UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)





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





For the quarterly period ended March
31, 2010


or


 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
      1934





For the transition period from
__________ to __________





Commission
file number:  000-31673





OHIO LEGACY CORP(Exact
      name of registrant as specified in its
charter)





Ohio
              34-1903890(State
      or other jurisdiction of incorporation or organization)
              I.R.S.
      Employer
IdentificationNumber





600 South Main St., North Canton,
      Ohio  44720(Address
      of principal executive
offices)





(330) 499-1900Registrant's
      telephone number





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x     No
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈
                  
                  Accelerated
      filer  ̈Non-accelerated
      filer  ̈
                  
                  Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes  ̈  No
x





As of May
14, 2010, the latest practicable date, there were 19,714,564 shares of the
issuer’s Common Stock, without par value, issued and
outstanding.





OHIO
LEGACY CORP


FORM
10-Q




AS OF AND
FOR THE THREE MONTHS ENDED MARCH 31, 2010




FIRST
QUARTER REPORT







PagePART
      I - FINANCIAL INFORMATIONItem
      1. Financial Statements
                
                3Item
      2. Management’s Discussion and Analysis
                
                21Item
      3. Not Applicable for Smaller Reporting Companies
                
                29Item
      4T. Controls and Procedures
                
                29PART
      II - OTHER INFORMATIONItem
      1. Legal Proceedings
                
                30Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                
                30Item
      3. Defaults Upon Senior Securities
                
                30Item
      4. Removed and Reserved
                
                30Item
      5. Other Information
                
                30Item
      6. Exhibits
                
                31SIGNATURES
                
                33


2


PART
      1 - FINANCIAL INFORMATIONItem 1.  Financial
      Statements.OHIO
      LEGACY CORPCONSOLIDATED
      BALANCE SHEETSAs
      of March 31, 2010 and December 31, 2009





March
      31,
                  
                  
                  December
      31,2010
                  
                  
                  2009(unaudited)ASSETSCash
      and due from banks
                  
                  $
                  2,275,517
                  
                  
                  $
                  1,970,133Federal
      funds sold and interest-bearing deposits in financial
      institutions
                  
                  
                  33,044,834
                  
                  
                  
                  22,195,657Cash
      and cash equivalents
                  
                  
                  35,320,351
                  
                  
                  
                  24,165,790Certificate
      of deposit in financial institution
                  
                  
                  100,000
                  
                  
                  
                  100,000Securities
      available for sale
                  
                  
                  27,645,537
                  
                  
                  
                  26,892,105Securities
      held to maturity (fair value March 31, 2009 - $3,074,226, December 31,
      2009 - $3,050,740)
                  
                  
                  2,996,023
                  
                  
                  
                  2,996,826Loans
      held for sale
                  
                  
                  -
                  
                  
                  
                  195,247Loans,
      net of allowance of $4,033,006 and $3,945,670 at March 31, 2010 and
      December 31, 2009
                  
                  
                  96,465,418
                  
                  
                  
                  100,855,165Federal
      bank stock
                  
                  
                  1,267,250
                  
                  
                  
                  1,267,250Premises
      and equipment, net
                  
                  
                  3,088,387
                  
                  
                  
                  2,952,392Other
      real estate owned
                  
                  
                  2,969,063
                  
                  
                  
                  3,175,658Accrued
      interest receivable and other assets
                  
                  
                  850,433
                  
                  
                  
                  640,595Total
      assets
                  
                  $
                  170,702,462
                  
                  
                  $
                  163,241,028LIABILITIESDeposits:Noninterest-bearing
      demand
                  
                  $
                  15,385,671
                  
                  
                  $
                  15,521,829Interest-bearing
      demand
                  
                  
                  9,280,175
                  
                  
                  
                  9,372,841Savings
      and money market
                  
                  
                  57,916,145
                  
                  
                  
                  57,119,495Certificates
      of deposit, net
                  
                  
                  58,060,674
                  
                  
                  
                  57,784,548Total
      deposits
                  
                  
                  140,642,665
                  
                  
                  
                  139,798,713Repurchase
      agreements
                  
                  
                  647,920
                  
                  
                  
                  1,037,776Long-term
      Federal Home Loan Bank advances
                  
                  
                  10,000,000
                  
                  
                  
                  18,500,000Capital
      lease obligations
                  
                  
                  432,980
                  
                  
                  
                  440,786Accrued
      interest payable and other liabilities
                  
                  
                  1,096,972
                  
                  
                  
                  1,097,242Total
      liabilities
                  
                  
                  152,820,537
                  
                  
                  
                  160,874,517SHAREHOLDERS'
      EQUITYPreferred
      stock, no par value, 500,000 shares authorized, none
      outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, no par value;March
      31, 2010: 22,500,000 shares authorized,19,714,564
      shares issued and outstandingDecember
      31, 2009:  5,000,000 shares authorized, 2,214,564 shares issued
      and outstanding
                  
                  
                  35,499,702
                  
                  
                  
                  18,782,779Accumulated
      deficit
                  
                  
                  (17,508,590
                  )
                  
                  
                  (16,178,901
                  )Accumulated
      other comprehensive loss
                  
                  
                  (109,187
                  )
                  
                  
                  (237,367
                  )Total
      shareholders' equity
                  
                  
                  17,881,925
                  
                  
                  
                  2,366,511Total
      liabilities and shareholders' equity
                  
                  $
                  170,702,462
                  
                  
                  $
                  163,241,028




See notes
to the consolidated financial statements.


3




OHIO
      LEGACY CORPCONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      the Three Months Ended March 31, 2010 and 2009(Unaudited)




For
      the Three Months EndedMarch
      31,2010
                
                
                2009Interest
      and dividend income:Loans,
      including fees
                
                $
                1,503,851
                
                
                $
                1,944,312Securities,
      taxable
                
                
                260,248
                
                
                
                401,012Securities,
      tax-exempt
                
                
                28,542
                
                
                
                28,554Interest-bearing
      deposits, federal funds sold and other
                
                
                12,508
                
                
                
                6,263Dividends
      on federal bank stock
                
                
                15,275
                
                
                
                16,464Total
      interest and dividend income
                
                
                1,820,424
                
                
                
                2,396,605Interest
      expense:Deposits
                
                
                519,614
                
                
                
                939,478Short-term
      Federal Home Loan Bank advances
                
                
                -
                
                
                
                2,085Long-term
      Federal Home Loan Bank advances
                
                
                114,488
                
                
                
                177,273Repurchase
      agreements
                
                
                1,083
                
                
                
                932Capital
      leases
                
                
                17,690
                
                
                
                18,846Investor
      notes
                
                
                9,693
                
                
                
                -Total
      interest expense
                
                
                662,568
                
                
                
                1,138,614Net
      interest income
                
                
                1,157,856
                
                
                
                1,257,991Provision
      for loan losses
                
                
                76,772
                
                
                
                181,000Net
      interest income after provision for loan losses
                
                
                1,081,084
                
                
                
                1,076,991Noninterest
      income:Service
      charges and other fees
                
                
                169,430
                
                
                
                212,186Gain
      on sales of securities available for sale
                
                
                -
                
                
                
                685,948Other
      than temporary impairment on securities available for sale
                
                
                -
                
                
                
                (111,200
                )Gain
      on sale of loans
                
                
                3,465
                
                
                
                19,489Gain
      (loss) on disposition of other real estate owned
                
                
                11,543
                
                
                
                38,020Direct
      write-down of other real estate owned
                
                
                -
                
                
                
                (22,500
                )Loss
      on disposal of fixed assets
                
                
                (1,506
                )
                
                
                -Other
      income
                
                
                14,849
                
                
                
                7,596Total
      noninterest income
                
                
                197,781
                
                
                
                829,539Noninterest
      expense:Salaries
      and benefits
                
                
                969,861
                
                
                
                726,394Occupancy
      and equipment
                
                
                214,699
                
                
                
                208,654Professional
      fees
                
                
                271,847
                
                
                
                102,656Franchise
      tax
                
                
                9,050
                
                
                
                37,500Data
      processing
                
                
                152,706
                
                
                
                177,510Marketing
      and advertising
                
                
                65,087
                
                
                
                27,050Stationery
      and supplies
                
                
                16,880
                
                
                
                19,778Amortization
      of intangible asset
                
                
                -
                
                
                
                16,259Deposit
      expense and insurance
                
                
                200,819
                
                
                
                125,652Investor
      expenses
                
                
                517,222
                
                
                
                -Other
      expenses
                
                
                190,384
                
                
                
                207,608Total
      noninterest expense
                
                
                2,608,555
                
                
                
                1,649,061Net
      income (loss) before income taxes
                
                
                (1,329,690
                )
                
                
                257,469Income
      tax benefit
                
                
                -
                
                
                
                (244,913
                )Net
      income (loss)
                
                $
                (1,329,690
                )
                
                $
                502,382Basic
      earnings (loss) per share
                
                $
                (0.13
                )
                
                $
                0.23Diluted
      earnings (loss) per share
                
                $
                (0.13
                )
                
                $
                0.23





See notes
to the consolidated financial statements.


4




OHIO
      LEGACY CORPCONDENSED
      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
  EQUITYFor
      the Three Months Ended March 31, 2010 and 2009(Unaudited)




For
      the Three Months EndedMarch
      31,2010
                      
                      
                      2009Balance,
      beginning of period
                      
                      $
                      2,366,511
                      
                      
                      $
                      9,520,857Stock
      based compensation expense
                      
                      
                      2,143
                      
                      
                      
                      6,463Proceeds
      on sale of common stock, net
                      
                      
                      16,714,781
                      
                      
                      
                      -Comprehensive
      income (loss):Net
      income (loss)
                      
                      
                      (1,329,690
                      )
                      
                      
                      502,382Net
      unrealized income (loss) on securities available for sale arising during
      the period, including effect of reclassifications
                      
                      
                      128,180
                      
                      
                      
                      (233,142
                      )Total
      comprehensive income (loss)
                      
                      
                      (1,201,510
                      )
                      
                      
                      269,240Balance,
      end of period
                      
                      $
                      17,881,925
                      
                      
                      $
                      9,796,560




See notes
to the consolidated financial statements.


5


OHIO
      LEGACY CORPCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Three Months Ended March 31, 2010 and 2009(Unaudited)




For
      the Three Months EndedMarch
      31,2010
                
                
                2009Cash
      flows from operating activities:Net
      income (loss)
                
                $
                (1,329,690
                )
                
                $
                502,382Adjustments
      to reconcile net earnings (loss) to net cash from operating
      activities:Depreciation
      and amortization
                
                
                83,904
                
                
                
                103,356Loss
      (gain) on disposition of fixed assets
                
                
                1,506
                
                
                
                -Securities
      amortization and accretion, net
                
                
                48,674
                
                
                
                9,874Origination
      of loans held for sale
                
                
                -
                
                
                
                (634,039
                )Proceeds
      from sales of loans held for sale
                
                
                198,712
                
                
                
                1,357,144Provision
      for loan losses
                
                
                76,772
                
                
                
                181,000Loss
      (gain) on disposition or direct write-down of real estate
      owned
                
                
                (11,543
                )
                
                
                (15,520
                )(Gain)
      loss on sale of securities available for sale
                
                
                -
                
                
                
                (685,950
                )Other
      than temporary impairment of securities
                
                
                -
                
                
                
                111,202Gain
      on sale of loans held for sale
                
                
                (3,465
                )
                
                
                (19,489
                )Stock
      based compensation expense
                
                
                2,143
                
                
                
                6,463Net
      change in:Accrued
      interest receivable and other assets
                
                
                (209,838
                )
                
                
                205,605Accrued
      interest payable and other liabilities
                
                
                (270
                )
                
                
                (839,307
                )Deferred
      loan fees
                
                
                (5,522
                )
                
                
                (4,640
                )Net
      cash from operating activities
                
                
                (1,148,617
                )
                
                
                278,081Cash
      flows from investing activities:Purchases
      of securities available for sale
                
                
                (2,034,779
                )
                
                
                (34,049,155
                )(Purchases)
      or redemptions of federal bank stock
                
                
                -
                
                
                
                133,950Maturities,
      calls and paydowns of securities available for sale
                
                
                1,361,656
                
                
                
                1,353,188Sales
      of securities available for sale
                
                
                -
                
                
                
                27,878,092Proceeds
      from sale of other real estate owned
                
                
                430,648
                
                
                
                694,600Net
      change in loans
                
                
                4,105,987
                
                
                
                5,286,841Acquisition
      of premises and equipment
                
                
                (221,405
                )
                
                
                (637
                )Net
      cash from investing activities
                
                
                3,642,107
                
                
                
                1,296,879Cash
      flows from financing activitiesNet
      change in deposits
                
                
                843,952
                
                
                
                13,743,780Net
      change in repurchase agreements
                
                
                (389,856
                )
                
                
                (197,889
                )Repayment
      of capital lease obligations
                
                
                (7,806
                )
                
                
                (6,649
                )Proceeds
      from short term FHLB advances, net of payments
                
                
                -
                
                
                
                (6,850,000
                )Proceeds
      from FHLB advances
                
                
                -
                
                
                
                3,000,000Repayments
      of FHLB advances
                
                
                (8,500,000
                )
                
                
                (5,500,000
                )Net
      proceeds from issuance of common stock
                
                
                16,714,781
                
                
                
                -Net
      cash from financing activities
                
                
                8,661,071
                
                
                
                4,189,242Net
      change in cash and cash equivalents
                
                
                11,154,561
                
                
                
                5,764,202Cash
      and cash equivalents at beginning of period
                
                
                24,165,790
                
                
                
                11,467,937Cash
      and cash equivalents at end of period
                
                $
                35,320,351
                
                
                $
                17,232,139




For
      the Three Months EndedMarch
      31,2010
                
                
                2009Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Interest
                
                $
                702,853
                
                
                $
                1,162,342Federal
      income taxes
                
                
                -Non-cash
      transactions:Transfer
      of loans to other real estate owned
                
                $
                212,510
                
                
                $
                154,948





See notes
to the consolidated financial statements.


6


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of Operations and
Principles of Consolidation: The consolidated financial statements
include Ohio Legacy Corp (“the Company”) and its wholly-owned subsidiary,
Premier Bank & Trust, National Association (“Bank”) (formerly known as Ohio
Legacy Bank, National Association).  Ohio Legacy Corp is approximately 76%
owned by Excel Bancorp, LLC, a registered bank holding company. 
Intercompany transactions and balances are eliminated in consolidation.
References to the Company include Ohio Legacy, consolidated with its subsidiary,
the Bank.





Ohio
Legacy is a bank holding company incorporated on July 1, 1999 under the laws of
the State of Ohio. The Bank began operations on October 3, 2000. The Bank
provides financial services through its full-service offices in Wooster and
Canton, Ohio. Its primary deposit products are checking, savings and certificate
of deposit accounts, and its primary lending products are residential mortgage,
commercial and installment loans.  Substantially all loans are secured by
specific items of collateral including business and consumer assets and real
estate. Commercial loans are expected to be repaid from cash flow from
operations of businesses. Real estate loans are secured by residential and
commercial real estate. Other financial instruments that potentially represent
concentrations of credit risk include deposit accounts in other financial
institutions and federal funds sold.  On March 23, 2010, the Bank received
approval from the Comptroller of the Currency of its application to commence
fiduciary powers pursuant to 12 USC 92a.Subsequently, the Bank
opted to include “Trust” in its name and announced a name change to Premier Bank
and Trust, N.A. effective April 2010.  The Bank also began to offer
investment brokerage services in April 2010.





These
consolidated financial statements are prepared without audit and reflect all
adjustments that, in the opinion of management, are necessary to present fairly
the financial position of the Company at March 31, 2010, and its results of
operations and cash flows for the periods presented.  All such adjustments
are normal and recurring in nature. The accounting principles used to prepare
the consolidated financial statements are in compliance with U.S. GAAP. However,
the financial statements have been prepared in accordance with the instructions
of Form 10-Q and, therefore, do not purport to contain all necessary financial
and footnote disclosures required by U.S. GAAP.





The
financial information presented in this report should be read in conjunction
with the Company’s Form 10-K for the year ended December 31, 2009, which
includes information and disclosures not presented in this report. 
Reference is made to the accounting policies of the Company described in Note 1
of the Notes to Consolidated Financial Statements.  The Company has
consistently followed those policies in preparing this Form 10-Q.





Use of
Estimates:  To prepare financial statements in conformity with
U.S. GAAP, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and the disclosures provided, and actual results could
differ. The allowance for loan losses, judgments about the other than temporary
impairment of securities, fair value of financial instruments, valuation of
deferred tax assets and the fair value of other real estate owned are
particularly subject to change.





Reclassifications:  Some
items in the prior year financial statements were reclassified to conform to the
current presentation.  The reclassifications had no impact on reported net
income or shareholders’ equity.


7





NOTE
2 – RECENT ACCOUNTING PRONOUNCEMENTS





In
June 2009, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 166, Accounting for Transfers of
Financial Assets, an Amendment of FASB Statement No. 140(Accounting
Standards Codification (ASC) 860).  The new accounting requirement amends
previous guidance relating to the transfers of financial assets and eliminates
the concept of a qualifying special-purpose entity.  ASC 860 must be
applied as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter.  ASC 860 must be applied to transfers occurring on or after the
effective date.   Additionally, on and after the effective date, the
concept of a qualifying special-purpose entity is no longer relevant for
accounting purposes. Therefore, formerly qualifying special-purpose entities
should be evaluated for consolidation by reporting entities on and after the
effective date in accordance with the applicable consolidation guidance. 
 Additionally, the disclosure provisions of ASC 860 were also amended and
apply to transfers that occurred both before and after the effective date of ASC
860.  The adoption of ASC 860 did not have a material effect on the
Company’s consolidated financial statements.





In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R)(ASC810), which amended
guidance for consolidation of variable interest entities by replacing
the  quantitative-based risks and rewards calculation for determining
which enterprise, if any, has a controlling financial interest in a variable
interest entity with an approach focused on identifying which enterprise has the
power to direct the activities of a variable interest entity that most
significantly impact the entity’s economic performance and has (1) the
obligation to absorb losses of the entity or (2) the right to receive
benefits from the entity.   SFAS No. 167 also requires additional
disclosures about an enterprise’s involvement in variable interest
entities.  SFAS No. 167 will be effective as of the beginning of each
reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter. 
 Early adoption is prohibited.  The adoption of SFAS No. 167 did not
have an impact on the Company’s consolidated financial statements.





In
January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06 to
Fair Value Measurements and Disclosures (ASC 820), Improving Disclosures About Fair
Value Measurements.This ASU added new disclosures about transfers
in and out of Level 1and 2 fair value measurements, clarified existing fair
value disclosure requirements about the appropriate level of disaggregation, and
clarified that a description of valuation techniques and inputs used to measure
fair value was required for recurring and nonrecurring Level 2 and 3 fair value
measurements.  The new disclosures and clarifications of existing
disclosures for ASC 820 were effective for interim and annual reporting periods
beginning after December 15, 2009.  Adoption of these disclosure provisions
of the ASU had no impact on the Company's consolidated financial statements.
This ASU also requires disclosures for Level 3 activity about purchases, sales,
issuances, and settlements be presented on a gross basis rather than as a net
number, as currently permitted. These disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. The adoption of these disclosure provisions of the ASU is not expected to
have an effect on the Company’s consolidated financial
statements.


8


Newly
Issued Not Yet Effective Standards





In April
2010, the FASB issued Accounting Standards Update No. 2010-18, Receivables
(Topic 310).  The amendments in this Update improve comparability by
eliminating diversity in practice about the treatment of modifications of loans
accounted for within pools under Subtopic 310-30.  Furthermore, the
amendments clarify guidance about maintaining the integrity of a pool as the
unit of accounting for acquired loans with credit deterioration.  The
amendments to this Update are effective for modifications of loans accounted for
within pools under Subtopic 310-30 occurring in the first interim or annual
period ending on or after July 15, 2010.  The effect of adopting this new
guidance is not expected to be material.





NOTE
3 – STOCK ISSUANCE





On
November 15, 2009, the Company and the Bank entered into a Stock Purchase
Agreement (the “Stock Purchase Agreement”) with Excel Financial, LLC (“Excel
Financial”).  Under the terms of the Stock Purchase Agreement, Excel
Financial agreed to purchase 15.0 million of the Company’s common shares at a
price of $1.00 per share.  As a condition to Excel Financial’s purchase of
the Company’s common shares, the Company agreed to sell a minimum of 1.5 million
of its common shares to investors other than Excel Financial in a private
offering, and to use its best efforts to sell an additional 1.0 million of its
common shares in the same private offering, all at a purchase price of $1.00 per
share.





At a
special meeting held January 8, 2010, the Company’s shareholders approved the
issuance and sale of up to 17,500,000 additional shares of Ohio Legacy common
stock. Shareholder approval was obtained in conjunction with the Stock Purchase
Agreement. At the special meeting, shareholders approved: (1) an amendment to
Ohio Legacy’s articles of incorporation to increase the number of authorized
shares of common stock from 5,000,000 to 22,500,000; (2) the issuance of
15,000,000 shares of common stock to Excel Bancorp LLC (“Excel Bancorp”), an
Ohio limited liability company formed to acquire the shares of Ohio Legacy’s
common stock, pursuant to the Stock Purchase Agreement, and the issuance of up
to 2,500,000 additional shares to other investors in a private offering made in
connection with the sale of shares to Excel Bancorp; and (3) the control share
acquisition by Excel Bancorp of 15,000,000 shares of common stock.





Excel
Financial had engaged consultants and advisors to assist it in this endeavor and
had no other business activity. Although the Company entered into the Stock
Purchase Agreement with Excel Financial, Excel Financial assigned the agreement
to its assignee, Excel Bancorp. The Federal Reserve Board approved Excel
Bancorp’s application to become a registered bank holding company on February
12, 2010, in connection with its acquisition of Ohio Legacy’s common stock.
Following regulatory approval, Ohio Legacy issued 15,000,000 shares of common
stock to Excel Bancorp and 2,500,000 shares of common stock in a private
offering on February 19, 2010, at an issue price of $1.00 per share (the
“Closing”).





The net
proceeds to the Company of the stock offering were $16,714,781 after payment of
various costs totaling $785,219.  Net proceeds were used by the Company to
increase the capital level of the Bank in the amount of $16,184,135 and to repay
notes payable and accrued interest to the organizers of Excel Bancorp and Excel
Financial in the amount of $526,915 for advances made to Excel Financial for
organization and operating expenses related to its pursuit of a bank
acquisition.  The Company accepted the assignment of the notes payable to
the organizers of Excel Bancorp and Excel Financial in exchange for their
agreement to waive a closing condition that required the Bank to maintain a
minimum tier 1 capital level of $5.7 million.


9


As
discussed in Note 10, the Bank entered into a Consent Order in 2009 that
specified achievement of higher capital ratios.  Following the Closing, the
Bank exceeded the minimum capital ratios required under the Consent Order with
the OCC of tier 1 capital of at least 8.75% of adjusted total assets and total
risk-based capital of at least 13.25% of risk-weighted assets. However, until
the Consent Order is terminated, the Bank cannot be classified as
well-capitalized under prompt corrective action provisions.





Various
management and board changes also took place as contemplated by the Stock
Purchase Agreement.





The
issuance of common stock to Excel Bancorp resulted in an “ownership change” of
the Company, as broadly defined in Section 382 of the Internal Revenue Code. As
a result of the ownership change, utilization of the Company’s net operating
loss carryforwards and certain built-in losses under federal income tax laws
will be subject to annual limitation. The annual limitation placed on the
Company’s ability to utilize these potential tax deductions will equal the
product of an applicable interest rate mandated under federal income tax laws
and the Company’s value immediately before the ownership change. The annual
limitation imposed under Section 382 would limit the deduction for both the
carryforward tax attributes and the built-in losses realized within five years
of the date of the ownership change to approximately $93,000 per year. Given the
limited carryforward period assigned to these tax deductions in excess of this
annual limit, some portion of these potential deductions will be lost and,
consequently, the related tax benefits will not be recorded in the financial
statements. See Note 11 for additional information regarding net operating loss
carryforwards.





NOTE
4 – EARNINGS (LOSS) PER SHARE





Basic
earnings (loss) per share is net Income (loss) divided by the weighted average
number of shares outstanding during the period.  Diluted earnings (loss)
per share include the dilutive effect of additional potential shares that may be
issued upon the exercise of stock options and stock warrants.  The
following table details the calculation of basic and diluted earnings (loss) per
share:





For the Three Months EndedMarch 31,2010
                        
                        
                        2009BASIC:Net
      income (loss)
                        
                        $
                        (1,329,690
                        )
                        
                        $
                        502,382Weighted
      average common shares outstanding
                        
                        
                        10,186,786
                        
                        
                        
                        2,214,564Basic
      earnings (loss) per share
                        
                        $
                        (0.13
                        )
                        
                        $
                        0.23DILUTED:Net
      income (loss)
                        
                        $
                        (1,329,690
                        )
                        
                        $
                        502,382Weighted
      average common shares outstanding
                        
                        
                        10,186,786
                        
                        
                        
                        2,214,564Dilutive
      effect of stock options
                        
                        
                        -
                        
                        
                        
                        -Dilutive
      effect of stock warrants
                        
                        
                        -
                        
                        
                        
                        -Total
      common shares and dilutive potential common shares
                        
                        
                        10,186,786
                        
                        
                        
                        2,214,564Diluted
      earnings (loss) per common share
                        
                        $
                        (0.13
                        )
                        
                        $
                        0.23


10


The
following table details, as of March 31, dilutive potential common shares that
were excluded from the computation of diluted earnings per share during the
periods then ended as the effect of their exercise was
anti-dilutive:





Three months ended March 31,2010
                  
                  
                  2009Stock
      options
                  
                  
                  -
                  
                  
                  
                  177,650Stock
      warrants
                  
                  
                  35,000
                  
                  
                  
                  150,000





NOTE
5 – INVESTMENT SECURITIES





The fair
value of available for sale securities and the related gross unrealized gains
and losses recognized in accumulated other comprehensive income (loss) were as
follows:





March 31, 2010Gross
                
                
                GrossAmortized
                
                
                Unrealized
                
                
                Unrealized
                
                
                FairCost
                
                
                Gains
                
                
                Losses
                
                
                ValueAvailable
      for sale, carried at fair value:U.S.
      Government agencies
                
                $
                2,033,345
                
                
                $
                -
                
                
                $
                (1,662
                )
                
                $
                2,031,683Mortgage-backed
      securities issued by U.S. Government-sponsored enterprises
                
                
                25,240,725
                
                
                
                180,212
                
                
                
                (129,468
                )
                
                
                25,291,469Other
      mortgage-backed securities
                
                
                391,853
                
                
                
                -
                
                
                
                (216,068
                )
                
                
                175,785Equity
      securities
                
                
                88,800
                
                
                
                57,800
                
                
                
                -
                
                
                
                146,600Total
                
                $
                27,754,723
                
                
                $
                238,012
                
                
                $
                (347,198
                )
                
                $
                27,645,537





December 31, 2009Gross
                        
                        
                        GrossAmortized
                        
                        
                        Unrealized
                        
                        
                        Unrealized
                        
                        
                        FairCost
                        
                        
                        Gains
                        
                        
                        Losses
                        
                        
                        ValueAvailable
      for sale, carried at fair value:Mortgage-backed
      securities issued by U.S. Government-sponsored enterprises
                        
                        $
                        26,616,829
                        
                        
                        $
                        30,703
                        
                        
                        $
                        (274,597
                        )
                        
                        $
                        26,372,935Other
      mortgage-backed securities
                        
                        
                        423,843
                        
                        
                        
                        -
                        
                        
                        
                        (27,473
                        )
                        
                        
                        396,370Equity
      securities
                        
                        
                        88,800
                        
                        
                        
                        34,000
                        
                        
                        
                        -
                        
                        
                        
                        122,800Total
                        
                        $
                        27,129,472
                        
                        
                        $
                        64,703
                        
                        
                        $
                        (302,070
                        )
                        
                        $
                        26,892,105





All
mortgage-backed securities at both period ends are residential mortgage-backed
securities.





The
carrying amount, unrecognized gains and losses, and fair value of securities
held to maturity were as follows:


March 31, 2010Gross
                          
                          
                          GrossAmortized
                          
                          
                          Unrealized
                          
                          
                          Unrealized
                          
                          
                          FairHeld
      to maturity, carried at amortized cost
                          
                          Cost
                          
                          
                          Gains
                          
                          
                          Losses
                          
                          
                          ValueMunicipal
      securities
                          
                          $
                          2,996,023
                          
                          
                          $
                          78,203
                          
                          
                          $
                          -
                          
                          
                          $
                          3,074,226


11





December 31, 2009Gross
                    
                    
                    GrossAmortized
                    
                    
                    Unrealized
                    
                    
                    Unrealized
                    
                    
                    FairHeld
      to maturity, carried at amortized cost
                    
                    Cost
                    
                    
                    Gains
                    
                    
                    Losses
                    
                    
                    ValueMunicipal
      securities
                    
                    $
                    2,996,826
                    
                    
                    $
                    56,408
                    
                    
                    $
                    (2,494
                    )
                    
                    $
                    3,050,740





The
amortized cost and fair value of the debt securities portfolio are shown by
expected maturity. Expected maturities may differ from contractual maturities
because the loans underlying the mortgage- backed securities generally can be
prepaid without penalty.





March 31, 2010Amortized Cost
                  
                  
                  Fair ValueAvailable
      for SaleU.S.
      Government-sponsored agency enterprisesOne
      to five years
                  
                  $
                  1,521,294
                  
                  
                  $
                  1,520,324Five
      to ten years
                  
                  
                  512,051
                  
                  
                  
                  511,359Beyond
      ten years
                  
                  
                  -
                  
                  
                  
                  -Mortgage
      backed securities
                  
                  
                  25,632,578
                  
                  
                  
                  25,467,254Total
                  
                  $
                  27,665,923
                  
                  
                  $
                  27,498,937Held
      to MaturityOne
      to five years
                  
                  $
                  181,060
                  
                  
                  $
                  184,615Five
      to ten years
                  
                  
                  1,262,778
                  
                  
                  
                  1,314,996Beyond
      ten years
                  
                  
                  1,552,185
                  
                  
                  
                  1,574,615Total
                  
                  $
                  2,996,023
                  
                  
                  $
                  3,074,226





The
following summarizes the investment securities with unrealized losses by
aggregated major security type and length of time in a continuous unrealized
loss position:


12





Less than 12 months
                        
                        
                        12 Months or More
                        
                        
                        TotalFair
                        
                        
                        Unrealized
                        
                        
                        Fair
                        
                        
                        Unrealized
                        
                        
                        Fair
                        
                        
                        UnrealizedMarch 31, 2010:
                        
                        Value
                        
                        
                        Loss
                        
                        
                        Value
                        
                        
                        Loss
                        
                        
                        Value
                        
                        
                        LossAvailable
      for sale:U.S.
      Government agencies
                        
                        $
                        1,527,573
                        
                        
                        $
                        (1,662
                        )
                        
                        
                        
                        
                        
                        
                        
                        $
                        1,527,573
                        
                        
                        $
                        (1,662
                        )Mortgage-backed
      securities issued by U.S. Government-sponsored enterprises
                        
                        
                        11,590,946
                        
                        
                        
                        (117,715
                        )
                        
                        
                        961,374
                        
                        
                        
                        (11,753
                        )
                        
                        
                        12,552,320
                        
                        
                        
                        (129,468
                        )Other
      mortgage-backed securities
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        175,785
                        
                        
                        
                        (216,068
                        )
                        
                        
                        175,785
                        
                        
                        
                        (216,068
                        )Total
                        
                        $
                        13,118,519
                        
                        
                        $
                        (119,377
                        )
                        
                        $
                        1,137,159
                        
                        
                        $
                        (227,821
                        )
                        
                        $
                        14,255,678
                        
                        
                        $
                        (347,198
                        )





Less than 12 months
                          
                          
                          12 Months or More
                          
                          
                          TotalFair
                          
                          
                          Unrealized
                          
                          
                          Fair
                          
                          
                          Unrealized
                          
                          
                          Fair
                          
                          
                          UnrealizedDecember 31, 2009:
                          
                          Value
                          
                          
                          Loss
                          
                          
                          Value
                          
                          
                          Loss
                          
                          
                          Value
                          
                          
                          LossAvailable
      for sale:Mortgage-backed
      securities issued by U.S. Government-sponsored enterprises
                          
                          $
                          15,498,626
                          
                          
                          $
                          (268,671
                          )
                          
                          $
                          273,428
                          
                          
                          $
                          (5,926
                          )
                          
                          $
                          15,772,054
                          
                          
                          $
                          (274,597
                          )Other
      mortgage-backed securities
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          396,370
                          
                          
                          
                          (27,473
                          )
                          
                          
                          396,370
                          
                          
                          
                          (27,473
                          )Total
                          
                          $
                          15,498,626
                          
                          
                          $
                          (268,671
                          )
                          
                          $
                          669,798
                          
                          
                          $
                          (33,399
                          )
                          
                          $
                          16,168,424
                          
                          
                          $
                          (302,070
                          )Held
      to maturity:Municipal
      securities
                          
                          $
                          331,478
                          
                          
                          $
                          (2,494
                          )
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          331,478
                          
                          
                          $
                          (2,494
                          )





Other-Than-Temporary-Impairment





Management
evaluates securities for other-than-temporary impairment (“OTTI”) at least on a
quarterly basis, and more frequently when economic or market conditions warrant
such an evaluation. The investment securities portfolio is evaluated for OTTI by
segregating the portfolio into two general segments and applying the appropriate
OTTI model. Investment securities classified as available for sale or
held-to-maturity are generally evaluated for OTTI under ASC 320.





In
determining OTTI under the ASC 320 model, management considers many factors,
including: (1) the length of time and the extent to which the fair value
has been less than cost, (2) the financial condition and near-term
prospects of the issuer, (3) whether the market decline was affected by
macroeconomic conditions, and (4) whether the entity has the intent to sell
the debt security or more likely than not will be required to sell the debt
security before its anticipated recovery.  The assessment of whether an
other than temporary decline exists involves a high degree of subjectivity and
judgment and is based on the information available to management at a point in
time.





The
second segment of the portfolio uses the OTTI guidance provided by ASC 325 that
is specific to purchased beneficial interests that, on the purchase date, were
rated below AA.  Under the ASC 325 model, the Company compares the present
value of the remaining cash flows as estimated at the preceding evaluation date
to the current expected remaining cash flows.  An OTTI is deemed to have
occurred if there has been an adverse change in the remaining expected future
cash flows.  The Company has no securities that meet this definition as of
March 31, 2010.


13


When OTTI
occurs under either model, the amount of the OTTI recognized in earnings depends
on whether an entity intends to sell the security or it is more likely than not
it will be required to sell the security before recovery of its amortized cost
basis, less any current-period credit loss.  If an entity intends to sell
or it is more likely than not it will be required to sell the security before
recovery of its amortized cost basis, less any current-period credit loss, the
OTTI shall be recognized in earnings equal to the entire difference between the
investment’s amortized cost basis and its fair value at the balance sheet
date.  If an entity does not intend to sell the security and it is not more
likely than not that the entity will be required to sell the security before
recovery of its amortized cost basis less any current-period loss, the OTTI
shall be separated into the amount representing the credit loss and the amount
related to all other factors.  The amount of the total OTTI related to the
credit loss is determined based on the present value of cash flows expected to
be collected and is recognized in earnings.  The amount of the total OTTI
related to other factors is recognized in other comprehensive income, net of
applicable taxes.  The previous amortized cost basis less the OTTI
recognized in earnings becomes the new amortized cost basis of the
investment.





As of
March 31, 2010, the Company’s security portfolio consisted of 42 securities, ten
of which were in an unrealized loss position for less than 12 months and two for
12 months or longer.  The unrealized losses are related to the Company’s
mortgage-backed securities, as discussed below:





Mortgage-backed
securities





At March
31, 2010, 94.8% of the carrying value of mortgage-backed securities held by the
Company were issued by the Government National Mortgage Association (“GNMA”),
which are backed by the full faith and credit of the U.S. government and an
additional 4.5% of the carrying value were issued by the Federal National
Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation
(“FHLMC”), institutions which the government has affirmed its commitment to
support.  Because the decline in fair value is attributable to changes in
interest rates and illiquidity, and not credit quality, and because the Company
does not have the intent to sell these mortgage-backed securities and it is
likely that it will not be required to sell the securities before their
anticipated recovery, the Company does not consider these securities to be
other-than-temporarily impaired at March 31, 2010.





The
Company’s mortgage-backed securities portfolio includes one non-agency security
with a market value of $175,785 which represents an unrealized loss of
approximately $216,068 at March 31, 2010; the estimated market value has been
less than its amortized cost for twelve months or more. This non-agency
mortgage-backed security is rated investment grade.    This
security is senior to several subordinate classes of securities that together
are collateralized by a pool of residential mortgages.  No losses incurred
on the mortgages in the pool have been assigned to the senior classes. 
Although the borrowers are not required to make principal payments during the
initial 10 year period, 61% of the original principal has been repaid as of
March 31, 2010. There are no negative amortization loans in the pool and none of
the loans are subprime, Alt A or similar type of high-default product. Based on
these factors, as of March 31, 2010, the Company believes there is no OTTI and
does not have the intent to sell this security and it is likely that it will not
be required to sell the security before its anticipated
recovery.


14


NOTE
6 – LOANS




Loans, by
collateral type, were as follows at March 31, 2010 and December 31,
2009:




March 31, 2010
                
                
                December 31, 2009Balance
                
                
                Percent
                
                
                Balance
                
                
                PercentResidential
      real estate
                
                $
                33,748,382
                
                
                
                33.6
                
                
                $
                33,147,634
                
                
                
                31.6Multifamily
      real estate
                
                
                5,697,363
                
                
                
                5.7
                
                
                
                5,757,491
                
                
                
                5.5Commercial
      real estate
                
                
                45,308,126
                
                
                
                45.0
                
                
                
                47,639,944
                
                
                
                45.4Construction
                
                
                3,662,063
                
                
                
                3.6
                
                
                
                3,958,572
                
                
                
                3.8Commercial
                
                
                5,712,661
                
                
                
                5.7
                
                
                
                7,673,195
                
                
                
                7.3Consumer
      and home equity
                
                
                6,459,513
                
                
                
                6.4
                
                
                
                6,719,205
                
                
                
                6.4Total
      Loans
                
                
                100,588,108
                
                
                
                100.0
                
                
                
                104,896,041
                
                
                
                100.0Less:  Allowance
      for loan losses
                
                
                (4,033,006
                )
                
                
                
                
                
                
                (3,945,670
                )Net
      deferred loan fees
                
                
                (89,684
                )
                
                
                
                
                
                
                (95,206
                )Loans,
      net
                
                $
                96,465,418
                
                
                
                
                
                
                $
                100,855,165





Approximately
$22,727,000 and $23,436,000 of residential real estate loans were pledged as
collateral for Federal Home Loan Bank advances at March 31, 2010 and December
31, 2009, respectively.





Activity
in the allowance for loan losses for the three months ended March 31 was as
follows:





For the Three Months EndedMarch 31,2010
                  
                  
                  2009Balance,
      January 1
                  
                  $
                  3,945,670
                  
                  
                  $
                  3,398,284Provision
      for loan losses
                  
                  
                  76,772
                  
                  
                  
                  181,000Loans
      charged-off
                  
                  
                  (3,896
                  )
                  
                  
                  (14,919
                  )Recoveries
      of charged-off loans
                  
                  
                  14,660
                  
                  
                  
                  1,530Balance,
      March 31
                  
                  $
                  4,033,206
                  
                  
                  $
                  3,565,895Balance
      as a percentage of total loans
                  
                  
                  4.01
                  %
                  
                  
                  2.86
                  %





Loans
individually considered impaired and nonaccrual loans were as follows at March
31, 2010, and December 31, 2009:





March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009Loans
      past due over 90 days and still accruing interest
                  
                  $
                  2,485
                  
                  
                  $
                  -Nonaccrual
      loans, includes smaller balance homogeneous loans
                  
                  
                  5,734,473
                  
                  
                  
                  5,826,976Impaired
      loans with no allowance for loan losses allocated
                  
                  
                  4,077,059
                  
                  
                  
                  5,826,976Impaired
      loans with allowance for loan loss allocated
                  
                  
                  1,657,414
                  
                  
                  
                  -Amount
      of the allowance for loan losses allocated
                  
                  
                  151,140
                  
                  
                  
                  -


15


NOTE
7 – OTHER REAL ESTATE OWNED





Other
real estate owned was as follows:





March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009Residential
      real estate
                  
                  $
                  1,045,065
                  
                  
                  $
                  1,160,603Commercial
      real estate
                  
                  
                  196,706
                  
                  
                  
                  196,706Land
      development
                  
                  
                  1,727,292
                  
                  
                  
                  1,818,349Total
      other real estate owned
                  
                  $
                  2,969,063
                  
                  
                  $
                  3,175,658





Assets
acquired through or instead of loan foreclosure are initially recorded at fair
value less costs to sell when acquired, establishing a new cost basis. If fair
value declines, a valuation allowance is recorded through expense. Costs after
acquisition are expensed. Expenditures that improve the fair value of the
property are capitalized. It is the Company’s intention to make periodic
reassessments of the value of assets held in this category and record valuation
adjustments or write-downs as the reassessments dictate.  Real estate owned
at March 31, 2010 and December 31, 2009 includes a property placed into
receivership until it can be improved and sold in an orderly
fashion.





NOTE
8 – FAIR VALUE





ASC
820-10 defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. ASC 820-10 also establishes a fair
value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair
values:





Level 1 – Quoted prices (unadjusted)
for identical assets or liabilities in active markets that the entity has the
ability to access as of the measurement date.





Level 2 – Quoted prices (unadjusted)
for similar assets or liabilities in active markets that the entity has the
ability to access as of the measurement date.





Level 3 – Significant unobservable
inputs that reflect a company’s own assumptions about the assumptions that
market participants would use in pricing an asset or liability.





The
Company used the following methods and significant assumptions to estimate the
fair value of each type of financial asset:





Investment
Securities:  The fair values for investment securities are
determined by quoted market prices, if available (Level 1). For securities where
quoted prices are not available, fair values are calculated based on market
prices of similar securities (Level 2). For securities where quoted prices or
market prices of similar securities are not available, fair values are
calculated using discounted cash flows or other market indicators (Level 3).
Discounted cash flows are calculated using spread to swap and LIBOR curves that
are updated to incorporate loss severities, volatility, credit spread and
optionality. During times when trading is more liquid, broker quotes are used
(if available) to validate the model. Rating agency and industry research
reports as well as defaults and deferrals on individual securities are reviewed
and incorporated into the calculations.


16


Impaired Loans and Other
Real Estate:  The fair value of impaired loans with specific
allocations of the allowance for loan losses and other real estate is generally
based on recent real estate appraisals. These appraisals may utilize a single
valuation approach or a combination of approaches including comparable sales and
the income approach. Adjustments are routinely made in the appraisal process by
the appraisers to adjust for differences between the comparable sales and income
data available. Such adjustments are typically significant and result in a Level
3 classification of the inputs for determining fair value.





Assets
measured at fair value on a recurring basis are summarized below:





March 31,
                      
                      
                      December31,2010
                      
                      
                      2009Available for sale
    securities
                      
                      $
                      27,645,537
                      
                      
                      $
                      26,892,105Quoted
      prices on active markets for identical assets (Level 1)Equity
      securities
                      
                      
                      146,600
                      
                      
                      
                      122,800Significant
      other observable inputs (Level 2)U.S.
      government sponsored enterprises
                      
                      
                      2,031,683
                      
                      
                      
                      -Mortgage-backed
      securities issued by U.S. Government-sponsored enterprises
                      
                      
                      25,291,469
                      
                      
                      
                      26,372,935Other
      mortgage backed securities
                      
                      
                      175,785
                      
                      
                      
                      396,370Significant
      unobservable inputs (Level 3)
                      
                      
                      -
                      
                      
                      
                      -Impaired loans
                      
                      $
                      4,399,948
                      
                      
                      $
                      4,670,389Quoted
      prices on active markets for identical assets (Level 1)
                      
                      
                      -
                      
                      
                      
                      -Significant
      other observable inputs (Level 2)
                      
                      
                      -
                      
                      
                      
                      -Significant
      unobservable inputs (Level 3)
                      
                      
                      4,399,948
                      
                      
                      
                      4,670,389Other real estate owned
                      
                      $
                      2,969,063
                      
                      
                      $
                      3,131,658Quoted
      prices on active markets for identical assets (Level 1)
                      
                      
                      -
                      
                      
                      
                      -Significant
      other observable inputs (Level 2)
                      
                      
                      -
                      
                      
                      
                      -Significant
      unobservable inputs (Level 3)
                      
                      
                      2,969,063
                      
                      
                      
                      3,131,658





Impaired
loans, which are measured for impairment using the fair value of the collateral
for collateral dependent loans, had a carrying amount of $4,399,948 after a
specific allocation of the allowance for loan losses of $151,140 at March 31,
2010. New specific loss reserves of $151,140 have been provided for during the
three months ending March 31, 2010.


17


The
carrying amounts and estimated fair values of financial assets and liabilities
at March 31, 2010 are as follows:





March 31, 2010
                  
                  
                  December 31, 2009Carrying
                    Amounts
                  
                  
                  Estimated Fair
                    Value
                  
                  
                  Carrying
                    Amounts
                  
                  
                  Estimated Fair
                    ValueFinancial assets:Cash
      and cash equivalents
                  
                  $
                  35,320,000
                  
                  
                  $
                  35,320,000
                  
                  
                  $
                  24,166,000
                  
                  
                  $
                  24,166,000Certificate
      of deposit in financial institution
                  
                  
                  100,000
                  
                  
                  
                  100,000
                  
                  
                  
                  100,000
                  
                  
                  
                  100,000Securities
      available for sale
                  
                  
                  27,646,000
                  
                  
                  
                  27,646,000
                  
                  
                  
                  26,892,000
                  
                  
                  
                  26,892,000Securities
      held to maturity
                  
                  
                  2,996,000
                  
                  
                  
                  3,074,000
                  
                  
                  
                  2,997,000
                  
                  
                  
                  3,051,000Loans
      held for sale
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  195,000
                  
                  
                  
                  195,000Loans,
      net
                  
                  
                  96,465,000
                  
                  
                  
                  96,304,000
                  
                  
                  
                  100,855,000
                  
                  
                  
                  101,308,000Accrued
      interest receivable
                  
                  
                  470,000
                  
                  
                  
                  470,000
                  
                  
                  
                  413,000
                  
                  
                  
                  413,000Financial
      liabilities:Deposits
                  
                  
                  (140,643,000
                  )
                  
                  
                  (141,305,000
                  )
                  
                  
                  (139,799,000
                  )
                  
                  
                  (140,668,000
                  )Repurchase
      agreements
                  
                  
                  (648,000
                  )
                  
                  
                  (648,000
                  )
                  
                  
                  (1,038,000
                  )
                  
                  
                  (1,038,000
                  )Overnight
      FHLB advances
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -FHLB
      advances
                  
                  
                  (10,000,000
                  )
                  
                  
                  (10,100,000
                  )
                  
                  
                  (18,500,000
                  )
                  
                  
                  (18,638,000
                  )Accrued
      interest payable
                  
                  
                  (107,000
                  )
                  
                  
                  (107,000
                  )
                  
                  
                  (148,000
                  )
                  
                  
                  (148,000
                  )





The
methods and assumptions used to estimate fair value are described as
follows:





Carrying
amount is the estimated fair value for cash and cash equivalents, accrued
interest receivable and payable, noninterest-bearing demand deposits and
variable-rate loans, deposits that reprice frequently and fully, repurchase
agreements, certificates of deposit in financial institutions and overnight FHLB
advances. Security fair values are determined as previously described. For
fixed-rate loans or deposits and for variable-rate loans or deposits with
infrequent repricing or repricing limits, fair value is based on discounted cash
flows using current market rates applied to the estimated life. The fair value
of borrowings is based upon current rates for similar financing over the
remaining terms of the borrowings. It was not practicable to determine the fair
value of federal bank stock due to restrictions placed on its transferability.
The estimated fair value for other financial instruments and off-balance sheet
loan commitments are considered nominal.





NOTE
9 – STOCK BASED COMPENSATION





The
Company granted 150,000 warrants (Director Warrants) to organizers of the
Company at the time of closing of the 2000 Offering.  The Director Warrants
vested in equal percentages each year over a three-year period from the date of
grant.  Each warrant entitles the holder to purchase a share of common
stock at $10.00 per share and will expire ten years from the date of
issuance.  At March 31, 2010, Director Warrants for 35,000 shares granted
to former directors were vested and exercisable.  No warrants have been
exercised to date.


18


In June
2000, the Company’s Board of Directors adopted an Omnibus Stock Option, Stock
Ownership and Long-Term Incentive Plan (“Stock Ownership Plan”) that was amended
in 2002 and 2004.  The Stock Ownership Plan expired on September 14,
2009.  The following types of awards could be granted under the Stock
Ownership Plan to eligible persons:  nonqualified stock options,
incentive stock options and restricted stock.  Under the Stock Ownership
Plan, each nonemployee Director could be granted 2,500 nonqualified options at
the time, or soon after, that person first became a Director. This initial
option grant vested annually in equal amounts over a five-year term.  In
addition, each nonemployee Director could receive an annual grant of up to 1,000
nonqualified options during his or her tenure on the Board, which vested
immediately. No Director grants were made in 2009.  Employee option grants
usually vested three years from the date of grant.  The exercise price of
an option was not less than the fair market value of the underlying common stock
on the date of the grant.





As a
condition to the consummation of the closing of the Stock Purchase Agreement
between the Company and Excel Financial (see Note 3), all outstanding options
and warrants held by the Company’s directors and employees were cancelled and
extinguished without consideration effective February 19, 2010 pursuant to stock
option and warrant cancellation and surrender agreements between the Company and
each of its directors and employees.  As of March 31, 2010, there were
35,000 common shares issuable under the Company’s equity compensation plans,
consisting of warrants to purchase 35,000 common shares (held by former
directors who were not serving on the Board of Directors at the time of the
closing); these warrants expire on October 1, 2010.





The
following table depicts the activity under the Stock Ownership
Plan:





2010WeightedAverageExerciseOptions
                    
                    
                    PriceOutstanding
      at January 1
                    
                    
                    162,300
                    
                    
                    $
                    10.79Granted
                    
                    
                    -Forfeited
                    
                    
                    (162,300
                    )
                    
                    
                    10.79Exercised
                    
                    
                    -Outstanding
      at March 31
                    
                    
                    -
                    
                    
                    
                    -Exercisable
      at March 31
                    
                    
                    -
                    
                    
                    
                    -





NOTE
10 – REGULATORY MATTERS





Banks are
subject to regulatory capital requirements administered by federal banking
agencies. Capital adequacy guidelines and prompt corrective action regulations
involve quantitative measures of assets, liabilities and certain off-balance
sheet items calculated under regulatory accounting practices. Capital amounts
and classifications are also subject to qualitative judgments by regulators.
Prompt corrective action regulations provide five classifications: (i) well
capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv)
significantly undercapitalized; and (v) critically undercapitalized, although
these terms are not used to represent overall financial condition. Failure to
meet capital requirements can initiate regulatory action.


19





The Bank,
through its Board of Directors, agreed to a Consent Order (the “Consent Order”)
with the Bank’s primary federal regulator, the Office of the Comptroller of the
Currency (the “OCC”), dated February 17, 2009. The Consent Order required the
Board of Directors to submit a capital plan to the Assistant Deputy Controller
that included specific plans to achieve and maintain tier 1 capital of at least
8.75% of adjusted total assets and total risk-based capital of at least 13.25%
of risk-weighted assets.





The
Consent Order provides that the OCC has the ability to take any action it deems
appropriate in fulfilling its regulatory and supervisory responsibilities during
the term of the Consent Order or upon the failure of the Bank to comply with the
terms of the Consent Order.   Among the actions that may be taken by
the OCC is the placing of the Bank into receivership.





As
described in Note 3, the Company and the Bank entered into a Stock Purchase
Agreement with Excel Financial.





At
December 31, 2009, the Bank met the definition of critically
undercapitalized.  The transactions contemplated by the Stock Purchase
Agreement were approved by the Company’s shareholders at a special meeting of
shareholders held on January 8, 2010.





After
the closing of the Stock Purchase Agreement and the private sale, the Company
contributed approximately $16.2 million to the capital of the Bank, improving
the Bank’s capital to levels sufficient to meet the capital minimums required by
the Consent Order.  However, until the Consent Order is terminated, the
Bank cannot be classified as well-capitalized under prompt corrective action
provisions.





Actual
and required capital amounts (in thousands) and ratios are presented below at
March 31, 2010:





To Be Well-Capitalized UnderFor Capital
                  
                  
                  Prompt CorrectiveActual
                  
                  
                  Adequacy Purposes
                  
                  
                  Action ProvisionsAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioTotal
      capital to risk-weighted assets
                  
                  
                  19,230
                  
                  
                  
                  20.1
                  %
                  
                  
                  7,645
                  
                  
                  
                  8.00
                  %
                  
                  
                  9,556
                  
                  
                  
                  10.00
                  %Tier
      1 capital to risk-weighted assets
                  
                  
                  17,998
                  
                  
                  
                  18.8
                  %
                  
                  
                  3,822
                  
                  
                  
                  4.00
                  %
                  
                  
                  5,733
                  
                  
                  
                  6.00
                  %Tier
      1 capital to average assets
                  
                  
                  17,998
                  
                  
                  
                  10.9
                  %
                  
                  
                  6,634
                  
                  
                  
                  4.00
                  %
                  
                  
                  8,293
                  
                  
                  
                  5.00
                  %





Note
11 – Income Taxes




The
Company has net operating loss carryforwards of approximately $6,503,000 that
will expire as follows:  $1,419,000 on December 31, 2027, $132,000 on
December 31, 2028, and $4,952,000 on December 31, 2029.  See Note 3 for
information regarding the annual limitations on the use of net operating loss
carryforwards resulting from an “ownership change” as broadly defined in Section
382 of the Internal Revenue Code of 1986, as amended.





At March
31, 2010 and December 31, 2009, a valuation allowance was recorded to reduce the
carrying amount of the Company’s net deferred tax assets to zero.




20




Item
2.  Management’s Discussion and Analysis.





In the
following section, management presents an analysis of Ohio Legacy Corp's
financial condition as of March 31, 2010, and results of operations as of and
for the three months ended March 31, 2010 and 2009.  This discussion is
provided to give shareholders a more comprehensive review of the issues facing
management than could be obtained from an examination of the financial
statements alone.  This analysis should be read in conjunction with the
consolidated financial statements and the accompanying notes included in this
Form 10-Q and the Company’s annual report on Form 10-K for the year ended
December 31, 2009.





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This Form
10-Q, including Management’s Discussion and Analysis of Financial Condition and
Results of Operations, includes “forward-looking statements” within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act which
can be identified by the use of forward-looking terminology, such as “may,”
“might,” “could,” “would,” “believe,” “expect,” “intend,” “plan,” “seek,”
“anticipate,” “estimate,” “project “or “continue” or the negative version of
such terms or comparable terminology.  All statements other than statements
of historical fact included in this Form 10-Q, including statements regarding
our outlook, financial position, results of operation, liquidity, capital
resources and interest rate sensitivity are forward-looking
statements.





The
Private Securities Litigation Reform Act provides a “safe harbor” for
forward-looking statements to encourage companies to provide prospective
information so long as those statements are identified as forward-looking and
are accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
discussed in the forward-looking statements.  We desire to take advantage
of the “safe harbor” provisions of that Act.





Forward-looking
statements speak only as of the date on which they are made and, except as may
be required by law, we undertake no obligation to update any forward-looking
statement to reflect events or circumstances occurring after the date on which
the statement is made.





Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results to be materially different from any future
results expressed or implied by such forward-looking statements.  Although
we believe the assumptions, judgments and expectations reflected in such
forward-looking statements are reasonable, we can give no assurance such
assumptions, judgments and expectations will prove to have been correct. 
Important factors that could cause actual results to differ materially from
those in the forward-looking statements included in this Form 10-Q include, but
are not limited to:





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





·
            rapid
      changes in technology affecting the financial services
      industry;





·
            changes
      in government regulation;





·
            general
      economic and business
conditions;


21





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





·
            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;





·
            our
      ability to retain existing customers and attract new
      customers;





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





·
            the
      adequacy of our allowance for loan losses;
and





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





OVERVIEW
OF STRATEGIC DEVELOPMENTS





During
the first quarter of 2010, the Company completed the issuance of 17,500,000 of
unregistered shares of its common stock to meet the regulatory capital
requirements imposed by the Consent Order issued by the Bank’s principal federal
regulator (See Notes 3 and 10).  As a result of the stock issuance, Excel
Bancorp acquired 76% of the outstanding shares of the Company, new senior
management was installed, and six directors were appointed to fill the unexpired
terms of seven resigning directors.   Following the Closing, the
Company invested $16.2 million of the proceeds of the stock offering in the Bank
as additional capital.





The
following key factors summarize the Company’s financial condition at March 31,
2010 compared to December 31, 2009:





·
            Total
      assets increased $7.5 million from $163.2 million to $170.7
      million;


·
            Total
      shareholders’ equity increased $15.5 million from $2.4 million to $17.9
      million;


·
            Tier
      1 capital for the Bank increased by $15.4 million from $2.6 million to
      $18.0 million;


·
            Net
      loans decreased $4.4 million from $100.9 million to $96.5
      million;


·
            Nonperforming
      assets (including nonaccrual loans, loans past due ninety days and still
      accruing interest and other real estate owned) remained high, but
      decreased slightly from $9.0 million to $8.7
  million;


·
            Total
      deposits increased $843,952 from $139.8 million to $140.6
      million;


·
            Federal
      Home Loan Bank advances totaling $8.5 million were repaid reducing
      outstanding advances from $18.5 million to $10
  million;





The
following key factors summarize our results of operations for the three months
ending March 31, 2010:





·
            The
      Company incurred a net loss of $1.3
million;


·
            Net
      interest income declined by $100,135 compared to the same period in
      2009;


·
            The
      provision for loan loss was $76,772 compared to $181,000 for the same
      period in 2009;


·
            No
      securities gains were recorded during the period compared to $574,748 in
      securities gains recorded for the same period in
  2009;


·
            The
      Company recorded investor expenses of $517,222 for the period in
      connection with the assignment of promissory notes from Excel Financial to
      the Company in connection with the assignment of the Stock Purchase
      Agreement to Excel Bancorp by Excel
Financial;


22





·
            The
      Company incurred other consulting and compensation expenses related to
      services provided by Excel Financial prior to the Closing, for the hiring
      of new management and severance expense associated with employee
      terminations.





The
following forward-looking statements describe our near term
outlook:





·
            Credit
      quality is expected to remain a primary focus of the Company, and costs
      associated with credit administration and collection efforts will remain
      high;


·
            Commercial
      lending,  with an emphasis on commercial and industrial lending,
      and new services in trust, brokerage and wealth management are expected to
      expand;


·
            Operating
      expenses associated with new management and new services are expected to
      be higher than the historical compensation costs at the
      Company;


·
            Noninterest
      income is expected to improve due to the introduction of trust, investment
      and wealth management services.


·
            The
      Bank’s costs associated with its regulatory risk profile including FDIC
      insurance and regulatory examination costs will remain high until it
      improves asset quality and
earnings.





CRITICAL
ACCOUNTING POLICIES





The
preparation of consolidated financial statements and related disclosures in
accordance with U.S. generally accepted accounting principles requires us to
make judgments, assumptions and estimates at a specific point in time that
affect the amounts reported in the accompanying consolidated financial
statements and related notes.  In preparing these financial statements, we
have utilized available information including our past history, industry
standards and the current economic environment, among other factors, in forming
our estimates and judgments of certain amounts included in the consolidated
financial statements, giving due consideration to materiality.  It is
possible that the ultimate outcome as anticipated by management in formulating
our estimates inherent in these financial statements may not materialize. 
Application of the critical accounting policies described below involves the
exercise of judgment and the use of assumptions as to future uncertainties and,
as a result, actual results could differ from these estimates.  In
addition, other companies may utilize different estimates, which may impact the
comparability of our results of operation to similar businesses.





Allowance for loan
losses.  The allowance for loan losses is a valuation allowance for
probable incurred credit losses, increased by the provision for loan losses and
recoveries, and decreased by charge-offs.  We estimate the allowance
balance by considering the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions and other factors.  Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan that, in our
judgment, should be charged off.  Loan losses are charged against the
allowance when we believe the loan balance cannot be collected.





We
consider various factors, including portfolio risk, economic environment and
loan delinquencies, when determining the level of the provision for loan
losses.  We monitor loan quality monthly and use an independent third party
each quarter to review our loan grading system.





Valuation allowance for deferred tax
assets.  Another critical accounting policy relates to valuation of
the deferred tax asset for net operating losses.  Net operating loss
carryforwards of approximately $6,503,000 will expire as
follows:  $1,419,000 on December 31, 2027 and $132,000 on December 31,
2028, and $4,952,000 on December 31, 2029.  A valuation allowance has been
recorded for the related deferred tax asset for these carryforwards and other
net deferred tax assets recorded by the Company to reduce the carrying amount of
these assets to zero.  Additional information is included in Note 3 to our
consolidated financial statements.


23


FINANCIAL
CONDITION – March 31, 2010 compared to December 31, 2009





Assets.At March 31,
2010, total assets increased to $170.7 million, up $7.5 million from $163.2 at
December 31, 2009.  Most notable were the increases to total shareholders’
equity and cash and cash equivalents which increased due to proceeds received on
the sale of common stock.





Cash and Cash Equivalents.Cash and cash equivalents increased to $35.3 million at March 31, 2010,
up $11.1 million from $24.2 million at year-end 2009.  The increase was
directly related to proceeds from a common stock issuance during February
2010.





Securities.Total
securities available for sale had an estimated fair value of $27.6 million at
March 31, 2010, compared to $26.9 million at year-end 2009.  Purchases of
securities available for sale during the first quarter of 2010 totaled $2.0
million, principal repayments totaled $1.4 million, and no securities were sold
during the first quarter.  The portfolio consists primarily of
mortgage-backed securities issued by the GNMA with an original term of 30
years.  The duration of the portfolio including municipal securities
classified as Held-to-Maturity was 4.4 years at March 31, 2010, and the
longer-term characteristics of the portfolio will contribute to increased market
price volatility for any given change in interest rates.  The net
unrealized loss on the securities portfolio was $30,983 at March 31, 2010
compared to net unrealized loss of $183,453 at December 31, 2009.





Loans and Asset Quality.Total loans, net of the allowance for loan loss and deferred loan fees,
decreased $4.4 million to $96.5 million at March 31, 2010 compared to $100.9
million at year-end 2009 principally due to repayments and payoffs of loans
during the quarter.  Loans classified by management as substandard and
special mention represented 12.8% of total loans at March 31, 2010, compared to
12.7% at December 31, 2009, although the balance of classified loans declined by
$423,808 at March 31, 2010 compared to year-end 2009.  Impaired loans
represented 5.7% of total loans at March 31, 2010, and totaled $5,734,473, down
$92,503 from year-end 2009.  Improving asset quality is a prime objective
for management.   Outstanding loan balances are expected to increase
over the remainder of the year through business development
efforts.





Allowance for loan losses.The amount of the allowance for loan loss (“Allowance”) is based on a
combination of actual experiential factors such as historical losses for each
category of loans, information about specific borrowers, and other factors,
including delinquencies, general economic conditions and the outlook for
specific industries, which are more subjective in nature.  The balance of
the Allowance at March 31, 2010, was $4,033,206 compared to $3,945,670 at
year-end 2009.  For the three months ending March 31, 2010, the provision
for loan losses charged to expense was $76,772, loans charged off totaled $3,896
and recoveries on loans previously charged-off totaled $14,660.  The
general allowance allocated to loans not classified by management totaled 2.67%
of non-classified loans at March 31, 2010, compared to 2.58% at year-end
2009.  As a percentage of total loans, the Allowance increased to 4.01% at
March 31, 2010, compared to 3.76% at year-end 2009, and 2.86% at March 31,
2009.  The Allowance for Loan Loss as a percentage of loans not
individually identified as impaired and that excludes the amount of the
Allowance specifically allocated to impaired loans totaled 4.09% at March 31,
2010, compared to 3.98% at December 31, 2009.





Loans are
considered nonperforming when impaired or in nonaccrual status. 
Nonperforming loans totaled $5,734,473 at March 31, 2010, compared to $5,826,976
at year-end 2009.  The amount the Allowance specifically allocated to
impaired loans totaled $151,140 at March 31, 2010; there were no allocations of
the Allowance to impaired loans at year-end 2009.  The provision for loan
losses for the period was the result of additional specific allocations in the
period.


24


Other
Real Estate Owned.Other Real Estate Owned (“OREO”) consisted of twelve properties at March
31, 2010 and totaled $2,969,063, down from $3,175,658 at year-end 2009. 
During the first three months of 2010, one property was transferred to OREO
totaling $212,510, and there were five properties with an aggregate basis of
$419,105 were sold from OREO.





Deposits.Total
deposits increased $843,952 to $140.6 million at March 31, 2010, compared to
year-end 2009.  Core deposits increased to $82.6 million at March 31, 2010,
compared to $82.0 million at year-end 2009.  Certificates of deposit
increased modestly to $58.1 million from $57.8 million at December 31,
2009.  Under applicable FDIC rules and regulations, a less than
well-capitalized insured depository institution may not pay a rate of interest
that significantly exceeds the prevailing rate in the institution's market area
or the prevailing rate in the market area from which the deposit is
accepted.





Federal Home Loan Bank
Advances.Total advances decreased $8.5 million to $10 million at
March 31, 2010, from $18.5 million at year-end 2009.  The weighted average
interest rate on matured advances was 4.05%.  The advances were repaid from
excess liquidity.





Shareholders’ Equity.Shareholders’ Equity increased $15.5 million to $17.9 million at March
31, 2010.  The increase was due to the sale of common stock completed in
February 2010.  Net proceeds of the stock sale totaled $16.7 million. 
Shareholders’ Equity was reduced by $1.3 for the net loss reported for the three
months ending March 31, 2010.





RESULTS
OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2010




The net
loss for the three months ending March 31, 2010, totaled $1,329,690, or a loss
of $0.13 per diluted share compared to net income of $502,382, or $0.23 per
diluted share during the first quarter of 2009.  Average diluted shares
outstanding increased to 10,186,786 shares for the first quarter of 2010
compared to 2,214,564 in average diluted shares outstanding during the same
quarter of 2009.  The increase in average diluted shares outstanding is due
to the issuance of 17,500,000 shares of common stock on February 19,
2010.





The
following table sets forth information relating to the average balance sheet and
reflects the average yield on interest-earning assets and the average cost of
interest-bearing liabilities for the periods indicated.  These yields and
costs are derived by dividing income or expense, on an annualized basis, by the
average balances of interest-earning assets or interest-bearing liabilities for
the periods presented.


25





Three Months Ended March 31,2010
                            
                            
                            2009Average
                            
                            
                            Interest
                            
                            
                            
                            
                            
                            
                            
                            
                            InterestOutstanding
                            
                            
                            Earned/
                            
                            
                            Yield/
                            
                            
                            Average
                            
                            
                            Earned/
                            
                            
                            Yield/(Dollars in Thousands)
                            
                            Balance
                            
                            
                            Paid
                            
                            
                            Rate
                            
                            
                            Balance
                            
                            
                            Paid
                            
                            
                            RateAssetsInterest-earning
      assets:Interest-bearing
      deposits inother financial institutions and federal funds
      sold
                            
                            $
                            27,651
                            
                            
                            $
                            12
                            
                            
                            
                            0.18
                            %
                            
                            $
                            4,602
                            
                            
                            $
                            6
                            
                            
                            
                            0.55
                            %Securities
      available for sale
                            
                            
                            26,539
                            
                            
                            
                            260
                            
                            
                            
                            3.92
                            %
                            
                            
                            32,203
                            
                            
                            
                            401
                            
                            
                            
                            4.90
                            %Securities
      held to maturity
                            
                            
                            2,997
                            
                            
                            
                            29
                            
                            
                            
                            3.81
                            %
                            
                            
                            3,000
                            
                            
                            
                            29
                            
                            
                            
                            3.81
                            %Federal
      agency stock
                            
                            
                            1,267
                            
                            
                            
                            15
                            
                            
                            
                            4.82
                            %
                            
                            
                            1,354
                            
                            
                            
                            16
                            
                            
                            
                            4.86
                            %Loans
      (1)
                            
                            
                            96,991
                            
                            
                            
                            1,504
                            
                            
                            
                            6.29
                            %
                            
                            
                            122,963
                            
                            
                            
                            1,945
                            
                            
                            
                            6.41
                            %Total
      interest-earning assets
                            
                            
                            155,445
                            
                            
                            
                            1,820
                            
                            
                            
                            4.75
                            %
                            
                            
                            164,122
                            
                            
                            
                            2,397
                            
                            
                            
                            5.92
                            %Noninterest-earning
      assets
                            
                            
                            10,428
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            27,423Total
      assets
                            
                            $
                            165,873
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            191,545Liabilities
      and Shareholders' EquityInterest-bearing
      liabilities:Interest-bearing
      demand deposits
                            
                            $
                            9,535
                            
                            
                            $
                            16
                            
                            
                            
                            0.67
                            %
                            
                            $
                            10,031
                            
                            
                            $
                            19
                            
                            
                            
                            0.75
                            %Savings
      accounts
                            
                            
                            16,879
                            
                            
                            
                            37
                            
                            
                            
                            0.90
                            %
                            
                            
                            15,757
                            
                            
                            
                            85
                            
                            
                            
                            2.19
                            %Money
      market accounts
                            
                            
                            40,089
                            
                            
                            
                            86
                            
                            
                            
                            0.87
                            %
                            
                            
                            39,940
                            
                            
                            
                            187
                            
                            
                            
                            1.90
                            %Certificates
      of deposit
                            
                            
                            56,968
                            
                            
                            
                            381
                            
                            
                            
                            2.71
                            %
                            
                            
                            74,714
                            
                            
                            
                            649
                            
                            
                            
                            3.52
                            %Total
      interest-bearing deposits
                            
                            
                            123,471
                            
                            
                            
                            520
                            
                            
                            
                            1.71
                            %
                            
                            
                            140,442
                            
                            
                            
                            940
                            
                            
                            
                            2.72
                            %Other
      Borrowings
                            
                            
                            16,525
                            
                            
                            
                            142
                            
                            
                            
                            3.51
                            %
                            
                            
                            23,240
                            
                            
                            
                            199
                            
                            
                            
                            3.48
                            %Total
      Interest-bearing liabilities
                            
                            
                            139,996
                            
                            
                            
                            662
                            
                            
                            
                            1.92
                            %
                            
                            
                            163,682
                            
                            
                            
                            1,139
                            
                            
                            
                            2.82
                            %Noninterest-bearing
      demand deposits
                            
                            
                            15,320
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            16,849Noninterest-bearing
      liabilities
                            
                            
                            817
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            819Total
      liabilities
                            
                            
                            156,133
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            181,350Shareholders'
      Equity
                            
                            
                            9,740
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            10,195Total
      liabilities and shareholders' equity
                            
                            $
                            165,873
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            191,545Net
      interest income; interest rate spread (2)
                            
                            
                            
                            
                            
                            $
                            1,158
                            
                            
                            
                            2.83
                            %
                            
                            
                            
                            
                            
                            $
                            1,258
                            
                            
                            
                            3.10
                            %Net
      earning assets
                            
                            $
                            15,449
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            440Net
      interest margin (3)
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3.02
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3.12
                            %Average
      interest-earning assets to interest-bearing liabilities
                            
                            
                            1.11
                            
                            
                            
                            X
                            
                            
                            
                            
                            
                            
                            
                            1.00
                            
                            
                            
                            X





(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.


26


Net interest income.For the three months ending March 31, 2010, net interest income was
$1,157,856, down $100,135 from same period in 2009 resulting in a lower net
interest margin which fell  to 3.02% from 3.12%.  The yield on
earning assets declined 1.17% to 4.75% for the first quarter of 2010 from 5.92%
for the comparable period of 2009.  The yield on interest-bearing
liabilities declined 0.90% to 1.92% for the first quarter of 2010 from 2.82% for
the same period in 2009.





Interest Income.Total
interest income for the first quarter of 2010 was $1.8 million, down from $2.4
million for the first quarter of 2009.  A low interest rate environment
combined with lower average loan balances and a larger allocation of funds to
liquid assets yielding only 0.18% contributed to lower interest income
levels.





Interest expense.Interest on deposits declined $419,864 to $519,614 for the first three
months of 2010 compared to the same period in 2009.  The average rate paid
on interest-bearing deposits dropped 1.01% to 1.71%.  Interest expense
related to other borrowings including Federal Home Loan Bank advances declined
by $56,182.





Provision for Loan Loss.The provision for loan loss declined by $104,228 to $76,772 for the first
quarter of 2010 compared to provision expense of $181,000 for the first quarter
of 2009.  The provision for loan loss will fluctuate based on management’s
evaluation of the credit risk and incurred losses in the loan portfolio during
the period.  See also the discussion above for the Allowance for Loan
Losses.





Noninterest income.Noninterest income declined $631,758 to $197,781 for the first quarter of
2010 compared to the same quarter of 2009.  The decline is principally due
to gains totaling $574,748 realized on the sale of $27.9 million in securities
during the first quarter of 2009.  The securities sold in 2009 were
reinvested in GNMA securities with a lower capital risk rating to improve the
Company’s capital levels.  There were no securities sales during the first
quarter of 2010.    Service charges and other fees on deposits
declined $42,756 to $169,430 for the first quarter of 2010.  Gains on the
sale of OREO properties totaled $11,543 for the first quarter of 2010 compared
to $15,520 in gains on sale of OREO, net of direct write-downs of OREO, for the
first quarter of 2009.





Noninterest expense.Noninterest expense increased $959,494 to $2,608,555 for the first
quarter of 2010 compared to $1,649,061 for the first quarter of 2009. 
Significant costs were incurred related to the change in ownership control and
subsequent change in management.  The Company recorded investor expenses of
$517,222 in February 2010 in connection with the assignment of promissory notes
from Excel Financial to the Company in connection with the assignment of the
Stock Purchase Agreement to Excel Bancorp by Excel Financial.   The
investor expenses represent expenses incurred in connection with the pursuit of
an acquisition of a financial institution and development of fiduciary services
in connection with an acquisition.





Salaries
and benefits increased $243,467 to $969,861 for the first quarter of 2010
compared to $726,394 for the first quarter of 2009.  Salaries expense
included incentive payments totaling $143,000 during the first quarter of 2010
paid to newly hired management.  Salaries and benefits expense also
included salary continuation for terminated staff totaling $27,637 and for
departing executive management totaling $82,728.





Professional
fees increased $169,191 to $271,847 for the first quarter of 2010. 
Included in this cost were consulting fees paid to Excel Financial totaled
$140,000 for the period.  The Company also retained experienced problem
loan workout specialists to assist in loan collection efforts.


27


Deposit
expense and insurance increased $75,167 to $200,819 for the first quarter of
2010 compared to the first quarter of 2009.  The costs for FDIC insurance
included in this category increased $74,062 to $159,452 due to the Bank’s risk
profile.





Occupancy
and equipment costs increased $6,045 to $214,699 for the first quarter of
2010.  A new office was opened in St. Clairsville, Ohio, that will serve as
a Trust, Investment and Wealth Management office.





Franchise
tax decreased $28,450 to $9,050 for the first quarter of 2010.  Ohio
franchise tax for financial institutions is assessed based on net worth, and the
lower capital levels at year-end resulted in lower costs for the first
quarter.





Marketing
and advertising expense increased $38,037 to $65,087 for the first quarter of
2010 compared to the same quarter in 2009.  During the first quarter of
2010, the Board of Directors of the Bank approved changing the name of the Bank
to Premier Bank & Trust, National Association.  The Bank opted to
include “Trust” in its name in connection with obtaining fiduciary powers from
the Office of the Comptroller of the Currency.  The Bank also expects to
conduct trust services in several states.  Costs associated with the name
change including logo design, costs associated with the reissuance of credit and
debit cards, and promotional materials totaled approximately
$47,000.





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





There
have been no material changes in the Company’s contractual obligations since
December 31, 2009.





At March
31, 2010, we had no active unconsolidated, related special purpose entities, nor
did we engage in derivatives and hedging contracts, such as interest rate swaps,
that may expose us to liabilities greater than the amounts recorded on the
consolidated balance sheet.  Our investment policy prohibits engaging in
derivatives contracts for speculative trading purposes; however, we may pursue
certain contracts, such as interest rate swaps, in our efforts to execute a
sound and defensive interest rate risk management policy.





LIQUIDITY





Liquidity
refers to our ability to fund loan demand and customers’ deposit withdrawal
needs and to meet other commitments and contingencies. The purpose of liquidity
management is to ensure sufficient cash flow to meet all of our financial
commitments and to capitalize on opportunities for business expansion in the
context of managing the Company’s interest rate risk exposure. This ability
depends on our financial strength, asset quality and the types of deposit and
loan instruments we offer to our customers.





Our
principal sources of funds are deposits, loan and security repayments,
maturities and sales of securities, borrowings from the FHLB and capital
transactions.  Alternative sources of funds include repurchase agreements
and brokered certificates of deposit and the sale of loans.  We are
currently prohibited from using brokered certificates of deposit while operating
under the terms of the Consent Agreement.  While scheduled loan repayments
and maturing investments are relatively predictable, deposit flows and early
loan and security prepayments are more influenced by interest rates, general
economic conditions and competition.  We maintain investments in liquid
assets based upon our assessment of our need for funds, our expected deposit
flows, yields available on short-term liquid assets and the objectives of our
asset/liability management program.




28


We have
implemented a liquidity contingency funding plan that identifies liquidity
thresholds and red flags that may provide evidence of an impending liquidity
crisis.  Additionally, the liquidity contingency plan details specific
actions to be taken by management and the Board of Directors and identifies
sources of emergency liquidity, both asset and liability-based, should we
encounter a liquidity crisis.  We actively monitor our liquidity position
and analyze various scenarios that could impact our ability to access emergency
funding in conjunction with our asset/liability and interest rate risk
management activities.





At March
31, 2010, the balances in cash and cash equivalents were $11.2 million higher
than at year-end.  Cash and cash equivalents represented 20.7% of total
assets at March 31, 2010 compared to 14.8% of total assets at December 31, 2009.
The higher cash and cash equivalent balances at March 31, 2010 was principally
due to the issuance of common stock during February 2010.





CAPITAL
RESOURCES





Total
shareholders’ equity was $17.9 million at March 31, 2010, an increase of $15.5
million from the prior year-end balance.  The increase in equity was due to
issuance of common stock as more fully described in Note 3 to the Consolidated
Financial Statements.  Shareholders’ Equity was reduced by the amount of
the net loss of $1.3 million during the three months ending March 31,
2010.





The Bank
is subject to regulatory capital requirements administered by federal banking
agencies.  Capital adequacy guidelines and prompt corrective action
regulations involve quantitative measures of assets, liabilities and certain
off-balance sheet items calculated under regulatory accounting practices. 
Capital amounts and classifications are also subject to qualitative judgments by
regulators.  Prompt corrective action regulations provide five
classifications: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized, although these
terms are not used to represent overall financial condition. Failure to meet
capital requirements can initiate regulatory action.  At March 31, 2010,
the Bank was adequately capitalized under the provisions of Prompt Corrective
Action.  Until the Consent Order is terminated, the Bank cannot be
classified as well-capitalized even if its capital ratios meet the minimum
capital requirements of a well capitalized institution.  See Note 10 for
more information regarding the Consent Order, the regulatory capital
requirements for the Bank, and the Bank’s capital ratios as of March 31,
2010.





The
payment of dividends by the Bank to the Company and by the Company to
shareholders is subject to restrictions by regulatory agencies.  These
restrictions generally limit dividends to the sum of the current year’s earnings
and the prior two years’ retained earnings, as defined.  In addition,
dividends may not reduce capital levels below the minimum regulatory
requirements as described above.  The Bank cannot not declare dividends
without prior approval from the Comptroller of the Currency in
2010.





Item
3.  Quantitative and Qualitative Disclosures About Market Risk





Not
applicable for Smaller Reporting Companies.




Item  4T. 
Controls and Procedures


As of
March 31, 2010, an evaluation was conducted under the supervision and with the
participation of the Company’s management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934, as amended).  Based on their evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There was no change in the Company’s
internal control over financial reporting that occurred during the Company’s
fiscal quarter ended March 31, 2010, that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


29


PART
II – OTHER INFORMATION




Item
1.  Legal Proceedings.





There are
no matters required to be reported under this item.





Item
1A.  Risk Factors





Not
applicable for Smaller Reporting Companies.





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





As
previously reported on Form 8-K, on November 15, 2009, the Company and the Bank,
entered into a Stock Purchase Agreement (the “Agreement”) with Excel Financial.
Under the terms of the Agreement, Excel agreed to purchase 15.0 million shares
of the Company’s no par value common stock at a price of $1.00 per share. 
As a condition to Excel’s purchase of the Company’s shares, the Company agreed
to sell a minimum of 1.5 million shares of its common stock to investors other
than Excel in a private offering, and to use its best efforts to sell an
additional 1.0 million shares of its common stock in the same private offering,
all at a purchase price of $1.00 per share.





On
February 20, 2010, the Company announced that, effective as of 11:59 p.m. on
Friday, February 19, 2010, the Company closed (i) the sale of 15.0 million
shares of its common stock, pursuant to the Agreement, to Excel Bancorp, LLC,
the assignee of Excel Financial, at a price of $1.00 per share and (ii) the sale
of 2.5 million shares of its common stock to other local investors at a price of
$1.00 per share. The aggregate proceeds from the sales were $17.5 million. 
The proceeds of the offering were used to increase the regulatory capital levels
of the Bank, to reimburse entities that advanced funds to Excel Financial to
pursue an acquisition of a financial institution culminating in the Agreement,
and for legal, accounting and other costs directly associated with the sale of
the securities.





Item
3.  Defaults Upon Senior Securities.





There are
no matters required to be reported under this item.





Item
4.  (Removed and Reserved)





Not
Applicable





Item
5.  Other Information.





There are
no matters required to be reported under this item.


30


Item
6.  Exhibits.





INDEX
TO EXHIBITS




The
following exhibits are included in this Report on Form 10-Q or are incorporated
herein by reference as noted in the following table:




Exhibit
                Number
              Description of Exhibit2.1
              Stock
      Purchase Agreement, dated as of November 15, 2009, by and among Excel
      Financial, LLC, Ohio Legacy Corp and Ohio Legacy Bank, National
      Association (incorporated herein by reference to Exhibit 99.2 to Ohio
      Legacy Corp’s Current Report on Form 8-K filed on November 16, 2009 (File
      No. 0-31673))3.1
              Second
      Amended and Restated Articles of Incorporation of Ohio Legacy Corp as
      filed with the Ohio Secretary of State on August 5, 2003 (incorporated
      herein by reference to Exhibit 3.1 to Ohio Legacy Corp’s Quarterly Report
      on Form 10QSB for the fiscal quarter ended June 30, 2003 (File No.
      0-31673))3.2
              Amendment
      to Article Fourth of the Second Amended and Restated Articles of
      Incorporation of Ohio Legacy Corp as filed with the Ohio Secretary of
      State on February 5, 2010 (filed herewith)3.3
              Code
      of Regulations of Ohio Legacy Corp (incorporated herein by reference to
      Exhibit 3.2 to Ohio Legacy Corp’s Annual Report on Form 10KSB for the
      fiscal year ended December 31, 2003 (File No. 0-31673))3.4
              Amendment
      No. 1 to Code of Regulations of Ohio Legacy Corp (incorporated herein by
      reference to Exhibit 3.2 to Ohio Legacy Corp’s Annual Report on Form 10KSB
      for the fiscal year ended December 31, 2003 (File No.
      0-31673))4.1
              Form
      of Ohio Legacy Corp Organizer Stock Purchase Warrant (incorporated herein
      by reference to Exhibit 4.3 to Ohio Legacy Corp’s Registration Statement
      on Form SB-2 filed on June 30, 2000 (File No.
  333-38328))10.1*
              Ohio
      Legacy Corp Omnibus Stock Option, Stock Ownership and Long Term Incentive
      Plan (incorporated herein by reference to Exhibit 10.1 to Ohio Legacy
      Corp’s Registration Statement on Form SB-2 filed on June 30, 2000 (File
      No. 333-38328))10.2*
              2002
      Amendment to Ohio Legacy Corp Omnibus Stock Option, Stock Ownership and
      Long Term Incentive Plan (incorporated herein by reference to Exhibit 4.2
      to Ohio Legacy Corp’s Registration Statement on Form S-8 filed on May 22,
      2002 (File No. 333-88842))10.3*
              2004
      Amendment to Ohio Legacy Corp Omnibus Stock Option, Stock Ownership and
      Long Term Incentive Plan (incorporated herein by reference to Exhibit 4.4
      to Ohio Legacy Corp’s Annual Report on Form 10KSB for the fiscal year
      ended December 31, 2003 (File No.
0-31673))


31




10.4*
            Amended
      and Restated Employment Agreement, dated as of May 24, 2005, by and among
      Ohio Legacy Corp, Ohio Legacy Bank, N.A., and Michael D. Kramer
      (incorporated herein by reference to Exhibit 10.11 to Ohio Legacy Corp’s
      Current Report on Form 8-K filed May 26, 2005 (File No.
      0-31673))10.5*
            Change
      in Control Agreement, dated as of December 18, 2007, by and between Ohio
      Legacy Bank and Gregory A. Spradlin (incorporated herein by reference to
      Exhibit 10.13 to Ohio Legacy Corp’s Annual Report on Form 10KSB for the
      fiscal year ended December 31, 2007 (File No. 0-31673))10.6*
            Change
      in Control Agreement, dated as of February 4, 2009, by and between Ohio
      Legacy Bank and Vanessa Richards (incorporated herein by reference to
      Exhibit 10.8 to Ohio Legacy Corp’s Annual Report on Form 10-K for the
      fiscal year ended December 31, 2008 (File No. 0-31673))10.7*
            Form
      of Stock Option and Warrant Cancellation and Surrender Agreement,
      effective as of February 19, 2010, by and between Ohio Legacy Corp and
      each of its directors and executive officers (filed
    herewith)10.8*
            Termination
      Agreement, effective as of February 19, 2010, by and between Ohio Legacy
      Corp D. Michael Kramer (filed herewith)10.9*
            Termination
      Agreement, effective as of February 19, 2010, by and between Ohio Legacy
      Corp and Vanessa Richards (filed herewith)10.10*
            Termination
      Agreement, effective as of February 19, 2010, by and between Ohio Legacy
      Corp and Gregory A. Spradlin (filed herewith)11
            Statement
      Regarding Computation of Earnings per Share (Incorporated by reference to
      Note 4 of this Form 10-Q)21
            Subsidiary
      of Ohio Legacy Corp23
            Consent
      of Independent Registered Public Accounting Firm31.1
            Rule
      13a-14(a)/15d-14(a) Certification (Principal Executive
      Officer)31.2
            Rule
      13a-14(a)/15d-14(a) Certification (Principal Financial
      Officer)32.1
            Section
      1350 Certification (Principal Executive Officer and Principal Financial
      Officer)







* Denotes
management contract or compensatory arrangement.




32




SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





OHIO
      LEGACY CORPDate:  May
      17, 2010By:
                /s/ Rick L. HullRick
      L. HullPresident
      and Chief Executive Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





By:
            /s/ Rick L. HullRick
      L. Hull, President and Chief Executive Officer and
Director(principal
      executive officer)Date:
            May
      17, 2010By:
            /s/ Jane MarshJane
      Marsh, Senior Vice President, Chief Financial Officer and
      Treasurer(principal
      financial officer and principal accounting officer)Date:
            May
      17, 2010By:
            /s/ Wilbur R. RoatWilbur
      R. Roat, Chairman of the Board and DirectorDate:
            May
      17, 2010By:
            /s/ Louis AltmanLouis
      Altman, DirectorDate:
            May
      17, 2010By:
            /s/ Robert F. BeldenRobert
      F. Belden, DirectorDate:
            May
      17, 2010By:
            /s/ Bruce A. Cassidy, Sr.Bruce
      A. Cassidy, DirectorDate:
            May
      17, 2010By:
            /s/Heather L. DavisHeather
      L. Davis, DirectorDate:
            May
      17, 2010


33




By:
            /s/ J. Edward DiamondJ.
      Edward Diamond, DirectorDate:
            May
      17, 2010By:
            /s/  Denise M.
    PenzDenise
      M. Penz, DirectorDate:
            May
      17, 2010By:
            /s/ Michael S. SteinerMichael
      S. Steiner, DirectorDate:
            May
      17, 2010By:
            /s/ Frank WenthurFrank
      Wenthur, DirectorDate:
            May
      17, 2010By:
            /s/ David B. WursterDavid
      B. Wurster, DirectorDate:
            May
      17, 2010


34