##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 000-31673
 OHIO LEGACY CORP
   
   
   
   
  þ o
  o þ




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PagePART I - FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis
    
    
    15Item 3. Controls and Procedures
    
    
    24PART II - OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26EX-31.1 Certification 302 - CEOEX-31.2 Certification 302 - CFOEX-32.1 Certifications - 906 - CEO and CFO
  2.




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
  
 June 30,
    
    December 31,2005
    
    2004(unaudited)ASSETSCash and due from banks
    
    $
    5,855,510
    
    
    $
    4,571,131Federal funds sold and interest-bearing deposits in financial institutions
    
    
    5,184,938
    
    
    
    12,418,192Cash and cash equivalents
    
    
    11,040,448
    
    
    
    16,989,323Certificate of deposit in financial institution
    
    
    100,000
    
    
    
    Securities available for sale
    
    
    38,076,236
    
    
    
    39,357,929Securities held to maturity (fair value of $641,000 and $640,000
at June 30, 2005, and December 31, 2004)
    
    
    644,995
    
    
    
    647,981Loans, net of allowance of $1,215,760 and $1,263,655 at
June 30, 2005 and December 31, 2004
    
    
    145,657,797
    
    
    
    132,084,072Federal bank stock
    
    
    1,455,500
    
    
    
    1,375,650Premises and equipment, net
    
    
    2,676,057
    
    
    
    2,269,068Intangible asset
    
    
    557,075
    
    
    
    669,174Accrued interest receivable and other assets
    
    
    1,795,231
    
    
    
    1,658,860Total assets
    
    $
    202,003,339
    
    
    $
    195,052,057LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    12,901,249
    
    
    $
    11,914,867Interest-bearing demand
    
    
    10,088,823
    
    
    
    13,262,252Savings
    
    
    47,251,108
    
    
    
    43,847,951Certificates of deposit
    
    
    92,778,488
    
    
    
    88,617,541Total deposits
    
    
    163,019,668
    
    
    
    157,642,611Federal Home Loan Bank advances
    
    
    16,550,000
    
    
    
    15,295,144Subordinated debentures
    
    
    3,325,000
    
    
    
    3,325,000Capital lease obligations
    
    
    964,260
    
    
    
    968,712Accrued interest payable and other liabilities
    
    
    556,942
    
    
    
    580,216Total liabilities
    
    
    184,415,870
    
    
    
    177,811,683SHAREHOLDERS EQUITYPreferred stock, no par value, 500,000 shares authorized,
none outstanding
    
    
    
    
    
    
    Common stock, no par value, 5,000,000 shares authorized,
2,138,780 and 2,121,220 shares issued and outstanding at
June 30, 2005, and December 31, 2004, respectively
    
    
    17,909,785
    
    
    
    17,734,155Accumulated deficit
    
    
    (16,585
    )
    
    
    (282,585
    )Accumulated other comprehensive loss
    
    
    (305,731
    )
    
    
    (211,196
    )Total shareholders equity
    
    
    17,587,469
    
    
    
    17,240,374Total liabilities and shareholders equity
    
    $
    202,003,339
    
    
    $
    195,052,057
  3.




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##### Table of Contents



For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Interest income:Loans, including fees
    
    $
    2,357,997
    
    
    $
    1,981,839
    
    
    $
    4,476,408
    
    
    $
    3,787,288Securities
    
    
    373,466
    
    
    
    314,070
    
    
    
    767,168
    
    
    
    670,436Interest-bearing deposits and federal funds sold
and dividends on federal bank stock
    
    
    47,796
    
    
    
    24,875
    
    
    
    128,263
    
    
    
    50,808Total interest income
    
    
    2,779,259
    
    
    
    2,320,784
    
    
    
    5,371,839
    
    
    
    4,508,532Interest expense:Deposits
    
    
    928,416
    
    
    
    731,768
    
    
    
    1,774,594
    
    
    
    1,470,803Federal Home Loan Bank advances
    
    
    93,421
    
    
    
    115,211
    
    
    
    184,307
    
    
    
    204,145Subordinated debentures
    
    
    70,722
    
    
    
    70,722
    
    
    
    141,444
    
    
    
    141,444Capital leases
    
    
    37,766
    
    
    
    38,094
    
    
    
    75,618
    
    
    
    76,258Total interest expense
    
    
    1,130,325
    
    
    
    955,795
    
    
    
    2,175,963
    
    
    
    1,892,650Net interest income
    
    
    1,648,934
    
    
    
    1,364,989
    
    
    
    3,195,876
    
    
    
    2,615,882Provision for loan losses
    
    
    15,000
    
    
    
    150,000
    
    
    
    107,046
    
    
    
    235,000Net interest income after provision for loan losses
    
    
    1,633,934
    
    
    
    1,214,989
    
    
    
    3,088,830
    
    
    
    2,380,882Noninterest income:Service charges and other fees
    
    
    128,050
    
    
    
    112,433
    
    
    
    254,287
    
    
    
    200,365Gain on sales of securities available for sale, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,147Gain on sale of loans
    
    
    
    
    
    
    
    
    
    
    9,782
    
    
    
    Loss on disposal of fixed asset
    
    
    (4,424
    )
    
    
    
    
    
    
    (4,424
    )
    
    
    Gain on sale of repossessed assets
    
    
    7,000
    
    
    
    
    
    
    
    7,000
    
    
    
    Other income
    
    
    5,316
    
    
    
    2,271
    
    
    
    10,793
    
    
    
    4,557Total noninterest income
    
    
    135,942
    
    
    
    114,704
    
    
    
    277,438
    
    
    
    218,069Noninterest expense:Salaries and benefits
    
    
    721,531
    
    
    
    485,903
    
    
    
    1,325,004
    
    
    
    950,605Occupancy and equipment
    
    
    196,174
    
    
    
    151,177
    
    
    
    397,097
    
    
    
    301,460Professional fees
    
    
    138,164
    
    
    
    108,656
    
    
    
    275,717
    
    
    
    196,623Franchise tax
    
    
    62,213
    
    
    
    58,356
    
    
    
    133,513
    
    
    
    121,406Data processing
    
    
    147,950
    
    
    
    110,567
    
    
    
    310,225
    
    
    
    211,492Marketing and advertising
    
    
    43,056
    
    
    
    39,756
    
    
    
    81,670
    
    
    
    83,653Stationery and supplies
    
    
    28,128
    
    
    
    21,543
    
    
    
    59,826
    
    
    
    38,961Intangible asset amortization
    
    
    54,766
    
    
    
    
    
    
    
    112,099
    
    
    
    Other expenses
    
    
    149,916
    
    
    
    127,735
    
    
    
    269,646
    
    
    
    246,751Total noninterest expense
    
    
    1,541,898
    
    
    
    1,103,693
    
    
    
    2,964,797
    
    
    
    2,150,951Earnings before income tax expense
    
    
    227,978
    
    
    
    226,000
    
    
    
    401,471
    
    
    
    448,000Income tax expense
    
    
    76,978
    
    
    
    
    
    
    
    135,471
    
    
    
    NET EARNINGS
    
    
    151,000
    
    
    
    226,000
    
    
    
    266,000
    
    
    
    448,000Other comprehensive income (loss), net of tax
    
    
    210,722
    
    
    
    (997,173
    )
    
    
    (94,535
    )
    
    
    (720,381
    )Comprehensive income (loss)
    
    $
    361,722
    
    
    $
    (771,173
    )
    
    $
    171,465
    
    
    $
    (272,381
    )Basic earnings per share
    
    $
    0.07
    
    
    $
    0.11
    
    
    $
    0.12
    
    
    $
    0.21Diluted earnings per share
    
    
    0.07
    
    
    
    0.10
    
    
    
    0.12
    
    
    
    0.21
  4.




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For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Shareholders equity, beginning of period
    
    $
    17,186,617
    
    
    $
    16,553,459
    
    
    $
    17,240,374
    
    
    $
    16,044,467Net earnings
    
    
    151,000
    
    
    
    226,000
    
    
    
    266,000
    
    
    
    448,000Other comprehensive income (loss), net of tax:Reclassification adjustment for amounts
realized on securities sales included in
net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,147
    )Net unrealized gain (loss) on available for sale
securities arising during the period
    
    
    210,722
    
    
    
    (997,173
    )
    
    
    (94,535
    )
    
    
    (707,234
    )Other comprehensive income (loss)
    
    
    210,722
    
    
    
    (997,173
    )
    
    
    (94,535
    )
    
    
    (720,381
    )Proceeds from exercise of stock warrants
    
    
    37,600
    
    
    
    17,000
    
    
    
    165,600
    
    
    
    27,200Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    8,500
    
    
    
    Income tax benefit from exercise of stock options
    
    
    1,530
    
    
    
    
    
    
    
    1,530
    
    
    
    Shareholders equity, end of period
    
    $
    17,587,469
    
    
    $
    15,799,286
    
    
    $
    17,587,469
    
    
    $
    15,799,286
  5.




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##### Table of Contents



For the Six Months Ended June 30,2005
    
    2004Cash flows from operating activities:Net earnings
    
    $
    266,000
    
    
    $
    448,000Adjustments to reconcile net earnings to net cash from
operating activities:Depreciation and amortization, net
    
    
    274,306
    
    
    
    129,449Securities amortization and accretion, net
    
    
    77,890
    
    
    
    89,698Federal Home loan Bank (FHLB) stock dividends
    
    
    (19,800
    )
    
    
    (11,700
    )Provision for loan losses
    
    
    107,046
    
    
    
    235,000Gain on sale of loans
    
    
    (9,782
    )
    
    
    Gain on sales of securities available for sale
    
    
    
    
    
    
    (13,147
    )Loss on disposal of fixed asset
    
    
    4,424
    
    
    
    Accretion of fair value purchase adjustments
    
    
    (79,242
    )
    
    
    Net change in:Accrued interest receivable and other assets
    
    
    (99,814
    )
    
    
    (221,977
    )Accrued interest payable and other liabilities
    
    
    (23,274
    )
    
    
    (117,052
    )Deferred loan fees
    
    
    35,962
    
    
    
    (2,952
    )Net cash provided by operating activities
    
    
    533,716
    
    
    
    535,319Cash flows from investing activities:Purchases of securities available for sale
    
    
    (3,459,730
    )
    
    
    (3,040,773
    )Purchases of certificates of deposit
    
    
    (100,000
    )
    
    
    Maturities, calls and paydowns of securities available for sale
    
    
    4,536,957
    
    
    
    4,097,869Proceeds from sale of securities available for sale
    
    
    
    
    
    
    2,966,602Proceeds from sale of loans
    
    
    257,418
    
    
    
    Purchases of federal bank stock
    
    
    (60,050
    )
    
    
    (199,150
    )Net change in loans
    
    
    (13,964,369
    )
    
    
    (14,617,935
    )Participation loans purchased
    
    
    
    
    
    
    (5,000,000
    )Purchases of premises and equipment
    
    
    (573,620
    )
    
    
    (28,072
    )Net cash used by investing activities
    
    
    (13,363,394
    )
    
    
    (15,821,459
    )Cash flows from financing activities:Net change in deposits
    
    
    5,456,299
    
    
    
    5,566,003Repayment of capital lease obligations
    
    
    (4,452
    )
    
    
    (3,810
    )Proceeds from exercise of stock warrants
    
    
    165,600
    
    
    
    27,200Proceeds from exercise of stock options
    
    
    8,500
    
    
    
    Proceeds from overnight FHLB advances, net of repayments
    
    
    4,500,000
    
    
    
    4,000,000Proceeds from FHLB advances
    
    
    
    
    
    
    5,000,000Repayments of FHLB advances and other borrowed funds
    
    
    (3,245,144
    )
    
    
    (727,766
    )Net cash provided by financing activities
    
    
    6,880,803
    
    
    
    13,861,627Net change in cash and cash equivalents
    
    
    (5,948,875
    )
    
    
    (1,424,513
    )Cash and cash equivalents at beginning of period
    
    
    16,989,323
    
    
    
    8,184,819Cash and cash equivalents at end of period
    
    $
    11,040,448
    
    
    $
    6,760,306Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    2,168,161
    
    
    $
    1,937,135Federal income taxes
    
    
    180,000
    
    
    
    59,000
  6.




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations and Principles of Consolidation
    Use of Estimates
 Reclassifications
 Income Taxes
 Stock-based compensation
  7.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net earnings as reported
    
    $
    151,000
    
    
    $
    226,000
    
    
    $
    266,000
    
    
    $
    448,000Deduct stock-based compensation expense
determined under fair value based method,
net of tax effects
    
    
    (161,000
    )
    
    
    (60,000
    )
    
    
    (208,000
    )
    
    
    (190,000
    )Pro forma net earnings (loss)
    
    $
    (10,000
    )
    
    $
    166,000
    
    
    $
    58,000
    
    
    $
    258,000Basic earnings (loss) per share as reported
    
    $
    0.07
    
    
    $
    0.11
    
    
    $
    0.12
    
    
    $
    0.21Pro forma basic earnings (loss) per share
    
    
    (0.00
    )
    
    
    0.08
    
    
    
    0.03
    
    
    
    0.12Diluted earnings (loss) per share as reported
    
    $
    0.07
    
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.21Pro forma diluted earnings (loss) per share
    
    
    (0.00
    )
    
    
    0.08
    
    
    
    0.03
    
    
    
    0.12
  2005
    
    2004Fair value, calculated
    
    $
    5.59
    
    
    $
    6.25Exercise price
    
    $
    12.00
    
    
    $
    12.00Risk-free interest rate, 10-year Treasury
    
    
    4.19
    %
    
    
    4.05
    %Expected stock price volatility
    
    
    25.91
    %
    
    
    32.99
    %Expected dividend rate
    
    None
    
    NoneExpected life
    
    10 years
    
    10 years
  8.




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##### Table of Contents



NOTE 2  EARNINGS PER SHARE
  Three months ended
    
    Six months endedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004BASIC:Net earnings
    
    $
    151,000
    
    
    $
    226,000
    
    
    $
    266,000
    
    
    $
    448,000Weighted average common shares outstanding
    
    
    2,135,439
    
    
    
    2,119,138
    
    
    
    2,129,171
    
    
    
    2,118,944Basic earnings per share
    
    $
    0.07
    
    
    $
    0.11
    
    
    $
    0.12
    
    
    $
    0.21DILUTED:Net earnings
    
    $
    151,000
    
    
    $
    226,000
    
    
    $
    266,000
    
    
    $
    448,000Weighted average common shares outstanding
    
    
    2,135,439
    
    
    
    2,119,138
    
    
    
    2,129,171
    
    
    
    2,118,944Dilutive effect of stock options
    
    
    21,300
    
    
    
    18,974
    
    
    
    33,435
    
    
    
    19,297Dilutive effect of stock warrants
    
    
    34,652
    
    
    
    42,850
    
    
    
    55,789
    
    
    
    43,408Total common shares and dilutive potential
common shares
    
    
    2,191,391
    
    
    
    2,180,962
    
    
    
    2,218,395
    
    
    
    2,181,649Diluted earnings per share
    
    $
    0.07
    
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.21
  Three months ended
    
    Six months endedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Stock options
    
    
    143,250
    
    
    
    58,500
    
    
    
    
    
    
    
    58,500
  9.




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##### Table of Contents



NOTE 3  LOANS
  June 30, 2005
    
    December 31, 2004Balance
    
    Percent
    
    Balance
    
    PercentResidential real estate
    
    $
    55,031,411
    
    
    
    37.4
    %
    
    $
    50,728,231
    
    
    
    38.0
    %Multifamily residential real estate
    
    
    9,955,254
    
    
    
    6.8
    
    
    
    10,147,946
    
    
    
    7.6Commercial real estate
    
    
    45,816,814
    
    
    
    31.2
    
    
    
    36,364,724
    
    
    
    27.2Construction
    
    
    10,948,395
    
    
    
    7.4
    
    
    
    13,315,449
    
    
    
    10.0Commercial
    
    
    13,411,447
    
    
    
    9.1
    
    
    
    10,709,713
    
    
    
    8.0Consumer and home equity
    
    
    11,914,538
    
    
    
    8.1
    
    
    
    12,250,004
    
    
    
    9.2Total loans
    
    
    147,077,859
    
    
    
    100.0
    %
    
    
    133,516,067
    
    
    
    100.0
    %Less: Allowance for loan losses
    
    
    (1,215,760
    )
    
    
    
    
    
    
    (1,263,655
    )Net deferred loan fees
    
    
    (204,302
    )
    
    
    
    
    
    
    (168,340
    )Loans, net
    
    $
    145,657,797
    
    
    
    
    
    
    $
    132,084,072
   For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Balance, beginning of period
    
    $
    1,344,001
    
    
    $
    1,188,749
    
    
    $
    1,263,655
    
    
    $
    1,121,913Provision for loan losses
    
    
    15,000
    
    
    
    150,000
    
    
    
    107,046
    
    
    
    235,000Loans charged-off
    
    
    (143,649
    )
    
    
    (114,800
    )
    
    
    (155,870
    )
    
    
    (134,600
    )Recoveries
    
    
    408
    
    
    
    1,604
    
    
    
    929
    
    
    
    3,240Balance, end of period
    
    $
    1,215,760
    
    
    $
    1,225,553
    
    
    $
    1,215,760
    
    
    $
    1,225,553Allowance for loan losses, percent of total loans
    
    
    0.83
    %
    
    
    0.95
    %
  June 30,
    
    December 31,2005
    
    2004Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    Nonaccrual loans
    
    
    385,865
    
    
    
    1,059,560Impaired loans, some also included in nonaccrual loans
    
    $
    321,000
    
    
    $
    974,000Amount of the allowance for loan losses allocated to
impaired loans
    
    
    60,000
    
    
    
    120,000
 10.




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##### Table of Contents



NOTE 3  LOANS
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Interest income foregone on nonaccrual loans
    
    $
    7,654
    
    
    $
    499
    
    
    $
    28,790
    
    
    $
    1,235Average of impaired loans during the period
    
    $
    338,949
    
    
    $
    112,500
    
    
    $
    700,232
    
    
    $
    94,000Interest income recognized during impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash-basis interest income recognized
during impairment
    
    
    6,747
    
    
    
    
    
    
    
    6,747
    
    
    
    
  June 30,
    
    December 31,2005
    
    2004Commitments to make loans:Variable-rate
    
    $
    375,000
    
    
    $
    5,471,000Fixed-rate
    
    
    
    
    
    
    Unused lines of credit, variable-rate
    
    $
    18,234,512
    
    
    $
    17,015,000
  NOTE 4  STOCK-BASED COMPENSATION
  11.




---



##### Table of Contents



NOTE 4  STOCK-BASED COMPENSATION
 
 2005
    
    2004Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseOptions
    
    Price
    
    Options
    
    PriceOutstanding at January 1
    
    
    188,000
    
    
    $
    10.22
    
    
    
    139,250
    
    
    $
    9.51Granted
    
    
    89,500
    
    
    
    12.00
    
    
    
    58,500
    
    
    
    12.00Forfeited
    
    
    (750
    )
    
    
    10.83
    
    
    
    (250
    )
    
    
    8.50Exercised
    
    
    (1,000
    )
    
    
    8.50
    
    
    
    
    
    
    
    Outstanding at June 30
    
    
    275,750
    
    
    $
    10.80
    
    
    
    197,500
    
    
    $
    10.25Exercisable at June 30
    
    
    136,500
    
    
    $
    10.64
    
    
    
    54,000
    
    
    $
    10.47Weighted average remaining
contractual life
    
    8.2 years
    
    
    
    
    
    8.6 years
  Outstanding
    
    ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Number
    
    Life (years)
    
    Price
    
    Number
    
    Price$8.50 - $9.70
    
    
    46,000
    
    
    
    7.7
    
    
    $
    8.59
    
    
    
    10,000
    
    
    $
    8.50$10.00
    
    
    86,500
    
    
    
    6.6
    
    
    
    10.00
    
    
    
    75,500
    
    
    
    10.00$12.00
    
    
    143,250
    
    
    
    9.4
    
    
    
    12.00
    
    
    
    51,000
    
    
    
    12.00275,750
    
    
    
    8.2
    
    
    $
    10.80
    
    
    
    136,500
    
    
    $
    10.64
  12.




---



##### Table of Contents



NOTE 5  STOCK WARRANTS
   13.




---



##### Table of Contents



Item 2. Managements Discussion and Analysis
  FORWARD-LOOKING STATEMENTS
  
    
    anticipated changes in industry conditions created by state and federal
legislation and regulations;
    
    anticipated changes in general interest rates and the impact of future interest
rate changes on our profitability, capital adequacy and the fair value of our financial
assets and liabilities;
    
    retention of our existing customer base and our ability to attract new customers;
    
    the development of new products and services and their success in the marketplace;
    
    the adequacy of the allowance for loan losses; and
    
    statements regarding our anticipated loan and deposit account growth, expense
levels, liquidity and capital resources and projections of earnings.
  
    
    competition in the industry and markets in which we operate;
    
    changes in general interest rates;
    
    rapid changes in technology affecting the financial services industry;
    
    changes in government regulation; and
    
    general economic and business conditions.
  14.




---



##### Table of Contents



OVERVIEW
 
 
    
    total assets increased 3.6% during the six month period to $202.0 million at
June 30, 2005. Total assets increased $1.5 million during the second quarter of 2005;
    
    deposits increased $5.4 million, or 3.4% during the first half of 2005.
However, total deposits decreased $381,000 during the second quarter of 2005;
    
    growth in our loan portfolio during the second quarter of 2005 was weaker than
the first with net loans increasing $4.2 million during the second quarter. The loan
portfolio has grown 10.3%, or $13.6 million from December 31, 2004; and,
    
    we purchased land and commenced construction on our fifth banking office.
  
    
    net income was $151,000, a decrease from the $226,000 recorded during the
second quarter of 2004, but an increase from the $115,000 recorded in the first quarter of
2005.
    
    we did not recognize federal income tax expense in 2004 due to a valuation
allowance on our deferred tax assets. Earnings before federal income tax expense increased
to $228,000 during the second quarter of 2005 from $226,000 in 2004;
    
    net interest income increased 21% over the second quarter of 2004;
    
    net interest spread and interest margin improved, despite increases in
short-term rates and the cost of funds; and,
    
    noninterest expense increased primarily due to the addition of personnel.
 SIGNIFICANT ACCOUNTING POLICIES
 Allowance for loan losses
  FINANCIAL CONDITION
 Assets
  15.




---



##### Table of Contents



Securities
 Loans
   Allowance for loan losses and asset quality
  Premises and equipment, accrued interest receivable and other assets.
  Deposits.
 16.




---



##### Table of Contents



Federal Home Loan Bank advances
 RESULTS
OF OPERATIONS  THREE MONTHS ENDED JUNE 30, 2005
  Net interest income
  17.




---



##### Table of Contents



Three months ended June 30,2005
    
    2004Average
    
    Interest
    
    
    
    
    
    Average
    
    InterestOutstanding
    
    earned/
    
    Yield/
    
    outstanding
    
    earned/
    
    Yield/(Dollars in thousands)
    
    Balance
    
    paid
    
    Rate
    
    balance
    
    paid
    
    RateAssetsInterest-earning assets:Interest-bearing deposits and federal funds sold
    
    $
    3,947
    
    
    $
    29
    
    
    
    2.93
    %
    
    $
    4,287
    
    
    $
    10
    
    
    
    0.95
    %Securities available for sale
    
    
    39,750
    
    
    
    368
    
    
    
    3.70
    
    
    
    35,253
    
    
    
    314
    
    
    
    3.51Securities held to maturity (1)
    
    
    646
    
    
    
    9
    
    
    
    5.39
    
    
    
    
    
    
    
    
    
    
    
    Federal agency stock
    
    
    1,430
    
    
    
    18
    
    
    
    5.30
    
    
    
    1,205
    
    
    
    15
    
    
    
    4.89Loans (2)
    
    
    143,907
    
    
    
    2,358
    
    
    
    6.57
    
    
    
    125,102
    
    
    
    1,982
    
    
    
    6.35Total interest-earning assets
    
    
    189,680
    
    
    
    2,782
    
    
    
    5.88
    
    
    
    165,847
    
    
    
    2,321
    
    
    
    5.59Noninterest-earning assets
    
    
    9,152
    
    
    
    
    
    
    
    
    
    
    
    6,825Total assets
    
    $
    198,832
    
    
    
    
    
    
    
    
    
    
    $
    172,672Liabilities and Shareholders EquityInterest-bearing liabilities:Interest-bearing demand deposits
    
    $
    10,413
    
    
    
    20
    
    
    
    0.78
    
    
    $
    10,872
    
    
    
    22
    
    
    
    0.80Savings accounts
    
    
    20,291
    
    
    
    50
    
    
    
    1.00
    
    
    
    34,955
    
    
    
    90
    
    
    
    1.03Money market accounts
    
    
    27,645
    
    
    
    183
    
    
    
    2.65
    
    
    
    2,931
    
    
    
    6
    
    
    
    0.80Certificates of deposit
    
    
    90,736
    
    
    
    675
    
    
    
    2.98
    
    
    
    74,418
    
    
    
    614
    
    
    
    3.31Total interest-bearing deposits
    
    
    149,085
    
    
    
    928
    
    
    
    2.50
    
    
    
    123,176
    
    
    
    732
    
    
    
    2.38Other borrowings
    
    
    19,397
    
    
    
    202
    
    
    
    4.16
    
    
    
    25,203
    
    
    
    224
    
    
    
    3.56Total interest-bearing liabilities
    
    
    168,482
    
    
    
    1,130
    
    
    
    2.69
    
    
    
    148,379
    
    
    
    956
    
    
    
    2.58Noninterest-bearing demand deposits
    
    
    12,192
    
    
    
    
    
    
    
    
    
    
    
    7,367Noninterest-bearing liabilities
    
    
    821
    
    
    
    
    
    
    
    
    
    
    
    833Total liabilities
    
    
    181,495
    
    
    
    
    
    
    
    
    
    
    
    156,579Shareholders equity
    
    
    17,337
    
    
    
    
    
    
    
    
    
    
    
    16,093Total liabilities and shareholders equity
    
    $
    198,832
    
    
    
    
    
    
    
    
    
    
    $
    172,672Net interest income; interest rate spread (3)
    
    
    
    
    
    $
    1,652
    
    
    
    3.19
    %
    
    
    
    
    
    $
    1,365
    
    
    
    3.01
    %Net earning assets
    
    $
    21,198
    
    
    
    
    
    
    
    
    
    
    $
    17,468Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.49
    %
    
    
    
    
    
    
    
    
    
    
    3.28
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    1.13
    x
    
    
    
    
    
    
    
    
    
    
    1.12
    x
 
 (1)
    
    Presented on a taxable-equivalent basis.(2)
    
    Net of net deferred loan fees and costs and loans in process. Nonaccrual loans are included in noninterest-earning assets.(3)
    
    Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income, annualized, divided by average interest-earning assets. Interest income
   18.




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##### Table of Contents



Interest expense
   Provision for loan losses
 Noninterest
income
 Noninterest expense
     19.




---



##### Table of Contents



Income taxes
 RESULTS OF OPERATIONS  SIX MONTHS ENDED JUNE 30, 2005
  Net interest income
  Six months ending June 30,2005
    
    2004Average
    
    Interest
    
    
    
    
    
    Average
    
    Interestoutstanding
    
    earned/
    
    Yield/
    
    outstanding
    
    earned/
    
    Yield/(Dollars in thousands)
    
    balance
    
    paid
    
    Rate
    
    balance
    
    paid
    
    RateAssetsInterest-earning assets:Interest-bearing deposits and federal funds sold
    
    $
    7,759
    
    
    $
    91
    
    
    
    2.39
    %
    
    $
    4,813
    
    
    $
    23
    
    
    
    0.95
    %Securities available for sale
    
    
    40,599
    
    
    
    756
    
    
    
    3.72
    
    
    
    36,334
    
    
    
    671
    
    
    
    3.66Securities held to maturity (1)
    
    
    647
    
    
    
    17
    
    
    
    5.38
    
    
    
    
    
    
    
    
    
    
    
    Federal agency stock
    
    
    1,403
    
    
    
    36
    
    
    
    5.18
    
    
    
    1,134
    
    
    
    28
    
    
    
    4.94Loans (2)
    
    
    139,455
    
    
    
    4,478
    
    
    
    6.47
    
    
    
    118,188
    
    
    
    3,787
    
    
    
    6.43Total interest-earning assets
    
    
    189,863
    
    
    
    5,378
    
    
    
    5.71
    
    
    
    160,469
    
    
    
    4,509
    
    
    
    5.62Noninterest-earning assets
    
    
    8,798
    
    
    
    
    
    
    
    
    
    
    
    6,567Total assets
    
    $
    198,661
    
    
    
    
    
    
    
    
    
    
    $
    167,036Liabilities and Shareholders EquityInterest-bearing liabilities:Interest-bearing demand deposits
    
    $
    10,970
    
    
    
    43
    
    
    
    0.78
    
    
    $
    10,033
    
    
    
    40
    
    
    
    0.80Savings accounts
    
    
    23,601
    
    
    
    122
    
    
    
    1.05
    
    
    
    35,211
    
    
    
    181
    

    
    
    1.03Money market accounts
    
    
    24,587
    
    
    
    315
    
    
    
    2.58
    
    
    
    2,995
    
    
    
    12
    
    
    
    0.81Certificates of deposit
    
    
    90,124
    
    
    
    1,295
    
    
    
    2.90
    
    
    
    72,178
    
    
    
    1,238
    
    
    
    3.44Total interest-bearing deposits
    
    
    149,282
    
    
    
    1,775
    
    
    
    2.40
    
    
    
    120,417
    
    
    
    1,471
    
    
    
    2.45Other borrowings
    
    
    19,373
    
    
    
    401
    
    
    
    4.14
    
    
    
    22,553
    
    
    
    422
    
    
    
    3.74Total interest-bearing liabilities
    
    
    168,655
    
    
    
    2,176
    
    
    
    2.60
    
    
    
    142,970
    
    
    
    1,893
    
    
    
    2.65Noninterest-bearing demand deposits
    
    
    12,026
    
    
    
    
    
    
    
    
    
    
    
    7,135Noninterest-bearing liabilities
    
    
    692
    
    
    
    
    
    
    
    
    
    
    
    792Total liabilities
    
    
    181,373
    
    
    
    
    
    
    
    
    
    
    
    150,897Shareholders equity
    
    
    17,288
    
    
    
    
    
    
    
    
    
    
    
    16,139Total liabilities and shareholders equity
    
    $
    198,661
    
    
    
    
    
    
    
    
    
    
    $
    167,036Net interest income; interest-rate spread (3)
    
    
    
    
    
    $
    3,202
    
    
    
    3.11
    %
    
    
    
    
    
    $
    2,616
    
    
    
    2.97
    %Net earning assets
    
    $
    21,208
    
    
    
    
    
    
    
    
    
    
    $
    17,499Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    3.25
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    1.13
    x
    
    
    
    
    
    
    
    
    
    
    1.12
    x
 20.




---



##### Table of Contents



FOOTNOTES TO YIELD TABLE
 (1)
    
    Presented on a taxable-equivalent basis.(2)
    
    Net of net deferred loan fees and costs and loans in process. Nonaccrual loans are included in noninterest-earning
assets.(3)
    
    Interest rate spread represents the difference between the yield on interest-earning assets and the cost of
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income, annualized, divided by average interest-earning assets. Interest income
  Interest expense
 Provision for loan losses
 Noninterest income.
 Noninterest expense
    21.




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##### Table of Contents



CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS
  Six months
    
    Year ended December 31,(Dollars in thousands)
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    ThereafterCertificates of deposit
    
    $
    25,889

    
    
    $
    35,957
    
    
    $
    18,181
    
    
    $
    8,309
    
    
    $
    2,946
    
    
    $
    1,496FHLB advances (1)
    
    
    6,754
    
    
    
    4,362
    
    
    
    5,434
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,325Capital lease obligations (3)
    
    
    93
    
    
    
    168
    
    
    
    179
    
    
    
    181
    
    
    
    181
    
    
    
    1,337Operating leases
    
    
    91
    
    
    
    182
    
    
    
    183
    
    
    
    183
    
    
    
    183
    
    
    
    685Deposits without maturity
    
    
    70,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Includes $4,500 of overnight borrowings(2)
    
    The subordinated debentures are redeemable at par, at the Companys option, any time prior to
maturity, which is March 31, 2022.(3)
    
    Includes $1,175 of amounts allocable to interest payments over the remaining term of the
leases.   LIQUIDITY
    22.




---



##### Table of Contents



CAPITAL RESOURCES
    To Be Well-Capitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital to risk-weighted assetsOhio Legacy Corp
    
    $
    21,877
    
    
    
    15.7
    %
    
    $
    11,176
    
    
    
    8.0
    %
    
    $
    13,970
    
    
    
    10.0
    %Ohio Legacy Bank
    
    
    20,529
    
    
    
    15.4
    
    
    
    10,667
    
    
    
    8.0
    
    
    
    13,334
    
    
    
    10.0Tier 1 capital to risk-weighted
assetsOhio Legacy Corp
    
    $
    20,661
    
    
    
    14.8
    %
    
    $
    5,588
    
    
    
    4.0
    %
    
    $
    8,382
    
    
    
    6.0
    %Ohio Legacy Bank
    
    
    19,313
    
    
    
    14.4
    
    
    
    5,334
    
    
    
    4.0
    
    
    
    8,000
    
    
    
    6.0Tier 1 capital to average assetsOhio Legacy Corp
    
    $
    20,661
    
    
    
    10.4
    %
    
    $
    7,951
    
    
    
    4.0
    %
    
    $
    9,938
    
    
    
    5.0
    %Ohio Legacy Bank
    
    
    19,313
    
    
    
    9.7
    
    
    
    7,950
    
    
    
    4.0
    
    
    
    9,938
    
    
    
    5.0
  23.




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##### Table of Contents



Item 3. Controls and Procedures
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
    Nominee for Director
    
    For
    
    Against
    
    AbstainRobert F. Belden
    
    
    1,891,796
    
    
    
    
    
    
    
    500Gregory A. Long
    
    
    1,891,796
    
    
    
    
    
    
    
    500Melvin J. Yoder
    
    
    1,889,796
    
    
    
    
    
    
    
    2,500
  Class I  Term ends 2006
    
    Class III  Term ends 2007J. Edward Diamond
    
    D. William AllenL. Dwight Douce
    
    Scott J. FitzpatrickDaniel H. Plumly
    
    Michael D. Meenan
 
 Item 5. Other Information.
  24.




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##### Table of Contents



Item 6. Exhibits.
 ExhibitNumber
    
    Note
    
    Description of Document3.1
    
    
    (1
    )
    
    Second Amended and Restated Articles of Incorporation of Ohio Legacy Corp3.2
    
    
    (2
    )
    
    Code of Regulations of Ohio Legacy Corp, as amended by Amendment No. 14.1
    
    
    (3
    )
    
    See Pages 1 through 9 of Exhibit 3.1 for provisions defining the rights of the holders of
common shares4.2
    
    
    (3
    )
    
    Form of Organizer Stock Purchase Warrant4.3
    
    
    (3
    )
    
    Form of Public Stock Purchase Warrant4.4
    
    
    (2
    )
    
    2004 Amendment to Omnibus Stock Option, Stock Ownership and Long Term Incentive Plan of Ohio
Legacy Corp10.1
    
    
    (3
    )
    
    Omnibus Stock Option, Stock Ownership and Long Term Incentive Plan10.2
    
    
    (4
    )
    
    2002 Amendment to Omnibus Stock Option, Stock Ownership and Long Term Incentive Plan of Ohio
Legacy Corp10.3
    
    
    (3
    )
    
    Employment Agreement with Mr. Douce10.4
    
    
    (7
    )
    
    Employment Agreement with Mr. Pettit10.5
    
    
    (3
    )
    
    Lease Agreement dated August 24, 1999, by and among Jack K. and Heidi M. Gant and Ohio
Legacy Corp10.6
    
    
    (3
    )
    
    Lease Agreement dated November 30, 1999, by and between Schoeppner Properties and Ohio
Legacy Corp10.7
    
    
    (7
    )
    
    Employment Agreement with Mr. Boss10.8
    
    
    (5
    )
    
    Lease Agreement dated October 2001 by and between Shee-Brees, L.L.C. and Ohio Legacy Corp10.9
    
    
    (7
    )
    
    Employment Agreement with Mr. Nadeau10.10
    
    
    (6
    )
    
    Assignment and assumption of lease by and among Unizan Bank, Ohio Legacy Bank and
Chesterland Productions, P.L.L. dated August 27, 200410.11
    
    
    (7
    )
    
    Employment Agreement with Mr. Kramer10.12
    
    
    (8
    )
    
    Employment and Consulting Agreement with Mr. Douce, effective January 1, 200611
    
    
    
    
    
    Statement Regarding Computation of Per Share Earnings (incorporated by reference to
Note 2 on page 9 of this Form 10-QSB)31.1
    
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer31.2
    
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer32.1
    
    
    
    
    
    Certification Pursuant To 18 U.S.C. Section 1350 As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)     -
    
    Incorporated by reference to Registrants Form 10-QSB for the fiscal quarter ended June 30, 2003, filed on August 14, 2003(2)     -
    
    Incorporated by reference to Registrants Form 10-KSB for the fiscal year ended December 31, 2003, filed on March 17, 2004(3)     -
    
    Incorporated by reference to Registrants Form SB-2, File No. 333-38328, effective June 1, 2000(4)     -
    
    Incorporated by reference to Registrants Form S-8, File No. 333-88842, effective May 22, 2002(5)     -
    
    Incorporated by reference to Registrants Form 10-KSB for the fiscal year ended December 31, 2001, filed on April 1, 2002(6)     -
    
    Incorporated by reference to Registrants Form 10-KSB for the fiscal year ended December 31, 2004, filed on March 22, 2005(7)     -
    
    Incorporated by reference to Registrants Form 8-K filed on May 26, 2005(8)     -
    
    Incorporated by reference to Registrants Form 8-K filed on August 4, 2005 25.




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##### Table of Contents



SIGNATURES
  OHIO LEGACY CORP(Registrant)Date:  August 15, 2005
    By:
    /s/ L. Dwight DouceL. Dwight DoucePresident, Chief Executive Officer and DirectorDate:  August 15, 2005
    By:
    /s/ Eric S. NadeauEric S. NadeauChief Financial Officer, Senior Vice President and Treasurer 26.