UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
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or
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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 FOR THE TRANSITION PERIOD FROM ___ TO ____
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COMMISSION FILE NUMBER : 000-51525
LEGACY BANCORP, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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20-3135053
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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99 NORTH STREET
PITTSFIELD, MASSACHUSETTS 01201
(Address of principal executive offices) (Zip Code)
(413) 443-4421
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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
þ
No
o
.
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
o
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 definition of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12(b)-2 of the Exchange Act.
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act).
Yes
o
No
þ
The number
of shares of Common Stock outstanding as of August 4, 2010 was
8,686,812.
LEGACY BANCORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1
PART I FINANCIAL INFORMATION
Item 1: Financial Statements
LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
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June 30,
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December 31,
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2010
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2009
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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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13,028
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$
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11,281
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Short-term investments
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18,859
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28,874
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Cash and cash equivalents
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31,887
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40,155
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Securities Available for sale
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184,560
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167,426
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Securities Held to maturity
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97
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97
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Restricted equity securities and other investments at cost
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18,998
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17,193
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Loans held for sale
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804
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706
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Loans, net of allowance for loan losses of $9,468
in 2010 and $11,089 in 2009
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646,781
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652,628
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Premises and equipment, net
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19,515
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19,568
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Accrued interest receivable
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3,191
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3,306
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Goodwill, net
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11,558
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9,730
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Other intangible assets
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3,816
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2,654
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Net deferred tax asset
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9,231
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10,202
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Bank-owned life insurance
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16,651
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16,263
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Foreclosed assets
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1,336
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1,195
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Other assets
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7,814
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5,142
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$
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956,239
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$
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946,265
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LIABILITIES AND STOCKHOLDERS EQUITY
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Deposits:
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Noninterest-bearing
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$
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70,651
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$
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75,232
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Interest-bearing
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604,125
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576,146
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Total deposits
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674,776
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651,378
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Securities sold under agreements to repurchase
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3,927
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6,386
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Federal Home Loan Bank advances
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148,595
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160,352
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Mortgagors escrow accounts
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930
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1,058
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Accrued expenses and other liabilities
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9,125
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5,724
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Total liabilities
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837,353
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824,898
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Commitments and contingencies
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Stockholders Equity
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Preferred Stock ($.01 par value, 10,000,000 shares
authorized, none issued or outstanding)
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Common Stock ($.01 par value, 40,000,000 shares
authorized and 10,308,600 issued at June 30, 2010 and
December 31, 2009; 8,701,712 outstanding at June 30, 2010
and 8,734,712 outstanding at December 31, 2009)
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103
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103
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Additional paid-in-capital
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102,951
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102,788
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Unearned Compensation ESOP
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(6,956
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)
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(7,322
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)
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Unearned Compensation Equity Incentive Plans
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(1,729
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)
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(2,078
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)
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Retained earnings
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45,395
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48,998
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Accumulated other comprehensive income
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1,191
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711
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Treasury stock, at cost (1,606,888 shares at June 30, 2010
and 1,573,888 shares at December 31, 2009)
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(22,069
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)
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(21,833
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)
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Total stockholders equity
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118,886
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121,367
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$
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956,239
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$
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946,265
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See accompanying notes to consolidated financial statements
2
LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2010
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2009
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2010
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2009
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(Unaudited)
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(Unaudited)
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Interest and dividend income:
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Loans
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$
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9,027
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$
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9,803
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$
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18,323
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$
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19,835
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Securities:
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Taxable
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1,243
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1,613
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2,428
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3,359
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Tax-Exempt
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160
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168
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327
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322
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Short-term investments
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7
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3
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13
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7
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Total interest and dividend income
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10,437
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11,587
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21,091
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23,523
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Interest expense:
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Deposits
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2,278
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2,798
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4,717
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5,804
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Federal Home Loan Bank advances
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1,402
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1,859
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|
2,851
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|
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3,813
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Other borrowed funds
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8
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|
18
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|
19
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36
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Total interest expense
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3,688
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|
4,675
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7,587
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9,653
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Net interest income
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6,749
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|
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6,912
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13,504
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|
|
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13,870
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Provision for loan losses
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3,756
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1,506
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6,176
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2,234
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Net interest income after provision for loan losses
|
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2,993
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|
|
5,406
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|
|
|
7,328
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11,636
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|
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|
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|
|
|
|
|
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|
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Non-interest income:
|
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|
|
|
|
|
|
|
|
|
|
|
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Customer service fees
|
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|
764
|
|
|
|
725
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|
|
1,485
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|
|
1,404
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|
Portfolio management fees
|
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|
480
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|
|
|
269
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|
|
|
761
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|
|
|
490
|
|
Income from bank owned life insurance
|
|
|
142
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|
|
|
156
|
|
|
|
297
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|
|
|
329
|
|
Insurance, annuities and mutual fund fees
|
|
|
64
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|
|
|
37
|
|
|
|
83
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|
|
|
59
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|
Gain on sales of securities, net
|
|
|
1,129
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|
|
|
60
|
|
|
|
1,230
|
|
|
|
42
|
|
Impairment losses on securities, net
|
|
|
(66
|
)
|
|
|
(1,430
|
)
|
|
|
(365
|
)
|
|
|
(3,011
|
)
|
Gain on sales of loans, net
|
|
|
70
|
|
|
|
370
|
|
|
|
131
|
|
|
|
570
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Miscellaneous
|
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|
48
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|
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|
11
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|
59
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|
|
|
23
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|
|
|
|
|
|
|
|
|
|
|
|
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Total non-interest income
|
|
|
2,631
|
|
|
|
198
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|
|
|
3,681
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(94
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)
|
|
|
|
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|
|
|
|
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Non-interest expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Salaries and employee benefits
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|
3,717
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|
|
|
3,451
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|
|
|
7,193
|
|
|
|
6,896
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|
Occupancy and equipment
|
|
|
991
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|
|
|
1,021
|
|
|
|
1,982
|
|
|
|
2,070
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|
Data processing
|
|
|
760
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|
|
|
671
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|
|
|
1,454
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|
|
|
1,334
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Professional fees
|
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|
268
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|
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|
232
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|
|
|
591
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|
|
|
477
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Advertising
|
|
|
381
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|
|
|
379
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|
|
|
700
|
|
|
|
705
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|
FDIC deposit insurance
|
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|
271
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|
|
|
665
|
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|
|
540
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|
|
|
897
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|
Other general and administrative
|
|
|
1,377
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|
|
|
1,231
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|
|
|
2,479
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|
|
|
2,348
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expenses
|
|
|
7,765
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|
|
|
7,650
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|
|
|
14,939
|
|
|
|
14,727
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Loss before income taxes
|
|
|
(2,141
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)
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|
|
(2,046
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)
|
|
|
(3,930
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)
|
|
|
(3,185
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Benefit for income taxes
|
|
|
(765
|
)
|
|
|
(553
|
)
|
|
|
(1,310
|
)
|
|
|
(900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,376
|
)
|
|
$
|
(1,493
|
)
|
|
$
|
(2,620
|
)
|
|
$
|
(2,285
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
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Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.17
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.29
|
)
|
Diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.29
|
)
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,020,690
|
|
|
|
7,979,133
|
|
|
|
8,024,633
|
|
|
|
7,978,768
|
|
Diluted
|
|
|
8,020,690
|
|
|
|
7,979,133
|
|
|
|
8,024,633
|
|
|
|
7,978,768
|
|
See accompanying notes to consolidated financial statements
3
LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Unearned
|
|
|
Compensation -
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Compensation -
|
|
|
Equity
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
ESOP
|
|
|
Incentive Plan
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
Balance at December 31, 2008
|
|
|
8,781,912
|
|
|
$
|
103
|
|
|
$
|
102,475
|
|
|
$
|
(8,055
|
)
|
|
$
|
(2,727
|
)
|
|
$
|
58,534
|
|
|
$
|
(4,722
|
)
|
|
$
|
(21,466
|
)
|
|
$
|
124,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,285
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,285
|
)
|
Net unrealized gain/loss on securities
available for sale, net of reclassification
adjustment and tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,638
|
|
|
|
|
|
|
|
1,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared ($0.05 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(804
|
)
|
|
|
|
|
|
|
|
|
|
|
(804
|
)
|
Common stock repurchased - 5% stock repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program announced March 2009
|
|
|
(22,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(236
|
)
|
|
|
(236
|
)
|
Stock option expense
|
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
Restricted stock expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420
|
|
Common stock held by ESOP committed
to be released (27,490 shares)
|
|
|
|
|
|
|
|
|
|
|
(92
|
)
|
|
|
366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
8,759,712
|
|
|
$
|
103
|
|
|
$
|
102,620
|
|
|
$
|
(7,689
|
)
|
|
$
|
(2,307
|
)
|
|
$
|
55,445
|
|
|
$
|
(3,084
|
)
|
|
$
|
(21,702
|
)
|
|
$
|
123,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
8,734,712
|
|
|
$
|
103
|
|
|
$
|
102,788
|
|
|
$
|
(7,322
|
)
|
|
$
|
(2,078
|
)
|
|
$
|
48,998
|
|
|
$
|
711
|
|
|
$
|
(21,833
|
)
|
|
$
|
121,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,620
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,620
|
)
|
Net unrealized gain/loss on securities
available for sale, net of reclassification
adjustment and tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
480
|
|
|
|
|
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared ($0.05 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
(803
|
)
|
Common stock repurchased - 5% stock repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program announced March 2009
|
|
|
(43,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(400
|
)
|
|
|
(400
|
)
|
Stock option expense
|
|
|
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143
|
|
Restricted stock expense
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462
|
|
Issuance of restricted stock
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
164
|
|
|
|
|
|
Common stock held by ESOP committed
to be released (27,490 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
366
|
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
|
8,701,712
|
|
|
$
|
103
|
|
|
$
|
102,951
|
|
|
$
|
(6,956
|
)
|
|
$
|
(1,729
|
)
|
|
$
|
45,395
|
|
|
$
|
1,191
|
|
|
$
|
(22,069
|
)
|
|
$
|
118,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
4
LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,620
|
)
|
|
$
|
(2,285
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
6,176
|
|
|
|
2,234
|
|
Net amortization of securities
|
|
|
394
|
|
|
|
249
|
|
Amortization of intangible assets
|
|
|
389
|
|
|
|
345
|
|
Depreciation and amortization expense
|
|
|
794
|
|
|
|
807
|
|
(Gain) loss on sales/impairment of securities, net
|
|
|
(865
|
)
|
|
|
2,969
|
|
Loss on sales/writedowns of foreclosed real estate,
net
|
|
|
264
|
|
|
|
|
|
Gain on sales of loans, net
|
|
|
(131
|
)
|
|
|
(570
|
)
|
Loans originated for sale
|
|
|
(11,245
|
)
|
|
|
(42,660
|
)
|
Proceeds from sales of loans
|
|
|
11,278
|
|
|
|
43,108
|
|
Share-based compensation expense
|
|
|
605
|
|
|
|
657
|
|
Deferred tax provision (benefit)
|
|
|
728
|
|
|
|
(434
|
)
|
Employee Stock Ownership Plan expense
|
|
|
257
|
|
|
|
274
|
|
Net change in:
|
|
|
|
|
|
|
|
|
Bank-owned life insurance
|
|
|
(388
|
)
|
|
|
(331
|
)
|
Accrued interest receivable
|
|
|
115
|
|
|
|
72
|
|
Other assets
|
|
|
(2,672
|
)
|
|
|
157
|
|
Accrued expenses and other liabilities
|
|
|
3,401
|
|
|
|
(1,678
|
)
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
6,480
|
|
|
|
2,914
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Activity in available-for-sale securities:
|
|
|
|
|
|
|
|
|
Sales
|
|
|
20,370
|
|
|
|
28,868
|
|
Maturities, prepayments and calls
|
|
|
64,421
|
|
|
|
34,567
|
|
Purchases
|
|
|
(100,408
|
)
|
|
|
(91,245
|
)
|
Purchase of other investments
|
|
|
(2,130
|
)
|
|
|
(673
|
)
|
Maturities, Prepayments and calls of other investments
|
|
|
2
|
|
|
|
|
|
Loan originations and purchases, net of principal payments
|
|
|
(1,977
|
)
|
|
|
21,209
|
|
Additions to premises and equipment
|
|
|
(741
|
)
|
|
|
(565
|
)
|
Additions to goodwill
|
|
|
(1,828
|
)
|
|
|
|
|
Additions to other intangible assets
|
|
|
(1,551
|
)
|
|
|
|
|
Net cash received in branch acquisition
|
|
|
|
|
|
|
9,031
|
|
Proceeds from sales of foreclosed assets
|
|
|
1,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing
activities
|
|
|
(22,599
|
)
|
|
|
1,192
|
|
|
|
|
|
|
|
|
(continued)
See accompanying notes to consolidated financial statements.
5
LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
23,398
|
|
|
|
18,256
|
|
Net (decrease) increase in securities sold under
agreements to repurchase
|
|
|
(2,459
|
)
|
|
|
1,245
|
|
Repayment of Federal Home Loan Bank advances
|
|
|
(16,625
|
)
|
|
|
(21,503
|
)
|
Proceeds from Federal Home Loan Bank advances
|
|
|
4,868
|
|
|
|
|
|
Net increase in mortgagors escrow accounts
|
|
|
(128
|
)
|
|
|
(83
|
)
|
Repurchase of common stock
|
|
|
(400
|
)
|
|
|
(236
|
)
|
Payment of dividends on common stock
|
|
|
(803
|
)
|
|
|
(804
|
)
|
|
|
|
|
|
|
|
Net cash provided
(used) by financing
activities
|
|
|
7,851
|
|
|
|
(3,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(8,268
|
)
|
|
|
981
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
40,155
|
|
|
|
33,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
31,887
|
|
|
$
|
34,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid on deposits
|
|
$
|
4,758
|
|
|
$
|
5,901
|
|
Interest paid on Federal Home Loan Bank advances
|
|
|
2,858
|
|
|
|
3,907
|
|
Interest paid on other borrowed funds
|
|
|
19
|
|
|
|
36
|
|
Income taxes paid
|
|
|
220
|
|
|
|
710
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
Real estate acquired through foreclosure
|
|
|
1,648
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
6
LEGACY BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of
Legacy Bancorp, Inc. (the Company) and its wholly-owned subsidiaries, LB Funding Corporation and
Legacy Banks (the Bank). The accounts of the Bank include all of its wholly-owned subsidiaries.
These financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) for interim financial statements and the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, the information reflects all adjustments (consisting solely of normal
recurring adjustments) that are necessary for a fair presentation.
Financial tables are presented in thousands ($000s) unless
otherwise indicated. The results shown for the
interim period ended June 30, 2010 are not necessarily indicative of the results to be obtained for
the year ending December 31, 2010. These consolidated interim financial statements should be read
in conjunction with the audited consolidated financial statements and notes thereto included in the
Companys most recent Annual Report on Form 10-K filed by the Company with the Securities and
Exchange Commission for the year ended December 31, 2009.
2. Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued guidance changing the
accounting principles and disclosures requirements related to securitizations and special-purpose
entities. Specifically, this guidance eliminates the concept of a qualifying special-purpose
entity, changes the requirements for derecognizing financial assets and changes how a company
determines when an entity that is insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. This guidance also expands existing disclosure
requirements to include more information about transfers of financial assets, including
securitization transactions, and where companies have continuing exposure to the risks related to
transferred financial assets. This guidance is effective as of the beginning of each reporting
entitys first annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period and for interim and annual reporting periods thereafter.
The recognition and measurement provisions regarding transfers of financial assets shall be applied
to transfers that occur on or after the effective date. The Company adopted this new guidance on
January 1, 2010, as required, and it did not have any impact on the Companys consolidated
financial statements.
In March 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-09 amending FASB ASC
Topic 855 to exclude SEC reporting entities from the requirement to disclose the date on which
subsequent events have been evaluated. It further modifies the requirement to disclose the date on
which subsequent events have been evaluated in reissued financial statements to apply only to such
statements that have been restated to correct an error or to apply U.S. GAAP retrospectively. The
Company has complied with ASU No. 2010-09.
In January 2010, the FASB issued ASU No. 2010-06- Fair Value Measurements and Disclosures amending
Topic 820. The ASU provides for additional disclosures of transfers between assets and liabilities
valued under Level 1 and 2 inputs as well as additional disclosures regarding those assets and
liabilities valued under Level 3 inputs. The new disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009 except for those provisions addressing Level 3
fair value measurements which provisions are effective for fiscal years, and periods therein,
beginning after December 15, 2010. The adoption of this Statement did not have a material impact on
the Companys consolidated financial statements.
In July 2010, the FASB issued ASU No. 2010-20,
Receivables (Topic 310), Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses.
This Update requires
an entity to provide disclosures that facilitate financial statement users evaluation of (1) the
nature of credit risk inherent in the entitys loan portfolio (2) how that risk is analyzed and
assessed in arriving at the allowance for loan and lease losses and (3) the changes and reasons for
those changes in the allowance for loan and lease losses. For public entities, the disclosures as
of the end of a reporting period are effective for interim and annual reporting periods ending on
or after December 15, 2010. The disclosures about activity that occurs during a reporting period
are effective for interim and annual reporting periods beginning on or after December 15, 2010. The
adoption of this Update will require significant additional disclosures in the December 31, 2010
financial statements and subsequent financial statements.
3. Earnings Per Share
Basic earnings per share is determined by dividing net income by the weighted-average number of net
outstanding shares of common stock for the period. The net outstanding shares of common stock
equals the gross number of shares of common stock issued less the average unallocated shares of the
Legacy Banks Employee Stock Ownership Plan (ESOP), the average number of treasury shares and the
average number of unvested shares related to restricted stock awards. Diluted earnings per share
is determined by dividing net income by the average number of net outstanding common shares
computed as if all potential common shares have been issued by the Company. Potential common
shares to be issued would include those related to outstanding options and unvested stock awards.
The diluted earnings per share calculation for the three and six months ended June 30, 2010
excludes 828,480 of stock options and 198,890 unvested shares of restricted stock whose effect
would have been antidilutive. Earnings per share have been computed as follows:
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net loss applicable to common stock
(000s)
|
|
$
|
(1,376
|
)
|
|
$
|
(1,493
|
)
|
|
$
|
(2,620
|
)
|
|
$
|
(2,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares issued
|
|
|
10,308,600
|
|
|
|
10,308,600
|
|
|
|
10,308,600
|
|
|
|
10,308,600
|
|
Less: average unallocated ESOP shares
|
|
|
(535,897
|
)
|
|
|
(590,725
|
)
|
|
|
(542,731
|
)
|
|
|
(597,710
|
)
|
Less: average treasury shares
|
|
|
(1,598,178
|
)
|
|
|
(1,540,002
|
)
|
|
|
(1,589,860
|
)
|
|
|
(1,533,382
|
)
|
Less: average unvested restricted stock awards
|
|
|
(153,835
|
)
|
|
|
(198,740
|
)
|
|
|
(151,376
|
)
|
|
|
(198,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of basic shares outstanding
|
|
|
8,020,690
|
|
|
|
7,979,133
|
|
|
|
8,024,633
|
|
|
|
7,978,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: dilutive unvested restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: diluted stock option shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of diluted shares outstanding
|
|
|
8,020,690
|
|
|
|
7,979,133
|
|
|
|
8,024,633
|
|
|
|
7,978,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.17
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.29
|
)
|
Diluted earnings (loss) per share
|
|
$
|
(0.17
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.29
|
)
|
4. Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses, gains and losses be
included in net income. Although certain changes in assets and liabilities are reported as a
separate component of the equity section of the balance sheet, such items, along with net income
are components of comprehensive income.
The components of other comprehensive income (loss) and related tax effects for available-for-sale
securities follows:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Securities
|
|
|
|
|
|
|
|
|
Net unrealized holding gains on available for sale (AFS)
securities
|
|
$
|
1,911
|
|
|
$
|
1,193
|
|
Reclassification
adjustment for gains on sales of AFS securities
|
|
|
(1,230
|
)
|
|
|
(42
|
)
|
Reclassification adjustment for OTTI losses on AFS securities
|
|
|
42
|
|
|
|
1,474
|
|
|
|
|
|
|
|
|
|
|
|
723
|
|
|
|
2,625
|
|
Tax effect
|
|
|
(243
|
)
|
|
|
(987
|
)
|
|
|
|
|
|
|
|
Net-of-tax amount
|
|
$
|
480
|
|
|
$
|
1,638
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income (loss) included in stockholders
equity are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
Securities
|
|
|
|
|
|
|
|
|
Net unrealized holding gains on available for sale securities
|
|
$
|
2,459
|
|
|
$
|
1,736
|
|
Tax effects
|
|
|
(907
|
)
|
|
|
(664
|
)
|
|
|
|
|
|
|
|
Net-of-tax amount
|
|
|
1,552
|
|
|
|
1,072
|
|
|
|
|
|
|
|
|
Directors Fee Plan
|
|
|
|
|
|
|
|
|
Unrecognized net actuarial loss and prior
service costs
|
|
|
(611
|
)
|
|
|
(611
|
)
|
Tax effect
|
|
|
250
|
|
|
|
250
|
|
|
|
|
|
|
|
|
Net-of-tax amount
|
|
|
(361
|
)
|
|
|
(361
|
)
|
|
|
|
|
|
|
|
|
|
$
|
1,191
|
|
|
$
|
711
|
|
|
|
|
|
|
|
|
8
5. Dividends
On June 2, 2010, the Company declared a cash dividend of $0.05 per share of common stock which was
paid on July 1, 2010 to shareholders of record as of the close of business on June 20, 2010.
6. Commitments and Other Contingencies
Outstanding loan commitments and other contingencies totaled $101.2 million at June 30, 2010,
compared to $134.3 million as of December 31, 2009. Loan commitments and other contingencies
primarily consist of commitments to originate new loans as well as the outstanding unused portions
of home equity and other lines of credit, unadvanced funds on construction loans and commercial
real estate partnership capital commitments.
The Company provides certain health and dental care and life insurance benefits for certain retired
employees. The total expense recognized in connection with these post-retirement benefits for the
three and six month period ended June 30, 2010 was $3,000 and $6,000 respectively.
7. Wealth Management Company Acquisition
On April 30, 2010, Legacy Banks acquired substantially
all of the assets of the Renaissance
Investment Group, Inc., a wealth management company located in
Pittsfield, Massachusetts. The purchase price included an estimated contingent portion which is based upon
forecasted gross revenue through September 30, 2011. The estimated contingent component may increase or decrease based
upon actual gross revenue recorded over that period. The
purchase price allocation resulted in approximately $1.6 million of customer list and other
intangibles, $1.8 million of goodwill and $5,000 of property and
equipment. The goodwill and customer list intangible is expected to
be deducted for tax purposes over a period of 15 years.
The consolidated
financial statements of the Company for the six months ended June 30, 2010 include $201,000 of
gross revenue and $193,000 of operating expenses, including approximately $27,000 of amortization
of acquisition related intangibles.
Through June 30, 2010, the Company has also expensed approximately
$54,000 of professional fees directly related to the acquisition. The Company anticipates further efficiencies as it continues
to consolidate its wealth management division, Legacy Portfolio Management, into Renaissance.
8. Securities
The amortized cost and estimated fair value of securities, with gross unrealized gains and losses,
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
109,661
|
|
|
$
|
718
|
|
|
$
|
(5
|
)
|
|
$
|
110,374
|
|
Municipal
|
|
|
12,060
|
|
|
|
298
|
|
|
|
(30
|
)
|
|
|
12,328
|
|
Corporate and other
|
|
|
1,315
|
|
|
|
28
|
|
|
|
|
|
|
|
1,343
|
|
GSE residential mortgage-backed
|
|
|
16,768
|
|
|
|
865
|
|
|
|
(2
|
)
|
|
|
17,631
|
|
U.S. Government guaranteed residential
mortgage-backed
|
|
|
39,217
|
|
|
|
887
|
|
|
|
(49
|
)
|
|
|
40,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
179,021
|
|
|
|
2,796
|
|
|
|
(86
|
)
|
|
|
181,731
|
|
|
Marketable equity securities
|
|
|
3,080
|
|
|
|
74
|
|
|
|
(325
|
)
|
|
|
2,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
182,101
|
|
|
$
|
2,870
|
|
|
$
|
(411
|
)
|
|
$
|
184,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
|
$
|
97
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2009
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
80,393
|
|
|
$
|
138
|
|
|
$
|
(555
|
)
|
|
$
|
79,976
|
|
Municipal
|
|
|
17,521
|
|
|
|
398
|
|
|
|
(44
|
)
|
|
|
17,875
|
|
Corporate and other
|
|
|
1,321
|
|
|
|
30
|
|
|
|
|
|
|
|
1,351
|
|
GSE residential mortgage-backed
|
|
|
29,591
|
|
|
|
983
|
|
|
|
(71
|
)
|
|
|
30,503
|
|
U.S. Government guaranteed residential
mortgage-backed
|
|
|
33,625
|
|
|
|
248
|
|
|
|
(237
|
)
|
|
|
33,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
162,451
|
|
|
|
1,797
|
|
|
|
(907
|
)
|
|
|
163,341
|
|
|
Marketable equity securities
|
|
|
3,239
|
|
|
|
889
|
|
|
|
(43
|
)
|
|
|
4,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
165,690
|
|
|
$
|
2,686
|
|
|
$
|
(950
|
)
|
|
$
|
167,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
|
$
|
97
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost and estimated fair value of debt securities by contractual maturity at June
30, 2010 is as follows. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call or prepayment
penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Held to Maturity
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
Within 1 year
|
|
$
|
5,067
|
|
|
$
|
5,087
|
|
|
$
|
|
|
|
$
|
|
|
Over 1 year to 5 years
|
|
|
70,166
|
|
|
|
70,736
|
|
|
|
82
|
|
|
|
82
|
|
Over 5 years to 10 years
|
|
|
32,721
|
|
|
|
32,982
|
|
|
|
|
|
|
|
|
|
Over 10 years
|
|
|
15,082
|
|
|
|
15,240
|
|
|
|
15
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bonds and obligations
|
|
|
123,036
|
|
|
|
124,045
|
|
|
|
97
|
|
|
|
97
|
|
|
Mortgage-backed
|
|
|
55,985
|
|
|
|
57,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
$
|
179,021
|
|
|
$
|
181,731
|
|
|
$
|
97
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2010 and 2009, proceeds from the sale and call of
securities available for sale amounted to $25.6 million and $21.4 million respectively. Gross
gains of $1,154,000 and $356,000, respectively, and gross losses of $34,000 and $296,000,
respectively, were realized on those sales. Gross gains on called securities were $41,000, and
gross losses were $32,000 in the three months ended 2010.
For the six months ended June 30, 2010 and 2009, proceeds from the sale and call of securities
available for sale amounted to $33.8 million and $56.6 million respectively. Gross gains of
$1,379,000 and $742,000, respectively, and gross losses of $145,000 and $700,000, respectively,
were realized on those sales. Gross gains on called securities were $47,000, and gross losses were
$51,000 in the six months ended 2010.
Information pertaining to securities with gross unrealized losses aggregated by investment category
and length of time that individual securities have been in a continuous loss position follows:
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than Twelve Months
|
|
|
Over Twelve Months
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
5
|
|
|
$
|
5,748
|
|
|
$
|
|
|
|
$
|
|
|
Municipal
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
2,242
|
|
GSE residential mortgage-backed
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
385
|
|
U.S. Government guaranteed residential
mortgage-backed
|
|
|
20
|
|
|
|
2,265
|
|
|
|
29
|
|
|
|
3,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
25
|
|
|
|
8,013
|
|
|
|
61
|
|
|
|
5,944
|
|
|
Marketable equity securities
|
|
|
264
|
|
|
|
1,570
|
|
|
|
61
|
|
|
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
289
|
|
|
$
|
9,583
|
|
|
$
|
122
|
|
|
$
|
6,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
555
|
|
|
$
|
46,751
|
|
|
$
|
|
|
|
$
|
|
|
Municipal
|
|
|
2
|
|
|
|
818
|
|
|
|
42
|
|
|
|
2,472
|
|
GSE residential mortgage-backed
|
|
|
38
|
|
|
|
2,983
|
|
|
|
33
|
|
|
|
1,779
|
|
U.S. Government guaranteed residential
mortgage-backed
|
|
|
237
|
|
|
|
19,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
832
|
|
|
|
69,723
|
|
|
|
75
|
|
|
|
4,251
|
|
Marketable equity securities
|
|
|
35
|
|
|
|
472
|
|
|
|
8
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
867
|
|
|
$
|
70,195
|
|
|
$
|
83
|
|
|
$
|
4,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management evaluates securities for other-than-temporary impairment (OTTI) at least on a
quarterly basis, and more frequently when economic or market concerns warrant such evaluation. At
June 30, 2010, temporarily impaired debt and mortgage-backed securities have unrealized losses from
the Companys amortized cost basis as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
# of
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
% of
|
|
|
|
Securities
|
|
|
Cost
|
|
|
Loss
|
|
|
Depreciation
|
|
Government-sponsored enterprises (GSE)
|
|
|
5
|
|
|
$
|
5,753
|
|
|
$
|
5
|
|
|
|
0.1
|
%
|
Municipal
|
|
|
5
|
|
|
|
2,272
|
|
|
|
30
|
|
|
|
1.3
|
%
|
GSE residential mortgage-backed
|
|
|
1
|
|
|
|
387
|
|
|
|
2
|
|
|
|
0.5
|
%
|
U.S. Government guaranteed residential mortgage-backed
|
|
|
8
|
|
|
|
5,631
|
|
|
|
49
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses on the Companys investment in debt securities and mortgage-backed
securities issued by the U.S. government, government-sponsored enterprises and municipal
governments were generally caused by interest rate changes. These investments are guaranteed or
sponsored by the U.S. Government, an agency thereof, or by a municipal government. Accordingly, it
is expected that the securities would not be settled at a price less than the par value of the
investment. Because the decline in market value is attributable to changes in interest rates and
not to credit quality, and because the Company has not decided to sell the securities, and it is
more likely than not it will not have to sell the securities before recovery of its cost basis, the Company does not
consider these investments to be other-than-temporarily impaired at June 30, 2010.
At June 30, 2010, twenty-three marketable equity securities have unrealized losses with aggregate
depreciation of 13.6% from the Companys cost basis. Although some issuers may have shown declines
in earnings as a result of the weakened economy, the Company has evaluated the near-term prospects
of the issuers in relation to the severity and duration of the depreciation of value and has
analyzed the issuers financial condition and financial performance as well as industry analysts
reports. Based on that evaluation as well as the Companys ability and intent to hold these
investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the
Company does not consider these investments to be other-than-temporarily impaired at June 30, 2010.
For the quarter ended June 30, 2010 the Company recognized OTTI losses totaling $42,000 on its
investment in one marketable equity security. For the six months ended June 30, 2010 the Company
recognized OTTI losses totaling $341,000 on its investment in one marketable equity security as
well as certain commercial real estate partnerships which are carried at cost and evaluated for
impairment quarterly based on an analysis of the financial statements of the partnerships and
underlying real estate projects. At June 30, 2010 the Company had potential additional capital
calls of approximately $4.4 million related to these partnership investments. These investments
are not redeemable and the Company does not intend to sell any part of these investments at this
time. The partnerships have a limited life of up to seven years over which the underlying assets
are expected to be liquidated by the partnerships.
11
9. Fair Values of Assets and Liabilities
The Company groups its assets and liabilities measured at fair value in three levels, based on the
markets in which the assets and liabilities are traded and the reliability of the assumptions used
to determine fair value, as follows:
|
|
Level 1 Valuation is based on quoted prices in active markets for identical assets or
liabilities. Level 1 assets and liabilities generally include debt and equity securities
that are traded in an active exchange market. Valuations are obtained from readily
available pricing sources for market transactions involving identical assets or
liabilities.
|
|
|
Level 2 Valuation is based on observable inputs other than Level 1 prices, such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
|
|
|
Level 3 Valuation is based on unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the assets or liabilities.
Level 3 assets and liabilities include financial instruments whose value is determined
using unobservable inputs to pricing models, discounted cash flow methodologies, or
similar techniques, as well as instruments for which the determination of fair value
requires significant management judgment or estimation.
|
The following methods and assumptions were used by the Company in estimating fair value
disclosures:
|
|
Cash and cash equivalents
The carrying amounts of cash and short-term
instruments approximate fair values based on the short-term nature of the assets.
|
|
|
Interest-bearing deposits in banks
The carrying amounts of interest-bearing
deposits maturing within ninety days approximate their fair values. Fair values of other
interest-bearing deposits are estimated using discounted cash flow analyses based on
current market rates for similar types of deposits.
|
|
|
Securities available for sale
The securities measured at fair value in Level 1
are based on quoted market prices in an active exchange market. These securities include
marketable equity securities. Securities measured at fair value in Level 2 are based on
independent market-based prices received from a third-party pricing service who utilizes
pricing models that consider standard input factors such as observable market data,
benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and
new issue data. These securities include debt and mortgage-backed securities issued by
government-sponsored enterprises including Federal Home Loan Mortgage Corporation (FHLMC)
Federal National Mortgage Association (FNMA) and Government National Mortgage Association
(GNMA) bonds, municipal bonds and corporate and other securities. The Company does not
have any securities measured at fair value in Level 3 as of June 30, 2010.
|
|
|
Federal Home Loan Bank stock
The fair value is based upon the redemption value
of the stock which equates to its carrying value.
|
|
|
Restricted equity securities and other investments
The carrying value of
restricted equity securities represents redemption value and, therefore, approximates
fair value. The fair value of other non-marketable equity securities is estimated based
on consideration of credit exposure. Investments measures at fair value in Level 3
include the Banks investment in certain real
estate partnerships, the value of which are based on an analysis of the financial
statements of the partnerships and underlying real estate projects.
|
|
|
Loans receivable
Fair values for certain mortgage loans (e.g., one-to-four
family residential) are based on quoted market prices of similar loans sold in
conjunction with securitization transactions adjusted for differences in loan
characteristics. Fair values for other loans (e.g., commercial real estate and investment
property mortgage loans, commercial and industrial loans and consumer loans) are
estimated using discounted cash flow analyses using market interest rates currently being
offered for loans with similar terms to borrowers of similar credit quality.
Non-performing loans are assumed to be carried at their current fair value.
|
|
|
Deposit liabilities
The fair values disclosed for demand deposits (e.g.,
interest and non-interest checking, passbook savings, and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the reporting date
(i.e., their carrying amounts). The carrying amounts of certificates of deposit (CDs)
originated by the company are valued using a replacement cost of funds approach and are
discounted to a 12 district FHLB average curve. Fair values for brokered time deposits
are also valued using a replacement cost of funds approach and are discounted to the
brokered CD curve.
|
|
|
Short-term borrowings
For short-term borrowings maturing within ninety days,
carrying values approximate fair values. Fair values of other short-term borrowings are
estimated using discounted cash flow analyses based on the current incremental borrowing
rates in the market for similar types of borrowing arrangements.
|
|
|
Long-term borrowings
The fair values of the Companys long-term borrowings are
estimated using discounted cash flow analyses based on the current incremental borrowing
rates in the market for similar types of borrowing arrangements.
|
12
|
|
Accrued interest
The carrying amounts of accrued interest approximate fair
value.
|
Assets measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
|
|
|
$
|
110,374
|
|
|
$
|
|
|
|
$
|
110,374
|
|
Municipal bonds
|
|
|
|
|
|
|
12,328
|
|
|
|
|
|
|
|
12,328
|
|
Corporate bonds and other obligations
|
|
|
|
|
|
|
1,343
|
|
|
|
|
|
|
|
1,343
|
|
GSE residential mortgage-backed
|
|
|
|
|
|
|
17,631
|
|
|
|
|
|
|
|
17,631
|
|
U.S. Government guaranteed residential
mortagage-backed
|
|
|
|
|
|
|
40,055
|
|
|
|
|
|
|
|
40,055
|
|
Common stock
|
|
|
2,829
|
|
|
|
|
|
|
|
|
|
|
|
2,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
2,829
|
|
|
|
181,731
|
|
|
|
|
|
|
|
184,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,829
|
|
|
$
|
181,731
|
|
|
$
|
|
|
|
$
|
184,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
|
|
|
$
|
79,976
|
|
|
$
|
|
|
|
$
|
79,976
|
|
Municipal bonds
|
|
|
|
|
|
|
17,875
|
|
|
|
|
|
|
|
17,875
|
|
Corporate bonds and other obligations
|
|
|
|
|
|
|
1,351
|
|
|
|
|
|
|
|
1,351
|
|
GSE residential mortgage-backed
|
|
|
|
|
|
|
30,503
|
|
|
|
|
|
|
|
30,503
|
|
U.S. Government guaranteed residential
mortagage-backed
|
|
|
|
|
|
|
33,636
|
|
|
|
|
|
|
|
33,636
|
|
Common stock
|
|
|
4,085
|
|
|
|
|
|
|
|
|
|
|
|
4,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
4,085
|
|
|
|
163,341
|
|
|
|
|
|
|
|
167,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,085
|
|
|
$
|
163,341
|
|
|
$
|
|
|
|
$
|
167,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no transfers to or from Levels 1 and 2 during the six months ended June 30, 2010.
There were no liabilities measured at fair value at June 30, 2010 or December 31, 2009.
Also, the Company may be required, from time to time, to measure certain other assets or
liabilities on a nonrecurring basis in accordance with GAAP. These adjustments to fair value
usually result from application of lower-of-cost-or-market accounting or write-downs of individual
assets. The following table summarizes the fair value hierarchy used to determine each adjustment
and the carrying value of the related individual assets as of June 30, 2010 and 2009. The gains or
losses represent the amount of the write-down recorded during the periods noted on the assets held
at period end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Ended
|
|
|
|
June 30, 2010
|
|
|
June 30, 2010
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Gains/(Losses)
|
|
|
Gains/(Losses)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18,801
|
|
|
$
|
(3,302
|
)
|
|
$
|
(5,405
|
)
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
6,357
|
|
|
|
(24
|
)
|
|
|
(323
|
)
|
Foreclosed assets
|
|
|
|
|
|
|
|
|
|
|
1,336
|
|
|
|
(189
|
)
|
|
|
(264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
|
|
|
$
|
|
|
|
$
|
26,494
|
|
|
$
|
(3,515
|
)
|
|
$
|
(5,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2009
|
|
|
June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Gains/(Losses)
|
|
|
Gains/(Losses)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
10,489
|
|
|
$
|
|
|
|
$
|
(1,502
|
)
|
|
$
|
(2,056
|
)
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
|
|
|
$
|
10,489
|
|
|
$
|
|
|
|
$
|
(1,502
|
)
|
|
$
|
(2,056
|
)
|
|
|
|
|
|
|
|
|
|
13
Impaired loans level 3: Certain impaired loans held for investment were written down to the
fair value, less costs to sell, of the underlying collateral securing these loans of $18.8 million,
resulting in a loss of $3.3 million and $5.4 million, respectively, for the three and six months
ended June 30, 2010, which was recognized in earnings through the provision for loan losses. The
fair value of the collateral used by the Company represents that amount expected to be received
from the sale of the property as determined by an independent, licensed or certified appraiser in
accordance with Uniform Standards of Professional Appraisal Practice, using observable market data
and discounted as considered necessary by management based on the date of valuation and new
information deemed relevant to the valuation.
Other investments level 3: Equity investments in certain real estate partnerships were deemed
impaired and adjusted to fair value based on an analysis of the financial statements of the
partnerships and underlying real estate projects. This adjustment resulted in a loss of $24,000 and
$323,000, respectively, for the three and six months ended June 30, 2010 which was recognized
through OTTI charges.
Foreclosed assets level 3: Foreclosed assets were deemed impaired and adjusted to fair value
through either the provision for loan losses or other expenses as a loss on other real estate
owned. The fair value of foreclosed assets is that amount expected to be received from the sale of
the property as determined by an independent, licensed or certified appraiser in accordance with
Uniform Standards of Professional Appraisal Practice, using observable market data.
Summary of Fair Values of Financial Instruments
The estimated fair values, and related carrying or notional amounts, of the Companys financial
instruments are as follows. Certain financial instruments and all nonfinancial instruments are
excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented
herein may not necessarily represent the underlying fair value of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
31,887
|
|
|
$
|
31,887
|
|
|
$
|
40,155
|
|
|
$
|
40,155
|
|
Securities Available for sale
|
|
|
184,560
|
|
|
|
184,560
|
|
|
|
167,426
|
|
|
|
167,426
|
|
Securities Held to maturity
|
|
|
97
|
|
|
|
97
|
|
|
|
97
|
|
|
|
97
|
|
Federal Home Loan Bank of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston stock
|
|
|
10,932
|
|
|
|
10,932
|
|
|
|
10,932
|
|
|
|
10,932
|
|
Savings Bank Life Insurance
stock
|
|
|
1,709
|
|
|
|
1,709
|
|
|
|
1,709
|
|
|
|
1,709
|
|
Other investments
|
|
|
6,357
|
|
|
|
6,357
|
|
|
|
4,552
|
|
|
|
4,552
|
|
Loans and loans held for sale
|
|
|
647,585
|
|
|
|
659,126
|
|
|
|
653,334
|
|
|
|
656,978
|
|
Accrued interest receivable
|
|
|
3,191
|
|
|
|
3,191
|
|
|
|
3,306
|
|
|
|
3,306
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
674,776
|
|
|
|
681,463
|
|
|
|
651,378
|
|
|
|
656,038
|
|
Repurchase agreements
|
|
|
3,927
|
|
|
|
3,927
|
|
|
|
6,386
|
|
|
|
6,386
|
|
FHLB advances
|
|
|
148,595
|
|
|
|
157,938
|
|
|
|
160,352
|
|
|
|
167,331
|
|
Mortgagors escrow accounts
|
|
|
930
|
|
|
|
930
|
|
|
|
1,058
|
|
|
|
1,058
|
|
10. Subsequent Events
On July 26, 2010 the Company announced that the Board of Directors of the Company and the Bank had
voted to terminate the Banks Employee Stock Ownership Plan (the Plan), effective August 1, 2010.
As of June 30, 2010, the Plan held 784,641 shares, or approximately 9% of the Companys total
outstanding shares of common stock, of which 549,792 shares are unallocated. The Bank will file a
request for a favorable determination letter with the Internal Revenue Service on the tax-qualified
status of the Plan on termination. On and after termination of the Plan, no further contributions
will be made on the outstanding Plan loan. Those payments previously made in the current Plan year
will cause the release of approximately 27,490 shares from the unallocated stock fund and those
shares will be allocated to participants for the year in which the Plan terminates. In connection
with the termination of the Plan and upon receipt of the favorable determination letter from the
Internal Revenue Service, it is anticipated that the Plan Trustee will transfer approximately
522,302 shares to LB Funding Corp., a wholly-owned subsidiary of the Company, to satisfy the Plan
loan. Upon such transfer, the 522,302 shares would be treated as treasury stock. If the shares in
the unallocated stock fund are insufficient to repay the outstanding loan in full, the Company
intends to forgive the remaining balance, subject to Internal Revenue Service approval.
Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
The following analysis discusses the changes in financial position and results of operations of
Legacy Bancorp, Inc. and subsidiaries, and should be read in conjunction with both the unaudited
consolidated interim financial statements and the notes thereto, appearing in Part I, Item 1 of
this report, as well as the Managements Discussion and Analysis section included in the
Companys most recent Annual Report on Form 10-K filed by the Company with the Securities and
Exchange Commission for the year ended December 31, 2009.
14
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, but are not limited to: changes
in the interest rate environment, changes in general economic conditions, the level of future
deposit premiums, the effect of developments in the secondary market affecting our loan pricing,
changes in consumer spending, borrowing and savings habits, changes in our organization,
compensation and benefit plans, legislative and regulatory changes that adversely affect the
businesses in which the Company 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 report. The Company disclaims any intent or obligation to update any
forward-looking statements, whether in response to new information, future events or otherwise.
Critical Accounting Policies
Critical accounting policies are those that involve significant judgments and assessments by
management, and which could potentially result in materially different results under different
assumptions and conditions. We consider the following to be critical accounting policies:
Allowance for Loan Losses.
The determination of the allowance for loan losses is considered
critical due to the high degree of judgment involved, the subjectivity of the underlying
assumptions used, and the potential for changes in the economic environment that could result in
material changes in the amount of the allowance for loan losses considered necessary. The allowance
is evaluated on a regular basis by management and is based on a periodic review of the
collectibility of the loans in light of historical experience, the nature and size of the loan
portfolio, adverse situations that may affect borrowers ability to repay, the estimated value of
any underlying collateral and prevailing economic conditions. Please refer to the
Allowance for
Loan Losses
section within Item 2 for a more detailed discussion of the allowance.
Income Taxes.
The Company uses the asset and liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. A valuation allowance related to deferred tax assets is
established when, in managements judgment, it is more likely than not that all or a portion of
such deferred tax assets will not be realized.
In determining whether a valuation allowance is necessary, the Company considers the level of
taxable income in prior years to the extent that carrybacks are permitted under current tax law, as
well as estimates of future pre-tax and taxable income and tax planning strategies that would, if
necessary, be implemented. The Company expects to realize the remaining deferred tax assets over
the allowable carryback period or in future years. However, if an unanticipated event occurred that
materially changed pre-tax and taxable income in future periods, an increase in the valuation
allowance may become necessary.
Other-Than-Temporary Impairment (OTTI).
Marketable equity securities are evaluated for OTTI based
on the severity and duration of the impairment and, if deemed to be other than temporary, the
declines in fair value are reflected in earnings as realized losses. For debt securities, OTTI is
required to be recognized (1) if the Company intends to sell the security; (2) if it is more
likely than not that the Company will be required to sell the security before recovery of its
amortized cost basis; or (3) the present value of expected cash flows is not sufficient to recover
the entire amortized cost basis. For all impaired debt securities that the Company intends to sell,
or more likely than not will be required to sell, the full amount of the depreciation is recognized
as OTTI through earnings. Credit-related OTTI for all other impaired debt securities is recognized
through earnings. Non-credit related OTTI for such debt securities is recognized in other
comprehensive income, net of applicable taxes.
Fair Values of Assets and Liabilities:
The Company groups its assets and liabilities generally
measured at fair value in three levels, based on the markets in which the assets and liabilities
are traded and the reliability of the assumptions used to determine fair value. Please refer to
note 9:
Fair Values of Assets and Liabilities
within Item 1 for a more detailed discussion of fair
value.
Goodwill.
Goodwill results from business acquisitions and represents the excess of the purchase
price over the fair value of acquired tangible assets and liabilities and identifiable intangible
assets. The Company recorded goodwill in connection with the purchase of a financial institution in
1997. Additionally, the Company recorded goodwill in connection with the purchase of branch
offices in 2007 located in Eastern New York State, and in March 2009 located in Haydenville,
Massachusetts. Most recently, in the second quarter of 2010, the Company recorded goodwill in
connection with the acquisition of a wealth management company located in Pittsfield,
Massachusetts. The total book value of goodwill is approximately $11.6 million and $9.7 million as
of June 30, 2010 and 2009, respectively.
15
Generally, financial information is to be reported on the basis that is used internally for
evaluating segment performance and deciding how to allocate resources to segments. The Company
evaluates its performance and allocates resources based on a single segment concept. Accordingly,
there are no separately identified material operating segments for which discrete financial
information is available. The Company does not derive revenues from, or have assets located in
foreign countries, nor does it derive revenues from any single customer that represents 10% or more
of its total revenues. Therefore, all of the Companys operations are considered by management to
be aggregated in one reportable segment, and the entire amount of goodwill is allocated to this one
reporting segment.
The fair value of goodwill is analyzed at least annually and this analysis utilizes three separate
methodologies. First, a market approach is used which incorporates a review of comparable market
transactions for peer companies, relying on recent merger and acquisition data from these
comparable transactions to estimate the price multiple at which the Company would be acquired in a
hypothetical market transaction. The second approach used was the asset approach, or replacement
cost approach which entails stating the recorded assets and
liabilities of the Company on a fair market value basis, and the value of the Companys equity is determined as the difference between the total fair value amounts for assets and liabilities.
The third approach utilized was the income approach which constructed a discounted cash flow model from financial projections.
The concluded fair value is calculating by weighting the values obtained based on the relevance of
the methodology based on the facts and circumstances for the Company on the valuation date. The
greatest weight (50%) was placed on the market approach given the amount of data obtainable on
comparable transactions. A 30% weight was applied to the asset approach due to the precision of the
fair value estimates provided. Lastly, a 20% or smallest weight was applied to the income
approach/discounted cash flow model due to the inherent uncertainty in forecasting future
performance, and the appropriate market discount rate. Impairment, if any, identified under this
analysis is recognized in the period identified. If an impairment determination is made in a
future reporting period, our earnings and the book value of these intangible assets will be reduced
by the amount of the impairment. If an impairment loss is recorded, it will have little or no
impact on the tangible book value of our common shares or our regulatory capital levels. The
Company performs an annual impairment test as of June 30. The impairment testing as of June 30,
2010 and 2009 indicated that no impairment charge was required as of those dates. The analysis
indicated that the fair value of the Companys equity exceeded its carrying value by 13.8% and
14.4% as of June 30, 2010 and 2009, respectively.
This discussion has highlighted those accounting policies that management considers to be critical;
however all accounting policies are important. See the discussion of each of the policies included
in Note 1 to the consolidated financial statements in the most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission to gain a better understanding of how our
financial performance is measured and reported.
Comparison of Financial Condition at June 30, 2010 and December 31, 2009
Overview:
Total assets remained relatively flat, increasing $10.0 million, or 1.1% from $946.3
million at December 31, 2009 to $956.2 million at June 30, 2010. Within the overall balance sheet,
investment securities increased while short term investments and net loans decreased. On the
liability side, an increase in total deposits was partially offset by a decrease in borrowings from
the Federal Home Loan Bank of Boston (FHLBB), as discussed below.
Investment Activities
: Cash and short-term investments decreased by $8.3 million, or 20.6%, from
$40.2 million at December 31, 2009 to $31.9 million at June 30, 2010. Available for sale
securities increased $17.1 million, or 10.2%, from $167.4 million at December 31, 2009 to $184.6
million, or 19.3% of total assets, at June 30, 2010. The portfolio consists primarily of debt
obligations issued by certain government-sponsored agencies and municipalities. Additionally, the
portfolio includes mortgage-backed securities with a fair value of $57.7 million, all of which are
issued or backed by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage
Association (FNMA), Government National Mortgage Association (GNMA) or other government-sponsored
agencies. Restricted equity securities and other investments totaled $19.0 million at June 30,
2010 and consisted primarily of stock in the Federal Home Loan Bank of Boston (FHLBB) totaling
$10.9 million, which must be held as a condition of membership in the Federal Home Loan Bank System
and as a condition to Legacy Banks borrowing under the FHLBB advance program. Other investments
also include interests in certain commercial real estate investment partnerships of $6.2 million.
At June 30, 2010 the Company had potential additional capital calls of approximately $4.4 million
related to these partnership investments. The remaining $1.9 million consisted of investments in
Savings Bank Life Insurance of Massachusetts, the Community Investment Fund, Depositors Insurance
Fund and other investments. The following table sets forth at the dates indicated information
regarding the amortized cost and fair values of the Companys investment securities.
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010
|
|
|
At December 31, 2009
|
|
|
|
Amortized
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(Dollars in Thousands)
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises (GSE)
|
|
$
|
109,661
|
|
|
$
|
110,374
|
|
|
$
|
80,393
|
|
|
$
|
79,976
|
|
Municipal bonds
|
|
|
12,060
|
|
|
|
12,328
|
|
|
|
17,521
|
|
|
|
17,875
|
|
Corporate bonds and other obligations
|
|
|
1,315
|
|
|
|
1,343
|
|
|
|
1,321
|
|
|
|
1,351
|
|
GSE residential mortgage-backed
|
|
|
16,768
|
|
|
|
17,631
|
|
|
|
29,591
|
|
|
|
30,503
|
|
U.S. Government guaranteed residential mortagage-backed
|
|
|
39,217
|
|
|
|
40,055
|
|
|
|
33,625
|
|
|
|
33,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
179,021
|
|
|
|
181,731
|
|
|
|
162,451
|
|
|
|
163,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
3,080
|
|
|
|
2,829
|
|
|
|
3,239
|
|
|
|
4,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
|
182,101
|
|
|
|
184,560
|
|
|
|
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
|
|
|
6,205
|
|
|
|
6,205
|
|
|
|
4,397
|
|
|
|
4,397
|
|
Other investments
|
|
|
152
|
|
|
|
152
|
|
|
|
155
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restricted equity securities and other investments
|
|
|
18,998
|
|
|
|
18,998
|
|
|
|
17,193
|
|
|
|
17,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
$
|
201,196
|
|
|
$
|
203,655
|
|
|
$
|
182,980
|
|
|
$
|
184,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lending Activities:
Total net loans, excluding loans held for sale, at June 30, 2010 were
$646.8 million, a decrease of $5.8 million, or 0.9%, from $652.6 million at December 31, 2009. The
following table sets forth the composition of the Banks loan portfolio (excluding loans held for
sale) in dollar amounts and as a percentage of the respective portfolio at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010
|
|
|
At December 31, 2009
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in Thousands)
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
278,386
|
|
|
|
42.51
|
%
|
|
$
|
285,618
|
|
|
|
43.12
|
%
|
Commercial
|
|
|
261,787
|
|
|
|
39.97
|
|
|
|
263,910
|
|
|
|
39.85
|
|
Home equity
|
|
|
69,493
|
|
|
|
10.61
|
|
|
|
69,625
|
|
|
|
10.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
609,666
|
|
|
|
93.09
|
|
|
|
619,153
|
|
|
|
93.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
33,760
|
|
|
|
5.16
|
|
|
|
31,373
|
|
|
|
4.74
|
|
Consumer and other
|
|
|
11,492
|
|
|
|
1.75
|
|
|
|
11,791
|
|
|
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,252
|
|
|
|
6.91
|
|
|
|
43,164
|
|
|
|
6.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
654,918
|
|
|
|
100.00
|
%
|
|
|
662,317
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred loan costs
|
|
|
1,331
|
|
|
|
|
|
|
|
1,400
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(9,468
|
)
|
|
|
|
|
|
|
(11,089
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans, net
|
|
$
|
646,781
|
|
|
|
|
|
|
$
|
652,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages decreased $7.2 million, or 2.5% as the majority of the residential
mortgage activity was in the 30 year fixed rate category, a product which the Bank generally sells
in the secondary market with servicing retained. Commercial real estate loans decreased $2.1
million, or 0.8%, primarily due to loan payoffs and specific loan charge-offs during the quarter.
Offsetting some of this decrease was growth in other commercial loans which increased $2.4 million,
or 7.6%.
17
Non-performing Assets:
The table below sets forth the amounts and categories of our non-performing
assets at the dates indicated. No interest income from these loans was recorded in net income for
the three and six month period ended June 30, 2010 while they were on non-accrual status. If the
non-accrual loans had been current, the gross interest income that would have been recorded was
approximately $263,000 and $522,000 for the three and six month period ended June 30, 2010,
respectively. At June 30, 2010 the Bank had twenty-one troubled debt restructurings (loans for
which a portion of interest or principal has been forgiven, or the loans have been modified to
lower the interest rate or extend the original term) totaling
approximately $11.3 million. Which included $10.8 million of
commercial real estate loans and $454,000 of other commercial loans. The modifications to these loans generally include an extension of the maturity date or a change to interest only payments for a temporary period of time.
The interest income recorded from these loans amounted
to approximately $163,000 for the six month period ended June 30, 2010. The Bank had seven
troubled debt restructurings totaling $10.8 million at December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
At June 30,
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
Non-accrual loans:
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
3,672
|
|
|
$
|
4,822
|
|
Commercial mortgage
|
|
|
11,476
|
|
|
|
13,942
|
|
Commercial
|
|
|
583
|
|
|
|
743
|
|
Home equity, consumer and other
|
|
|
68
|
|
|
|
71
|
|
|
|
|
|
|
|
|
Total non-accrual loans
|
|
|
15,799
|
|
|
|
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
|
|
|
15,799
|
|
|
|
19,578
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
1,336
|
|
|
|
1,195
|
|
|
|
|
|
|
|
|
Total non-performing assets (NPAs)
|
|
$
|
17,135
|
|
|
$
|
20,773
|
|
|
|
|
|
|
|
|
Troubled debt restructurings included in NPAs
|
|
$
|
4,475
|
|
|
$
|
5,904
|
|
Troubled debt restructurings not included in NPAs
|
|
|
6,792
|
|
|
|
4,886
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings
|
|
$
|
11,267
|
|
|
$
|
10,790
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
Non-performing loans to total loans
|
|
|
2.41
|
%
|
|
|
2.96
|
%
|
Non-performing assets to total assets
|
|
|
1.79
|
%
|
|
|
2.20
|
%
|
Overall nonperforming loans (NPLs) were $15.8 million at
June 30, 2010, a decrease of $3.8
million as compared to December 31, 2009. Part of this decrease was a result of the Bank charging
off $7.8 million of loan balances, $4.0 million of which had
been reserved for prior to December 31, 2009.
The increase in charge-off activity relates to updated valuations of collateral dependent loans for
the six months ended June 30, 2010. Collateral dependent loans are adjusted to fair value less
selling costs by partial charge-offs once the loss is confirmed on a case by case basis after considering
factors such as the borrowers resources, expectation of foreclosure and alternative source of recovery.
These charge-offs also reduced the overall ratio of
nonperforming assets to total assets to 1.79% at June 30, 2010 as compared to 2.20% at December 31,
2009. The Bank continues to monitor all loans very closely and analyze their balance to the value
of any underlying collateral, with the establishment of a specific reserve against the loan if
deemed necessary. Loans are generally placed on non-accrual status either when reasonable doubt
exists as to the full timely collection of interest and principal, or when a loan becomes 90 days
past due.
Allowance for Loan Losses
:
In originating loans, the Bank recognizes that losses will be
experienced on loans and that the risk of loss will vary with many factors, including the type of
loan being made, the creditworthiness of the borrower over the term of the loan, general economic
conditions and, in the case of a secured loan, the quality of the security for the loan over the
term of the loan. The Bank maintains an allowance for loan losses to absorb losses inherent in the
loan portfolio, and as such, this allowance represents managements best estimate of the probable
known and inherent credit losses in the loan portfolio as of the date of the financial statements.
The Board and management take the following into consideration when determining the adequacy of the
allowance for loan losses for each loan category or sub-category: (i) changes in the trend of the
volume and severity of past due and classified loans, and trends in the volume of non-accrual
loans, troubled debt restructurings and other loan modifications, (ii) changes in the trend of loan
charge-offs and recoveries, (iii) changes in the nature, volume or terms of the loan portfolios,
(iv) changes in lending policies or procedures, including the Banks loan review system,
underwriting standards and collection, charge-off and recovery practices, and the degree of
oversight by the Board, (v) changes in the experience, ability, and depth of lending management and
staff, (vi) changes in national and local economic and business conditions and developments,
including the condition of various industry and market segments, (vii) the existence and effect of
any concentrations of credit and changes in the level of such concentrations, and (viii) the effect
of external factors such as competition and
18
legal and regulatory requirements on the level of
estimated credit losses in the portfolios. The amount of the additions to the allowance charged to
operating expense for any period is a reflection of various factors analyzed by management,
including the amount of loan growth in the period as well as the type of loan growth.
Additionally, the amount of charge-offs and recoveries in a given year will impact the amount of
provision expense. The allowance for loan losses is evaluated on a regular basis by management and
is inherently subjective as it requires estimates that are susceptible to significant revision as
more information becomes available.
The allowance consists of allocated and general components. The allocated component relates to
loans classified as impaired, for which an allowance is established when the discounted cash flows
or collateral value or observable market price of the impaired loan is lower than the carrying
value of the loan. The general component covers non-classified loans and is based on historical
loss experience adjusted for qualitative factors, as outlined above.
A loan is considered impaired when, based on current information and events, it is probable that
the Bank will be unable to collect the scheduled payments of principal or interest when due
according to the original contractual terms of the loan agreement. Impaired loans with payments
past due 90 days or greater are generally maintained on a non-accrual basis. Factors considered by
management in determining impairment include payment status, collateral value, and the probability
of collecting scheduled principal and interest payments when due. Impairment is measured on a
loan-by-loan basis for commercial loans and commercial real estate loans by either the present
value of expected future cash flows discounted at the loans effective interest rate or the fair
value of the collateral if the loan is collateral dependent. The Company periodically may agree to
modify the contractual terms of loans. When a loan is modified and a concession is made to a
borrower experiencing financial difficulty, the modification is considered a TDR. All TDRs are
initially classified as impaired.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.
Accordingly, the Bank generally does not separately identify individual consumer and residential
loans for impairment disclosures. At June 30, 2010, impaired loans totaled $28.8 million with a
corresponding specific reserve allowance of $2.6 million. This specific reserve is part of the
overall loan loss reserve.
While the Bank believes that it has established adequate allocated and general allowances for
losses on loans, adjustments to the allowance may be necessary if future conditions differ
substantially from the information used in making the evaluations. In addition, as an integral
part of their examination process, the Banks regulators periodically review the allowance for loan
losses. These regulatory agencies may require the Bank to recognize additions to the allowance
based on their judgments of information available to them at the time of their examination, thereby
negatively affecting the Banks financial condition and earnings. The following table sets forth
activity in the Banks allowance for loan losses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the three
|
|
|
At or for the six months
|
|
|
|
months ended June 30,
|
|
|
ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
Balance at beginning of period
|
|
$
|
8,099
|
|
|
$
|
7,330
|
|
|
$
|
11,089
|
|
|
$
|
6,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans on residential real estate:
|
|
|
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
Mortgage loans on commercial real estate:
|
|
|
(2,172
|
)
|
|
|
|
|
|
|
(7,349
|
)
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
(201
|
)
|
|
|
|
|
|
|
(398
|
)
|
|
|
(14
|
)
|
Consumer and other
|
|
|
(23
|
)
|
|
|
(69
|
)
|
|
|
(43
|
)
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
(224
|
)
|
|
|
(69
|
)
|
|
|
(441
|
)
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
(2,396
|
)
|
|
|
(69
|
)
|
|
|
(7,825
|
)
|
|
|
(140
|
)
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans on real estate
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
30
|
|
Consumer and other
|
|
|
9
|
|
|
|
27
|
|
|
|
28
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
9
|
|
|
|
45
|
|
|
|
28
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
9
|
|
|
|
46
|
|
|
|
28
|
|
|
|
77
|
|
Net recoveries (charge-offs)
|
|
|
(2,387
|
)
|
|
|
(23
|
)
|
|
|
(7,797
|
)
|
|
|
(63
|
)
|
|
Provision for loan losses
|
|
|
3,756
|
|
|
|
1,506
|
|
|
|
6,176
|
|
|
|
2,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
9,468
|
|
|
$
|
8,813
|
|
|
$
|
9,468
|
|
|
$
|
8,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net recoveries (charge-offs) to average loans outstanding - 12 month
rolling average
|
|
|
|
|
|
|
|
|
|
|
(1.25
|
%)
|
|
|
(0.02
|
%)
|
|
Allowance for loan losses to non-performing loans at end of period
|
|
|
|
|
|
|
|
|
|
|
59.93
|
%
|
|
|
59.00
|
%
|
|
Allowance for loan losses to total loans at end of period
|
|
|
|
|
|
|
|
|
|
|
1.45
|
%
|
|
|
1.30
|
%
|
19
Mortgage Servicing Rights:
The Company had $503,000 of
mortgage servicing rights on its balance sheet as of June 30, 2010 as
compared to $514,000 at December 31, 2009. The Company recorded
servicing fee income of $34,000 and $64,000 for the three and six month
periods ended June 30, 2010, respectively. The amount of mortgage
loans serviced by the Company for others amounted to approximately $82.1 million as of June 30, 2010.
Deposits
: The following table sets forth the Banks deposit accounts (excluding escrow
deposits) at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010
|
|
|
At December 31, 2009
|
|
|
|
Balance
|
|
|
Percent
|
|
|
Balance
|
|
|
Percent
|
|
|
|
(Dollars in Thousands)
|
|
Deposit type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
$
|
70,651
|
|
|
|
10.47
|
%
|
|
$
|
75,232
|
|
|
|
11.55
|
%
|
Regular savings
|
|
|
52,461
|
|
|
|
7.78
|
|
|
|
49,883
|
|
|
|
7.66
|
|
Relationship savings
|
|
|
142,538
|
|
|
|
21.12
|
|
|
|
125,328
|
|
|
|
19.24
|
|
Money market deposits
|
|
|
72,337
|
|
|
|
10.72
|
|
|
|
63,077
|
|
|
|
9.68
|
|
NOW deposits
|
|
|
46,516
|
|
|
|
6.89
|
|
|
|
48,546
|
|
|
|
7.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total transaction accounts
|
|
|
384,503
|
|
|
|
56.98
|
|
|
|
362,066
|
|
|
|
55.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term certificates less than $100,000
|
|
|
168,413
|
|
|
|
24.96
|
|
|
|
174,284
|
|
|
|
26.76
|
|
Term certificates $100,000 or more
|
|
|
121,860
|
|
|
|
18.06
|
|
|
|
115,028
|
|
|
|
17.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total certificate accounts
|
|
|
290,273
|
|
|
|
43.02
|
|
|
|
289,312
|
|
|
|
44.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
674,776
|
|
|
|
100.00
|
%
|
|
$
|
651,378
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits increased $23.4 million or 3.6% from $651.4 million at December 31, 2009 to $674.8
million at June 30, 2010. The increase in deposits was primarily in relationship savings and
money market deposits which increased $17.2 million, or 13.7% and $9.3 million or 14.7%,
respectively. These increases were partially offset by decreases primarily in demand and NOW
deposits. At June 30, 2010 CDs represented 43.0% of total deposits, slightly less than at December
31, 2009.
Borrowings:
Advances from the FHLBB and securities sold under agreements to repurchase have
decreased $14.2 million, or 8.5%, to $152.5 million at June 30, 2010. The increase in overall
deposits has allowed the Bank to pay off high rate FHLBB borrowings as they matured during the
year.
Stockholders Equity:
Overall stockholders equity decreased by $2.5 million, or 2.0% during the
first six months of 2010. Total equity was impacted by the net loss of $2.6 million, the
declaration of a dividend of $0.05 per share during the first and second quarter of 2010 and the
purchase of 43,000 shares of stock at an average price of $9.30 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.
Comparison of Operating Results for the Three Months Ended June 30, 2010 and 2009
Net loss for the three months ended June 30, 2010 was $1.4 million, as compared to a net loss of
$1.5 million for the same period in 2009. The decrease in the loss was primarily due to an
increase in net gains on the sales of securities and a decrease in the charges taken on certain
investments deemed to be other-than-temporarily-impaired, offset by an increase in the provision
for loan losses, as discussed below.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense
on interest-bearing liabilities. Net interest income depends upon the relative amounts of
interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on
them.
The following table sets forth average balance sheets, average yields and costs, and certain other
information for the periods indicated. All average balances are daily average balances. The
yields set forth below include the effect of deferred fees, and discounts and premiums
that are amortized or accreted to interest income or expense. The Bank does not accrue interest on
loans on non-accrual status, however, the balance of these loans is included in the total average
balance, which has the effect of lowering average loan yields.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2010
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average Outstanding
|
|
|
|
|
|
|
|
|
|
Outstanding Balance
|
|
|
Interest
|
|
|
Yield/ Rate
(1)
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/ Rate
(1)
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Net (2)
|
|
$
|
641,497
|
|
|
$
|
9,027
|
|
|
|
5.63
|
%
|
|
$
|
685,660
|
|
|
$
|
9,803
|
|
|
|
5.72
|
%
|
Investment securities
|
|
|
206,586
|
|
|
|
1,403
|
|
|
|
2.72
|
%
|
|
|
183,022
|
|
|
|
1,781
|
|
|
|
3.89
|
%
|
Short-term investments
|
|
|
16,122
|
|
|
|
7
|
|
|
|
0.17
|
%
|
|
|
18,488
|
|
|
|
3
|
|
|
|
0.06
|
%
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
864,205
|
|
|
|
10,437
|
|
|
|
4.83
|
%
|
|
|
887,170
|
|
|
|
11,587
|
|
|
|
5.22
|
%
|
Non-interest-earning assets
|
|
|
78,636
|
|
|
|
|
|
|
|
|
|
|
|
73,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
942,841
|
|
|
|
|
|
|
|
|
|
|
$
|
960,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings deposits
|
|
$
|
51,976
|
|
|
|
34
|
|
|
|
0.26
|
%
|
|
$
|
51,768
|
|
|
|
44
|
|
|
|
0.34
|
%
|
Relationship savings
|
|
|
139,321
|
|
|
|
300
|
|
|
|
0.86
|
%
|
|
|
120,731
|
|
|
|
380
|
|
|
|
1.26
|
%
|
Money market
|
|
|
68,286
|
|
|
|
115
|
|
|
|
0.67
|
%
|
|
|
72,699
|
|
|
|
186
|
|
|
|
1.02
|
%
|
NOW accounts
|
|
|
44,823
|
|
|
|
32
|
|
|
|
0.29
|
%
|
|
|
44,548
|
|
|
|
45
|
|
|
|
0.40
|
%
|
Certificates of deposits
|
|
|
287,989
|
|
|
|
1,797
|
|
|
|
2.50
|
%
|
|
|
281,784
|
|
|
|
2,143
|
|
|
|
3.04
|
%
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
592,395
|
|
|
|
2,278
|
|
|
|
1.54
|
%
|
|
|
571,530
|
|
|
|
2,798
|
|
|
|
1.96
|
%
|
Borrowed funds
|
|
|
155,017
|
|
|
|
1,410
|
|
|
|
3.64
|
%
|
|
|
189,940
|
|
|
|
1,877
|
|
|
|
3.95
|
%
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
747,412
|
|
|
|
3,688
|
|
|
|
1.97
|
%
|
|
|
761,470
|
|
|
|
4,675
|
|
|
|
2.46
|
%
|
Non-interest-bearing liabilities
|
|
|
72,859
|
|
|
|
|
|
|
|
|
|
|
|
72,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
820,271
|
|
|
|
|
|
|
|
|
|
|
|
834,360
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
122,570
|
|
|
|
|
|
|
|
|
|
|
|
126,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
942,841
|
|
|
|
|
|
|
|
|
|
|
$
|
960,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
6,749
|
|
|
|
|
|
|
|
|
|
|
$
|
6,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread (3)
|
|
|
|
|
|
|
|
|
|
|
2.86
|
%
|
|
|
|
|
|
|
|
|
|
|
2.76
|
%
|
Net interest-earning assets (4)
|
|
$
|
116,793
|
|
|
|
|
|
|
|
|
|
|
$
|
125,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (5)
|
|
|
|
|
|
|
|
|
|
|
3.12
|
%
|
|
|
|
|
|
|
|
|
|
|
3.12
|
%
|
Average interest-earning assets to
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
115.63
|
%
|
|
|
|
|
|
|
|
|
|
|
116.51
|
%
|
|
|
|
(1)
|
|
Yields and rates for the three months ended June 30, 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 June 30, 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.
|
The following table presents the dollar amount of changes in interest income and interest
expense for the major categories of the Banks interest-earning assets and interest-bearing
liabilities. Information is provided for each category of interest-earning assets and interest-
bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in
average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate
(i.e., changes in average rate multiplied by prior-period average balances). The changes
attributable to the combined impact of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2010 vs. 2009
|
|
|
|
Increase
|
|
|
Total
|
|
|
|
(Decrease) Due to
|
|
|
Increase
|
|
|
|
Volume
|
|
|
Rate
|
|
|
(Decrease)
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Net
|
|
$
|
(624
|
)
|
|
$
|
(152
|
)
|
|
$
|
(776
|
)
|
Investment securities
|
|
|
283
|
|
|
|
(661
|
)
|
|
|
(378
|
)
|
Short-term investments
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
Total interest-earning assets
|
|
|
(341
|
)
|
|
|
(809
|
)
|
|
|
(1,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings deposits
|
|
|
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
Relationship savings
|
|
|
76
|
|
|
|
(156
|
)
|
|
|
(80
|
)
|
Money market
|
|
|
(10
|
)
|
|
|
(61
|
)
|
|
|
(71
|
)
|
NOW accounts
|
|
|
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
Certificates of deposits
|
|
|
49
|
|
|
|
(395
|
)
|
|
|
(346
|
)
|
|
|
|
|
Total deposits
|
|
|
115
|
|
|
|
(635
|
)
|
|
|
(520
|
)
|
Borrowed funds
|
|
|
(327
|
)
|
|
|
(140
|
)
|
|
|
(467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(212
|
)
|
|
|
(775
|
)
|
|
|
(987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income
|
|
$
|
(129
|
)
|
|
$
|
(34
|
)
|
|
$
|
(163
|
)
|
|
|
|
Net interest income
for the three months ended June 30, 2010 was $6.7 million, a decrease of
$163,000, or 2.4%, over the same period of 2009. This decrease was primarily a result of a
decrease in the net loan portfolio, as outlined below.
Interest income
for the three months ended June 30, 2010 decreased $1.2 million, or 9.9%, to $10.4
million as compared to $11.6 million in the same period of 2009. This decrease was driven by both
an overall decrease in market rates as well as a decrease in the net loan portfolio. The yield on
interest-earning assets was 4.83% for the quarter, a decrease of 39 basis points from a yield of
5.22% in the second quarter of 2009, resulting in a decrease in interest income of $809,000.
Average outstanding net loans decreased $44.2 million, or 6.4%, primarily due to commercial loan
payoffs and charge-offs, as well as the volume of refinancing of fixed-rate residential mortgages,
which the Bank sells into the secondary market. Some of the cash flow from the refinancing and
sale of these mortgages was reinvested into investment securities, resulting in an increase of
$23.6 million, or 12.9% in their average balance for the quarter as compared to the same period in
2009. This overall change in volume of earning assets resulted in a decrease in interest income of
$341,000.
Interest expense
decreased $987,000, or 21.1%, to $3.7 million for the three months ended June 30,
2010 as compared to $4.7 million during the same period in 2009. Average interest-bearing
liabilities in the second quarter of 2010 decreased $14.1 million, or 1.8%, as compared to the same
quarter of 2009, accounting for a decrease to interest expense of $212,000. The average cost of
funds decreased to 1.97% for the three month period ended June 30, 2010, a decrease of 49 basis
points from a cost of funds of 2.46% for the same period in 2009, resulting in a decrease in
interest expense of $775,000.
Provision for loan loss expense
increased $2.3 million to $3.8 million for the three months ended
June 30, 2010 as compared to a provision expense of $1.5 million for the three months ended June
30, 2009. This increase reflected both the difference in the amount of and mix of loan growth for
the period as well as higher specific reserves established against certain loans in 2010.
Additionally, as part of a continuous review and analysis of current market and economic conditions
by management, the Company adjusted the reserve ratio applied to certain
loan categories in 2010. The charge-offs of specific non-performing loans also resulted in the
reduction in the ratio of the allowance for loan losses to total loans to 1.45% at June 30, 2010,
as compared to 1.67% at December 31, 2009 and 1.30% at June 30, 2009.
Non-interest income
for the second quarter was $2.6 million, an increase of $2.4 million as
compared to 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 as well as an increase in the net gain
on the sale of investment securities. The Bank incurred $66,000 of OTTI credit losses on certain
limited partnership and equity investments during the second quarter of 2010 as compared to a
charge of $1.4 million on certain bonds, equities and limited partnership investments in the second
quarter of 2009. Portfolio management fees increased $211,000, or 78.4% in the second quarter of
2010 as compared to the same period of 2009 primarily as a result of the Banks acquisition of the
Renaissance Investment Group in April 2010. In 2010, the Bank also had increases in customer fees,
insurance and other fees, partially offset by a decrease on the gain on sale of mortgages.
22
Non-interest expense
increased $115,000, or 1.5%, to $7.8 million for the three months ended June
30, 2010 as compared to the same period of 2009. Increases in salaries and benefits, data
processing, professional fees and other general and administration expense were partially offset by
a decrease in FDIC insurance expense.
Income tax benefit
increased $212,000 to $765,000 in the second quarter of 2010 from a benefit of
$553,000 in the second quarter of 2009 partially as a result of the increase in net loss before
taxes. The Companys combined federal and state effective tax rate for the second quarter of 2010
was 35.7% as compared to 27.0% in the second quarter of 2009.
Comparison of Operating Results for the Six Months Ended June 30, 2010 and 2009
Net loss for the six months ended June 30, 2010 was $2.6 million, as compared to a net loss of $2.3
million for the same period in 2009. The increase in the loss was primarily due to an increase in
the provision for loan losses, offset somewhat by an increase in net gains on the sales of
securities and a decrease in the charges taken on certain investments deemed to be
other-than-temporarily-impaired, as discussed below.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense
on interest-bearing liabilities. Net interest income depends upon the relative amounts of
interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on
them.
The following table sets forth average balance sheets, average yields and costs, and certain other
information for the periods indicated. All average balances are daily average balances. The
yields set forth below include the effect of deferred fees, and discounts and premiums that are
amortized or accreted to interest income or expense. The Bank does not accrue interest on loans on
non-accrual status, however, the balance of these loans is included in the total average balance,
which has the effect of lowering average loan yields.
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2010
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/ Rate
(1)
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/ Rate
(1)
|
|
|
|
(Dollars in thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Net (2)
|
|
$
|
644,587
|
|
|
$
|
18,323
|
|
|
|
5.69
|
%
|
|
$
|
689,985
|
|
|
$
|
19,835
|
|
|
|
5.75
|
%
|
Investment securities
|
|
|
198,540
|
|
|
|
2,755
|
|
|
|
2.78
|
%
|
|
|
170,726
|
|
|
|
3,681
|
|
|
|
4.31
|
%
|
Short-term investments
|
|
|
15,934
|
|
|
|
13
|
|
|
|
0.16
|
%
|
|
|
20,295
|
|
|
|
7
|
|
|
|
0.07
|
%
|
|
|
|
|
|
Total interest-earning assets
|
|
|
859,061
|
|
|
|
21,091
|
|
|
|
4.91
|
%
|
|
|
881,006
|
|
|
|
23,523
|
|
|
|
5.34
|
%
|
Non-interest-earning assets
|
|
|
78,486
|
|
|
|
|
|
|
|
|
|
|
|
73,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
937,547
|
|
|
|
|
|
|
|
|
|
|
$
|
954,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings deposits
|
|
$
|
51,109
|
|
|
|
67
|
|
|
|
0.26
|
%
|
|
$
|
50,960
|
|
|
|
93
|
|
|
|
0.36
|
%
|
Relationship savings
|
|
|
133,790
|
|
|
|
623
|
|
|
|
0.93
|
%
|
|
|
122,164
|
|
|
|
858
|
|
|
|
1.40
|
%
|
Money market
|
|
|
66,322
|
|
|
|
246
|
|
|
|
0.74
|
%
|
|
|
65,119
|
|
|
|
385
|
|
|
|
1.18
|
%
|
NOW accounts
|
|
|
44,517
|
|
|
|
65
|
|
|
|
0.29
|
%
|
|
|
43,024
|
|
|
|
94
|
|
|
|
0.44
|
%
|
Certificates of deposits
|
|
|
288,579
|
|
|
|
3,716
|
|
|
|
2.58
|
%
|
|
|
280,688
|
|
|
|
4,374
|
|
|
|
3.12
|
%
|
|
|
|
|
|
Total interest-bearing
deposits
|
|
|
584,317
|
|
|
|
4,717
|
|
|
|
1.61
|
%
|
|
|
561,955
|
|
|
|
5,804
|
|
|
|
2.07
|
%
|
Borrowed funds
|
|
|
157,728
|
|
|
|
2,870
|
|
|
|
3.64
|
%
|
|
|
194,408
|
|
|
|
3,849
|
|
|
|
3.96
|
%
|
|
|
|
|
|
Total interest-bearing
liabilities
|
|
|
742,045
|
|
|
|
7,587
|
|
|
|
2.04
|
%
|
|
|
756,363
|
|
|
|
9,653
|
|
|
|
2.55
|
%
|
Non-interest-bearing
liabilities
|
|
|
72,389
|
|
|
|
|
|
|
|
|
|
|
|
72,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
814,434
|
|
|
|
|
|
|
|
|
|
|
|
828,730
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
123,113
|
|
|
|
|
|
|
|
|
|
|
|
125,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
937,547
|
|
|
|
|
|
|
|
|
|
|
$
|
954,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
13,504
|
|
|
|
|
|
|
|
|
|
|
$
|
13,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread (3)
|
|
|
|
|
|
|
|
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
2.79
|
%
|
Net interest-earning assets
(4)
|
|
$
|
117,016
|
|
|
|
|
|
|
|
|
|
|
$
|
124,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (5)
|
|
|
|
|
|
|
|
|
|
|
3.14
|
%
|
|
|
|
|
|
|
|
|
|
|
3.15
|
%
|
Average interest-earning
assets to interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
115.77
|
%
|
|
|
|
|
|
|
|
|
|
|
116.48
|
%
|
|
|
|
(1)
|
|
Yields and rates for the six months ended June 30, 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 six months ended June 30, 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.
|
The following table presents the dollar amount of changes in interest income and interest
expense for the major categories of the Banks interest-earning assets and interest-bearing
liabilities. Information is provided for each category of interest-earning assets and
interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e.,
changes in average balances multiplied by the prior-period average rate) and (ii) changes
attributable to rate (i.e., changes in average rate multiplied by prior-period average balances).
The changes attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2010 vs. 2009
|
|
|
|
Increase
|
|
|
Total
|
|
|
|
(Decrease) Due to
|
|
|
Increase
|
|
|
|
Volume
|
|
|
Rate
|
|
|
(Decrease)
|
|
|
|
(Dollars in thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Net
|
|
$
|
(1,305
|
)
|
|
$
|
(207
|
)
|
|
$
|
(1,512
|
)
|
Investment securities
|
|
|
785
|
|
|
|
(1,711
|
)
|
|
|
(926
|
)
|
Short-term investments
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
6
|
|
|
|
|
Total interest-earning assets
|
|
|
(522
|
)
|
|
|
(1,910
|
)
|
|
|
(2,432
|
)
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings deposits
|
|
|
|
|
|
|
(26
|
)
|
|
|
(26
|
)
|
Relationship savings
|
|
|
92
|
|
|
|
(327
|
)
|
|
|
(235
|
)
|
Money market
|
|
|
7
|
|
|
|
(146
|
)
|
|
|
(139
|
)
|
NOW accounts
|
|
|
3
|
|
|
|
(32
|
)
|
|
|
(29
|
)
|
Certificates of deposits
|
|
|
127
|
|
|
|
(785
|
)
|
|
|
(658
|
)
|
|
|
|
Total deposits
|
|
|
229
|
|
|
|
(1,316
|
)
|
|
|
(1,087
|
)
|
Borrowed funds
|
|
|
(685
|
)
|
|
|
(294
|
)
|
|
|
(979
|
)
|
|
|
|
Total interest-bearing liabilities
|
|
|
(456
|
)
|
|
|
(1,610
|
)
|
|
|
(2,066
|
)
|
|
|
|
Change in net interest income
|
|
$
|
(66
|
)
|
|
$
|
(300
|
)
|
|
$
|
(366
|
)
|
|
|
|
Net interest income
for the six months ended June 30, 2010 was $13.5 million, a decrease of
$366,000, or 2.6%, over the same period of 2009. This decrease was a result of both the difference
in net interest margin in each period as well as a decrease in the net loan portfolio, as outlined
below.
Interest income
for the six months ended June 30, 2010 decreased $2.4 million, or 10.3%, to $21.1
million as compared to $23.5 million in the same period of 2009. This decrease was mostly rate
driven as the yield on interest-earning assets was 4.91% for the first half of 2010, a decrease of
43 basis points from a yield of 5.34% in the first half of 2009, resulting in a decrease in
interest income of $1.9 million. Average outstanding net loans decreased $45.4 million, or 6.6%,
primarily due to commercial loan payoffs and charge-offs, as well as the volume of refinancing of
fixed-rate residential mortgages, which the Bank sells into the secondary market. Much of the cash
flow from the refinancing and sale of these mortgages was reinvested into investment securities,
resulting in an increase of $27.8 million, or 16.3% in their average balance for the first half of
2010 as compared to the same period in 2009. This overall change in volume of earning assets
resulted in a decrease in interest income of $522,000.
Interest expense
decreased $2.1 million, or 21.4%, to $7.6 million for the six months ended
June 30, 2010 as compared to $9.7 million during the same period in 2009. Average interest-bearing
liabilities in the first half of 2010 decreased $14.3 million, or 1.9%, as compared to the same
period of 2009, accounting for a decrease to interest expense of $456,000. The average cost of
funds decreased to 2.04% for the six month period ended June 30, 2010, a decrease of 51 basis
points from a cost of funds of 2.55% for the same period in 2009, resulting in a decrease in
interest expense of $1.6 million.
Provision for loan loss expense
increased $3.9 million to $6.2 million for the six months ended
June 30, 2010 as compared to a provision expense of $2.2 million for the six months ended June 30,
2009. This increase reflected both the difference in the amount of and mix of the net change in
loan balances in each period, as well as higher specific reserves established against certain loans in
2010. Additionally, as part of a continuous review and analysis of current market and economic conditions by
management, the Company adjusted the reserve ratio applied to certain
loan categories in 2010.
The charge-offs of specific non-performing loans also resulted in the reduction in the ratio
of the allowance for loan losses to total loans to 1.44% at June 30, 2010, as compared to 1.67% at
December 31, 2009 and 1.30% at June 30, 2009.
Non-interest income
was $3.7 million in the first six months of 2010, an increase of $3.8
million as compared to 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 as well as an increase in the
net gain on the sale of investment securities. The Bank incurred $365,000 of OTTI credit losses on
certain limited partnership and equity investments during the first half of 2010 as compared to a
charge of $3.0 million on certain bonds, equities and limited partnership investments in the second
quarter of 2009. Portfolio management fees increased $271,000, or 55.3% in the 2010 as compared to
the same period of 2009 primarily as a result of the Banks acquisition of the Renaissance
Investment Group in April 2010. In 2010, the Bank also had increases in customer fees, insurance
and other fees, partially offset by a decrease on the gain on sale of mortgages.
25
Non-interest expense
increased $212,000, or 1.4%, to $14.9 million for the first six months
ended June 30, 2010 as compared to the same period of 2009. Increases in salaries and benefits,
data processing, professional fees and other general and administration expense were partially
offset by a decrease in occupancy expenses and FDIC insurance expense.
Income tax benefit
increased $410,000 to $1.3 million in the first half of 2010 from a benefit of
$900,000 in the first half of 2009 partially as a result of the increase in net loss before taxes.
The Companys combined federal and state effective tax rate for the first six months of 2010 was
33.3% as compared to 28.3% in the same period of 2009.
Minimum Regulatory Capital Requirements:
As of June 30, 2010, the most recent notification from the
FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, an institution must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table.
There are no conditions or events since that notification that management believes have changed the
Banks category. The Banks capital amounts and ratios as of June 30, 2010 and December 31, 2009
are presented in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum To Be Well
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
Capitalized Under
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Prompt Corrective
|
|
|
|
Actual
|
|
|
Requirement
|
|
|
Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk weighted assets
|
|
$
|
74,173
|
|
|
|
11.6
|
%
|
|
$
|
51,115
|
|
|
|
8.0
|
%
|
|
$
|
63,894
|
|
|
|
10.0
|
%
|
Tier 1 capital to risk weighted assets:
|
|
|
66,165
|
|
|
|
10.4
|
|
|
|
25,558
|
|
|
|
4.0
|
|
|
|
38,336
|
|
|
|
6.0
|
|
Tier 1 capital to average assets:
|
|
|
66,165
|
|
|
|
7.3
|
|
|
|
36,018
|
|
|
|
4.0
|
|
|
|
45,023
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk weighted assets:
|
|
$
|
81,484
|
|
|
|
12.3
|
%
|
|
$
|
52,824
|
|
|
|
8.0
|
%
|
|
$
|
66,030
|
|
|
|
10.0
|
%
|
Tier 1 capital to risk weighted assets:
|
|
|
72,811
|
|
|
|
11.0
|
|
|
|
26,412
|
|
|
|
4.0
|
|
|
|
39,618
|
|
|
|
6.0
|
|
Tier 1 capital to average assets:
|
|
|
72,811
|
|
|
|
8.0
|
|
|
|
36,232
|
|
|
|
4.0
|
|
|
|
45,290
|
|
|
|
5.0
|
|
Contractual Obligations
. Additional information relating to payments due under contractual
obligations is presented in the Annual Report on Form 10-K filed by the Company with the Securities
and Exchange Commission for the year ended December 31, 2009. The following table presents
information indicating various contractual obligations and commitments of the Company as of June
30, 2010 and the respective maturity dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
Three Years
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
through
|
|
|
through
|
|
|
Over Five
|
|
|
|
Total
|
|
|
or Less
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Years
|
|
|
|
(Dollars in Thousands)
|
|
Federal Home Loan Bank of Boston advances
|
|
$
|
148,595
|
|
|
$
|
13,500
|
|
|
$
|
45,000
|
|
|
$
|
51,900
|
|
|
$
|
38,195
|
|
Securities sold under agreements to repurchase
|
|
|
3,927
|
|
|
|
3,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
152,522
|
|
|
$
|
17,427
|
|
|
$
|
45,000
|
|
|
$
|
51,900
|
|
|
$
|
38,195
|
|
|
|
|
Off-Balance Sheet Arrangements:
Other than loan commitments and other contingencies shown
below, the Company does not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on its financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources. Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract and generally have fixed expiration dates or other
termination clauses. The following table presents certain information about the Banks loan
commitments and other contingencies outstanding as of June 30, 2010:
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
|
More than
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
Three Years
|
|
|
|
|
|
|
|
|
|
|
One Year or
|
|
|
through
|
|
|
Through Five
|
|
|
Over Five
|
|
|
|
Total
|
|
|
Less
|
|
|
Three Years
|
|
|
Years
|
|
|
years
|
|
|
|
(Dollars in Thousands)
|
|
Commitments to grant loans
(1)
|
|
$
|
9,569
|
|
|
$
|
9,569
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial loan lines-of-credit
|
|
|
12,850
|
|
|
|
12,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused portion of home equity loans
(2)
|
|
|
62,972
|
|
|
|
2,074
|
|
|
|
9,282
|
|
|
|
15,082
|
|
|
|
36,534
|
|
Unused portion of construction loans
(3)
|
|
|
2,689
|
|
|
|
2,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused portion of overdraft lines-of-credit
(4)
|
|
|
4,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,775
|
|
Unused portion of personal lines-of-credit
(5)
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
752
|
|
Standby letters of credit
(6)
|
|
|
3,221
|
|
|
|
3,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commitments and contingencies
(7)
|
|
|
4,383
|
|
|
|
|
|
|
|
4,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan and other commitments
|
|
$
|
101,211
|
|
|
$
|
30,403
|
|
|
$
|
13,665
|
|
|
$
|
15,082
|
|
|
$
|
42,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Commitments for loans are extended to customers for up to 60 days after which they expire.
|
|
(2)
|
|
Unused portions of home equity loans are available to the borrower for up to 10 years.
|
|
(3)
|
|
Unused portions of residential construction loans are available to the borrower for up to one
year. Commercial construction loans
maturities may be longer than one year.
|
|
(4)
|
|
Unused portion of checking overdraft lines-of-credit are available to customers in good
standing indefinitely.
|
|
(5)
|
|
Unused portion of personal lines-of-credit are available to customers in good standing
indefinitely.
|
|
(6)
|
|
Standby letters of credit are generally available for less than one year.
|
|
(7)
|
|
Other commitments relate primarily to potential additional capital calls the Company is
committed to contribute as part of its investment
in certain real estate limited partnerships.
|
Item 3: Quantitative and Qualitative Disclosures about Market Risks
There has been no material change in the Companys market risk during the six months ended June 30,
2010. See the discussion and analysis of quantitative and qualitative disclosures about market
risk provided in the Companys Annual Report on Form 10-K for the year ended December 31, 2009 for
a general discussion of the qualitative aspects of market risk and discussion of the simulation
model used by the Bank to measure its interest rate risk.
Item 4: Controls and Procedures
Disclosure Controls and Procedures: The Companys management, under the supervision and with the
participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Companys disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act), as of the end of the period covered by this report. Based on such evaluation, the
Companys Chief Executive Officer and Chief Financial Officer concluded that as of end of the
period covered by this report, the Companys disclosure controls and procedures were effective in
recording, processing, summarizing and reporting, on a timely basis, information required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act.
Internal Control Over Financial Reporting: There were no changes in the Companys internal control
over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during
the fiscal quarter to which this report relates that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.
27
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings other than routine legal proceedings
occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate,
are believed by management to be immaterial to the financial condition and results of operations
of the Company.
Item 1A. Risk Factors
In addition to the other information contained this Quarterly Report on Form 10-Q, the following
risk factors represent material updates and additions to the risk factors previously disclosed in
the Companys Annual Report on Form 10-K for the year ended December 31, 2009, filed with the
Securities and Exchange Commission on March 15, 2010. Additional risks not presently known to us,
or that we currently deem immaterial, may also adversely affect our business, financial condition
or results of operations. Further, to the extent that any of the information contained in this
Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth
below also is a cautionary statement identifying important factors that could cause our actual
results to differ materially from those expressed in any forward-looking statements made by or on
behalf of us.
Financial reform legislation recently enacted by Congress will, among other things, eliminate the
Office of Thrift Supervision, tighten capital standards, create a new Consumer Financial Protection
Bureau and result in new laws and regulations that are expected to increase our costs of
operations.
Congress recently enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act). This new law will significantly change the current bank regulatory structure and
affect the lending, deposit, investment, trading and operating activities of financial institutions
and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad
range of new implementing rules and regulations, and to prepare numerous studies and reports for
Congress. The federal agencies are given significant discretion in drafting the implementing rules
and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act
may not be known for many months or years.
Certain provisions of the Dodd-Frank Act are expected to have a near term impact on the Company.
For example, the new law provides that the Office of Thrift Supervision, which currently is the
primary federal regulator for the Company, will cease to exist one year from the date of the new
laws enactment. The Board of Governors of the Federal Reserve System will supervise and regulate
all savings and loan holding companies that were formerly regulated by the Office of Thrift
Supervision, including the Company. Also effective one year after the date of enactment is a
provision of the Dodd-Frank Act that eliminates the federal prohibitions on paying interest on
demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on
competitive responses, this significant change to existing law could have an adverse impact on the
Companys interest expense.
The Dodd-Frank Act also broadens the base for Federal Deposit Insurance Corporation insurance
assessments. Assessments will now be based on the average consolidated total assets less tangible
equity capital of a financial institution. The Dodd-Frank Act also permanently increases the
maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000
per depositor, retroactive to January 1, 2009, and non-interest bearing transaction accounts have
unlimited deposit insurance through December 31, 2013.
The Dodd-Frank Act will require publicly traded companies to give stockholders a non-binding vote
on executive compensation and so-called golden parachute payments, and by authorizing the
Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate
their own candidates using a companys proxy materials. The legislation also directs the Federal
Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company
executives, regardless of whether the company is publicly traded or not.
The Dodd-Frank Act creates a new Consumer Financial Protection Bureau with broad powers to
supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad
rule-making authority for a wide range of consumer protection laws that apply to all banks and
savings institutions, including the authority to prohibit unfair, deceptive or abusive acts and
practices. The Consumer Financial Protection Bureau has examination and enforcement authority over
all banks and savings institutions with more than $10 billion in assets. Savings institutions such
as Legacy Banks with $10 billion or less in assets will continued to be examined for compliance
with the consumer laws by their primary bank regulators.
It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be
written implementing rules and regulations will have on community banks. However, it is expected
that at a minimum they will increase our operating and compliance costs and could increase our
interest expense.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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(a)
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Unregistered Sales of Equity Securities Not applicable
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(b)
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Use of Proceeds Not applicable
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(c)
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|
Repurchase of Our Equity Securities In March 2009 the Company announced that its
Board of Directors authorized a stock repurchase program (the Stock Repurchase Program)
for the purchase of up to 439,095 shares of the Companys common stock
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28
|
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|
or approximately 5% of its outstanding common stock. Purchases under this Stock Repurchase
Program in the second quarter of 2010 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(c) Total Number of
|
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(d) Maximum Number or
|
|
|
|
|
|
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Shares Purchased as
|
|
Approximate Dollar Value of
|
|
|
(a) Total Number
|
|
|
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Part of
|
|
Shares that May Yet Be
|
|
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of Shares
|
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(b) Average Price
|
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Publicly announced Plans
|
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Purchased Under the Plans or
|
Period
|
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Purchased
|
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Paid per Share
|
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or Programs
|
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Programs
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April 1 30
|
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12,200
|
|
$9.59
|
|
12,200
|
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344,445
|
May 1 31
|
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4,500
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$9.18
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4,500
|
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339,945
|
June 1 30
|
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11,100
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$8.67
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11,100
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328,845
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In the period from July 1, 2010 to August 4, 2010, the Company purchased an additional
14,900 shares under the repurchase program at an average price of
$8.36 per share. Any
further repurchases under the Stock Repurchase Program will be made through open market
purchase transactions from time to time. The amount and exact timing of any repurchases will
depend on market conditions and other factors, at the discretion of management of the
Company. There is no assurance that the Company will repurchase shares during any period.
|
Item 3. Defaults Upon Senior Securities
None
Item 4. (Removed and Reserved)
Item 5 Other Information
None
29
Item 6
:
Exhibits
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|
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3.1
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Certificate of Incorporation of Legacy Bancorp, Inc.(1)
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3.2
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Bylaws of Legacy Bancorp, Inc. (as amended) (1)
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10.1
|
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Legacy Banks ESOP Trust Agreement(2)
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10.2
|
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ESOP Plan Document (2)
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10.3
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ESOP Loan Documents (2)
|
10.4.1
|
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Employment Agreement between Legacy Banks and J. Williar Dunlaevy (2)
|
10.4.2
|
|
Employment Agreement between Legacy Banks and Michael A. Christopher (2)
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10.4.3
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|
Employment Agreement between Legacy Banks and Steven F. Pierce (2)
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10.4.4
|
|
Employment Agreement between Legacy Banks and Stephen M. Conley (2)
|
10.4.5
|
|
Employment Agreement between Legacy Banks and Richard M. Sullivan (2)
|
10.5.1
|
|
Employment Agreement between Legacy Bancorp, Inc. and J. Williar Dunlaevy (2)
|
10.5.2
|
|
Employment Agreement between Legacy Bancorp, Inc. and Michael A. Christopher (2)
|
10.5.3
|
|
Employment Agreement between Legacy Bancorp, Inc. and Steven F. Pierce (2)
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10.5.4
|
|
Employment Agreement between Legacy Bancorp, Inc. and Stephen M. Conley (2)
|
10.5.5
|
|
Employment Agreement between Legacy Bancorp, Inc. and Richard M. Sullivan (2)
|
10.5.6
|
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Separation Agreement and General Release dated as of November 5, 2007 between Legacy Bancorp,
Inc., Legacy Banks and Michael A. Christopher (4)
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10.5.7
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Separation Agreement and General Release dated as of December 21, 2007 between Legacy Bancorp,
Inc., Legacy Banks and Stephen M. Conley (5)
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10.5.8
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|
Consulting Agreement dated as of November 5, 2007 between Legacy Bancorp, Inc., Legacy Banks and
Michael A. Christopher (4)
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10.5.9
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Purchase Agreement by and between First Niagara Bank and Legacy Banks dated as of July 25, 2007 (6)
|
10.5.10
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Change In Control Agreement between Legacy Bancorp, Inc. and Paul H. Bruce (7)
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10.5.11
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Change In Control Agreement between Legacy Bancorp, Inc. and Kimberly A. Mathews (7)
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10.5.12
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Purchase Agreement by and between The Bank of Western Massachusetts and Legacy Banks dated as of
December 15, 2008 (8)
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10.5.13
|
|
Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)
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10.5.14
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|
Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and Steven F. Pierce (9)
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10.5.15
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Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and Richard M. Sullivan (9)
|
10.5.16
|
|
Amended and Restated Supplemental Executive Retirement Agreement effective as of November 20, 2008
by and between Legacy Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)
|
10.5.17
|
|
Employment Agreement effective as of April, 2010 by and between Legacy Bancorp, Inc., Legacy Banks
and Patrick J. Sullivan (10)
|
10.5.18
|
|
Separation Agreement and General Release dated as of May 11, 2010 between Legacy Bancorp, Inc.,
Legacy Banks and Steven F. Pierce (11)
|
10.11
|
|
2006 Equity Incentive Plan (3)
|
11.0
|
|
Statement re: Computation of Per Share Earnings is incorporated herein by reference to
Notes to
Consolidated Financial Statements
within Part I, Financial Statements
|
31.1
|
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of J. Williar Dunlaevy
|
31.2
|
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Certification pursuant to Rule 13a-14(a)/15d-14(a) of Paul H. Bruce
|
32
|
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Certification pursuant to 18 U.S.C. Section 1350
|
|
|
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(1)
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Incorporated by reference from the Registrants Quarterly Report on Form 10-Q for the Quarter
Ended March 31, 2005 filed October 27, 2005.
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(2)
|
|
Incorporated by reference from the Registration Statement on Form S-1 (No. 333-126481) filed
July 8, 2005, as amended.
|
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(3)
|
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Incorporated by reference from the Registrants Definitive Proxy Statement on Form DEF 14A
filed September 28, 2006
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(4)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed November 5,
2007.
|
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(5)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed December 21,
2007.
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|
(6)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed July 25,
2007.
|
|
(7)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed October 30,
2008.
|
|
(8)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed December 16,
2008.
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(9)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed November 25,
2008.
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|
(10)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed March 4,
2010.
|
|
(11)
|
|
Incorporated by reference from the Registrants Current Report on Form 8-K filed May 11,
2010.
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30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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LEGACY BANCORP, INC.
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|
Date: August 6, 2010
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/s/ J. Williar Dunlaevy
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|
|
J. Williar Dunlaevy
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|
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Chief Executive Officer and Chairman of the Board
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|
|
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Date: August 6, 2010
|
/s/ Paul H. Bruce
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|
|
Paul H. Bruce
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|
|
Senior Vice President, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer)
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|
|
31
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