**UNITED      STATES SECURITIES**

**AND      EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

| x      | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF 1934  |
|--------|------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                   |
|   | For                the quarterly period ended June 30, 2008                                                            |
|   |                                                                                                                   |
| o      | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF 1934 |
|   |                                                                                                                   |
|   | For                the transition period from __________ to                __________                                  |

| OHIO                LEGACY CORP                                                                 |
|-------------------------------------------------------------------------------------------------|
| (Exact                name of small business issuer as specified in its                charter) |
|                                                                                            |
| OHIO                                                                                            |
| (State                or other jurisdiction of incorporation or organization)                   |
|                                                                                            |
| 34-1903890                                                                                      |
| (I.R.S.                Employer Identification No.)                                             |
|                                                                                            |
| 2375                Benden Drive Suite C, Wooster, OH, 44691                                    |
| (Address                of principal executive offices)                                         |
|                                                                                            |
| (330)                263-1955                                                                   |
| Issuer's                telephone number                                                        |

----

|                                                                                              | Page   |
|---------------------------------------------------------------------------------------------------|--------|
|                                                                                              |   |   |
| PART                I - FINANCIAL INFORMATION                                                     |   |   |
|                                                                                              |   |   |
| Item                1. Financial Statements                                                       |   | 3 |
|                                                                                              |   |   |
| Item                2. Management’s Discussion and Analysis                                 |   | 12 |
|                                                                                              |   |   |
| Item                3. Not Applicable for Smaller Reporting Companies                             |   | 20 |
|                                                                                              |   |   |
| Item                4. Controls and Procedures                                                    |   | 20 |
|                                                                                              |   |   |
| PART                II - OTHER INFORMATION                                                        |   |   |
|                                                                                              |   |   |
| Item                1. Legal Proceedings                                                          |   | 21 |
|                                                                                              |   |   |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds |   | 21 |
|                                                                                              |   |   |
| Item                3. Defaults Upon Senior Securities                                            |   | 21 |
|                                                                                              |   |   |
| Item                4. Submission of Matters to a Vote of Security Holders                        |   | 21 |
|                                                                                              |   |   |
| Item                5. Other Information                                                          |   | 21 |
|                                                                                              |   |   |
| Item                6. Exhibits                                                                   |   | 22 |
|                                                                                              |   |   |
| SIGNATURES                                                                                        |   | 23 |

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements.**

----

|                                                                                                                                                                                                               |   | June                30, |        | December                31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|-----------------------------|--------|
|                                                                                                                                                                                                               |   | 2008                    |        | 2007                        |   |
|                                                                                                                                                                                                               |   | (unaudited)             |        |                        |   |
| **ASSETS**                                                                                                                                                                                                         |   |                    |        |                        |   |
| Cash                and due from banks                                                                                                                                                                             |   | $                       | 6,971,962   |                        | $      | 5,764,580 |   |
| Federal                funds sold and interest-bearing deposits in financial                institutions                                                                                                           |   |                    | 195,641     |                        |   | 1,350,625 |   |
| Cash                and cash equivalents                                                                                                                                                                           |   |                    | 7,167,603   |                        |   | 7,115,205 |   |
| Certificate                of deposit in financial institution                                                                                                                                                     |   |                    | 100,000     |                        |   | 100,000 |   |
| Securities                available for sale                                                                                                                                                                       |   |                    | 36,358,869  |                        |   | 29,010,334 |   |
| Securities                held to maturity (fair value of $3,017,278 and $2,995,122 at June                30, 2008                and December 31, 2007)                                                          |   |                    | 3,001,289   |                        |   | 3,002,754 |   |
| Loans                held for sale                                                                                                                                                                                 |   |                    | 1,410,835   |                        |   | 911,906 |   |
| Loans,                net of allowance of $1,632,253 and $1,622,906 at June 30, 2008 and                December 31, 2007                                                                                          |   |                    | 126,084,313 |                        |   | 131,642,471 |   |
| Federal                bank stock                                                                                                                                                                                  |   |                    | 1,448,550   |                        |   | 1,541,200 |   |
| Premises                and equipment, net                                                                                                                                                                         |   |                    | 2,790,152   |                        |   | 2,901,906 |   |
| Intangible                asset                                                                                                                                                                                    |   |                    | 100,119     |                        |   | 150,322 |   |
| Other                real estate owned                                                                                                                                                                             |   |                    | 3,749,757   |                        |   | 2,416,367 |   |
| Accrued                interest receivable and other assets                                                                                                                                                        |   |                    | 1,832,703   |                        |   | 1,488,214 |   |
|                                                                                                                                                                                                               |   |                    |        |                        |   |   |   |
| Total                assets                                                                                                                                                                                        |   | $                       | 184,044,190 |                        | $      | 180,280,679 |   |
|                                                                                                                                                                                                               |   |                    |        |                        |   |   |   |
| **LIABILITIES**                                                                                                                                                                                                    |   |                    |        |                        |   |   |   |
| Deposits:                                                                                                                                                                                                          |   |                    |        |                        |   |   |   |
| Noninterest-bearing                demand                                                                                                                                                                          |   | $                       | 16,176,263  |                        | $      | 14,329,339 |   |
| Interest-bearing                demand                                                                                                                                                                             |   |                    | 9,271,565   |                        |   | 9,995,343 |   |
| Savings                                                                                                                                                                                                            |   |                    | 53,993,617  |                        |   | 49,566,417 |   |
| Certificates                of deposit, net                                                                                                                                                                        |   |                    | 69,132,514  |                        |   | 73,458,253 |   |
| Total                deposits                                                                                                                                                                                      |   |                    | 148,573,959 |                        |   | 147,349,352 |   |
| Repurchase                agreements                                                                                                                                                                               |   |                    | 1,350,808   |                        |   | 2,022,869 |   |
| Short                term Federal Home Loan Bank advances                                                                                                                                                          |   |                    | 1,950,000   |                        |   | 2,025,000 |   |
| Long                term Federal Home Loan Bank advances                                                                                                                                                           |   |                    | 16,000,000  |                        |   | 12,000,000 |   |
| Capital                lease obligations                                                                                                                                                                           |   |                    | 481,585     |                        |   | 493,168 |   |
| Accrued                interest payable and other liabilities                                                                                                                                                      |   |                    | 715,230     |                        |   | 1,076,647 |   |
| Total                liabilities                                                                                                                                                                                   |   |                    | 169,071,582 |                        |   | 164,967,036 |   |
|                                                                                                                                                                                                               |   |                    |        |                        |   |   |   |
| **SHAREHOLDERS’                EQUITY**                                                                                                                                                                      |   |                    |        |                        |   |   |   |
| Preferred                stock, no par value, 500,000 shares authorized, none                outstanding                                                                                                           |   |                    | -           |                        |   | - |   |
| Common                stock, no par value, 5,000,000 shares authorized, 2,214,564 shares                issued                and outstanding at June 30, 2008, and December 31, 2007,                respectively |   |                    | 18,799,339  |                        |   | 18,781,925 |   |
| Accumulated                earnings (loss)                                                                                                                                                                         |   |                    | (3,598,977  | )                           |   | (3,472,218 | ) |
| Accumulated                other comprehensive earnings (loss)                                                                                                                                                     |   |                    | (227,754    | )                           |   | 3,936 |   |
| Total                shareholders’ equity                                                                                                                                                                    |   |                    | 14,972,608  |                        |   | 15,313,643 |   |
|                                                                                                                                                                                                               |   |                    |        |                        |   |   |   |
| Total                liabilities and shareholders’ equity                                                                                                                                                    |   | $                       | 184,044,190 |                        | $      | 180,280,679 |   |

----

----

|                                                                      |   | For                the Three Months Ended |      | For                the Six Months Ended |   |
|---------------------------------------------------------------------------|--------|-------------------------------------------|-----------|-----------------------------------------|--------|
|                                                                      |   | June                30,                   |      | June                30,                 |   |
|                                                                      |   | 2008                                      |      | 2007                                    |   | 2008 |   | 2007 |   |
| Interest                and dividends income:                             |   |                                      |      |                                    |   |   |   |   |   |
| Loans,                including fees                                      |   | $                                         | 2,202,767 |                                    | $      | 3,259,258 |   | $ | 4,530,466 |   | $ | 6,500,532 |   |
| Securities,                taxable                                        |   |                                      | 456,503   |                                    |   | 261,310 |   |   | 855,432 |   |   | 536,757 |   |
| Securities,                tax-exempt                                     |   |                                      | 28,661    |                                    |   | 25,946 |   |   | 57,227 |   |   | 49,268 |   |
| Interest-bearing                deposits and federal funds sold and other |   |                                      | 28,307    |                                    |   | 42,574 |   |   | 60,423 |   |   | 143,022 |   |
| Dividends                on federal bank stock                            |   |                                      | 20,493    |                                    |   | 24,300 |   |   | 41,702 |   |   | 48,123 |   |
| Total                interest and dividends income                        |   |                                      | 2,736,731 |                                    |   | 3,613,388 |   |   | 5,545,250 |   |   | 7,277,702 |   |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Interest                expense:                                          |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Deposits                                                                  |   |                                      | 1,092,626 |                                    |   | 1,711,647 |   |   | 2,324,214 |   |   | 3,422,874 |   |
| Short                term Federal Home Loan Bank advances                 |   |                                      | 3,756     |                                    |   | 26,138 |   |   | 28,570 |   |   | 83,568 |   |
| Long                term Federal Home Loan Bank advances                  |   |                                      | 176,106   |                                    |   | 174,363 |   |   | 339,546 |   |   | 312,771 |   |
| Subordinated                debentures                                    |   |                                      | -         |                                    |   | 70,722 |   |   | - |   |   | 141,445 |   |
| Repurchase                agreements                                      |   |                                      | 5,373     |                                    |   | 27,531 |   |   | 17,833 |   |   | 41,122 |   |
| Capital                leases                                             |   |                                      | 19,599    |                                    |   | 36,373 |   |   | 39,431 |   |   | 73,040 |   |
| Total                interest expense                                     |   |                                      | 1,297,460 |                                    |   | 2,046,774 |   |   | 2,749,594 |   |   | 4,074,820 |   |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Net                interest income                                        |   |                                      | 1,439,271 |                                    |   | 1,566,614 |   |   | 2,795,656 |   |   | 3,202,882 |   |
| Provision                for loan losses                                  |   |                                      | 5,000     |                                    |   | 14,000 |   |   | 11,500 |   |   | 57,000 |   |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Net                interest income (loss) after provision for loan losses |   |                                      | 1,434,271 |                                    |   | 1,552,614 |   |   | 2,784,156 |   |   | 3,145,882 |   |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Noninterest                income:                                        |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Service                charges and other fees                             |   |                                      | 246,403   |                                    |   | 289,994 |   |   | 460,651 |   |   | 555,633 |   |
| Gain                on sale of loans                                      |   |                                      | 63,993    |                                    |   | 44,344 |   |   | 95,018 |   |   | 95,295 |   |
| Gain                on redemption of equity interest in Visa              |   |                                      | -         |                                    |   | - |   |   | 18,391 |   |   | - |   |
| Gain                (loss) on disposition of other real estate owned      |   |                                      | -         |                                    |   | (620 | ) |   | 9,170 |   |   | 4,831 |   |
| Other                than temporary impairment of securities              |   |                                      | (159,000  | )                                       |   | - |   |   | (159,000 | ) |   | - |   |
| Direct                write-down of other real estate owned               |   |                                      | -         |                                    |   | - |   |   | - |   |   | - |   |
| Other                income                                               |   |                                      | 6,180     |                                    |   | 30,377 |   |   | 17,543 |   |   | 53,573 |   |
| Total                noninterest income                                   |   |                                      | 157,576   |                                    |   | 364,095 |   |   | 441,773 |   |   | 709,332 |   |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Noninterest                expense:                                       |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Salaries                and benefits                                      |   |                                      | 838,435   |                                    |   | 986,213 |   |   | 1,634,903 |   |   | 2,013,735 |   |
| Occupancy                and equipment                                    |   |                                      | 229,389   |                                    |   | 232,750 |   |   | 456,483 |   |   | 469,564 |   |
| Professional                fees                                          |   |                                      | 82,972    |                                    |   | 173,155 |   |   | 180,899 |   |   | 290,306 |   |
| Franchise                tax                                              |   |                                      | 48,821    |                                    |   | 62,903 |   |   | 99,071 |   |   | 126,653 |   |
| Data                processing                                            |   |                                      | 165,111   |                                    |   | 175,952 |   |   | 335,367 |   |   | 349,704 |   |
| Marketing                and advertising                                  |   |                                      | 35,826    |                                    |   | 51,925 |   |   | 95,737 |   |   | 101,846 |   |
| Stationery                and supplies                                    |   |                                      | 24,760    |                                    |   | 25,533 |   |   | 52,140 |   |   | 60,420 |   |
| Amortization                of intangible asset                           |   |                                      | 23,960    |                                    |   | 34,229 |   |   | 50,202 |   |   | 71,025 |   |
| Deposit                expenses and insurance                             |   |                                      | 68,300    |                                    |   | 76,453 |   |   | 129,437 |   |   | 118,601 |   |
| Other                expenses                                             |   |                                      | 169,932   |                                    |   | 155,417 |   |   | 318,449 |   |   | 324,072 |   |
| Total                noninterest expense                                  |   |                                      | 1,687,506 |                                    |   | 1,974,530 |   |   | 3,352,688 |   |   | 3,925,926 |   |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Earnings                (loss) before income tax expense                  |   |                                      | (95,659   | )                                       |   | (57,821 | ) |   | (126,759 | ) |   | (70,712 | ) |
| Income                tax expense (benefit)                               |   |                                      | -         |                                    |   | (23,504 | ) |   | - |   |   | (30,949 | ) |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Net                earnings (loss)                                        |   | $                                         | (95,659   | )                                       | $      | (34,317 | ) | $ | (126,759 | ) | $ | (39,763 | ) |
|                                                                      |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Basic                earnings (loss) per share                            |   | $                                         | (0.04     | )                                       | $      | (0.02 | ) | $ | (0.06 | ) | $ | (0.02 | ) |
| Diluted                earnings (loss) per share                          |   | $                                         | (0.04     | )                                       | $      | (0.02 | ) | $ | (0.06 | ) | $ | (0.02 | ) |

----

----

|                                                                                                       |   | For                the Six Months EndedJune                30, |        |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|-------------|
|                                                                                                       |   |
|                                                                                                       |   | 2008                                                           |        | 2007 |   |
| Cash                flows from operating activities:                                                       |   |                                                           |        |   |   |
| Net                earnings (loss)                                                                         |   | $                                                              | (126,759    | ) | $ | (39,763 | ) |
| Adjustments                to reconcile net earnings to net cash from operating                activities: |   |                                                           |        |   |   |   |   |
| Depreciation                and amortization                                                               |   |                                                           | 231,244     |   |   | 276,050 |   |
| Securities                amortization and accretion, net                                                  |   |                                                           | 14,403      |   |   | 44,097 |   |
| Origination                of loans held for sale                                                          |   |                                                           | (11,009,182 | ) |   | (9,549,556 | ) |
| Proceeds                from sales of loans held for sale                                                  |   |                                                           | 10,605,271  |   |   | 9,149,889 |   |
| Provision                for loan losses                                                                   |   |                                                           | 11,500      |   |   | 57,000 |   |
| Loss                from Ohio Legacy Trust 1                                                               |   |                                                           | -           |   |   | 772 |   |
| Gain                (loss) on disposition of other real estate                                             |   |                                                           | (9,170      | ) |   | (4,831 | ) |
| Direct                write-down of other real estate                                                      |   |                                                           | -           |   |   | 39,949 |   |
| Gain                on sale of loans held for sale                                                         |   |                                                           | (95,018     | ) |   | (95,295 | ) |
| Accretion                of fair value purchase adjustments                                                |   |                                                           | -           |   |   | (7,999 | ) |
| FHLB                stock dividend                                                                         |   |                                                           | (26,100     | ) |   | - |   |
| Stock                option expense                                                                        |   |                                                           | 17,414      |   |   | 21,853 |   |
| Other                than temporary impairment of securities                                               |   |                                                           | 159,000     |   |   | - |   |
| Net                change in:                                                                              |   |                                                           |        |   |   |   |   |
| Accrued                interest receivable and other assets                                                |   |                                                           | (225,133    | ) |   | (201,898 | ) |
| Accrued                interest payable and other liabilities                                              |   |                                                           | (361,417    | ) |   | (78,966 | ) |
| Deferred                loan fees                                                                          |   |                                                           | (43,615     | ) |   | (16,344 | ) |
| Net                cash from operating activities                                                          |   |                                                           | (857,562    | ) |   | (405,042 | ) |
|                                                                                                       |   |                                                           |        |   |   |   |   |
| Cash                flows from investing activities:                                                       |   |                                                           |        |   |   |   |   |
| Purchases                of securities held to maturity                                                    |   |                                                           | (100,000    | ) |   | (804,847 | ) |
| Purchases                of securities available for sale                                                  |   |                                                           | (9,920,610  | ) |   | - |   |
| Maturities                of securities held to maturity                                                   |   |                                                           | 100,000     |   |   | - |   |
| Maturities,                calls and paydowns of securities available for sale                             |   |                                                           | 2,049,091   |   |   | 2,455,573 |   |
| Redemption                of federal bank stock                                                            |   |                                                           | 118,750     |   |   | - |   |
| Proceeds                from sales of other real estate owned                                              |   |                                                           | 13,366      |   |   | 401,130 |   |
| Net                change in loans                                                                         |   |                                                           | 4,439,197   |   |   | 638,173 |   |
| Expenditures                to improve other real estate owned                                             |   |                                                           | (186,150    | ) |   | (44,310 | ) |
| Purchases                of premises and equipment                                                         |   |                                                           | (69,287     | ) |   | (55,111 | ) |
| Net                cash from investing activities                                                          |   |                                                           | (3,556,003  | ) |   | 2,590,608 |   |
|                                                                                                       |   |                                                           |        |   |   |   |   |
| Cash                flows from financing activities:                                                       |   |                                                           |        |   |   |   |   |
| Net                change in deposits                                                                      |   |                                                           | 1,224,607   |   |   | (3,555,117 | ) |
| Net                change in repurchase agreements                                                         |   |                                                           | (672,061    | ) |   | 654,755 |   |
| Repayment                of capital lease obligations                                                      |   |                                                           | (11,583     | ) |   | (15,321 | ) |
| Proceeds                from short term FHLB advances, net of repayments                                   |   |                                                           | (75,000     | ) |   | 1,500,000 |   |
| Proceeds                from long term FHLB advances                                                       |   |                                                           | 6,000,000   |   |   | - |   |
| Repayments                of long term FHLB advances                                                       |   |                                                           | (2,000,000  | ) |   | (5,259,147 | ) |
| Net                cash provided by financing activities                                                   |   |                                                           | 4,465,963   |   |   | (6,674,830 | ) |
|                                                                                                       |   |                                                           |        |   |   |   |   |
| Net                change in cash and cash equivalents                                                     |   |                                                           | 52,398      |   |   | (4,489,264 | ) |
| Cash                and cash equivalents at beginning of period                                            |   |                                                           | 7,115,205   |   |   | 13,039,865 |   |
|                                                                                                       |   |                                                           |        |   |   |   |   |
| Cash                and cash equivalents at end of period                                                  |   | $                                                              | 7,167,603   |   | $ | 8,550,601 |   |
|                                                                                                       |   |                                                           |        |   |   |   |   |
| Supplemental                disclosures of cash flow information:                                          |   |                                                           |        |   |   |   |   |
| Cash                paid during the period for:                                                            |   |                                                           |        |   |   |   |   |
| Interest                                                                                                   |   | $                                                              | 2,749,594   |   | $ | 4,137,149 |   |
| Federal                income taxes                                                                        |   |                                                           | -           |   |   | - |   |
| Non-cash                transactions:                                                                      |   |                                                           |        |   |   |   |   |
| Transfer                of loans to other real estate owned                                                |   | $                                                              | 1,151,076   |   | $ | 129,369 |   |

----

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**NOTE      2 - STOCK BASED COMPENSATION**

----

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      2 - STOCK BASED COMPENSATION (continued)**

|                                                    |   | Six                months ended June 30, 2008Total                options outstanding |    |
|---------------------------------------------------------|--------|---------------------------------------------------------------------------------------|---------|
|                                                    |   |                                                                                  |    | Weighted |   |
|                                                    |   |                                                                                  |    | Average |   |
|                                                    |   |                                                                                  |    | Exercise |   |
|                                                    |   | Shares                                                                                |    | Price |   |
|                                                    |   |                                                                                  |    |   |   |
| Options                outstanding, beginning of period |   |                                                                                  | 214,150 |   | $ | 10.64 |   |
| Forfeited                                               |   |                                                                                  | (28,800 | ) |   | 10.36 |   |
| Exercised                                               |   |                                                                                  | -       |   |   | - |   |
| Granted                                                 |   |                                                                                  | -       |   |   | - |   |
|                                                    |   |                                                                                  |    |   |   |   |   |
| Options                outstanding, end of period       |   |                                                                                  | 185,350 |   | $ | 10.69 |   |
|                                                    |   |                                                                                  |    |   |   |   |   |
| Options                exercisable, end of period       |   |                                                                                  | 158,250 |   | $ | 10.95 |   |

|                             |   | Compensation |   |
|----------------------------------|--------|--------------|--------|
|                             |   | Costs        |   |
|                             |   |         |   |
| Remainder                of 2008 |   | $            | 18,147 |   |
| 2009                             |   |         | 17,659 |   |
| 2010                             |   |         | 2,081  |   |
| Total                            |   | $            | 37,887 |   |

**NOTE      3 - EARNINGS (LOSS) PER SHARE**

----

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      3 - EARNINGS PER SHARE (continued)**

|                                                                                   |   | Three                months endedJune                30 |      | Six                months endedJune                30 |   |
|----------------------------------------------------------------------------------------|--------|---------------------------------------------------------|-----------|-------------------------------------------------------|--------|
|                                                                                   |   | 2008                                                    |      | 2007                                                  |   | 2008 |   | 2007 |   |
| BASIC:                                                                                 |   |                                                    |      |                                                  |   |   |   |   |   |
| Net                earnings (loss)                                                     |   | $                                                       | (95,659   | )                                                     | $      | (34,317 | ) | $ | (126,759 | ) | $ | (39,763 | ) |
|                                                                                   |   |                                                    |      |                                                  |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding                              |   |                                                    | 2,214,564 |                                                  |   | 2,214,564 |   |   | 2,214,564 |   |   | 2,214,564 |   |
|                                                                                   |   |                                                    |      |                                                  |   |   |   |   |   |   |   |   |   |
| Basic                earnings (loss) per share                                         |   | $                                                       | (0.04     | )                                                     | $      | (0.02 | ) | $ | (0.06 | ) | $ | (0.02 | ) |
|                                                                                   |   |                                                    |      |                                                  |   |   |   |   |   |   |   |   |   |
| DILUTED:                                                                               |   |                                                    |      |                                                  |   |   |   |   |   |   |   |   |   |
| Net                earnings (loss)                                                     |   | $                                                       | (95,659   | )                                                     | $      | (34,317 | ) | $ | (126,759 | ) | $ | (39,763 | ) |
|                                                                                   |   |                                                    |      |                                                  |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding                              |   |                                                    | 2,214,564 |                                                  |   | 2,214,564 |   |   | 2,214,564 |   |   | 2,214,564 |   |
| Dilutive                effect of stock options                                        |   |                                                    | -         |                                                  |   | - |   |   | - |   |   | - |   |
| Dilutive                effect of stock warrants                                       |   |                                                    | -         |                                                  |   | - |   |   | - |   |   | - |   |
| Total                common shares and dilutive potential common                shares |   |                                                    | 2,214,564 |                                                  |   | 2,214,564 |   |   | 2,214,564 |   |   | 2,214,564 |   |
|                                                                                   |   |                                                    |      |                                                  |   |   |   |   |   |   |   |   |   |
| Diluted                earnings (loss) per share                                       |   | $                                                       | (0.04     | )                                                     | $      | (0.02 | ) | $ | (0.06 | ) | $ | (0.02 | ) |

|                          |   | Three                months ended June 30 |    | Six                months ended June 30 |   |
|-------------------------------|--------|-------------------------------------------|---------|-----------------------------------------|--------|
|                          |   | 2008                                      |    | 2007                                    |   | 2008 |   | 2007 |   |
|                          |   |                                      |    |                                    |   |   |   |   |   |
| Stock                options  |   |                                      | 185,350 |                                    |   | 286,025 |   |   | 185,350 |   |   | 286,025 |   |
| Stock                warrants |   |                                      | 150,000 |                                    |   | 150,000 |   |   | 150,000 |   |   | 150,000 |   |

**NOTE      4 - LOANS **

|                                                      |   | June                30, 2008 |        | December                31, 2007 |   |
|-----------------------------------------------------------|--------|------------------------------|-------------|----------------------------------|--------|
|                                                      |   | Balance                      |        | Percent                          |   | Balance |   | Percent |   |
|                                                      |   |                         |        |                             |   |   |   |   |   |
| Residential                real estate                    |   | $                            | 39,623,911  |                             |   | 31.0 | % | $ | 36,548,270 |   |   | 27.4 | % |
| Multifamily                residential real estate        |   |                         | 6,858,488   |                             |   | 5.3 |   |   | 7,918,222 |   |   | 5.9 |   |
| Commercial                real estate                     |   |                         | 53,151,083  |                             |   | 41.6 |   |   | 59,574,635 |   |   | 44.7 |   |
| Construction                                              |   |                         | 11,481,986  |                             |   | 9.0 |   |   | 10,714,524 |   |   | 8.0 |   |
| Commercial                                                |   |                         | 11,239,097  |                             |   | 8.8 |   |   | 12,528,137 |   |   | 9.4 |   |
| Consumer                and home equity                   |   |                         | 5,478,366   |                             |   | 4.3 |   |   | 6,141,569 |   |   | 4.6 |   |
| Total                loans                                |   |                         | 127,832,931 |                             |   | 100.0 | % |   | 133,425,357 |   |   | 100.0 | % |
|  Less: Allowance                for loan losses |   |                         | (1,632,253  | )                                |   |   |   |   | (1,622,906 | ) |   |   |   |
| Net                deferred loan fees                     |   |                         | (116,365    | )                                |   |   |   |   | (159,980 | ) |   |   |   |
| Loans,                net                                 |   | $                            | 126,084,313 |                             |   |   |   | $ | 131,642,471 |   |   |   |   |

----

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      4 - LOANS (continued)**

|                                                             |   | For                the Three Months Ended |      | For                the Six Months Ended |   |
|------------------------------------------------------------------|--------|-------------------------------------------|-----------|-----------------------------------------|--------|
|                                                             |   | June                30,                   |      | June                30,                 |   |
|                                                             |   | 2008                                      |      | 2007                                    |   | 2008 |   | 2007 |   |
|                                                             |   |                                      |      |                                    |   |   |   |   |   |
| Balance,                beginning of period                      |   | $                                         | 1,628,411 |                                    | $      | 1,756,875 |   | $ | 1,622,906 |   | $ | 1,757,110 |   |
| Provision                for loan losses                         |   |                                      | 5,000     |                                    |   | 14,000 |   |   | 11,500 |   |   | 57,000 |   |
| Loans                charged-off                                 |   |                                      | (12,289   | )                                       |   | (5,984 | ) |   | (24,534 | ) |   | (52,611 | ) |
| Recoveries                                                       |   |                                      | 11,131    |                                    |   | 1,488 |   |   | 22,381 |   |   | 4,880 |   |
|                                                             |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Balance,                end of period                            |   | $                                         | 1,632,253 |                                    | $      | 1,766,379 |   | $ | 1,632,253 |   | $ | 1,766,379 |   |
|                                                             |   |                                      |      |                                    |   |   |   |   |   |   |   |   |   |
| Allowance                for loan losses, percent of total loans |   |                                      | 1.28      | %                                       |   | 0.99 | % |   |   |   |   |   |   |

|                                                                        |   | June                30,2008 |      | December                31,2007 |   |
|-----------------------------------------------------------------------------|--------|-----------------------------|-----------|---------------------------------|--------|
|                                                                        |   |                        |      |                            |   |
| Loans                past due over 90 days still on accrual                 |   | $                           | -         |                            | $      | - |   |
| Nonaccrual                loans, includes smaller balance homogeneous loans |   |                        | 4,049,236 |                            |   | 4,205,143 |   |
|                                                                        |   |                        |      |                            |   |   |   |
| Impaired                loans, included in nonaccrual loans                 |   |                        | 3,499,917 |                            |   | 3,550,936 |   |
| Amount                of the allowance for loan losses allocated            |   | $                           | 12,749    |                            | $      | 11,472 |   |

**NOTE      5 - OTHER REAL ESTATE OWNED**

|                                     |   | June                30, 2008 |      | December                31, 2007 |   |
|------------------------------------------|--------|------------------------------|-----------|----------------------------------|--------|
|                                     |   |                         |      |                             |   |
| Residential                real estate   |   | $                            | 1,456,277 |                             | $      | 136,716 |   |
| Land                development          |   |                         | 2,293,480 |                             |   | 2,279,651 |   |
| Total                real estate owned   |   |                         | 3,749,757 |                             |   | 2,416,367 |   |
|                                     |   |                         |      |                             |   |   |   |
| Less:                valuation allowance |   |                         | -         |                             |   | - |   |
|                                     |   |                         |      |                             |   |   |   |
| Real                estate owned, net    |   | $                            | 3,749,757 |                             | $      | 2,416,367 |   |

----

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      6 - SUBSEQUENT EVENT AND RELATED CONTINGENCIES**

**NOTE        7 - FAIR VALUE MEASUREMENT **

|                                           |   | June                  30, 2008 |       | Quoted                  Prices on Active Markets for Identical Assets (Level                  1) |   | Significant                  Other Observable Inputs (Level 2) |   | Significant                  Unobservable Inputs (Level                  3) |       |
|------------------------------------------------|--------|--------------------------------|------------|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|-----------------------------------------------------------------------------|------------|
|                                           |   |                           |       |                                                                                             |   |                                                           |   |                                                                        |       |
| Available                  for sale securities |   | $                              | 36,358,869 |                                                                                             | $      | 2,900,000                                                      |   | $                                                                           | 33,458,869 |   | $ | - |   |

|                            |   | June                  30, 2008 |      | Quoted                  Prices on Active Markets for Identical Assets (Level                  1) |   | Significant                  Other Observable Inputs (Level                  2) |   | Significant                  Unobservable Inputs (Level                  3) |    |
|---------------------------------|--------|--------------------------------|-----------|--------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|
|                            |   |                           |      |                                                                                             |   |                                                                            |   |                                                                        |    |
| Impaired                  loans |   | $                              | 3,987,092 |                                                                                             | $      | -                                                                               |   | $                                                                           | 696,120 |   | $ | 3,290,972 |   |

----

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE        8 - OTHER COMPREHENSIVE INCOME (LOSS)**

|                                                                                                          |   |   |     |   |   |     |   |   |     |
|---------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|----------|--------|--------|----------|
|                                                                                                          |   | 2008   |     | 2007   |   | 2008     |   | 2007   |     |
| Net                  earnings (loss)                                                                          |   | $      | (95,659  | )      | $      | (34,317  | )      | $      | (26,759  | ) | $ | (39,763 | ) |
| Other                  comprehensive income (loss), net of tax:                                               |   |   |     |   |   |     |   |   |     |   |   |   |   |
| Unrealized                  gains (losses) on securities arising during the period                            |   |   | (705,030 | )      |   | (127,800 | )      |   | (510,045 | ) |   | 27,248 |   |
| Less:                  reclassification adjustment for losses (gains) included in net                  income |   |   | 159,000  |   |   | -        |   |   | 159,000  |   |   | - |   |
| Net                  unrealized gains (losses)                                                                |   |   | (546,030 | )      |   | (127,800 | )      |   | (351,045 | ) |   | 27,248 |   |
| Income                  tax effect                                                                            |   |   | 185,650  |   |   | 43,452   |   |   | 119,355  |   |   | (9,264 | ) |
| Other                  comprehensive income (loss), net of tax                                                |   |   | (360,380 | )      |   | (84,348  | )      |   | (231,690 | ) |   | 17,984 |   |
| Comprehensive                  income (loss)                                                                  |   | $      | (456,039 | )      | $      | (118,665 | )      | $      | (358,449 | ) | $ | (21,779 | ) |

----

**Item      2. Management’s Discussion and Analysis**

**FORWARD-LOOKING      STATEMENTS**

| ·   | anticipated                changes in industry conditions created by state and federal legislation                and regulations; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | anticipated                changes in general interest rates and the impact of future interest                rate                changes on our profitability, capital adequacy and the fair value                of our                financial assets and liabilities; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | retention                of our existing customer base and our ability to attract new                customers; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | the                development of new products and services and their success in the                marketplace; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | the                adequacy of the allowance for loan losses;                and |
|--------------------|----------------------------------------------------------------------------------|

| ·   | statements                regarding our anticipated loan and deposit account growth, expense                levels,                liquidity and capital resources and projections of                earnings. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | competition                in the industry and markets in which we                operate; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | changes                in general interest rates; |
|--------------------|---------------------------------------------------|

| ·   | rapid                changes in technology affecting the financial services                industry; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | deterioration                in securities markets due to a lack of liquidity and demand for securities                related to real estate; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes                in government regulation; and |
|--------------------|------------------------------------------------------|

| ·   | general                economic and business conditions. |
|--------------------|----------------------------------------------------------|

**OVERVIEW**

| §   | Interest                expense has been reduced on all major funding                categories. |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | Net                interest margin was 3.38% for the period, a marked improvement over                previous quarters. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| §   | Non                interest income performed as expected during the period, except for                an                other-than-temporary impairment charge recorded on the Company’s                securities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Non                interest expense fully reflects the cost savings measures implemented                over                the last three quarters. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Charge-offs                remained low for both the quarter and the first six months of the                year. |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

----

**Credit      Quality**

**Net      Interest Income - **

**Noninterest      Income - **

**Noninterest      Expense - **

**Loans      and Leases - **

**Deposits      - **
** **

**CRITICAL      ACCOUNTING POLICIES**

*Allowance      for loan losses*

----

**FINANCIAL      CONDITION - JUNE 30, 2008 COMPARED TO DECEMBER 31, 2007**

*Assets*
** **

*Securities*

*Loans*

*Allowance      for loan losses and asset quality*
** **

*Accrued      interest receivable and other assets. *

*Deposits*

----

*Federal      Home Loan Bank advances*

**RESULTS      OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2008**

|                                                                                                                                                                                             |   | Three                months ended June 30, |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                                                                                                                                             |   | 2008                                       |    | 2007 |   |
|                                                                                                                                                                                             |   | Average                                    |    | Interest |   |   |   | Average |   | Interest |   |   |   |
|                                                                                                                                                                                             |   | Outstanding                                |    | earned/ |   | Yield/ |   | outstanding |   | earned/ |   | Yield/ |   |
| (Dollars                in thousands)                                                                                                                                                            |   | Balance                                    |    | paid |   | Rate |   | balance |   | paid |   | Rate |   |
| Assets                                                                                                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                                                                                                                          |   |                                       |    |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                deposits and federal funds sold                                                                                                                        |   |  $                                    | 5,176   |   |  $ | 28 |   |   | 2.20 | % |  $ | 3,211 |   | $ | 43 |   |   | 5.30 | % |
| Securities                available for sale                                                                                                                                                |   |                                       | 33,557  |   |   | 457 |   |   | 5.44 |   |   | 24,950 |   |   | 261 |   |   | 4.19 |   |
| Securities                held to maturity                                                                                                                                                       |   |                                       | 3,002   |   |   | 29 |   |   | 3.82 |   |   | 3,005 |   |   | 26 |   |   | 3.46 |   |
| Federal                agency stock                                                                                                                                                              |   |                                       | 1,466   |   |   | 20 |   |   | 5.59 |   |   | 1,541 |   |   | 24 |   |   | 6.31 |   |
| Loans                (1)                                                                                                                                                                         |   |                                       | 127,886 |   |   | 2,203 |   |   | 6.93 |   |   | 179,217 |   |   | 3,259 |   |   | 7.29 |   |
| Total                interest-earning assets                                                                                                                                                     |   |                                       | 171,087 |   |   | 2,737 |   |   | 6.43 |   |   | 211,924 |   |   | 3,613 |   |   | 6.84 |   |
| Noninterest-earning assets                                                                                                                                                                  |   |                                       | 15,830  |   |   |   |   |   |   |   |   | 17,540 |   |   |   |   |   |   |   |
| Total                assets                                                                                                                                                                      |   |  $                                    | 186,917 |   |   |   |   |   |   |   |  $ | 229,464 |   |   |   |   |   |   |   |
|                                                                                                                                                                                             |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Shareholders’ Equity                                                                                                                                        |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                                                                                                                     |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                                                                                                                             |   |  $                                    | 9,556   |   |   | 25 |   |   | 1.05 | % |  $ | 9,633 |   |   | 23 |   |   | .97 | % |
| Savings                accounts                                                                                                                                                                  |   |                                       | 5,415   |   |   | 10 |   |   | .78 |   |   | 8,046 |   |   | 15 |   |   | .77 |   |
| Money                market accounts                                                                                                                                                             |   |                                       | 48,495  |   |   | 320 |   |   | 2.65 |   |   | 45,421 |   |   | 440 |   |   | 3.88 |   |
| Certificates                of deposit                                                                                                                                                      |   |                                       | 72,724  |   |   | 737 |   |   | 4.08 |   |   | 102,471 |   |   | 1,234 |   |   | 4.83 |   |
| Total                interest-bearing deposits                                                                                                                                                   |   |                                       | 136,190 |   |   | 1,093 |   |   | 3.23 |   |   | 165,571 |   |   | 1,712 |   |   | 4.15 |   |
| Other                borrowings                                                                                                                                                                  |   |                                       | 19,389  |   |   | 205 |   |   | 4.25 |   |   | 23,521 |   |   | 335 |   |   | 5.70 |   |
| Total                interest-bearing liabilities                                                                                                                                                |   |                                       | 155,579 |   |   | 1,297 |   |   | 3.35 |   |   | 189,092 |   |   | 2,047 |   |   | 4.34 |   |
| Noninterest-bearing                demand deposits                                                                                                                                               |   |                                       | 15,538  |   |   |   |   |   |   |   |   | 18,260 |   |   |   |   |   |   |   |
| Noninterest-bearing liabilities                                                                                                                                                             |   |                                       | 419     |   |   |   |   |   |   |   |   | 876 |   |   |   |   |   |   |   |
| Total                liabilities                                                                                                                                                                 |   |                                       | 171,536 |   |   |   |   |   |   |   |   | 208,228 |   |   |   |   |   |   |   |
| Shareholders’                equity                                                                                                                                                        |   |                                       | 15,381  |   |   |   |   |   |   |   |   | 21,236 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’ equity                                                                                                                             |   |  $                                    | 186,917 |   |   |   |   |   |   |   |  $ | 229,464 |   |   |   |   |   |   |   |
|                                                                                                                                                                                             |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income; interest-rate spread (2)                                                                                                                                |   |                                       |    |   |  $ | 1,439 |   |   | 3.08 | % |   |   |   |  $ | 1,566 |   |   | 2.50 | % |
| Net                earning assets                                                                                                                                                                |   |  $                                    | 15,508  |   |   |   |   |   |   |   |  $ | 22,832 |   |   |   |   |   |   |   |
| Net                interest margin (3)                                                                                                                                                           |   |                                       |    |   |   |   |   |   | 3.38 | % |   |   |   |   |   |   |   | 2.98 | % |
| Average                interest-earning assets to interest-bearing liabilities                                                                                                         |   |                                       | 1.1x    |   |   |   |   |   |   |   |   | 1.12x |   |   |   |   |   |   |   |
|                                                                                                                                                                                             |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ____________________                                                                                                                                                                             |   |                                       |    |   |   |   |
|                                                                                                                                                                                             |   |                                       |    |   |   |   |
| (1) Net                of net deferred loan fees and costs and loans in process. Non-accrual                loans are reported in non-interest earning assets in this                table. |
| (2) Interest                rate spread represents the difference between the yield on interest                earning assets and the cost of interest bearing                liabilities.  |
| (3) Net                interest margin represents net interest income, annualized, divided                by                average interest-earning assets.                                |

----

*Net      interest income*

*Interest      income*

*Interest      expense*

*Provision      for loan losses*

*Noninterest      income*

*Noninterest      expense*

*Salary      and benefits*

*Professional      fees*

*Franchise      tax.*

*Marketing      and advertising*

----

**RESULTS      OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2008**

|                                                                                     |   | Six                months ending June 30, |    |
|------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                                     |   | 2008                                      |    | 2007 |   |
|                                                                                     |   | Average                                   |    | Interest |   |   |   | Average |   | Interest |   |   |   |
|                                                                                     |   | outstanding                               |    | earned/ |   | Yield/ |   | outstanding |   | earned/ |   | Yield/ |   |
| (Dollars                in thousands)                                                    |   | balance                                   |    | Paid |   | Rate |   | balance |   | paid |   | Rate |   |
| Assets                                                                                   |   |                                      |    |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                  |   |                                      |    |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                deposits and federal funds sold                |   | $                                         | 4,584   |   | $ | 60 |   |   | 2.67 | % | $ | 5,495 |   | $ | 143 |   |   | 5.25 | % |
| Securities                available for sale                                        |   |                                      | 31,123  |   |   | 855 |   |   | 5.50 |   |   | 25,224 |   |   | 537 |   |   | 4.33 |   |
| Securities                held to maturity                                               |   |                                      | 3,002   |   |   | 57 |   |   | 3.81 |   |   | 2,831 |   |   | 49 |   |   | 3.46 |   |
| Federal                agency stock                                                      |   |                                      | 1,504   |   |   | 42 |   |   | 5.55 |   |   | 1,541 |   |   | 48 |   |   | 6.30 |   |
| Loans                (1)                                                                 |   |                                      | 129,449 |   |   | 4,530 |   |   | 7.08 |   |   | 177,828 |   |   | 6,501 |   |   | 7.37 |   |
| Total                interest-earning assets                                             |   |                                      | 169,662 |   |   | 5,545 |   |   | 6.61 |   |   | 212,919 |   |   | 7,278 |   |   | 6.89 |   |
| Noninterest-earning assets                                                          |   |                                      | 16,362  |   |   |   |   |   |   |   |   | 17,463 |   |   |   |   |   |   |   |
| Total                assets                                                              |   | $                                         | 186,024 |   |   |   |   |   |   |   | $ | 230,382 |   |   |   |   |   |   |   |
|                                                                                     |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Shareholders’ Equity                                |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                             |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                     |   | $                                         | 9,715   |   |   | 60 |   |   | 1.25 |   | $ | 9,290 |   |   | 40 |   |   | 0.87 |   |
| Savings                accounts                                                          |   |                                      | 5,415   |   |   | 22 |   |   | 0.82 |   |   | 8,523 |   |   | 34 |   |   | 0.80 |   |
| Money                market accounts                                                     |   |                                      | 46,363  |   |   | 683 |   |   | 2.98 |   |   | 44,301 |   |   | 828 |   |   | 3.77 |   |
| Certificates                of deposit                                              |   |                                      | 73,560  |   |   | 1,559 |   |   | 4.29 |   |   | 105,222 |   |   | 2,521 |   |   | 4.83 |   |
| Total                interest-bearing deposits                                           |   |                                      | 135,053 |   |   | 2,324 |   |   | 3.48 |   |   | 167,336 |   |   | 3,423 |   |   | 4.14 |   |
| Other                borrowings                                                          |   |                                      | 19,166  |   |   | 425 |   |   | 4.44 |   |   | 24,065 |   |   | 652 |   |   | 5.46 |   |
| Total                interest-bearing liabilities                                        |   |                                      | 154,219 |   |   | 2,750 |   |   | 3.61 |   |   | 191,401 |   |   | 4,075 |   |   | 4.30 |   |
| Noninterest-bearing                demand deposits                                       |   |                                      | 15,064  |   |   |   |   |   |   |   |   | 18,139 |   |   |   |   |   |   |   |
| Noninterest-bearing liabilities                                                     |   |                                      | 682     |   |   |   |   |   |   |   |   | 1,035 |   |   |   |   |   |   |   |
| Total                liabilities                                                         |   |                                      | 169,965 |   |   |   |   |   |   |   |   | 210,575 |   |   |   |   |   |   |   |
| Shareholders’                equity                                                |   |                                      | 16,059  |   |   |   |   |   |   |   |   | 19,807 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’ equity                     |   | $                                         | 186,024 |   |   |   |   |   |   |   | $ | 230,382 |   |   |   |   |   |   |   |
|                                                                                     |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income; interest-rate spread (2)                        |   |                                      |    |   | $ | 2,796 |   |   | 3.00 | % |   |   |   | $ | 3,203 |   |   | 2.56 | % |
| Net                earning assets                                                        |   | $                                         | 15,443  |   |   |   |   |   |   |   | $ | 21,518 |   |   |   |   |   |   |   |
| Net                interest margin (3)                                                   |   |                                      |    |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   |   | 3.06 | % |
| Average                interest-earning assets to interest-bearing liabilities |   |                                      | 1.10x   |   |   |   |   |   |   |   |   | 1.11x |   |   |   |   |   |   |   |

| FOOTNOTES                TO YIELD TABLE                                                                                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                            |
| (1) Net                of net deferred loan fees and costs and loans in process. Nonaccrual                loans                are included in noninterest-earning assets.                |
| (2) Interest                rate spread represents the difference between the yield on                interest-earning assets and the cost of interest-bearing                liabilities. |
| (3) Net                interest margin represents net interest income, annualized, divided                by                average interest-earning assets.                               |

*Net      interest income*

*Interest      income*

*Interest      expense*

----

*Provision      for loan losses*

*Noninterest      income*

*Noninterest      expense*

*Salary      and benefits*

*Professional      fees*

*Franchise      tax.*

**STRATEGIC      DEVELOPMENTS**

**CONTRACTUAL      OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET      ARRANGEMENTS**

----

**LIQUIDITY**

**CAPITAL      RESOURCES**

|                                                  |   |   |   |                             |   |                             |   |                             |   | To                Be Well-       |   |
|-------------------------------------------------------|--------|--------|--------|----------------------------------|--------|----------------------------------|--------|----------------------------------|--------|----------------------------------|--------|
|                                                  |   |   |   |                             |   |                             |   |                             |   | Capitalized                Under |   |
|                                                  |   |   |   |                             |   | For                Capital       |   | Prompt                Corrective |   |
|                                                  |   | Actual |   | Adequacy                Purposes |   | Action                Provisions |   |
|                                                  |   | Amount |   | Ratio                            |   | Amount                           |   | Ratio                            |   | Amount                           |   | Ratio |   |
|                                                  |   |   |   |                             |   |                             |   |                             |   |                             |   |   |   |
| Total                capital to risk-weighted assets  |   | $      | 16,342 |                             |   | 12.0                             | %      | $                                | 10,890 |                             |   | 8.0 | % | $ | 13,613 |   |   | 10.0 | % |
|                                                  |   |   |   |                             |   |                             |   |                             |   |                             |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets |   | $      | 14,710 |                             |   | 10.8                             | %      | $                                | 5,445  |                             |   | 4.0 | % | $ | 8,168 |   |   | 6.0 | % |
|                                                  |   |   |   |                             |   |                             |   |                             |   |                             |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets       |   | $      | 14,710 |                             |   | 7.9                              | %      | $                                | 7,461  |                             |   | 4.0 | % | $ | 9,327 |   |   | 5.0 | % |

----

**Item      3. Not applicable for Smaller Reporting Companies.**

**Item      4. Controls and Procedures**

----

**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings.**

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

**Item      3. Defaults Upon Senior Securities.**

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

**Item      5. Other Information.**

----

**Item      6. Exhibits.**

| Exhibit |   |                                                                                                                                                                                       |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  | Note   | Description                  of Document                                                                                                                                                   |
| 3.1     | (1)    | Second                  Amended and Restated Articles of Incorporation of Ohio Legacy                  Corp                                                                                |
| 3.2     | (2)    | Code                  of Regulations of Ohio Legacy Corp, as amended by Amendment No.                  1                                                                                   |
| 4.1     | (3)    | See                  Pages 1 through 9 of Exhibit 3.1 for provisions defining the rights                  of the                  holders of common shares                                 |
| 4.2     | (3)    | Form                  of Organizer Stock Purchase Warrant                                                                                                                                  |
| 4.4     | (2)    | 2004                  Amendment to Omnibus Stock Option, Stock Ownership and Long Term                  Incentive                  Plan of Ohio Legacy Corp                                |
| 10.1    | (3)    | Omnibus                  Stock Option, Stock Ownership and Long Term Incentive Plan                                                                                                        |
| 10.2    | (4)    | 2002                  Amendment to Omnibus Stock Option, Stock Ownership and Long Term                  Incentive                  Plan** **of                  Ohio Legacy Corp      |
| 10.5    | (3)    | Lease                  Agreement dated August 24, 1999, by and among Jack K. and Heidi                  M. Gant                  and Ohio Legacy Corp                                      |
| 10.6    | (3)    | Lease                  Agreement dated November 30, 1999, by and between Schoeppner Properties                  and Ohio Legacy Corp                                                       |
| 10.8    | (5)    | Lease                  Agreement dated October 2001 by and between Shee-Bree’s, L.L.C. and Ohio                  Legacy Corp                                                         |
| 10.10   | (6)    | Assignment                  and assumption of lease by and among Unizan Bank, Ohio Legacy Bank                  and                  Chesterland Productions, P.L.L. dated August 27, 2004 |
| 10.11   | (7)    | Employment                  Agreement with Mr. Kramer                                                                                                                                      |
| 10.12   | (8)    | Change                  in Control Agreement with Mr. Williams                                                                                                                             |
| 10.13   | (8)    | Change                  in Control Agreement with Mr. Spradlin                                                                                                                             |
| 10.14   | (8)    | Change                  in Control Agreement with Mr. Dodds                                                                                                                                |
| 10.15   | (9)    | Loan                  Processing Agreement dated April 28, 2008 by and between Midwest                  Mortgage                  Processing, LLC and Ohio Legacy Bank, N.A.               |
| 10.16   | (9)    | Administrative                  Services Agreement dated April 28, 2008 by and between JMC Marketing                  Ltd.                  And Ohio Legacy Bank, N.A.                     |
| 10.17   |   | Guaranty                  dated April 28, 2008 by and between James A. Hinkle, Cheldon Rose,                  Michael                  Prall and Ohio Legacy Bank, N.A.                    |
| 11      |   | Statement                  Regarding Computation of Per Share Earnings (incorporated by reference                  to                  Note 3 on page 8 of the this Form 10-Q)             |
| 31.1    |   | Rule                  13a-14(a)/15d-14(a) Certification of Principal Executive Officer                  and                  acting Chief Financial Officer                                |
| 32.1    |   | Certification                  Pursuant To 18 U.S.C. Section 1350 As Adopted Pursuant to Section                  906 of                  the Sarbanes-Oxley Act of 2002                   |

| (1) | - | Incorporated                by reference to Registrant’s Form 10-QSB for the fiscal quarter ended June                30, 2003, filed on August 14, 2003 |
|-----|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | - | Incorporated                by reference to Registrant’s Form 10-KSB for the fiscal year ended                December 31, 2003, filed on March 17, 2004 |
| (3) | - | Incorporated                by reference to Registrant’s Form SB-2, File No. 333-38328, effective June                1, 2000                            |
| (4) | - | Incorporated                by reference to Registrant’s Form S-8,                File No. 333-88842, effective May 22, 2002                             |
| (5) | - | Incorporated                by reference to Registrant’s Form 10-KSB for the fiscal year ended                December 31, 2001, filed on April 1, 2002  |
| (6) | - | Incorporated                by reference to Registrant’s Form 10-KSB for the fiscal year ended                December 31, 2004, filed on March 22, 2005 |
| (7) | - | Incorporated                by reference to Registrant’s Form 8-K filed on May 6,                2005                                                    |
| (8) | - | Incorporated                by reference to Registrant’s Form 10-K filed on April 7,                2008                                                 |
| (9) | - | Incorporated                by reference to Registrant’s Form 10-Q filed on May 15,                2008                                                  |

----

**SIGNATURES**

|                                 |   | OHIO                LEGACY CORP                              |   |
|--------------------------------------|--------|--------------------------------------------------------------|--------|
|                                 |   | (Registrant)                                                 |   |
|                                 |   |                                                         |   |
|                                 |   |                                                         |   |
| Date:                August 14, 2008 |   | By:                /s/ D. Michael Kramer                     |   |
|                                 |   | D.                Michael Kramer, President,                 |   |
|                                 |   | President,                Chief Executive Officer and acting |   |
|                                 |   | Chief                Financial Officer                       |   |

----