##### 



Exhibit 13
 
 OHIO LEGACY CORP
Big enough to serve you, small enough to know you. 2005




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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
    
    
    28MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    29CORPORATE INFORMATION
    
    
    40SHAREHOLDER INFORMATION
    
    
    41




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##### 



OHIO LEGACY CORP
 MESSAGE TO OUR SHAREHOLDERS
        -s- Daniel H. Plumly
    
    -s- D. Michael KramerDaniel H. Plumly
    
    D. Michael KramerChairman of the Board
    
    President & CEO
 - 1 -




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
  
 
 - 2 -




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##### 



OHIO LEGACY CORP
 CONSOLIDATED BALANCE SHEETS
 2005
    
    
    2004ASSETSCash and due from banks
    
    $
    4,528,094
    
    
    $
    4,571,131Federal funds sold and interest-bearing deposits in financial
institutions
    
    
    3,594,452
    
    
    
    12,418,192Cash and cash equivalents
    
    
    8,122,546
    
    
    
    16,989,323Certificate of deposit in financial institution
    
    
    100,000
    
    
    
    Securities available for sale
    
    
    33,032,297
    
    
    
    39,357,929Securities held to maturity (fair value of $823,359 and $640,429
at December 31, 2005 and 2004)
    
    
    838,224
    
    
    
    647,981Loans, net of allowance of $1,589,407 and $1,263,655
at December 31, 2005 and 2004
    
    
    158,182,319
    
    
    
    132,084,072Federal bank stock
    
    
    1,479,500
    
    
    
    1,375,650Premises and equipment, net
    
    
    3,797,314
    
    
    
    2,269,068Intangible assets
    
    
    455,244
    
    
    
    669,174Accrued interest receivable and other assets
    
    
    2,010,323
    
    
    
    1,658,860Total assets
    
    $
    208,017,767
    
    
    $
    195,052,057LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    15,727,338
    
    
    $
    11,914,867Interest-bearing demand
    
    
    12,231,345
    
    
    
    13,262,252Savings
    
    
    42,665,057
    
    
    
    43,847,951Certificates of deposit, net
    
    
    92,273,308
    
    
    
    88,617,541Total deposits
    
    
    162,897,048
    
    
    
    157,642,611Repurchase agreements
    
    
    3,066,517
    
    
    
    Short term Federal Home Loan Bank advances
    
    
    7,200,000
    
    
    
    Federal Home Loan Bank advances
    
    
    11,796,010
    
    
    
    15,295,144Subordinated debentures
    
    
    3,325,000
    
    
    
    3,325,000Capital lease obligations
    
    
    959,450
    
    
    
    968,712Accrued interest payable and other liabilities
    
    
    668,867
    
    
    
    580,216Total liabilities
    
    
    189,912,892
    
    
    
    177,811,683SHAREHOLDERS 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 and 2,121,220 outstanding in 2005 and 2004
    
    
    18,658,386
    
    
    
    17,734,155Accumulated earnings (deficit)
    
    
    79,415
    
    
    
    (282,585
    )Accumulated other comprehensive income (loss)
    
    
    (632,926
    )
    
    
    (211,196
    )Total shareholders equity
    
    
    18,104,875
    
    
    
    17,240,374Total liabilities and shareholders equity
    
    $
    208,017,767
    
    
    $
    195,052,057
  - 3 -




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##### 



CONSOLIDATED STATEMENTS OF OPERATIONS
 2005
    
    
    2004Interest and dividends income:Loans, including fees
    
    $
    9,668,907
    
    
    $
    7,982,123Securities, taxable
    
    
    1,426,027
    
    
    
    1,321,899Securities, tax-exempt
    
    
    25,632
    
    
    
    5,778Interest-bearing deposits, federal funds sold and other
    
    
    157,467
    
    
    
    101,474Dividends on federal bank stock
    
    
    77,295
    
    
    
    61,457Total interest and dividends income
    
    
    11,355,328
    
    
    
    9,472,731Interest expense:Deposits
    
    
    3,805,256
    
    
    
    2,826,665Short term Federal Home Loan Bank advances
    
    
    119,411
    
    
    
    Federal Home Loan Bank advances
    
    
    352,873
    
    
    
    437,921Subordinated debentures
    
    
    282,888
    
    
    
    282,888Repurchase agreements
    
    
    28,757
    
    
    
    Capital leases
    
    
    150,877
    
    
    
    152,208Total interest expense
    
    
    4,740,062
    
    
    
    3,699,682Net interest income
    
    
    6,615,266
    
    
    
    5,773,049Provision for loan losses
    
    
    523,046
    
    
    
    306,000Net interest income after provision for loan losses
    
    
    6,092,220
    
    
    
    5,467,049Noninterest income:Service charges and other fees
    
    
    541,594
    
    
    
    426,605Gain on sales of securities available for sale, net
    
    
    
    
    
    
    7,910Gain on sales of credit card portfolio
    
    
    9,782
    
    
    
    Loss on disposal of fixed assets
    
    
    (6,929
    )
    
    
    Other income
    
    
    38,154
    
    
    
    11,534Total other income
    
    
    582,601
    
    
    
    446,049Noninterest expense:Salaries and benefits
    
    
    2,977,111
    
    
    
    2,141,525Occupancy and equipment
    
    
    816,499
    
    
    
    657,244Professional fees
    
    
    463,233
    
    
    
    407,224Franchise tax
    
    
    242,507
    
    
    
    233,474Data processing
    
    
    584,086
    
    
    
    451,512Marketing and advertising
    
    
    175,569
    
    
    
    173,374Stationery and supplies
    
    
    125,023
    
    
    
    103,005Amortization of intangible asset
    
    
    213,930
    
    
    
    80,438Deposit expenses and insurance
    
    
    148,777
    
    
    
    191,008Other expenses
    
    
    380,343
    
    
    
    287,346Total noninterest expense
    
    
    6,127,078
    
    
    
    4,726,150Net earnings before income taxes
    
    
    547,743
    
    
    
    1,186,948Income tax expense (benefit)
    
    
    185,743
    
    
    
    (86,052
    )Net earnings
    
    $
    362,000
    
    
    $
    1,273,000Basic net earnings per share
    
    $
    0.17
    
    
    $
    0.60Diluted net earnings per share
    
    $
    0.16
    
    
    $
    0.58
  - 4 -




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##### 



OHIO LEGACY CORP
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Outstanding
    
    
    
    
    
    
    
    
    
    
    AccumulatedShares of
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Common
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, December 31, 2003
    
    
    2,118,000
    
    
    $
    17,701,955
    
    
    $
    (1,555,585
    )
    
    $
    (101,903
    )
    
    $
    16,044,467Proceeds from exercise of stock
warrants
    
    
    3,220
    
    
    
    32,200
    
    
    
    
    
    
    
    
    
    
    
    32,200Comprehensive income (loss)Net earnings
    
    
    
    
    
    
    
    
    
    
    1,273,000
    
    
    
    
    
    
    
    1,273,000Change in net unrealized gain on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109,293
    )
    
    
    (109,293
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,163,707Balance, December 31, 2004
    
    
    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
    )Shareholders equity, end of
period
    
    
    2,214,564
    
    
    $
    18,658,386
    
    
    $
    79,415
    
    
    $
    (632,926
    )
    
    $
    18,104,875
  - 5 -




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##### 



CONSOLIDATED STATEMENTS OF CASH FLOWS
  2005
    
    
    2004Cash flows from operating activities:Net earnings
    
    $
    362,000
    
    
    $
    1,273,000Adjustments to reconcile net earnings to net cash from
operating activities:Depreciation and amortization
    
    
    553,606
    
    
    
    355,508Securities amortization and accretion, net
    
    
    158,965
    
    
    
    157,008Federal Home Loan Bank (FHLB) stock dividends
    
    
    (43,800
    )
    
    
    (28,700
    )Provision for loan losses
    
    
    523,046
    
    
    
    306,000Loss from Ohio Legacy Trust I
    
    
    8,074
    
    
    
    9,981Gain 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
    
    
    
    Gain on sale of credit card portfolio
    
    
    (9,782
    )
    
    
    Accretion of fair value purchase adjustments
    
    
    (116,738
    )
    
    
    (67,025
    )Change in deferred income taxes
    
    
    (133,880
    )
    
    
    44,264Change in valuation allowance on deferred tax assets
    
    
    
    
    
    
    (494,019
    )Net change in:Accrued interest receivable and other assets
    
    
    (32,574
    )
    
    
    (169,204
    )Accrued interest payable and other liabilities
    
    
    88,651
    
    
    
    (238,589
    )Deferred loan fees
    
    
    52,531
    
    
    
    (6,942
    )Net cash from operating activities
    
    
    1,417,028
    
    
    
    1,131,372Cash flows from investing activities:Purchases of securities available for sale
    
    
    (3,459,730
    )
    
    
    (13,364,565
    )Purchases of securities held to maturity
    
    
    (197,765
    )
    
    
    (649,423
    )Purchases of certificates of deposit
    
    
    (100,000
    )
    
    
    Maturities, calls and paydowns of securities available for sale
    
    
    9,020,636
    
    
    
    7,530,438Proceeds from sales 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
    
    
    (26,921,460
    )
    
    
    (18,590,762
    )Participation loans purchased
    
    
    
    
    
    
    (5,000,000
    )Purchases of premises and equipment
    
    
    (1,874,851
    )
    
    
    (223,594
    )Net cash used by investing activities
    
    
    (23,335,802
    )
    
    
    (26,428,741
    )Cash flows from financing activities:Net change in deposits
    
    
    5,371,175
    
    
    
    18,976,156Net change in repurchase agreements
    
    
    3,066,517
    
    
    
    Cash received from branch acquisition, net of assets acquired
    
    
    
    
    
    
    14,565,618Repayment of capital lease obligations
    
    
    (9,262
    )
    
    
    (7,931
    )Proceeds from exercise of stock warrants
    
    
    923,440
    
    
    
    32,200Redemption of stock warrants
    
    
    (9,239
    )
    
    
    Proceeds from exercise of stock options
    
    
    8,500
    
    
    
    Proceeds from short term FHLB advances, net of repayments
    
    
    7,200,000
    
    
    
    Proceeds from FHLB advances
    
    
    2,000,000
    
    
    
    5,000,000Repayments of FHLB advances
    
    
    (5,499,134
    )
    
    
    (4,464,170
    )Net cash from financing activities
    
    
    13,051,997
    
    
    
    34,101,873Net change in cash and cash equivalents:
    
    
    (8,866,777
    )
    
    
    8,804,504Cash and cash equivalents at beginning of period
    
    
    16,989,323
    
    
    
    8,184,819Cash and cash equivalents at end of period
    
    $
    8,122,546
    
    
    $
    16,989,323Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    4,684,555
    
    
    $
    4,083,660Federal income taxes
    
    
    310,000
    
    
    
    374,000
  - 6 -




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##### 



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:
  - 7 -




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##### 



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:
 - 8 -




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##### 



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:
 2005
    
    
    2004BASIC:Net earnings
    
    $
    362,000
    
    
    $
    1,273,000Weighted average common shares outstanding
    
    
    2,165,392
    
    
    
    2,119,857Basic earnings per share
    
    $
    0.17
    
    
    $
    0.60DILUTED:Net earnings
    
    $
    362,000
    
    
    $
    1,273,000Weighted average common shares outstanding
    
    
    2,165,392
    
    
    
    2,119,857Dilutive effect of stock options
    
    
    19,514
    
    
    
    23,642Dilutive effect of stock warrants
    
    
    28,920
    
    
    
    43,185Total common shares and dilutive potential
common shares
    
    
    2,213,826
    
    
    
    2,186,684Diluted earnings per share
    
    $
    0.16
    
    
    $
    0.58
  Stock Compensation:
 - 9 -




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  2005
    
    
    2004Net earnings as reported
    
    $
    362,000
    
    
    $
    1,273,000Deduct stock-based compensation expense
determined under fair value based method,
net of taxes
    
    
    (644,000
    )
    
    
    (287,000
    )Pro forma net earnings (loss)
    
    $
    (282,000
    )
    
    $
    986,000Basic net earnings per share as reported
    
    $
    0.17
    
    
    $
    0.60Pro forma basic net earnings (loss) per share
    
    
    (0.13
    )
    
    
    0.47Diluted net earnings per share as reported
    
    $
    0.16
    
    
    $
    0.58Pro forma diluted net earnings (loss) per share
    
    
    (0.13
    )
    
    
    0.45
  October 2005
    
    August 2005
    
    April 2005
    
    February 2004Stock Options
    
    Stock Options
    
    Stock Options
    
    Stock OptionsOptions granted
    
    
    5,000
    
    
    
    5,000
    
    
    
    89,500
    
    
    
    58,500Fair value, calculated
    
    $
    4.42
    
    
    $
    4.76
    
    
    $
    5.59
    
    
    $
    6.25Exercise price
    
    
    9.22
    
    
    
    10.00
    
    
    
    12.00
    
    
    
    12.00Risk-free interest rate, 10-year Treasury
    
    
    4.39
    %
    
    
    4.23
    %
    
    
    4.19
    %
    
    
    4.05
    %Expected stock price volatility
    
    
    26.62
    
    
    
    26.99
    
    
    
    25.91
    
    
    
    32.99Expected dividend rate
    
    None
    
    None
    
    None
    
    NoneExpected life
    
    10 years
    
    10 years
    
    10 years
    
    10 years
  Loan Commitments and Related Financial Instruments:
 Comprehensive Income (Loss):
 Loss Contingencies:
 - 10 -




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##### 



OHIO
LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Dividend Restriction:
 Fair Values of Financial Instruments:
 Operating Segments:
 Reclassifications:
 Recently Issued Accounting Standards:
  NOTE 2  SECURITIES
  Gross
    
    
    GrossFair
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    LossesAvailable for sale, carried at
fair value: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
    )December 31, 2004U.S. Government-sponsored
enterprises
    
    $
    7,844,551
    
    
    $
    2,726
    
    
    $
    (153,534
    )Mortgage-backed securities
    
    
    31,513,378
    
    
    
    83,752
    
    
    
    (252,937
    )Total
    
    $
    39,357,929
    
    
    $
    86,478
    
    
    $
    (406,471
    )
 - 11 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2  SECURITIES (continued)
  Gross
    
    
    GrossAmortized
    
    
    Unrecognized
    
    
    Unrecognized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueHeld to
maturity, carried at amortized cost:December 31,
2005Obligations of local governments
    
    $
    838,224
    
    
    $
    
    
    
    $
    (14,865
    )
    
    $
    823,359December 31, 2004Obligations of local governments
    
    $
    647,981
    
    
    $
    
    
    
    $
    (7,552
    )
    
    $
    640,429
  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
    )
  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
    
    $
    
    
    
    $
    
    
    
    $
    7,342
    
    
    $
    (153
    )
    
    $
    7,342
    
    
    $
    (153
    )Mortgage-backed securities
    
    
    19,326
    
    
    
    (162
    )
    
    
    4,072
    
    
    
    (91
    )
    
    
    23,398
    
    
    
    (253
    )Total
    
    $
    19,326
    
    
    $
    (162
    )
    
    $
    11,414
    
    
    $
    (244
    )
    
    $
    30,740
    
    
    $
    (406
    )Held to maturity:Obligations of local governments
    
    $
    640
    
    
    $
    (8
    )
    
    $
    
    
    
    $
    
    
    
    $
    640
    
    
    $
    (8
    )
 - 12 -




---



##### 



OHIO
LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2  SECURITIES (continued)
   AvailableHeld-to-maturity
    
    
    for saleCarrying
    
    
    Fair
    
    
    Fair(Dollars in thousands)
    
    Amount
    
    
    Value
    
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    
    
    
    $
    Due from one to five years
    
    
    
    
    
    
    
    
    
    
    7,209Due from five to ten years
    
    
    535
    
    
    
    524
    
    
    
    Due after ten years
    
    
    303
    
    
    
    299
    
    
    
    Mortgage-backed
    
    
    
    
    
    
    
    
    
    
    24,901Total
    
    $
    838
    
    
    $
    823
    
    
    $
    32,110
  Proceeds from sales
    
    $
    4,104,915Gross realized gains
    
    $
    23,163Gross realized losses
    
    
    (15,253
    )Net gain on sales of securities
    
    $
    7,910Tax expense related to net gains
    
    $
    2,689
   - 13 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3  LOANS
  2005
    
    
    2004Balance
    
    
    Percent
    
    
    Balance
    
    PercentResidential real estate
    
    $
    59,320,852
    
    
    
    37.1
    %
    
    $
    50,728,231
    
    
    
    38.0
    %Multifamily residential real estate
    
    
    9,929,945
    
    
    
    6.2
    
    
    
    10,147,946
    
    
    
    7.6Commercial real estate
    
    
    54,522,175
    
    
    
    34.1
    
    
    
    36,364,724
    
    
    
    27.2Construction
    
    
    11,758,408
    
    
    
    7.3
    
    
    
    13,315,449
    
    
    
    10.0Commercial
    
    
    12,805,424
    
    
    
    8.0
    
    
    
    10,709,713
    
    
    
    8.0Consumer and home equity
    
    
    11,655,793
    
    
    
    7.3
    
    
    
    12,250,004
    
    
    
    9.2Total loans
    
    
    159,992,597
    
    
    
    100.0
    %
    
    
    133,516,067
    
    
    
    100.0
    %Less: Allowance for loan losses
    
    
    (1,589,407
    )
    
    
    
    
    
    
    (1,263,655
    )Net deferred loan fees
    
    
    (220,871
    )
    
    
    
    
    
    
    (168,340
    )Loans, net
    
    $
    158,182,319
    
    
    
    
    
    
    $
    132,084,072
   2005
    
    
    2004Balance, January 1
    
    $
    1,263,655
    
    
    $
    1,121,913Provision for loan losses
    
    
    523,046
    
    
    
    306,000Losses on charged-off loans
    
    
    (203,658
    )
    
    
    (169,373
    )Recoveries of charged-off loans
    
    
    6,364
    
    
    
    5,115Balance, December 31
    
    $
    1,589,407
    
    
    $
    1,263,655Balance as a percentage of total loans
    
    
    0.99
    %
    
    
    0.95
    %
 - 14 -




---



##### 



OHIO
LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3  LOANS (continued)
  2005
    
    
    2004At December 31:Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    Nonaccrual loans, includes
smaller balance homogeneous loans
    
    
    663,970
    
    
    
    1,059,560Impaired loans, included in nonaccrual loans
    
    
    344,837
    
    
    
    974,000Amount of the allowance for loan losses allocated
    
    
    35,000
    
    
    
    120,000During the year ended December 31:Average of impaired loans during the year
    
    $
    530,728
    
    
    $
    138,000Interest income recognized during impairment
    
    
    
    
    
    
    Cash-basis
interest income recognized during impairment
    
    
    7,786
    
    
    
    816Interest income foregone on nonaccrual loans
    
    $
    59,207
    
    
    $
    49,802
  Balances, January 1
    
    $
    2,988,814New loans
    
    
    170,000Repayments
    
    
    (275,159
    )Balances, December 31
    
    $
    2,883,655
 - 15 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  PREMISES AND EQUIPMENT
  2005
    
    
    2004Land
    
    $
    524,559
    
    
    $
    31,836Office building
    
    
    1,926,103
    
    
    
    1,003,000Leasehold improvements
    
    
    977,068
    
    
    
    971,502Furniture, fixtures and equipment
    
    
    1,517,919
    
    
    
    1,139,661Premises and equipment, cost
    
    
    4,945,649
    
    
    
    3,145,999Less: Accumulated depreciation
    
    
    (1,148,335
    )
    
    
    (876,931
    )Premises and equipment, net
    
    $
    3,797,314
    
    
    $
    2,269,068
        - 16 -




---



##### 



OHIO
LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  PREMISES AND EQUIPMENT (continued)
  Operating
    
    
    CapitalLeases
    
    
    Leases2006
    
    $
    209,745
    
    
    $
    168,2112007
    
    
    199,862
    
    
    
    178,9982008
    
    
    183,474
    
    
    
    181,2482009
    
    
    183,474
    
    
    
    181,2482010
    
    
    183,474
    
    
    
    181,248Thereafter
    
    
    501,841
    
    
    
    1,156,020Total minimum lease payments
    
    $
    1,461,870
    
    
    
    2,046,973Amounts representing interest
    
    
    
    
    
    
    (1,087,539
    )Present value of minimum lease payments
    
    
    
    
    
    $
    959,434
 NOTE 5  INTANGIBLE ASSET
   2006
    
    $
    172,8562007
    
    
    131,7812008
    
    
    90,7062009
    
    
    49,6322010
    
    
    10,269
 - 17 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 6  DEPOSITS
   2006
    
    $
    54,581,5682007
    
    
    24,577,1712008
    
    
    8,255,8832009
    
    
    2,933,1922010
    
    
    1,920,764Thereafter
    
    
    4,730$
    92,273,308
  2005
    
    
    2004Average
    
    
    Average
    
    
    Average
    
    
    AverageBalances
    
    
    Rate
    
    
    Balances
    
    
    RateNoninterest-bearing demand deposits
    
    $
    12,893,000
    
    
    
N/A

    
    
    $
    8,783,000
    
    
    
N/AInterest-bearing demand deposits
    
    
    10,497,000
    
    
    
    0.78
    %
    
    
    11,086,000
    
    
    
    0.83
    %Savings accounts
    
    
    19,856,000
    
    
    
    0.99
    
    
    
    34,543,000
    
    
    
    1.03Money market accounts
    
    
    26,254,000
    
    
    
    2.59
    
    
    
    4,721,000
    
    
    
    1.46Certificates of deposit
    
    
    91,617,000
    
    
    
    3.11
    
    
    
    75,565,000
    
    
    
    3.05Total deposits
    
    $
    161,117,000
    
    
    
    
    
    
    $
    134,698,000
 NOTE 7  REPURCHASE AGREEMENTS
  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 -




---



##### 



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 8  FEDERAL HOME LOAN BANK ADVANCES
   2005
    
    
    2004Eighteen-month interest-only advance
2.02% fixed rate, maturing June 16, 2005
    
    $
    
    
    
    $
    2,500,000Two-year interest-only advance
2.36% fixed rate, maturing December 16, 2005
    
    
    
    
    
    
    1,500,000Thirty-month interest-only advance
2.77% fixed rate, maturing June 23, 2006
    
    
    1,500,000
    
    
    
    1,500,000Three-year interest-only advance
3.07% fixed rate, maturing December 22, 2006
    
    
    1,500,000
    
    
    
    1,500,000Three-year, constant monthly payment advance
2.26% fixed rate, final maturity October 1,
2006
    
    
    853,818
    
    
    
    1,857,417Three-year interest-only advance
2.42% fixed rate, maturing March 10, 2007
    
    
    5,000,000
    
    
    
    5,000,000Two-year interest-only advance
4.32% fixed rate, maturing September 7, 2007
    
    
    2,000,000
    
    
    
    Four-year, constant monthly payment advance
2.57% fixed rate, final maturity October 1,
2007
    
    
    942,192
    
    
    
    1,437,727$
    11,796,010
    
    
    $
    15,295,144
  2006
    
    $
    4,362,2402007
    
    
    7,433,770$
    11,796,010
 NOTE 9  SUBORDINATED DEBENTURES
  - 19 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9  SUBORDINATED DEBENTURES (continued)
   NOTE 10  INCOME TAXES
  2005
    
    
    2004Current federal
    
    $
    319,623
    
    
    $
    363,703Deferred federal
    
    
    (133,880
    )
    
    
    44,264Change in valuation allowance
    
    
    
    
    
    
    (494,019
    )Total income tax expense (benefit)
    
    $
    185,743
    
    
    $
    (86,052
    )
  2005
    
    
    2004Federal statutory rate (34%) times financial
statement earnings
    
    $
    186,233
    
    
    $
    403,562Effect of:Change in deferred tax valuation allowance
    
    
    
    
    
    
    (494,019
    )Other, net
    
    
    (490
    )
    
    
    4,405Total income tax benefit
    
    $
    185,743
    
    
    $
    (86,052
    )
 - 20 -




---



##### 



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 10  INCOME TAXES (continued)
  2005
    
    
    2004Deferred tax assets:Organizational costs capitalized
    
    $
    
    
    
    $
    32,764Allowance for loan losses
    
    
    478,876
    
    
    
    375,258Deferred loan fees
    
    
    75,096
    
    
    
    57,235Deferred compensation
    
    
    38,608
    
    
    
    34,324Intangible asset amortization
    
    
    77,431
    
    
    
    21,685Other
    
    
    12,728
    
    
    
    Unrealized loss on securities available for
sale
    
    
    326,053
    
    
    
    108,797Total deferred tax assets
    
    
    1,008,792
    
    
    
    630,063Deferred tax liabilities:Depreciation
    
    
    (39,150
    )
    
    
    (49,475
    )Prepaid expenses
    
    
    (32,673
    )
    
    
    (10,013
    )FHLB stock dividends
    
    
    (26,418
    )
    
    
    (11,526
    )Other
    
    
    (863
    )
    
    
    (497
    )Total deferred tax liabilities
    
    
    (99,104
    )
    
    
    (71,511
    )Net deferred tax assets
    
    $
    909,688
    
    
    $
    558,552
  NOTE 11  STOCK-BASED COMPENSATION
   - 21 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11  STOCK-BASED COMPENSATION (continued)
  2005
    
    
    2004Weighted Average
    
    
    
    
    
    
    Weighted AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOutstanding at January 1
    
    
    188,000
    
    
    $
    10.22
    
    
    
    139,250
    
    
    $
    9.51Granted
    
    
    99,500
    
    
    
    11.76
    
    
    
    58,500
    
    
    
    12.00Forfeited
    
    
    (750
    )
    
    
    10.83
    
    
    
    (9,750
    )
    
    
    10.64Exercised
    
    
    (1,000
    )
    
    
    8.50
    
    
    
    
    
    
    
    Outstanding at December 31
    
    
    285,750
    
    
    $
    10.76
    
    
    
    188,000
    
    
    $
    10.22Exercisable at December 31
    
    
    248,250
    
    
    $
    11.09
    
    
    
    54,000
    
    
    $
    10.47Weighted average remaining
contractual life
    
    7.8 years
    
    
    
    
    
    8.1 years
  Outstanding
    
    
    ExercisableWeighted AverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedContractual
    
    
    Average
    
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Number
    
    
    Life (years)
    
    
    Exercise Price
    
    
    Number
    
    
    Exercise Price$8.50 - $9.99
    
    
    51,000
    
    
    
    7.17
    
    
    $
    8.65
    
    
    
    13,500
    
    
    $
    8.81$10.00
    
    
    91,500
    
    
    
    6.50
    
    
    
    10.00
    
    
    
    91,500
    
    
    
    10.00$12.00
    
    
    143,250
    
    
    
    8.88
    
    
    
    12.00
    
    
    
    143,250
    
    
    
    12.00285,750
    
    
    
    7.80
    
    
    $
    10.76
    
    
    
    248,250
    
    
    $
    11.09
   NOTE 12  STOCK WARRANTS
   - 22 -




---



##### 



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 13  CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS
 off-balance
   To Be Well-Capitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio2005Total capital to risk-weighted
assetsOhio Legacy Corp
    
    $
    23,197
    
    
    
    15.4
    %
    
    $
    12,081
    
    
    
    8.0
    %
    
    $
    15,102
    
    
    NAOhio Legacy Bank
    
    
    21,250
    
    
    
    14.0
    
    
    
    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
    %
    
    $
    9,061
    
    
    NAOhio Legacy Bank
    
    
    19,661
    
    
    
    13.0
    
    
    
    6,046
    
    
    
    4.0
    
    
    
    9,070
    
    
    
    6.0
    %Tier 1 capital to average assetsOhio Legacy Corp
    
    $
    21,608
    
    
    
    10.4
    %
    
    $
    8,310
    
    
    
    4.0
    %
    
    $
    10,388
    
    
    NAOhio Legacy Bank
    
    
    19,661
    
    
    
    9.5
    
    
    
    8,310
    
    
    
    4.0
    
    
    
    10,388
    
    
    
    5.0
    %2004Total capital to risk-weighted
assetsOhio Legacy Corp
    
    $
    21,285
    
    
    
    16.7
    %
    
    $
    10,184
    
    
    
    8.0
    %
    
    $
    12,730
    
    
    NAOhio Legacy Bank
    
    
    20,442
    
    
    
    16.0
    
    
    
    10,226
    
    
    
    8.0
    
    
    
    12,782
    
    
    
    10.0
    %Tier 1 capital to risk-weighted
assetsOhio Legacy Corp
    
    $
    20,021
    
    
    
    15.7
    %
    
    $
    5,092
    
    
    
    4.0
    %
    
    $
    7,638
    
    
    NAOhio Legacy Bank
    
    
    19,178
    
    
    
    15.0
    
    
    
    5,113
    
    
    
    4.0
    
    
    
    7,669
    
    
    
    6.0
    %Tier 1 capital to average assetsOhio Legacy Corp
    
    $
    20,021
    
    
    
    10.5
    %
    
    $
    7,602
    
    
    
    4.0
    %
    
    $
    9,502
    
    
    NAOhio Legacy Bank
    
    
    19,178
    
    
    
    10.1
    
    
    
    7,596
    
    
    
    4.0
    
    
    
    9,494
    
    
    
    5.0
    %
 - 23 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 13  CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS (continued)
   NOTE 14  LOAN COMMITMENTS AND RELATED ACTIVITIES
   2005
    
    2004Commitments to make loans:Variable-rate
    
    $
    702,000
    
    
    $
    5,471,000Fixed-rate
    
    
    123,000
    
    
    
    Unused lines of credit, variable-rate
    
    $
    19,052,000
    
    
    $
    17,015,000
  - 24 -




---



##### 



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 15  FAIR VALUES OF FINANCIAL INSTRUMENTS
  2005
    
    2004Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    8,122,546
    
    
    $
    8,122,000
    
    
    $
    16,989,323
    
    
    $
    16,989,000Securities available for
sale
    
    
    33,032,297
    
    
    
    33,032,000
    
    
    
    39,357,929
    
    
    
    39,358,000Securities held to maturity
    
    
    838,224
    
    
    
    823,000
    
    
    
    647,981
    
    
    
    640,000Loans, net
    
    
    158,182,319
    
    
    
    156,306,000
    
    
    
    132,084,072
    
    
    
    132,428,000Federal bank stock
    
    
    1,479,500
    
    
    
    1,479,000
    
    
    
    1,375,650
    
    
    
    1,376,000Accrued interest receivable
    
    
    811,449
    
    
    
    811,000
    
    
    
    771,184
    
    
    
    771,000Financial liabilities:Deposits
    
    $
    (162,897,048
    )
    
    $
    (163,480,000
    )
    
    $
    (157,642,611
    )
    
    $
    (158,071,000
    )Repurchase agreements
    
    
    (3,066,517
    )
    
    
    (3,066,000
    )
    
    
    
    
    
    
    Subordinated debentures
    
    
    (3,325,000
    )
    
    
    (3,406,000
    )
    
    
    (3,325,000
    )
    
    
    (3,564,000
    )Overnight FHLB advances
    
    
    (7,200,000
    )
    
    
    (7,200,000
    )
    
    
    
    
    
    
    FHLB advances
    
    
    (11,796,010
    )
    
    
    (11,549,000
    )
    
    
    (15,295,144
    )
    
    
    (15,039,000
    )Accrued interest payable
    
    
    (316,100
    )
    
    
    (316,000
    )
    
    
    (260,593
    )
    
    
    (261,000
    )
  - 25 -




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 16  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
 CONDENSED BALANCE SHEETS
    
    As of December 31,2005
    
    
    2004ASSETSDue from banks
    
    $
    1,596,731
    
    
    $
    250,646Interest-bearing deposits in financial institutions
    
    
    
    
    
    
    525,670Cash and cash equivalents
    
    
    1,596,731
    
    
    
    776,316Investment in subsidiary, Ohio Legacy Bank, N.A.
    
    
    19,483,579
    
    
    
    19,635,653Other assets
    
    
    397,377
    
    
    
    235,579Total assets
    
    $
    21,477,687
    
    
    $
    20,647,548LIABILITIES AND SHAREHOLDERS EQUITYSubordinated debenture to Ohio Legacy Trust I
    
    $
    3,325,000
    
    
    $
    3,325,000Other liabilities
    
    
    47,812
    
    
    
    82,174Shareholders equity
    
    
    18,104,875
    
    
    
    17,240,374Total liabilities and shareholders equity
    
    $
    21,477,687
    
    
    $
    20,647,548
 CONDENSED STATEMENTS OF OPERATIONS
    
    For the year ended December 31,2005
    
    
    2004Interest income
    
    $
    3,575
    
    
    $
    1,437Interest expense
    
    
    (282,893
    )
    
    
    (282,893
    )Net interest expense
    
    
    (279,318
    )
    
    
    (281,456
    )Loss on investment in Ohio Legacy Trust I
    
    
    (8,074
    )
    
    
    (9,981
    )Professional fees
    
    
    (154,739
    )
    
    
    (108,778
    )Other income (expense)
    
    
    16,041
    
    
    
    (71,566
    )Loss before undistributed earnings of subsidiary
    
    
    (426,090
    )
    
    
    (471,781
    )Equity in undistributed earnings of subsidiary
    
    
    643,645
    
    
    
    1,599,729Net earnings before income taxes
    
    
    217,555
    
    
    
    1,127,948Income tax benefit
    
    
    144,445
    
    
    
    145,052Net earnings
    
    $
    362,000
    
    
    $
    1,273,000
 - 26 -




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##### 



OHIO LEGACY CORP
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 16  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (continued)
 CONDENSED STATEMENTS OF CASH FLOWS
    
    For the year ended December 31,2005
    
    
    2004Cash flows from operating activities:Net earnings
    
    $
    362,000
    
    
    $
    1,273,000Adjustments:Equity in undistributed earnings of subsidiary
    
    
    (643,645
    )
    
    
    (1,599,729
    )Loss on investment in Ohio Legacy Trust I
    
    
    8,074
    
    
    
    9,981Net change in other assets and other liabilities
    
    
    171,285
    
    
    
    (152,598
    )Net used by operating activities
    
    
    (102,286
    )
    
    
    (469,346
    )Cash flows from financing activities:Repayment of other borrowed funds
    
    
    
    
    
    
    Proceeds from exercise of stock warrants
    
    
    923,440
    
    
    
    32,200Proceeds from exercise of options
    
    
    8,500
    
    
    
    Redemption of stock warrants
    
    
    (9,239
    )
    
    
    Proceeds from issuance of common stock,
net of offering costs
    
    
    
    
    
    
    Net cash from financing activities
    
    
    922,701
    
    
    
    32,200Net change in cash and cash equivalents
    
    
    820,415
    
    
    
    (437,146
    )Beginning cash and cash equivalents
    
    
    776,316
    
    
    
    1,213,462Ending cash and cash equivalents
    
    $
    1,596,731
    
    
    $
    776,316
 NOTE 17  OTHER COMPREHENSIVE INCOME (LOSS)
  2005
    
    
    2004Net unrealized holding losses on available for
sale securities during the period
    
    $
    (638,986
    )
    
    $
    (210,180
    )Reclassification adjustments for security
gains later recognized in income
    
    
    
    
    
    
    (7,910
    )Net unrealized losses during the period
    
    
    (638,986
    )
    
    
    (218,090
    )Tax effect of unrealized gains at beginning of period
    
    
    
    
    
    
    34,646Tax effect related to current period net unrealized
losses
on available for sale securities
    
    
    217,256
    
    
    
    74,151Other comprehensive income (loss)
    
    $
    (421,730
    )
    
    $
    (109,293
    )
 - 27 -




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##### 



COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
 (Dollars in thousands, except per share data)
    
    2005
    
    
    2004Balance Sheet Data:Total assets
    
    $
    208,018
    
    
    $
    195,052Securities available for sale
    
    
    33,032
    
    
    
    39,358Securities held to maturity
    
    
    838
    
    
    
    648Loans, net
    
    
    158,182
    
    
    
    132,084Allowance for loan losses
    
    
    (1,589
    )
    
    
    (1,264
    )Total deposits
    
    
    162,897
    
    
    
    157,643Total borrowings
    
    
    25,388
    
    
    
    18,620Shareholders equity
    
    
    18,105
    
    
    
    17,240Average assets
    
    
    201,465
    
    
    
    175,758Average shareholders equity
    
    
    17,685
    
    
    
    16,341Income Statement Data:Total interest income
    
    $
    11,355
    
    
    $
    9,473Total interest expense
    
    
    4,740
    
    
    
    3,700Net interest income
    
    
    6,615
    
    
    
    5,773Provision for loan losses
    
    
    523
    
    
    
    306Net interest income after provision for loan losses
    
    
    6,092
    
    
    
    5,467Noninterest income
    
    
    583
    
    
    
    446Noninterest expense
    
    
    6,127
    
    
    
    4,726Earnings before income tax benefit
    
    
    548
    
    
    
    1,187Income tax expense (benefit)
    
    
    186
    
    
    
    (86
    )Net earnings
    
    $
    362
    
    
    $
    1,273Per Share Data:Basic net earnings per share
    
    $
    0.17
    
    
    $
    0.60Diluted net earnings per share
    
    $
    0.16
    
    
    $
    0.58Average shares used in earnings per share
calculations:Basic
    
    
    2,165,392
    
    
    
    2,119,857Diluted
    
    
    2,213,826
    
    
    
    2,186,684Tangible book value per share at year-end
    
    $
    7.97
    
    
    $
    7.81Operating Ratios and Other Key Metrics:Total net loans to total deposits
    
    
    97.11
    %
    
    
    83.79
    %Total shareholders equity to total assets
    
    
    8.70
    
    
    
    8.84Average shareholders equity to average assets
    
    
    8.78
    
    
    
    9.30Return on average equity
    
    
    2.05
    
    
    
    7.79Return on average assets
    
    
    0.18
    
    
    
    0.72Allowance for loan losses to total loans
    
    
    0.99
    
    
    
    0.95Interest spread
    
    
    3.12
    
    
    
    3.11Net interest margin
    
    
    3.45
    
    
    
    3.41Efficiency ratio (1) (2)
    
    
    82.15
    
    
    
    74.79Noninterest income to average assets (1)
    
    
    0.29
    
    
    
    0.25Noninterest expense to average assets (2)
    
    
    3.04
    
    
    
    2.64
 
 (1)
    
    Excludes gains on sales of securities(2)
    
    Excludes amortization of intangible assets - 28 -




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##### 



OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
  FORWARD-LOOKING STATEMENTS
  
    
    anticipated changes in industry conditions created by state and federal legislation and
regulations;
    
    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.
 - 29 -




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OVERVIEW AND OUTLOOK
      - 30 -




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OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 OVERVIEW AND OUTLOOK (continued)
   CRITICAL ACCOUNTING POLICIES
  Allowance for loan losses.
  - 31 -




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 FINANCIAL CONDITION  DECEMBER 31, 2005, COMPARED TO DECEMBER 31, 2004
 Assets.
 Cash and cash equivalents.
 Securities.
 Loans.
   Allowance for loan losses.
 - 32 -




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##### 



OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 Premises and equipment.
 Intangible asset.
 Federal bank stock.
 Accrued interest receivable and other assets.
 Deposits.
 Repurchase agreements.
 FHLB advances, subordinated debentures.
  Accrued interest payable and other liabilities.
 - 33 -




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 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.
     Income taxes.
 - 34 -




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OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 RESULTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 2004 AND 2003
 Net interest income.
 Interest income.
  Interest expense.
  Provision for loan losses.
 Noninterest income.
  Noninterest expense.
   - 35 -




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
     Income taxes.
 CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET
ARRANGEMENTS
  (Dollars in thousands)
    
    NoteReference
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    ThereafterCertificates of deposit
    
    
    6
    
    
    $
    54,581
    
    
    $
    24,577
    
    
    $
    8,256
    
    
    $
    2,933
    
    
    $
    1,921
    
    
    $
    5Repurchase agreements
    
    
    7
    
    
    
    3,067
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term FHLB advances
    
    
    8
    
    
    
    7,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FHLB advances
    
    
    8
    
    
    
    4,362
    
    
    
    7,434
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures
(1)
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,325Capital lease
obligations (2)
    
    
    4
    
    
    
    168
    
    
    
    179
    
    
    
    181
    
    
    
    181
    
    
    
    181
    
    
    
    1,157Operating leases
    
    
    4
    
    
    
    210
    
    
    
    200
    
    
    
    183
    
    
    
    183
    
    
    
    183
    
    
    
    502Deposits without maturity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,624
 
 (1)
    
    The subordinated debentures are redeemable at par, at the Companys option, any time
prior to maturity, which is March 31, 2022.(2)
    
    Includes $1,088 of amounts allocable to interest payments over the remaining term of
the leases.   - 36 -




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OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 LIQUIDITY
       - 37 -




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MANAGEMENTS DISCUSSION AND ANALYSIS
 CAPITAL RESOURCES
     INTEREST RATE SENSITIVITY
  Percent variable rate2005
    
    2004Interest-bearing deposits and federal funds sold
    
    
    100
    %
    
    
    100
    %Securities
    
    
    43
    
    
    
    43Loans
    
    
    75
    
    
    
    71Federal bank stock
    
    
    100
    
    
    
    100Total interest-earning assets
    
    
    70
    
    
    
    67
   - 38 -




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OHIO LEGACY CORP
 MANAGEMENTS DISCUSSION AND ANALYSIS
 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.
    
    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.
  - 39 -




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##### 



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,
    
    President, Long, Cook & Samsa, Inc. CPAsNational Pro Football Hall of Fame
    
    Wooster, OhioCanton, OhioJ. Edward Diamond
    
    Daniel H. Plumly, ChairmanPrivate investor
    
    Member, Critchfield, Critchfield & Johnston, Ltd.Canton, Ohio
    
    Wooster, OhioRobert F. Belden
    
    Michael D. MeenanPresident, Belden Brick Company
    
    President and OwnerCanton, Ohio
    
    Riverview Industrial Wood Products, Inc.Wooster, OhioL. Dwight Douce
    
    Melvin YoderExecutive Vice President
    
    President, Yoder LumberOhio Legacy Corp and Ohio Legacy Bank, N.A.
    
    Sugarcreek, OhioWooster, OhioScott J. FitzpatrickPartner, Fitzpatrick EnterprisesCanton, Ohio
 CORPORATE AND BANK LOCATIONS
 Corporate and Main Office
    
    Wooster Milltown
    
    Millersburg305 West Liberty Street
    
    3562 Commerce Parkway
    
    225 North Clay StreetWooster, Ohio 44691
    
    Wooster, Ohio 44691
    
    Millersburg, Ohio 44654330-263-1955
    
    330-345-2031
    
    330-674-5301
 Canton
    
    North Canton4026 Dressler Road NW
    
    600 South Main StreetCanton, Ohio 44718
    
    North Canton, Ohio 44720330-478-1000
    
    330-499-1900
 - 40 -




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OHIO LEGACY CORP
 SHAREHOLDER INFORMATION
 INDEPENDENT AUDITORS
    
    SPECIAL COUNSEL
    
    CORPORATE COUNSELCrowe Chizek and Company LLC
    
    Squire, Sanders & Dempsey L.L.P.
    
    Critchfield, Critchfield & Johnston LTDSuite 205
    
    4900 Key Tower
    
    225 N. Market Street5900 Landerbrook Drive
    
    127 Public Square
    
    Wooster, Ohio 44691Cleveland, Ohio 44124
    
    Cleveland, Ohio 44114
 ANNUAL MEETING
  PRICE RANGE OF COMMON STOCK AND DIVIDENDS
  2005
    
    
    2004High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    14.98
    
    
    $
    12.75
    
    
    $
    13.25
    
    
    $
    10.78Second Quarter
    
    
    12.99
    
    
    
    10.24
    
    
    
    12.51
    
    
    
    10.54Third Quarter
    
    
    10.74
    
    
    
    9.24
    
    
    
    11.50
    
    
    
    10.00Fourth Quarter
    
    
    9.95
    
    
    
    9.05
    
    
    
    15.00
    
    
    
    11.50
  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
  - 41 -




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##### 



Ohio Legacy Bank is a community bank that supports and participates in the communities we serve.In 2005 we supported these community organizations:Canton Regional Chamber of CommerceHolmes County Chamber of CommerceNorth Canton Area Chamber of CommerceWooster Area Chamber of CommerceWayne County Historical Society Voices Performance SponsorWayne County Humane SocietyWelcome Wagon InternationalCleveland Pops Orchestra SponsorEvery Womans House Holiday Bells SponsorHolmes County Antique Festival Parade & Car Show SponsorHolmes County Chamber of Commerce Annual Golf Outing SponsorKillbuck Early American Days Timbershow SponsorMillersburg Baseball AssociationWayne-Holmes Soap Box Derby Car SponsorPro Football Hall of Fame Festival Enshrinees Game Day Roundtable SponsorHolmes County Sheriff s Reserve Kid s School Program SponsorWest Holmes High School Academic Corp Challenge SponsorCanton Palace Theatre Golf Outing FundraiserAmerican Heart Association Heartwalk EventJoel Pomerene Foundation 7th Annual Charity Classic SponsorRelay for Life  WoosterHolmes County Park District Youth Track SponsorAmerican Red Cross Golf Classic SponsorshipWooster KiwanisWooster-Madisonburg Evening Lions ClubRotary Club of WoosterQuota International of WoosterWayne-Holmes Association of RealtorsWayne County Performing Arts Council  ShenandoahHolmes County Senior Center ContributionWayne County Business ShowcaseWayne County FairWayne & Holmes Counties Jr. Fair SupporterWayne County Home and Garden ShowDowntown Wooster Window WonderlandNorth Canton Mainstreet FestivalMain Street WoosterfestAmerican Red Cross Festival of TreesWayne County Children Services Child Abuse Prevention SponsorUnited Way of Holmes, Stark & Wayne CountiesBoy Scouts of America Annual Golf Sponsor
 - 42 -




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##### 



How CDARS Can Work for You
 Full Insurance. 1
 One Bank.
 One Rate.
 One Statement.
 No Fees.
 A Wide Variety of Maturities.
 Community Investment. 2
  [1]
    
    Funds may be submitted for placement only after a depositor enters into a CDARS
Deposit Placement Agreement with us. The agreement contains important information and
conditions regarding the placement of funds by us through CDARS.[2]
    
    Because funds are exchanged on a dollar-for-dollar basis with other banks in the
network, we can use the full amount of deposits placed through CDARS for local lending,
which may satisfy some depositors; local investment goals/mandates. Alternatively, with a
depositors consent, we may choose to receive fee income instead of deposits from other
banks. Under these circumstances, deposited funds would not be available for local lending.
  - 43 -




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##### 



 OHIO LEGACY BANK OFFERS 
 Business Checking Accounts
 Legacy Business Elite
 
    
    $100 towards your first order of checks
    
    No monthly fee
    
    Receive 500 items* free per month:
 s
    
    200 Debitss
    
    200 Deposited Itemss
    
    100 Deposits
 
    
    Basic Cash Management set-up fee waived
    
    Check safekeeping included (printed images available for $10)
    
    Personal account relationship is required
 Commercial Checking
 
    
    Earnings credit of $2.00 per $1,000
    
    Receive 100 deposited items at no charge
 s
    
    All other items are 10¢ each
 
    
    Monthly fee of $10
 Business Value With Interest
 
    
    The following items* are free each statement cycle:
 s
    
    50 Debits  s 100 Deposited Items  s 30 Deposits
 
    
    Monthly fee of $8.00 waived with $5,000 average daily balance
 Business Value Checking
 
    
    Earnings credit of $2.00 per $1,000
    
    Monthly fee of $8.00
    
    The same per item conditions as Business Value with Interest
 Free Business Checking
 
    
    No monthly service fee
    
    The following items* are free each statement cycle:
 s
    
    20 Debits  s 50 Deposited Items  s 10 Deposits
 
    
    Check safekeeping is required (printed images available for $5)
 General Checking Account Information
 
    
    Minimum of $25.00 to open a business checking account
    
    Non-Sufficient Fund Fee/Returned Item Charge is $30.00 per item
    
    Additional items are 25¢ each
 (LENDER LOGO)
    
    (FDIC LOGO)
 
 - 44 -




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##### 



OHIO LEGACY CORP
 
  OHIO LEGACY BANK OFFERS 
 Business Banking Services
 Free Business Courier Service Available
    
    Debit Card
    
    Pickup at your business location
    
    
    
    
    
    Available for your business and employees
    
    Your deposit picked up daily or as needed
    
    
    
    
    
    24-hour accessNight Depository Service
    
    Merchant Services
    
    A secure site for your business deposits
    
    
    
    
    
    Enables you to accept credit cards for payment
    
    Locked bag provided to you at no charge
    
    
    
    
    
    VISA, MasterCard or DiscoverInternet Cash Management
    
    Direct Deposit For Employees
    
    View your account activity at your convenience
    
    
    
    
    
    Benefits for the company
    
    Ability to transfer funds from your office
    
    
    
    
    
    s
    
    Reduce expensess
    
    Security of deliveryRepurchase Agreement
    
    
    
    
    
    Benefits for your employees
    
    Earn higher rate of interest
    
    
    
    
    
    s
    
    Immediate credit of payroll funds
    
    Automatic daily sweeps
    
    
    
    
    
    s
    
    Saves your employee timeMulti Cash Management
    
    Business Loans
    
    Sweeps between your deposit accounts and
line of credit
    
    
    
    
    
    Real estate transactions, operating and
equipment purchases
  LOCATIONS 
 Wooster Main
    
    Wooster Milltown
    
    Millersburg305 West Liberty Street
    
    3562 Commerce Parkway
    
    225 North Clay StreetWooster, Ohio 44691
    
    Wooster, Ohio 44691
    
    Millersburg, Ohio 44654330-263-1955
    
    330-345-2031
    
    330-674-5301
 Canton
    
    North Canton4026 Dressler Road NW
    
    600 South Main StreetCanton, Ohio 44718
    
    North Canton, Ohio 44720330-478-1000
    
    330-499-1900
 24-Hour Anytime Line
877-965-1113
 www.ohiolegacycorp.com
www.ohiolegacybank.com
 (LENDER LOGO)
    
    (FDIC LOGO)




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