##### 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 MARCH 31, 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
(State or other jurisdiction of incorporation or organization)
    
    20-3135053
(IRS Employer Identification No.)
 99 NORTH STREET
PITTSFIELD, MASSACHUSETTS 01201
 (413) 443-4421
 
 þ o
  Large accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer þ
 o þ
 10,308,600




---



##### 



LEGACY BANCORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page No.Part I  Financial InformationItem 1
    
    Financial StatementsConsolidated Balance Sheets as of March 31, 2006, and December 31, 2005
    
    
    3Consolidated Statements of Income for the three months ended March 31, 2006 and 2005
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the three months ended March 31, 2006, and 2005
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 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
    
    
    17Item 4
    
    Controls and Procedures
    
    
    19Part II  Other InformationItem 1
    
    Legal Proceedings
    
    
    19Item 1A
    
    Risk Factors
    
    
    19Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    19Item 5
    
    Other Information
    
    
    19Item 6
    
    Exhibits
    
    
    19EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32 Section 906 Certification of CEO & CFO
  1




---



##### Table of Contents



Item 1: Financial Statements
  2




---



##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCash and due from banks
    
    $
    11,359
    
    
    $
    12,331Short-term investments
    
    
    16,235
    
    
    
    6,901Cash and cash equivalents
    
    
    27,594
    
    
    
    19,232Securities and other investments
    
    
    176,270
    
    
    
    179,855Loans held for sale
    
    
    436
    
    
    
    126Loans, net of allowance for loan losses of $4,463 in
2006 and $4,220 in 2005
    
    
    557,419
    
    
    
    547,500Premises and equipment, net
    
    
    14,084
    
    
    
    14,236Accrued interest receivable
    
    
    3,387
    
    
    
    3,235Goodwill, net
    
    
    3,085
    
    
    
    3,085Net deferred tax asset
    
    
    5,478
    
    
    
    5,258Bank-owned life insurance
    
    
    4,181
    
    
    
    4,153Other assets
    
    
    1,585
    
    
    
    1,650Total Assets
    
    $
    793,519
    
    
    $
    778,330LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    486,180
    
    
    $
    474,381Securities sold under agreements to repurchase
    
    
    5,569
    
    
    
    4,999Federal Home Loan Bank advances
    
    
    147,978
    
    
    
    145,923Mortgagors escrow accounts
    
    
    1,224
    
    
    
    931Accrued expenses and other liabilities
    
    
    5,802
    
    
    
    5,930Total liabilities
    
    
    646,753
    
    
    
    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
March 31, 2006 and December 31, 2005
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    100,216
    
    
    
    100,202Unearned Compensation  ESOP
    
    
    (10,069
    )
    
    
    (10,252
    )Retained earnings
    
    
    57,974
    
    
    
    57,202Accumulated other comprehensive loss
    
    
    (1,458
    )
    
    
    (1,089
    )Total stockholders equity
    
    
    146,766
    
    
    
    146,166Total Liabilities and Stockholders Equity
    
    $
    793,519
    
    
    $
    778,330
  3




---



##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
 Three Months Ended March 31,2006
    
    
    2005(Unaudited)Interest and dividend income:Loans
    
    $
    8,513
    
    
    $
    7,278Securities:Taxable
    
    
    1,763
    
    
    
    1,158Tax-Exempt
    
    
    55
    
    
    
    30Short-term investments
    
    
    80
    
    
    
    43Total interest and dividend income
    
    
    10,411
    
    
    
    8,509Interest expense:Deposits
    
    
    2,701
    
    
    
    1,690Federal Home Loan Bank advances
    
    
    1,575
    
    
    
    1,652Other borrowed funds
    
    
    36
    
    
    
    18Total interest expense
    
    
    4,312
    
    
    
    3,360Net interest income
    
    
    6,099
    
    
    
    5,149Provision for loan losses
    
    
    164
    
    
    
    246Net interest income, after provision for loan losses
    
    
    5,935
    
    
    
    4,903Non-interest income:Customer service fees
    
    
    654
    
    
    
    662Portfolio management fees
    
    
    238
    
    
    
    213Income from bank owned life insurance
    
    
    28
    
    
    
    22Insurance, annuities and mutual fund fees
    
    
    30
    
    
    
    43Gain on sales of securities, net
    
    
    40
    
    
    
    42Gain on sales of loans, net
    
    
    39
    
    
    
    20Miscellaneous
    
    
    9
    
    
    
    1Total non-interest income
    
    
    1,038
    
    
    
    1,003Non-interest expenses:Salaries and employee benefits
    
    
    2,835
    
    
    
    2,507Occupancy and equipment
    
    
    667
    
    
    
    554Data processing
    
    
    481
    
    
    
    438Professional fees
    
    
    369
    
    
    
    128Advertising
    
    
    151
    
    
    
    152Other general and administrative
    
    
    741
    
    
    
    606Total non-interest expenses
    
    
    5,244
    
    
    
    4,385Income before income taxes
    
    
    1,729
    
    
    
    1,521Provision for income taxes
    
    
    648
    
    
    
    582Net income
    
    $
    1,081
    
    
    $
    939Earnings per shareBasic
    
    $
    0.11
    
    
    
    n/aDiluted
    
    $
    0.11
    
    
    
    n/aWeighted average shares outstandingBasic
    
    
    9,539,044
    
    
    
    n/aDiluted
    
    
    9,539,044
    
    
    
    n/a
  4




---



##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE THREE MONTHS ENDED MARCH 31, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    939
    
    
    
    
    
    
    
    939Change in net unrealized gain/loss on
securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (983
    )
    
    
    (983
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44
    )Balance at March 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,376
    
    
    
    (973
    )
    
    
    59,403Balance at December 31, 2005
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    100,202
    
    
    $
    (10,252
    )
    
    $
    57,202
    
    
    $
    (1,089
    )
    
    $
    146,166Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,081
    
    
    
    
    
    
    
    1,081Change in net unrealized gain/loss on
securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (369
    )
    
    
    (369
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    712Cash dividends declared ($0.03 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (309
    )
    
    
    
    
    
    
    (309
    )Change in unearned compensation
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    197Balance at March 31, 2006
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    100,216
    
    
    $
    (10,069
    )
    
    $
    57,974
    
    
    $
    (1,458
    )
    
    $
    146,766
 5




---



##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 Quarters ended March 31,2006
    
    
    2005(Unaudited)Cash flows from operating activities:Net income
    
    $
    1,081
    
    
    $
    939Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    164
    
    
    
    246Net amortization of securities
    
    
    (327
    )
    
    
    72Depreciation and amortization expense
    
    
    249
    
    
    
    226Gain (loss) on sales of securities, net
    
    
    (40
    )
    
    
    (42
    )Gain on sales of loans, net
    
    
    (39
    )
    
    
    (20
    )Loans originated for sale
    
    
    (2,795
    )
    
    
    (3,115
    )Proceeds from sale of loans
    
    
    2,524
    
    
    
    2,381Deferred tax benefit
    
    
    
    
    
    
    601Employee Stock Ownership Plan expense
    
    
    197
    
    
    
    Net change in:Bank-owned life insurance
    
    
    (28
    )
    
    
    (22
    )Accrued interest receivable
    
    
    (152
    )
    
    
    (167
    )Other assets
    
    
    65
    
    
    
    (57
    )Accrued expenses and other liabilities
    
    
    (128
    )
    
    
    (1,084
    )Net cash provided by (used in) operating activities
    
    
    771
    
    
    
    (42
    )Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    460
    
    
    
    3,272Maturities, prepayments and calls
    
    
    27,307
    
    
    
    3,995Purchases
    
    
    (24,028
    )
    
    
    (5,568
    )Purchases of Federal Home Loan Bank stock
    
    
    
    
    
    
    (226
    )Purchase of other closely held stocks
    
    
    (494
    )
    
    
    (234
    )Maturities, prepayments and call of other investments
    
    
    118
    
    
    
    Loan originations and purchases, net of principal payments
    
    
    (10,083
    )
    
    
    (13,928
    )Additions to premises and equipment
    
    
    (97
    )
    
    
    (95
    )Net cash used in investing activities
    
    
    (6,817
    )
    
    
    (12,784
    )
   6




---



##### Table of Contents



LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in thousands)
 Quarters ended March 31,2005
    
    
    2004(Unaudited)Cash flows from financing activities:Net increase in deposits
    
    
    11,799
    
    
    
    17,356Net increase in securities sold under
agreement to repurchase
    
    
    570
    
    
    
    694Repayment of Federal Home Loan Bank advances
    
    
    (31,211
    )
    
    
    (49,471
    )Proceeds from Federal Home Loan Bank advances
    
    
    33,266
    
    
    
    46,100Net increase in mortgagors escrow accounts
    
    
    293
    
    
    
    94Payment of dividends on common stock
    
    
    (309
    )
    
    
    Net cash provided by financing activities
    
    
    14,408
    
    
    
    14,773Net change in cash and cash equivalents
    
    
    8,362
    
    
    
    1,947Cash and cash equivalents at beginning of year
    
    
    19,232
    
    
    
    16,798Cash and cash equivalents at end of year
    
    $
    27,594
    
    
    $
    18,745Supplemental cash flow information:Interest paid on deposits
    
    $
    2,700
    
    
    $
    1,728Interest paid on Federal Home Loan Bank advances
    
    
    1,505
    
    
    
    1,617Interest paid on other borrowed funds
    
    
    36
    
    
    
    18Income taxes paid
    
    
    110
    
    
    
    631
  7




---



##### Table of Contents



LEGACY BANCORP AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Basis of presentation
  2. Earnings Per Share
   Three Months Ended March 31,2006
    
    
    2005Net income applicable to common stock (in thousands)
    
    $
    1,081
    
    
    
    n/aAverage number of shares outstanding
    
    
    10,308,600
    
    
    
    n/aLess: average number of unallocated ESOP shares
    
    
    (769,556
    )
    
    
    n/aAverage number of basic shares outstanding
    
    
    9,539,044
    
    
    
    n/aPlus: potential shares that may be issued by the Company
    
    
    
    
    
    
    n/aAverage number of diluted shares outstanding
    
    
    9,539,044
    
    
    
    n/aBasic earnings per share
    
    $
    0.11
    
    
    
    n/aDiluted earnings per share
    
    $
    0.11
    
    
    
    n/a
 8




---



##### Table of Contents



3. Dividends
  4. 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
  Allowance for Loan Losses.
 Income Taxes.
  9




---



##### Table of Contents



Comparison of Financial Condition At March 31, 2006 and December 31, 2005
 Overview:
 Investment Activities
 At March 31, 2006
    
    
    At December 31, 2005Amortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(Dollars in Thousands)Securities available for sale:Government-sponsored enterprises
    
    $
    93,137
    
    
    $
    91,587
    
    
    $
    95,613
    
    
    $
    94,369Municipal bonds
    
    
    6,482
    
    
    
    6,356
    
    
    
    6,061
    
    
    
    6,002Corporate bonds and other obligations
    
    
    5,634
    
    
    
    5,629
    
    
    
    6,149
    
    
    
    6,161Mortgage-backed securities
    
    
    55,654
    
    
    
    53,858
    
    
    
    56,896
    
    
    
    55,505Total debt securities
    
    
    160,907
    
    
    
    157,430
    
    
    
    164,719
    
    
    
    162,037Marketable equity securities:Common stock
    
    
    4,839
    
    
    
    6,045
    
    
    
    4,399
    
    
    
    5,399Total securities available for sale
    
    
    165,746
    
    
    
    163,475
    
    
    
    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
    
    
    1,933
    
    
    
    1,933
    
    
    
    1,557
    
    
    
    1,557Total restricted equity securities
and other investments
    
    
    12,698
    
    
    
    12,698
    
    
    
    12,322
    
    
    
    12,322Total securities
    
    $
    178,541
    
    
    $
    176,270
    
    
    $
    181,537
    
    
    $
    179,855
 10




---



##### Table of Contents



Lending Activities:
 At March 31, 2006
    
    
    At December 31, 2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans on real estate:Residential
    
    $
    314,774
    
    
    
    56.06
    %
    
    $
    308,008
    
    
    
    55.86
    %Commercial
    
    
    161,525
    
    
    
    28.77
    
    
    
    160,675
    
    
    
    29.14Home equity
    
    
    60,557
    
    
    
    10.79
    
    
    
    58,640
    
    
    
    10.64536,856
    
    
    
    95.62
    
    
    
    527,323
    
    
    
    95.64Other loans:Commercial
    
    
    21,047
    
    
    
    3.74
    
    
    
    20,579
    
    
    
    3.73Consumer and other
    
    
    3,570
    
    
    
    0.64
    
    
    
    3,457
    
    
    
    0.6324,617
    
    
    
    4.38
    
    
    
    24,036
    
    
    
    4.36Total loans
    
    
    561,473
    
    
    
    100.00
    %
    
    
    551,359
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    409
    
    
    
    
    
    
    
    361Allowance for loan losses
    
    
    (4,463
    )
    
    
    
    
    
    
    (4,220
    )Total Loans, net
    
    $
    557,419
    
    
    
    
    
    
    $
    547,500
  Non-performing Assets:
 11




---



##### Table of Contents



At March 31,
    
    
    At December 31,2006
    
    
    2005(Dollars in Thousands)Non-accrual loans:Residential mortgage
    
    $
    356
    
    
    $
    479Commercial mortgage
    
    
    
    
    
    
    96Commercial
    
    
    40
    
    
    
    250Home equity, consumer and other
    
    
    79
    
    
    
    78Total non-accrual loans
    
    
    475
    
    
    
    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
    
    $
    475
    
    
    $
    903Ratios:Non-performing loans to total loans
    
    
    0.09
    %
    
    
    0.16
    %Non-performing assets to total assets
    
    
    0.06
    %
    
    
    0.12
    %
 Allowance for Loan Losses :
    12




---



##### Table of Contents



At or for the Three Months Ended March 31,2006
    
    
    2005(Dollars in Thousands)Balance at beginning of period
    
    $
    4,220
    
    
    $
    3,846Charge-offs:Mortgage loans on real estate:
    
    
    
    
    
    
    Other loans:Commercial
    
    
    (4
    )
    
    
    (78
    )Consumer and other
    
    
    (33
    )
    
    
    (29
    )Total other loans
    
    
    (37
    )
    
    
    (107
    )Total charge-offs
    
    
    (37
    )
    
    
    (107
    )Recoveries:Mortgage loans on real estate
    
    
    
    
    
    
    Other loans:Commercial
    
    
    97
    
    
    
    10Consumer and other
    
    
    19
    
    
    
    14Total other loans
    
    
    116
    
    
    
    24Total recoveries
    
    
    116
    
    
    
    24Net charge-offs
    
    
    79
    
    
    
    (83
    )Provision for loan losses
    
    
    164
    
    
    
    246Balance at end of period
    
    $
    4,463
    
    
    $
    4,009Ratios:Net charge-offs to average loans outstanding (annualized)
    
    
    0.06
    %
    
    
    -0.06
    %Allowance for loan losses to non-performing loans at end of period
    
    
    939.58
    %
    
    
    195.94
    %Allowance for loan losses to total loans at end of period
    
    
    0.79
    %
    
    
    0.75
    %
 13




---



##### Table of Contents



Deposits
 At March 31, 2006
    
    
    At December 31, 2005Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)
    
    
    (Dollars in Thousands)Deposit type:Demand deposits
    
    $
    47,653
    
    
    
    9.80
    %
    
    $
    52,773
    
    
    
    11.12
    %Regular savings
    
    
    59,861
    
    
    
    12.31
    
    
    
    63,335
    
    
    
    13.35LifePath Savings
    
    
    73,229
    
    
    
    15.06
    
    
    
    73,151
    
    
    
    15.42Money market deposits
    
    
    57,004
    
    
    
    11.73
    
    
    
    55,168
    
    
    
    11.63NOW deposits
    
    
    41,267
    
    
    
    8.49
    
    
    
    41,692
    
    
    
    8.78Total transaction accounts
    
    
    279,014
    
    
    
    57.39
    
    
    
    286,119
    
    
    
    60.30Certificates of deposit
    
    
    207,166
    
    
    
    42.61
    
    
    
    188,262
    
    
    
    39.70Total deposits
    
    $
    486,180
    
    
    
    100.00
    %
    
    $
    474,381
    
    
    
    100.00
    %
  Borrowings
 Stockholders Equity
 Comparison of Operating Results for the Three Months Ended March 31, 2006 and March 31, 2005
  Analysis of Net Interest Income
   14




---



##### Table of Contents



Three Months Ended March 31, 2006
    
    
    Three Months Ended March 31, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    551,127
    
    
    $
    8,513
    
    
    
    6.18
    %
    
    $
    511,972
    
    
    $
    7,278
    
    
    
    5.69
    %Investment securities
    
    
    176,233
    
    
    
    1,818
    
    
    
    4.13
    %
    
    
    128,850
    
    
    
    1,188
    
    
    
    3.69
    %Short-term investments
    
    
    7,334
    
    
    
    80
    
    
    
    4.36
    %
    
    
    7,574
    
    
    
    43
    
    
    
    2.27
    %Total interest-earning assets
    
    
    734,694
    
    
    
    10,411
    
    
    
    5.67
    %
    
    
    648,396
    
    
    
    8,509
    
    
    
    5.25
    %Non-interest-earning assets
    
    
    41,861
    
    
    
    
    
    
    
    
    
    
    
    36,388Total assets
    
    $
    776,555
    
    
    
    
    
    
    
    
    
    
    $
    684,784Interest-bearing liabilities:Savings deposits
    
    $
    62,205
    
    
    
    67
    
    
    
    0.43
    %
    
    $
    72,304
    
    
    
    77
    
    
    
    0.43
    %LifePath Savings
    
    
    72,524
    
    
    
    562
    
    
    
    3.10
    %
    
    
    66,993
    
    
    
    351
    
    
    
    2.10
    %Money market
    
    
    51,879
    
    
    
    306
    
    
    
    2.36
    %
    
    
    57,579
    
    
    
    159
    
    
    
    1.10
    %NOW accounts
    
    
    38,166
    
    
    
    21
    
    
    
    0.22
    %
    
    
    37,541
    
    
    
    18
    
    
    
    0.19
    %Certificates of deposits
    
    
    197,220
    
    
    
    1,745
    
    
    
    3.54
    %
    
    
    167,415
    
    
    
    1,085
    
    
    
    2.59
    %Total deposits
    
    
    421,994
    
    
    
    2,701
    
    
    
    2.56
    %
    
    
    401,832
    
    
    
    1,690
    
    
    
    1.68
    %Borrowed Funds
    
    
    151,627
    
    
    
    1,611
    
    
    
    4.25
    %
    
    
    170,364
    
    
    
    1,670
    
    
    
    3.92
    %Total interest-bearing liabilities
    
    
    573,621
    
    
    
    4,312
    
    
    
    3.01
    %
    
    
    572,196
    
    
    
    3,360
    
    
    
    2.35
    %Non-interest bearing liabilities
    
    
    55,645
    
    
    
    
    
    
    
    
    
    
    
    52,482Total liabilities
    
    
    629,266
    
    
    
    
    
    
    
    
    
    
    
    624,678Equity
    
    
    147,289
    
    
    
    
    
    
    
    
    
    
    
    60,106Total liabilities and equity
    
    $
    776,555
    
    
    
    
    
    
    
    
    
    
    $
    684,784Net interest income
    
    
    
    
    
    $
    6,099
    
    
    
    
    
    
    
    
    
    
    $
    5,149Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    2.90
    %Net interest-earning assets (4)
    
    $
    161,073
    
    
    
    
    
    
    
    
    
    
    $
    76,200Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.32
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    128.08
    %
    
    
    
    
    
    
    
    
    
    
    113.32
    %
 
 (1)
    
    Yields and rates for the three months ended March 31, 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 March 31, 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.  15




---



##### Table of Contents



Three Months Ended March 31,2006 vs. 2005Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    581
    
    
    $
    654
    
    
    $
    1,235Investment securities
    
    
    475
    
    
    
    155
    
    
    
    630Short-term investments
    
    
    (1
    )
    
    
    38
    
    
    
    37Total interest-earning assets
    
    
    1,055
    
    
    
    847
    
    
    
    1,902Interest-bearing liabilities:Savings deposits
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )Life Path
    
    
    31
    
    
    
    180
    
    
    
    211Money market
    
    
    (14
    )
    
    
    161
    
    
    
    147NOW accounts
    
    
    
    
    
    
    3
    
    
    
    3Certificates of deposits
    
    
    216
    
    
    
    444
    
    
    
    660Total deposits
    
    
    223
    
    
    
    788
    
    
    
    1,011Borrowed Funds
    
    
    (252
    )
    
    
    193
    
    
    
    (59
    )Total interest-bearing liabilities
    
    
    (29
    )
    
    
    981
    
    
    
    952Change in net interest income
    
    $
    1,084
    
    
    $
    (134
    )
    
    $
    950
 Net interest income
 Interest income
 Interest expense
 16




---



##### Table of Contents



Provision for loan loss expense
 Non-interest income
 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
    
    RatioMarch 31, 2006Total capital to risk weighted assets
    
    $
    102,244
    
    
    
    19.9
    %
    
    $
    41,124
    
    
    
    8.0
    %
    
    $
    51,405
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:
    
    
    98,609
    
    
    
    19.2
    
    
    
    20,562
    
    
    
    4.0
    
    
    
    30,843
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    98,609
    
    
    
    13.4
    
    
    
    22,114
    
    
    
    3.0
    
    
    
    36,857
    
    
    
    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
 
 Item 3: Quantitative and Qualitative Disclosures About Market Risks
  17




---



##### Table of Contents



Contractual Obligations .
 March 31, 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
    
    $
    147,978
    
    
    $
    32,492
    
    
    $
    58,500
    
    
    $
    41,733
    
    
    $
    15,253Securities sold under agreements to repurchase
    
    
    5,569
    
    
    
    5,569
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    153,547
    
    
    $
    38,061
    
    
    $
    58,500
    
    
    $
    41,733
    
    
    $
    15,253
 Loan Commitments and other contingencies .
 March 31, 2006More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year or
    
    
    through Three
    
    
    Through Five
    
    
    Over FiveTotal
    
    
    Less
    
    
    Years
    
    
    Years
    
    
    years(Dollars in Thousands)Commitments to grant loans (1)
    
    $
    14,604
    
    
    $
    14,604
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    14,020
    
    
    
    14,020
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (2)
    
    
    65,227
    
    
    
    839
    
    
    
    1,259
    
    
    
    3,750
    
    
    
    59,379Unused portion of construction loans (3)
    
    
    5,003
    
    
    
    5,003
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft
lines-of-credit(4)
    
    
    4,410
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,410Unused portion of personal
lines-of-credit(5)
    
    
    467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467Standby letters of credit(6)
    
    
    606
    
    
    
    606
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies
    
    
    4,259
    
    
    
    4,259
    
    
    
    
    
    
    
    
    
    
    
    Total loan commitments
    
    $
    108,596
    
    
    $
    39,331
    
    
    $
    1,259
    
    
    $
    3,750
    
    
    $
    64,256
 
 (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. Off-Balance Sheet Arrangements:
 18




---



##### 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 4. Submission of Matters to a Vote of Security Holders
  
 Item 5 Other Information
  
 Item 6 Exhibits
  19




---



##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date: May 12, 2006
    
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and Chairman of the BoardDate: May 12, 2006
    
    /s/ Stephen M. ConleyStephen M. ConleySenior Vice President, Chief Financial Officer andTreasurer (Principal Accounting Officer)
 20




---



##### 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 Registration 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. 21