First Place Financial Corp. (Company) was formed as a thrift holding company as a result of the conversion of First Place Bank (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 opened for business in 1922. At the time of the conversion, the Company had total assets of $610 million. As of June 30, 2009, the Company had $3.404 billion in total assets.

On June 27, 2006, the Company acquired The Northern Savings & Loan Company of Elyria, Ohio (Northern) and converted it from an Ohio chartered stock savings association to a federally chartered stock savings association. Northern opened for business in 1920. At the time of the merger Northern had total assets of $360 million. On July 25, 2006, the Company's two federally chartered savings association subsidiaries, Northern and First Place Bank merged into a single federal savings association with the name First Place Bank.

On April 27, 2007, the Bank completed the acquisition of seven retail banking offices in the greater Flint, Michigan area acquired from Republic Bancorp, Inc. and Citizens Banking Corporation (Citizens). As of that date, the Bank recorded the purchase of the offices that resulted in First Place Bank assuming $200 million in deposits, and receiving $29 million in consumer loans and fixed assets and $164 million in cash. The results of operations of the offices have been included in the consolidated financial statements since the acquisition date.

On October 31, 2007, the Company acquired Hicksville Building, Loan and Savings Bank of Hicksville, Ohio (HBLS Bank). As of the acquisition date, HBLS Bank had total assets of $53 million, which included $33 million in loans, $40 million in deposits and $9 million 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.

On June 30, 2008, the Company acquired OC Financial, Inc. of Dublin, Ohio (OC Financial), the holding company for Ohio Central Savings (OC Bank). As of June 30, 2008, OC Financial had total assets of $68 million, which included $42 million in loans, $44 million in deposits and $10 million in long-term debt. On July 11, 2008, the Company's two federally chartered savings association subsidiaries, OC Bank and First Place Bank merged into a single federal savings association with the name First Place Bank.

On June 23, 2009, the Bank entered into definitive agreements to acquire three retail banking offices in the greater Cleveland, Ohio area from AmTrust Bank (AmTrust), a Cleveland, Ohio-based closely-held banking institution. This transaction would have involved the Bank assuming approximately $225 million in deposits. On September 10, 2009, the Company and AmTrust mutually agreed to terminate the definitive agreements.

For additional information on the above definitive agreement and acquisitions, see Note 2 - Acquisitions in the Notes to Consolidated Financial Statements.

Management's discussion and analysis represents a review of the Company's consolidated financial condition and results of operations. This review should be read in conjunction with the consolidated financial statements and footnotes.

Business Overview

The Company is a community-oriented financial institution engaged primarily in gathering deposits to originate one- to four-family residential mortgage loans, commercial and consumer loans. The Company currently operates 44 retail locations, 2 business financial centers and 18 loan production offices located in Ohio, Michigan and Indiana with a concentration of banking offices in Northeast Ohio and Southeast Michigan. Subsequent to June 30, 2009, the Company opened a loan production office in Rockville, Maryland. The Company is currently the second largest publicly traded thrift institution in Ohio.

Since its initial public offering of common stock in 1998, the Company has expanded its asset base and product offerings in order to increase both fee income and net income. Growth has been achieved by increasing market

share in current markets, expanding into new markets in the Midwest by opening de novo loan production and retail banking offices and through acquisitions. 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 capital and earnings.

The Company seeks to provide a return to its shareholders through dividends and appreciation by taking on various levels of credit risk, interest rate risk, liquidity risk and capital risk in order to achieve profits. The goal of achieving high levels of profitability on a consistent basis is balanced with acceptable levels of risk in each area. The Company monitors a number of financial measures to assess profitability and various types of risk. Those measures include but are not limited to diluted earnings (loss) per common share, return on average assets, return on average equity, efficiency ratio, net interest margin, noninterest expense to average assets, loans to deposits, equity to assets, tangible equity to tangible assets, nonperforming loans to total loans, nonperforming assets to total assets, allowance for loan losses to total loans, allowance for loan losses to nonperforming loans and net portfolio value.

Forward-Looking Statements

When used in this Annual Report, or in future filings with the Securities and Exchange Commission, in press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "expect," "will continue," "anticipate," "estimate," "project," "believe," "should," "may," "will," "plan," or 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, that 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 undertakes no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Financial Condition

General. Assets at June 30, 2009 totaled $3.404 billion compared with $3.341 billion at June 30, 2008, an increase of $63 million or 1.9%. We anticipate that future growth will come from a combination of increasing market share in existing markets, the addition of new retail branches, the conversion of loan production offices to business financial centers and acquisitions. Growth by acquisition will be subject to the availability and pricing of appropriate acquisition partners.

Securities available for sale. Securities available for sale decreased $8 million during fiscal 2009. The decrease was composed of sales and redemptions of $4 million, proceeds from maturities and calls of $40 million, principal paydowns of $32 million, a decrease of $12 million for the change in fair value of securities and a charge of $1 million for other-than-temporary impairment of securities, partially offset by purchases of $77 million and $4 million in other activity (increase in market value). See the Noninterest Income section of the Comparison of Results of Operations for the Years Ended June 30, 2009 and 2008, for further discussion of the impairment charges. Significant reductions in securities are not likely as the Company strives to maintain a reasonable level of securities to provide adequate liquidity and in order to have securities available to pledge to secure public funds and other types of transactions. Fluctuations in the market value of securities held by the Company relate primarily to changes in interest rates, and management believes, at the date of this report, that all declines in market value in the securities portfolio are temporary.

Loans held for sale. The Company engages in mortgage banking as part of an overall strategy to deliver loan products to customers. As a result, the Company sells most fixed rate residential loan originations and a portion of its adjustable-rate residential loan originations. During fiscal 2009, the Company originated $1.910 billion in one-to four-family residential loans and sold $1.568 billion compared to originations of $1.282 billion and sales of $1.163 billion in fiscal 2008. The Company was able to increase the level of sales activity during fiscal 2009 compared to fiscal 2008 due to an increase in market share and favorable long-term interest rates.

Loans held for sale totaled $376 million at June 30, 2009, an increase of $304 million or 420.3% from $72 million at June 30, 2008. The increase in loans held for sale was due to the higher volume of refinanced loans as a result of favorable long-term interest rates during the fourth fiscal quarter of 2009 compared to the same period in fiscal 2008. Also contributing to the increase in loans held for sale was the extension of the holding period from 10 days to 45 days in an effort to increase interest income and net interest margin.

Loans. Total loans decreased $181 million or 6.8% to $2.468 billion at June 30, 2009, from $2.649 billion at June 30, 2008. This decrease was composed of decreases of $164 million or 16.1% in mortgage and construction loans and $27 million or 6.8% in consumer loans, partially offset by an increase of $10 million or 0.8% in commercial loans. The decrease in mortgage and construction loans and consumer loans was the result of deteriorating economic conditions and the tightening of credit underwriting standards during fiscal 2009. The Company also continued to grow commercial loans during fiscal 2009 which brought more diversity and higher yields to the loan portfolio. At June 30, 2009 the portfolio was 34% of the portfolio was comprised of mortgage and construction loans, 51% of the portfolio was comprised of commercial loans and 15% of the portfolio was comprised of consumer loans compared with 38% of mortgage and construction loans, 47% of commercial loans and 15% of consumer loans as of June 30, 2008. Management anticipates the volume of the loan portfolio to remain level or decrease slightly during fiscal 2010 and the mix of the loan portfolio to remain relatively unchanged from the mix at June 30, 2009.

Nonperforming Assets. Nonperforming assets consist of nonperforming loans and real estate owned. The following table presents for the periods indicated the total nonperforming loans and nonperforming assets, as well as the change, expressed in both dollars and percentage.

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                                   At June 30,                         Dollar               Percentage
                           2009                   2008                 Change                 Change
                                                     (Dollars in thousands)
Nonperforming
Assets
Nonaccrual loans    $          92,752     $        49,592        $          43,160                87.0 %
Troubled debt                  10,476               1,130                    9,346               827.1 %
restructurings
Total
nonperforming                 103,228              50,722                   52,506               103.5 %
loans
Real estate owned              36,790              23,695                   13,095                55.3 %
Total
nonperforming       $         140,018     $        74,417        $          65,601                88.2 %
assets
Ratio
Nonperforming
assets to total                 4.11%                2.23 %
assets

In the normal course of business, the Company continually works with borrowers in various stages of delinquency. When deemed beneficial for the borrower and the Company, concessions are made through modifications of current loan terms with the intention of maximizing the amounts collected on the loan prospectively. These modified loans are considered troubled debt restructurings under current accounting guidance and are classified as nonperforming loans even if all contractual terms are met. In the current recessionary economy, these restructurings are becoming more prevalent. The Company also works with borrowers to avoid foreclosure if at all possible. Furthermore, if it becomes inevitable that a borrower will not be able to retain ownership of their property, the Company often seeks a deed in lieu of foreclosure in order to gain control of the property earlier in the recovery process. As a result, real estate owned grew $13.1 million at June 30, 2009 compared to June 30, 2008. The strategy of pursuing deeds in lieu of foreclosure more aggressively should result in a reduction in the holding period for nonperforming assets and ultimately reduce economic losses. The increase in nonperforming loans was composed of $14.0 million of mortgage and construction loans, $23.7 million of

commercial loans, $5.5 million of consumer loans and $9.3 million in troubled debt restructurings. The increase in nonperforming loans was related to a decline in the local economy, particularly in the automotive industry. This is consistent with both Midwest and national trends. Of the total nonperforming loans at June 30, 2009, 90% were secured by real estate. Real estate loans are generally well secured and if these loans do default, a significant amount of the loan balance will be recovered by liquidating the real estate.

Included in nonperforming loans at June 30, 2009 were two loans totaling $7.5 million. In the third quarter of fiscal 2009, the Company became aware that the collateral pledged on these loans was fraudulent and evidenced by fraudulently altered documents. The Company then requested and received replacement collateral from the borrower, the value of which purportedly exceeded the loan balance. However, the Company is not assured of receiving the full face value of this collateral. The Company placed these loans on nonaccrual and nonperforming status during the fourth quarter of fiscal 2009. The Company is pursuing all legal avenues to recover the loan balance including legal actions against the borrower and other parties that may have facilitated the fraudulent activity. If the total loan balance is not realized through a combination of legal actions and liquidation of collateral, the Company believes, based on consultation with legal counsel, that it is probable a court would determine the Company holds a valid claim under its blanket bond insurance policy and it is therefore probable that a court would determine that the Company will recover any ascertainable loss resulting from the Company's good faith reliance on the as-altered collateral documents. As a result, a loss on these loans is not believed to be probable at this time and no specific allowance or charge-off was recorded at June 30, 2009.

Allowance for Loan Losses. The allowance for loan losses represents management's estimate of probable incurred credit losses in the loan portfolio at each balance sheet date. All lending activity contains associated risks of loan losses, although the Company has not substantially engaged in higher risk products such as subprime loans. Each quarter management analyzes the adequacy of the allowance for loan losses based on a review of the loans in the portfolio along with an analysis of external factors and historical delinquency and loss trends. The allowance is developed through four specific components; 1) the specific allowance for loans subject to individual analysis, 2) the allowance for classified loans not otherwise subject to individual analysis, 3) the allowance for non-classified loans (primarily homogenous), and 4) the remaining unallocated balance.

Classified loans with a balance of $1 million or greater are subject to individual analysis. Loan classifications are those used by regulators consisting of (in order of increasing deterioration) Other Assets Especially Mentioned, Substandard, Doubtful, and Loss. In evaluating each of these loans for impairment, the measure of expected loss is based on i) the present value of the expected future cash flows discounted at the loan's effective interest rate,
(ii) a loan's observable market price, or (iii) the fair value of the collateral if the loan is collateral dependent.

All classified assets under the $1 million threshold are combined with the homogenous loan pools and segregated into twelve loan segments. The segmentation is based on grouping loans with similar risk characteristics (one-to-four family, construction, home equity, etc.). Loss rate factors are developed for each loan segment which are used to estimate losses and determine an allowance. The loss rate factors for each segment are derived from historical delinquency, classification, and charge-off rates and adjusted for economic factors, a peer comparison factor, and a classification factor. The economic factors consider unemployment, inflation, foreclosure filings, and bankruptcy filings in the national, Ohio and Michigan markets. The peer comparison factor uses nonperforming loan, nonperforming asset, and charge-off data from Ohio and Michigan based banks and thrifts with total asset between $500 million and $10 billion to develop a comparative factor. The classification factor layers on a 'premium' allowance increasing in weight for each classification grade.

For the remaining non-classified loans, historic loss rates are applied to each of the twelve loan segments. For the historic loss rates compiled for this group of non-classified loans, as well as for the delinquency and nonperforming trends compiled for the classified loans, a trend of trailing ten quarters was used. In contrast to using the trailing 24 quarters used at June 30, 2008, this current compilation captures the more detrimental effects of the current ongoing recession.

The remaining unallocated reserve is not built, but an amount representing a margin of allowance for the inherent inaccuracies in the estimation processes used in determining the specific allowance components and for the risks which may emerge given the current economic conditions. Given the Company's focus on the current

recessionary economy and the reflection of such on the loss and adjustment factors used in the segmented allowance determination, combined with the reduction of risk achieved through the level of charge-offs recorded in the recently completed fourth quarter, management believes the remaining unallocated allowance is appropriately within a reasonable range.

One of the more notable recessionary effects nationwide has been the reduction in real estate values over the past several quarters. Real estate values in Ohio and Michigan did not experience the dramatic increases over the past decade as in many other sections of the country. As a result, the declines are not as significant comparatively. However, with real estate collateralizing a substantial portion of the Company's loans, it is critical to determine the impact of any declining values in the allowance determination. In the evaluation of individual loans of $1 million or greater, current appraisals were obtained wherever practical, or if not available, they were considered in the evaluation process. In the development of the loss factors used for the classified loan group, foreclosure filings in the Ohio and Michigan markets were 25% of the weighting in adjusting for the current economy, thus reflecting the effect of declining real estate values. Within the Company's residential loan portfolio, less than 5% have loan to value ratios greater than 100%. Conversely, more than 80% of the portfolio has loan to value ratios 79% or less, allowing for some margin of declining real estate value without exposing the Company to loss.

In an effort to limit the Company's exposure to real estate related losses, multiple reviews of credit scores were performed on existing home equity lines over the past year. In instances where the score had fallen below a satisfactory level, caps were placed on the lines or the lines were frozen at their current balance in order to limit exposure in a deteriorating situation.

Based on 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. In addition to the analysis and procedures just described, the Company utilizes an outside party to conduct an independent review of commercial and commercial real estate loans. The Company uses the results of this review to help determine the effectiveness of the existing policies and procedures, and to provide an independent assessment of the allowance for loan losses allocated to these types of loans.

The allowance for loan losses was $39.6 million at June 30, 2009, up $11.4 million from $28.2 million at June 30, 2008. Net charge-offs during fiscal 2009 were $31.6 million, an increase of $17.1 million from net charge-offs of $14.5 million during fiscal 2008. Net charge-offs to average loans increased to 1.22% for fiscal 2009 compared with 0.56% for fiscal 2008. The mix and composition of portfolio loans and nonperforming loans changes from year to year. When the Company sets the allowance for loan losses, it is dependent on a detailed analysis of different ratios which may not move in the same direction. As a result, the ratio of allowance for loan losses to nonperforming loans at June 30, 2009 decreased from the prior year while the ratio of allowance for loan losses to total loans at June 30, 2009 increased from the prior year. The ratio of the allowance for loan losses to total loans for the Company was 1.60% at June 30, 2009 compared with 1.07% at June 30, 2008. Additionally, the allowance for loan losses to nonperforming loans was 38.34% at June 30, 2009 compared with 55.63% at June 30, 2008. The ratio of nonperforming loans to total loans was 4.18% at June 30, 2009, up from 1.91% at June 30, 2008.

Deposits. Total deposits were $2.436 billion at June 30, 2009, an increase of $67 million, compared with $2.369 billion at June 30, 2008. The increase in deposits was comprised of increases of $208 million in certificates of deposit and $3 million in checking accounts, partially offset by decreases of $75 million in savings accounts and $69 million in money market accounts. The largest deposit category was certificates of deposit, which represented 54.7% of deposits at June 30, 2009 compared with 47.5% as of June 30, 2008. The $208 million increase in certificates of deposit during the fiscal year was comprised of increases of $165 million in brokered deposits and $82 million in retail certificates of deposit partially offset by a decrease of $39 million in public funds. Retail certificates of deposit grew 8.3% during fiscal 2009. At June 30, 2009, the Company had $198 million in brokered deposits with original maturities from one to 120 months compared with $33 million at June 30, 2008. The Company considers brokered deposits to be an element of a diversified funding strategy and an alternative to borrowings. Management regularly compares rates to determine the most economical source of funding. The Company anticipates that it will continue to consider brokered funds as a funding alternative in the future and as a source of short-term liquidity, but not as the primary source of fund

ing to support growth. Currently, the Office of Thrift Supervision (OTS), the Company's primary regulator, has limited the Company's brokered deposits to approximately $231 million.

The Company participates in the Certificate of Deposit Account Registry Service (CDARS) program, a network of financial institutions that exchange funds among members in order to ensure Federal Deposit Insurance Corporation (FDIC) insurance coverage on customer deposits above the single institution limit. These deposits are considered brokered deposits and are included in the brokered deposit totals above. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution. Included in certificates of deposit at June 30, 2009 are CDARS balances of $111 million, an increase of $100 million from the $11 million at June 30, 2008. With the instability in the financial markets over the past year, many customers with funds in excess of the insured limit of $250 thousand are looking for safer investment alternatives and finding that in the CDARS program.

Short-term Borrowings and Long-term Debt. Short-term borrowings increased $126 million to $323 million at June 30, 2009, after an $88 million reclassification of borrowings from long-term debt to short-term borrowings. Long-term debt decreased $89 million to $335 million at June 30, 2009, compared with $424 million at June 30, 2008. The decrease was due to the $88 million reclassification of borrowings from long-term debt to short-term borrowings. Included in long-term debt throughout the year were $62 million of junior subordinated debentures. The Company uses short-term borrowings and long-term debt as part of its liquidity management, cash flow, and asset/liability management and considers them to be part of a diversified funding strategy. Short-term borrowings and long-term debt are alternatives to raising cash through deposit growth and are used when they offer a favorable alternative to deposits in terms of rate, maturity or volume. Currently, the Company may not incur additional debt without OTS approval. For additional information on short-term borrowings and long-term debt, see Note 10 - Short-Term Borrowings and Long-Term Debt in the Notes to Consolidated Financial Statements.

Subsequent to June 30, 2009, the Company obtained a $10 million line of credit with a commercial bank. Borrowings from the commercial bank are unsecured. Interest on the line accrues daily and is variable based on the lending bank's federal funds rate.

Capital Resources. Total shareholders' equity decreased $38 million to $281 million at June 30, 2009, compared with $319 million at June 30, 2008. This decrease was primarily composed of the net loss for fiscal 2009 of $110 million and $3 million of cash dividends declared on the Company's common stock, partially offset by the issuance of $73 million of preferred stock and a common stock warrant in connection with the Company's participation in the U.S. . . .