UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2010

or

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

For the transition period from __________ to __________

Commission file number:  000-31673

OHIO LEGACY CORP

(Exact name of registrant as specified in its charter)

Ohio	34-1903890
(Stateorotherjurisdictionofincorporationororganization)	I.R.S. Employer Identification Number

600 South Main St., North Canton, Ohio  44720

(Address of principal executive offices)

(330) 499-1900

Registrant's telephone number

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

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

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

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

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

As of August 16, 2010, the latest practicable date, there were 19,714,564 shares of the issuer’s Common Stock, without par value, issued and outstanding.

OHIO LEGACY CORP

FORM 10-Q

AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010

SECOND QUARTER REPORT

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis	20
Item 3. Quantitative and Qualitative Disclosures about Market Risk	32
Item 4T. Controls and Procedures	32
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Removed and Reserved	33
Item 5. Other Information	33
Item 6. Exhibits	34
SIGNATURES	35

2

PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements.

OHIO LEGACY CORP

CONSOLIDATED BALANCE SHEETS

As of June 30, 2010 and December 31, 2009

	June 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
Cash and due from banks	$	1,739,509		$	1,970,133
Federal funds sold and interest-bearing deposits in financial institutions		39,324,681			22,195,657
Cash and cash equivalents		41,064,190			24,165,790
Certificate of deposit in financial institution		100,000			100,000
Securities available for sale		25,635,750			26,892,105
Securities held to maturity (fair value June 30, 2009 - $3,075,613, December 31, 2009 - 3,050,740)		2,995,313			2,996,826
Loans held for sale		64,272			195,247
Loans, net of allowance of $3,817,696 and $3,945,670 at June 30, 2010 and December 31, 2009		94,684,431			100,855,165
Federal bank stock		1,557,700			1,267,250
Premises and equipment, net		3,094,452			2,952,392
Other real estate owned		2,089,217			3,175,658
Accrued interest receivable and other assets		697,738			640,595
Total assets	$	171,983,063		$	163,241,028
LIABILITIES
Deposits:
Noninterest-bearing demand	$	15,775,601		$	15,521,829
Interest-bearing demand		9,504,231			9,372,841
Savings		58,399,524			57,119,495
Certificates of deposit, net		55,311,658			57,784,548
Total deposits		138,991,014			139,798,713
Repurchase agreements		3,767,660			1,037,776
Long-term Federal Home Loan Bank advances		10,000,000			18,500,000
Capital lease obligations		424,855			440,786
Accrued interest payable and other liabilities		980,619			1,097,242
Total liabilities		154,164,148			160,874,517
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 500,000 shares authorized, none outstanding		-			-
Common stock, no par value;
June 30, 2010:  22,500,000 shares authorized, 19,714,564 shares issued and outstanding
December 31, 2009:  5,000,000 shared authorized, 2,214,564 shares issued and outstanding		35,499,702			18,782,779
Accumulated deficit		(18,089,259	)		(16,178,901	)
Accumulated other comprehensive income (loss)		408,472			(237,367	)
Total shareholders' equity		17,818,915			2,366,511
Total liabilities and shareholders' equity	$	171,983,063		$	163,241,028

See notes to the consolidated financial statements.

3

OHIO LEGACY CORP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Interest and dividend income:
Loans, including fees	$	1,488,346		$	1,747,129		$	2,992,197		$	3,691,442
Securities, taxable		248,902			449,459			509,150			850,471
Securities, tax-exempt		28,636			28,650			57,178			57,204
Interest-bearing deposits, federal funds sold and other		19,861			7,810			32,369			14,073
Dividends on federal bank stock		18,266			15,874			33,540			32,338
Total interest and dividend income		1,804,011			2,248,922			3,624,434			4,645,528
Interest expense:
Deposits		488,707			898,088			1,008,320			1,837,566
Short-term Federal Home Loan Bank advances		-			-			-			2,085
Long-term Federal Home Loan Bank advances		70,083			155,909			184,570			333,181
Repurchase agreements		1,992			940			3,076			1,872
Capital leases		17,370			18,574			35,060			37,421
Investor notes		-			-			9,693			-
Total interest expense		578,152			1,073,511			1,240,719			2,212,125
Net interest income		1,225,859			1,175,411			2,383,715			2,433,403
Provision for loan losses		(223,479	)		375,000			(146,707	)		556,000
Net interest income after provision for loan losses		1,449,338			800,411			2,530,422			1,877,403
Noninterest income:
Service charges and other fees		206,439			211,068			375,869			423,253
Gain on sales of securities available for sale, net		31,229			-			31,229			685,948
Other than temporary impairment loss
Total impairment loss		(47,200	)		-			(47,200	)		(111,200	)
Loss recognized in other comprehensive income		-			-			-			-
Net impairment loss recognized in earnings		(47,200	)		-			(47,200	)		(111,200	)
Gain on sale of loans		1,864			3,677			5,328			23,167
Gain on disposition of other real estate owned		18,629			474			30,173			38,494
Direct write-down of other real estate owned		(219,797	)		(24,000	)		(219,797	)		(46,500	)
Loss on disposition of fixed assets		(7,193	)		-			(8,699	)		-
Other income		19,656			11,757			34,505			19,352
Total noninterest income		3,627			202,976			201,408			1,032,514
Noninterest expense:
Salaries and benefits		897,383			738,972			1,867,245			1,465,366
Occupancy and equipment		234,274			206,815			448,973			415,469
Professional fees		144,472			51,487			416,319			154,143
Franchise tax		6,500			28,052			15,550			65,552
Data processing		170,171			172,588			322,877			350,098
Marketing and advertising		29,968			21,670			95,055			48,720
Stationery and supplies		22,410			16,755			39,290			36,533
Amortization of intangible asset		-			13,692			-			29,951
Deposit expense and insurance		93,799			361,615			294,618			487,267
Investor expenses		-			-			517,222			-
Other expenses		434,656			374,705			625,039			582,312
Total noninterest expense		2,033,633			1,986,351			4,642,188			3,635,411
Net loss before income taxes		(580,668	)		(982,964	)		(1,910,358	)		(725,494	)
Income tax benefit		-			(6,076	)		-			(250,989	)
Net loss	$	(580,668	)	$	(976,888	)	$	(1,910,358	)	$	(474,505	)
Basic loss per share	$	(0.03	)	$	(0.44	)	$	(0.13	)	$	(0.21	)
Diluted loss per share	$	(0.03	)	$	(0.44	)	$	(0.13	)	$	(0.21	)

See notes to the consolidated financial statements.

4

OHIO LEGACY CORP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Six Months Ended June 30, 2010 and 2009

(Unaudited)

	For the Six Months Ended
	June 30,
	2010			2009
Balance, beginning of period	$	2,366,511		$	9,520,857
Stock based compensation expense (forfeitures)		2,143			(9,547	)
Proceeds on sale of common stock, net		16,714,781			-
Comprehensive loss:
Net loss		(1,910,358	)		(474,505	)
Net unrealized income (loss) on securities available for sale arising during the period, including effect of reclassifications		645,838			(579,232	)
Total comprehensive loss		(1,264,520	)		(1,053,737	)
Balance, end of period	$	17,818,915		$	8,457,573

See notes to the consolidated financial statements.

5

OHIO LEGACY CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2010 and 2009

(Unaudited)

	For the Six Months Ended
	June 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	(1,910,358	)	$	(474,505	)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Depreciation and amortization		180,967			203,598
Loss (gain) on disposition of fixed assets		8,699			-
Securities amortization and accretion, net		100,228			68,603
Origination of loans held for sale		(159,272	)		(844,682	)
Proceeds from sales of loans held for sale		295,575			1,760,787
Provision for loan losses		(146,707	)		556,000
Loss (gain) on disposition or direct writedown of real estate owned		189,624			8,016
(Gain) loss on sale of securities available for sale		(31,229	)		(685,948	)
Other than temporary impairment of securities		47,200			111,200
Gain on sale of loans held for sale		(5,328	)		(23,167	)
Stock based compensation expense		2,143			(9,547	)
Net change in:
Accrued interest receivable and other assets		(57,143	)		221,506
Accrued interest payable and other liabilities		(116,623	)		(653,020	)
Deferred loan fees		8,795			(13,018	)
Net cash from operating activities		(1,593,429	)		225,823
Cash flows from investing activities:
Purchases of securities available for sale		(3,460,975	)		(44,758,741	)
(Purchases) or redemptions of federal bank stock		(290,450	)		133,950
Maturities, calls and paydowns of securities available for sale		2,350,575			3,388,667
Sales of securities available for sale		2,897,908			27,878,086
Proceeds from sale of other real estate owned		1,106,448			1,120,250
Net change in loans		6,096,136			13,139,582
Improvements to real estate owned		-			(99,840	)
Acquisition of premises and equipment		(331,927	)		(636	)
Other investing activities		3,080			-
Net cash from investing activities		8,370,795			801,318
Cash flows from financing activities
Net change in deposits		(807,699	)		11,366,669
Net change in repurchase agreements		2,729,884			(409,320	)
Repayment of capital lease obligations		(15,931	)		(13,570	)
Proceeds from short term FHLB advances, net of payments		-			(6,850,000	)
Proceeds from FHLB advances		-			3,000,000
Repayments of FHLB advances		(8,500,000	)		(5,500,000	)
Net proceeds from issuance of common stock		16,714,780			-
Net cash from financing activities		10,121,034			1,593,779
Net change in cash and cash equivalents		16,898,400			2,620,920
Cash and cash equivalents at beginning of period		24,165,790			11,467,937
Cash and cash equivalents at end of period	$	41,064,190		$	14,088,857

	For the Six Months Ended
	June 30,
	2010		2009
Supplemental disclosures of cash flow information:
Cash received during the period:
Federal income tax refund		-	$	250,989
Cash paid during the period for:
Interest	$	1,293,859	$	2,302,393
Federal income taxes		-		-
Non-cash transactions:
Transfer of loans to other real estate owned		212,510	$	441,060

See notes to the consolidated financial statements.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

These consolidated financial statements are prepared without audit and reflect all adjustments that, in the opinion of management, are necessary to present fairly the financial position of the Company at June 30, 2010, and its results of operations and cash flows for the periods presented.  All such adjustments are normal and recurring in nature.  The accounting principles used to prepare the consolidated financial statements are in compliance with U.S. GAAP.  However, the financial statements were prepared in accordance with the instructions of Form 10-Q and, therefore, do not purport to contain all necessary financial and footnote disclosures required by U.S. GAAP.

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

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

7

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

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

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

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

NOTE 3 – STOCK ISSUANCE

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

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

8

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

The net proceeds to the Company of the stock offering were $16,714,781 after payment of various costs totaling $785,219.  Net proceeds were used by the Company to increase the capital level of the Bank in the amount of $16,184,135 and to repay notes payable and accrued interest to the organizers of Excel Bancorp and Excel Financial in the amount of $526,915 for advances made to Excel Financial for organization and operating expenses related to its pursuit of a bank acquisition.  The Company accepted the assignment of the notes payable to the organizers of Excel Bancorp and Excel Financial in exchange for their agreement to waive a closing condition that required the Bank to maintain a minimum tier 1 capital level of $5.7 million.  Since the notes to the organizers were an obligation to reimburse expenses not directly related to the stock offering, the cost was expensed rather than deducted from the stock offering proceeds.

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

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

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

9

NOTE 4 – EARNINGS (LOSS) PER SHARE

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

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
BASIC:
Net loss	$	(580,668	)	$	(976,888	)	$	(1,910,358	)	$	(474,505	)
Weighted average common shares outstanding		19,714,564			2,214,564			14,976,995			2,214,564
Basic loss per share	$	(0.03	)	$	(0.44	)	$	(0.13	)	$	(0.21	)
DILUTED:
Net loss	$	(580,668	)	$	(976,888	)	$	(1,910,358	)	$	(474,505	)
Weighted average common shares outstanding		19,714,564			2,214,564			14,976,995			2,214,564
Dilutive effect of stock options		-			-			-			-
Dilutive effect of stock warrants		-			-			-			-
Total common shares and dilutive potential common shares		19,714,564			2,214,564			14,976,995			2,214,564
Diluted loss per common share	$	(0.03	)	$	(0.44	)	$	(0.13	)	$	(0.21	)

The following table details, as of June 30, dilutive potential common shares that were excluded from the computation of diluted earnings per share during the periods then ended as the effect of their exercise was anti-dilutive:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Stock options		-		165,650		43,938		165,650
Stock warrants		35,500		150,000		66,497		150,000

NOTE 5 – INVESTMENT SECURITIES

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

10

	June 30, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available for sale, carried at fair value:	Cost		Gains		Losses			Value
U.S. Government agencies	$	3,440,795	$	5,909	$	(20	)	$	3,446,684
Mortgage-backed securities issued by U.S. Government-sponsored enterprises		21,371,254		598,800		-			21,970,054
Other mortgage-backed securities		373,629		-		(196,217	)		177,412
Equity securities		41,600							41,600
Total	$	25,227,278	$	604,709	$	(196,237	)	$	25,635,750

	December 31, 2009
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Availableforsale,carriedatfairvalue:	Cost		Gains		Losses			Value
Mortgage-backed securities issued by U.S. Government-sponsored enterprises	$	26,616,829	$	30,703	$	(274,597	)	$	26,372,935
Other mortgage-backed securities		423,843		-		(27,473	)		396,370
Equity securities		88,800		34,000		-			122,800
Total	$	27,129,472	$	64,703	$	(302,070	)	$	26,892,105

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

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

	June 30,2010
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Held to maturity, carried at amortized cost	Cost		Gains		Losses		Value
Municipal securities	$	2,995,313	$	80,300	$	-	$	3,075,613

	December 31, 2009
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Held to maturity, carried at amortized cost	Cost		Gains		Losses			Value
Municipal securities	$	2,996,826	$	56,408	$	(2,494	)	$	3,050,740

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

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	June 30, 2010
	Amortized Cost		Fair Value
Available for Sale
U.S. Government-sponsored agency enterprises
One to five years	$	2,934,907	$	2,940,816
Five to ten years		505,888		505,868
Beyond ten years		-		-
Mortgage backed securities		21,744,883		22,147,466
Total	$	25,185,678	$	25,594,150
Held to Maturity
One to five years	$	180,103	$	182,408
Five to ten years		1,263,294		1,316,058
Beyond ten years		1,551,916		1,577,147
Total	$	2,995,313	$	3,075,613

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

	Less than 12 months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
June 30, 2010	Value		Loss			Value		Loss			Value		Loss
Available for sale:
U.S. Government agencies	$	505,868	$	(20	)						$	505,868	$	(20	)
Other mortgage-backed securities						$	177,412	$	(196,217	)		177,412		(196,217	)
Total	$	505,868	$	(20	)	$	177,412	$	(196,217	)	$	683,280	$	(196,237	)

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

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

As of June 30, 2010, the Company’s security portfolio consisted of 42 securities, one of which was in an unrealized loss position for less than 12 months and one for 12 months or longer.

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Mortgage-backed securities

The Company’s mortgage-backed securities portfolio includes one non-agency security with a fair value of $177,412 which represents an unrealized loss of approximately $196,217 at June 30, 2010; the estimated fair value has been less than its amortized cost for twelve months or more. This non-agency mortgage-backed security is rated investment grade.    This security is senior to several subordinate classes of securities that together are collateralized by a pool of residential mortgages.  No losses incurred on the mortgages in the pool have been assigned to the senior classes.  Although the borrowers are not required to make principal payments during the initial 10 year period, 64% of the original principal has been repaid as of June 30, 2010. There are no negative amortization loans in the pool and none of the loans are subprime, Alt A or similar type of high-default product. Based on these factors, as of June 30, 2010, the Company believes there is no OTTI and does not have the intent to sell this security and it is likely that it will not be required to sell the security before its anticipated recovery. Management believes this increase is primarily the result of the illiquidity of this security in the market, as well as management’s use of a new pricing service subsequent to year-end that uses more conservative assumptions than in prior periods.

Preferred Stock

The Company owns preferred stock issued by the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”).  During June 2010, FNMA and FHLMC announced that the New York Stock Exchange would delist shares of its common and preferred shares in July because the common stock had not maintained a minimum stock price of $1.00 for thirty consecutive days.  Following this announcement, the preferred stock prices declined significantly.  At June 30, 2010, the FNMA Series R preferred share price was $0.36 (down from $0.93 per share at May 31, 2010) and the FHLMC Series 2007 Fixed-to-Floating Rate preferred share price was $0.34 (down from $1.05 per share at May 31, 2010).  In July the preferred shares began to trade on the over the counter market.  The companies reported combined losses of $18 billion during the first quarter of 2010, and no dividends have been paid on the preferred shares since dividend payments were suspended in September 2008.  Each company continues to operate under the conservatorship of the Federal Housing Finance Agency.  These factors contributed to management’s decision to record an OTTI charge at June 30, 2010 in the amount of $47,200 to reduce the carrying value of the securities to estimated fair value at June 30, 2010.

NOTE 6 – LOANS

Loans, by collateral type, were as follows at June 30, 2010 and December 31, 2009:

	June 30, 2010					December 31, 2009
	Balance			Percent		Balance			Percent
Residential real estate	$	33,750,330			34.2	$	33,147,634			31.6
Multifamily real estate		5,612,670			5.7		5,757,491			5.5
Commercial real estate		43,600,557			44.2		47,639,944			45.4
Construction		2,935,022			3.0		3,958,572			3.8
Commercial		6,145,657			6.2		7,673,195			7.3
Consumer and home equity		6,544,303			6.7		6,719,205			6.4
Total Loans		98,588,539			100.0		104,896,041			100.0
Less:  Allowance for loan losses		(3,817,696	)				(3,945,670	)
Net deferred loan fees		(86,412	)				(95,206	)
Loans, net	$	94,684,431				$	100,855,165

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Approximately $22,727,000 and $23,436,000 of residential real estate loans were pledged as collateral for Federal Home Loan Bank advances at June 30, 2010 and December 31, 2009, respectively.

Activity in the allowance for loan losses for the three and six months ended June 30 was as follows:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Balance, beginning of period	$	4,033,006		$	3,565,895		$	3,945,670		$	3,398,284
Provision for loan losses		(223,479	)		375,000			(146,707	)		556,000
Loans charged-off		(387	)		(1,504,765	)		(4,283	)		(1,519,684	)
Recoveries of charged-off loans		8,556			382,082			23,016			383,612
Balance, end of period	$	3,817,696		$	2,818,212		$	3,817,696		$	2,818,212
Balance as a percentage of total loans		3.87	%		2.44	%		3.87	%		2.44	%

Loans individually considered impaired and nonaccrual loans were as follows at June 30, 2010, and December 31, 2009:

	June 30,		December 31,
	2010		2009
Loans past due over 90 days and still accruing interest	$	11,077	$	-
Nonaccrual loans, includes smaller balance homogeneous loans		6,138,137		5,826,976
Impaired loans, included in nonaccrual loans		6,138,137		5,826,976
Impaired loans with no allowance for loan loss allocated		4,204,883		5,826,976
Amount of the allowance for loan losses allocated		441,695		-

NOTE 7 – OTHER REAL ESTATE OWNED

Other real estate owned was as follows:

	June 30,		December 31,
	2010		2009
Residential real estate	$	1,577,292	$	1,160,603
Commercial real estate		25,001		196,706
Land development		486,924		1,818,349
Total other real estate owned	$	2,089,217	$	3,175,658

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs after acquisition are expensed. Expenditures that improve the fair value of the property are capitalized. It is the Company’s intention to make periodic reassessments of the value of assets held in this category and record valuation adjustments or write-downs as the reassessments dictate.  Real estate owned at June 30, 2010 and December 31, 2009 includes a property placed into receivership until it can be improved and sold in an orderly fashion.

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Direct write-downs of other real estate owned totaled $219,797 and $46,500 for the six months ended June 30, 2010 and 2009, respectively.

NOTE 8 – FAIR VALUE

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

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

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

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

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

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

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

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

	June 30,		December 31,
	2010		2009
Available for sale securities	$	25,635,750	$	26,892,105
Quoted prices on active markets for identical assets (Level 1)
Equity securities		41,600		122,800
Significant other observable inputs (Level 2)
U.S. government sponsored enterprises		3,446,684		-
Mortgage-backed securities issued by U.S. Government-sponsored enterprises		21,970,054		26,372,935
Other mortgage backed securities		177,412		396,370
Significant unobservable inputs (Level 3)		-		-
Impaired loans	$	4,081,062	$	4,670,389
Quoted prices on active markets for identical assets (Level 1)		-		-
Significant other observable inputs (Level 2)		-		-
Significant unobservable inputs (Level 3)		4,081,062		4,670,389
Other real estate owned	$	1,832,706	$	3,131,658
Quoted prices on active markets for identical assets (Level 1)		-		-
Significant other observable inputs (Level 2)		-		-
Significant unobservable inputs (Level 3)		1,832,706		3,131,658

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $4,081,062 after a specific allocation of the allowance for loan losses of $441,695 at June 30, 2010. New specific loss reserves of $290,555 were provided for during the three months ending June 30, 2010.

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The carrying amounts and estimated fair values of financial assets and liabilities at June 30, 2010 are as follows:

	June 30, 2010						December 31, 2009
	CarryingAmounts			EstimatedFairValue			CarryingAmounts			EstimatedFairValue
Financial assets
Cash and cash equivalents	$	41,064,000		$	41,064,000		$	24,166,000		$	24,166,000
Certificate of deposit in financial institution		100,000			100,000			100,000			100,000
Securities available for sale		25,636,000			25,636,000			26,892,000			26,892,000
Securities held to maturity		2,995,000			3,076,000			2,997,000			3,051,000
Loans held for sale		64,000			64,000			195,000			195,000
Loans, net		94,684,000			95,515,205			100,855,000			101,308,000
Accrued interest receivable		423,000			423,000			413,000			413,000
Financial liabilities
Deposits		(138,991,000	)		(139,593,000	)		(139,799,000	)		(140,668,000	)
Repurchase agreements		(3,768,000	)		(3,768,000	)		(1,038,000	)		(1,038,000	)
Overnight FHLB advances		-			-			-			-
FHLB advances		(10,000,000	)		(10,083,000	)		(18,500,000	)		(18,638,000	)
Accrued interest payable		(95,000	)		(95,000	)		(148,000	)		(148,000	)

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

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

NOTE 9 – STOCK BASED COMPENSATION

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

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

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

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

	2010
				Weighted
				Average
				Exercise
	Options			Price
Outstanding at January 1		162,300		$	10.79
Granted		-
Forfeited		(162,300	)		10.79
Exercised		-
Outstanding at June 30		-			-
Exercisable at June 30		-			-

Shareholders adopted the Ohio Legacy Corp 2010 Cash and Equity Incentive Plan in May 2010.  As of June 30, 2010, no grants were issued under this plan.

NOTE 10 – REGULATORY MATTERS

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

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

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

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

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

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

Actual and required capital amounts (in thousands) and ratios are presented below at June 30, 2010:

											To Be Well-
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets	$	18,661		19.9	%	$	7,504		8.00	%	$	9,380		10.00	%
Tier 1 capital to risk-weighted assets		17,456		18.6	%		3,752		4.00	%		5,628		6.00	%
Tier 1 capital to average assets		17,456		10.2	%		6,878		4.00	%		8,598		5.00	%

Note 11 – Income Taxes

The Company has net operating loss carryforwards of approximately $5,352,000 that will expire as follows:  $1,419,000 on December 31, 2027, $132,000 on December 31, 2028, and $3,801,000 on December 31, 2029.  See Note 3 for information regarding the annual limitations on the use of net operating loss carryforwards resulting from an “ownership change” as broadly defined in Section 382 of the Internal Revenue Code of 1986, as amended.

At June 30, 2010 and December 31, 2009, a valuation allowance was recorded to reduce the carrying amount of the Company’s net deferred tax assets to zero.

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Item 2.  Management’s Discussion and Analysis.

In the following section, management presents an analysis of Ohio Legacy Corp's financial condition as of June 30, 2010, and results of operations as of and for the three and six months ended June 30, 2010 and 2009.  This discussion is provided to give shareholders a more comprehensive review of the issues facing management than could be obtained from an examination of the financial statements alone.  This analysis should be read in conjunction with the consolidated financial statements and the accompanying notes included in this Form 10-Q and the Company’s annual report on Form 10-K for the year ended December 31, 2009.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

· rapid changes in technology affecting the financial services industry;

· changes in government regulation;

· general economic and business conditions;

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

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· changes in general interest rates and the impact of future interest rate changes on our profitability, capital adequacy and the fair value of our financial assets and liabilities;

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

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

· the adequacy of our allowance for loan losses; and

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

OVERVIEW OF STRATEGIC DEVELOPMENTS

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

The following key factors summarize the Company’s financial condition at June 30, 2010 compared to December 31, 2009:

· Total assets increased $8.8 million from $163.2 million to $172.0 million;

· Total shareholders’ equity increased $15.4 million from $2.4 million to $17.8 million;

· Tier 1 capital for the Bank increased by $14.9 million from $2.6 million to $17.5 million;

· Net loans decreased $6.2 million from $100.9 million to $94.7 million;

· Nonperforming assets (including nonaccrual loans, loans past due ninety days and still accruing interest and other real estate owned) remained high, but decreased slightly from $9.0 million to $8.2 million;

· Total deposits decreased $807,699 from $139.8 million to $139.0 million;

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

The following key factors summarize our results of operations for the six months ending June 30, 2010:

· The Company incurred a net loss of $1.9 million;

· Net interest income declined by $49,688 compared to the same period in 2009;

· A negative provision for loan loss totaling $146,707 was recorded compared to a provision expense of $556,000 for the same period in 2009;

· Direct write-down on other real estate owned totaled $219,797 compared to $46,500 for the same period in 2009;

· Securities gains realized during the period were $31,229 compared to $685,948 in securities gains recorded for the same period in 2009;

· An OTTI charge of $47,200 was recorded during the period compared to an OTTI charge of $111,200 for the same period in 2009;

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

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

· The Company began to offer trust and investment services during 2010.

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

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

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

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

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

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

CRITICAL ACCOUNTING POLICIES

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

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

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

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Valuation allowance for deferred tax assets.  Another critical accounting policy relates to valuation of the deferred tax asset for net operating losses.  Net operating loss carryforwards of approximately $5,352,000 will expire as follows:  $1,419,000 on December 31, 2027 and $132,000 on December 31, 2028, and $3,801,000 on December 31, 2029.  A valuation allowance has been recorded for the related deferred tax asset for these carryforwards and other net deferred tax assets recorded by the Company to reduce the carrying amount of these assets to zero.  Additional information is included in Note 3 to our consolidated financial statements.

FINANCIAL CONDITION – June 30, 2010 compared to December 31, 2009

Assets.  At June 30, 2010, total assets increased to $172.0 million, up $8.8 million from $163.2 at December 31, 2009.  Most notable were the increases to total shareholders’ equity and cash and cash equivalents which increased due to proceeds received on the sale of common stock.

Cash and Cash Equivalents.  Cash and cash equivalents increased to $41.1 million at June 30, 2010, up $16.9 million from $24.2 million at year-end 2009.  The increase was directly related to proceeds from a common stock issuance during February 2010.

Securities.  Total securities available for sale had an estimated fair value of $25.6 million at June 30, 2010, compared to $26.9 million at year-end 2009.  Purchases of securities available for sale during the first six months of 2010 totaled $3.5 million, principal repayments totaled $2.4 million, and $2.9 million in proceeds were received on securities sold during the second quarter.  The portfolio consists primarily of mortgage-backed securities issued by the GNMA with an original term of 30 years.  The duration of the portfolio including municipal securities classified as Held-to-Maturity was 4.1 years at June 30, 2010, and the longer-term characteristics of the portfolio will contribute to increased market price volatility for any given change in interest rates.  The estimated net unrealized gain on the securities portfolio was $488,772 at June 30, 2010 compared to net unrealized loss of $183,453 at December 31, 2009.

Loans and Asset Quality.  Total loans, net of the allowance for loan loss and deferred loan fees, decreased $6.2 million to $94.7 million at June 30, 2010 compared to $100.9 million at year-end 2009 principally due to repayments and payoffs of loans during the quarter.  Loans classified by management as substandard and special mention represented 13.8% of total loans at June 30, 2010, compared to 12.8% at March 31, 2010, and 12.7% at December 31, 2009. The balance of loans classified as substandard and special mention increased by $288,255 at June 30, 2010 compared to year-end 2009.  Impaired loans represented 6.2% of total loans at June 30, 2010, and totaled $6,138,137, up $311,161 from year-end 2009.  Improving asset quality is a prime objective for management.   Outstanding loan balances are expected to increase over the remainder of the year through business development efforts.

Allowance for loan losses.  The amount of the allowance for loan losses (“allowance”) is based on a combination of actual experiential factors such as historical losses for each category of loans, information about specific borrowers, and other factors, including delinquencies, general economic conditions and the outlook for specific industries, which are more subjective in nature.  The balance of the allowance at June 30, 2010, was $3,817,696 compared to $3,945,670 at year-end 2009.  For the three months ending June 30, 2010, the Company recorded a negative provision for loan losses of $223,479, and for the six months ended June 30, 2010, the Company recorded a negative provision for loan loss of $146,707.  Management concluded based on its evaluation of the estimate for the allowance, that a negative loan loss provision was warranted due to principal reductions for non-classified loans experienced in loan types that required higher historical experience loss factors relative to other loan types within non-classified loans resulting in a decrease in the allowance of approximately $289,000 since March 31, 2010.  The historical net-charge off percentage for loans classified as substandard declined from the previous period resulting in a lower estimate of loss within this loan classification of approximately $211,000.  The portion of the allowance estimated for other factors such as local economic conditions, industry trends, and credit administration decreased approximately $38,000 at June 30, 2010, compared to March 31, 2010 due to lower loan balances.  Partially offsetting these reductions to the estimate of the allowance was an increase of approximately $291,000 in the specific allocation of the allowance for impaired loans and an increase of approximately $32,000 in the allowance for special mention loan balances.

23

Loans charged off totaled $4,283 for the six months ended June 30, 2010, and recoveries on loans previously charged off totaled $23,016.  The general allowance allocated to loans not classified by management totaled 2.37% of non-classified loans at June 30, 2010, compared to 2.58% at year-end 2009.  As a percentage of total loans, the allowance was 3.87% at June 30, 2010, compared to 3.76% at year-end 2009, and 4.01% at March 31, 2010.  The allowance for loan losses as a percentage of loans not individually identified as impaired and that excludes the amount of the allowance specifically allocated to impaired loans totaled 3.43% at June 30, 2010, compared to 3.76% at December 31, 2009, and 3.86% at March 31, 2010.

Loans are considered nonperforming when impaired or in nonaccrual status.  Nonperforming loans totaled $6,138,137 at June 30, 2010, compared to $5,826,976 at year-end 2009 and $5,734,473 at March 31, 2010.  The amount the allowance specifically allocated to impaired loans totaled $441,695 at June 30, 2010 and $151,140 at March 31, 2010; there were no allocations of the allowance to impaired loans at year-end 2009.

Other Real Estate Owned.  Other real estate owned (“OREO”) consisted of nine properties at June 30, 2010 and totaled $2,089,217, down from $3,175,658 at year-end 2009.  During the first six months of 2010, one property was transferred to OREO totaling $212,510, and there were eleven properties with an aggregate basis of $1,076,276 were sold from OREO.  Direct write-downs on two properties totaling $219,797 were recorded during the three months ending June 30, 2010.

Deposits.  Total deposits decreased $807,699 to $139.0 million at June 30, 2010, compared to year-end 2009.  Core deposits increased to $83.7 million at June 30, 2010, compared to $82.0 million at year-end 2009.  Certificates of deposit decreased $2.5 to $55.3 million from $57.8 million at December 31, 2009.  Under applicable FDIC rules and regulations, a less than well-capitalized insured depository institution may not pay a rate of interest that significantly exceeds the prevailing rate in the institution's market area or the prevailing rate in the market area from which the deposit is accepted.

Federal Home Loan Bank Advances.  Total advances decreased $8.5 million to $10 million at June 30, 2010, from $18.5 million at year-end 2009.  The weighted average interest rate on matured advances was 4.05%.  The advances were repaid from excess liquidity.

Shareholders’ Equity.  Shareholders’ equity increased $15.5 million to $17.8 million at June 30, 2010.  The increase was due to the sale of common stock completed in February 2010.  Net proceeds of the stock sale totaled $16.7 million.  Shareholders’ equity was reduced by $1.9 for the net loss reported for the six months ending June 30, 2010.

RESULTS OF OPERATIONS – THREE MONTHS ENDED JUNE 30, 2010

The net loss for the three months ending June 30, 2010, totaled $580,668, or a loss of $0.03 per diluted share compared to a net loss of $976,888, or $0.44 per diluted share during the second quarter of 2009.  Average diluted shares outstanding increased to 19,714,564 shares for the second quarter of 2010 compared to 2,214,564 in average diluted shares outstanding during the same quarter of 2009.  The increase in average diluted shares outstanding is due to the issuance of 17,500,000 shares of common stock on February 19, 2010.

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

	Three Months Ended June 30,
	2010							2009
	Average		Interest							Interest
	Outstanding		Earned/		Yield/			Average		Earned/		Yield/
(Dollars in Thousands)	Balance		Paid		Rate			Balance		Paid		Rate
Assets
Interest-earning assets:
Interest-bearing deposits in other financial institutions and federal funds sold	$	35,517	$	20		0.22	%	$	14,338	$	8		0.22	%
Securities available for sale		26,795		249		3.72	%		42,424		449		4.24	%
Securities held to maturity		2,996		29		3.82	%		2,999		29		3.82	%
Federal agency stock		1,477		18		4.95	%		1,321		16		4.81	%
Loans (1)		94,711		1,488		6.30	%		112,960		1,747		6.20	%
Total interest-earning assets		161,496		1,804		4.48	%		174,042		2,249		5.18	%
Noninterest-earning assets		10,494							16,806
Total assets	$	171,990						$	190,848
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	9,039	$	15		0.68	%	$	8,821	$	19		0.86	%
Savings accounts		16,445		36		0.87	%		17,139		74		1.72	%
Money market accounts		42,587		94		0.89	%		42,214		164		1.55	%
Certificates of deposit		56,769		344		2.43	%		75,704		642		3.40	%
Total interest-bearing deposits		124,840		489		1.57	%		143,878		899		2.50	%
Other Borrowings		12,438		89		2.88	%		20,109		175		3.50	%
Total Interest-bearing liabilities		137,278		578		1.69	%		163,987		1,074		2.63	%
Noninterest-bearing demand deposits		15,926							16,692
Noninterest-bearing liabilities		914							413
Total liabilities		154,118							181,092
Shareholders' Equity		17,872							9,756
Total liabilities and shareholders' equity	$	171,990						$	190,848
Net interest income; interest rate spread (2)			$	1,226		2.79	%			$	1,175		2.55	%
Net earning assets	$	24,218						$	10,055
Net interest margin (3)						3.05	%						2.71	%
Average interest-earning assets to interest-bearing liabilities		1.2		X					1.1		X

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(1) Net of net deferred loan fees and costs and loans in process. Non-accrual loans are reported in non-interest earning assets in this table.

(2) Interest rate spread represents the difference between the yield on interest earning assets and the cost of interest bearing liabilities.

(3) Net interest margin represents net interest income, annualized, divided by average interest-earning assets.

Net interest income. For the three months ending June 30, 2010, net interest income was $1,225,859, up $50,448 from same period in 2009 while total interest earning assets were down by $12.5 million. The yield on earning assets declined 0.70% to 4.48% for the second quarter of 2010 from 5.18% for the comparable period of 2009. The yield on interest-bearing liabilities declined 0.94% to 1.69% for the second quarter of 2010 from 2.63% for the same period in 2009. The net interest margin increased to 3.05% from 2.71%.

Interest Income. Total interest income for the second quarter of 2010 was $1.8 million, down from $2.2 million for the second quarter of 2009. A low interest rate environment combined with lower average loan balances and a larger allocation of funds to liquid assets yielding only 0.22% contributed to lower interest income levels. Average balances in cash and cash equivalents increased to $35.5 million during the second quarter of 2010 compared to $14.3 million during the second quarter of 2009.

Interest expense. Interest on deposits declined $409,381 to $488,707 for the second three months of 2010 compared to the same period in 2009. The average rate paid on interest-bearing deposits dropped 0.93% to 1.57%. Interest expense related to other borrowings including Federal Home Loan Bank advances declined by $85,978.

Provision for Loan Loss. A negative loan loss provision totaling $223,479 was recorded during the second quarter of 2010, compared to a loan loss provision of $375,000 for the same quarter last year; negative loan loss provisions provide a positive contribution to net income. The provision for loan loss will fluctuate based on management’s evaluation of the credit within the loan portfolio, changes in credit loss experience factors, and incurred losses in the loan portfolio during the period. See also the discussion above for the Allowance for Loan Losses.

Noninterest income. Noninterest income declined $199,349 to $3,627 for the second quarter of 2010 compared to the same quarter of 2009. The most significant changes to noninterest income for the comparative second quarter periods was a direct write-down on other real estate owned totaling $219,797 on two properties compared to a direct write-down on other real estate owned totaling $24,000 for the second quarter of 2009. An impairment charge on FNMA and FHLMC preferred stock totaling $47,200 was also recorded in the second quarter of 2010. Positive contributors to noninterest income included a gain on sale of securities available for sale totaling $31,229 and a gain on sale of other real estate owned totaling $18,629. Service charges and other fees on deposits totaled $206,439 for the second quarter, down $4,629 from the second quarter of 2009.

Noninterest expense. Noninterest expense increased $47,282, or 2.38%, to $2,033,633 for the second quarter of 2010 compared to $1,986,351 for the second quarter of 2009. The significant changes are detailed below.

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Salaries and benefits increased 21.4% to $897,383 for the second quarter of 2010 compared to $738,972 for the same period of 2009. Following the recapitalization in February 2010, management positions were added, and the Company staffed positions for new product offerings for trust, investments and wealth management. During the second quarter positions were added to the lending, human resources and trust administration staff.

Occupancy and equipment costs increased $27,459 to $234,274 for the second quarter of 2010. A new office was opened in St. Clairsville, Ohio, for trust, investment and wealth management services that contributed to this increase. Building repairs and maintenance costs were higher by $8,133, and depreciation expense increased $10,511.

Professional fees, including legal, accounting and other consulting expense, increased $92,985 to $144,472 for the second quarter of 2010. The Company retained experienced problem loan workout specialists to assist in loan collection efforts. Accounting, auditing and examination costs also increased.

Deposit expense and insurance decreased $267,816 to $93,799 compared to $361,615 in the second quarter of 2009. The costs for FDIC insurance included in this category decreased $264,260 due partly to the absence in 2010 of an emergency assessment totaling $88,878 imposed in 2009 for all financial institutions based on asset size as of June 30, 2009. In addition, the Bank’s improved risk-based capital position following the stock offering in February 2010 resulted in lower expense for the quarter. Part of the reduction related to lower costs for the first quarter of 2010; the Bank received its assessment for the first quarter of 2010 in June that retroactively reduced the deposit insurance cost to the beginning of the year.

Franchise tax decreased $21,552 to $6,500 for the second quarter of 2010. Ohio franchise tax for financial institutions is assessed based on net worth, and the lower capital levels at year-end resulted in lower costs for the second quarter.

No amortization expense was recorded during the second quarter of 2010 compared to an expense of $13,692 for the second quarter of 2009. The balance of intangible assets was zero at year end 2009 and June 30, 2010.

Other expenses increased $59,951 during the second quarter of 2010 compared to the same period in 2009. Fidelity bond Insurance expense increased $21,999, loan collection expenses increased $80,366 and other expense in the parent company increased $16,788. These increases were partially offset by a decrease in other real estate owned expenses of $64,669.

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RESULTS OF OPERATIONS – SIX MONTHS ENDED JUNE 30, 2010

	Six Months Ended June 30,
	2010							2009
	Average		Interest							Interest
	Outstanding		Earned/		Yield/			Average		Earned/		Yield/
(Dollars in Thousands)	Balance		Paid		Rate			Balance		Paid		Rate
Assets
Interest-earning assets:
Interest-bearing deposits in other financial institutions and federal funds sold	$	31,584	$	32		0.21	%	$	9,470	$	14		0.30	%
Securities available for sale		26,667		509		3.82	%		37,195		851		4.57	%
Securities held to maturity		2,997		57		3.82	%		3,000		57		3.81	%
Federal agency stock		1,372		34		4.89	%		1,338		32		4.83	%
Loans (1)		95,851		2,992		6.30	%		117,962		3,691		6.33	%
Total interest-earning assets		158,471		3,624		4.61	%		168,965		4,645		5.56	%
Noninterest-earning assets		10,461							22,234
Total assets	$	168,932						$	191,199
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	9,287	$	31		0.67	%	$	9,426	$	38		0.80	%
Savings accounts		16,662		73		0.88	%		16,448		159		1.95	%
Money market accounts		41,338		180		0.88	%		41,077		350		1.72	%
Certificates of deposit		56,869		724		2.57	%		75,209		1,291		3.47	%
Total interest-bearing deposits		124,156		1,008		1.64	%		142,160		1,838		2.61	%
Other Borrowings		14,482		232		3.21	%		21,676		374		3.46	%
Total Interest-bearing liabilities		138,638		1,240		1.80	%		163,836		2,212		2.73	%
Noninterest-bearing demand deposits		15,623							16,771
Noninterest-bearing liabilities		866							617
Total liabilities		155,127							181,224
Shareholders' Equity		13,805							9,975
Total liabilities and shareholders' equity	$	168,932						$	191,199
Net interest income; interest rate spread (2)			$	2,384		2.81	%			$	2,433		2.83	%
Net earning assets	$	19,833						$	5,129
Net interest margin (3)						3.04	%						2.91	%
Average interest-earning assets to interest-bearing liabilities		1.1		X					1.0		X

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(1) Net of net deferred loan fees and costs and loans in process. Non-accrual loans are reported in non-interest earning assets in this table.

(2) Interest rate spread represents the difference between the yield on interest earning assets and the cost of interest bearing liabilities.

(3) Net interest margin represents net interest income, annualized, divided by average interest-earning assets.

Net interest income. For the six months ended June 30, 2010, net interest income was $2.4 million, down $49,688 from the same period in 2009. Total interest and dividend income decreased $1,021,094. This decrease in revenue was partially offset by a decrease of $971,406 in total interest expense. The net interest margin improved to 3.04% from 2.91%.

Interest income. The average balance of funds invested in interest-bearing deposits and federal funds sold increased by $22.1 million and yielded only 0.21% during the first half of 2010. In addition the average balance of loans fell by $22.1 million. These volume changes in combination with an exceptionally low interest rate environment were the principal drivers behind the decline in interest income. Also, proceeds from an investment portfolio restructuring during the first half of 2009 resulted in a lower yielding investment portfolio as those proceeds were reinvested at lower interest rates. The yield on securities available for sale decreased 0.75% to 3.82% for the six months ending June 30, 2010.

Interest expense. The low interest rate environment was evident in the decline in the Company’s cost of interest-bearing liabilities to 1.80% from 2.73% for the first half of 2010. The cost of every funding category declined. The volume of interest-bearing liabilities declined $25.2 million. The average balance of certificates of deposit balances declined $18.3 million, and the average borrowings declined $7.2 million. Advances owed to the Federal Home Loan Bank totaling $8.5 million were repaid during 2010.

Provision for loan losses. A negative loan loss provision totaling $146,707 was recorded for the six months ended June 30, 2010; this had a positive effect on earnings. During the same period of 2009, the Company recorded provision expense of $556,000. The provision for loan loss will fluctuate based on management’s evaluation of the credits within the loan portfolio, changes in credit loss experience factors, and incurred losses in the loan portfolio during the period. See also the discussion above for the Allowance for Loan Losses.

Noninterest income. Noninterest income declined to $201,408 for the first six months of 2010 from $1.0 million for the same period in 2009. Gains on sales of securities available for sale decreased $654,719 and the direct write-down of other real estate owned increased $173,297. An other than temporary impairment charge on FNMA and FHLMC preferred stock was $47,200 in the first half of 2010, down from a charge of $111,200 for the same period in 2009. Service charge revenue and other fees decreased $47,384 due to a decline in overdraft fee income, net of refunds, totaling $71,175. This decline was partially offset by trust and brokerage fees totaling $17,111 and other increases in service charge revenue.

Noninterest expense. Total noninterest expense increased $1,006,777 to $4.6 million compared to $3.6 million for the first half of the prior year. Substantial costs were incurred related to the change in ownership control and subsequent change in management. The Company recorded investor expenses of $517,222 in February 2010 in connection with the assignment of promissory notes from Excel Financial to the Company in connection with the assignment of the Stock Purchase Agreement to Excel Bancorp by Excel Financial. The investor expenses represent expenses incurred in connection with the pursuit of an acquisition of a financial institution and development of fiduciary services in connection with an acquisition. Other changes are described below.

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Salary and benefits. Compensation costs increased $401,879 for the six months ended June 30, 2010. Salaries expense included incentive payments totaling $153,000 during the first six months of 2010 paid to newly hired management. Salaries and benefits expense also included salary continuation for terminated staff totaling $39,993 and for departing executive management totaling $85,569. New positions were added in trust and investment services, credit administration, and other departments within the Company.

Occupancy and equipment costs increased $33,504 for the six months ended June 30, 2010. Part of this increase relates to a new trust and investment office that opened in St. Clairsville, Ohio, in February 2010.

Professional fees increased $262,176 for the six months ended June 30, 2010. These costs include legal, accounting and auditing, regulatory examination and consulting fees. Consulting fees of $140,000 were paid to Excel Financial for the period prior to closing the stock offering. The Company also retained experienced problem loan workout specialists to assist in loan collection efforts.

Franchise tax decreased $50,002 for the six months ended June 30, 2010 due to a lower capital valuation at year end 2009 compared to year end 2008. Ohio franchise tax for financial institutions is assessed based on the company’s net worth for the previous year end.

Marketing and advertising expense increased $46,335 for the six months ended June 30, 2010. During the first quarter of 2010, the Board of Directors of the Bank approved changing the name of the Bank to Premier Bank & Trust, National Association. The Bank opted to include “Trust” in its name in connection with obtaining fiduciary powers from the Office of the Comptroller of the Currency. The Bank also expects to conduct trust services in several states. Costs associated with the name change including logo design, costs associated with the reissuance of credit and debit cards, and promotional materials totaled approximately $47,000.

Deposit expense and insurance fees decreased $192,649 for the months ended June 30, 2010. During the second quarter of 2009, the FDIC imposed an emergency assessment for all insured financial institutions that was paid in September 2009. The assessment totaled $88,878 and was based on total assets as of June 30, 2009. In addition to the absence of this special assessment in the second quarter of 2010, an improvement in the Bank’s risk rating for FDIC insurance based on higher capital levels following the common stock issuance in February contributed to a reduction in this expense for the six months ended June 30, 2010.

As a result of a change in the tax law late in 2008 that allows net operating losses to be carried back five years, the Company was able to amend its 2003 tax return and record a refund of taxes paid for that year, The refund of $289,300 was offset by a $38,311 change in accrued taxes for 2008, resulting in a tax benefit of $244,900 for the six months ended 2009. No tax benefits were recorded during 2010.

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

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

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At June 30, 2010, the Company had no active unconsolidated, related special purpose entities, nor did the Company engage in derivatives and hedging contracts, such as interest rate swaps, that may expose the Company to liabilities greater than the amounts recorded on the consolidated balance sheet. The investment policy prohibits engaging in derivatives contracts for speculative trading purposes; however, the Company may pursue certain contracts, such as interest rate swaps, to execute a sound and defensive interest rate risk management policy.

LIQUIDITY

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

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

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

At June 30, 2010, the balances in cash and cash equivalents were $16.9 million higher than at year-end. Cash and cash equivalents represented 23.9% of total assets at June 30, 2010 compared to 14.8% of total assets at December 31, 2009. The higher cash and cash equivalent balances at June 30, 2010 were principally due to the issuance of common stock during February 2010.

CAPITAL RESOURCES

Total shareholders’ equity was $17.8 million at June 30, 2010, an increase of $15.5 million from the prior year-end balance. The increase in equity was due to issuance of common stock as more fully described in Note 3 to the Consolidated Financial Statements. Shareholders’ Equity was reduced by the amount of the net loss of $1.9 million during the six months ended June 30, 2010.

The Bank is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. Failure to meet capital requirements can initiate regulatory action. At June 30, 2010, the Bank was adequately capitalized under the provisions of prompt corrective action. Until the Consent Order is terminated, the Bank cannot be classified as well-capitalized even though its capital ratios meet the minimum capital requirements of a well capitalized institution. See Note 10 for more information regarding the Consent Order, the regulatory capital requirements for the Bank, and the Bank’s capital ratios as of June 30, 2010.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for Smaller Reporting Companies.

Item 4T. Controls and Procedures

As of June 30, 2010, an evaluation was conducted under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company’s internal control over financial reporting that occurred during the Company’s second fiscal quarter ended June 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

Not applicable for Smaller Reporting Companies.

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

Not applicable.

Item 3. Defaults Upon Senior Securities.

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

Item 4. (Removed and Reserved)

Not Applicable

Item 5. Other Information.

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

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Item 6. Exhibits.

INDEX TO EXHIBITS

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

Exhibit Number	Description of Exhibit
2.1	Stock Purchase Agreement, dated as of November 15, 2009, by and among Excel Financial, LLC, Ohio Legacy Corp and Ohio Legacy Bank, National Association (incorporated herein by reference to Exhibit 99.2 to Ohio Legacy Corp’s Current Report on Form 8-K filed on November 16, 2009 (File No. 0-31673))
3.1	Second Amended and Restated Articles of Incorporation of Ohio Legacy Corp as filed with the Ohio Secretary of State on August 5, 2003 (incorporated herein by reference to Exhibit 3.1 to Ohio Legacy Corp’s Quarterly Report on Form 10QSB for the fiscal quarter ended June 30, 2003 (File No. 0-31673))
3.2	Amendment to Article Fourth of the Second Amended and Restated Articles of Incorporation of Ohio Legacy Corp as filed with the Ohio Secretary of State on February 5, 2010 (filed herewith)
3.3	Code of Regulations of Ohio Legacy Corp (incorporated herein by reference to Exhibit 3.2 to Ohio Legacy Corp’s Annual Report on Form 10KSB for the fiscal year ended December 31, 2003 (File No. 0-31673))
3.4	Amendment No. 1 to Code of Regulations of Ohio Legacy Corp (incorporated herein by reference to Exhibit 3.2 to Ohio Legacy Corp’s Annual Report on Form 10KSB for the fiscal year ended December 31, 2003 (File No. 0-31673))
4.1	Form of Ohio Legacy Corp Organizer Stock Purchase Warrant (incorporated herein by reference to Exhibit 4.3 to Ohio Legacy Corp’s Registration Statement on Form SB-2 filed on June 30, 2000 (File No. 333-38328))
11	Statement Regarding Computation of Earnings per Share (Incorporated by reference to Note 4 of this Form 10-Q)
21	Subsidiary of Ohio Legacy Corp
23	Consent of Independent Registered Public Accounting Firm
31.1	Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
31.2	Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)
32.1	Section 1350 Certification (Principal Executive Officer and Principal Financial Officer)

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SIGNATURES

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

OHIO LEGACY CORP

Date: August 16, 2010

By:	/s/ Rick L. Hull
Rick L. Hull
President and Chief Executive Officer

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

By:	/s/ Rick L. Hull
	Rick L. Hull, President and Chief Executive Officer and Director
	(principal executive officer)
Date:	August 16, 2010
By:	/s/ Jane Marsh
	Jane Marsh, Senior Vice President, Chief Financial Officer and Treasurer
	(principal financial officer and principal accounting officer)
Date:	August 16, 2010
By:	/s/ Wilbur R. Roat
	Wilbur R. Roat, Chairman of the Board and Director
Date:	August 16, 2010
By:	/s/ Louis Altman
	Louis Altman, Director
Date:	August 16, 2010
By:	/s/ Robert F. Belden
	Robert F. Belden, Director
Date:	August 16, 2010
By:	/s/ Bruce A. Cassidy, Sr.
	Bruce A. Cassidy, Director
Date:	August 16, 2010
By:	/s/Heather L. Davis
	Heather L. Davis, Director

35

Date:	August 16, 2010
By:	/s/ J. Edward Diamond
J. Edward Diamond, Director
Date:	August 16, 2010
By:	/s/ Denise M. Penz
	Denise M. Penz, Director
Date:	August 16, 2010
By:	/s/ Michael S. Steiner
	Michael S. Steiner, Director
Date:	August 16, 2010
By:	/s/ Frank Wenthur
	Frank Wenthur, Director
Date:	August 16, 2010
By:	/s/ David B. Wurster
	David B. Wurster, Director
Date:	August 16, 2010

36