Legacy Bancorp, Inc. (the “Company” or “Legacy”) (NASDAQ: LEGC),
the holding company for Legacy Banks (the “Bank”), today reported a
net loss of $1.2 million or $0.15 per diluted share for the quarter
ended March 31, 2010, compared to a net loss of $792,000 or $0.10
per diluted share in the first quarter of 2009. The first quarter
decrease was the result of an increase in the provision for loan
losses, partially offset by a decrease in charges on investments
deemed to be other-than-temporarily impaired (OTTI). The total
shares outstanding resulted in a book value per share and tangible
book value per share of $13.80 and $12.40, respectively, at March
31, 2010.
J. Williar Dunlaevy, Chief Executive Officer, commented “While
we are disappointed to start off 2010 by reporting a net loss,
there are also some bright and encouraging components within our
report for the first quarter.
“We continue to be disciplined each and every quarter in
assessing credit quality. Individuals and businesses continue to
face economic challenges from the recession. While there have been
some positive signals, both locally and nationally, unemployment
and weak job growth remain major concerns. They impact both
borrowers and property valuation. The result is that in the first
quarter we added to our loan loss reserves and also took
charge-offs against certain non-performing loans. While these
charge-offs have lowered the overall reserve ratio to 1.25%, much
of those amounts were reserved for in previous quarters. As a
result of the charges taken, the levels of non-performing loans and
assets declined significantly. Legacy will continue to identify and
work problem loan situations diligently.
“On the positive side, we are very pleased with the deposit
growth generated by our branch network in the first quarter, which
has allowed us to continue to reduce our borrowings from the
Federal Home Loan Bank. Additionally, we have been diligent in
reducing the overall cost of funds, resulting in an increase to our
net interest margin as compared to the fourth quarter of 2009.
“On April 1st Patrick J. Sullivan became President and CEO of
Legacy Banks and President of Legacy Bancorp. We could not be more
pleased about Pat coming on board. He is a person of high energy
with a proven track record of over thirty years of experience
building growth and profitability. He already has the management
team focused on a profit improvement plan aimed at margin
expansion, expense reduction, expanding core commercial services
while diversifying away from commercial real estate, and building
household relationships through basic lending products.
“Earlier this month we were very proud to announce the agreement
to acquire the Renaissance Investment Group, LLC, of Pittsfield,
Massachusetts. This registered independent investment advisory
company has enjoyed tremendous success since its inception in 2000.
This transaction is a significant revenue opportunity as we
leverage Renaissance with our existing wealth management programs
and our overall customer base.
“Our capital to asset ratio, at 12.7%, continues to be very
strong and is the foundation of a very strong balance sheet. While
Legacy, and the industry in general, continue to face the current
economic and financial challenges, we are more confident than ever
in our financial strength, and our ability to grow and build
shareholder value.”
The Company’s overall balance sheet remained relatively flat,
decreasing by $41,000 from $946.3 million at December 31, 2009 to
$946.2 million at March 31, 2010. Within the overall asset
balances, the gross loan portfolio, excluding loans held for sale,
decreased by $16.0 million, or 2.4% in the first quarter of 2010.
Residential mortgages decreased $6.2 million, or 2.2% as the
majority of the residential mortgage activity was in the 30 year
fixed rate category, a product which the Bank currently sells in
the secondary market with servicing retained. Commercial real
estate loans decreased $9.0 million, or 3.4%, primarily due to loan
payoffs and specific loan charge offs during the quarter. The
available-for-sale investment portfolio increased by $12.8 million
or 7.6%, while cash and cash equivalents decreased by $1.6 million,
or 4.0% at March 31, 2010 as compared to year end.
Deposits have increased by $9.9 million, or 1.5%, to
$661.2 million from a balance of $651.4 million at December
31, 2009. Deposits increased primarily in money market accounts and
relationship savings which increased $8.4 million, or 13.3% and
$13.4 million or 10.7%, respectively. These increases were
partially offset by decreases in demand accounts and certificate of
deposits (CD’s). Advances from the Federal Home Loan Bank of Boston
(FHLBB) have decreased by $10.0 million, or 6.2% at March 31, 2010
as compared to the end of 2009 as the increase in overall deposits
allowed the Bank to pay off high rate FHLBB borrowings as they
matured during the quarter.
Overall stockholders’ equity decreased by $1.0 million, or 0.9%
during the first quarter of 2010. Total equity was impacted by the
net loss of $1.2 million, the declaration of a dividend of $0.05
per share during the first quarter and the purchase of 15,200
shares of stock at an average price of $9.56 per share as part of
the Stock Repurchase Program announced in March 2009. These
decreases to equity were partially offset by the amortization of
unearned compensation and an increase in the unrealized gain on
available-for-sale investment securities.
Overall nonperforming loans (NPLs) were $12.2 million at March
31, 2010, a decrease of $7.4 million as compared to the end of
2009. Part of this decrease was a result of the Bank charging off
$5.4 million of loan balances, $3.8 million of which had been
reserved for in previous quarters. These charge-offs also reduced
the overall ratio of nonperforming assets to total assets to 1.47%
at March 31, 2010 as compared to 2.20% at December 31, 2009. Legacy
is, and always has been, diligent in evaluating its loan portfolio,
especially given the current volatility in the credit markets. The
provision for loan losses was $2.4 million in the first quarter of
2010, an increase of $1.7 million as compared to the same period in
2009. This increase was the result of a continuous review and
analysis of current market and economic conditions by management,
as well as higher specific reserves established against certain
loans in the first quarter of 2010. The charge-offs of NPLs also
resulted in the reduction in the ratio of the allowance for loan
losses to total loans to 1.25% at March 31, 2010, as compared to
1.67% at December 31, 2009 and 1.05% at March 31, 2009.
The Company’s net interest income decreased by $203,000, or 2.9%
in the first quarter of 2010 as compared to the same period in
2009. The net interest margin (NIM) was 3.16% for the three months
ended March 31, 2010, a decrease of 2 basis points from the first
quarter of 2009, but an increase of 11 basis points from the fourth
quarter of 2009 as the Bank has been diligent in lowering the costs
of its average interest-bearing liabilities.
Non-interest income for the first quarter increased $1.3 million
from the same period of 2009. The primary cause of the increase was
the decrease in the amount of writedowns taken on investments
deemed to be OTTI. The Bank incurred $299,000 of OTTI charges on
certain limited partnership investments in 2010 as compared to OTTI
charges of $1.6 million on certain bonds, equity securities and
limited partnership investments in the first quarter of 2009. The
Bank also had increases in fees from customers, portfolio
management fees and gains on sale of investments, partially offset
by a decrease on the gain on sale of mortgages.
Operating expenses increased by $96,000, or 1.4% for the first
quarter of 2010 as compared to the same period of 2009. The bank
had small increases in salaries and benefits, data processing,
professional fees and FDIC insurance expense, offset by decreases
in occupancy and advertising expense. The Company’s core efficiency
ratio (reported efficiency ratio net of effect of non-core
adjustments) for the quarter increased to 87.4% as compared to
83.6% in the first quarter of 2009 due to the decrease in net
interest income and increase in operating expenses.
CONFERENCE CALL
J. Williar Dunlaevy, Chairman and Chief Executive Officer, and
Paul H. Bruce, Chief Financial Officer, will host a conference call
at 3:00 p.m. (Eastern Time) on Thursday April 29, 2010. Persons
wishing to access the conference call may do so by dialing
877-407-0778. Replays of the conference call will be available
beginning April 29, 2010 at 6:00 p.m. (Eastern Time) through May 5,
2010 at 11:59 p.m. (Eastern Time) by dialing 877-660-6853 and using
Account #286 and Conference ID #348947 (both numbers are needed to
access the replay).
FORWARD LOOKING STATEMENTS
Certain statements herein constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based on the beliefs and
expectations of management, as well as the assumptions made using
information currently available to management. Since these
statements reflect the views of management concerning future
events, these statements involve risks, uncertainties and
assumptions. As a result, actual results may differ from those
contemplated by these statements. Forward-looking statements can be
identified by the fact that they do not relate strictly to
historical or current facts. They often include words like
“believe,” “expect,” “anticipate,” “estimate,” and “intend” or
future or conditional verbs such as “will,” “would,” “should,”
“could” or “may.” Certain factors that could cause actual results
to differ materially from expected results include changes in the
interest rate environment, changes in general economic conditions,
legislative and regulatory changes that adversely affect the
businesses in which Legacy Bancorp is engaged and changes in the
securities market. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this release and the associated conference call. The
Company disclaims any intent or obligation to update any
forward-looking statements, whether in response to new information,
future events or otherwise.
NON-GAAP FINANCIAL MEASURES
In addition to results presented in accordance with GAAP, this
press release contains certain non-GAAP financial measures. We
believe that providing certain non-GAAP financial measures, such as
core efficiency ratio, provides investors with information useful
in understanding our financial performance, our performance trends
and financial position. A reconciliation of non-GAAP to GAAP
financial measures is included in the accompanying financial
tables, elsewhere in this report.
LEGACY BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (Dollars in thousands, except per share
amounts) March 31, December 31, 2010 2009
ASSETS (Unaudited) Cash and due from banks $ 14,073 $ 11,281
Short-term investments 24,470 28,874
Cash and cash equivalents 38,543 40,155 Securities - Available for
sale 180,195 167,426 Securities - Held to maturity 97 97 Restricted
equity securities and other investments - at cost 17,090 17,193
Loans held for sale 1,018 706 Loans, net of allowance for loan
losses of $8,099 in 2010 and $11,089 in 2009 639,560 652,628
Premises and equipment, net 19,654 19,568 Accrued interest
receivable 3,191 3,306 Goodwill, net 9,730 9,730 Net deferred tax
asset 8,810 10,202 Bank-owned life insurance 16,419 16,263
Foreclosed assets 1,781 1,195 Other assets 10,136
7,796 $ 946,224 $ 946,265
LIABILITIES AND STOCKHOLDERS' EQUITY Deposits:
Noninterest-bearing $ 68,491 $ 75,232 Interest-bearing
592,753 576,146 Total deposits 661,244 651,378
Securities sold under agreements to repurchase 6,165 6,386 Federal
Home Loan Bank advances 150,349 160,352 Mortgagors' escrow accounts
1,095 1,058 Accrued expenses and other liabilities 7,047
5,724 Total liabilities 825,900
824,898 Commitments and contingencies Stockholders'
Equity
Preferred Stock ($.01 par value,
10,000,000 sharesauthorized, none issued or outstanding)
- -
Common Stock ($.01 par value,
40,000,000 sharesauthorized and 10,308,600 issued at March 31, 2010
andDecember 31, 2009; 8,719,512 outstanding at March 31, 2010and
8,734,712 outstanding at December 31, 2009)
103 103 Additional paid-in-capital 102,857 102,788
Unearned Compensation - ESOP (7,139 ) (7,322 ) Unearned
Compensation - Equity Incentive Plan (1,858 ) (2,078 ) Retained
earnings 47,295 48,998 Accumulated other comprehensive income 1,044
711
Treasury stock, at cost (1,589,088
shares at March 31, 2010and 1,573,888 shares at December 31,
2009)
(21,978 ) (21,833 ) Total stockholders' equity
120,324 121,367 $ 946,224 $ 946,265
LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in
thousands, except per share amounts) Three Months Ended March
31, 2010 2009 (Unaudited) Interest and dividend income:
Loans $ 9,296 $ 10,033 Securities: Taxable 1,185 1,746 Tax-Exempt
167 154 Short-term investments 6 4
Total interest and dividend income 10,654
11,937 Interest expense: Deposits 2,439 3,005 Federal Home
Loan Bank advances 1,449 1,954 Other borrowed funds 10
19 Total interest expense 3,898
4,978 Net interest income 6,756 6,959 Provision for
loan losses 2,421 728 Net interest
income after provision for loan losses 4,335
6,231 Non-interest income: Customer service fees 722
680 Portfolio management fees 280 221 Income from bank owned life
insurance 154 172 Insurance, annuities and mutual fund fees 20 22
Gain (loss) on sales of securities, net 101 (19 ) Impairment losses
on securities, net (299 ) (1,581 ) Gain on sales of loans, net 60
199 Miscellaneous 11 12
Total non-interest income
1,049 (294 ) Non-interest expenses: Salaries
and employee benefits 3,475 3,444 Occupancy and equipment 991 1,049
Data processing 694 664 Professional fees 323 245 Advertising 319
326 FDIC deposit insurance 269 250 Other general and administrative
1,102 1,099 Total non-interest expenses
7,173 7,077 Income (loss) before
income taxes (1,789 ) (1,140 ) Provision (benefit) for
income taxes (545 ) (348 ) Net income (loss) $
(1,244 ) $ (792 ) Earnings (loss) per share Basic $ (0.15 ) $ (0.10
) Diluted $ (0.15 ) $ (0.10 ) Weighted average shares outstanding
Basic 8,028,621 7,977,953 Diluted 8,028,621 7,977,953
LEGACY BANCORP, INC. AND SUBSIDIARIES SELECTED
CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA (Dollars in
thousands except per share data)
Three Months Ended March
31, 2010 2009
Financial Highlights: Net interest income $ 6,756 $ 6,959
Net income (loss) (1,244) (792) Per share data: Earnings (loss) —
basic (0.15) (0.10) Earnings (loss) — diluted (0.15) (0.10)
Dividends declared 0.05 0.05 Book value per share — end of period
13.80 14.13 Tangible book value per share — end of period 12.40
12.69
Ratios and Other Information: Return (loss) on
average assets (0.53) % (0.33) % Return (loss) on average equity
(4.02) % (2.53) % Net interest rate spread (1) 2.87 % 2.81 % Net
interest margin (2) 3.16 % 3.18 % Efficiency ratio (3) 87.4 % 83.6
%
Average interest-earning assets to
averageinterest-bearing liabilities
115.92 % 116.45 %
At period end: Stockholders’ equity
$ 120,324 $ 124,112 Total assets 946,224 968,095 Equity to total
assets 12.7 % 12.8 % Non-performing assets to total assets 1.47 %
1.16 % Non-performing loans to total loans 1.88 % 1.61 % Allowance
for loan losses to non-performing loans 66.56 % 65.42 % Allowance
for loan losses to total loans 1.25 % 1.05 % Number of full service
offices 19 19
(1) The net interest rate spread
represents the difference between the yield on total average
interest-earningassets and the cost of total average
interest-bearing liabilities for the period.
(2) The net interest margin
represents net interest income as a percent of average
interest-earning assets forthe period.
(3) The efficiency ratio
represents non-interest expense for the period minus expenses
related to theamortization of intangible assets other than the
amortization of mortgage servicing rights, divided by thesum of net
interest income (before the loan loss provision) plus non-interest
income (excluding net gains orlosses on the sale or impairment of
securities).
Analysis of Net Interest Margin
– First Quarter:
Three Months Ended March 31, 2010 Three Months Ended
March 31, 2009
AverageOutstanding
Balance
Interest Yield/ Rate(1)
AverageOutstanding
Balance
Interest Yield/ Rate(1)
(Dollars in
thousands) Interest-earning assets: Loans - Net (2) $
647,710 $ 9,296 5.74% $ 694,359 $ 10,033 5.78% Investment
securities 190,406 1,352 2.84% 158,293 1,900 4.80% Short-term
investments 15,743 6 0.15%
22,121 4 0.07% Total interest-earning assets
853,859 10,654 4.99% 874,773 11,937 5.46% Non-interest-earning
assets 78,336 73,681 Total assets $ 932,195 $ 948,454
Interest-bearing liabilities: Savings deposits $ 50,232 33
0.26% $ 50,142 48 0.38% Relationship savings 128,198 324 1.01%
123,614 478 1.55% Money market 64,336 131 0.81% 57,454 199 1.39%
NOW accounts 44,208 34 0.31% 41,486 49 0.47% Certificates of
deposits 289,174 1,917 2.65%
279,579 2,231 3.19% Total interest-bearing
deposits 576,148 2,439 1.69% 552,275 3,005 2.18% Borrowed funds
160,469 1,459 3.64% 198,926
1,973 3.97% Total interest-bearing liabilities
736,617 3,898 2.12% 751,201 4,978 2.65% Non-interest-bearing
liabilities 71,916 71,839 Total liabilities 808,533
823,040 Equity 123,662 125,414 Total liabilities and
equity $ 932,195 $ 948,454 Net interest income $ 6,756 $
6,959 Net interest rate spread (3) 2.87% 2.81% Net
interest-earning assets (4) $ 117,242 $ 123,572 Net interest
margin (5) 3.16% 3.18% Average interest-earning assets to
interest-bearing liabilities 115.92% 116.45% (1) Yields and
rates for the three months ended March 31, 2010 and 2009 are
annualized. (2) Includes loans held for sale.
(3) Net interest rate spread
represents the difference between the yield on total average
interest-earning assets and the cost of total average
interest-bearing liabilities for the three months ended March 31,
2010 and 2009.
(4) Net interest-earning assets represents total interest-earning
assets less total interest-bearing liabilities. (5) Net interest
margin represents net interest income divided by average total
interest-earning assets.
Loan Portfolio
Composition:
At March 31, 2010 At
December 31, 2009 Amount Percent
Amount Percent (Dollars in Thousands)
Mortgage loans on real estate: Residential $ 279,419 43.23 % $
285,618 43.12 % Commercial 254,866 39.44 263,910 39.85 Home equity
68,771 10.64 69,625 10.51
603,056 93.31 619,153 93.48 Other loans:
Commercial 31,829 4.93 31,373 4.74 Consumer and other 11,401
1.76 11,791 1.78 43,230 6.69
43,164 6.52 Total loans 646,286 100.00 % 662,317
100.00 % Other Items: Net deferred loan costs 1,373 1,400 Allowance
for loan losses (8,099) (11,089) Total Loans,
net $ 639,560 $ 652,628
Nonperforming Loans:
At March 31, At December 31,
2010 2009 (Dollars in Thousands)
Non-accrual loans: Residential mortgage $ 3,519 $ 4,822
Commercial mortgage 7,974 13,942 Commercial 666 743 Home equity,
consumer and other 9 71 Total
non-accrual loans 12,168 19,578
Loans greater than 90 days delinquent and still accruing:
Residential mortgage - - Commercial mortgage - - Commercial - -
Home equity, consumer and other - -
Total loans 90 days delinquent and still accruing -
- Total non-performing loans 12,168
19,578 Other real estate owned 1,781
1,195 Total non-performing assets (NPAs) $ 13,949
$ 20,773 Troubled debt restructurings included in
NPAs $ 3,514 $ 5,904 Troubled debt restructurings not included in
NPAs 5,526 4,886 Total troubled debt
restructurings $ 9,040 $ 10,790
Ratios:
Non-performing loans to total loans 1.88 % 2.96 % Non-performing
assets to total assets 1.47 % 2.20 %
Securities and Other Investment
Portfolio Composition:
At March 31, 2010 At December
31, 2009
Amortized Cost
Fair Value
Amortized Cost
Fair Value (Dollars in Thousands)
Securities available for sale: Government-sponsored
enterprises (GSE) $ 91,117 $ 91,233 $ 80,393 $ 79,976 Municipal
bonds 17,034 17,359 17,521 17,875 Corporate bonds and other
obligations 1,318 1,347 1,321 1,351 GSE residential mortgage-backed
27,869 28,808 29,591 30,503 U.S. Government guaranteed residential
mortagage-backed 37,471 37,627 33,625
33,636 Total debt securities 174,809 176,374
162,451 163,341 Common stock 3,120 3,821
3,239 4,085 Total securities available for sale
177,929 180,195 165,690 167,426
Securities held to maturity:
Other bonds and obligations 97 97 97 97
Restricted equity securities and other investments: Federal
Home Loan Bank of Boston stock 10,932 10,932 10,932 10,932 Savings
Bank Life Insurance 1,709 1,709 1,709 1,709 Real estate
partnerships 4,296 4,296 4,397 4,397 Other investments 153
153 155 155
Total restricted equity
securitiesand other investments
17,090 17,090 17,193 17,193 Total
securities $ 195,116 $ 197,382 $ 182,980 $ 184,716
Deposit Accounts
Composition:
At March 31, 2010 At December
31, 2009 Balance Percent Balance
Percent (Dollars in Thousands) Deposit
type: Demand $ 68,491 10.36 % $ 75,232 11.55 % Regular savings
51,563 7.80 49,883 7.66 Relationship savings 138,761 20.99 125,328
19.24 Money market deposits 71,453 10.80 63,077 9.68 NOW deposits
43,895 6.64 48,546 7.45 Total
transaction accounts 374,163 56.58 362,066
55.58 Term certificates less than $100,000 172,053 26.02
174,284 26.76 Term certificates $100,000 or more 115,028
17.40 115,028 17.66 Total certificate accounts
287,081 43.42 289,312 44.42 Total
deposits $ 661,244 100.00 % $ 651,378 100.00 %
Reconciliation of Non-GAAP Financial Measures
This press release contains financial information determined by
methods other than in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). The
Company’s management uses these non-GAAP measures in its analysis
of the Company’s performance. These measures typically adjust GAAP
performance measures to exclude significant gains or losses that
are expected to be non-recurring and to exclude the effects of
amortization of intangible assets (in the case of the efficiency
ratio). Because these items and their impact on the Company’s
performance are difficult to predict, management believes that
presentations of financial measures excluding the impact of these
items provide useful supplemental information that is essential to
a proper understanding of the operating results of the Company’s
core businesses. These disclosures should not be viewed as a
substitute for operating results determined in accordance with
GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies.
Three Months Ended March 31, 2010
2009 Net Income
(loss) (GAAP) $ (1,244 ) $ (792 ) Less: (Gain) loss on sale or
impairment of securities, net 198 1,600
Adjustment: Income taxes related
to non-recurring adjustments noted above
(60 ) (488 ) Adjustment to deferred tax valuation reserve -
-
Net Income (Core) $
(1,106 ) $ 320
Efficiency Ratio (As
Reported) 87.4 % 83.6 % Effect of gain or loss on sale or
impairment of securities, net - - Effect of FDIC deposit insurance
special assessment - -
Efficiency Ratio (Core) 87.4 % 83.6
%
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