PEOPLES OHIO FINANCIAL CORP - 10-Q Quarterly Report

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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, 2004

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Transition Period
------------------------------------------------------

Commission File Number 0-49619

PEOPLES OHIO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Ohio 31-1795575
------------------------------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

635 South Market Street, Troy, Ohio 45373
----------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)

Issuer's Telephone Number, including Area Code (937) 339-5000

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

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILLED 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
FILLING REQUIREMENTS FOR THE PAST 90 DAYS.

YES X NO
----------------- -------------------

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).

YES NO X
----------------- -------------------

As of FEBRUARY 14, 2005, there were 7,267,289 common shares of the registrant
issued and outstanding.

1

PEOPLES OHIO FINANCIAL CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of December
31, 2004 and June 30, 2004.

Condensed Consolidated Statements of Income for the
three and six months ended December 31, 2004 and
2003.

Condensed Consolidated Statement of Shareholders'
Equity for the six months ended December 31, 2004.

Condensed Consolidated Statements of Cash Flows for
the six months ended December 31, 2004 and 2003.

Notes to Condensed Consolidated Financial Statements.

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

Item 3. Quantitative and Qualitative Disclosures about Market
Risk.

Item 4. Controls and Procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 3. Defaults upon Senior Securities.

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

Item 5. Other Information.

Item 6. Exhibits.

SIGNATURE PAGE

INDEX TO EXHIBITS

2

ITEM 1. FINANCIAL STATEMENTS

PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements

3

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 30, 2004 AND 2003
(UNAUDITED)

See notes to condensed consolidated financial statements

4

PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)

See notes to condensed consolidated financial statements

5

PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(UNAUDITED)

See notes to condensed consolidated financial statements

6

PEOPLES OHIO FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and Article 10 of Regulation
S-X, and, in the opinion of management, reflect all adjustments necessary to
present fairly the financial position as of December 31, 2004 and June 30, 2004,
the results of operations and the cash flows for the three and six-month periods
ended December 31, 2004 and 2003.

All adjustments to the financial statements were normal and recurring in nature.
These results have been determined on the basis of accounting principles
generally accepted in the United States of America. The results of operations
for the three and six-month periods ended December 31, 2004, are not necessarily
indicative of results for the entire fiscal year.

The condensed consolidated balance sheet of Peoples Ohio Financial Corporation
(the "Company") as of June 30, 2004 has been derived from the audited
consolidated balance sheet of the Company as of that date.

The condensed consolidated financial statements are those of the Company and
Peoples Savings Bank of Troy (the "Bank"). Certain information and footnote
disclosures normally included in the Company's financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's 2004 Annual Report to Shareholders.

(2) Earnings Per Share

The following table is for the three and six-month period ending December 31,
2004 and 2003 and reflects the weighted average number of shares of common stock
for both basic and diluted earnings per share ("EPS") as well as the dilutive
effect of stock options.

Options to purchase 193,870 shares of common stock with exercise prices ranging
from $4.20 to $8.13 per share were outstanding at December 31, 2004, but were
not included in the computation of diluted EPS because such exercise prices were
greater than the average market price of the common shares.

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(3) Stock Options

The Company has a stock-based employee compensation plan. The Company accounts
for this plan under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees, and related Interpretations.
No stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the grant date. The following table
illustrates the effect on net income and earnings per share as if the Company
had applied the fair value provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation. The proforma
effect on income for the periods presented includes the effect of forfeitures.

(4) New Accounting Pronouncement Not Yet Adopted

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
Payment ("SFAS 123(R)"). SFAS 123(R) addresses all forms of share-based payment
awards, including shares issued under employee stock purchase plans, stock
options, restricted stock and stock appreciation rights. SFAS 123(R) will
require the Company to expense share based-payment awards with compensation cost
for share based-payment transactions measured at fair value. Prior to SFAS
123(R), only certain pro forma disclosures of fair value were required.
Management does not anticipate that the adoption of this standard will have a
significant impact on the Company's consolidated net income and net income per
share. SFAS 123(R) requires registrants to record compensation expense for all
awards granted after adopting the standard as well as record compensation
expense for the unvested portion of previously granted awards outstanding at the
date of adoption. In addition, registrants may elect to restate prior period
financial statements, basing the amounts on the expense previously calculated
and reported in pro forma footnote disclosures. SFAS 123(R) requires the Company
to adopt the new accounting provision no later than the first quarter of fiscal
2006.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

GENERAL

Peoples Ohio Financial Corporation (the "Company") is based in west central Ohio
and is the parent company of Peoples Savings Bank of Troy (the "Bank"). The
Company was formed during the year ended June 30, 2002 to provide various
benefits to the Bank, as well as to take advantage of a more effective structure
for expanded financial activities. The Bank, a state chartered savings bank, was
originally chartered in 1890. The Bank is primarily engaged in attracting
deposits from Miami and northern Montgomery counties and originating mortgage
loans throughout those same areas. All references to the Company include the
Bank unless otherwise indicated.

FORWARD LOOKING STATEMENTS

In addition to historical information, this Form 10-Q may include certain
forward-looking statements based upon current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the composition or quality of the Bank's loan
and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. A further description of the risks and uncertainties to the business are
included in detail under the caption "Liquidity and Capital Resources of the
Company and the Bank."

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company's condensed consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America and reporting practices followed within the thrift industry. The
application of these principles requires management to make estimates,
assumptions, and judgments that affect the amounts reported in the financial
statements and accompanying notes. These estimates, assumptions, and judgments
are based on information available as of the date of the financial statements;
as this information changes, the financial statements could reflect different
estimates, assumptions, and judgments.

Management believes the allowance for loan loss policy is a critical accounting
policy requiring significant estimates and assumptions in the preparation of the
condensed consolidated financial statements. The allowance for loan losses
provides coverage for probable losses inherent in the Company's loan portfolio.
Management evaluates the adequacy of the allowance for credit losses each
quarter based on changes, if any, in underwriting activities, the loan portfolio
composition (including product mix and geographic, industry or customer-specific
concentrations), trends in loan performance, regulatory guidance and economic
factors. This evaluation is inherently subjective, as it requires the use of
significant management estimates. Many factors can affect management's estimates
of specific and expected losses, including volatility of default probabilities,
rating migrations, loss severity and economic and political conditions. The
allowance is increased through provisions charged to operating earnings and
reduced by net charge-offs.

The Company determines the amount of the allowance based on relative risk
characteristics of the loan portfolio. The allowance recorded for commercial
loans is based on reviews of individual credit relationships and an analysis of
the migration of commercial loans and actual loss experience. The allowance
recorded for homogeneous consumer loans is based on an analysis of loan mix,
risk characteristics of the portfolio, fraud loss and bankruptcy experiences,
and historical losses, adjusted for current trends, for each homogeneous
category or group of loans. The allowance for credit losses relating to impaired
loans is based on the loan's observable market price, the collateral for certain
collateral-dependent loans, or the discounted cash flows using the loan's
effective interest rate.

Regardless of the extent of the Company's analysis of customer performance,
portfolio trends or risk management processes, certain inherent but undetected
losses are probable within the loan portfolio. This is due to several factors
including inherent delays in obtaining information regarding a customer's
financial condition or changes in their unique business conditions, the
judgmental nature of individual loan evaluations, collateral assessments and the
interpretation of economic trends. Volatility of economic or customer-specific
conditions affecting the

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identification and estimation of losses for larger non-homogeneous credits and
the sensitivity of assumptions utilized to establish allowances for homogenous
groups of loans are among other factors. The Company estimates a range of
inherent losses related to the existence of these exposures. The estimates are
based upon the Company's evaluation of imprecision risk associated with the
commercial and consumer allowance levels and the estimated impact of the current
economic environment.

Other accounting policies followed by the Company are presented in Note 1 to the
consolidated financial statements. These policies, along with the disclosures
presented in the the audited financial statements and notes thereto included in
the Company's 2004 Annual Report to Shareholders, and in this financial review,
provide information on how significant assets and liabilities are valued in the
financial statements and how those values are determined.

FINANCIAL CONDITION

Total consolidated assets of the Company at December 31, 2004 were $188,560,000,
compared to $193,196,000 at June 30, 2004, a decline of $4.6 million or 2.4%.

CASH AND CASH EQUIVALENTS declined $4.6 million or 42.6%, from $10,875,000 at
June 30, 2004 to $6,242,000 at December 31, 2004. Management uses its short
- -term "cash accounts" to hold funds generated from these regular banking
activities as it evaluates investment (loan) alternatives.

INVESTMENT SECURITIES declined $10.8 million or 66.3%, from $16,242,000 at June
30, 2004 to $5,472,000 at December 31, 2004. This decline was the result of
management shifting proceeds from maturing investment securities to the Bank's
loan portfolio as demand for loans in nearly every category increased.

NET LOANS increased $10.9 million or 7.2%, from $150,735,000 at June 30, 2004,
to $161,606,000 at December 31, 2004. The following table illustrates changes in
the Bank's loan portfolio by category for each period presented.

The Bank continues to be a strong residential lender throughout the communities
in which it operates. The increase in residential single-family mortgages was
the result of an active marketing campaign that began during the fourth quarter
of fiscal 2004 and continued through the second quarter of fiscal 2005.
Management continued its focus on shorter-term residential construction single
family mortgage, commercial real estate, commercial business and home equity
lending resulting in the increase of both the residential construction and home
improvement loan portfolios during the period.

10

THE ALLOWANCE FOR LOAN LOSSES declined from $1,048,000 at June 30, 2004 to
$838,000 at December 31, 2004. This decrease was the result of a provision for
loan losses of $60,000 during the six months ended December 31, 2004 and net
charge-offs of $270,000. The ratio of the Company's allowance for loan losses to
gross loans was 0.49% and 0.67% at December 31, 2004 and June 30, 2004,
respectively. The allowance for loan losses is maintained to absorb loan losses
based on management's continuing review and evaluation of the loan portfolio and
its judgment regarding the impact of economic conditions on the portfolio.

The following table compares non-performing loans, which are loans past due 90
days or more and non-accruing loans, at December 31, 2004 and June 30, 2004.

Non-performing loans, declined from $1,248,000 at June 30, 2004, to $1,056,000
at December 31, 2004. Loans past-due 90 days or more and still accruing declined
from $610,000 at June 30, 2004 to $530,000 at December 31, 2004. This decline
was primarily attributable to one credit relationship involving a $375,000
commercial real estate loan, which was classified as a non-accrual loan during
the first quarter of fiscal year 2005, was acquired and subsequently disposed of
during the second quarter of fiscal year 2005. Non-accrual loans decreased from
$683,000 at June 30, 2004 to $526,000 at December 31, 2004. In addition to the
aforementioned credit relationship, two additional single-family credit
relationships that had been classified as non-accrual loans were acquired and
sold during the second quarter of fiscal year 2005. These dispositions were
somewhat offset by the classification of a $454,000 single-family loan to
non-accrual status during the second quarter of fiscal year 2005. Management
continues to work closely with its delinquent borrowers to bring these loans
current.

The ratio of the Company's allowance for loan losses to non-performing loans was
79.4% and 84.0% at December 31, 2004 and June 30, 2004, respectively. Management
believes that the problems with these loans are isolated and not indicative of
the loan portfolio in total.

DEPOSITS decreased $4,986,000, or 4.4%, from $114,223,000 at June 30, 2004 to
$109,237,000 at December 31, 2004. The following table illustrates changes in
the various types of deposits for each period presented.

The increases in NOW accounts was primarily attributable to the opening of new
accounts. The Company has deposit relationships with several municipalities and
school districts. It is the nature of these accounts to fluctuate as tax
revenues are collected and disbursed. The decline in the Company's money market
accounts is primarily attributable to fluctuations in these "public fund"
accounts.

TOTAL STOCKHOLDERS' EQUITY increased $94,000, or 0.4%, from $24,391,000 million
at June 30, 2004, to $24,485,000 million at December 31, 2004. The increase was
the result of $862,000 in net earnings, $201,000 contributed from the exercise
of options, and $9,000 related to the net change in equity related to the
Company's ESOP. These increases

11

to stockholders' equity were somewhat offset by $472,000 in dividends paid to
the Company's stockholders, $502,000 related to the repurchase of stock, and a
$4,000 decrease in the unrealized gain on securities available for sale during
the six month period ended December 31, 2004. During July 2004, the Company's
Board of Directors authorized the repurchase of up 365,000 shares of the
Company's common stock. Treasury stock purchases are made on the open market and
used for general corporate purposes.

RESULTS OF OPERATIONS--COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 2004 AND
2003

The Company reported earnings of $862,000 for the six months ended December 31,
2004, a decline of $42,000, or 4.7%, from the $904,000 reported for the same
period in 2003. Basic and fully diluted earnings per share were unchanged at
$0.12 for the six months ended December 31, 2004, and 2003. The Company's return
on average assets was 0.90% for the six months ended December 31, 2004 compared
to 0.90% for the same period in 2003. Return on average equity was 7.09% for the
six months ended December 31, 2004, compared to 7.43% for the same period in
2003.

The decline in earnings was primarily a result of an increase in noninterest
expense of $48,000, or 1.5%, from $3,133,000 reported for the six months ended
December 31, 2003 to $3,181,000 for six months ended December 31, 2004.

NET INTEREST INCOME was $3,486,000 for the six months ended December 31, 2004,
virtually the same as the $3,490,000 reported for six months ended December 31,
2003. Total interest income was $5,463,000 for the six months ended December 31,
2004, a decline of $208,000, or 3.7% from the $5,671,000 reported during the six
months ended December 31, 2003. This decline in interest income was offset by a
$204,000 or 9.4% decline in interest expense from $2,181,000 for the six months
ended December 31 2003, to $1,977,000 for the six months ended December 31,
2004.

While total interest income was virtually unchanged when comparing the six
months ended December 31, 2004, to the same period in 2003. Average loans
outstanding increased from $151,881,000 during the six months ended December 31,
2003, to $155,000,000 during the six months ended December 31, 2004. This
increase was the result of strong demand for residential construction,
commercial real estate and home equity loans during the period and a continued
effort by management to grow this shorter-term portion of its loan portfolio.
This increase in average loans outstanding was mitigated by the continued low
interest rate environment's impact on the average yield of the Company's loan
portfolio. Management noted that the average yield on the Company's loan
portfolio declined 37 basis points from 6.82% during the six months ended
December 31, 2003 to 6.45% during the six months ended December 31, 2004.

Interest expense was $1,977,000 for the six months ended December 31, 2004,
$204,000 or 9.4%, lower than the $2,181,000 recorded for the six months ended
December 31 2003, as interest expense paid on certificates of deposit and
Federal Home Loan Bank ("FHLB") advances declined significantly in comparison to
the same period in the previous year. Interest expense on certificates of
deposit was $331,000, $153,000 or 31.6% lower than the $484,000 recorded in six
months ended December 31, 2003. The average balance of certificates of deposit
declined by $7,018,000, from $38,387,000 for the six months ended December 31,
2003, to $31,369,000 for six months ended December 31, 2004. This decline in
average certificates of deposit outstanding was partially offset by an increase
in the average rate paid on those certificates of 32 basis points, from 2.50%
during the six months ended December 31, 2003, to 2.82% during the six months
ended December 31 2004. Interest expense on FHLB advances was $1,411,000, for
the six months ended December 31, 2004, $92,000 or 6.1% lower than the
$1,503,000 recorded in the six months ended December 31, 2003. While the average
balance of FHLB advances remained fairly stable, increasing $1,076,000, from
$54,262,000 for the six months ended December 31, 2003 to $55,338,000 for the
six months ended December 31, 2004, the average rate paid on those advances
declined 43 basis points, from 5.49% during the six months ended December 31
2003, to 5.06% during the same period in 2004. The remaining change in interest
expense was attributable to a$41,000 increase in the amount of interest paid to
the Company's demand deposit and savings account customers.

THE PROVISION FOR LOAN LOSSES was $60,000 for six months ended December 31, 2004
and the same period in 2003. The provision for both periods reflects
management's analysis of the Bank's loan portfolio based on information that is
currently available to it at such time. In particular, management considers the
level of non-performing loans and potential problem loans. Net charge-offs for
the six months ended December 31, 2004 were $270,000 compared to $62,000 during
the same period in 2003. While management believes that the allowance for loan
losses is

12

sufficient based on information currently available to it, no assurances can be
made that future events, conditions, or regulatory directives will not result in
increased provisions for loan losses which may adversely effect income.

NONINTEREST INCOME was $1,037,000 for six months ended December 31, 2004,
$11,000 or 1.1% less than the $1,048,000 reported for the six months ended
December 31, 2003. The decline was attributable to a $52,000 reduction in income
generated from fiduciary activities (trust services). This decreases was
somewhat offset by a $40,000 increase in service charges earned on deposit
accounts which were the result of normal fee increases over the prior period.

NONINTEREST EXPENSE was $3,181,000 for six months ended December 31, 2004,
$48,000 or 1.5% higher than the $3,133,000 reported for the six months ended
December 31, 2003. Growth in the following noninterest expense categories
contributed to the increase: professional services increased $99,000 or 134.3%,
data processing fees increased $59,000 or 20.5% and State of Ohio franchise
taxes increased $18,000 or 13.6%. These increases in noninterest expense were
somewhat offset by declines in salaries and employee benefits which declined
$68,000 or 4.6%, occupancy expense which declined $15,000 or 6.5%, other
noninterest expenses which declined $28,000 or 3.7%.

The increase in other professional services was attributable to fees related to
compliance with provisions set forth in the Sarbanes-Oxley Act of 2002, and fees
for services provided to the Bank's wealth management (formerly trust) services.
The increase in data processing fees was attributable to periodic maintenance on
the Bank's processing hardware. Partially offsetting these increases were
declines in salary and employee benefits primarily due to a $62,000 reduction in
employee from fiscal 2004 to fiscal 2005. The decline in other noninterest
expense, as well as, several of the other noninterest expense categories was the
result of management's continued focus on controlling the Bank's noninterest
expense.

TOTAL INCOME TAX EXPENSE was $419,000 (an effective tax rate of 32.7%) for the
six months ended December 31, 2004, compared to $441,000 (an effective tax rate
of 32.8%) during the six months ended December 31, 2003.

RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 2004
AND 2003.

The Company reported earnings of $441,000 for the three months ended December
31, 2004, an increase of $51,000, or 13.1%, from the $390,000 reported for the
same period in 2003. Both basic and diluted earnings per share increased $0.01,
or 20.0%, from $0.05 for the three months ended December 31, 2003, to $0.06 for
the three months ended December 31, 2004. The Company's return on average assets
was 0.92% for the three months ended December 31, 2004 compared to 0.79% for the
same period in 2003 while return on average equity was 7.26% for the three
months ended December 31, 2004 compared to 6.42% for the same period 2003.

NET INTEREST INCOME was $1,767,000 for the three months ended December 31, 2004,
$50,000, or 2.9%, greater than the $1,717,000 reported for three months ended
December 31, 2003.

Interest income was relatively unchanged at $2,755,000 for the three months
ended December 31, 2004, compared to $2,760,000 for the three months ended
December 31 2003. However, the composition of interest income shifted from
interest income earned on investment securities to interest income earned on
loans. Interest income earned on loans increased by $35,000 or 1.4%, from
$2,541,000 for the three months ended December 31, 2003, to $2,576,000 for the
three months ended December 31, 2004. This was attributable to an increase in
the average balance of total loans outstanding, from $150.1 million for the
quarter ended December 31, 2003 to $158.1 for the quarter ended December 31,
2004. However, the overall yield on loans declined 32 basis points from 6.73%
during the quarter ended December 31, 2003, to 6.41% during the quarter ended
December 31, 2004. Interest income earned on investment securities and other
interest earning assets declined by $40,000 or 18.3%, from $219,000 for the
three months ended December 31, 2003, to $179,000 for the three months ended
December 31, 2004. This decline was solely the result of management's
reinvestment of proceeds from maturing investment securities into the loan
portfolio.

Interest expense was $988,000 for the three months ended December 31, 2004, a
decrease of $55,000 or 5.3%, $1,043,000 for the three months ended December 31
2003. This decline was the result of the lower interest rate environment coupled
with a change in the mix of deposits and FHLB advances used to fund the Bank's
assets. Average total deposits decreased $4.6 million, from $117.8 million for
the quarter ended December 31, 2003, to $113.2 million during the quarter ended
December 31, 2004, while the average rate paid on deposit accounts declined

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slightly from 1.11% during the quarter ended December 31, 2003, to 0.98% during
the quarter ended December 31, 2004. While the Bank paid-off maturing long-term
FHLB advances, it increased its level of "overnight" borrowing from the FHLB.
Accordingly, while the average balance of FHLB borrowings increased from $51.0
million during the quarter ended December 31, 2003, to $55.1 million during the
quarter ended December 31, 2004, the average rate paid on those advances
declined from 5.19% during the quarter ended December 31, 2003, to 5.11% during
the quarter ended December 31, 2004.

THE PROVISION FOR LOAN LOSSES was $30,000 for three months ended December 31,
2004 and for the same period in 2003. The provision for both periods reflects
management's analysis of the Bank's loan portfolio based on information that is
currently available to it at such time. In particular, management considers the
level of non-performing loans and potential problem loans. Total charge-offs for
three months ended December 2004 were $244,000 compared to $28,000 during the
same period in 2003. Included in the $244,000 charged-off during the three
months ended December 31, 2004, was $156,000 related to a problem credit that
had been specifically reserved for in a prior period. While management believes
that the allowance for loan losses is sufficient based on information currently
available to it, no assurances can be made that future events, conditions, or
regulatory directives will not result in increased provisions for loan losses
which may adversely affect income.

NONINTEREST EXPENSE was $1,571,000 for three months ended December 31, 2004,
$52,000 or 3.2% less than the $1,623,000 reported for the three months ended
December 31, 2003. This decline was primarily the result of a $59,000 or 7.8%
decline in salary and employee benefits as full time equivalent employees
declined from 63 at December 31,2003 to 60 at December 31, 2004. In addition,
other noninterest expense declined $17,000 or 3.3%. These declines were
partially offset by a $23,000 or 16.3% increase in Data processing expenses from
$141,000 for the quarter ending December 31, 2003 to $164,000 for the quarter
ending December 31, 2004.

TOTAL INCOME TAX EXPENSE was $219,000 (an effective tax rate of 33.2%) for the
three months ended December 31, 2004, compared to $198,000 (an effective tax
rate of 33.6%) during the three months ended December 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY AND THE BANK

Banking regulations require the Bank to maintain sufficient liquidity to ensure
its safe and sound operation. The Bank's regulatory liquidity was 14.28% and
15.80% at December 31, 2004 and 2003, respectively. The primary source of
funding for the Company is dividend payments from the Bank. Dividend payments by
the Bank have been used primarily by the Company to pay dividends to its
stockholders.

The Bank's liquidity is a product of its operating, investing and financing
activities. The primary investment activity of the Bank is the origination of
mortgage loans and, to a lesser extent, commercial and consumer loans. The
primary sources of funds are deposits, FHLB borrowings, prepayments and
maturities of outstanding loans, mortgage-backed securities, and investments.
While scheduled payments of loans and mortgage-backed securities and maturing
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by interest rates, economic conditions and
competition. The Bank utilizes FHLB borrowings to leverage its capital base and
provide funds for lending and to better manage its interest rate risk. The sole
investment of the Company is its investment in the Bank's stock.

At December 31, 2004, the Bank had outstanding commitments to fund existing
construction loans of $8,023,000, originate loans of $4,046,000, open-end
consumer lines of credit of $8,426,000, unused commercial lines of credit of
$5,245,000 and standby letters of credit of $2,134,000. As of December 31, 2004,
certificates of deposit scheduled to mature in one year or less totaled
$21,770,000. Based on historical experience, management believes that a
significant portion of maturing deposits will remain with the Bank. Management
anticipates that the Bank will continue to have sufficient funds, through
deposits, borrowings, and normal operations to meet its commitments.

The Bank is required by Office of Thrift Supervision ("OTS") regulations to meet
certain minimum capital requirements. At December 31, 2004, the Bank exceeded
all of its regulatory capital requirements with tangible and tier 1 capital both
at $22,690,000 or 12.15% of adjusted total assets, and risk-based capital at
$23,528,000 or 17.61% of risk-weighted assets. The minimum ratios required by
the OTS are 1.5% for tangible capital to adjusted total assets, 4.0% for tier 1
capital to adjusted total assets and 8.0% for risk-based capital to
risk-weighted assets.

The Bank's most liquid assets are cash and cash equivalents. The level of cash
and cash equivalents is dependent on the Bank's operating, financing lending and
investing activities during any given period. At December 31, 2004,

14

the Bank's cash and cash equivalents totaled $6,242,000. The Company's and
Bank's future short-term requirements for cash are not expected to
significantly change. However, in the event that the Bank should require funds
in excess of its ability to generate them internally, additional sources of
funds are available, including additional FHLB advances. With no parent company
debt and sound capital levels, the Company should have many options available
for satisfying its longer-term cash needs such as borrowing funds, raising
equity capital and issuing trust preferred securities.

Management is not aware of any current recommendations or government proposals
which, if implemented would have a material effect on the Company's liquidity,
capital resources or operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in the Company's market risk since June 30,
2004, except as discussed in the Management's Discussion and Analysis of
Financial Condition and Results of Operations set forth in Item 2, above. For
information regarding the Company's Market Risk, refer to the Company's Form
10-K for the year ending June 30, 2004.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, the
Company's Chief Executive Officer and Chief Financial Officer evaluated, with
the participation of the Company's management, the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")). Based upon their evaluation, the Company's Chief Executive Officer and
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures are effective to ensure that information required to be disclosed
in the reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms.

No changes were made to the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
during the Company's most recent fiscal quarter that have materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.

15

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal actions incident
to its business, none of which is believed by management to
be material to the financial condition of the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS

In July 2004, the Company's Board of Directors approved a
share repurchase authorization of up to 364,118 shares. In
the quarter ended December 31, 2004, the Company made the
following repurchases of common stock:

There were no share repurchase plans that expired during the quarter, and the
Company did not terminate any plan prior to its expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The information contained in Part II Item 4 of the
Company's Form 10-Q filed with the SEC on November 15,
2004, for the period ended September 30, 2004, is
incorporated herein by reference.

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS

a. Exhibits

3.1 Peoples Ohio Financial Corporation Articles of
Incorporation (incorporated by reference to the Form
8-A filed with the SEC on February 8, 2002 (the "Form
8-A"), Exhibit 2(a))

3.2 Peoples Ohio Financial Corporation Amended and
Restated Code of Regulations (Incorporated by
reference to the Form 8-A, Exhibit 2(b))

31.1 Certification of Ronald B. Scott, Chief Executive
Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

31.2 Certification of Richard J. Dutton, Chief Financial
Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32 Certification of Ronald B. Scott, Chief Executive
Officer and Richard J. Dutton, Chief Financial
Officer, pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002

16

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.

PEOPLES OHIO FINANCIAL CORPORATION

Dated: February 14, 2005 By /s/ Ronald B. Scott
----------------------------------
Ronald B. Scott
President, Chief Executive Officer

By /s/ Richard J. Dutton
----------------------------------
Richard J. Dutton
Vice-President, Chief Financial
Officer

17

INDEX TO EXHIBITS