##### 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, 2011
 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
  Large accelerated filer o
Accelerated
filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
 8,631,732




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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 March 31, 2011
and December 31, 2010
    
    
    2Consolidated Statements of Operations for the three
months ended March 31, 2011 and 2010
    
    
    3Consolidated Statements of Changes in Stockholders Equity
for the three months ended March 31, 2011 and 2010
    
    
    4Consolidated Statements of Cash Flows for the three
months ended March 31, 2011 and 2010
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Managements
Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3
    
    Quantitative and Qualitative Disclosures about Market Risks
    
    
    27Item 4
    
    Controls and Procedures
    
    
    27Part II  Other InformationItem 1
    
    Legal Proceedings
    
    
    28Item 1A
    
    Risk Factors
    
    
    28Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3
    
    Defaults Upon Senior Securities
    
    
    28Item 4
    
    (Removed and Reserved)
    
    
    28Item 5
    
    Other Information
    
    
    28Item 6
    
    Exhibits
    
    
    29EX-31.1EX-31.2EX-32
  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, except per share amounts)
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCash and due from banks
    
    $
    13,947
    
    
    $
    12,186Short-term investments
    
    
    13,680
    
    
    
    14,906Cash and cash equivalents
    
    
    27,627
    
    
    
    27,092Securities  available for sale
    
    
    191,853
    
    
    
    185,688Securities  held to maturity
    
    
    97
    
    
    
    97Restricted equity securities and other investments  at cost
    
    
    16,863
    
    
    
    16,546Loans held for sale
    
    
    785
    
    
    
    3,839Loans, net of allowance for loan losses of $8,694
in 2011 and $9,010 in 2010
    
    
    592,739
    
    
    
    607,102Premises and equipment, net
    
    
    18,823
    
    
    
    19,142Accrued interest receivable
    
    
    2,577
    
    
    
    2,631Goodwill, net
    
    
    11,558
    
    
    
    11,558Mortgage servicing rights
    
    
    776
    
    
    
    737Other intangible assets
    
    
    2,675
    
    
    
    2,888Net deferred tax asset
    
    
    12,428
    
    
    
    12,684Bank-owned life insurance
    
    
    17,058
    
    
    
    17,047Foreclosed assets
    
    
    2,365
    
    
    
    2,216Other assets
    
    
    7,333
    
    
    
    7,610$
    905,557
    
    
    $
    916,877LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    78,115
    
    
    $
    75,116Interest-bearing
    
    
    598,680
    
    
    
    610,129Total deposits
    
    
    676,795
    
    
    
    685,245Securities sold under agreements to repurchase
    
    
    3,671
    
    
    
    5,329Federal Home Loan Bank advances
    
    
    105,385
    
    
    
    105,388Mortgagors escrow accounts
    
    
    1,006
    
    
    
    1,211Accrued expenses and other liabilities
    
    
    6,886
    
    
    
    8,145Total liabilities
    
    
    793,743
    
    
    
    805,318Commitments and contingenciesStockholders Equity:Preferred 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 March 31, 2011 and
December 31, 2010; 8,631,732 outstanding at March 31,
2011 and December 31, 2010)
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    103,125
    
    
    
    103,168Unearned compensation  ESOP
    
    
    (6,956
    )
    
    
    (6,956
    )Unearned compensation  Equity Incentive Plans
    
    
    (853
    )
    
    
    (1,053
    )Retained earnings
    
    
    39,434
    
    
    
    39,114Accumulated other comprehensive loss
    
    
    (455
    )
    
    
    (233
    )Treasury stock, at cost (1,676,868 shares
at March 31, 2011 and December 31, 2010)
    
    
    (22,584
    )
    
    
    (22,584
    )Total stockholders equity
    
    
    111,814
    
    
    
    111,559$
    905,557
    
    
    $
    916,877
  2




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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
 Three Months Ended March 31,2011
    
    
    2010(Unaudited)Interest and dividend income:Loans
    
    $
    8,018
    
    
    $
    9,296Securities:Taxable
    
    
    870
    
    
    
    1,185Tax-exempt
    
    
    20
    
    
    
    167Short-term investments
    
    
    4
    
    
    
    6Total interest and dividend income
    
    
    8,912
    
    
    
    10,654Interest expense:Deposits
    
    
    1,844
    
    
    
    2,439Federal Home Loan Bank advances
    
    
    1,016
    
    
    
    1,449Other borrowed funds
    
    
    5
    
    
    
    10Total interest expense
    
    
    2,865
    
    
    
    3,898Net interest income
    
    
    6,047
    
    
    
    6,756Provision for loan losses
    
    
    41
    
    
    
    2,421Net interest income, after provision for loan losses
    
    
    6,006
    
    
    
    4,335Non-interest income:Customer service fees
    
    
    724
    
    
    
    722Portfolio management fees
    
    
    543
    
    
    
    280Income from bank-owned life insurance
    
    
    140
    
    
    
    154Insurance, annuities and mutual fund fees
    
    
    51
    
    
    
    20Gain on sales of securities, net
    
    
    27
    
    
    
    101Impairment losses on investments
    
    
    (36
    )
    
    
    (299
    )Gain on sales of loans, net
    
    
    139
    
    
    
    60Miscellaneous
    
    
    14
    
    
    
    11Total non-interest income
    
    
    1,602
    
    
    
    1,049Non-interest expenses:Salaries and employee benefits
    
    
    2,826
    
    
    
    3,475Occupancy and equipment
    
    
    1,018
    
    
    
    991Data processing
    
    
    699
    
    
    
    694Professional fees
    
    
    302
    
    
    
    323Advertising
    
    
    89
    
    
    
    319FDIC deposit insurance
    
    
    305
    
    
    
    269Foreclosed assets, net
    
    
    330
    
    
    
    118Other general and administrative
    
    
    944
    
    
    
    984Total non-interest expenses
    
    
    6,513
    
    
    
    7,173Income (loss) before income taxes
    
    
    1,095
    
    
    
    (1,789
    )Provision (benefit) for income taxes
    
    
    372
    
    
    
    (545
    )Net income (loss)
    
    $
    723
    
    
    $
    (1,244
    )Earnings (loss) per shareBasic
    
    $
    0.09
    
    
    $
    (0.15
    )Diluted
    
    $
    0.09
    
    
    $
    (0.15
    )Weighted average shares outstandingBasic
    
    
    8,014,817
    
    
    
    8,028,621Diluted
    
    
    8,052,772
    
    
    
    8,028,621
  3




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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Dollars in thousands, except per share amounts)
(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, 2009
    
    
    8,734,712
    
    
    $
    103
    
    
    $
    102,788
    
    
    $
    (7,322
    )
    
    $
    (2,078
    )
    
    $
    48,998
    
    
    $
    711
    
    
    $
    (21,833
    )
    
    $
    121,367Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,244
    )
    
    
    
    
    
    
    
    
    
    
    (1,244
    )Net unrealized gain/loss on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    333Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (911
    )Cash dividends declared ($0.05 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (408
    )
    
    
    
    
    
    
    
    
    
    
    (408
    )Common stock
repurchased  5% stock repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Program announced March 2009
    
    
    (15,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145
    )
    
    
    (145
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220Common stock held by ESOP committed
to be released (13,745 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    132Balance at March 31, 2010
    
    
    8,719,512
    
    
    $
    103
    
    
    $
    102,857
    
    
    $
    (7,139
    )
    
    $
    (1,858
    )
    
    $
    47,295
    
    
    $
    1,044
    
    
    $
    (21,978
    )
    
    $
    120,324Balance at December 31, 2010
    
    
    8,631,732
    
    
    $
    103
    
    
    $
    103,168
    
    
    $
    (6,956
    )
    
    $
    (1,053
    )
    
    $
    39,114
    
    
    $
    (233
    )
    
    $
    (22,584
    )
    
    $
    111,559Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    723
    
    
    
    
    
    
    
    
    
    
    
    723Net unrealized gain/loss on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    
    
    
    
    (222
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    501Cash dividends declared ($0.05 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (403
    )
    
    
    
    
    
    
    
    
    
    
    (403
    )Stock option expense net of cumulative forfeitures
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205Balance at March 31, 2011
    
    
    8,631,732
    
    
    $
    103
    
    
    $
    103,125
    
    
    $
    (6,956
    )
    
    $
    (853
    )
    
    $
    39,434
    
    
    $
    (455
    )
    
    $
    (22,584
    )
    
    $
    111,814
  4




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##### Table of Contents



LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 Three Months Ended March 31,2011
    
    
    2010(Unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    723
    
    
    $
    (1,244
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Provision for loan losses
    
    
    41
    
    
    
    2,421Net amortization of securities
    
    
    149
    
    
    
    205Amortization of mortgage servicing rights
    
    
    33
    
    
    
    23Amortization of other intangible assets
    
    
    213
    
    
    
    154Depreciation and amortization expense
    
    
    374
    
    
    
    395(Gain) loss on sales/impairment of securities, net
    
    
    9
    
    
    
    198Loss on sales/writedowns of foreclosed real estate, net
    
    
    213
    
    
    
    75Gain on sales of loans, net
    
    
    (139
    )
    
    
    (60
    )Loans originated for sale
    
    
    (6,860
    )
    
    
    (5,667
    )Proceeds from sales of loans
    
    
    9,981
    
    
    
    5,415Share-based compensation expense
    
    
    157
    
    
    
    289Deferred tax provision
    
    
    390
    
    
    
    1,195Employee Stock Ownership Plan expense
    
    
    
    
    
    
    132Net change in:Bank-owned life insurance
    
    
    (143
    )
    
    
    (156
    )Accrued interest receivable
    
    
    54
    
    
    
    115Other assets
    
    
    277
    
    
    
    (2,517
    )Accrued expenses and other liabilities
    
    
    (1,259
    )
    
    
    1,323Net cash provided by operating activities
    
    
    4,213
    
    
    
    2,296Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    2,097
    
    
    
    2,141Maturities, prepayments and calls
    
    
    22,935
    
    
    
    28,010Purchases
    
    
    (31,675
    )
    
    
    (42,494
    )Purchase of other investments
    
    
    (353
    )
    
    
    (196
    )Loan originations and purchases, net of principal payments
    
    
    13,827
    
    
    
    9,986Redemption of bank-owned life insurance
    
    
    132
    
    
    
    Additions to premises and equipment
    
    
    (55
    )
    
    
    (481
    )Proceeds from sales of foreclosed assets
    
    
    133
    
    
    
    Net cash provided (used) by investing activities
    
    
    7,041
    
    
    
    (3,034
    )
   5




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##### Table of Contents



LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in thousands)
 Three Months Ended March 31,2011
    
    
    2010(Unaudited)Cash flows from financing activities:Net (decrease) increase in deposits
    
    
    (8,450
    )
    
    
    9,866Net decrease in securities sold under
agreements to repurchase
    
    
    (1,658
    )
    
    
    (221
    )Repayment of Federal Home Loan Bank advances
    
    
    (13,760
    )
    
    
    (13,021
    )Proceeds from Federal Home Loan Bank advances
    
    
    13,757
    
    
    
    3,018Net (decrease) increase in mortgagors escrow accounts
    
    
    (205
    )
    
    
    37Repurchase of common stock
    
    
    
    
    
    
    (145
    )Payment of dividends on common stock
    
    
    (403
    )
    
    
    (408
    )Net cash used by financing activities
    
    
    (10,719
    )
    
    
    (874
    )Net change in cash and cash equivalents
    
    
    535
    
    
    
    (1,612
    )Cash and cash equivalents at beginning of period
    
    
    27,092
    
    
    
    40,155Cash and cash equivalents at end of period
    
    $
    27,627
    
    
    $
    38,543Supplemental cash flow information:Interest paid on deposits
    
    $
    1,915
    
    
    $
    2,497Interest paid on Federal Home Loan Bank advances
    
    
    1,134
    
    
    
    1,433Interest paid on other borrowed funds
    
    
    5
    
    
    
    10Income taxes paid
    
    
    20
    
    
    
    100Non-cash activities:Real estate acquired through foreclosure
    
    
    495
    
    
    
    708
  6




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##### Table of Contents



LEGACY BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Recent Developments
  2. Basis of presentation
  3. Recent Accounting Pronouncements
 Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
 A Creditors Determination
of Whether a Restructuring Is a Troubled Debt Restructuring. Receivables
(Topic 310), Disclosures about the Credit Quality of Financing Receivables and the Allowance for
Credit Losses
 Reconsideration of Effective Control for
Repurchase Agreements
 7




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##### Table of Contents



4. Earnings Per Share
  Three Months Ended March 31,2011
    
    
    2010Net income (loss) applicable to common stock
(000s)
    
    $
    723
    
    
    $
    (1,244
    )Average number of shares issued
    
    
    10,308,600
    
    
    
    10,308,600Less: average unallocated ESOP shares
    
    
    (522,755
    )
    
    
    (549,640
    )Less: average treasury shares
    
    
    (1,676,868
    )
    
    
    (1,581,449
    )Less: average unvested restricted stock awards
    
    
    (94,160
    )
    
    
    (148,890
    )Average number of basic shares outstanding
    
    
    8,014,817
    
    
    
    8,028,621Plus: dilutive unvested restricted stock awards
    
    
    31,141
    
    
    
    Plus: diluted stock option shares
    
    
    6,814
    
    
    
    Average number of diluted shares outstanding
    
    
    8,052,772
    
    
    
    8,028,621Basic earnings (loss) per share
    
    $
    0.09
    
    
    $
    (0.15
    )Diluted earnings (loss) per share
    
    $
    0.09
    
    
    $
    (0.15
    )
 5. Comprehensive Income (Loss)
   Three Months Ended March 31,2011
    
    
    2010(Dollars in thousands)SecuritiesNet unrealized holding (losses) gains on available for
sale (AFS) securities
    
    $
    (329
    )
    
    $
    631Reclassification adjustment for gains on sales of AFS securities
    
    
    (27
    )
    
    
    (101
    )(356
    )
    
    
    530Tax effect
    
    
    134
    
    
    
    (197
    )Net-of-tax amount
    
    $
    (222
    )
    
    $
    333
  8




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##### Table of Contents



March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)SecuritiesNet unrealized holding gains
on available for sale securities
    
    $
    (469
    )
    
    $
    (112
    )Tax effects
    
    
    183
    
    
    
    48Net-of-tax amount
    
    
    (286
    )
    
    
    (64
    )Directors Fee PlanUnrecognized net actuarial loss and
prior service costs
    
    
    (285
    )
    
    
    (285
    )Tax effect
    
    
    116
    
    
    
    116Net-of-tax amount
    
    
    (169
    )
    
    
    (169
    )$
    (455
    )
    
    $
    (233
    )
 6. Dividends
  7. Commitments and Other Contingencies
  8. Securities
  March 31, 2011Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)Securities Available for SaleDebt securities:Government-sponsored enterprises (GSE)
    
    $
    144,881
    
    
    $
    125
    
    
    $
    (1,069
    )
    
    $
    143,937Municipal
    
    
    1,599
    
    
    
    25
    
    
    
    (9
    )
    
    
    1,615GSE residential mortgage-backed
    
    
    5,775
    
    
    
    228
    
    
    
    
    
    
    
    6,003U.S. Government guaranteed residential mortgage-backed
    
    
    39,702
    
    
    
    508
    
    
    
    (378
    )
    
    
    39,832Total debt securities
    
    
    191,957
    
    
    
    886
    
    
    
    (1,456
    )
    
    
    191,387Marketable equity securities
    
    
    365
    
    
    
    101
    
    
    
    
    
    
    
    466Total securities available for sale
    
    $
    192,322
    
    
    $
    987
    
    
    $
    (1,456
    )
    
    $
    191,853Securities Held to MaturityOther bonds and obligations
    
    $
    97
    
    
    $
    
    
    
    $
    
    
    
    $
    97
 9




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##### Table of Contents



December 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)Securities Available for SaleDebt securities:Government-sponsored enterprises (GSE)
    
    $
    132,221
    
    
    $
    244
    
    
    $
    (841
    )
    
    $
    131,624Municipal
    
    
    3,145
    
    
    
    36
    
    
    
    (36
    )
    
    
    3,145Corporate and other
    
    
    401
    
    
    
    1
    
    
    
    
    
    
    
    402GSE residential mortgage-backed
    
    
    6,370
    
    
    
    225
    
    
    
    (1
    )
    
    
    6,594U.S. Government guaranteed residential mortgage-backed
    
    
    42,775
    
    
    
    522
    
    
    
    (330
    )
    
    
    42,967Total debt securities
    
    
    184,912
    
    
    
    1,028
    
    
    
    (1,208
    )
    
    
    184,732Marketable equity securities
    
    
    888
    
    
    
    114
    
    
    
    (46
    )
    
    
    956Total securities available for sale
    
    $
    185,800
    
    
    $
    1,142
    
    
    $
    (1,254
    )
    
    $
    185,688Securities Held to MaturityOther bonds and obligations
    
    $
    97
    
    
    $
    
    
    
    $
    
    
    
    $
    97
  Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(Dollars in thousands)Within 1 year
    
    $
    8,791
    
    
    $
    8,825
    
    
    $
    
    
    
    $
    Over 1 year to 5 years
    
    
    113,652
    
    
    
    112,978
    
    
    
    82
    
    
    
    82Over 5 years to 10 years
    
    
    12,099
    
    
    
    11,974
    
    
    
    
    
    
    
    Over 10 years
    
    
    11,938
    
    
    
    11,775
    
    
    
    15
    
    
    
    15Total bonds and obligations
    
    
    146,480
    
    
    
    145,552
    
    
    
    97
    
    
    
    97Mortgage-backed
    
    
    45,477
    
    
    
    45,835
    
    
    
    
    
    
    
    Total debt securities
    
    $
    191,957
    
    
    $
    191,387
    
    
    $
    97
    
    
    $
    97
   10




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##### Table of Contents



Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value(Dollars in thousands)March 31, 2011:Debt securities:Government-sponsored enterprises (GSE)
    
    $
    1,069
    
    
    $
    104,056
    
    
    $
    
    
    
    $
    Municipal
    
    
    9
    
    
    
    605
    
    
    
    
    
    
    
    U.S. Government guaranteed residential mortgage-backed
    
    
    338
    
    
    
    14,894
    
    
    
    40
    
    
    
    1,199Total debt securities
    
    
    1,416
    
    
    
    119,555
    
    
    
    40
    
    
    
    1,199Marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total temporarily impaired securities
    
    $
    1,416
    
    
    $
    119,555
    
    
    $
    40
    
    
    $
    1,199December 31, 2010:Debt securities:Government-sponsored enterprises (GSE)
    
    $
    841
    
    
    $
    73,475
    
    
    $
    
    
    
    $
    Municipal
    
    
    36
    
    
    
    1,577
    
    
    
    
    
    
    
    GSE residential mortgage-backed
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    131U.S. Government guaranteed residential mortgage-backed
    
    
    330
    
    
    
    17,235
    
    
    
    
    
    
    
    Total debt securities
    
    
    1,207
    
    
    
    92,287
    
    
    
    1
    
    
    
    131Marketable equity securities
    
    
    46
    
    
    
    302
    
    
    
    
    
    
    
    Total temporarily impaired securities
    
    $
    1,253
    
    
    $
    92,589
    
    
    $
    1
    
    
    $
    131
  Gross# of
    
    Amortized
    
    Unrealized
    
    % ofSecurities
    
    Cost
    
    Loss
    
    Depreciation(Dollars in thousands)Government-sponsored enterprises (GSE)
    
    
    133
    
    
    $
    105,125
    
    
    $
    1,069
    
    
    
    1.0
    %Municipal
    
    
    2
    
    
    
    614
    
    
    
    9
    
    
    
    1.5
    %U.S. Government guaranteed residential mortgage-backed
    
    
    22
    
    
    
    16,472
    
    
    
    378
    
    
    
    2.3
    %
   9. Loans
  11




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##### Table of Contents



At March 31, 2011
    
    
    At December 31, 2010Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    257,034
    
    
    
    42.83
    %
    
    $
    266,166
    
    
    
    43.30
    %Land notes
    
    
    9,777
    
    
    
    1.63
    
    
    
    10,599
    
    
    
    1.72Home equity
    
    
    72,679
    
    
    
    12.11
    
    
    
    74,328
    
    
    
    12.09Commercial
    
    
    207,315
    
    
    
    34.55
    
    
    
    211,431
    
    
    
    34.40Commercial contruction
    
    
    13,496
    
    
    
    2.24
    
    
    
    13,596
    
    
    
    2.21560,301
    
    
    
    93.36
    
    
    
    576,120
    
    
    
    93.72Other loans:Commercial
    
    
    29,629
    
    
    
    4.94
    
    
    
    28,123
    
    
    
    4.57Consumer and other
    
    
    10,196
    
    
    
    1.70
    
    
    
    10,518
    
    
    
    1.7139,825
    
    
    
    6.64
    
    
    
    38,641
    
    
    
    6.28Total loans
    
    
    600,126
    
    
    
    100.00
    %
    
    
    614,761
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    1,307
    
    
    
    
    
    
    
    1,351Allowance for loan losses
    
    
    (8,694
    )
    
    
    
    
    
    
    (9,010
    )Total Loans, net
    
    $
    592,739
    
    
    
    
    
    
    $
    607,102
   March 31, 2011Residential
    
    Commercial
    
    Home
    
    Commercial
    
    ConsumerResidential
    
    Land Notes
    
    Mortgages
    
    Equity
    
    Business
    
    and other
    
    TotalAmount of allowance
for loans
individually
evaluated for
impairement
    
    $
    164
    
    
    $
    313
    
    
    $
    266
    
    
    $
    
    
    
    $
    69
    
    
    $
    
    
    
    $
    812Amount of allowance
for loans
collectively
evaluated for
impairement
    
    $
    1,028
    
    
    $
    568
    
    
    $
    5,085
    
    
    $
    400
    
    
    $
    576
    
    
    $
    225
    
    
    $
    7,882Loans individually
evaluated for
impairement
    
    $
    3,642
    
    
    $
    579
    
    
    $
    10,408
    
    
    $
    313
    
    
    $
    248
    
    
    $
    2
    
    
    $
    15,192Loans collectively
evaluated for
impairement
    
    $
    253,392
    
    
    $
    9,198
    
    
    $
    210,403
    
    
    $
    72,366
    
    
    $
    29,381
    
    
    $
    10,194
    
    
    $
    584,934
 December 31, 2010Residential
    
    Commercial
    
    Home
    
    Commercial
    
    ConsumerResidential
    
    Land Notes
    
    Mortgages
    
    Equity
    
    Business
    
    and other
    
    TotalAmount of allowance
for loans
individually
evaluated for
impairement
    
    $
    75
    
    
    $
    422
    
    
    $
    496
    
    
    $
    
    
    
    $
    69
    
    
    $
    
    
    
    $
    1,062Amount of allowance
for loans
collectively
evaluated for
impairement
    
    $
    1,276
    
    
    $
    585
    
    
    $
    4,789
    
    
    $
    446
    
    
    $
    598
    
    
    $
    254
    
    
    $
    7,948Loans individually
evaluated for
impairement
    
    $
    3,445
    
    
    $
    778
    
    
    $
    11,938
    
    
    $
    120
    
    
    $
    545
    
    
    $
    5
    
    
    $
    16,831Loans collectively
evaluated for
impairement
    
    $
    262,721
    
    
    $
    9,821
    
    
    $
    213,089
    
    
    $
    74,208
    
    
    $
    27,578
    
    
    $
    10,513
    
    
    $
    597,930
 12




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##### Table of Contents



For the three months ended March 31, 2011Residential
    
    
    Land
    
    
    Commercial
    
    
    Home
    
    
    Commercial
    
    
    ConsumerMortgages
    
    
    Notes
    
    
    Mortgages
    
    
    Equity
    
    
    Business
    
    
    & Other
    
    
    TotalBeginning balance
    
    $
    1,351
    
    
    $
    1,007
    
    
    $
    5,285
    
    
    $
    446
    
    
    $
    667
    
    
    $
    254
    
    
    $
    9,010Charge-offs
    
    
    (54
    )
    
    
    
    
    
    
    (349
    )
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    (436
    )Recoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    9
    
    
    
    79Provision
    
    
    91
    
    
    
    (126
    )
    
    
    70
    
    
    
    (9
    )
    
    
    
    
    
    
    15
    
    
    
    41Ending balance
    
    $
    1,388
    
    
    $
    881
    
    
    $
    5,006
    
    
    $
    437
    
    
    $
    737
    
    
    $
    245
    
    
    $
    8,694
 For the three months ended March 31, 2010Residential
    
    
    Land
    
    
    Commercial
    
    
    Home
    
    
    Commercial
    
    
    ConsumerMortgages
    
    
    Notes
    
    
    Mortgages
    
    
    Equity
    
    
    Business
    
    
    & Other
    
    
    TotalBeginning balance
    
    $
    1,041
    
    
    $
    36
    
    
    $
    8,922
    
    
    $
    348
    
    
    $
    561
    
    
    $
    181
    
    
    $
    11,089Charge-offs
    
    
    (35
    )
    
    
    
    
    
    
    (5,177
    )
    
    
    
    
    
    
    (198
    )
    
    
    (20
    )
    
    
    (5,430
    )Recoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    19Provision
    
    
    (5
    )
    
    
    (2
    )
    
    
    2,231
    
    
    
    (4
    )
    
    
    206
    
    
    
    (5
    )
    
    
    2,421Ending balance
    
    $
    1,001
    
    
    $
    34
    
    
    $
    5,976
    
    
    $
    344
    
    
    $
    569
    
    
    $
    175
    
    
    $
    8,099
  General component
      13




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##### Table of Contents



Allocated component
   Unallocated Component
   March 31, 2011Past due 90Greater
    
    
    
    
    
    
    days or more
    
    
    Loan on30-59 Days
    
    
    60-89 Days
    
    
    Than 90
    
    
    Total Past
    
    
    and still
    
    
    non-Past Due
    
    
    Past Due
    
    
    Days
    
    
    Due
    
    
    accruing
    
    
    accrualMortgage loans on real estateResidential
    
    $
    1,424
    
    
    $
    
    
    
    $
    3,524
    
    
    $
    4,948
    
    
    $
    
    
    
    $
    3,524Land notes
    
    
    248
    
    
    
    82
    
    
    
    313
    
    
    
    643
    
    
    
    
    
    
    
    313Home equity
    
    
    930
    
    
    
    14
    
    
    
    277
    
    
    
    1,221
    
    
    
    
    
    
    
    277Commercial
    
    
    2,166
    
    
    
    
    
    
    
    6,485
    
    
    
    8,651
    
    
    
    
    
    
    
    6,485Commercial Construction
    
    
    
    
    
    
    
    
    
    
    1,589
    
    
    
    1,589
    
    
    
    
    
    
    
    1,589Other LoansCommercial
    
    
    245
    
    
    
    108
    
    
    
    183
    
    
    
    536
    
    
    
    
    
    
    
    183Consumer and other
    
    
    13
    
    
    
    1
    
    
    
    2
    
    
    
    16
    
    
    
    
    
    
    
    2$
    5,026
    
    
    $
    205
    
    
    $
    12,373
    
    
    $
    17,604
    
    
    $
    
    
    
    $
    12,373
 December 31, 2010Past due 90Greater
    
    
    
    
    
    
    days or more
    
    
    Loan on30-59 Days
    
    
    60-89 Days
    
    
    Than 90
    
    
    Total Past
    
    
    and still
    
    
    non-Past Due
    
    
    Past Due
    
    
    Days
    
    
    Due
    
    
    accruing
    
    
    accrualMortgage loans on real estateResidential
    
    $
    1,400
    
    
    $
    799
    
    
    $
    3,445
    
    
    $
    5,644
    
    
    $
    
    
    
    $
    3,445Land notes
    
    
    139
    
    
    
    89
    
    
    
    422
    
    
    
    650
    
    
    
    
    
    
    
    422Home equity
    
    
    178
    
    
    
    14
    
    
    
    120
    
    
    
    312
    
    
    
    
    
    
    
    120Commercial
    
    
    
    
    
    
    125
    
    
    
    7,247
    
    
    
    7,372
    
    
    
    
    
    
    
    7,247Commercial Construction
    
    
    
    
    
    
    
    
    
    
    1,190
    
    
    
    1,190
    
    
    
    
    
    
    
    1,190Other LoansCommercial
    
    
    415
    
    
    
    166
    
    
    
    315
    
    
    
    896
    
    
    
    
    
    
    
    315Consumer and other
    
    
    290
    
    
    
    1
    
    
    
    5
    
    
    
    296
    
    
    
    
    
    
    
    5$
    2,422
    
    
    $
    1,194
    
    
    $
    12,744
    
    
    $
    16,360
    
    
    $
    
    
    
    $
    12,744
 14




---



##### Table of Contents



For the three months endedAt March 31, 2011

    
    
    March 31, 2011Unpaid
    
    
    
    
    
    
    Average
    
    
    InterestRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    IncomeInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    RecognizedImpaired loans without a valuation allowance:Residential real estate
    
    $
    2,576
    
    
    $
    2,576
    
    
    $
    
    
    
    $
    3,275
    
    
    $
    23Land notes
    
    
    266
    
    
    
    266
    
    
    
    
    
    
    
    266
    
    
    
    Home equity
    
    
    313
    
    
    
    313
    
    
    
    
    
    
    
    385
    
    
    
    Commercial real estate
    
    
    6,838
    
    
    
    9,918
    
    
    
    
    
    
    
    7,364
    
    
    
    46Commercial construction
    
    
    1,589
    
    
    
    6,035
    
    
    
    
    
    
    
    1,236
    
    
    
    Commercial
    
    
    145
    
    
    
    367
    
    
    
    
    
    
    
    150
    
    
    
    7Consumer and other
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    8
    
    
    
    Total
    
    
    11,729
    
    
    
    19,477
    
    
    
    
    
    
    
    12,684
    
    
    
    76Impaired loans with a valuation allowance:Residential real estate
    
    $
    1,066
    
    
    $
    1,066
    
    
    $
    164
    
    
    $
    887
    
    
    $
    Land notes
    
    
    313
    
    
    
    313
    
    
    
    313
    
    
    
    313
    
    
    
    Home equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    1,981
    
    
    
    1,981
    
    
    
    266
    
    
    
    1,985
    
    
    
    26Commercial construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    103
    
    
    
    103
    
    
    
    69
    
    
    
    104
    
    
    
    2Consumer and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,463
    
    
    
    3,463
    
    
    
    812
    
    
    
    3,289
    
    
    
    28Total impaired loans
    
    $
    15,192
    
    
    $
    22,940
    
    
    $
    812
    
    
    $
    15,973
    
    
    $
    104
 At December 31, 2010UnpaidRecorded
    
    
    Principal
    
    
    RelatedInvestment
    
    
    Balance
    
    
    AllowanceImpaired loans without a valuation allowance:Residential real estate
    
    $
    2,912
    
    
    $
    2,963
    
    
    $
    Land notes
    
    
    356
    
    
    
    356
    
    
    
    Home equity
    
    
    120
    
    
    
    120
    
    
    
    Commercial real estate
    
    
    7,324
    
    
    
    10,235
    
    
    
    Commercial construction
    
    
    1,190
    
    
    
    5,636
    
    
    
    Commercial
    
    
    433
    
    
    
    690
    
    
    
    Consumer and other
    
    
    5
    
    
    
    5
    
    
    
    Total
    
    
    12,340
    
    
    
    20,005
    
    
    
    Impaired loans with a valuation allowance:Residential real estate
    
    $
    533
    
    
    $
    533
    
    
    $
    75Land notes
    
    
    422
    
    
    
    422
    
    
    
    422Home equity
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    3,424
    
    
    
    3,424
    
    
    
    496Commercial construction
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    112
    
    
    
    112
    
    
    
    69Consumer and other
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,491
    
    
    
    4,491
    
    
    
    1,062Total impaired loans
    
    $
    16,831
    
    
    $
    24,496
    
    
    $
    1,062
  15




---



##### Table of Contents



Loans rated 1-3A
 Loans rated 4
 Loans rated 5
 Loans rated 6
 Loans rated 7
   March 31, 2011
    
    
    December 31, 2010Commercial
    
    
    
    
    
    
    CommercialReal Estate
    
    
    Commercial
    
    
    Real Estate
    
    
    CommercialLoans rated 1-3A
    
    $
    182,296
    
    
    $
    24,458
    
    
    $
    177,985
    
    
    $
    20,474Loans rated 4
    
    
    15,959
    
    
    
    2,251
    
    
    
    17,900
    
    
    
    1,988Loans rated 5
    
    
    22,556
    
    
    
    2,869
    
    
    
    29,142
    
    
    
    5,603Loans rated 6
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    58Loans rated 7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    220,811
    
    
    $
    29,629
    
    
    $
    225,027
    
    
    $
    28,123
 10. Fair Values of Assets and Liabilities
 
 The Company groups its assets and liabilities measured at fair value in three levels, based on the
markets in which the assets and liabilities are traded and the reliability of the assumptions used
to determine fair value, as follows:     Cash and cash equivalents
 Securities available for sale
 16




---



##### Table of Contents



Federal Home Loan Bank stock
 Restricted equity securities and other investments
 Loans receivable
 Deposit liabilities
 Short-term borrowings
 Long-term borrowings
 Accrued interest
  March 31, 2011Level 1
   

    

    Level 2
   

    

    Level 3
    
    
    Fair Value(Dollars in thousands)AssetsDebt Securities:Government-sponsored enterprises (GSE)
    
    $
    
    
    
    $
    143,937
    
    
    $
    
    
    
    $
    143,937Municipal bonds
    
    
    
    
    
    
    1,615
    
    
    
    
    
    
    
    1,615GSE residential mortgage-backed
    
    
    
    
    
    
    6,003
    
    
    
    
    
    
    
    6,003U.S. Government guaranteed residential mortgage-backed
    
    
    
    
    
    
    39,832
    
    
    
    
    
    
    
    39,832Marketable equity securities
    
    
    466
    
    
    
    
    
    
    
    
    
    
    
    466Securities available for sale
    
    
    466
    
    
    
    191,387
    
    
    
    
    
    
    
    191,853Total assets
    
    $
    466
    
    
    $
    191,387
    
    
    $
    
    
    
    $
    191,853
 December 31, 2010Level 1
    


    Level 2
  


    Level 3
    
    
    Fair Value(Dollars in thousands)AssetsDebt Securities:Government-sponsored enterprises (GSE)
    
    $
    
    
    
    $
    131,624
    
    
    $
    
    
    
    $
    131,624Municipal bonds
    
    
    
    
    
    
    3,145
    
    
    
    
    
    
    
    3,145Corporate bonds and other obligations
    
    
    
    
    
    
    402
    
    
    
    
    
    
    
    402GSE residential mortgage-backed
    
    
    
    
    
    
    6,594
    
    
    
    
    
    
    
    6,594U.S. Government guaranteed residential mortgage-backed
    
    
    
    
    
    
    42,967
    
    
    
    
    
    
    
    42,967Marketable equity securities
    
    
    956
    
    
    
    
    
    
    
    
    
    
    
    956Securities available for sale
    
    
    956
    
    
    
    184,732
    
    
    
    
    
    
    
    185,688Total assets
    
    $
    956
    
    
    $
    184,732
    
    
    $
    
    
    
    $
    185,688
 17




---



##### Table of Contents



Quarter EndedMarch 31, 2011
    
    
    March 31, 2011TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Gains/(Losses)(Dollars in thousands)AssetsImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    10,861
    
    
    $
    20Other investments
    
    
    
    
    
    
    
    
    
    
    4,132
    
    
    
    (36
    )Foreclosed assets
    
    
    
    
    
    
    
    
    
    
    2,365
    
    
    
    (213
    )Total assets
    
    $
    
    
    
    $
    
    
    
    $
    17,358
    
    
    $
    (229
    )
 Quarter EndedMarch 31, 2010
    
    
    March 31, 2010TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Gains/(Losses)(Dollars in thousands)AssetsImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    16,380
    
    
    $
    (2,103
    )Other investments
    
    
    
    
    
    
    
    
    
    
    4,449
    
    
    
    (299
    )Foreclosed assets
    
    
    
    
    
    
    
    
    
    
    1,781
    
    
    
    (75
    )Total assets
    
    $
    
    
    
    $
    
    
    
    $
    22,610
    
    
    $
    (2,477
    )
 Impaired loans:
 Other investments:
 Foreclosed assets:
 Summary of Fair Values of Financial Instruments
  18




---



##### Table of Contents



March 31, 2011
    
    December 31, 2010Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    Value(Dollars in thousands)Financial assets:Cash and cash equivalents
    
    $
    27,627
    
    
    $
    27,627
    
    
    $
    27,092
    
    
    $
    27,092Securities  Available for sale
    
    
    191,853
    
    
    
    191,853
    
    
    
    185,688
    
    
    
    185,688Securities  Held to maturity
    
    
    97
    
    
    
    97
    
    
    
    97
    
    
    
    97Federal Home Loan Bank of
Boston stock
    
    
    10,932
    
    
    
    10,932
    
    
    
    10,932
    
    
    
    10,932Savings Bank Life Insurance stock
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709Other investments
    
    
    4,222
    
    
    
    4,222
    
    
    
    3,905
    
    
    
    3,905Loans and loans held for sale
    
    
    593,524
    
    
    
    607,248
    
    
    
    610,941
    
    
    
    626,967Accrued interest receivable
    
    
    2,577
    
    
    
    2,577
    
    
    
    2,631
    
    
    
    2,631Financial liabilities:Deposits
    
    
    676,795
    
    
    
    682,351
    
    
    
    685,245
    
    
    
    691,501Repurchase agreements
    
    
    3,671
    
    
    
    3,671
    
    
    
    5,329
    
    
    
    5,329FHLB advances
    
    
    105,385
    
    
    
    112,081
    
    
    
    105,388
    
    
    
    112,882Mortgagors escrow accounts
    
    
    1,006
    
    
    
    1,006
    
    
    
    1,211
    
    
    
    1,211
 
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
   19




---



##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses Loans
 Income Taxes:
  Other-Than-Temporary Impairment (OTTI):
 Fair Values of Assets and Liabilities: Fair Values of Assets and Liabilities
 Goodwill:
   20




---



##### Table of Contents



Comparison of Financial Condition at March 31, 2011 and December 31, 2010
 Overview:
 Investment Activities
 At March 31, 2011
    
    
    At December 31, 2010Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(Dollars in thousands)Securities available for sale:Government-sponsored enterprises (GSE)
    
    $
    144,881
    
    
    $
    143,937
    
    
    $
    132,221
    
    
    $
    131,624Municipal bonds
    
    
    1,599
    
    
    
    1,615
    
    
    
    3,145
    
    
    
    3,145Corporate bonds and other obligations
    
    
    
    
    
    
    
    
    
    
    401
    
    
    
    402GSE residential mortgage-backed
    
    
    5,775
    
    
    
    6,003
    
    
    
    6,370
    
    
    
    6,594U.S. Government guaranteed residential mortgage-backed
    
    
    39,702
    
    
    
    39,832
    
    
    
    42,775
    
    
    
    42,967Total debt securities
    
    
    191,957
    
    
    
    191,387
    
    
    
    184,912
    
    
    
    184,732Marketable equity securities
    
    
    365
    
    
    
    466
    
    
    
    888
    
    
    
    956Total securities available for sale
    
    
    192,322
    
    
    
    191,853
    
    
    
    185,800
    
    
    
    185,688Securities held to maturity:Other bonds and obligations
    
    
    97
    
    
    
    97
    
    
    
    97
    
    
    
    97Restricted equity securities and other investments:Federal Home Loan Bank of Boston stock
    
    
    10,932
    
    
    
    10,932
    
    
    
    10,932
    
    
    
    10,932Savings Bank Life Insurance
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709Real estate partnerships
    
    
    4,132
    
    
    
    4,132
    
    
    
    3,815
    
    
    
    3,815Other investments
    
    
    90
    
    
    
    90
    
    
    
    90
    
    
    
    90Total restricted equity securities
and other investments
    
    
    16,863
    
    
    
    16,863
    
    
    
    16,546
    
    
    
    16,546Total securities
    
    $
    209,282
    
    
    $
    208,813
    
    
    $
    202,443
    
    
    $
    202,331
 Lending Activities: Loans
 21




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##### Table of Contents



Non-performing Assets:
 At March 31,
    
    
    At December 31,2011
    
    
    2010(Dollars in thousands)Non-accrual loans:Residential real estate
    
    $
    3,524
    
    
    $
    3,445Land notes
    
    
    313
    
    
    
    422Home equity
    
    
    277
    
    
    
    120Commercial real estate
    
    
    6,485
    
    
    
    7,247Commercial construction
    
    
    1,589
    
    
    
    1,190Commercial
    
    
    183
    
    
    
    315Consumer and other
    
    
    2
    
    
    
    5Total non-accrual loans
    
    
    12,373
    
    
    
    12,744Loans greater than 90 days delinquent and still
accruing:Residential real estate
    
    
    
    
    
    
    Land notes
    
    
    
    
    
    
    Home equity
    
    
    
    
    
    
    Commercial real estate
    
    
    
    
    
    
    Commercial construction
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    Consumer and other
    
    
    
    
    
    
    Total loans 90 days delinquent and still accruing
    
    
    
    
    
    
    Total non-performing loans
    
    
    12,373
    
    
    
    12,744Other real estate owned
    
    
    2,365
    
    
    
    2,216Total non-performing assets (NPAs)
    
    $
    14,738
    
    
    $
    14,960Troubled debt restructurings included in NPAs
    
    $
    2,492
    
    
    $
    2,451Troubled debt restructurings not included in NPAs
    
    
    811
    
    
    
    2,098Total troubled debt restructurings
    
    $
    3,303
    
    
    $
    4,549Ratios:Non-performing loans to total loans
    
    
    2.06
    %
    
    
    2.07
    %Non-performing assets to total assets
    
    
    1.63
    %
    
    
    1.63
    %
  Allowance for Loan Losses : Loans
 22




---



##### Table of Contents



At or for the three monthsended March 31,2011
    
    
    2010(Dollars in thousands)Balance at beginning of period
    
    $
    9,010
    
    
    $
    11,089Total charge-offs
    
    
    (436
    )
    
    
    (5,430
    )Total recoveries
    
    
    79
    
    
    
    19Net recoveries (charge-offs)
    
    
    (357
    )
    
    
    (5,411
    )Provision for loan losses
    
    
    41
    
    
    
    2,421Balance at end of period
    
    $
    8,694
    
    
    $
    8,099Ratios:Net
recoveries (charge-offs) to average loans outstanding  12 month rolling average
    
    
    (1.16
    %)
    
    
    (0.88
    %)Allowance for loan losses to non-performing loans at end of period
    
    
    70.27
    %
    
    
    66.56
    %Allowance for loan losses to total loans at end of period
    
    
    1.45
    %
    
    
    1.25
    %
 Mortgage Servicing Rights
 Deposits
 At March 31, 2011
    
    
    At December 31, 2010Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in thousands)Deposit type:Demand
    
    $
    78,115
    
    
    
    11.54
    %
    
    $
    75,116
    
    
    
    10.96
    %Regular savings
    
    
    54,610
    
    
    
    8.07
    
    
    
    53,504
    
    
    
    7.81Relationship savings
    
    
    144,431
    
    
    
    21.34
    
    
    
    142,110
    
    
    
    20.74Money market deposits
    
    
    62,701
    
    
    
    9.26
    
    
    
    68,611
    
    
    
    10.01NOW deposits
    
    
    47,243
    
    
    
    6.98
    
    
    
    48,197
    
    
    
    7.03Total transaction accounts
    
    
    387,100
    
    
    
    57.20
    
    
    
    387,538
    
    
    
    56.55Term certificates less
than $100,000
    
    
    156,416
    
    
    
    23.11
    
    
    
    162,408
    
    
    
    23.70Term certificates
$100,000 or more
    
    
    133,279
    
    
    
    19.69
    
    
    
    135,299
    
    
    
    19.75Total certificate accounts
    
    
    289,695
    
    
    
    42.80
    
    
    
    297,707
    
    
    
    43.45Total deposits
    
    $
    676,795
    
    
    
    100.00
    %
    
    $
    685,245
    
    
    
    100.00
    %
  Borrowings:
 Stockholders Equity:
 Comparison of Operating Results for the Three Months Ended March 31, 2011 and 2010
  23




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##### Table of Contents



Analysis of Net Interest Income
   Three Months Ended March 31, 2011
    
    

    Three Months Ended March 31, 2010Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  net (2)
    
    $
    601,640
    
    
    $
    8,018
    
    
    
    5.33
    %
    
    $
    647,710
    
    
    $
    9,296
    
    
    
    5.74
    %Investment securities
    
    
    205,265
    
    
    
    890
    
    
    
    1.73
    %
    
    
    190,406
    
    
    
    1,352
    
    
    
    2.84
    %Short-term investments
    
    
    9,722
    
    
    
    4
    
    
    
    0.16
    %
    
    
    15,743
    
    
    
    6
    
    
    
    0.15
    %Total interest-earning assets
    
    
    816,627
    
    
    
    8,912
    
    
    
    4.37
    %
    
    
    853,859
    
    
    
    10,654
    
    
    
    4.99
    %Non-interest-earning assets
    
    
    82,124
    
    
    
    
    
    
    
    
    
    
    
    78,336Total assets
    
    $
    898,751
    
    
    
    
    
    
    
    
    
    
    $
    932,195Interest-bearing liabilities:Savings deposits
    
    $
    52,035
    
    
    
    27
    
    
    
    0.21
    %
    
    $
    50,232
    
    
    
    33
    
    
    
    0.26
    %Relationship savings
    
    
    141,340
    
    
    
    181
    
    
    
    0.51
    %
    
    
    128,198
    
    
    
    324
    
    
    
    1.01
    %Money market
    
    
    63,938
    
    
    
    68
    
    
    
    0.43
    %
    
    
    64,336
    
    
    
    131
    
    
    
    0.81
    %NOW accounts
    
    
    46,054
    
    
    
    26
    
    
    
    0.23
    %
    
    
    44,208
    
    
    
    34
    
    
    
    0.31
    %Certificates of deposit
    
    
    294,141
    
    
    
    1,542
    
    
    
    2.10
    %
    
    
    289,174
    
    
    
    1,917
    
    
    
    2.65
    %Total interest-bearing deposits
    
    
    597,508
    
    
    
    1,844
    
    
    
    1.23
    %
    
    
    576,148
    
    
    
    2,439
    
    
    
    1.69
    %Borrowed funds
    
    
    110,720
    
    
    
    1,021
    
    
    
    3.69
    %
    
    
    160,469
    
    
    
    1,459
    
    
    
    3.64
    %Total interest-bearing
liabilities
    
    
    708,228
    
    
    
    2,865
    
    
    
    1.62
    %
    
    
    736,617
    
    
    
    3,898
    
    
    
    2.12
    %Non-interest-bearing liabilities
    
    
    77,985
    
    
    
    
    
    
    
    
    
    
    
    71,916Total liabilities
    
    
    786,213
    
    
    
    
    
    
    
    
    
    
    
    808,533Equity
    
    
    112,538
    
    
    
    
    
    
    
    
    
    
    
    123,662Total liabilities and equity
    
    $
    898,751
    
    
    
    
    
    
    
    
    
    
    $
    932,195Net interest income
    
    
    
    
    
    $
    6,047
    
    
    
    
    
    
    
    
    
    
    $
    6,756Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.75
    %
    
    
    
    
    
    
    
    
    
    
    2.87
    %Net interest-earning assets (4)
    
    $
    108,399
    
    
    
    
    
    
    
    
    
    
    $
    117,242Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    3.16
    %Average interest-earning assets
to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    115.31
    %
    
    
    
    
    
    
    
    
    
    
    115.92
    %
 
 (1)
    
    Yields and rates are annualized.(2)
    
    Includes loans held for sale and non-accrual loans.(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.  24




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##### Table of Contents



Three Months Ended March 31,2011 vs. 2010Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  net
    
    $
    (638
    )
    
    $
    (640
    )
    
    $
    (1,278
    )Investment securities
    
    
    115
    
    
    
    (577
    )
    
    
    (462
    )Short-term investments
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Total interest-earning assets
    
    
    (525
    )
    
    
    (1,217
    )
    
    
    (1,742
    )Interest-bearing liabilities:Savings deposits
    
    
    1
    
    
    
    (7
    )
    
    
    (6
    )Relationship savings
    
    
    37
    
    
    
    (180
    )
    
    
    (143
    )Money market
    
    
    (1
    )
    
    
    (62
    )
    
    
    (63
    )NOW accounts
    
    
    1
    
    
    
    (9
    )
    
    
    (8
    )Certificates of deposit
    
    
    34
    
    
    
    (409
    )
    
    
    (375
    )Total deposits
    
    
    72
    
    
    
    (667
    )
    
    
    (595
    )Borrowed funds
    
    
    (458
    )
    
    
    20
    
    
    
    (438
    )Total interest-bearing liabilities
    
    
    (386
    )
    
    
    (647
    )
    
    
    (1,033
    )Change in net interest income
    
    $
    (139
    )
    
    $
    (570
    )
    
    $
    (709
    )
 Net interest income
 Interest income
 Interest expense
 Provision for loan losses
 Non-interest income
 Non-interest expense
 25




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##### Table of Contents



Income tax
 Minimum Regulatory Capital Requirements:
 Minimum To Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)March 31, 2011:Total capital to risk weighted assets
    
    $
    74,344
    
    
    
    12.6
    %
    
    $
    47,384
    
    
    
    8.0
    %
    
    $
    59,230
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:
    
    
    66,880
    
    
    
    11.3
    
    
    
    23,692
    
    
    
    4.0
    
    
    
    35,538
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    66,880
    
    
    
    7.8
    
    
    
    34,463
    
    
    
    4.0
    
    
    
    43,079
    
    
    
    5.0December 31, 2010:Total capital to risk weighted assets:
    
    $
    72,341
    
    
    
    12.0
    %
    
    $
    48,249
    
    
    
    8.0
    %
    
    $
    60,311
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:
    
    
    64,754
    
    
    
    10.7
    
    
    
    24,124
    
    
    
    4.0
    
    
    
    36,187
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    64,754
    
    
    
    7.2
    
    
    
    36,155
    
    
    
    4.0
    
    
    
    45,194
    
    
    
    5.0
 Contractual Obligations
 March 31, 2011More than
    
    More thanOne Year
    
    Three YearsOne Year
    
    through
    
    through
    
    Over FiveTotal
    
    or Less
    
    Three Years
    
    Five Years
    
    Years(Dollars in thousands)Federal Home Loan Bank of Boston advances
    
    $
    105,385
    
    
    $
    2,000
    
    
    $
    43,000
    
    
    $
    22,200
    
    
    $
    38,185Securities sold under agreements to repurchase
    
    
    3,671
    
    
    
    3,671
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    109,056
    
    
    $
    5,671
    
    
    $
    43,000
    
    
    $
    22,200
    
    
    $
    38,185
 Off-Balance Sheet Arrangements:
 26




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##### Table of Contents



March 31, 2011More than
    
    
    More thanOne Year
    
    
    Years ThreeOne Year
    
    
    through
    
    
    Through
    
    
    Over FiveTotal
    
    
    or Less
    
    
    Three Years
    
    
    Five Years
    
    
    years(Dollars in thousands)Commitments to grant loans (1)
    
    $
    10,581
    
    
    $
    10,581
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    21,254
    
    
    
    21,254
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (2)
    
    
    67,560
    
    
    
    2,977
    
    
    
    10,297
    
    
    
    15,393
    
    
    
    38,893Unused portion of construction loans (3)
    
    
    1,448
    
    
    
    1,448
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft lines-of-credit(4)
    
    
    4,333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,333Unused portion of personal lines-of-credit(5)
    
    
    689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    689Standby letters of credit(6)
    
    
    2,871
    
    
    
    2,871
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies(7)
    
    
    3,934
    
    
    
    
    
    
    
    3,934
    
    
    
    
    
    
    
    Total loan and other commitments
    
    $
    112,670
    
    
    $
    39,131
    
    
    $
    14,231
    
    
    $
    15,393
    
    
    $
    43,915
 
 (1)
    
    Commitments for loans are extended to customers for up to 60 days after which they expire.(2)
    
    Unused portions of home equity loans are available to the borrower for up to 10 years.(3)
    
    Unused portions of residential construction loans are available to the borrower for up to one
year. Commercial construction loans maturities may be longer than one year.(4)
    
    Unused portion of checking overdraft lines-of-credit are available to customers in good
standing indefinitely.(5)
    
    Unused portion of personal lines-of-credit are available to customers in good standing
indefinitely.(6)
    
    Standby letters of credit are generally available for less than one year.(7)
    
    Other commitments relate primarily to potential additional capital calls the Company is
committed to contribute as part of its investment in certain real estate limited
partnerships. 
 Item 3: Quantitative and Qualitative Disclosures about Market Risks
  
 Item 4: Controls and Procedures
   27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 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  None
 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5 Other Information
  28




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##### Table of Contents



Item 6 Exhibits
 3.1
    
    Certificate of Incorporation of Legacy Bancorp, Inc.(1)3.2
    
    Bylaws of Legacy Bancorp, Inc. (as amended) (1)10.1
    
    Legacy Banks ESOP Trust Agreement(2)10.2
    
    ESOP Plan Document (2)10.3
    
    ESOP Loan Documents (2)10.4.1
    
    Employment Agreement between Legacy Banks and J. Williar Dunlaevy (2)10.4.2
    
    Employment Agreement between Legacy Banks and Michael A. Christopher (2)10.4.3
    
    Employment Agreement between Legacy Banks and Steven F. Pierce (2)10.4.4
    
    Employment Agreement between Legacy Banks and Stephen M. Conley (2)10.4.5
    
    Employment Agreement between Legacy Banks and Richard M. Sullivan (2)10.5.1
    
    Employment Agreement between Legacy Bancorp, Inc. and J. Williar Dunlaevy (2)10.5.2
    
    Employment Agreement between Legacy Bancorp, Inc. and Michael A. Christopher (2)10.5.3
    
    Employment Agreement between Legacy Bancorp, Inc. and Steven F. Pierce (2)10.5.4
    
    Employment Agreement between Legacy Bancorp, Inc. and Stephen M. Conley (2)10.5.5
    
    Employment Agreement between Legacy Bancorp, Inc. and Richard M. Sullivan (2)10.5.6
    
    Separation Agreement and General Release dated as of November 5, 2007 between Legacy Bancorp,
Inc., Legacy Banks and Michael A. Christopher (4)10.5.7
    
    Separation Agreement and General Release dated as of December 21, 2007 between Legacy Bancorp,
Inc., Legacy Banks and Stephen M. Conley (5)10.5.8
    
    Consulting Agreement dated as of November 5, 2007 between Legacy Bancorp, Inc., Legacy Banks and
Michael A. Christopher (4)10.5.9
    
    Purchase Agreement by and between First Niagara Bank and Legacy Banks dated as of July 25, 2007 (6)10.5.10
    
    Change In Control Agreement between Legacy Bancorp, Inc. and Paul H. Bruce (7)10.5.11
    
    Change In Control Agreement between Legacy Bancorp, Inc. and Kimberly A. Mathews (7)10.5.12
    
    Purchase Agreement by and between The Bank of Western Massachusetts and Legacy Banks dated as of
December 15, 2008 (8)10.5.13
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)10.5.14
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and Steven F. Pierce (9)10.5.15
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and Richard M. Sullivan (9)10.5.16
    
    Amended and Restated Supplemental Executive Retirement Agreement effective as of November 20, 2008
by and between Legacy Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)10.5.17
    
    Employment Agreement effective as of April, 2010 by and between Legacy Bancorp, Inc., Legacy Banks
and Patrick J. Sullivan (10)10.5.18
    
    Separation Agreement and General Release dated as of May 11, 2010 between Legacy Bancorp, Inc.,
Legacy Banks and Steven F. Pierce (11)10.5.19
    
    Change In Control Agreement between Legacy Bancorp, Inc. and Richard M. Sullivan (12)10.5.20
    
    Definitive Merger Agreement between Legacy Bancorp, Inc. and Berkshire Hills Bancorp (13)10.11
    
    Amended and Restated 2006 Equity Incentive Plan (13)11.0
    
    Statement re: Computation of Per Share Earnings is incorporated herein by reference to Notes to
Consolidated Financial Statementswithin Part I, 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 March 31, 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 Definitive Proxy Statement on Form DEF 14A
filed September 28, 2006(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed November 5,
2007.(5)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed December 21,
2007.(6)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed July 25,
2007.(7)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed October 30,
2008.(8)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed December 16,
2008.(9)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed November 25,
2008.(10)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed March 4,
2010.(11)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed May 11,
2010.(12)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed November 1,
2010.(13)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K filed December 22,
2010. 29




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##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date: May 10, 2011
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and 
Chairman of the BoardDate: May 10, 2011
    /s/ Paul H. BrucePaul H. BruceSenior Vice President, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer) 30