**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 June 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)
            **31-1010517**
              (I.R.S.
                Employer
              Identification
                Number)**14621
                S. R. 93**
              **Jackson,
                Ohio**
              (Address
                of principal executive office)
            **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 large accelerated filer, an accelerated
        filer, or a non-accelerated filer. See definition of “accelerated filer and
        large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
 Large
                  accelerated filero
              Accelerated
                  filerý
              Non-accelerated
                  filero
 
 
 Indicate
        by check mark whether the registrant is a shell copany (as defined in Rule
        12b-2
        of the Exchange Act).
 
 Yeso
              Noý
 
 As
        of
        August 8, 2006, the latest practicable date, 5,379,915 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:
            Defaults
                Upon Senior Securities
            20Item
                4:
            Submission
                of Matters to a Vote of Security
                Holders
            20Item
                5:
            Other
                Information
            21Item
                6:
            Exhibits
            21Signatures
            
            22Certifications
            
            23














-
          2
          -


**PART
      I - FINANCIAL INFORMATION**


Item
      1: Financial Statements





**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF FINANCIAL
      CONDITION**


June
                30,
            
            December
                31,*(In
                thousands, except share data)*
            
            2006
            
            2005(Unaudited)**ASSETS**Cash
                and due from banks
            
            $
            22,808
            
            $
            24,786Federal
                funds sold
            
            
            1,946
            
            
            1,614Investment
                securities designated as available for sale - at market
            
            
            139,516
            
            
            131,193Investment
                securities designated as held to maturity - at cost (approximate
                marketvalue
                of $3,780 and $3,851 at June 30, 2006 and December 31, 2005, respectively)
            
            
            3,608
            
            
            3,619Loans
                receivable - net
            
            
            1,023,174
            
            
            1,014,673Loans
                held for sale - at lower of cost or market
            
            
            455
            
            
            410Office
                premises and equipment - net
            
            
            26,208
            
            
            22,736Federal
                Home Loan Bank stock - at cost
            
            
            7,845
            
            
            7,626Real
                estate acquired through foreclosure
            
            
            1,018
            
            
            376Accrued
                interest receivable on loans
            
            
            4,128
            
            
            4,156Accrued
                interest receivable on investment securities
            
            
            916
            
            
            875Goodwill
                - net
            
            
            7,935
            
            
            7,935Core
                deposit intangible - net
            
            
            3,556
            
            
            4,068Bank
                owned life insurance
            
            
            13,216
            
            
            12,948Prepaid
                expenses and other assets
            
            
            3,258
            
            
            1,561Prepaid
                federal income taxes
            
            
            1,424
            
            
            1,178Deferred
                federal income taxes
            
            
            1,760
            
            
            1,304TOTAL
                ASSETS
            
            **$**
            **1,262,771**
            
            **$**
            **1,241,058****LIABILITIES
                AND STOCKHOLDERS’ EQUITY**DepositsDemand
            
            $
            96,365
            
            $
            97,575Savings
                and time deposits
            
            
            881,673
            
            
            880,821Total
                deposits
            
            
            978,038
            
            
            978,396Securities
                sold under agreements to repurchase
            
            
            42,606
            
            
            18,263Advances
                from the Federal Home Loan Bank
            
            
            124,477
            
            
            123,119Subordinated
                debentures
            
            
            23,000
            
            
            23,000Accrued
                interest payable and other liabilities
            
            
            4,404
            
            
            4,199Total
                liabilities
            
            
            1,172,525
            
            
            1,146,977Stockholders’
                equityCommon
                stock - $.50 stated value; authorized 15,000,000 shares,5,874,634
                shares issued at June 30, 2006 and December 31, 2005
            
            
            2,937
            
            
            2,937Additional
                paid-in capital
            
            
            13,707
            
            
            13,952Retained
                earnings
            
            
            89,917
            
            
            85,505Treasury
                stock (494,878 and 270,420 shares at June 30, 2006 andDecember
                31, 2005, respectively - at cost)
            
            
            (14,498
            )
            
            (7,972
            )Accumulated
                comprehensive loss:Unrealized
                loss on securities designated as available for sale, netof
                related tax effects
            
            
            (1,817
            )
            
            (341
            )Total
                stockholders’ equity
            
            
            90,246
            
            
            94,081TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            **$**
            **1,262,771**
            
            **$**
            **1,241,058**




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**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF EARNINGS**





For
                the
            
            For
                theSix
                Months Ended
            
            Three
                Months EndedJune
                30,
            
            June
                30,*(In
                thousands, except share data)*
            
            2006
            
            2005
            
            2006
            
            2005(Unaudited)**INTEREST
                INCOME**Loans
            
            $
            35,272
            
            $
            30,425
            
            $
            17,903
            
            $
            15,685Investment
                securities
            
            
            3,026
            
            
            2,235
            
            
            1,561
            
            
            1,291Interest-bearing
                deposits and other
            
            
            320
            
            
            207
            
            
            183
            
            
            114Total
                interest income
            
            
            38,618
            
            
            32,867
            
            
            19,647
            
            
            17,090**INTEREST
                EXPENSE**Deposits
            
            
            15,098
            
            
            10,249
            
            
            7,856
            
            
            5,539Borrowings
            
            
            4,309
            
            
            2,946
            
            
            2,271
            
            
            1,565Total
                interest expense
            
            
            19,407
            
            
            13,195
            
            
            10,127
            
            
            7,104Net
                interest income
            
            
            19,211
            
            
            19,672
            
            
            9,520
            
            
            9,986Provision
                for losses on loans
            
            
            1,273
            
            
            5,459
            
            
            1,073
            
            
            4,709Net
                interest income after provision for losses on loans
            
            
            17,938
            
            
            14,213
            
            
            8,447
            
            
            5,277**OTHER
                INCOME**Service
                fees, charges and other operating
            
            
            4,186
            
            
            3,081
            
            
            2,217
            
            
            1,753Commissions
                income
            
            
            1,693
            
            
            1,361
            
            
            873
            
            
            690Bank
                owned life insurance
            
            
            269
            
            
            189
            
            
            119
            
            
            110Gain
                on sale of loans
            
            
            542
            
            
            542
            
            
            333
            
            
            224Gain
                (loss) on sale of securities
            
            
            104
            
            
            370
            
            
            (35
            )
            
            227Total
                other income
            
            
            6,794
            
            
            5,543
            
            
            3,507
            
            
            3,004**GENERAL,
                ADMINISTRATIVE AND OTHER EXPENSE**Employee
                compensation and benefits
            
            
            8,404
            
            
            7,576
            
            
            4,104
            
            
            3,994Occupancy
                and equipment
            
            
            1,980
            
            
            2,053
            
            
            987
            
            
            1,051Federal
                deposit insurance premiums
            
            
            63
            
            
            60
            
            
            31
            
            
            30Franchise
                taxes
            
            
            796
            
            
            103
            
            
            480
            
            
            50Other
                operating
            
            
            4,761
            
            
            4,178
            
            
            2,437
            
            
            2,339Amortization
                of core deposit intangible
            
            
            512
            
            
            371
            
            
            228
            
            
            299Merger-related
                expenses
            
            
            -
            
            
            453
            
            
            -
            
            
            136Total
                general, administrative and other expense
            
            
            16,516
            
            
            14,794
            
            
            8,267
            
            
            7,899Earnings
                before federal income taxes (benefits)
            
            
            8,216
            
            
            4,962
            
            
            3,687
            
            
            382**FEDERAL
                INCOME TAX (BENEFITS)**Current
            
            
            1,389
            
            
            137
            
            
            679
            
            
            (1,214
            )Deferred
            
            
            339
            
            
            964
            
            
            14
            
            
            995Total
                federal income tax (benefits)
            
            
            1,728
            
            
            1,101
            
            
            693
            
            
            (219
            )**NET
                EARNINGS**
            
            **$**
            **6,488**
            
            **$**
            **3,861**
            
            **$**
            **2,994**
            
            **$**
            **601****EARNINGS
                PER SHARE**Basic
            
            **$**
            **1.18**
            
            **$**
            **.68**
            
            **$**
            **.55**
            
            **$**
            **.10**Diluted
            
            **$**
            **1.16**
            
            **$**
            **.66**
            
            **$**
            **.54**
            
            **$**
            **.10****DIVIDENDS
                PER SHARE**
            
            **$**
            **.38**
            
            **$**
            **.34**
            
            **$**
            **.20**
            
            **$**
            **.17**









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**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE
      INCOME**


For
                the
            
            For
                theSix
                Months Ended
            
            Three
                Months EndedJune
                30,
            
            June
                30,*(In
                thousands)*
            
            2006
            
            2005
            
            2006
            
            2005Net
                earnings
            
            $
            6,488
            
            $
            3,861
            
            $
            2,994
            
            $
            601Other
                comprehensive income (loss), net of related tax effects:Unrealized
                gains (losses) on securities designated as availablefor
                sale, net of taxes (benefits) of $(758), $192, $(695) and$707,
                respectively
            
            
            (1,408
            )
            
            356
            
            
            (1,291
            )
            
            1,312Reclassification
                adjustment for realized (gains) losses includedin
                net earnings, net of taxes (benefits) of $36, $131, $(12) and$79,
                respectively
            
            
            (68
            )
            
            (239
            )
            
            23
            
            
            (148
            )Comprehensive
                income
            
            **$**
            **5,012**
            
            **$**
            **3,978**
            
            **$**
            **1,726**
            
            **$**
            **1,765**Accumulated
                comprehensive income (loss)
            
            **$**
            **(1,817**
            **)**
            **$**
            **722**
            
            **$**
            **(1,817**
            **)**
            **$**
            **722**















































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**Oak
      Hill Financial, Inc.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**








For
                the Six Months EndedJune
                30,*(In
                thousands)*
            
            2006
            
            2005(Unaudited)**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                earnings for the period
            
            $
            6,488
            
            $
            3,861Adjustments
                to reconcile net earnings to net cash provided byoperating
                activities:Depreciation
                and amortization
            
            
            730
            
            
            868Amortization
                of core deposit intangible
            
            
            512
            
            
            371Gain
                on sale of securities
            
            
            (104
            )
            
            (370
            )Amortization
                of premiums, discounts and mortgage servicing rights - net
            
            
            384
            
            
            588Proceeds
                from sale of loans in secondary market
            
            
            17,546
            
            
            17,701Loans
                disbursed for sale in secondary market
            
            
            (17,262
            )
            
            (17,128
            )Gain
                on sale of loans
            
            
            (329
            )
            
            (317
            )Gain
                on disposition of assets
            
            
            -
            
            
            (85
            )Accretion
                of deferred loan origination fees
            
            
            (227
            )
            
            (258
            )Loss
                on sale of other real estate owned
            
            
            44
            
            
            203Purchase
                of loans
            
            
            (451
            )
            
            -Federal
                Home Loan Bank stock dividends
            
            
            (219
            )
            
            (163
            )Provision
                for losses on loans
            
            
            1,273
            
            
            5,459Compensation
                expense related to stock incentive plan
            
            
            23
            
            
            -Bank
                owned life insurance income
            
            
            (269
            )
            
            (189
            )Increase
                (decrease) in cash due to changes in:Prepaid
                expenses and other assets
            
            
            (1,696
            )
            
            (1,155
            )Accrued
                interest receivable
            
            
            (13
            )
            
            (329
            )Accrued
                interest payable and other liabilities
            
            
            205
            
            
            1,268Federal
                income taxesCurrent
            
            
            (246
            )
            
            1,008Deferred
            
            
            339
            
            
            964Net
                cash provided by operating activities
            
            
            6,728
            
            
            12,297**CASH
                FLOWS USED IN INVESTING ACTIVITIES:**Loan
                disbursements
            
            
            (163,667
            )
            
            (152,440
            )Principal
                repayments on loans
            
            
            153,156
            
            
            137,132Principal
                repayments on mortgage-backed securities designatedas
                available for sale
            
            
            7,343
            
            
            8,367Proceeds
                from sale of investment securities designatedas
                available for sale
            
            
            13,900
            
            
            18,891Proceeds
                from maturity of investment securities
            
            
            1,172
            
            
            1,100Proceeds
                from disposition of assets
            
            
            -
            
            
            279Proceeds
                from sale of other real estate owned
            
            
            544
            
            
            970Purchase
                of investment securities designatedas
                available for sale
            
            
            (33,210
            )
            
            (45,614
            )Purchase
                of insurance agency
            
            
            -
            
            
            (12
            )(Increase)
                decrease in federal funds sold - net
            
            
            (332
            )
            
            147Purchase
                of office premises and equipment
            
            
            (4,232
            )
            
            (1,091
            )Lawrence
                Financial acquisition - net of cash paid
            
            
            -
            
            
            6,674Net
                cash used in investing activities
            
            
            (25,326
            )
            
            (25,597
            )Net
                cash used in operating and investing activities(balance
                carried forward)
            
            
            (18,598
            )
            
            (13,300
            )










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**Oak
      Hill Financial, Inc.**


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


For
                  the Six Months EndedJune
                  30,*(In
                  thousands)*
              
              2006
              
              2005(Unaudited)Net
                  cash used in operating and investing activities(balance
                  brought forward)
              
              $
              (18,598
              )
              $
              (13,300
              )**CASH
                  FLOWS PROVIDED BY FINANCING ACTIVITIES:**Net
                  proceeds from securities sold under agreement to
                  repurchase
              
              
              24,343
              
              
              13,389Net
                  decrease in deposit accounts
              
              
              (211
              )
              
              (9,764
              )Proceeds
                  from Federal Home Loan Bank advances
              
              
              28,000
              
              
              12,500Repayments
                  of Federal Home Loan Bank advances
              
              
              (26,642
              )
              
              (8,677
              )Repayments
                  of notes payable
              
              
              -
              
              
              (2,700
              )Proceeds
                  from issuance of subordinated debentures
              
              
              -
              
              
              5,000Dividends
                  on common shares
              
              
              (2,076
              )
              
              (1,920
              )Purchase
                  of treasury shares
              
              
              (7,279
              )
              
              (3,801
              )Proceeds
                  from issuance of shares under stock option plan
              
              
              367
              
              
              1,259Tax
                  benefit of stock options exercised
              
              
              118
              
              
              373Net
                  cash provided by financing activities
              
              
              16,620
              
              
              5,659Net
                  decrease in cash and cash equivalents
              
              
              (1,978
              )
              
              (7,641
              )Cash
                  and cash equivalents at beginning of period
              
              
              24,786
              
              
              31,009Cash
                  and cash equivalents at end of period
              
              **$**
              **22,808**
              
              **$**
              **23,368****SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                  paid during the period for:Federal
                  income taxes
              
              **$**
              **1,549**
              
              **$**
              **744**Interest
                  on deposits and borrowings
              
              **$**
              **19,369**
              
              **$**
              **12,984****SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:**Unrealized
                  gains (losses) on securities designated as available for
                  sale,net
                  of related tax benefits
              
              **$**
              **(1,476**
              **)**
              **$**
              **117**Recognition
                  of mortgage servicing rights in accordance with SFAS No.
                  140
              
              **$**
              **213**
              
              **$**
              **225**Transfer
                  from loans to real estate acquired through foreclosure
              
              **$**
              **779**
              
              **$**
              **33**Loans
                  identified as held for sale
              
              **$**
              **455**
              
              **$**
              **-**Fair
                  value of assets acquired in acquisition of Lawrence
                  Financial
              
              **$**
              **-**
              
              **$**
              **125,121**Common
                  stock issued in acquisition of Lawrence Financial
              
              **$**
              **-**
              
              **$**
              **8,589**Goodwill
                  and other intangible assets arising from acquisitions -
                  net
              
              **$**
              **-**
              
              **$**
              **9,162**


























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**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 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.





On
      April
      1, 2005, the Company acquired Lawrence Financial Holdings, Inc. (“Lawrence
      Financial”) for a purchase price of approximately $15.3 million, which included
      net cash consideration of $6.7 million. In addition, the Company issued 221,051
      shares of common stock to Lawrence Financial shareholders. The transaction
      added
      $116.9 million in assets, $76.5 million in loans, $104.2 million in deposits
      and
      $8.6 million in equity to the Company.





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 six and three
      months ended June 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
      eliminated.





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
      June
      30, 2006, the Company had $381.7 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 $222.3 million in advances from the Federal Home
      Loan Bank of Cincinnati (“FHLB”). Also, as an operational philosophy, the
      Company





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          to Table of Contents*
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          8
          -


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 30, 2006 and 2005








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





seeks
      to
      obtain advances to help with asset/liability management and liquidity. At June
      30, 2006, the Company had $129.9 million of outstanding FHLB advances and
      letters of credit.





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 June 30, 2006, the Company had total off-balance sheet
      contractual commitments consisting of $12.3 million to originate loans, $120.0
      million in unused lines of credit and letters of credit totaling $16.8 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 June 30, 2006 by expiration period:





One
                year
            
            One
                to
            
            After*(In
                thousands)*
            
            or
                less
            
            three
                years
            
            three
                years
            
            TotalLoan
                commitments
            
            $
            12,323
            
            $
            -
            
            $
            -
            
            $
            12,323Unused
                lines of credit
            
            
            54,047
            
            
            23,557
            
            
            42,437
            
            
            120,041Letters
                of credit
            
            
            6,709
            
            
            10,125
            
            
            -
            
            
            16,834$
            73,079
            
            $
            33,682
            
            $
            42,437
            
            $
            149,198




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





One
                year
            
            One
                to
            
            After*(In
                thousands)*
            
            or
                less
            
            three
                years
            
            three
                years
            
            TotalOffice
                premises and equipment
            
            $
            165
            
            
            
            
            $
            $
            
            $
            165Advances
                from the Federal Home Loan Bank
            
            
            32,351
            
            
            26,055
            
            
            66,071
            
            
            124,477Securities
                sold under agreement to repurchase
            
            
            12,606
            
            
            
            
            
            30,000
            
            
            42,606Subordinated
                debentures
            
            
            
            
            
            
            
            
            23,000
            
            
            23,000Lease
                obligations
            
            
            598
            
            
            823
            
            
            435
            
            
            1,856$
            45,720
            
            $
            26,878
            
            $
            119,506
            
            $
            192,104




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 six
      and
      three month periods ended June 30:





For
                the Six Months Ended
            
            For
                the Three Months EndedJune
                30,
            
            June
                30,2006
            
            2005
            
            2006
            
            2005Weighted-average
                common shares outstanding (basic)
            
            
            5,512,408
            
            
            5,682,908
            
            
            5,457,931
            
            
            5,798,175Dilutive
                effect of assumed exercise of stock options
            
            
            93,796
            
            
            138,156
            
            
            87,797
            
            
            124,163Weighted-average
                common shares outstanding (diluted)
            
            
            5,606,204
            
            
            5,821,064
            
            
            5,545,728
            
            
            5,922,338







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          9
          -


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 30, 2006 and 2005








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





Options
      to purchase 174,450 and 122,250 shares of common stock with a weighted-average
      exercise price of $34.99 and $37.21 were outstanding at June 30, 2006 and 2005,
      respectively, but were excluded from the computation of common share equivalents
      for the six and three month periods ended June 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
      provisions 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


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          10
          -


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 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 is considered impaired. The
      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 will apply 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 will recognize compensation cost
      for
      the portion of equity-based awards for which the requisite service period has
      not been rendered (“unvested equity-based awards”) that are 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 six and three month
      periods ended June 30, 2006, the Company recorded $23,000 and $11,000 in
      compensation cost for equity-based awards that vested during the six and three
      months ended June 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 June 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 $118,000 of tax benefits classified as financing
      cash flows for the six months ended June 30, 2006.





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











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          11
          -


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 30, 2006 and 2005







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





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 six and three
      months ended June 30, 2005:





For
                the Six Months Ended
            For
                the Three Months Ended*(In
                thousands, except share data)***
            June
                30, 2005
            June
                30, 2005Net
                earnings:As
                reported
            
            $
            3,861
            
            
            $
            601Stock-based
                compensation, net of tax
            
            
            (506
            )
            
            
            (253
            )Pro-forma
                net earnings
            
            **$**
            **3,355**
            
            
            **$**
            **348**Basic
                earnings per share:As
                reported
            
            $
            .68
            
            
            $
            .10Stock-based
                compensation, net of tax
            
            
            (.09
            )
            
            
            (.04
            )Pro-forma
            
            $
            .59
            
            
            **$**
            **.06**Diluted
                earnings per share:As
                reported
            
            $
            .66
            
            
            $
            .10Stock-based
                compensation, net of tax
            
            
            (.08
            )
            
            
            (.04
            )Pro-forma
            
            **$**
            **.58**
            
            
            **$**
            **.06**





There
      were no options granted during the six months ended June 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.
















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          12
          -


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 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 six months
      ended June 30, 2006 and the year ended December 31, 2005:





Six
                Months Ended June 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
            
            
            (22,750
            )
            
            15.72
            
            
            (92,800
            )
            
            16.60Forfeited
            
            
            (7,900
            )
            
            33.75
            
            
            (13,433
            )
            
            33.89Outstanding
                at end of period
            
            
            453,583
            
            $
            23.32
            
            
            484,233
            
            $
            23.14Exercisable
                at end of period
            
            
            446,583
            
            
            
            
            
            475,983Weighted-average
                remaining contractual term
            
            
            
            
            
            6.9
                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


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          13
          -


**Oak
      Hill Financial, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


For
      the
      six and three month periods ended June 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.





































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**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 counterparties 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, 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
      six and three month periods ended June 30, 2006 and 2005








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





The
      Company’s total assets amounted to $1.3 billion at June 30, 2006, an increase of
      $21.7 million, or 1.7%, over the total at December 31, 2005. The increase in
      assets was funded primarily through an increase of $24.3 million in repurchase
      agreements and a $1.4 million, or 1.1% increase in FHLB advances, which were
      partially offset by a decrease in deposits of $358,000.





Cash
      and
      due from banks, federal funds sold, and investment
      securities, including mortgage-backed securities, increased by $6.7 million,
      or 4.1%, to
      a total of $167.9 million at June 30, 2006, compared to December 31, 2005.
      Investment securities increased by $8.3 million, as purchases of $33.2 million
      exceeded maturities and repayments of $8.5 million and sales of $13.8 million.
      Federal funds sold increased by $332,000 during the six-month period ended
      June
      30, 2006.




Loans
      receivable, including loans held for sale, totaled $1.0 billion at June 30,
      2006, an increase of $8.5 million, or 0.8%, over the comparable totals at
      December 31, 2005. Loan disbursements and purchases totaled $181.4 million
      during the six-month period ended June 30, 2006, which were partially offset
      by
      loan sales of $17.2 million and principal repayments of $153.2 million. Loan
      disbursements and purchases increased by $11.8 million when compared to the
      same
      period in 2005. Sales volume decreased by $167,000 when compared to the same
      period in 2005. Loan originations increased primarily due to the increase in
      originations of commercial and other loans. Growth in the loan portfolio during
      the six months ended June 30, 2006 was comprised of a $14.1 million, or 2.0%,
      increase in commercial and residential real estate loans, a $2.7 million, or
      5.1%, increase in construction and land development loans, and a $3.7 million,
      or 3.5%, increase in installment loans, which were partially offset by a $12.0
      million, or 7.3%, decrease in commercial and other loans and a $29,000, or
      1.3%,
      decrease in credit card loans. The allowance for loan losses totaled $13.7
      million at June 30, 2006, an increase of $25,000, or 0.2%, over the total at
      December 31, 2005. The allowance for loan losses represented 1.32% and 1.33%
      of
      the total loan portfolio at June 30, 2006 and December 31, 2005, respectively.


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**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      six and three month periods ended June 30, 2006 and 2005








Net
      charge-offs totaled approximately $1.2 million and $4.4 million for the six
      months ended June 30, 2006 and 2005, respectively. The Company’s allowance
      represented 73.9% and 77.3% of nonperforming loans, which totaled $18.5 million
      and $17.7 million at June 30, 2006 and December 31, 2005, respectively. At
      June
      30, 2006, nonperforming loans were comprised of $7.2 million of loans secured
      primarily by commercial real estate, $2.3 million in commercial and other loans,
      $8.6 million secured by one-to-four family residential real estate, and $367,000
      in installment and credit card loans loans. The Company continues to diligently
      explore several avenues to improve the status of such loans in a timely manner.
      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 for at June
      30,
      2006.





Deposits
      totaled $978.0 million at June 30, 2006, a decrease of $358,000 from the total
      at December 31, 2005. Brokered deposits continued to be an integral 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 $46.4 million with a weighted-average cost of 3.57%
      at
      June 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 $124.5 million at June 30, 2006, an
      increase of $1.4 million, or 1.1%, over the total at December 31, 2005.
      Securities sold under agreements to repurchase totaled $42.6 million at June
      30,
      2006, an increase of $24.3 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 $90.2 million at June 30, 2006, a
      decrease of $3.8 million, or 4.1%, from the balance at December 31, 2005. The
      decrease resulted primarily from $2.1 million in dividends, the Company’s
      repurchase of 249,655 outstanding shares of common stock at an aggregate price
      of $7.3 million ($29.16 per share), and a $1.5 million increase in the
      unrealized loss on securities available for sale, net of tax, which were
      partially offset by net earnings of $6.5 million and proceeds from options
      exercised of $367,000.








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





*General*





Net
      earnings for the six months ended June 30, 2006 totaled $6.5 million, a $2.6
      million, or 68.0%, increase over net earnings reported in the comparable 2005
      period. The increase in earnings resulted primarily from a $4.2 million decrease
      in the provision for losses on loans and a $1.3 million increase in total other
      income, which were partially offset by a $1.7 million increase in general,
      administrative and other expenses, a $627,000 increase in the provision for
      federal income tax expense, and $461,000 decrease in net interest
      income.





*Net
      Interest Income*





Total
      interest income for the six months ended June 30, 2006, amounted to $38.6
      million, an increase of $5.8 million, or 17.5%, over the comparable 2005 period.
      Interest income on loans totaled $35.3 million, an increase of $4.8 million,
      or
      15.9%, over the 2005 period. This increase resulted primarily from a
      $62.1
      million, or 6.4%, increase in the average portfolio balance, to a total of
      $1.0
      billion for the six months ended June 30, 2006, coupled with a 58 basis point
      increase in the average fully-taxable equivalent yield, to 6.92% for the six
      month period ended June 30, 2006. Interest income on investment securities
      and
      other interest-earning assets increased by $904,000, or 37.0%. This increase
      resulted primarily from a $28.6 million, or 23.9%, increase in the average
      portfolio balance, to a total of $148.2 million for the six months ended June
      30, 2006, coupled with a 51 basis point increase in the average fully-taxable
      equivalent yield, to 5.39% for the six months ended June 30, 2006.





Total
      interest expense amounted to $19.4 million for the six months ended June 30,
      2006, an increase of $6.2 million ,
      or
      47.1%, over the comparable
      2005 period. Interest expense on deposits increased by $4.8 million, or 47.3%,
      to a total of $15.1 million for the six months ended June 30, 2006. The increase
      resulted primarily from a $70.4 million, or 7.8%, increase in the average
      portfolio balance, to a total of $978.8 million for the six months ended June
      30, 2006, coupled with an 83 basis point increase in the average cost of
      deposits, to 3.11% for the six months ended June 30, 2006. Interest expense
      on
      borrowings increased by $1.4 million, or 46.3%, for the six months ended June
      30, 2006. The increase was due to a $28.7 million, or 20.3%, increase in the
      average borrowings outstanding for the six months ended June 30, 2006, coupled
      with a 91 basis point increase in the average cost of borrowings, to 5.11%
      for
      the six months ended June 30, 2006.


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**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      six and three month periods ended June 30, 2006 and 2005








As
      a
      result of the foregoing changes in interest income and interest expense, net
      interest income decreased by $461,000, or 2.3%, for the six months ended June
      30, 2006, as compared to the same period in 2005. The interest rate spread
      decreased 33 basis points, to 3.32% for the six months ended June 30, 2006,
      compared to 3.65% for the six months ended June 30, 2005. The fully-taxable
      equivalent net interest margin decreased 33 basis points, from 3.74% to 3.41%
      for the six months ended June 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 $1.3 million
      provision for losses on loans for
      the
      six months ended June 30, 2006, a decrease of $4.2
      million, or 76.7%, compared to same period in 2005. The provision for losses
      on
      loans for the six months ended June 30, 2006 gives effect to the increase of
      $843,000 in nonperforming loans over the period, the $8.5 million of growth
      in
      the loan portfolio, as well as net charge-offs of $1.2 million during the six
      months ended June 30, 2006.





*Other
      Income*





Other
      income totaled $6.8 million for the six months ended June 30, 2006, an increase
      of $1.3 million, or 22.6%, over the amount reported in the comparable 2005
      period. This increase resulted primarily from a $1.4 million, or 32.4% increase
      in service fees, charges and other income, which was partially offset by a
      $266,000, or 71.9%, 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 totaling $605,000, an increase in commission income
      of $333,000, and an increase in ATM fees totaling $152,000. Bank owned life
      insurance increased by $80,000, or 42.3%, in the 2006 period.





*General,
      Administrative and Other Expense*





General,
      administrative and other expense totaled $16.5 million for the six months ended
      June 30, 2006, an increase of $1.7 million, or 11.6%, over the amount reported
      in the 2005 period. The increase resulted primarily from an $828,000, or 10.9%,
      increase in employee compensation and benefits and a $964,000, or 18.9%,
      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 $73,000, or 3.6%, decrease in occupancy and equipment
      expense.





The
      decrease in occupancy and equipment expense was due primarily to a $120,000,
      or
      17.6%, decrease in maintenance contracts, a $65,000, or 15.8%, decrease in
      rent
      expense, and a $74,000 decrease in other occupancy and equipment expenses,
      which
      were partially offset by an $83,000, or 12.2% increase in depreciation expense
      and a $103,000, or 36.8%, increase in utilities, property taxes and insurance.
      The increase in other expenses resulted primarily from a $141,000 increase
      in
      amortization of core deposit intangible, a $693,000 increase in franchise tax
      expense, a $284,000 increase in credit and collection expense, and a $36,000
      increase in professional fees, coupled with incremental increases in other
      operating expenses year-to-year, all of which were partially offset by a
      $453,000 decrease in merger-related expenses incurred in the acquisition of
      Lawrence Financial. The increase in compensation and benefits resulted primarily
      from an $1.2 million, or 16.9%, increase in salaries and wages attributable
      to
      yearly salary increases and the addition of staff in the Lawrence merger and
      a
      $74,000, or 16.3%, increase in group insurance, which were partially offset
      by
      an $83,000, or 33.0%, decrease in retirement expense and an $11,000, or 1.6%,
      decrease in payroll tax expense. ****





*Federal
      Income Taxes*





The
      provision for federal income taxes totaled $1.7 million for the six months
      ended
      June 30, 2006, an increase of $627,000, or 56.9%, over the amount recorded
      in
      the comparable 2005 period. The increase resulted primarily from a $3.3 million,
      or 65.6%, increase in earnings before taxes, which was partially offset by
      $250,000 increase in New Markets Tax Credits pursuant to the Bank’s qualified
      investment in Oak Hill Community Development Corp. The effective tax rates
      were
      21.0% and 22.2% for the six months ended June 30, 2006 and 2005,
      respectively.

















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**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      six and three month periods ended June 30, 2006 and 2005








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





*General*





Net
      earnings for the three months ended June 30 2006 totaled $3.0 million, a $2.4
      million increase over net earnings reported in the comparable 2005 period.
      The
      increase in earnings resulted primarily from a $3.6 million decrease in the
      provision for losses on loans and a $503,000 increase in other income, which
      were partially offset by a $912,000 increase in the provision for federal income
      tax, a $466,000 decrease in net interest income, and a $368,000 increase in
      general, administrative and other expenses.





*Net
      Interest Income*





Total
      interest income for the three months ended June 30, 2006, totaled $19.6 million,
      an increase of $2.6 million, or 15.0%, from the comparable 2005 period. Interest
      income on loans totaled $17.9 million, an increase of $2.2 million, or 14.1%,
      over the 2005 period. This increase resulted primarily from a
      $23.9
      million, or 2.4% increase in the average portfolio balance, to a total of $1.0
      billion for the three months ended June 30, 2006, coupled with a 73 basis point
      increase in the average fully-taxable equivalent yield, to 6.97% for the three
      month period ended June 30, 2006. Interest income on investment securities
      and
      other interest-earning assets increased by $339,000, or 24.1%. This increase
      resulted primarily from a $16.6 million, or 12.3%, increase in the average
      portfolio balance, to a total of $151.8 million for the three months ended
      June
      30, 2006, coupled with a 39 basis point increase in the average fully-taxable
      equivalent yield, to 5.40% for the three months ended June 30,
      2006.





Total
      interest expense amounted to $10.1 million for the three months ended June
      30,
      2006, an increase of $3.0 million ,
      or
      42.6%, over the comparable
      2005 period. Interest expense on deposits increased by $2.3 million, or 41.8%,
      to a total of $7.9 million for the three months ended June 30, 2006. The
      increase resulted primarily from a $19.2 million, or 2.0%, increase in the
      average portfolio balance, to a total of $981.9 million for the three months
      ended June 30, 2006, coupled with a 90 basis point increase in the average
      cost
      of deposits, to 3.21% for the three months ended June 30, 2006. Interest expense
      on borrowings increased by $706,000, or 45.1%, for the three months ended June
      30, 2006. The increase was due to a $29.7 million, or 20.4%, increase in the
      average borrowings outstanding for the three months ended June 30, 2006, coupled
      with an 88 basis point increase in the average cost of borrowings, to 5.20%
      for
      the three months ended June 30, 2006.





As
      a
      result of the foregoing changes in interest income and interest expense, net
      interest income decreased by $466,000, or 4.7%, for the three months ended
      June
      30, 2006, as compared to the same period in 2005. The interest rate spread
      decreased 27 basis points, to 3.26% for the three months ended June 30, 2006,
      compared to 3.53% for the three months ended June 30, 2005. The fully-taxable
      equivalent net interest margin decreased 27 basis points, from 3.61% to 3.34%
      for the three months ended June 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 $1.1 million
      provision for losses on loans for
      the
      three months ended June 30, 2006, a decrease of $3.6
      million, or 77.2%, compared to same period in 2005. The provision for losses
      on
      loans for the three months ended June 30, 2006 was predicated upon the $6.5
      million of growth in the loan portfolio, as well as net charge-offs of $1.1
      million during the quarter.





*Other
      Income*





Other
      income totaled $3.5 million for the three months ended June 30, 2006, an
      increase of $503,000, or 16.7%, over the amount reported in the comparable
      2005
      period. This increase resulted primarily from a $656,000, or 25.7%, increase
      in
      service fees, charges and other income, including commissions income, earnings
      from bank owned life insurance, and a $109,000, or 48.7%, increase on gain
      on
      sale of loans, which were partially offset by a $262,000 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 $240,000,
      an
      increase in commission income of $183,000, an increase in ATM fees totaling
      $70,000, and an increase in bank owned life insurance income of $9,000 in the
      2006 quarter.











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**Oak
      Hill Financial, Inc.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**


For
      the
      six and three month periods ended June 30, 2006 and 2005








*General,
      Administrative and Other Expense*





General,
      administrative and other expense totaled $8.3 million for the three months
      ended
      June 30, 2006, an increase of $368,000, or 4.7%, over the amount reported in
      the
      2005 period. The increase resulted primarily from a $110,000, or 2.8%, increase
      in employee compensation and benefits and a $322,000, or 11.4%, 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 $64,000, or 6.1%, decrease in occupancy and equipment
      expense.





The
      decrease in occupancy and equipment expense was due primarily to a $56,000,
      or
      16.5%, decrease in maintenance contracts, a $33,000, or 16.3%, decrease in
      rent
      expense, and a $36,000 decrease in other occupancy and equipment expenses,
      which
      were partially offset by a $15,000, or 4.2%, increase in depreciation expense
      and a $46,000, or 34.5%, increase in utilities, property taxes and insurance.
      The increase in other expenses resulted primarily from a $430,000 increase
      in
      franchise tax expense. The increase in compensation and benefits resulted
      primarily from a $322,000, or 8.6%, increase in salaries and wages attributable
      to yearly salary increases and the addition of staff and a $13,000, or 5.5%,
      increase in group insurance, which were partially offset by a $79,000, or 48.3%,
      decrease in retirement plans and a $16,000, or 5.1%, decrease in payroll tax
      expense. ****





*Federal
      Income Taxes*





The
      provision for federal income taxes amounted to $693,000 for the three months
      ended June 30, 2006, an increase of $912,000 over the benefits recorded in
      the
      comparable 2005 period. The increase resulted primarily from a $3.3 million
      increase in earnings before taxes, which was partially offset by a $125,000
      increase in New Markets Tax Credits pursuant to the Bank’s qualified investment
      in Oak Hill Community Development Corp. The effective tax rates (benefit) were
      18.8% and (57.3)% for the three months ended June 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 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 June 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 June 30, 2006. Based on this evaluation, there were no changes in the
      Company’s internal control over financial reporting made during the quarter
      ended June 30, 2006, that have materially affected, or are reasonably likely to materially affect, the Company’s internal
      control over financial reporting.










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**Oak
      Hill Financial, Inc.**


**PART
      II - OTHER INFORMATION**








Item
      1: *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)April
                1, 2006 -April
                30, 2006
            63,500
            $28.15
            63,500
            192,100May
                1, 2006 -May
                31, 2006
            88,200
            $28.08
            88,200
            103,900June
                1, 2006 -June
                30, 2006
            23,500
            $26.89
            23,500
            80,400







(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*





(a)
            The
                Company had its 2006 Annual Meeting of Shareholders (“Annual Meeting”) on
                April 18, 2006. Holders of 5,223,211 common shares of the Company
                were
                present, in person or by proxy, representing 93.9% of the Company’s
                5,560,345 common shares
                outstanding.





(b)
      and
      (c) The
      following persons were elected Class II members of the Company’s Board of
      Directors to serve until the 2008 Annual Meeting or until their successors
      are
      duly elected and qualified. Each person received the number of votes indicated
      below:





*Name*
            *Votes
                For*
            *Votes
                Withheld*Candice
                R. DeClark-Peace
            4,831,085
            392,126Barry
                M. Dorsey, Ed.D.
            4,971,776
            251,435Donald
                R. Seigneur
            4,830,880
            392,331William
                S. Siders
            4,745,293
            477,918H.
                Grant Stephenson
            4,592,623
            630,588Donald
                P. Wood
            4,831,880
            391,331





The
      continuing Class I Directors, whose terms expire at the 2007 Annual Meeting,
      are
      R. E. Coffman, Jr., John D. Kidd, D. Bruce Knox and Neil S.
      Strawser.





The
      proposal for ratification of the appointment of Grant Thornton LLP as
      independent registered public accounting firm for the Company for the year
      ending December 31,


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2006,
      was
      approved with 5,206,194 votes FOR, 14,757 votes AGAINST and 2,260 votes
      ABSTAIN.




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 August 8,
                  2006,
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                  (“SOX”).31(b)
              Certification
                  of Chief Financial Officer, Ron J. Copher, dated August 8, 2006,
                  pursuant
                  to Section 302 of SOX.32(a)
              Certification
                  of Chief Executive Officer, R. E. Coffman, Jr., dated August 8,
                  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 August 8, 2006,
                  pursuant
                  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
                  SOX.**






















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**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:
                  August 8, 2006
              By:
              */s/
                  R. E. Coffman, Jr.*R.
                  E. Coffman, Jr.President
                  & Chief Executive OfficerDate:
                  August 8, 2006
              By:
              */s/
                  Ron J. Copher*Ron
                  J. CopherChief
                  Financial Officer


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