----

----

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

| o | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|-------------------------------------------------------------------------------------------------------------------------------------------|

**OREGON      PACIFIC BANCORP**

*(Exact      name of Registrant as specified in its charter)*

| **Oregon**                                       |   | **71-0918151**                       |
|--------------------------------------------------|--------|--------------------------------------|
| *(State                or other jurisdiction of* |   | *(I.R.S.                Employer*    |
| *incorporation                or organization)*  |   | *Identification                No.)* |

**1355      Highway 101**

**Florence,      Oregon 97439**

*(Address      of principal executive offices)*

**(541)      997-7121**

*(Issuer’s      telephone number)*

**  **

----

----

----

**OREGON      PACIFIC BANCORP**

**INDEX**

| Part                    I   | Financial                    Information                                                 |                                                                                                                              |
|-----------------------------|------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    1.                                                               | Financial                    statements                                                                                           |   |
|                        |                                                                                     |                                                                                                                              |   |
|                        |                                                                                     | Consolidated                    balance sheets                                                                                    | 3 |
|                        |                                                                                     | Consolidated                    statements of income and comprehensive                    income                                  | 4-5 |
|                        |                                                                                     | Consolidated                    statements of changes in stockholders’                    equity                            | 6 |
|                        |                                                                                     | Consolidated                    statements of cash flows                                                                          | 7 |
|                        |                                                                                     | Notes                    to consolidated financial statements                                                                     | 8-12 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    2.                                                               | Management’s                    Discussion and Analysis of Financial Condition And                    Results of Operations | 13-19 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    3.                                                               | Quantitive                    and Qualitive Disclosures about Market                    Risk                                      | 19 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    4.                                                               | Controls                    and Procedures                                                                                        | 19-20 |
|                        |                                                                                     |                                                                                                                              |   |
| Part                    II. | Other                  Information                                                       |                                                                                                                              |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    1.                                                               | Legal                    proceedings                                                                                              | 20 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    1A.                                                              | Risk                    Factors                                                                                                   | 20 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    2.                                                               | Unregistered                    sales of equity securities and use of                    proceeds                                 | 20 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    3.                                                               | Defaults                    upon senior securities                                                                                | 20 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    4.                                                               | Submission                    of matters to a vote of security                    holders                                         | 20-21 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    5.                                                               | Other                    information                                                                                              | 21 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Item                    6.                                                               | Exhibits                    and Reports on Form 8-K                                                                               | 21 |
|                        |                                                                                     |                                                                                                                              |   |
|                        | Signatures                                                                               | 22                                                                                                                                |
|                        | Certifications                    of Chief Executive Officer and Chief Financial Officer | 23-25                                                                                                                             |

----

*Index*

| **PART                1.** | **FINANCIAL                INFORMATION** |
|----------------------------|------------------------------------------|

| **Item                1.** | **Financial                statements** |
|----------------------------|-----------------------------------------|

| ASSETS                                                                                                                                                                                                                                       |   | JUNE                30, 2006 |        | DECEMBER                31, 2005 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-------------|----------------------------------|--------|
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |
| Cash                and cash equivalents                                                                                                                                                                                                     |   | $                            | 6,566,007   |                             | $      | 5,018,838 |   |
| Interest-bearing                deposits in banks                                                                                                                                                                                            |   |                         | 6,581,299   |                             |   | 5,916,224 |   |
| Available-for-sale                securities, at fair value                                                                                                                                                                                  |   |                         | 10,828,399  |                             |   | 11,643,557 |   |
| Restricted                equity securities                                                                                                                                                                                                  |   |                         | 1,023,100   |                             |   | 1,023,100 |   |
| Loans                held-for-sale                                                                                                                                                                                                           |   |                         | 1,093,695   |                             |   | 1,350,810 |   |
| Loans,                net of allowance for loan losses and deferred fees                                                                                                                                                                     |   |                         | 120,837,090 |                             |   | 117,985,801 |   |
| Premises                & equipment, net                                                                                                                                                                                                 |   |                         | 5,562,181   |                             |   | 5,232,814 |   |
| Intangible                assets, net                                                                                                                                                                                                        |   |                         | 418,600     |                             |   | - |   |
| Accrued                interest and other assets                                                                                                                                                                                             |   |                         | 2,493,495   |                             |   | 2,269,861 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Total                assets                                                                                                                                                                                                                  |   | $                            | 155,403,866 |                             | $      | 150,441,005 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                                                                                                                                          |   |                         |        |                             |   |   |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Deposits:                                                                                                                                                                                                                                    |   |                         |        |                             |   |   |   |
| Demand                deposits                                                                                                                                                                                                               |   | $                            | 35,302,737  |                             | $      | 29,668,703 |   |
| Interest-bearing                demand deposits                                                                                                                                                                                              |   |                         | 43,247,235  |                             |   | 40,468,295 |   |
| Savings                deposits                                                                                                                                                                                                              |   |                         | 17,427,659  |                             |   | 18,433,466 |   |
| Time                certificate accounts:                                                                                                                                                                                                    |   |                         |        |                             |   |   |   |
| $100,000                or more                                                                                                                                                                                                              |   |                         | 15,133,428  |                             |   | 15,709,566 |   |
| Other                time certificate accounts                                                                                                                                                                                               |   |                         | 15,213,292  |                             |   | 17,049,226 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Total                deposits                                                                                                                                                                                                                |   |                         | 126,324,351 |                             |   | 121,329,256 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Federal                Home Loan Bank borrowings and other debt                                                                                                                                                                              |   |                         | 11,007,306  |                             |   | 11,412,806 |   |
| Floating                rate Junior Subordinated Deferrable Interest                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Debentures                (Trust Preferred Securities)                                                                                                                                                                                       |   |                         | 4,124,000   |                             |   | 4,124,000 |   |
| Deferred                compensation liability                                                                                                                                                                                               |   |                         | 2,013,569   |                             |   | 1,865,781 |   |
| Accrued                interest and other liabilities                                                                                                                                                                                        |   |                         | 901,589     |                             |   | 1,445,931 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Total                liabilities                                                                                                                                                                                                             |   |                         | 144,370,815 |                             |   | 140,177,774 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Stockholders'                equity                                                                                                                                                                                                          |   |                         |        |                             |   |   |   |
| Common                stock, no par value, 10,000,000 shares authorized with 2,179,915                and                2,166,006 issued and outstanding at June 30, 2006 and December 31,                2005,                respectively |   |                         | 5,002,326   |                             |   | 4,858,728 |   |
| Undivided                profits                                                                                                                                                                                                             |   |                         | 6,074,209   |                             |   | 5,376,065 |   |
| Accumulated                other comprehensive (loss) income, net of tax                                                                                                                                                                     |   |                         | (43,484     | )                                |   | 28,438 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Total                stockholders' equity                                                                                                                                                                                                    |   |                         | 11,033,051  |                             |   | 10,263,231 |   |
|                                                                                                                                                                                                                                         |   |                         |        |                             |   |   |   |
| Total                liabilities and stockholders' equity                                                                                                                                                                                    |   | $                            | 155,403,866 |                             | $      | 150,441,005 |   |

----

*Index*

**OREGON      PACIFIC BANCORP**

**CONSOLIDATED      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME**

|                                                               |   | Three                Months Ended |      | Six                Months Ended |   |
|--------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                               |   | June                30,           |      | June                30,         |   |
|                                                               |   | 2006                              |      | 2005                            |   | 2006 |   | 2005 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |
| INTEREST                INCOME                                     |   |                              |      |                            |   |   |   |   |   |
| Interest                and fees on loans                          |   | $                                 | 2,584,232 |                            | $      | 2,142,097 |   | $ | 5,141,779 |   | $ | 4,496,402 |   |
| Interest                on investment securities:                  |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| U.S.                Teasuries and agencies                         |   |                              | 36,905    |                            |   | 28,951 |   |   | 73,703 |   |   | 87,920 |   |
| State                and political subdivisions                    |   |                              | 74,288    |                            |   | 80,161 |   |   | 149,512 |   |   | 160,973 |   |
| Corporate                and other investments                     |   |                              | 15,782    |                            |   | 24,518 |   |   | 24,256 |   |   | 52,661 |   |
| Interest                on deposits in banks                       |   |                              | 128,644   |                            |   | 31,870 |   |   | 234,599 |   |   | 46,895 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Total                interest income                               |   |                              | 2,839,851 |                            |   | 2,307,597 |   |   | 5,623,849 |   |   | 4,844,851 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| INTEREST                EXPENSE                                    |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                    |   |                              | 267,595   |                            |   | 176,396 |   |   | 490,381 |   |   | 289,994 |   |
| Savings                deposits                                    |   |                              | 27,125    |                            |   | 24,453 |   |   | 52,279 |   |   | 48,803 |   |
| Time                deposits                                       |   |                              | 281,074   |                            |   | 175,345 |   |   | 561,486 |   |   | 308,796 |   |
| Other                borrowings                                    |   |                              | 212,679   |                            |   | 179,877 |   |   | 419,708 |   |   | 351,554 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Total                interest expense                              |   |                              | 788,473   |                            |   | 556,071 |   |   | 1,523,854 |   |   | 999,147 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Net                interest income                                 |   |                              | 2,051,378 |                            |   | 1,751,526 |   |   | 4,099,995 |   |   | 3,845,704 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| PROVISION                FOR LOAN LOSSES                           |   |                              | -         |                            |   | 45,000 |   |   | 26,000 |   |   | 215,000 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Net                interest income after provision for loan losses |   |                              | 2,051,378 |                            |   | 1,706,526 |   |   | 4,073,995 |   |   | 3,630,704 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| NONINTEREST                INCOME                                  |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Service                charges and fees                            |   |                              | 261,021   |                            |   | 239,469 |   |   | 511,414 |   |   | 471,603 |   |
| Trust                fee income                                    |   |                              | 165,149   |                            |   | 156,368 |   |   | 324,192 |   |   | 302,172 |   |
| Mortgage                loan sales and servicing fees              |   |                              | 119,660   |                            |   | 123,723 |   |   | 245,584 |   |   | 285,672 |   |
| Investment                sales commissions                        |   |                              | 120,529   |                            |   | 36,020 |   |   | 211,817 |   |   | 63,913 |   |
| Other                income                                        |   |                              | 39,334    |                            |   | 28,953 |   |   | 73,380 |   |   | 126,711 |   |
|                                                               |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Total                noninterest income                            |   |                              | 705,693   |                            |   | 584,533 |   |   | 1,366,387 |   |   | 1,250,071 |   |

----

*Index*

**OREGON      PACIFIC BANCORP**

**CONSOLIDATED      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME**

|                                                                                |   | Three                Months Ended |      | Six                Months Ended |   |
|-------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                                                |   | June                30,           |      | June                30,         |   |
|                                                                                |   | 2006                              |      | 2005                            |   | 2006 |   | 2005 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |
| NONINTEREST                EXPENSE                                                  |   |                              |      |                            |   |   |   |   |   |
| Salaries                and benefits                                                |   | $                                 | 1,217,327 |                            | $      | 1,050,371 |   | $ | 2,448,873 |   | $ | 2,165,788 |   |
| Occupancy                                                                           |   |                              | 226,123   |                            |   | 221,161 |   |   | 454,403 |   |   | 430,075 |   |
| Supplies                                                                            |   |                              | 40,109    |                            |   | 41,798 |   |   | 80,269 |   |   | 88,832 |   |
| Postage                and freight                                                  |   |                              | 28,939    |                            |   | 28,408 |   |   | 49,810 |   |   | 49,425 |   |
| Outside                services                                                     |   |                              | 178,142   |                            |   | 158,068 |   |   | 346,296 |   |   | 331,939 |   |
| Advertising                                                                         |   |                              | 15,897    |                            |   | 30,433 |   |   | 30,373 |   |   | 51,232 |   |
| Loan                collection expense                                              |   |                              | 5,356     |                            |   | 14,695 |   |   | 25,041 |   |   | 28,543 |   |
| Securities                and trust department expenses                             |   |                              | 82,253    |                            |   | 46,963 |   |   | 139,602 |   |   | 84,932 |   |
| Other                expenses                                                       |   |                              | 188,508   |                            |   | 168,010 |   |   | 378,895 |   |   | 324,314 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Total                noninterest expense                                            |   |                              | 1,982,654 |                            |   | 1,759,907 |   |   | 3,953,562 |   |   | 3,555,080 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| INCOME                BEFORE INCOME TAXES                                           |   |                              | 774,417   |                            |   | 531,152 |   |   | 1,486,820 |   |   | 1,325,695 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| PROVISION                FOR INCOME TAXES                                           |   |                              | 276,188   |                            |   | 220,702 |   |   | 528,009 |   |   | 529,785 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| NET                INCOME                                                           |   |                              | 498,229   |                            |   | 310,450 |   |   | 958,811 |   |   | 795,910 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| OTHER                COMPREHENSIVE INCOME                                           |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Unrealized                holding gain/(loss) arising during the period, net of tax |   |                              | (35,234   | )                               |   | 55,690 |   |   | (71,922 | ) |   | (78,020 | ) |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE                INCOME                                                 |   | $                                 | 462,995   |                            | $      | 366,140 |   | $ | 886,889 |   | $ | 717,890 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| EARNINGS                PER SHARE OF COMMON STOCK                                   |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share                                             |   | $                                 | 0.23      |                            | $      | 0.14 |   | $ | 0.44 |   | $ | 0.37 |   |
| Diluted                earnings per share                                           |   | $                                 | 0.23      |                            | $      | 0.14 |   | $ | 0.44 |   | $ | 0.37 |   |
|                                                                                |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| WEIGHTED                AVERAGE COMMON SHARES OUTSTANDING                           |   |                              |      |                            |   |   |   |   |   |   |   |   |   |
| Basic                                                                               |   |                              | 2,177,178 |                            |   | 2,152,253 |   |   | 2,174,052 |   |   | 2,149,998 |   |
| Diluted                                                                             |   |                              | 2,185,702 |                            |   | 2,158,574 |   |   | 2,182,414 |   |   | 2,155,300 |   |

----

*Index*

**OREGON      PACIFIC BANCORP**

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

|                                                    |   |                        |      |      |   |          |   | Accumulated   |      |   |   |
|---------------------------------------------------------|--------|-----------------------------|-----------|-----------|--------|---------------|--------|---------------|-----------|--------|--------|
|                                                    |   |                        |      |      |   |          |   | Other         |      | Total  |   |
|                                                    |   | Common                Stock |      | Undivided |   | Comprehensive |   | Stockholders' |      |
|                                                    |   | Shares                      |      | Amount    |   | Profits       |   | Income        |      | Equity |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |
| Balance,                December 31, 2004               |   |                        | 2,148,616 |      | $      | 4,698,162     |   | $             | 3,983,420 |   | $      | 210,715 |   | $ | 8,892,297 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Shares                acquired in stock repurchase plan |   |                        | (4,300    | )         |   | (31,610       | )      |          | -         |   |   | - |   |   | (31,610 | ) |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Sale                of nonregistered stock              |   |                        | 1,081     |      |   | 11,003        |   |          | -         |   |   | - |   |   | 11,003 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Exercise                of stock options                |   |                        | 1,538     |      |   | 9,997         |   |          | -         |   |   | - |   |   | 9,997 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Cash                dividends paid                      |   |                        | -         |      |   | -             |   |          | (301,551  | )      |   | - |   |   | (301,551 | ) |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Dividends                reinvested in stock            |   |                        | 19,071    |      |   | 171,176       |   |          | (171,176  | )      |   | - |   |   | - |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Net                income and comprehensive income      |   |                        | -         |      |   | -             |   |          | 1,865,372 |   |   | (182,277 | ) |   | 1,683,095 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Balance,                December 31, 2005               |   |                        | 2,166,006 |      | $      | 4,858,728     |   | $             | 5,376,065 |   | $      | 28,438 |   | $ | 10,263,231 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Bonuses                paid in stock for 2005           |   |                        | 1,686     |      |   | 20,000        |   |          | -         |   |   | - |   |   | 20,000 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Exercise                of stock options                |   |                        | 4,212     |      |   | 22,500        |   |          | -         |   |   | - |   |   | 22,500 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Stock-based                compensation                 |   |                        | -         |      |   | 7,626         |   |          | -         |   |   | - |   |   | 7,626 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Cash                dividends paid                      |   |                        | -         |      |   | -             |   |          | (167,195  | )      |   | - |   |   | (167,195 | ) |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Dividends                reinvested in stock            |   |                        | 8,011     |      |   | 93,472        |   |          | (93,472   | )      |   | - |   |   | - |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Net                income and comprehensive income      |   |                        | -         |      |   | -             |   |          | 958,811   |   |   | (71,922 | ) |   | 886,889 |   |
|                                                    |   |                        |      |      |   |          |   |          |      |   |   |   |   |   |   |   |
| Balance,                June 30, 2006                   |   |                        | 2,179,915 |      | $      | 5,002,326     |   | $             | 6,074,209 |   | $      | (43,484 | ) | $ | 11,033,051 |   |

----

*Index*

**OREGON      PACIFIC BANCORP**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                     |   | Six                Months Ended June 30, |       |
|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|
|                                                                                                     |   | 2006                                     |       | 2005 |   |
|                                                                                                     |   |                                     |       |   |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                      |   |                                     |       |   |   |
| Net                income                                                                                |   | $                                        | 958,811    |   | $ | 795,910 |   |
| Adjustments                to reconcile net income to net cash from operating                activities: |   |                                     |       |   |   |   |   |
| Depreciation                and amortization                                                             |   |                                     | 290,504    |   |   | 240,408 |   |
| Provision                for loan losses                                                                 |   |                                     | 26,000     |   |   | 215,000 |   |
| Federal                Home Loan Bank stock dividends                                                    |   |                                     | -          |   |   | (3,000 | ) |
| Stock-based                compensation                                                                  |   |                                     | 7,626      |   |   | - |   |
| Net                change in mortgage loans held-for-sale                                                |   |                                     | 257,115    |   |   | (538,830 | ) |
| Net                increase in accrued interest and other assets                                         |   |                                     | (175,686   | ) |   | (332,713 | ) |
| Net                (decrease) increase in accrued interest and other                liabilities          |   |                                     | (396,554   | ) |   | 8,257 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| Net                cash from operating activities                                                        |   |                                     | 967,816    |   |   | 385,032 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                      |   |                                     |       |   |   |   |   |
| Proceeds                from sales and maturities of available-for-sale securities                       |   |                                     | 690,000    |   |   | 3,058,836 |   |
| Net                increase in interest-bearing deposits in banks                                        |   |                                     | (665,075   | ) |   | (1,480,165 | ) |
| Loans                originated, net of principal repayments                                             |   |                                     | (2,877,289 | ) |   | (7,666,414 | ) |
| Purchase                of premises and equipment                                                        |   |                                     | (573,183   | ) |   | (112,850 | ) |
| Purchase                of brokerage firm                                                                |   |                                     | (460,000   | ) |   | - |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| Net                cash from investing activities                                                        |   |                                     | (3,885,547 | ) |   | (6,200,593 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                                      |   |                                     |       |   |   |   |   |
| Net                increase in demand and savings deposit accounts                                       |   |                                     | 7,407,167  |   |   | 4,207,943 |   |
| Net                (decrease) increase in time deposits                                                  |   |                                     | (2,412,072 | ) |   | 4,166,510 |   |
| Proceeds                from Federal Home Loan Bank borrowings                                           |   |                                     | 1,522,000  |   |   | 4,000,000 |   |
| Repayment                of Federal Home Loan Bank borrowings                                            |   |                                     | (1,927,500 | ) |   | (5,427,501 | ) |
| Shares                acquired in stock repurchase plan                                                  |   |                                     | -          |   |   | (31,610 | ) |
| Proceeds                from exercise of common stock options                                            |   |                                     | 22,500     |   |   | - |   |
| Proceeds                for issuance of common stock                                                     |   |                                     | -          |   |   | 1,003 |   |
| Stock                bonuses granted                                                                     |   |                                     | 20,000     |   |   | - |   |
| Cash                dividends paid                                                                       |   |                                     | (167,195   | ) |   | (134,813 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |
| Net                cash from financing activities                                                        |   |                                     | 4,464,900  |   |   | 6,781,532 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                      |   |                                     | 1,547,169  |   |   | 965,971 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| CASH                AND CASH EQUIVALENTS, beginning of period                                            |   | $                                        | 5,018,838  |   | $ | 4,341,385 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| CASH                AND CASH EQUIVALENTS, end of period                                                  |   | $                                        | 6,566,007  |   | $ | 5,307,356 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| SCHEDULE                OF NONCASH ACTIVITIES                                                            |   |                                     |       |   |   |   |   |
| Stock                dividends reinvested                                                                |   | $                                        | 93,472     |   | $ | 79,078 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |
| Change                in fair value of AFS securities, net of tax                                        |   | $                                        | (71,922    | ) | $ | (78,020 | ) |

----

*Index*

Oreg

----

*Index*

|                                            |   | Amortized                Cost |       | Gross                Unrealized Gains |   | Gross                Unrealized Losses Less than 12 Months |   | Gross                Unrealized Losses More than 12 Months |    | Estimated                Fair Value |   |
|-------------------------------------------------|--------|-------------------------------|------------|---------------------------------------|--------|------------------------------------------------------------|--------|------------------------------------------------------------|---------|-------------------------------------|--------|
| June                30, 2006:                   |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |
|                                            |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |
| U.S.                Treasury and agencies       |   | $                             | 4,000,000  |                                  | $      | -                                                          |   | $                                                          | -       |                                | $      | (100,625 | ) | $ | 3,899,375 |   |
| State                and political subdivisions |   |                          | 6,444,307  |                                  |   | 64,396                                                     |   |                                                       | (33,505 | )                                   |   | (6,544 | ) |   | 6,468,654 |   |
| Corporate                notes                  |   |                          | 456,565    |                                  |   | 3,805                                                      |   |                                                       | -       |                                |   | - |   |   | 460,370 |   |
|                                            |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |   |   |   |   |   |
|                                            |   | $                             | 10,900,872 |                                  | $      | 68,201                                                     |   | $                                                          | (33,505 | )                                   | $      | (107,169 | ) | $ | 10,828,399 |   |
|                                            |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |   |   |   |   |   |
| December                31, 2005:               |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |   |   |   |   |   |
|                                            |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |   |   |   |   |   |
| U.S.                Treasury and agencies       |   | $                             | 4,000,000  |                                  | $      | -                                                          |   | $                                                          | (12,500 | )                                   | $      | (63,125 | ) | $ | 3,924,375 |   |
| State                and political subdivisions |   |                          | 6,884,782  |                                  |   | 123,997                                                    |   |                                                       | (8,861  | )                                   |   | (6,304 | ) |   | 6,993,614 |   |
| Corporate                notes                  |   |                          | 711,378    |                                  |   | 14,328                                                     |   |                                                       | (138    | )                                   |   | - |   |   | 725,568 |   |
|                                            |   |                          |       |                                  |   |                                                       |   |                                                       |    |                                |   |   |   |   |   |   |
|                                            |   | $                             | 11,596,160 |                                  | $      | 138,325                                                    |   | $                                                          | (21,499 | )                                   | $      | (69,429 | ) | $ | 11,643,557 |   |

| Mortgage                Servicing Rights at June 30, |   | 2006   |    | 2005   |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                 |   |   |    |   |   |
| Balance                at beginning of year          |   | $      | 808,709 |   | $      | 811,436 |   |
| Additions                                            |   |   | 61,724  |   |   | 75,117 |   |
| Amortization                                         |   |   | (63,659 | )      |   | (91,499 | ) |
|                                                 |   |   |    |   |   |   |   |
| Balance                at June 30,                   |   | $      | 806,774 |   | $      | 795,054 |   |

----

*Index*

|                                                                          |   | JUN.                30, 2006 |        | DEC.                31, 2005 |   |
|-------------------------------------------------------------------------------|--------|------------------------------|-------------|------------------------------|--------|
|                                                                          |   |                         |        |                         |   |
| Real                estate                                                    |   | $                            | 20,673,395  |                         | $      | 18,583,333 |   |
| Commercial                                                                    |   |                         | 93,370,431  |                         |   | 94,138,523 |   |
| Installment                                                                   |   |                         | 9,019,049   |                         |   | 7,541,900 |   |
| Overdrafts                                                                    |   |                         | 98,338      |                         |   | 72,495 |   |
|                                                                          |   |                         |        |                         |   |   |   |
| Total                Loans                                                    |   |                         | 123,161,213 |                         |   | 120,336,251 |   |
| Less                allowance for loan losses                                 |   |                         | (1,884,235  | )                            |   | (1,858,185 | ) |
| Less                deferred loan fees                                        |   |                         | (439,888    | )                            |   | (492,265 | ) |
| Loans,                net of allowance for loan losses and deferred loan fees |   | $                            | 120,837,090 |                         | $      | 117,985,801 |   |

|                                        |   | JUN.                30, 2006 |      | JUN.                30, 2005 |   |
|---------------------------------------------|--------|------------------------------|-----------|------------------------------|--------|
|                                        |   |                         |      |                         |   |
| Balance,                beginning of period |   | $                            | 1,858,185 |                         | $      | 1,640,060 |   |
| Provision                for loan losses    |   |                         | 26,000    |                         |   | 215,000 |   |
| Loans                charged off            |   |                         | -         |                         |   | (1,569 | ) |
| Loan                recoveries              |   |                         | 50        |                         |   | 3,711 |   |
|                                        |   |                         |      |                         |   |   |   |
| Balance,                end of period       |   | $                            | 1,884,235 |                         | $      | 1,857,202 |   |

----

*Index*

|                                                  |   | Exercise                      Price |   | Number                      Outstanding |   | Remaining                      Contractual Life                      (years) |   | Options                      Exercisable |   |
|-------------------------------------------------------|--------|-------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                  |   |                                |   |                                    |   |                                                                              |   |                                     |   |
|                                                  |   | $                                   | 4.81   |                                    |   | 2,597                                                                             |   |                                     | 4.5    |   |   | 2,597 |   |
|                                                  |   | $                                   | 7.25   |                                    |   | 17,242                                                                            |   |                                     | 2.6    |   |   | 8,622 |   |
|                                                  |   | $                                   | 7.40   |                                    |   | 1,351                                                                             |   |                                     | 1.8    |   |   | 1,351 |   |
|                                                  |   | $                                   | 11.85  |                                    |   | 13,082                                                                            |   |                                     | 7.8    |   |   | - |   |
|                                                  |   |                                |   |                                    |   |                                                                              |   |                                     |   |   |   |   |   |
|                                                  |   |                                | Total  |                                    |   | 34,272                                                                            |   |                                     |   |   |   | 12,570 |   |
| Weighted                      Average Per Share Price |   | $                                   | 8.83   |                                    |   |                                                                              |   |                                     |   |   |

----

*Index*

|                                                                                                                                                                                                        |   | 6                Months Ended |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                                                                                                                        |   | June                30, 2005  |    |
|                                                                                                                                                                                                        |   |                          |    |
| Net                earnings, as reported                                                                                                                                                                    |   | $                             | 795,910 |   |
| Deduct:                Total stock-based employee compensation expense determined under                the fair                value-based method for all awards, net of related tax                effects |   |                          | (242    | ) |
|                                                                                                                                                                                                        |   |                          |    |   |
| Pro                forma net earnings                                                                                                                                                                       |   | $                             | 795,668 |   |
|                                                                                                                                                                                                        |   |                          |    |   |
| Basic                earnings per common share:                                                                                                                                                             |   |                          |    |   |
| As                reported                                                                                                                                                                                  |   | $                             | 0.37    |   |
| Pro                forma                                                                                                                                                                                    |   | $                             | 0.37    |   |
|                                                                                                                                                                                                        |   |                          |    |   |
| Diluted                earnings per common share:                                                                                                                                                           |   |                          |    |   |
| As                reported                                                                                                                                                                                  |   | $                             | 0.37    |   |
| Pro                forma                                                                                                                                                                                    |   | $                             | 0.37    |   |

|                                 |   | 2005   |   |
|--------------------------------------|--------|--------|--------|
|                                 |   |   |   |
| Dividend                yield        |   |   | 2.44   | % |
| Expected                life (years) |   |   | 7.5    |   |
| Expected                volatility   |   |   | 14.39  | % |
| Risk-free                rate        |   |   | 4.50   | % |

** **

----

*Index*

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

**Critical      Accounting Policies and Estimates**

**Overview**

----

*Index*

**Financial      Condition**

**Results      of Operations**

----

*Index*

*Average      Balances and Average Rates Earned and Paid. *

----

*Index*

|                                                             |   | Six                Months Ended Jun                30, 2006 |    | Six                Months Ended Jun                30, 2005 |   | Increase                (Decrease) |         |
|------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|-------------------------------------------------------------|--------|------------------------------------|--------------|
|                                                             |   |                                                        |    | Interest                                                    |   | Average                            |         |   |   | Interest |   | Average |   |   |   |   |   |   |   |
|                                                             |   | Average                                                     |    | Income                or                                    |   | Yield                or            |         | Average |   | Income                or |   | Yield                or |   | Due                to change in |   | Net |   |
| **(dollars                in thousands)**                        |   | Balance                                                     |    | Expense                                                     |   | Rates                              |         | Balance |   | Expense |   | Rates |   | Volume |   | Rate |   | Change |   |
| Interest-earning                assets:                          |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                **(2)(3)**                                  |   | $                                                           | 121,248 |                                                   | $      | 5,142                              |    |   | 8.48 | %   | $ | 114,019 |    | $ | 4,182 |    |   | 7.34 | %   | $ | 265 |    | $ | 695 |    | $ | 960 |   |
| Investment                securities                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                securities                                |   |                                                        | 5,592   |                                                        |   | 98                                 |         |   | 3.51 | % |   | 7,888 |   |   | 141 |   |   | 3.58 | % |   | (41 | ) |   | (2 | ) |   | (43 | ) |
| Nontaxable                securities **(1)**                     |   |                                                        | 6,726   |                                                        |   | 227                                |         |   | 6.76 | % |   | 7,255 |   |   | 244 |   |   | 6.72 | % |   | (18 | ) |   | 1 |   |   | (17 | ) |
| Interest-earning                balances due from banks          |   |                                                        | 10,100  |                                                        |   | 235                                |         |   | 4.65 | % |   | 3,464 |   |   | 47 |   |   | 2.71 | % |   | 90 |   |   | 98 |   |   | 188 |   |
| Total                interest-earning assets                     |   |                                                        | 143,666 |                                                        |   | 5,702                              |         |   | 7.94 | % |   | 132,626 |   |   | 4,614 |   |   | 6.96 | % |   | 296 |   |   | 792 |   |   | 1,088 |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                and due from banks                           |   |                                                        | 4,814   |                                                        |   |                               |         |   |   |   |   | 4,388 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Premises                and equipment, net                       |   |                                                        | 5,331   |                                                        |   |                               |         |   |   |   |   | 5,147 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                real estate                                 |   |                                                        | 0       |                                                        |   |                               |         |   |   |   |   | 0 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan                loss allowance                               |   |                                                        | (1,878  | )                                                           |   |                               |         |   |   |   |   | (1,774 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                assets                                      |   |                                                        | 4,513   |                                                        |   |                               |         |   |   |   |   | 3,142 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                      |   | $                                                           | 156,446 |                                                        |   |                               |         |   |   |   | $ | 143,529 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                     |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                checking and savings accounts    |   | $                                                           | 59,589  |                                                        | $      | 543                                |         |   | 1.82 | % | $ | 61,436 |   | $ | 339 |   |   | 1.10 | % | $ | (10 | ) | $ | 214 |   | $ | 204 |   |
| Time                deposit and IRA accounts                     |   |                                                        | 32,179  |                                                        |   | 561                                |         |   | 3.49 | % |   | 24,376 |   |   | 309 |   |   | 2.54 | % |   | 99 |   |   | 153 |   |   | 252 |   |
| Borrowed                funds                                    |   |                                                        | 16,676  |                                                        |   | 420                                |         |   | 5.04 | % |   | 15,980 |   |   | 351 |   |   | 4.39 | % |   | 15 |   |   | 54 |   |   | 69 |   |
| Total                interest-bearing liabilities                |   |                                                        | 108,444 |                                                        |   | 1,524                              |         |   | 2.81 | % |   | 101,792 |   |   | 999 |   |   | 1.96 | % |   | 104 |   |   | 421 |   |   | 525 |   |
| Noninterest-bearing                deposits                      |   |                                                        | 34,161  |                                                        |   |                               |         |   |   |   |   | 29,996 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                liabilities                                 |   |                                                        | 3,646   |                                                        |   |                               |         |   |   |   |   | 2,994 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                liabilities                                 |   |                                                        | 146,251 |                                                        |   |                               |         |   |   |   |   | 134,782 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders’                equity                        |   |                                                        | 10,195  |                                                        |   |                               |         |   |   |   |   | 8,747 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                liabilities and share-holders’ equity |   | $                                                           | 156,446 |                                                        |   |                               |         |   |   |   | $ | 143,529 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                               |   |                                                        |    |                                                        | $      | 4,178                              |         |   |   |   |   |   |   | $ | 3,615 |   |   |   |   | $ | 192 |   | $ | 371 |   | $ | 563 |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest spread                               |   |                                                        |    |                                                        |   |                               |         |   | 5.13 | % |   |   |   |   |   |   |   | 5.00 | % |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest expense to average earning assets    |   |                                                        |    |                                                        |   |                               |         |   | 2.12 | % |   |   |   |   |   |   |   | 1.51 | % |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                        |    |                                                        |   |                               |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest margin                               |   |                                                        |    |                                                        |   |                               |         |   | 5.82 | % |   |   |   |   |   |   |   | 5.45 | % |   |   |   |   |   |   |   |   |   |

|  | (1) | Tax-exempt                income has been adjusted to a tax-equivalent basis at                34%. |
|--|-----|-----------------------------------------------------------------------------------------------------|

|  | (2) | Nonaccrual                loans are included in the average                balance. |
|--|-----|-------------------------------------------------------------------------------------|

|  | (3) | 2005                excludes one-time interest repayment of $377,000 for a loan charged                off in                1998 and recovered in 2004. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

|                                                       |   | Three                months ended |    |   |   |                    |   |
|------------------------------------------------------------|--------|-----------------------------------|---------|--------|--------|-------------------------|--------|
|                                                       |   | June                30,           |    |   |   |                    |   |
|                                                       |   | 2006                              |    | 2005   |   | $                Change |   | %                Change |   |
|                                                       |   |                              |    |   |   |                    |   |   |   |
| Service                charges and fees                    |   | $                                 | 261,021 |   | $      | 239,469                 |   | $ | 21,552 |   |   | 9.0 | % |
| Trust                fee income                            |   |                              | 165,149 |   |   | 156,368                 |   | $ | 8,781 |   |   | 5.6 | % |
| Mortgage                loan sales and servicing fees, net |   |                              | 119,660 |   |   | 123,723                 |   | $ | (4,063 | ) |   | -3.3 | % |
| Investment                sales commissions                |   |                              | 120,529 |   |   | 36,020                  |   | $ | 84,509 |   |   | 234.6 | % |
| Other                income                                |   |                              | 39,334  |   |   | 28,953                  |   | $ | 10,381 |   |   | 35.9 | % |
|                                                       |   |                              |    |   |   |                    |   |   |   |   |   |   |   |
|                                                       |   | $                                 | 705,693 |   | $      | 584,533                 |   | $ | 121,160 |   |   | 20.7 | % |

|                                                       |   | Six                months ended |      |   |   |                    |   |
|------------------------------------------------------------|--------|---------------------------------|-----------|--------|--------|-------------------------|--------|
|                                                       |   | June                30,         |      |   |   |                    |   |
|                                                       |   | 2006                            |      | 2005   |   | $                Change |   | %                Change |   |
|                                                       |   |                            |      |   |   |                    |   |   |   |
| Service                charges and fees                    |   | $                               | 511,414   |   | $      | 471,603                 |   | $ | 39,811 |   |   | 8.4 | % |
| Trust                fee income                            |   |                            | 324,192   |   |   | 302,172                 |   | $ | 22,020 |   |   | 7.3 | % |
| Mortgage                loan sales and servicing fees, net |   |                            | 245,584   |   |   | 285,672                 |   | $ | (40,088 | ) |   | -14.0 | % |
| Investment                sales commissions                |   |                            | 211,817   |   |   | 63,913                  |   | $ | 147,904 |   |   | 231.4 | % |
| Other                income                                |   |                            | 73,380    |   |   | 126,711                 |   | $ | (53,331 | ) |   | -42.1 | % |
|                                                       |   |                            |      |   |   |                    |   |   |   |   |   |   |   |
|                                                       |   | $                               | 1,366,387 |   | $      | 1,250,071               |   | $ | 116,316 |   |   | 9.3 | % |

----

*Index*

|                                                    |   | Three                months ended |      |   |   |                    |   |
|---------------------------------------------------------|--------|-----------------------------------|-----------|--------|--------|-------------------------|--------|
|                                                    |   | June                30,           |      |   |   |                    |   |
|                                                    |   | 2006                              |      | 2005   |   | $                Change |   | %                Change |   |
|                                                    |   |                              |      |   |   |                    |   |   |   |
| Salaries                and benefits                    |   | $                                 | 1,217,327 |   | $      | 1,050,371               |   | $ | 166,956 |   |   | 15.9 | % |
| Occupancy                expense                        |   |                              | 226,123   |   |   | 221,161                 |   | $ | 4,962 |   |   | 2.2 | % |
| Outside                services                         |   |                              | 178,142   |   |   | 158,068                 |   | $ | 20,074 |   |   | 12.7 | % |
| Securities                and trust department expenses |   |                              | 82,253    |   |   | 46,963                  |   | $ | 35,290 |   |   | 75.1 | % |
| Other                expenses                           |   |                              | 278,809   |   |   | 283,344                 |   | $ | (4,535 | ) |   | -1.6 | % |
|                                                    |   |                              |      |   |   |                    |   |   |   |   |   |   |   |
|                                                    |   | $                                 | 1,982,654 |   | $      | 1,759,907               |   | $ | 222,747 |   |   | 12.7 | % |

|                                                    |   | Six                months ended |      |   |   |                    |   |
|---------------------------------------------------------|--------|---------------------------------|-----------|--------|--------|-------------------------|--------|
|                                                    |   | June                30,         |      |   |   |                    |   |
|                                                    |   | 2006                            |      | 2005   |   | $                Change |   | %                Change |   |
|                                                    |   |                            |      |   |   |                    |   |   |   |
| Salaries                and benefits                    |   | $                               | 2,448,873 |   | $      | 2,165,788               |   | $ | 283,085 |   |   | 13.1 | % |
| Occupancy                expense                        |   |                            | 454,403   |   |   | 430,075                 |   | $ | 24,328 |   |   | 5.7 | % |
| Outside                services                         |   |                            | 346,296   |   |   | 331,939                 |   | $ | 14,357 |   |   | 4.3 | % |
| Securities                and trust department expenses |   |                            | 139,602   |   |   | 84,932                  |   | $ | 54,670 |   |   | 64.4 | % |
| Other                expenses                           |   |                            | 564,388   |   |   | 542,346                 |   | $ | 22,042 |   |   | 4.1 | % |
|                                                    |   |                            |      |   |   |                    |   |   |   |   |   |   |   |
|                                                    |   | $                               | 3,953,562 |   | $      | 3,555,080               |   | $ | 398,482 |   |   | 11.2 | % |

**Liquidity      and Capital Resources**

----

*Index*

| **Item                3.** | **Quantitive                and Qualitive Disclosures about Market                Risk** |
|----------------------------|------------------------------------------------------------------------------------------|

| **Item                4.** | **Controls                and Procedures** |
|----------------------------|--------------------------------------------|

| (a) | The                Company’s management, including the Company’s Chief Executive Officer and                Chief Financial Officer, evaluated the effectiveness of its disclosure                controls and procedures as of June 30, 2006. Based on this evaluation,                the                Chief Executive Officer and the Chief Financial Officer each concludes                that as of June 30, 2006, the Company maintained effective disclosure                controls and procedures in all material respects, including those                to                ensure that information required to be disclosed in reports filed                or                submitted with the SEC is recorded, processed, and reported within                the                time periods specified by the SEC, and is accumulated and communicated                to                management, including the Chief Executive Officer and the Chief Financial                Officer, as appropriate to allow for timely decision regarding required                disclosure. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Changes                in Internal Controls: In the quarter ended June 30, 2006, the Company                did                not make any significant changes in, nor take any corrective actions                regarding, its internal controls or other factors that could significantly                affect these controls. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Disclosure      Controls and Internal Controls.**

----

*Index*

**Limitations      on the Effectiveness of Controls**

| **PART                II.** | **OTHER                INFORMATION** |
|-----------------------------|--------------------------------------|

| **Item                1.** | **Legal                proceedings.** |
|----------------------------|---------------------------------------|

| **Item                1A.** | **Risk                factors.** |
|-----------------------------|----------------------------------|

| **Item                2.** | **Unregistered                sales of equity securities and use of                proceeds.** |
|----------------------------|------------------------------------------------------------------------------------------------|

| **Item                3.** | **Defaults                upon senior securities.** |
|----------------------------|-----------------------------------------------------|

| **Item                4.** | **Submission                of matters to a vote of security                holders.** |
|----------------------------|----------------------------------------------------------------------------------------|

----

*Index*

| Nominees                         |   | Term   |                       | Votes: |   | For    |   | Withheld |      |
|----------------------------------|--------|--------|----------------------------|--------|--------|--------|--------|----------|-----------|
|                             |   |   |                       |   |   |   |   |     |      |
| Dr.                A. J. Brauer  |   |   | Three                Years |   |   |   |   |     | 1,574,661 |   |   | 28,647 |   |
| Lydia                G. Brackney |   |   | Three                Years |   |   |   |   |     | 1,603,208 |   |   | 100 |   |
| Richard                L. Yecny  |   |   | Three                Years |   |   |   |   |     | 1,603,208 |   |   | 100 |   |

| **Item                5.** | **Other                information.** |
|----------------------------|---------------------------------------|

| **Item                6.** | **Exhibits                and reports on Form 8-K.** |
|----------------------------|------------------------------------------------------|

| (a) | Exhibits. |
|-----|-----------|

|   | 3.1 | Articles                of Incorporation of Oregon Pacific Bancorp (incorporated herein by                reference to Exhibit 3(i) to Oregon Pacific Bancorp’s Form 10-K for the                year ended December 31, 2002 filed with the Securities and Exchange                Commission on June 30, 2003). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2 | Bylaws                of Oregon Pacific Bancorp (incorporated herein by reference to Exhibit                3(i) to Oregon Pacific Bancorp’s Form 10-K for the year ended December 31,                2002 filed with the Securities and Exchange Commission on June 30,                2003). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.1 | 2003                Stock Incentive Plan (incorporated by reference to Exhibit 1 to Oregon                Pacific Bancorp’s Form DEF 14A filed with the Securities and Exchange                Commission on March 25, 2003). |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Oregon                Pacific Bank Deferred Compensation and Incentive Plan (incorporated                herein                by reference to Exhibit 10.2 to Oregon Pacific Bancorp’s Form 10-K for the                year ended December 31, 2003 filed with the Securities and Exchange                Commission on March 30, 2004). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Certification                of Chief Executive Officer pursuant to rule 13a-14(a) or Rule 15d-14(a)                and Section 302(a) of the Sarbanes-Oxley Act of                2002.** |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification                of Chief Financial Officer pursuant to rule 13a-14(a) or Rule 15d-14(a)                and Section 302(a) of the Sarbanes-Oxley Act of                2002.** |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                  906 of                  the Sarbanes-Oxley Act of 2002.                  ** |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | On                February 10, 2006 a Form 8-K was filed under items 2.02                and 9.01 announcing                2005 fourth quarter and year earnings. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

**SIGNATURES**

|   | OREGON                PACIFIC BANCORP |
|--------|---------------------------------------|
|   |                                  |   |
|   |                                  |   |
|   | By:                                   | /s/                Thomas K. Grove |
|   |                                  |   |
|   |                                  | Thomas                K. Grove |
|   |                                  | President,                Chief Executive Officer And Director (*Chief                Executive Officer)* |
|   |                                  |   |
|   |                                  |   |
|   | By:                                   | /s/                Joanne Forsberg |
|   |                                  |   |
|   |                                  | Joanne                Forsberg |
|   |                                  | Chief                Financial Officer and Secretary (*Principal                Financial Officer)* |

----