**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549








**FORM
      10-Q**


QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      Quarter Ended September 30, 2006








Commission
      File Number: 0-26876








**OAK
      HILL FINANCIAL, INC.**


(Exact
      name of Registrant as specified in its charter)





**Ohio**
              (State
                or other jurisdiction of
              incorporation
                or organization)
              
              **14621
                S. R. 93**
              **Jackson,
                Ohio**
              (Address
                of principal executive office)
            **31-1010517**
              (I.R.S.
                Employer
              Identification
                Number)
              
              
              **45640**
              (Zip
                Code)








Registrant’s
      telephone number, including area code: (740) 286-3283








Indicate
      by check mark whether the issuer (1) has filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports) and (2) has been subject to such filing requirements
      for
      the past 90 days.





Yesý
            Noo





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).





Yesý
            Noo





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yeso
            Noý





As
      of
      November 8, 2006, the latest practicable date, 5,340,823 shares of the
      Registrant’s common stock, $.50 stated value, were outstanding.














**Oak
      Hill Financial, Inc.**





**TABLE
      OF CONTENTS**







Page**PART
                I - FINANCIAL INFORMATION**Item
                1:
            Financial
                StatementsConsolidated
                Statements of Financial
                Condition
            3Consolidated
                Statements of Earnings
            4Consolidated
                Statements of Comprehensive
                Income
            5Consolidated
                Statements of Cash Flows
            6Notes
                to Consolidated Financial
                Statements
            8Item
                2:
            Management’s
                Discussion and Analysis of Financial
                ConditionAnd
                Results of Operations
            15Item
                3:
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            19Item
                4:
            Controls
                and Procedures
            19**PART
                II - OTHER INFORMATION**Item
                1:
            Legal
                Proceedings
            20Item
              1A:
            Risk
              Factors
            20Item
                2:
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            20Item
                3:
            Default
                Upon Senior Securities
            20Item
                4:
            Submission
                of Matters to a Vote of Security
                Holders
            20Item
                5:
            Other
                Information
            20Item
                6:
            Exhibits
            
            20Signatures
            
            
            22Certifications
            
            
            23














-2-


**PART
      I - FINANCIAL INFORMATION**


Item
      1: Financial Statements





**Oak
                Hill Financial, Inc.****CONSOLIDATED
                STATEMENTS OF FINANCIAL
                CONDITION**September
                30,
            
            December
                31,*(In
                thousands, except share data)*
            
            2006
            
            2005(Unaudited)**ASSETS**Cash
                and due from banks
            
            $
            20,797
            
            $
            24,786Federal
                funds sold
            
            
            446
            
            
            1,614Investment
                securities designated as available for sale - at market
            
            
            140,972
            
            
            131,193Investment
                securities designated as held to maturity - at cost (approximate
                marketvalue
                of $3,884 and $3,851 at September 30, 2006 and December 31, 2005,
                respectively)
            
            
            3,602
            
            
            3,619Loans
                receivable - net
            
            
            1,015,909
            
            
            1,014,673Loans
                held for sale - at lower of cost or market
            
            
            1,004
            
            
            410Office
                premises and equipment - net
            
            
            26,994
            
            
            22,736Federal
                Home Loan Bank stock - at cost
            
            
            7,958
            
            
            7,626Real
                estate acquired through foreclosure
            
            
            2,682
            
            
            376Accrued
                interest receivable on loans
            
            
            4,589
            
            
            4,156Accrued
                interest receivable on investment securities
            
            
            1,308
            
            
            875Goodwill
                - net
            
            
            7,935
            
            
            7,935Core
                deposit intangible - net
            
            
            3,327
            
            
            4,068Bank
                owned life insurance
            
            
            13,343
            
            
            12,948Prepaid
                expenses and other assets
            
            
            3,460
            
            
            1,561Prepaid
                federal income taxes
            
            
            575
            
            
            1,178Deferred
                federal income taxes
            
            
            619
            
            
            1,304TOTAL
                ASSETS
            
            **$**
            **1,255,520**
            
            **$**
            **1,241,058****LIABILITIES
                AND STOCKHOLDERS’ EQUITY**DepositsDemand
            
            $
            89,970
            
            $
            97,575Savings
                and time deposits
            
            
            873,552
            
            
            880,821Total
                deposits
            
            
            963,522
            
            
            978,396Securities
                sold under agreements to repurchase
            
            
            41,101
            
            
            18,263Advances
                from the Federal Home Loan Bank
            
            
            129,321
            
            
            123,119Subordinated
                debentures
            
            
            23,000
            
            
            23,000Accrued
                interest payable and other liabilities
            
            
            4,404
            
            
            4,199Total
                liabilities
            
            
            1,161,348
            
            
            1,146,977Stockholders’
                equityCommon
                stock - $.50 stated value; authorized 15,000,000 shares5,874,634
                shares issued at September 30, 2006 and December 31, 2005
            
            
            2,937
            
            
            2,937Additional
                paid-in capital
            
            
            13,668
            
            
            13,952Retained
                earnings
            
            
            92,077
            
            
            85,505Treasury
                stock (508,660 and 270,420 shares at September 30, 2006
                andDecember
                31, 2005, respectively - at cost)
            
            
            (14,815
            )
            
            (7,972
            )Accumulated
                comprehensive income (loss):Unrealized
                gain (loss) on securities designated as available for sale,
                netof
                related tax effects
            
            
            305
            
            
            (341
            )Total
                stockholders’ equity
            
            
            94,172
            
            
            94,081TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            **$**
            **1,255,520**
            
            **$**
            **1,241,058**








*Table
          of Contents*
 -3-


**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF EARNINGS**








For
                the
            
            For
                theNine
                Months Ended
            
            Three
                Months EndedSeptember
                30,
            
            September
                30,*(In
                thousands, except share data)*
            
            2006
            
            2005
            
            2006
            
            2005(Unaudited)**INTEREST
                INCOME**Loans
            
            $
            53,957
            
            $
            47,182
            
            $
            18,685
            
            $
            16,757Investment
                securities
            
            
            4,677
            
            
            3,542
            
            
            1,651
            
            
            1,307Interest-bearing
                deposits and other
            
            
            466
            
            
            322
            
            
            146
            
            
            115Total
                interest income
            
            
            59,100
            
            
            51,046
            
            
            20,482
            
            
            18,179**INTEREST
                EXPENSE**Deposits
            
            
            23,350
            
            
            16,261
            
            
            8,252
            
            
            6,012Borrowings
            
            
            6,903
            
            
            4,694
            
            
            2,594
            
            
            1,748Total
                interest expense
            
            
            30,253
            
            
            20,955
            
            
            10,846
            
            
            7,760Net
                interest income
            
            
            28,847
            
            
            30,091
            
            
            9,636
            
            
            10,419Provision
                for losses on loans
            
            
            1,729
            
            
            5,671
            
            
            456
            
            
            212Net
                interest income after provision for losses on loans
            
            
            27,118
            
            
            24,420
            
            
            9,180
            
            
            10,207**OTHER
                INCOME**Service
                fees, charges and other operating
            
            
            6,244
            
            
            4,784
            
            
            2,058
            
            
            1,703Commissions
                income
            
            
            2,584
            
            
            2,071
            
            
            891
            
            
            710Bank
                owned life insurance
            
            
            395
            
            
            324
            
            
            126
            
            
            135Gain
                on sale of loans
            
            
            742
            
            
            869
            
            
            200
            
            
            327Gain
                on sale of securities
            
            
            145
            
            
            508
            
            
            41
            
            
            138Total
                other income
            
            
            10,110
            
            
            8,556
            
            
            3,316
            
            
            3,013**GENERAL,
                ADMINISTRATIVE AND OTHER EXPENSE**Employee
                compensation and benefits
            
            
            12,751
            
            
            12,012
            
            
            4,347
            
            
            4,436Occupancy
                and equipment
            
            
            3,043
            
            
            3,090
            
            
            1,063
            
            
            1,037Federal
                deposit insurance premiums
            
            
            93
            
            
            92
            
            
            30
            
            
            32Franchise
                taxes
            
            
            1,072
            
            
            148
            
            
            276
            
            
            45Other
                operating
            
            
            7,272
            
            
            6,424
            
            
            2,511
            
            
            2,246Amortization
                of core deposit intangible
            
            
            740
            
            
            670
            
            
            228
            
            
            299Merger-related
                expenses
            
            
            
            
            
            502
            
            
            
            
            
            49Total
                general, administrative and other expense
            
            
            24,971
            
            
            22,938
            
            
            8,455
            
            
            8,144Earnings
                before federal income taxes
            
            
            12,257
            
            
            10,038
            
            
            4,041
            
            
            5,076**FEDERAL
                INCOME TAXES**Current
            
            
            2,252
            
            
            1,256
            
            
            863
            
            
            1,119Deferred
            
            
            337
            
            
            982
            
            
            (2
            )
            
            18Total
                federal income tax
            
            
            2,589
            
            
            2,238
            
            
            861
            
            
            1,137**NET
                EARNINGS**
            
            **$**
            **9,668**
            
            **$**
            **7,800**
            
            **$**
            **3,180**
            
            **$**
            **3,939****EARNINGS
                PER SHARE**Basic
            
            **$**
            **1.77**
            
            **$**
            **1.37**
            
            **$**
            **0.59**
            
            **$**
            **0.69**Diluted
            
            **$**
            **1.74**
            
            **$**
            **1.34**
            
            **$**
            **0.58**
            
            **$**
            **0.68****DIVIDENDS
                PER SHARE**
            
            **$**
            **0.57**
            
            **$**
            **0.51**
            
            **$**
            **0.19**
            
            **$**
            **0.17**








*Table
          of Contents*
 -4-





**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE
      INCOME**








For
                the
            
            For
                theNine
                Months Ended
            
            Three
                Months EndedSeptember
                30,
            
            September
                30,*(In
                thousands, except share data)*
            
            2006
            
            2005
            
            2006
            
            2005(Unaudited)Net
                earnings
            
            $
            9,668
            
            $
            7,800
            
            $
            3,180
            
            $
            3,939Other
                comprehensive income (loss), net of tax:Unrealized
                gains (losses) on securities designated as available for
                sale,net
                of taxes (benefits) of $399, $(265), $1,157 and $(457), respectively
            
            
            740
            
            
            (492
            )
            
            2,148
            
            
            (849
            )Reclassification
                adjustment for realized gains included in net earnings,net
                of taxes of $51, $178, $15, and $47, respectively
            
            
            (94
            )
            
            (330
            )
            
            (26
            )
            
            (91
            )Comprehensive
                income
            
            $
            **10,314**
            
            **$**
            **6,978**
            
            **$**
            **5,302**
            
            **$**
            **2,999**Accumulated
                comprehensive income (loss)
            
            **$**
            **305**
            
            **$**
            **(217**
            **)**
            **$**
            **305**
            
            **$**
            **(217**
            **)**



















*Table
          of Contents*
 -5-


**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




For
                the Nine Months EndedSeptember
                30,*(In
                thousands)*
            
            2006
            
            2005(Unaudited)**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                earnings for the period
            
            $
            9,668
            
            $
            7,800Adjustments
                to reconcile net earnings to net cash provided byoperating
                activities:Depreciation
                and amortization
            
            
            1,135
            
            
            1,305Amortization
                of core deposit intangible
            
            
            741
            
            
            670Gain
                on sale of securities
            
            
            (145
            )
            
            (508
            )Amortization
                of premiums, discounts and mortgage servicing rights - net
            
            
            672
            
            
            1,003Proceeds
                from sale of loans in secondary market
            
            
            23,319
            
            
            27,907Loans
                disbursed for sale in secondary market
            
            
            (23,483
            )
            
            (27,139
            )Gain
                on sale of loans
            
            
            (430
            )
            
            (512
            )Gain
                on disposition of assets
            
            
            –
            
            
            (109
            )Accretion
                of deferred loan origination fee
            
            
            (367
            )
            
            (397
            )Loss
                on sale of other real estate owned
            
            
            57
            
            
            274Purchase
                of loans
            
            
            (451
            )
            
            –Federal
                Home Loan Bank stock dividends
            
            
            (332
            )
            
            (254
            )Provision
                for losses on loans
            
            
            1,729
            
            
            5,671Compensation
                expense related to stock incentive plan
            
            
            23
            
            
            –Bank
                owned life insurance income
            
            
            (395
            )
            
            (324
            )Increase
                (decrease) in cash due to changes in:Prepaid
                expenses and other assets
            
            
            (1,899
            )
            
            (8,866
            )Accrued
                interest receivable
            
            
            (866
            )
            
            (602
            )Accrued
                interest payable and other liabilities
            
            
            205
            
            
            (464
            )Federal
                income taxesCurrent
            
            
            603
            
            
            1,297Deferred
            
            
            337
            
            
            982Net
                cash provided by operating activities
            
            
            10,121
            
            
            7,734**CASH
                FLOWS USED IN INVESTING ACTIVITIES:**Loan
                disbursements
            
            
            (252,247
            )
            
            (227,692
            )Principal
                repayments on loans
            
            
            246,800
            
            
            214,276Principal
                repayments on mortgage-backed securities designatedas
                available for sale
            
            
            12,232
            
            
            12,691Proceeds
                from sale of investment securities designatedas
                available for sale
            
            
            23,528
            
            
            31,529Proceeds
                from maturity of investment securities
            
            
            1,211
            
            
            1,173Proceeds
                from disposition of assets
            
            
            –
            
            
            795Proceeds
                from sale of other real estate owned
            
            
            567
            
            
            1,175Purchase
                of investment securities designatedas
                available-for-sale
            
            
            (46,031
            )
            
            (69,829
            )Purchase
                of insurance agency
            
            
            –
            
            
            (12
            )(Increase)
                decrease in federal funds sold - net
            
            
            1,168
            
            
            (2,281
            )Purchase
                of office premises and equipment
            
            
            (5,441
            )
            
            (4,876
            )Lawrence
                Financial acquisition - net of cash paid
            
            
            –
            
            
            6,689Net
                cash used in investing activities
            
            
            (18,213
            )
            
            (36,362
            )Net
                cash used in operating and investing activities(balance
                carried forward)
            
            
            (8,092
            )
            
            (28,628
            )




*Table
          of Contents*
 -6-


**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS** *(continued)*








For
                the Nine Months EndedSeptember
                30,*(In
                thousands)*
            
            2006
            
            2005(Unaudited)Net
                cash used in operating and investing activities(balance
                brought forward)
            
            $
            (8,092
            )
            $
            (28,628
            )**CASH
                FLOWS PROVIDED BY FINANCING ACTIVITIES:**Net
                proceeds from securities sold under agreement to
                repurchase
            
            
            22,838
            
            
            14,301Net
                increase (decrease) in deposit accounts
            
            
            (14,691
            )
            
            12,228Proceeds
                from Federal Home Loan Bank advances
            
            
            57,000
            
            
            23,500Repayments
                of Federal Home Loan Bank advances
            
            
            (50,798
            )
            
            (24,340
            )Repayments
                of notes payable
            
            
            –
            
            
            (2,700
            )Proceeds
                from issuance of subordinated debentures
            
            
            –
            
            
            5,000Dividends
                on common shares
            
            
            (3,096
            )
            
            (2,880
            )Purchase
                of treasury shares
            
            
            (7,778
            )
            
            (6,188
            )Proceeds
                from issuance of shares under stock option plan
            
            
            496
            
            
            1,903Tax
                benefit of stock options exercised
            
            
            132
            
            
            415Net
                cash provided by financing activities
            
            
            4,103
            
            
            21,239Net
                decrease in cash and cash equivalents
            
            
            (3,989
            )
            
            (7,389
            )Cash
                and cash equivalents at beginning of period
            
            
            24,786
            
            
            31,009Cash
                and cash equivalents at end of period
            
            **$**
            **20,797**
            
            **$**
            **23,620****SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid during the period for:Federal
                income taxes
            
            **$**
            **1,549**
            
            **$**
            **2,137**Interest
                on deposits and borrowings
            
            **$**
            **30,367**
            
            **$**
            **21,037****SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:**Unrealized
                gain (loss) on securities designated as available for
                sale,net
                of related tax effects
            
            **$**
            **740**
            
            **$**
            **(492**
            **)**Recognition
                of mortgage servicing rights in accordance with SFAS No. 140
            
            **$**
            **312**
            
            **$**
            **357**Transfer
                from loans to real estate acquired through foreclosure
            
            **$**
            **2,479**
            
            **$**
            **63**Loans
                identified as held-for-sale
            
            **$**
            **1,004**
            
            **$**
            **75**Fair
                value of assets acquired in acquisition of Lawrence Federal
            
            **$**
            –
            
            **$**
            **125,121******Common
                stock issued in acquisition of Lawrence Federal
            
            **$**
            –
            
            $
            **8,589**Goodwill
                and other intangible assets arising from acquisitions - net
            
            **$**
            –
            
            $
            **9,162****SUPPLEMENTAL
                DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:**Acquisition
                of treasury stock in exchange for stock options
            
            **$**
            **84**
            
            **$**
            –




*Table
          of Contents*
 -7-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005





1. *Basis
      of Presentation*





Oak
      Hill
      Financial, Inc. (the “Company”) is a financial holding company t he
      principal assets of which have been its ownership of Oak Hill Banks (“Oak Hill”)
      and Oak Hill Financial Insurance (“OHFI”). The Company also owns forty-nine
      percent of Oak Hill Title Agency, LLC (“Oak Hill Title”) which provides title
      services for commercial and residential real estate transactions. Accordingly,
      the Company’s results of operations are primarily dependent upon the results of
      operations of its subsidiaries.





Oak
      Hill
      conducts a general commercial banking business in southern and central Ohio
      which consists of attracting deposits from the general public and applying
      those
      funds to the origination of loans for commercial, consumer and residential
      purposes. OHFI is an insurance agency specializing in group health insurance
      and
      other employee benefits.





Oak
      Hill’s profitability is significantly dependent on net interest income, which is
      the difference between interest income generated from interest-earning assets
      (i.e., loans and investments) and the interest expense paid on interest-bearing
      liabilities (i.e., customer deposits and borrowed funds). Net interest income
      is
      affected by the relative amount of interest-earning assets and interest-bearing
      liabilities and the interest received or paid on these balances. The level
      of
      interest rates paid or received by Oak Hill can be significantly influenced
      by a
      number of competitive factors, such as governmental monetary policy, that are
      outside of management’s control.





The
      accompanying unaudited consolidated financial statements were prepared in
      accordance with instructions for Form 10-Q and, therefore, do not include
      information or footnotes necessary for a complete presentation of financial
      position, results of operations and cash flows in conformity with accounting
      principles generally accepted in the United States of America. Accordingly,
      these financial statements should be read in conjunction with the consolidated
      financial statements and notes thereto of the Company included in the Annual
      Report on Form 10-K for the year ended December 31, 2005. However, all
      adjustments (consisting of normal recurring accruals), which, in the opinion
      of
      management, are necessary for a fair presentation of the consolidated financial
      statements, have been included. The results of operations for the nine and
      three
      months ended September 30, 2006 are not necessarily indicative of the results
      that may be expected for the entire year.





2. *Principles
      of Consolidation*





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries, Oak Hill and OHFI. The Company effectively controls
      Oak Hill Title; therefore, their accounts are also included in the financial
      statements of the Company with the remaining ownership being accounted for
      as
      minority interest. All intercompany balances and transactions have been
      elim inated.





3. *Liquidity
      and Capital Resources*





Like
      other financial institutions, the Company must ensure that sufficient funds
      are
      available to meet deposit withdrawals, loan commitments, and expenses. Control
      of the Company’s cash flow requires the anticipation of deposit flows and loan
      payments. The Company’s primary sources of funds are deposits, borrowings and
      principal and interest payments on loans. The Company uses funds from deposit
      inflows, proceeds from borrowings and principal and interest payments on loans
      primarily to originate loans, and to purchase short-term investment securities
      and interest-bearing deposits.





At
      September 30, 2006, the Company had $387.4 million of certificates of deposit
      maturing within one year. It has been the Company’s historic experience that
      such certificates of deposit will be renewed with Oak Hill at market rates
      of interest.
      It is management’s belief that maturing certificates of deposit over the next
      year will similarly be renewed with Oak Hill at market rates of interest.





In
      the
      event that certificates of deposit cannot be renewed at prevalent market rates,
      the Company can obtain up to $245.1 million in advances from the Federal Home
      Loan Bank of Cincinnati (“FHLB”). Also, as an operational philosophy, the
      Company seeks to obtain advances to help with asset/liability management and
      liquidity. At September 30, 2006, the Company had $129.3 million of outstanding
      FHLB advances.











*Table
          of Contents*
 -8-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005








3. *Liquidity
      and Capital Resources* *(continued)*




The
      Company engages in off-balance sheet credit-related activities that could
      require the Company to make cash payments in the event that specified future
      events occur. The contractual amounts of these activities represent the maximum
      exposure to the Company. However, certain off-balance sheet commitments are
      expected to expire or be only partially used; therefore, the total amount of
      commitments does not necessarily represent future cash requirements. These
      off-balance sheet activities are necessary to meet the financing needs of the
      Company’s customers. At September 30, 2006, the Company had total off-balance
      sheet contractual commitments consisting of $29.2 million to originate loans,
      $129.4 million in unused lines of credit and letters of credit totaling $17.1
      million. Funding for these amounts is expected to be provided by the sources
      described above. Management believes the Company has adequate resources to
      meet
      its normal funding requirements.





The
      table
      below details the amount of loan commitments, unused lines of credit and letters
      of credit outstanding at September 30, 2006 by expiration period:





One
                year
            
            One
                to
            
            After*(In
                thousands)*
            
            or
                less
            
            three
                years
            
            three
                years
            
            TotalLoan
                commitments
            
            $
            29,165
            
            $
            –
            
            $
            –
            
            $
            29,165Unused
                lines of credit
            
            
            60,504
            
            
            15,287
            
            
            53,559
            
            
            129,350Letters
                of credit
            
            
            6,888
            
            
            10,179
            
            
            
            
            
            17,067$
            96,557
            
            $
            25,466
            
            $
            53,559
            
            $
            175,582




The
      table
      below details the amount of contractual obligations outstanding at September
      30,
      2006, by expiration date:





One
                year
            
            One
                to
            
            After*(In
                thousands)*
            
            or
                less
            
            three
                years
            
            three
                years
            
            TotalOffice
                premises and equipment
            
            $
            208
            
            $
            –
            
            $
            –
            
            $
            208Advances
                from the Federal Home Loan Bank
            
            
            44,501
            
            
            34,245
            
            
            50,575
            
            
            129,321Securities
                sold under agreement to repurchase
            
            
            11,101
            
            
            
            
            
            30,000
            
            
            41,101Subordinated
                debentures
            
            
            
            
            
            
            
            
            23,000
            
            
            23,000Lease
                obligations
            
            
            596
            
            
            723
            
            
            420
            
            
            1,739$
            56,406
            
            $
            34,968
            
            $
            103,995
            
            $
            195,369




4. *Earnings
      Per Share*





Basic
      earnings per common share is computed based upon the weighted-average number
      of
      common shares outstanding during the period. Diluted earnings per common share
      is computed including the dilutive effect of additional potential common shares
      issuable under stock options. The computations were as follows for the nine
      and
      three-month periods ended September 30:





For
                the
            
            For
                theNine
                Months Ended
            
            Three
                Months EndedSeptember
                30,
            
            September
                30,2006
            
            2005
            
            2006
            
            2005Weighted-average
                common shares outstanding (basic)
            
            
            5,467,480
            
            
            5,684,826
            
            
            5,379,089
            
            
            5,688,601Dilutive
                effect of assumed exercise of stock options
            
            
            89,423
            
            
            128,108
            
            
            80,672
            
            
            108,452Weighted-average
                common shares outstanding (diluted)
            
            
            5,556,903
            
            
            5,812,934
            
            
            5,459,761
            
            
            5,797,053




*Table
          of Contents*
 -9-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005




4. *Earnings
      Per Share* *(continued)*





Options
      to purchase 172,550 and 125,250 shares of common stock with a weighted-average
      exercise price of $34.87 and $37.12 were outstanding at September 30, 2006
      and
      2005, but were excluded from the computation of common share equivalents for
      the
      nine and three month periods ended September 30, 2006 and 2005 because the
      exercise prices were greater than the average market price of the common
      shares.





5. *Critical
      Accounting Policies*





The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to use judgments in making estimates and assumptions that affect
      the
      reported amounts of assets, liabilities, revenues and expenses. The following
      critical accounting policies are based upon judgments and assumptions by
      management that include inherent risks and uncertainties.





*Allowance
      for Losses on Loans:* The
      balance in the allowance is an accounting estimate of probable but unconfirmed
      and unrecorded asset impairment that has occurred in the Company’s loan
      portfolio as of the date of the consolidated financial statements. It
      is the
      Company’s policy to provide valuation allowances for estimated losses on loans
      based upon past loss experience, adjusted for changes in trends and conditions
      of the certain items, including:





·
            Local
                market areas and national economic
                developments;





·
            Levels
                of and trends in delinquencies and impaired
                loans;





·
            Levels
                of and trends in recoveries of prior
                charge-offs;





·
            Adverse
                situations that may affect specific borrowers’abilityto
                repay;





·
            Effects
                of any changes in lending policies and
                procedures;





·
            Credit
                concentrations;





·
            Experience,
                ability, and depth of lending management and credit administration
                staff;





·
            Volume
                and terms of loans; and





·
            Current
                collateral values, where
                appropriate.





When
      the
      collection of a loan becomes doubtful, or otherwise troubled, the Company
      records a loan loss provision equal to the difference between the fair value
      of
      the property securing the loan and the loan’s carrying value. Unsecured credits
      are charged- off upon becoming contractually delinquent for greater than 90
      days. Major loans and major lending areas are reviewed periodically to determine
      potential problems at an early date. The allowance for loan losses is increased
      by charges to earnings and decreased by charge-offs (net of
      recoveries).





The
      Company accounts for its allowance for losses on loans in accordance with SFAS
      No. 5, “Accounting for Contingencies,” and SFAS No. 114, “Accounting by
      Creditors for Impairment of a Loan.” Both Statements require the Company to
      evaluate the collectibility of both contractual interest and principal loan
      payments. SFAS No. 5 requires the accrual of a loss when it is probable that
      a
      loan has been impaired and the amount of the loss can be reasonably estimated.
      SFAS No. 114 requires that impaired loans be measured based upon the present
      value of expected future cash flows discounted at the loan’s effective interest
      rate or, as an alternative, at the loans’ observable market price or fair value
      of the collateral if the loan is collateral dependent.





A
      loan is
      defined under SFAS No. 114 as impaired when, based on current information and
      events, it is probable that a creditor will be unable to collect all amounts
      due
      according to the contractual terms of the loan agreement. In applying the
      pr ovisions
      of SFAS No. 114, the Company considers its investment in one-to-four family
      residential loans, consumer installment loans and credit card loans to be
      homogeneous and therefore excluded from separate identification for evaluation
      of impairment. These
      homogeneous loan groups are evaluated for impairment in accordance with SFAS
      No.
      5. With respect to the Company’s


*Table
          of Contents*
 -10-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005




5. *Critical
      Accounting Policies* *(continued)*





investment
      in commercial and other loans, and its evaluation of impairment
      thereof ,
      management believes such loans are adequately collateralized and as a result
      impaired loans are
      carried as a practical expedient at the lower of cost or fair
      value.





It
      is the
      Company’s policy to charge off unsecured credits that are more than ninety days
      delinquent. Similarly, collateral- dependent loans which become more than ninety
      days delinquent are considered to constitute more than a minimum delay in
      repayment and are evaluated for impairment under SFAS No. 114 at that
      time.





*Goodwill
      and Other Intangible Assets.* The
      Company has recorded goodwill and core deposit intangibles as a result of merger
      and acquisition activity.





Goodwill
      represents the excess purchase price paid over the net book value of the assets
      acquired in a merger or acquisition. Pursuant to SFAS No. 142, “Goodwill and
      Intangible Assets,” goodwill is not amortized, but is tested for impairment at
      the reporting unit annually and whenever an impairment indicator arises. The
      evaluation involves assigning assets and liabilities to reporting units and
      comparing the fair value of each reporting unit to its carrying value including
      goodwill. If the fair value of a reporting unit exceeds its carrying amount,
      goodwill is not considered impaired. However, if the carrying amount of the
      reporting unit exceeds the fair value, goodwill can be considered
      impaired. The potential impairment loss equals the excess of carrying value
      over
      fair value.





Core
      deposit intangibles represent the value of long-term deposit relationships
      and
      are amortized over their estimated useful lives. The Company annually evaluates
      these estimated useful lives. If the Company determines that events or
      circumstances warrant a change in these estimated useful lives, the Company
      will
      adjust the amortization of the core deposit intangibles, which could affect
      future amortization expense.





6.  *Stock
      Incentive Plan*





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123(R), “Share-Based Payment,” which revises SFAS No. 123, “Accounting for
      Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”)
      Opinion No.25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R)
      requires that cost related to the fair value of all equity-based awards to
      employees, including grants of employee stock options, be recognized in the
      financial statements.





The
      Company adopted the provisions of SFAS No. 123(R) effective January 1, 2006,
      using the modified prospective transition method, as permitted, and therefore
      has not restated its financial statements for prior periods. Under this method,
      the Company has applied the provisions of SFAS No. 123(R) to new equity-based
      awards and to equity-based awards modified, repurchased, or cancelled after
      January 1, 2006. In addition, the Company has recognized compensation cost
      for
      the portion of equity-based awards for which the requisite service period has
      not been rendered (“unvested equity-based awards”) that were outstanding as of
      January 1, 2006. The compensation cost recorded for unvested equity-based awards
      will be based on their grant-date fair value. For the nine month period ended
      September 30, 2006, the Company recorded $23,000 in compensation cost for
      equity-based awards that vested during the nine months ended September 30,
      2006.
      The Company has $60,000 of total unrecognized compensation cost related to
      non-vested equity-based awards granted under its stock incentive plan as of
      September 30, 2006, which is expected to be recognized over a weighted-average
      period of 1.2 years.





Prior
      to
      the adoption of SFAS No. 123(R), the Company presented tax benefits resulting
      from the exercise of stock options as operating cash flows in the Consolidated
      Statement of Cash Flows. SFAS No. 123(R) requires that cash flows from the
      exercise of stock options resulting from tax benefits in excess of recognized
      cumulative compensation cost (“excess tax benefits”) be classified as financing
      cash flows. The Company had $132,000 of tax benefits classified as financing
      cash flows for the nine months ended September 30, 2006.





*Table
          of Contents*
 -11-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005








*6.*
            *Stock
                Incentive Plan**(continued)*





The
      Company accounted for its equity-based compensation awards prior to the adoption
      of SFAS No. 123(R) by applying APB Opinion No. 25 and related Interpretations,
      as permitted by SFAS No. 123. Accordingly, the Company did not recognize any
      compensation cost in its financial statements. Had compensation cost been
      recognized in accordance with the fair value recognition provisions of SFAS
      No.
      123, the Company’s net earnings and earnings per share would have been reduced
      to the pro forma amounts indicated below for the nine and three months ended
      September 30, 2005:





For
                the Nine Months Ended
            
            For
                the Three Months Ended*(In
                thousands, except share data)***
            
            September
                30, 2005
            
            September
                30, 2005Net
                earnings:As
                reported
            
            $
            7,800
            
            $
            3,939Stock-based
                compensation, net of tax
            
            
            (758
            )
            
            (252
            )Pro-forma
                net earnings
            
            **$**
            **7,042**
            
            **$**
            **3,687**Basic
                earnings per share:As
                reported
            
            $
            1.37
            
            $
            .69Stock-based
                compensation, net of tax
            
            
            (.13
            )
            
            (.04
            )Pro-forma
            
            **$**
            **1.24**
            
            **$**
            **.65**Diluted
                earnings per share:As
                reported
            
            $
            1.34
            
            $
            .68Stock-based
                compensation, net of tax
            
            
            (.13
            )
            
            (.04
            )Pro-forma
            
            **$**
            **1.21**
            
            **$**
            **.64**




There
      were no options granted during the nine months ended September 30, 2006. The
      fair value of each option granted in 2005 was estimated on the date of grant
      using the Black-Scholes option-pricing model with the following weighted-average
      assumptions.





2005Dividend
                yield
            
            2.4%Expected
                life
            
            4
                yearsExpected
                volatility
            
            38.4%Risk-free
                interest rate
            
            4.25%





The
      expected life of the options was based on evaluations of historical and expected
      future employee exercise behavior. The risk-free interest rate was based on
      the
      United States Treasury’s rates at the dates of grant with maturity dates
      approximately equal to the expected life at the grant date. The expected
      volatility was based on the historical volatility of the Company’s stock. The
      dividend yield was based on the Company’s expectation of future dividend
      payouts.







*Table
          of Contents*
 -12-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005








6. *Stock
      Incentive Plan* *(continued)*





The
      Company has a stock incentive plan that provides for grants of options of up
      to
      1,200,000 authorized, but unissued shares of its common stock, restricted stock,
      stock appreciation rights, and other equity-based compensation. The following
      is
      a summary of the changes in outstanding options for the nine months ended
      September 30, 2006 and the year ended December 31, 2005:





Nine
                  Months Ended September 30, 2006
              
              Year
                  Ended December 31, 2005Weighted-
              
              Weighted-Average
              
              AverageExercise
              
              ExerciseShares
              
              Price
              
              Shares
              
              PriceOutstanding
                  at beginning of period
              
              
              484,233
              
              $
              23.14
              
              
              582,466
              
              $
              22.21Granted
              
              
              −
              
              
              −
              
              
              8,000
              
              
              32.76Exercised
              
              
              (26,550
              )
              
              15.59
              
              
              (92,800
              )
              
              16.60Forfeited
              
              
              (13,100
              )
              
              34.00
              
              
              (13,433
              )
              
              33.89Outstanding
                  at end of period
              
              
              444,583
              
              **$**
              **23.27**
              
              
              **484,233**
              
              **$**
              **23.14**Exercisable
                  at period end
              
              
              **439,583**
              
              
              
              
              
              **475,983**Weighted-average
                  remaining contractual term
              
              
              **6.6
                  years**
              
              
              
              
              
              **7.3
                  years**


7. *Effects
      of Recent Accounting Pronouncements*





In
      February 2006, the Financial Accounting Standards Board (the “FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 155, “Accounting for
      Certain Hybrid Instruments - an amendment of FASB Statements No. 133 and 140,”
to simplify and make more consistent the accounting for certain financial
      instruments. Specifically, SFAS No. 155 amends SFAS No. 133, “Accounting for
      Derivative Instruments and Hedging Activities,” to permit fair value
      remeasurement for any hybrid financial instrument with an embedded derivative
      that otherwise would require bifurcation, provided that the whole instrument
      is
      accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishment
      of Liabilities,” to allow a qualifying special purpose entity to hold a
      derivative instrument that pertains to a beneficial interest other than another
      derivative financial instrument.





SFAS
      No.
      155 is effective for all financial instruments acquired or issued after the
      beginning of an entity’s first fiscal year that begins after September 15, 2006,
      or January 1, 2007 as to the Company, with earlier application allowed. The
      Company is currently evaluating SFAS No. 155, but does not expect it to have
      a
      material effect on the Company’s financial position or results of
      operations.





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets - an amendment of SFAS No. 140,” to simplify the accounting for
      separately recognized servicing assets and servicing liabilities. Specifically,
      SFAS No. 156 amends SFAS No. 140 to require an entity to take the following
      steps:





·
            Separately
                recognize financial assets as servicing assets or servicing entities,
                each
                time it undertakes an obligation to service a financial asset by entering
                into certain kinds of servicing
                contracts;


·
            Initially
                measure all separately recognized servicing assets and liabilities
                at fair
                value, if practicable, and;


·
            Separately
                present servicing assets and liabilities subsequently measured at
                fair
                value in the statement of financial position and additional disclosures
                for all separately recognized servicing assets and servicing
                liabilities.





Additionally,
      SFAS No. 156 permits, but does not require, an entity to choose either the
      amortization method or the fair value measurement method for measuring each
      class of separately recognized servicing assets and servicing liabilities.
      SFAS
      No. 156 also


*Table
          of Contents*
 -13-


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005




7 *.*  *Effects
      of Recent Accounting Pronouncements* *(continued)*





permits
      a
      servicer that uses derivative financial instruments to offset risks on servicing
      to use fair value measurement when reporting both the derivative financial
      instrument and related servicing asset or liability.





SFAS
      No.
      156 applies to all separately recognized servicing assets and liabilities
      acquired or issued after the beginning of an entity’s fiscal year that begins
      after September 15, 2006, or January 1, 2007 as to the Company, with earlier
      application permitted. The Company is currently evaluating SFAS No. 156, but
      does not expect it to have a material adverse effect on the Company’s financial
      position or results of operations.





In
      July
      2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes.” The interpretation clarifies the accounting for
      uncertainty in income taxes recognized in a company’s financial statements in
      accordance with SFAS No. 109, “Accounting for Income Taxes.” Specifically, FIN
      48 prescribes a recognition threshold and a measurement attribute for the
      financial statement recognition and measurement of a tax provision taken or
      expected to be taken on a tax return. FIN 48 also provides guidance on the
      related derecognition, classification, interest and penalties, accounting for
      interim periods, disclosure, and transition of uncertain tax positions. FIN
      48
      is effective for fiscal years beginning after December 15, 2006, or January
      1,
      2007 as to the Company. The Company is currently evaluating FIN 48, but does
      not
      expect it to have a material adverse effect on the Company’s financial position
      or results of operations.





In
      September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.”  SAB 108 was issued to
      provide consistency between how registrants quantify financial statement
      misstatements.





Historically,
      there have been two widely-used methods for quantifying the effects of financial
      statement misstatements.  These methods are referred to as the “roll-over”
and “iron curtain” method.  The roll-over method quantifies the amount by
      which the current year income statement is misstated.  Exclusive reliance
      on an income statement approach can result in the accumulation of errors on
      the
      balance sheet that may not have been material to any individual income
      statement, but which may misstate one or more balance sheet accounts.  The
      iron curtain method quantifies the error as the cumulative amount by which
      the
      current year balance sheet is misstated.   Exclusive reliance on a
      balance sheet approach can result in disregarding the effects of errors in
      the
      current year income statement that results from the correction of an error
      existing in previously issued financial statements.  The Company currently
      uses the roll-over method for quantifying identified financial statement
      misstatements.





SAB
      108
      established an approach that requires quantification of financial statement
      misstatements based on the effects of the misstatement on each of the company’s
      financial statements and the related financial statement disclosures.  This
      approach is commonly referred to as the “dual approach” because it requires
      quantification of errors under both the roll-over and iron curtain
      methods.





SAB
      108
      allows registrants to initially apply the dual approach either by (1)
      retroactively adjusting prior financial statements as if the dual approach
      had
      always been used or by (2) recording the cumulative effect of initially applying
      the dual approach as adjustments to the carrying values of assets and
      liabilities as of January 1, 2006 with an offsetting adjustment recorded to
      the
      opening balance of retained earnings.    Use of this “cumulative
      effect” transition method requires detailed disclosure of the nature and amount
      of each individual error being corrected through the cumulative adjustment
      and
      how and when it arose.





Management
      is currently evaluating the requirements of SAB 108 but does not expect it
      to
      have a material adverse effect on the Company’s financial position or results of
      operations.





*Table
            of Contents*
 -14-


**Forward-Looking
      Statements**





This
      report, including Management’s Discussion and Analysis of Financial Condition
      and Results of Operations, contains forward-looking statements about the
      Company. These forward-looking statements include statements regarding financial
      condition, results of operations, plans, objectives, and the future performance
      and business of the Company, including management’s establishment of an
      allowance for loan losses, its statements regarding the adequacy of such
      allowance for loan losses, and management’s belief that the allowance for loan
      losses is adequate. Forward-looking statements can be identified by the fact
      that they do not relate strictly to historical or current facts.





By
      their
      nature, forward-looking statements are subject to numerous assumptions, risks,
      and uncertainties. A number of factors could cause actual conditions, events,
      or
      results to differ significantly and materially from those described in the
      forward-looking statements. These factors include, but are not limited to,
      those
      set forth below and under the heading “Business Risks” included in Item 1 of the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (2005
      Form 10-K), and other factors described in the 2005 Form 10-K, and from
      time-to-time in other filings with the Securities and Exchange
      Commission.





Forward-looking
      statements speak only as of the date they are made. The Company assumes no
      obligation to update forward-looking statements to reflect circumstances or
      events that occur after the date the forward-looking statements were made or
      to
      reflect the occurrence of unanticipated events.





**Risk
      Factors**




Oak
      Hill
      Financial, like other financial companies, is subject to a number of risks,
      many
      of which are outside of management’s control. Management strives to mitigate
      those risks while optimizing returns. Among the risks assumed are: (1) **credit
      risk** ,
      which
      is the risk that loan customers or other counter parties will be unable to
      perform their contractual obligations, (2) **market
      risk** ,
      which
      is the risk that changes in market rates and prices will adversely affect the
      Company’s financial condition or results of operations, (3) **liquidity
      risk** ,
      which
      is the risk that the Company will have insufficient cash or access to cash
      to
      meet operating needs, and (4) **operational
      risk** ,
      which
      is the risk of loss resulting from inadequate or failed internal processes,
      people, or systems, or external events, and (5) **legal
      risk** ,
      which
      is the risk of legal proceedings against the Company as well as regulatory
      and
      governmental reviews or investigations that arise in the course of the Company’s
      business. The description of the Company’s business contained in Item 1 of its
      2005 Form 10-K, while not all inclusive, discusses a number of business risks
      that, in addition to the other information in this report, readers should
      carefully consider.





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





**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005





*Discussion
      of Financial Condition Changes from December 31, 2005 to September 30,
      2006*





The
      Company’s total assets amounted to $1.3 billion at September 30, 2006, an
      increase of $14.5 million, or 1.2%, over the total at December 31, 2005. The
      increase in assets was funded primarily through an increase of $6.2 million,
      or
      5.0%, increase in FHLB advances and a $22.8 million increase in repurchase
      agreements, which were partially offset by a decrease in deposits of $14.9
      million.





Cash
      and
      due from banks, federal funds sold, and investment
      securities, including mortgage-backed securities, increased by $4.6 million,
      or 2.9%, to
      a total of $165.8 million at September 30, 2006, compared to December 31, 2005.
      Investment securities increased by $9.8 million, as purchases of $46.0 million
      exceeded maturities and repayments of $13.4 million and sales of $23.4 million.
      Federal funds sold decreased by $1.2 million during the nine-month period ended
      September 30, 2006.




Loans
      receivable, including loans held for sale, totaled $1.0 billion at September
      30,
      2006, an increase of $1.8 million, or 0.2%, over the comparable totals at
      December 31, 2005. Loan disbursements and purchases totaled $276.2 million
      during the nine-month period ended September 30, 2006, which were partially
      offset by loan sales of $22.9 million and principal repayments of $246.8
      million. Loan disbursements and purchases increased by $21.4 million when
      compared to the same period in 2005. Loan originations increased primarily
      due
      to the increase in originations of commercial and residential real estate loans.
      Growth in the loan portfolio during the nine months ended September 30, 2006
      was
      comprised of an $18.3 million, or 2.6%, increase in commercial and residential
      real estate loans and a $2.4 million, or 2.2%, increase in installment loans,
      which were partially offset by an $18.1 million, or 11.0%, decrease in
      commercial and other loans, a $782,000, or 1.5%, decrease in construction and
      land development loans, and a $40,000, or 1.8%, decrease in credit card loans.
      The allowance for loan losses represented 1.32% and 1.33% of the total loan
      portfolio at September 30, 2006 and December 31, 2005, respectively.




*Table
          of Contents*
 -15-


**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005




Net
      charge-offs totaled approximately $1.8 million and $4.7 million for the nine
      months ended September 30, 2006 and 2005, respectively. The Company’s allowance
      represented 99.3% and 77.3% of nonperforming loans, which totaled $13.7 million
      and $17.7 million at September 30, 2006 and December 31, 2005, respectively.
      At
      September 30, 2006, nonperforming loans were comprised of $6.3 million of loans
      secured primarily by commercial real estate, $1.6 million in commercial and
      other loans, $5.4 million secured by one-to-four family residential real estate,
      and $392,000 in installment and credit card loans. In management’s opinion,
      based upon its ongoing review, knowledge, and current information, the carrying
      value of commercial and non-residential credits are appropriate and all
      nonperforming loans were adequately collateralized or reserved at September
      30,
      2006.





Deposits
      totaled $963.5 million at September 30, 2006, a decrease of $14.9 million,
      or
      1.5%, from the total at December 31, 2005. Brokered deposits remained part
      of
      the Company’s overall funding strategy, although to a lesser extent, due to
      competitive rates and lower operational costs compared with retail deposits.
      Brokered deposits totaled $45.5 million with a weighted-average cost of 3.84%
      at
      September 30, 2006, as compared to the $80.5 million in brokered deposits with
      a
      3.20% weighted-average cost at December 31, 2005.





Advances
      from the Federal Home Loan Bank totaled $129.3 million at September 30, 2006,
      an
      increase of $6.2 million, or 5.0%, over the total at December 31, 2005.
      Securities sold under agreements to repurchase totaled $41.1 million at
      September 30, 2006, an increase of $22.8 million, over the total at December
      31,
      2005. The increase resulted primarily from $20.0 million in reverse repurchase
      agreements incepted in March 2006 and $10.0 million incepted in April 2006,
      which were partially offset by the repayment of $10.0 million in reverse
      repurchase agreements originally incepted in March 2005.





The
      Company’s stockholders’ equity amounted to $94.2 million at September 30, 2006,
      an increase of $91,000, or 0.1%, over the balance at December 31, 2005. The
      increase resulted primarily from net earnings of $9.7 million, proceeds from
      options exercised of a $628,000 and a $646,000 decrease in the unrealized loss
      on securities available for sale, net of tax, which were partially offset by
      $3.1 million in dividends, the Company’s repurchase of 266,355 outstanding
      shares of common stock at an aggregate price of $7.7 million ($28.89 per share),
      and the acquisition of treasury stock in exchange for stock options totaling
      $84,000.




*Comparison
      of Results of Operations for the Nine-Month Periods Ended September 30, 2006
      and
      2005*





*General*





Net
      earnings for the nine months ended September 30, 2006 totaled $9.7 million,
      a
      $1.9 million increase from the net earnings reported in the comparable 2005
      period. The increase in earnings resulted primarily from a $3.9 million decrease
      in the provision for losses on loans and a $1.6 million increase in total other
      income, which were partially offset by a $2.0 million increase in general,
      administrative and other expenses, a $351,000 increase in the provision for
      federal income tax expense, and a $1.2 million decrease in net interest
      income.





*Net
      Interest Income*





Total
      interest income for the nine months ended September 30, 2006, totaled $59.1
      million, an increase of $8.1 million, or 15.8%, over the comparable 2005 period.
      Interest income on loans totaled $54.0 million, an increase of $6.8 million,
      or
      14.4%, over the 2005 period. This increase resulted primarily from a
      $47.3
      million, or 4.8%, increase in the average portfolio balance to a total of $1.0
      billion for the nine months ended September 30, 2006, coupled with a 59 basis
      point increase in the average fully-taxable equivalent yield, to 7.02% for
      the
      nine month period ended September 30, 2006. Interest income on investment
      securities and other interest-earning assets increased by $1.3 million, or
      33.1%. The increase resulted primarily from a $26.4 million, or 21.1%, increase
      in the average portfolio balance, to a total of $151.5 million for the nine
      months ended September 30, 2006, coupled with a 42 basis point increase in
      the
      average fully-taxable equivalent yield, to 5.35% for the nine months ended
      September 30, 2006.





Total
      interest expense amounted to $30.3 million for the nine months ended September
      30, 2006, an increase of $9.3 million ,
      or
      44.4%, over the comparable
      2005 period. Interest expense on deposits increased by $7.1 million, or 43.6%,
      to a total of $23.4 million for the nine months ended September 30, 2006. The
      increase resulted primarily from an 87 basis point increase in the average
      cost
      of deposits, to 3.21% for the nine months ended September 30, 2006, coupled
      with
      a $45.0 million, or 4.8%, increase in the average portfolio balance, to a total
      of $973.6 million for the nine months ended September 30, 2006. Interest expense
      on borrowings increased by $2.2 million, or 47.1%, for the nine months ended
      September 30, 2006. The increase was due to a 77 basis point increase in the
      average cost of borrowings, to 5.13%, coupled with a $36.0 million, or 25.0%,
      increase in the average borrowings outstanding for the nine months ended
      September 30, 2006.








*Table
          of Contents*
 -16-


**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005




As
      a
      result of the foregoing changes in interest income and interest expense, net
      interest income decreased by $1.2 million, or 4.1%, for the nine months ended
      September 30, 2006, as compared to the same period in 2005. The interest rate
      spread decreased by 35 basis points, to 3.30% for the nine months ended
      September 30, 2006, compared to 3.65% for the nine months ended September 30,
      2005. The fully-taxable equivalent net interest margin decreased by 34 basis
      points, from 3.73% to 3.39% for the nine months ended September 30, 2005 and
      2006, respectively.





*Provision
      for Losses on Loans*





A
      provision for losses on loans is charged to earnings to bring the total
      allowance for loan losses to a level considered appropriate by management based
      on historical experience, the volume and type of lending conducted by the
      Company, the status of past due principal and interest payments, general
      economic conditions, particularly as such conditions relate to the Company’s
      market area and other factors related to the collectibility of the Company’s
      loan portfolio. As a result of such analysis, management recorded a $1.7 million
      provision for losses on loans for
      the
      nine months ended September 30, 2006, a decrease of $3.9
      million compared to the same period in 2005. The provision for losses on loans
      for the nine months ended September 30, 2006 generally gives effect to the
      $1.8
      million of growth in the loan portfolio, as well as considering the impact
      of
      net charge-offs of $1.8 million during the nine months ended September 30,
      2006.





*Other
      Income*





Other
      income totaled $10.1 million for the nine months ended September 30, 2006,
      an
      increase of $1.6 million, or 18.2%, over the amount reported in the comparable
      2005 period. This increase resulted primarily from a $2.0 million, or 28.5%,
      increase in service fees and charges and other income, which were partially
      offset by a $127,000, or 14.6%, decrease in gain on sale of loans and a
      $363,000, or 71.5%, decrease in gain on sale of securities. The increase in
      service fees, charges and other income was due primarily to an increase in
      service charges on deposits, primarily due to increased overdraft fees, totaling
      $821,000, an increase in commission income of $513,000, an increase in ATM
      fees
      totaling $207,000, and an increase in bank owned life insurance income of
      $71,000.




*General,
      Administrative and Other Expense*





General,
      administrative and other expense totaled $25.0 million for the nine months
      ended
      September 30, 2006, an increase of $2.0 million, or 8.9%, over the amount
      reported in the 2005 period. The increase resulted primarily from a $739,000,
      or
      6.2%, increase in employee compensation and benefits and a $1.3 million, or
      17.1%, increase in other operating expenses, including merger-related expenses
      in 2005, amortization of core deposit intangible, and franchise taxes, which
      were partially offset by a $47,000, or 1.5%, decrease in occupancy and equipment
      expense.





The
      decrease in occupancy and equipment expense was due primarily to a $139,000,
      or
      14.1%, decrease in maintenance contracts, a $91,000, or 15.2%, decrease in
      rent
      expense, and a $59,000 decrease in other occupancy and equipment expenses,
      which
      were partially offset by a $106,000, or 9.8%, increase in depreciation expense
      and a $136,000, or 31.2%, increase in utilities, property taxes and insurance.
      The increase in other expenses resulted primarily from a $70,000 increase in
      amortization of core deposit intangibles, an $83,000 increase in ATM expense,
      a
      $924,000 increase in franchise tax expense, a $370,000 increase in credit and
      collection expense, and a $73,000 increase in professional fees, coupled with
      incremental increases in other operating expenses year-to-year, all of which
      were partially offset by a $502,000 decrease in merger-related expenses incurred
      in the acquisition of Lawrence Financial. The increase in compensation and
      benefits resulted primarily from a $1.3 million, or 11.6%, increase in salaries
      and wages partially attributable to yearly salary increases and the addition
      of
      staff in the Lawrence merger and an $82,000, or 11.5%, increase in group
      insurance, which were partially offset by a $334,000, or 56.9%, decrease in
      retirement expense and a $17,000, or 1.7%, decrease in payroll tax
      expense.





*Federal
      Income Taxes*





The
      provision for federal income taxes amounted to $2.6 million for the nine months
      ended September 30, 2006, an increase of $351,000, or 15.7%, over the comparable
      2005 period. The increase resulted primarily from a $2.2 million, or 22.1%,
      increase in earnings before taxes, which was partially offset by a $125,000
      increase in New Markets Tax Credits pursuant to the Bank’s investment in Oak
      Hill Community Development Corp. The effective tax rates were 21.1% and 22.3%
      for the nine months ended September 30, 2006 and 2005,
      respectively.





*Table
          of Contents*
 -17-


Oak
      Hill
      Financial, Inc.


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005





*Comparison
      of Results of Operations for the Three-Month Periods Ended September 30, 2006
      and 2005*





*General*





Net
      earnings for the three months ended September 30, 2006 totaled $3.2 million,
      a
      $759,000, or 19.3%, decrease from net earnings reported in the comparable 2005
      period. The decrease in earnings resulted primarily from a $244,000 increase
      in
      the provision for losses on loans, a $311,000 increase in total general,
      administrative and other expenses, and a $783,000 decrease in net interest
      income, which were partially offset by a $303,000 increase in other income
      and a
      $276,000 decrease in the provision for federal income tax.





*Net
      Interest Income*





Total
      interest income for the three months ended September 30, 2006, amounted to
      $20.5
      million, an increase of $2.3 million, or 12.7%, over the comparable 2005 period.
      Interest income on loans totaled $18.7 million, an increase of $1.9 million,
      or
      11.5%, over the 2005 period. This increase resulted primarily from a
      $18.2
      million, or 1.8%, increase in the average portfolio balance, to a total of
      $1.0
      billion for the three months ended September 30, 2006, coupled with a 64 basis
      point increase in the average fully-taxable equivalent yield, to 7.22% for
      the
      three month period ended September 30, 2006. Interest income on investment
      securities and other interest-earning assets increased by $375,000, or 26.4%.
      This increase resulted primarily from a $22.0 million, or 16.1%, increase in
      the
      average portfolio balance, to a total of $158.1 million for the three months
      ended September 30, 2006, coupled with a 25 basis point increase in the average
      fully-taxable equivalent yield, to 5.27% for the three months ended September
      30, 2006.





Total
      interest expense amounted to $10.8 million for the three months ended September
      30, 2006, an increase of $3.1 million ,
      or
      39.8%, over the comparable
      2005 period. Interest expense on deposits increased by $2.2 million, or 37.3%,
      to a total of $8.3 million for the three months ended September 30, 2006. The
      increase resulted primarily from an $87.7 million, or 10.0%, increase in the
      average portfolio balance, to a total of $963.3 million for the three months
      ended September 30, 2006, coupled with a 68 basis point increase in the average
      cost of deposits, to 3.40% for the three months ended September 30, 2006.
      Interest expense on borrowings increased by $846,000, or 48.4%, for the three
      months ended September 30, 2006. The increase was due to a $50.3 million, or
      33.8%, increase in the average borrowings outstanding for the three months
      ended
      September 30, 2006, coupled with a 51 basis point increase in the average cost
      of borrowings, to 5.17% for the three months ended September 30,
      2006.





As
      a
      result of the foregoing changes in interest income and interest expense, net
      interest income decreased by $783,000, or 7.5%, for the three months ended
      September 30, 2006, as compared to the same period in 2005. The interest rate
      spread decreased by 13 basis points, to 3.26% for the nine months ended
      September 30, 2006, compared to 3.39% for the three months ended September
      30,
      2005. The fully-taxable equivalent net interest margin decreased by 38 basis
      points, from 3.72% to 3.34% for the three months ended September 30, 2005 and
      2006, respectively.





*Provision
      for Losses on Loans*





A
      provision for losses on loans is charged to earnings to bring the total
      allowance for loan losses to a level considered appropriate by management based
      on historical experience, the volume and type of lending conducted by the
      Company, the status of past due principal and interest payments, general
      economic conditions, particularly as such conditions relate to the Company’s
      market area, and other factors related to the collectibility of the Company’s
      loan portfolio. As a result of such analysis, management recorded a $456,000
      provision for losses on loans for
      the
      three months ended September 30, 2006, a increase of $244,000
      compared to same period in 2005. The provision for losses on loans for the
      three
      months ended September 30, 2006 was predicated primarily upon net charge-offs
      of
      $503,000 during the quarter.





*Other
      Income*





Other
      income totaled $3.3 million for the three months ended September 30, 2006,
      an
      increase of $303,000, or 10.1%, over the amount reported in the comparable
      2005
      period. This increase resulted primarily from a $527,000, or 20.7%, increase
      in
      service fees, charges and other income, including commission income, earnings
      from bank owned life insurance, which were partially offset by a $127,000,
      or
      38.8%, decrease in gain on sales of loans and a $97,000, or 70.3%, decrease
      in
      gain on sale of securities. The increase in the components of other income
      was
      due primarily to an increase in service charges on deposits totaling $216,000,
      an increase in commission income of $181,000, an increase in ATM fees totaling
      $55,000, which were partially offset by a decrease in bank owned life insurance
      income of $9,000 in the 2006 period.





*Table
          of Contents*
 -18-


Oak
      Hill
      Financial, Inc.


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      nine and three month periods ended September 30, 2006 and 2005




*General,
      Administrative and Other Expense*





General,
      administrative and other expense totaled $8.5 million for the three months
      ended
      September 30, 2006, an increase of $311,000, or 3.8%, over the amount reported
      in the 2005 period. The increase resulted primarily from a $26,000, or 2.5%,
      increase in occupancy and equipment and a $374,000, or 14.0%, net increase
      in
      the operating expense category of merger-related expenses, deposit insurance,
      amortization of core deposit intangible, and franchise taxes, which were
      partially offset by a $88,000, or 2.0%, decrease in employee compensation and
      benefits.





The
      increase in occupancy and equipment expense was due primarily to a $23,000,
      or
      5.8%, increase in depreciation expense and a $34,000, or 21.3%, increase in
      utilities, property taxes and insurance, which were partially offset by a
      $18,000, or 6.1%, decrease in maintenance contracts, and a $26,000, or 13.9%,
      decrease in rent expense. The increase in other expenses resulted primarily
      from
      a $231,000 increase in franchise tax expense, coupled with incremental increases
      in other expenses year-to-year, which were partially offset by a $71,000
      decrease in the amortization of core deposit intangible. The decrease in
      compensation and benefits resulted primarily from a $251,000, or 74.8%, decrease
      in retirement plans, a $9,000, or 11.3%, decrease in director’s fees, and a
      $6,000, or 1.9%, decrease in payroll tax expense, which were partially offset
      by
      a $96,000, or 2.4%, increase in salaries and wages partially attributable to
      yearly salary increases and the addition of staff and an $8,000, or 3.0%,
      increase in group insurance.




*Federal
      Income Taxes*





The
      provision for federal income taxes amounted to $861,000 for the three months
      ended September 30, 2006, a decrease of $276,000, or 24.3%, from the total
      recorded in the comparable 2005 period. The decrease resulted primarily from
      a
      $1.0 million decrease in earnings before taxes, which was partially offset
      by a
      $125,000 decrease in New Markets Tax Credits pursuant to the Bank’s qualified
      investment in Oak Hill Community Development Corp. The effective tax rates
      were
      21.3% and 22.4% for the three months ended September 30, 2006 and 2005,
      respectively.





Item
      3: *Quantitative
      and Qualitative Disclosure About Market Risk*





There
      has
      been no significant change from disclosures included in the Company’s Annual
      Report on Form 10-K for the year ended December 31, 2005.








Item
      4: *Controls
      and Procedures*





*Disclosure
      Controls and Procedures*





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed by the Company in the reports
      that it files or submits under the Securities Act of 1934, as amended (the
      “Exchange Act”) is recorded, processed, summarized and reported, within the time
      periods specified in the SEC’s rules and forms. Disclosure controls and
      procedures include, without limitation, controls and procedures
      designed to ensure that information required to be disclosed by the Company
      in
      the reports that it files or submits under the Exchange Act is accumulated
      and
      communicated to the Company’s management as appropriate to allow timely
      decisions regarding required disclosure.





At
      the
      end of the period covered by this report, the Company’s management, with the
      participation of its chief executive officer and chief financial officer,
      carried out an evaluation of the effectiveness of our disclosure controls and
      procedures pursuant to Rule 13a-15 promulgated under the Exchange Act. Based
      upon this evaluation, the Company’s chief executive officer and chief financial
      officer concluded that the Company’s disclosure controls and procedures were
      effective at September 30, 2006.





The
      Company’s management also conducted an evaluation of internal control over
      financial reporting to determine whether any changes occurred during the quarter
      ended September 30, 2006. Based on this evaluation, there were no changes in
      the
      Company’s internal control over financial reporting made during the quarter
      ended September 30, 2006, that have materially affected, or are reasonable
      likely to materially affect, the Company’s internal control over financial
      reporting.





*Table
          of Contents*
 -19-


**Oak
      Hill Financial, Inc.**


**PART
      II - OTHER INFORMATION**








Item1: *Legal
      Proceedings*





Not
      applicable.





Item
      1A:  *Risk
      Factors*





There
      have been no material changes from risk factors disclosed in the Company’s
      Annual Report on Form 10-K for   the
      year
      ended December 31, 2005.





Item
      2: *Unregistered
      Sales of Equity Securities and Use of Proceeds*





Total
                Number of
            
            Maximum
                NumberShares
                Purchased
            
            of
                Shares that MayAs
                Part of Publicly
            
            Yet
                Be PurchasedTotal
                Number of
            
            Average
                Price
            
            Announce
                Plans
            
            Under
                the PlansShares
                Purchased
            
            Paid
                Per Share
            
            or
                Programs
            
            or
                Programs(1)July
                1, 2006 -July
                31, 2006
            
            
            –
            
            
            –
            
            
            
            
            
            80,400August
                1, 2006 -August
                31, 2006
            
            
            –
            
            
            –
            
            
            
            
            
            80,400September
                1, 2006 -September
                30, 2006
            
            
            16,700
            
            $
            24.82
            
            
            16,700
            
            
            63,700




(1)
            During
                January 2006, the Company completed the share repurchase plan announced
                on
                May 26, 2005. On February 21, 2006, the Company announced that its
                Board
                of Directors had authorized management to repurchase up to 278,000
                shares
                of the Company’s common stock through open market or privately negotiated
                transactions. The authorization does not have an expiration
                date.





Item
      3: *Defaults
      Upon Senior Securities*





Not
      applicable.





Item
      4: *Submission
      of Matters to a Vote of Security Holders*





Not
      applicable.








Item
      5: *Other
      Information*





Not
      applicable.





Item
      6: *Exhibits*





Exhibits:




*Exhibit
                  Number*
              *Description*31(a)
              Certification
                  of Chief Executive Officer, R. E. Coffman, Jr., dated November
                  9, 2006,
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                  (“SOX”).31(b)
              Certification
                  of Chief Financial Officer, Ron J. Copher, dated November 9, 2006,
                  pursuant to Section 302 of SOX.


*Table
          of Contents*
 -20-


32(a)
              Certification
                  of Chief Executive Officer, R. E. Coffman, Jr., dated November
                  9, 2006,
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  SOX.**32(b)
              Certification
                  of Chief Financial Officer, Ron J. Copher, dated November 9, 2006,
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  SOX.**

























*Table
          of Contents*
 -21-


**SIGNATURES**








Pursuant
      to the requirements of the Securities and Exchange Act of 1934, the Registrant
      has duly caused this report to be signed on its behalf by the undersigned
      thereunto duly authorized.








**Oak
                Hill Financial, Inc.**Date:
                November 9, 2006
            By:
            */s/
                R. E. Coffman, Jr.*R.
                E. Coffman, Jr.President
                & Chief Executive OfficerDate:
                November 9, 2006
            By:
            */s/
                Ron J. Copher*Ron
                J. CopherChief
                Financial Officer








*Table
      of Contents*


-22-