##### 



Exhibit 13
 OHIO STATE BANCSHARES, INC.
 ANNUAL REPORT




---



##### 



Presidents Letter
    
    
    1Comparative Summary of Selected Financial Data
    
    
    2Financial Statements
    
    
    3Report of Independent Registered Public Accounting Firm
    
    
    3Consolidated Financial Statements
    
    
    4Notes to Consolidated Financial Statements
    
    
    8Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    25Board of Directors
    
    
    40Officers
    
    
    41




---



##### 



(OHIO STATE BANCSHARES LOGO)
    

(PICTURE)
    
    (OHIO STATE BANK LOGO)
       
 
 1




---



##### 



2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001STATEMENT OF OPERATIONS DATATotal interest income
    
    $
    8,012
    
    
    $
    6,661
    
    
    $
    6,202
    
    
    $
    6,369
    
    
    $
    6,148Total interest expense
    
    
    3,186
    
    
    
    2,198
    
    
    
    2,133
    
    
    
    2,322
    
    
    
    2,924Net interest income
    
    
    4,826
    
    
    
    4,463
    
    
    
    4,069
    
    
    
    4,047
    
    
    
    3,224Provision for loan losses
    
    
    386
    
    
    
    403
    
    
    
    412
    
    
    
    435
    
    
    
    336Net interest income after provision for
loan losses
    
    
    4,440
    
    
    
    4,060
    
    
    
    3,657
    
    
    
    3,612
    
    
    
    2,888Noninterest income
    
    
    893
    
    
    
    742
    
    
    
    783
    
    
    
    724
    
    
    
    598Noninterest expense
    
    
    4,621
    
    
    
    4,002
    
    
    
    3,317
    
    
    
    2,882
    
    
    
    2,582Income tax expense
    
    
    135
    
    
    
    165
    
    
    
    266
    
    
    
    414
    
    
    
    251Net income
    
    $
    577
    
    
    $
    635
    
    
    $
    857
    
    
    $
    1,040
    
    
    $
    653PER SHARE DATA:Basic and diluted earnings per
common share
    
    $
    3.03
    
    
    $
    3.34
    
    
    $
    4.51
    
    
    $
    6.53
    
    
    $
    4.47Book value per share at year-end
    
    
    59.32
    
    
    
    59.07
    
    
    
    57.16
    
    
    
    53.78
    
    
    
    42.57Cash dividends per share
    
    
    0.80
    
    
    
    0.80
    
    
    
    0.80
    
    
    
    0.60
    
    
    
    0.60Number of shares used in earnings per
share calculations
    
    
    190,000
    
    
    
    190,000
    
    
    
    190,000
    
    
    
    159,273
    
    
    
    146,000BALANCE SHEET DATA:Total assets
    
    $
    143,326
    
    
    $
    125,012
    
    
    $
    110,862
    
    
    $
    104,733
    
    
    $
    91,407Total securities
    
    
    34,052
    
    
    
    25,444
    
    
    
    26,506
    
    
    
    31,970
    
    
    
    21,637Total net loans
    
    
    94,792
    
    
    
    88,915
    
    
    
    75,358
    
    
    
    60,545
    
    
    
    57,493Allowance for loan losses
    
    
    986
    
    
    
    961
    
    
    
    844
    
    
    
    793
    
    
    
    714Total deposits
    
    
    113,673
    
    
    
    96,124
    
    
    
    87,007
    
    
    
    84,889
    
    
    
    81,787Borrowings
    
    
    17,408
    
    
    
    16,487
    
    
    
    12,268
    
    
    
    8,928
    
    
    
    2,837Shareholders equity
    
    
    11,272
    
    
    
    11,223
    
    
    
    10,860
    
    
    
    10,219
    
    
    
    6,215OPERATING RATIOS:Total net loans to total deposits
    
    
    83.39
    %
    
    
    92.50
    %
    
    
    86.61
    %
    
    
    71.32
    %
    
    
    70.30
    %Total shareholders equity to total assets
    
    
    7.86
    
    
    
    8.98
    
    
    
    9.80
    
    
    
    9.76
    
    
    
    6.80Average shareholders equity to
average assets
    
    
    7.86
    
    
    
    9.26
    
    
    
    9.74
    
    
    
    8.01
    
    
    
    7.36Return on average equity
    
    
    5.11
    
    
    
    5.77
    
    
    
    8.14
    
    
    
    13.49
    
    
    
    10.99Return on average assets
    
    
    0.40
    
    
    
    0.53
    
    
    
    0.79
    
    
    
    1.08
    
    
    
    0.81Dividend payout ratio
    
    
    26.40
    
    
    
    23.95
    
    
    
    17.75
    
    
    
    9.69
    
    
    
    13.41Total interest expense to interest income
    
    
    39.77
    
    
    
    33.00
    
    
    
    34.40
    
    
    
    36.46
    
    
    
    47.55Allowance for loan losses
to total loans
    
    
    1.03
    
    
    
    1.07
    
    
    
    1.11
    
    
    
    1.29
    
    
    
    1.23Average assets
    
    $
    143,647
    
    
    $
    118,783
    
    
    $
    108,027
    
    
    $
    96,248
    
    
    $
    80,744Average shareholders equity
    
    
    11,288
    
    
    
    11,002
    
    
    
    10,517
    
    
    
    7,707
    
    
    
    5,942
  2




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##### 



Crowe
Chizek and Company LLC
  
    (Crowe Chizek and Company LLC)Crowe Chizek and Company LLC
 
 3




---



##### 



2005
    
    
    2004ASSETSCash and due from financial institutions
    
    $
    4,020,399
    
    
    $
    2,872,837Interest-bearing deposits in other financial institutions
    
    
    200,542
    
    
    
    1,192,147Federal funds sold
    
    
    2,471,000
    
    
    
    435,000Cash and cash equivalents
    
    
    6,691,941
    
    
    
    4,499,984Securities available for sale
    
    
    34,051,759
    
    
    
    25,444,326Loans, net of allowance of $986,385 and $961,404
    
    
    94,792,219
    
    
    
    88,915,318Premises and equipment, net
    
    
    3,121,605
    
    
    
    2,576,597Cash surrender value of life insurance policies
    
    
    1,618,400
    
    
    
    1,545,308Goodwill
    
    
    270,500
    
    
    
    Intangible assets
    
    
    459,713
    
    
    
    Accrued interest receivable
    
    
    700,199
    
    
    
    565,921Federal Home Loan Bank and other restricted stock
    
    
    576,840
    
    
    
    537,740Other real estate owned
    
    
    435,060
    
    
    
    486,165Other assets
    
    
    608,256
    
    
    
    441,052$
    143,326,492
    
    
    $
    125,012,411LIABILITIES AND SHAREHOLDERS EQUITYDepositsNoninterest-bearing
    
    $
    14,070,105
    
    
    $
    9,260,575Interest-bearing
    
    
    99,603,204
    
    
    
    86,863,208Total
    
    
    113,673,309
    
    
    
    96,123,783Borrowings
    
    
    14,408,377
    
    
    
    13,487,320Subordinated debentures
    
    
    3,000,000
    
    
    
    3,000,000Accrued interest payable
    
    
    201,210
    
    
    
    168,029Other liabilities
    
    
    772,074
    
    
    
    1,010,343Total liabilities
    
    
    132,054,970
    
    
    
    113,789,475Shareholders equityCommon stock, $10.00 par value, 500,000 shares authorized;
190,000 shares issued and outstanding
    
    
    1,900,000
    
    
    
    1,900,000Additional paid-in capital
    
    
    5,045,227
    
    
    
    5,045,227Retained earnings
    
    
    4,609,252
    
    
    
    4,184,651Accumulated other comprehensive income
    
    
    (282,957
    )
    
    
    93,058Total shareholders equity
    
    
    11,271,522
    
    
    
    11,222,936$
    143,326,492
    
    
    $
    125,012,411
  4




---



##### 



2005
    
    
    2004Interest and dividend incomeLoans, including fees
    
    $
    6,600,051
    
    
    $
    5,629,186Taxable securities
    
    
    973,202
    
    
    
    665,562Nontaxable securities
    
    
    287,487
    
    
    
    291,524Dividends
    
    
    24,640
    
    
    
    21,573Federal funds sold and other
    
    
    126,194
    
    
    
    52,757Total interest and dividend income
    
    
    8,011,574
    
    
    
    6,660,602Interest expenseDeposits
    
    
    2,448,533
    
    
    
    1,694,857Subordinated debentures
    
    
    186,262
    
    
    
    117,340Federal Home Loan Bank advances and other borrowings
    
    
    551,683
    
    
    
    385,585Total interest expense
    
    
    3,186,478
    
    
    
    2,197,782Net interest income
    
    
    4,825,096
    
    
    
    4,462,820Provision for loan losses
    
    
    385,500
    
    
    
    403,100Net interest income after provision for loan losses
    
    
    4,439,596
    
    
    
    4,059,720Noninterest incomeFees for customer services
    
    
    743,854
    
    
    
    641,319Net gains on sales of securities
    
    
    1,169
    
    
    
    32,117Gain on sale of credit card portfolio
    
    
    70,471
    
    
    
    Other
    
    
    77,174
    
    
    
    68,676Total noninterest income
    
    
    892,668
    
    
    
    742,112Noninterest expenseSalaries and employee benefits
    
    
    2,294,587
    
    
    
    2,260,333Occupancy and equipment
    
    
    855,478
    
    
    
    656,860Professional fees
    
    
    238,382
    
    
    
    215,603Office supplies
    
    
    186,017
    
    
    
    138,321Loan collection and repossessions
    
    
    79,437
    
    
    
    73,235Advertising and public relations
    
    
    119,630
    
    
    
    94,653Taxes, other than income
    
    
    150,750
    
    
    
    109,222ATM and debit card processing
    
    
    97,783
    
    
    
    24,177Intangible asset amortization
    
    
    73,287
    
    
    
    Other
    
    
    525,321
    
    
    
    429,899Total noninterest expense
    
    
    4,620,672
    
    
    
    4,002,303Income before income taxes
    
    
    711,592
    
    
    
    799,529Income tax expense
    
    
    134,991
    
    
    
    164,916Net income
    
    $
    576,601
    
    
    $
    634,613Basic and diluted earnings per share
    
    $
    3.03
    
    
    $
    3.34Weighted average shares outstanding
    
    
    190,000
    
    
    
    190,000
  5




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##### 



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, January 1, 2004
    
    $
    1,900,000
    
    
    $
    5,045,227
    
    
    $
    3,702,038
    
    
    $
    212,885
    
    
    $
    10,860,150Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    634,613
    
    
    
    
    
    
    
    634,613Change in net unrealized
gain (loss) on securities
available for sale, net of
reclassification and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (119,827
    )
    
    
    (119,827
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    514,786Cash dividends declared
($0.80 per share)
    
    
    
    
    
    
    
    
    
    
    (152,000
    )
    
    
    
    
    
    
    (152,000
    )Balance, December 31,
2004
    
    
    1,900,000
    
    
    
    5,045,227
    
    
    
    4,184,651
    
    
    
    93,058
    
    
    
    11,222,936Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    576,601
    
    
    
    
    
    
    
    576,601Change in net unrealized
gain (loss) on securities
available for sale, net of
reclassification and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (376,015
    )
    
    
    (376,015
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,586Cash dividends declared
($0.80 per share)
    
    
    
    
    
    
    
    
    
    
    (152,000
    )
    
    
    
    
    
    
    (152,000
    )Balance, December 31,
2005
    
    $
    1,900,000
    
    
    $
    5,045,227
    
    
    $
    4,609,252
    
    
    $
    (282,957
    )
    
    $
    11,271,522
  6




---



##### 



2005
    
    
    2004Cash flows from operating activitiesNet income
    
    $
    576,601
    
    
    $
    634,613Adjustment to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    369,163
    
    
    
    237,781Net amortization of securities
    
    
    64,102
    
    
    
    68,156Provision for loan losses
    
    
    385,500
    
    
    
    403,100Deferred taxes
    
    
    (88,183
    )
    
    
    (226,539
    )Net realized gains on sales of securities
    
    
    (1,169
    )
    
    
    (32,117
    )Federal Home Loan Bank stock dividends
    
    
    (23,400
    )
    
    
    (19,400
    )Increase in cash surrender value of bank owned life insurance
    
    
    (43,092
    )
    
    
    (54,314
    )Gain on sale of credit card portfolio
    
    
    (70,471
    )
    
    
    Net (gain) loss on sales of other real estate owned
    
    
    (3,083
    )
    
    
    11,988Change in deferred loan costs
    
    
    77,077
    
    
    
    131,112Change in accrued interest receivable
    
    
    (108,069
    )
    
    
    (42,184
    )Change in accrued interest payable
    
    
    8,959
    
    
    
    46,512Change in other assets and other liabilities
    
    
    (46,976
    )
    
    
    605,880Net cash from operating activities
    
    
    1,096,959
    
    
    
    1,764,588Cash flows from investing activitiesSecurities available for saleSales
    
    
    298,800
    
    
    
    6,063,134Maturities, prepayments and calls
    
    
    4,018,771
    
    
    
    5,308,770Purchases
    
    
    (13,557,657
    )
    
    
    (10,545,806
    )Purchases of Federal Home Loan Bank stock
    
    
    (15,700
    )
    
    
    Loan originations and payments, net
    
    
    (1,147,909
    )
    
    
    (14,234,701
    )Proceeds from sale of credit card portfolio
    
    
    778,474
    
    
    
    Purchases of premises and equipment
    
    
    (572,384
    )
    
    
    (1,093,816
    )Maturities of certificates of deposit
    
    
    
    
    
    
    500,000Improvements to other real estate owned
    
    
    
    
    
    
    (247,755
    )Proceeds from sale of other real estate owned
    
    
    177,786
    
    
    
    35,826Purchase of bank owned life insurance
    
    
    (30,000
    )
    
    
    (30,000
    )Net cash from investing activities
    
    
    (10,049,819
    )
    
    
    (14,244,348
    )Cash flows from financing activitiesNet changes in deposits
    
    
    (1,370,132
    )
    
    
    9,116,731Net cash received from branch acquisitions
    
    
    11,745,892
    
    
    
    Proceeds from issuance of subordinated debentures
    
    
    
    
    
    
    3,000,000Proceeds from long-term borrowings
    
    
    7,200,000
    
    
    
    5,200,000Principal repayments of long-term borrowings
    
    
    (6,278,943
    )
    
    
    (2,732,277
    )Net change in federal funds purchased
    
    
    
    
    
    
    (1,248,000
    )Cash dividends paid
    
    
    (152,000
    )
    
    
    (152,000
    )Net cash from financing activities
    
    
    11,144,817
    
    
    
    13,184,454Net change in cash and cash equivalents
    
    
    2,191,957
    
    
    
    704,694Beginning cash and cash equivalents
    
    
    4,499,984
    
    
    
    3,795,290Ending cash and cash equivalents
    
    $
    6,691,941
    
    
    $
    4,499,984Supplemental cash flow information:Interest paid
    
    $
    3,153,297
    
    
    $
    2,151,270Income taxes paid
    
    
    300,000
    
    
    
    230,000Supplemental noncash disclosures:Transfers from loans to other real estate owned and repossessions
    
    $
    198,200
    
    
    $
    142,934
  7




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##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
 Nature of Operations
 Use of Estimates
 Cash Flow Reporting
 Securities
   Loans
  8




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Allowance for Loan Losses
   Foreclosed Assets
 Premises and Equipment
 Bank Owned Life Insurance
 Federal Home Loan Bank (FHLB) and other restricted stock:
  9




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Goodwill and Other Intangible Assets
 Long-term Assets
 Income Taxes
 Loan Commitments and Related Financial Instruments
 Earnings Per Common Share
 Dividend Restriction
 Loss Contingencies
 Restrictions on Cash
 Comprehensive Income
 Fair Values of Financial Instruments
  10




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Operating Segments
 Adoption of New Accounting Standards
 Reclassifications
 NOTE 2  SECURITIES AVAILABLE FOR SALE
  2005Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury
    
    $
    100,579
    
    
    $
    2,234
    
    
    $
    
    
    
    $
    102,813U.S. government sponsored entities
    
    
    17,397,029
    
    
    
    2,752
    
    
    
    (293,781
    )
    
    
    17,106,000Mortgage-backed
    
    
    8,631,902
    
    
    
    
    
    
    
    (208,310
    )
    
    
    8,423,592State and municipal
    
    
    7,821,810
    
    
    
    136,188
    
    
    
    (53,396
    )
    
    
    7,904,602Corporate
    
    
    529,162
    
    
    
    
    
    
    
    (14,410
    )
    
    
    514,752Total debt securities
    
    $
    34,480,482
    
    
    $
    141,174
    
    
    $
    (569,897
    )
    
    $
    34,051,759
 2004Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury
    
    $
    100,667
    
    
    $
    6,161
    
    
    $
    
    
    
    $
    106,828U.S. government sponsored entities
    
    
    10,456,402
    
    
    
    35,583
    
    
    
    (72,983
    )
    
    
    10,419,002Mortgage-backed
    
    
    7,052,053
    
    
    
    17,243
    
    
    
    (23,960
    )
    
    
    7,045,336State and municipal
    
    
    7,150,743
    
    
    
    201,886
    
    
    
    (19,610
    )
    
    
    7,333,019Corporate
    
    
    543,464
    
    
    
    
    
    
    
    (3,323
    )
    
    
    540,141Total debt securities
    
    $
    25,303,329
    
    
    $
    260,873
    
    
    $
    (119,876
    )
    
    $
    25,444,326
  11




---



##### 



NOTE 2  SECURITIES
  2005
    
    2004Proceeds
    
    $
    298,800
    
    
    $
    6,063,134Gross gains
    
    
    1,169
    
    
    
    65,516Gross losses
    
    
    
    
    
    
    (33,399
    )
   FairValueDue in one year or less
    
    $
    4,739,748Due from one to five years
    
    
    21,795,238Due from five to ten years
    
    
    6,449,127Due after ten years
    
    
    1,067,646$
    34,051,759
   2005Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossU.S. government
sponsored entities
    
    $
    9,307,211
    
    
    $
    (124,686
    )
    
    $
    6,795,852
    
    
    $
    (169,095
    )
    
    $
    16,103,063
    
    
    $
    (293,781
    )Mortgage-backed
    
    
    5,688,295
    
    
    
    (131,295
    )
    
    
    2,735,297
    
    
    
    (77,015
    )
    
    
    8,423,592
    
    
    
    (208,310
    )State and municipal
    
    
    2,182,460
    
    
    
    (21,514
    )
    
    
    1,418,694
    
    
    
    (31,882
    )
    
    
    3,601,154
    
    
    
    (53,396
    )Corporate
    
    
    
    
    
    
    
    
    
    
    514,752
    
    
    
    (14,410
    )
    
    
    514,752
    
    
    
    (14,410
    )Total temporarily impaired
    
    $
    17,177,966
    
    
    $
    (277,495
    )
    
    $
    11,464,595
    
    
    $
    (292,402
    )
    
    $
    28,642,561
    
    
    $
    (569,897
    )
 2004U.S. government
sponsored entities
    
    $
    7,558,167
    
    
    $
    (56,818
    )
    
    $
    983,835
    
    
    $
    (16,165
    )
    
    $
    8,542,002
    
    
    $
    (72,983
    )Mortgage-backed
    
    
    4,209,571
    
    
    
    (23,960
    )
    
    
    
    
    
    
    
    
    
    
    4,209,571
    
    
    
    (23,960
    )State and municipal
    
    
    1,458,806
    
    
    
    (9,697
    )
    
    
    372,166
    
    
    
    (9,913
    )
    
    
    1,830,972
    
    
    
    (19,610
    )Corporate
    
    
    540,141
    
    
    
    (3,323
    )
    
    
    
    
    
    
    
    
    
    
    540,141
    
    
    
    (3,323
    )Total temporarily impaired
    
    $
    13,766,685
    
    
    $
    (93,798
    )
    
    $
    1,356,001
    
    
    $
    (26,078
    )
    
    $
    15,122,686
    
    
    $
    (119,876
    )
  12




---



##### 



NOTE 2  SECURITIES
  NOTE 3  LOANS
  2005
    
    
    2004Commercial
    
    $
    9,614,236
    
    
    $
    10,888,028Installment
    
    
    18,529,276
    
    
    
    20,844,232Residential and non-commercial real estate
    
    
    41,745,373
    
    
    
    38,797,724Commercial real estate
    
    
    25,556,701
    
    
    
    18,227,011Credit card
    
    
    
    
    
    
    738,878Other
    
    
    52,638
    
    
    
    23,39295,498,224
    
    
    
    89,519,265Net deferred loan costs
    
    
    280,380
    
    
    
    357,457Allowance for loan losses
    
    
    (986,385
    )
    
    
    (961,404
    )$
    94,792,219
    
    
    $
    88,915,318
   2005
    
    
    2004Beginning balance
    
    $
    961,404
    
    
    $
    844,174Loans charged-off
    
    
    (450,700
    )
    
    
    (366,270
    )Recoveries of previous charge-offs
    
    
    90,181
    
    
    
    80,400Provision for loan losses
    
    
    385,500
    
    
    
    403,100Ending balance
    
    $
    986,385
    
    
    $
    961,404
  2005
    
    2004Year-end balance of impaired loans with allocated allowance
    
    $
    550,492
    
    
    
    Amount of allowance allocated at year-end
    
    
    159,991
    
    
    
    Average balance of impaired loans
    
    
    306,249
    
    
    
    Interest income recognized during impairment
    
    
    
    
    
    
    Cash-basis interest income recognized
    
    
    
    
    
    
    
  13




---



##### 



NOTE 3  LOANS
  2005
    
    2004Loans past due over 90 days still on accrual
    
    $
    7,772
    
    
    $
    344,874Loans on nonaccrual
    
    
    1,151,297
    
    
    
    340,045
  NOTE 4  PREMISES AND EQUIPMENT
  2005
    
    
    2004Land
    
    $
    153,875
    
    
    $
    115,875Building and improvements
    
    
    2,337,380
    
    
    
    1,950,328Furniture, fixtures and equipment
    
    
    2,062,456
    
    
    
    1,646,624Leasehold improvements
    
    
    59,295
    
    
    
    59,295Total cost
    
    
    4,613,006
    
    
    
    3,772,122Less accumulated depreciation
    
    
    (1,491,401
    )
    
    
    (1,195,525
    )$
    3,121,605
    
    
    $
    2,576,597
     14




---



##### 



NOTE 5  GOODWILL AND INTANGIBLE ASSETS
  As of December 31, 2005Acquired non-amortizable goodwill
    
    $
    270,500Acquired core deposit intangible
    
    $
    533,000Accumulated core deposit amortization
    
    
    (73,287
    )Total intangible assets
    
    $
    459,713
  2006
    
    $
    68,9572007
    
    
    58,6132008
    
    
    49,8212009
    
    
    46,5992010
    
    
    46,372
  NOTE 6  DEPOSITS
  2005
    
    
    2004Demand and money market
    
    $
    21,742,739
    
    
    $
    24,956,871Savings
    
    
    18,301,064
    
    
    
    15,101,460Time:In denominations under $100,000
    
    
    32,359,147
    
    
    
    27,004,224In denominations of $100,000 or more
    
    
    27,200,254
    
    
    
    19,800,653Total interest-bearing deposits
    
    $
    99,603,204
    
    
    $
    86,863,208Scheduled maturities of time deposits were as follows.1 year or less
    
    $
    35,897,596
    
    
    $
    26,264,1281 through 2 years
    
    
    15,042,702
    
    
    
    6,864,7052 through 3 years
    
    
    6,975,633
    
    
    
    7,074,4173 through 4 years
    
    
    1,035,317
    
    
    
    5,559,9864 through 5 years
    
    
    579,756
    
    
    
    959,579Greater than 5 years
    
    
    28,397
    
    
    
    82,062$
    59,559,401
    
    
    $
    46,804,877
   15




---



##### 



NOTE 7  BORROWINGS
  2005
    
    
    2004Maximum month-end balance during the year
    
    $
    16,578,000
    
    
    $
    13,487,000Average balance during the year
    
    
    15,037,000
    
    
    
    11,654,000Average interest rate during the year
    
    
    3.67
    %
    
    
    3.31
    %Average interest rate at year-end
    
    
    3.99
    %
    
    
    3.31
    %
  2005
    
    
    2004Convertible advance, 4.60%, due January 24, 2011
    
    $
    1,000,000
    
    
    $
    1,000,000Mortgage-matched advance, 5.91% fixed rate, maturity July 1, 2011
    
    
    29,716
    
    
    
    46,300Constant monthly payment advances with fixed rates
between 3.78% and 4.43%, final maturities ranging from
May, 2007 through January, 2009
    
    
    1,578,661
    
    
    
    2,241,020Regular fixed rate advances with rates between 2.72% and 4.90%
and maturities through August, 2008 for 2005 and rates between
1.85% and 4.90% and maturities through September, 2006 for 2004
    
    
    11,800,000
    
    
    
    10,200,000$
    14,408,377
    
    
    $
    13,487,320
   Year ended December 31,2006
    
    $
    5,294,5192007
    
    
    5,697,3632008
    
    
    2,401,7902009
    
    
    5,6232010
    
    
    5,965Thereafter
    
    
    1,003,117$
    14,408,377
   16




---



##### 



NOTE 8  SUBORDINATED DEBENTURES
   Maturity:
    
    April 23, 2034Coupon Payment:
    
    Quarterly at 285 basis points over the 3-month LIBOR rateCall Options:
    
    Callable quarterly by the Corporation starting April 2009
at par. May be called prior to 2009, at par, if a
material change in tax treatment or the Federal Reserve
capital requirements occurs.Put Options:
    
    None
  NOTE 9  EMPLOYEE BENEFITS
     17




---



##### 



NOTE 10  INCOME TAXES
  2005
    
    
    2004Current
    
    $
    223,174
    
    
    $
    391,455Deferred
    
    
    (88,183
    )
    
    
    (226,539
    )$
    134,991
    
    
    $
    164,916
  2005
    
    
    2004Federal statutory rate times pretax income at 34%
    
    $
    241,941
    
    
    $
    271,840Effect of:Tax exempt interest
    
    
    (87,008
    )
    
    
    (90,332
    )Cash surrender value increase of bank owned life insurance
    
    
    (14,651
    )
    
    
    (18,474
    )Other, net
    
    
    (5,291
    )
    
    
    1,882Total
    
    $
    134,991
    
    
    $
    164,916Effective tax rate %
    
    
    19.0
    %
    
    
    20.6
    %
  2005
    
    
    2004Deferred tax assetsAllowance for loan losses
    
    $
    193,608
    
    
    $
    186,913Deferred compensation
    
    
    290,594
    
    
    
    281,434Unrealized loss on securities available for sale
    
    
    145,766
    
    
    
    Deferred loan fees
    
    
    29,702
    
    
    
    30,304Other
    
    
    6,705
    
    
    
    Total deferred tax assets
    
    
    666,375
    
    
    
    498,651Deferred tax liabilitiesDepreciation
    
    
    (133,214
    )
    
    
    (142,152
    )Accrual to cash conversion
    
    
    
    
    
    
    (76,986
    )FHLB stock dividend
    
    
    (58,990
    )
    
    
    (50,184
    )Unrealized gain on securities available for sale
    
    
    
    
    
    
    (47,939
    )Prepaid expenses
    
    
    (42,488
    )
    
    
    (37,328
    )Security accretion
    
    
    (8,225
    )
    
    
    (2,492
    )Total deferred tax liabilities
    
    
    (242,917
    )
    
    
    (357,081
    )Net deferred tax asset (liability)
    
    $
    423,458
    
    
    $
    141,570
  18




---



##### 



NOTE 11  RELATED PARTIES
  Beginning balance
    
    $
    170,131New loans
    
    
    188,175Effect of changes in composition of related parties
    
    
    359,586Repayments
    
    
    (77,666
    )Ending balance
    
    $
    640,226
  NOTE 12  LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
    2005
    
    
    2004Commitments to extend credit
    
    $
    8,153,000
    
    
    $
    5,878,000Credit card arrangements
    
    
    
    
    
    
    1,748,000Overdraft protection
    
    
    1,100,000
    
    
    
    846,000Letters of credit
    
    
    152,000
    
    
    
    122,000
  19




---



##### 



NOTE 13  FAIR VALUES OF FINANCIAL INSTRUMENTS
  2005
    
    2004Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    6,691,941
    
    
    $
    6,691,941
    
    
    $
    4,499,984
    
    
    $
    4,499,984Securities available for sale
    
    
    34,051,759
    
    
    
    34,051,759
    
    
    
    25,444,326
    
    
    
    25,444,326Loans, net
    
    
    94,792,219
    
    
    
    94,164,512
    
    
    
    88,915,318
    
    
    
    89,802,033Restricted stock
    
    
    576,840
    
    
    
    576,840
    
    
    
    537,740
    
    
    
    537,740Accrued interest receivable
    
    
    700,199
    
    
    
    700,199
    
    
    
    565,921
    
    
    
    565,921Financial liabilitiesDemand and savings
deposits
    
    
    (54,113,908
    )
    
    
    (54,113,908
    )
    
    
    (49,318,906
    )
    
    
    (49,318,906
    )Time deposits
    
    
    (59,559,401
    )
    
    
    (59,577,269
    )
    
    
    (46,804,877
    )
    
    
    (47,400,544
    )Borrowings
    
    
    (14,408,377
    )
    
    
    (14,249,885
    )
    
    
    (13,487,320
    )
    
    
    (13,452,257
    )Subordinated debentures
    
    
    (3,000,000
    )
    
    
    (3,686,764
    )
    
    
    (3,000,000
    )
    
    
    (3,019,300
    )Accrued interest payable
    
    
    (201,210
    )
    
    
    (201,210
    )
    
    
    (168,029
    )
    
    
    (168,029
    )
   20




---



##### 



NOTE 14  CAPITAL REQUIREMENTS, RESTRICTIONS ON RETAINED EARNINGS AND REGULATORY MATTERS
    To Be WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action RegulationsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)2005Total capital (to risk weighted
assets)
    
    $
    12,874
    
    
    
    13.1
    %
    
    $
    7,869
    
    
    
    8.0
    %
    
    $
    9,836
    
    
    
    10.0
    %Tier 1 capital (to risk weighted
assets)
    
    
    11,887
    
    
    
    12.1
    
    
    
    3,934
    
    
    
    4.0
    
    
    
    5,901
    
    
    
    6.0Tier 1 capital (to average assets)
    
    
    11,887
    
    
    
    8.3
    
    
    
    5,721
    
    
    
    4.0
    
    
    
    7,151
    
    
    
    5.02004Total capital (to risk weighted
assets)
    
    $
    11,814
    
    
    
    13.1
    %
    
    $
    7,219
    
    
    
    8.0
    %
    
    $
    9,024
    
    
    
    10.0
    %Tier 1 capital (to risk weighted
assets)
    
    
    10,853
    
    
    
    12.0
    
    
    
    3,610
    
    
    
    4.0
    
    
    
    5,414
    
    
    
    6.0Tier 1 capital (to average assets)
    
    
    10,853
    
    
    
    8.8
    
    
    
    4,910
    
    
    
    4.0
    
    
    
    6,137
    
    
    
    5.0
   21




---



##### 



NOTE 15  OTHER COMPREHENSIVE INCOME (LOSS)
  2005
    
    
    2004Unrealized holding gains (losses) on available-for-sale
securities
    
    $
    (568,551
    )
    
    $
    (149,439
    )Reclassification adjustments for gains later
recognized in income
    
    
    (1,169
    )
    
    
    (32,117
    )Net unrealized gains (losses)
    
    
    (569,720
    )
    
    
    (181,556
    )Tax effect
    
    
    193,705
    
    
    
    61,729Other comprehensive income (loss)
    
    $
    (376,015
    )
    
    $
    (119,827
    )
 NOTE 16  BUSINESS COMBINATIONS
  ASSETS ACQUIREDCash
    
    $
    11,745,000Loans
    
    
    6,098,000Land and branch facilities
    
    
    253,000Accrued interest receivable
    
    
    26,000Personal property and other assets
    
    
    21,000Intangible assets
    
    
    804,000Total assets acquired
    
    $
    18,947,000LIABILITIES ASSUMEDDemand and savings deposits
    
    $
    7,458,000Time deposits
    
    
    11,462,000Accrued interest payable
    
    
    24,000Other liabilities
    
    
    3,000Total liabilities assumed
    
    $
    18,947,000
  22




---



##### 



NOTE 17  PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
  
 2005
    
    
    2004AssetsCash and cash equivalents
    
    $
    1,695,093
    
    
    $
    3,098,476Investment in bank subsidiary
    
    
    12,334,565
    
    
    
    10,946,275Investment in Ohio State Bancshares Capital Trust I
    
    
    55,500
    
    
    
    73,500Other assets
    
    
    226,311
    
    
    
    132,810Total assets
    
    $
    14,311,469
    
    
    $
    14,251,061Liabilities and shareholders equitySubordinated debentures
    
    $
    3,000,000
    
    
    $
    3,000,000Accrued interest payable
    
    
    39,947
    
    
    
    28,125Shareholders equity
    
    
    11,271,522
    
    
    
    11,222,936Total liabilities and shareholders equity
    
    $
    14,311,469
    
    
    $
    14,251,061
 
 2005
    
    
    2004Interest expense
    
    $
    186,262
    
    
    $
    117,340Professional fees
    
    
    14,126
    
    
    
    26,904Fees paid to The Ohio State Bank
    
    
    58,700
    
    
    
    44,400Loss on investment in Ohio State Bancshares Capital Trust I
    
    
    18,000
    
    
    
    16,500Other expenses
    
    
    4,117
    
    
    
    5,543Total expenses
    
    
    281,205
    
    
    
    210,687Income (loss) before income tax and undistributed
subsidiary income
    
    
    (281,205
    )
    
    
    (210,687
    )Income tax benefit
    
    
    93,501
    
    
    
    56,634Equity in undistributed subsidiary income
    
    
    764,305
    
    
    
    788,666Net income
    
    
    576,601
    
    
    
    634,613Other comprehensive income
    
    
    (376,015
    )
    
    
    (119,827
    )Total comprehensive income
    
    $
    200,586
    
    
    $
    514,786
  23




---



##### 



NOTE 17  PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
 
 2005
    
    
    2004Cash flows from operating activitiesNet income
    
    $
    576,601
    
    
    $
    634,613Adjustments:Equity in undistributed subsidiary income
    
    
    (764,305
    )
    
    
    (788,666
    )Loss on investment in Ohio State Bancshares Capital Trust I
    
    
    18,000
    
    
    
    16,500Change in other assets
    
    
    (93,501
    )
    
    
    (56,634
    )Change in accrued interest payable
    
    
    11,822
    
    
    
    28,125Net cash from operating activities
    
    
    (251,383
    )
    
    
    (166,062
    )Cash flows from investing activitiesInvestment in Ohio State Bancshares Capital Trust I
    
    
    
    
    
    
    (90,000
    )Capital contributions to subsidiary
    
    
    (1,000,000
    )
    
    
    (1,600,000
    )Net cash from investing activities
    
    
    (1,000,000
    )
    
    
    (1,690,000
    )Cash flows from financing activitiesProceeds from issuance of subordinated debentures
    
    
    
    
    
    
    3,000,000Dividends paid
    
    
    (152,000
    )
    
    
    (152,000
    )Net cash from financing activities
    
    
    (152,000
    )
    
    
    2,848,000Net change in cash and cash equivalents
    
    
    (1,403,383
    )
    
    
    991,938Beginning cash and cash equivalents
    
    
    3,098,476
    
    
    
    2,106,538Ending cash and cash equivalents
    
    $
    1,695,093
    
    
    $
    3,098,476
 24




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    CRITICAL ACCOUNTING ESTIMATES
 Allowance for loan losses Allowance and Provision for Loan Losses.
 Supplemental Defined Benefit Plan Noninterest Expense
  25




---



##### 



RESULTS OF OPERATIONS
  NET INTEREST INCOME
       26




---



##### 



Average Balance Sheets and Analysis of Net Interest Income for the Years Ended December 31,
 2005
    
    
    2004Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestAverage
    
    
    Yield or
    
    
    Earned
    
    
    Average
    
    
    Yield or
    
    
    EarnedBalance
    
    
    Rate Paid
    
    
    or Paid
    
    
    Balance
    
    
    Rate Paid
    
    
    or PaidASSETS:Interest-Earning Assets:Federal funds sold
    
    $
    3,030
    
    
    
    3.04
    %
    
    $
    92
    
    
    $
    2,583
    
    
    
    1.11
    %
    
    $
    29Interest-earning deposits
    
    
    1,203
    
    
    
    2.83
    
    
    
    34
    
    
    
    1,300
    
    
    
    1.85
    
    
    
    24Taxable securities
    
    
    25,473
    
    
    
    3.82
    
    
    
    973
    
    
    
    18,049
    
    
    
    3.69
    
    
    
    665Nontaxable securities
    
    
    7,436
    
    
    
    5.04
    
    
    
    374
    
    
    
    7,297
    
    
    
    5.23
    
    
    
    382FHLB and other bank stock
    
    
    562
    
    
    
    4.38
    
    
    
    25
    
    
    
    528
    
    
    
    4.09
    
    
    
    22Loans
    
    
    96,724
    
    
    
    6.82
    
    
    
    6,600
    
    
    
    81,591
    
    
    
    6.90
    
    
    
    5,629Total Interest-Earning Assets
    
    
    134,428
    
    
    
    6.02
    
    
    
    8,098
    
    
    
    111,348
    
    
    
    6.06
    
    
    
    6,751Noninterest-Earning Assets:Cash and due from
financial institutions
    
    
    3,128
    
    
    
    
    
    
    
    
    
    
    
    3,062Premises and equipment, net
    
    
    3,042
    
    
    
    
    
    
    
    
    
    
    
    2,243Accrued interest and other assets
    
    
    4,119
    
    
    
    
    
    
    
    
    
    
    
    2,858Unrealized gains (losses) on securities
    
    
    (108
    )
    
    
    
    
    
    
    
    
    
    
    163Less: Allowance for loan losses
    
    
    (962
    )
    
    
    
    
    
    
    
    
    
    
    (891
    )Total Noninterest-Earning Assets
    
    
    9,219
    
    
    
    
    
    
    
    
    
    
    
    7,435TOTAL ASSETS
    
    $
    143,647
    
    
    
    
    
    
    
    
    
    
    $
    118,783LIABILITIES AND SHAREHOLDERS EQUITY:Interest-Bearing Liabilities:Demand deposits
    
    $
    24,216
    
    
    
    0.97
    
    
    
    234
    
    
    $
    24,864
    
    
    
    0.78
    
    
    
    194Savings deposits
    
    
    18,650
    
    
    
    1.49
    
    
    
    278
    
    
    
    15,403
    
    
    
    0.96
    
    
    
    148Time deposits
    
    
    59,039
    
    
    
    3.28
    
    
    
    1,936
    
    
    
    43,095
    
    
    
    3.14
    
    
    
    1,353Other borrowings
    
    
    15,037
    
    
    
    3.67
    
    
    
    552
    
    
    
    11,654
    
    
    
    3.31
    
    
    
    386Subordinated debentures
    
    
    3,000
    
    
    
    6.21
    
    
    
    186
    
    
    
    2,538
    
    
    
    4.62
    
    
    
    117Total Interest-Bearing Liabilities
    
    
    119,942
    
    
    
    2.66
    
    
    
    3,186
    
    
    
    97,554
    
    
    
    2.25
    
    
    
    2,198Noninterest-Bearing Liabilities:Demand deposits
    
    
    11,159
    
    
    
    
    
    
    
    
    
    
    
    9,133Accrued interest payable
and other liabilities
    
    
    1,258
    
    
    
    
    
    
    
    
    
    
    
    1,094Total Noninterest-Bearing Liabilities
    
    
    12,417
    
    
    
    
    
    
    
    
    
    
    
    10,227TOTAL LIABILITIES
    
    
    132,359
    
    
    
    
    
    
    
    
    
    
    
    107,781TOTAL SHAREHOLDERS EQUITY
    
    
    11,288
    
    
    
    
    
    
    
    
    
    
    
    11,002TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    $
    143,647
    
    
    
    
    
    
    
    
    
    
    $
    118,783NET INTEREST INCOME
    
    
    
    
    
    
    
    
    
    $
    4,912
    
    
    
    
    
    
    
    
    
    
    $
    4,553NET INTEREST SPREAD
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.81
    %NET YIELD ON INTEREST
EARNING ASSETS
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    
    
    
    
    4.09
    %
  27




---



##### 



INTEREST RATES AND INTEREST DIFFERENTIAL
 2005 Compared to 2004
    
    
    2004 Compared to 2003Increase/(Decrease)
    
    
    Increase/(Decrease)(In thousands)Change
    
    
    Change
    
    
    
    
    
    
    Change
    
    
    ChangeTotal
    
    
    due to
    
    
    due to
    
    
    Total
    
    
    due to
    
    
    due toChange
    
    
    Volume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    RateFederal funds sold
    
    $
    63
    
    
    $
    6
    
    
    $
    57
    
    
    $
    4
    
    
    $
    3
    
    
    $
    1Interest-earning deposits
    
    
    10
    
    
    
    (2
    )
    
    
    12
    
    
    
    (21
    )
    
    
    (27
    )
    
    
    6Taxable securities
    
    
    308
    
    
    
    283
    
    
    
    25
    
    
    
    (129
    )
    
    
    (149
    )
    
    
    20Nontaxable securities (1)
    
    
    (8
    )
    
    
    7
    
    
    
    (15
    )
    
    
    (41
    )
    
    
    12
    
    
    
    (53
    )FHLB and other bank stock
    
    
    3
    
    
    
    1
    
    
    
    2
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Loans (2)
    
    
    971
    
    
    
    1,033
    
    
    
    (62
    )
    
    
    637
    
    
    
    1,015
    
    
    
    (378
    )Total interest income
    
    
    1,347
    
    
    
    1,328
    
    
    
    19
    
    
    
    449
    
    
    
    854
    
    
    
    (405
    )Demand deposits
    
    
    40
    
    
    
    (5
    )
    
    
    45
    
    
    
    (49
    )
    
    
    
    
    
    
    (49
    )Savings deposits
    
    
    130
    
    
    
    36
    
    
    
    94
    
    
    
    4
    
    
    
    7
    
    
    
    (3
    )Time deposits
    
    
    583
    
    
    
    520
    
    
    
    63
    
    
    
    (40
    )
    
    
    108
    
    
    
    (148
    )Other borrowings
    
    
    166
    
    
    
    121
    
    
    
    45
    
    
    
    33
    
    
    
    84
    
    
    
    (51
    )Subordinated debentures
    
    
    69
    
    
    
    24
    
    
    
    45
    
    
    
    117
    
    
    
    117
    
    
    
    Total interest expense
    
    
    988
    
    
    
    696
    
    
    
    292
    
    
    
    65
    
    
    
    316
    
    
    
    (251
    )Net interest income
    
    $
    359
    
    
    $
    632
    
    
    $
    (273
    )
    
    $
    384
    
    
    $
    538
    
    
    $
    (154
    )
 
 (1)
    
    Nontaxable income is adjusted to a fully tax equivalent basis using a 34% tax rate.(2)
    
    Nonaccrual loan balances are included for purposes of computing the rate and volume
effects although interest on these balances has been excluded.  28




---



##### 



ALLOWANCE AND PROVISION FOR LOAN LOSSES
   Nonaccrual, Past Due and Impaired Loans at December 31,2005
    
    
    2004(In thousands)Nonaccrual loans not included in impaired loans
    
    $
    616
    
    
    $
    340Loans past due 90 days or more,
excluding nonaccrual and impaired loans
    
    
    8
    
    
    
    345Impaired loans
    
    
    535
    
    
    
    Total
    
    $
    1,159
    
    
    $
    685
    29




---



##### 



2005
    
    
    2004(in thousands)Allowance for loan losses:Balance at beginning of period
    
    $
    961
    
    
    $
    844Loans charged-off:Commercial
    
    
    (16
    )
    
    
    (32
    )Real estate
    
    
    (56
    )
    
    
    (21
    )Credit card
    
    
    (43
    )
    
    
    (31
    )Installment
    
    
    (336
    )
    
    
    (282
    )Total loans charged-off:
    
    
    (451
    )
    
    
    (366
    )Recoveries of loans previously charged-off:Commercial
    
    
    26
    
    
    
    2Real estate
    
    
    6
    
    
    
    5Credit card
    
    
    1
    
    
    
    Installment
    
    
    57
    
    
    
    73Total loan recoveries
    
    
    90
    
    
    
    80Net loans charged-off
    
    
    (361
    )
    
    
    (286
    )Provision for loan losses
    
    
    386
    
    
    
    403Balance at end of period
    
    $
    986
    
    
    $
    961
 2005
    
    
    2004Ratios:Net loans charged-off to average loans
    
    
    0.37
    %
    
    
    0.35
    %Net loans charged-off to total loans at end of period
    
    
    0.38
    
    
    
    0.32Allowance for loan losses to average loans
    
    
    1.02
    
    
    
    1.18Allowance for loan losses to total loans at end of period
    
    
    1.03
    
    
    
    1.07Net loans charged-off to allowance for loan losses at end of period
    
    
    36.55
    
    
    
    29.73Net loans charged-off to provision for loan losses
    
    
    93.52
    
    
    
    70.92Allowance for loan losses to nonperforming loans (1)
    
    
    85.10
    
    
    
    140.37
 
 (1)
    
    Nonperforming loans consist of nonaccrual loans, loans past due 90 days or more and still
accruing interest, and impaired loans.  Percentage of
    
    
    
    
    
    
    Percentage ofLoans in Each
    
    
    
    
    
    
    Loans in EachAllowance
    
    
    Category to
    
    
    Allowance
    
    
    Category toAmount
    
    
    Total Loans
    
    
    Amount
    
    
    Total LoansDecember 31, 2005
    
    
    December 31, 2004Commercial
    
    $
    148,790
    
    
    
    10.07
    %
    
    $
    51,382
    
    
    
    12.16
    %Real Estate
    
    
    248,369
    
    
    
    70.47
    
    
    
    222,857
    
    
    
    63.70Installment
    
    
    463,846
    
    
    
    19.40
    
    
    
    497,144
    
    
    
    23.28Credit Cards
    
    
    
    
    
    
    0.00
    
    
    
    42,689
    
    
    
    0.83Other
    
    
    
    
    
    
    0.06
    
    
    
    
    
    
    
    0.03Unallocated
    
    
    125,380
    
    
    
    N/A
    
    
    
    147,332
    
    
    
    N/ATotal
    
    $
    986,385
    
    
    
    100.00
    %
    
    $
    961,404
    
    
    
    100.00
    %




---



##### 



NONINTEREST INCOME
  NONINTEREST EXPENSE
  Executive officer matter
    
    $
    99,459Customer and check cashing losses
    
    
    32,073State of Ohio sales/use tax audit
    
    
    13,595Data conversion expenses
    
    
    19,537Additional office supplies due to name change
    
    
    16,546Branch purchase consulting fees
    
    
    7,828Before tax impact of non-recurring expenses
    
    $
    189,038




---



##### 



FINANCIAL CONDITION
 TOTAL ASSETS
  LOANS
  2005
    
    
    2004
    
    
    2005
    
    
    2005Balance
    
    
    Balance
    
    

$ Growth
    
    
    % GrowthCommercial
    
    $
    9,614,000
    
    
    $
    10,888,000
    
    
    $
    (1,274,000
    )
    
    
    (11.70
    )%Installment
    
    
    18,529,000
    
    
    
    20,844,000
    
    
    
    (2,315,000
    )
    
    
    (11.11
    )Residential and non-
commercial real estate
    
    
    41,745,000
    
    
    
    38,798,000
    
    
    
    2,947,000
    
    
    
    7.60Commercial real estate
    
    
    25,557,000
    
    
    
    18,227,000
    
    
    
    7,330,000
    
    
    
    40.22Credit card and other
    
    
    53,000
    
    
    
    762,000
    
    
    
    (709,000
    )
    
    
    (93.04
    )




---



##### 



One
    
    
    OneYear
    
    
    Through
    
    
    After Five(In thousands)
    
    or Less
    
    
    Five Years
    
    
    Years
    
    
    TotalResidential Real EstateFixed Rate
    
    $
    379
    
    
    $
    1,264
    
    
    $
    1,770
    
    
    $
    3,413Variable Rate
    
    
    7,107
    
    
    
    2,995
    
    
    
    28,230
    
    
    
    38,332Total Real Estate
    
    
    7,486
    
    
    
    4,259
    
    
    
    30,000
    
    
    
    41,745Commercial Real EstateFixed Rate
    
    
    5
    
    
    
    569
    
    
    
    610
    
    
    
    1,184Variable Rate
    
    
    3,867
    
    
    
    2,356
    
    
    
    18,150
    
    
    
    24,373Total Real Estate
    
    
    3,872
    
    
    
    2,925
    
    
    
    18,760
    
    
    
    25,557CommercialFixed Rate
    
    
    223
    
    
    
    2,671
    
    
    
    68
    
    
    
    2,962Variable Rate
    
    
    3,572
    
    
    
    729
    
    
    
    2,351
    
    
    
    6,652Total Commercial
    
    
    3,795
    
    
    
    3,400
    
    
    
    2,419
    
    
    
    9,614InstallmentFixed Rate
    
    
    484
    
    
    
    17,184
    
    
    
    719
    
    
    
    18,387Variable Rate
    
    
    52
    
    
    
    75
    
    
    
    15
    
    
    
    142Total Installment
    
    
    536
    
    
    
    17,259
    
    
    
    734
    
    
    
    18,529OtherFixed Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable Rate
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53Total Other
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    53Total All Loans
    
    $
    15,742
    
    
    $
    27,843
    
    
    $
    51,913
    
    
    $
    95,498Fixed Rate
    
    $
    1,091
    
    
    $
    21,688
    
    
    $
    3,167
    
    
    $
    25,946Variable
    
    
    14,651
    
    
    
    6,155
    
    
    
    48,746
    
    
    
    69,552




---



##### 



SECURITIES
    2005
    
    
    2004Amortized
    
    
    Fair
    
    
    Average
    
    
    Amortized
    
    
    Fair
    
    
    AverageCost
    
    
    Value
    
    
    Yield
    
    
    Cost
    
    
    Value
    
    
    Yield(Dollars in thousands)U.S. Treasury:Over 5 years through 10 years
    
    $
    101
    
    
    $
    103
    
    
    
    4.88
    %
    
    $
    101
    
    
    $
    107
    
    
    
    4.88
    %Total U.S. Treasury
    
    
    101
    
    
    
    103
    
    
    
    4.88
    
    
    
    101
    
    
    
    107
    
    
    
    4.88U.S. Government Sponsored Entities:Less than one year
    
    
    2,070
    
    
    
    2,055
    
    
    
    3.05
    
    
    
    399
    
    
    
    397
    
    
    
    2.35Over 1 year through 5 years
    
    
    13,605
    
    
    
    13,364
    
    
    
    4.01
    
    
    
    7,456
    
    
    
    7,444
    
    
    
    3.67Over 5 years through 10 years
    
    
    1,722
    
    
    
    1,687
    
    
    
    5.24
    
    
    
    2,601
    
    
    
    2,578
    
    
    
    4.45Total U.S. Government
Sponsored Entities
    
    
    17,397
    
    
    
    17,106
    
    
    
    4.02
    
    
    
    10,456
    
    
    
    10,419
    
    
    
    3.81Corporate Debt Securities:Over 1 year through 5 years
    
    
    529
    
    
    
    515
    
    
    
    3.37
    
    
    
    543
    
    
    
    540
    
    
    
    3.37Total Corporate Securities
    
    
    529
    
    
    
    515
    
    
    
    3.37
    
    
    
    543
    
    
    
    540
    
    
    
    3.37State and MunicipalLess than one year
    
    
    634
    
    
    
    632
    
    
    
    2.76
    
    
    
    403
    
    
    
    402
    
    
    
    1.84Over 1 year through 5 years
    
    
    2,249
    
    
    
    2,220
    
    
    
    3.20
    
    
    
    1,091
    
    
    
    1,097
    
    
    
    2.64Over 5 years through 10 years
    
    
    2,455
    
    
    
    2,483
    
    
    
    3.97
    
    
    
    3,069
    
    
    
    3,140
    
    
    
    3.75Over 10 years
    
    
    2,484
    
    
    
    2,570
    
    
    
    4.78
    
    
    
    2,588
    
    
    
    2,694
    
    
    
    4.80Total State and Municipal
    
    
    7,822
    
    
    
    7,905
    
    
    
    3.91
    
    
    
    7,151
    
    
    
    7,333
    
    
    
    3.87Mortgage-Backed Securities
    
    
    8,631
    
    
    
    8,423
    
    
    
    4.28
    
    
    
    7,052
    
    
    
    7,045
    
    
    
    4.13Total Securities
    
    $
    34,480
    
    
    $
    34,052
    
    
    
    4.05
    %
    
    $
    25,303
    
    
    $
    25,444
    
    
    
    3.91
    %




---



##### 



FUNDING
    ASSET/LIABILITY MANAGEMENT




---



##### 



One
    
    
    Three
    
    
    Over0-3
    
    
    3-12
    
    
    Through
    
    
    Through
    
    
    FiveMonths
    
    
    Months
    
    
    Three Years
    
    
    Five Years
    
    
    Years
    
    
    TotalAssetsLoans (1)
    
    $
    24,366
    
    
    $
    10,064
    
    
    $
    31,532
    
    
    $
    17,718
    
    
    $
    10,667
    
    
    $
    94,347Securities (2)
    
    
    2,201
    
    
    
    3,019
    
    
    
    13,790
    
    
    
    7,839
    
    
    
    7,203
    
    
    
    34,052Interest-earning deposits
    
    
    201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201Federal funds sold
    
    
    2,471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,471Rate sensitive assets (RSA)
    
    
    29,239
    
    
    
    13,083
    
    
    
    45,322
    
    
    
    25,557
    
    
    
    17,870
    
    
    
    131,071LiabilitiesInterest-bearing demand
    
    
    21,743
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,743Savings
    
    
    18,301
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,301Time deposits
    
    
    11,109
    
    
    
    24,809
    
    
    
    22,018
    
    
    
    1,615
    
    
    
    8
    
    
    
    59,559Other borrowings
    
    
    2,274
    
    
    
    3,021
    
    
    
    8,099
    
    
    
    11
    
    
    
    1,003
    
    
    
    14,408Subordinated debentures
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Rate sensitive liabilities (RSL)
    
    
    56,427
    
    
    
    27,830
    
    
    
    30,117
    
    
    
    1,626
    
    
    
    1,011
    
    
    
    117,011Period gap (3)
    
    $
    (27,188
    )
    
    $
    (14,747
    )
    
    $
    15,205
    
    
    $
    23,931
    
    
    $
    16,859
    
    
    $
    14,060Cumulative gap
    
    $
    (27,188
    )
    
    $
    (41,935
    )
    
    $
    (26,730
    )
    
    $
    (2,799
    )
    
    $
    14,060Percentage of RSA
    
    
    (20.74
    )%
    
    
    (31.99
    )%
    
    
    (20.39
    )%
    
    
    (2.14
    )%
    
    
    10.73
    %
 
 (1)
    
    Loans are assumed to adjust based on their contractual terms, with no assumptions as to
prepayments. Loans are presented gross less loans on nonaccrual and do not include net
deferred loan costs and the allowance for loan losses.(2)
    
    Securities are assumed to adjust based on their expected life. Maturities may be shortened
due to early calls or faster prepayment speeds based on interest rates that existed at
year-end.(3)
    
    Gap is defined as rate sensitive assets less rate sensitive liabilities and may be expressed
in dollars or as a percentage.




---



##### 



Year-end
    
    
    
    
    
    Year-end
    
    
    
    
    
    Year-end2005
    
    
    
    
    
    2004
    
    
    
    
    
    2003Projections
    
    % Change
    
    Projections
    
    % Change
    
    Projections
    
    % Change1-year Net Interest Income+200 Basis points
    
    $
    4,454,000
    
    
    
    (6.6
    )%
    
    $
    4,559,000
    
    
    
    (5.7
    )%
    
    $
    4,231,000
    
    
    
    (6.0
    )%+100 Basis points
    
    
    4,612,000
    
    
    
    (3.3
    )
    
    
    4,701,000
    
    
    
    (2.8
    )
    
    
    4,366,000
    
    
    
    (3.0
    )Base case
    
    
    4,769,000
    
    
    
    0.0
    
    
    
    4,836,000
    
    
    
    0.0
    
    
    
    4,501,000
    
    
    
    0.0-100 Basis points
    
    
    4,862,000
    
    
    
    2.0
    
    
    
    4,917,000
    
    
    
    1.7
    
    
    
    4,604,000
    
    
    
    2.3-200 Basis points
    
    
    4,910,000
    
    
    
    2.9
    
    
    
    4,922,000
    
    
    
    1.8
    
    
    
    4,603,000
    
    
    
    2.3
 CAPITAL RESOURCES
   LIQUIDITY




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##### 



IMPACT OF INFLATION




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##### 



MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
   Low Bid
    
    
    High Bid
    
    
    Low Ask
    
    
    High Ask20051st Qtr.
    
    $
    84.00
    
    
    $
    84.00
    
    
    $
    87.00
    
    
    $
    87.002nd Qtr.
    
    
    84.00
    
    
    
    88.00
    
    
    
    87.00
    
    
    
    91.003rd Qtr.
    
    
    88.00
    
    
    
    88.00
    
    
    
    91.00
    
    
    
    91.004th Qtr.
    
    
    88.00
    
    
    
    90.00
    
    
    
    91.00
    
    
    
    93.0020041st Qtr.
    
    $
    77.00
    
    
    $
    77.00
    
    
    $
    80.00
    
    
    $
    80.002nd Qtr.
    
    
    77.00
    
    
    
    82.00
    
    
    
    80.00
    
    
    
    85.003rd Qtr.
    
    
    82.00
    
    
    
    82.00
    
    
    
    85.00
    
    
    
    85.004th Qtr.
    
    
    82.00
    
    
    
    85.00
    
    
    
    85.00
    
    
    
    87.00
   39




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BOARD OF DIRECTORS (1)
 Fred K. White  Chairman
    
    Retired, Division Manager,Ohio EdisonReal Estate Sales,HER Kinney PropertiesMarion, OhioGary E. Pendleton
    
    President and CEO,The Ohio State BankMarion, OhioLois J. Fisher
    
    Real Estate DeveloperMarion, OhioTheodore L. Graham
    
    Managing Partner, GrahamInvestment Co.Marion, OhioTed M. McKinniss
    
    Attorney of counsel withKegler Brown Hill and RitterMarion, OhioThurman R. Mathews
    
    Owner, Mathews-Kennedy Ford/Lincoln MercuryMarion, OhioLowell E. Thurston
    
    President, Carrolls JewelersMarion, Ohio
 
 (1)
    
    All are Directors of Ohio State Bancshares, Inc. and The Ohio State Bank (formerly The
Marion Bank) 40




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##### 



OHIO STATE BANCSHARES, INC.
  
 THE OHIO STATE BANK
  
  
     41




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##### 



IN MEMORIAM
  (PHOTO OF LLOYD PECK JOHNSTON)
    
    Lloyd Peck Johnston
 Director(PHOTO OF PETE MILLER)
    
    Pete Miller  Director(PHOTO OF SUSAN DEVORE)
    
    Susan DeVore  Loan Officer
 42