##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008
 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.
  Delaware
    
    20-3135053(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
 99 NORTH STREET
PITTSFIELD, MASSACHUSETTS 01201
 (413) 443-4421
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 8,872,460




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##### 



LEGACY BANCORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page No.Part I  Financial InformationItem 1 Financial StatementsConsolidated Balance Sheets as of June 30, 2008
and December 31, 2007
    
    
    2Consolidated Statements of Income for the three and six months
Ended June 30, 2008 and 2007
    
    
    3Consolidated Statements of Changes in Stockholders Equity
for the six months ended June 30, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows for the
six months ended June 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    9Item 3 Quantitative and Qualitative Disclosures about Market Risks
    
    
    21Item 4 Controls and Procedures
    
    
    21Part II  Other InformationItem 1 Legal Proceedings
    
    
    21Item 1A Risk Factors
    
    
    22Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3 Defaults Upon Senior Securities
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    22Item 5 Other Information
    
    
    22Item 6 Exhibits
    
    
    23Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32 Section 906 Certification of CEO & CFO
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1: Financial Statements
 LEGACY BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCash and due from banks
    
    $
    13,227
    
    
    $
    13,931Short-term investments
    
    
    5,698
    
    
    
    48,294Cash and cash equivalents
    
    
    18,925
    
    
    
    62,225Securities and other investments
    
    
    164,665
    
    
    
    152,054Loans held for sale
    
    
    
    
    
    
    395Loans, net of allowance for loan losses of $5,866
in 2008 and $5,568 in 2007
    
    
    682,949
    
    
    
    653,629Premises and equipment, net
    
    
    19,207
    
    
    
    18,866Accrued interest receivable
    
    
    3,424
    
    
    
    3,404Goodwill, net
    
    
    9,687
    
    
    
    9,687Net deferred tax asset
    
    
    6,622
    
    
    
    5,580Bank-owned life insurance
    
    
    15,033
    
    
    
    14,788Other assets
    
    
    4,595
    
    
    
    3,913$
    925,107
    
    
    $
    924,541LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    591,014
    
    
    $
    610,447Securities sold under agreements to repurchase
    
    
    5,142
    
    
    
    4,055Federal Home Loan Bank advances
    
    
    192,494
    
    
    
    167,382Mortgagors escrow accounts
    
    
    874
    
    
    
    1,034Accrued expenses and other liabilities
    
    
    7,271
    
    
    
    8,531Total liabilities
    
    
    796,795
    
    
    
    791,449Commitments and contingenciesStockholders EquityPreferred Stock ($.01 par value, 10,000,000 shares
authorized, none issued or outstanding)
    
    
    
    
    
    
    Common Stock ($.01 par value, 40,000,000 shares
authorized and 10,308,600 issued at June 30, 2008 and
December 31, 2007; 8,940,360 outstanding at June 30,
2008, and 9,240,960 outstanding at December 31, 2007)
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    102,119
    
    
    
    101,720Unearned Compensation  ESOP
    
    
    (8,421
    )
    
    
    (8,787
    )Unearned Compensation  Equity Incentive Plan
    
    
    (3,147
    )
    
    
    (3,525
    )Retained earnings
    
    
    59,215
    
    
    
    58,709Accumulated other comprehensive (loss) income
    
    
    (2,003
    )
    
    
    270Treasury stock, at cost (1,368,240 shares at June 30, 2008
and 1,067,640 shares at December 31, 2007)
    
    
    (19,554
    )
    
    
    (15,398
    )Total stockholders equity
    
    
    128,312
    
    
    
    133,092$
    925,107
    
    
    $
    924,541
  2




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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
 Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Interest and dividend income:Loans
    
    $
    10,379
    
    
    $
    10,003
    
    
    $
    20,904
    
    
    $
    19,541Securities:Taxable
    
    
    1,911
    
    
    
    2,031
    
    
    
    3,856
    
    
    
    4,070Tax-Exempt
    
    
    126
    
    
    
    66
    
    
    
    242
    
    
    
    132Short-term investments
    
    
    50
    
    
    
    137
    
    
    
    214
    
    
    
    293Total interest and dividend income
    
    
    12,466
    
    
    
    12,237
    
    
    
    25,216
    
    
    
    24,036Interest expense:Deposits
    
    
    3,545
    
    
    
    4,547
    
    
    
    8,061
    
    
    
    8,645Federal Home Loan Bank advances
    
    
    1,921
    
    
    
    1,778
    
    
    
    3,788
    
    
    
    3,390Other borrowed funds
    
    
    21
    
    
    
    29
    
    
    
    48
    
    
    
    62Total interest expense
    
    
    5,487
    
    
    
    6,354
    
    
    
    11,897
    
    
    
    12,097Net interest income
    
    
    6,979
    
    
    
    5,883
    
    
    
    13,319
    
    
    
    11,939Provision for loan losses
    
    
    346
    
    
    
    193
    
    
    
    571
    
    
    
    438Net interest income after provision for loan
losses
    
    
    6,633
    
    
    
    5,690
    
    
    
    12,748
    
    
    
    11,501Non-interest income:Customer service fees
    
    
    863
    
    
    
    932
    
    
    
    1,609
    
    
    
    1,648Portfolio management fees
    
    
    304
    
    
    
    295
    
    
    
    582
    
    
    
    563Income from bank owned life insurance
    
    
    109
    
    
    
    100
    
    
    
    243
    
    
    
    122Insurance, annuities and mutual fund fees
    
    
    49
    
    
    
    61
    
    
    
    114
    
    
    
    109Gain on sales of securities, net
    
    
    385
    
    
    
    305
    
    
    
    472
    
    
    
    393Loss on impairment of securities
    
    
    (344
    )
    
    
    
    
    
    
    (590
    )
    
    
    Gain on sales of loans, net
    
    
    52
    
    
    
    49
    
    
    
    117
    
    
    
    97Miscellaneous
    
    
    10
    
    
    
    11
    
    
    
    33
    
    
    
    20Total non-interest income
    
    
    1,428
    
    
    
    1,753
    
    
    
    2,580
    
    
    
    2,952Non-interest expenses:Salaries and employee benefits
    
    
    3,620
    
    
    
    3,826
    
    
    
    7,195
    
    
    
    7,571Occupancy and equipment
    
    
    931
    
    
    
    713
    
    
    
    1,843
    
    
    
    1,414Data processing
    
    
    647
    
    
    
    521
    
    
    
    1,283
    
    
    
    1,035Professional fees
    
    
    184
    
    
    
    266
    
    
    
    351
    
    
    
    550Advertising
    
    
    304
    
    
    
    269
    
    
    
    559
    
    
    
    444Other general and administrative
    
    
    1,060
    
    
    
    748
    
    
    
    2,179
    
    
    
    1,508Total non-interest expenses
    
    
    6,746
    
    
    
    6,343
    
    
    
    13,410
    
    
    
    12,522Income before income taxes
    
    
    1,315
    
    
    
    1,100
    
    
    
    1,918
    
    
    
    1,931Provision for income taxes
    
    
    401
    
    
    
    385
    
    
    
    587
    
    
    
    713Net income
    
    $
    914
    
    
    $
    715
    
    
    $
    1,331
    
    
    $
    1,218Earnings per shareBasic
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.13Diluted
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.13Weighted average shares outstandingBasic
    
    
    8,095,109
    
    
    
    9,126,427
    
    
    
    8,187,925
    
    
    
    9,172,259Diluted
    
    
    8,129,991
    
    
    
    9,153,185
    
    
    
    8,219,011
    
    
    
    9,197,331
  3




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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
 (Dollars in thousands)
 (Unaudited)
 Unearned
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    Unearned
    
    
    Compensation -
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Compensation -
    
    
    Equity
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    ESOP
    
    
    Incentive Plan
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    EquityBalance at December 31, 2006
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    106,094
    
    
    $
    (9,519
    )
    
    $
    (5,375
    )
    
    $
    58,863
    
    
    $
    (169
    )
    
    $
    
    
    
    $
    149,997Comprehensive income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,218
    
    
    
    
    
    
    
    
    
    
    
    1,218Net unrealized gain (loss) on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (219
    )
    
    
    
    
    
    
    (219
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    999Cash dividends declared ($0.08 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (761
    )
    
    
    
    
    
    
    
    
    
    
    (761
    )Common stock repurchased  Restricted stock portion
of 2006 Equity Incentive Plan (412,344 shares)
    
    
    (65,844
    )
    
    
    
    
    
    
    (5,579
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,080
    )
    
    
    (6,659
    )Common stock repurchased - 5% Stock Repurchase
Program announced April 2007
    
    
    (231,400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,479
    )
    
    
    (3,479
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    714Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    537Common stock held by ESOP committed
to be released (27,490 shares)
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    425Balance at June 30, 2007
    
    
    10,011,356
    
    
    $
    103
    
    
    $
    101,288
    
    
    $
    (9,153
    )
    
    $
    (4,838
    )
    
    $
    59,320
    
    
    $
    (388
    )
    
    $
    (4,559
    )
    
    $
    141,773Balance at December 31, 2007
    
    
    9,240,960
    
    
    $
    103
    
    
    $
    101,720
    
    
    $
    (8,787
    )
    
    $
    (3,525
    )
    
    $
    58,709
    
    
    $
    270
    
    
    $
    (15,398
    )
    
    $
    133,092Comprehensive
income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,331
    
    
    
    
    
    
    
    
    
    
    
    1,331Net unrealized gain (loss) on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,273
    )
    
    
    
    
    
    
    (2,273
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (942
    )Cash dividends declared ($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (818
    )
    
    
    
    
    
    
    
    
    
    
    (818
    )Common stock repurchased - 5% Stock Repurchase
Program announced December 2007
    
    
    (303,600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,205
    )
    
    
    (4,205
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Restricted stock granted
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (7
    )
    
    
    
    
    
    
    49
    
    
    
    Common stock held by ESOP committed
to be released (27,490 shares)
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373Balance at June 30, 2008
    
    
    8,940,360
    
    
    $
    103
    
    
    $
    102,119
    
    
    $
    (8,421
    )
    
    $
    (3,147
    )
    
    $
    59,215
    
    
    $
    (2,003
    )
    
    $
    (19,554
    )
    
    $
    128,312
  4




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##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 Six Months ended June 30,2008
    
    
    2007(Unaudited)Cash flows from operating activities:Net income
    
    $
    1,331
    
    
    $
    1,218Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    571
    
    
    
    438Net accretion of securities
    
    
    (74
    )
    
    
    (507
    )Depreciation and amortization expense
    
    
    697
    
    
    
    566Loss (gain) on sales/impairment of securities, net
    
    
    118
    
    
    
    (393
    )Gain on sales of loans, net
    
    
    (117
    )
    
    
    (97
    )Loans originated for sale
    
    
    (4,522
    )
    
    
    (6,817
    )Proceeds from sale of loans
    
    
    5,034
    
    
    
    6,112Share-based compensation expense
    
    
    812
    
    
    
    1,251Deferred tax provision
    
    
    382
    
    
    
    76Employee Stock Ownership Plan expense
    
    
    373
    
    
    
    425Net change in:Bank-owned life insurance
    
    
    (245
    )
    
    
    (125
    )Accrued interest receivable
    
    
    (20
    )
    
    
    61Other assets
    
    
    (682
    )
    
    
    38Accrued expenses and other liabilities
    
    
    (1,260
    )
    
    
    112Net cash provided by operating activities
    
    
    2,398
    
    
    
    2,358Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    32,625
    
    
    
    5,415Maturities, prepayments and calls
    
    
    29,415
    
    
    
    44,006Purchases
    
    
    (76,339
    )
    
    
    (37,921
    )Redemption of Federal Home Loan Bank stock
    
    
    
    
    
    
    478Purchase of other investments
    
    
    (2,053
    )
    
    
    (747
    )Maturities, prepayments and call of other investments
    
    
    
    
    
    
    40Loan originations and purchases, net of principal payments
    
    
    (29,891
    )
    
    
    (37,172
    )Purchases of bank-owned life insurance
    
    
    
    
    
    
    (9,814
    )Additions to premises and equipment
    
    
    (1,038
    )
    
    
    (2,592
    )Net cash used in investing activities
    
    
    (47,281
    )
    
    
    (38,307
    )
   5




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##### Table of Contents



LEGACY BANCORP, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
 (Dollars in thousands)
 Six Months ended June 30,2008
    
    
    2007(Unaudited)Cash flows from financing activities:Net increase
(decrease) in deposits
    
    
    (19,433
    )
    
    
    31,986Net (decrease) increase in securities sold under
agreements to repurchase
    
    
    1,087
    
    
    
    (1,356
    )Repayment of Federal Home Loan Bank advances
    
    
    (297,396
    )
    
    
    (85,566
    )Proceeds from Federal Home Loan Bank advances
    
    
    322,508
    
    
    
    99,191Net increase in mortgagors escrow accounts
    
    
    (160
    )
    
    
    (74
    )Repurchase of common stock
    
    
    (4,205
    )
    
    
    (10,138
    )Payment of dividends on common stock
    
    
    (818
    )
    
    
    (761
    )Net cash provided by financing activities
    
    
    1,583
    
    
    
    33,282Net change in cash and cash equivalents
    
    
    (43,300
    )
    
    
    (2,667
    )Cash and cash equivalents at beginning of period
    
    
    62,225
    
    
    
    21,644Cash and cash equivalents at end of period
    
    $
    18,925
    
    
    $
    18,977Supplemental cash flow information:Interest paid on deposits
    
    $
    8,061
    
    
    $
    8,554Interest paid on Federal Home Loan Bank advances
    
    
    3,805
    
    
    
    3,344Interest paid on other borrowed funds
    
    
    48
    
    
    
    62Income taxes paid
    
    
    305
    
    
    
    1,225
  6




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##### Table of Contents



LEGACY BANCORP AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of presentation
  2. Recent Accounting Pronouncements
 Noncontrolling Interests in Consolidated Financial
Statements  An Amendment of ARB No. 51.
  Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements
 Fair Values of Assets and Liabilities: Fair Value Measurements The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of
FASB Statement No. 115
  7




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##### Table of Contents



Level 1
 Level 2
 Level 3
  June 30, 2008Assets/LiabilitiesLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    
    at Fair Value(Dollars in thousands)AssetsSecurities available for sale
    
    
    8,194
    
    
    
    136,908
    
    
    
    
    
    
    
    
    145,102Total assets
    
    
    8,194
    
    
    
    136,908
    
    
    
    
    
    
    
    
    145,102
  Quarter
    
    
    
    Year-to-dateEnded
    
    
    
    EndedJune 30, 2008
    
    
    
    June 30, 2008
    
    
    
    June 30, 2008Total
    
    
    
    TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    
    Gains/(Losses)
    
    
    
    Gains/(Losses)(Dollars in thousands)AssetsLoans
    
    
    
    
    
    
    973
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    (53
    )Total assets
    
    
    
    
    
    
    973
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    (53
    )
  3. Earnings Per Share
  8




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##### Table of Contents



Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income applicable to common stock (000s)
    
    $
    914
    
    
    $
    715
    
    
    $
    1,331
    
    
    $
    1,218Average number of shares issued
    
    
    10,308,600
    
    
    
    10,308,600
    
    
    
    10,308,600
    
    
    
    10,308,600Less: average unallocated ESOP shares
    
    
    (645,855
    )
    
    
    (700,834
    )
    
    
    (652,727
    )
    
    
    (707,668
    )Less: average treasury shares
    
    
    (1,298,996
    )
    
    
    (134,839
    )
    
    
    (1,200,000
    )
    
    
    (82,173
    )Less: average unvested restricted stock awards
    
    
    (268,640
    )
    
    
    (346,500
    )
    
    
    (267,948
    )
    
    
    (346,500
    )Average number of basic shares outstanding
    
    
    8,095,109
    
    
    
    9,126,427
    
    
    
    8,187,925
    
    
    
    9,172,259Plus: dilutive unvested restricted stock awards
    
    
    34,882
    
    
    
    26,758
    
    
    
    30,381
    
    
    
    25,072Plus: diluted stock option shares
    
    
    
    
    
    
    
    
    
    
    705
    
    
    
    Average number of diluted shares outstanding
    
    
    8,129,991
    
    
    
    9,153,185
    
    
    
    8,219,011
    
    
    
    9,197,331Basic earnings per share
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.11
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.13
 4. Dividends
  5. Loan Commitments and other Contingencies
  
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  Critical Accounting Policies
  9




---



##### Table of Contents



Allowance for Loan Losses.
 Income Taxes.
 Goodwill.
 Other-Than-Temporary Impairment.
  Comparison of Financial Condition at June 30, 2008 and December 31, 2007
 Overview:
 Investment Activities
 10




---



##### Table of Contents



At June 30, 2008
    
    
    At December 31, 2007Amortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(Dollars in Thousands)Securities available for sale:Government-sponsored enterprises
    
    $
    28,775
    
    
    $
    28,572
    
    
    $
    48,041
    
    
    $
    48,262Municipal bonds
    
    
    12,875
    
    
    
    12,466
    
    
    
    9,930
    
    
    
    9,941Corporate bonds and other obligations
    
    
    
    
    
    
    
    
    
    
    1,501
    
    
    
    1,531Mortgage-backed securities
    
    
    97,914
    
    
    
    95,870
    
    
    
    65,551
    
    
    
    65,726Total debt securities
    
    
    139,564
    
    
    
    136,908
    
    
    
    125,023
    
    
    
    125,460Common stock
    
    
    7,814
    
    
    
    8,194
    
    
    
    8,100
    
    
    
    9,084Total securities available for sale
    
    
    147,378
    
    
    
    145,102
    
    
    
    133,123
    
    
    
    134,544Securities held to maturity:Other bonds and obligations
    
    
    97
    
    
    
    97
    
    
    
    97
    
    
    
    97Restricted equity securities and other investments:Federal Home Loan Bank of Boston stock
    
    
    10,722
    
    
    
    10,722
    
    
    
    10,722
    
    
    
    10,722Savings Bank Life Insurance
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709Other investments
    
    
    7,035
    
    
    
    7,035
    
    
    
    4,982
    
    
    
    4,982Total restricted equity securities
and other investments
    
    
    19,466
    
    
    
    19,466
    
    
    
    17,413
    
    
    
    17,413Total securities
    
    $
    166,941
    
    
    $
    164,665
    
    
    $
    150,633
    
    
    $
    152,054
 Lending Activities:
 At June 30, 2008
    
    
    At December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans on real estate:Residential
    
    $
    353,213
    
    
    
    51.40
    %
    
    $
    349,772
    
    
    
    53.17
    %Commercial
    
    
    230,780
    
    
    
    33.58
    
    
    
    212,191
    
    
    
    32.26Home equity
    
    
    57,342
    
    
    
    8.34
    
    
    
    56,752
    
    
    
    8.63641,335
    
    
    
    93.32
    
    
    
    618,715
    
    
    
    94.06Other loans:Commercial
    
    
    33,311
    
    
    
    4.85
    
    
    
    27,664
    
    
    
    4.20Consumer and other
    
    
    12,602
    
    
    
    1.83
    
    
    
    11,421
    
    
    
    1.7445,913
    
    
    
    6.68
    
    
    
    39,085
    
    
    
    5.94Total loans
    
    
    687,248
    
    
    
    100.00
    %
    
    
    657,800
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    1,567
    
    
    
    
    
    
    
    1,397Unamortized premiums
    
    
    
    
    
    
    
    
    
    
    Allowance for loan losses
    
    
    (5,866
    )
    
    
    
    
    
    
    (5,568
    )Total loans, net
    
    $
    682,949
    
    
    
    
    
    
    $
    653,629
  Non-performing Assets:
 11




---



##### Table of Contents



At June 30,
    
    
    At December 31,2008
    
    
    2007(Dollars in Thousands)Non-accrual loans:Residential mortgage
    
    $
    189
    
    
    $
    499Commercial mortgage
    
    
    5,891
    
    
    
    539Commercial
    
    
    251
    
    
    
    386Home equity, consumer and other
    
    
    106
    
    
    
    108Total non-accrual loans
    
    
    6,437
    
    
    
    1,532Loans 90 days or greater delinquent and still accruing:Residential mortgage
    
    
    
    
    
    
    Commercial mortgage
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    Home equity, consumer and other
    
    
    
    
    
    
    Total loans 90 days delinquent and still accruing
    
    
    
    
    
    
    Total non-performing loans
    
    $
    6,437
    
    
    $
    1,532Other non-performing assets:Real estate owned
    
    $
    75
    
    
    $
    185Troubled debt restructurings
    
    
    
    
    
    
    Total other non-performing assets
    
    $
    75
    
    
    $
    185Total non-performing assets
    
    $
    6,512
    
    
    $
    1,717Ratios:Non-performing loans to total loans
    
    
    0.94
    %
    
    
    0.23
    %Non-performing assets to total assets
    
    
    0.70
    %
    
    
    0.19
    %
  Allowance for Loan Losses :
  12




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##### Table of Contents



At or for the Three Months
    
    
    At or for the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Balance at beginning of period
    
    $
    5,656
    
    
    $
    4,864
    
    
    $
    5,568
    
    
    $
    4,677Charge-offs:Mortgage loans on real estate
    
    
    (16
    )
    
    
    (9
    )
    
    
    (93
    )
    
    
    (31
    )Other loans:Commercial
    
    
    (163
    )
    
    
    
    
    
    
    (182
    )
    
    
    (18
    )Consumer and other
    
    
    (46
    )
    
    
    (20
    )
    
    
    (121
    )
    
    
    (60
    )Total other loans
    
    
    (209
    )
    
    
    (20
    )
    
    
    (303
    )
    
    
    (78
    )Total charge-offs
    
    
    (225
    )
    
    
    (29
    )
    
    
    (396
    )
    
    
    (109
    )Recoveries:Mortgage loans on real estate
    
    
    62
    
    
    
    4
    
    
    
    69
    
    
    
    11Other loans:Commercial
    
    
    8
    
    
    
    3
    
    
    
    8
    
    
    
    3Consumer and other
    
    
    19
    
    
    
    8
    
    
    
    46
    
    
    
    23Total other loans
    
    
    27
    
    
    
    11
    
    
    
    54
    
    
    
    26Total recoveries
    
    
    89
    
    
    
    15
    
    
    
    123
    
    
    
    37Net charge-offs
    
    
    (136
    )
    
    
    (14
    )
    
    
    (273
    )
    
    
    (72
    )Provision for loan losses
    
    
    346
    
    
    
    193
    
    
    
    571
    
    
    
    438Balance at end of period
    
    $
    5,866
    
    
    $
    5,043
    
    
    $
    5,866
    
    
    $
    5,043Ratios:Net charge-offs to average
loans outstanding  annualized
    
    
    (0.08
    %)
    
    
    (0.01
    %)
    
    
    (0.08
    %)
    
    
    (0.02
    %)Allowance for loan losses to non-performing
loans at end of period
    
    
    91.13
    %
    
    
    419.55
    %
    
    
    91.13
    %
    
    
    419.55
    %Allowance for loan losses to total loans at end of period
    
    
    0.85
    %
    
    
    0.81
    %
    
    
    0.85
    %
    
    
    0.81
    %
 Deposits:
 13




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##### Table of Contents



At June 30, 2008
    
    
    At December 31, 2007Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)Deposit type:Demand
    
    $
    63,644
    
    
    
    10.77
    %
    
    $
    64,348
    
    
    
    10.54
    %Regular savings
    
    
    49,993
    
    
    
    8.46
    
    
    
    53,684
    
    
    
    8.79Smart banking/relationship savings
    
    
    126,098
    
    
    
    21.33
    
    
    
    112,705
    
    
    
    18.46Money market deposits
    
    
    58,623
    
    
    
    9.92
    
    
    
    64,373
    
    
    
    10.55NOW deposits
    
    
    42,011
    
    
    
    7.11
    
    
    
    41,981
    
    
    
    6.88Total transaction accounts
    
    
    340,369
    
    
    
    57.59
    
    
    
    337,091
    
    
    
    55.22Certificates of deposit
    
    
    250,645
    
    
    
    42.41
    
    
    
    273,356
    
    
    
    44.78Total deposits
    
    $
    591,014
    
    
    
    100.00
    %
    
    $
    610,447
    
    
    
    100.00
    %
  Borrowings
 Stockholders Equity
 Comparison of Operating Results for the Three Months Ended June 30, 2008 and 2007
  Analysis of Net Interest Income
   14




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##### Table of Contents



Three Months Ended June 30, 2008
    
    
    Three Months Ended June 30, 2007Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    

Yield/
Rate(1)(Dollars in thousands)Interest-earning assets:Loans  net (2)
    
    $
    670,887
    
    
    $
    10,379
    
    
    
    6.19
    %
    
    $
    606,447
    
    
    $
    10,003
    
    
    
    6.60
    %Investment securities
    
    
    164,048
    
    
    
    2,037
    
    
    
    4.97
    %
    
    
    167,715
    
    
    
    2,097
    
    
    
    5.00
    %Short-term investments
    
    
    10,971
    
    
    
    50
    
    
    
    1.82
    %
    
    
    10,857
    
    
    
    137
    
    
    
    5.05
    %Total interest-earning assets
    
    
    845,906
    
    
    
    12,466
    
    
    
    5.89
    %
    
    
    785,019
    
    
    
    12,237
    
    
    
    6.24
    %Non-interest-earning assets
    
    
    66,881
    
    
    
    
    
    
    
    
    
    
    
    51,346Total assets
    
    $
    912,787
    
    
    
    
    
    
    
    
    
    
    $
    836,365Interest-bearing liabilities:Savings deposits
    
    $
    49,221
    
    
    
    47
    
    
    
    0.38
    %
    
    $
    47,718
    
    
    
    51
    
    
    
    0.43
    %Smart banking/relationship savings
    
    
    125,789
    
    
    
    600
    
    
    
    1.91
    %
    
    
    99,798
    
    
    
    1,013
    
    
    
    4.06
    %Money market
    
    
    57,159
    
    
    
    314
    
    
    
    2.20
    %
    
    
    56,473
    
    
    
    530
    
    
    
    3.75
    %NOW accounts
    
    
    42,362
    
    
    
    53
    
    
    
    0.50
    %
    
    
    35,980
    
    
    
    59
    
    
    
    0.66
    %Certificates of deposits
    
    
    255,176
    
    
    
    2,531
    
    
    
    3.97
    %
    
    
    241,838
    
    
    
    2,894
    
    
    
    4.79
    %Total interest-bearing deposits
    
    
    529,707
    
    
    
    3,545
    
    
    
    2.68
    %
    
    
    481,807
    
    
    
    4,547
    
    
    
    3.77
    %Borrowed funds
    
    
    186,201
    
    
    
    1,942
    
    
    
    4.17
    %
    
    
    153,602
    
    
    
    1,807
    
    
    
    4.71
    %Total interest-bearing liabilities
    
    
    715,908
    
    
    
    5,487
    
    
    
    3.07
    %
    
    
    635,409
    
    
    
    6,354
    
    
    
    4.00
    %Non-interest-bearing liabilities
    
    
    65,847
    
    
    
    
    
    
    
    
    
    
    
    55,943Total liabilities
    
    
    781,755
    
    
    
    
    
    
    
    
    
    
    
    691,352Equity
    
    
    131,032
    
    
    
    
    
    
    
    
    
    
    
    145,013Total liabilities and equity
    
    $
    912,787
    
    
    
    
    
    
    
    
    
    
    $
    836,365Net interest income
    
    
    
    
    
    $
    6,979
    
    
    
    
    
    
    
    
    
    
    $
    5,883Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.82
    %
    
    
    
    
    
    
    
    
    
    
    2.24
    %Net interest-earning assets (4)
    
    $
    129,998
    
    
    
    
    
    
    
    
    
    
    $
    149,610Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.30
    %
    
    
    
    
    
    
    
    
    
    
    3.00
    %Average interest-earning assets to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.16
    %
    
    
    
    
    
    
    
    
    
    
    123.55
    %
 
 (1)
    
    Yields and rates for the three months ended June 30, 2008 and 2007 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average
interest-earning assets and the cost of total average
interest-bearing liabilities.(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.  15




---



##### Table of Contents



Three Months Ended June 30,2008 vs. 2007Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  net
    
    $
    906
    
    
    $
    (530
    )
    
    $
    376Investment securities
    
    
    (47
    )
    
    
    (13
    )
    
    
    (60
    )Short-term investments
    
    
    1
    
    
    
    (88
    )
    
    
    (87
    )Total interest-earning assets
    
    
    860
    
    
    
    (631
    )
    
    
    229Interest-bearing liabilities:Savings deposits
    
    
    2
    
    
    
    (6
    )
    
    
    (4
    )Smart banking/relationship savings
    
    
    401
    
    
    
    (814
    )
    
    
    (413
    )Money market
    
    
    6
    
    
    
    (222
    )
    
    
    (216
    )NOW accounts
    
    
    22
    
    
    
    (28
    )
    
    
    (6
    )Certificates of deposits
    
    
    173
    
    
    
    (536
    )
    
    
    (363
    )Total deposits
    
    
    604
    
    
    
    (1,606
    )
    
    
    (1,002
    )Borrowed funds
    
    
    293
    
    
    
    (158
    )
    
    
    135Total interest-bearing liabilities
    
    
    897
    
    
    
    (1,764
    )
    
    
    (867
    )Change in net interest income
    
    $
    (37
    )
    
    $
    1,133
    
    
    $
    1,096
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 Non-interest income
 Non-interest expense
 16




---



##### Table of Contents



Income tax expense
 Comparison of Operating Results for the Six Months Ended June 30, 2008 and 2007
  Analysis of Net Interest Income
   17




---



##### Table of Contents



Six Months Ended June 30, 2008
    
    
    Six Months Ended June 30, 2007Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  net (2)
    
    $
    663,299
    
    
    $
    20,904
    
    
    
    6.30
    %
    
    $
    595,647
    
    
    $
    19,541
    
    
    
    6.56
    %Investment securities
    
    
    166,567
    
    
    
    4,098
    
    
    
    4.92
    %
    
    
    167,385
    
    
    
    4,202
    
    
    
    5.02
    %Short-term investments
    
    
    15,985
    
    
    
    214
    
    
    
    2.68
    %
    
    
    11,868
    
    
    
    293
    
    
    
    4.94
    %Total interest-earning assets
    
    
    845,851
    
    
    
    25,216
    
    
    
    5.96
    %
    
    
    774,900
    
    
    
    24,036
    
    
    
    6.20
    %Non-interest-earning assets
    
    
    66,606
    
    
    
    
    
    
    
    
    
    
    
    46,051Total assets
    
    $
    912,457
    
    
    
    
    
    
    
    
    
    
    $
    820,951Interest-bearing liabilities:Savings deposits
    
    $
    50,446
    
    
    
    101
    
    
    
    0.40
    %
    
    $
    48,334
    
    
    
    105
    
    
    
    0.43
    %Smart banking/relationship savings
    
    
    121,277
    
    
    
    1,411
    
    
    
    2.33
    %
    
    
    97,830
    
    
    
    1,992
    
    
    
    4.07
    %Money market
    
    
    59,347
    
    
    
    812
    
    
    
    2.74
    %
    
    
    52,406
    
    
    
    920
    
    
    
    3.51
    %NOW accounts
    
    
    41,196
    
    
    
    112
    
    
    
    0.54
    %
    
    
    35,782
    
    
    
    113
    
    
    
    0.63
    %Certificates of deposits
    
    
    264,721
    
    
    
    5,625
    
    
    
    4.25
    %
    
    
    235,246
    
    
    
    5,515
    
    
    
    4.69
    %Total interest-bearing deposits
    
    
    536,987
    
    
    
    8,061
    
    
    
    3.00
    %
    
    
    469,598
    
    
    
    8,645
    
    
    
    3.68
    %Borrowed funds
    
    
    177,287
    
    
    
    3,836
    
    
    
    4.33
    %
    
    
    148,877
    
    
    
    3,452
    
    
    
    4.64
    %Total interest-bearing liabilities
    
    
    714,274
    
    
    
    11,897
    
    
    
    3.33
    %
    
    
    618,475
    
    
    
    12,097
    
    
    
    3.91
    %Non-interest-bearing liabilities
    
    
    65,826
    
    
    
    
    
    
    
    
    
    
    
    56,101Total liabilities
    
    
    780,100
    
    
    
    
    
    
    
    
    
    
    
    674,576Equity
    
    
    132,357
    
    
    
    
    
    
    
    
    
    
    
    146,375Total liabilities and equity
    
    $
    912,457
    
    
    
    
    
    
    
    
    
    
    $
    820,951Net interest income
    
    
    
    
    
    $
    13,319
    
    
    
    
    
    
    
    
    
    
    $
    11,939Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.63
    %
    
    
    
    
    
    
    
    
    
    
    2.29
    %Net interest-earning assets (4)
    
    $
    131,577
    
    
    
    
    
    
    
    
    
    
    $
    156,425Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %Average interest-earning assets to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.42
    %
    
    
    
    
    
    
    
    
    
    
    125.29
    %
 
 (1)
    
    Yields and rates for the six months ended June 30, 2008 and 2007 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average
interest-earning assets and the cost of total average
interest-bearing liabilities.(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.  18




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##### Table of Contents



Six Months Ended June 30,2008 vs. 2007Increase
    
    
    Total(Decrease) Due to
    
    
    IncreaseVolume
    
    
    Rate
    
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  net
    
    $
    2,093
    
    
    $
    (730
    )
    
    $
    1,363Investment securities
    
    
    (21
    )
    
    
    (83
    )
    
    
    (104
    )Short-term investments
    
    
    252
    
    
    
    (331
    )
    
    
    (79
    )Total interest-earning assets
    
    
    2,324
    
    
    
    (1,144
    )
    
    
    1,180Interest-bearing liabilities:Savings deposits
    
    
    10
    
    
    
    (14
    )
    
    
    (4
    )Smart banking/relationship savings
    
    
    741
    
    
    
    (1,322
    )
    
    
    (581
    )Money market
    
    
    165
    
    
    
    (273
    )
    
    
    (108
    )NOW accounts
    
    
    (17
    )
    
    
    16
    
    
    
    (1
    )Certificates of deposits
    
    
    439
    
    
    
    (329
    )
    
    
    110Total deposits
    
    
    1,338
    
    
    
    (1,922
    )
    
    
    (584
    )Borrowed funds
    
    
    591
    
    
    
    (207
    )
    
    
    384Total interest-bearing liabilities
    
    
    1,929
    
    
    
    (2,129
    )
    
    
    (200
    )Change in net interest income
    
    $
    395
    
    
    $
    985
    
    
    $
    1,380
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 Non-interest income
 19




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##### Table of Contents



Non-interest expense
 Income tax expense
 Minimum Regulatory Capital Requirements:
 Minimum To Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)June 30, 2008:Total capital to risk weighted assets
    
    $
    91,011
    
    
    
    13.6
    %
    
    $
    53,647
    
    
    
    8.0
    %
    
    $
    67,059
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:
    
    
    84,728
    
    
    
    12.6
    
    
    
    26,823
    
    
    
    4.0
    
    
    
    40,235
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    84,728
    
    
    
    9.7
    
    
    
    26,298
    
    
    
    3.0
    
    
    
    43,829
    
    
    
    5.0December 31, 2007:Total capital to risk weighted assets:
    
    $
    89,183
    
    
    
    13.9
    %
    
    $
    51,265
    
    
    
    8.0
    %
    
    $
    64,081
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:
    
    
    82,937
    
    
    
    12.9
    
    
    
    25,632
    
    
    
    4.0
    
    
    
    38,449
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    82,937
    
    
    
    9.9
    
    
    
    25,161
    
    
    
    3.0
    
    
    
    41,935
    
    
    
    5.0
 Contractual Obligations
 June 30, 2008More than
    
    More thanOne Year
    
    Three YearsOne Year
    
    through
    
    through Five
    
    Over FiveTotal
    
    or Less
    
    Three Years
    
    Years
    
    Years(Dollars in Thousands)Federal Home Loan Bank of Boston advances
    
    $
    192,494
    
    
    $
    41,800
    
    
    $
    62,471
    
    
    $
    30,500
    
    
    $
    57,723Securities sold under agreements to repurchase
    
    
    5,142
    
    
    
    5,142
    
    
    
    
    
    
    
    
    
    
    
    Total FHLBB advances and repurchase agreements
    
    $
    197,636
    
    
    $
    46,942
    
    
    $
    62,471
    
    
    $
    30,500
    
    
    $
    57,723
 Off-Balance Sheet Arrangements:
 20




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##### Table of Contents



June 30, 2008More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year or
    
    
    through
    
    
    Through Five
    
    
    Over FiveTotal
    
    
    Less
    
    
    Three Years
    
    
    Years
    
    
    years(Dollars in Thousands)Commitments to grant loans (1)
    
    $
    31,488
    
    
    $
    31,488
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    15,611
    
    
    
    15,611
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (2)
    
    
    78,004
    
    
    
    738
    
    
    
    3,725
    
    
    
    12,790
    
    
    
    60,751Unused portion of construction loans (3)
    
    
    5,794
    
    
    
    5,794
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft lines-of-credit(4)
    
    
    5,369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,369Unused portion of personal lines-of-credit(5)
    
    
    875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875Standby letters of credit(6)
    
    
    731
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies(7)
    
    
    9,172
    
    
    
    9,172
    
    
    
    
    
    
    
    
    
    
    
    Total loan & other commitments
    
    $
    147,044
    
    
    $
    63,534
    
    
    $
    3,725
    
    
    $
    12,790
    
    
    $
    66,995
 
 (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.(4)
    
    Unused portion of checking overdraft lines-of-credit are available to customers in good
standing indefinitely.(5)
    
    Unused portion of personal lines-of-credit are available to customers in good standing
indefinitely.(6)
    
    Standby letters of credit are generally available for less than one year.(7)
    
    Other commitments relate primarily to potential additional capital calls the Company is
committed to contribute as part of its investment
in certain limited partnerships. 
 Item 3: Quantitative and Qualitative Disclosures about Market Risks
  
 Item 4: Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 21




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##### Table of Contents



Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Unregistered Sales of Equity Securities  Not applicable(b)
    
    Use of Proceeds  Not applicable(c)
    
    Repurchase of Our Equity Securities  In December 2007 the Company announced that its
Board of Directors authorized a stock repurchase program (the Stock Repurchase Program)
for the purchase of up to 462,048 shares of the Companys common stock or approximately 5%
of its outstanding common stock. Purchases under this Stock Repurchase Program in the
second quarter of 2008 were as follows:
 (d) Maximum Number or(c) Total Number of
    
    Approximate Dollar Value ofShares Purchased as Part
    
    Shares that May Yet Be(a) Total Number of
    
    (b) Average Price
    
    of Publicly announced
    
    Purchased Under the PlansPeriod
    
    Shares Purchased
    
    Paid per Share
    
    Plans or Programs
    
    or ProgramsApril 1  30
    
    
    74,400
    
    
    $
    14.00
    
    
    
    74,400
    
    
    
    248,948May 1  31
    
    
    32,300
    
    
    $
    13.55
    
    
    
    32,300
    
    
    
    216,648June 1  30
    
    
    58,200
    
    
    $
    13.14
    
    
    
    58,200
    
    
    
    158,448
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    The following individuals were elected as directors, each for a three-year term by
the following vote:
 FOR
    
    
    WITHHELDJ. Williar Dunleavy
    
    
    7,886,069
    
    
    
    350,505David L. Klausmeyer
    
    
    7,924,889
    
    
    
    311,685Anne W. Pasko
    
    
    7,912,032
    
    
    
    324,542
 2.
    
    The appointment of Wolf & Company, P.C. as the independent registered public accounting
firm of Legacy Bancorp, Inc. for the fiscal year ending December 31, 2008 was ratified by
the stockholders by the following vote:
 FOR
    
    WITHHELD
    
    ABSTAIN8,088,417
    
    116,770
    
    31,388
 
 Item 5 Other Information
  22




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##### Table of Contents



Item 6 Exhibits
 2.1
    
    Amended and Restated Plan of Conversion (1)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)10.5.6
    
    Separation Agreement and General Release dated as of November 5, 2007 between Legacy Bancorp,
Inc., Legacy Banks and Michael A. Christopher (3)10.5.7
    
    Separation Agreement and General Release dated as of December 21, 2007 between Legacy Bancorp,
Inc., Legacy Banks and Stephen M. Conley (4)10.5.8
    
    Consulting Agreement dated as of November 5, 2007 between Legacy Bancorp, Inc., Legacy Banks and
Michael A. Christopher (3)10.5.9
    
    Purchase Agreement by and between First Niagara Bank and Legacy Banks dated as of July 25, 2007 (5)10.11
    
    2007 Equity Incentive Plan (3)11.0
    
    Statement re: Computation of per share earnings is incorporated herein by reference to Notes to
Consolidated Financial Statementswithin Part I, Item 1, Financial Statements31.1
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of J. Williar Dunlaevy31.2
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of Paul H. Bruce32
    
    Certification pursuant to 18 U.S.C. Section 1350
 
 (1)
    
    Incorporated by reference from the Registrants 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.(3)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed November 5,
2007.(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed December 21,
2007.(5)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed July 25,
2007. 23




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##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date:
    
    August 6, 2008
    
    
    
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and Chairman of the BoardDate:
    
    August 6, 2008
    
    
    
    /s/ Paul H. Bruce

Paul H. BruceSenior Vice President, Chief Financial Officer and 

Treasurer (Principal Accounting Officer)
 24