##### 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 September 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
  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
    
    
    26Exhibit 31.1 Certification 302-CEOExhibit 31.2 Certification 302-CFOExhibit 32.1 Certifications-CEO and CFO
  2.




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 September 30,
    
    
    December 31,2005
    
    
    2004(unaudited)ASSETSCash and due from banks
    
    $
    4,252,511
    
    
    $
    4,571,131Federal funds sold and interest-bearing deposits in financial institutions
    
    
    5,220,691
    
    
    
    12,418,192Cash and cash equivalents
    
    
    9,473,202
    
    
    
    16,989,323Certificate of deposit in financial institution
    
    
    100,000
    
    
    
    Securities available for sale
    
    
    35,296,036
    
    
    
    39,357,929Securities held to maturity (fair value of $832,000 and $640,000
at September 30, 2005, and December 31, 2004)
    
    
    840,571
    
    
    
    647,981Loans, net of allowance of $1,289,160 and $1,263,655 at
September 30, 2005 and December 31, 2004
    
    
    153,731,653
    
    
    
    132,084,072Federal bank stock
    
    
    1,466,400
    
    
    
    1,375,650Premises and equipment, net
    
    
    3,315,672
    
    
    
    2,269,068Intangible assets
    
    
    504,876
    
    
    
    669,174Accrued interest receivable and other assets
    
    
    1,868,524
    
    
    
    1,658,860Total assets
    
    $
    206,596,934
    
    
    $
    195,052,057LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    12,535,072
    
    
    $
    11,914,867Interest-bearing demand
    
    
    10,018,559
    
    
    
    13,262,252Savings
    
    
    42,389,388
    
    
    
    43,847,951Certificates of deposit
    
    
    93,829,922
    
    
    
    88,617,541Total deposits
    
    
    158,772,941
    
    
    
    157,642,611Repurchase agreements
    
    
    2,400,137
    
    
    
    Overnight Federal Home Loan Bank advances
    
    
    8,500,000
    
    
    
    Federal Home Loan Bank advances
    
    
    13,674,117
    
    
    
    15,295,144Subordinated debentures
    
    
    3,325,000
    
    
    
    3,325,000Capital lease obligations
    
    
    961,901
    
    
    
    968,712Accrued interest payable and other liabilities
    
    
    608,396
    
    
    
    580,216Total liabilities
    
    
    188,242,492
    
    
    
    177,811,683SHAREHOLDERS EQUITYPreferred stock, no par value, 500,000 shares authorized,
none outstanding
    
    
    
    
    
    
    Common stock, no par value, 5,000,000 shares authorized,
2,214,564 and 2,121,220 shares issued and outstanding at
September 30, 2005, and December 31, 2004, respectively
    
    
    18,658,386
    
    
    
    17,734,155Accumulated earnings (deficit)
    
    
    123,415
    
    
    
    (282,585
    )Accumulated other comprehensive loss
    
    
    (427,359
    )
    
    
    (211,196
    )Total shareholders equity
    
    
    18,354,442
    
    
    
    17,240,374Total liabilities and shareholders equity
    
    $
    206,596,934
    
    
    $
    195,052,057
  3.




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##### Table of Contents



For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Interest and divdend income:Loans, including fees
    
    $
    2,515,946
    
    
    $
    2,075,429
    
    
    $
    6,992,354
    
    
    $
    5,862,717Securities
    
    
    347,840
    
    
    
    311,123
    
    
    
    1,115,008
    
    
    
    981,559Interest-bearing deposits and federal funds sold
    
    
    30,040
    
    
    
    23,893
    
    
    
    121,951
    
    
    
    47,300Dividends on federal bank stock
    
    
    19,405
    
    
    
    16,347
    
    
    
    55,757
    
    
    
    43,748Total interest income
    
    
    2,913,231
    
    
    
    2,426,792
    
    
    
    8,285,070
    
    
    
    6,935,324Interest expense:Deposits
    
    
    982,651
    
    
    
    672,052
    
    
    
    2,757,245
    
    
    
    2,142,855Overnight Federal Home Loan Bank advances
    
    
    47,491
    
    
    
    
    
    
    
    53,406
    
    
    
    Federal Home Loan Bank advances
    
    
    81,033
    
    
    
    128,493
    
    
    
    259,425
    
    
    
    332,638Subordinated debentures
    
    
    70,722
    
    
    
    70,722
    
    
    
    212,166
    
    
    
    212,166Repurchase agreements
    
    
    4,896
    
    
    
    
    
    
    
    4,896
    
    
    
    Capital leases
    
    
    37,676
    
    
    
    38,014
    
    
    
    113,294
    
    
    
    114,272Total interest expense
    
    
    1,224,469
    
    
    
    909,281
    
    
    
    3,400,432
    
    
    
    2,801,931Net interest income
    
    
    1,688,762
    
    
    
    1,517,511
    
    
    
    4,884,638
    
    
    
    4,133,393Provision for loan losses
    
    
    103,000
    
    
    
    71,000
    
    
    
    210,046
    
    
    
    306,000Net interest income after provision for loan losses
    
    
    1,585,762
    
    
    
    1,446,511
    
    
    
    4,674,592
    
    
    
    3,827,393Noninterest income:Service charges and other fees
    
    
    138,058
    
    
    
    110,335
    
    
    
    392,345
    
    
    
    310,700Gain (loss) on sales of securities available
for sale, net
    
    
    
    
    
    
    (5,237
    )
    
    
    
    
    
    
    7,910Gain on sale of loans
    
    
    
    
    
    
    
    
    
    
    9,782
    
    
    
    Loss on disposal of fixed assets
    
    
    (2,505
    )
    
    
    
    
    
    
    (6,929
    )
    
    
    Gain on sale of repossessed assets
    
    
    
    
    
    
    
    
    
    
    7,000
    
    
    
    Other income
    
    
    7,957
    
    
    
    2,610
    
    
    
    18,750
    
    
    
    7,167Total noninterest income
    
    
    143,510
    
    
    
    107,708
    
    
    
    420,948
    
    
    
    325,777Noninterest expense:Salaries and benefits
    
    
    792,251
    
    
    
    531,797
    
    
    
    2,117,255
    
    
    
    1,482,402Occupancy and equipment
    
    
    192,253
    
    
    
    166,591
    
    
    
    589,350
    
    
    
    468,051Professional fees
    
    
    95,780
    
    
    
    109,288
    
    
    
    371,497
    
    
    
    305,911Franchise tax
    
    
    58,269
    
    
    
    56,034
    
    
    
    191,782
    
    
    
    177,440Data processing
    
    
    132,201
    
    
    
    111,819
    
    
    
    442,426
    
    
    
    323,311Marketing and advertising
    
    
    36,141
    
    
    
    38,416
    
    
    
    117,811
    
    
    
    122,069Stationery and supplies
    
    
    29,622
    
    
    
    28,756
    
    
    
    89,448
    
    
    
    67,717Intangible asset amortization
    
    
    52,199
    
    
    
    9,042
    
    
    
    164,298
    
    
    
    9,042Deposit expenses and insurance
    
    
    33,289
    
    
    
    40,124
    
    
    
    110,339
    
    
    
    132,345Other expenses
    
    
    95,722
    
    
    
    62,352
    
    
    
    288,318
    
    
    
    216,882Total noninterest expense
    
    
    1,517,727
    
    
    
    1,154,219
    
    
    
    4,482,524
    
    
    
    3,305,170Earnings before income tax expense
    
    
    211,545
    
    
    
    400,000
    
    
    
    613,016
    
    
    
    848,000Income tax expense
    
    
    71,545
    
    
    
    
    
    
    
    207,016
    
    
    
    NET EARNINGS
    
    
    140,000
    
    
    
    400,000
    
    
    
    406,000
    
    
    
    848,000Other comprehensive income (loss), net of tax
    
    
    (121,628
    )
    
    
    667,560
    
    
    
    (216,163
    )
    
    
    (52,821
    )Comprehensive income
    
    $
    18,372
    
    
    $
    1,067,560
    
    
    $
    189,837
    
    
    $
    795,179Basic earnings per share
    
    $
    0.06
    
    
    $
    0.19
    
    
    $
    0.19
    
    
    $
    0.40Diluted earnings per share
    
    
    0.06
    
    
    
    0.19
    
    
    
    0.18
    
    
    
    0.39
  4.




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For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Shareholders equity, beginning of period
    
    $
    17,587,469
    
    
    $
    15,799,286
    
    
    $
    17,240,374
    
    
    $
    16,044,467Net earnings
    
    
    140,000
    
    
    
    400,000
    
    
    
    406,000
    
    
    
    848,000Other comprehensive income (loss), net of tax:Reclassification adjustment for amounts
realized on securities sales included in
net earnings
    
    
    
    
    
    
    5,237
    
    
    
    
    
    
    
    (7,910
    )Net unrealized gain (loss) on available for sale
securities arising during the period
    
    
    (121,628
    )
    
    
    662,323
    
    
    
    (216,163
    )
    
    
    (44,911
    )Other comprehensive income (loss)
    
    
    (121,628
    )
    
    
    667,560
    
    
    
    (216,163
    )
    
    
    (52,821
    )Proceeds from exercise of stock warrants
    
    
    757,840
    
    
    
    
    
    
    
    923,440
    
    
    
    27,200Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    8,500
    
    
    
    Redemption of stock warrants
    
    
    (9,239
    )
    
    
    
    
    
    
    (9,239
    )
    
    
    Income tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    1,530
    
    
    
    Shareholders equity, end of period
    
    $
    18,354,442
    
    
    $
    16,866,846
    
    
    $
    18,354,442
    
    
    $
    16,866,846
  5.




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##### Table of Contents



2005
    
    
    2004Cash flows from operating activities:Net earnings
    
    $
    406,000
    
    
    $
    848,000Adjustments to reconcile net earnings to net cash from operating activities:Depreciation and amortization, net
    
    
    407,595
    
    
    
    206,736Securities amortization and accretion, net
    
    
    123,531
    
    
    
    122,286Federal Home loan Bank (FHLB) stock dividends
    
    
    (30,700
    )
    
    
    (20,000
    )Provision for loan losses
    
    
    210,046
    
    
    
    306,000Gain on sale of loans
    
    
    (9,782
    )
    
    
    Gain on sales of securities available for sale
    
    
    
    
    
    
    (7,910
    )Gain on sale of other real estate owned
    
    
    
    
    
    
    (2,000
    )Loss on disposal of fixed asset
    
    
    6,929
    
    
    
    Accretion of fair value purchase adjustments
    
    
    (108,570
    )
    
    
    Net change in:Accrued interest receivable and other assets
    
    
    (108,782
    )
    
    
    (209,887
    )Accrued interest payable and other liabilities
    
    
    28,180
    
    
    
    (423,570
    )Deferred loan fees
    
    
    39,337
    
    
    
    (17,680
    )Net cash provided by operating activities
    
    
    963,784
    
    
    
    801,975Cash flows from investing activities:Purchases of securities available for sale
    
    
    (3,459,730
    )
    
    
    (5,030,698
    )Purchases of securities held to maturity
    
    
    (197,764
    )
    
    
    (343,188
    )Purchases of certificates of deposit
    
    
    (100,000
    )
    
    
    Maturities, calls and paydowns of securities available for sale
    
    
    7,087,751
    
    
    
    5,805,295Proceeds from sale of securities available for sale
    
    
    
    
    
    
    4,104,915Proceeds from sale of other real estate owned
    
    
    
    
    
    
    72,000Proceeds from sale of loans
    
    
    257,418
    
    
    
    Purchases of federal bank stock
    
    
    (60,050
    )
    
    
    (307,750
    )Net change in loans
    
    
    (22,144,600
    )
    
    
    (20,953,443
    )Purchases of premises and equipment
    
    
    (1,296,830
    )
    
    
    (46,918
    )Net cash used by investing activities
    
    
    (19,913,805
    )
    
    
    (16,699,787
    )Cash flows from financing activities:Net change in deposits
    
    
    1,238,900
    
    
    
    3,977,117Net change in repurchase agreements
    
    
    2,400,137
    
    
    
    Cash received from branch acquisition, net of assets acquired
    
    
    
    
    
    
    14,565,618Repayment of capital lease obligations
    
    
    (6,811
    )
    
    
    (5,831
    )Proceeds from exercise of stock warrants
    
    
    923,440
    
    
    
    27,200Redemption of stock warrants
    
    
    (9,239
    )
    
    
    Proceeds from exercise of stock options
    
    
    8,500
    
    
    
    Proceeds from overnight FHLB advances, net of repayments
    
    
    8,500,000
    
    
    
    Proceeds from FHLB advances
    
    
    2,000,000
    
    
    
    5,000,000Repayments of FHLB advances
    
    
    (3,621,027
    )
    
    
    (1,094,882
    )Net cash provided by financing activities
    
    
    11,433,900
    
    
    
    22,469,222Net change in cash and cash equivalents
    
    
    (7,516,121
    )
    
    
    6,571,410Cash and cash equivalents at beginning of period
    
    
    16,989,323
    
    
    
    8,184,819Cash and cash equivalents at end of period
    
    $
    9,473,202
    
    
    $
    14,756,229Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    3,366,585
    
    
    $
    3,093,361Federal income taxes
    
    
    205,000
    
    
    
    204,000Noncash transactions:Commitments to purchase securities held to maturity
    
    $
    
    
    
    $
    306,262
  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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net earnings as reported
    
    $
    140,000
    
    
    $
    400,000
    
    
    $
    406,000
    
    
    $
    848,000Deduct stock-based compensation expense
determined under fair value based
method, net of tax effects
    
    
    (55,000
    )
    
    
    (56,000
    )
    
    
    (263,000
    )
    
    
    (246,000
    )Pro forma net earnings
    
    $
    85,000
    
    
    $
    344,000
    
    
    $
    143,000
    
    
    $
    602,000Basic earnings per share as reported
    
    $
    0.06
    
    
    $
    0.19
    
    
    $
    0.19
    
    
    $
    0.40Pro forma basic earnings per share
    
    
    0.04
    
    
    
    0.16
    
    
    
    0.07
    
    
    
    0.28Diluted earnings per share as reported
    
    $
    0.06
    
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    0.39Pro forma diluted earnings per share
    
    
    0.04
    
    
    
    0.16
    
    
    
    0.07
    
    
    
    0.28
  August
    
    April
    
    February2005
    
    2005
    
    2004Fair value, calculated
    
    $
    4.76
    
    
    $
    5.59
    
    
    $
    6.25Exercise price
    
    $
    10.00
    
    
    $
    12.00
    
    
    $
    12.00Risk-free interest rate, 10-year Treasury
    
    
    4.23
    %
    
    
    4.19
    %
    
    
    4.05
    %Expected stock price volatility
    
    
    26.99
    %
    
    
    25.91
    %
    
    
    32.99
    %Expected dividend rate
    
    None
    
    None
    
    NoneExpected life
    
    10 years
    
    10 years
    
    10 years
  8.




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NOTE 2  EARNINGS PER SHARE
  Three months ended
    
    
    Nine months endedSeptember 30
    
    
    September 302005
    
    
    2004
    
    
    2005
    
    
    2004BASIC:Net earnings
    
    $
    140,000
    
    
    $
    400,000
    
    
    $
    406,000
    
    
    $
    848,000Weighted average common shares outstanding
    
    
    2,187,482
    
    
    
    2,120,720
    
    
    
    2,148,822
    
    
    
    2,119,540Basic earnings per share
    
    $
    0.06
    
    
    $
    0.19
    
    
    $
    0.19
    
    
    $
    0.40DILUTED:Net earnings
    
    $
    140,000
    
    
    $
    400,000
    
    
    $
    406,000
    
    
    $
    848,000Weighted average common shares outstanding
    
    
    2,187,482
    
    
    
    2,120,720
    
    
    
    2,148,822
    
    
    
    2,119,540Dilutive effect of stock options
    
    
    7,850
    
    
    
    11,929
    
    
    
    20,862
    
    
    
    15,887Dilutive effect of stock warrants
    
    
    4,165
    
    
    
    24,248
    
    
    
    31,535
    
    
    
    37,178Total common shares and dilutive potential
common shares
    
    
    2,199,497
    
    
    
    2,156,897
    
    
    
    2,201,219
    
    
    
    2,172,605Diluted earnings per share
    
    $
    0.06
    
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    0.39
  9.




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##### Table of Contents



NOTE 3  LOANS
  September 30, 2005
    
    
    December 31, 2004Balance
    
    
    Percent
    
    
    Balance
    
    
    PercentResidential real estate
    
    $
    56,404,752
    
    
    
    36.3
    %
    
    $
    50,728,231
    
    
    
    38.0
    %Multifamily residential real estate
    
    
    9,831,591
    
    
    
    6.3
    
    
    
    10,147,946
    
    
    
    7.6Commercial real estate
    
    
    51,053,017
    
    
    
    32.9
    
    
    
    36,364,724
    
    
    
    27.2Construction
    
    
    11,616,777
    
    
    
    7.5
    
    
    
    13,315,449
    
    
    
    10.0Commercial
    
    
    14,606,178
    
    
    
    9.4
    
    
    
    10,709,713
    
    
    
    8.0Consumer and home equity
    
    
    11,716,175
    
    
    
    7.6
    
    
    
    12,250,004
    
    
    
    9.2Total loans
    
    
    155,228,490
    
    
    
    100.0
    %
    
    
    133,516,067
    
    
    
    100.0
    %Less: Allowance for loan losses
    
    
    (1,289,160
    )
    
    
    
    
    
    
    (1,263,655
    )Net deferred loan fees
    
    
    (207,677
    )
    
    
    
    
    
    
    (168,340
    )Loans, net
    
    $
    153,731,653
    
    
    
    
    
    
    $
    132,084,072
   For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Balance, beginning of period
    
    $
    1,215,760
    
    
    $
    1,225,553
    
    
    $
    1,263,655
    
    
    $
    1,121,913Provision for loan losses
    
    
    103,000
    
    
    
    71,000
    
    
    
    210,046
    
    
    
    306,000Loans charged-off
    
    
    (34,096
    )
    
    
    (9,413
    )
    
    
    (189,966
    )
    
    
    (144,013
    )Recoveries
    
    
    4,496
    
    
    
    869
    
    
    
    5,425
    
    
    
    4,109Balance, end of period
    
    $
    1,289,160
    
    
    $
    1,288,009
    
    
    $
    1,289,160
    
    
    $
    1,288,009Allowance for loan losses, percent of total loans
    
    
    0.83
    %
    
    
    0.98
    %
  September 30,
    
    December 31,2005
    
    2004Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    Nonaccrual loans
    
    
    464,811
    
    
    
    1,059,560Impaired loans, some also included in nonaccrual loans
    
    $
    345,000
    
    
    $
    974,000Amount of the allowance for loan losses allocated to
impaired loans
    
    
    27,000
    
    
    
    120,000
 10.




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##### Table of Contents



NOTE 3  LOANS
 For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Interest income foregone on nonaccrual loans
    
    $
    7,192
    
    
    $
    3,073
    
    
    $
    35,982
    
    
    $
    4,308Average of impaired loans during the period
    
    $
    321,000
    
    
    $
    209,000
    
    
    $
    572,000
    
    
    $
    133,000Interest income recognized during impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash-basis interest income recognized
during impairment
    
    
    
    
    
    
    
    
    
    
    6,747
    
    
    
    
  September 30,
    
    December 31,2005
    
    2004Commitments to make loans, variable-rate
    
    $
    799,700
    
    
    $
    5,471,000Unused lines of credit, variable-rate
    
    $
    16,178,000
    
    
    $
    17,015,000
 NOTE 4  PREMISES AND EQUIPMENT
  September 30,
    
    
    December 31,2005
    
    
    2004Land
    
    $
    524,559
    
    
    $
    31,836Office building
    
    
    1,003,000
    
    
    
    1,003,000Leasehold improvements
    
    
    977,068
    
    
    
    971,502Furniture, fixtures and equipment
    
    
    1,285,861
    
    
    
    1,139,661Premises and equipment, cost
    
    
    3,790,488
    
    
    
    3,145,999Less: Accumulated depreciation
    
    
    (1,061,123
    )
    
    
    (876,931
    )Premises and equipment in service, net
    
    
    2,729,365
    
    
    
    2,269,068Construction in progress
    
    
    586,307
    
    
    
    Premises and equipment, net
    
    $
    3,315,672
    
    
    $
    2,269,068
  11.




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##### Table of Contents



NOTE 5  REPURCHASE AGREEMENTS
  Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,2005
    
    2005Average daily balance during the period
    
    $
    593,000
    
    
    $
    199,000Average interest rate during the period
    
    
    3.28
    %
    
    
    3.28
    %Maximum month-end balance during the period
    
    $
    2,400,137
    
    
    $
    2,400,137Weighted average interest rate at end of period
    
    
    3.50
    %
    
    
    3.50
    %
 NOTE 6  STOCK WARRANTS
   12.




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##### 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 client base and our ability to attract new clients, especially core deposits;
    
    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.
  13.




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##### Table of Contents



OVERVIEW
  
    
    total assets increased 5.9% during the nine month period to $206.0 million at
September 30, 2005. Total assets increased $4.6 million during the third quarter of 2005;
    
    deposits increased $1.1 million from year end 2004. However, total deposits
decreased $4.2 million during the third quarter of 2005;
    
    loan growth was $21.6 million during the nine months of 2005, with growth of
$8.1 million occurring in the third quarter;
    
    the significant runoff in core deposits during the third quarter of 2005
resulted in a higher cost of funds as we borrowed from the Federal Home Loan Bank of
Cincinnati to fund loan growth and liquidity; and,
    
    we constructed our fifth banking office.
  
    
    net earnings totaled $140,000, a decrease from the $400,000 recorded during the
third quarter of 2004;
    
    we did not recognize federal income tax expense in 2004 due to a valuation
allowance on our deferred tax assets. Net earnings before income tax were $212,000 in 2005;
    
    net interest income increased 11% over the third quarter of 2004;
    
    net interest spread fell 3 basis points from the second quarter of 2005 as the
cost of funds increased more than the yield on assets;
    
    net interest margin was flat compared to the second quarter of 2005 and the
third quarter of 2004 as we were able to increase net earning assets to offset a decreasing
net interest spread; and,
    
    while noninterest expense was higher in 2005 compared to 2004, noninterest
expense decreased from the second quarter of 2005.
  
    
    the flat yield curve is compressing the spread earned between new loans and our
funding sources;
    
    we are experiencing significant pricing pressure on money market funds from
large regional and national banks;
    
    we expect compensation and occupancy expense to increase in the fourth quarter
of 2005 and in early 2006 due to the launch of our fifth banking office and the addition of
personnel focusing on the development and growth of our deposit products and sales efforts;
    
    we have hired a Chief Deposit Officer and are in the process of realigning our
branch personnel to improve our deposit gathering program;
    
    we expect to grow the loan portfolio and shift assets toward loans to offset
rising deposit and borrowing costs; and,
    
    our loan and securities portfolios are primarily variable-rate, which should
mitigate some of the impact of sharply-rising market rates for deposits and borrowings
 SIGNIFICANT ACCOUNTING POLICIES
 Allowance for loan losses
 14.




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##### Table of Contents



FINANCIAL CONDITION
 Assets
 Securities
 Loans
   Allowance for loan losses and asset quality
 Premises and equipment, accrued interest receivable and other assets.
  15.




---



##### Table of Contents



Deposits.
     Federal Home Loan Bank advances and Repurchase Agreements
 Common Stock Warrant Redemption.
 16.




---



##### Table of Contents



RESULTS OF OPERATIONS  THREE MONTHS ENDED SEPTEMBER 30, 2005
  Net interest income
  Three months ended September 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
    
    $
    3,381
    
    
    $
    30
    
    
    
    3.52
    %
    
    $
    6,759
    
    
    $
    24
    
    
    
    1.39
    %Securities available for sale
    
    
    37,286
    
    
    
    341
    
    
    
    3.66
    
    
    
    32,699
    
    
    
    311
    
    
    
    3.74Securities held to maturity (1)
    
    
    804
    
    
    
    10
    
    
    
    5.22
    
    
    
    11
    
    
    
    
    
    
    
    5.55Federal agency stock
    
    
    1,456
    
    
    
    19
    
    
    
    5.33
    
    
    
    1,325
    
    
    
    16
    
    
    
    4.98Loans (2)
    
    
    149,183
    
    
    
    2,516
    
    
    
    6.69
    
    
    
    131,248
    
    
    
    2,076
    
    
    
    6.27Total interest-earning assets
    
    
    192,110
    
    
    
    2,916
    
    
    
    6.02
    
    
    
    172,042
    
    
    
    2,427
    
    
    
    5.58Noninterest-earning assets
    
    
    9,042
    
    
    
    
    
    
    
    
    
    
    
    6,884Total assets
    
    $
    201,152
    
    
    
    
    
    
    
    
    
    
    $
    178,926Liabilities and Shareholders EquityInterest-bearing liabilities:Interest-bearing demand deposits
    
    $
    9,684
    
    
    
    19
    
    
    
    0.77
    
    
    $
    11,874
    
    
    
    26
    
    
    
    0.86Savings accounts
    
    
    16,863
    
    
    
    42
    
    
    
    0.99
    
    
    
    35,702
    
    
    
    93
    
    
    
    1.03Money market accounts
    
    
    28,392
    
    
    
    186
    
    
    
    2.60
    
    
    
    3,415
    
    
    
    9
    
    
    
    1.07Certificates of deposit
    
    
    92,607
    
    
    
    736
    
    
    
    3.15
    
    
    
    73,167
    
    
    
    544
    
    
    
    2.95Total interest-bearing deposits
    
    
    147,546
    
    
    
    983
    
    
    
    2.64
    
    
    
    124,158
    
    
    
    672
    
    
    
    2.15Other borrowings
    
    
    22,418
    
    
    
    241
    
    
    
    4.31
    
    
    
    27,982
    
    
    
    237
    
    
    
    3.39Total interest-bearing liabilities
    
    
    169,964
    
    
    
    1,224
    
    
    
    2.86
    
    
    
    152,140
    
    
    
    909
    
    
    
    2.37Noninterest-bearing demand deposits
    
    
    12,449
    
    
    
    
    
    
    
    
    
    
    
    9,078Noninterest-bearing liabilities
    
    
    711
    
    
    
    
    
    
    
    
    
    
    
    1,473Total liabilities
    
    
    183,124
    
    
    
    
    
    
    
    
    
    
    
    162,691Shareholders equity
    
    
    18,028
    
    
    
    
    
    
    
    
    
    
    
    16,235Total liabilities and shareholders equity
    
    $
    201,152
    
    
    
    
    
    
    
    
    
    
    $
    178,926Net interest income; interest rate spread (3)
    
    
    
    
    
    $
    1,692
    
    
    
    3.16
    %
    
    
    
    
    
    $
    1,518
    
    
    
    3.21
    %Net earning assets
    
    $
    22,146
    
    
    
    
    
    
    
    
    
    
    $
    19,902Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.50
    %
    
    
    
    
    
    
    
    
    
    
    3.52
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    1.13
    x
    
    
    
    
    
    
    
    
    
    
    1.13
    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. 17.




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##### Table of Contents



Interest income
   Interest expense
  Provision for loan losses
 Noninterest income
 18.




---



##### Table of Contents



Noninterest expense
      Intangible asset amortization.
 Income taxes
 RESULTS OF OPERATIONS  NINE MONTHS ENDED SEPTEMBER 30, 2005
  Net interest income
 19.




---



##### Table of Contents



Nine months ending September 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
    
    $
    6,300
    
    
    $
    122
    
    
    
    2.59
    %
    
    $
    5,461
    
    
    $
    47
    
    
    
    1.14
    %Securities available for sale
    
    
    39,494
    
    
    
    1,097
    
    
    
    3.70
    
    
    
    35,122
    
    
    
    981
    
    
    
    3.69Securities held to maturity (1)
    
    
    699
    
    
    
    27
    
    
    
    5.32
    
    
    
    4
    
    
    
    
    
    
    
    5.55Federal agency stock
    
    
    1,421
    
    
    
    56
    
    
    
    5.23
    
    
    
    1,197
    
    
    
    45
    
    
    
    4.96Loans (2)
    
    
    142,698
    
    
    
    6,992
    
    
    
    6.55
    
    
    
    122,541
    
    
    
    5,862
    
    
    
    6.37Total interest-earning assets
    
    
    190,612
    
    
    
    8,294
    
    
    
    5.82
    
    
    
    164,325
    
    
    
    6,935
    
    
    
    5.61Noninterest-earning assets
    
    
    8,879
    
    
    
    
    
    
    
    
    
    
    
    6,672Total assets
    
    $
    199,491
    
    
    
    
    
    
    
    
    
    
    $
    170,997Liabilities and Shareholders EquityInterest-bearing liabilities:Interest-bearing demand deposits
    
    $
    10,541
    
    
    
    61
    
    
    
    0.78
    
    
    $
    10,647
    
    
    
    66
    
    
    
    0.82Savings accounts
    
    
    21,355
    
    
    
    164
    
    
    
    1.03
    
    
    
    35,375
    
    
    
    274
    
    
    
    1.03Money market accounts
    
    
    25,855
    
    
    
    501
    
    
    
    2.59
    
    
    
    3,135
    
    
    
    21
    
    
    
    0.90Certificates of deposit
    
    
    90,952
    
    
    
    2,031
    
    
    
    2.99
    
    
    
    72,508
    
    
    
    1,782
    
    
    
    3.27Total interest-bearing deposits
    
    
    148,703
    
    
    
    2,757
    
    
    
    2.48
    
    
    
    121,665
    
    
    
    2,143
    
    
    
    2.35Other borrowings
    
    
    20,388
    
    
    
    643
    
    
    
    4.21
    
    
    
    24,363
    
    
    
    659
    
    
    
    3.61Total interest-bearing liabilities
    
    
    169,091
    
    
    
    3,400
    
    
    
    2.69
    
    
    
    146,028
    
    
    
    2,802
    
    
    
    2.56Noninterest-bearing demand deposits
    
    
    12,167
    
    
    
    
    
    
    
    
    
    
    
    7,783Noninterest-bearing liabilities
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    1,019Total liabilities
    
    
    181,956
    
    
    
    
    
    
    
    
    
    
    
    154,830Shareholders equity
    
    
    17,535
    
    
    
    
    
    
    
    
    
    
    
    16,167Total liabilities and shareholders equity
    
    $
    199,491
    
    
    
    
    
    
    
    
    
    
    $
    170,997Net interest income; interest-rate spread (3)
    
    
    
    
    
    $
    4,894
    
    
    
    3.13
    %
    
    
    
    
    
    $
    4,133
    
    
    
    3.05
    %Net earning assets
    
    $
    21,521
    
    
    
    
    
    
    
    
    
    
    $
    18,297Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.44
    %
    
    
    
    
    
    
    
    
    
    
    3.35
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    1.13
    x
    
    
    
    
    
    
    
    
    
    
    1.13
    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
  20.




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##### Table of Contents



Interest expense
 Provision for loan losses
 Noninterest income.
 Noninterest expense
  CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS
  21.




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##### Table of Contents



Three months
    
    Year ended December 31,(Dollars in thousands)
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    ThereafterCertificates of deposit
    
    $
    12,065
    
    
    $
    47,795
    
    
    $
    21,070
    
    
    $
    8,413
    
    
    $
    2,924
    
    
    $
    1,527FHLB advances (1)
    
    
    10,378
    
    
    
    4,362
    
    
    
    7,434
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,325Capital lease obligations (3)
    
    
    41
    
    
    
    168
    
    
    
    179
    
    
    
    181
    
    
    
    181
    
    
    
    1,337Operating leases
    
    
    49
    
    
    
    208
    
    
    
    199
    
    
    
    183
    
    
    
    183
    
    
    
    685Repurchase agreements
    
    
    2,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deposits without maturity
    
    
    64,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Includes $8,500 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 $1,125 of amounts allocable to interest payments over the remaining term of the
leases.   LIQUIDITY
     22.




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##### 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
    
    $
    22,892
    
    
    
    15.6
    %
    
    $
    11,753
    
    
    
    8.0
    %
    
    $
    14,691
    
    
    
    10.0
    %Ohio Legacy Bank
    
    
    20,873
    
    
    
    14.2
    
    
    
    11,753
    
    
    
    8.0
    
    
    
    14,691
    
    
    
    10.0Tier 1 capital to risk-weighted
assetsOhio Legacy Corp
    
    $
    21,603
    
    
    
    14.7
    %
    
    $
    5,876
    
    
    
    4.0
    %
    
    $
    8,815
    
    
    
    6.0
    %Ohio Legacy Bank
    
    
    19,584
    
    
    
    13.3
    
    
    
    5,876
    
    
    
    4.0
    
    
    
    8,815
    
    
    
    6.0Tier 1 capital to average assetsOhio Legacy Corp
    
    $
    21,603
    
    
    
    10.7
    %
    
    $
    8,071
    
    
    
    4.0
    %
    
    $
    10,089
    
    
    
    5.0
    %Ohio Legacy Bank
    
    
    19,584
    
    
    
    9.7
    
    
    
    8,051
    
    
    
    4.0
    
    
    
    10,063
    
    
    
    5.0
  23.




---



##### 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.
  
 Item 5. Other Information.
  24.




---



##### 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
    
    
    (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:  November 14, 2005
    By:
    /s/ L. Dwight DouceL. Dwight DoucePresident, Chief Executive Officer and DirectorDate:  November 14, 2005
    By:
    /s/ Eric S. NadeauEric S. NadeauChief Financial Officer, Senior Vice President and Treasurer 26.