Management's discussion and analysis represents a review of First Place Financial Corp.'s (the Company) consolidated financial condition and results of operations. This review should be read in conjunction with the condensed consolidated financial statements and footnotes.

Business Overview

The 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 originally opened for business in 1922. At the time of the conversion, the Company had total assets of approximately $610 million. During fiscal year 2000, the Company acquired Ravenna Savings Bank with total assets of $200 million. During fiscal 2001, the Company completed a merger-of-equals with FFY Financial Corp. with total assets of $680 million. During fiscal 2004, the Company acquired Franklin Bancorp, Inc. of Southfield, Michigan with total assets of $627 million. During fiscal year 2006, the Company acquired The Northern Savings & Loan Company of Elyria, Ohio with total assets of $360 million. During fiscal year 2007, the Company acquired seven retail banking offices from Republic Bancorp, Inc. and Citizens Banking Corporation in the greater Flint, Michigan area assuming $200 million in deposits. During fiscal year 2008, the Company acquired Hicksville Building, Loan and Savings Bank of Hicksville, Ohio with total assets of $53 million and OC Financial, Inc. of Dublin, Ohio with total assets of $68 million.

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, Indiana and Maryland with a concentration of banking offices in Northeast Ohio and Southeast Michigan. In addition, the Company owns nonbank subsidiaries that operate in the following industries: real estate brokerage, title insurance, investment brokerage, wealth management and general insurance.

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 Form 10-Q, or in future filings with the Securities and Exchange Commission (SEC), 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 totaled $3.245 billion at September 30, 2009, a decrease of $159 million or 4.7% from $3.404 billion at June 30, 2009. The majority of this decrease was due to decreases of $91 million in loans held for sale, $28 million in interest-bearing deposits in other banks and $19 million in portfolio loans while deposits decreased $105 million and short-term borrowings decreased $35 million. The reduction in assets was part of management's strategy to change the mix of the balance sheet and improve net interest margin.

The following table presents the Company's financial condition at September 30, 2009 and June 30, 2009, along with selected GAAP financial ratios and measures and other financial measures.

                              Financial Condition

                             (Dollars in thousands)



                                                At
                                           September 30,       At June 30,         Increase (Decrease)
                                               2009                2009            Amount        Percent
Loans                                     $     2,449,937      $  2,468,444      $  (18,507 )       (0.7 )%
Assets                                    $     3,245,382      $  3,404,467      $ (159,085 )       (4.7 )%
Deposits                                  $     2,330,869      $  2,435,601      $ (104,732 )       (4.3 )%
Total equity                              $       278,238      $    281,479      $   (3,241 )       (1.2 )%

Selected GAAP financial ratios and
measures and other financial measures
Loans to deposits                                  105.11 %          101.35 %
Total equity to total assets                         8.57 %            8.27 %
Total tangible equity to tangible
assets                                               8.27 %            7.96 %
Nonperforming loans to total loans                   5.17 %            4.18 %
Nonperforming assets to total assets                 4.93 %            4.11 %
Allowance for loan losses to total
loans                                                2.07 %            1.60 %
Allowance for loan losses to
nonperforming loans                                 39.96 %           38.34 %

Securities. The Company's securities balance was relatively unchanged and totaled $276 million at September 30, 2009, compared to $277 million at June 30, 2009. During the first three months of fiscal 2010, the Company purchased $7 million in securities and recognized a $6 million increase in the fair value of securities available for sale while receiving principal paydowns on mortgage-backed securities of $13 million.

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 the quarter ended September 30, 2009, the Company sold $507 million in loans compared with sales of $433 million for the quarter ended June 30, 2009 and $255 million for the quarter ended September 30, 2008. The Company was able to increase the level of sales activity during the first fiscal quarter of 2010 compared to the preceding quarter and the same quarter in the prior year due to an increase in market share and continued favorable long-term interest rates.

Loans held for sale totaled $286 million at September 30, 2009, compared to $377 million at June 30, 2009, a decrease of $91 million or 24.1%. The decrease in loans held for sale was primarily due to the sale of the preceding quarter's higher volume of refinanced loans and a decrease in the volume of loans originated during the current quarter. The Company anticipates that it will continue to sell a majority of the one-to-four family residential loans that it originates.

Loans. The loan portfolio totaled $2.450 billion at September 30, 2009, a decrease of $18 million, or 0.7% from $2.468 billion at June 30, 2009. The decrease in the loan portfolio was due to decreases of $11 million, or 12.3% annualized, in consumer loans, $6 million, or 2.7% annualized, in mortgage and construction loans and $1 million, or 0.4% annualized, in commercial loans. The decrease in consumer and mortgage and construction loans was the result of deteriorating economic conditions and the tightening of credit underwriting standards during the current quarter and fiscal 2009. During the quarter ended September 30, 2009, the mix of the loan portfolio did not change significantly as commercial loans accounted for 50.8% of the loan portfolio, mortgage and construction loans accounted for 34.5% and consumer loans accounted for 14.7%. The Company 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 September 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 allowance for loan losses and selected ratios.

                             Asset Quality History

                             (Dollars in thousands)



                                    9/30/2009       6/30/2009       3/31/2009        12/31/2008        9/30/2008
Nonperforming Assets
Nonaccrual loans                    $  116,487      $   92,752      $   66,188      $     63,945      $    59,832
Troubled debt restructurings            10,253          10,476           3,002             3,006            3,028

Total nonperforming loans              126,740         103,228          69,190            66,951           62,860
Real estate owned                       33,123          36,790          34,969            34,801           26,573

Total nonperforming assets          $  159,863      $  140,018      $  104,159      $    101,752      $    89,433


Allowance for loan losses           $   50,643      $   39,580      $   35,766      $     33,577      $    31,428

Ratios
Nonperforming loans to total
loans                                     5.17 %          4.18 %          2.74 %            2.56 %           2.39 %
Nonperforming assets to total
assets                                    4.93 %          4.11 %          3.08 %            3.10 %           2.70 %
Allowance for loan losses to
total loans                               2.07 %          1.60 %          1.41 %            1.28 %           1.19 %
Allowance for loan losses to
nonperforming loans                      39.96 %         38.34 %         51.69 %           50.15 %          50.00 %

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 loans 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 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. 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 of $23 million or 22.8% in nonperforming loans during the quarter ended September 30, 2009 was composed of $14 million of mortgage and construction loans, $8 million of commercial loans and $1 million of consumer loans. The increase in nonperforming loans was related to a continued decline in the local economies of the Company's market areas, particularly in the housing markets and automotive industry. This is consistent with both Midwest and national trends. Of the total nonperforming loans at September 30, 2009, 85% 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 September 30, 2009 were two loans totaling $7 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. The Company placed these loans on nonaccrual and nonperforming status during the fourth quarter of fiscal 2009. An involuntary bankruptcy petition filed against the borrower was upheld during the first fiscal quarter of 2010. The Company is not assured of maintaining its lien on the replacement collateral. The Company is investigating taking legal action against parties other than the borrower that may have facilitated the fraudulent activity. If the total loan balance is not realized through a combination of the bankruptcy and legal actions, 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 September 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 high 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 under accounting guidance for impaired loans. 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.

Classified assets under the $1 million threshold are segregated into twelve loan pools with similar risk characteristics (one-to-four family, construction, home equity, etc.). Weighted historic loss rate factors are developed for each loan pool and classification, which are used to estimate losses and determine an allowance.

For the remaining non-classified loans, a weighted historic net charge off factor is applied to each of the twelve loan segments. Utilizing weighted historic loss data against both classified and non-classified loans captures the more detrimental effects of the current ongoing recession.

The remaining unallocated reserve represents management's best estimate of other potential risks inherent in the Company's loan portfolio. Each quarter, management will adjust this amount to be directionally consistent with the changes in the economy and trends in the Company's asset quality.

Each quarter, management will evaluate trends in regional economic conditions that have the potential to impair the repayment of the loans currently in the Company's portfolio. These factors will include such things as, but will not be limited to, trends in unemployment, foreclosure and bankruptcy filings, delinquencies, non-performing and criticized loans, and charge-offs. The Company believes these metrics assist in the identification and measurement of possible losses inherent in the loan portfolio that have not yet been identified through management's routine delinquency monitoring. Based on the direction of these trends, an appropriate reserve will be quantified.

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.

The allowance for loan losses was $51 million at September 30, 2009, up from $40 million at June 30, 2009 and $31 million at September 30, 2008. Net charge-offs during the quarter ended September 30, 2009 were $11 million, an increase of $7 million from net charge-offs of $4 million during the quarter ended September 30, 2008. Net charge-offs to average loans increased to 1.85% for the quarter ended September 30, 2009 compared with 0.63% for the quarter ended September 30, 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 the allowance for loan losses to nonperforming loans at September 30, 2009 decreased from September 30, 2008 while the ratio of the allowance for loan losses to total loans at September 30, 2009 increased from September 30, 2008. The allowance for loan losses to nonperforming loans was 39.96% at September 30, 2009 compared with 38.34% at June 30, 2009 and 50.00% at September 30, 2008. Additionally, the ratio of the allowance for loan losses to total loans for the Company was 2.07% at September 30, 2009 compared with 1.60% at June 30, 2009 and 1.19% at September 30, 2008. The ratio of nonperforming loans to total loans was 5.17% at September 30, 2009 compared with 4.18% at June 30, 2009 and 2.39% at September 30, 2008.

Real Estate Owned. At September 30, 2009, the Company's real estate owned (REO) consisted of 236 repossessed properties with a net book value of $33 million. Any initial loss when a property is acquired is recorded as a charge to the allowance for loan losses before being transferred from the loan portfolio to REO. The Company initially records an acquired property at the fair value of the related asset, less estimated costs to sell the property. Thereafter, if there is a further deterioration in value, a specific valuation allowance is established and charged to operations. The costs to carry REO are charged to expense as incurred.

Real Estate Held for Investment. At September 30, 2009, the Company's real estate held for investment (REH) consisted of 24 repossessed properties with a net book value of $7 million. Selected properties are transferred to REH primarily due to their ability to generate cash flow from rent receipts. Any initial loss when a property is acquired is recorded as a charge to the allowance for loan losses before being transferred from the loan portfolio to REH. The Company initially records an acquired property at the fair value of the related asset. The Company also depreciates REH properties with depreciation being calculated using the straight-line method based on the estimated useful lives of the assets. Thereafter, if there is a further deterioration in value, a specific valuation allowance is established and charged to operations. The costs to carry REH are charged to expense as incurred.

Deposits. Total deposits were $2.331 billion at September 30, 2009, a decrease of $105 million or 4.3%, compared to $2.436 billion at June 30, 2009. The decrease in deposits was primarily due to a net decrease of $60 million in deposits from the Company's retail branch network and a net decrease of $45 million in certificates of deposit acquired through brokers and public funds of the State of Ohio. The net decrease of $60 million in deposits from the Company's retail branch network was comprised of a decrease of $115 million in higher rate retail and public fund certificates of deposit, partially offset by a $55 million increase in lower rate money market, savings and checking accounts. The net decrease of $45 million in brokered and State of Ohio funds was comprised of a decrease of $65 million in higher rate brokered funds, partially offset by an increase of $20 million in lower rate State of Ohio funds. 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 funding to support growth. The Company's brokered deposit balance cannot exceed approximately $231 million without the prior approval of its primary regulator, the Office of Thrift Supervision (OTS). The Company currently has an availability of $98 million that could be raised through brokered deposits without prior approval of the OTS.

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 September 30, 2009 are CDARS balances of $71 million, a decrease of $40 million from the $111 million at June 30, 2009. With the increase in deposit insurance, many customers have opted to return to the traditional deposit accounts.

Short-term Borrowings and Long-term Debt. During the first three months of fiscal year 2010, short-term borrowings decreased $35 million to $288 million at September 30, 2009, from $323 million at June 30, 2009. During the first three months of fiscal year 2010, long-term debt remained relatively stable at $335 million. 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 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 Parent Company may not incur additional debt without the OTS approval. For additional information on short-term borrowings and long-term debt, see Note 6-Short-Term Borrowings and Long-Term Debt in the Notes to Condensed Consolidated Financial Statements.

Capital Resources. During the first three months of fiscal year 2010, total shareholders' equity decreased $3 million, or 1.2% to $278 million at September 30, 2009 compared with $281 million at June 30, 2009. The decrease was primarily composed of the current quarter's net loss of $6 million and $1 million in dividends paid on the Company's preferred stock, partially offset by an increase of $4 million in unrealized gains on securities available for sale. Total equity to total assets was 8.57% at September 30, 2009, up from 8.27% at June 30, 2009. Total tangible equity to total tangible assets was 8.27% at September 30, 2009, up from 7.96% at June 30, 2009.

In connection with the issuance of the preferred stock and common stock warrant to the Treasury in 2009, the ability to declare or pay dividends on the Company's common shares is limited to $0.085 per share per quarter, and only if all dividends have been paid on the Series A preferred shares. The Company's ability to pay dividends on common shares is further limited by restrictions of the OTS as described below under the heading Liquidity and Cash Flows. In addition, the Company's ability to repurchase common shares is restricted by the approval of the Treasury and again only if there are no payments in arrears on the Series A preferred share dividends.

The OTS regulations require savings institutions to maintain certain minimum levels of regulatory capital. Additionally, the regulations establish a . . .