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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Commission File Number 0-25049

FIRST PLACE FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

185 E. Market Street, Warren, OH 44481

(Address of principal executive offices)

(330) 373-1221

(Registrant’s telephone number, including area code)

Not Applicable

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Securities Exchange Act).  Yes x  No  ¨

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

13,299,887 common shares as of April 30, 2003

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

See accompanying notes to consolidated financial statements.

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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See accompanying notes to consolidated financial statements.

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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

See accompanying notes to consolidated financial statements.

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FIRST PLACE FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to consolidated financial statements.

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Notes to Unaudited Consolidated Financial Statements

1. Principles of Consolidation:

The interim unaudited condensed consolidated financial statements include the accounts of First Place Financial Corp. (Company) and its wholly owned subsidiaries, First Place Bank (Bank) and First Place Holdings, Inc. The consolidated financial statements also include subsidiaries of First Place Holdings, Inc.—First Place Insurance Agency, Ltd., Coldwell Banker First Place Real Estate, Ltd., APB Financial Group, Ltd., and Title Works Agency, LLC. Please refer to Note 2, Acquisitions, for additional information regarding APB Financial Group, Ltd. and Title Works Agency, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

2. Acquisitions:

At June 30, 2002, the Company owned two-thirds interest in Coldwell Banker First Place Real Estate, Ltd., a real estate agency/brokerage located in Warren and Youngstown, Ohio. In July 2002, the Company acquired the remaining one-third interest in the business for consideration of $314,000. The acquisition consideration was allocated to goodwill. In January 2003, the Company acquired APB Financial Group, Ltd., an employee benefit consulting firm headquartered in Warrendale, Pennsylvania for consideration of $1.3 million, which has been initially allocated to goodwill. The Company is in the process of obtaining valuations of certain intangible assets acquired in this transaction, thus, the allocation of the purchase price is subject to change. Also in January 2003, the Company acquired an additional 26% ownership in Title Works Agency, LLC for consideration of $22,000, increasing the ownership position of the Company to 75%.

3. Basis of Presentation:

The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in First Place Financial Corp.’s 2002 Annual Report to Shareholders incorporated by reference into First Place Financial Corp.’s 2002 Annual Report on Form 10-K. The interim condensed consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.

Certain reclassifications have been made to prior periods’ consolidated financial statements and related notes in order to conform to the current period presentation.

4. Earnings per Share:

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

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Stock options for 33,117 and 21,381 shares of common stock were not considered in computing diluted earnings per share for the quarters ended March 31, 2003 and 2002, respectively, because they were antidilutive. Stock options for 24,621 and 21,381 shares of common stock were not considered in computing diluted earnings per share for the nine months ended March 31, 2003 and 2002, respectively, because they were antidilutive.

5. Effect of New Accounting Pronouncement:

Effective July 1, 2002, Derivatives Implementation Group (DIG) Statement 133 Implementation Issue No. C13 required that non-portfolio mortgage loan commitments with interest rate locks be accounted for as free-standing derivatives subject to Statement of Financial Accounting Standards (“SFAS”) No. 133. The change in the value of these commitments is reflected in earnings as a component of current period gain or loss on sale of loans. For the three months ended March 31, 2003, a pre-tax loss of $618,000 was recorded on these loan commitments. For the nine months ended March 31, 2003, a pre-tax gain, net of losses, of $605,000 was recorded on these loan commitments.

The effect on net income and earnings per share for the three and nine months ended March 31, 2003 and 2002, excluding the effect of the adoption of this new accounting pronouncement was as follows:

On October 1, 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 147, “Acquisitions of Certain Financial Institutions”, effective for certain business combinations initiated after October 1, 2002. This statement addresses the financial accounting and

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reporting for the acquisition of all or part of a financial institution, except for a transaction between two or more mutual enterprises. This statement removes acquisitions of financial institutions, other than transactions between two or more mutual enterprises, from the scope of SFAS No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions”, and FASB Interpretations No. 9, Applying APB Opinions No. 16 and 17 “When a Savings and Loan Association or a Similar Institution is Acquired in a Business Combination Accounted for by the Purchase Method”. The acquisition of all or part of a financial institution that meets the definition of a business combination shall be accounted for by the purchase method in accordance with SFAS No. 141, “Business Combinations”, and SFAS No. 142, “Goodwill and Other Intangible Assets”. This statement also provides guidance on the accounting for the impairment or disposal of acquired long-term customer-relationship intangible assets (such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets), including those acquired in transactions between two or more mutual enterprises. The adoption of this statement did not have a material effect on the Company’s financial position or results of operations.

The Company has stock option plans for certain employees that are accounted for under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations. Because the exercise price at the date of the grant is equal to the market value of the stock, no compensation expense is recognized. On December 31, 2002 FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for an entity that changes to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure provisions of SFAS No. 123 to require expanded and more prominent disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation.

The following pro forma disclosures present the Company’s net income and earning per share, determined as if the Company had recognized compensation expense for its employee stock options under the fair value method under the provisions of SFAS No. 123:

In January 2003, FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” This interpretation clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statement,” and addresses consolidation by business enterprises of variable interest entities (more commonly known as Special Purpose Entities or SPE’s). Interpretation No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risk among the parties involved. Interpretation No. 46 also enhances the disclosure requirements related to variable interest entities. This statement is effective for variable interest entities created or in which an enterprise obtains an interest after January 31, 2003. Interpretation No. 46 will be effective for the Company beginning July 1, 2003, for all interest in variable interest entities acquired before February 1, 2003. The adoption of Interpretation No. 46 is not expected to have an effect on the Company’s consolidated financial statements.

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

The following analysis discusses changes in the Company’s financial condition and results of operations during the periods included in the Condensed Consolidated Financial Statements that are a part of this filing.

Forward-Looking Statements

When used in this Form 10-Q, or, in future filings by First Place Financial Corp. with the Securities and Exchange Commission, in the Company’s 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”, “are expected

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to”, “will continue”, “is anticipated”, “estimate”, “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the market areas where the Company conducts business, changes in policies by regulatory agencies, fluctuations in interest rates, changes in the relationship between short- and long-term interest rates, demand for loans in the market areas where 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 wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Results of Operations

Comparison of the Three and Nine Months Ended March 31, 2003 and 2002

General. Net income for the three months ended March 31, 2003 totaled $4.4 million, or $0.34 per diluted share compared to net income of $3.4 million, or $0.25 per diluted share for the three months ended March 31, 2002. Return on average equity for the quarter was 9.94% compared to 7.32% for the three months ended March 31, 2002. Return on average assets for the quarter was 1.20% compared to 0.83% for the three months ended March 31, 2002.

Net income for the nine months ended March 31, 2003 totaled $11.7 million, or $0.90 per diluted share compared to net income of $13.0 million, or $0.91 per diluted share for the nine months ended March 31, 2002. Return on average equity for the nine months ended March 31, 2003 was 8.65% compared to 9.01% for the nine months ended March 31, 2002 and return on average assets for the nine months ended March 31, 2003 was 1.01% compared to 1.05% for the same period in the prior year.

Net Interest Income. Net interest income for the quarter ended March 31, 2003 totaled $11.0 million, an increase of $49,000 over the quarter ended March 31, 2002. A $4.8 million decline in interest income was offset by an equal decline in interest expense. Contributing to the decline in interest income was a decrease in average interest-earning assets of $197.5 million compared to the prior year period and a general decline in interest rates. The decrease in average interest-earning assets was primarily due to the amortization and prepayment of mortgage-backed securities, a reduction in short-term investments, and, to a lesser extent, prepayment of loan balances. The yield on average interest-earning assets declined by 46 basis points (“bp”), a combination of a decline in interest rates offset somewhat by an improvement in asset mix. The improvement in asset mix resulted from a decrease in lower yielding short-term assets as a percentage of total earning assets and an increase in higher yielding loans as a percentage of total earning assets. The decline in interest expense was attributable to a decrease of $159.5 million in average interest-bearing liabilities and overall lower interest rates. The decrease in average interest-bearing liabilities was primarily a result of scheduled repayments of repurchase agreements and Federal Home Loan Bank advances and a reduction in short-term borrowings. Average deposit balances were essentially unchanged from the prior year period, although time deposit balances decreased and core deposit balances increased. The yield on average interest-bearing liabilities decreased by 98 bp, caused by a general decline in interest rates and an improvement in liability mix. The improvement in liability mix resulted from a decrease in higher cost borrowings and an increase in lower cost deposits. The change in the mix of interest-earning assets and interest-bearing liabilities had a significant favorable impact on the net interest margin. The net interest margin increased from 2.88% for the quarter ended March 31, 2002 to 3.29% for the quarter ended March 31, 2003.

Net interest income for the nine month period ended March 31, 2003 was $32.8 million, a decrease of $1.0 million from $33.8 million for the nine month period ended March 31, 2002. The decline in net interest income was primarily caused by a decrease in average interest-earning assets and a general decline in interest rates. Average interest-earning assets decreased $110.6 million primarily from the amortization and prepayment of mortgage-backed securities, the refinancing and sale of fixed rate portfolio mortgage loans, and a reduction in short-term investments partially offset by an increase in other investments. Average interest-bearing liabilities declined by $92.9 million in the nine month period ended March 31, 2003 compared to the prior year period reflecting a decrease in average balances of repurchase agreements and other borrowings of $114.6 million partially offset by growth in deposits of $21.7 million. The net interest margin was 3.17% for the nine months ended March 31, 2003 compared to 3.06% for the prior year period. The increase was due primarily to the change in the mix of balances of

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interest-bearing liabilities. A reduction of higher costing repurchase agreements and FHLB borrowings and an increase in lower costing deposit balances as a percentage of total interest-bearing liabilities contributed to the improvement in the net interest margin.

Provision for Loan Losses. The provision for loan losses was $768,000 for the three months ended March 31, 2003, a decrease of $242,000 compared to the three months ended March 31, 2002. Net charge-offs for the quarter ended March 31, 2003 were $602,000 compared to $407,000 for the prior year quarter ended March 31, 2002. Despite a lower level of net charge-offs in the prior year quarter, a larger provision was recorded in the prior year to increase the overall level of the loan loss reserve, which resulted in a loan loss reserve ratio of 1.02% at March 31, 2002. A smaller provision was required in the third quarter of the current year in order to maintain an allowance for loan losses at a level adequate to absorb management’s estimate of probable losses inherent in the loan portfolio. The loan loss reserve ratio at March 31, 2003 was 1.05%. For the nine months ended March 31, 2003 the provision for loan losses was $2.0 million, down $354,000 from the nine months ended March 31, 2002, reflecting a $771,000 decline in net charge-offs. Annualized net charge-offs to average loans for the nine months ended March 31, 2003 were 0.27% compared to 0.35% for the nine months ended March 31, 2002. The Company experienced an increase in nonperforming assets from $12.6 million at June 30, 2002 to $16.0 million at March 31, 2003 primarily due to an increase in one-to-four family mortgage loans. The Company typically does not experience significant losses from loans on one-to-four family mortgages. The ratio of the allowance for loan losses to nonperforming loans was 66.39% at March 31, 2003, compared to 81.11% at June 30, 2002.

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

Noninterest Income. Noninterest income totaled $5.8 million for the three months ended March 31, 2003, an increase of 57% over the three months ended March 31, 2002. Noninterest income totaled $13.5 million for the nine months ended March 31, 2003, an increase of 17% over the nine months ended March 31, 2002.

Gains on sale of loans were $3.2 million for the three months ended March 31, 2003 compared to $1.8 million for the prior year period, an increase of $1.4 million. The Company originated $232 million in mortgages for the quarter ended March 31, 2003, an increase of 68% over the prior year quarter. Gains on sale of loans were $8.4 million for the nine months ended March 31, 2003 compared to $5.8 million for the prior year, an increase of $2.6 million. The increase in gains occurred primarily because of increased mortgage loan originations and sales resulting from a low interest rate environment favorable to mortgage activity. A sustained period of low market interest rates caused by economic and geopolitical conditions has benefited the Company by contributing to increased mortgage activity. These conditions are not expected to continue indefinitely which will likely result in lower levels of mortgage activity in the future. However, the Company does expect to maintain the relatively high level of mortgage activity through the balance of this fiscal year ending June 30, 2003. Derivatives Implementation Group Issue No. C13, which became effective July 1, 2002, requires that non-portfolio mortgage loan commitments with interest rate locks be accounted for as free-standing derivatives subject to SFAS 133. The implied value of these commitments varies as interest rates move subsequent to the date the rates were locked. The change in the value of these commitments is reflected in earnings as a non-cash component of current period gain or loss on sale of loans. A loss of $618,000 was recorded on these loan commitments for the quarter ended March 31, 2003. For the nine months ended March 31, 2003, a net gain of $605,000 was recorded. The Company also hedges mortgage loan commitments and loans held for sale to limit the exposure to potential movements in interest rates. Fair value adjustments related to these hedges are also recorded in current period earnings as an adjustment to gain or loss on sale of loans. For the quarter and nine months ended March 31, 2003, losses of $289,000 and $1.5 million, respectively, were recorded on these hedges.

The Company generally retains the servicing rights of mortgage loans that it originates and sells into secondary markets. The Company monitors the effect of changing interest rates and prepayment speeds on the estimated value of the mortgage servicing rights (MSRs) and recorded a non-cash impairment valuation of $669,000 during the quarter as a reduction to servicing income compared to a partial reversal of prior period impairment charges of

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$45,000 in the prior year quarter. Additionally, amortization of the related capitalized servicing asset is netted against servicing revenue in noninterest income. Accelerated amortization caused by rapid prepayment of loans in a lower rate environment combined with the impairment adjustment resulted in a net servicing loss of $1.3 million in the current year quarter compared to a net servicing loss of $452,000 in the quarter ended March 31, 2002. Loan servicing income decreased $2.8 million to a net loss of $3.2 million for the nine months ended March 31, 2003 compared to the prior year period. The net loss for the nine months included a total of $1.6 million for non-cash impairment adjustments of the value of MSRs compared to $7,000 for the nine months ended March 31, 2002. The process used to arrive at the estimated aggregate fair value of the Company’s MSRs is a material estimate that is particularly susceptible to significant changes in the near term. The value of the MSRs portfolio is analyzed quarterly by considering critical assumptions for prepayment speeds, the targeted investor yield to a buyer of MSRs, and float on escrows. Market interest rates are an external factor that can have a material influence on this valuation process, as interest rates influence prepayment speeds and targeted investor yield. Management believes that the estimated aggregate fair value of the MSRs is fairly stated at March 31, 2003.

Security gains were $355,000 for the three months ended March 31, 2003, compared to $412,000 for the three months ended March 31, 2002. Certain securities were sold in the current quarter that were anticipated to have very rapid prepayments due to continued low interest rates. Security gains of $784,000 for the nine months ended March 31, 2003 were $569,000 below the total gains of $1.4 million for the prior year period. The prior year nine month period included the sale of long-term fixed rate securities that were sold to reduce the overall duration of the securities portfolio and improve the Company’s interest rate risk profile.

Service charges increased 16% to $1.3 million for the three months ended March 31, 2003 over the same period in the prior year. Service charge revenue totaled $3.8 million for the nine months ended March 31, 2003 compared to $3.3 million for the prior year period, an increase of 15%. In both cases, the improvement was due to an increase in revenue from transaction accounts and ATM transactions due primarily to price increases.

Other revenues increased $1.3 million in the current quarter and $2.1 million in the current nine month period compared to the comparable periods in the prior year. The increases resulted primarily from acquisitions of non-bank businesses that occurred in June, 2002 and January, 2003.

Noninterest Expense. The Company experienced a moderately higher level of noninterest expense in the current quarter and year-to-date period compared to the same periods last year. Noninterest expense was $9.4 million for the three months ended March 31, 2003, an 8% increase compared to the three months ended March 31, 2002. For the nine months ended March 31, 2003, noninterest expense was $26.9 million, a 13% increase compared to the nine months ended March 31, 2002. The increase in noninterest expense compared to last year for both the current quarter and the nine months ended March 31, 2003 was primarily due to the business acquisitions described above, and secondarily due to the increase in mortgage loan production. For the quarter ended March 31, 2003 compared to the prior year quarter, these acquisitions added $764,000 to noninterest expense compared to an overall increase in total noninterest expense of $699,000. For the nine months ended March 31, 2003, acquisitions added $1.5 million to noninterest expense compared to an overall increase of $3.0 million. The efficiency ratio was 55.16% for the three month period ended March 31, 2003 and 57.24% for the nine month period ended March 31, 2003. For the prior year three and nine month periods the efficiency ratios were 59.43% and 52.58%, respectively.

Salaries and benefits expense was 5% higher in the current quarter compared to the prior year period due primarily to employee costs related to the business acquisitions. Mitigating the overall increase in salaries and benefits for the quarter was a higher deferral of loan origination costs due to the higher volume of mortgage loan production. For the nine months ended March 31, 2003 compared to the prior year period, salaries and benefits were 10% higher primarily due to employee costs related to increased mortgage loan production and the business acquisitions. Other expense increases for the current year quarter and fiscal year-to-date occurred primarily from increases in costs attributable to higher loan production volumes.

Income Taxes. Income tax expense totaled $2.2 million for the quarter ended March 31, 2003, an increase of $656,000 compared to $1.5 million for the prior year quarter ended March 31, 2002 due to the higher net income in the current quarter. Income tax expense totaled $5.6 million for the nine months ended March 31, 2003, a decrease of $601,000 compared to $6.2 million for the prior year period due to lower year-to-date net income. The effective tax rate for the nine months ended March 31, 2003 was 32.3% compared to 32.4% for the nine months ended March 31, 2002.

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Financial Condition

General. Assets totaled $1,515.5 million at March 31, 2003, a decrease of $75.4 million, or 4.7% from $1,590.9 million at June 30, 2002. Generally, assets have declined as the Company used federal funds sold and principal payments on mortgage related securities to repay the scheduled maturity of borrowings. Capital ratios remain strong, as supported by the ratio of equity to total assets at March 31, 2003 of 11.88%.

Securities. Securities available for sale declined $87.0 million, or 18.8% and totaled $375.9 million at March 31, 2003 compared to $462.9 million at June 30, 2002. The decline was primarily due to principal payments received on mortgage related securities and the sale of certain securities as previously discussed, partially offset by securities purchased. Average balances of securities available for sale for the quarter ended March 31, 2003 were $364.9 million, a decrease of $46.6 million or 11.3% from the quarter ended December 31, 2002.

Loans. Loans receivable, excluding loans held for sale, totaled $909.1 million at March 31, 2003, an increase of $3.1 million, or 0.3% from $906.0 million at June 30, 2002. The increase in loan balances since June 30, 2002 was primarily in commercial loans, which increased $17.6 million, offset primarily by a decline in mortgages of $11.2 million. Average loan balances, including loans held for sale, totaled $963.2 million for the quarter ended March 31, 2003 compared to $965.2 million for the quarter ended December 31, 2002.

Since September 2002, the Company had been offering short-term deferred presentment consumer loans, also known as payday loans, in Texas. The Company was directed by the Office of Thrift Supervision (OTS) to discontinue making payday loans in Texas. The Company discontinued lending activity under this program and completed an orderly exit from this program in April, 2003. Discontinuing the program will not have a material impact on the Company.

Other Assets. Other assets increased by $40.0 million to $96.4 million at March 31, 2003 compared to June 30, 2002. The increase was primarily the result of the purchase of $15 million of bank owned life insurance and an increase of $23.4 million in accounts receivable due from the sale of loans to the secondary market.

Deposits. Deposits decreased $25.8 million, or 2.3%, during the quarter and totaled $1,075.2 million at March 31, 2003 compared to $1,061.4 million at June 30, 2002. During the quarter non-interest bearing account balances decreased $1.6 million but have increased $5.9 million or 20.6% from June 30, 2002. Interest bearing accounts decreased $24.2 million in the current period quarter but have increased $7.8 million from June 30, 2002. Compared to June 30, 2002, money market account balances increased $44.1 million while time deposits decreased $31.3 million. Average deposit balances during the quarter ended March 31, 2003 were $1,050.8 million compared to $1,065.7 million for the quarter ended December 31, 2002, a decrease of 1.4% or $14.9 million.

Borrowings. Repurchase agreements decreased $54.2 million or 85.0% from $63.7 million at June 30, 2002 and totaled $9.5 million at March 31, 2003. The decrease was due to scheduled maturities. Federal Home Loan Bank advances declined $16.2 million or 6.6% to $231.3 million at March 31, 2003 compared to $247.5 million at June 30, 2002 due primarily to a reduction of short-term floating rate advances. Repayments of repurchase agreements and Federal Home Loan Bank advances were made primarily from short-term investments in fed funds sold and the proceeds received from the principal amortization and sale of securities. The Company monitors borrowings as part of its liquidity management, cash flow, and asset/liability management. Future borrowing commitments will depend on these factors and other changes in the balance sheet.

During the quarter ended September 30, 2002 the Company redeemed interest rate swaps, which were being used to hedge certain FHLB advances, at the fair value of $12.6 million and recorded a loss in other comprehensive income, net of tax, of $8.2 million that is being amortized to interest expense over the remaining original terms of the individual interest rate swap contracts. The amount to be amortized to expense is expected to be less than what the net interest cost would have been in each period under the prevailing lower interest rate environment that existed at the time the interest rate swaps were redeemed. Approximately 60% of this expense will be recognized within the next three fiscal years with the remainder to be recognized in essentially equal annual increments through fiscal year 2010.

Capital Resources. Total shareholders’ equity decreased $5.3 million, or 2.9% and totaled $180.0 million at March 31, 2003 compared to $185.3 million at June 30, 2002. The overall decline in shareholders’ equity was due to the repurchase of treasury shares from the Company’s ongoing buy-back program. During the quarter ended March 31, 2003 the Company repurchased 140,211 shares at an average price of $16.66 per share. As of March 31, 2003, there were 37,309 shares remaining under the stock buy-back program approved by the board of directors on July 16, 2002. On March 19, 2003 the Company announced a share repurchase program to buy back an additional 750,000 shares of the Company’s common stock in open market or in privately negotiated transactions in accordance with applicable regulations of the Securities and Exchange Commission. Stock repurchase programs are a component of

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the Company’s strategy to reduce/invest excess capital after consideration of market and economic factors, the effect on shareholder dilution, adequacy of capital, effect on liquidity and an assessment of alternative investment returns. Shares repurchased by the Company may be used to meet the Company’s requirements for common shares under its dividend reinvestment plan, stock option or other stock based plans and for general corporate purposes such as expansion and acquisitions or future capital requirements.

OTS regulations require savings institutions to maintain certain minimum levels of regulatory capital. Additionally, the regulations establish a framework for the classification of savings institutions into five categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Generally, an institution is considered well-capitalized if it has a core (Tier 1) capital ratio of at least 5.0% (based on average total assets); a core (Tier 1) risk-based capital ratio of a least 6.0%; and a total risk-based capital ratio of at least 10.0%. The Bank had capital ratios above the well-capitalized levels at March 31, 2003 and June 30, 2002. At March 31, 2003, the ratios of the Bank were 9.4%, 15.4%, and 16.4%, respectively.

Critical Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with generally accepted accounting principles in the United States of America. These policies are presented in Note 1 to the consolidated audited financial statements in First Place Financial Corp.’s 2002 Annual Report to Shareholders incorporated by reference into First Place Financial Corp.’s 2002 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 30, 2002. Some of these accounting policies, as discussed below, are considered to be critical accounting policies. Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company has identified two accounting polices that are critical accounting policies and an understanding of these policies is necessary to understand our financial statements. These two policies relate to determining the adequacy of the allowance for loan losses and the valuation of the mortgage servicing rights. Additional information regarding these policies is included in the sections captioned “Provision for Loan Losses” and “Noninterest Income”, respectively. We believe that the judgments, estimates and assumptions used in the preparation of our consolidated financial statements are appropriate given the factual circumstances at the time.

Liquidity and Cash Flows

In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs. The Company’s objective in liquidity management is to maintain the ability to meet loan commitments, purchase securities or to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings. The Company’s principal sources of funds are deposits, amortization and prepayments of loans, maturities, sales and principal receipts of securities, borrowings, repurchase agreements and operations.

The Company is required by regulation to maintain sufficient liquidity to ensure its safe and sound operation. Thus, adequate liquidity may vary depending on the Company’s overall asset/liability structure, market conditions, the activities of competitors, and the requirements of its own deposit and loan customers. Management believes that the Company’s liquidity is sufficient.

Liquidity management is both a daily and long-term responsibility of management. The Company adjusts its investments in liquid assets, primarily cash, short-term investments and other assets that are widely traded in the secondary market, based upon management’s assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities and (iv) the objective of its asset/liability management program. Along with its liquid assets, the Bank has additional sources of liquidity available including, but not limited to, the ability to obtain deposits by offering above-market interest rates and access to advances from the Federal Home Loan Bank.

The primary investing activities of the Company are originating loans and purchasing securities. For the nine months ended March 31, 2003 proceeds from the securities portfolio provided $154.1 million and an increase in the loan portfolio used $3.4 million. For the nine months ended March 31, 2002, a decrease in the securities portfolio provided $170.6 million and the loan portfolio provided $38.2 million. Generally, during periods of declining interest rates, the Company would be expected to experience increased loan and mortgage related security prepayments, which would likely be reinvested at lower interest rates. During periods of increasing interest rates, loan and mortgage related security prepayments would be expected to decline, reducing funds available for investment at higher interest rates.

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