UNITED
STATES SECURITIES
AND
EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
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For
the quarterly period ended June 30, 2008
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
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For
the transition period from __________ to
__________
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Commission
file number:
000-31673
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OHIO
LEGACY CORP
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(Exact
name of small business issuer as specified in its
charter)
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OHIO
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(State
or other jurisdiction of incorporation or organization)
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34-1903890
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(I.R.S.
Employer Identification No.)
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2375
Benden Drive Suite C, Wooster, OH, 44691
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(Address
of principal executive offices)
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(330)
263-1955
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Issuer's
telephone number
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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 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
o
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
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act
of 1934 subsequent to the distribution of securities under a plan confirmed
by a
court Yes
o
No
o
As
of
August 13, 2008, the latest practicable date, there were 2,214,564 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 JUNE 30, 2008
SECOND
QUARTER REPORT
_____________________________________________________________________________________________
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Page
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PART
I - FINANCIAL INFORMATION
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Item
1. Financial Statements
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3
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Item
2. Management’s Discussion and Analysis
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12
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Item
3. Not Applicable for Smaller Reporting Companies
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20
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Item
4. Controls and Procedures
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20
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PART
II - OTHER INFORMATION
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Item
1. Legal Proceedings
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21
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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21
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Item
3. Defaults Upon Senior Securities
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21
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Item
4. Submission of Matters to a Vote of Security Holders
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21
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Item
5. Other Information
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21
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Item
6. Exhibits
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22
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SIGNATURES
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23
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PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements.
OHIO
LEGACY CORP
CONSOLIDATED
BALANCE SHEETS
As
of
June 30, 2008, and December 31, 2007
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June
30,
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December
31,
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2008
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2007
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(unaudited)
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ASSETS
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Cash
and due from banks
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$
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6,971,962
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$
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5,764,580
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Federal
funds sold and interest-bearing deposits in financial
institutions
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195,641
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1,350,625
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Cash
and cash equivalents
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7,167,603
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7,115,205
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Certificate
of deposit in financial institution
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100,000
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100,000
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Securities
available for sale
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36,358,869
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29,010,334
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Securities
held to maturity (fair value of $3,017,278 and $2,995,122 at June
30, 2008
and December 31, 2007)
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3,001,289
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3,002,754
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Loans
held for sale
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1,410,835
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911,906
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Loans,
net of allowance of $1,632,253 and $1,622,906 at June 30, 2008 and
December 31, 2007
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126,084,313
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131,642,471
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Federal
bank stock
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1,448,550
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1,541,200
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Premises
and equipment, net
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2,790,152
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2,901,906
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Intangible
asset
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100,119
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150,322
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Other
real estate owned
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3,749,757
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2,416,367
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Accrued
interest receivable and other assets
|
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|
1,832,703
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1,488,214
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|
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Total
assets
|
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$
|
184,044,190
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|
$
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180,280,679
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LIABILITIES
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Deposits:
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Noninterest-bearing
demand
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$
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16,176,263
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$
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14,329,339
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Interest-bearing
demand
|
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9,271,565
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9,995,343
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Savings
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53,993,617
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49,566,417
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Certificates
of deposit, net
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69,132,514
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73,458,253
|
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Total
deposits
|
|
|
148,573,959
|
|
|
147,349,352
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Repurchase
agreements
|
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1,350,808
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|
2,022,869
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Short
term Federal Home Loan Bank advances
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1,950,000
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2,025,000
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Long
term Federal Home Loan Bank advances
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16,000,000
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12,000,000
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Capital
lease obligations
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481,585
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493,168
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Accrued
interest payable and other liabilities
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715,230
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1,076,647
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Total
liabilities
|
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169,071,582
|
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164,967,036
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SHAREHOLDERS’
EQUITY
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Preferred
stock, no par value, 500,000 shares authorized,
none
outstanding
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-
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-
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Common
stock, no par value, 5,000,000 shares authorized, 2,214,564 shares
issued
and outstanding at June 30, 2008, and December 31, 2007,
respectively
|
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18,799,339
|
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|
18,781,925
|
|
|
Accumulated
earnings (loss)
|
|
|
(3,598,977
|
)
|
|
(3,472,218
|
)
|
|
Accumulated
other comprehensive earnings (loss)
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|
|
(227,754
|
)
|
|
3,936
|
|
|
Total
shareholders’ equity
|
|
|
14,972,608
|
|
|
15,313,643
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Total
liabilities and shareholders’ equity
|
|
$
|
184,044,190
|
|
$
|
180,280,679
|
|
See
notes
to the consolidated financial statements.
OHIO
LEGACY CORP
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the
Three and Six Months Ended June 30, 2008 and 2007
(Unaudited)
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For
the Three Months Ended
|
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For
the Six Months Ended
|
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|
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June
30,
|
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June
30,
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
Interest
and dividends income:
|
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|
|
|
|
|
|
|
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Loans,
including fees
|
|
$
|
2,202,767
|
|
$
|
3,259,258
|
|
$
|
4,530,466
|
|
$
|
6,500,532
|
|
|
Securities,
taxable
|
|
|
456,503
|
|
|
261,310
|
|
|
855,432
|
|
|
536,757
|
|
|
Securities,
tax-exempt
|
|
|
28,661
|
|
|
25,946
|
|
|
57,227
|
|
|
49,268
|
|
|
Interest-bearing
deposits and federal funds sold and other
|
|
|
28,307
|
|
|
42,574
|
|
|
60,423
|
|
|
143,022
|
|
|
Dividends
on federal bank stock
|
|
|
20,493
|
|
|
24,300
|
|
|
41,702
|
|
|
48,123
|
|
|
Total
interest and dividends income
|
|
|
2,736,731
|
|
|
3,613,388
|
|
|
5,545,250
|
|
|
7,277,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,092,626
|
|
|
1,711,647
|
|
|
2,324,214
|
|
|
3,422,874
|
|
|
Short
term Federal Home Loan Bank advances
|
|
|
3,756
|
|
|
26,138
|
|
|
28,570
|
|
|
83,568
|
|
|
Long
term Federal Home Loan Bank advances
|
|
|
176,106
|
|
|
174,363
|
|
|
339,546
|
|
|
312,771
|
|
|
Subordinated
debentures
|
|
|
-
|
|
|
70,722
|
|
|
-
|
|
|
141,445
|
|
|
Repurchase
agreements
|
|
|
5,373
|
|
|
27,531
|
|
|
17,833
|
|
|
41,122
|
|
|
Capital
leases
|
|
|
19,599
|
|
|
36,373
|
|
|
39,431
|
|
|
73,040
|
|
|
Total
interest expense
|
|
|
1,297,460
|
|
|
2,046,774
|
|
|
2,749,594
|
|
|
4,074,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
1,439,271
|
|
|
1,566,614
|
|
|
2,795,656
|
|
|
3,202,882
|
|
|
Provision
for loan losses
|
|
|
5,000
|
|
|
14,000
|
|
|
11,500
|
|
|
57,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) after provision for loan losses
|
|
|
1,434,271
|
|
|
1,552,614
|
|
|
2,784,156
|
|
|
3,145,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges and other fees
|
|
|
246,403
|
|
|
289,994
|
|
|
460,651
|
|
|
555,633
|
|
|
Gain
on sale of loans
|
|
|
63,993
|
|
|
44,344
|
|
|
95,018
|
|
|
95,295
|
|
|
Gain
on redemption of equity interest in Visa
|
|
|
-
|
|
|
-
|
|
|
18,391
|
|
|
-
|
|
|
Gain
(loss) on disposition of other real estate owned
|
|
|
-
|
|
|
(620
|
)
|
|
9,170
|
|
|
4,831
|
|
|
Other
than temporary impairment of securities
|
|
|
(159,000
|
)
|
|
-
|
|
|
(159,000
|
)
|
|
-
|
|
|
Direct
write-down of other real estate owned
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Other
income
|
|
|
6,180
|
|
|
30,377
|
|
|
17,543
|
|
|
53,573
|
|
|
Total
noninterest income
|
|
|
157,576
|
|
|
364,095
|
|
|
441,773
|
|
|
709,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
|
838,435
|
|
|
986,213
|
|
|
1,634,903
|
|
|
2,013,735
|
|
|
Occupancy
and equipment
|
|
|
229,389
|
|
|
232,750
|
|
|
456,483
|
|
|
469,564
|
|
|
Professional
fees
|
|
|
82,972
|
|
|
173,155
|
|
|
180,899
|
|
|
290,306
|
|
|
Franchise
tax
|
|
|
48,821
|
|
|
62,903
|
|
|
99,071
|
|
|
126,653
|
|
|
Data
processing
|
|
|
165,111
|
|
|
175,952
|
|
|
335,367
|
|
|
349,704
|
|
|
Marketing
and advertising
|
|
|
35,826
|
|
|
51,925
|
|
|
95,737
|
|
|
101,846
|
|
|
Stationery
and supplies
|
|
|
24,760
|
|
|
25,533
|
|
|
52,140
|
|
|
60,420
|
|
|
Amortization
of intangible asset
|
|
|
23,960
|
|
|
34,229
|
|
|
50,202
|
|
|
71,025
|
|
|
Deposit
expenses and insurance
|
|
|
68,300
|
|
|
76,453
|
|
|
129,437
|
|
|
118,601
|
|
|
Other
expenses
|
|
|
169,932
|
|
|
155,417
|
|
|
318,449
|
|
|
324,072
|
|
|
Total
noninterest expense
|
|
|
1,687,506
|
|
|
1,974,530
|
|
|
3,352,688
|
|
|
3,925,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) before income tax expense
|
|
|
(95,659
|
)
|
|
(57,821
|
)
|
|
(126,759
|
)
|
|
(70,712
|
)
|
|
Income
tax expense (benefit)
|
|
|
-
|
|
|
(23,504
|
)
|
|
-
|
|
|
(30,949
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(95,659
|
)
|
$
|
(34,317
|
)
|
$
|
(126,759
|
)
|
$
|
(39,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
$
|
(0.02
|
)
|
|
Diluted
earnings (loss) per share
|
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
$
|
(0.02
|
)
|
See
notes
to the consolidated financial statements.
OHIO
LEGACY CORP
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
the
Six Months Ended June 30, 2008 and 2007
(Unaudited)
|
|
|
For
the Six Months Ended
June
30,
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(126,759
|
)
|
$
|
(39,763
|
)
|
|
Adjustments
to reconcile net earnings to net cash from
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
231,244
|
|
|
276,050
|
|
|
Securities
amortization and accretion, net
|
|
|
14,403
|
|
|
44,097
|
|
|
Origination
of loans held for sale
|
|
|
(11,009,182
|
)
|
|
(9,549,556
|
)
|
|
Proceeds
from sales of loans held for sale
|
|
|
10,605,271
|
|
|
9,149,889
|
|
|
Provision
for loan losses
|
|
|
11,500
|
|
|
57,000
|
|
|
Loss
from Ohio Legacy Trust 1
|
|
|
-
|
|
|
772
|
|
|
Gain
(loss) on disposition of other real estate
|
|
|
(9,170
|
)
|
|
(4,831
|
)
|
|
Direct
write-down of other real estate
|
|
|
-
|
|
|
39,949
|
|
|
Gain
on sale of loans held for sale
|
|
|
(95,018
|
)
|
|
(95,295
|
)
|
|
Accretion
of fair value purchase adjustments
|
|
|
-
|
|
|
(7,999
|
)
|
|
FHLB
stock dividend
|
|
|
(26,100
|
)
|
|
-
|
|
|
Stock
option expense
|
|
|
17,414
|
|
|
21,853
|
|
|
Other
than temporary impairment of securities
|
|
|
159,000
|
|
|
-
|
|
|
Net
change in:
|
|
|
|
|
|
|
|
|
Accrued
interest receivable and other assets
|
|
|
(225,133
|
)
|
|
(201,898
|
)
|
|
Accrued
interest payable and other liabilities
|
|
|
(361,417
|
)
|
|
(78,966
|
)
|
|
Deferred
loan fees
|
|
|
(43,615
|
)
|
|
(16,344
|
)
|
|
Net
cash from operating activities
|
|
|
(857,562
|
)
|
|
(405,042
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of securities held to maturity
|
|
|
(100,000
|
)
|
|
(804,847
|
)
|
|
Purchases
of securities available for sale
|
|
|
(9,920,610
|
)
|
|
-
|
|
|
Maturities
of securities held to maturity
|
|
|
100,000
|
|
|
-
|
|
|
Maturities,
calls and paydowns of securities available for sale
|
|
|
2,049,091
|
|
|
2,455,573
|
|
|
Redemption
of federal bank stock
|
|
|
118,750
|
|
|
-
|
|
|
Proceeds
from sales of other real estate owned
|
|
|
13,366
|
|
|
401,130
|
|
|
Net
change in loans
|
|
|
4,439,197
|
|
|
638,173
|
|
|
Expenditures
to improve other real estate owned
|
|
|
(186,150
|
)
|
|
(44,310
|
)
|
|
Purchases
of premises and equipment
|
|
|
(69,287
|
)
|
|
(55,111
|
)
|
|
Net
cash from investing activities
|
|
|
(3,556,003
|
)
|
|
2,590,608
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
change in deposits
|
|
|
1,224,607
|
|
|
(3,555,117
|
)
|
|
Net
change in repurchase agreements
|
|
|
(672,061
|
)
|
|
654,755
|
|
|
Repayment
of capital lease obligations
|
|
|
(11,583
|
)
|
|
(15,321
|
)
|
|
Proceeds
from short term FHLB advances, net of repayments
|
|
|
(75,000
|
)
|
|
1,500,000
|
|
|
Proceeds
from long term FHLB advances
|
|
|
6,000,000
|
|
|
-
|
|
|
Repayments
of long term FHLB advances
|
|
|
(2,000,000
|
)
|
|
(5,259,147
|
)
|
|
Net
cash provided by financing activities
|
|
|
4,465,963
|
|
|
(6,674,830
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
52,398
|
|
|
(4,489,264
|
)
|
|
Cash
and cash equivalents at beginning of period
|
|
|
7,115,205
|
|
|
13,039,865
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
7,167,603
|
|
$
|
8,550,601
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,749,594
|
|
$
|
4,137,149
|
|
|
Federal
income taxes
|
|
|
-
|
|
|
-
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
Transfer
of loans to other real estate owned
|
|
$
|
1,151,076
|
|
$
|
129,369
|
|
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 (Ohio Legacy) and
its
wholly-owned subsidiary, Ohio Legacy Bank, National Association (Bank).
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.
These
consolidated financial statements are prepared without audit and reflect all
adjustments that, in the opinion of management, are necessary to present fairly
the financial position of the Company at June 30, 2008, 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 have been prepared in accordance with the instructions
of
Form 10-Q and, therefore, do not purport to contain all necessary financial
and
footnote disclosures required by U.S. GAAP.
The
financial information presented in this report should be read in conjunction
with the Company’s Form 10-KSB for the year ended December 31, 2007, which
includes information and disclosures not presented in this report. Reference
is
made to the accounting policies of the Company described in Note 1 of the Notes
to Consolidated Financial Statements. The Company has consistently followed
those policies in preparing this Form 10-Q.
Use
of
Estimates
:
To
prepare financial statements in conformity with U.S. GAAP, management makes
estimates and assumptions based on available information. These estimates and
assumptions affect the amounts reported in the financial statements and the
disclosures provided, and actual results could differ. The allowance for loan
losses, judgments about the other than temporary impairment of securities,
fair
value of financial instruments, valuation of deferred tax assets and the fair
value of other real estate owned are particularly subject to change.
Reclassifications
:
Some
items in the prior year financial statements were reclassified to conform to
the
current presentation.
Income
Taxes
:
Income
tax expense is the total of the current year income tax due or refundable and
the change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax amounts for the temporary differences
between carrying amounts and tax bases of assets and liabilities, computed
using
enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets
to the amount expected to be realized.
NOTE
2 - STOCK BASED COMPENSATION
The
Company granted 150,000 warrants (Director Warrants) to organizers of the
Company at the time of closing of the 2000 Offering. The Director Warrants
vest
in equal percentages each year over a three-year period from the date of grant.
Each warrant entitles the holder to purchase a share of common stock at $10.00
per share and will expire ten years from the date of issuance. At June 30,
2008
all Director Warrants were vested and exercisable. No warrants have been
exercised to date.
OHIO
LEGACY CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 - STOCK BASED COMPENSATION (continued)
Following
is the activity under the plan.
|
|
|
Six
months ended June 30, 2008
Total
options outstanding
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
Price
|
|
|
|
|
|
|
|
|
|
Options
outstanding, beginning of period
|
|
|
214,150
|
|
$
|
10.64
|
|
|
Forfeited
|
|
|
(28,800
|
)
|
|
10.36
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding, end of period
|
|
|
185,350
|
|
$
|
10.69
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable, end of period
|
|
|
158,250
|
|
$
|
10.95
|
|
The
aggregate intrinsic value of all options outstanding and exercisable at June
30,
2008 was $0.
The
compensation cost yet to be recognized for stock options that have been awarded
but not vested is as follows:
|
|
|
Compensation
|
|
|
|
|
Costs
|
|
|
|
|
|
|
|
Remainder
of 2008
|
|
$
|
18,147
|
|
|
2009
|
|
|
17,659
|
|
|
2010
|
|
|
2,081
|
|
|
Total
|
|
$
|
37,887
|
|
NOTE
3 - EARNINGS (LOSS) PER SHARE
Basic
earnings (loss) per share is net earnings (loss) divided by the weighted average
number of shares outstanding during the period. Diluted earnings (loss) per
share include the dilutive effect of additional potential shares that may be
issued upon the exercise of stock options and stock warrants. The following
table details the calculation of basic and diluted earnings (loss) per
share:
OHIO
LEGACY CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 - EARNINGS PER SHARE (continued)
|
|
|
Three
months ended
June
30
|
|
Six
months ended
June
30
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
BASIC:
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(95,659
|
)
|
$
|
(34,317
|
)
|
$
|
(126,759
|
)
|
$
|
(39,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(95,659
|
)
|
$
|
(34,317
|
)
|
$
|
(126,759
|
)
|
$
|
(39,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
Dilutive
effect of stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Dilutive
effect of stock warrants
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Total
common shares and dilutive potential
common
shares
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
2,214,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
$
|
(0.02
|
)
|
The
following table details, as of June 30, dilutive potential common shares that
were excluded from the computation of diluted earnings per share during the
periods then ended as the effect of their exercise was
antidilutive:
|
|
|
Three
months ended June 30
|
|
Six
months ended June 30
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
185,350
|
|
|
286,025
|
|
|
185,350
|
|
|
286,025
|
|
|
Stock
warrants
|
|
|
150,000
|
|
|
150,000
|
|
|
150,000
|
|
|
150,000
|
|
NOTE
4 - LOANS
Loans,
by
collateral type, were as follows at June 30, 2008, and December 31,
2007:
|
|
|
June
30, 2008
|
|
December
31, 2007
|
|
|
|
|
Balance
|
|
Percent
|
|
Balance
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
39,623,911
|
|
|
31.0
|
%
|
$
|
36,548,270
|
|
|
27.4
|
%
|
|
Multifamily
residential real estate
|
|
|
6,858,488
|
|
|
5.3
|
|
|
7,918,222
|
|
|
5.9
|
|
|
Commercial
real estate
|
|
|
53,151,083
|
|
|
41.6
|
|
|
59,574,635
|
|
|
44.7
|
|
|
Construction
|
|
|
11,481,986
|
|
|
9.0
|
|
|
10,714,524
|
|
|
8.0
|
|
|
Commercial
|
|
|
11,239,097
|
|
|
8.8
|
|
|
12,528,137
|
|
|
9.4
|
|
|
Consumer
and home equity
|
|
|
5,478,366
|
|
|
4.3
|
|
|
6,141,569
|
|
|
4.6
|
|
|
Total
loans
|
|
|
127,832,931
|
|
|
100.0
|
%
|
|
133,425,357
|
|
|
100.0
|
%
|
|
Less:
Allowance
for loan losses
|
|
|
(1,632,253
|
)
|
|
|
|
|
(1,622,906
|
)
|
|
|
|
|
Net
deferred loan fees
|
|
|
(116,365
|
)
|
|
|
|
|
(159,980
|
)
|
|
|
|
|
Loans,
net
|
|
$
|
126,084,313
|
|
|
|
|
$
|
131,642,471
|
|
|
|
|
At
June
30, 2008, and December 31, 2007, approximately $31,413,000 and $24,543,000,
respectively of single-family residential real estate loans were pledged as
collateral for advances from the Federal Home Loan Bank of
Cincinnati.
OHIO
LEGACY CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 - LOANS (continued)
Activity
in the allowance for loan losses for the three and six months ended June 30
was
as follows:
|
|
|
For
the Three Months Ended
|
|
For
the Six Months Ended
|
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$
|
1,628,411
|
|
$
|
1,756,875
|
|
$
|
1,622,906
|
|
$
|
1,757,110
|
|
|
Provision
for loan losses
|
|
|
5,000
|
|
|
14,000
|
|
|
11,500
|
|
|
57,000
|
|
|
Loans
charged-off
|
|
|
(12,289
|
)
|
|
(5,984
|
)
|
|
(24,534
|
)
|
|
(52,611
|
)
|
|
Recoveries
|
|
|
11,131
|
|
|
1,488
|
|
|
22,381
|
|
|
4,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
end of period
|
|
$
|
1,632,253
|
|
$
|
1,766,379
|
|
$
|
1,632,253
|
|
$
|
1,766,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses, percent of total loans
|
|
|
1.28
|
%
|
|
0.99
|
%
|
|
|
|
|
|
|
Loans
individually considered impaired and nonaccrual loans were as follows at June
30, 2008, and
December
31, 2007:
|
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
|
|
|
|
|
|
Loans
past due over 90 days still on accrual
|
|
$
|
-
|
|
$
|
-
|
|
|
Nonaccrual
loans, includes smaller balance homogeneous loans
|
|
|
4,049,236
|
|
|
4,205,143
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans, included in nonaccrual loans
|
|
|
3,499,917
|
|
|
3,550,936
|
|
|
Amount
of the allowance for loan losses allocated
|
|
$
|
12,749
|
|
$
|
11,472
|
|
NOTE
5 - OTHER REAL ESTATE OWNED
Other
real estate owned was as follows at June 30, 2008 and December 31,
2007:
|
|
|
June
30,
2008
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
$
|
1,456,277
|
|
$
|
136,716
|
|
|
Land
development
|
|
|
2,293,480
|
|
|
2,279,651
|
|
|
Total
real estate owned
|
|
|
3,749,757
|
|
|
2,416,367
|
|
|
|
|
|
|
|
|
|
|
|
Less:
valuation allowance
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate owned, net
|
|
$
|
3,749,757
|
|
$
|
2,416,367
|
|
Assets
acquired through or instead of loan foreclosure are initially recorded at fair
value less costs to sell when acquired, establishing a new cost basis. If fair
value declines, a valuation allowance is recorded through expense. Costs after
acquisition are expensed. Expenditures that improve the fair value of the
property are capitalized. It is the Company’s intention to make periodic
reassessments of the value of assets held in this category and record valuation
adjustments or write-downs as the reassessments dictate. Real estate owned
at
June 30, 2008 and December 31, 2007 includes a property placed into receivership
until it can be improved and sold in an orderly fashion.
OHIO
LEGACY CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 - SUBSEQUENT EVENT AND RELATED CONTINGENCIES
The
Company owns 80,000 shares of 8.375% Series Z preferred stock issued by the
Federal Home Loan Mortgage Corporation (FHLMC) and 40,000 shares of 7.625%
Series R preferred stock issued by the Federal National Mortgage Association
(FNMA).
The
Company’s holding of this preferred stock has declined substantially in value
since the June 30, 2008 balance sheet date. Management evaluated this decline
in
value and decided its initial determination that the Company’s holdings were
only temporarily impaired should be reassessed. Ultimately, the Company’s
holdings of these shares were deemed to be other-than-temporarily impaired
as of
June 30, 2008 and a charge to earnings of $159,000 was recorded as of that
date.
If,
by
September 30, 2008, the value of the Company’s holdings of this stock does not
recover most of the decline that has occurred since June 30, 2008, the Company
will probably record another charge to earnings for other-than-temporary
impairment of this stock.
NOTE
7 - FAIR VALUE MEASUREMENT
Statement
157 defines fair value as the exchange price that would be received for an
asset
or paid to transfer a liability (an 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. Statement 157 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
value:
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, and 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 that
market participants would use in pricing an asset or liability.
The
Company uses the following methods and significant assumptions to estimate
fair
value.
Securities:
The fair values of securities available for sale are determined by obtaining
quoted prices on nationally recognized securities exchanges or matrix pricing,
which is a mathematical technique used widely 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.
Loans
held for sale: The fair value of loans held for sale is determined, when
possible, using quoted secondary-market prices. If no such quoted price exists,
the fair value of a loan is determined using quoted prices for a similar
asset
or assets, adjusted for the specific attributes of that loan.
Assets
measured at fair value on a recurring basis are summarized below:
|
|
|
June
30, 2008
|
|
Quoted
Prices on Active Markets for Identical Assets
(Level
1)
|
|
Significant
Other Observable Inputs (Level 2)
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for sale securities
|
|
$
|
36,358,869
|
|
$
|
2,900,000
|
|
$
|
33,458,869
|
|
$
|
-
|
|
Assets
and liabilities measured at fair value on a non-recurring basis are summarized
below:
|
|
|
June
30, 2008
|
|
Quoted
Prices on Active Markets for Identical Assets
(Level
1)
|
|
Significant
Other Observable Inputs
(Level
2)
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
$
|
3,987,092
|
|
$
|
-
|
|
$
|
696,120
|
|
$
|
3,290,972
|
|
The
following represents impairment charges recognized during the
period.
Impaired
loans, which are measured for impairment using the fair value of the loan,
or
the fair value of the collateral for collateral-dependent loans, had a carrying
amount of $3,987,092 with valuation allowance of $0. Impairment charges recorded
through the provision for loan losses during the period were
immaterial.
OHIO
LEGACY CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8 - OTHER COMPREHENSIVE INCOME (LOSS)
Other
comprehensive income (loss) components and the related tax effects were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
Net
earnings (loss)
|
|
$
|
(95,659
|
)
|
$
|
(34,317
|
)
|
$
|
(26,759
|
)
|
$
|
(39,763
|
)
|
|
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains (losses) on securities arising during the period
|
|
|
(705,030
|
)
|
|
(127,800
|
)
|
|
(510,045
|
)
|
|
27,248
|
|
|
Less:
reclassification adjustment for losses (gains) included in net
income
|
|
|
159,000
|
|
|
-
|
|
|
159,000
|
|
|
-
|
|
|
Net
unrealized gains (losses)
|
|
|
(546,030
|
)
|
|
(127,800
|
)
|
|
(351,045
|
)
|
|
27,248
|
|
|
Income
tax effect
|
|
|
185,650
|
|
|
43,452
|
|
|
119,355
|
|
|
(9,264
|
)
|
|
Other
comprehensive income (loss), net of tax
|
|
|
(360,380
|
)
|
|
(84,348
|
)
|
|
(231,690
|
)
|
|
17,984
|
|
|
Comprehensive
income (loss)
|
|
$
|
(456,039
|
)
|
$
|
(118,665
|
)
|
$
|
(358,449
|
)
|
$
|
(21,779
|
)
|
OHIO
LEGACY CORP
Item
2. Management’s Discussion and Analysis
FORWARD-LOOKING
STATEMENTS
This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which can be identified by the
use
of forward-looking terminology, such as: "may," "might," "could," "would,"
“should,” "believe," "expect," "intend," "plan," "seek," "anticipate,"
"estimate," "project" or "continue" or the negative thereof or comparable
terminology. All statements other than statements of historical fact included
in
this MD&A regarding our financial position, capital adequacy and liquidity
are forward-looking statements. These forward-looking statements also include,
but are not limited to:
|
·
|
anticipated
changes in industry conditions created by state and federal legislation
and regulations;
|
|
·
|
anticipated
changes in general interest rates and the impact of future interest
rate
changes on our profitability, capital adequacy and the fair value
of our
financial assets and liabilities;
|
|
·
|
retention
of our existing customer base and our ability to attract new
customers;
|
|
·
|
the
development of new products and services and their success in the
marketplace;
|
|
·
|
the
adequacy of the allowance for loan losses;
and
|
|
·
|
statements
regarding our anticipated loan and deposit account growth, expense
levels,
liquidity and capital resources and projections of
earnings.
|
These
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 expectations reflected in such forward-looking
statements are reasonable, we can give no assurance such 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 herein
include, but are not limited to:
|
·
|
competition
in the industry and markets in which we
operate;
|
|
·
|
changes
in general interest rates;
|
|
·
|
rapid
changes in technology affecting the financial services
industry;
|
|
·
|
deterioration
in securities markets due to a lack of liquidity and demand for securities
related to real estate;
|
|
·
|
changes
in government regulation; and
|
|
·
|
general
economic and business conditions.
|
OVERVIEW
The
following key items summarize the Company’s financial results through June 30,
2008:
|
§
|
Interest
expense has been reduced on all major funding
categories.
|
|
§
|
Net
interest margin was 3.38% for the period, a marked improvement over
previous quarters.
|
|
§
|
Non
interest income performed as expected during the period, except for
an
other-than-temporary impairment charge recorded on the Company’s
securities.
|
|
§
|
Non
interest expense fully reflects the cost savings measures implemented
over
the last three quarters.
|
|
§
|
Charge-offs
remained low for both the quarter and the first six months of the
year.
|
OHIO
LEGACY CORP
Credit
Quality
- The
provision for loan losses totaled $5,000 and $11,500, respectively, for the
quarter and the first six months of 2008. The Company’s level of non-performing
loans remained high, but stable with $4.0 million categorized as non-accrual
and
$3.7 million as other real estate owned (OREO.) Criticized substandard loans
that are still accruing also remained high at $3.0 million. Management believes
that these loans are correctly valued as a result of charges taken during the
third and fourth quarters of 2007. The Company is actively monitoring all
substandard, non-accrual and OREO assets through monthly or more frequent
reviews of each relationship.
Net
Interest Income -
Interest
income was down compared to the same period in 2007, reflecting the reduction
of
$38.9 million in earning assets as a result of the sale of loans associated
with
the Millersburg office during the third quarter of 2007. Respectively, for
the
quarter and for the first six months of 2008, interest income fell $877,000
or
24.2% and $1.7 million or 23.8% compared to the same periods a year ago.
Interest expense for the same periods declined $749,000 or 36.6% and $1.3
million or 32.5%. The net interest margin increased to 3.38% in the second
quarter, compared to 2.98% for the same period last year. For the year to date
through June 30, the net interest margin was 3.33% compared to 3.04% in
2007.
Noninterest
Income -
Compared
to the second quarter and the first six months of 2007, noninterest income
fell
$207,000 and $268,000, respectively. A decrease in service charge income as
a
result of the sale of the Millersburg office accounts for a portion of the
reduction. In addition, we recorded an other-than-temporary impairment charge
of
$159,000 on the Company’s holdings of the preferred shares of FHLMC and FNMA. We
are pleased with the performance of our fee businesses against our financial
plan for 2008. Our partnership with Midwest Mortgage Processing LLC and JMC
Marketing Ltd. began in May and was profitable in June. We look for improved
performance from this partnership in the form of additional gains on loan sales
as the housing segment begins to stabilize.
Noninterest
Expense -
The
Company continued to focus on reducing and stabilizing noninterest expense
levels resulting in declines of $287,000 or 14.5% and $573,000 or 14.6% for
the
quarter and the first six months of 2008 compared to 2007. Salaries accounted
for the largest share of this reduction, with decreases of $148,000 and $379,000
for the quarter and the first half of the year.
Loans
and Leases -
Loan
balances decreased $5.1 million from December 31, 2007. Our financial plan
for
2008 did not include any loan growth, which reflects the Company’s decision to
reduce the concentration of commercial real estate assets in our portfolio.
Commercial real estate loans have declined $6.4 million since the end of 2007,
and residential real estate loans have increased by $3.1 million.
Deposits
-
Demand
deposits
were up $1.1 million or 4.1% since December 31, 2007. Money market and savings
balances increased $6.5 million or 8.9% for the same period. Certificates of
deposit declined by $4.3 million or 5.9% since year end. The changes in the
mix
of deposits reflect the Company’s continued focus on growing core deposit
relationships and reducing its dependence on higher cost CDs.
CRITICAL
ACCOUNTING POLICIES
Allowance
for loan losses
.
The
allowance for loan losses is a valuation allowance for probable incurred credit
losses. Loan losses are charged against the allowance when management believes
the uncollectibility of a loan balance is confirmed.
Subsequent
recoveries, if any, are credited to the allowance. Management estimates the
allowance balance required using past loan loss experience, 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 management’s judgment, should be charged
off.
The
allowance consists of specific and general components. The specific component
relates to loans that are individually classified as impaired or loans otherwise
classified as substandard or doubtful. The general component covers
non-classified loans and is based on historical loss experience adjusted for
current factors.
A
loan is
considered impaired when, based on current information and events, it is
probable that the Company will be unable to collect the scheduled payments
of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the
probability
of collecting scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are
not
classified as impaired. Management determines the significance of payment delays
and payment shortfalls on a case-by-case basis, taking into consideration all
of
the circumstances surrounding the loan and the borrower, including the length
of
the delay, the reasons for the delay, the borrower’s prior payment record, and
the amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a loan by loan basis for commercial and construction
loans by either the present value of expected future cash flows discounted
at
the loan’s effective interest rate, the loan’s obtainable market price, or the
fair value of the collateral if the loan is collateral dependent. Large groups
of smaller balance homogeneous loans are collectively evaluated for
impairment.
Accordingly, the Company does not separately identify individual consumer and
residential loans for impairment disclosures.
FINANCIAL
CONDITION - JUNE 30, 2008 COMPARED TO DECEMBER 31, 2007
Assets
.
At
June,
2008, assets totaled $184.0 million, up from $180.3 million at December 31,
2007. Growth in securities and other real estate offset declines in net loans.
Securities
.
Total
securities increased by $7.3 million to $39.4 million. The portfolio consists
primarily of mortgage backed securities, which provide cash flow that can be
used to fund additional loan growth, liability runoff or be reinvested. At
June
30, 2008 we believe the effective duration of the portfolio excluding equity
investments was approximately 3.9 years. The unrealized loss on the portfolio,
net of tax, was approximately $228,000, compared to a gain of $3,900 at year
end. The market has continued to experience significant volatility in prices
and
yields due to ongoing concerns about the economy in general and the mortgage
sector in particular.
The
Company recorded an other-than-temporary impairment charge on its holdings
of
the preferred shares of FHLMC and FNMA. The price of these securities declined
5% from their original cost as of June 30, 2008. However, the prices for the
securities decreased rapidly in July 2008 and have not recovered. As a result,
management determined that the decline in value as of June 30, 2008 was
other-than-temporary and recorded a charge to earnings for the difference
between their cost and their fair value as of the balance sheet
date.
Loans
.
At June
30, 2008, the loan portfolio, net of the allowance for loan losses and deferred
fees, totaled $126.1 million, a decrease of just under $5.6 million compared
to
December 31, 2007. Commercial real estate loans make up the largest segment
of
the portfolio, but decreased from 44.7% at year end to 41.6% at mid-year.
Residential real estate loans increased from 27.4% to 31.0% over the same
period. The Company remains committed to a long-term strategy of diversifying
the mix of the loan portfolio by adding high-quality commercial business banking
assets while maintaining or reducing real estate-based assets.
Allowance
for loan losses and asset quality
.
Nonperforming
loans totaled $4.0 million at June 30, 2008 compared to $4.2 million at December
31, 2007. The decrease is the result of approximately $1.2 million in balances
transferred to other real estate, $332,300 in balances paid down or paid off
and
$12,300 in balances charged off. Eight additional loans totaling $1.3 million
were added to the category. Loans are considered nonperforming if they are
impaired or if they are in non-accrual status. We review nonperforming loans
on
a weekly basis to assess the risk of loss.
The
allowance for loan losses totaled $1.6 million at June 30, 2008, essentially
unchanged since year end 2007. We continue to closely monitor credit quality
and
delinquencies as our loan portfolio seasons, and will increase the allowance
for
loan losses if we believe losses have been incurred. As a percentage of total
loans, the allowance has increased from 1.22% to 1.28%.
Accrued
interest receivable and other assets.
Accrued
interest receivable and other assets increased by $344,500 from year end. Normal
business activity, which results in higher balances in prepaid franchise tax
and
insurance accounts earlier in the year and increases in accrued
interest on loans and securities and accounts receivable make up about $200,000
of the increase.
Deposits
.
Total
deposits increased $1.2 million to $148.6 million at June 30, 2008. Core deposit
balances increased 7.5% to $79.4 million from $73.9 million at year end.
Noninterest bearing demand deposits increased 12.9% to $16.2 million. We remain
committed to our strategy of growing core deposits through the acquisition
of
business banking relationships. The certificate of deposit portfolio decreased
$4.3 million during the period to $69.1 million or 46.5% of total
deposits
compared to $73.5 million or 49.7% of total deposits at year-end. Our deposit
strategy continues to focus on reducing the size of the CD portfolio as a
percentage of total deposits while increasing the average maturity. This will
help reduce our overall cost of funds and provide protection against rising
interest rates in the future.
Federal
Home Loan Bank advances
.
Long
term advances increased from $12.0 million at year end 2007 to $16.0 million
at
June 30, 2008. The growth was part of an asset/liability management strategy
executed in the first quarter to lock in long term borrowing rates at
historically low levels. The three new advances totaling $6.0 million had an
average term of twenty-eight months and an average rate of 2.88%. A $2.0 million
27-month advance with a rate of 4.94% matured early in the second
quarter.
RESULTS
OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2008
The
following tables set forth information relating to our average balance sheets
and reflects the average yield on interest-earning assets and the average cost
of interest-bearing liabilities for the periods indicated. These yields and
costs are derived by dividing income or expense, on an annualized basis, by
the
average balances of interest-earning assets or interest-bearing liabilities
for
the periods presented.
|
|
|
Three
months ended June 30,
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
Average
|
|
Interest
|
|
|
|
Average
|
|
Interest
|
|
|
|
|
|
|
Outstanding
|
|
earned/
|
|
Yield/
|
|
outstanding
|
|
earned/
|
|
Yield/
|
|
|
(Dollars
in thousands)
|
|
Balance
|
|
paid
|
|
Rate
|
|
balance
|
|
paid
|
|
Rate
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits and federal funds sold
|
|
$
|
5,176
|
|
$
|
28
|
|
|
2.20
|
%
|
$
|
3,211
|
|
$
|
43
|
|
|
5.30
|
%
|
|
Securities
available for sale
|
|
|
33,557
|
|
|
457
|
|
|
5.44
|
|
|
24,950
|
|
|
261
|
|
|
4.19
|
|
|
Securities
held to maturity
|
|
|
3,002
|
|
|
29
|
|
|
3.82
|
|
|
3,005
|
|
|
26
|
|
|
3.46
|
|
|
Federal
agency stock
|
|
|
1,466
|
|
|
20
|
|
|
5.59
|
|
|
1,541
|
|
|
24
|
|
|
6.31
|
|
|
Loans
(1)
|
|
|
127,886
|
|
|
2,203
|
|
|
6.93
|
|
|
179,217
|
|
|
3,259
|
|
|
7.29
|
|
|
Total
interest-earning assets
|
|
|
171,087
|
|
|
2,737
|
|
|
6.43
|
|
|
211,924
|
|
|
3,613
|
|
|
6.84
|
|
|
Noninterest-earning assets
|
|
|
15,830
|
|
|
|
|
|
|
|
|
17,540
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
186,917
|
|
|
|
|
|
|
|
$
|
229,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
demand deposits
|
|
$
|
9,556
|
|
|
25
|
|
|
1.05
|
%
|
$
|
9,633
|
|
|
23
|
|
|
.97
|
%
|
|
Savings
accounts
|
|
|
5,415
|
|
|
10
|
|
|
.78
|
|
|
8,046
|
|
|
15
|
|
|
.77
|
|
|
Money
market accounts
|
|
|
48,495
|
|
|
320
|
|
|
2.65
|
|
|
45,421
|
|
|
440
|
|
|
3.88
|
|
|
Certificates
of deposit
|
|
|
72,724
|
|
|
737
|
|
|
4.08
|
|
|
102,471
|
|
|
1,234
|
|
|
4.83
|
|
|
Total
interest-bearing deposits
|
|
|
136,190
|
|
|
1,093
|
|
|
3.23
|
|
|
165,571
|
|
|
1,712
|
|
|
4.15
|
|
|
Other
borrowings
|
|
|
19,389
|
|
|
205
|
|
|
4.25
|
|
|
23,521
|
|
|
335
|
|
|
5.70
|
|
|
Total
interest-bearing liabilities
|
|
|
155,579
|
|
|
1,297
|
|
|
3.35
|
|
|
189,092
|
|
|
2,047
|
|
|
4.34
|
|
|
Noninterest-bearing
demand deposits
|
|
|
15,538
|
|
|
|
|
|
|
|
|
18,260
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
|
419
|
|
|
|
|
|
|
|
|
876
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
171,536
|
|
|
|
|
|
|
|
|
208,228
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
15,381
|
|
|
|
|
|
|
|
|
21,236
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
186,917
|
|
|
|
|
|
|
|
$
|
229,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income; interest-rate spread
(2)
|
|
|
|
|
$
|
1,439
|
|
|
3.08
|
%
|
|
|
|
$
|
1,566
|
|
|
2.50
|
%
|
|
Net
earning assets
|
|
$
|
15,508
|
|
|
|
|
|
|
|
$
|
22,832
|
|
|
|
|
|
|
|
|
Net
interest margin
(3)
|
|
|
|
|
|
|
|
|
3.38
|
%
|
|
|
|
|
|
|
|
2.98
|
%
|
|
Average
interest-earning assets to
interest-bearing liabilities
|
|
|
1.1x
|
|
|
|
|
|
|
|
|
1.12
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.
|
OHIO
LEGACY CORP
Net
earnings (loss) totaled $(95,659) for the three months ended June 30, 2008,
or
$(0.04) per diluted share, compared to $(34,317) or $(0.02) per diluted share
during the second quarter of 2007. The restructuring of the balance sheet during
the latter part of 2007 has begun to have a positive impact on the earnings
stream for the year.
Net
interest income
.
During
the three months ended June 30, 2008, net interest income was $1.4 million,
compared to $1.6 million in the comparable quarter last year. The decrease
is
primarily the result of the sale of a banking office during the third quarter
of
2007. The decrease in the volume of earning assets was offset in large part
by
an increase in the net interest margin from 2.98% to 3.38%.
Interest
income
.
Total
interest income for the quarter was $2.7 million, down 24.3% from $3.6 million
in the same quarter in 2007. The decrease was due in large part to the sale
of
$38.9 million of loans associated with the branch office that was sold in the
third quarter of 2007. The decrease in the yield on earning assets by 41 basis
points from 6.84% to 6.43% also had a negative impact on total interest
income.
Interest
expense
.
For the
three months ended June 30, total interest expense was $1.3 million compared
to
$2.0 million in the prior year. As noted above, the balance of liabilities
was
reduced by $23.1 million as a result of the sale of the branch and another
$3.3
million as a result of the retirement of the Company’s trust preferred debt. The
cost of interest bearing liabilities decreased 99 basis points from 4.34% to
3.35%, which contributed to the overall decrease in interest
expense.
Provision
for loan losses
.
The
provision for loan losses totaled $5,000 during the second quarter of 2008,
compared to $14,000 the second quarter of 2007. As discussed above in the
“Allowance for loan losses,” our provision for loan losses can be expected to
fluctuate from period to period.
Noninterest
income
.
Noninterest income for the second quarter was $157,600 compared to $364,100
for
the same period the prior year. The most significant reason for the decline
was
the aforementioned other-than-temporary impairment charge. A reduction of
approximately $44,000 in service charge income due to the sale of a banking
office in 2007 was partially offset by an additional $20,000 in gains on the
sale of loans originated for sale.
Noninterest
expense
.
Total
noninterest expense decreased $287,000 to $1.7 million compared to $2.0 million
for the prior year quarter. The significant changes are described
below.
Salary
and benefits
.
The
largest portion of the decrease is due to a $147,800 reduction in salary and
benefits as a result of the branch sale and the elimination of additional
positions in the fourth quarter of 2007.
Professional
fees
.
In the
second quarter, professional fees were $90,200 lower than in the previous year,
due in part to the expenses associated with the branch sale in
2007.
Franchise
tax.
The
decrease of $14,000 in the most recent quarter was the result of reduced capital
from the net losses booked in the third and fourth quarters of
2007.
Marketing
and advertising
.
Expenses declined $16,100 in 2008 as compared to the 2007, primarily due to
more
targeted advertising as the focus on deposits moved from certificates of deposit
to transaction accounts.
OHIO
LEGACY CORP
RESULTS
OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2008
|
|
|
Six
months ending June 30,
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
Average
|
|
Interest
|
|
|
|
Average
|
|
Interest
|
|
|
|
|
|
|
outstanding
|
|
earned/
|
|
Yield/
|
|
outstanding
|
|
earned/
|
|
Yield/
|
|
|
(Dollars
in thousands)
|
|
balance
|
|
Paid
|
|
Rate
|
|
balance
|
|
paid
|
|
Rate
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits and federal funds sold
|
|
$
|
4,584
|
|
$
|
60
|
|
|
2.67
|
%
|
$
|
5,495
|
|
$
|
143
|
|
|
5.25
|
%
|
|
Securities
available for sale
|
|
|
31,123
|
|
|
855
|
|
|
5.50
|
|
|
25,224
|
|
|
537
|
|
|
4.33
|
|
|
Securities
held to maturity
|
|
|
3,002
|
|
|
57
|
|
|
3.81
|
|
|
2,831
|
|
|
49
|
|
|
3.46
|
|
|
Federal
agency stock
|
|
|
1,504
|
|
|
42
|
|
|
5.55
|
|
|
1,541
|
|
|
48
|
|
|
6.30
|
|
|
Loans
(1)
|
|
|
129,449
|
|
|
4,530
|
|
|
7.08
|
|
|
177,828
|
|
|
6,501
|
|
|
7.37
|
|
|
Total
interest-earning assets
|
|
|
169,662
|
|
|
5,545
|
|
|
6.61
|
|
|
212,919
|
|
|
7,278
|
|
|
6.89
|
|
|
Noninterest-earning assets
|
|
|
16,362
|
|
|
|
|
|
|
|
|
17,463
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
186,024
|
|
|
|
|
|
|
|
$
|
230,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
demand deposits
|
|
$
|
9,715
|
|
|
60
|
|
|
1.25
|
|
$
|
9,290
|
|
|
40
|
|
|
0.87
|
|
|
Savings
accounts
|
|
|
5,415
|
|
|
22
|
|
|
0.82
|
|
|
8,523
|
|
|
34
|
|
|
0.80
|
|
|
Money
market accounts
|
|
|
46,363
|
|
|
683
|
|
|
2.98
|
|
|
44,301
|
|
|
828
|
|
|
3.77
|
|
|
Certificates
of deposit
|
|
|
73,560
|
|
|
1,559
|
|
|
4.29
|
|
|
105,222
|
|
|
2,521
|
|
|
4.83
|
|
|
Total
interest-bearing deposits
|
|
|
135,053
|
|
|
2,324
|
|
|
3.48
|
|
|
167,336
|
|
|
3,423
|
|
|
4.14
|
|
|
Other
borrowings
|
|
|
19,166
|
|
|
425
|
|
|
4.44
|
|
|
24,065
|
|
|
652
|
|
|
5.46
|
|
|
Total
interest-bearing liabilities
|
|
|
154,219
|
|
|
2,750
|
|
|
3.61
|
|
|
191,401
|
|
|
4,075
|
|
|
4.30
|
|
|
Noninterest-bearing
demand deposits
|
|
|
15,064
|
|
|
|
|
|
|
|
|
18,139
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
|
682
|
|
|
|
|
|
|
|
|
1,035
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
169,965
|
|
|
|
|
|
|
|
|
210,575
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
16,059
|
|
|
|
|
|
|
|
|
19,807
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
186,024
|
|
|
|
|
|
|
|
$
|
230,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income; interest-rate spread
(2)
|
|
|
|
|
$
|
2,796
|
|
|
3.00
|
%
|
|
|
|
$
|
3,203
|
|
|
2.56
|
%
|
|
Net
earning assets
|
|
$
|
15,443
|
|
|
|
|
|
|
|
$
|
21,518
|
|
|
|
|
|
|
|
|
Net
interest margin
(3)
|
|
|
|
|
|
|
|
|
3.33
|
%
|
|
|
|
|
|
|
|
3.06
|
%
|
|
Average
interest-earning assets to
interest-bearing liabilities
|
|
|
1.10
x
|
|
|
|
|
|
|
|
|
1.11
x
|
|
|
|
|
|
|
|
|
FOOTNOTES
TO YIELD TABLE
|
|
|
|
(1)
Net
of net deferred loan fees and costs and loans in process. Nonaccrual
loans
are included in noninterest-earning assets.
|
|
(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
earnings (loss) totaled $(126,759) for the six months ended June 30, 2008,
or
$(0.06) per diluted share, compared to $(39,763) or $(0.02) per diluted share
during the first half of 2007.
Net
interest income
.
During
the six months ended June 30, 2008, net interest income was $2.8 million,
compared to $3.2 million for the same period the prior year. The decrease is
primarily the result of the sale of a banking office during the third quarter
of
2007. The reduction in the volume of earning assets was offset in large part
by
an increase in the net interest margin from 3.04% to 3.33%.
Interest
income
.
Total
interest income was $5.6 million for the first six months of 2008, compared
to
$7.3 million for the comparable period in 2007. The decline is due to both
a
lower volume of earning assets as a result of the branch sale and a lower yield
on those assets as the FOMC reduced the target federal funds rate 225 basis
point during the six month period. The yield on loans dropped 0.25% during
the
period, from 7.37% to 7.08% as variable rate notes reset downward and new volume
was added at lower rates. The decline was partially offset by an increase in
the
yield on securities from 4.33% to 5.50% as the result of a restructuring
transactions the third quarter of 2007 and ongoing purchases at market
rates.
Interest
expense
.
Total
interest expense fell $1.3 million to $2.8 million in 2008, compared to $4.1
million for the same period in 2007. Deposit expense reductions accounted for
$1.1 million of the decrease as a result of the both the branch sale, debt
redemption and the previously announced strategy of focusing on lower cost
transaction deposits.
OHIO
LEGACY CORP
Provision
for loan losses
.
The
provision for loan losses totaled $11,500 during the first half of 2008,
compared to $57,000 the same period in 2007. As discussed above in the
“Allowance for loan losses,” our provision for loan losses can be expected to
fluctuate from period to period.
Noninterest
income
.
Noninterest income was $441,800 for the first six months of 2008, compared
to
$709,000 for the first half of 2007. The most significant reason for the decline
was the aforementioned other-than-temporary impairment charge. Service charge
income declined approximately $95,000 during the period. An $18,300 gain on
the
redemption of the Company’s equity interest in Visa was offset by lower income
on other real estate owned and service charges on official checks.
Noninterest
expense
.
Total
noninterest expense declined $573,200 to $3.4 million compared to $3.9 million
for the first half of the prior year. The reductions occurred in nearly every
category; the significant changes are described below.
Salary
and benefits
.
The
largest portion of the decrease is due to a $378,800 reduction in salary and
benefits as a result of the branch sale and the elimination of additional
positions in the fourth quarter of 2007.
Professional
fees
.
In the
first half of 2008, professional fees were $180,900 compared to $290,300 in
the
prior year.. The decrease is due to fees incurred in 2007 for the sale of the
branch and non-performing loans.
Franchise
tax.
The
decrease of $27,600 in the first half was the result of reduced capital from
the
net losses booked in the third and fourth quarters of 2007.
STRATEGIC
DEVELOPMENTS
The
Company signed agreements with Midwest Mortgage Processing LLC and JMC Marketing
Ltd. and opened mortgage loan production offices in the Dayton and Columbus
areas in May. This business effort broke even in May and was profitable in
June.
Both of these housing markets are more stable than northern Ohio and represent
an opportunity to leverage the mortgage banking staff investment that we made
in
the fall of 2006. As the regulatory environment for mortgage bankers tightens,
we are confident the opportunity to hire mortgage experts in stable to growing
markets will increase. We believe this strategy complements our core banking
initiatives and will contribute to our goal of becoming a profitable, superior
small business bank.
During
the second quarter, the Company was able to take advantage of the earlier
declines in rates and lower our cost of funds on most products. However, the
continuing demand for liquidity by the banking competitors which operate in
our
markets has led to retail pricing on both demand and term deposits that is
well
above national averages and significantly above our prices. We are attempting
to
use our service advantage to combat these pricing differences and believe that
we have done so effectively over the last few months. However, if these
competitors continue to raise rates in an effort to satisfy their cash needs,
our ability to maintain deposit rates at reasonable levels will diminish
severely, resulting in a negative impact on the net interest margin.
Credit
quality continues to be our greatest concern. While our impaired asset numbers
are stable, they are also too high by nearly every measure. We are committed
to
reducing our non-accrual loans, OREO assets and criticized-substandard loans
in
an orderly manner. The realities of the housing downturn will force us to hold
some of these assets longer than we would like. However, as stated previously,
Management believes that these assets have been correctly valued and the risk
of
additional material loss is low.
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, 2007.
At
June
30, 2008, we had no active unconsolidated, related special purpose entities,
nor
did we engage in derivatives and hedging contracts, such as interest rate swaps,
that may expose us to liabilities greater than the amounts recorded on the
consolidated balance sheet. Our investment policy prohibits engaging in
derivatives contracts for speculative trading
purposes;
however, we may pursue certain contracts, such as interest rate swaps, in our
efforts to execute a sound and defensive interest rate risk management
policy.
OHIO
LEGACY CORP
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 and
maturities, sales of securities, borrowings from the FHLB and capital
transactions. Alternative sources of funds include repurchase agreements and
brokered CDs and the sale of loans. 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 impending liquidity
crises. 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 liquidity risk and analyze various
scenarios that could impact our ability to access emergency funding in
conjunction with our asset/liability and interest rate risk management
activities.
At
June
30, 2008, the balances in cash and cash equivalents were essentially unchanged
from year end 2007. Cash and cash equivalents represented 3.9% of total assets
at June 30, 2008 and 4.0% of total assets at December 31, 2007.
CAPITAL
RESOURCES
Total
shareholders’ equity was $15.0 million at June 30, 2008, a decrease of $341,000
from the prior year-end balance. The reduction in equity was due to a $231,700
unrealized decline in the market value of the investment portfolio that was
partially offset by stock option expense of $17,400.
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.
Failure to meet capital requirements can initiate regulatory
action.
Actual
and required capital amounts (in thousands) and ratios are presented below
at
June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
To
Be Well-
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
Under
|
|
|
|
|
|
|
|
|
For
Capital
|
|
Prompt
Corrective
|
|
|
|
|
Actual
|
|
Adequacy
Purposes
|
|
Action
Provisions
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
capital to risk-weighted assets
|
|
$
|
16,342
|
|
|
12.0
|
%
|
$
|
10,890
|
|
|
8.0
|
%
|
$
|
13,613
|
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 capital to risk-weighted assets
|
|
$
|
14,710
|
|
|
10.8
|
%
|
$
|
5,445
|
|
|
4.0
|
%
|
$
|
8,168
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 capital to average assets
|
|
$
|
14,710
|
|
|
7.9
|
%
|
$
|
7,461
|
|
|
4.0
|
%
|
$
|
9,327
|
|
|
5.0
|
%
|
The
payment of dividends by the Bank to Ohio Legacy and by Ohio Legacy to
shareholders is subject to restrictions by regulatory agencies. These
restrictions generally limit dividends to the sum of current year’s 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. During 2008, the bank could declare dividends without prior approval
only
after 2008 net profits exceeded $2,738,150.
Item
3. Not applicable for Smaller Reporting Companies.
Item
4. Controls and Procedures
As
of
June 30, 2008, an evaluation was conducted under the supervision and with the
participation of Ohio Legacy Corp’s management, including our Chief Executive
Officer and acting 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 acting 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 Ohio Legacy Corp’s internal control over financial reporting that
occurred during the Company’s fiscal quarter ended June 30, 2008, that has
materially affected, or is reasonably likely to materially affect, Ohio Legacy’s
Corp’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
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
There
are
no matters required to be reported under this item.
Item
3. Defaults Upon Senior Securities.
There
are
no matters required to be reported under this item.
Item
4. Submission of Matters to a Vote of Security Holders.
There
are
no matters required to be reported under this item.
Item
5. Other Information.
There
are
no matters required to be reported under this item.
OHIO
LEGACY CORP
Item
6. Exhibits.
|
Exhibit
|
|
|
|
Number
|
Note
|
Description
of Document
|
|
3.1
|
(1)
|
Second
Amended and Restated Articles of Incorporation of Ohio Legacy
Corp
|
|
3.2
|
(2)
|
Code
of Regulations of Ohio Legacy Corp, as amended by Amendment No.
1
|
|
4.1
|
(3)
|
See
Pages 1 through 9 of Exhibit 3.1 for provisions defining the rights
of the
holders of common shares
|
|
4.2
|
(3)
|
Form
of Organizer Stock Purchase Warrant
|
|
4.4
|
(2)
|
2004
Amendment to Omnibus Stock Option, Stock Ownership and Long Term
Incentive
Plan of Ohio Legacy Corp
|
|
10.1
|
(3)
|
Omnibus
Stock Option, Stock Ownership and Long Term Incentive Plan
|
|
10.2
|
(4)
|
2002
Amendment to Omnibus Stock Option, Stock Ownership and Long Term
Incentive
Plan
of
Ohio Legacy Corp
|
|
10.5
|
(3)
|
Lease
Agreement dated August 24, 1999, by and among Jack K. and Heidi
M. Gant
and Ohio Legacy Corp
|
|
10.6
|
(3)
|
Lease
Agreement dated November 30, 1999, by and between Schoeppner Properties
and Ohio Legacy Corp
|
|
10.8
|
(5)
|
Lease
Agreement dated October 2001 by and between Shee-Bree’s, L.L.C. and Ohio
Legacy Corp
|
|
10.10
|
(6)
|
Assignment
and assumption of lease by and among Unizan Bank, Ohio Legacy Bank
and
Chesterland Productions, P.L.L. dated August 27, 2004
|
|
10.11
|
(7)
|
Employment
Agreement with Mr. Kramer
|
|
10.12
|
(8)
|
Change
in Control Agreement with Mr. Williams
|
|
10.13
|
(8)
|
Change
in Control Agreement with Mr. Spradlin
|
|
10.14
|
(8)
|
Change
in Control Agreement with Mr. Dodds
|
|
10.15
|
(9)
|
Loan
Processing Agreement dated April 28, 2008 by and between Midwest
Mortgage
Processing, LLC and Ohio Legacy Bank, N.A.
|
|
10.16
|
(9)
|
Administrative
Services Agreement dated April 28, 2008 by and between JMC Marketing
Ltd.
And Ohio Legacy Bank, N.A.
|
|
10.17
|
|
Guaranty
dated April 28, 2008 by and between James A. Hinkle, Cheldon Rose,
Michael
Prall and Ohio Legacy Bank, N.A.
|
|
11
|
|
Statement
Regarding Computation of Per Share Earnings (incorporated by reference
to
Note 3 on page 8 of the this Form 10-Q)
|
|
31.1
|
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive Officer
and
acting Chief Financial Officer
|
|
32.1
|
|
Certification
Pursuant To 18 U.S.C. Section 1350 As Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
_____________________
|
(1)
|
-
|
Incorporated
by reference to Registrant’s Form 10-QSB for the fiscal quarter ended June
30, 2003, filed on August 14, 2003
|
|
(2)
|
-
|
Incorporated
by reference to Registrant’s Form 10-KSB for the fiscal year ended
December 31, 2003, filed on March 17, 2004
|
|
(3)
|
-
|
Incorporated
by reference to Registrant’s Form SB-2, File No. 333-38328, effective June
1, 2000
|
|
(4)
|
-
|
Incorporated
by reference to Registrant’s Form S-
8,
File No. 333-88842, effective May 22, 2002
|
|
(5)
|
-
|
Incorporated
by reference to Registrant’s Form 10-KSB for the fiscal year ended
December 31, 2001, filed on April 1, 2002
|
|
(6)
|
-
|
Incorporated
by reference to Registrant’s Form 10-KSB for the fiscal year ended
December 31, 2004, filed on March 22, 2005
|
|
(7)
|
-
|
Incorporated
by reference to Registrant’s Form 8-K filed on May 6,
2005
|
|
(8)
|
-
|
Incorporated
by reference to Registrant’s Form 10-K filed on April 7,
2008
|
|
(9)
|
-
|
Incorporated
by reference to Registrant’s Form 10-Q filed on May 15,
2008
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
OHIO
LEGACY CORP
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
August 14, 2008
|
|
By:
/s/ D. Michael Kramer
|
|
|
|
|
D.
Michael Kramer, President,
|
|
|
|
|
President,
Chief Executive Officer and acting
|
|
|
|
|
Chief
Financial Officer
|
|
Ohio Legacy (NASDAQ:OLCB)
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