##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005                                                 
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | FOR THE TRANSITION PERIOD
    FROM           TO                                             

COMMISSION FILE NUMBER: 000-51525


LEGACY BANCORP, INC.


(Exact name of registrant as specified in its charter)


|                                                                                       |  |                                      
|-------------------------------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                                               |  | 20-3135053                           
|(State or other jurisdiction of
    incorporation or organization)                     |  | (IRS Employer
    Identification No.)
|                                                                                      
|99 NORTH STREET
     PITTSFIELD, MASSACHUSETTS(Address of principal executive offices) |  | 01201(Zip Code)                      

(413) 443-4421


(Registrants telephone number, including area code)


Securities registered pursuant to section 12(b) of the
Act:


None


Securities registered pursuant to section 12(g) of the
Act:


(Common Stock ($0.01 par value per share)


o þ


o þ


þ o


S-K 10-K 10-K. þ




o o þ


o þ






Documents Incorporated By Reference


10-K.










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TABLE OF CONTENTS


|                                                              |  |                                                                                                                      |    |      |    | 
|------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                              |  |                                                                                                                      |    | Page |   
|                                                              |  |                                                                                                                      |    |      |   
|Part I                                                       
|Item 1.                                                       |  | Business                                                                                                             |    |      | 2  | 
|Item 1a.                                                      |  | Risk Factors                                                                                                         |    |      | 30 | 
|Item 1b.                                                      |  | Unresolved Staff Comments                                                                                            |    |      | 32 | 
|Item 2.                                                       |  | Properties                                                                                                           |    |      | 33 | 
|Item 3.                                                       |  | Legal proceedings                                                                                                    |    |      | 33 | 
|Item 4.                                                       |  | Submission of matters to a vote of security
    holders                                                              |    |      | 33 | 
|                                                             
|Part II                                                      
|Item 5.                                                       |  | Market for registrants common equity,
    related stockholder matters and issuer purchases of equity
    securities |    |      | 34 | 
|Item 6.                                                       |  | Selected financial data                                                                                              |    |      | 35 | 
|Item 7.                                                       |  | Managements discussion and analysis
    of financial condition and results of operations                            |    |      | 36 | 
|Item 7a.                                                      |  | Quantitative and qualitative disclosures
    about market risk                                                       |    |      | 45 | 
|Item 8.                                                       |  | Financial statements and supplementary
    data                                                                      |    |      | 50 | 
|Item 9.                                                       |  | Changes in and disagreements with
    accountants on accounting and financial disclosure                             |    |      | 50 | 
|Item 9a.                                                      |  | Controls and procedures                                                                                              |    |      | 50 | 
|Item 9b.                                                      |  | Other information                                                                                                    |    |      | 51 | 
|Part III                                                     
|Item 10.                                                      |  | Directors and executive officers of the
    registrant                                                               |    |      | 51 | 
|Item 11.                                                      |  | Executive compensation                                                                                               |    |      | 51 | 
|Item 12.                                                      |  | Security ownership of certain beneficial
    owners and management and related stockholder matters                   |    |      | 52 | 
|Item 13.                                                      |  | Certain relationships and related
    transactions                                                                   |    |      | 52 | 
|Item 14.                                                      |  | Principal accountant fees and services                                                                               |    |      | 52 | 
|                                                             
|Part IV                                                      
|Item 15.                                                      |  | Exhibits and financial statement
    schedules                                                                       |    |      | 52 | 
|Signatures                                                    |  |                                                                                                                      | 53 |     
|EX-11.0 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
|EX-14.0 CODE OF ETHICS                                       
|EX-21.0 LIST OF SUBSIDIARIES OF THE REGISTRANT               
|EX-31.1 SECTION 302 CERTIFICATION OF THE C.E.O.              
|EX-31.2 SECTION 302 CERTIFICATION OF THE C.F.O.              
|EX-32 SECTION 906 CERTIFICATION OF THE C.E.O. AND C.F.O.     



1



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Part I







|        |         
|------- | --------
|Item 1. | Business

Forward-Looking Statements:


Financial Statements:


General:


Market Area and Competition:


2



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Lending Activities


General:


3



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one-to lines-of






|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |   |         |         |   |  |        |       |  
|------------------------------ | ------------------------- | ---------------------- | ------- | ------- | ------- |  | ------ | ------ | - | - | ------- | ------- | - | ------ | ------ | ----- | ------- | - | ------- | ------- | - |  | ------ | ----- | -
|                               |                           | At December 31,        |        
|                               |                           |                        |        
|                               |                           | 2005                   |         |         | 2004    |  |        | 2003   |  
|                               |                           |                        |         |         |         |  |        |        |  
|                               |                           | Amount                 |         |         | Percent |  |        | Amount |   |   | Percent |         |   | Amount |        |       | Percent |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|                               |                           | (Dollars in thousands) |        
|Mortgage loans on real estate: |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |   |         |         |   |  |        |      
|                               | Residential               |                        | $       | 308,008 |         |  |        | 55.86  | % |   | $       | 284,114 |   |        |        | 55.89 | %       |   | $       | 254,166 |   |  |        | 54.15 | %
|                               | Commercial                |                        |         | 160,675 |         |  |        | 29.14  |   |   |         | 141,540 |   |        |        | 27.84 |         |   |         | 139,708 |   |  |        | 29.77 |  
|                               | Home equity               |                        |         | 58,640  |         |  |        | 10.64  |   |   |         | 53,508  |   |        |        | 10.53 |         |   |         | 44,506  |   |  |        | 9.48  |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|                               |                           |                        | 527,323 |         |         |  | 95.64  |        |   |   | 479,162 |         |   |        | 94.26  |       |         |   | 438,380 |         |   |  | 93.40  |      
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|Other loans:                   |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |   |         |         |   |  |        |      
|                               | Commercial                |                        |         | 20,579  |         |  |        | 3.73   |   |   |         | 24,856  |   |        |        | 4.89  |         |   |         | 22,087  |   |  |        | 4.70  |  
|                               | Consumer and other        |                        |         | 3,457   |         |  |        | 0.63   |   |   |         | 4,332   |   |        |        | 0.85  |         |   |         | 8,897   |   |  |        | 1.90  |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|                               |                           |                        | 24,036  |         |         |  | 4.36   |        |   |   | 29,188  |         |   |        | 5.74   |       |         |   | 30,984  |         |   |  | 6.60   |      
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|Total loans                    |                           |                        | 551,359 |         |         |  | 100.00 | %      |   |   | 508,350 |         |   |        | 100.00 | %     |         |   | 469,364 |         |   |  | 100.00 | %    
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|Other Items:                   |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |   |         |         |   |  |        |      
|                               | Net deferred loan costs   |                        |         | 361     |         |  |        |        |   |   |         | 224     |   |        |        |       |         |   |         | 275     |   |  |        |       |  
|                               | Unamortized premiums      |                        |         |        |         |  |        |        |   |   |         |        |   |        |        |       |         |   |         | 36      |   |  |        |       |  
|                               | Allowance for loan losses |                        |         | (4,220  | )       |  |        |        |   |   |         | (3,846  | ) |        |        |       |         |   |         | (4,420  | ) |  |        |       |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  
|Total Loans, net               |                           | $                      | 547,500 |         |         |  |        |        |   | $ | 504,728 |         |   |        |        |       |         | $ | 465,255 |         |   |  |        |      
|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |        |        |       |         |  

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|                               |                           |                        |         |         |         |  |        |        |   |   |         |         |   |  |        |       |  
|------------------------------ | ------------------------- | ---------------------- | ------- | ------- | ------- |  | ------ | ------ | - | - | ------- | ------- | - |  | ------ | ----- | -
|                               |                           | At December 31,        |        
|                               |                           |                        |        
|                               |                           | 2002                   |         |         | 2001    | 
|                               |                           |                        |         |         |         | 
|                               |                           | Amount                 |         |         | Percent |  |        | Amount |   |   | Percent |        
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|                               |                           | (Dollars in thousands) |        
|Mortgage loans on real estate: |                           |                        |         |         |         |  |        |        |   |   |         |         |   |  |        |      
|                               | Residential               |                        | $       | 216,092 |         |  |        | 57.86  | % |   | $       | 249,407 |   |  |        | 65.16 | %
|                               | Commercial                |                        |         | 95,919  |         |  |        | 25.68  |   |   |         | 57,976  |   |  |        | 15.15 |  
|                               | Home equity               |                        |         | 30,484  |         |  |        | 8.16   |   |   |         | 24,189  |   |  |        | 6.32  |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|                               |                           |                        | 342,495 |         |         |  | 91.70  |        |   |   | 331,572 |         |   |  | 86.63  |      
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|Other loans:                   |                           |                        |         |         |         |  |        |        |   |   |         |         |   |  |        |      
|                               | Commercial                |                        |         | 22,158  |         |  |        | 5.94   |   |   |         | 39,716  |   |  |        | 10.38 |  
|                               | Consumer and other        |                        |         | 8,827   |         |  |        | 2.36   |   |   |         | 11,457  |   |  |        | 2.99  |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|                               |                           |                        | 30,985  |         |         |  | 8.30   |        |   |   | 51,173  |         |   |  | 13.37  |      
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|Total loans                    |                           |                        | 373,480 |         |         |  | 100.00 | %      |   |   | 382,745 |         |   |  | 100.00 | %    
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|Other Items:                   |                           |                        |         |         |         |  |        |        |   |   |         |         |   |  |        |      
|                               | Net deferred loan costs   |                        |         | 585     |         |  |        |        |   |   |         | 876     |   |  |        |       |  
|                               | Unamortized premiums      |                        |         | 118     |         |  |        |        |   |   |         | 262     |   |  |        |       |  
|                               | Allowance for loan losses |                        |         | (3,633  | )       |  |        |        |   |   |         | (3,540  | ) |  |        |       |  
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        
|Total Loans, net               |                           | $                      | 370,550 |         |         |  |        |        |   | $ | 380,343 |         |   |  |        |      
|                               |                           |                        |         |         |         |  |        |        |   |   |         |        

Residential Real Estate Loans:






loan-to


5



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loan-to




Commercial Real Estate Loans:










Home Equity
Lines-of-Credit and
Loans: lines-of lines-of lines-of


lines-of one-to


6



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lines-of lines-of


Commercial Loans:






Consumer and Other Loan:


Loan Origination and Underwriting:






7



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|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |         |   |         |   |         |   |         | 
|-------------------------------- | ------------------------------ | ----------------------------------------- | ------- |  | ------- | - | ------- | ---- | ------- | - | ------- |  | ------- | ---- | ------- | - | ------- | - | ------- | - | ------- | 
|                                 |                                | For the Years Ended December 31,          |        
|                                 |                                |                                           |        
|                                 |                                | 2005                                      |         |  | 2004    |   |         | 2003 |         |   | 2002    |  |         | 2001 |        
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|                                 |                                | (Dollars in thousands)                    |        
|Loans at beginning of year       |                                | $                                         | 508,350 |  |         | $ | 469,364 |      |         | $ | 373,480 |  |         | $    | 382,745 |   |         | $ | 414,809 |  
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|Originations:                    |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |         |   |         |   |         |  
|                                 | Mortgage loans on real estate: |                                           |         |  |         |   |         |      |         |   |         |  |         |      |         |   |         |   |         |   |        
|                                 |                                | Residential                               |         |  | 86,247  |   |         |      | 92,944  |   |         |  | 138,305 |      |         |   | 101,468 |   |         |   | 62,487  | 
|                                 |                                | Commercial                                |         |  | 52,321  |   |         |      | 45,191  |   |         |  | 81,875  |      |         |   | 41,509  |   |         |   | 17,574  | 
|                                 |                                | Home Equity                               |         |  | 35,429  |   |         |      | 39,416  |   |         |  | 41,059  |      |         |   | 26,250  |   |         |   | 19,499  | 
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|                                 |                                |                                           | 173,997 |  |         |   | 177,551 |      |         |   | 261,239 |  |         |      | 169,227 |   |         |   | 99,560  |  
|Other Loans:                     |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |         |   |         |   |         |  
|                                 |                                | Commercial Business                       |         |  | 10,832  |   |         |      | 13,170  |   |         |  | 543     |      |         |   | 17,544  |   |         |   | 16,256  | 
|                                 |                                | Consumer and other                        |         |  | 1,617   |   |         |      | 3,783   |   |         |  | 5,982   |      |         |   | 3,785   |   |         |   | 5,706   | 
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|                                 |                                |                                           | 12,449  |  |         |   | 16,953  |      |         |   | 6,525   |  |         |      | 21,329  |   |         |   | 21,962  |  
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|Total loans originated           |                                |                                           | 186,446 |  |         |   | 194,504 |      |         |   | 267,764 |  |         |      | 190,556 |   |         |   | 121,522 |  
|Purchases of mortgage loans      |                                |                                           | 5,000   |  |         |   |        |      |         |   |        |  |         |      |        |   |         |   |        |  
|Deduct:                          |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |         |   |         |   |         |  
|                                 |                                | Principal loan repayments and prepayments |         |  | 125,481 |   |         |      | 138,968 |   |         |  | 150,836 |      |         |   | 163,761 |   |         |   | 117,271 | 
|                                 |                                | Loan sales                                |         |  | 22,342  |   |         |      | 15,611  |   |         |  | 20,794  |      |         |   | 35,953  |   |         |   | 36,098  | 
|                                 |                                | Charge-offs                               |         |  | 614     |   |         |      | 939     |   |         |  | 250     |      |         |   | 107     |   |         |   | 217     | 
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|Total deductions                 |                                |                                           | 148,437 |  |         |   | 155,518 |      |         |   | 171,880 |  |         |      | 199,821 |   |         |   | 153,586 |  
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|Net increase (decrease) in loans |                                |                                           | 43,009  |  |         |   | 38,986  |      |         |   | 95,884  |  |         |      | (9,265  | ) |         |   | (32,064 | )
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        
|Loans at end of year             |                                | $                                         | 551,359 |  |         | $ | 508,350 |      |         | $ | 469,364 |  |         | $    | 373,480 |   |         | $ | 382,745 |  
|                                 |                                |                                           |         |  |         |   |         |      |         |   |         |  |         |      |        







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Loan Maturity.


|                                 |  |                        |         |          |                     |  |      |            |          |   |         |  |  |          |      |   |      |   |        |  |  |  |      |  
|-------------------------------- |  | ---------------------- | ------- | -------- | ------------------- |  | ---- | ---------- | -------- | - | ------- |  |  | -------- | ---- | - | ---- | - | ------ |  |  |  | ---- | -
|                                 |  | Residential Mortgage   |         |          | Commercial Mortgage |  |      | Commercial |         
|                                 |  |                        |         |          |                     |  |      |            |         
|                                 |  |                        |         | Weighted |                     |  |      |            | Weighted |   |         |  |  | Weighted |     
|                                 |  |                        |         | Average  |                     |  |      |            | Average  |   |         |  |  | Average  |     
|                                 |  | Amount                 |         |          | Rate                |  |      | Amount     |          |   | Rate    |  |  | Amount   |      |   | Rate |  
|                                 |  |                        |         |          |                     |  |      |            |          |   |         |  |  |          |      |   |      |  
|                                 |  | (Dollars in thousands) |        
|Due less than one year           |  | $                      | 74,781  |          |                     |  | 5.82 | %          |          | $ | 56,310  |  |  |          | 7.21 | % |      | $ | 16,383 |  |  |  | 8.02 | %
|Due after one year to five years |  |                        | 163,918 |          |                     |  | 5.28 |            |          |   | 56,959  |  |  |          | 6.68 |   |      |   | 4,191  |  |  |  | 7.49 |  
|Due after five years             |  |                        | 69,309  |          |                     |  | 5.61 |            |          |   | 47,406  |  |  |          | 6.90 |   |      |   | 5      |  |  |  | 4.27 |  
|                                 |  |                        |         |          |                     |  |      |            |          |   |         |  |  |          |      |   |      |  
|Total                            |  | $                      | 308,008 |          |                     |  | 5.49 | %          |          | $ | 160,675 |  |  |          | 6.93 | % |      | $ | 20,579 |  |  |  | 7.91 | %
|                                 |  |                        |         |          |                     |  |      |            |          |   |         |  |  |          |      |   |      |  

|                                 |  |                        |        |          |       |  |      |        |          |   |         |  |  |  |      |  
|-------------------------------- |  | ---------------------- | ------ | -------- | ----- |  | ---- | ------ | -------- | - | ------- |  |  |  | ---- | -
|                                 |  | Home Equity,           |        |          |      
|                                 |  | Consumer and Other     |        |          | Total | 
|                                 |  |                        |        |          |       | 
|                                 |  |                        |        | Weighted |       |  |      |        | Weighted |  
|                                 |  |                        |        | Average  |       |  |      |        | Average  |  
|                                 |  | Amount                 |        |          | Rate  |  |      | Amount |          |   | Rate    | 
|                                 |  |                        |        |          |       |  |      |        |          |   |         | 
|                                 |  | (Dollars in thousands) |       
|Due less than one year           |  | $                      | 60,691 |          |       |  | 6.95 | %      |          | $ | 208,165 |  |  |  | 6.70 | %
|Due after one year to five years |  |                        | 1,304  |          |       |  | 7.84 |        |          |   | 226,372 |  |  |  | 5.69 |  
|Due after five years             |  |                        | 102    |          |       |  | 7.86 |        |          |   | 116,822 |  |  |  | 6.14 |  
|                                 |  |                        |        |          |       |  |      |        |          |   |         | 
|Total                            |  | $                      | 62,097 |          |       |  | 6.97 | %      |          | $ | 551,359 |  |  |  | 6.17 | %
|                                 |  |                        |        |          |       |  |      |        |          |   |         | 

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|                                |  |                             |         |  |            |   |         |       |  |   |         | 
|------------------------------- |  | --------------------------- | ------- |  | ---------- | - | ------- | ----- |  | - | ------- | 
|                                |  | Due After December 31, 2006 |        
|                                |  |                             |        
|                                |  | Fixed                       |         |  | Adjustable |   |         | Total | 
|                                |  |                             |         |  |            |   |         |       | 
|                                |  | (Dollars in thousands)      |        
|Residential mortgage            |  | $                           | 139,053 |  |            | $ | 94,174  |       |  | $ | 233,227 | 
|Commercial mortgage             |  |                             | 66,234  |  |            |   | 38,131  |       |  |   | 104,365 | 
|Commercial business             |  |                             | 2,921   |  |            |   | 1,275   |       |  |   | 4,196   | 
|Home equity, consumer and other |  |                             | 1,406   |  |            |   |        |       |  |   | 1,406   | 
|                                |  |                             |         |  |            |   |         |       | 
|Total Loans                     |  | $                           | 209,614 |  |            | $ | 133,580 |       |  | $ | 343,194 | 
|                                |  |                             |         |  |            |   |         |       | 

Asset Quality


General:


Delinquent Loans.: th th


Other Real Estate Owned:


Classification of Assets and Loan Review:




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Non-Performing Assets.


|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |       |       |   |   |       |      |  
|------------------------------------------------------------- | ------------------------------------- | ---------------------- | --- | ---- | ---- | - | ----- | ----- | - | - | ----- | ---- | - | ---- | ----- | ----- | - | - | ----- | ---- | -
|                                                              |                                       | At December 31,        |    
|                                                              |                                       |                        |    
|                                                              |                                       | 2005                   |     |      | 2004 |   |       | 2003  |   |   | 2002  |      |   | 2001 |      
|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |      
|                                                              |                                       | (Dollars in thousands) |    
|Non-accrual loans:                                            |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |       |       |   |   |       |     
|                                                              | Residential mortgage                  |                        | $   | 479  |      |   | $     | 123   |   |   | $     | 875  |   |      | $     | 971   |   |   | $     | 723  |  
|                                                              | Commercial mortgage                   |                        |     | 96   |      |   |       | 1,229 |   |   |       | 662  |   |      |       | 1,209 |   |   |       | 445  |  
|                                                              | Commercial                            |                        |     | 250  |      |   |       | 388   |   |   |       | 316  |   |      |       | 866   |   |   |       | 200  |  
|                                                              | Home equity, consumer and other       |                        |     | 78   |      |   |       | 29    |   |   |       |     |   |      |       | 30    |   |   |       | 29   |  
|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |      
|Total non-accrual loans                                       |                                       |                        | 903 |      |      |   | 1,769 |       |   |   | 1,853 |      |   |      | 3,076 |       |   |   | 1,397 |     
|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |      
|Loans greater than 90 days delinquent and still
    accruing: |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |       |       |   |   |       |     
|                                                              | Residential mortgage                  |                        |     |     |      |   |       |      |   |   |       |     |   |      |       |      |   |   |       | 201  |  
|                                                              | Commercial mortgage                   |                        |     |     |      |   |       |      |   |   |       |     |   |      |       |      |   |   |       |     |  
|                                                              | Commercial                            |                        |     |     |      |   |       |      |   |   |       |     |   |      |       |      |   |   |       |     |  
|                                                              | Home equity, consumer and other       |                        |     |     |      |   |       |      |   |   |       |     |   |      |       |      |   |   |       | 56   |  
|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |      
|Total loans 90 days delinquent and still accruing             |                                       |                        |    |      |      |   |      |       |   |   |      |      |   |      |      |       |   |   | 257   |     
|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |      
|Total non-performing assets                                   |                                       | $                      | 903 |      |      | $ | 1,769 |       |   | $ | 1,853 |      |   | $    | 3,076 |       |   | $ | 1,654 |     
|                                                              |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |      
|Ratios:                                                       |                                       |                        |     |      |      |   |       |       |   |   |       |      |   |      |       |       |   |   |       |     
|                                                              | Non-performing loans to total loans   |                        |     | 0.16 | %    |   |       | 0.35  | % |   |       | 0.40 | % |      |       | 0.83  | % |   |       | 0.43 | %
|                                                              | Non-performing assets to total assets |                        |     | 0.12 | %    |   |       | 0.26  | % |   |       | 0.29 | % |      |       | 0.52  | % |   |       | 0.27 | %



Allowance for Loan Losses.




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|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |        |      |     |   |        |      |      |  
|-------------------------------------------------------------------------- | ------------------------------ | -------------------------------------- | ------ | ---- | ---- | - | ------ | ---- | ---- | - | ------ | ---- | ---- | ---- | ------ | ---- | --- | - | ------ | ---- | ---- | -
|                                                                           |                                | At or for the Years Ended December 31, |       
|                                                                           |                                |                                        |       
|                                                                           |                                | 2005                                   |        |      | 2004 |   |        | 2003 |      |   | 2002   |      |      | 2001 |       
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           |                                | (Dollars in thousands)                 |       
|Balance at beginning of year                                               |                                | $                                      | 3,846  |      |      | $ | 4,420  |      |      | $ | 3,633  |      |      | $    | 3,540  |      |     | $ | 3,710  |     
|Charge-offs:                                                               |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |        |      |     |   |        |     
|                                                                           | Mortgage loans on real estate: |                                        |        |     |      |   |        | (621 | )    |   |        |     |      |      |        | (20  | )   |   |        | (30  | )   
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           | Other loans:                   |                                        |        |      |      |   |        |      |      |   |        |      |      |      |        |      |     |   |        |      |     
|                                                                           |                                | Commercial business                    |        |      | (506 | ) |        |      | (258 | ) |        |      | (184 | )    |        |      | (19 | ) |        |      | (124 | )
|                                                                           |                                | Consumer and other                     |        |      | (108 | ) |        |      | (60  | ) |        |      | (66  | )    |        |      | (68 | ) |        |      | (63  | )
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           | Total other loans              |                                        |        | (614 | )    |   |        | (318 | )    |   |        | (250 | )    |      |        | (87  | )   |   |        | (187 | )   
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           | Total charge-offs              |                                        |        | (614 | )    |   |        | (939 | )    |   |        | (250 | )    |      |        | (107 | )   |   |        | (217 | )   
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|Recoveries:                                                                |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |        |      |     |   |        |     
|                                                                           | Mortgage loans on real estate  |                                        |        |     |      |   |        |     |      |   |        |     |      |      |        |     |     |   |        |     |     
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           | Other loans:                   |                                        |        |      |      |   |        |      |      |   |        |      |      |      |        |      |     |   |        |      |     
|                                                                           |                                | Commercial business                    |        |      | 66   |   |        |      | 128  |   |        |      | 31   |      |        |      | 49  |   |        |      | 35   |  
|                                                                           |                                | Consumer and other                     |        |      | 81   |   |        |      | 25   |   |        |      | 27   |      |        |      | 11  |   |        |      | 12   |  
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           | Total other loans              |                                        |        | 147  |      |   |        | 153  |      |   |        | 58   |      |      |        | 60   |     |   |        | 47   |     
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|                                                                           | Total recoveries               |                                        |        | 147  |      |   |        | 153  |      |   |        | 58   |      |      |        | 60   |     |   |        | 47   |     
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|Net (charge-offs) recoveries                                               |                                |                                        | (467   | )    |      |   | (786   | )    |      |   | (192   | )    |      |      | (47    | )    |     |   | (170   | )   
|Provision for loan losses                                                  |                                |                                        | 841    |      |      |   | 212    |      |      |   | 979    |      |      |      | 140    |      |     |   |       |     
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|Balance at end of year                                                     |                                | $                                      | 4,220  |      |      | $ | 3,846  |      |      | $ | 4,420  |      |      | $    | 3,633  |      |     | $ | 3,540  |     
|                                                                           |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |       
|Ratios:                                                                    |                                |                                        |        |      |      |   |        |      |      |   |        |      |      |      |        |      |     |   |        |     
|Net (charge-offs) recoveries to average loans outstanding
    (annualized) |                                |                                        | (0.09  | )%   |      |   | (0.16  | )%   |      |   | (0.05  | )%   |      |      | (0.01  | )%   |     |   | (0.04  | %)  
|Allowance for loan losses to non-performing loans at end of year           |                                |                                        | 467.33 | %    |      |   | 217.41 | %    |      |   | 238.53 | %    |      |      | 118.11 | %    |     |   | 214.03 | %   
|Allowance for loan losses to total loans at end of year                    |                                |                                        | 0.77   | %    |      |   | 0.76   | %    |      |   | 0.94   | %    |      |      | 0.98   | %    |     |   | 0.92   | %   



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|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |       |       |  |   |         |         |  |  |        |       |  
|------------------------------ | ------------------ | ---------------------- | ----- | ---------- | ----------- | - | ------- | ----------- | ---------- |  | --------- | ----- | - | ----------- | ----- | ----- | ----------- | - | ------- | --------- |  |  | ----------- | ----- | - | ----------- | ----- | ----- |  | - | ------- | ------- |  |  | ------ | ----- | -
|                               |                    | At December 31,        |      
|                               |                    |                        |      
|                               |                    | 2005                   |       |            | 2004        |   |         | 2003        |           
|                               |                    |                        |       |            |             |   |         |             |           
|                               |                    |                        |       | Percent of |             |   |         |             | Percent of |  |           |       |   | Percent of  |      
|                               |                    |                        |       | Loans in   |             |   |         |             | Loans in   |  |           |       |   | Loans in    |      
|                               |                    |                        |       | Each       |             |   |         |             | Each       |  |           |       |   | Each        |      
|                               |                    | Allowance              |       |            | Loan        |   |         | Category to |            |  | Allowance |       |   | Loan        |       |       | Category to |   |         | Allowance |  |  | Loan        |       |   | Category to |      
|                               |                    | for Loan               |       |            | Balances by |   |         | Total       |            |  | for Loan  |       |   | Balances by |       |       | Total       |   |         | for Loan  |  |  | Balances by |       |   | Total       |      
|                               |                    | Losses                 |       |            | Category    |   |         | Loans       |            |  | Losses    |       |   | Category    |       |       | Loans       |   |         | Losses    |  |  | Category    |       |   | Loans       |      
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |      
|                               |                    | (Dollars in thousands) |      
|Mortgage loans on real estate: |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |       |       |  |   |         |         |  |  |        |      
|                               | Residential        |                        | $     | 881        |             |   | $       | 308,008     |            |  |           | 55.86 | % |             | $     | 785   |             |   | $       | 284,114   |  |  |             | 55.89 | % |             | $     | 713   |  |   | $       | 254,166 |  |  |        | 54.15 | %
|                               | Commercial         |                        |       | 2,779      |             |   |         | 160,675     |            |  |           | 29.14 | % |             |       | 2,363 |             |   |         | 141,540   |  |  |             | 27.84 | % |             |       | 3,113 |  |   |         | 139,708 |  |  |        | 29.77 | %
|                               | Home equity        |                        |       | 168        |             |   |         | 58,640      |            |  |           | 10.64 | % |             |       | 156   |             |   |         | 53,508    |  |  |             | 10.53 | % |             |       | 124   |  |   |         | 44,506  |  |  |        | 9.48  | %
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |      
|                               |                    |                        | 3,828 |            |             |   | 527,323 |             |            |  | 95.64     | %     |   |             | 3,304 |       |             |   | 479,162 |           |  |  | 94.26       | %     |   |             | 3,950 |       |  |   | 438,380 |         |  |  | 93.40  | %    
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |      
|Other loans:                   |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |       |       |  |   |         |         |  |  |        |      
|                               | Commercial         |                        |       | 353        |             |   |         | 20,579      |            |  |           | 3.73  | % |             |       | 423   |             |   |         | 24,856    |  |  |             | 4.89  | % |             |       | 369   |  |   |         | 22,087  |  |  |        | 4.70  | %
|                               | Consumer and other |                        |       | 39         |             |   |         | 3,457       |            |  |           | 0.63  | % |             |       | 119   |             |   |         | 4,332     |  |  |             | 0.85  | % |             |       | 101   |  |   |         | 8,897   |  |  |        | 1.90  | %
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |      
|                               |                    |                        | 392   |            |             |   | 24,036  |             |            |  | 4.36      | %     |   |             | 542   |       |             |   | 29,188  |           |  |  | 5.74        | %     |   |             | 470   |       |  |   | 30,984  |         |  |  | 6.60   | %    
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |      
|Total                          |                    | $                      | 4,220 |            |             | $ | 551,359 |             |            |  | 100.00    | %     |   | $           | 3,846 |       |             | $ | 508,350 |           |  |  | 100.00      | %     |   | $           | 4,420 |       |  | $ | 469,364 |         |  |  | 100.00 | %    
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |           |  |  |             |       |   |             |      

|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |         |  |  |        |       |  
|------------------------------ | ------------------ | ---------------------- | ----- | ---------- | ----------- | - | ------- | ----------- | ---------- |  | --------- | ----- | - | ----------- | ----- | ----- | ----------- | - | ------- | ------- |  |  | ------ | ----- | -
|                               |                    | At December 31,        |      
|                               |                    |                        |      
|                               |                    | 2002                   |       |            | 2001        |  
|                               |                    |                        |       |            |             |  
|                               |                    |                        |       | Percent of |             |   |         |             | Percent of | 
|                               |                    |                        |       | Loans in   |             |   |         |             | Loans in   | 
|                               |                    |                        |       | Each       |             |   |         |             | Each       | 
|                               |                    | Allowance              |       |            | Loan        |   |         | Category to |            |  | Allowance |       |   | Loan        |       |       | Category to |  
|                               |                    | for Loan               |       |            | Balances by |   |         | Total       |            |  | for Loan  |       |   | Balances by |       |       | Total       |  
|                               |                    | Losses                 |       |            | Category    |   |         | Loans       |            |  | Losses    |       |   | Category    |       |       | Loans       |  
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |  
|                               |                    | (Dollars in thousands) |      
|Mortgage loans on real estate: |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |         |  |  |        |      
|                               | Residential        |                        | $     | 627        |             |   | $       | 216,092     |            |  |           | 57.86 | % |             | $     | 846   |             |   | $       | 249,407 |  |  |        | 65.16 | %
|                               | Commercial         |                        |       | 2,426      |             |   |         | 95,919      |            |  |           | 25.68 | % |             |       | 1,596 |             |   |         | 57,976  |  |  |        | 15.15 | %
|                               | Home equity        |                        |       | 88         |             |   |         | 30,484      |            |  |           | 8.16  | % |             |       | 86    |             |   |         | 24,189  |  |  |        | 6.32  | %
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |  
|                               |                    |                        | 3,141 |            |             |   | 342,495 |             |            |  | 91.70     | %     |   |             | 2,528 |       |             |   | 331,572 |         |  |  | 86.63  | %    
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |  
|Other loans:                   |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |   |         |         |  |  |        |      
|                               | Commercial         |                        |       | 383        |             |   |         | 22,158      |            |  |           | 5.93  | % |             |       | 709   |             |   |         | 39,716  |  |  |        | 10.38 | %
|                               | Consumer and other |                        |       | 109        |             |   |         | 8,827       |            |  |           | 2.36  | % |             |       | 303   |             |   |         | 11,457  |  |  |        | 2.99  | %
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |  
|                               |                    |                        | 492   |            |             |   | 30,985  |             |            |  | 8.30      | %     |   |             | 1,012 |       |             |   | 51,173  |         |  |  | 13.37  | %    
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |  
|Total                          |                    | $                      | 3,633 |            |             | $ | 373,480 |             |            |  | 100.00    | %     |   | $           | 3,540 |       |             | $ | 382,745 |         |  |  | 100.00 | %    
|                               |                    |                        |       |            |             |   |         |             |            |  |           |       |   |             |       |       |             |  

Investment Activities


General.


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Accounting for Certain Investments in Debt and Equity
Securities


Government Sponsored Enterprises.


Municipal Bonds.


Corporate Obligations.


Mortgage-Backed Securities.


Marketable Equity Securities.


Restricted Equity Securities and Other investments.


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|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         |  |     |         |         |  |     |         |         | 
|--------------------------------------------------- | -------------------------------------------------------- | ---------------------- | -- | ------- | -------------------- |  | -- | -------------------- | ------- |  | ----- | ------- | ------- | --------- | --- | ------- | ------- |  | --- | ------- | ------- |  | --- | ------- | ------- | 
|                                                    |                                                          | At December 31, 2005   |    |         | At December 31, 2004 |  |    | At December 31, 2003 |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |        
|                                                    |                                                          | Amortized              |    |         | Fair                 |  |    | Amortized            |         |  | Fair  |         |         | Amortized |     |         | Fair    | 
|                                                    |                                                          | Cost                   |    |         | Value                |  |    | Cost                 |         |  | Value |         |         | Cost      |     |         | Value   | 
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|                                                    |                                                          | (Dollars in thousands) |   
|Securities available for sale:                      |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         |  |     |         |         |  |     |        
|                                                    | Government-sponsored enterprises                         |                        | $  | 95,613  |                      |  | $  | 94,369               |         |  | $     | 42,504  |         |           | $   | 42,263  |         |  | $   | 35,905  |         |  | $   | 36,015  |        
|                                                    | Municipal bonds                                          |                        |    | 6,061   |                      |  |    | 6,002                |         |  |       | 3,575   |         |           |     | 3,565   |         |  |     | 536     |         |  |     | 554     |        
|                                                    | Corporate bonds and other obligations                    |                        |    | 6,149   |                      |  |    | 6,161                |         |  |       | 12,448  |         |           |     | 12,696  |         |  |     | 17,591  |         |  |     | 18,346  |        
|                                                    | Mortgage-backed securities                               |                        |    | 56,896  |                      |  |    | 55,505               |         |  |       | 58,657  |         |           |     | 58,253  |         |  |     | 54,065  |         |  |     | 53,653  |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|                                                    |                                                          | Total debt securities  |    |         | 164,719              |  |    |                      | 162,037 |  |       |         | 117,184 |           |     |         | 116,777 |  |     |         | 108,097 |  |     |         | 108,568 | 
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|Marketable equity securities:                       |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         |  |     |         |         |  |     |        
|                                                    | Common stock                                             |                        |    | 4,399   |                      |  |    | 5,399                |         |  |       | 3,076   |         |           |     | 3,545   |         |  |     | 2,939   |         |  |     | 3,233   |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|                                                    | Total securities available for sale                      |                        |    | 169,118 |                      |  |    | 167,436              |         |  |       | 120,260 |         |           |     | 120,322 |         |  |     | 111,036 |         |  |     | 111,801 |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|Securities held to maturity:                        |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         |  |     |         |         |  |     |        
|                                                    | Other bonds                                              |                        |    | 97      |                      |  |    | 97                   |         |  |       | 161     |         |           |     | 161     |         |  |     | 161     |         |  |     | 161     |        
|                                                    | Mortgage-backed securities                               |                        |    |        |                      |  |    |                     |         |  |       | 2       |         |           |     | 2       |         |  |     | 2       |         |  |     | 3       |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|                                                    |                                                          |                        | 97 |         |                      |  | 97 |                      |         |  | 163   |         |         |           | 163 |         |         |  | 163 |         |         |  | 164 |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|Restricted equity securities and other investments: |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         |  |     |         |         |  |     |        
|                                                    | Federal Home Loan Bank of Boston stock                   |                        |    | 9,056   |                      |  |    | 9,056                |         |  |       | 8,830   |         |           |     | 8,830   |         |  |     | 6,871   |         |  |     | 6,871   |        
|                                                    | Savings Bank Life Insurance and DIF stock                |                        |    | 1,709   |                      |  |    | 1,709                |         |  |       | 1,709   |         |           |     | 1,709   |         |  |     | 1,709   |         |  |     | 1,709   |        
|                                                    | Other investments                                        |                        |    | 1,557   |                      |  |    | 1,557                |         |  |       | 870     |         |           |     | 870     |         |  |     | 235     |         |  |     | 235     |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|                                                    | Total restricted equity securities and other investments |                        |    | 12,322  |                      |  |    | 12,322               |         |  |       | 11,409  |         |           |     | 11,409  |         |  |     | 8,815   |         |  |     | 8,815   |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 
|                                                    | Total securities                                         |                        | $  | 181,537 |                      |  | $  | 179,855              |         |  | $     | 131,832 |         |           | $   | 131,894 |         |  | $   | 120,014 |         |  | $   | 120,780 |        
|                                                    |                                                          |                        |    |         |                      |  |    |                      |         |  |       |         |         |           |     |         |         | 

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|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         |  |  |      |   |   |         |        |         |  |  |      |   | 
|------------------------------------ | ------------------------------------- | ------------------------- | ------ | ----------------- | ------- | ------------- | ----------------- | --------- | -------------- | ------------- | ------- | ------ | ------ | ---------------- |  | ---- | ------- | - | -------- | --------- | ------ |  | ------- | -------- | - | --------- | ------ | ------ | ------- |  |  | ---- | - | - | ------- | ------ | ------- |  |  | ---- | - | 
|                                     |                                       |                           |        |                   |         | More Than One |                   |           | More Than Five |               |         |        |        |                  |  |     
|                                     |                                       |                           |        | Year through Five |         |               | Years through Ten |           |                | More Than Ten |         |        |       
|                                     |                                       | One Year of Less          |        |                   | Years   |               |                   | Years     |                |               | Years   |        |        | Total Securities | 
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  | 
|                                     |                                       |                           |        | Weighted          |         |               |                   |           | Weighted       |               |         |        |        | Weighted         |  |      |         |   | Weighted |           |        |  |         | Weighted |  
|                                     |                                       | Amortized                 |        |                   | Average |               |                   | Amortized |                |               | Average |        |        | Amortized        |  |      | Average |   |          | Amortized |        |  | Average |          |   | Amortized |        |        | Average | 
|                                     |                                       | Cost                      |        |                   | Yield   |               |                   | Cost      |                |               | Yield   |        |        | Cost             |  |      | Yield   |   |          | Cost      |        |  | Yield   |          |   | Cost      |        |        | Yield   | 
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|                                     |                                       | (Dollars in thousands)    |       
|Securities available for sale (AFS): |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         |  |  |      |   |   |         |        |         |  |  |     
|                                     | Government-sponsored enterprises      |                           | $      | 39,735            |         |               |                   | 4.46      | %              |               | $       | 55,878 |        |                  |  | 3.74 | %       |   |          |          |        |  |         |         |   |           | $      |       |         |  |  |     |   |   | $       | 95,613 |         |  |  | 4.04 | %
|                                     | Municipal Bonds                       |                           |        |                  |         |               |                   |          |                |               |         | 515    |        |                  |  | 4.21 | %       |   |          | 1,714     |        |  |         | 3.52     | % |           |        | 3,832  |         |  |  | 3.97 | % |   |         | 6,061  |         |  |  | 3.91 | %
|                                     | Corporate bonds and other obligations |                           |        | 4,119             |         |               |                   | 5.25      | %              |               |         | 2,030  |        |                  |  | 5.37 | %       |   |          |          |        |  |         |         |   |           |        |       |         |  |  |     |   |   |         | 6,149  |         |  |  | 5.29 | %
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|                                     |                                       | Subtotal                  |        |                   | 43,854  |               |                   |           |                |               |         |        | 58,423 |                  |  |      |         |   |          |           | 1,714  |  |         |          |   |           |        |        | 3,832   |  |  |      |   |   |         |        | 107,823 |  |  |      |   | 
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|                                     | Mortgage-backed securities            |                           |        |                  |         |               |                   |          |                |               |         | 10,745 |        |                  |  | 3.91 | %       |   |          | 13,672    |        |  |         | 4.26     | % |           |        | 32,479 |         |  |  | 4.30 | % |   |         | 56,896 |         |  |  | 4.22 | %
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|                                     |                                       | Total AFS debt securities |        |                   | 43,854  |               |                   |           |                |               |         |        | 69,168 |                  |  |      |         |   |          |           | 15,386 |  |         |          |   |           |        |        | 36,311  |  |  |      |   |   |         |        | 164,719 |  |  |      |   | 
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|Securities held to maturity (HTM):   |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         |  |  |      |   |   |         |        |         |  |  |     
|                                     | Corporate bonds and other obligations |                           |        |                  |         |               |                   |          |                |               |         | 30     |        |                  |  | 3.00 | %       |   |          | 52        |        |  |         | 3.00     | % |           |        | 15     |         |  |  | 3.00 | % |   |         | 97     |         |  |  | 3.00 | %
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|                                     |                                       | Total HTM debt securities |        |                   |        |               |                   |           |                |               |         |        | 30     |                  |  |      |         |   |          |           | 52     |  |         |          |   |           |        |        | 15      |  |  |      |   |   |         |        | 97      |  |  |      |   | 
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 
|Total debt securities                |                                       | $                         | 43,854 |                   |         |               |                   |           |                | $             | 69,198  |        |        |                  |  |      |         | $ | 15,438   |           |        |  |         |          |   | $         | 36,326 |        |         |  |  |      |   | $ | 164,816 |        |         |  |  |     
|                                     |                                       |                           |        |                   |         |               |                   |           |                |               |         |        |        |                  |  |      |         |   |          |           |        |  |         |          |   |           |        |        |         | 

Sources of Funds


General.


Deposits.






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|                           |                       |                          |         |          |         |  |         |      |          |         |         |      |   |          |         |        |      |         |       |         |   |  |         |      |   |      |         |        |  |  |       |      |   |  |      |      |  
|-------------------------- | --------------------- | ------------------------ | ------- | -------- | ------- |  | ------- | ---- | -------- | ------- | ------- | ---- | - | -------- | ------- | ------ | ---- | ------- | ----- | ------- | - |  | ------- | ---- | - | ---- | ------- | ------ |  |  | ----- | ---- | - |  | ---- | ---- | -
|                           |                       | Years Ended December 31, |        
|                           |                       |                          |        
|                           |                       | 2005                     |         |          | 2004    |  |         | 2003 |         
|                           |                       |                          |         |          |         |  |         |      |         
|                           |                       |                          |         | Weighted |         |  |         |      | Weighted |         |         |      |   | Weighted |        
|                           |                       | Average                  |         |          |         |  | Average |      |          | Average |         |      |   |          | Average |        |      | Average |       |         |   |  | Average |     
|                           |                       | Balance                  |         |          | Percent |  |         | Rate |          |         | Balance |      |   | Percent  |         |        | Rate |         |       | Balance |   |  | Percent |      |   | Rate |        
|                           |                       |                          |         |          |         |  |         |      |          |         |         |      |   |          |         |        |      |         |       |         |   |  |         |      |   |      |        
|                           |                       | (Dollars in thousands)   |        
|Deposit type:              |                       |                          |         |          |         |  |         |      |          |         |         |      |   |          |         |        |      |         |       |         |   |  |         |      |   |      |         |        |  |  |       |      |   |  |      |     
|                           | Demand deposits       |                          | $       | 55,996   |         |  |         | 11.9 | %        |         |         |     | % |          | $       | 48,123 |      |         |       | 11.1    | % |  |         |     | % |      | $       | 46,429 |  |  |       | 11.3 | % |  |      |     | %
|                           | NOW deposits          |                          |         | 39,507   |         |  |         | 8.3  |          |         |         | 0.21 |   |          |         | 36,431 |      |         |       | 8.4     |   |  |         | 0.15 |   |      |         | 34,064 |  |  |       | 8.3  |   |  |      | 0.18 |  
|                           | Money market deposits |                          |         | 59,016   |         |  |         | 12.5 |          |         |         | 1.61 |   |          |         | 72,107 |      |         |       | 16.6    |   |  |         | 0.94 |   |      |         | 93,619 |  |  |       | 22.7 |   |  |      | 1.01 |  
|                           | Regular savings       |                          |         | 69,088   |         |  |         | 14.6 |          |         |         | 0.43 |   |          |         | 81,352 |      |         |       | 18.8    |   |  |         | 0.41 |   |      |         | 90,646 |  |  |       | 22.0 |   |  |      | 0.69 |  
|                           | Life Path Savings     |                          |         | 71,188   |         |  |         | 15.1 |          |         |         | 2.37 |   |          |         | 40,338 |      |         |       | 9.3     |   |  |         | 1.85 |   |      |         |        |  |  |       |     |   |  |      |     |  
|                           |                       |                          |         |          |         |  |         |      |          |         |         |      |   |          |         |        |      |         |       |         |   |  |         |      |   |      |        
|Total transaction accounts |                       |                          | 294,795 |          |         |  | 62.4    |      |          |         | 1.04    |      |   |          | 278,351 |        |      |         | 64.2  |         |   |  | 0.65    |      |   |      | 264,758 |        |  |  | 64.3  |      |   |  | 0.62 |     
|Certificates of deposit    |                       |                          | 177,613 |          |         |  | 37.6    |      |          |         | 2.94    |      |   |          | 155,024 |        |      |         | 35.8  |         |   |  | 2.45    |      |   |      | 146,837 |        |  |  | 35.7  |      |   |  | 2.79 |     
|                           |                       |                          |         |          |         |  |         |      |          |         |         |      |   |          |         |        |      |         |       |         |   |  |         |      |   |      |        
|Total deposits             |                       | $                        | 472,408 |          |         |  | 100.0   | %    |          |         | 1.76    | %    |   | $        | 433,375 |        |      |         | 100.0 | %       |   |  | 1.29    | %    |   | $    | 411,595 |        |  |  | 100.0 | %    |   |  | 1.39 | %   
|                           |                       |                          |         |          |         |  |         |      |          |         |         |      |   |          |         |        |      |         |       |         |   |  |         |      |   |      |        



|              |              |                        |         |         |      |   |         |        |  |   |         |        | 
|------------- | ------------ | ---------------------- | ------- | ------- | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|              |              | At December 31,        |        
|              |              |                        |        
|              |              | 2005                   |         |         | 2004 |   |         | 2003   | 
|              |              |                        |         |         |      |   |         |        | 
|              |              | (Dollars in thousands) |        
|Interest Rate |              |                        |         |         |      |   |         |        |  |   |         |       
|              | Less than 2% |                        | $       | 4,488   |      |   | $       | 53,731 |  |   | $       | 66,017 | 
|              | 2.00%-2.99%  |                        |         | 49,175  |      |   |         | 71,473 |  |   |         | 38,782 | 
|              | 3.00%-3.99%  |                        |         | 103,039 |      |   |         | 30,638 |  |   |         | 23,970 | 
|              | 4.00%-4.99%  |                        |         | 28,875  |      |   |         | 5,300  |  |   |         | 16,430 | 
|              | 5.00%-5.99%  |                        |         | 2,662   |      |   |         | 3,410  |  |   |         | 3,803  | 
|              | 6.00%-6.99%  |                        |         | 23      |      |   |         | 895    |  |   |         | 1,128  | 
|              |              |                        |         |         |      |   |         |        | 
|Total         |              | $                      | 188,262 |         |      | $ | 165,447 |        |  | $ | 150,130 |       
|              |              |                        |         |         |      |   |         |        | 

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|              |              |                          |         |        |              |   |        |        |  |   |       |       |  |      |       |       |       |   |     |     |  |   |         |         | 
|------------- | ------------ | ------------------------ | ------- | ------ | ------------ | - | ------ | ------ |  | - | ----- | ----- |  | ---- | ----- | ----- | ----- | - | --- | --- |  | - | ------- | ------- | 
|              |              |                          |         | After  |              |   |       
|              |              | Year Ending December 31, |         |        | December 31, |   |        |       
|              |              |                          |         |        |              |   |        |       
|              |              | 2006                     |         |        | 2007         |   |        | 2008   |  |   | 2009  |       |  | 2009 |       |       | Total |  
|              |              |                          |         |        |              |   |        |        |  |   |       |       |  |      |       |       |       |  
|              |              | (Dollars in thousands)   |        
|Interest Rate |              |                          |         |        |              |   |        |        |  |   |       |       |  |      |       |       |       |   |     |     |  |   |         |        
|              | Less than 2% |                          | $       | 3,984  |              |   | $      | 504    |  |   | $     |      |  |      | $     |      |       |   | $   |    |  |   | $       | 4,488   | 
|              | 2.00%-2.99%  |                          |         | 45,510 |              |   |        | 3,601  |  |   |       | 64    |  |      |       |      |       |   |     |    |  |   |         | 49,175  | 
|              | 3.00%-3.99%  |                          |         | 71,389 |              |   |        | 24,347 |  |   |       | 6,116 |  |      |       | 1,026 |       |   |     | 161 |  |   |         | 103,039 | 
|              | 4.00%-4.99%  |                          |         | 20,976 |              |   |        | 5,763  |  |   |       | 766   |  |      |       | 555   |       |   |     | 815 |  |   |         | 28,875  | 
|              | 5.00%-5.99%  |                          |         | 1,054  |              |   |        | 1,608  |  |   |       |      |  |      |       |      |       |   |     |    |  |   |         | 2,662   | 
|              | 6.00%-6.99%  |                          |         | 23     |              |   |        |       |  |   |       |      |  |      |       |      |       |   |     |    |  |   |         | 23      | 
|              |              |                          |         |        |              |   |        |        |  |   |       |       |  |      |       |       |       |  
|Total         |              | $                        | 142,936 |        |              | $ | 35,823 |        |  | $ | 6,946 |       |  | $    | 1,581 |       |       | $ | 976 |     |  | $ | 188,262 |        
|              |              |                          |         |        |              |   |        |        |  |   |       |       |  |      |       |       |       |  



|                                     |       |                      |        |        | 
|------------------------------------ | ----- | -------------------- | ------ | ------ | 
|                                     |       | At December 31, 2005 |       
|                                     |       |                      |       
|                                     |       | (In thousands)       |       
|Three months of less                 |       | $                    | 18,209 |       
|Over three months through six months |       |                      | 19,516 |       
|Over six months through one year     |       |                      | 15,667 |       
|Over one year to three years         |       |                      | 12,182 |       
|Over three years                     |       |                      | 956    |       
|                                     |       |                      |       
|                                     | Total |                      | $      | 66,530 | 
|                                     |       |                      |       

Borrowings.




|                                              |  |                                        |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------- |  | -------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                              |  | At or for the Years Ended December 31, |        
|                                              |  |                                        |        
|                                              |  | 2005                                   |         |   | 2004 |   |         | 2003 | 
|                                              |  |                                        |         |   |      |   |         |      | 
|                                              |  | (Dollars in thousands)                 |        
|Balance at end of year                        |  | $                                      | 145,923 |   |      | $ | 159,704 |      |  | $ | 131,250 |  
|Average balance during year                   |  | $                                      | 157,674 |   |      | $ | 136,896 |      |  | $ | 114,346 |  
|Maximum outstanding at any month end          |  | $                                      | 174,023 |   |      | $ | 159,704 |      |  | $ | 137,594 |  
|Weighted average interest rate at end of year |  |                                        | 4.22    | % |      |   | 3.94    | %    |  |   | 4.06    | %
|Weighted average interest rate during year    |  |                                        | 4.26    | % |      |   | 4.12    | %    |  |   | 4.57    | %

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Personnel.


Segment Reporting:


Subsidiary Activities and Portfolio Management Services




Legacy Insurance Services of the Berkshires.


Legacy Securities Corporation.


Portfolio Management Services.




Legacy Funding Corporation.


Discontinued Operations:


Regulation And Supervision


General:


21



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10-K


Massachusetts Banking Laws and Supervision:








| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Lending Activities: A Massachusetts-chartered savings
    bank may make a wide variety of mortgage loans including
    fixed-rate loans, adjustable-rate loans, variable-rate loans,
    participation loans, graduated payment loans, construction and
    development loans, condominium and co-operative loans, second
    mortgage loans and other types of loans that may be made in
    accordance with applicable regulations. Commercial loans may be
    made to corporations and other commercial enterprises with or
    without security. Consumer and personal loans may also be made
    with or without security. Loans to individual borrowers
    generally must be limited to 20% of the total of a banks
    capital accounts and stockholders equity.                                                                                                              
|
| | Insurance Sales: Massachusetts banks may engage in
    insurance sales activities if the Massachusetts Commissioner of
    Banks has approved a plan of operation for insurance activities
    and the bank obtains a license from the Massachusetts Division
    of Insurance. A bank may be licensed directly or indirectly
    through an affiliate or a subsidiary corporation established for
    this purpose. Legacy Banks has a subsidiary, Legacy Insurance
    Services of the Berkshires, that is licensed to sell insurance
    products.                                                                                                                                                                                                                                                                                                                                    
|
| | Investment Activities: In general,
    Massachusetts-chartered savings banks may invest in preferred
    and common stock of any corporation organized under the laws of
    the United States or any state provided such investments do not
    involve control of any corporation and do not, in the aggregate,
    exceed 4.0% of the banks deposits. Massachusetts-chartered
    savings banks may in addition invest an amount equal to 1.0% of
    their deposits in stocks of Massachusetts corporations or
    companies with substantial employment in the Commonwealth which
    have pledged to the Massachusetts Commissioner of Banks that
    such monies will be used for further development within the
    Commonwealth. At the present time, Legacy Banks does have
    authority to invest in equity securities.                                                     
|
| | Dividends: A Massachusetts stock bank may declare from
    net profits cash dividends not more frequently than quarterly
    and non-cash dividends at any time. No dividends may be
    declared, credited or paid if the banks capital stock is
    impaired. The approval of the Massachusetts Commissioner of
    Banks is required if the total of all dividends declared in any
    calendar year exceeds the total of its net profits for that year
    combined with its retained net profits of the preceding two
    years. Net profits for this purpose means the remainder of all
    earnings from current operations plus actual recoveries on loans
    and investments and other assets after deducting from the total
    thereof all current operating expenses, actual losses, accrued
    dividends on preferred stock, if any, and all federal and state
    taxes.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Parity Regulation: Effective November 19, 2002,
    Massachusetts law was amended to increase the powers of
    Massachusetts banks under certain conditions. As a result of
    such amendment, a Massachusetts bank may engage in any activity
    or offer any product or service if the activity, product or
    service is engaged in or offered in accordance with regulations
    promulgated by the Massachusetts Commissioner of Banks and has
    been authorized for national banks, federal thrifts or state
    banks in a state other than Massachusetts; provided that the
    activity is permissible under applicable federal and
    Massachusetts law and subject to the same limitations and
    restrictions imposed on the national bank, federal thrift or
    out-of-state bank that
    had previously been granted the power.

Federal Regulations


Capital Requirements.








Standards for Safety and Soundness.


23



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Investment Activities. less


Interstate Banking and Branching.


Prompt Corrective Regulatory Action.






24



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Transaction with Affiliates and Regulation W of the
Federal Reserve Regulations.






Enforcement.


25



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Insurance of Deposit Accounts.




Privacy Regulations.


Community Reinvestment Act.




26



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Consumer Protection and Fair Lending Regulations.


The USA PATRIOT Act.


Federal Reserve System




Federal Home Loan Bank System






Holding Company Regulation


General:


27



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Acquisition of the Company:


Massachusetts Holding Company Regulation:


28



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Federal Securities Laws:


Financial Privacy:


Taxation


Federal taxes:


Bad Debt Reserves:


Distributions:


29



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Massachusetts Taxation:




Delaware Taxation:


Available Information: http://www.LegacyBanks.com 10-K; 10-Q; 8-K;







|         |             
|-------- | ------------
|Item 1a. | Risk Factors



Risks Related to Our Business




| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Commercial Real Estate and Commercial Loans Expose Us
    to Increased Credit Risks, and These Risks Will Increase if We
    Succeed in Increasing These Types of Loans.







| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Our Continuing Concentration of Loans in Our Primary
    Market Area May Increase Our Risk.



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| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Changes in Market Interest Rates Could Adversely Affect
    Our Financial Condition and Results of Operations.







| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | We May Have Difficulty Meeting Our Branch Expansion Goals,
    and Our Branch Expansion Strategy May Not Be Accretive to
    Earnings.





| |                                                                       
| | ----------------------------------------------------------------------
| | Our Ability to Grow May Be Limited if We Cannot Make
    Acquisitions.



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| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Strong Competition Within Our Market Area May Limit Our
    Growth and Profitability.





| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | We Operate in a Highly Regulated Environment and May Be
    Adversely Affected by Changes in Law and Regulations.








|         |                          
|-------- | -------------------------
|Item 1b. | Unresolved Staff Comments

None


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|        |           
|------- | ----------
|Item 2. | Properties



|       |                 |                                                            |                                           |        |      |      |         |  |      |      | 
|------ | --------------- | ---------------------------------------------------------- | ----------------------------------------- | ------ | ---- | ---- | ------- |  | ---- | ---- | 
|       |                 |                                                            |                                           | Year   |      |      | Lease   | 
|       |                 | Location                                                   |                                           | Opened |      |      | Expires | 
|       |                 |                                                            |                                           |        |      |      |         | 
|Owned: |                 |                                                            |                                           |        |      |      |         |  |      |     
|       | Main Office:    |                                                            | 99 North Street
    Pittsfield, MA 01201  |        |      | 2000 |         |  |      |      | 
|       | Branch Offices: |                                                            | 76 Park Street
    Lee, MA 01238          |        |      | 1996 |         |  |      |      | 
|       |                 | 25 Main Street
    Lenox, MA 01240                         |                                           |        | 1990 |      |         |  |      |     
|       |                 | 2 Holmes Road
    Lenox, MA 01240                          |                                           |        | 1977 |      |         |  |      |     
|       |                 | 30 East Otis Road
    Otis, MA 01253                       |                                           |        | 1996 |      |         |  |      |     
|       |                 | 734 Williams Street (Land leased)
    Pittsfield, MA 01201 |                                           |        | 1997 |      |         |  |      |     
|       | Leased:         |                                                            | 609 Merrill Road
    Pittsfield, MA 01201 |        |      | 1971 |         |  |      | 2008 | 
|       |                 | 700 Main Street
    Great Barrington, MA 01230             |                                           |        | 1975 |      |         |  | 2009 |     
|       |                 | 102 Main Street
    North Adams, MA 01247                  |                                           |        | 1996 |      |         |  | 2008 | (1) 
|       |                 | 480 West Housatonic Street
    Pittsfield, MA 01201        |                                           |        | 2005 |      |         |  | 2010 | (2) 
|       |                 | Lee Outlet Village (ATM Only)
    Lee, MA 01238            |                                           |        | 1995 |      |         |  | 2011 |     






|    |                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Legacy bank has an option to renew for 5 years                                                                                                                         
|   
|(2) | New branch which replaced office at 436 West Housatonic
    Street, Pittsfield in August of 2005. Legacy bank has an option
    to renew for 3 additional 5 year terms.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission Of Matters To A Vote Of Security Holders



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Part II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market For Registrants Common Equity, Related
    Stockholder Matters And Issuer Purchases Of Equity
    Securities



|              |  |                                 |       |  |             |  |     |             |  |  |             |  |  |  |     | 
|------------- |  | ------------------------------- | ----- |  | ----------- |  | --- | ----------- |  |  | ----------- |  |  |  | --- | 
|              |  | For the Year Ended December 31, |      
|              |  |                                 |      
|              |  | 4th Quarter                     |       |  | 3rd Quarter |  |     | 2nd Quarter |  |  | 1st Quarter | 
|              |  |                                 |       |  |             |  |     |             |  |  |             | 
|High          |  | $                               | 13.70 |  |             |  | n/a |             |  |  | n/a         |  |  |  | n/a | 
|Low           |  | $                               | 13.10 |  |             |  | n/a |             |  |  | n/a         |  |  |  | n/a | 
|Dividend Paid |  | $                               |      |  |             |  | n/a |             |  |  | n/a         |  |  |  | n/a | 



34



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

10-K.


|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |   |         |        |   |   |         |        | 
|------------------------ | ---------------------------------- | --------------------------------------------------------- | - | ------- | ------ | - | - | ------- | ------ |  | ---- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | 
|                         |                                    | At or for the Years Ended December 31,                    |  
|                         |                                    |                                                           |  
|                         |                                    | 2005                                                      |   |         | 2004   |   |   | 2003    |        |  | 2002 |         |        | 2001 |  
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  
|                         |                                    | (Dollars in thousands, except per share data)             |  
|Selected Financial Data: |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |   |         |        |   |   |        
|                         | Total assets                       |                                                           | $ | 778,330 |        |   | $ | 681,287 |        |  | $    | 634,978 |        |      | $ | 592,942 |        |   | $ | 607,013 |       
|                         | Loans, net(1)                      |                                                           |   | 547,626 |        |   |   | 505,344 |        |  |      | 465,903 |        |      |   | 372,121 |        |   |   | 383,279 |       
|                         | Securities and other investments:  |                                                           |   | 179,855 |        |   |   | 131,894 |        |  |      | 120,779 |        |      |   | 161,124 |        |   |   | 115,732 |       
|                         | Deposits                           |                                                           |   | 474,381 |        |   |   | 450,868 |        |  |      | 422,521 |        |      |   | 419,175 |        |   |   | 448,221 |       
|                         | Federal Home Loan Bank advances    |                                                           |   | 145,923 |        |   |   | 159,704 |        |  |      | 131,250 |        |      |   | 97,617  |        |   |   | 85,493  |       
|                         | Repurchase agreements              |                                                           |   | 4,999   |        |   |   | 4,557   |        |  |      | 6,618   |        |      |   | 8,055   |        |   |   | 8,159   |       
|                         | Total stockholders equity         |                                                           |   | 146,166 |        |   |   | 59,447  |        |  |      | 56,335  |        |      |   | 54,276  |        |   |   | 51,539  |       
|                         | Nonperforming loans                |                                                           |   | 903     |        |   |   | 1,769   |        |  |      | 1,853   |        |      |   | 3,076   |        |   |   | 1,654   |       
|Selected Operating Data: |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |   |         |        |   |   |        
|                         | Total interest and dividend income |                                                           |   | 36,978  |        |   |   | 31,636  |        |  |      | 30,139  |        |      |   | 32,346  |        |   |   | 38,145  |       
|                         | Total interest expense             |                                                           |   | 15,054  |        |   |   | 12,102  |        |  |      | 11,852  |        |      |   | 15,266  |        |   |   | 21,296  |       
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  
|                         |                                    | Net interest income                                       |   |         | 21,924 |   |   |         | 19,534 |  |      |         | 18,287 |      |   |         | 17,080 |   |   |         | 16,849 | 
|                         | Provision for loan losses          |                                                           |   | 841     |        |   |   | 212     |        |  |      | 979     |        |      |   | 140     |        |   |   |        |       
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  
|                         |                                    | Net interest income after provision for loan losses       |   |         | 21,083 |   |   |         | 19,322 |  |      |         | 17,308 |      |   |         | 16,940 |   |   |         | 16,849 | 
|                         | Non-interest income (charges):     |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |   |         |        |   |   |         |       
|                         |                                    | Service charges and fees                                  |   |         | 4,402  |   |   |         | 3,713  |  |      |         | 3,792  |      |   |         | 3,485  |   |   |         | 2,896  | 
|                         |                                    | Gain (loss) on sales and dispositions of securities (net) |   |         | (89    | ) |   |         | 116    |  |      |         | 29     |      |   |         | (992   | ) |   |         | 173    | 
|                         |                                    | Gain on sale of loans                                     |   |         | 236    |   |   |         | 278    |  |      |         | 331    |      |   |         | 484    |   |   |         | 477    | 
|                         |                                    | FHLB prepayment restructuring charge                      |   |         | (2,351 | ) |   |         |       |  |      |         |       |      |   |         |       |   |   |         |       | 
|                         |                                    | Other                                                     |   |         | 1,179  |   |   |         | 328    |  |      |         | 268    |      |   |         | 154    |   |   |         | 273    | 
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  
|                         |                                    | Total non-interest income (charges)                       |   |         | 3,377  |   |   |         | 4,435  |  |      |         | 4,420  |      |   |         | 3,131  |   |   |         | 3,819  | 
|                         | Total non-interest expense         |                                                           |   | 26,398  |        |   |   | 17,949  |        |  |      | 17,007  |        |      |   | 17,428  |        |   |   | 15,558  |       
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  
|                         |                                    | Income (loss)before income taxes                          |   |         | (1,938 | ) |   |         | 5,808  |  |      |         | 4,721  |      |   |         | 2,643  |   |   |         | 5,110  | 
|                         | Provision for income taxes         |                                                           |   | 297     |        |   |   | 2,254   |        |  |      | 1,731   |        |      |   | 890     |        |   |   | 1,866   |       
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  
|                         |                                    | Net income (loss)                                         |   |         | (2,235 | ) |   |         | 3,554  |  |      |         | 2,990  |      |   |         | 1,753  |   |   |         | 3,244  | 
|                         |                                    |                                                           |   |         |        |   |   |         |        |  |      |         |        |      |  

35



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|                                          |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |        |  
|----------------------------------------- | --------------------------------------------------------------- | --------------------------------------------- | - | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ------ | -
|                                          |                                                                 | At or for the Years Ended December 31,        |  
|                                          |                                                                 |                                               |  
|                                          |                                                                 | 2005                                          |   |        | 2004 |  |  | 2003   |   |  | 2002 |        |   | 2001 | 
|                                          |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      | 
|                                          |                                                                 | (Dollars in thousands, except per share data) |  
|Selected Financial Ratios and Other Data: |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       
|Performance Ratios:                       |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       
|                                          | Return (loss) on average assets(2)                              |                                               |   | (0.31  | )%   |  |  | 0.55   | % |  |      | 0.49   | % |      |  | 0.30   | % |  |  | 0.56   | %
|                                          | Return (loss) on average equity(3)                              |                                               |   | (2.90  | )    |  |  | 6.12   |   |  |      | 5.40   |   |      |  | 3.34   |   |  |  | 6.60   |  
|                                          | Interest rate spread(4)                                         |                                               |   | 2.84   |      |  |  | 2.90   |   |  |      | 2.93   |   |      |  | 2.77   |   |  |  | 2.67   |  
|                                          | Net interest margin(5)                                          |                                               |   | 3.22   |      |  |  | 3.18   |   |  |      | 3.22   |   |      |  | 3.11   |   |  |  | 3.10   |  
|                                          | Efficiency ratio(6)                                             |                                               |   | 104.2  |      |  |  | 73.8   |   |  |      | 75.2   |   |      |  | 84.5   |   |  |  | 75.9   |  
|                                          | Non-interest expense to average assets                          |                                               |   | 3.56   |      |  |  | 2.70   |   |  |      | 2.81   |   |      |  | 2.95   |   |  |  | 2.68   |  
|                                          | Average interest-bearing assets to interest-bearing liabilities |                                               |   | 117.30 |      |  |  | 113.89 |   |  |      | 114.19 |   |      |  | 112.02 |   |  |  | 110.80 |  
|Regulatory Capital Ratios(7):             |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       
|                                          | Equity to total assets                                          |                                               |   | 18.80  | %    |  |  | 8.73   | % |  |      | 8.87   | % |      |  | 9.15   | % |  |  | 8.49   | %
|                                          | Average equity to average assets                                |                                               |   | 10.70  |      |  |  | 8.91   |   |  |      | 9.16   |   |      |  | 8.87   |   |  |  | 8.45   |  
|                                          | Total capital (bank only) to risk-weighted assets               |                                               |   | 19.97  |      |  |  | 12.57  |   |  |      | 12.75  |   |      |  | 14.51  |   |  |  | 14.17  |  
|Asset Quality Ratios:                     |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       
|                                          | Nonperforming assets to total assets                            |                                               |   | 0.12   | %    |  |  | 0.26   | % |  |      | 0.29   | % |      |  | 0.52   | % |  |  | 0.27   | %
|                                          | Nonperforming loans to total loans                              |                                               |   | 0.16   |      |  |  | 0.35   |   |  |      | 0.40   |   |      |  | 0.83   |   |  |  | 0.43   |  
|                                          | Allowance for loan losses to nonperforming loans                |                                               |   | 467.33 |      |  |  | 217.41 |   |  |      | 238.53 |   |      |  | 118.11 |   |  |  | 214.03 |  
|                                          | Allowance for loan losses to total loans                        |                                               |   | 0.77   |      |  |  | 0.76   |   |  |      | 0.94   |   |      |  | 0.98   |   |  |  | 0.92   |  
|Share Data:                               |                                                                 |                                               |   |        |      |  |  |        |   |  |      |        |   |      |  |        |   |  |  |       
|                                          | Book value per share  end of year                              |                                               | $ | 14.18  |      |  |  | n/a    |   |  |      | n/a    |   |      |  | n/a    |   |  |  | n/a    |  
|                                          | Tangible book value per share  end of year                     |                                               |   | 13.88  |      |  |  | n/a    |   |  |      | n/a    |   |      |  | n/a    |   |  |  | n/a    |  
|                                          | Market price at year end                                        |                                               |   | 13.35  |      |  |  | n/a    |   |  |      | n/a    |   |      |  | n/a    |   |  |  | n/a    |  






|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes loans held for sale.                                                                                                                                                                                                          
|   
|(2) | Net income divided by average total assets.                                                                                                                                                                                            
|   
|(3) | Net income divided by average total equity.                                                                                                                                                                                            
|   
|(4) | Net interest rate spread represents the difference between the
    weighted average yield on interest-earning assets and the
    weighted average cost of interest-bearing liabilities.                                                
|   
|(5) | Net interest margin represents net interest income as a
    percentage of average interest-earning assets for the year.                                                                                                                
|   
|(6) | The efficiency ratio represents non-interest expense for the
    year less expenses related to the amortization of intangibles
    divided by the sum of net interest income (before loan loss
    provision) plus non-interest income.
|   
|(7) | All capital ratios are as of the end of the year.                                                                                                                                                                                      






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion And Analysis Of Financial
    Condition And Results Of Operation

General:


Overview: mutual-to


36



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Dividend:


Growth Strategy and Challenges:










37



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Critical Accounting Policies:


Allowance for Loan Losses:


Income Taxes:




Net Interest Income:


38



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Non-Interest Expense:


Net income:


Comparison of Financial Condition at December 31, 2005
and December 31, 2004


Total Assets:


Cash and Short-term Investments:


Securities:


Net Loans:


Deposits:


39



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Borrowed Funds:


Retained Earnings:


Comparison of Operating Results For the Years Ended
December 31, 2005 and 2004


Analysis of Net Interest Income:


40



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|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |         |         |  |   |        |        |  |  |        |      |  
|--------------------------------------------------------------- | ---------------------------------- | ---------------------- | ------- | ------- | ------------------- | - | ------- | ------------------- |  | ----------- | ------- | ------- | - | -------- | ------- | ------- | ------- | ----------- | ------ | ------- |  |  | -------- | ---- | - | ------- | ------- | ------- |  | - | ------ | ------ |  |  | ------ | ---- | -
|                                                                |                                    | Twelve Months Ended    |         |         | Twelve Months Ended |   |         | Twelve Months Ended | 
|                                                                |                                    | December 31, 2005      |         |         | December 31, 2004   |   |         | December 31, 2003   | 
|                                                                |                                    |                        |         |         |                     |   |         |                     | 
|                                                                |                                    | Average                |         |         |                     |   | Average |                     |  |             |         | Average |   |          |        
|                                                                |                                    | Outstanding            |         |         |                     |   | Yield/  |                     |  | Outstanding |         |         |   |          | Yield/  |         |         | Outstanding |        |         |  |  | Yield/   |     
|                                                                |                                    | Balance                |         |         | Interest            |   |         | Rate(1)             |  |             | Balance |         |   | Interest |         |         | Rate(1) |             |        | Balance |  |  | Interest |      |   | Rate(1) |        
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|                                                                |                                    | (Dollars in thousands) |        
|Interest-earning assets:                                        |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |         |         |  |   |        |        |  |  |        |     
|Loans  Net(2)                                                  |                                    | $                      | 523,696 |         |                     | $ | 30,988  |                     |  |             | 5.92    | %       |   | $        | 487,501 |         |         | $           | 27,405 |         |  |  | 5.62     | %    |   | $       | 420,287 |         |  | $ | 25,007 |        |  |  | 5.95   | %   
|Investment securities                                           |                                    |                        | 137,180 |         |                     |   | 5,324   |                     |  |             | 3.88    | %       |   |          | 121,310 |         |         |             | 4,156  |         |  |  | 3.43     | %    |   |         | 140,474 |         |  |   | 5,057  |        |  |  | 3.60   | %   
|Short-term investments                                          |                                    |                        | 19,139  |         |                     |   | 666     |                     |  |             | 3.48    | %       |   |          | 6,271   |         |         |             | 75     |         |  |  | 1.20     | %    |   |         | 7,081   |         |  |   | 75     |        |  |  | 1.06   | %   
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Total interest-earning assets                                   |                                    |                        | 680,015 |         |                     |   | 36,978  |                     |  |             | 5.44    | %       |   |          | 615,082 |         |         |             | 31,636 |         |  |  | 5.14     | %    |   |         | 567,842 |         |  |   | 30,139 |        |  |  | 5.31   | %   
|Non-interest-earning assets                                     |                                    |                        | 37,740  |         |                     |   |         |                     |  |             |         |         |   |          | 36,159  |         |         |             |        |         |  |  |          |      |   |         | 36,445  |         |  |   |        |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Total assets                                                    |                                    | $                      | 717,755 |         |                     |   |         |                     |  |             |         |         |   | $        | 651,241 |         |         |             |        |         |  |  |          |      |   | $       | 604,287 |         |  |   |        |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Interest-bearing liabilities:                                   |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |         |         |  |   |        |        |  |  |        |     
|Savings deposits                                                |                                    | $                      | 69,088  |         |                     |   | 299     |                     |  |             | 0.43    | %       |   | $        | 80,545  |         |         |             | 334    |         |  |  | 0.41     | %    |   | $       | 90,646  |         |  |   | 625    |        |  |  | 0.69   | %   
|LifePath Savings                                                |                                    |                        | 71,188  |         |                     |   | 1,686   |                     |  |             | 2.37    | %       |   |          | 40,338  |         |         |             | 748    |         |  |  | 1.85     | %    |   |         |        |         |  |   |       |        |  |  | 0.00   | %   
|Money market                                                    |                                    |                        | 59,016  |         |                     |   | 952     |                     |  |             | 1.61    | %       |   |          | 72,107  |         |         |             | 681    |         |  |  | 0.94     | %    |   |         | 93,619  |         |  |   | 948    |        |  |  | 1.01   | %   
|NOW accounts                                                    |                                    |                        | 39,507  |         |                     |   | 85      |                     |  |             | 0.22    | %       |   |          | 36,431  |         |         |             | 56     |         |  |  | 0.15     | %    |   |         | 34,064  |         |  |   | 60     |        |  |  | 0.18   | %   
|Certificates of deposits                                        |                                    |                        | 177,613 |         |                     |   | 5,230   |                     |  |             | 2.94    | %       |   |          | 155,024 |         |         |             | 3,795  |         |  |  | 2.45     | %    |   |         | 146,837 |         |  |   | 4,099  |        |  |  | 2.79   | %   
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|                                                                | Total deposits                     |                        |         | 416,412 |                     |   |         | 8,252               |  |             |         | 1.98    | % |          |         | 384,445 |         |             |        | 5,614   |  |  |          | 1.46 | % |         |         | 365,166 |  |   |        | 5,732  |  |  |        | 1.57 | %
|Borrowed Funds                                                  |                                    |                        | 163,328 |         |                     |   | 6,802   |                     |  |             | 4.16    | %       |   |          | 155,602 |         |         |             | 6,488  |         |  |  | 4.17     | %    |   |         | 132,123 |         |  |   | 6,120  |        |  |  | 4.63   | %   
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|                                                                | Total interest-bearing liabilities |                        |         | 579,740 |                     |   |         | 15,054              |  |             |         | 2.60    | % |          |         | 540,047 |         |             |        | 12,102  |  |  |          | 2.24 | % |         |         | 497,289 |  |   |        | 11,852 |  |  |        | 2.38 | %
|Non-interest bearing liabilities                                |                                    |                        | 61,049  |         |                     |   |         |                     |  |             |         |         |   |          | 53,158  |         |         |             |        |         |  |  |          |      |   |         | 51,660  |         |  |   |        |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Total liabilities                                               |                                    |                        | 640,789 |         |                     |   |         |                     |  |             |         |         |   |          | 593,205 |         |         |             |        |         |  |  |          |      |   |         | 548,949 |         |  |   |        |        |  |  |        |     
|Equity                                                          |                                    |                        | 76,966  |         |                     |   |         |                     |  |             |         |         |   |          | 58,036  |         |         |             |        |         |  |  |          |      |   |         | 55,338  |         |  |   |        |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Total liabilities and equity                                    |                                    | $                      | 717,755 |         |                     |   |         |                     |  |             |         |         |   | $        | 651,241 |         |         |             |        |         |  |  |          |      |   | $       | 604,287 |         |  |   |        |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Net interest income                                             |                                    |                        |         |         |                     | $ | 21,924  |                     |  |             |         |         |   |          |         |         |         | $           | 19,534 |         |  |  |          |      |   |         |         |         |  | $ | 18,287 |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Net interest rate spread(3)                                     |                                    |                        |         |         |                     |   |         |                     |  |             | 2.84    | %       |   |          |         |         |         |             |        |         |  |  | 2.90     | %    |   |         |         |         |  |   |        |        |  |  | 2.93   | %   
|Net interest-earning assets(4)                                  |                                    | $                      | 100,275 |         |                     |   |         |                     |  |             |         |         |   | $        | 75,035  |         |         |             |        |         |  |  |          |      |   | $       | 70,553  |         |  |   |        |        |  |  |        |     
|                                                                |                                    |                        |         |         |                     |   |         |                     |  |             |         |         |   |          |         |         |         |             |        |         |  |  |          |      |   |         |        
|Net interest margin(5)                                          |                                    |                        |         |         |                     |   |         |                     |  |             | 3.22    | %       |   |          |         |         |         |             |        |         |  |  | 3.18     | %    |   |         |         |         |  |   |        |        |  |  | 3.22   | %   
|Average interest-earning assets to interest-bearing liabilities |                                    |                        |         |         |                     |   |         |                     |  |             | 117.30  | %       |   |          |         |         |         |             |        |         |  |  | 113.89   | %    |   |         |         |         |  |   |        |        |  |  | 114.19 | %   






|    |                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Yields and rates for the twelve months ended December 31,
    2005, 2004 and 2003 are actual.                                                                                                                                                     
|   
|(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 twelve months
    ended December 31, 2005, 2004 and 2003.
|   
|(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.                                                                                                                                          

41



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|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |   |        |   |  |   |       |  
|---------------------------------- |  | -------------------------- | ----- | - | -------------------------- | - | -------- | ----------------- |  | - | -------- | - |  | ---- | ----- | - | ---------- | - | ------ | - |  | - | ----- | -
|                                   |  | Twelve Months Ended        |       |   | Twelve Months Ended        |  
|                                   |  | December 31, 2005 Vs. 2004 |       |   | December 31, 2004 Vs. 2003 |  
|                                   |  |                            |       |   |                            |  
|                                   |  | Increase                   |       |   |                            |   | Increase |                   |  |  
|                                   |  | (Decrease) Due to          |       |   | Total                      |   |          | (Decrease) Due to |  |   | Total    |  
|                                   |  |                            |       |   | Increase                   |   |          |                   |  |   | Increase |  
|                                   |  | Volume                     |       |   | Rate                       |   |          | (Decrease)        |  |   | Volume   |   |  | Rate |       |   | (Decrease) |  
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  
|                                   |  | (Dollars in thousands)     |       |   | (Dollars in thousands)     |  
|Interest-earning assets:           |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |   |        |   |  |   |       |  
|Loans  Net                        |  | $                          | 2,085 |   |                            | $ | 1,498    |                   |  | $ | 3,583    |   |  | $    | 3,835 |   |            | $ | (1,438 | ) |  | $ | 2,397 |  
|Investment securities              |  |                            | 583   |   |                            |   | 585      |                   |  |   | 1,168    |   |  |      | (665  | ) |            |   | (240   | ) |  |   | (905  | )
|Short-term investments             |  |                            | 307   |   |                            |   | 284      |                   |  |   | 591      |   |  |      | (9    | ) |            |   | 7      |   |  |   | (2    | )
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  
|Total interest-earning assets      |  |                            | 2,975 |   |                            |   | 2,367    |                   |  |   | 5,342    |   |  |      | 3,161 |   |            |   | (1,671 | ) |  |   | 1,490 |  
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  
|Interest-bearing liabilities:      |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |   |        |   |  |   |       |  
|Savings deposits                   |  |                            | (54   | ) |                            |   | 19       |                   |  |   | (35      | ) |  |      | (59   | ) |            |   | (229   | ) |  |   | (288  | )
|Life Path                          |  |                            | 685   |   |                            |   | 253      |                   |  |   | 938      |   |  |      |      |   |            |   | 747    |   |  |   | 747   |  
|Money market                       |  |                            | (93   | ) |                            |   | 364      |                   |  |   | 271      |   |  |      | (206  | ) |            |   | (62    | ) |  |   | (268  | )
|NOW accounts                       |  |                            | 4     |   |                            |   | 25       |                   |  |   | 29       |   |  |      | 4     |   |            |   | (8     | ) |  |   | (4    | )
|Certificates of deposits           |  |                            | 605   |   |                            |   | 830      |                   |  |   | 1,435    |   |  |      | 220   |   |            |   | (525   | ) |  |   | (305  | )
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  
|Total deposits                     |  |                            | 1,147 |   |                            |   | 1,491    |                   |  |   | 2,638    |   |  |      | (41   | ) |            |   | (77    | ) |  |   | (118  | )
|Borrowed Funds                     |  |                            | 202   |   |                            |   | 112      |                   |  |   | 314      |   |  |      | 986   |   |            |   | (618   | ) |  |   | 368   |  
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  
|Total interest-bearing liabilities |  |                            | 1,349 |   |                            |   | 1,603    |                   |  |   | 2,952    |   |  |      | 945   |   |            |   | (695   | ) |  |   | 250   |  
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  
|Change in net interest income      |  | $                          | 1,626 |   |                            | $ | 764      |                   |  | $ | 2,390    |   |  | $    | 2,216 |   |            | $ | (976   | ) |  | $ | 1,240 |  
|                                   |  |                            |       |   |                            |   |          |                   |  |   |          |   |  |      |       |   |            |  

Net Income:


Net Interest Income: mutual-to


Interest Income:


42



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Interest Expense:


Provision for Loan Losses:


Non-interest Income:


Non-interest Expense:


Income Taxes:


Comparison of Operating Results For the Years Ended
December 31, 2004 and December 31, 2003


Net Income:


Net Interest Income:


43



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Interest Income:


Interest Expense:


Provision for Loan Losses:


Non-interest Income:


Non-interest Expense:


Income Taxes:


44



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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7a: | Quantitative and Qualitative Disclosures About Market
    Risk





Management of Credit Risk:


Management of Market Risk:






45



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| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Emphasizing the origination and retention of adjustable-rate
    mortgage loans, variable rate commercial loans and variable rate
    home equity
    lines-of-credit;
|
| |  | Investing in securities with relatively short maturities and/or
    expected average lives;                                                                           
|
| |  | Classifying nearly all of the investment portfolio as
    available for sale in order to provide for
    flexibility in liquidity management; and                   
|
| |  | Lengthening liabilities such as certificates of deposits and
    Federal Home Loan Bank of Boston borrowings when
    appropriate.                                    







|                                  |  |                          |       |   
|--------------------------------- |  | ------------------------ | ----- | --
|                                  |  | Percentage Change in     |      
|                                  |  | Estimated Net Interest   |      
|                                  |  | Income Over 12 Months as |      
|                                  |  | Compared to Flat Rates   |      
|                                  |  |                          |      
|400 basis point increase in rates |  |                          | (5.13 | )%
|200 basis point increase in rates |  |                          | (2.60 | )%
|Flat interest rates               |  |                          |      |   
|200 basis point decrease in rates |  |                          | 1.68  | % 

12-month 12-month




46



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Liquidity Risk Management:








47



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Contractual Obligations:


|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |        |  |  |   |        | 
|---------------------------------------------- |  | ---------------------- | ------- | --------- | ------- | - | ----------- | ----------- |  | ------- | ---------- |  | --------- | ----- | ------ |  |  | - | ------ | 
|                                               |  | December 31, 2005      |        
|                                               |  |                        |        
|                                               |  |                        |         | 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      |  | $                      | 145,923 |           |         | $ | 29,257      |             |  | $       | 57,000     |  |           | $     | 38,909 |  |  | $ | 20,757 | 
|Securities sold under agreements to repurchase |  |                        | 4,999   |           |         |   | 4,999       |             |  |         |           |  |           |       |       |  |  |   |       | 
|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |       
|Total contractual obligations                  |  | $                      | 150,922 |           |         | $ | 34,256      |             |  | $       | 57,000     |  |           | $     | 38,909 |  |  | $ | 20,757 | 
|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |       

Loan Commitments:


|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |       |  |  |   |        | 
|---------------------------------------------- |  | ---------------------- | ------- | --------- | ------- | - | ----------- | ----------- |  | ------- | ---------- |  | --------- | ----- | ----- |  |  | - | ------ | 
|                                               |  | December 31, 2005      |        
|                                               |  |                        |        
|                                               |  |                        |         | More Than |         |   | More Than   |             |  |        
|                                               |  |                        |         | One Year  |         |   | Three Years |             |  |        
|                                               |  |                        |         | One Year  |         |   | through     |             |  | through |            |  | Over Five |      
|                                               |  | Total                  |         |           | or Less |   |             | Three Years |  |         | Five Years |  |           | Years |      
|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |      
|                                               |  | (Dollars in thousands) |        
|Commitments to grant loans(1)                  |  | $                      | 11,914  |           |         | $ | 11,914      |             |  | $       |           |  |           | $     |      |  |  | $ |       | 
|Commercial loan lines-of-credit                |  |                        | 15,251  |           |         |   | 15,251      |             |  |         |           |  |           |       |      |  |  |   |       | 
|Unused portion of home equity loans(2)         |  |                        | 61,698  |           |         |   | 768         |             |  |         | 1,302      |  |           |       | 3,127 |  |  |   | 56,501 | 
|Unused portion of construction loans(3)        |  |                        | 7,305   |           |         |   | 7,305       |             |  |         |           |  |           |       |      |  |  |   |       | 
|Unused portion of overdraft lines-of-credit(4) |  |                        | 4,545   |           |         |   |            |             |  |         |           |  |           |       |      |  |  |   | 4,545  | 
|Unused portion of personal lines-of- credit(5) |  |                        | 461     |           |         |   |            |             |  |         |           |  |           |       |      |  |  |   | 461    | 
|Standby letters of credit(6)                   |  |                        | 617     |           |         |   | 617         |             |  |         |           |  |           |       |      |  |  |   |       | 
|Other commitments and contingencies            |  |                        | 1,110   |           |         |   | 1,110       |             |  |         |           |  |           |       |      |  |  |   |       | 
|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |      
|Total loan commitments                         |  | $                      | 102,901 |           |         | $ | 36,965      |             |  | $       | 1,302      |  |           | $     | 3,127 |  |  | $ | 61,507 | 
|                                               |  |                        |         |           |         |   |             |             |  |         |            |  |           |       |      






|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 construction loans are available to the
    borrower for up to one year for development loans and up to one
    year for other construction loans.

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|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(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.                                           

Management of Other Risks:




Off-Balance Sheet Arrangements




Impact of Inflation and Changing Prices




Impact of Recent Accounting Standards


Share-Based Payments: Share-Based
Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to
Employees




49



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re-measure


Servicing Rights: Accounting for Servicing of Financial
Assets







|        |                                           
|------- | ------------------------------------------
|Item 8: | Financial Statements And Supplemental Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes In And Disagreements With Accountants On
    Accounting And Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9a. | Controls And Procedures

13a-15(e)


S-K S-K


50



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|         |                  
|-------- | -----------------
|Item 9b. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors And Executive Officers Of The Registrant





J. Williar Dunlaevy


Michael A. Christopher


Steven F. Pierce


Stephen M. Conley


Richard M. Sullivan







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation



51



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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership Of Certain Beneficial Owners And
    Management And Related Stockholder Matters






















|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships And Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees And Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits And Financial Statement Schedules

52



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SIGNATURES






| |                                                  
| | -------------------------------------------------
| | LEGACY BANCORP, INC.                             
|
| | /s/ J. Williar Dunlaevy                          
| |                                                  
| | J. Williar Dunlaevy                              
| | Chief Executive Officer and Chairman of the Board





| |                                      
| | -------------------------------------
| | /s/ Michael A. Christopher           
| |                                      
| | Michael A. Christopher               
| | Chief Operating Officer and President





| |                                                   
| | --------------------------------------------------
| | /s/ Stephen M. Conley                             
| |                                                   
| | Stephen M. Conley                                 
| | Senior Vice President, Chief Financial Officer and
| | Treasurer (Principal Accounting Officer)          





| |                     
| | --------------------
| | /s/ Eugene A. Dellea
| |                     
| | Eugene A. Dellea    
| | Director            





| |                        
| | -----------------------
| | /s/ David L. Klausmeyer
| |                        
| | David L. Klausmeyer    
| | Director               





| |                      
| | ---------------------
| | /s/ Gary A. Lopenzina
| |                      
| | Gary A. Lopenzina    
| | Director             



53



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| |                  
| | -----------------
| | /s/ Anne W. Pasko
| |                  
| | Anne W. Pasko    
| | Director         





| |                    
| | -------------------
| | /s/ Robert B. Trask
| |                    
| | Robert B. Trask    
| | Director           





| |                      
| | ---------------------
| | /s/ Dorothy B. Winsor
| |                      
| | Dorothy B. Winsor    
| | Director             



54



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INDEX TO EXHIBITS


| |    |      |  |                                                                                       
| | -- | ---- |  | --------------------------------------------------------------------------------------
| | 3  | .1   |  | Certificate of Incorporation of Legacy Bancorp, Inc.(1)                               
|
| | 3  | .2   |  | Bylaws of Legacy Bancorp, Inc. (as amended)(1)                                        
|
| | 10 | .1   |  | Legacy Banks ESOP Trust Agreement(2)                                                  
|
| | 10 | .2   |  | ESOP Plan Document(2)                                                                 
|
| | 10 | .3   |  | ESOP Loan Documents(2)                                                                
|
| | 10 | .4.1 |  | Employment Agreement between Legacy Banks and J. Williar
    Dunlaevy(2)              
|
| | 10 | .4.2 |  | Employment Agreement between Legacy Banks and Michael A.
    Christopher(2)           
|
| | 10 | .4.3 |  | Employment Agreement between Legacy Banks and Steven F. Pierce(2)                     
|
| | 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)         
|
| | 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 | .8   |  | Legacy Banks Employee Severance Compensation Plan(2)                                  
|
| | 10 | .9.1 |  | Legacy Banks Supplemental Executive Retirement Plan with J.
    Williar Dunlaevy(2)   
|
| | 10 | .9.2 |  | Legacy Banks Supplemental Executive Retirement Plan with Michael
    A. Christopher(2)
|
| | 10 | .10  |  | Director Fee Continuation Plan(2)                                                     
|
| | 11 | .0   |  | Statement regarding computation of per share earnings                                 
|
| | 14 | .0   |  | Code of Ethics                                                                        
|
| | 21 | .0   |  | List of all subsidiaries of the Registrant                                            
|
| | 31 | .1   |  | Certification pursuant to Rule 13a-14(a)/15d-14(a) of J.
    Williar Dunlaevy         
|
| | 31 | .2   |  | Certification pursuant to Rule 13a-14(a)/15d-14(a) of
    Stephen M. Conley           
|
| | 32 |      |  | Certification pursuant to 18 U.S.C. Section 1350                                      






|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference from the Registration Quarterly Report
    on Form 10-Q for
    the Quarter Ended June 30, 2005 filed October 27, 2005.
|   
|(2) | Incorporated by reference from the Registration Statement on
    Form S-1 (No.
    333-126481) filed
    July 8, 2005, as amended                

55



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                        |  |      |          | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | 
|                                                                                                                        |  | Page |         
|                                                                                                                        |  |      |         
|Report of Independent Registered Public
    Accounting Firm                                                             |  |      | F-1      | 
|Consolidated Balance Sheets as of
    December 31, 2005 and December 31, 2004                                           |  |      | F-2      | 
|Consolidated Statements of Operations for
    the Years Ended December 31, 2005, 2004 and 2003                          |  |      | F-3      | 
|Consolidated Statements of Changes in
    Stockholders Equity for the Years Ended December 31,
    2005, 2004 and 2003 |  |      | F-4      | 
|Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2005, 2004 and 2003                          |  |      | F-5      | 
|Notes to Consolidated Financial
    Statements                                                                          |  |      | F-6-F-33 | 





---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















F-1



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


(Dollars in Thousands)


|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |   |         |        |         | 
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                                                                 |                                                                                                                                                                                 | December 31,              |        
|                                                                                 |                                                                                                                                                                                 |                           |        
|                                                                                 |                                                                                                                                                                                 | 2005                      |         |        | 2004    |  
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|ASSETS                                                                          
|Cash and due from banks                                                          |                                                                                                                                                                                 | $                         | 12,331  |        |         | $ | 11,820  |       
|Short-term investments                                                           |                                                                                                                                                                                 |                           | 6,901   |        |         |   | 4,978   |       
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|                                                                                 | Cash and cash equivalents                                                                                                                                                       |                           |         | 19,232 |         |   |         | 16,798 |        
|Securities and other investments                                                 |                                                                                                                                                                                 |                           | 179,855 |        |         |   | 131,894 |       
|Loans held for sale                                                              |                                                                                                                                                                                 |                           | 126     |        |         |   | 616     |       
|Loans, net of allowance for loan losses of $4,220 in 2005 and
    $3,846 in 2004 |                                                                                                                                                                                 |                           | 547,500 |        |         |   | 504,728 |       
|Premises and equipment, net                                                      |                                                                                                                                                                                 |                           | 14,236  |        |         |   | 13,777  |       
|Accrued interest receivable                                                      |                                                                                                                                                                                 |                           | 3,235   |        |         |   | 2,789   |       
|Goodwill, net                                                                    |                                                                                                                                                                                 |                           | 3,085   |        |         |   | 3,085   |       
|Net deferred tax asset                                                           |                                                                                                                                                                                 |                           | 5,258   |        |         |   | 2,783   |       
|Bank-owned life insurance                                                        |                                                                                                                                                                                 |                           | 4,153   |        |         |   | 3,886   |       
|Other assets                                                                     |                                                                                                                                                                                 |                           | 1,650   |        |         |   | 931     |       
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|Total Assets                                                                     |                                                                                                                                                                                 | $                         | 778,330 |        |         | $ | 681,287 |       
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|                                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                                            
|Deposits                                                                         |                                                                                                                                                                                 | $                         | 474,381 |        |         | $ | 450,868 |       
|Securities sold under agreements to repurchase                                   |                                                                                                                                                                                 |                           | 4,999   |        |         |   | 4,557   |       
|Federal Home Loan Bank advances                                                  |                                                                                                                                                                                 |                           | 145,923 |        |         |   | 159,704 |       
|Mortgagors escrow accounts                                                      |                                                                                                                                                                                 |                           | 931     |        |         |   | 1,020   |       
|Accrued expenses and other liabilities                                           |                                                                                                                                                                                 |                           | 5,930   |        |         |   | 5,691   |       
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|                                                                                 |                                                                                                                                                                                 | Total liabilities         |         |        | 632,164 |   |         |        | 621,840 | 
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|Commitments and contingencies (Note 11)                                          |                                                                                                                                                                                 |                           |         |        |         |   |         |       
|Stockholders Equity                                                             |                                                                                                                                                                                 |                           |         |        |         |   |         |       
|                                                                                 | Prefferred Stock ($.01 par value, 10,000,000 shares
    authorized, none issued or outstanding)                                                                                 |                           |         |       |         |   |         |       |        
|                                                                                 | Common Stock ($.01 par value, 40,000,000 shares
    authorized, 10,308,600 issued and outstanding at
    December 31, 2005, none issued or outstanding at
    December 31, 2004 |                           |         | 103    |         |   |         |       |        
|Additional paid-in-capital                                                       |                                                                                                                                                                                 |                           | 100,202 |        |         |   |        |       
|Unearned Compensation  ESOP                                                     |                                                                                                                                                                                 |                           | (10,252 | )      |         |   |        |       
|Retained earnings                                                                |                                                                                                                                                                                 |                           | 57,202  |        |         |   | 59,437  |       
|Accumulated other comprehensive (loss) income                                    |                                                                                                                                                                                 |                           | (1,089  | )      |         |   | 10      |       
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|                                                                                 |                                                                                                                                                                                 | Total stockholders equity |         |        | 146,166 |   |         |        | 59,447  | 
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  
|Total Liabilities and Stockholders Equity                                       |                                                                                                                                                                                 | $                         | 778,330 |        |         | $ | 681,287 |       
|                                                                                 |                                                                                                                                                                                 |                           |         |        |         |  



F-2



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


(Dollars in Thousands)


|                                                     |                                                     |                          |                                     |        |       |        |        |        |       |        |        |        |       |        | 
|---------------------------------------------------- | --------------------------------------------------- | ------------------------ | ----------------------------------- | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ----- | ------ | 
|                                                     |                                                     | Years Ended December 31, |                                    
|                                                     |                                                     |                          |                                    
|                                                     |                                                     | 2005                     |                                     |        | 2004  |        |        | 2003   |      
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Interest and dividend income:                        |                                                     |                          |                                     |        |       |        |        |        |       |        |        |       
|                                                     | Loans                                               |                          | $                                   | 30,988 |       |        | $      | 27,405 |       |        | $      | 25,007 |      
|                                                     | Securities:                                         |                          |                                     |        |       |        |        |        |       |        |        |        |      
|                                                     |                                                     | Taxable                  |                                     |        | 5,146 |        |        |        | 4,107 |        |        |        | 5,024 |       
|                                                     |                                                     | Tax-Exempt               |                                     |        | 178   |        |        |        | 49    |        |        |        | 33    |       
|                                                     | Short-term investments                              |                          |                                     | 666    |       |        |        | 75     |       |        |        | 75     |      
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|                                                     |                                                     |                          | Total interest and dividend income  |        |       | 36,978 |        |        |       | 31,636 |        |        |       | 30,139 | 
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Interest expense:                                    |                                                     |                          |                                     |        |       |        |        |        |       |        |        |       
|                                                     | Deposits                                            |                          |                                     | 8,252  |       |        |        | 5,614  |       |        |        | 5,732  |      
|                                                     | Federal Home Loan Bank advances                     |                          |                                     | 6,713  |       |        |        | 5,639  |       |        |        | 5,227  |      
|                                                     | Other borrowed funds                                |                          |                                     | 89     |       |        |        | 849    |       |        |        | 893    |      
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|                                                     |                                                     |                          | Total interest expense              |        |       | 15,054 |        |        |       | 12,102 |        |        |       | 11,852 | 
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Net interest income                                  |                                                     |                          | 21,924                              |        |       |        | 19,534 |        |       |        | 18,287 |       
|Provision for loan losses                            |                                                     |                          | 841                                 |        |       |        | 212    |        |       |        | 979    |       
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Net interest income, after provision for loan losses |                                                     |                          | 21,083                              |        |       |        | 19,322 |        |       |        | 17,308 |       
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Non-interest income (charges):                       |                                                     |                          |                                     |        |       |        |        |        |       |        |        |       
|                                                     | Customer service fees                               |                          |                                     | 3,344  |       |        |        | 2,649  |       |        |        | 2,751  |      
|                                                     | Portfolio management fees                           |                          |                                     | 890    |       |        |        | 839    |       |        |        | 781    |      
|                                                     | Income from bank-owned life insurance               |                          |                                     | 218    |       |        |        | 17     |       |        |        |       |      
|                                                     | Insurance, annuities and mutual fund fees           |                          |                                     | 168    |       |        |        | 225    |       |        |        | 260    |      
|                                                     | Gain on sales of securities, net                    |                          |                                     | 160    |       |        |        | 136    |       |        |        | 96     |      
|                                                     | Loss on impairment of securities available for sale |                          |                                     | (225   | )     |        |        | (7     | )     |        |        | (67    | )    
|                                                     | Loss on impairment of other investments             |                          |                                     | (24    | )     |        |        | (13    | )     |        |        |       |      
|                                                     | Gain on sales of loans, net                         |                          |                                     | 236    |       |        |        | 278    |       |        |        | 331    |      
|                                                     | FHLB prepayment restructuring charge                |                          |                                     | (2,351 | )     |        |        |       |       |        |        |       |      
|                                                     | Gain on curtailment of defined benefit pension plan |                          |                                     | 905    |       |        |        |       |       |        |        |       |      
|                                                     | Miscellaneous                                       |                          |                                     | 56     |       |        |        | 311    |       |        |        | 268    |      
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|                                                     |                                                     |                          | Total non-interest income (charges) |        |       | 3,377  |        |        |       | 4,435  |        |        |       | 4,420  | 
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Non-interest expenses:                               |                                                     |                          |                                     |        |       |        |        |        |       |        |        |       
|                                                     | Salaries and employee benefits                      |                          |                                     | 10,964 |       |        |        | 10,164 |       |        |        | 9,697  |      
|                                                     | Occupancy and equipment                             |                          |                                     | 2,217  |       |        |        | 2,122  |       |        |        | 2,317  |      
|                                                     | Data processing                                     |                          |                                     | 1,870  |       |        |        | 1,856  |       |        |        | 1,610  |      
|                                                     | Professional fees                                   |                          |                                     | 652    |       |        |        | 547    |       |        |        | 459    |      
|                                                     | Advertising                                         |                          |                                     | 694    |       |        |        | 598    |       |        |        | 609    |      
|                                                     | Charitable contributions                            |                          |                                     | 7,846  |       |        |        | 168    |       |        |        | 154    |      
|                                                     | Other general and administrative                    |                          |                                     | 2,155  |       |        |        | 2,494  |       |        |        | 2,161  |      
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|                                                     |                                                     |                          | Total non-interest expenses         |        |       | 26,398 |        |        |       | 17,949 |        |        |       | 17,007 | 
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|Income (loss) before income taxes                    |                                                     |                          | (1,938                              | )      |       |        | 5,808  |        |       |        | 4,721  |       
|Provision for income taxes                           |                                                     |                          | 297                                 |        |       |        | 2,254  |        |       |        | 1,731  |       
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      
|                                                     |                                                     |                          | Net income (loss)                   |        | $     | (2,235 | )      |        | $     | 3,554  |        |        | $     | 2,990  | 
|                                                     |                                                     |                          |                                     |        |       |        |        |        |      



F-3



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


(Dollars in Thousands)


|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         |        |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------- | - | ---------- | - | --- | ------------ |  | ----------- | -------- | - | ----- | ------------- | ------- | ----- | ------------- | - | ------ | ------ | - | - | ------ | ------ | - | - | ------- | ------ | -
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  | Accumulated |          |   |      
|                                                                                          |                                                                                                                             | Common Stock |            |   | Additional |   |     | Unearned     |  |             |          |   | Other |               |         | Total |              
|                                                                                          |                                                                                                                             |              |            |   | Paid-in    |   |     | Compensation |  |             | Retained |   |       | Comprehensive |         |       | Stockholders  |  
|                                                                                          |                                                                                                                             | Shares       |            |   | Amount     |   |     | Capital      |  |             | ESOP     |   |       | Earnings      |         |       | Income (Loss) |   |        | Equity |  
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Balance at December 31, 2002                                                              |                                                                                                                             |              |           |   |            | $ |    |              |  | $           |         |   |       | $             |        |       |               | $ | 53,025 |        |   | $ | 1,251  |        |   | $ | 54,276  |       
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Purchase of minority interest                                                             |                                                                                                                             |              |           |   |            |   |    |              |  |             |         |   |       |               |        |       |               |   | (132   | )      |   |   |       |        |   |   | (132    | )     
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Comprehensive income:                                                                     |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         |       
|                                                                                          | Net income                                                                                                                  |              |            |  |            |   |     |             |  |             |          |  |       |               |         |      |               |   |        | 2,990  |   |   |        |       |   |   |         | 2,990  |  
|                                                                                          | Change in net unrealized gain/loss on securities available for
    sale, net of reclassification adjustment and tax effects |              |            |  |            |   |     |             |  |             |          |  |       |               |         |      |               |   |        |       |   |   |        | (799   | ) |   |         | (799   | )
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|                                                                                          | Total comprehensive income                                                                                                  |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         | 2,191  |  
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Balance at December 31, 2003                                                              |                                                                                                                             |              |           |   |            |   |    |              |  |             |         |   |       |               |        |       |               |   | 55,883 |        |   |   | 452    |        |   |   | 56,335  |       
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Comprehensive income:                                                                     |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         |       
|                                                                                          | Net income                                                                                                                  |              |            |  |            |   |     |             |  |             |          |  |       |               |         |      |               |   |        | 3,554  |   |   |        |       |   |   |         | 3,554  |  
|                                                                                          | Change in net unrealized gain/loss on securities available for
    sale, net of reclassification adjustment and tax effects |              |            |  |            |   |     |             |  |             |          |  |       |               |         |      |               |   |        |       |   |   |        | (442   | ) |   |         | (442   | )
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|                                                                                          | Total comprehensive income                                                                                                  |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         | 3,112  |  
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Balance at December 31, 2004                                                              |                                                                                                                             |              |           |   |            |   |    |              |  |             |         |   |       |               |        |       |               |   | 59,437 |        |   |   | 10     |        |   |   | 59,447  |       
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Comprehensive loss:                                                                       |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         |       
|                                                                                          | Net loss                                                                                                                    |              |            |  |            |   |     |             |  |             |          |  |       |               |         |      |               |   |        | (2,235 | ) |   |        |       |   |   |         | (2,235 | )
|                                                                                          | Change in net unrealized gain/loss on securities available for
    sale, net of reclassification adjustment and tax effects |              |            |  |            |   |     |             |  |             |          |  |       |               |         |      |               |   |        |       |   |   |        | (1,099 | ) |   |         | (1,099 | )
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|                                                                                          | Total comprehensive loss                                                                                                    |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |   |   |        |        |   |   |         | (3,334 | )
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Issuance of common stock for initial public offering, net of
    expenses of $2.8 million |                                                                                                                             |              | 9,545,000  |   |            |   | 95  |              |  |             | 92,570   |   |       |               |        |       |               |   |       |        |   |   |       |        |   |   | 92,665  |       
|Issuance of common stock to Legacy Banks Foundation                                       |                                                                                                                             |              | 763,600    |   |            |   | 8   |              |  |             | 7,628    |   |       |               |        |       |               |   |       |        |   |   |       |        |   |   | 7,636   |       
|Stock purchased for ESOP                                                                  |                                                                                                                             |              |           |   |            |   |    |              |  |             |         |   |       |               | (10,984 | )     |               |   |       |        |   |   |       |        |   |   | (10,984 | )     
|Release of ESOP stock                                                                     |                                                                                                                             |              |           |   |            |   |    |              |  |             | 4        |   |       |               | 732     |       |               |   |       |        |   |   |       |        |   |   | 736     |       
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  
|Balance at December 31, 2005                                                              |                                                                                                                             |              | 10,308,600 |   |            | $ | 103 |              |  | $           | 100,202  |   |       | $             | (10,252 | )     |               | $ | 57,202 |        |   | $ | (1,089 | )      |   | $ | 146,166 |       
|                                                                                          |                                                                                                                             |              |            |   |            |   |     |              |  |             |          |   |       |               |         |       |               |   |        |        |  



F-4



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Dollars in Thousands)


|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |         |       |         |         |         |      |         |  
|---------------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------------------------------------------- | -------------------------------------- | ----------------------------------------- | ------- | ---- | -------- | -------- | ------- | ----- | ------- | ------- | ------- | ---- | ------- | -
|                                               |                                                                                              | Years Ended December 31,                              |                                       
|                                               |                                                                                              |                                                       |                                       
|                                               |                                                                                              | 2005                                                  |                                        |                                           | 2004    |      |          | 2003     |        
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|Cash flows from operating activities:          |                                                                                              |                                                       |                                        |                                           |         |      |          |          |         |       |         |        
|                                               | Net (loss) income                                                                            |                                                       | $                                      | (2,235                                    | )       |      | $        | 3,554    |         |       | $       | 2,990   |        
|                                               | Adjustments to reconcile net (loss) income to net cash provided
    by operating activities: |                                                       |                                        |                                           |         |      |          |          |         |       |         |         |        
|                                               |                                                                                              | Provision for loan losses                             |                                        |                                           | 841     |      |          |          | 212     |       |         |         | 979     |     
|                                               |                                                                                              | Net amortization of securities                        |                                        |                                           | 171     |      |          |          | 466     |       |         |         | 801     |     
|                                               |                                                                                              | Amortization of mortgage servicing rights             |                                        |                                           |        |      |          |          |        |       |         |         | 52      |     
|                                               |                                                                                              | Depreciation and amortization expense                 |                                        |                                           | 966     |      |          |          | 922     |       |         |         | 1,092   |     
|                                               |                                                                                              | Gain on sales of securities, net                      |                                        |                                           | (160    | )    |          |          | (136    | )     |         |         | (96     | )   
|                                               |                                                                                              | Loss on impairment of securities available for sale   |                                        |                                           | 225     |      |          |          | 7       |       |         |         | 67      |     
|                                               |                                                                                              | Loss on impairment of other investments               |                                        |                                           | 24      |      |          |          | 13      |       |         |         |        |     
|                                               |                                                                                              | Gain on sales of foreclosed real estate, net          |                                        |                                           |        |      |          |          | (86     | )     |         |         |        |     
|                                               |                                                                                              | Gain on sales of loans, net                           |                                        |                                           | (236    | )    |          |          | (278    | )     |         |         | (331    | )   
|                                               |                                                                                              | Loans originated for sale                             |                                        |                                           | (14,739 | )    |          |          | (15,579 | )     |         |         | (19,871 | )   
|                                               |                                                                                              | Proceeds from sale of loans                           |                                        |                                           | 22,578  |      |          |          | 15,889  |       |         |         | 21,125  |     
|                                               |                                                                                              | Deferred tax benefit                                  |                                        |                                           | (1,830  | )    |          |          | (76     | )     |         |         | (492    | )   
|                                               |                                                                                              | Contribution of common stock to Charitable Foundation |                                        |                                           | 736     |      |          |          |        |       |         |         |        |     
|                                               |                                                                                              | Employee Stock Ownership Plan expense                 |                                        |                                           | 7,636   |      |          |          |        |       |         |         |        |     
|                                               |                                                                                              | Net change in:                                        |                                        |                                           |         |      |          |          |         |       |         |         |         |     
|                                               |                                                                                              |                                                       | Bank-owned life insurance              |                                           |         | (465 | )        |          |         | 51    |         |         |         | (417 | )      
|                                               |                                                                                              |                                                       | Accrued interest receivable            |                                           |         | (446 | )        |          |         | (96   | )       |         |         | 217  |        
|                                               |                                                                                              |                                                       | Other assets                           |                                           |         | (719 | )        |          |         | (629  | )       |         |         | (435 | )      
|                                               |                                                                                              |                                                       | Accrued expenses and other liabilities |                                           |         | 239  |          |          |         | 1,267 |         |         |         | 23   |        
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|                                               |                                                                                              |                                                       |                                        | Net cash provided by operating activities |         |      | 12,586   |          |         |       | 5,501   |         |         |      | 5,704   |  
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|Cash flows from investing activities:          |                                                                                              |                                                       |                                        |                                           |         |      |          |          |         |       |         |        
|                                               | Activity in available-for-sale securities:                                                   |                                                       |                                        |                                           |         |      |          |          |         |       |         |         |        
|                                               |                                                                                              | Sales                                                 |                                        |                                           | 4,551   |      |          |          | 2,323   |       |         |         | 22,901  |     
|                                               |                                                                                              | Maturities, prepayments and calls                     |                                        |                                           | 25,003  |      |          |          | 45,837  |       |         |         | 88,090  |     
|                                               |                                                                                              | Purchases                                             |                                        |                                           | (78,648 | )    |          |          | (57,690 | )     |         |         | (70,894 | )   
|                                               | Activity in held-to-maturity securities:                                                     |                                                       |                                        |                                           |         |      |          |          |         |       |         |         |        
|                                               |                                                                                              | Maturities, prepayments and calls                     |                                        |                                           | 66      |      |          |          |        |       |         |         | 65      |     
|                                               | Purchases of Federal Home Loan Bank stock                                                    |                                                       |                                        | (226                                      | )       |      |          | (1,959   | )       |       |         | (1,976  | )      
|                                               | Redemption (purchase) of other closely held stocks                                           |                                                       |                                        | (827                                      | )       |      |          |         |         |       |         | 44      |        
|                                               | Maturities, prepayments and call of other investments                                        |                                                       |                                        | 116                                       |         |      |          |         |         |       |         |        |        
|                                               | Loan originations and purchases, net of principal payments                                   |                                                       |                                        | (50,726                                   | )       |      |          | (53,246  | )       |       |         | (95,684 | )      
|                                               | Purchases of bank-owned life insurance                                                       |                                                       |                                        |                                          |         |      |          | (3,000   | )       |       |         |        |        
|                                               | Redemption of bank-owned life insurance                                                      |                                                       |                                        | 198                                       |         |      |          | 789      |         |       |         |        |        
|                                               | Additions to premises and equipment                                                          |                                                       |                                        | (1,425                                    | )       |      |          | (376     | )       |       |         | (278    | )      
|                                               | Proceeds from sale of premises and equipment                                                 |                                                       |                                        |                                          |         |      |          |         |         |       |         | 334     |        
|                                               | Proceeds from sales of foreclosed assets                                                     |                                                       |                                        |                                          |         |      |          | 1,275    |         |       |         |        |        
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|                                               |                                                                                              |                                                       |                                        | Net cash used in investing activities     |         |      | (101,918 | )        |         |       | (66,047 | )       |         |      | (57,398 | )
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|Cash flows from financing activities:          |                                                                                              |                                                       |                                        |                                           |         |      |          |          |         |       |         |        
|                                               | Net increase in deposits                                                                     |                                                       |                                        | 23,513                                    |         |      |          | 28,347   |         |       |         | 3,346   |        
|                                               | Net increase (decrease) in securities sold under agreement to
    repurchase                 |                                                       |                                        | 442                                       |         |      |          | (2,061   | )       |       |         | (1,437  | )      
|                                               | Repayment of Federal Home Loan Bank advances                                                 |                                                       |                                        | (174,534                                  | )       |      |          | (117,097 | )       |       |         | (68,117 | )      
|                                               | Proceeds from Federal Home Loan Bank advances                                                |                                                       |                                        | 160,753                                   |         |      |          | 145,551  |         |       |         | 101,750 |        
|                                               | Net change in other secured borrowings                                                       |                                                       |                                        |                                          |         |      |          | (806     | )       |       |         | 4,076   |        
|                                               | Net (decrease) increase in mortgagors escrow accounts                                       |                                                       |                                        | (89                                       | )       |      |          | 368      |         |       |         | 336     |        
|                                               | Net proceeds from Initial Public Offering (IPO)                                              |                                                       |                                        | 92,665                                    |         |      |          |         |         |       |         |        |        
|                                               | Purchase of Common Stock in connection with Employee Stock
    Ownership Plan                |                                                       |                                        | (10,984                                   | )       |      |          |         |         |       |         |        |        
|                                               | Purchase of minority interest                                                                |                                                       |                                        |                                          |         |      |          |         |         |       |         | (132    | )      
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|                                               |                                                                                              |                                                       |                                        | Net cash provided by financing activities |         |      | 91,766   |          |         |       | 54,302  |         |         |      | 39,822  |  
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|Net change in cash and cash equivalents        |                                                                                              |                                                       | 2,434                                  |                                           |         |      | (6,244   | )        |         |       | (11,872 | )      
|Cash and cash equivalents at beginning of year |                                                                                              |                                                       | 16,798                                 |                                           |         |      | 23,042   |          |         |       | 34,914  |        
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|Cash and cash equivalents at end of year       |                                                                                              | $                                                     | 19,232                                 |                                           |         | $    | 16,798   |          |         | $     | 23,042  |        
|                                               |                                                                                              |                                                       |                                        |                                           |         |      |          |          |        
|Supplemental cash flow information:            |                                                                                              |                                                       |                                        |                                           |         |      |          |          |         |       |         |        
|                                               | Interest paid on deposits                                                                    |                                                       | $                                      | 8,216                                     |         |      | $        | 5,535    |         |       | $       | 5,651   |        
|                                               | Interest paid on Federal Home Loan Bank advances                                             |                                                       |                                        | 6,757                                     |         |      |          | 5,568    |         |       |         | 5,204   |        
|                                               | Interest paid on other borrowed funds                                                        |                                                       |                                        | 89                                        |         |      |          | 849      |         |       |         | 893     |        
|                                               | Income taxes paid                                                                            |                                                       |                                        | 2,460                                     |         |      |          | 2,385    |         |       |         | 2,715   |        
|                                               | Transfers from loans to foreclosed real estate                                               |                                                       |                                        |                                          |         |      |          | 1,189    |         |       |         |        |        
|                                               | Non-cash reduction in other secured borrowings                                               |                                                       |                                        |                                          |         |      |          | 12,372   |         |       |         |        |        
|                                               | Transfers from loans to loans held for sale                                                  |                                                       |                                        | 7,113                                     |         |      |          |         |         |       |         |        |        



F-5



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Years Ended December 31, 2005, 2004 and 2003


(Dollars in Thousands)




|   |                                           
|-- | ------------------------------------------
|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| |                      
| | ---------------------
| | Basis of presentation

wholly-owned




| |                 
| | ----------------
| | Stock conversion







| |                 
| | ----------------
| | Use of estimates





| |         
| | --------
| | Business





| |                   
| | ------------------
| | Operating segments



F-6



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (Continued)






| |                  
| | -----------------
| | Reclassifications





| |                          
| | -------------------------
| | Cash and cash equivalents





| |           
| | ----------
| | Securities





held-to




| |                    
| | -------------------
| | Loans held for sale



F-7



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)


SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (Continued)




| |      
| | -----
| | Loans











| |                          
| | -------------------------
| | Allowance for loan losses









F-8



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)


SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (Continued)






| |                        
| | -----------------------
| | Other real estate owned





| |                   
| | ------------------
| | Earnings per share





| |                       
| | ----------------------
| | Premises and equipment





| |         
| | --------
| | Goodwill





| |                              
| | -----------------------------
| | Transfers of financial assets





| |             
| | ------------
| | Pension plan



F-9



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)


SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (Continued)




| |                                            
| | -------------------------------------------
| | Postretirement benefits other than pensions





| |                  
| | -----------------
| | Advertising costs





| |                            
| | ---------------------------
| | Portfolio management assets





| |                          
| | -------------------------
| | Comprehensive income/loss





|                                                                                   |  |                          |        |   |      |   |      |      |  |   |        |  
|---------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ---- | ---- |  | - | ------ | -
|                                                                                   |  | Years Ended December 31, |       
|                                                                                   |  |                          |       
|                                                                                   |  | 2005                     |        |   | 2004 |   |      | 2003 | 
|                                                                                   |  |                          |        |   |      |   |      |      | 
|Change in net unrealized holding gains/losses on available for
    sale securities |  | $                        | (1,809 | ) |      | $ | (574 | )    |  | $ | (1,314 | )
|Reclassification adjustment for gains realized in income                           |  |                          | (160   | ) |      |   | (136 | )    |  |   | (96    | )
|Reclassification adjustment for impairment losses recognized in
    income         |  |                          | 225    |   |      |   | 7    |      |  |   | 67     |  
|                                                                                   |  |                          |        |   |      |   |      |      | 
|                                                                                   |  |                          | (1,744 | ) |      |   | (703 | )    |  |   | (1,343 | )
|Tax effects                                                                        |  |                          | 645    |   |      |   | 261  |      |  |   | 544    |  
|                                                                                   |  |                          |        |   |      |   |      |      | 
|Net-of-tax amount                                                                  |  | $                        | (1,099 | ) |      | $ | (442 | )    |  | $ | (799   | )
|                                                                                   |  |                          |        |   |      |   |      |      | 



| |                                 
| | --------------------------------
| | Recent accounting pronouncements

Share-Based Payment Accounting for Stock-Based Compensation, Accounting for Stock Issued to
Employees


F-10



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (Concluded)






Accounting for Servicing of Financial Assets




|   |                                                
|-- | -----------------------------------------------
|2. | RESTRICTIONS ON CASH AND AMOUNTS DUE FROM BANKS







|   |                       
|-- | ----------------------
|3. | SHORT-TERM INVESTMENTS



|                        |  |              |       |  |      |   |       | 
|----------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                        |  | December 31, |      
|                        |  |              |      
|                        |  | 2005         |       |  | 2004 |  
|                        |  |              |       |  |      |  
|Federal funds sold      |  | $            | 2,798 |  |      | $ | 813   | 
|FHLB Overnight deposits |  |              | 2,103 |  |      |   | 4,165 | 
|Asset Management Fund   |  |              | 2,000 |  |      |   |      | 
|                        |  |              |       |  |      |  
|                        |  | $            | 6,901 |  |      | $ | 4,978 | 
|                        |  |              |       |  |      |  

F-11



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |           
|-- | ----------
|4. | SECURITIES



|                                               |                                                            |              |         |       |      |   |         |       | 
|---------------------------------------------- | ---------------------------------------------------------- | ------------ | ------- | ----- | ---- | - | ------- | ----- | 
|                                               |                                                            | December 31, |        
|                                               |                                                            |              |        
|                                               |                                                            | 2005         |         |       | 2004 |  
|                                               |                                                            |              |         |       |      |  
|Securities available for sale, at fair value   |                                                            | $            | 167,436 |       |      | $ | 120,322 |      
|Securities held to maturity, at amortized cost |                                                            |              | 97      |       |      |   | 163     |      
|Other equity securities, at cost:              |                                                            |              |         |       |      |   |         |      
|                                               | Federal Home Loan Bank of Boston stock                     |              |         | 9,056 |      |   |         | 8,830 | 
|                                               | Savings Bank Life Insurance Company of Massachusetts stock |              |         | 1,709 |      |   |         | 1,709 | 
|                                               | Other investments                                          |              |         | 1,557 |      |   |         | 870   | 
|                                               |                                                            |              |         |       |      |  
|                                               |                                                            | $            | 179,855 |       |      | $ | 131,894 |      
|                                               |                                                            |              |         |       |      |  



|                              |                                  |                                     |       |        |            |  |       |            |       |  |       |        |        |   |       |        |         | 
|----------------------------- | -------------------------------- | ----------------------------------- | ----- | ------ | ---------- |  | ----- | ---------- | ----- |  | ----- | ------ | ------ | - | ----- | ------ | ------- | 
|                              |                                  | December 31, 2005                   |      
|                              |                                  |                                     |      
|                              |                                  |                                     |       | Gross  |            |  | Gross |            |       | 
|                              |                                  | Amortized                           |       |        | Unrealized |  |       | Unrealized |       |  | Fair  |       
|                              |                                  | Cost                                |       |        | Gains      |  |       | Losses     |       |  | Value |       
|                              |                                  |                                     |       |        |            |  |       |            |       |  |       |       
|Securities Available for Sale |                                  |                                     |       |        |            |  |       |            |       |  |       |        |        |   |       |       
|Debt securities:              |                                  |                                     |       |        |            |  |       |            |       |  |       |        |        |   |       |       
|                              | Government-sponsored enterprises |                                     | $     | 95,613 |            |  | $     | 11         |       |  | $     | (1,255 | )      |   | $     | 94,369 |        
|                              | Municipal                        |                                     |       | 6,061  |            |  |       | 7          |       |  |       | (66    | )      |   |       | 6,002  |        
|                              | Corporate                        |                                     |       | 6,149  |            |  |       | 26         |       |  |       | (14    | )      |   |       | 6,161  |        
|                              | Mortgage backed                  |                                     |       | 56,896 |            |  |       | 12         |       |  |       | (1,403 | )      |   |       | 55,505 |        
|                              |                                  |                                     |       |        |            |  |       |            |       |  |       |       
|                              |                                  | Total debt securities               |       |        | 164,719    |  |       |            | 56    |  |       |        | (2,738 | ) |       |        | 162,037 | 
|Marketable equity securities  |                                  |                                     | 4,399 |        |            |  | 1,004 |            |       |  | (4    | )      |        |   | 5,399 |       
|                              |                                  |                                     |       |        |            |  |       |            |       |  |       |       
|                              |                                  | Total securities available for sale |       | $      | 169,118    |  |       | $          | 1,060 |  |       | $      | (2,742 | ) |       | $      | 167,436 | 
|                              |                                  |                                     |       |        |            |  |       |            |       |  |       |       
|Securities Held to Maturity   |                                  |                                     |       |        |            |  |       |            |       |  |       |        |        |   |       |       
|                              | Other bonds and obligations      |                                     | $     | 97     |            |  | $     |           |       |  | $     |       |        |   | $     | 97     |        
|                              |                                  |                                     |       |        |            |  |       |            |       |  |       |       

F-12



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |                       
|-- | ----------------------
|4. | SECURITIES (Continued)

|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |      |        |      |       |        |         |         | 
|----------------------------- | -------------------------------- | ----------------------------------- | --------------------- | ------ | ---------- | ------- | ----- | ---------- | ----- | --- | ----- | ---- | ------ | ---- | ----- | ------ | ------- | ------- | 
|                              |                                  | December 31, 2004                   |                      
|                              |                                  |                                     |                      
|                              |                                  |                                     |                       | Gross  |            |         | Gross |            |       |    
|                              |                                  | Amortized                           |                       |        | Unrealized |         |       | Unrealized |       |     | Fair  |     
|                              |                                  | Cost                                |                       |        | Gains      |         |       | Losses     |       |     | Value |     
|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |     
|Securities Available for Sale |                                  |                                     |                       |        |            |         |       |            |       |     |       |      |        |      |       |       
|Debt securities:              |                                  |                                     |                       |        |            |         |       |            |       |     |       |      |        |      |       |       
|                              | Government-sponsored enterprises |                                     | $                     | 42,504 |            |         | $     | 68         |       |     | $     | (309 | )      |      | $     | 42,263 |        
|                              | Municipal                        |                                     |                       | 3,575  |            |         |       | 9          |       |     |       | (19  | )      |      |       | 3,565  |        
|                              | Corporate                        |                                     |                       | 12,448 |            |         |       | 250        |       |     |       | (2   | )      |      |       | 12,696 |        
|                              | Mortgage backed                  |                                     |                       | 58,657 |            |         |       | 169        |       |     |       | (573 | )      |      |       | 58,253 |        
|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |     
|                              |                                  |                                     | Total debt securities |        |            | 117,184 |       |            |       | 496 |       |      |        | (903 | )     |        |         | 116,777 | 
|Marketable equity securities  |                                  |                                     | 3,076                 |        |            |         | 698   |            |       |     | (229  | )    |        |      | 3,545 |       
|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |     
|                              |                                  | Total securities available for sale |                       | $      | 120,260    |         |       | $          | 1,194 |     |       | $    | (1,132 | )    |       | $      | 120,322 |        
|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |     
|Securities Held to Maturity   |                                  |                                     |                       |        |            |         |       |            |       |     |       |      |        |      |       |       
|Debt securities:              |                                  |                                     |                       |        |            |         |       |            |       |     |       |      |        |      |       |       
|                              | Other bonds and obligations      |                                     | $                     | 161    |            |         | $     |           |       |     | $     |     |        |      | $     | 161    |        
|                              | Mortgage-backed                  |                                     |                       | 2      |            |         |       |           |       |     |       |     |        |      |       | 2      |        
|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |     
|                              |                                  | Total securities held to maturity   |                       | $      | 163        |         |       | $          |      |     |       | $    |       |      |       | $      | 163     |        
|                              |                                  |                                     |                       |        |            |         |       |            |       |     |       |     



|                         |                             |                    |        |         |                  |   |        |           |  |   |       |    |  |   |    |    | 
|------------------------ | --------------------------- | ------------------ | ------ | ------- | ---------------- | - | ------ | --------- |  | - | ----- | -- |  | - | -- | -- | 
|                         |                             | Available for Sale |        |         | Held to Maturity |  
|                         |                             |                    |        |         |                  |  
|                         |                             | Amortized          |        |         | Fair             |   |        | Amortized |  |   | Fair  |   
|                         |                             | Cost               |        |         | Value            |   |        | Cost      |  |   | Value |   
|                         |                             |                    |        |         |                  |   |        |           |  |   |       |   
|Within 1 year            |                             | $                  | 43,854 |         |                  | $ | 43,831 |           |  | $ |      |    |  | $ |   |   
|Over 1 year to 5 years   |                             |                    | 58,423 |         |                  |   | 57,210 |           |  |   | 30    |    |  |   | 30 |   
|Over 5 years to 10 years |                             |                    | 1,714  |         |                  |   | 1,694  |           |  |   | 52    |    |  |   | 52 |   
|Over 10 years            |                             |                    | 3,832  |         |                  |   | 3,797  |           |  |   | 15    |    |  |   | 15 |   
|                         |                             |                    |        |         |                  |   |        |           |  |   |       |   
|                         | Total bonds and obligations |                    |        | 107,823 |                  |   |        | 106,532   |  |   |       | 97 |  |   |    | 97 | 
|Mortgage-backed          |                             |                    | 56,896 |         |                  |   | 55,505 |           |  |   |      |    |  |   |   |   
|                         |                             |                    |        |         |                  |   |        |           |  |   |       |   
|                         | Total debt securities       |                    | $      | 164,719 |                  |   | $      | 162,037   |  |   | $     | 97 |  |   | $  | 97 | 
|                         |                             |                    |        |         |                  |   |        |           |  |   |       |   



F-13



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |                       
|-- | ----------------------
|4. | SECURITIES (Continued)





|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |     |       |  |     |        |        | 
|---------------------------- | -------------------------------- | ------------------------------------- | - | --- | ------------------ |  | ----- | ---------- | ------ |  | ----- | --- | ----- |  | --- | ------ | ------ | 
|                             |                                  | Less Than Twelve                      |   |     |                   
|                             |                                  | Months                                |   |     | Over Twelve Months | 
|                             |                                  |                                       |   |     |                    | 
|                             |                                  | Gross                                 |   |     |                    |  | Gross |            |        | 
|                             |                                  | Unrealized                            |   |     | Fair               |  |       | Unrealized |        |  | Fair  |    
|                             |                                  | Losses                                |   |     | Value              |  |       | Losses     |        |  | Value |    
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    
|December 31, 2005:           |                                  |                                       |   |     |                    |  |       |            |        |  |       |     |       |  |     |       
|Debt securities:             |                                  |                                       |   |     |                    |  |       |            |        |  |       |     |       |  |     |       
|                             | Government-sponsored enterprises |                                       | $ | 552 |                    |  | $     | 35,105     |        |  | $     | 703 |       |  | $   | 23,578 |       
|                             | Municipal                        |                                       |   | 26  |                    |  |       | 2,003      |        |  |       | 40  |       |  |     | 2,056  |       
|                             | Corporate                        |                                       |   | 14  |                    |  |       | 1,522      |        |  |       |    |       |  |     |       |       
|                             | Mortgage backed                  |                                       |   | 552 |                    |  |       | 27,531     |        |  |       | 851 |       |  |     | 24,423 |       
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    
|                             |                                  | Total debt securities                 |   |     | 1,144              |  |       |            | 66,161 |  |       |     | 1,594 |  |     |        | 50,057 | 
|Marketable equity securities |                                  |                                       | 1 |     |                    |  | 166   |            |        |  | 3     |     |       |  | 158 |       
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    
|                             |                                  | Total temporarily impaired securities |   | $   | 1,145              |  |       | $          | 66,327 |  |       | $   | 1,597 |  |     | $      | 50,215 | 
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    
|December 31, 2004:           |                                  |                                       |   |     |                    |  |       |            |        |  |       |     |       |  |     |       
|Debt securities:             |                                  |                                       |   |     |                    |  |       |            |        |  |       |     |       |  |     |       
|                             | Government-sponsored enterprises |                                       | $ | 142 |                    |  | $     | 18,718     |        |  | $     | 167 |       |  | $   | 8,996  |       
|                             | Municipal                        |                                       |   | 19  |                    |  |       | 2,326      |        |  |       |    |       |  |     |       |       
|                             | Corporate                        |                                       |   | 2   |                    |  |       | 1,270      |        |  |       |    |       |  |     |       |       
|                             | Mortgage backed                  |                                       |   | 189 |                    |  |       | 21,035     |        |  |       | 384 |       |  |     | 17,805 |       
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    
|                             |                                  | Total debt securities                 |   |     | 352                |  |       |            | 43,349 |  |       |     | 551   |  |     |        | 26,801 | 
|Marketable equity securities |                                  |                                       | 8 |     |                    |  | 73    |            |        |  | 221   |     |       |  | 772 |       
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    
|                             |                                  | Total temporarily impaired securities |   | $   | 360                |  |       | $          | 43,422 |  |       | $   | 772   |  |     | $      | 27,573 | 
|                             |                                  |                                       |   |     |                    |  |       |            |        |  |       |    





F-14



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |                       
|-- | ----------------------
|4. | SECURITIES (Concluded)





|   |      
|-- | -----
|5. | LOANS



|                               |                    |              |         |         |         |  |         |         |         | 
|------------------------------ | ------------------ | ------------ | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                               |                    | December 31, |        
|                               |                    |              |        
|                               |                    | 2005         |         |         | 2004    | 
|                               |                    |              |         |         |         | 
|Mortgage loans on real estate: |                    |              |         |         |         |  |         |        
|                               | Residential        |              | $       | 308,008 |         |  | $       | 284,114 |        
|                               | Commercial         |              |         | 160,675 |         |  |         | 141,540 |        
|                               | Home equity        |              |         | 58,640  |         |  |         | 53,508  |        
|                               |                    |              |         |         |         | 
|                               |                    |              | 527,323 |         |         |  | 479,162 |        
|                               |                    |              |         |         |         | 
|Other loans:                   |                    |              |         |         |         |  |         |        
|                               | Commercial         |              |         | 20,579  |         |  |         | 24,856  |        
|                               | Consumer and other |              |         | 3,457   |         |  |         | 4,332   |        
|                               |                    |              |         |         |         | 
|                               |                    |              | 24,036  |         |         |  | 29,188  |        
|                               |                    |              |         |         |         | 
|                               |                    | Total loans  |         |         | 551,359 |  |         |         | 508,350 | 
|Net deferred loan costs        |                    |              | 361     |         |         |  | 224     |        
|Allowance for loan losses      |                    |              | (4,220  | )       |         |  | (3,846  | )      
|                               |                    |              |         |         |         | 
|                               |                    | Loans, net   |         | $       | 547,500 |  |         | $       | 504,728 | 
|                               |                    |              |         |         |         | 



|                             |  |                          |       |   |      |   |       |      |  |   |       |  
|---------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                             |  | Years Ended December 31, |      
|                             |  |                          |      
|                             |  | 2005                     |       |   | 2004 |   |       | 2003 | 
|                             |  |                          |       |   |      |   |       |      | 
|Balance at beginning of year |  | $                        | 3,846 |   |      | $ | 4,420 |      |  | $ | 3,633 |  
|Provision for loan losses    |  |                          | 841   |   |      |   | 212   |      |  |   | 979   |  
|Recoveries                   |  |                          | 147   |   |      |   | 153   |      |  |   | 58    |  
|Loans charged-off            |  |                          | (614  | ) |      |   | (939  | )    |  |   | (250  | )
|                             |  |                          |       |   |      |   |       |      | 
|Balance at end of year       |  | $                        | 4,220 |   |      | $ | 3,846 |      |  | $ | 4,420 |  
|                             |  |                          |       |   |      |   |       |      | 

F-15



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |                  
|-- | -----------------
|5. | LOANS (Concluded)



|                                                             |  |              |       |  |      |   |       |      |  |   |       | 
|------------------------------------------------------------ |  | ------------ | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                             |  | December 31, |      
|                                                             |  |              |      
|                                                             |  | 2005         |       |  | 2004 |   |       | 2003 | 
|                                                             |  |              |       |  |      |   |       |      | 
|Impaired loans with no valuation allowance                   |  | $            | 1,060 |  |      | $ | 2,254 |      |  | $ | 390   | 
|Impaired loans with a valuation allowance                    |  |              |      |  |      |   | 891   |      |  |   | 1,270 | 
|                                                             |  |              |       |  |      |   |       |      | 
|Total impaired loans                                         |  | $            | 1,060 |  |      | $ | 3,145 |      |  | $ | 1,660 | 
|                                                             |  |              |       |  |      |   |       |      | 
|Valuation allowance allocated to impaired loans              |  | $            |      |  |      | $ | 179   |      |  | $ | 801   | 
|                                                             |  |              |       |  |      |   |       |      | 
|Average investment in impaired loans                         |  | $            | 2,162 |  |      | $ | 2,364 |      |  | $ | 1,623 | 
|                                                             |  |              |       |  |      |   |       |      | 
|Interest income recognized on impaired loans on a cash basis |  | $            |      |  |      |   |      |      |  | $ |      | 
|                                                             |  |              |       |  |      |   |       |      | 
|Non-accrual loans                                            |  | $            | 903   |  |      | $ | 1,769 |      |  | $ | 1,853 | 
|                                                             |  |              |       |  |      |   |       |      | 









|   |                       
|-- | ----------------------
|6. | PREMISES AND EQUIPMENT



|                                          |                            |              |        |        |           |   |        |              |  |  |            |            | 
|----------------------------------------- | -------------------------- | ------------ | ------ | ------ | --------- | - | ------ | ------------ |  |  | ---------- | ---------- | 
|                                          |                            | December 31, |        |        |          
|                                          |                            |              |        |        | Estimated |  
|                                          |                            | 2005         |        |        | 2004      |   |        | Useful Lives | 
|                                          |                            |              |        |        |           |   |        |              | 
|Premises:                                 |                            |              |        |        |           |   |        |              |  |  |            |           
|                                          | Land                       |              | $      | 818    |           |   | $      | 350          |  |  |            |            | 
|                                          | Buildings and improvements |              |        | 14,821 |           |   |        | 14,557       |  |  |            | 5-39 Years | 
|Furniture and equipment                   |                            |              | 5,926  |        |           |   | 5,288  |              |  |  | 3-10 Years |           
|                                          |                            |              |        |        |           |   |        |              | 
|                                          |                            |              | 21,565 |        |           |   | 20,195 |              |  |  |            |           
|Accumulated depreciation and amortization |                            |              | (7,329 | )      |           |   | (6,418 | )            |  |  |            |           
|                                          |                            |              |        |        |           |   |        |              | 
|                                          |                            | $            | 14,236 |        |           | $ | 13,777 |              |  |  |            |           
|                                          |                            |              |        |        |           |   |        |              | 



F-16



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |         
|-- | --------
|7. | DEPOSITS



|                                      |                                |              |         |         |      |   |         |         | 
|------------------------------------- | ------------------------------ | ------------ | ------- | ------- | ---- | - | ------- | ------- | 
|                                      |                                | December 31, |        
|                                      |                                |              |        
|                                      |                                | 2005         |         |         | 2004 |  
|                                      |                                |              |         |         |      |  
|Demand                                |                                | $            | 52,773  |         |      | $ | 47,766  |        
|NOW                                   |                                |              | 41,692  |         |      |   | 39,328  |        
|Regular                               |                                |              | 63,335  |         |      |   | 72,546  |        
|LifePath Savings                      |                                |              | 73,151  |         |      |   | 62,309  |        
|Money market                          |                                |              | 55,168  |         |      |   | 63,472  |        
|                                      |                                |              |         |         |      |  
|                                      | Total non-certificate accounts |              |         | 286,119 |      |   |         | 285,421 | 
|                                      |                                |              |         |         |      |  
|Term certificates less than $100,000  |                                |              | 121,732 |         |      |   | 117,225 |        
|Term certificates of $100,000 or more |                                |              | 66,530  |         |      |   | 48,222  |        
|                                      |                                |              |         |         |      |  
|                                      | Total certificate accounts     |              |         | 188,262 |      |   |         | 165,447 | 
|                                      |                                |              |         |         |      |  
|                                      | Total deposits                 |              | $       | 474,381 |      |   | $       | 450,868 | 
|                                      |                                |              |         |         |      |  



|                        |  |                   |         |          |                   |  |      |        |          |   |         |  |  |  |      |  
|----------------------- |  | ----------------- | ------- | -------- | ----------------- |  | ---- | ------ | -------- | - | ------- |  |  |  | ---- | -
|                        |  | December 31, 2005 |         |          | December 31, 2004 | 
|                        |  |                   |         |          |                   | 
|                        |  |                   |         | Weighted |                   |  |      |        | Weighted |  
|                        |  |                   |         | Average  |                   |  |      |        | Average  |  
|                        |  | Amount            |         |          | Rate              |  |      | Amount |          |   | Rate    | 
|                        |  |                   |         |          |                   |  |      |        |          |   |         | 
|Within 1 year           |  | $                 | 142,883 |          |                   |  | 3.32 | %      |          | $ | 96,546  |  |  |  | 2.13 | %
|Over 1 year to 3 years  |  |                   | 42,822  |          |                   |  | 3.63 |        |          |   | 58,362  |  |  |  | 3.05 |  
|Over 3 years to 5 years |  |                   | 2,557   |          |                   |  | 4.14 |        |          |   | 10,539  |  |  |  | 3.43 |  
|                        |  |                   |         |          |                   |  |      |        |          |   |         | 
|                        |  | $                 | 188,262 |          |                   |  | 3.40 | %      |          | $ | 165,447 |  |  |  | 2.54 | %
|                        |  |                   |         |          |                   |  |      |        |          |   |         | 



F-17



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|   |                                               
|-- | ----------------------------------------------
|8. | SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE





|                                                   |  |              |       |   |      |   |       |  
|-------------------------------------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                                                   |  | December 31, |      
|                                                   |  |              |      
|                                                   |  | 2005         |       |   | 2004 |  
|                                                   |  |              |       |   |      |  
|Repurchase agreements with customers               |  | $            | 4,999 |   |      | $ | 4,557 |  
|                                                   |  |              |       |   |      |  
|Fair value of securities underlying the agreements |  | $            | 7,592 |   |      | $ | 5,759 |  
|                                                   |  |              |       |   |      |  
|Weighted Average Interest Rate                     |  |              | 1.80  | % |      |   | 1.21  | %
|                                                   |  |              |       |   |      |  



|   |                                
|-- | -------------------------------
|9. | FEDERAL HOME LOAN BANK ADVANCES



|                                             |  |        |         |         |               |          |         |      |  |  |      |   |  |  |      |  
|-------------------------------------------- |  | ------ | ------- | ------- | ------------- | -------- | ------- | ---- |  |  | ---- | - |  |  | ---- | -
|                                             |  |        |         |         |               | Weighted |        
|                                             |  |        |         | Average |              
|                                             |  | Amount |         |         | Interest Rate |         
|                                             |  |        |         |         |               |         
|Maturing During the Year Ending December 31, |  | 2005   |         |         | 2004          |          |         | 2005 |  |  | 2004 |  
|                                             |  |        |         |         |               |          |         |      |  |  |      |  
|2005                                         |  | $      |        |         |               | $        | 47,641  |      |  |  |     | % |  |  | 2.72 | %
|2006                                         |  |        | 29,257  | *       |               |          | 23,595  |      |  |  | 3.88 |   |  |  | 3.77 |  
|2007                                         |  |        | 23,500  |         |               |          | 10,500  |      |  |  | 4.23 |   |  |  | 4.25 |  
|2008                                         |  |        | 33,500  |         |               |          | 9,000   |      |  |  | 4.53 |   |  |  | 5.38 |  
|2009                                         |  |        | 28,459  | *       |               |          | 25,447  |      |  |  | 3.86 |   |  |  | 3.75 |  
|2010                                         |  |        | 10,450  |         |               |          | 6,750   |      |  |  | 4.75 |   |  |  | 4.98 |  
|Thereafter                                   |  |        | 20,757  | *       |               |          | 36,771  |      |  |  | 4.42 |   |  |  | 5.14 |  
|                                             |  |        |         |         |               |          |         |      |  |  |      |  
|                                             |  | $      | 145,923 |         |               | $        | 159,704 |      |  |  | 4.22 | % |  |  | 3.94 | %
|                                             |  |        |         |         |               |          |         |      |  |  |      |  






|  |                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------
|* | Includes amortizing advances requiring $178,000 in combined
    monthly principal and interest payments at December 31,
    2005.





F-18



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |             
|--- | ------------
|10. | INCOME TAXES



|                            |         |                          |        |        |      |   |       |       |   |   |       |       |  
|--------------------------- | ------- | ------------------------ | ------ | ------ | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                            |         | Years Ended December 31, |       
|                            |         |                          |       
|                            |         | 2005                     |        |        | 2004 |   |       | 2003  |  
|                            |         |                          |        |        |      |   |       |       |  
|Current tax provision:      |         |                          |        |        |      |   |       |       |   |   |       |      
|                            | Federal |                          | $      | 1,665  |      |   | $     | 1,883 |   |   | $     | 1,022 |  
|                            | State   |                          |        | 462    |      |   |       | 447   |   |   |       | 1,201 |  
|                            |         |                          |        |        |      |   |       |       |  
|                            |         |                          | 2,127  |        |      |   | 2,330 |       |   |   | 2,223 |      
|                            |         |                          |        |        |      |   |       |       |  
|Deferred tax benefit:       |         |                          |        |        |      |   |       |       |   |   |       |      
|                            | Federal |                          |        | (2,551 | )    |   |       | (47   | ) |   |       | (111  | )
|                            | State   |                          |        | (109   | )    |   |       | (29   | ) |   |       | (118  | )
|                            |         |                          |        |        |      |   |       |       |  
|                            |         |                          | (2,660 | )      |      |   | (76   | )     |   |   | (229  | )    
|                            |         |                          |        |        |      |   |       |       |  
|Change in valuation reserve |         |                          | 830    |        |      |   |      |       |   |   | (263  | )    
|                            |         |                          |        |        |      |   |       |       |  
|                            |         | $                        | 297    |        |      | $ | 2,254 |       |   | $ | 1,731 |      
|                            |         |                          |        |        |      |   |       |       |  



|                                    |                                         |              |       |       |      |  |      |      |   |  |      |      |  
|----------------------------------- | --------------------------------------- | ------------ | ----- | ----- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                    |                                         | Years Ended  |      
|                                    |                                         | December 31, |      
|                                    |                                         |              |      
|                                    |                                         | 2005         |       |       | 2004 |  |      | 2003 |  
|                                    |                                         |              |       |       |      |  |      |      |  
|Statutory tax rate                  |                                         |              | 34.0  | %     |      |  | 34.0 | %    |   |  | 34.0 | %   
|Increase (decrease) resulting from: |                                         |              |       |       |      |  |      |      |   |  |      |     
|                                    | State taxes, net of federal tax benefit |              |       | (12.0 | )    |  |      | 4.7  |   |  |      | 15.1 |  
|                                    | Dividends received deduction            |              |       | 1.6   |      |  |      | (0.4 | ) |  |      | (0.6 | )
|                                    | Change in valuation reserve             |              |       | (42.8 | )    |  |      |     |   |  |      | (5.6 | )
|                                    | Reduction in reserve for exposures      |              |       |      |      |  |      |     |   |  |      | (6.4 | )
|                                    | Other, net                              |              |       | 3.9   |      |  |      | 0.5  |   |  |      | 0.2  |  
|                                    |                                         |              |       |       |      |  |      |      |  
|Effective tax rates                 |                                         |              | (15.3 | )%    |      |  | 38.8 | %    |   |  | 36.7 | %   
|                                    |                                         |              |       |       |      |  |      |      |  

F-19



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                         
|--- | ------------------------
|10. | INCOME TAXES (Continued)



|                        |         |              |       |       |      |   |       |       |  
|----------------------- | ------- | ------------ | ----- | ----- | ---- | - | ----- | ----- | -
|                        |         | December 31, |      
|                        |         |              |      
|                        |         | 2005         |       |       | 2004 |  
|                        |         |              |       |       |      |  
|Deferred tax asset:     |         |              |       |       |      |   |       |      
|                        | Federal |              | $     | 5,548 |      |   | $     | 2,299 |  
|                        | State   |              |       | 922   |      |   |       | 734   |  
|                        |         |              |       |       |      |  
|                        |         |              | 6,470 |       |      |   | 3,033 |      
|Valuation reserve       |         |              | (830  | )     |      |   |      |      
|                        |         |              |       |       |      |  
|                        |         |              | 5,640 |       |      |   | 3,033 |      
|                        |         |              |       |       |      |  
|Deferred tax liability: |         |              |       |       |      |   |       |      
|                        | Federal |              |       | (284  | )    |   |       | (150  | )
|                        | State   |              |       | (98   | )    |   |       | (100  | )
|                        |         |              |       |       |      |  
|                        |         |              | (382  | )     |      |   | (250  | )    
|                        |         |              |       |       |      |  
|Net deferred tax asset  |         | $            | 5,258 |       |      | $ | 2,783 |      
|                        |         |              |       |       |      |  



|                                                            |  |              |       |   |      |   |       |  
|----------------------------------------------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                                                            |  | December 31, |      
|                                                            |  |              |      
|                                                            |  | 2005         |       |   | 2004 |  
|                                                            |  |              |       |   |      |  
|Net unrealized gain (loss) on securities available for sale |  | $            | 593   |   |      | $ | (52   | )
|Depreciation and amortization                               |  |              | 44    |   |      |   | (54   | )
|Deferred income                                             |  |              | (152  | ) |      |   | (95   | )
|Allowance for loan losses                                   |  |              | 1,726 |   |      |   | 1,573 |  
|Employee benefit plans                                      |  |              | 1,385 |   |      |   | 1,025 |  
|Capital loss carryforward                                   |  |              | 169   |   |      |   | 171   |  
|Charitable contribution carryforward                        |  |              | 2,237 |   |      |   |      |  
|Other                                                       |  |              | 86    |   |      |   | 215   |  
|Valuation reserve                                           |  |              | (830  | ) |      |   |      |  
|                                                            |  |              |       |   |      |  
|Net deferred tax asset                                      |  | $            | 5,258 |   |      | $ | 2,783 |  
|                                                            |  |              |       |   |      |  

F-20



---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                         
|--- | ------------------------
|10. | INCOME TAXES (Concluded)



|                                                                                   |  |                          |       |   |      |   |       |      |  |   |       | 
|---------------------------------------------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | 
|                                                                                   |  | Years Ended December 31, |      
|                                                                                   |  |                          |      
|                                                                                   |  | 2005                     |       |   | 2004 |   |       | 2003 | 
|                                                                                   |  |                          |       |   |      |   |       |      | 
|Balance at beginning of year                                                       |  | $                        | 2,783 |   |      | $ | 2,446 |      |  | $ | 1,410 | 
|Deferred tax benefit                                                               |  |                          | 2,660 |   |      |   | 76    |      |  |   | 229   | 
|Deferred tax effects of net unrealized losses on securities
    available for sale |  |                          | 645   |   |      |   | 261   |      |  |   | 544   | 
|(Increase) decrease in valuation reserve                                           |  |                          | (830  | ) |      |   |      |      |  |   | 263   | 
|                                                                                   |  |                          |       |   |      |   |       |      | 
|Balance at end of year                                                             |  | $                        | 5,258 |   |      | $ | 2,783 |      |  | $ | 2,446 | 
|                                                                                   |  |                          |       |   |      |   |       |      | 



|                                                 |  |              |     |  |      |   |      |  |  |   |      |  
|------------------------------------------------ |  | ------------ | --- |  | ---- | - | ---- |  |  | - | ---- | -
|                                                 |  | December 31, |    
|                                                 |  |              |    
|                                                 |  | 2005         |     |  | 2004 |   | 2003 | 
|                                                 |  |              |     |  |      |   |      | 
|Balance at beginning of year                     |  | $            |    |  |      | $ |     |  |  | $ | 263  |  
|Reserve for charitable contribution carryforward |  |              | 830 |  |      |   |     |  |  |   |     |  
|Utilization of reserve                           |  |              |    |  |      |   |     |  |  |   | (263 | )
|                                                 |  |              |     |  |      |   |      |  | 
|Balance at end of year                           |  | $            | 830 |  |      | $ |     |  |  | $ |     |  
|                                                 |  |              |     |  |      |   |      |  | 







F-21



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                              
|--- | -----------------------------
|11. | COMMITMENTS AND CONTINGENCIES





| |                                     
| | ------------------------------------
| | Loan and other financial commitments





|                                                |  |              |        |  |      |   |        | 
|----------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                                |  | December 31, |       
|                                                |  |              |       
|                                                |  | 2005         |        |  | 2004 |  
|                                                |  |              |        |  |      |  
|Commitments to grant loans                      |  | $            | 11,914 |  |      | $ | 34,082 | 
|Unused funds on commercial lines-of-credit      |  |              | 15,251 |  |      |   | 12,148 | 
|Unadvanced funds on home equity lines-of-credit |  |              | 61,698 |  |      |   | 50,408 | 
|Unadvanced funds on construction loans          |  |              | 7,305  |  |      |   | 9,395  | 
|Standby letters-of-credit and other commitments |  |              | 6,733  |  |      |   | 1,352  | 

lines-of lines-of lines-of


letters-of letters-of letters-of


Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others


F-22



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                          
|--- | -----------------------------------------
|11. | COMMITMENTS AND CONTINGENCIES (Concluded)



| |                            
| | ---------------------------
| | Operating lease commitments



|                          |  |        |     | 
|------------------------- |  | ------ | --- | 
|Years Ending December 31, |  | Amount |    
|                          |  |        |    
|2006                      |  | $      | 156 | 
|2007                      |  |        | 159 | 
|2008                      |  |        | 141 | 
|2009                      |  |        | 122 | 
|2010                      |  |        | 63  | 
|Thereafter                |  |        | 228 | 
|                          |  |        |    
|                          |  | $      | 869 | 
|                          |  |        |    





| |             
| | ------------
| | Legal claims





| |                      
| | ---------------------
| | Employment agreements





|    |                                        
|--- | ---------------------------------------
|12. | MINIMUM REGULATORY CAPITAL REQUIREMENTS



F-23



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)


12.                        MINIMUM
REGULATORY CAPITAL REQUIREMENTS (Continued)








|                                        |  |        |         |         |             |         |                   |                  |              |               |        |  |  |        |     |   |       |   |        |  |  |  |      |  
|--------------------------------------- |  | ------ | ------- | ------- | ----------- | ------- | ----------------- | ---------------- | ------------ | ------------- | ------ |  |  | ------ | --- | - | ----- | - | ------ |  |  |  | ---- | -
|                                        |  |        |         |         |             |         |                   |                  |              | Minimum To Be |       
|                                        |  |        |         |         |             |         |                   | Well Capitalized |             
|                                        |  |        |         |         |             | Minimum |                   |                  | Under Prompt |              
|                                        |  |        |         | Capital |             |         | Corrective Action |                 
|                                        |  | Actual |         |         | Requirement |         |                   | Provisions       |             
|                                        |  |        |         |         |             |         |                   |                  |             
|                                        |  | Amount |         |         | Ratio       |         |                   | Amount           |              |               | Ratio  |  |  | Amount |     |   | Ratio |  
|                                        |  |        |         |         |             |         |                   |                  |              |               |        |  |  |        |     |   |       |  
|December 31, 2005                       |  |        |         |         |             |         |                   |                  |              |               |        |  |  |        |     |   |       |   |        |  |  |  |      |  
|Total capital to risk weighted assets   |  | $      | 100,794 |         |             |         | 20.0              | %                |              | $             | 40,375 |  |  |        | 8.0 | % |       | $ | 50,468 |  |  |  | 10.0 | %
|Tier 1 capital to risk weighted assets: |  |        | 95,859  |         |             |         | 19.0              |                  |              |               | 20,187 |  |  |        | 4.0 |   |       |   | 30,281 |  |  |  | 6.0  |  
|Tier 1 capital to average assets:       |  |        | 95,859  |         |             |         | 12.6              |                  |              |               | 22,762 |  |  |        | 3.0 |   |       |   | 37,936 |  |  |  | 5.0  |  
|December 31, 2004:                      |  |        |         |         |             |         |                   |                  |              |               |        |  |  |        |     |   |       |   |        |  |  |  |      |  
|Total capital to risk weighted assets:  |  | $      | 58,603  |         |             |         | 12.6              | %                |              | $             | 37,285 |  |  |        | 8.0 | % |       | $ | 46,607 |  |  |  | 10.0 | %
|Tier 1 capital to risk weighted assets: |  |        | 54,363  |         |             |         | 11.7              |                  |              |               | 18,643 |  |  |        | 4.0 |   |       |   | 27,964 |  |  |  | 6.0  |  
|Tier 1 capital to average assets:       |  |        | 54,363  |         |             |         | 8.0               |                  |              |               | 20,391 |  |  |        | 3.0 |   |       |   | 33,984 |  |  |  | 5.0  |  



|                                                                     |                                                                 |                                             |         |         |         |  |        |        |        | 
|-------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------- | ------- | ------- | ------- |  | ------ | ------ | ------ | 
|                                                                     |                                                                 | 2005                                        |         |         | 2004    | 
|                                                                     |                                                                 |                                             |         |         |         | 
|Total stockholders equity per consolidated financial
    statements |                                                                 |                                             | 146,166 |         |         |  | 59,447 |       
|Adjustments for bank Tier 1 Capital:                                 |                                                                 |                                             |         |         |         |  |        |       
|                                                                     | Holding company equity adjustment                               |                                             |         | (48,271 | )       |  |        | (1,978 | )     
|                                                                     | Net unrealized losses (gains) on AFS securities                 |                                             |         | 1,089   |         |  |        | (10    | )     
|                                                                     | Disallowed goodwill and intangible assets and other adjustments |                                             |         | (3,125  | )       |  |        | (3,096 | )     
|                                                                     |                                                                 |                                             |         |         |         | 
|                                                                     |                                                                 | Total Bank Tier 1 Capital                   |         |         | 95,859  |  |        |        | 54,363 | 
|Adjustments for total capital                                        |                                                                 |                                             |         |         |         |  |        |       
|                                                                     | Allowed unrealized gains on equity securities                   |                                             |         | 450     |         |  |        | 211    |       
|                                                                     | Includable allowance for loan losses                            |                                             |         | 4,485   |         |  |        | 4,029  |       
|                                                                     |                                                                 |                                             |         |         |         | 
|                                                                     |                                                                 | Total Bank capital per regulatory reporting |         |         | 100,794 |  |        |        | 58,603 | 
|                                                                     |                                                                 |                                             |         |         |         | 

F-24



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                                    
|--- | ---------------------------------------------------
|12. | MINIMUM REGULATORY CAPITAL REQUIREMENTS (Concluded)





|    |                       
|--- | ----------------------
|13. | EMPLOYEE BENEFIT PLANS



| |                     
| | --------------------
| | Defined Benefit plan



|                                |                                                |                  |        |        |      |   |        |        |  
|------------------------------- | ---------------------------------------------- | ---------------- | ------ | ------ | ---- | - | ------ | ------ | -
|                                |                                                | Plan Years Ended |       
|                                |                                                | October 31,      |       
|                                |                                                |                  |       
|                                |                                                | 2005             |        |        | 2004 |  
|                                |                                                |                  |        |        |      |  
|Change in plan assets:          |                                                |                  |        |        |      |   |        |       
|                                | Fair value of plan assets at beginning of year |                  | $      | 9,425  |      |   | $      | 8,553  |  
|                                | Actual gain on plan assets                     |                  |        | 826    |      |   |        | 894    |  
|                                | Employer contribution                          |                  |        |       |      |   |        | 370    |  
|                                | Benefits paid                                  |                  |        | (259   | )    |   |        | (392   | )
|                                |                                                |                  |        |        |      |  
|                                | Fair value of plan assets at end of year       |                  |        | 9,992  |      |   |        | 9,425  |  
|                                |                                                |                  |        |        |      |  
|Change in benefit obligation:   |                                                |                  |        |        |      |   |        |       
|                                | Benefit obligation at beginning of year        |                  |        | 11,205 |      |   |        | 9,088  |  
|                                | Service cost                                   |                  |        | 649    |      |   |        | 553    |  
|                                | Interest cost                                  |                  |        | 644    |      |   |        | 568    |  
|                                | Plan Amendment                                 |                  |        | (1,290 | )    |   |        |       |  
|                                | Actuarial (loss)/gain                          |                  |        | (499   | )    |   |        | 1,388  |  
|                                | Benefits paid                                  |                  |        | (259   | )    |   |        | (392   | )
|                                |                                                |                  |        |        |      |  
|                                | Benefit obligation at end of year              |                  |        | 10,450 |      |   |        | 11,205 |  
|                                |                                                |                  |        |        |      |  
|Funded status                   |                                                |                  | (458   | )      |      |   | (1,780 | )     
|Unrecognized net actuarial loss |                                                |                  | (147   | )      |      |   | 911    |       
|Transition obligation           |                                                |                  |       |        |      |   | (91    | )     
|                                |                                                |                  |        |        |      |  
|Accrued pension cost            |                                                | $                | (605   | )      |      | $ | (960   | )     
|                                |                                                |                  |        |        |      |  
|Accumulated benefit obligation  |                                                | $                | 10,450 |        |      | $ | 7,019  |       
|                                |                                                |                  |        |        |      |  

F-25



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                   
|--- | ----------------------------------
|13. | EMPLOYEE BENEFIT PLANS (Continued)



|                              |  |             |      |   |      |  |      |  
|----------------------------- |  | ----------- | ---- | - | ---- |  | ---- | -
|                              |  | October 31, |     
|                              |  |             |     
|                              |  | 2005        |      |   | 2004 | 
|                              |  |             |      |   |      | 
|Discount rate                 |  |             | 4.47 | % |      |  | 5.75 | %
|Rate of compensation increase |  |             | n/a  |   |      |  | 4.50 | %



|                                                                 |  |                              |      |   |      |   |      |      |  |   |      |  
|---------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                 |  | Plan Years Ended October 31, |     
|                                                                 |  |                              |     
|                                                                 |  | 2005                         |      |   | 2004 |   |      | 2003 | 
|                                                                 |  |                              |      |   |      |   |      |      | 
|Service cost  benefits earned during year                       |  | $                            | 648  |   |      | $ | 553  |      |  | $ | 513  |  
|Interest cost on projected benefits                              |  |                              | 644  |   |      |   | 568  |      |  |   | 566  |  
|Expected return on plan assets                                   |  |                              | (754 | ) |      |   | (684 | )    |  |   | (577 | )
|Net amortization of transition obligation and prior service cost |  |                              | (30  | ) |      |   | (30  | )    |  |   | (30  | )
|Recognized net actuarial (gain)loss                              |  |                              | 40   |   |      |   | (13  | )    |  |   | 18   |  
|                                                                 |  |                              |      |   |      |   |      |      | 
|                                                                 |  | $                            | 548  |   |      | $ | 394  |      |  | $ | 490  |  
|                                                                 |  |                              |      |   |      |   |      |      | 





|                                                  |  |                              |       |  |      |  |       |      |  |  |       | 
|------------------------------------------------- |  | ---------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                                  |  | Plan Years Ended October 31, |      
|                                                  |  |                              |      
|                                                  |  | 2005                         |       |  | 2004 |  |       | 2003 | 
|                                                  |  |                              |       |  |      |  |       |      | 
|Discount rate on benefit obligations              |  |                              | 5.75% |  |      |  | 6.25% |      |  |  | 6.75% | 
|Rates of increase in compensation levels          |  |                              | 4.50% |  |      |  | 4.50% |      |  |  | 4.50% | 
|Expected long-term rates of return on plan assets |  |                              | 8.00% |  |      |  | 8.00% |      |  |  | 8.00% | 



F-26



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                   
|--- | ----------------------------------
|13. | EMPLOYEE BENEFIT PLANS (Continued)



|                  |  |               |     |   |      |  |     |  
|----------------- |  | ------------- | --- | - | ---- |  | --- | -
|                  |  | Percentage of |    
|                  |  | Plan Assets   |    
|                  |  | at            |    
|                  |  | October 31,   |    
|                  |  |               |    
|Asset Category    |  | 2005          |     |   | 2004 | 
|                  |  |               |     |   |      | 
|Equity securities |  |               | 65  | % |      |  | 66  | %
|Debt securities   |  |               | 35  |   |      |  | 34  |  
|                  |  |               |     |   |      | 
|Total             |  |               | 100 | % |      |  | 100 | %
|                  |  |               |     |   |      | 







| |                          
| | -------------------------
| | Defined contribution plan





| |                             
| | ----------------------------
| | Supplemental Executive Plans





| |                              
| | -----------------------------
| | Employee Stock Ownership plan



F-27



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                   
|--- | ----------------------------------
|13. | EMPLOYEE BENEFIT PLANS (Concluded)

15-year




|                         |  |        |        | 
|------------------------ |  | ------ | ------ | 
|Year Ending December 31, |  | Amount |       
|                         |  |        |       
|2006                     |  | $      | 446    | 
|2007                     |  |        | 477    | 
|2008                     |  |        | 508    | 
|2009                     |  |        | 545    | 
|2010                     |  |        | 582    | 
|Thereafter               |  |        | 8,426  | 
|                         |  |        |       
|                         |  | $      | 10,984 | 
|                         |  |        |       





|                          |  |  |         | 
|------------------------- |  |  | ------- | 
|Allocated                 |  |  | 54,979  | 
|Committed to be allocated |  |  |        | 
|Unallocated               |  |  | 769,709 | 
|                          |  |  |        
|                          |  |  | 824,688 | 
|                          |  |  |        



F-28



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                                  
|--- | -------------------------------------------------
|14. | POSTRETIREMENT HEALTH AND LIFE INSURANCE BENEFITS



|                                                                 |  |              |    |  |      |   |    |      |  |   |    | 
|---------------------------------------------------------------- |  | ------------ | -- |  | ---- | - | -- | ---- |  | - | -- | 
|                                                                 |  | Years Ended  |   
|                                                                 |  | December 31, |   
|                                                                 |  |              |   
|                                                                 |  | 2005         |    |  | 2004 |   |    | 2003 | 
|                                                                 |  |              |    |  |      |   |    |      | 
|Interest cost on projected benefits                              |  | $            | 52 |  |      | $ | 57 |      |  | $ | 63 | 
|Recognized net actuarial loss                                    |  |              | 12 |  |      |   | 12 |      |  |   | 16 | 
|Net amortization of transition obligation and prior service cost |  |              | 4  |  |      |   | 5  |      |  |   | 4  | 
|                                                                 |  |              |    |  |      |   |    |      | 
|                                                                 |  | $            | 68 |  |      | $ | 74 |      |  | $ | 83 | 
|                                                                 |  |              |    |  |      |   |    |      | 



|                              |                                         |              |   |      |      |  |   |      |  
|----------------------------- | --------------------------------------- | ------------ | - | ---- | ---- |  | - | ---- | -
|                              |                                         | December 31, |  
|                              |                                         |              |  
|                              |                                         | 2005         |   |      | 2004 | 
|                              |                                         |              |   |      |      | 
|Change in benefit obligation: |                                         |              |   |      |      |  |   |     
|                              | Benefit obligation at beginning of year |              | $ | 909  |      |  | $ | 919  |  
|                              | Interest cost                           |              |   | 52   |      |  |   | 57   |  
|                              | Actuarial loss                          |              |   | (261 | )    |  |   | 1    |  
|                              | Benefits paid                           |              |   | (76  | )    |  |   | (68  | )
|                              |                                         |              |   |      |      | 
|                              | Benefit obligation at end of year       |              | $ | 624  |      |  | $ | 909  |  
|                              |                                         |              |   |      |      | 
|                              | Funded status                           |              | $ | (624 | )    |  | $ | (909 | )
|                              | Unrecognized transition obligation      |              |   | 34   |      |  |   | 37   |  
|                              | Unrecognized net actuarial loss         |              |   | 46   |      |  |   | 322  |  
|                              | Unrecognized prior service cost         |              |   | (46  | )    |  |   | (50  | )
|                              |                                         |              |   |      |      | 
|                              | Accrued pension cost                    |              | $ | (590 | )    |  | $ | (600 | )
|                              |                                         |              |   |      |      | 



F-29



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                                                  
|--- | -----------------------------------------------------------------
|14. | POSTRETIREMENT HEALTH AND LIFE INSURANCE
    BENEFITS (Concluded)



|          |  |   |     | 
|--------- |  | - | --- | 
|2006      |  | $ | 55  | 
|2007      |  |   | 55  | 
|2008      |  |   | 55  | 
|2009      |  |   | 54  | 
|2010      |  |   | 54  | 
|2011-2015 |  |   | 260 | 





|    |                           
|--- | --------------------------
|15. | RELATED PARTY TRANSACTIONS





|                             |  |                          |       |   |      |   |       |      |  |   |       |  
|---------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                             |  | Years Ended December 31, |      
|                             |  |                          |      
|                             |  | 2005                     |       |   | 2004 |   |       | 2003 | 
|                             |  |                          |       |   |      |   |       |      | 
|Balance at beginning of year |  | $                        | 3,878 |   |      | $ | 3,319 |      |  | $ | 1,879 |  
|Additions/change in status   |  |                          | 495   |   |      |   | 1,096 |      |  |   | 2,139 |  
|Repayments                   |  |                          | (680  | ) |      |   | (537  | )    |  |   | (699  | )
|                             |  |                          |       |   |      |   |       |      | 
|Balance at end of year       |  | $                        | 3,693 |   |      | $ | 3,878 |      |  | $ | 3,319 |  
|                             |  |                          |       |   |      |   |       |      | 



|    |                                    
|--- | -----------------------------------
|16. | FAIR VALUE OF FINANCIAL INSTRUMENTS



F-30



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                                
|--- | -----------------------------------------------
|16. | FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)



Cash and cash equivalents:


Securities:


Loans, net and loans held for sale:


Deposits:


Securities sold under agreements to repurchase:


Federal Home Loan Bank advances:


Accrued interest and mortgagors escrow
accounts:


Off-balance-sheet instruments:


F-31



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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Dollars in Thousands)




|    |                                                
|--- | -----------------------------------------------
|16. | FAIR VALUE OF FINANCIAL INSTRUMENTS (Concluded)



|                       |                                        |              |   |         |       |  |   |          |  |  |       |         |  |  |   |         | 
|---------------------- | -------------------------------------- | ------------ | - | ------- | ----- |  | - | -------- |  |  | ----- | ------- |  |  | - | ------- | 
|                       |                                        | December 31, |  
|                       |                                        |              |  
|                       |                                        | 2005         |   |         | 2004  | 
|                       |                                        |              |   |         |       | 
|                       |                                        | Carrying     |   |         | Fair  |  |   | Carrying |  |  | Fair  |        
|                       |                                        | Amount       |   |         | Value |  |   | Amount   |  |  | Value |        
|                       |                                        |              |   |         |       |  |   |          |  |  |       |        
|Financial assets:      |                                        |              |   |         |       |  |   |          |  |  |       |         |  |  |   |        
|                       | Cash and cash equivalents              |              | $ | 19,232  |       |  | $ | 19,232   |  |  | $     | 16,798  |  |  | $ | 16,798  | 
|                       | Securities available for sale          |              |   | 167,436 |       |  |   | 167,436  |  |  |       | 120,322 |  |  |   | 120,322 | 
|                       | Securities held to maturity            |              |   | 97      |       |  |   | 97       |  |  |       | 163     |  |  |   | 163     | 
|                       | Federal Home Loan Bank of Boston stock |              |   | 9,056   |       |  |   | 9,056    |  |  |       | 8,830   |  |  |   | 8,830   | 
|                       | Savings Bank Life Insurance stock      |              |   | 1,709   |       |  |   | 1,709    |  |  |       | 1,709   |  |  |   | 1,709   | 
|                       | Other closely held stocks              |              |   | 1,557   |       |  |   | 1,557    |  |  |       | 222     |  |  |   | 222     | 
|                       | Loans and loans held for sale          |              |   | 547,626 |       |  |   | 551,076  |  |  |       | 505,344 |  |  |   | 518,180 | 
|                       | Accrued interest receivable            |              |   | 3,235   |       |  |   | 3,235    |  |  |       | 2,790   |  |  |   | 2,790   | 
|Financial liabilities: |                                        |              |   |         |       |  |   |          |  |  |       |         |  |  |   |        
|                       | Deposits                               |              |   | 474,381 |       |  |   | 472,816  |  |  |       | 450,868 |  |  |   | 450,372 | 
|                       | Repurchase agreements                  |              |   | 4,999   |       |  |   | 4,999    |  |  |       | 4,557   |  |  |   | 4,557   | 
|                       | FHLB advances                          |              |   | 145,923 |       |  |   | 145,237  |  |  |       | 159,704 |  |  |   | 161,221 | 
|                       | Mortgagors escrow accounts            |              |   | 931     |       |  |   | 931      |  |  |       | 1,020   |  |  |   | 1,020   | 



|    |                                            
|--- | -------------------------------------------
|17. | PARENT COMPANY ONLY CONDENSED BALANCE SHEET



|                                               |                                            |                   |         |         | 
|---------------------------------------------- | ------------------------------------------ | ----------------- | ------- | ------- | 
|                                               |                                            | December 31, 2005 |        
|                                               |                                            |                   |        
|Cash and short-term investments                |                                            | $                 | 3,896   |        
|Securities at fair value                       |                                            |                   | 32,688  |        
|Investment in common stock of Legacy Banks     |                                            |                   | 98,007  |        
|Investment in common stock of LB Funding Corp. |                                            |                   | 9,876   |        
|Deferred taxes and other assets                |                                            |                   | 1,728   |        
|                                               |                                            |                   |        
|                                               | Total Assets                               |                   | $       | 146,195 | 
|                                               |                                            |                   |        
|                                              
|Liabilities and Stockholders Equity          
|Accrued Expenses                               |                                            | $                 | 29      |        
|Stockholders Equity                           |                                            |                   | 146,166 |        
|                                               |                                            |                   |        
|                                               | Total Liabilities and Stockholders Equity |                   | $       | 146,195 | 
|                                               |                                            |                   |        

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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Concluded)


(Dollars in Thousands)




|    |                           
|--- | --------------------------
|18. | QUARTERLY DATA (UNAUDITED)



|                                     |                   |         |        |        |         |   |       |         |  |   |         |     |  |         |       |     |         |   |       |         |  |   |         |     |  |   |       |     |  |   |       |     | 
|------------------------------------ | ----------------- | ------- | ------ | ------ | ------- | - | ----- | ------- |  | - | ------- | --- |  | ------- | ----- | --- | ------- | - | ----- | ------- |  | - | ------- | --- |  | - | ----- | --- |  | - | ----- | --- | 
|                                     |                   | 2005    |        |        | 2004    |  
|                                     |                   |         |        |        |         |  
|                                     |                   | Fourth  |        |        | Third   |   |       | Second  |  |   | First   |     |  | Fourth  |       |     | Third   |   |       | Second  |  |   | First   |    
|                                     |                   | Quarter |        |        | Quarter |   |       | Quarter |  |   | Quarter |     |  | Quarter |       |     | Quarter |   |       | Quarter |  |   | Quarter |    
|                                     |                   |         |        |        |         |   |       |         |  |   |         |     |  |         |       |     |         |   |       |         |  |   |         |    
|Interest and dividend income         |                   | $       | 10,304 |        |         | $ | 9,294 |         |  | $ | 8,870   |     |  | $       | 8,510 |     |         | $ | 8,466 |         |  | $ | 7,956   |     |  | $ | 7,591 |     |  | $ | 7,623 |    
|Interest expense                     |                   |         | 4,139  |        |         |   | 3,932 |         |  |   | 3,623   |     |  |         | 3,360 |     |         |   | 3,314 |         |  |   | 3,095   |     |  |   | 2,845 |     |  |   | 2,848 |    
|                                     |                   |         |        |        |         |   |       |         |  |   |         |     |  |         |       |     |         |   |       |         |  |   |         |    
|Net interest income                  |                   |         | 6,165  |        |         |   | 5,362 |         |  |   | 5,247   |     |  |         | 5,150 |     |         |   | 5,152 |         |  |   | 4,861   |     |  |   | 4,746 |     |  |   | 4,775 |    
|Provision (credit) for loan losses   |                   |         | 365    |        |         |   | 99    |         |  |   | 130     |     |  |         | 247   |     |         |   | 223   |         |  |   | 252     |     |  |   | 111   |     |  |   | (374  | )  
|Non-interest income                  |                   |         | 105    |        |         |   | 1,254 |         |  |   | 1,013   |     |  |         | 1,005 |     |         |   | 1,108 |         |  |   | 1,224   |     |  |   | 1,131 |     |  |   | 972   |    
|Non-interest expenses                |                   |         | 13,097 |        |         |   | 4,405 |         |  |   | 4,510   |     |  |         | 4,386 |     |         |   | 4,488 |         |  |   | 4,335   |     |  |   | 4,463 |     |  |   | 4,663 |    
|Provision (benefit) for income taxes |                   |         | (1,739 | )      |         |   | 832   |         |  |   | 622     |     |  |         | 582   |     |         |   | 606   |         |  |   | 589     |     |  |   | 493   |     |  |   | 566   |    
|                                     |                   |         |        |        |         |   |       |         |  |   |         |     |  |         |       |     |         |   |       |         |  |   |         |    
|                                     | Net (loss) income |         | $      | (5,453 | )       |   | $     | 1,280   |  |   | $       | 998 |  |         | $     | 940 |         |   | $     | 943     |  |   | $       | 909 |  |   | $     | 810 |  |   | $     | 892 | 
|                                     |                   |         |        |        |         |   |       |         |  |   |         |     |  |         |       |     |         |   |       |         |  |   |         |    



Quarterly data may not sum to annual data due to rounding




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