates)	$	192,336
Construction loan funds not yet disbursed		148,352
Unused lines of credit and commercial letters of credit		300,041
Mortgage-backed securities sales commitments		80,000

The loans sold with recourse were sold to government-sponsored enterprises and others. This recourse is limited and is eliminated when the loans reach certain loan to value ratios. The Company is able to estimate credit losses associated with sold loans where recourse currently exists. Therefore, a liability has been established to recognize those credit losses.

9. Earnings per Share

(Dollars in thousands, except per share data.)

The computation of basic and diluted earnings per share is shown in the following table:

	Three months ended December 31,						Six months ended December 31,
	2007			2006			2007			2006
Basic earnings per share computation:
Net (loss) income	$	(3,147	)	$	6,530		$	3,107		$	13,532
Gross weighted average shares outstanding		16,540,250			17,465,402			16,737,468			17,454,385
Less: Average unearned ESOP shares		(366,063	)		(425,222	)		(373,412	)		(432,668	)
Less: Average unearned RRP shares		(78,554	)		(81,517	)		(78,937	)		(81,975	)
Net weighted average shares outstanding		16,095,633			16,958,663			16,285,119			16,939,742
Basic (loss) earnings per share	$	(0.20	)	$	0.39		$	0.19		$	0.80
Diluted earnings per share computation:
Net (loss) income	$	(3,147	)	$	6,530		$	3,107		$	13,532
Weighted average shares outstanding for basic earnings per share		16,095,633			16,958,663			16,285,119			16,939,742
Add: Dilutive effects of assumed exercises of stock options		—			249,123			97,969			244,451
Add: Dilutive effects of unearned Recognition and Retention Plan shares		—			714			—			617
Weighted average shares and potentially dilutive shares		16,095,633			17,208,500			16,383,088			17,184,810
Diluted (loss) earnings per share	$	(0.20	)	$	0.38		$	0.19		$	0.79

There were stock options for 242,241 shares that were antidilutive for the three and six months ending December 31, 2007. These stock options were not considered in the computation of diluted earnings per share. There were no stock options that were antidilutive for the three and six month periods ending December 31, 2006.

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10. Impairment of securities

(Dollars in thousands)

During the quarter ended December 31, 2007, the Company determined that two mutual fund securities and certain Fannie Mae and Freddie Mac preferred stock experienced impairment that was other-than-temporary. Analysis of activity for the six months ended December 31, 2007 follows.

	Amortized cost			Unrealized gain			Unrealized Loss			Fair market value
June 30, 2007	$	50,680		$	2,954		$	(1,730	)	$	51,904
Change in market value		—			(2,954	)		(4,170	)		(7,124	)
Recognition of impairment		(5,900	)		—			5,900			—
December 31, 2007	$	44,780		$	—		$	—		$	44,780

11. Acquisition

(Dollars in thousands)

On October 31, 2007, the Company completed its acquisition of Hicksville Building, Loan and Savings Bank (HBLS Bank), located in Hicksville, Ohio. As of that date, the Company acquired $48,789 in assets, which included $33,204 in loans and assumed $39,970 in deposits and $9,172 in long-term debt. On November 26, 2007, the Company’s two federally chartered savings association subsidiaries, HBLS Bank and First Place Bank merged into a single federal savings association with the name First Place Bank.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following analysis discusses changes in First Place Financial Corp.’s (Company) results of operations and financial condition during the periods included in the Condensed Consolidated Financial Statements, which are part of this filing.

Forward-Looking Statements

When used in this Form 10-Q, or future press releases or other public or shareholder communications, in filings by First Place Financial Corp. (the Company) with the Securities and Exchange Commission or in oral statements made with the approval of an authorized executive officer, words or phrases such as “will likely result,” “expect,” “will continue,” “anticipate,” “estimate,” “project,” “believe,” “should,” “may,” “will,” “plan,” variations of such terms or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Company’s actual results to be materially different from those indicated. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the market areas the Company conducts business, which could materially impact credit quality trends, changes in laws, regulations or policies of regulatory agencies, fluctuations in interest rates, demand for loans in the market areas the Company conducts business, and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company does not undertake to update or revise forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made, except as required under applicable laws.

Business Overview

Background.The Company is a unitary savings and loan holding company formed as a result of the conversion of First Place Bank (formerly known as First Federal Savings and Loan Association of Warren) from a federally chartered mutual savings and loan association to a federally chartered stock savings association in December 1998. First Federal Savings and Loan Association of Warren originally opened for business in 1922. In May 2000, the Company acquired Ravenna Savings Bank of Ravenna, Ohio. In December 2000, the Company completed a merger of equals with FFY Financial Corp. of Youngstown, Ohio. In May 2004, the Company acquired Franklin Bancorp, Inc. of Southfield, Michigan. In June 2006, the Company acquired The Northern Savings & Loan Company of Elyria, Ohio.

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On April 27, 2007, the Company acquired seven retail banking offices from Republic Bancorp, Inc. and Citizens Banking Corporation (Citizens) in the greater Flint, Michigan area. The transaction resulted in the Bank assuming $200 million in deposits, receiving $29 million in fixed assets and consumer loans and $164 million in cash. Management believes that this acquisition positions the Company to achieve the goal of strengthening its base of core deposit funds to meet growing demand in the commercial sector. It also represents a natural extension of its footprint in the Michigan market by expanding its retail banking office presence into the Flint, Michigan area.

On October 31, 2007, the Company completed its acquisition of Hicksville Building, Loan and Savings Bank (HBLS Bank), located in Hicksville, Ohio. As of that date, the Company acquired $48,789 in assets, which included $33,204 in loans and assumed $39,970 in deposits and $9,172 in long-term debt. On November 26, 2007, the Company’s two federally chartered savings association subsidiaries, HBLS Bank and First Place Bank merged into a single federal savings association with the name First Place Bank.

First Place Bank is a community oriented financial institution engaged primarily in the gathering of deposits to originate residential, commercial and consumer loans. It currently operates in Ohio, Michigan, Indiana, Pennsylvania and North Carolina with a concentration of banking offices in Northeast Ohio and Southeast Michigan. First Place Bank also operates loan production offices in various cities in Ohio, Michigan, Indiana and North Carolina. In addition, the Company, through its subsidiaries, owns affiliates that operate in the following industries: real estate brokerage, title insurance, investment brokerage and general insurance. As of December 31, 2007, the Company had $3.3 billion in assets and was the second largest publicly traded thrift institution in Ohio.

Strategic Plan. The Company seeks to grow assets and fees in order to grow net income. Currently, the Company seeks to grow by increasing market share in current markets, expanding into new markets in the Midwest by opening de novo banking offices and new loan production offices as well as through acquisitions of other financial institutions. The Company evaluates acquisition targets based on the economic viability of the markets they are in, the degree to which they can be efficiently integrated into current operations and the degree to which they are accretive to earnings, initially and over time.

The Company provides a return to its shareholders by taking on various levels of credit risk, interest rate risk, liquidity risk and capital risk in order to achieve profits. The Company’s goal of achieving high levels of profitability on a consistent basis is balanced with what management believes are acceptable levels of risk in each area. The Company uses certain financial ratios and other financial measures to monitor profitability and to monitor the levels of risk. Those ratios and financial measures are shown below.

Results of Operations

Comparison of the Three and Six Months Ended December 31, 2007 and 2006

Selected Financial Ratios and Other Financial Measures

(Dollars in thousands, except per share data)

	Three Months Ended December 31,						Increase (Decrease)
	2007			2006			Amount			Percent
Total assets	$	3,304,274		$	3,074,252		$	230,022		7.5	%
Net income (loss)	$	(3,147	)	$	6,530		$	(9,677	)	(148.2	)%
Diluted earnings (loss) per share	$	(0.20	)	$	0.38		$	(0.58	)	(152.6	)%
Return on average equity		(3.93	)%		8.06	%				(11.99	)%
Return on average assets		(0.39	)%		0.86	%				(1.25	)%
Net interest margin		2.92	%		3.04	%				(0.12	)%
Efficiency ratio		99.17	%		60.54	%				38.63	%
Noninterest expense as a percent of average assets		2.76	%		2.29	%				0.47	%
Non-performing assets to total assets		1.69	%		0.96	%				0.73	%
Equity to total assets		9.45	%		10.55	%				(1.10	)%
Tangible equity to tangible assets		6.42	%		7.44	%				(1.02	)%

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Summary. The Company recorded a net loss of $3.1 million for the quarter ended December 31, 2007, compared with net income of $6.5 million for the quarter ended December 31, 2006, a decrease of $9.6 million or 148.2%. Losses per share were $0.20 for the current quarter compared with diluted earnings per share of $0.38 for the same quarter in the prior year, a decrease of $0.58. Return on average equity for the current quarter was -3.93% compared with 8.06% for the same quarter in the prior year. Return on average tangible equity for the current quarter was -5.91% compared with 11.90% for the same quarter in the prior year. The significant decline in earnings was primarily due to charges recorded in the current quarter in four categories that totaled $11.0 million before taxes. They included a $5.9 million charge for impairment of securities, a $3.2 million increase in the provision for loan losses, a $1.1 million charge for an increase in the provision for loss on the sale of real estate owned and a $0.8 million charge for merger expenses. These charges decreased earnings by $7.1 million after considering income taxes. Total assets increased $230 million to $3.304 billion at December 31, 2007 from $3.074 billion at December 31, 2006. The increase in total assets was primarily due to an increase in the commercial loan portfolio. Non-performing assets as a percent of total assets increased to 1.69% from 0.96% a year earlier.

Selected Financial Ratios and Other Financial Measures

(Dollars in thousands, except per share data)

	Six Months Ended December 31,						Increase (Decrease)
	2007			2006			Amount			Percent
Total assets	$	3,304,274		$	3,074,252		$	230,022		7.5	%
Net income	$	3,107		$	13,532		$	(10,425	)	(77.0	)%
Diluted earnings per share	$	0.19		$	0.79		$	(0.60	)	(75.9	)%
Return on average equity		1.93	%		8.42	%				(6.49	)%
Return on average assets		0.19	%		0.88	%				(0.69	)%
Net interest margin		2.93	%		3.14	%				(0.21	)%
Efficiency ratio		78.57	%		60.82	%				17.75	%
Noninterest expense as a percent of average assets		2.66	%		2.36	%				0.30	%
Non-performing assets to total assets		1.69	%		0.96	%				0.73	%
Equity to total assets		9.45	%		10.55	%				(1.10	)%
Tangible equity to tangible assets		6.42	%		7.44	%				(1.02	)%

Summary. For the six months ended December 31, 2007, the Company reported net income of $3.1 million compared with $13.5 million for the same period in the prior year, or a decrease of 77.0%. Diluted earnings per share were $0.19 for the first half of fiscal 2008 compared with $0.79 for the same period in the prior year, or a decrease of 75.9%. Return on average assets and return on average equity for the six months ended December 31, 2007 were 0.19% and 1.93% respectively, down from 0.88% and 8.42% for the six months ended December 31, 2006. Return on average tangible equity for the first half of fiscal 2008 was 2.90% compared with 12.51% for the same period in the prior year. The significant decline in earnings was primarily due to charges recorded in the current quarter in four categories that totaled $11.0 million before taxes. They included a $5.9 million charge for impairment of securities, a $3.2 million increase in the provision for loan losses, a $1.1 million charge for an increase in the provision for loss on the sale of real estate owned and a $0.8 million charge for merger expenses. These charges decreased earnings by $7.1 after considering income taxes. Total assets increased $230 million to $3.304 billion at December 31, 2007 from $3.074 billion at December 31, 2006. The increase in total assets was primarily due to an increase in the commercial loan portfolio. Non-performing assets as a percent of total assets increased to 1.69% from 0.96% a year earlier.

Explanation of Certain Non-GAAP Measures.This Form 10-Q contains certain financial information determined by methods other than Generally Accepted Accounting Principles (GAAP). Specifically, the Company has provided financial measures that are based on core earnings rather than net income. Ratios and other financial measures with the word Core in their title were computed using core earnings rather than net income. Core earnings excludes merger, integration and restructuring expense, extraordinary income or expense, income or expense from discontinued operations, and income, expense, gains and losses that are not reflective of ongoing

16

operations or that we do not expect to reoccur. Management of the Company believes that this information is useful to both investors and to management and can aid them in understanding the Company’s current performance, performance trends and financial condition. While core earnings can be useful in evaluating current performance and projecting current trends into the future, management does not believe that core earnings are a substitute for GAAP net income. We encourage investors and others to use core earnings as a supplemental tool for analysis and not as a substitute for GAAP net income. The Company’s non-GAAP measures may not be comparable to the non-GAAP numbers of other companies. In addition, future results of operations may include nonrecurring items that would not be included in core earnings. A reconciliation from GAAP net income to the non-GAAP measure of core earnings is shown below.

	Three months ended December 31,					Six months ended December 31,
	2007			2006		2007		2006
	(Dollars in thousands)
Reconciliation of GAAP Net Income To Core Earnings
GAAP Net (loss) income	$	(3,147	)	$	6,530	$	3,107	$	13,532
Merger, integration and restructuring expense, net of tax		514			—		514		—
Other-than-temporary impairment of securities, net of tax		3,835			—		3,835		—
Core earnings	$	1,202		$	6,530	$	7,456	$	13,532

Core earnings for the quarter ended December 31, 2007 were $1.2 million, an 81.6% decrease over core earnings of $6.5 million for the same quarter in the prior year. Diluted core earnings per share were $0.07 for the quarter ended December 31, 2007 compared with $0.38 for the prior year quarter. Core earnings for the six months ended December 31, 2007 were $7.5 million, a 44.9% decrease from core earnings of $13.5 million for the same period in the prior year. Diluted core earnings per share were $0.46 for the six months ended December 31, 2007 compared with $0.79 for the same period in the prior year. The decrease in core earnings for the second quarter of fiscal 2008 compared to the same period in the prior year was primarily due to increases of $3.2 million in the provision for loan losses and $1.1 million in the provision for loss on the sale of real estate owned. The decrease in core earnings for the first six months of fiscal 2008 compared to the same period in the prior year was primarily due to the same charges in the December 31, 2007 quarter, charges of $3.2 million in the provision for loan losses and $1.1 million in the provision for loss on the sale of real estate owned.

Net Interest Income.Net interest income for the quarter ended December 31, 2007, totaled $21.6 million, an increase of $0.7 million or 3.1% from $20.9 million for the quarter ended December 31, 2006. The increase in net interest income resulted from an increase of $190.1 million or 6.8% in average interest-earning assets compared to the same quarter in the prior year, partially offset by a decline in the net interest margin to 2.92%, down from 3.04% in the prior year quarter. The decrease in net interest margin from the same period in the prior year was the result of experiencing an inverted yield curve for substantially all of fiscal 2007 and the impact of 100 basis points in Federal Reserve short-term interest rate decreases between September 2007 and December 2007 as the Company is modestly asset sensitive for periods less than six months. The Company anticipates increased downward pressure on the net interest margin in the third fiscal quarter of 2008 due to a reduction in short-term interest rates made by the Federal Reserve in January, 2008.

The average yield on interest-earning assets was 6.55% for the quarter ended December 31, 2007, which was level with the same quarter in the prior year. The components of the yield on interest-earning assets include the yields on loans, securities, Federal Home Loan Bank stock and interest-bearing deposits in other banks. The increase in the average of interest-earning assets was primarily due to commercial loans. The average rate paid on interest-bearing liabilities was 4.13% for the quarter ended December 31, 2007 compared to 4.04% for the prior year quarter, an increase of 9 basis points. This increase was due to increases in the average rates paid on deposits, partially offset by decreases in the average rates paid on borrowings. The increase in the cost of deposits was primarily due to competition from other financial institutions in the Company’s market area. The decrease in the cost of borrowings was primarily due to the impact of 100 basis points in Federal Reserve short-term interest rate decreases between September 2007 and December 2007.

Net interest income for the six months ended December 31, 2007, totaled $42.9 million, a decrease of $0.7 million or 1.6% from $43.6 million for the quarter ended December 31, 2006. The decrease in net interest income resulted from a decline in the net interest

17

margin to 2.93%, down from 3.14% for the first half of the prior year, partially offset by an increase of $141.9 million or 5.0% in average interest-earning assets compared to the same period in the prior year. The decrease in net interest margin from the same period in the prior year was the result of experiencing an inverted yield curve for substantially all of fiscal 2007 and the impact of 100 basis points in Federal Reserve short-term interest rate decreases between September 2007 and December 2007 as the Company is modestly asset sensitive for periods less than six months. The Company anticipates increased downward pressure on the net interest margin in the last half of fiscal 2008 due to a reduction in short-term interest rates made by the Federal Reserve in January, 2008.

The average yield on interest-earning assets was 6.58% for the six months ended December 31, 2007, which was level with the same period in the prior year. The components of the yield on interest-earning assets include the yields on loans, securities, Federal Home Loan Bank stock and interest-bearing deposits in other banks. The increase in the average of interest-earning assets was primarily due to commercial loans. The average rate paid on interest-bearing liabilities was 4.15% for the six months ended December 31, 2007 compared to 3.92% for the same period in the prior year, an increase of 23 basis points. This increase was due to increases in the average rates paid on deposits and long-term debt, partially offset by a decrease in the average rate paid on short-term borrowings. The increase in the cost of deposits was primarily due to competition from other financial institutions in the Company’s market area. The increase in the cost of long-term debt was primarily due to the recognition of a $0.9 million reduction of interest expense in the first half of the prior year. This reduction represented the unamortized balance of a purchase accounting premium on a Federal Home Loan Bank advance that was called. The decrease in the cost of short-term borrowings was primarily due to the impact of 100 basis points in Federal Reserve short-term interest rate decreases between September 2007 and December 2007.

The following schedules detail the various components of net interest income for the three and six months ended December 31, 2007 and 2006. All asset yields are calculated on tax-equivalent basis where applicable. Security yields are based on amortized historic cost.

18

Average Balances, Interest Rates and Yields

(Dollars in thousands)

	Three Months Ended December 31, 2007							Three Months Ended December 31, 2006
	Average Balance			Interest		Average Yield/cost		Average Balance			Interest		Average Yield/cost
ASSETS
Interest-earning assets
Loans and loans held for sale	$	2,673,547		$	44,800	6.67	%	$	2,497,247		$	41,729	6.68	%
Securities and interest-bearing deposits		282,086			3,862	5.45	%		269,230			3,719	5.53	%
Federal Home Loan Bank stock		33,809			595	7.00	%		32,891			492	6.01	%
Total interest-earning assets		2,989,442			49,257	6.55	%		2,799,368			45,940	6.56	%
Noninterest-earning assets
Cash and due from banks		48,582							60,187
Allowance for loan losses		(27,379	)						(23,283	)
Other assets		226,296							187,438
Total assets	$	3,236,941						$	3,023,710
LIABILITIES
Interest-bearing liabilities
Deposits
Checking accounts	$	147,575			209	0.56	%	$	136,842			171	0.49	%
Savings and money market accounts		809,319			6,683	3.28	%		759,921			5,621	2.93	%
Certificates of deposit		1,080,568			13,159	4.84	%		987,596			11,761	4.72	%
Total deposits		2,037,462			20,051	3.92	%		1,884,359			17,553	3.70	%
Borrowings
Short-term borrowings		176,987			1,829	4.11	%		211,804			2,776	5.20	%
Long-term debt		416,974			5,446	5.19	%		328,098			4,334	5.24	%
Total interest-bearing liabilities		2,631,423			27,326	4.13	%		2,424,261			24,663	4.04	%
Noninterest-bearing liabilities
Noninterest-bearing checking accounts		242,158							234,469
Other liabilities		44,451							43,524
Total liabilities		2,918,032							2,702,254
Shareholders’ equity		318,909							321,456
Total liabilities and shareholders equity	$	3,236,941						$	3,023,710
Fully tax-equivalent net interest income					21,931							21,277
Interest rate spread						2.42	%						2.52	%
Net interest margin						2.92	%						3.04	%
Average interest-earning assets to average interest-bearing liabilities						113.61	%						115.47	%
Tax-equivalent adjustment					373							375
Net interest income				$	21,558						$	20,902

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Average Balances, Interest Rates and Yields

(Dollars in thousands)

	Six Months Ended December 31, 2007							Six Months Ended December 31, 2006
	Average Balance			Interest		Average Yield/cost		Average Balance			Interest		Average Yield/cost
ASSETS
Interest-earning assets
Loans and loans held for sale	$	2,653,682		$	89,342	6.70	%	$	2,518,918		$	84,593	6.72	%
Securities		281,262			7,666	5.42	%		274,907			7,503	5.46	%
Federal Home Loan Bank stock		33,509			1,129	6.70	%		32,709			955	5.79	%
Total interest-earning assets		2,968,453			98,137	6.58	%		2,826,534			93,051	6.58	%
Noninterest-earning assets
Cash and due from banks		49,241							60,620
Allowance for loan losses		(26,696	)						(22,922	)
Other assets		220,464							196,551
Total assets	$	3,211,462						$	3,060,783
LIABILITIES
Interest-bearing liabilities
Deposits
Checking accounts	$	148,681			393	0.53	%	$	137,353			337	0.49	%
Savings and money market accounts		799,434			13,062	3.25	%		751,745			10,754	2.84	%
Certificates of deposit		1,065,811			26,095	4.87	%		970,813			22,672	4.63	%
Total deposits		2,013,926			39,550	3.91	%		1,859,911			33,763	3.60	%
Borrowings
Short-term borrowings		186,167			4,238	4.53	%		281,825			7,264	5.11	%
Long-term debt		409,072			10,673	5.19	%		320,630			7,658	4.74	%
Total interest-bearing liabilities		2,609,165			54,461	4.15	%		2,462,366			48,685	3.92	%
Noninterest-bearing liabilities
Noninterest-bearing checking accounts		238,799							231,272
Other liabilities		42,857							48,189
Total liabilities		2,890,821							2,741,827
Shareholders’ equity		320,641							318,956
Total liabilities and shareholders equity	$	3,211,462						$	3,060,783
Fully tax-equivalent net interest income					43,676							44,366
Interest rate spread						2.43	%						2.66	%
Net interest margin						2.93	%						3.14	%
Average interest-earning assets to average interest-bearing liabilities						113.77	%						114.79	%
Tax-equivalent adjustment					746							732
Net interest income				$	42,930						$	43,634

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Provision for Loan Losses. Non-performing loans were $46.3 million, or 1.75% of total loans at December 31, 2007 compared with $25.7 million, or 1.06% at December 31, 2006. The increase in the provision in the current quarter compared with the prior year quarter is based on the large increase in nonperforming loans during the first and second quarters of fiscal 2008. With the increase in nonperforming loans, management performed a review of all classified commercial loans and a review of the historic loss rates on residential and consumer loans. Based on the review, a provision for loan losses of $5.2 million was recorded for the quarter ended December 31, 2007 compared to $1.4 million for the quarter ended December 31, 2006. Net charge-offs were $5.3 million for the quarter ended December 31, 2007 and $0.8 million for the same quarter in the prior year. The current quarter charge-offs included $3.9 million of commercial charge-offs that were a direct result of management’s review of commercial loans. Total loans were $2.648 billion at December 31, 2007 compared with $2.423 billion at December 31, 2006. The provision for loan losses was $7.2 million for the six months ended December 31, 2007 compared with $2.8 million for the six months ended December 31, 2006. Net charge-offs for the first half of fiscal 2008 were $6.9 million compared with $1.7 million for the same period in the prior year. The amount of the provision for loan losses in the first half of fiscal 2008 compared with the same period in the prior year is consistent with the increase in non-performing loans and total loans.

Noninterest Income. Noninterest income totaled $0.7 million for the quarter ended December 31, 2007, a decrease of $6.8 million or 90.5% from $7.5 million in the same quarter in the prior year. For the six months ended December 31, 2007, noninterest income totaled $10.9 million, a decrease of $4.5 million or 29.3% from $15.4 million for the same period in the prior year. The majority of the decrease for the current quarter and first half of fiscal 2008 was due to recording $5.9 million of other than temporary impairment of securities in the current quarter compared with none in the same periods in the prior year.

Generally accepted accounting principles require a company to make a determination whether an impairment is temporary or other-than-temporary. Among other determining factors, an other-than-temporary impairment occurs when the market value of a security falls significantly below amortized cost and there is a low probability of the security recovering its loss in the near term. All of the securities currently on the books of the Company are classified as available for sale. Therefore, all securities are recorded in the statement of condition at market value. This is accomplished by a credit or charge to other comprehensive income, and those market value changes are not reflected in the income statement. If securities are impaired and the impairment is determined to be other-than-temporary, the securities are written down by reversing the existing charge to other comprehensive income and recording a charge to the income statement.

The $5.9 million pre-tax charge for other than temporary impairment of securities is composed of a $4.3 million charge related to $11.3 million of Fannie Mae and Freddie Mac preferred stock and a $1.6 million charge related to $33.5 million in mutual fund securities. Recent capital restructuring at Fannie Mae and Freddie Mac and developments in the residential mortgage business have resulted in impairment of these securities. Due to the uncertainty of future market conditions and how they might impact the financial performance of Fannie Mae and Freddie Mac, management was unable to determine when or if this impairment will be reversed in the foreseeable future. The mutual funds were primarily invested in agency backed mortgage securities that did not have any significant exposure to subprime mortgages. Recent changes in the interest rate environment and the market for mortgage-backed securities has led management to conclude that these securities are other than temporarily impaired. The $5.9 million charge did not have any effect on total capital or the net asset value of the securities as they had already been recorded at market value as available for sale securities.

Service charges increased $0.6 million, or 40.5% to $2.1 million for the quarter ended December 31, 2007, as compared with $1.5 million for the prior year quarter. Service charges increased $1.1 million, or 34.6% to $4.1 million for the six months ended December 31, 2007, as compared with $3.0 million for the same period in the prior year. The increases for the current quarter and first half of fiscal 2008 were primarily due to the impact of the Flint, Michigan branches acquired in April 2007, the banking office of HBLS Bank in Hicksville, Ohio acquired in October 2007 and the effectiveness of procedural changes, implemented during the third quarter of fiscal year 2007, in the way service charges on deposit accounts are levied.

Net gain on the sale of securities for the current quarter remained consistent with the same quarter in the prior year. For the six months ended December 31, 2007, net gain on the sale of securities increased $0.6 million to a $0.7 million gain for the six months ended December 31, 2007 from a $0.1 million gain for the same period in the prior year.

Net gains on the sale of loans for the quarter ended December 31, 2007 decreased $0.6 million or 34.3% and was $1.1 million compared with $1.6 million for the quarter ended December 31, 2006. The volume of loan sales in the current quarter was $242

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million, up $45 million from sales of $197 million in the same quarter in the prior year. The margin on loans was lower in the current quarter compared with the prior year quarter due to the impact of hedging and the accounting for loans held for sale. Long-term interest rates were falling at the end of the current quarter resulting in hedge losses, which are recognized immediately as derivatives are recorded at fair value. The offsetting economic gains occurred in an increase in the value of loans held for sale. However, loans held for sale are recorded at the lower of cost or market so no corresponding gains were recognized. These gains will be realized next quarter as those loans held for sale are sold. For the current quarter, 45% of the volume of loan sales was with servicing released.

Net gains on the sale of loans for the six months ended December 31, 2007 decreased $0.8 million or 21.7% and were $2.9 million compared with $3.7 million for the same period in the prior year. The volume of loan sales for the first half of fiscal 2008 was $536 million, up $19 million from sales of $517 million in the same period in the prior year. However, the gains in the first half of the prior fiscal year included $1.5 million on the sale of $98 million of loans held for sale that were obtained as part of the acquisition of The Northern Savings and Loan Company of Elyria, Ohio in June 2006. For the six months ended December 31, 2007, 52% of the volume of loan sales was with servicing released.

During the first quarter of fiscal year 2008, the Company sold loan servicing rights with a book value of $10.5 million, which represented loans with principal balances totaling $1.1 billion or approximately 50% of the Company’s existing loan servicing rights portfolio at the time of sale. The purpose of the sale was to reduce the size of the servicing asset in order to reduce volatility associated with income from loan servicing rights, to reduce exposure to impairment losses and to take advantage of a favorable market for loan servicing rights. The gain on the sale was $1.5 million, and the Company’s only other previous sale of loan servicing rights was in fiscal year 2006. Management expects to sell servicing rights in the future to continue to limit the volatility of income from loan servicing rights. However, the exact timing of future sales is not currently known and will be based on future loan origination volumes, the proportion of loans initially sold with servicing rights retained and the market for the sale of loan servicing rights.

Loan servicing income is composed of the current fees generated from the servicing of sold loans less the current amortization of mortgage servicing rights (MSR) and the adjustment for any change in the allowance for impairment of MSRs, which are valued at the lower of cost or market. The valuation of MSRs is a critical accounting policy and the Company utilizes the services of an independent firm in determining market values. Both the amortization and the valuation of MSRs are sensitive to movements in interest rates. Both amortization and impairment valuation allowances tend to increase as rates fall and tend to decrease as rates rise. However, the level of amortization is a function of interest rates over the period while the level of impairment valuation allowances is a function of interest rates at the end of the period. During the past two years, both short-term and long-term interest rates have varied significantly and have not moved in tandem resulting in significant shifts in the shape and slope of the yield curve. The level and variability in interest rates over that period have resulted in significant variations in loan servicing income, including changes in the level of impairment of MSRs. The table below shows how the change in the impairment of MSRs has affected loan servicing income.

	Three months ended December 31,						Six months ended December 31,
	2007			2006			2007			2006
	(Dollars in thousands)
Loan servicing income (loss)
Loan servicing revenue, net of amortization	$	159		$	303		$	449		$	506
Change in impairment		(305	)		(55	)		(305	)		(35	)
Total loan servicing income	$	(146	)	$	248		$	144		$	471

The decrease in total loan servicing income in the current quarter compared with the prior year quarter was due to an increase in impairment charges and a decrease in net loan servicing revenue. The decrease in loan servicing revenue was due to the sale of 50% of the Company’s existing loan servicing rights portfolio during the first quarter of fiscal 2008. The decrease in total loan servicing income in the current six months period compared with the prior year period was due to an increase in impairment charges and to a lesser extent from a decrease in net loan servicing revenue.

Noninterest Expense.Noninterest expense increased $5.0 million or 28.9% to $22.5 million for the three months ended December 31, 2007, compared with the same quarter in the prior year. Annualized noninterest expense as a percent of average assets was 2.76% for the quarter ended December 31, 2007 compared to 2.29% for the prior year quarter. The efficiency ratio for the three months ended December 31, 2007, was 99.2% compared with 60.5% for the same period in the prior year. The increase in noninterest expense was

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primarily due to an increase in real estate owned expense, merger expenses and the cost related to adding nine branches and four loan production offices over the past nine months. Real estate owned expense increased $1.6 million in the current quarter compared with the same quarter in the prior year. This total included $0.5 million in operating costs and losses on sales and $1.1 million in provision for anticipated losses on future sales. The provision was a direct result of decreasing real estate values experienced in recent months. The balance of real estate owned increased from $3.7 million at December 31, 2006 to $9.6 million at December 31, 2007 accounting for the increase in operating costs and the higher sale activity. On October 31, 2007, the Company completed the acquisition of HBLS Bank in Hicksville, Ohio. In connection with that acquisition, $0.8 million of merger expenses were recorded. After considering the increases in real estate owned costs and merger expenses, the remaining increase in noninterest expense was $2.6 million or 15.4% over the prior year quarter. That increase was concentrated in salaries and employee benefits, occupancy and marketing costs and was primarily due to increases in retail branch locations and loan production offices. At December 31, 2006 First Place had 34 branch locations. In April 2007 seven branches were acquired in the Flint Michigan area. During the second quarter of fiscal 2008 the Hicksville location was acquired and a de novo branch was opened bringing the total number of branches to 43 or a 26.5% increase from a year earlier. The new loan production offices were located in Ohio, Michigan and North Carolina. Excluding locations that were new since December 2006, the increase in noninterest expense for the current quarter from the same quarter in the prior year was $0.6 million or 4.1%.

Noninterest expense increased $6.5 million or 17.9% to $42.9 million for the six months ended December 31, 2007, compared with $36.4 million for the same period in the prior year. Annualized noninterest expense as a percent of average assets was 2.66% for the six months ended December 31, 2007 compared to 2.36% for the same period in the prior year. The efficiency ratio for the six months ended December 31, 2007, was 78.6% compared with 60.8% for the same period in the prior year. The increase in noninterest expense was primarily due to an increase in real estate owned expense, merger expenses and the cost related to adding nine branches and four loan production offices over the past nine months. Real estate owned expense increased $1.8 million in the first half of fiscal 2008 compared with the same period in the prior year. This total included $0.7 million in operating costs and losses on sales and $1.1 million in provision for anticipated losses on future sales. The provision was a direct result of decreasing real estate values experienced in recent months. The balance of real estate owned increased from $3.7 million at December 31, 2006 to $9.6 million at December 31, 2007 accounting for the increase in operating costs and the higher sale activity. On October 31, 2007 the Company completed the acquisition of HBLS Bank in Hicksville, Ohio. In connection with that acquisition $0.8 million of merger expenses were recorded. After considering the increases in real estate owned costs and merger expenses, the remaining increase in noninterest expense was $3.9 million or 10.8% over the same period in the prior year. That increase was concentrated in salaries and employee benefits, occupancy and marketing costs and was primarily due to increases in retail branch locations and loan production offices. At December 31, 2006 First Place had 34 branch locations. In April 2007 seven branches were acquired in the Flint Michigan area. During the second quarter of fiscal 2008 the Hicksville location was acquired and a de novo branch was opened bringing the total number of branches to 43 or a 26.5% increase from a year earlier. The new loan production offices were located in Ohio, Michigan and North Carolina. Excluding locations that were new since December 2006, the increase in noninterest expense for the first half of fiscal 2008 from the same period in the prior year was $0.9 million or 2.7%.

Income Taxes. An income tax benefit of $2.2 million was recorded for the three months ended December 31, 2007, compared with income tax expense of $3.0 million for the prior year quarter. The effective tax benefit rate was 41.5% for the three months ended December 31, 2007 compared with an effective tax rate of 31.8% for the prior year quarter. Income tax expense was $0.7 million for the six months ended December 31, 2007 compared with $6.4 million for the prior year period. The effective tax rate was 18.1% for the six months ended December 31, 2007 compared with 32.0% for the prior year period. The changes in the effective tax rate were due to varying levels of pretax income or loss related to relatively constant levels of permanent tax adjustments.

Financial Condition

General. Assets totaled $3.304 billion at December 31, 2007, an increase of $78 million or 2.4% from June 30, 2007. The acquisition of HBLS Bank on October 31, 2007 accounted for $48 million of the increase in total assets. The increase in total assets was also due to a net increase in the loan portfolio of $140 million, partially offset by decreases of $30 million in cash and due from banks, $17 million in securities available for sale and $23 million in loans held for sale. Capital ratios decreased as the ratio of equity to total assets decreased at December 31, 2007 to 9.45% compared with 10.11% at June 30, 2007. Tangible equity also decreased to $205 million at December 31, 2007 compared with $218 million at June 30, 2007.

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Securities. Securities available for sale totaled $268 million at December 31, 2007, compared to $285 million at June 30, 2007, a decrease of $17 million or 6.1%. During the first six months of fiscal 2008, the Company received proceeds from sales of securities of $10 million, proceeds from maturities and calls of $27 million and recorded a $6 million charge for other than temporary impairment of securities, partially offset by purchases of $23 million. The decrease resulted from securities that matured or were sold during the first half of fiscal 2008 and were not replaced, as well as the other than temporary impairment charge.

Loans Held for Sale.Loans held for sale totaled $73 million at December 31, 2007, compared to $96 million at June 30, 2007, a decrease of $23 million or 24.6%. The decrease was due to a shortened time span between the time an interest rate is locked for a loan closing and the subsequent sale of the loan and a seasonal decrease in the volume of mortgage banking activity.

Loans. The loan portfolio totaled $2.648 billion at December 31, 2007, an increase of $140 million, or 5.6% from June 30, 2007. The increase in the loan portfolio was due to an increase of $2 million, or 0.4% annualized, in mortgage and construction loans, an increase of $126 million, or 24.1% annualized, in commercial loans and an increase of $12 million, or 6.5% annualized in consumer loans. At December 31, 2007, commercial loans accounted for 44.3% of the loan portfolio, which is up from 41.7% at June 30, 2007.

	As of December 31, 2007				As of June 30, 2007
	Amount		Percent		Amount		Percent
	(Dollars in thousands)
Mortgage and construction	$	1,081,719	40.9	%	$	1,079,788	43.0	%
Commercial		1,173,115	44.3	%		1,046,893	41.7	%
Consumer		393,383	14.8	%		381,011	15.3	%
Total loans	$	2,648,217	100.0	%	$	2,507,692	100.0	%

Non-performing Assets and Allowance for Loan Losses.The following table indicates asset quality data over the past five quarters.

Asset Quality History

(Dollars in thousands)

	12/31/07			9/30/07			06/30/07			3/31/07			12/31/06
Non-performing assets	$	55,914		$	46,848		$	40,678		$	32,732		$	29,439
Non-performing assets as a % of total assets		1.69	%		1.46	%		1.26	%		1.06	%		0.96	%
Non-performing loans	$	46,322		$	36,832		$	33,962		$	27,630		$	25,702
Non-performing loans as a % of total loans		1.75	%		1.45	%		1.35	%		1.14	%		1.06	%
Delinquent loans	$	77,234		$	61,803		$	53,389		$	45,351		$	40,650
Delinquent loans as a % of total loans		2.92	%		2.43	%		2.13	%		1.87	%		1.68	%
Allowance for loan losses	$	26,360		$	26,165		$	25,851		$	23,844		$	23,425
Allowance for loan losses as a % of loans		1.00	%		1.03	%		1.03	%		0.98	%		0.97	%
Allowance for loan losses as a % of non-performing loans		56.91	%		71.04	%		76.12	%		86.30	%		91.14	%

Management analyzes the adequacy of the allowance for loan losses regularly through reviews of the performance of the loan portfolio considering economic conditions, changes in interest rates and the effect of such changes on real estate values, changes in the composition of the loan portfolio, and trends in past due and non-performing loans. The allowance for loan losses is a significant estimate that is particularly susceptible to changes in the near term and is established through a provision for loan losses based on management’s evaluation of the risk in the Company’s loan portfolio and the general economy. This evaluation, which includes a review of all loans for which full collectibility may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an adequate loan loss allowance. Future additions to the allowance for loan losses will be dependent on these factors. The Company maintains an allowance for loan losses at a level adequate to absorb management’s estimate of probable losses in the loan portfolio.

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Non-performing assets at December 31, 2007 were $55.9 million or 1.69% of total assets compared with $40.7 million or 1.26% of total assets at June 30, 2007. The increase in non-performing assets was due to a $2.9 million increase in real estate owned and an increase of $12.3 million in nonperforming loans. Single-family residential properties represented $8.3 million of the $9.6 million balance of real estate owned at December 31, 2007. Non-performing loans were $46.3 million at December 31, 2007 and $34.0 million at June 30, 2007. All of the increase in non-performing loans was due to increases in mortgage and consumer loans as commercial non-performing loans decreased slightly between June and December 2007. With the increase in nonperforming loans, management performed a review of all classified commercial loans and a review of the historic loss rates on residential and consumer loans. This review had several consequences. First, net charge-offs of $5.3 million were recorded for the quarter ended December 31, 2007. This was an increase of $3.6 million over the quarter ended September 30, 2007. Charge-offs for the current quarter included $3.9 million of commercial loans directly related to management’s review. In addition, certain commercial loans that were not charged off were downgraded. The allowance for loan losses includes specific allowances for loans that were impaired. It also includes loss rates on criticized loans, loss rates on non-criticized loans and loss allowances based on other broad factors. All four components of the allowances were reviewed and adjusted based on recent loss experience, trends in real estate values and other economic factors. Management combined quantitative analysis and experience-based judgment to arrive at the December 31, 2007 level of the allowance for loan losses. The allowance for loan losses increased during the quarter to $26.4 million at December 31, 2007, up $0.5 million from $25.9 million at June 30, 2007. The ratio of allowance for loan losses to total loans was 1.00% at December 31, 2007, down from 1.03% at September 30, 2007 and June 30, 2007. This small decrease in the allowance is reasonable considering the significant reduction in risk accomplished through the $5.3 million of charge-offs in the second quarter of fiscal 2008. Of the total nonperforming loans at December 31, 2007, 98% were secured by real estate. Real estate loans are generally well secured when they are originated and result in lower levels of losses than loans secured by automobiles, other personal property or unsecured loans. If these loans do default, the actual losses are often only a portion of the total loan amount. Delinquent loans were $77.2 million and $53.4 million at December 31, 2007 and June 30, 2007, respectively.

Fixed Assets. Fixed assets increased $6 million to $52 million at December 31, 2007, compared with $46 million at June 30, 2007. The increase in fixed assets is primarily due to the acquisition of HBLS Bank in Hicksville, Ohio and the construction of two new retail offices that were previously located in grocery stores.

Deposits.Deposits increased $59 million or 2.6% during the first six months of fiscal 2008 and totaled $2.300 billion at December 31, 2007, compared to $2.241 billion at June 30, 2007. This increase included $40 million in deposits acquired as part of HBLS Bank in October 2007. The remaining $19 million increase in deposits was composed of increases of $9 million in retail deposits and $10 million in wholesale public fund deposits. At December 31, 2007, the Company had $25 million in brokered deposits, the same as at June 30, 2007. The Company considers these brokered deposits to be an element of a diversified funding strategy and an alternative to borrowings. Management regularly compares rates among retail deposits, brokered deposits and other borrowings to determine the most economical source of funding. The Company anticipates that they will continue to use brokered funds as a funding alternative in the future, but not as the primary source of funding to support growth.

Borrowings and Debt. During the first six months of fiscal year 2008, long-term debt showed an increase of $39 million as a result of a net increase of $98 million in long-term borrowings from the Federal Home Loan Bank and an increase of $9 million in long-term debt from the acquisition of HBLS Bank, partially offset by a $68 million reclassification of borrowings from long-term to short-term. During the first half of fiscal 2008, the Company borrowed $100 million in long-term fixed-rate advances from the Federal Home Loan Bank with original maturities ranging from 84 to 120 months at rates ranging from 3.08% to 4.55% with a weighted average rate of 3.67%. During the first six months of fiscal year 2008, short-term borrowings showed a net increase of $27 million consisting of a $68 million reclassification of borrowings from long-term to short-term, partially offset by a decrease of $34 million in short term borrowings and a maturity of $7 million in securities sold under agreements to repurchase. At December 31, 2007, $131 million of the $222 million of short-term borrowings were in the form of overnight borrowings from the Federal Home Loan Bank. The increases in short-term borrowings and long-term debt were needed to help fund loan growth in the first half of fiscal 2008.

Capital Resources. Total shareholders’ equity decreased $14 million, or 4.3% during the six months ended December 31, 2007, and totaled $312 million. The primary components of the decrease in shareholders’ equity were dividends declared on the Company’s common stock totaling $5.3 million and repurchases of the Company’s common stock totaling $14.1 million, partially offset by net income of $3.1 million. During the first six months of the fiscal year, the Company repurchased 880,086 shares of common stock at

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an average price of $16.04 per share. During March 2007, the Company’s board of directors authorized the purchase of up to 800,000 shares of issued and outstanding common stock over the following 12 month period. In August 2007, the Company’s board of directors authorized the purchase of up to an additional 500,000 shares of issued and outstanding common stock under the original March 2007 authorization. Under those authorizations, 165,069 shares remain of Company common stock available for repurchase through March 20, 2008. The Company does not currently anticipate making any additional treasury stock purchases between January and March, 2008 due to the large volume of purchases already completed this fiscal year. The stock repurchase program is a component of the Company’s strategy to invest or reduce excess capital after consideration of market and economic factors, the effect on shareholder dilution, adequacy of capital and the effect on liquidity. The shares of common stock repurchased will be held as treasury shares and may be used by the Company in its dividend reinvestment plan, its stock option plan, as consideration in an acquisition transaction or for general corporate purposes. Tangible equity also decreased to $205 million at December 31, 2007 compared with $218 million at June 30, 2007.

Office of Thrift Supervision (OTS) regulations require savings institutions to maintain certain minimum levels of regulatory capital. Additionally, the regulations establish a framework for the classification of savings institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. A comparison of the Bank’s actual capital ratios to ratios required to be well capitalized under OTS regulations at December 31, 2007 follows:

	Actual ratio at December 31, 2007		Actual ratio at June 30, 2007		Well-capitalized ratio
Total capital to risk-weighted assets	11.02	%	10.42	%	10.00	%
Tier 1 (core) capital less deductions to risk-weighted assets	10.01	%	9.34	%	6.00	%
Tier 1 (core) capital to adjusted total assets	7.40	%	7.30	%	5.00	%

Critical Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with GAAP and conform to general practices within the banking industry. Some of these accounting policies require management to make estimates and judgments about matters that are uncertain. Application of assumptions different from those used by management could have a material impact on the Company’s financial position or results of operations. These policies are considered critical accounting policies. These policies include the policies to determine the adequacy of the allowance for loan losses and the valuation of the mortgage servicing rights. These policies, current assumptions and estimates utilized and the related disclosure of this process are determined by management and reviewed periodically with the audit committee of the board of directors. Management believes that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time. Details of the policies and the nature of the estimates follow.

Allowance for loan losses. The allowance for loan losses represents management’s estimate of probable incurred credit losses in the portfolio at each balance sheet date. Management analyzes the adequacy of the allowance based on a review of the loans in the portfolio along with an analysis of external factors. Loans are reviewed individually, or in the case of small homogeneous loans, in the aggregate. This review includes historical data, the ability of the borrower to meet the terms of the loan, an evaluation of the collateral securing the loan, various collection strategies and other factors relevant to the loan or loans. External factors considered include but are not limited to economic conditions, current interest rates, trends in the borrower’s industry and the market for various types of collateral. In addition, overall information about the loan portfolio or segments of the portfolio is considered, including industry concentrations, delinquency statistics and workout experience based on factors such as historical loss experience, the nature and volume of the portfolio, loan concentrations, specific problem loans and current economic conditions. As a result, determining the appropriate level for the allowance for loan losses involves not only evaluating the current financial situation of individual borrowers or groups of borrowers but also current predictions about future cash flows that could change before an actual loss is determined. Based on the variables involved and the fact that management must make judgments about outcomes that are uncertain, the determination of the allowance for loan losses is considered to be a critical accounting policy.

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One of the tools utilized by management to determine the appropriate level for the allowance for loan losses is the grading of individual loans according to the severity of the credit issues. An illustration of the sensitivity of this system to changes in conditions or changes in estimates follows. The most serious grading a loan can receive is to be classified as a loss. A loan classified in the loss grade would be 100% reserved and would be subject to charge-off. The next most serious grade is identified as doubtful. At December 31, 2007, the Company had $13.0 million of loans classified as doubtful. If all of these loans were to deteriorate and become classified as a loss, the allowance for loan losses would need to increase by approximately $7.7 million.

Mortgage Servicing Rights. When the Company sells a mortgage loan and retains the rights to service that loan, the amortized cost of the loan is allocated between the loan sold and the mortgage servicing right retained. The basis assigned to the mortgage servicing right is amortized in proportion to and over the life of the net revenue anticipated to be received from servicing the loan. Mortgage servicing rights are valued at the lower of amortized cost or estimated fair value. Fair value is measured by stratifying the portfolio of loan servicing rights into groups of loans with similar risk characteristics. When the amortized cost of a group of loans exceeds the fair value, an allowance for impairment is recorded to reduce the value of the mortgage servicing rights to fair value. Fair value for each group of loans is determined quarterly by obtaining an appraisal from an independent third party. That appraisal is based on a modeling process in conjunction with information on recent bulk and flow sales of mortgage servicing rights. Some of the assumptions used in the modeling process are prepayment speeds, delinquency rates, servicing costs, periods to hold idle cash, returns currently available on idle cash, and a discount rate, which takes into account the current rate of return anticipated by holders of servicing rights. The process of determining the fair value of servicing rights involves a number of judgments and estimates including the way loans are grouped, the estimation of the various assumptions used by recent buyers and a projection of how those assumptions may change in the future. The most important variable in valuing servicing rights is the level of interest rates. Long-term interest rates are the primary determinant of prepayment speeds while short-term interest rates determine the return available on idle cash. The process of estimating the value of loan servicing rights is further complicated by the fact that short-term and long-term interest rates may change in a similar magnitude and direction or may change independent of each other.

Loan prepayment speeds have varied significantly over the past three years and could continue to vary in the future. In addition, any of the other variables mentioned above could change over time. Therefore, the valuation of mortgage servicing rights is, and is expected to continue to be, a critical accounting policy where the results are based on estimates that are subject to change over time and can have a significant financial impact on the Company.

Liquidity and Cash Flows

Liquidity is a measurement of the Company’s ability to generate adequate cash flows to meet the demands of its customers and provide adequate flexibility for the Company to take advantage of market opportunities. Cash is used to fund loans, purchase investments, fund the maturity of liabilities, and at times to fund deposit outflows and operating activities. The Company’s principal sources of funds are deposits; amortization, prepayments and sales of loans; maturities, sales and principal receipts from securities; borrowings; the issuance of debt or equity securities and operations. Managing liquidity entails balancing the need for cash or the ability to borrow against the objectives of maximizing profitability and minimizing interest rate risk. The most liquid types of assets typically carry the lowest yields.

At December 31, 2007, the Company had $120 million of cash and unpledged securities available to meet cash needs. Unpledged securities can be sold or pledged to secure additional borrowings. In addition, the Company had the ability to borrow an additional $77 million from the Federal Home Loan Bank based on loans currently pledged under blanket pledge agreements and $35 million on unsecured commercial bank lines of credit. This is compared to $133 million of cash and unpledged securities, Federal Home Loan Bank availability of $101 million and $35 million of availability in unsecured commercial bank lines of credit at June 30, 2007. Potential cash available as measured by liquid assets and borrowing capacity has decreased $37 million through December 31, 2007 primarily due to reductions in the total borrowing capacity at the FHLB caused by changes in the mix and asset quality characteristics in the loan portfolio. Management receives reports on liquidity on a regular basis and considers the level of liquidity in setting both loan and deposit rates. In addition to the sources of funds listed above, the Company has the ability to raise additional funds by increasing deposit rates relative to competition in national markets, or to sell additional loans currently held in the loan portfolio. Additionally, the Company has the ability to borrow approximately $10 million from the Federal Reserve Bank system. Management believes that the current and potential resources mentioned are adequate to meet liquidity needs in the foreseeable future.

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The Company, as a savings and loan holding company, has more limited sources of liquidity. In addition to its existing liquid assets, it can raise funds in the securities markets through debt or equity offerings or it can receive dividends from its subsidiaries. The Bank is the principal subsidiary with the ability to pay significant dividends. Cash can be used by the holding company to make acquisitions, pay the quarterly interest payments on its Junior Subordinated Debentures, pay dividends to common shareholders and to fund operating expenses. At December 31, 2007, the holding company had cash and unpledged securities of $15 million available to meet cash needs. Annual debt service on the junior subordinated debentures is approximately $4 million. Banking regulations limit the amount of dividends that can be paid to the holding company without prior approval of the OTS. Generally, the Bank may pay dividends without prior approval as long as the dividend is not more than the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as the Bank would remain well capitalized. At the present time, the Bank could pay approximately $24 million of dividends without OTS approval. Future dividend payments by the Bank beyond the $24 million currently available would be based upon future earnings or the approval of the OTS.

Off-balance sheet arrangements

See Note 8, Commitments, Contingencies and Guarantees, of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for a discussion of off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company, like other financial institutions, is subject to market risk. Market risk is the type of risk that occurs when a company suffers economic loss due to changes in the market value of various types of assets or liabilities. As a financial institution, the Company makes a profit by accepting and managing various risks, with credit risk and interest rate risk being the most significant. Interest rate risk is the Company’s primary market risk. It is the risk that occurs when changes in market interest rates will result in a reduction in net interest income or net interest margin because interest-bearing assets and interest-bearing liabilities mature at different intervals and reprice at different times. Asset/liability management is the measurement and analysis of the Company’s exposure to changes in net interest income due to changes in interest rates. The objective of the Company’s asset/liability management function is to balance the goal of maximizing net interest income with the control of risks in the areas of liquidity, safety, capital adequacy and earnings volatility. In general, the Company’s customers seek loans with long-term fixed rates and deposit products with shorter maturities, which creates a mismatch of asset and liability maturities. The Company’s primary strategy to counteract this mismatch is to sell the majority of long-term fixed-rate loans within 60 days after they are closed. The Company manages this risk and other aspects of interest rate risk on a continuing basis through a number of functions including review of monthly financial results, rate setting, cash forecasting and planning, budgeting and an Asset/Liability Committee.

On a quarterly basis, the Asset/Liability Committee reviews the results of an interest rate risk model that forecasts changes in net interest income and net portfolio value (NPV), based on one or more interest rate scenarios. NPV is the market value of financial assets less the market value of financial liabilities. The model combines detailed information on existing assets and liabilities with an interest rate forecast, loan prepayment speed assumptions and assumptions about how those assets and liabilities will react to changes in interest rates. These assumptions are inherently uncertain, and as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as differences in how interest rates change at various points along the yield curve.

The change in the NPV ratio is a long-term measure of what might happen to the market value of financial assets and liabilities over time if interest rates changed instantaneously and the Company did not change existing strategies. The actual results could be better or worse based on changes in interest rate risk strategies. The table below indicates a comparison of the projected NPV for various changes in interest rates as of the end of the most recent quarter compared with the end of the previous fiscal year. The projections are based on an instantaneous change in interest rates and the assumption that short-term and long-term interest rates change by the same magnitude and in the same direction.

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Basis point change in rates	NPV ratio December 31, 2007		NPV ratio June 30, 2007
Up 200	7.95	%	8.39	%
Up 100	8.74	%	9.76	%
No change	9.26	%	10.92	%
Down 100	9.33	%	11.85	%
Down 200	9.33	%	12.60	%

The NPV projections indicate that the Company has experienced a decrease in its exposure to rising interest rates and in its potential benefit from falling interest rates during the six months ended December 31, 2007. The NPV ratio for no change in rates has decreased 166 basis points. This model indicates what would be likely to happen given no change in the shape of the yield curve. The Company also has exposure to changes in the shape of the yield curve.

In addition to the risk of changes in net interest income, the Company is exposed to interest rate risk related to loans held for sale and loan commitments. This is the risk that occurs when changes in interest rates will reduce gains or result in losses on the sale of residential mortgage loans that the Company has committed to originate but has not yet contracted to sell. The Company hedges this risk by executing commitments to sell loans or mortgage-backed securities based on the volume of committed loans that are likely to close. Additionally, loan servicing rights act as an economic hedge against rising rates, as they become more valuable in a rising rate environment, often offsetting part or all of the decline in the value of loan commitments or loans held for sale in a rising rate environment.

Item 4. Controls and Procedures

The Company’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of December 31, 2007, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, management concluded that disclosure controls and procedures were effective as of December 31, 2007. Additionally, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2007 that have materially adversely affected, or are reasonably likely to materially adversely affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor any of its affiliates is involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company.

Item 1A. Risk Factors

There were no material changes from the risk factors as previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007.

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

Company Purchases of Common Stock for the Quarter Ended December 31, 2007

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as a Part of a Publicly Announced Plan	Maximum Number of Shares That May Yet Be Purchased Under a Publicly Announced Plan
October 1, 2007 - October 31, 2007	171,335	$	16.01	171,335	357,594
November 1, 2007 - November 30, 2007	192,525	$	15.05	192,525	165,069
December 1, 2007 - December 31, 2007	—	$	—	—	165,069
Total	363,860	$	15.50	363,860

On March 20, 2007, the Company’s board of directors publicly announced that it had approved a new buy-back program authorizing the repurchase of up to 800,000 shares of the Company’s common stock. On August 21, 2007, the Company’s board of directors publicly announced that it had approved a buy-back program authorizing the repurchase of up to an additional 500,000 shares of the Company’s common stock. All of the purchases summarized above were made pursuant to the March 2007 and August 2007 authorizations and there are 165,069 shares remaining that may be repurchased under these authorizations. The authorizations are in force through March 20, 2008.

Item 3. Defaults Upon Senior Securities – Not applicable.

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

The Company held its Annual Meeting of Shareholders on October 25, 2007. The voting results on each issue submitted to the shareholders at that meeting are indicated below.

Election of Directors for a three year term:

	For	Percent		Withheld	Percent
A. Gary Bitonte, M.D.	14,028,905	98.1	%	277,436	1.9	%
Earl T. Kissell	13,970,402	97.7	%	335,939	2.3	%
E. Jeffrey Rossi	14,022,697	98.0	%	283,644	2.0	%
William A. Russell	14,039,801	98.1	%	266,540	1.9	%
Robert L. Wagmiller	13,893,502	97.1	%	412,839	2.9	%

The following Directors terms continued after the Annual Meeting: Donald Cagigas, Marie Izzo Cartwright, Robert P. Grace, Thomas M. Humphries, Steven R. Lewis, Jeffrey B. Ohlemacher, Samuel A. Roth and Ronald P. Volpe, Ph.D.

Ratification of the appointment of Crowe Chizek and Company LLC, as independent auditors of the Company for the fiscal year ending June 30, 2008.

For	Against	Abstain
14,130,589	88,149	87,603

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Item 5. Other Information – Not applicable.

Item 6. Exhibits

The following exhibits are filed as part of this Form 10-Q, and this list includes the Exhibit Index:

Exhibit Number	Document	Reference to Prior Filing or Exhibit Number Attached Herein
3.2	Bylaws of First Place Financial Corp.	(i)
31.1	CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	31.1
31.2	CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	31.2
32.1	CEO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32.1
32.2	CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32.2

(i) Filed as an exhibit to the Company’s Current Report on Form 8-K dated November 21, 2007 and incorporated by reference herein.

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SIGNATURES

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

FIRST PLACE FINANCIAL CORP.

Date:	February 7, 2008	/s/ Steven R. Lewis	/s/ David W. Gifford
		Steven R. Lewis	David W. Gifford
		President and Chief Executive Officer	Interim Chief Financial Officer Principal Accounting Officer

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