OHIO LEGACY CORP - FORM 10-Q

Attached files

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EX-32.1 - OHIO LEGACY CORP	v222439_ex32-1.htm
EX-31.1 - OHIO LEGACY CORP	v222439_ex31-1.htm
EX-31.2 - OHIO LEGACY CORP	v222439_ex31-2.htm

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 March 31, 2011

o	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
(State or other jurisdiction of incorporation or organization)	I.R.S. Employer Identification Number

	600 South Main St., North Canton, Ohio 44720
	(Address of principal executive offices)

	OHIO LEGACY CORP
	(Exact name of registrant as specified in its charter)

	(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 o	Accelerated filer o
	Non-accelerated filer o	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 o No x

As of May 13, 2011, 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 MONTHS ENDED MARCH 31, 2011

FIRST QUARTER REPORT

		Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis		22

Item 3. Quantitative and Qualitative Disclosures about Market Risk		30

Item 4T. Controls and Procedures		30

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 3. Defaults Upon Senior Securities		31

Item 4. Removed and Reserved		31

Item 5. Other Information		31

Item 6. Exhibits		32

SIGNATURES		33

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

OHIO LEGACY CORP

CONSOLIDATED BALANCE SHEETS

(Unaudited)

As of March 31, 2011 and December 31, 2010

	March 31,			December 31,
	2011			2010

ASSETS
Cash and due from banks	$	1,258,327		$	1,121,473
Federal funds sold and interest-bearing deposits in financial institutions		37,071,587			31,560,745
Cash and cash equivalents		38,329,914			32,682,218
Certificate of deposit in financial institution		100,000			100,000
Securities available for sale		16,816,032			25,206,895
Securities held to maturity (fair value March 31, 2011 - $2,896,914, December 31, 2010 - $2,885,216)		2,815,800			2,815,634
Loans held for sale		222,235			636,794
Loans, net of allowance of $3,110,033 and $3,055,766 at March 31, 2011 and December 31, 2010		101,953,427			101,146,194
Federal bank stock		1,518,000			1,557,700
Premises and equipment, net		3,369,985			3,461,455
Assets acquired in settlement of loans		2,252,175			2,351,302
Accrued interest receivable and other assets		789,785			658,779
Total assets	$	168,167,353		$	170,616,971

Commitments and contingent liabilities		-			-


LIABILITIES
Deposits:
Noninterest-bearing demand	$	21,045,328		$	20,760,836
Interest-bearing demand		9,636,888			9,564,745
Savings		62,978,215			59,285,422
Certificates of deposit, net		51,725,405			53,604,644
Total deposits		145,385,836			143,215,647
Repurchase agreements		5,507,566			4,391,252
Long-term Federal Home Loan Bank advances		-			5,000,000
Capital lease obligations		398,429			407,593
Accrued interest payable and other liabilities		813,758			1,131,963
Total liabilities	$	152,105,589		$	154,146,455


SHAREHOLDERS' EQUITY
Preferred stock, no par value, 500,000 shares authorized, none outstanding		-			-
Common stock, no par value,
March 31, 2011 and December 31, 2010: 22,500,000 shared authorized, 19,714,564 shares issued and outstanding		35,654,897			35,603,803
Accumulated deficit		(19,757,578	)		(19,289,011	)
Accumulated other comprehensive income		164,445			155,724
Total shareholders' equity		16,061,764			16,470,516

Total liabilities and shareholders' equity	$	168,167,353		$	170,616,971

See notes to the consolidated financial statements.

OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	For the Three Months Ended
	March 31,
	2011			2010
Interest and dividend income:
Loans, including fees	$	1,393,962		$	1,503,851
Securities, taxable		147,963			260,248
Securities, tax-exempt		27,172			28,542
Interest-bearing deposits, federal funds sold and other		17,920			12,508
Dividends on federal bank stock		19,625			15,275
Total interest and dividend income		1,606,642			1,820,424

Interest expense:
Deposits		325,972			519,614
Long-term Federal Home Loan Bank advances		13,754			114,488
Repurchase agreements		2,591			1,083
Capital leases		16,332			17,690
Investor notes		-			9,693
Total interest expense		358,649			662,568
Net interest income		1,247,993			1,157,856
Provision for loan losses		23,772			76,772
Net interest income after provision for loan losses		1,224,221			1,081,084
Noninterest income:
Service charges and other fees		153,194			169,430
Trust and brokerage fees		165,838			-
Gain on sales of securities available for sale, net		32,999			-
Gain on sale of loans		26,747			3,465
Gain (loss) on disposition of other real estate owned		(35,299	)		11,543
Loss on disposition of fixed assets		(1,337	)		(1,506	)
Other income		10,212			14,849
Total noninterest income		352,354			197,781

Noninterest expense:
Salaries and benefits		1,045,550			969,861
Occupancy and equipment		245,836			214,699
Professional fees		134,651			271,847
Franchise tax		53,800			9,050
Data processing		179,995			152,706
Marketing and advertising		22,948			65,087
Stationery and supplies		18,448			16,880
Deposit expense and insurance		113,209			200,819
Investor expenses		-			517,222
Other expenses		230,705			190,384
Total noninterest expense		2,045,142			2,608,555
Net loss before income taxes		(468,567	)		(1,329,690	)
Income tax benefit		-			-
Net loss	$	(468,567	)	$	(1,329,690	)


Basic loss per share	$	(0.02	)	$	(0.13	)
Diluted loss per share	$	(0.02	)	$	(0.13	)

See notes to the consolidated financial statements.

OHIO LEGACY CORP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three Months Ended March 31, 2011 and 2010

(Unaudited)

	For the Three Months Ended
	March 31,
	2011			2010

Balance, beginning of period	$	16,470,516		$	2,366,511

Stock based compensation expense		51,094			2,143

Proceeds on sale of common stock, net		-			16,714,781

Comprehensive income (loss):
Net income (loss)		(468,567	)		(1,329,690	)
Net unrealized income (loss) on securities available for sale arising during the period, including effect of reclassifications		8,721			128,180
Total comprehensive income (loss)		(459,846	)		(1,201,510	)
Balance, end of period	$	16,061,764		$	17,881,925

See notes to the consolidated financial statements.

OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	For the Three Months Ended
	March 31,
	2011			2010

Cash flows from operating activities:
Net loss	$	(468,567	)	$	(1,329,690	)
Adjustments to reconcile net loss to net cash from operating activities:
Provision for loan losses		23,772			76,772
Depreciation and amortization		94,761			83,904
Loss on disposition of fixed assets		1,337			1,506
Securities amortization and accretion, net		87,268			48,674
Origination of loans held for sale		(719,150	)		-
Proceeds from sales of loans held for sale		1,383,656			198,712
Loss (gain) on disposition of real estate owned		35,299			(11,543	)
Gain on sale of securities available for sale		(32,999	)		-

Gain on sale of loans held for sale		(26,747	)		(3,465	)
Stock based compensation expense		51,094			2,143
Net change in:
Accrued interest receivable and other assets		(131,006	)		(209,838	)
Accrued interest payable and other liabilities		(318,205	)		(270	)
Deferred loan fees		23,203			(5,522	)
Net cash from operating activities		3,717			(1,148,617	)

Cash flows from investing activities:
Purchases of securities available for sale		(984,645	)		(2,034,779	)
(Purchases) or redemptions of federal bank stock		39,700			-
Maturities, calls and paydowns of securities available for sale		4,377,950			1,361,656
Sales of securities available for sale		4,951,844			-
Proceeds from sale of other real estate owned		191,101			430,648
Participation loans purchased		(725,000	)		-
Net change in loans		(479,681	)		4,105,987
Proceeds from sale of premises and equipment		13,250			-
Acquisition of premises and equipment		(17,879	)		(221,405	)
Net cash from investing activities		7,341,982			3,642,107

Cash flows from financing activities
Net change in deposits		2,170,189			843,952
Net change in repurchase agreements		1,116,314			(389,856	)
Repayment of capital lease obligations		(9,164	)		(7,806	)
Repayments of FHLB advances		(5,000,000	)		(8,500,000	)
Net proceeds from issuance of common stock		-			16,714,781
Net cash from financing activities		(1,722,661	)		8,661,071

Net change in cash and cash equivalents		5,647,696			11,154,561
Cash and cash equivalents at beginning of period		32,682,218			24,165,790

Cash and cash equivalents at end of period	$	38,329,914		$	35,320,351

See notes to the consolidated financial statements.

	For the Three Months Ended
	March 31,
	2011		2010
Supplemental disclosures of cash flow information:
Cash received during the period:
Federal income tax refund	$	-	$	-

Cash paid during the period for:
Interest		395,200		702,853
Federal income taxes		-		-
Non-cash transactions:
Transfer of loans to assets acquired in settlement of loans		127,272		212,510

See notes to the consolidated financial statements.

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 March 31, 2011, 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 note 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, 2010, 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 assets acquired in settlement of loans are particularly subject to change.

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.

Adoption of New Accounting Pronouncements:

Improving Disclosures About Fair Value Measurements: In January 2010, the FASB issued an amendment to Fair Value Measurements and Disclosures, Topic 820, Improving Disclosures About Fair ValueMeasurements. This amendment requires new disclosures regarding significant transfers in and out of Level 1 and 2 fair value measurements and the reasons for the transfers. This amendment also requires that a reporting entity present separately information about purchases, sales, issuances and settlements, on a gross basis rather than a net basis for activity in Level 3 fair value measurements using significant unobservable inputs. This amendment also clarifies existing disclosures on the level of disaggregation, in that the reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities, and that a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 and 3. The new disclosures and clarifications of existing disclosures for ASC 820 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASC 820 did not have a material effect on the Company’s consolidated financial statements.

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses: In July 2010, FASB issued Accounting Standards Update 2010-20, Disclosures about the Credit Quality of FinancingReceivables and the Allowance for Credit Losses (ASU 2010-20), to address concerns about the sufficiency, transparency, and robustness of credit risk disclosures for finance receivables and the related allowance for credit losses. This ASU requires new and enhanced disclosures at disaggregated levels, specifically defined as “portfolio segments” and “classes”. Among other things, the expanded disclosures include roll-forward schedules of the allowance for credit losses and information regarding the credit quality of receivables as of the end of a reporting period. New and enhanced disclosures are required for interim and annual periods ending after December 15, 2010, although the disclosures of reporting period activity are required for interim and annual periods beginning after December 15, 2010. The adoption of the new guidance had no impact to the financial statements except for the additional disclosures.

No. 2011-01 | Receivables (Topic 310) Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20: In January 2011, FASB issued Accounting Standards Update 2011-01, Deferral of the Effective Date of Disclosures about Troubled DebtRestructurings in Update No. 2010-20 (ASU 2011-01). ASU 2011-01 was issued as a result of concerns raised from stakeholders that the introduction of new disclosure requirements (paragraphs 310-10-50-31 through 50-34 of the FASB Accounting Standards Codification) about troubled debt restructurings in one reporting period followed by a change in what constitutes a troubled debt restructuring shortly thereafter would be burdensome for preparers and may not provide financial statement users with useful information.

No. 2011-02 | Receivables (Topic 310) A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring: In April 2011, the FASB amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. With regard to determining whether a concession has been granted, the ASU clarifies that creditors are precluded from using the effective interest method to determine whether a concession has been granted. In the absence of using the effective interest method, a creditor must now focus on other considerations such as the value of the underlying collateral, evaluation of other collateral or guarantees, the debtor’s ability to access other funds at market rates, interest rate increases and whether the restructuring results in a delay in payment that is insignificant. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For purposes of measuring impairment on newly identified troubled debt restructurings, the amendments should be applied prospectively for the first interim or annual period beginning on or after June 15, 2011. Management is currently working through the guidance to determine the impact, if any.

NOTE 2 – 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.

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 9, 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 10 for additional information regarding net operating loss carryforwards.

NOTE 3 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is equal to net income (loss) divided by the weighted average number of shares outstanding during the period. Diluted earnings (loss) per share includes the dilutive effect of additional potential common 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
	March 31,
	2011			2010
BASIC:
Net loss	$	(468,567	)	$	(1,329,690	)
Weighted average common shares outstanding		19,714,564			10,186,786
Basic loss per share	$	(0.02	)	$	(0.13	)


DILUTED:
Net loss	$	(468,567	)	$	(1,329,690	)
Weighted average common shares outstanding		19,714,564			10,186,786
Dilutive effect of stock options		-			-
Dilutive effect of stock warrants		-			-
Total common shares and dilutive potential common shares		19,714,564			10,186,786
Diluted loss per common share	$	(0.02	)	$	(0.13	)

The dilutive potential common shares that were excluded from the computation of diluted earnings per share because the effect of their exercise was anti-dilutive totaled 1,330,244 shares for the three months ending March 31, 2011 and 35,000 for the three months ending March 31, 2010.

NOTE 4 – 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:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available for sale, carried at fair value:	Cost		Gains		Losses			Value
March 31, 2011
U.S. Government-sponsored enterprises	$	4,792,632	$	4,821	$	-		$	4,797,453
Mortgage-backed securities issued by U.S. Government-sponsored enterprises		11,306,732		282,672		(5,203	)		11,584,201
Other mortgage-backed securities		309,822		-		(67,594	)		242,228
Equity securities		39,900		152,250		-			192,150
Total	$	16,449,086	$	439,743	$	(72,797	)	$	16,816,032

December 31, 2010
U.S. Government-sponsored enterprises	$	8,261,724	$	3,424	$	(1,722	)	$	8,263,426
Mortgage-backed securities issued by U.S. Government-sponsored enterprises		16,228,702		396,481		-			16,625,183
Other mortgage-backed securities		316,644		-		(69,078	)		247,566
Equity securities		41,600		29,120		-			70,720
Total	$	24,848,670	$	429,025	$	(70,800	)	$	25,206,895

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:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Held to maturity, carried at amortized cost	Cost		Gains		Losses		Value
March 31, 2011
Municipal securities	$	2,815,800	$	81,114	$	-	$	2,896,914

December 31, 2010
Municipal securities	$	2,815,634	$	69,582	$	-	$	2,885,216

The fair value of debt securities and the carrying amount, if different, at March 31, 2011 by expected maturity are depicted in the following table. Expected maturities may differ from contractual maturities because the loans underlying the mortgage-backed securities generally can be prepaid without penalty.

	Held-to-maturity				Available for sale
	Carrying Amount		Fair Value		Fair Value

Due in one year or less		-		-		-
Due from one to five years	$	634,857	$	659,783	$	1,502,627
Due from five to ten years		629,962		658,087		3,294,826
Due after ten years		1,550,981		1,579,044		-
Equity securities		-		-		192,150
Mortgage-backed securities		-		-		11,826,429
Total	$	2,815,800	$	2,896,914	$	16,816,032

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
March 31, 2011:	Value		Loss			Value		Loss			Value		Loss
Available for sale:
Mortgage-backed securities issued by U.S. Government-sponsored enterprises	$	1,960,188	$	(5,203	)	$	-	$	-			1,960,188		(5,203	)
Other mortgage-backed securities		-		-			242,228		(67,594	)	$	242,228	$	(67,594	)
Total	$	1,960,188	$	(5,203	)	$	242,228	$	(67,594	)	$	2,202,416	$	(72,797	)

	Less than 12 months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2010:	Value		Loss			Value		Loss			Value		Loss
Available for sale:
U.S. Government agencies	$	2,555,180	$	(1,722	)	$	-	$	-		$	2,555,180	$	(1,722	)
Other mortgage-backed securities		-		-			247,566		(69,078	)		247,566		(69,078	)
Total	$	2,555,180	$	(1,722	)	$	247,566	$	(69,078	)	$	2,802,746	$	(70,800	)

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 March 31, 2011, the Company’s security portfolio consisted of 38 securities, one of which was in an unrealized loss position for 12 months or longer.

Mortgage-backed securities

The Company’s mortgage-backed securities portfolio includes one non-agency security with a fair value of $242,228 which represents an unrealized loss of approximately $67,594 at March 31, 2011; the estimated fair value has been less than its amortized cost for twelve months or more. This non-agency mortgage-backed security is rated Aa2 by Moody’s and AAA by Standard & Poor’s rating services. 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, 69% of the original principal has been repaid as of March 31, 2011. 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 March 31, 2011, 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.

NOTE 5 – LOANS

Loans, by collateral type, were as follows at March 31, 2011 and December 31, 2010:

	March 31, 2011						December 31, 2010
	Balance			Percent			Balance			Percent
Residential real estate	$	32,044,752			30.5	%	$	30,320,666			29.1	%
Multifamily real estate		5,311,184			5.0	%		7,465,237			7.2	%
Commercial real estate		42,755,786			40.7	%		42,222,715			40.4	%
Construction		2,956,287			2.8	%		2,137,849			2.1	%
Commercial		14,506,096			13.8	%		15,114,240			14.5	%
Consumer and home equity		7,538,592			7.2	%		7,013,694			6.7	%
Total Loans		105,112,697			100.0	%		104,274,401			100.0	%
Less: Allowance for loan losses		(3,110,033	)					(3,055,766	)
Net Deferred Loan Fees		(49,237	)					(72,441	)
Loans, net	$	101,953,427					$	101,146,194

Approximately $24,636,000 and $23,966,000 of residential real estate loans were pledged as collateral to support available borrowing capacity at the Federal Home Loan Bank at March 31, 2011 and for advances outstanding and additional borrowing capacity at December 31, 2010, respectively. Approximately $29,446,000 and $30,177,000 of commercial and home equity loans were pledged as collateral at the Federal Reserve Bank of Cleveland for available discount window borrowing at March 31, 2011 and December 31, 2010.

Activity in the allowance for loan losses for the three months ended March 31 was as follows:

	For the Three Months Ended
	March 31,
	2011			2010

Balance, beginning of period	$	3,055,766		$	3,945,670
Provision for loan losses		23,772			76,772
Loans charged-off		(174	)		(3,896	)
Recoveries of charged-off loans		30,669			14,460

Balance, end of period	$	3,110,033		$	4,033,006

Balance as a percentage of total loans		2.96	%		4.01	%

Activity in the allowance for loan loss by portfolio segment for the three months ended March 31, 2011 was as follows:

	1-4 family residential		1-4 family rental			Multi-family real state		Home Equity		Consumer			Commercial		Commercial Secured by Trust Assets

Balance, December 31, 2010	$	183,507	$	331,184		$	454,670	$	93,187	$	10,818		$	275,473	$	12,095
Provision for loan losses		9,963		(115,792	)		71,951		2,873		2,116			45,004		9
Charge-offs		-		-			-		-		(174	)		-		-
Recoveries		-		-			-		-		498			473		-
Balance, March 31, 2011	$	193,470	$	215,392		$	526,621	$	96,060	$	13,258		$	320,950	$	12,104

	Commercial real estate
	Non-owner occupied		Owner Occupied			Construction		Total

Balance, December 31, 2010	$	509,739	$	1,043,458		$	141,635	$	3,055,766
Provision for loan losses		27,878		(20,409	)		179		23,772
Charge-offs		-		-			-		(174	)
Recoveries		-		23,698			6,000		30,669
Balance, March 31, 2011	$	537,617	$	1,046,747		$	147,814	$	3,110,033

Loans individually considered impaired and nonaccrual loans were as follows at March 31, 2011 and December 31, 2010:

	March 31,		December 31,
	2011		2010

Loans past due over 90 days still on accrual	$	14,832	$	11,495
Nonaccrual loans, includes smaller balance homogeneous loans		3,519,307		3,452,602
Impaired loans, included in nonaccrual loans		3,353,189		3,409,242
Impaired loans with no allowance for loan losses allocated		3,021,975		3,371,759
Amount of the allowance for loan losses allocated		125,330		6,435

No interest income was recognized during impairment for the three months ending March 31, 2011.

The recorded investment in loans is defined as the sum of the unpaid principal balance, accrued interest receivable and net deferred fees and deferred costs. Because the recorded investment in loans is not materially different than the unpaid principal balance, the tables below are presented using the unpaid principal balance.

The following tables present the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method.

	Loans Collectively Evaluated for Impairment				Loans Individually Evaluated for Impairment				Total
March 31, 2011	Allowance for Loan Loss		Recorded Investment		Allowance for Loan Loss		Recorded Investment		Allowance for Loan Loss		Recorded Investment
1-4 family residential mortgage	$	187,035	$	27,544,902	$	6,435	$	366,702	$	193,470	$	27,911,604
1-4 family rental property		215,392		3,936,483		-		196,666		215,392		4,133,149
Multi-family real estate		526,621		5,311,184		-		-		526,621		5,311,184
Home equity		96,060		6,481,116		-		11,940		96,060		6,493,056
Consumer		13,259		1,045,536		-		-		13,259		1,045,536
Commercial		247,583		8,157,975		73,367		296,290		320,950		8,454,265
Commercial secured by trust assets		12,104		6,051,831		-		-		12,104		6,051,831
Commercial real estate:
Non-owner occupied		521,438		18,973,726		16,179		234,150		537,617		19,207,876
Owner occupied		1,017,397		22,292,978		29,349		1,254,931		1,046,746		23,547,909
Construction and development		147,814		1,963,777		-		992,510		147,814		2,956,287
Total	$	2,984,703	$	101,759,508	$	125,330	$	3,353,189	$	3,110,033	$	105,112,697

	Loans Collectively Evaluated for Impairment				Loans Individually Evaluated for Impairment				Total
December 31, 2010	Allowance for Loan Loss		Recorded Investment		Allowance for Loan Loss		Recorded Investment		Allowance for Loan Loss		Recorded Investment
1-4 family residential mortgage	$	177,072	$	23,716,528	$	6,435	$	164,170	$	183,507	$	23,880,698
1-4 family rental property		331,184		6,161,295		-		278,673		331,184		6,439,968
Multi-family real estate		454,670		7,396,465		-		68,772		454,670		7,465,237
Home equity		93,187		6,277,141		-		-		93,187		6,277,141
Consumer		10,818		736,553		-		-		10,818		736,553
Commercial		275,473		8,818,892		-		247,731		275,473		9,066,623
Commercial secured by trust assets		12,095		6,047,617		-		-		12,095		6,047,617
Commercial real estate:
Non-owner occupied		509,739		18,112,082		-		174,750		509,739		18,286,832
Owner occupied		1,043,458		22,594,876		-		1,341,007		1,043,458		23,935,883
Construction and development		141,635		1,003,710		-		1,134,139		141,635		2,137,849
Total	$	3,049,331	$	100,865,159	$	6,435	$	3,409,242	$	3,055,766	$	104,274,401

The following table presents loans individually evaluated for impairment by loan class.

	March 31, 2011						December 31, 2010
	Average Recorded Investment		Recorded Investment		Allowance for Loan Losses Allocated		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
1-4 family residential mortgage	$	254,349	$	329,219	$	-	$	126,687	$	-
1-4 family rental property		224,190		196,666		-		278,673		-
Multi-family real estate		45,848		-		-		68,772		-
Home equity		3,980		11,940		-		-		-
Commercial		212,184		148,754		-		247,731		-
Commercial real estate:
Non-owner occupied		194,150		172,350		-		174,750		-
Owner occupied		1,227,597		1,170,536		-		1,341,007		-
Construction and development		1,055,427		992,510		-		1,134,139		-

With an allowance recorded:
1-4 Single family residential mortgage		31,048		37,483		6,435		37,483		6,435
Commercial		40,851		147,535		73,367		-		-
Commercial real estate:
Non-owner occupied		15,207		61,800		16,179		-		-
Owner occupied		18,349		84,396		29,349		-		-
	$	3,323,180	$	3,353,189	$	125,330	$	3,409,242	$	6,435

The following table presents information for loans individually evaluated for impairment as of March 31, 2010:

	March 31, 2010

Average of impaired loans during the period	$	5,625,690
Interest income recognized during impairment		-
Cash-basis income recognized during impairment		-

The following tables present the aging of the recorded investment in past due loans by class of loans.

			Days Past Due
March 31, 2011	Loans Not Past Due		30-59 Days		60-89 Days		90 Days or Greater & Still Accruing		90 Days or Greater & Non-Accruing		Total Past Due		Total
1-4 family residential mortgage	$	27,124,487	$	420,415	$	-	$	-	$	366,702	$	787,117	$	27,911,604
1-4 family rental property		3,936,483		-		-		-		196,666		196,666		4,133,149
Multi-family real estate		5,311,184		-		-		-		-		-		5,311,184
Home equity loans		6,377,311		73,896		29,909		-		11,940		115,745		6,493,056
Consumer		853,161		295		15,445		10,518		166,117		192,375		1,045,536
Commercial		7,833,281		320,380		-		4,314		296,290		620,984		8,454,265
Commericial secured by trust assets		6,051,831		-		-		-		-		-		6,051,831
Commercial real estate:												-
Non-owner occupied		18,973,726		-		-		-		234,150		234,150		19,207,876
Owner occupied		22,216,564		76,413		-		-		1,254,932		1,331,345		23,547,909
Construction and development		1,963,777		-		-		-		992,510		992,510		2,956,287
Total	$	100,641,805	$	891,399	$	45,354	$	14,832	$	3,519,307	$	4,470,892	$	105,112,697

			Days Past Due
December 31, 2010	Loans Not Past Due		30-59 Days		60-89 Days		90 Days or Greater & Still Accruing		90 Days or Greater & Non-Accruing		Total Past Due		Total
1-4 family residential mortgage	$	23,367,952	$	207,521	$	141,055	$	-	$	164,170	$	512,746	$	23,880,698
1-4 family rental property		6,161,295		-		-		-		278,673		278,673		6,439,968
Multi-family real estate		7,396,465		-		-		-		68,772		68,772		7,465,237
Home equity loans		6,192,016		74,621		10,504		-		-		85,125		6,277,141
Consumer		676,801		4,898		-		11,495		43,359		59,752		736,553
Commercial		8,751,090		8,889		58,913		-		247,731		315,533		9,066,623
Commercial secured by trust assets		6,047,617		-		-		-				-		6,047,617
Commercial real estate:												-		-
Non-owner occupied		18,050,282		61,800		-		-		174,750		236,550		18,286,832
Owner occupied		22,594,876		-		-		-		1,341,007		1,341,007		23,935,883
Construction and development		1,003,709		-		-		-		1,134,140		1,134,140		2,137,849
Total	$	100,242,103	$	357,729	$	210,472	$	11,495	$	3,452,602	$	4,032,298	$	104,274,401

Credit Quality Indicators:

The Company classifies all non-homogeneous loans such as commercial and commercial real estate loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk into four non-classified categories (i.e. passing grade loans) and three categories of classified loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans not analyzed as part of homogeneous groups include commercial, commercial real estate, multi-family real estate, construction and development loans. Homogeneous groups of loans are not typically risk rated unless the loan is placed on nonaccrual status. A loan may also be separated from the homogeneous pool and individually risk rated due to recurrent delinquency problems, typically 60 to 89 days past due. The risk category of loans by class of loans was as follows:

March 31, 2011	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total

1-4 Family residential mortgage	$	23,033,478	$	3,495,701	$	438,513	$	792,710	$	151,202	$	27,911,604
1-4 family rental property		130,000		3,238,402		370,545		394,202		-		4,133,149
Multi-family real estate		-		2,515,888		1,998,773		796,523		-		5,311,184
Home equity loans		6,377,095		83,347		2,311		30,303		-		6,493,056
Consumer		1,045,536		-		-		-		-		1,045,536
Commercial		-		7,826,701		279,884		264,803		82,877		8,454,265
Commercial secured by trust assets				6,051,831		-		-		-		6,051,831
Commercial real estate:
Non-owner occupied		-		14,668,359		3,515,251		962,466		61,800		19,207,876
Owner occupied		537,468		18,001,532		1,647,757		3,238,439		122,713		23,547,909
Construction and development		546,791		1,385,662		31,324		992,510				2,956,287
Total	$	31,670,368	$	57,267,423	$	8,284,358	$	7,471,956	$	418,592	$	105,112,697

December 31, 2010	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total

1-4 family residential mortgage	$	23,135,647	$	392,160	$	-	$	197,341	$	155,550	$	23,880,698
1-4 family rental property		-		5,413,008		453,930		573,030		-		6,439,968
Multi-family real estate		91,908		4,350,194		1,591,890		1,431,245		-		7,465,237
Home equity loans		6,055,818		200,000		2,582		18,741		-		6,277,141
Consumer		736,553		-		-		-		-		736,553
Commercial		-		8,403,145		311,832		281,043		70,603		9,066,623
Commercial secured by trust assets		-		6,047,617		-		-		-		6,047,617
Commercial real estate:
Non-owner occupied		-		13,879,607		3,434,311		972,914		-		18,286,832
Owner occupied		-		18,659,084		1,722,292		3,427,262		127,245		23,935,883
Construction and development		262,922		592,301		32,824		1,249,802		-		2,137,849
Total	$	30,282,848	$	57,937,116	$	7,549,661	$	8,151,378	$	353,398	$	104,274,401

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the current principal balance of residential and consumer loans based on payment activity:

	Residential
March 31, 2011	1-4 family		Home Equity		Consumer		Total
Performing	$	27,544,902	$	6,481,116	$	879,419	$	34,905,437
Nonperforming		366,702		11,940		166,117		544,759
Total	$	27,911,604	$	6,493,056	$	1,045,536	$	35,450,196

	Residential
December31, 2010	1-4 Family		Home Equity		Consumer		Total
Performing	$	23,716,528	$	6,277,141	$	693,194	$	30,686,863
Nonperforming		164,170		-		43,359		207,529
Total	$	23,880,698	$	6,277,141	$	736,553	$	30,894,392

NOTE 6 – ASSETS ACQUIRED IN SETTLEMENT OF LOANS

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. The Company makes periodic reassessments of the value of assets held in this category and record valuation adjustments or write-downs as the reassessments dictate.

Assets acquired in settlement of loans were as follows:

	March 31,		December 31,
	2011		2010
Interest in limited liability company	$	1,305,437	$	1,305,437
Residential real estate		174,712		401,111
Commercial real estate				-
Multi-family real estate		389,525		320,753
Land development		382,501		324,001
Total	$	2,252,175	$	2,351,302

The interest in the limited liability company was obtained through a U.S. Bankruptcy Code 363 sale. The limited liability company was formed by the lead bank for the banks participating in the project financing to acquire title to the real estate, conduct the operation of the facility, and market the real estate and the operations of the business for sale. The carrying value of its interest is based upon the estimated fair value of the real estate less costs to sell.

There were no direct write-downs of other real estate owned during the three months ended March 31, 2011 or 2010.

NOTE 7 – 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 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

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:

Securities: The fair values for 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 matrix pricing, which is a mathematical technique used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

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.

Assets measured at fair value on a recurring basis are summarized in the following table:

	March 31,		December 31,
	2011		2010
Available for sale securities	$	16,816,032	$	25,206,895

Quoted prices on active markets for identical assets (Level 1)
Equity securities		192,150		70,720
Significant other observable inputs (Level 2)
U.S. government sponsored enterprises		4,797,453		8,263,426
Mortgage-backed securities issued by U.S. Government-
sponsored enterprises		11,584,201		16,625,183
Other mortgage backed securities		242,228		247,566
Significant unobservable inputs (Level 3)		-		-

Assets measured at fair value on a non-recurring basis are summarized in the following table:

	Fair Value Measurements Using
			Significant
	Quoted Prices in		Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2011:
Impaired loans:
1-4 family residential mortgage		-		-	$	360,267	$	360,267
1-4 family rental property		-		-		196,666		196,666
Home equity						11,940		11,940
Multi-family real estate		-		-		-		-
Commercial		-		-		222,923		222,923
Commercial real estate:
Non-owner occupied		-		-		217,971		217,971
Owner occupied		-		-		1,225,582		1,225,582
Construction and development		-		-		992,510		992,510

Assets acquired in settlement of loans:
Residential		-		-		174,711		174,711
Construction		-		-		324,001		324,001


December 31, 2010:
Impaired loans:
1-4 family residential mortgage		-		-	$	157,735	$	157,735
1-4 family rental property		-		-		278,673		278,673
Multi-family real estate		-		-		68,772		68,772
Commercial		-		-		247,731		247,731
Commercial real estate:
Non-owner occupied		-		-		174,750		174,750
Owner occupied		-		-		1,341,007		1,341,007
Construction and development		-		-		1,134,139		1,134,139

Assets acquired in settlement of loans:
Residential		-		-		401,112		401,112
Construction		-		-		324,001		324,001

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,353,189, with a valuation allowance of $125,330 at March 31, 2011, resulting in an additional provision for loan losses of $118,895 for the three months ended March 31, 2011. At December 31, 2010, impaired loans had a principal balance of $3,409,242 with a valuation allowance of $6,435, resulting in an additional provision for loan losses of $718,750 in 2010, of which $151,140 was provided for during the three months ended March 31, 2010.

Assets acquired in settlement of loans, measured at fair value less costs to sell, had a carrying value of $2,252,175 at March 31, 2011 and $2,351,302 at December 31, 2010. There were no direct write-downs in the value of these assets during the three months ended March 31, 2011. Gross write-downs totaling $542,490 were recorded on assets acquired in settlement of loans during 2010. There were no direct write-downs during the three months ended March 31, 2010.

The carrying amounts and estimated fair values of financial assets and liabilities are as follows:

	March 31, 2011						December 31, 2010
	Carrying Amounts			Estimated Fair Value			Carrying Amounts			Estimated Fair Value
Financial assets
Cash and cash equivalents	$	38,330,000		$	38,330,000		$	32,682,000		$	32,682,000
Certificate of deposit in financial institution		100,000			100,000			100,000			100,000
Securities available for sale		16,816,000			16,816,000			25,207,000			25,207,000
Securities held to maturity		2,816,000			2,897,000			2,816,000			2,885,000
Loans held for sale		222,000			226,000			637,000			637,000
Loans, net		101,953,000			101,119,000			101,146,000			100,206,000
Federal bank stock		1,518,000		NA				1,557,700		NA
Accrued interest receivable		438,000			438,000			429,000			429,000


Financial liabilities
Deposits		(145,386,000	)		(145,786,000	)		(143,216,000	)		(143,669,000	)
Repurchase agreements		(5,508,000	)		(5,508,000	)		(4,391,000	)		(4,391,000	)
Federal Home Loan Bank advances		-			-			(5,000,000	)		(5,013,000	)
Accrued interest payable		(49,000	)		(49,000	)		(69,000	)		(69,000	)

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 8 – STOCK BASED COMPENSATION

Shareholders adopted the Ohio Legacy Corp 2010 Cash and Equity Incentive Plan in May 2010. The Plan permits the grant of share-based awards for a maximum of 2,000,000 shares of common stock. The Plan provides for awards of options, restricted stock, stock appreciation rights, and other stock-based awards to employees, directors and consultants. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. Options awards have vesting periods as determined by the Compensation Committee of the Board of Directors. All options currently outstanding have an original vesting period of five years.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company use historical data to estimate option exercise and post-vesting termination behavior. (Employee and management options are tracked separately.) The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The following table depicts the activity under this Plan:

	2011
	Options			Weighted Average Exercise Price
Outstanding, January 1		1,330,400		$	2.30
Granted		-			-
Forfeited		(500	)		2.30
Exercised		-			-
Outstanding, March 31		1,329,900		$	2.30

The weighted average remaining contractual life of the options outstanding at March 31, 2011 was 9.28 years. The intrinsic value of options outstanding was $0.

No options were granted during 2011. The fair market value of options granted during 2010 was determined using the following weighted-average assumptions as of grant date:

	2010
Risk-free interest rate		1.11% - 1.83%
Expected term	6.5 years
Expected stock price volatility		0.298
Dividend yield		0%

The weighted average fair value of options granted during 2010 was $0.78. The Company has a policy of using authorized by unissued common shares to satisfy option exercises.

The compensation cost yet to be recognized for stock options that have been awarded but not vested is as follows:

For the remainder of 2011	$	156,390
2012		207,151
2013		207,151
2014		207,151
2015		103,127
Total	$	880,970

NOTE 9 – 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 Comptroller 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.

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 2, 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 March 31, 2011 and December 31, 2010:

																To Be Well-
																Capitalized Under
						Consent Order					For Capital					Prompt Corrective
	Actual					Requirement					Adequacy Purposes					Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2011:
Total capital to risk-weighted assets
Premier Bank & Trust	$	17,015		16.4	%	$	13,732		13.25	%	$	8,291		8.0	%	$	10,364		10.0	%

Tier 1 capital to risk-weighted assets
Premier Bank & Trust		15,705		15.2	%	na		na				4,145		4.0	%		6,218		6.0	%

Tier 1 capital to average assets
Premier Bank & Trust		15,705		9.4	%	$	14,657		8.75	%		6,700		4.0	%		8,375		5.0	%


December 31, 2010:
Total capital to risk-weighted assets
Premier Bank & Trust	$	17,507		17.1	%	$	13,552		13.25	%	$	8,182		8.0	%	$	10,228		10.0	%

Tier 1 capital to risk-weighted assets
Premier Bank & Trust		16,207		15.8	%	na		na				4,091		4.0	%		6,137		6.0	%

Tier 1 capital to average assets
Premier Bank & Trust		16,207		9.6	%	$	14,716		8.75	%		6,727		4.0	%		8,409		5.0	%

Note 10 – Income Taxes

A valuation allowance of $5,724,835 at March 31, 2011 and $5,453,661 at December 31, 2010, was recorded to reduce the carrying amount of the Company’s net deferred tax assets to zero.

Internal Revenue Code section 382 places a limitation on the amount of taxable income that can be offset by net operating loss carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Accordingly, utilization of net operating loss carryforwards may be subject to an annual limitation regarding their utilization against future taxable income upon change in control.

At February 19, 2010, a Stock Purchase Agreement between Ohio Legacy Corp and Excel Bancorp resulted in a section 382 limitation against pre-transaction Ohio Legacy Corp net operating loss carryforwards. The Company reduced the deferred tax asset related to NOL carryforwards and the valuation allowance by $1,039,000 in 2010.

At December 31, 2010, after consideration of the reduction to pre-transaction net operating losses due to the section 382 limitation, the Company had net operating loss carryforwards of approximately $8,987,000 that will expire as follows: $1,419,000 on December 31, 2027, $132,000 on December 31, 2028, $1,694,000 on December 31, 2029, and $5,742,000 on December 31, 2030.

In addition, the Company has approximately $46,000 of alternative minimum tax credits that may be carried forward indefinitely.

Item 2. Management’s Discussion and Analysis.

In the following section, management presents an analysis of Ohio Legacy Corp's financial condition as of March 31, 2011, and results of operations as of and for the three ended March 31, 2011 and 2010. 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, 2010.

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;

·	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 last year, 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 2 and 9). As a result of the stock issuance, Excel Bancorp acquired 76% of the outstanding shares of the Company, new senior management was installed, and nine new directors were appointed to the Board of Directors during 2010. 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 March 31, 2011 compared to December 31, 2010:

·	Total assets decreased $2.4 million from $170.6 million to $168.2 million as the Company reduced the leverage in the balance sheet through the repayment of $5 million in debt with the Federal Home Loan Bank.

·	Liquidity remained high with cash and cash equivalents increasing $5.6 million to $38.3 million.

·	Total deposits increased $2.2 million from $143.2 million to $145.4 million with a continuation of the trend by depositors to invest in money market funds reducing time deposits.

·	Total shareholders’ equity decreased $409,000 from $16.5 million to $16.1 million due to the operating loss recorded by the Company for the first quarter of 2011.

·	The Bank’s capital ratios exceeded the minimum ratios required by the Consent Order;

·	Net loans increased modestly by $807,000 to $102.0 million.

·	Nonperforming assets (including nonaccrual loans, loans past due ninety days and still accruing interest and assets acquired in settlement of loans) were nearly unchanged at $5.8 million.

The following key factors summarize our results of operations for the three months ending March 31, 2011:

·	The Company incurred a net loss of $468,567 for the first quarter of 2011, down from $1.3 million for the same quarter in 2010.

·	Net interest income improved by $90,137 compared to the same period in 2010.

·	The provision for loan loss was $23,772 compared to $76,772 for the same period in 2010.

Noninterest expense decreased by $563,413 principally due to the absence of investor expenses of $517,222 recorded in the first quarter of 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 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 the change in management during 2010 and new services are expected to be higher than the historical compensation costs at the Company;

·	Noninterest income related to the introduction of trust, investment and wealth management services during the second quarter of 2010 is expected to expand.

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

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.

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 $8,987,000 will expire as follows: $1,419,000 on December 31, 2027, $132,000 on December 31, 2028, $1,694,000 on December 31, 2029, and $5,742,000 on December 31, 2030. 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 Notes 10 to our consolidated financial statements.

FINANCIAL CONDITION – March 31, 2011 compared to December 31, 2010

Assets. At March 31, 2011, total assets decreased to $168.2 million, down $2.4 million from $170.6 million at December 31, 2010. The decrease was principally due to the repayment from operating liquidity of Federal Home Loan Bank advances totaling $5 million during the first quarter of 2011.

Cash and Cash Equivalents. Cash and cash equivalents increased to $38.3 million at March 31, 2011, up $5.6 million from $32.7 million at year-end 2010. The increase in cash was due to proceeds received from sales and calls of securities available for sale that were not reinvested.

Securities. Total securities available for sale had an estimated fair value of $16.8 million at March 31, 2011, compared to $25.2 million at year-end 2010. Sales of securities available for sale totaled $5.0 million and maturities, calls and principal repayments totaled $4.4 million. Securities sales consisted principally of GNMA mortgage-backed securities issued in 2009 with an original term of 30 years and a coupon rate of 4.5%. These securities were sold as a defensive move to reduce the market price sensitivity of the portfolio to rising interest rates. The net unrealized gain on the securities portfolio was $366,946 at March 31, 2011 compared to a net unrealized gain of $358,225 at December 31, 2010. Securities held to maturity at March 31, 2011 consisted of tax exempt debt and was unchanged from year-end 2010.

Loans and Asset Quality. Total loans, net of the allowance for loan loss and deferred loan fees, increased $807,000 to $102.0 million at March 31, 2011. Loans classified by management as special mention, substandard, doubtful and not deemed impaired represented 12.2% of total loans at March 31, 2011, compared to 12.5% at December 31, 2010, and 14.3% at September 30, 2010. Impaired loans represented 3.2% of total loans at March 31, 2011, and totaled $3,353,189, down $56,053 from year-end 2010. Improving asset quality continues to be a prime objective for management. Outstanding loan balances are expected to increase over the remainder of the year through business development efforts, however expected loan growth may be constrained by continued economic weakness in the markets served by the Company.

Allowance for loan losses. The balance of the allowance for loan loss at March 31, 2011, was $3,110,033 compared to $3,055,766 at year-end 2010. For the three months ending March 31, 2011, the provision for loan losses charged to expense was $23,772 and recoveries on loans previously charged-off totaled $30,669. The amount of the allowance for loan loss (“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 general allowance allocated to loans not classified by management totaled 1.83% of non-classified loans at March 31, 2011, compared to 1.90% at year-end 2010. As a percentage of total loans, the Allowance increased to 2.96% at March 31, 2011, compared to 2.93% at year-end 2010. The Allowance for Loan Loss as a percentage of loans not individually identified as impaired and that excludes the amount of the Allowance specifically allocated to impaired loans totaled 2.93% at March 31, 2011, compared to 3.02% at year-end 2010. Specific allocations of the allowance for impaired loans increased to $125,330 at March 31, 2011 compared to $6,435 at year-end 2010.

Assets acquired in settlement of loans. These assets include other real estate owned (“OREO”) and an interest in a limited liability company acquired during 2010 that owns the real estate and operations of an indoor waterpark and resort obtained through a U.S. Bankruptcy Code 363 sale. The limited liability company was formed by the lead bank for the banks participating in the project financing to acquire title to the real estate, conduct the operation of the facility, and market the real estate and the operations of the business for sale. The carrying value of its interest is $1.3 million and is based upon the estimated fair value of the real estate less costs to sell.

Other real estate owned consisted of eight properties and totaled $947,000 at March 31, 2011 compared to $1.0 million at year-end 2010. One property was sold during the first quarter of 2011 for a loss of $35,299, and two properties with an estimated value of $127,000 were transferred to OREO.

Deposits. Total deposits increased $2.2 million to $145.4 million at March 31, 2011, compared to year-end 2010. Core deposits increased to $93.7 million at March 31, 2011, compared to $89.6 million at year-end 2010. Certificates of deposit decreased to $51.7 million from $53.6 million at December 31, 2010. The decrease in certificates of deposit was largely the result of promotional certificates renewing without reinvestment into currently offered certificate of deposit products. Interest-bearing deposit funds have tended to migrate into money market funds as customers anticipate higher interest rates in the near term reflecting an unwillingness to lengthen deposit maturities.

Federal Home Loan Bank Advances. Debt remaining from the Federal Home Loan Bank was repaid during the first quarter of 2011. The weighted average interest rate on $5.0 million in matured advances was 2.43%. The advances were repaid from excess operating liquidity.

Shareholders’ Equity. Shareholders’ Equity decreased $409,000 to $16.1 million at March 31, 2011. The decrease was due to the operating loss of $469,000 incurred for the first quarter of 2011. Stock-based compensation expense of $51,000 increased equity as well as $9,000 in other comprehensive income.

RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2011

The net loss for the three months ending March 31, 2011, totaled $468,567, or a loss of $0.02 per diluted share compared to a net loss of $1,329,690, or $0.13 per diluted share during the first quarter of 2010. Average diluted shares outstanding increased to 19,714,564 shares for the first quarter of 2011 compared to 10,186,786 during the same quarter of 2010. The increase in average diluted shares outstanding was due to the issuance of 17,500,000 shares of common stock on February 19, 2010.

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 March 31,
	2011							2010
			Interest							Interest
	Average		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	$	32,306	$	18		0.22	%	$	27,651	$	12		0.18	%
Securities available for sale		22,335		148		2.65	%		26,539		260		3.92	%
Securities held to maturity		2,816		27		3.86	%		2,997		29		3.81	%
Federal agency stock		1,556		20		5.04	%		1,267		15		4.82	%
Loans (1)		100,745		1,394		5.61	%		96,991		1,504		6.29	%
Total interest-earning assets		159,758		1,607		4.08	%		155,445		1,820		4.75	%
Noninterest-earning assets		8,304							10,428
Total assets	$	168,062						$	165,873

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	9,322	$	7		0.31	%	$	9,535	$	16		0.67	%
Savings accounts		14,548		16		0.43	%		16,879		37		0.90	%
Money market accounts		47,916		80		0.68	%		40,089		86		0.87	%
Certificates of deposit		52,015		223		1.74	%		56,968		381		2.71	%
Total interest-bearing deposits		123,801		326		1.07	%		123,471		520		1.71	%
Other Borrowings		6,293		33		2.11	%		16,525		142		3.51	%
Total Interest-bearing liabilities		130,094		359		1.12	%		139,996		662		1.92	%
Noninterest-bearing demand deposits		20,785							15,320
Noninterest-bearing liabilities		881							817
Total liabilities		151,760							156,133
Shareholders' equity		16,302							9,740
Total liabilities and
shareholders' equity	$	168,062						$	165,873

Net interest income; interest rate spread (2)			$	1,248		2.96	%			$	1,158		2.83	%
Net earning assets	$	29,664						$	15,449
Net interest margin (3)						3.17	%						3.02	%

Average interest-earning assets to interest-bearing liabilities		1.23		X					1.11		X

(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 March 31, 2011, net interest income was $1,247,993, up $90,137 from same period in 2010. The net interest margin improved to 3.17% for the first quarter of 2011, up from 3.02% in the year ago quarter. The yield on earning assets declined to 4.08% for the first quarter of 2011 from 4.75% for the comparable period of 2010. This reduction was more than offset by a decline in the cost of interest-bearing liabilities which fell to 1.12% from 1.92%.

Interest Income. Total interest income for the first quarter of 2011 was $1.6 million, down from $1.8 million for the first quarter of 2010. The decline in interest income was principally driven by lower yields on earning assets. An increase in average loans outstanding partially reduced the impact of these lower yields.

Interest expense. Interest on deposits declined $193,642 to $325,972 for the first three months of 2011 compared to the same period in 2010. The average yield on interest-bearing deposits fell to 1.07% for the first quarter of 2011 compared to 1.71% for the year ago quarter. Interest expense related to other borrowings including Federal Home Loan Bank advances declined by $110,277.

Provision for Loan Loss. The provision for loan loss declined by $53,000 to $23,772 for the first quarter of 2011 compared to provision expense of $76,772 for the first quarter of 2010. The provision for loan loss will fluctuate based on management’s evaluation of the credit risk 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 increased $154,573 to $352,354 for the first quarter of 2011 compared to $197,781 for the same quarter of 2010. The increase was driven by trust and brokerage fees. The Bank’s trust department and brokerage business generated $165,838 in gross fees during the first quarter of 2011. These new services, introduced during the second quarter of 2010, garnered assets under management in excess of $100 million in 2011.

Service charges and other fees declined $16,236, or 9.6%, to $153,194 for the first quarter of 2011 compared to the same period of 2010. The decline was due to lower overdraft fee income which decreased by approximately $20,000.

Gains on sale of securities available of sale resulted in revenue of $32, 999 in the first quarter of 2011 also contributing to the increase in total noninterest income. Securities sold included $4.9 million of 30 year GNMA mortgage-backed securities issued during 2009. These securities were sold to reduce the price sensitivity of the Bank’s securities portfolio in a rising interest rate environment. There were no security sales during the first quarter of 2010.

Gains on sale of loans increased by $23,282 to $26,747 for the first quarter of 2011 compared to the same quarter of 2010. Low mortgage rates prevailed during the first quarter of 2011 contributing to a pickup in mortgage activity.

The sale of one property from other real estate owned resulted in a loss of $35,299 for the first quarter of 2011 compared to a gain of $11,543 recognized during the first quarter of 2010. A decline in rental income on OREO resulted in a reduction in other income which fell by $4,637 to $10,212 during the first quarter of 2011.

Noninterest expense. Noninterest expense decreased $563,413 to $2,045,142 for the first quarter of 2011 compared to $2,608,555 for the first quarter of 2010. Significant costs were incurred during the first quarter of 2010 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.

Salaries and benefits increased $75,689 to $1,045,550 for the first quarter of 2011 compared to $969,861 for the first quarter of 2010. Since the change of control in 2010, Management has increased staff significantly in support of lending, trust and brokerage, branch management, and human resources. Benefits expense recorded during 2011 included $51,094 in costs associated with stock options granted during the last half of 2010. Salaries expense for the first quarter of 2010 included incentive payments totaling $143,000 paid to newly hired management and salary continuation for terminated staff totaling $27,637 and for salaries paid and accrued for departing executive management from the date of the transaction closing until their employment terminated totaling $82,728.

Professional fees decreased $137,196 to $134,651 for the first quarter of 2011. Included in the cost for the first quarter of 2010 were consulting fees paid to Excel Financial totaling $140,000. The Company also retained experienced problem loan workout specialists to assist in loan collection efforts.

Franchise tax increased $44,750 to $53,800 for the first quarter of 2011. Ohio franchise tax for financial institutions is assessed based on net worth, and the capital invested in the Company during 2010 resulted in higher capital levels at year-end 2010 which resulted in higher franchise tax expense for the first quarter.

Data processing costs increased $27,289 to $179,995 for the first quarter of 2011. These costs are primarily transaction driven. Approximately $23,000 of this increase is related to new trust services.

Deposit expense and insurance decreased $87,610 to $113,209 for the first quarter of 2011 compared to the first quarter of 2010. The costs for FDIC insurance included in this category decreased $76,846 to $82,607 due to the improvement in the Bank’s risk profile.

Occupancy and equipment costs increased $31,137 to $245,836 for the first quarter of 2011. A new office was opened in St. Clairsville, Ohio that serves as a Trust, Investment and Wealth Management office contributing approximately $19,000 to this increase.

Marketing and advertising expense decreased $42,139 to $22,948 for the first quarter of 2011 compared to the same quarter in 2010. The decrease is due to the absence of expense related to the name change for the Bank that occurred in 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 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.

Other expenses increased $40,321 to $230,705 for the first quarter of 2011. Directors’ fees, reinstated during the second quarter of 2010, contributed $21,000 to the increase. Loan-related expenses increased $25,900, while expenses for OREO decreased by $17,965.

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, 2010.

At March 31, 2011, 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 March 31, 2011, the balances in cash and cash equivalents were $5.6 million higher than at year-end. Cash and cash equivalents represented 22.8% of total assets at March 31, 2011 compared to 19.2% of total assets at December 31, 2010. The Consolidated Statement of Cash Flows provides details on sources and uses of cash.

CAPITAL RESOURCES

Total shareholders’ equity was $16.1 million at March 31, 2011, a decrease of $409,000 from the prior year-end balance. The decrease in equity was primarily due to the net loss of $468,567 incurred by the Company for the three months ending March 31, 2011.

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 March 31, 2011, 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 9 for more information regarding the Consent Order, the regulatory capital requirements for the Bank, and the Bank’s capital ratios as of March 31, 2011.

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 2011.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable for Smaller Reporting Companies.

Item 4T. Controls and Procedures

As of March 31, 2011, 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 first fiscal quarter ended March 31, 2011, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

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 (incorporated herein by reference to Exhibit 3.2 to Ohio Legacy Corp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 0-31673))
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))
10.1*		Ohio Legacy Corp. 2010 Equity and Cash Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Ohio Legacy Corp’s Current Report on Form 8-K filed May 20, 2010 (File No. 0-31673))
10.2*		Form of Incentive Stock Option Award Agreement under Ohio Legacy Corp. 2010 Equity and Cash Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Ohio Legacy Corp’s Current Report on Form 8-K filed July 15, 2010 (File No. 0-31673))
10.3*		Form of Nonqualified Stock Option Award Agreement under Ohio Legacy Corp. 2010 Equity and Cash Incentive Plan (incorporated herein by reference to Exhibit 10.2 to Ohio Legacy Corp’s Current Report on Form 8-K filed July 15, 2010 (File No. 0-31673))
10.4*		Amended and Restated Employment Agreement, dated as of May 24, 2005, by and among Ohio Legacy Corp, Ohio Legacy Bank, N.A., and Michael D. Kramer (incorporated herein by reference to Exhibit 10.11 to Ohio Legacy Corp’s Current Report on Form 8-K filed May 26, 2005 (File No. 0-31673))
10.5*		Change in Control Agreement, dated as of December 18, 2007, by and between Ohio Legacy Bank and Gregory A. Spradlin (incorporated herein by reference to Exhibit 10.13 to Ohio Legacy Corp’s Annual Report on Form 10KSB for the fiscal year ended December 31, 2007 (File No. 0-31673))
10.6*		Change in Control Agreement, dated as of February 4, 2009, by and between Ohio Legacy Bank and Vanessa Richards (incorporated herein by reference to Exhibit 10.8 to Ohio Legacy Corp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 0-31673))
10.7*		Form of Stock Option and Warrant Cancellation and Surrender Agreement, effective as of February 19, 2010, by and between Ohio Legacy Corp and each of its directors and executive officers (incorporated herein by reference to Exhibit 10.7 to Ohio Legacy Corp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 0-31673))
10.8*		Termination Agreement, effective as of February 19, 2010, by and between Ohio Legacy Corp and D. Michael Kramer (incorporated herein by reference to Exhibit 10.8 to Ohio Legacy Corp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 0-31673))
10.9*		Termination Agreement, effective as of February 19, 2010, by and between Ohio Legacy Corp and Vanessa Richards (incorporated herein by reference to Exhibit 10.9 to Ohio Legacy Corp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 0-31673))
10.10*		Termination Agreement, effective as of February 19, 2010, by and between Ohio Legacy Corp and Gregory A. Spradlin (incorporated herein by reference to Exhibit 10.10 to Ohio Legacy Corp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 0-31673))
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)

SIGNATURES

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:	May 13, 2011


By:	/s/ Jane Marsh
	Jane Marsh, Senior Vice President, Chief Financial Officer and Treasurer
	(principal financial officer and principal accounting officer)

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