##### 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 SEPTEMBER 30, 2006
 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
  o o þ
 o þ
 10,308,600




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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 September 30, 2006, and December 31, 2005
    
    
    3Consolidated Statements of Income for the three months ended September 30, 2006 and 2005 and the nine months ended September 30, 2006 and 2005
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the nine months ended September 30, 2006 and 2005
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2006, and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3 Quantitative and Qualitative Disclosures About Market Risks
    
    
    22Item 4 Controls and Procedures
    
    
    23Part II  Other InformationItem 1Legal Proceedings
    
    
    23Item 1ARisk Factors
    
    
    23Item 2Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3Defaults Upon Senior Securities
    
    
    23Item 4Submission of Matters to a Vote of Security Holders
    
    
    23Item 5Other Information
    
    
    23Item 6Exhibits
    
    
    23EX-31.1 CEO Certification Rule 13a-14(a) / 15d-14(a)EX-31.2 CFO Certification Rule 13a-14(a) / 15d-14(a)EX-32.1 CEO & CFO Certification Section 1350
  1




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##### Table of Contents



Item 1: Financial Statements
  2




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##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCash and due from banks
    
    $
    10,941
    
    
    $
    11,440Short-term investments
    
    
    8,263
    
    
    
    7,792Cash and cash equivalents
    
    
    19,204
    
    
    
    19,232Securities and other investments
    
    
    178,459
    
    
    
    179,921Loans held for sale
    
    
    448
    
    
    
    126Loans, net of allowance for loan losses of $4,691 in
2006 and $4,220 in 2005
    
    
    575,063
    
    
    
    547,500Premises and equipment, net
    
    
    14,372
    
    
    
    14,236Accrued interest receivable
    
    
    3,708
    
    
    
    3,235Goodwill, net
    
    
    3,085
    
    
    
    3,085Net deferred tax asset
    
    
    5,252
    
    
    
    5,258Bank-owned life insurance
    
    
    4,343
    
    
    
    4,153Other assets
    
    
    1,483
    
    
    
    1,584Total Assets
    
    $
    805,417
    
    
    $
    778,330LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    507,146
    
    
    $
    474,464Securities sold under agreements to repurchase
    
    
    3,532
    
    
    
    4,999Federal Home Loan Bank advances
    
    
    137,877
    
    
    
    145,923Mortgagors escrow accounts
    
    
    1,269
    
    
    
    931Accrued expenses and other liabilities
    
    
    5,999
    
    
    
    5,847Total liabilities
    
    
    655,823
    
    
    
    632,164Commitments 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, 10,308,600 issued and outstanding at
June 30, 2006 and December 31, 2005)
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    100,269
    
    
    
    100,202Unearned Compensation  ESOP
    
    
    (9,702
    )
    
    
    (10,252
    )Retained earnings
    
    
    59,740
    
    
    
    57,202Accumulated other comprehensive loss
    
    
    (816
    )
    
    
    (1,089
    )Total stockholders equity
    
    
    149,594
    
    
    
    146,166Total Liabilities and Stockholders Equity
    
    $
    805,417
    
    
    $
    778,330
  3




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##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Interest and dividend income:Loans
    
    $
    9,235
    
    
    $
    7,925
    
    
    $
    26,609
    
    
    $
    22,791Securities:Taxable
    
    
    1,865
    
    
    
    1,222
    
    
    
    5,424
    
    
    
    3,569Tax-Exempt
    
    
    62
    
    
    
    51
    
    
    
    177
    
    
    
    124Short-term investments
    
    
    85
    
    
    
    96
    
    
    
    296
    
    
    
    190Total interest and dividend income
    
    
    11,247
    
    
    
    9,294
    
    
    
    32,506
    
    
    
    26,674Interest expense:Deposits
    
    
    3,737
    
    
    
    2,226
    
    
    
    9,706
    
    
    
    5,883Federal Home Loan Bank advances
    
    
    1,629
    
    
    
    1,681
    
    
    
    4,812
    
    
    
    4,969Other borrowed funds
    
    
    31
    
    
    
    25
    
    
    
    99
    
    
    
    63Total interest expense
    
    
    5,397
    
    
    
    3,932
    
    
    
    14,617
    
    
    
    10,915Net interest income
    
    
    5,850
    
    
    
    5,362
    
    
    
    17,889
    
    
    
    15,759Provision (credit) for loan losses
    
    
    (95
    )
    
    
    99
    
    
    
    245
    
    
    
    476Net interest
income after provision (credit) for loan losses
    
    
    5,945
    
    
    
    5,263
    
    
    
    17,644
    
    
    
    15,283Non-interest income:Customer service fees
    
    
    686
    
    
    
    701
    
    
    
    1,994
    
    
    
    2,039Portfolio management fees
    
    
    240
    
    
    
    228
    
    
    
    739
    
    
    
    667Income from bank owned life insurance
    
    
    89
    
    
    
    96
    
    
    
    142
    
    
    
    139Insurance, annuities and mutual fund fees
    
    
    58
    
    
    
    48
    
    
    
    122
    
    
    
    120Gain (loss) on sales of securities, net
    
    
    (14
    )
    
    
    61
    
    
    
    152
    
    
    
    138Loss on impairment of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Gain on sales of loans, net
    
    
    58
    
    
    
    117
    
    
    
    124
    
    
    
    186Miscellaneous
    
    
    11
    
    
    
    3
    
    
    
    32
    
    
    
    7Total non-interest income
    
    
    1,128
    
    
    
    1,254
    
    
    
    3,305
    
    
    
    3,271Non-interest expenses:Salaries and employee benefits
    
    
    2,885
    
    
    
    2,570
    
    
    
    8,670
    
    
    
    7,644Occupancy and equipment
    
    
    613
    
    
    
    540
    
    
    
    1,886
    
    
    
    1,640Data processing
    
    
    501
    
    
    
    475
    
    
    
    1,471
    
    
    
    1,398Professional fees
    
    
    335
    
    
    
    133
    
    
    
    1,101
    
    
    
    394Advertising
    
    
    165
    
    
    
    166
    
    
    
    553
    
    
    
    515Other general and administrative
    
    
    512
    
    
    
    521
    
    
    
    1,873
    
    
    
    1,710Total non-interest expenses
    
    
    5,011
    
    
    
    4,405
    
    
    
    15,554
    
    
    
    13,301Income before income taxes
    
    
    2,062
    
    
    
    2,112
    
    
    
    5,395
    
    
    
    5,253Provision for income taxes
    
    
    759
    
    
    
    832
    
    
    
    1,998
    
    
    
    2,035Net income
    
    $
    1,303
    
    
    $
    1,280
    
    
    $
    3,397
    
    
    $
    3,218Earnings per shareBasic
    
    $
    0.14
    
    
    
    n/a
    
    
    $
    0.36
    
    
    
    n/aDiluted
    
    $
    0.14
    
    
    
    n/a
    
    
    $
    0.36
    
    
    
    n/aWeighted average shares outstandingBasic
    
    
    9,566,530
    
    
    
    n/a
    
    
    
    9,552,888
    
    
    
    n/aDiluted
    
    
    9,566,530
    
    
    
    n/a
    
    
    
    9,552,888
    
    
    
    n/a
  4




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##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
 (Dollars in thousands)
 (Unaudited)
 AccumulatedAdditional
    
    
    Unearned
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Compensation
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    ESOP
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance at December 31, 2004
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    59,437
    
    
    $
    10
    
    
    $
    59,447Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,218
    
    
    
    
    
    
    
    3,218Change in net unrealized gain/loss on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (852
    )
    
    
    (852
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,366Balance at September 30, 2005
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    62,655
    
    
    $
    (842
    )
    
    $
    61,813Balance at December 31, 2005
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    100,202
    
    
    $
    (10,252
    )
    
    $
    57,202
    
    
    $
    (1,089
    )
    
    $
    146,166Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,397
    
    
    
    
    
    
    
    3,397Change in net unrealized gain/loss on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    273Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,670Cash dividends declared ($0.09 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (859
    )
    
    
    
    
    
    
    (859
    )Change in unearned compensation
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    550
    
    
    
    
    
    
    
    
    
    
    
    617Balance at September 30, 2006
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    100,269
    
    
    $
    (9,702
    )
    
    $
    59,740
    
    
    $
    (816
    )
    
    $
    149,594
  5




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##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 Nine Months ended September 30,2006
    
    
    2005(Unaudited)Cash flows from operating activities:Net income
    
    $
    3,397
    
    
    $
    3,218Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    245
    
    
    
    476Net amortization (accretion) of securities
    
    
    (854
    )
    
    
    204Depreciation and amortization expense
    
    
    757
    
    
    
    706Gain on sales of securities, net
    
    
    (152
    )
    
    
    (138
    )Loss on impairment of securities available for sale
    
    
    
    
    
    
    25Gain on sales of loans, net
    
    
    (124
    )
    
    
    (186
    )Loans originated for sale
    
    
    (7,480
    )
    
    
    (8,504
    )Proceeds from sale of loans
    
    
    7,282
    
    
    
    8,512Deferred tax (provision) benefit
    
    
    (164
    )
    
    
    601Employee Stock Ownership Plan expense
    
    
    617
    
    
    
    Net change in:Bank-owned life insurance
    
    
    (190
    )
    
    
    (173
    )Accrued interest receivable
    
    
    (473
    )
    
    
    (193
    )Other assets
    
    
    101
    
    
    
    (1,330
    )Accrued expenses and other liabilities
    
    
    152
    
    
    
    (433
    )Net cash provided by operating activities
    
    
    3,114
    
    
    
    2,785Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    1,593
    
    
    
    4,331Maturities, prepayments and calls
    
    
    72,180
    
    
    
    18,017Purchases
    
    
    (69,841
    )
    
    
    (32,887
    )Purchases of Federal Home Loan Bank stock
    
    
    
    
    
    
    (226
    )Purchase of other investments
    
    
    (1,063
    )
    
    
    Maturities, prepayments and call of other investments
    
    
    42
    
    
    
    Loan originations and purchases, net of principal payments
    
    
    (27,808
    )
    
    
    (28,789
    )Purchases of bank-owned life insurance
    
    
    
    
    
    
    198Additions to premises and equipment
    
    
    (893
    )
    
    
    (1,255
    )Net cash used in investing activities
    
    
    (25,790
    )
    
    
    (40,611
    )
  6
    Table of Contents   LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in thousands)
 Nine Months ended September 30,2006
    
    
    2005(Unaudited)Cash flows from financing activities:Net increase in deposits
    
    
    32,682
    
    
    
    44,528Net decrease in securities sold under
agreement to repurchase
    
    
    (1,467
    )
    
    
    902Repayment of Federal Home Loan Bank advances
    
    
    (139,285
    )
    
    
    (103,927
    )Proceeds from Federal Home Loan Bank advances
    
    
    131,239
    
    
    
    112,787Net decrease in mortgagors escrow accounts
    
    
    338
    
    
    
    218Payment of dividends on common stock
    
    
    (859
    )
    
    
    Net cash provided by financing activities
    
    
    22,648
    
    
    
    54,508Net change in cash and cash equivalents
    
    
    (28
    )
    
    
    16,682Cash and cash equivalents at beginning of period
    
    
    19,232
    
    
    
    16,798Cash and cash equivalents at end of period
    
    $
    19,204
    
    
    $
    33,480Supplemental cash flow information:Interest paid on deposits
    
    $
    10,201
    
    
    $
    5,948Interest paid on Federal Home Loan Bank advances
    
    
    5,832
    
    
    
    4,917Interest paid on other borrowed funds
    
    
    99
    
    
    
    61Income taxes paid
    
    
    2,025
    
    
    
    1,900Transfers from loans to loans held for sale
    
    
    
    
    
    
    6,629
 7
    Table of Contents   LEGACY
BANCORP AND SUBSIDIARIES 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
 1. Basis of presentation
  2. New Accounting Standards
  Accounting for Servicing of Financial Assets Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Uncertainty in Income
Taxes
 Fair Value
Measurement
 8
    Table of Contents  3. Earnings Per Share
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income applicable to common stock (in thousands)
    
    $
    1,303
    
    
    
    n/a
    
    
    $
    3,397
    
    
    
    n/aAverage number of shares outstanding
    
    
    10,308,600
    
    
    
    n/a
    
    
    
    10,308,600
    
    
    
    n/aLess: average number of unallocated ESOP shares
    
    
    (742,070
    )
    
    
    n/a
    
    
    
    (755,712
    )
    
    
    n/aAverage number of basic shares outstanding
    
    
    9,566,530
    
    
    
    n/a
    
    
    
    9,552,888
    
    
    
    n/aPlus: potential shares that may be issued by the
Company
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aAverage number of diluted shares outstanding
    
    
    9,566,530
    
    
    
    n/a
    
    
    
    9,552,888
    
    
    
    n/aBasic earnings per share
    
    $
    0.14
    
    
    
    n/a
    
    
    $
    0.36
    
    
    
    n/aDiluted earnings per share
    
    $
    0.14
    
    
    
    n/a
    
    
    $
    0.36
    
    
    
    n/a
 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
  9
    Table of Contents  Critical Accounting Policies
  Allowance for Loan Losses.
 Income Taxes.
  Comparison of Financial Condition At September 30, 2006 and December 31, 2005
 Overview:
 Investment Activities
 10
    Table of Contents  At September 30, 2006
    
    
    At December 31, 2005Amortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(Dollars in Thousands)Securities available for sale:Government-sponsored enterprises
    
    $
    97,163
    
    
    $
    96,150
    
    
    $
    95,613
    
    
    $
    94,369Municipal bonds
    
    
    6,767
    
    
    
    6,789
    
    
    
    6,061
    
    
    
    6,002Corporate bonds and other obligations
    
    
    3,977
    
    
    
    3,983
    
    
    
    6,149
    
    
    
    6,161Mortgage-backed securities
    
    
    52,815
    
    
    
    51,447
    
    
    
    56,896
    
    
    
    55,505Total debt securities
    
    
    160,722
    
    
    
    158,369
    
    
    
    164,719
    
    
    
    162,037Marketable equity securities:Common stock
    
    
    5,471
    
    
    
    6,586
    
    
    
    4,399
    
    
    
    5,399Total securities available for sale
    
    
    166,193
    
    
    
    164,955
    
    
    
    169,118
    
    
    
    167,436Securities held to maturity:Other bonds
    
    
    97
    
    
    
    97
    
    
    
    97
    
    
    
    97Restricted equity securities and other investments:Federal Home Loan Bank of Boston stock
    
    
    9,056
    
    
    
    9,056
    
    
    
    9,056
    
    
    
    9,056Savings Bank Life Insurance and DIF stock
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709Other investments
    
    
    2,642
    
    
    
    2,642
    
    
    
    1,623
    
    
    
    1,623Total restricted equity securities
and other investments
    
    
    13,407
    
    
    
    13,407
    
    
    
    12,388
    
    
    
    12,388Total securities
    
    $
    179,697
    
    
    $
    178,459
    
    
    $
    181,603
    
    
    $
    179,921
 Lending Activities:
 11
    Table of Contents  At September 30, 2006
    
    
    At December 31, 2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans on real estate:Residential
    
    $
    322,380
    
    
    
    55.68
    %
    
    $
    308,008
    
    
    
    55.86
    %Commercial
    
    
    168,519
    
    
    
    29.11
    
    
    
    160,675
    
    
    
    29.14Home equity
    
    
    60,135
    
    
    
    10.39
    
    
    
    58,640
    
    
    
    10.64551,034
    
    
    
    95.18
    
    
    
    527,323
    
    
    
    95.64Other loans:Commercial
    
    
    22,425
    
    
    
    3.87
    
    
    
    20,579
    
    
    
    3.73Consumer and other
    
    
    5,520
    
    
    
    0.95
    
    
    
    3,457
    
    
    
    0.6327,945
    
    
    
    4.82
    
    
    
    24,036
    
    
    
    4.36Total loans
    
    
    578,979
    
    
    
    100.00
    %
    
    
    551,359
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    775
    
    
    
    
    
    
    
    361Allowance for loan losses
    
    
    (4,691
    )
    
    
    
    
    
    
    (4,220
    )Total Loans, net
    
    $
    575,063
    
    
    
    
    
    
    $
    547,500
  Non-performing Assets:
 12
    Table of Contents  At September 30,
    
    
    At December 31,2006
    
    
    2005(Dollars in Thousands)Non-accrual loans:Residential mortgage
    
    $
    537
    
    
    $
    479Commercial mortgage
    
    
    
    
    
    
    96Commercial
    
    
    88
    
    
    
    250Home equity, consumer and other
    
    
    1
    
    
    
    78Total non-accrual loans
    
    
    626
    
    
    
    903Loans greater than 90 days delinquent and still accruing:Residential mortgage
    
    
    
    
    
    
    Commercial mortgage
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    Home equity, consumer and other
    
    
    
    
    
    
    Total loans 90 days delinquent and still accruing
    
    
    
    
    
    
    Total non-performing assets
    
    $
    626
    
    
    $
    903Ratios:Non-performing loans to total loans
    
    
    0.11
    %
    
    
    0.16
    %Non-performing assets to total assets
    
    
    0.08
    %
    
    
    0.12
    %
 Allowance for Loan Losses :
    13
    Table of Contents  At or for the Three Months Ended
    
    
    At or for the Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in Thousands)Balance at beginning of period
    
    $
    4,693
    
    
    $
    4,140
    
    
    $
    4,220
    
    
    $
    3,846Charge-offs:Mortgage loans on real estate:
    
    
    
    
    
    
    
    
    
    
    (50
    )
    
    
    Other loans:Commercial
    
    
    (2
    )
    
    
    (54
    )
    
    
    (7
    )
    
    
    (155
    )Consumer and other
    
    
    (23
    )
    
    
    (23
    )
    
    
    (72
    )
    
    
    (74
    )Total other loans
    
    
    (25
    )
    
    
    (77
    )
    
    
    (79
    )
    
    
    (229
    )Total charge-offs
    
    
    (25
    )
    
    
    (77
    )
    
    
    (129
    )
    
    
    (229
    )Recoveries:Mortgage loans on real estate
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    Other loans:Commercial
    
    
    104
    
    
    
    16
    
    
    
    306
    
    
    
    40Consumer and other
    
    
    11
    
    
    
    18
    
    
    
    46
    
    
    
    63Total other loans
    
    
    115
    
    
    
    34
    
    
    
    352
    
    
    
    103Total recoveries
    
    
    118
    
    
    
    34
    
    
    
    355
    
    
    
    103Net recoveries (charge-offs)
    
    
    93
    
    
    
    (43
    )
    
    
    226
    
    
    
    (126
    )Provision (credit) for loan losses
    
    
    (95
    )
    
    
    99
    
    
    
    245
    
    
    
    476Balance at end of period
    
    $
    4,691
    
    
    $
    4,196
    
    
    $
    4,691
    
    
    $
    4,196Ratios:Net recoveries (charge-offs) to
average loans outstanding 
annualized
    
    
    0.06
    %
    
    
    (0.03
    %)
    
    
    0.05
    %
    
    
    (0.03
    %)Allowance for loan losses to
non-performing loans at end of
period
    
    
    749.36
    %
    
    
    356.20
    %
    
    
    749.36
    %
    
    
    356.20
    %Allowance for loan losses to
total loans at end of period
    
    
    0.81
    %
    
    
    0.78
    %
    
    
    0.81
    %
    
    
    0.78
    %
 Deposits
  14
    Table of Contents   At September 30, 2006
    
    
    At December 31, 2005Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)
    
    
    (Dollars in Thousands)Deposit type:Demand & Misc. Other Deposits
    
    $
    51,127
    
    
    
    10.08
    %
    
    $
    53,109
    
    
    
    11.19
    %Regular savings
    
    
    54,171
    
    
    
    10.68
    
    
    
    63,335
    
    
    
    13.35LifePath Savings
    
    
    88,068
    
    
    
    17.37
    
    
    
    73,151
    
    
    
    15.42Money market deposits
    
    
    57,927
    
    
    
    11.42
    
    
    
    55,168
    
    
    
    11.63NOW deposits
    
    
    38,089
    
    
    
    7.51
    
    
    
    41,439
    
    
    
    8.72Total transaction accounts
    
    
    289,382
    
    
    
    57.06
    
    
    
    286,202
    
    
    
    60.31Certificates of deposit
    
    
    217,764
    
    
    
    42.94
    
    
    
    188,262
    
    
    
    39.69Total deposits
    
    $
    507,146
    
    
    
    100.00
    %
    
    $
    474,464
    
    
    
    100.00
    %
  Borrowings
 Stockholders Equity
 Comparison of Operating Results for the Three Months Ended September 30, 2006 and September 30,
2005
  Analysis of Net Interest Income
   15




---



##### Table of Contents



Three Months Ended September 30, 2006
    
    
    Three Months Ended September 30, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    572,365
    
    
    $
    9,235
    
    
    
    6.45
    %
    
    $
    527,776
    
    
    $
    7,925
    
    
    
    6.01
    %Investment securities
    
    
    174,439
    
    
    
    1,927
    
    
    
    4.42
    %
    
    
    129,848
    
    
    
    1,273
    
    
    
    3.92
    %Short-term investments
    
    
    6,455
    
    
    
    85
    
    
    
    5.27
    %
    
    
    11,735
    
    
    
    96
    
    
    
    3.27
    %Total interest-earning assets
    
    
    753,259
    
    
    
    11,247
    
    
    
    5.97
    %
    
    
    669,359
    
    
    
    9,294
    
    
    
    5.55
    %Non-interest-earning assets
    
    
    41,496
    
    
    
    
    
    
    
    
    
    
    
    39,286Total assets
    
    $
    794,755
    
    
    
    
    
    
    
    
    
    
    $
    708,645Interest-bearing liabilities:Savings deposits
    
    $
    56,515
    
    
    
    62
    
    
    
    0.44
    %
    
    $
    70,179
    
    
    
    75
    
    
    
    0.43
    %LifePath Savings
    
    
    80,499
    
    
    
    856
    
    
    
    4.25
    %
    
    
    73,628
    
    
    
    453
    
    
    
    2.46
    %Money market
    
    
    52,133
    
    
    
    421
    
    
    
    3.23
    %
    
    
    62,232
    
    
    
    286
    
    
    
    1.84
    %NOW accounts
    
    
    37,220
    
    
    
    36
    
    
    
    0.39
    %
    
    
    41,108
    
    
    
    23
    
    
    
    0.22
    %Certificates of deposits
    
    
    219,435
    
    
    
    2,362
    
    
    
    4.31
    %
    
    
    182,347
    
    
    
    1,389
    
    
    
    3.05
    %Total deposits
    
    
    445,802
    
    
    
    3,737
    
    
    
    3.35
    %
    
    
    429,494
    
    
    
    2,226
    
    
    
    2.07
    %Borrowed Funds
    
    
    145,218
    
    
    
    1,660
    
    
    
    4.57
    %
    
    
    158,636
    
    
    
    1,706
    
    
    
    4.30
    %Total interest-bearing liabilities
    
    
    591,020
    
    
    
    5,397
    
    
    
    3.65
    %
    
    
    588,130
    
    
    
    3,932
    
    
    
    2.67
    %Non-interest-bearing liabilities
    
    
    57,262
    
    
    
    
    
    
    
    
    
    
    
    57,913Total liabilities
    
    
    648,282
    
    
    
    
    
    
    
    
    
    
    
    646,043Equity
    
    
    146,473
    
    
    
    
    
    
    
    
    
    
    
    62,602Total liabilities and equity
    
    $
    794,755
    
    
    
    
    
    
    
    
    
    
    $
    708,645Net interest income
    
    
    
    
    
    $
    5,850
    
    
    
    
    
    
    
    
    
    
    $
    5,362Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.32
    %
    
    
    
    
    
    
    
    
    
    
    2.88
    %Net interest-earning assets (4)
    
    $
    162,239
    
    
    
    
    
    
    
    
    
    
    $
    81,229Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.11
    %
    
    
    
    
    
    
    
    
    
    
    3.20
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    127.45
    %
    
    
    
    
    
    
    
    
    
    
    113.81
    %
 
 (1)
    
    Yelds and rates for the three months ended September 30, 2006 and 2005 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average interest-earning assets and the cost of total average
interest-bearing liabilities for the three months ended September 30, 2006 and 2005.(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.  16




---



##### Table of Contents



Three Months Ended September 30,2006 vs. 2005Increase
    
    
    Total(Decrease) Due to
    
    
    IncreaseVolume
    
    
    Rate
    
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    702
    
    
    $
    608
    
    
    $
    1,310Investment securities
    
    
    477
    
    
    
    177
    
    
    
    654Short-term investments
    
    
    30
    
    
    
    (41
    )
    
    
    (11
    )Total interest-earning assets
    
    
    1,209
    
    
    
    744
    
    
    
    1,953Interest-bearing liabilities:Savings deposits
    
    
    (15
    )
    
    
    2
    
    
    
    (13
    )Life Path
    
    
    46
    
    
    
    357
    
    
    
    403Money market
    
    
    (37
    )
    
    
    172
    
    
    
    135NOW accounts
    
    
    (2
    )
    
    
    15
    
    
    
    13Certificates of deposits
    
    
    321
    
    
    
    652
    
    
    
    973Total deposits
    
    
    313
    
    
    
    1,198
    
    
    
    1,511Borrowed Funds
    
    
    (179
    )
    
    
    133
    
    
    
    (46
    )Total interest-bearing liabilities
    
    
    134
    
    
    
    1,331
    
    
    
    1,465Change in net interest income
    
    $
    1,075
    
    
    $
    (587
    )
    
    $
    488
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 17




---



##### Table of Contents



Non-interest income
 Non-interest expense
 Income tax expense
 Comparison of Operating Results for the Nine Months Ended September 30, 2006 and September 30, 2005
  Analysis of Net Interest Income
   18




---



##### Table of Contents



Nine Months Ended September 30, 2006
    
    
    Nine Months Ended September 30, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    561,975
    
    
    $
    26,609
    
    
    
    6.31
    %
    
    $
    519,339
    
    
    $
    22,791
    
    
    
    5.85
    %Investment securities
    
    
    175,121
    
    
    
    5,601
    
    
    
    4.26
    %
    
    
    128,952
    
    
    
    3,693
    
    
    
    3.82
    %Short-term investments
    
    
    8,199
    
    
    
    296
    
    
    
    4.81
    %
    
    
    8,982
    
    
    
    190
    
    
    
    2.82
    %Total interest-earning assets
    
    
    745,295
    
    
    
    32,506
    
    
    
    5.82
    %
    
    
    657,273
    
    
    
    26,674
    
    
    
    5.41
    %Non-interest-earning assets
    
    
    41,041
    
    
    
    
    
    
    
    
    
    
    
    37,708Total assets
    
    $
    786,336
    
    
    
    
    
    
    
    
    
    
    $
    694,981Interest-bearing liabilities:Savings deposits
    
    $
    58,341
    
    
    
    191
    
    
    
    0.44
    %
    
    $
    71,077
    
    
    
    228
    
    
    
    0.43
    %LifePath Savings
    
    
    74,426
    
    
    
    2,032
    
    
    
    3.64
    %
    
    
    70,260
    
    
    
    1,189
    
    
    
    2.26
    %Money market
    
    
    52,865
    
    
    
    1,109
    
    
    
    2.80
    %
    
    
    60,214
    
    
    
    675
    
    
    
    1.49
    %NOW accounts
    
    
    38,159
    
    
    
    80
    
    
    
    0.28
    %
    
    
    39,175
    
    
    
    62
    
    
    
    0.21
    %Certificates of deposits
    
    
    210,957
    
    
    
    6,294
    
    
    
    3.98
    %
    
    
    176,063
    
    
    
    3,731
    
    
    
    2.83
    %Total deposits
    
    
    434,748
    
    
    
    9,706
    
    
    
    2.98
    %
    
    
    416,789
    
    
    
    5,885
    
    
    
    1.88
    %Borrowed Funds
    
    
    149,577
    
    
    
    4,911
    
    
    
    4.38
    %
    
    
    162,360
    
    
    
    5,030
    
    
    
    4.13
    %Total interest-bearing
liabilities
    
    
    584,325
    
    
    
    14,617
    
    
    
    3.34
    %
    
    
    579,149
    
    
    
    10,915
    
    
    
    2.51
    %Non-interest-bearing liabilities
    
    
    56,086
    
    
    
    
    
    
    
    
    
    
    
    54,721Total liabilities
    
    
    640,411
    
    
    
    
    
    
    
    
    
    
    
    633,870Equity
    
    
    145,925
    
    


    
    

    
    
    
    
    
    
    
    61,111Total liabilities and equity
    
    $
    786,336
    
    
    
    
    
    
    
    
    
    
    $
    694,981Net interest income
    
    
    
    
    
    $
    17,889
    
    
    
    
    
    
    
    
    
    
    $
    15,759Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.48
    %
    
    
    
    
    
    
    
    
    
    
    2.90
    %Net interest-earning assets (4)
    
    $
    160,970
    
    
    
    
    
    
    
    
    
    
    $
    78,124Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.20
    %
    
    
    
    
    
    
    
    
    
    
    3.20
    %Average interest-earning assets
to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    127.55
    %
    
    
    
    
    
    
    
    
    
    
    113.49
    %
 
 (1)
    
    Yields and rates for the nine months ended September 30, 2006 and 2005 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average
interest-earning assets and the
cost of total average interest-bearing liabilities for the nine months ended September 30,
2006 and 2005.(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.  19




---



##### Table of Contents



Nine Months Ended September 30,2006 vs. 2005Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    1,950
    
    
    $
    1,868
    
    
    $
    3,818Investment securities
    
    
    1,443
    
    
    
    465
    
    
    
    1,908Short-term investments
    
    
    (15
    )
    
    
    121
    
    
    
    106Total interest-earning assets
    
    
    3,378
    
    
    
    2,454
    
    
    
    5,832Interest-bearing liabilities:Savings deposits
    
    
    (43
    )
    
    
    6
    
    
    
    (37
    )Life Path
    
    
    74
    
    
    
    769
    
    
    
    843Money market
    
    
    (70
    )
    
    
    504
    
    
    
    434NOW accounts
    
    
    (1
    )
    
    
    19
    
    
    
    18Certificates of deposits
    
    
    841
    
    
    
    1,722
    
    
    
    2,563Total deposits
    
    
    801
    
    
    
    3,020
    
    
    
    3,821Borrowed Funds
    
    
    (200
    )
    
    
    81
    
    
    
    (119
    )Total interest-bearing liabilities
    
    
    601
    
    
    
    3,101
    
    
    
    3,702Change in net interest income
    
    $
    2,777
    
    
    $
    (647
    )
    
    $
    2,130
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 Non-interest income
 20




---



##### 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
    
    RatioSeptember 30, 2006Total capital to risk weighted assets
    
    $
    100,669
    
    
    
    19.0
    %
    
    $
    42,449
    
    
    
    8.0
    %
    
    $
    53,061
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:
    
    
    95,312
    
    
    
    18.0
    
    
    
    21,224
    
    
    
    4.0
    
    
    
    31,836
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    95,312
    
    
    
    12.6
    
    
    
    22,720
    
    
    
    3.0
    
    
    
    37,867
    
    
    
    5.0December 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
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    95,859
    
    
    
    12.6
    
    
    
    22,762
    
    
    
    3.0
    
    
    
    37,936
    
    
    
    5.0
 Contractual Obligations
 21




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##### Table of Contents



September 30, 2006More than
    
    ThreeOne Year
    
    YearsOne Year
    
    through
    
    through
    
    Over FiveTotal
    
    or Less
    
    Three Years
    
    Five Years
    
    Years(Dollars in Thousands)Federal Home Loan Bank of Boston advances
    
    $
    137,877
    
    
    $
    36,255
    
    
    $
    81,000
    
    
    $
    13,376
    
    
    $
    7,246Securities sold under agreements to repurchase
    
    
    3,532
    
    
    
    3,532
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    141,409
    
    
    $
    39,787
    
    
    $
    81,000
    
    
    $
    13,376
    
    
    $
    7,246
 Off-Balance Sheet Arrangements:
 September 30, 2006More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year or
    
    
    through
    
    
    Through
    
    
    Over FiveTotal
    
    
    Less
    
    
    Three Years
    
    
    Five Years
    
    
    years(Dollars in Thousands)Commitments to grant loans (1)
    
    $
    34,564
    
    
    $
    34,564
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    13,822
    
    
    
    13,822
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (2)
    
    
    66,972
    
    
    
    1,118
    
    
    
    2,629
    
    
    
    9,322
    
    
    
    53,903Unused portion of construction loans (3)
    
    
    5,788
    
    
    
    5,788
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft lines-of-credit(4)
    
    
    4,180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,180Unused portion of personal lines-of-credit(5)
    
    
    421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    421Standby letters of credit(6)
    
    
    606
    
    
    
    606
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies
    
    
    8,606
    
    
    
    8,606
    
    
    
    
    
    
    
    
    
    
    
    Total loan commitments
    
    $
    134,959
    
    
    $
    64,504
    
    
    $
    2,629
    
    
    $
    9,322
    
    
    $
    58,504
 
 (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.(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. 
 Item 3: Quantitative and Qualitative Disclosures About Market Risks
  22




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##### Table of Contents



Item 4: Controls and Procedures
 Disclosure Controls and Procedures
 Internal Control Over Financial Reporting
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5 Other Information
  
 Item 6 Exhibits
  23




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##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date:
    
    November 9, 2006
    
    
    
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and Chairman of the BoardDate:
    
    November 9, 2006
    
    
    
    /s/ Stephen M. ConleyStephen M. ConleySenior Vice President, Chief Financial Officer andTreasurer (Principal Accounting Officer)
 24




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##### Table of Contents



INDEX TO EXHIBITS
 2.1
    
    Amended and Restated Plan of Conversion*3.1
    
    Certificate of Incorporation of Legacy Bancorp, Inc.*3.2
    
    Bylaws of Legacy Bancorp, Inc. (as amended)*10.1
    
    Legacy Banks ESOP Trust Agreement**10.2
    
    ESOP Plan Document**10.3
    
    ESOP Loan Documents**10.4.1
    
    Employment Agreement between Legacy Banks and J. Williar Dunlaevy**10.4.2
    
    Employment Agreement between Legacy Banks and Michael A. Christopher**10.4.3
    
    Employment Agreement between Legacy Banks and Steven F. Pierce**10.4.4
    
    Employment Agreement between Legacy Banks and Stephen M. Conley**10.4.5
    
    Employment Agreement between Legacy Banks and Richard M. Sullivan**10.5.1
    
    Employment Agreement between Legacy Bancorp, Inc. and J. Williar Dunlaevy**10.5.2
    
    Employment Agreement between Legacy Bancorp, Inc. and Michael A. Christopher**10.5.3
    
    Employment Agreement between Legacy Bancorp, Inc. and Steven F. Pierce**10.5.4
    
    Employment Agreement between Legacy Bancorp, Inc. and Stephen M. Conley**10.5.5
    
    Employment Agreement between Legacy Bancorp, Inc. and Richard M. Sullivan**10.8
    
    Legacy Banks Employee Severance Compensation Plan**10.9.1
    
    Legacy Banks Supplemental Executive Retirement Plan with J. Williar Dunlaevy**10.9.2
    
    Legacy Banks Supplemental Executive Retirement Plan with Michael A. Christopher**10.10
    
    Director Fee Continuation Plan**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 Stephen M. Conley32
    
    Certification pursuant to 18 U.S.C. Section 1350
 
 *
    
    Incorporated by reference from the Registrants Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 2005 filed October 27, 2005.**
    
    Incorporated by reference from the Registration Statement on Form S-1 (No. 333-126481) filed
July 8, 2005, as amended. 25