##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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
  o o þ
 o þ




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##### 



LEGACY BANCORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page No.Part I  Financial InformationItem 1 Financial StatementsConsolidated Balance Sheets as of June 30, 2006, and December 31, 2005
    
    
    3Consolidated Statements of Income for the three months ended June 30, 2006 and 2005 and the six months ended June 30, 2006 and 2005
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the six months ended June 30, 2006 and 2005
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3 Quantitative and Qualitative Disclosures About Market Risks
    
    
    21Item 4 Controls and Procedures
    
    
    22Part II  Other InformationItem 1 Legal Proceedings
    
    
    22Item 1A Risk Factors
    
    
    22Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3 Defaults Upon Senior Securities
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    22Item 5 Other Information
    
    
    23Item 6 Exhibits
    
    
    23Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32 Section 906 Certification of CEO & CFO
  1




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Item 1: Financial Statements
  2




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LEGACY BANCORP, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 June 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCash and due from banks
    
    $
    19,911
    
    
    $
    12,331Short-term investments
    
    
    4,592
    
    
    
    6,901Cash and cash equivalents
    
    
    24,503
    
    
    
    19,232Securities and other investments
    
    
    177,790
    
    
    
    179,855Loans held for sale
    
    
    187
    
    
    
    126Loans, net of allowance for loan losses of $4,693 in
2006 and $4,220 in 2005
    
    
    573,388
    
    
    
    547,500Premises and equipment, net
    
    
    13,988
    
    
    
    14,236Accrued interest receivable
    
    
    3,602
    
    
    
    3,235Goodwill, net
    
    
    3,085
    
    
    
    3,085Net deferred tax asset
    
    
    5,842
    
    
    
    5,258Bank-owned life insurance
    
    
    4,207
    
    
    
    4,153Other assets
    
    
    1,578
    
    
    
    1,650Total Assets
    
    $
    808,170
    
    
    $
    778,330LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    497,913
    
    
    $
    474,512Securities sold under agreements to repurchase
    
    
    4,500
    
    
    
    4,999Federal Home Loan Bank advances
    
    
    151,979
    
    
    
    145,923Mortgagors escrow accounts
    
    
    905
    
    
    
    931Accrued expenses and other liabilities
    
    
    5,720
    
    
    
    5,799Total liabilities
    
    
    661,017
    
    
    
    632,164Commitments and contingenciesStockholders EquityPreferred Stock ($.01 par value, 10,000,000 shares
authorized, none issues or outstanding)
    
    
    
    
    
    
    Common Stock ($.01 par value, 40,000,000 shares
authorized, 10,308,600 issued and outstanding at
June 30, 2006 and December 31, 2005
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    100,240
    
    
    
    100,202Unearned Compensation  ESOP
    
    
    (9,886
    )
    
    
    (10,252
    )Retained earnings
    
    
    58,724
    
    
    
    57,202Accumulated other comprehensive loss
    
    
    (2,028
    )
    
    
    (1,089
    )Total stockholders equity
    
    
    147,153
    
    
    
    146,166Total Liabilities and Stockholders Equity
    
    $
    808,170
    
    
    $
    778,330
  3




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LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Interest and dividend income:Loans
    
    $
    8,861
    
    
    $
    7,588
    
    
    $
    17,375
    
    
    $
    14,867Securities:Taxable
    
    
    1,796
    
    
    
    1,187
    
    
    
    3,559
    
    
    
    2,346Tax-Exempt
    
    
    60
    
    
    
    43
    
    
    
    115
    
    
    
    73Short-term investments
    
    
    131
    
    
    
    52
    
    
    
    211
    
    
    
    94Total interest and
dividend income
    
    
    10,848
    
    
    
    8,870
    
    
    
    21,260
    
    
    
    17,380Interest expense:Deposits
    
    
    3,268
    
    
    
    1,968
    
    
    
    5,969
    
    
    
    3,657Federal Home Loan Bank advances
    
    
    1,608
    
    
    
    1,636
    
    
    
    3,183
    
    
    
    3,289Other borrowed funds
    
    
    32
    
    
    
    19
    
    
    
    68
    
    
    
    37Total interest expense
    
    
    4,908
    
    
    
    3,623
    
    
    
    9,220
    
    
    
    6,983Net interest income
    
    
    5,940
    
    
    
    5,247
    
    
    
    12,040
    
    
    
    10,397Provision for loan losses
    
    
    176
    
    
    
    130
    
    
    
    340
    
    
    
    377Net interest income, after provision for
loan losses
    
    
    5,764
    
    
    
    5,117
    
    
    
    11,700
    
    
    
    10,020Non-interest income:Customer service fees
    
    
    653
    
    
    
    676
    
    
    
    1,307
    
    
    
    1,338Portfolio management fees
    
    
    261
    
    
    
    226
    
    
    
    499
    
    
    
    439Income from bank owned life insurance
    
    
    26
    
    
    
    21
    
    
    
    53
    
    
    
    42Insurance, annuities and mutual fund
fees
    
    
    33
    
    
    
    29
    
    
    
    63
    
    
    
    72Gain on sales of securities, net
    
    
    127
    
    
    
    35
    
    
    
    166
    
    
    
    77Loss on impairment of securities
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    (25
    )Gain on sales of loans, net
    
    
    27
    
    
    
    49
    
    
    
    67
    
    
    
    69Miscellaneous
    
    
    11
    
    
    
    2
    
    
    
    21
    
    
    
    4Total non-interest income
    
    
    1,138
    
    
    
    1,013
    
    
    
    2,176
    
    
    
    2,016Non-interest expenses:Salaries and employee benefits
    
    
    2,951
    
    
    
    2,566
    
    
    
    5,785
    
    
    
    5,073Occupancy and equipment
    
    
    605
    
    
    
    548
    
    
    
    1,272
    
    
    
    1,102Data processing
    
    
    490
    
    
    
    482
    
    
    
    971
    
    
    
    920Professional fees
    
    
    397
    
    
    
    132
    
    
    
    766
    
    
    
    261Advertising
    
    
    237
    
    
    
    197
    
    
    
    388
    
    
    
    349Other general and administrative
    
    
    618
    
    
    
    585
    
    
    
    1,361
    
    
    
    1,191Total non-interest
expenses
    
    
    5,298
    
    
    
    4,510
    
    
    
    10,543
    
    
    
    8,896Income before income taxes
    
    
    1,604
    
    
    
    1,620
    
    
    
    3,333
    
    
    
    3,140Provision for income taxes
    
    
    591
    
    
    
    622
    
    
    
    1,239
    
    
    
    1,203Net income
    
    $
    1,013
    
    
    $
    998
    
    
    $
    2,094
    
    
    $
    1,937Earnings per shareBasic
    
    $
    0.11
    
    
    
    n/a
    
    
    $
    0.22
    
    
    
    n/aDiluted
    
    $
    0.11
    
    
    
    n/a
    
    
    $
    0.22
    
    
    
    n/aWeighted average shares outstandingBasic
    
    
    9,552,787
    
    
    
    n/a
    
    
    
    9,545,953
    
    
    
    n/aDiluted
    
    
    9,552,787
    
    
    
    n/a
    
    
    
    9,545,953
    
    
    
    n/a
  4




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LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
 (Dollars in thousands)
 (Unaudited)
 AccumulatedAdditional
    
    
    Unearned
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Compensation
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    ESOP
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance at December 31, 2004
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    59,437
    
    
    $
    10
    
    
    $
    59,447Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,937
    
    
    
    
    
    
    
    1,937Change in net unrealized
gain/loss on securities
available for sale, net of
reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (334
    )
    
    
    (334
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,603Balance at June 30, 2005
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    61,374
    
    
    $
    (324
    )
    
    $
    61,050Balance at December 31, 2005
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    100,202
    
    
    $
    (10,252
    )
    
    $
    57,202
    
    
    $
    (1,089
    )
    
    $
    146,166Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,094
    
    
    
    
    
    
    
    2,094Change in net unrealized
gain/loss on securities
available for sale, net of
reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (939
    )
    
    
    (939
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,155Cash dividends declared ($0.06
per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (572
    )
    
    
    
    
    
    
    (572
    )Change in unearned compensation
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    404Balance at June 30, 2006
    
    
    10,308,600
    
    
    $
    103
    
    
    $
    100,240
    
    
    $
    (9,886
    )
    
    $
    58,724
    
    
    $
    (2,028
    )
    
    $
    147,153
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LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 Six Months ended June 30,2006
    
    
    2005(Unaudited)Cash flows from operating activities:Net income
    
    $
    2,094
    
    
    $
    1,937Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    340
    
    
    
    377Net amortization of securities
    
    
    (598
    )
    
    
    139Depreciation and amortization expense
    
    
    500
    
    
    
    459Gain on sales of securities, net
    
    
    (166
    )
    
    
    (77
    )Loss on impairment of securities available for sale
    
    
    
    
    
    
    25Gain on sales of loans, net
    
    
    (67
    )
    
    
    (69
    )Loans originated for sale
    
    
    (3,949
    )
    
    
    (5,290
    )Proceeds from sale of loans
    
    
    3,955
    
    
    
    5,033Deferred tax benefit
    
    
    
    
    
    
    602Employee Stock Ownership Plan expense
    
    
    404
    
    
    
    Net change in:Bank-owned life insurance
    
    
    (54
    )
    
    
    167Accrued interest receivable
    
    
    (367
    )
    
    
    (50
    )Other assets
    
    
    72
    
    
    
    (730
    )Accrued expenses and other liabilities
    
    
    (79
    )
    
    
    (758
    )Net cash provided by operating activities
    
    
    2,085
    
    
    
    1,765Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    1,162
    
    
    
    3,652Maturities, prepayments and calls
    
    
    51,097
    
    
    
    10,021Purchases
    
    
    (50,044
    )
    
    
    (12,193
    )Purchases of Federal Home Loan Bank stock
    
    
    
    
    
    
    (226
    )Purchase of other investments
    
    
    (1,063
    )
    
    
    Maturities, prepayments and call of other investments
    
    
    154
    
    
    
    Loan originations and purchases, net of principal payments
    
    
    (26,228
    )
    
    
    (15,209
    )Additions to premises and equipment
    
    
    (252
    )
    
    
    (853
    )Net cash used in investing activities
    
    
    (25,174
    )
    
    
    (14,808
    )
   6




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##### Table of Contents



LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in thousands)
 Six Months ended June 30,2006
    
    
    2005(Unaudited)Cash flows from financing activities:Net increase in deposits
    
    
    23,401
    
    
    
    32,356Net decrease in securities sold under
agreement to repurchase
    
    
    (499
    )
    
    
    (77
    )Repayment of Federal Home Loan Bank advances
    
    
    (84,290
    )
    
    
    (76,941
    )Proceeds from Federal Home Loan Bank advances
    
    
    90,346
    
    
    
    69,637Net decrease in mortgagors escrow accounts
    
    
    (26
    )
    
    
    (212
    )Payment of dividends on common stock
    
    
    (572
    )
    
    
    Net cash provided by financing activities
    
    
    28,360
    
    
    
    24,763Net change in cash and cash equivalents
    
    
    5,271
    
    
    
    11,720Cash and
cash equivalents at beginning of period
    
    
    19,232
    
    
    
    16,798Cash and
cash equivalents at end of period
    
    $
    24,503
    
    
    $
    28,518Supplemental cash flow information:Interest paid on deposits
    
    $
    6,485
    
    
    $
    3,620Interest paid on Federal Home Loan Bank advances
    
    
    4,197
    
    
    
    3,269Interest paid on other borrowed funds
    
    
    68
    
    
    
    37Income taxes paid
    
    
    1,165
    
    
    
    1,200Transfers from loans to loans held for sale
    
    
    
    
    
    
    6,629
  7




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##### 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 June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income applicable to common
stock (in thousands)
    
    $
    1,013
    
    
    
    n/a
    
    
    $
    2,094
    
    
    
    n/aAverage number of shares outstanding
    
    
    10,308,600
    
    
    
    n/a
    
    
    
    10,308,600
    
    
    
    n/aLess: average number of unallocated
ESOP shares
    
    
    (755,813
    )
    
    
    n/a
    
    
    
    (762,647
    )
    
    
    n/aAverage number of basic shares
outstanding
    
    
    9,552,787
    
    
    
    n/a
    
    
    
    9,545,953
    
    
    
    n/aPlus: potential shares that may be
issued by the Company
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aAverage number of diluted shares
outstanding
    
    
    9,552,787
    
    
    
    n/a
    
    
    
    9,545,953
    
    
    
    n/aBasic earnings per share
    
    $
    0.11
    
    
    
    n/a
    
    
    $
    0.22
    
    
    
    n/aDiluted earnings per share
    
    $
    0.11
    
    
    
    n/a
    
    
    $
    0.22
    
    
    
    n/a
 8




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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




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Comparison of Financial Condition At June 30, 2006 and December 31, 2005
 Overview:
 Investment Activities
 At June 30, 2006
    
    
    At December 31, 2005Amortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(Dollars in Thousands)Securities available for sale:Government-sponsored enterprises
    
    $
    98,574
    
    
    $
    96,804
    
    
    $
    95,613
    
    
    $
    94,369Municipal bonds
    
    
    6,772
    
    
    
    6,578
    
    
    
    6,061
    
    
    
    6,002Corporate bonds and other obligations
    
    
    4,483
    
    
    
    4,465
    
    
    
    6,149
    
    
    
    6,161Mortgage-backed securities
    
    
    52,432
    
    
    
    50,281
    
    
    
    56,896
    
    
    
    55,505Total debt securities
    
    
    162,261
    
    
    
    158,128
    
    
    
    164,719
    
    
    
    162,037Marketable equity securities:Common stock
    
    
    5,404
    
    
    
    6,334
    
    
    
    4,399
    
    
    
    5,399Total securities available for sale
    
    
    167,665
    
    
    
    164,462
    
    
    
    169,118
    
    
    
    167,436Securities held to maturity:Other bonds
    
    
    97
    
    
    
    97
    
    
    
    97
    
    
    
    97Restricted equity securities and other investments:Federal Home Loan Bank of Boston stock
    
    
    9,056
    
    
    
    9,056
    
    
    
    9,056
    
    
    
    9,056Savings Bank Life Insurance and DIF stock
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709
    
    
    
    1,709Other investments
    
    
    2,466
    
    
    
    2,466
    
    
    
    1,557
    
    
    
    1,557Total restricted equity securities
and other investments
    
    
    13,231
    
    
    
    13,231
    
    
    
    12,322
    
    
    
    12,322Total securities
    
    $
    180,993
    
    
    $
    177,790
    
    
    $
    181,537
    
    
    $
    179,855
 Lending Activities:
 10




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##### Table of Contents



At June 30, 2006
    
    
    At December 31, 2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans on real estate:Residential
    
    
    318,043
    
    
    
    55.08
    %
    
    
    308,008
    
    
    
    55.86
    %Commercial
    
    
    171,481
    
    
    
    29.70
    
    
    
    160,675
    
    
    
    29.14Home equity
    
    
    59,562
    
    
    
    10.31
    
    
    
    58,640
    
    
    
    10.64549,086
    
    
    
    95.09
    
    
    
    527,323
    
    
    
    95.64Other loans:Commercial
    
    
    23,471
    
    
    
    4.07
    
    
    
    20,579
    
    
    
    3.73Consumer and other
    
    
    4,875
    
    
    
    0.84
    
    
    
    3,457
    
    
    
    0.6328,346
    
    
    
    4.91
    
    
    
    24,036
    
    
    
    4.36Total loans
    
    
    577,432
    
    
    
    100.00
    %
    
    
    551,359
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    649
    
    
    
    
    
    
    
    361Allowance for loan losses
    
    
    (4,693
    )
    
    
    
    
    
    
    (4,220
    )Total Loans, net
    
    $
    573,388
    
    
    
    
    
    
    $
    547,500
  Non-performing Assets:
 11




---



##### Table of Contents



At June 30,
    
    
    At December 31,2006
    
    
    2005(Dollars in Thousands)Non-accrual loans:Residential mortgage
    
    $
    810
    
    
    $
    479Commercial mortgage
    
    
    125
    
    
    
    96Commercial
    
    
    
    
    
    
    250Home equity, consumer and other
    
    
    141
    
    
    
    78Total non-accrual loans
    
    
    1,076
    
    
    
    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
    
    $
    1,076
    
    
    $
    903Ratios:Non-performing loans to total loans
    
    
    0.19
    %
    
    
    0.16
    %Non-performing assets to total assets
    
    
    0.13
    %
    
    
    0.12
    %
 Allowance for Loan Losses :
    12




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##### Table of Contents



At or for the Three Months
    
    
    At or for the Six MonthsEnded June30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in Thousands)Balance at beginning of period
    
    $
    4,463
    
    
    $
    4,009
    
    
    $
    4,220
    
    
    $
    3,846Charge-offs:Mortgage loans on real estate:
    
    
    (50
    )
    
    
    
    
    
    
    (50
    )
    
    
    Other loans:Commercial
    
    
    (1
    )
    
    
    (23
    )
    
    
    (5
    )
    
    
    (101
    )Consumer and other
    
    
    (16
    )
    
    
    (22
    )
    
    
    (49
    )
    
    
    (51
    )Total other loans
    
    
    (17
    )
    
    
    (45
    )
    
    
    (54
    )
    
    
    (152
    )Total charge-offs
    
    
    (67
    )
    
    
    (45
    )
    
    
    (104
    )
    
    
    (152
    )Recoveries:Mortgage loans on real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans:Commercial
    
    
    105
    
    
    
    14
    
    
    
    202
    
    
    
    24Consumer and other
    
    
    16
    
    
    
    31
    
    
    
    35
    
    
    
    45Total other loans
    
    
    121
    
    
    
    45
    
    
    
    237
    
    
    
    69Total recoveries
    
    
    121
    
    
    
    45
    
    
    
    237
    
    
    
    69Net recoveries (charge-offs)
    
    
    54
    
    
    
    
    
    
    
    133
    
    
    
    (83
    )Provision for loan losses
    
    
    176
    
    
    
    131
    
    
    
    340
    
    
    
    377Balance at end of period
    
    $
    4,693
    
    
    $
    4,140
    
    
    $
    4,693
    
    
    $
    4,140Ratios:Net recoveries (charge-offs) to average loans
outstanding  annualized
    
    
    0.04
    %
    
    
    0.00
    %
    
    
    0.05
    %
    
    
    (0.03
    %)Allowance for loan losses to non-performing loans at end
of period
    
    
    436.15
    %
    
    
    342.43
    %
    
    
    436.15
    %
    
    
    342.43
    %Allowance for loan losses to total loans at end of period
    
    
    0.81
    %
    
    
    0.79
    %
    
    
    0.81
    %
    
    
    0.79
    %
 13




---



##### Table of Contents



Deposits
 At June 30, 2006
    
    
    At December 31, 2005Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)
    
    
    (Dollars in Thousands)Deposit type:Demand & Misc. Other Deposits
    
    $
    51,397
    
    
    
    10.32
    %
    
    $
    53,157
    
    
    
    11.20
    %Regular savings
    
    
    57,434
    
    
    
    11.53
    
    
    
    63,335
    
    
    
    13.35Life Path Savings
    
    
    72,137
    
    
    
    14.49
    
    
    
    73,151
    
    
    
    15.42Money market deposits
    
    
    57,603
    
    
    
    11.58
    
    
    
    55,168
    
    
    
    11.63NOW deposits
    
    
    39,048
    
    
    
    7.84
    
    
    
    41,439
    
    
    
    8.72Total transaction accounts
    
    
    277,619
    
    
    
    55.76
    
    
    
    286,250
    
    
    
    60.32Certificates of deposit
    
    
    220,294
    
    
    
    44.24
    
    
    
    188,262
    
    
    
    39.68Total deposits
    
    $
    497,913
    
    
    
    100.00
    %
    
    $
    474,512
    
    
    
    100.00
    %
  Borrowings
 Stockholders Equity
 Comparison of Operating Results for the Three Months Ended June 30, 2006 and June 30, 2005
  Analysis of Net Interest Income
  14




---



##### Table of Contents



Three Months Ended June 30, 2006
    
    Three Months Ended June 30, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    562,199
    
    
    $
    8,861
    
    
    
    6.30
    %
    
    $
    518,092
    
    
    $
    7,588
    
    
    
    5.86
    %Investment securities
    
    
    174,709
    
    
    
    1,856
    
    
    
    4.25
    %
    
    
    128,436
    
    
    
    1,230
    
    
    
    3.83
    %Short-term investments
    
    
    10,819
    
    
    
    131
    
    
    
    4.84
    %
    
    
    7,591
    
    
    
    52
    
    
    
    2.74
    %Total interest-earning assets
    
    
    747,727
    
    
    
    10,848
    
    
    
    5.80
    %
    
    
    654,119
    
    
    
    8,870
    
    
    
    5.42
    %Non-interest-earning assets
    
    
    43,507
    
    
    
    
    
    
    
    
    
    
    
    36,787Total assets
    
    $
    791,234
    
    
    
    
    
    
    
    
    
    
    $
    690,906Interest-bearing liabilities:Savings deposits
    
    $
    58,933
    
    
    
    64
    
    
    
    0.43
    %
    
    $
    70,769
    
    
    
    76
    
    
    
    0.43
    %Life Path Savings
    
    
    70,169
    
    
    
    614
    
    
    
    3.50
    %
    
    
    70,086
    
    
    
    384
    
    
    
    2.19
    %Money market
    
    
    54,579
    
    
    
    382
    
    
    
    2.80
    %
    
    
    60,782
    
    
    
    230
    
    
    
    1.51
    %NOW accounts
    
    
    39,102
    
    
    
    23
    
    
    
    0.24
    %
    
    
    38,838
    
    
    
    20
    
    
    
    0.21
    %Certificates of deposits
    
    
    215,972
    
    
    
    2,185
    
    
    
    4.05
    %
    
    
    178,259
    
    
    
    1,258
    
    
    
    2.82
    %Total deposits
    
    
    438,755
    
    
    
    3,268
    
    
    
    2.98
    %
    
    
    418,734
    
    
    
    1,968
    
    
    
    1.88
    %Borrowed Funds
    
    
    149,388
    
    
    
    1,640
    
    
    
    4.39
    %
    
    
    158,210
    
    
    
    1,655
    
    
    
    4.18
    %Total interest-bearing liabilities
    
    
    588,143
    
    
    
    4,908
    
    
    
    3.34
    %
    
    
    576,944
    
    
    
    3,623
    
    
    
    2.51
    %Non-interest-bearing liabilities
    
    
    55,333
    
    
    
    
    
    
    
    
    
    
    
    53,730Total liabilities
    
    
    643,476
    
    
    
    
    
    
    
    
    
    
    
    630,674Equity
    
    
    147,758
    
    
    
    
    
    
    
    
    
    
    
    60,232Total liabilities and equity
    
    $
    791,234
    
    
    
    
    
    
    
    
    
    
    $
    690,906Net interest income
    
    
    
    
    
    $
    5,940
    
    
    
    
    
    
    
    
    
    
    $
    5,247Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.46
    %
    
    
    
    
    
    
    
    
    
    
    2.91
    %Net interest-earning assets (4)
    
    $
    159,584
    
    
    
    
    
    
    
    
    
    
    $
    77,175Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Average interest-earning assets
to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    127.13
    %
    
    
    
    
    
    
    
    
    
    
    113.38
    %
 
 (1)
    
    Yields and rates for the three months ended June 30, 2006 and 2005 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average
interest-earning assets and the cost of total average interest-bearing liabilities for the three
months ended June 30, 2006 and 2005.(4)
    
    Net interest-earning assets represents total interest-earning assets less total
interest-bearing liabilities.(5)
    
    Net interest margin represents net interest income divided by average total interest-earning assets.  15




---



##### Table of Contents



Three Months Ended June 30,2006 vs. 2005Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    676
    
    
    $
    597
    
    
    $
    1,273Investment securities
    
    
    480
    
    
    
    146
    
    
    
    626Short-term investments
    
    
    28
    
    
    
    51
    
    
    
    79Total interest-earning assets
    
    
    1,184
    
    
    
    794
    
    
    
    1,978Interest-bearing liabilities:Savings deposits
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )Life Path
    
    
    
    
    
    
    230
    
    
    
    230Money market
    
    
    (20
    )
    
    
    172
    
    
    
    152NOW accounts
    
    
    
    
    
    
    3
    
    
    
    3Certificates of deposits
    
    
    303
    
    
    
    624
    
    
    
    927Total deposits
    
    
    271
    
    
    
    1,029
    
    
    
    1,300Borrowed Funds
    
    
    (153
    )
    
    
    138
    
    
    
    (15
    )Total interest-bearing liabilities
    
    
    118
    
    
    
    1,167
    
    
    
    1,285Change in net interest income
    
    $
    1,066
    
    
    $
    (373
    )
    
    $
    693
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 16




---



##### Table of Contents



Non-interest income
 Non-interest expense
 Income tax expense
 Comparison of Operating Results for the Six Months Ended June 30, 2006 and June 30, 2005
  Analysis of Net Interest Income
   17




---



##### Table of Contents



Six Months Ended June 30, 2006
    
    Six Months Ended June 30, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    556,693
    
    
    $
    17,375
    
    
    
    6.24
    %
    
    $
    515,049
    
    
    $
    14,867
    
    
    
    5.77
    %Investment securities
    
    
    175,467
    
    
    
    3,674
    
    
    
    4.19
    %
    
    
    128,497
    
    
    
    2,419
    
    
    
    3.77
    %Short-term investments
    
    
    9,086
    
    
    
    211
    
    
    
    4.64
    %
    
    
    7,583
    
    
    
    94
    
    
    
    2.48
    %Total interest-earning assets
    
    
    741,246
    
    
    
    21,260
    
    
    
    5.74
    %
    
    
    651,129
    
    
    
    17,380
    
    
    
    5.34
    %Non-interest-earning assets
    
    
    42,689
    
    
    
    
    
    
    
    
    
    
    
    36,907Total assets
    
    $
    783,935
    
    
    
    
    
    
    
    
    
    
    $
    688,036Interest-bearing liabilities:Savings deposits
    
    $
    59,773
    
    
    
    130
    
    
    
    0.43
    %
    
    $
    70,664
    
    
    
    151
    
    
    
    0.43
    %Life Path Savings
    
    
    71,340
    
    
    
    1,176
    
    
    
    3.30
    %
    
    
    68,548
    
    
    
    735
    
    
    
    2.14
    %Money market
    
    
    53,237
    
    
    
    688
    
    
    
    2.58
    %
    
    
    59,190
    
    
    
    389
    
    
    
    1.31
    %NOW accounts
    
    
    38,636
    
    
    
    44
    
    
    
    0.23
    %
    
    
    38,193
    
    
    
    39
    
    
    
    0.20
    %Certificates of deposits
    
    
    206,648
    
    
    
    3,931
    
    
    
    3.80
    %
    
    
    172,867
    
    
    
    2,343
    
    
    
    2.71
    %Total deposits
    
    
    429,634
    
    
    
    5,969
    
    
    
    2.78
    %
    
    
    409,462
    
    
    
    3,657
    
    
    
    1.79
    %Borrowed Funds
    
    
    151,287
    
    
    
    3,251
    
    
    
    4.30
    %
    
    
    165,122
    
    
    
    3,326
    
    
    
    4.03
    %Total interest-bearing liabilities
    
    
    580,921
    
    
    
    9,220
    
    
    
    3.17
    %
    
    
    574,584
    
    
    
    6,983
    
    
    
    2.43
    %Non-interest-bearing liabilities
    
    
    55,489
    
    
    
    
    
    
    
    
    
    
    
    53,098Total liabilities
    
    
    636,410
    
    
    
    
    
    
    
    
    
    
    
    627,682Equity
    
    
    147,525
    
    
    
    
    
    
    
    
    
    
    
    60,354Total liabilities and equity
    
    $
    783,935
    
    
    
    
    
    
    
    
    
    
    $
    688,036Net interest income
    
    
    
    
    
    $
    12,040
    
    
    
    
    
    
    
    
    
    
    $
    10,397Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.57
    %
    
    
    
    
    
    
    
    
    
    
    2.91
    %Net interest-earning assets (4)
    
    $
    160,325
    
    
    
    
    
    
    
    
    
    
    $
    76,545Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %Average interest-earning assets
to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    127.60
    %
    
    
    
    
    
    
    
    
    
    
    113.32
    %
 
 (1)
    
    Yields and rates for the six months ended June 30, 2006 and 2005 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average
interest-earning assets and the cost of total average interest-bearing liabilities for the six
months ended June 30, 2006 and 2005.(4)
    
    Net interest-earning assets represents total interest-earning assets less total
interest-bearing liabilities.(5)
    
    Net interest margin represents net interest income divided by average total interest-earning assets.  18




---



##### Table of Contents



Six Months Ended June 30,2006 vs. 2005Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    1,249
    
    
    $
    1,259
    
    
    $
    2,508Investment securities
    
    
    962
    
    
    
    293
    
    
    
    1,255Short-term investments
    
    
    22
    
    
    
    95
    
    
    
    117Total interest-earning assets
    
    
    2,233
    
    
    
    1,647
    
    
    
    3,880Interest-bearing liabilities:Savings deposits
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Life Path
    
    
    31
    
    
    
    410
    
    
    
    441Money market
    
    
    (35
    )
    
    
    334
    
    
    
    299NOW accounts
    
    
    
    
    
    
    5
    
    
    
    5Certificates of deposits
    
    
    520
    
    
    
    1,068
    
    
    
    1,588Total deposits
    
    
    495
    
    
    
    1,817
    
    
    
    2,312Borrowed Funds
    
    
    (107
    )
    
    
    32
    
    
    
    (75
    )Total interest-bearing liabilities
    
    
    388
    
    
    
    1,849
    
    
    
    2,237Change in net interest income
    
    $
    1,845
    
    
    $
    (202
    )
    
    $
    1,643
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 Non-interest income
 19




---



##### Table of Contents



Non-interest expense
 Income tax expense
 Minimum Regulatory Capital Requirements:
 Minimum To Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioJune 30, 2006Total capital to risk weighted
assets
    
    $
    103,388
    
    
    
    19.5
    %
    
    $
    42,417
    
    
    
    8.0
    %
    
    $
    53,022
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:
    
    
    98,017
    
    
    
    18.5
    
    
    
    21,209
    
    
    
    4.0
    
    
    
    31,813
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    98,017
    
    
    
    13.0
    
    
    
    22,550
    
    
    
    3.0
    
    
    
    37,583
    
    
    
    5.0December 31, 2005:Total capital to risk weighted
assets:
    
    $
    100,794
    
    
    
    20.0
    %
    
    $
    40,375
    
    
    
    8.0
    %
    
    $
    50,468
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:
    
    
    95,859
    
    
    
    19.0
    
    
    
    20,187
    
    
    
    4.0
    
    
    
    30,281
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    95,859
    
    
    
    12.6
    
    
    
    22,762
    
    
    
    3.0
    
    
    
    37,936
    
    
    
    5.0
 Contractual Obligations
 20




---



##### Table of Contents



June 30, 2006More 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
    
    $
    151,979
    
    
    $
    43,174
    
    
    $
    69,800
    
    
    $
    24,755
    
    
    $
    14,250Securities sold under agreements to repurchase
    
    
    4,500
    
    
    
    4,500
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    156,479
    
    
    $
    47,674
    
    
    $
    69,800
    
    
    $
    24,755
    
    
    $
    14,250
 Off-Balance Sheet Arrangements:
 June 30, 2006More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year or
    
    
    through
    
    
    Through Five
    
    
    Over FiveTotal
    
    
    Less
    
    
    Three Years
    
    
    Years
    
    
    years(Dollars in Thousands)Commitments to grant loans (1)
    
    $
    16,651
    
    
    $
    16,651
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    10,805
    
    
    
    10,805
    
    
    
    
    
    
    
    
    
    
    
    Unused
portion of home equity lines (2)
    
    
    68,497
    
    
    
    573
    
    
    
    1,535
    
    
    
    4,771
    
    
    
    61,618Unused portion of construction loans (3)
    
    
    4,938
    
    
    
    4,938
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft lines-of-credit(4)
    
    
    4,253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,253Unused portion of personal lines-of-credit(5)
    
    
    410
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410Standby letters of credit(6)
    
    
    606
    
    
    
    606
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies
    
    
    8,726
    
    
    
    8,726
    
    
    
    
    
    
    
    
    
    
    
    Total loan commitments
    
    $
    114,886
    
    
    $
    42,299
    
    
    $
    1,535
    
    
    $
    4,771
    
    
    $
    66,281
 
 (1)
    
    Commitments for loans are extended to customers for up to 60 days after which they expire.(2)
    
    Unused portions of home equity lines are available to the borrower for up to 10 years.(3)
    
    Unused portions of construction loans are available to the borrower for up to one year for
development loans and up to one year for other construction loans.(4)
    
    Unused portion of checking overdraft lines-of-credit are available to customers in good
standing indefinitely.(5)
    
    Unused portion of personal lines-of-credit are available to customers in good standing
indefinitely.(6)
    
    Standby letters of credit are generally available for less than one year. 
 Item 3: Quantitative and Qualitative Disclosures About Market Risks
  21




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##### Table of Contents



Item 4: Controls and Procedures
 Disclosure Controls and Procedures
 Internal Control Over Financial Reporting
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    The following individuals were elected as directors, each for a three-year term by the
following vote:
 FOR
    
    WITHHELDMichael A. Christopher
    
    
    7,882,250
    
    
    
    218,527Dorothy B. Winsor
    
    
    7,882,275
    
    
    
    218,502
 2.
    
    The appointment of Wolf & Company, P.C. as the independent registered public accounting
firm of Legacy Bancorp, Inc. for the fiscal year ending December 31, 2006 was ratified by
the stockholders by the following vote:
 FOR
    
    AGAINST
    
    ABSTAIN7,909,882
    
    17,844
    
    173,051
 22




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##### Table of Contents



Item 5 Other Information
  
 Item 6 Exhibits
  23




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##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date: August 11, 2006
    
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and Chairman of the BoardDate: August 11, 2006
    
    /s/ Stephen M. ConleyStephen M. ConleySenior Vice President, Chief Financial Officer andTreasurer (Principal Accounting Officer)
 24




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##### Table of Contents



INDEX TO EXHIBITS
 2.1
    
    Amended and Restated Plan of Conversion*3.1
    
    Certificate of Incorporation of Legacy Bancorp, Inc.*3.2
    
    Bylaws of Legacy Bancorp, Inc. (as amended)*10.1
    
    Legacy Banks ESOP Trust Agreement**10.2
    
    ESOP Plan Document**10.3
    
    ESOP Loan Documents**10.4.1
    
    Employment Agreement between Legacy Banks and J. Williar Dunlaevy**10.4.2
    
    Employment Agreement between Legacy Banks and Michael A. Christopher**10.4.3
    
    Employment Agreement between Legacy Banks and Steven F. Pierce**10.4.4
    
    Employment Agreement between Legacy Banks and Stephen M. Conley**10.4.5
    
    Employment Agreement between Legacy Banks and Richard M. Sullivan**10.5.1
    
    Employment Agreement between Legacy Bancorp, Inc. and J. Williar Dunlaevy**10.5.2
    
    Employment Agreement between Legacy Bancorp, Inc. and Michael A. Christopher**10.5.3
    
    Employment Agreement between Legacy Bancorp, Inc. and Steven F. Pierce**10.5.4
    
    Employment Agreement between Legacy Bancorp, Inc. and Stephen M. Conley**10.5.5
    
    Employment Agreement between Legacy Bancorp, Inc. and Richard M. Sullivan**10.8
    
    Legacy Banks Employee Severance Compensation Plan**10.9.1
    
    Legacy Banks Supplemental Executive Retirement Plan with J. Williar Dunlaevy**10.9.2
    
    Legacy Banks Supplemental Executive Retirement Plan with Michael A. Christopher**10.10
    
    Director Fee Continuation Plan**11.0
    
    Statement re: Computation of per share earnings is incorporated herein by
reference to Notes to Consolidated Financial Statementswithin Part I, Item 1,
Financial Statements31.1
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of J. Williar Dunlaevy31.2
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of Stephen M. Conley32
    
    Certification pursuant to 18 U.S.C. Section 1350
 
 *
    
    Incorporated by reference from the Registrants Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 2005 filed October 27, 2005.**
    
    Incorporated by reference from the Registration Statement on Form S-1 (No. 333-126481) filed
July 8, 2005, as amended. 25