##### Table of Contents



Exhibit
13




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##### 



OHIO LEGACY CORP
 
 CONTENTS
  
 MESSAGE TO OUR SHAREHOLDERS
    
    
    1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    2CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
    
    
    3CONSOLIDATED STATEMENTS OF OPERATIONS
    
    
    4CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS EQUITY
    
    
    5CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    
    7COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
    
    
    29MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    30CORPORATE INFORMATION
    
    
    41SHAREHOLDER INFORMATION
    
    
    42




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##### Table of Contents



OHIO LEGACY CORP
 
 MESSAGE TO OUR SHAREHOLDERS
   
    
    Transforming our balance sheet by developing better and deeper banking
relationships that allow us to grow our core/low cost deposit base.
    
    Continuing to grow our top-line revenue at a faster pace which will help us improve our
efficiency ratio.
    
    Continuing to grow our balance sheet at better than peer averages while
maintaining our credit quality standards and improving the earnings profile of the
company.
  
    
    We increased the number of checking accounts by over 600 in 2006 and these
accounts allowed us to grow over $6.2 million in lower cost deposits.
    
    Our North Canton office, opened in October of 2005, ended the year at $16.6
million in deposits of which $8.6 million was in lower cost core deposits.
    
    Our noninterest income increased by $556,000, contributing toward improved top line revenue over 2005.
    
    Our assets increased $22.5 million, representing 10.8% growth in 2006.
    
    For the first year since 2003 we did not add any offices. However, we did
add two important business lines. In May we added a business banking team and in
September we added a mortgage banking division.
     -s- Daniel H. Plumly
    
    -s- D. Michael KramerDaniel H. Plumly 
Chairman of the Board
    
    D. Michael Kramer
President & CEO
 
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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Crowe
Chizek and Company LLC
 
    
  
 
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##### Table of Contents



OHIO LEGACY CORP
 
 CONSOLIDATED BALANCE SHEETS
 2006
    
    
    2005ASSETSCash and due from banks
    
    $
    5,659,986
    
    
    $
    4,528,094Federal funds sold and interest-bearing deposits in financial
institutions
    
    
    7,379,879
    
    
    
    3,594,452Cash and cash equivalents
    
    
    13,039,865
    
    
    
    8,122,546Certificate of deposit in financial institution
    
    
    100,000
    
    
    
    100,000Securities available for sale
    
    
    26,945,022
    
    
    
    33,032,297Securities
held to maturity (fair value of $2,166,324 and $823,359 at December 31, 2006 and 2005)
    
    
    2,201,682
    
    
    
    838,224Loans held for sale
    
    
    1,212,470
    
    
    
    Loans, net of allowance of $1,757,110 and $1,589,407
at December 31, 2006 and 2005
    
    
    177,021,214
    
    
    
    158,182,319Federal bank stock
    
    
    1,541,200
    
    
    
    1,479,500Premises and equipment, net
    
    
    3,618,697
    
    
    
    3,797,314Intangible assets
    
    
    282,388
    
    
    
    455,244Other real estate owned
    
    
    2,566,301
    
    
    
    Accrued interest receivable and other assets
    
    
    1,954,992
    
    
    
    2,010,323Total assets
    
    $
    230,483,831
    
    
    $
    208,017,767LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    17,346,767
    
    
    $
    15,727,338Interest-bearing demand
    
    
    9,988,257
    
    
    
    12,231,345Savings
    
    
    49,504,180
    
    
    
    42,665,057Certificates of deposit, net
    
    
    109,477,664
    
    
    
    92,273,308Total deposits
    
    
    186,316,868
    
    
    
    162,897,048Repurchase agreements
    
    
    1,317,527
    
    
    
    3,066,517Short term Federal Home Loan Bank advances
    
    
    
    
    
    
    7,200,000Federal Home Loan Bank advances
    
    
    19,433,770
    
    
    
    11,796,010Subordinated debentures
    
    
    3,325,000
    
    
    
    3,325,000Capital lease obligations
    
    
    940,183
    
    
    
    959,450Accrued interest payable and other liabilities
    
    
    731,926
    
    
    
    668,867Total liabilities
    
    
    212,065,274
    
    
    
    189,912,892SHAREHOLDERS EQUITYPreferred stock, no par value, 500,000 shares authorized and
None outstanding
    
    
    
    
    
    
    Common stock, no par value, 5,000,000 shares authorized and
2,214,564 outstanding in 2006 and 2005
    
    
    18,737,150
    
    
    
    18,658,386Accumulated earnings
    
    
    166,415
    
    
    
    79,415Accumulated other comprehensive income (loss)
    
    
    (485,008
    )
    
    
    (632,926
    )Total shareholders equity
    
    
    18,418,557
    
    
    
    18,104,875Total liabilities and shareholders equity
    
    $
    230,483,831
    
    
    $
    208,017,767
  
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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS
 2006
    
    
    2005Interest and dividends income:Loans, including fees
    
    $
    12,030,510
    
    
    $
    9,668,907Securities, taxable
    
    
    1,192,162
    
    
    
    1,426,027Securities, tax-exempt
    
    
    34,847
    
    
    
    25,632Interest-bearing deposits and federal funds sold and other
    
    
    230,725
    
    
    
    157,467Dividends on federal bank stock
    
    
    88,520
    
    
    
    77,295Total interest and dividends income
    
    
    13,576,764
    
    
    
    11,355,328Interest expense:Deposits
    
    
    5,449,750
    
    
    
    3,805,256Short term Federal Home Loan Bank advances
    
    
    219,945
    
    
    
    119,411Federal Home Loan Bank advances
    
    
    779,990
    
    
    
    352,873Subordinated debentures
    
    
    282,888
    
    
    
    282,888Repurchase agreements
    
    
    111,270
    
    
    
    28,757Capital leases
    
    
    148,944
    
    
    
    150,877Total interest expense
    
    
    6,992,787
    
    
    
    4,740,062Net interest income
    
    
    6,583,977
    
    
    
    6,615,266Provision for loan losses
    
    
    467,000
    
    
    
    523,046Net interest income after provision for loan losses
    
    
    6,116,977
    
    
    
    6,092,220Noninterest income:Service charges and other fees
    
    
    1,050,597
    
    
    
    541,594Gain on sale of loans
    
    
    24,702
    
    
    
    Gain on sales of credit card portfolio
    
    
    
    
    
    
    9,782Gain (loss) on disposal of fixed assets
    
    
    128
    
    
    
    (6,929
    )Gain (loss) on sale of other real estate owned
    
    
    (9,666
    )
    
    
    Gain (loss) on sale of other repossessed assets
    
    
    5,630
    
    
    
    10,800Other income
    
    
    67,942
    
    
    
    27,354Total other income
    
    
    1,139,333
    
    
    
    582,601Noninterest expense:Salaries and benefits
    
    
    3,774,255
    
    
    
    2,977,111Occupancy and equipment
    
    
    951,264
    
    
    
    816,499Professional fees
    
    
    357,661
    
    
    
    463,233Franchise tax
    
    
    241,362
    
    
    
    242,507Data processing
    
    
    627,733
    
    
    
    584,086Marketing and advertising
    
    
    185,087
    
    
    
    175,569Stationery and supplies
    
    
    126,678
    
    
    
    125,023Amortization of intangible asset
    
    
    172,856
    
    
    
    213,930Deposit expenses and insurance
    
    
    204,649
    
    
    
    148,777Other expenses
    
    
    453,337
    
    
    
    380,343Total noninterest expense
    
    
    7,094,882
    
    
    
    6,127,078Earnings before income taxes
    
    
    161,428
    
    
    
    547,743Income tax expense
    
    
    74,428
    
    
    
    185,743Net earnings
    
    $
    87,000
    
    
    $
    362,000Basic net earnings per share
    
    $
    0.04
    
    
    $
    0.17Diluted net earnings per share
    
    $
    0.04
    
    
    $
    0.16
  
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##### Table of Contents



OHIO LEGACY CORP
  
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Outstanding
    
    
    
    
    
    
    
    
    
    
    AccumulatedShares of
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Common
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Deficit
    
    
    Income (Loss)
    
    
    EquityBalance, January 1, 2005
    
    
    2,121,220
    
    
    $
    17,734,155
    
    
    $
    (282,585
    )
    
    $
    (211,196
    )
    
    $
    17,240,374Proceeds from exercise of stock warrants
    
    
    92,344
    
    
    
    923,440
    
    
    
    
    
    
    
    
    
    
    
    923,440Proceeds from exercise of stock options
    
    
    1,000
    
    
    
    8,500
    
    
    
    
    
    
    
    
    
    
    
    8,500Redemption of stock warrants
    
    
    
    
    
    
    (9,239
    )
    
    
    
    
    
    
    
    
    
    
    (9,239
    )Income tax benefit from exercise of stock options
    
    
    
    
    
    
    1,530
    
    
    
    
    
    
    
    
    
    
    
    1,530Comprehensive income (loss)Net earnings
    
    
    
    
    
    
    
    
    
    
    362,000
    
    
    
    
    
    
    
    362,000Change in
net unrealized gain on securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (421,730
    )
    
    
    (421,730
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,730
    )Balance, December 31, 2005
    
    
    2,214,564
    
    
    
    18,658,386
    
    
    
    79,415
    
    
    
    (632,926
    )
    
    
    18,104,875Stock option expense
    
    
    
    
    
    
    78,764
    
    
    
    
    
    
    
    
    
    
    
    78,764Comprehensive income (loss)Net earnings
    
    
    
    
    
    
    
    
    
    
    87,000
    
    
    
    
    
    
    
    87,000Change in
net unrealized gain on securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,918
    
    
    
    147,918Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,918Shareholders equity, end of period
    
    
    2,214,564
    
    
    $
    18,737,150
    
    
    $
    166,415
    
    
    $
    (485,008
    )
    
    $
    18,418,557
  
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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 2006
    
    
    2005Cash flows from operating activities:Net earnings
    
    $
    87,000
    
    
    $
    362,000Adjustments to reconcile net earnings to net cash from
operating activities:Depreciation and amortization
    
    
    583,625
    
    
    
    553,606Securities amortization and accretion, net
    
    
    114,543
    
    
    
    158,965Federal Home Loan Bank (FHLB) stock dividends
    
    
    (54,700
    )
    
    
    (43,800
    )Origination of loans held for sale
    
    
    (4,140,970
    )Proceeds from sale of loans held for sale
    
    
    2,953,202
    
    
    
    Provision for loan losses
    
    
    467,000
    
    
    
    523,046Loss (gain) from Ohio Legacy Trust I
    
    
    8,076
    
    
    
    8,074Loss on sale of other real estate owned
    
    
    9,666
    
    
    
    Loss (gain) on disposal of fixed asset
    
    
    (128
    )
    
    
    6,929Gain on sale of loans and credit card portfolio
    
    
    (24,702
    )
    
    
    (9,782
    )Accretion of fair value purchase adjustments
    
    
    (19,599
    )
    
    
    (116,738
    )Change in deferred taxes
    
    
    (109,648
    )
    
    
    (133,880
    )Stock option expense
    
    
    78,764
    
    
    
    Net change in:Accrued interest receivable and other assets
    
    
    (110,745
    )
    
    
    (32,574
    )Accrued interest payable and other liabilities
    
    
    181,285
    
    
    
    88,651Deferred loan fees
    
    
    (16,797
    )
    
    
    52,531Net cash from operating activities
    
    
    5,872
    
    
    
    1,417,028Cash flows from investing activities:Purchases of securities available for sale
    
    
    (1,000,000
    )
    
    
    (3,459,730
    )Purchases of securities held to maturity
    
    
    (1,373,638
    )
    
    
    (197,765
    )Purchases of certificates of deposit
    
    
    
    
    
    
    (100,000
    )Maturities, calls and paydowns of securities available for sale
    
    
    7,280,252
    
    
    
    9,020,636Proceeds from sale of other real estate owned
    
    
    201,471
    
    
    
    Proceeds from sale of credit card portfolio
    
    
    
    
    
    
    257,418Purchases of federal bank stock
    
    
    (7,000
    )
    
    
    (60,050
    )Net change in loans
    
    
    (22,066,535
    )
    
    
    (26,921,460
    )Purchases of premises and equipment
    
    
    (232,024
    )
    
    
    (1,874,851
    )Net cash used by investing activities
    
    
    (17,197,475
    )
    
    
    (23,335,802
    )Cash flows from financing activities:Net change in deposits
    
    
    23,439,419
    
    
    
    5,371,175Net change in repurchase agreements
    
    
    (1,748,990
    )
    
    
    3,066,517Repayment of capital lease obligations
    
    
    (19,267
    )
    
    
    (9,262
    )Proceeds from exercise of stock warrants
    
    
    
    
    
    
    923,440Redemption of stock warrants
    
    
    
    
    
    
    (9,239
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    8,500Proceeds from short term FHLB advances, net of repayments
    
    
    (7,200,000
    )
    
    
    7,200,000Proceeds from FHLB advances
    
    
    12,000,000
    
    
    
    2,000,000Repayments of FHLB advances
    
    
    (4,362,240
    )
    
    
    (5,499,134
    )Net cash from financing activities
    
    
    22,108,922
    
    
    
    13,051,997Net change in cash and cash equivalents:
    
    
    4,917,319
    
    
    
    (8,866,777
    )Cash and cash equivalents at beginning of period
    
    
    8,122,546
    
    
    
    16,989,323Cash and cash equivalents at end of period
    
    $
    13,039,865
    
    
    $
    8,122,546Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    6,882,201
    
    
    $
    4,684,555Federal income taxes
    
    
    233,948
    
    
    
    310,000Noncash transactions:Transfer of loans to other real estate owned
    
    $
    2,777,438
    
    
    $
    
  
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##### Table of Contents



OHIO LEGACY CORP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations and Principles of Consolidation:
  Use of Estimates:
 Cash Flows:
 Restrictions on Cash:
 Securities:
   Loans Held for Sale:
 
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Loans:
    Allowance for Loan Losses:
  Other Real Estate Owned:
 Federal Bank Stock:
 
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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Premises and Equipment and Long-lived Assets:
 Intangible Assets:
 Income Taxes:
 Earnings Per Share:
 2006
    
    
    2005BASIC:Net earnings
    
    $
    87,000
    
    
    $
    362,000Weighted average common shares outstanding
    
    
    2,214,564
    
    
    
    2,165,392Basic earnings per share
    
    $
    0.04
    
    
    $
    0.17DILUTED:Net earnings
    
    $
    87,000
    
    
    $
    362,000Weighted average common shares outstanding
    
    
    2,214,564
    
    
    
    2,165,392Dilutive effect of stock options
    
    
    3,629
    
    
    
    16,657Dilutive effect of stock warrants
    
    
    142
    
    
    
    23,651Total common shares and dilutive potential
common shares
    
    
    2,218,335
    
    
    
    2,205,700Diluted earnings per share
    
    $
    0.04
    
    
    $
    0.16
  Stock-Based Compensation:
 
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
   2005
    
    
    Pro Forma asAs
    
    
    Pro Forma
    
    
    If underReported
    
    
    Adjustments
    
    

SFAS 1232(R)Income before income taxes
    
    $
    547,743
    
    
    $
    (707,594
    )
    
    $
    (159,851
    )Income taxes
    
    
    185,743
    
    
    
    (63,594
    )
    
    
    122,149Net income
    
    $
    362,000
    
    
    $
    (644,000
    )
    
    $
    (282,000
    )Basic earnings per share
    
    $
    0.17
    
    
    $
    (0.30
    )
    
    $
    (0.13
    )Diluted earnings per share
    
    $
    0.16
    
    
    $
    (0.29
    )
    
    $
    (0.13
    )
 Loan Commitments and Related Financial Instruments:
 Comprehensive Income (Loss):
 Loss Contingencies:
 Dividend Restriction:
 Fair Values of Financial Instruments:
 
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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Operating Segments:
 Reclassifications:
 Recent Accounting Pronouncements:
 Effect
of Newly Issued But Not Yet Effective Accounting Standards:
   
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2  SECURITIES
  Gross
    
    
    GrossAvailable for sale, carried at
    
    Fair
    
    
    Unrealized
    
    
    Unrealizedfair value:
    
    Value
    
    
    Gains
    
    
    LossesDecember
31, 2006U.S.
Government-sponsored enterprises
    
    $
    7,286,761
    
    
    $
    
    
    
    $
    (210,796
    )Mortgage-backed securities
    
    
    19,658,261
    
    
    
    2,016
    
    
    
    (526,080
    )Total
    
    $
    26,945,022
    
    
    $
    2,016
    
    
    $
    (736,876
    )December
31, 2005U.S.
Government-sponsored enterprises
    
    $
    7,208,633
    
    
    $
    
    
    
    $
    (287,811
    )Mortgage-backed securities
    
    
    25,823,664
    
    
    
    7,832
    
    
    
    (679,000
    )Total
    
    $
    33,032,297
    
    
    $
    7,832
    
    
    $
    (966,811
    )
  Gross
    
    
    GrossHeld to maturity, carried at
    
    Amortized
    
    
    Unrecognized
    
    
    Unrecognized
    
    
    Fairamortized cost:
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember
31, 2006Obligations of local
governments
    
    $
    2,201,682
    
    
    $
    
    
    
    $
    (35,358
    )
    
    $
    2,166,324December
31, 2005Obligations of local governments
    
    $
    838,224
    
    
    $
    
    
    
    $
    (14,865
    )
    
    $
    823,359
  Less than
    
    
    One yearone year
    
    
    or more
    
    
    TotalFair
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    Fair(Dollars in thousands)
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossAvailable for sale:U.S. Government-sponsored
enterprises
    
    $
    988
    
    
    $
    (12
    )
    
    $
    6,299
    
    
    $
    (199
    )
    
    $
    7,287
    
    
    $
    (211
    )Mortgage-backed securities
    
    
    691
    
    
    
    (3
    )
    
    
    18,292
    
    
    
    (523
    )
    
    
    18,983
    
    
    
    (526
    )Total
    
    $
    1,679
    
    
    $
    (15
    )
    
    $
    24,591
    
    
    $
    (722
    )
    
    $
    26,270
    
    
    $
    (737
    )Held to maturity:Obligations of local governments
    
    $
    1,350
    
    
    $
    (23
    )
    
    $
    816
    
    
    $
    (12
    )
    
    $
    2,166
    
    
    $
    (35
    )
 
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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2
 SECURITIES (continued)
  Less than
    
    
    One yearone year
    
    
    or more
    
    
    TotalFair
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    Fair(Dollars in thousands)
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossAvailable for sale:U.S. Government-sponsored
enterprises
    
    $
    
    
    
    $
    
    
    
    $
    7,209
    
    
    $
    (288
    )
    
    $
    7,209
    
    
    $
    (288
    )Mortgage-backed securities
    
    
    11,748
    
    
    
    (221
    )
    
    
    13,153
    
    
    
    (458
    )
    
    
    24,901
    
    
    
    (679
    )Total
    
    $
    11,748
    
    
    $
    (221
    )
    
    $
    20,362
    
    
    $
    (746
    )
    
    $
    32,110
    
    
    $
    (967
    )Held to maturity:Obligations of local
governments
    
    $
    191
    
    
    $
    (5
    )
    
    $
    632
    
    
    $
    (10
    )
    
    $
    823
    
    
    $
    (15
    )
   AvailableHeld-to-maturity
    
    
    for saleCarrying
    
    
Fair

    
    
    Fair(Dollars in thousands)
    
    Amount
    
    
    Value
    
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    
    
    
    $
    Due from one to five years
    
    
    
    
    
    
    
    
    
    
    6,299Due from five to ten years
    
    
    829
    
    
    
    816
    
    
    
    988Due after ten years
    
    
    1,373
    
    
    
    1,350
    
    
    
    Mortgage-backed
    
    
    
    
    
    
    
    
    
    
    19,658Total
    
    $
    2,202
    
    
    $
    2,166
    
    
    $
    26,945
    
 - 13 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3  LOANS
  2006
    
    
    2005Balance
    
    
    Percent
    
    
    Balance
    
    
    PercentResidential real estate
    
    $
    65,282,422
    
    
    
    36.5
    %
    
    $
    59,320,852
    
    
    
    37.1
    %Multifamily residential real estate
    
    
    9,452,861
    
    
    
    5.3
    
    
    
    9,929,945
    
    
    
    6.2Commercial real estate
    
    
    65,228,180
    
    
    
    36.4
    
    
    
    54,522,175
    
    
    
    34.1Construction
    
    
    10,235,414
    
    
    
    5.7
    
    
    
    11,758,408
    
    
    
    7.3Commercial
    
    
    18,524,153
    
    
    
    10.4
    
    
    
    12,805,424
    
    
    
    8.0Consumer and home equity
    
    
    10,259,367
    
    
    
    5.7
    
    
    
    11,655,793
    
    
    
    7.3Total loans
    
    
    178,982,397
    
    
    
    100.0
    %
    
    
    159,992,597
    
    
    
    100.0
    %Less: Allowance for loan
losses
    
    
    (1,757,110
    )
    
    
    
    
    
    
    (1,589,407
    )Net deferred loan fees
    
    
    (204,073
    )
    
    
    
    
    
    
    (220,871
    )Loans, net
    
    $
    177,021,214
    
    
    
    
    
    
    $
    158,182,319
   2006
    
    

2005Balance, January 1
    
    $
    1,589,407
    
    
    $
    1,263,655Provision for loan losses
    
    
    467,000
    
    
    
    523,046Losses on charged-off loans
    
    
    (311,186
    )
    
    
    (203,658
    )Recoveries of charged-off loans
    
    
    11,889
    
    
    
    6,364Balance, December 31
    
    $
    1,757,110
    
    
    $
    1,589,407Balance as a percentage of total loans
    
    
    0.98
    %
    
    
    0.99
    %
 
 - 14 -




---



##### Table of Contents



OHIO
LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3  LOANS (continued)
  2006
    
    
    2005At December 31:Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    Nonaccrual
loans, includes smaller balance homogeneous loans
    
    
    2,439,938
    
    
    
    663,970Impaired loans, included in nonaccrual loans
    
    
    1,481,109
    
    
    
    344,837Amount of the allowance for loan losses allocated
    
    
    32,000
    
    
    
    35,000During the year ended December 31:Average of impaired loans during the year
    
    $
    1,170,561
    
    
    $
    530,728Interest income recognized during impairment
    
    
    
    
    
    
    Cash-basis
interest income recognized during impairment
    
    
    5,424
    
    
    
    7,786Interest income foregone on nonaccrual loans
    
    $
    153,178
    
    
    $
    59,207
  Balances, January 1
    
    $
    2,883,655New loans
    
    
    2,220,000Repayments
    
    
    (436,238
    )Balances,
December 31
    
    $
    4,667,417
 
 - 15 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  PREMISES AND EQUIPMENT
  2006
    
    
    2005Land
    
    $
    524,559
    
    
    $
    524,559Office building
    
    
    1,930,141
    
    
    
    1,926,103Leasehold improvements
    
    
    977,068
    
    
    
    977,068Furniture, fixtures and equipment
    
    
    1,687,164
    
    
    
    1,517,919Premises and equipment, cost
    
    
    5,118,932
    
    
    
    4,945,649Less: Accumulated depreciation
    
    
    (1,500,235
    )
    
    
    (1,148,335
    )Premises and equipment, net
    
    $
    3,618,697
    
    
    $
    3,797,314
        
 - 16 -




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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  PREMISES AND EQUIPMENT (Continued)
  Operating
    
    
    CapitalLeases
    
    
    Leases2007
    
    $
    199,862
    
    
    $
    178,9982008
    
    
    183,474
    
    
    
    181,2482009
    
    
    183,474
    
    
    
    181,2482010
    
    
    183,474
    
    
    
    181,2482011
    
    
    97,829
    
    
    
    190,408Thereafter
    
    
    404,012
    
    
    
    965,612Total minimum lease payments
    
    $
    1,252,125
    
    
    
    1,878,762Amounts representing interest
    
    
    
    
    
    
    (938,579
    )Present value of minimum lease payments
    
    
    
    
    
    $
    940,183
 NOTE 5  INTANGIBLE ASSETS
  2007
    
    $
    131,7812008
    
    
    90,7062009
    
    
    49,6322010
    
    
    10,269
 NOTE 6  DEPOSITS
   2007
    
    $
    78,106,2212008
    
    
    25,451,8792009
    
    
    3,206,6402010
    
    
    1,867,7662011
    
    
    720,990Thereafter
    
    
    124,168$
    109,477,664
 
 - 17 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2006
    
    
    2005Average
    
    
    Average
    
    
    Average
    
    
    AverageBalances
    
    
    Rate
    
    
    Balances
    
    
    RateNoninterest-bearing demand deposits
    
    $
    15,158,000
    
    
    
    N/A
    
    
    $
    12,893,000
    
    
    
    N/AInterest-bearing demand deposits
    
    
    9,005,000
    
    
    
    0.75
    %
    
    
    10,497,000
    
    
    
    0.78
    %Savings accounts
    
    
    11,637,000
    
    
    
    0.82
    
    
    
    19,856,000
    
    
    
    0.99Money market accounts
    
    
    32,828,000
    
    
    
    3.40
    
    
    
    26,254,000
    
    
    
    2.59Certificates of deposit
    
    
    100,369,000
    
    
    
    4.16
    
    
    
    91,617,000
    
    
    
    3.11Total deposits
    
    $
    168,997,000
    
    
    
    
    
    
    $
    161,117,000
 NOTE 7  REPURCHASE AGREEMENT
  Average daily balance during the year
    
    $
    2,608,000Average interest rate during the year
    
    
    4.27
    %Maximum month-end balance during the year
    
    $
    3,375,685Interest rate at year-end
    
    
    4.45
    %
  Average daily balance during the year
    
    $
    840,000Average interest rate during the year
    
    
    3.42
    %Maximum month-end balance during the year
    
    $
    3,066,517Interest rate at year-end
    
    
    3.65
    %
 
 - 18 -




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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 8  FEDERAL HOME LOAN BANK ADVANCES
   2006
    
    
    2005Thirty-month interest-only advance2.77% fixed rate, maturing June 23, 2006
    
    $
    
    
    
    $
    1,500,000Three-year interest-only advance3.07% fixed rate, maturing December 22, 2006
    
    
    
    
    
    
    1,500,000Three-year, constant monthly payment advance2.26% fixed rate, final maturity October 1, 2006
    
    
    
    
    
    
    853,818Three-year interest-only advance2.42% fixed rate, maturing March 10, 2007
    
    
    5,000,000
    
    
    
    5,000,000Two-year interest-only advance4.32% fixed rate, maturing September 7, 2007
    
    
    2,000,000
    
    
    
    2,000,000Four-year, constant monthly payment advance2.57% fixed rate, final maturity October 1, 2007
    
    
    433,770
    
    
    
    942,192Twenty-seven month interest-only advance4.94% fixed rate, maturing April 25, 2008
    
    
    2,000,000
    
    
    
    Three-year interest-only advance4.89% fixed rate, maturing January 16, 2009
    
    
    3,000,000
    
    
    
    Three-year interest-only advance5.24% fixed rate, maturing February 23, 2009
    
    
    2,500,000
    
    
    
    Four-year interest-only advance4.98% fixed rate, maturing January 25, 2010
    
    
    2,000,000
    
    
    
    Four-year interest-only advance5.25% fixed rate, maturing February 23, 2010
    
    
    2,500,000
    
    
    
    $
    19,433,770
    
    
    $
    11,796,010
  2007
    
    $
    7,433,7702008
    
    
    2,000,0002009
    
    
    5,500,0002010
    
    
    4,500,0002011
    
    
    $
    19,433,770
 
 - 19 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9  SUBORDINATED DEBENTURES
    NOTE 10  INCOME TAXES
  2006
    
    
    2005Current federal
    
    $
    184,076
    
    
    $
    319,623Deferred federal
    
    
    (109,648
    )
    
    
    (133,880
    )Change in valuation allowance
    
    
    
    
    
    
    Total income tax expense (benefit)
    
    $
    74,428
    
    
    $
    185,743
  2006
    
    
    2005Federal statutory rate (34%) times financial
statement earnings
    
    $
    54,887
    
    
    $
    186,233Effect of:Tax exempt income net of disallowed interest expense
    
    
    (13,229
    )
    
    
    (10,162
    )Stock-based compensation
    
    
    11,793
    
    
    
    Other, net
    
    
    20,977
    
    
    
    9,672Total income tax benefit
    
    $
    74,428
    
    
    $
    185,743
 
 - 20 -




---



##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
10  INCOME TAXES (Continued)
  2006
    
    
    2005Deferred tax assets:Allowance for loan losses
    
    $
    525,810
    
    
    $
    478,876Deferred loan fees
    
    
    69,384
    
    
    
    75,096Deferred compensation
    
    
    38,608
    
    
    
    38,608Nonaccrual loan interest income
    
    
    34,555
    
    
    
    Intangible asset amortization
    
    
    119,210
    
    
    
    77,431Stock-based compensation
    
    
    14,987
    
    
    
    Other
    
    
    2,956
    
    
    
    12,728Unrealized loss on securities available for sale
    
    
    249,852
    
    
    
    326,053Total deferred tax assets
    
    
    1,055,362
    
    
    
    1,008,792Deferred tax liabilities:Depreciation
    
    
    (38,023
    )
    
    
    (39,150
    )Prepaid expenses
    
    
    (28,127
    )
    
    
    (32,673
    )FHLB stock dividends
    
    
    (45,016
    )
    
    
    (26,418
    )Other
    
    
    (1,241
    )
    
    
    (863
    )Total deferred tax liabilities
    
    
    (112,407
    )
    
    
    (99,104
    )Net deferred tax assets
    
    $
    942,955
    
    
    $
    909,688
 NOTE 11  STOCK BASED COMPENSATION
   
 - 21 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11  STOCK-BASED COMPENSATION (continued)
  2006
    
    
    2005Weighted Average
    
    
    
    
    
    
    Weighted AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOutstanding at January 1
    
    
    285,750
    
    
    $
    10.76
    
    
    
    188,000
    
    
    $
    10.22Granted
    
    
    35,375
    
    
    
    9.44
    
    
    
    99,500
    
    
    
    11.76Forfeited
    
    
    (33,750
    )
    
    
    10.58
    
    
    
    (750
    )
    
    
    10.83Exercised
    
    
    
    
    
    
    
    
    
    
    (1,000
    )
    
    
    8.50Outstanding at December 31
    
    
    287,375
    
    
    $
    10.62
    
    
    
    285,750
    
    
    $
    10.76Exercisable at December 31
    
    
    257,000
    
    
    $
    10.76
    
    
    
    248,250
    
    
    $
    11.09Weighted average remaining
contractual life
    
    7.1
    years
    
    
    
    
    
    7.8
    years
 2006
    
    2005Weighted average fair value of options granted during the year:
    
    
    4.58
    
    
    
    5.49
  Twelve Months EndedDecember 31, 2006Weighted AverageShares
    
    
    Fair ValueTotal unvested optionsUnvested options, beginning of period
    
    
    37,500
    
    
    $
    2.99Vested
    
    
    (37,000
    )
    
    
    3.25Forfeited
    
    
    (5,500
    )
    
    
    2.94Granted
    
    
    35,375
    
    
    
    4.58Unvested options, end of period
    
    
    30,375
    
    
    $
    4.54
  Year Ended December 31,2006
    
    2005Proceeds of options exercised
    
    $
    
    
    
    $
    8,500Related tax benefit recognized
    
    
    
    
    
    
    1,530Intrinsic value of options exercised
    
    
    
    
    
    
    4,500
  
 - 22 -




---



##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11  STOCK-BASED COMPENSATION (continued)
  Outstanding
    
    ExercisableWeighted Average
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    WeightedContractual
    
    Exercise
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Number
    
    Life (years)
    
    Price
    
    Number
    
    Exercise Price$8.50  $9.99
    
    
    75,375
    
    
    
    7.83
    
    
    $
    8.98
    
    
    
    45,000
    
    
    $
    8.72$10.00
    
    
    84,500
    
    
    
    5.34
    
    
    
    10.00
    
    
    
    84,500
    
    
    
    10.00$12.00
    
    
    127,500
    
    
    
    7.90
    
    
    
    12.00
    
    
    
    127,500
    
    
    
    12.00287,375
    
    
    
    7.13
    
    
    $
    10.62
    
    
    
    257,000
    
    
    $
    10.76
   Oct. 2006
    
    
    Oct. 2006
    
    
    July 2006
    
    
    May 2006
    
    
    May 2006Stock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    StockOptions
    
    
    Options
    
    
    Options
    
    
    Options
    
    
    OptionsOptions granted
    
    
    1,000
    
    
    
    1,500
    
    
    
    3,000
    
    
    
    500
    
    
    
    29,375Fair value, calculated
    
    $
    4.19
    
    
    $
    4.24
    
    
    $
    4.36
    
    
    $
    4.50
    
    
    $
    4.64Exercise price
    
    $
    9.01
    
    
    $
    9.00
    
    
    $
    9.05
    
    
    $
    9.27
    
    
    $
    9.52Risk-free interest rate,
10-year Treasury
    
    
    4.68
    %
    
    
    4.83
    %
    
    
    5.06
    %
    
    
    5.12
    %
    
    
    5.10
    %Expected stock price volatility
    
    
    23.54
    %
    
    
    23.54
    %
    
    
    23.87
    %
    
    
    24.14
    %
    
    
    24.43
    %Expected dividend rate
    
    None
    
    None
    
    None
    
    None
    
    NoneExpected life
    
    7 years
    
    7 years
    
    7 years
    
    7 years
    
    7 years
 October 2005
    
    August 2005
    
    April 2005Stock Options
    
    Stock Options
    
    Stock OptionsOptions granted
    
    
    5,000
    
    
    
    5,000
    
    
    
    89,500Fair value, calculated
    
    $
    4.42
    
    
    $
    4.76
    
    
    $
    5.59Exercise price
    
    
    9.22
    
    
    
    10.00
    
    
    
    12.00Risk-free interest rate, 10-year Treasury
    
    
    4.39
    %
    
    
    4.23
    %
    
    
    4.19
    %Expected stock price volatility
    
    
    26.62
    
    
    
    26.99
    
    
    
    25.91Expected dividend rate
    
    None
    
    None
    
    NoneExpected life
    
    10 years
    
    10 years
    
    10 years
  
 - 23 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11  STOCK-BAESD COMPENSATION (continued)
  CompensationCosts2007
    
    $
    46,1162008
    
    
    44,2722009
    
    
    17,119Total
    
    $
    107,507
 NOTE 12  STOCK WARRANTS
   NOTE 13  CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS
   
 - 24 -




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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 13  CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS (continued)
  To Be Well-Capitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio2006Total capital to
risk-weighted
assetsOhio Legacy
Bank
    
    $
    22,055
    
    
    
    12.8
    %
    
    $
    13,823
    
    
    
    8.0
    %
    
    $
    17,279
    
    
    
    10.0
    %Tier 1 capital to
risk-weighted
assetsOhio Legacy
Bank
    
    
    20,298
    
    
    
    11.7
    
    
    
    6,911
    
    
    
    4.0
    
    
    
    10,367
    
    
    
    6.0Tier 1 capital to
average assetsOhio
Legacy Bank
    
    
    20,298
    
    
    
    8.9
    
    
    
    9,157
    
    
    
    4.0
    
    
    
    11,446
    
    
    
    5.02005Total capital to
risk-weighted
assetsOhio Legacy Corp
    
    $
    23,197
    
    
    
    15.4
    %
    
    $
    12,081
    
    
    
    8.0
    %
    
    NAOhio Legacy Bank
    
    
    21,250
    
    
    
    14.1
    
    
    
    12,093
    
    
    
    8.0
    
    
    $
    15,116
    
    
    
    10.0
    %Tier 1 capital to
risk-weighted
assetsOhio Legacy
Corp
    
    
    21,608
    
    
    
    14.3
    
    
    
    6,040
    
    
    
    4.0
    
    
    NAOhio Legacy
Bank
    
    
    19,661
    
    
    
    13.0
    
    
    
    6,046
    
    
    
    4.0
    
    
    
    9,070
    
    
    
    6.0Tier 1 capital to
average assetsOhio Legacy Corp
    
    
    21,608
    
    
    
    10.4
    
    
    
    8,310
    
    
    
    4.0
    
    
    NAOhio
Legacy Bank
    
    
    19,661
    
    
    
    9.5
    
    
    
    8,310
    
    
    
    4.0
    
    
    
    10,388
    
    
    
    5.0
   
 - 25 -




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 14  LOAN COMMITMENTS AND RELATED ACTIVITIES
   2006
    
    
    2005Commitments to make loans:Variable-rate
    
    $
    3,643,000
    
    
    $
    702,000Fixed-rate
    
    
    
    
    
    
    123,000Unused lines of credit, variable-rate
    
    $
    20,633,000
    
    
    $
    19,052,000Standby letters of credit
    
    $
    599,000
    
    
    $
    220,000
 NOTE 15  FAIR VALUES OF FINANCIAL INSTRUMENTS
  2006
    
    
    2005Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    13,039,865
    
    
    $
    13,040,000
    
    
    $
    8,122,546
    
    
    $
    8,122,000Securities available for sale
    
    
    26,945,022
    
    
    
    26,945,000
    
    
    
    33,032,297
    
    
    
    33,032,000Securities held to maturity
    
    
    2,201,682
    
    
    
    2,166,000
    
    
    
    838,224
    
    
    
    823,000Loans held for sale
    
    
    1,212,470
    
    
    
    1,230,000
    
    
    
    
    
    
    
    Loans, net
    
    
    177,021,214
    
    
    
    175,440,000
    
    
    
    158,182,319
    
    
    
    156,306,000Federal bank stock
    
    
    1,541,200
    
    
    
    1,541,000
    
    
    
    1,479,500
    
    
    
    1,479,000Accrued interest receivable
    
    
    917,811
    
    
    
    918,000
    
    
    
    811,449
    
    
    
    811,000Financial liabilities:Deposits
    
    $
    (186,316,868
    )
    
    $
    (187,760,000
    )
    
    $
    (162,897,048
    )
    
    $
    (163,480,000
    )Repurchase agreements
    
    
    (1,317,527
    )
    
    
    (1,317,000
    )
    
    
    (3,066,517
    )
    
    
    (3,066,000
    )Subordinated debentures
    
    
    (3,325,000
    )
    
    
    (3,337,000
    )
    
    
    (3,325,000
    )
    
    
    (3,406,000
    )Overnight FHLB advances
    
    
    
    
    
    
    
    
    
    
    (7,200,000
    )
    
    
    (7,200,000
    )FHLB advances
    
    
    (19,433,770
    )
    
    
    (19,301,000
    )
    
    
    (11,796,010
    )
    
    
    (11,549,000
    )Accrued interest payable
    
    
    (426,365
    )
    
    
    (426,000
    )
    
    
    (316,100
    )
    
    
    (316,000
    )
  
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##### Table of Contents



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 16  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
 CONDENSED BALANCE SHEETS
 As of December 31,2006
    
    
    2005ASSETSCash and cash equivalents
    
    $
    1,270,165
    
    
    $
    1,596,731Investment in subsidiary, Ohio Legacy Bank, N.A.
    
    
    20,094,088
    
    
    
    19,483,579Other assets
    
    
    426,624
    
    
    
    397,377Total assets
    
    $
    21,790,877
    
    
    $
    21,477,687LIABILITIES AND SHAREHOLDERS EQUITYSubordinated debenture to Ohio Legacy Trust I
    
    $
    3,325,000
    
    
    $
    3,325,000Other liabilities
    
    
    47,320
    
    
    
    47,812Shareholders equity
    
    
    18,418,557
    
    
    
    18,104,875Total liabilities and shareholders equity
    
    $
    21,790,877
    
    
    $
    21,477,687
 CONDENSED STATEMENTS OF OPERATIONS
 For the year ended December 31,2006
    
    
    2005Interest income
    
    $
    
    
    
    $
    3,575Interest expense
    
    
    (282,893
    )
    
    
    (282,893
    )Net interest expense
    
    
    (282,893
    )
    
    
    (279,318
    )Loss on investment in Ohio Legacy Trust I
    
    
    (8,074
    )
    
    
    (8,074
    )Professional fees
    
    
    (146,240
    )
    
    
    (154,739
    )Other income (expense)
    
    
    (115,208
    )
    
    
    16,041Loss before undistributed earnings of subsidiary
    
    
    (552,415
    )
    
    
    (426,090
    )Equity in undistributed earnings of subsidiary
    
    
    462,591
    
    
    
    643,645Earnings before income taxes
    
    
    (89,824
    )
    
    
    217,555Income tax benefit
    
    
    (176,824
    )
    
    
    (144,445
    )Net earnings
    
    $
    87,000
    
    
    $
    362,000
 
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 16  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (continued)
 CONDENSED STATEMENTS OF CASH FLOWS
 For the year ended December 31,2006
    
    

2005Cash flows from operating activities:Net Earnings
    
    $
    87,000
    
    
    $
    362,000Adjustments:Equity in undistributed earnings of subsidiary
    
    
    (462,591
    )
    
    
    (643,645
    )Loss on investment in Ohio Legacy Trust I
    
    
    8,074
    
    
    
    8,074Stock options expense
    
    
    78,764
    
    
    
    Net change in other assets and other liabilities
    
    
    (37,813
    )
    
    
    171,285Net used by operating activities
    
    
    (326,566
    )
    
    
    (102,286
    )Cash flows from investing activities:Investment in subsidiary
    
    
    
    
    
    
    Net cash used by investing activities
    
    
    
    
    
    
    Cash flows from financing activities:Proceeds from exercise of stock warrants
    
    
    
    
    
    
    923,440Proceeds from exercise of options
    
    
    
    
    
    
    8,500Redemption of stock warrants
    
    
    
    
    
    
    (9,239
    )Net cash from financing activities
    
    
    
    
    
    
    922,701Net change in cash and cash equivalents
    
    
    (326,566
    )
    
    
    820,415Beginning cash and cash equivalents
    
    
    1,596,731
    
    
    
    776,316Ending cash and cash equivalents
    
    $
    1,270,165
    
    
    $
    1,596,731
 NOTE 17  OTHER COMPREHENSIVE INCOME (LOSS)
  2006
    
    
    2005Net unrealized holding gains (losses) on available
for sale securities during the period
    
    $
    224,119
    
    
    $
    (638,986
    )Tax effect related to current period net unrealized losses
on available for sale securities
    
    
    (76,201
    )
    
    
    217,256Other comprehensive income (loss)
    
    $
    147,918
    
    
    $
    (421,730
    )
 
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##### Table of Contents



OHIO
LEGACY CORP
 
 COMPARATIVE
SUMMARY OF SELECTED FINANCIAL DATA
  (Dollars in thousands, except per share data)
    
    2006
    
    
    2005Balance Sheet Data:Total assets
    
    $
    230,484
    
    
    $
    208,018Securities available for sale
    
    
    26,945
    
    
    
    33,032Securities held to maturity
    
    
    2,202
    
    
    
    838Loans, net of deferred fees
    
    
    178,778
    
    
    
    159,772Allowance for loan losses
    
    
    (1,757
    )
    
    
    (1,589
    )Total deposits
    
    
    186,317
    
    
    
    162,897Total borrowings
    
    
    24,076
    
    
    
    25,388Shareholders equity
    
    
    18,419
    
    
    
    18,105Average assets
    
    
    218,915
    
    
    
    201,465Average shareholders equity
    
    
    17,877
    
    
    
    17,685Income Statement Data:Total interest income
    
    $
    13,577
    
    
    $
    11,355Total interest expense
    
    
    6,993
    
    
    
    4,740Net interest income
    
    
    6,584
    
    
    
    6,615Provision for loan losses
    
    
    467
    
    
    
    523Net interest income after provision for loan losses
    
    
    6,117
    
    
    
    6,092Noninterest income
    
    
    1,139
    
    
    
    583Noninterest expense
    
    
    7,095
    
    
    
    6,127Earnings before income tax benefit
    
    
    161
    
    
    
    548Income tax expense (benefit)
    
    
    74
    
    
    
    186Net earnings
    
    $
    87
    
    
    $
    362Per Share Data:Basic net earnings per share
    
    $
    0.04
    
    
    $
    0.17Diluted net earnings per share
    
    $
    0.04
    
    
    $
    0.16Average shares used in earnings per share calculations:Basic
    
    
    2,214,564
    
    
    
    2,165,392Diluted
    
    
    2,218,335
    
    
    
    2,205,700Tangible book value per share at year-end
    
    $
    8.19
    
    
    $
    7.97Operating Ratios and Other Key Metrics:Total net loans to total deposits
    
    
    95.01
    %
    
    
    97.11
    %Total shareholders equity to total assets
    
    
    7.99
    
    
    
    8.70Average shareholders equity to average assets
    
    
    8.17
    
    
    
    8.78Return on average equity
    
    
    0.49
    
    
    
    2.05Return on average assets
    
    
    0.04
    
    
    
    0.18Allowance for loan losses to total loans
    
    
    0.98
    
    
    
    0.99Interest spread
    
    
    2.76
    
    
    
    3.12Net interest margin
    
    
    3.18
    
    
    
    3.45Efficiency ratio (1) (2)
    
    
    89.63
    
    
    
    82.15Noninterest income to average assets (1)
    
    
    0.52
    
    
    
    0.29Noninterest expense to average assets (2)
    
    
    3.16
    
    
    
    2.94
 
 (1)
    
    Excludes gains on sales of securities(2)
    
    Excludes amortization of intangible assets 
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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.
 OVERVIEW AND OUTLOOK
  
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OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
  
    
    Transforming our balance sheet by developing better and deeper banking relationships
that allow us to grow our core/low cost deposit base.
    
    Continuing to grow our top-line revenue at a faster pace which will help us improve our
efficiency ratio.
    
    Continuing to grow our balance sheet at better than peer averages while maintaining our
credit quality standards and improving the earnings profile of the Company.
     
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MANAGEMENTS DISCUSSION AND ANALYSIS
 OVERVIEW OF STRATEGIC DEVELOPMENTS
  
    
    Mortgage Banking  we built and deployed a mortgage banking team that is responsible
for originating mortgage loans and then selling them into the secondary mortgage market.
Historically our approach to Mortgage banking has been to originate fixed rate loans on 15
and 30 year terms and then hold them until maturity in our loan portfolio. This creates the
dynamic discussed above where short term deposits are funding extremely long term loans. By
selling the mortgage into the secondary market we eliminate the interest risk associated
with carrying the loan from our portfolio, realize a fee for selling the loan to investors
and still maintain our cross-sell opportunities with clients. This approach to the mortgage
business addresses all of our primary goals simultaneously. This did require an investment
as we were fortunate to be able to hire several seasoned mortgage professionals away from
their current employers. Additionally we started this business in a down market which has
delayed some of the revenue realization that we had planned on. During the last quarter we
recognized $24,000 in gain on sale of loans. Given that this business was not started
until September we remain confident that this approach is sound and will pay significant
dividends.
    
    Business Banking  we added two Business Bankers in 2006. These individuals are
primarily responsible for growing our commercial deposit business through the sale of
traditional deposit products and cash management services to our small business and
commercial client and prospect base. Our business bankers coordinate the marketing efforts
of our commercial bankers and banking center managers by acting as team leaders in their
respective markets for client development. In just six months our business bankers
accounted for over $3.0 million in core deposit growth, half of our annual total. This
approach is not new to the industry, however it is new in some of our markets and we
believe the early results are indicative of what we can expect to achieve consistently.
    
    Account Retention  we added an account retention program in the second half of 2006.
Why a retention program when we are only 6 years old? We believe that it is critical to
have relationships with our clients; it is the relationship that transforms customers into
clients. Additionally it is the relationship that earns our right to understand needs more
fully and to present new alternatives as well as ask for the opportunity to serve friends
and family of our clients. While this program will grow over time to include a number of
elements, we introduced the Legacy Club in the third quarter. Legacy Club clients are
eligible to participate in travel and social events sponsored by the club. The club
coordinator is a seasoned banker with over 15 years of experience in running retention
programs at the regional bank level. This program in a little over 3 months has generated
over $1.0 million in new deposits.
    
    Credit Risk Management  we transitioned from a Directors Loan Committee to the
Credit Risk Management Committee in mid-year. There is much more than a name change here 
we instituted a variety of new reporting disciplines for the tracking of credit quality
trends in the industry and in our Company. This is a Committee of the Banks Board of
Directors. This Committee monitors monthly changes in our risk profile, the results of
external loan reviews and assesses the adequacy of our processes, policies and reserves.
Our external loan review partner reports directly to this Committee much the same way our
auditors report to the Audit Committee. Credit quality has our full attention and this
Committee helps to assure that.
  
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##### Table of Contents



OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 CRITICAL ACCOUNTING POLICIES
  Allowance
for loan losses.
  FINANCIAL
CONDITION  DECEMBER 31, 2006, COMPARED TO DECEMBER 31, 2005
 Overview.
 Cash
and cash equivalents.
 Securities.
 Loans.
 
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
  Allowance for loan losses.
    Premises and equipment.
 Intangible asset.
 Federal bank stock.
 Accrued interest receivable and other assets.
 Deposits.
 Repurchase agreements.
 
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##### Table of Contents



OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 FHLB
advances, subordinated debentures.
  Accrued
interest payable and other liabilities.
 RESULTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 2006 AND 2005
 Net
interest income.
 Interest
income.
 Interest
expense.
 Provision for loan losses.
 Noninterest income.
 Noninterest expense.
 
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
      Income
taxes.
 RESULTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 2005 AND 2004
 Net
interest income.
 Interest income.
 Interest expense.
 Provision
for loan losses.
 Noninterest
income.
 Noninterest
expense.
  
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##### Table of Contents



OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
    Income
taxes.
 CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND
OFF-BALANCE SHEET ARRANGEMENTS
  Note(Dollars in thousands)
    
    Reference
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    ThereafterCertificates of deposit
    
    
    6
    
    
    $
    78,106
    
    
    $
    25,452
    
    
    $
    3,207
    
    
    $
    1,868
    
    
    $
    720
    
    
    $
    124Repurchase agreements
    
    
    7
    
    
    
    1,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FHLB advances
    
    
    8
    
    
    
    7,434
    
    
    
    2,000
    
    
    
    5,500
    
    
    
    4,500
    
    
    
    
    
    
    
    Subordinated debentures
(1)
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,325Capital lease
obligations (2)
    
    
    4
    
    
    
    179
    
    
    
    181
    
    
    
    181
    
    
    
    181
    
    
    
    190
    
    
    
    966Operating leases
    
    
    4
    
    
    
    200
    
    
    
    183
    
    
    
    183
    
    
    
    183
    
    
    
    98
    
    
    
    404Deposits without maturity
    
    
    
    
    
    
    76,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    The subordinated debentures are redeemable at par starting March 31, 2007, at the Companys
option, any time prior to maturity, which is March 31, 2022.(2)
    
    Includes $939 of amounts allocable to interest payments over the remaining term of the leases.   
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MANAGEMENTS DISCUSSION AND ANALYSIS
 LIQUIDITY
       CAPITAL RESOURCES
     
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OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 INTEREST RATE SENSITIVITY
  Percent variable rate2006
    
    2005Interest-bearing deposits and federal funds sold
    
    
    100
    %
    
    
    100
    %Securities
    
    
    34
    
    
    
    43Loans
    
    
    72
    
    
    
    75Federal bank stock
    
    
    100
    
    
    
    100Total interest-earning assets
    
    
    68
    
    
    
    70
   IMPACT OF INFLATION AND CHANGING PRICES
   CORPORATE GOVERNANCE AND AVAILABILITY OF REPORTS
  
    
    The Chairman of the Board of Directors is a non-employee director.
    
    After the Companys 2005 Annual Meeting of Shareholders the Board of Directors
restructured the composition of the holding companys board. This restructuring resulted in
seven of the nine directors of Ohio Legacy meeting the more stringent independence
requirements of Rule 10A-3 of the Securities Exchange Act and Section 301(3)(B) of the
Sarbanes-Oxley Act of 2002. At December 31, 2005, seven of nine directors met this
threshold.
    
    The Company has a Nominating and Corporate Governance Committee comprised of three
independent directors.
 
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
 
    
    The Companys Audit and Compliance Committee is comprised of four independent
directors. The Board has identified an audit committee financial expert who serves as
Chairman of the Audit and Compliance Committee.
 
    
    The Board of Directors has adopted and implemented a Code of Ethics for Senior
Financial Officers, a Director Code of Conduct and a Code of Business Conduct and Ethics
for all employees of the Company and its subsidiary.
 
    
    The Audit and Compliance Committee has developed a process for the receipt,
retention and investigation of anonymous submissions by employees or external parties of
concerns regarding questionable accounting or auditing matters.
  PERFORMANCE GRAPH
  
 6/28/2002
    
    12/31/02
    
    12/31/03
    
    12/31/04
    
    12/31/05
    
    12/31/06Ohio Legacy Corp (OLCB)
    
    100
    
    100.6
    
    127.9
    
    176.5
    
    110.6
    
    110.6NASDAQ Composite Index
    
    100
    
    98.6
    
    147.4
    
    160.4
    
    163.8
    
    163.8NASDAQ Bank Index
    
    100
    
    100.8
    
    129.7
    
    148.4
    
    145.0
    
    145.0
 
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##### Table of Contents



OHIO LEGACY CORP
 
 CORPORATE INFORMATION
 EXECUTIVE OFFICERS OF OHIO LEGACY CORP AND OHIO LEGACY BANK, N.A.
 
 DIRECTORS OF OHIO LEGACY CORP
 D. William Allen
    
    Gregory A. LongChief Financial Officer,
    
    PresidentNational Pro Football Hall of Fame
    
    Long, Cook & Samsa, Inc. CPAsCanton, Ohio
    
    Wooster, OhioJ. Edward Diamond
    
    Daniel H. Plumly, ChairmanPrivate investor
    
    Member, Critchfield, Critchfield & Johnston, Ltd.Canton, Ohio
    
    Wooster, OhioRobert F. Belden
    
    D. Michael KramerPresident
    
    President and Chief Executive OfficerBelden Brick Company
    
    Ohio Legacy Corp and Ohio Legacy Bank, N.A.Canton, Ohio
    
    Wooster, OhioScott J. Fitzpatrick
    
    Melvin YoderPartner
    
    PresidentFitzpatrick Enterprises
    
    Yoder LumberCanton, Ohio
    
    Sugarcreek, Ohio
 CORPORATE AND BANK LOCATIONS
 Corporate and Main Office
    
    Milltown Office
    
    Canton Office
    
    Millersburg Office305 West Liberty Street
    
    3562 Commerce Parkway
    
    4026 Dressler Road NW
    
    225 N. Clay StreetWooster, Ohio 44691
    
    Wooster, Ohio 44691
    
    Canton, Ohio 44718
    
    Millersburg, Ohio 44654
 North Canton Office
 
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##### Table of Contents



SHAREHOLDER INFORMATION
 INDEPENDENT AUDITORS
    
    SPECIAL COUNSEL
    
    CORPORATE COUNSELCrowe Chizek and Company LLC
    
    Squire, Sanders & Dempsey L.L.P.
    
    Critchfield, Critchfield & Johnston Ltd.Suite 205
    
    4900 Key Tower
    
    225 North Market Street5900 Landerbrook Drive
    
    127 Public Square
    
    Wooster, Ohio 44691Cleveland, Ohio 44124
    
    Cleveland, Ohio 44114
 ANNUAL MEETING
  PRICE RANGE OF COMMON STOCK AND DIVIDENDS
  2006
    
    

2005HIGH
    
    
    LOW
    
    
    HIGH
    
    
    LOWFirst Quarter
    
    $
    10.75
    
    
    $
    9.67
    
    
    $
    14.98
    
    
    $
    12.75Second Quarter
    
    
    9.80
    
    
    
    9.10
    
    
    
    12.99
    
    
    
    10.24Third Quarter
    
    
    9.47
    
    
    
    8.80
    
    
    
    10.74
    
    
    
    9.24Fourth Quarter
    
    
    9.35
    
    
    
    8.50
    
    
    
    9.95
    
    
    
    9.05
  SHAREHOLDER AND GENERAL INQUIRES
    
    TRANSFER AGENTD. Michael Kramer, Chief Executive Officer
    
    Illinois Stock Transfer CompanyOhio Legacy Corp
    
    209 West Jackson Boulevard305 West Liberty Street
    
    Suite 903Wooster, Ohio 44691
    
    Chicago, Illinois 60606330-263-1955
    
    312-427-2953
  
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##### Table of Contents



OHIO LEGACY CORP
 Were a community bank
that supports and participates
in the communities we serve.
 
 In 2006 we supported these community organizations:
 Alice Noble Ice Arena
    
    Holmes County Junior Fair Awards
    
    Triway Boys BasketballAmerican Heart Association
    
    Holmes County Park District
    
    Triway Girls BasketballAmerican Red Cross
    
    Holmes County Sheriffs Reserve
    
    Wooster High School AthleticsBuckeye Council  BSA
    
    Holmes Fire District #1 Fire Fighters
    
    Wayne Center for the ArtsCanton Regional Chamber of Commerce
    
    Hoops 4 Healing Foundation Inc.
    
    Wayne County Historical SocietyCanton Symphony Orchestra
    
    Hoover High School Lacrosse
    
    Wayne County Humane SocietyCavaliers Charities
    
    J R Coleman Family Services
    
    Wayne County Performing Arts CouncilCentral Christian School
    
    Joel Pomerene Foundation
    
    Wayne-Holmes Soap Box DerbyChild & Adolescent Service Center
    
    Junior Achievement
    
    West Fork Community & Senior CenterChristian Childrens Home of Ohio
    
    Killbuck Early American Days
    
    West Holmes Academic BoosterCollege of Wooster
    
    Killbuck Little League
    
    West Holmes Athletic BoostersDomestic Violence Project Inc.
    
    Lake Community YMCA
    
    Wooster Main Street FoundationEvery Womans House
    
    Malone College
    
    Wooster High School YearbookFamily Life Center
    
    Millersburg Baseball Association
    
    Wooster Area Chamber of CommerceGlenOak High School Baseball
    
    North Canton Area Chamber of Commerce
    
    Wooster Arts Jazz FestFesta Italiana
    
    North Canton Rotary Club
    
    Wooster High School Golf TournamentHiland Academic Booster Club
    
    Northern Appalachian Music Alliance
    
    Wooster Police Honor GuardHolmes County Agriculture Society
    
    Perry Local Schools
    
    Wooster KiwanisHolmes County Antique Festival
    
    Perry Theatre
    
    Wooster Madisonburg Evening Lions ClubHolmes County Chamber of Commerce
    
    Stark Jewish News
    
    Wooster Rotary ClubHolmes County Friends & Neighbors
    
    The Arc of Stark County Inc.
    
    Wooster SoftballHolmes Historical Society
    
    TheWaterford at St Luke
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