##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
 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




---



##### 



LEGACY BANCORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page No.Part I  Financial InformationItem 1
    
    Financial StatementsConsolidated Balance Sheets as of September 30, 2009
and December 31, 2008
    
    
    2Consolidated Statements of Operations for the three and nine
months ended September 30, 2009 and 2008
    
    
    3Consolidated Statements of Changes in Stockholders Equity
for the nine months ended September 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows for the nine
months ended September 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    15Item 3
    
    Quantitative and Qualitative Disclosures about Market Risks
    
    
    28Item 4
    
    Controls and Procedures
    
    
    28Part II  Other InformationItem 1
    
    Legal Proceedings
    
    
    29Item 1A
    
    Risk Factors
    
    
    29Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3
    
    Defaults Upon Senior Securities
    
    
    30Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5
    
    Other Information
    
    
    30Item 6
    
    Exhibits
    
    
    31EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32 Section 906 Certification of CEO & CFO
  1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1:
    
    Financial Statements
 LEGACY BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share amounts)
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCash and due from banks
    
    $
    12,549
    
    
    $
    13,245Short-term investments
    
    
    25,979
    
    
    
    20,350Cash and cash equivalents
    
    
    38,528
    
    
    
    33,595Securities  Available for sale
    
    
    176,108
    
    
    
    132,357Securities  Held to maturity
    
    
    97
    
    
    
    97Restricted equity securities and other investments  at cost
    
    
    17,584
    
    
    
    20,185Loans held for sale
    
    
    379
    
    
    
    Loans, net of allowance for loan losses of $8,836
in 2009 and $6,642 in 2008
    
    
    658,001
    
    
    
    695,264Premises and equipment, net
    
    
    19,691
    
    
    
    19,770Accrued interest receivable
    
    
    3,347
    
    
    
    3,633Goodwill, net
    
    
    9,730
    
    
    
    9,687Net deferred tax asset
    
    
    9,063
    
    
    
    10,023Bank-owned life insurance
    
    
    15,972
    
    
    
    15,551Other assets
    
    
    4,056
    
    
    
    4,495Foreclosed assets
    
    
    990
    
    
    
    $
    953,546
    
    
    $
    944,657LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    68,327
    
    
    $
    66,545Interest-bearing
    
    
    579,633
    
    
    
    541,543Total deposits
    
    
    647,960
    
    
    
    608,088Securities sold under agreements to repurchase
    
    
    6,400
    
    
    
    5,238Federal Home Loan Bank advances
    
    
    167,491
    
    
    
    197,898Mortgagors escrow accounts
    
    
    1,138
    
    
    
    1,015Accrued expenses and other liabilities
    
    
    6,259
    
    
    
    8,276Total liabilities
    
    
    829,248
    
    
    
    820,515Commitments and contingenciesStockholders EquityPreferred Stock ($.01 par value, 10,000,000 shares
authorized, none issued or outstanding)
    
    
    
    
    
    
    Common Stock ($.01 par value, 40,000,000 shares
authorized and 10,308,600 issued at September 30, 2009 and
December 31, 2008; 8,746,812 outstanding at September 30,
2009 and 8,781,912 outstanding at December 31, 2008)
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    102,717
    
    
    
    102,475Unearned Compensation  ESOP
    
    
    (7,505
    )
    
    
    (8,055
    )Unearned Compensation  Equity Incentive Plan
    
    
    (2,097
    )
    
    
    (2,727
    )Retained earnings
    
    
    53,346
    
    
    
    58,534Accumulated other comprehensive income (loss)
    
    
    (421
    )
    
    
    (4,722
    )Treasury stock, at cost (1,561,788 shares at September 30, 2009
and 1,526,688 shares at December 31, 2008)
    
    
    (21,845
    )
    
    
    (21,466
    )Total stockholders equity
    
    
    124,298
    
    
    
    124,142$
    953,546
    
    
    $
    944,657
  2




---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share amounts)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Interest and dividend income:Loans
    
    $
    9,642
    
    
    $
    10,564
    
    
    $
    29,478
    
    
    $
    31,468Securities:Taxable
    
    
    1,552
    
    
    
    1,895
    
    
    
    4,911
    
    
    
    5,752Tax-Exempt
    
    
    167
    
    
    
    135
    
    
    
    488
    
    
    
    377Short-term investments
    
    
    3
    
    
    
    24
    
    
    
    10
    
    
    
    238Total interest and dividend income
    
    
    11,364
    
    
    
    12,618
    
    
    
    34,887
    
    
    
    37,835Interest expense:Deposits
    
    
    2,656
    
    
    
    3,261
    
    
    
    8,460
    
    
    
    11,322Federal Home Loan Bank advances
    
    
    1,748
    
    
    
    2,067
    
    
    
    5,561
    
    
    
    5,856Other borrowed funds
    
    
    16
    
    
    
    25
    
    
    
    52
    
    
    
    73Total interest expense
    
    
    4,420
    
    
    
    5,353
    
    
    
    14,073
    
    
    
    17,251Net interest income
    
    
    6,944
    
    
    
    7,265
    
    
    
    20,814
    
    
    
    20,584Provision for loan losses
    
    
    101
    
    
    
    4
    
    
    
    2,334
    
    
    
    575Net interest income after provision for loan losses
    
    
    6,843
    
    
    
    7,261
    
    
    
    18,480
    
    
    
    20,009Non-interest income:Customer service fees
    
    
    736
    
    
    
    826
    
    
    
    2,140
    
    
    
    2,435Portfolio management fees
    
    
    233
    
    
    
    272
    
    
    
    723
    
    
    
    855Income from bank owned life insurance
    
    
    90
    
    
    
    227
    
    
    
    418
    
    
    
    469Insurance, annuities and mutual fund fees
    
    
    25
    
    
    
    33
    
    
    
    84
    
    
    
    147Gain on sales of securities, net
    
    
    199
    
    
    
    (166
    )
    
    
    241
    
    
    
    306Total other-than temporary impairment losses
    
    
    (3,426
    )
    
    
    (675
    )
    
    
    (8,927
    )
    
    
    (1,265
    )Related loss
(gain) recognized in other
comprehensive income
    
    
    (226
    )
    
    
    
    
    
    
    2,264
    
    
    
    Net impairment losses
    
    
    (3,652
    )
    
    
    (675
    )
    
    
    (6,663
    )
    
    
    (1,265
    )Gain on sales of loans, net
    
    
    156
    
    
    
    4
    
    
    
    725
    
    
    
    121Miscellaneous
    
    
    9
    
    
    
    11
    
    
    
    33
    
    
    
    44Total non-interest income
    
    
    (2,204
    )
    
    
    532
    
    
    
    (2,299
    )
    
    
    3,112Non-interest expenses:Salaries and employee benefits
    
    
    3,447
    
    
    
    3,739
    
    
    
    10,343
    
    
    
    10,934Occupancy and equipment
    
    
    931
    
    
    
    912
    
    
    
    3,001
    
    
    
    2,754Data processing
    
    
    691
    
    
    
    615
    
    
    
    2,025
    
    
    
    1,898Professional fees
    
    
    287
    
    
    
    187
    
    
    
    765
    
    
    
    538Advertising
    
    
    367
    
    
    
    327
    
    
    
    1,072
    
    
    
    886FDIC Deposit Insurance
    
    
    250
    
    
    
    36
    
    
    
    1,190
    
    
    
    79Other general and administrative
    
    
    997
    
    
    
    1,019
    
    
    
    3,302
    
    
    
    3,155Total non-interest expenses
    
    
    6,970
    
    
    
    6,835
    
    
    
    21,698
    
    
    
    20,244Income (loss) before income taxes
    
    
    (2,331
    )
    
    
    958
    
    
    
    (5,517
    )
    
    
    2,877Provision (benefit) for income taxes
    
    
    (633
    )
    
    
    394
    
    
    
    (1,533
    )
    
    
    981Net income (loss)
    
    $
    (1,698
    )
    
    $
    564
    
    
    $
    (3,984
    )
    
    $
    1,896Earnings (loss) per shareBasic
    
    $
    (0.21
    )
    
    $
    0.07
    
    
    $
    (0.50
    )
    
    $
    0.23Diluted
    
    $
    (0.21
    )
    
    $
    0.07
    
    
    $
    (0.50
    )
    
    $
    0.23Weighted average shares outstandingBasic
    
    
    7,978,928
    
    
    
    7,960,579
    
    
    
    7,981,042
    
    
    
    8,111,590Diluted
    
    
    7,978,928
    
    
    
    7,994,020
    
    
    
    7,981,042
    
    
    
    8,143,461
  3




---



##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (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, 2007
    
    
    9,240,960
    
    
    $
    103
    
    
    $
    101,720
    
    
    $
    (8,787
    )
    
    $
    (3,525
    )
    
    $
    58,709
    
    
    $
    270
    
    
    $
    (15,398
    )
    
    $
    133,092Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,896
    
    
    
    
    
    
    
    
    
    
    
    1,896Net unrealized loss on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,163
    )
    
    
    
    
    
    
    (4,163
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,267
    )Cash dividends declared ($0.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,217
    )
    
    
    
    
    
    
    
    
    
    
    (1,217
    )Common stock repurchased - 5% Stock RepurchaseProgram announced December 2007
    
    
    (431,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,747
    )
    
    
    (5,747
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    588
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    588Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630Restricted stock granted
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (7
    )
    
    
    
    
    
    
    49
    
    
    
    Common stock held by ESOP committed
to be released (41,235 shares)
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    544Balance at September 30, 2008
    
    
    8,812,260
    
    
    $
    103
    
    
    $
    102,303
    
    
    $
    (8,238
    )
    
    $
    (2,937
    )
    
    $
    59,381
    
    
    $
    (3,893
    )
    
    $
    (21,096
    )
    
    $
    125,623Balance at December 31, 2008
    
    
    8,781,912
    
    
    $
    103
    
    
    $
    102,475
    
    
    $
    (8,055
    )
    
    $
    (2,727
    )
    
    $
    58,534
    
    
    $
    (4,722
    )
    
    $
    (21,466
    )
    
    $
    124,142Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,984
    )
    
    
    
    
    
    
    
    
    
    
    (3,984
    )Net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,301
    
    
    
    
    
    
    
    4,301Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317Cash dividends declared ($0.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,204
    )
    
    
    
    
    
    
    
    
    
    
    (1,204
    )Common stock repurchased - 5% Stock RepurchaseProgram announced March 2009
    
    
    (35,100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (379
    )
    
    
    (379
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630Common stock held by ESOP committed
to be released (41,235 shares)
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    436Balance at September 30, 2009
    
    
    8,746,812
    
    
    $
    103
    
    
    $
    102,717
    
    
    $
    (7,505
    )
    
    $
    (2,097
    )
    
    $
    53,346
    
    
    $
    (421
    )
    
    $
    (21,845
    )
    
    $
    124,298
  4




---



##### Table of Contents



LEGACY BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 Nine months ended September 30,2009
    
    
    2008(Unaudited)Cash flows from operating activities:Net (loss) income
    
    $
    (3,984
    )
    
    $
    1,896Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Provision for loan losses
    
    
    2,334
    
    
    
    575Net (accretion) amortization of securities
    
    
    453
    
    
    
    (77
    )Amortization of core deposit intangible
    
    
    523
    
    
    
    490Depreciation and amortization expense
    
    
    1,214
    
    
    
    595Loss on sales/impairment of securities, net
    
    
    6,422
    
    
    
    959Gain on sales of loans, net
    
    
    (725
    )
    
    
    (121
    )Loans originated for sale
    
    
    (56,678
    )
    
    
    (9,260
    )Proceeds from sales of loans
    
    
    57,024
    
    
    
    9,776Share-based compensation expense
    
    
    986
    
    
    
    1,218Deferred tax (benefit) provision
    
    
    (1,745
    )
    
    
    488Employee Stock Ownership Plan expense
    
    
    436
    
    
    
    544Net change in:Bank-owned life insurance
    
    
    (421
    )
    
    
    (518
    )Accrued interest receivable
    
    
    286
    
    
    
    (22
    )Other assets
    
    
    201
    
    
    
    (388
    )Accrued expenses and other liabilities
    
    
    (2,017
    )
    
    
    (1,619
    )Net cash provided by operating activities
    
    
    4,309
    
    
    
    4,536Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    33,306
    
    
    
    38,967Maturities, prepayments and calls
    
    
    43,896
    
    
    
    32,295Purchases
    
    
    (117,548
    )
    
    
    (84,188
    )Purchase of other investments
    
    
    (673
    )
    
    
    (2,320
    )Loan originations and purchases, net of principal payments
    
    
    34,929
    
    
    
    (35,098
    )Additions to premises and equipment
    
    
    (661
    )
    
    
    (1,376
    )Additions to
other real estate owned
    
    
    (990)
    
    
    
    Net cash
received in branch acquisition
    
    
    9,031
    
    
    
    Net cash provided (used) by investing activities
    
    
    1,290
    
    
    
    (51,720
    )
   5




---



##### Table of Contents



LEGACY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)

(Dollars in thousands)
 Nine months ended September 30,2009
    
    
    2008(Unaudited)Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    30,039
    
    
    
    (16,991
    )Net increase in securities sold under
agreements to repurchase
    
    
    1,162
    
    
    
    792Repayment of Federal Home Loan Bank advances
    
    
    (30,554
    )
    
    
    (487,399
    )Proceeds from Federal Home Loan Bank advances
    
    
    147
    
    
    
    511,454Net increase in mortgagors escrow accounts
    
    
    123
    
    
    
    188Repurchase of common stock
    
    
    (379
    )
    
    
    (5,747
    )Payment of dividends on common stock
    
    
    (1,204
    )
    
    
    (1,217
    )Net cash provided (used) by financing activities
    
    
    (666
    )
    
    
    1,080Net change in cash and cash equivalents
    
    
    4,933
    
    
    
    (46,104
    )Cash and cash equivalents at beginning of period
    
    
    33,595
    
    
    
    62,225Cash and cash equivalents at end of period
    
    $
    38,528
    
    
    $
    16,121Supplemental cash flow information:Interest paid on deposits
    
    $
    8,653
    
    
    $
    11,396Interest paid on Federal Home Loan Bank advances
    
    
    5,685
    
    
    
    5,871Interest paid on other borrowed funds
    
    
    52
    
    
    
    73Income taxes paid
    
    
    1,395
    
    
    
    1,030Non-cash activities:Real estate acquired through foreclosure
    
    
    990
    
    
    
    
  6




---



##### Table of Contents



LEGACY BANCORP AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
 1. Basis of presentation
  2. Recent Accounting Pronouncements
 Fair Value Measurements and Disclosures (Topic
820)  Measuring Liabilities at Fair Value"
 1.
    
    A valuation technique that uses:
 a.
    
    The quoted price of the identical liability when traded as an assetb.
    
    Quoted prices for similar liabilities or similar liabilities when traded
as assets.
 2.
    
    Another valuation technique that is consistent with the principles of Topic 820. Two
examples would be an income approach, such as a present value technique, or a market
approach, such as a technique that is based on the amount at the measurement date that the
reporting entity would pay to transfer the identical liability or would receive to enter
into the identical liability.
  
    
    When estimating the fair value of a liability, a reporting entity is not required to
include a separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of the liability; and
    
    That both a quoted price in an active market for the identical liability at the
measurement date and the quoted price for the identical liability when traded as an asset
in an active market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements.
   7




---



##### Table of Contents



Topic 105  Generally Accepted Accounting
Principles  FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles
 Subsequent Events"
 Interim Disclosures about Fair Value of Financial
Instruments. Notes to Condensed Consolidated Financial Statements.
 Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly. Notes to Condensed
Consolidated Financial Statements
 Recognition and Presentation of
Other-Than-Temporary-Impairment. Notes to Condensed Consolidated Financial Statements
 Determining Whether Instruments Granted in Shared-Based
Payment Transaction are Participating Securities.
 Business Combinations.
 8




---



##### Table of Contents



3. Earnings Per Share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income applicable to common stock
(000s)
    
    $
    (1,698
    )
    
    $
    564
    
    
    $
    (3,984
    )
    
    $
    1,896Average number of shares issued
    
    
    10,308,600
    
    
    
    10,308,600
    
    
    
    10,308,600
    
    
    
    10,308,600Less: average unallocated ESOP shares
    
    
    (577,133
    )
    
    
    (632,112
    )
    
    
    (590,775
    )
    
    
    (645,805
    )Less: average treasury shares
    
    
    (1,553,799
    )
    
    
    (1,447,269
    )
    
    
    (1,538,043
    )
    
    
    (1,283,025
    )Less: average unvested restricted stock awards
    
    
    (198,740
    )
    
    
    (268,640
    )
    
    
    (198,740
    )
    
    
    (268,180
    )Average number of basic shares outstanding
    
    
    7,978,928
    
    
    
    7,960,579
    
    
    
    7,981,042
    
    
    
    8,111,590Plus: dilutive unvested restricted stock awards
    
    
    
    
    
    
    33,441
    
    
    
    
    
    
    
    31,401Plus: diluted stock option shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470Average number of diluted shares outstanding
    
    
    7,978,928
    
    
    
    7,994,020
    
    
    
    7,981,042
    
    
    
    8,143,461Basic earnings (loss) per share
    
    $
    (0.21
    )
    
    $
    0.07
    
    
    $
    (0.50
    )
    
    $
    0.23Diluted earnings (loss) per share
    
    $
    (0.21
    )
    
    $
    0.07
    
    
    $
    (0.50
    )
    
    $
    0.23
 4. Comprehensive Income (Loss)
   Nine Months Ended September 30,2009
    
    
    2008(Dollars in thousands)Unrealized holding gains (losses) on available-for-sale
securities
    
    $
    6,116
    
    
    $
    (8,062
    )Reclassification
adjustment for (gains) losses on available-for-sale securities realized in income
    
    
    3,154
    
    
    
    1,265Noncredit portion of other-than-temporary impairment losses on
available-for-sale securities
    
    
    (2,264
    )
    
    
    Net realized gains (losses)
    
    
    7,006
    
    
    
    (6,797
    )Tax effect
    
    
    (2,705
    )
    
    
    2,634Net of tax amount
    
    
    4,301
    
    
    
    (4,163
    )
  September 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Net unrealized holding gains (losses) on
available for sale securities
    
    $
    2,348
    
    
    $
    (6,922
    )Tax effects
    
    
    (934
    )
    
    
    2.698Net-of-tax amount
    
    
    1,414
    
    
    
    (4,224
    )Noncredit
portion of other-than-temporary impairment losses on
available-for-sale securities
    
    
    (2,264
    )
    
    
    Tax effect
    
    
    927
    
    
    
    Net-of-tax
amount
    
    
    (1,337
    )
    
    
    Unrecognized net actuarial loss and prior
service costs pertaining to Directors fee plan
    
    
    (843
    )
    
    
    (843
    )Tax effect
    
    
    345
    
    
    
    345Net-of-tax amount
    
    
    (498
    )
    
    
    (498
    )Net accumulated other comprehensive (loss) income
    
    $
    (421
    )
    
    $
    (4,722
    )
 5. Dividends
  6. Commitments and Other Contingencies
   7. Securities
  9




---



##### Table of Contents



September 30, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairIn OCI
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities Available for SaleDebt securities:Government-sponsored enterprises (GSE)
    
    $
    78,811
    
    
    $
    646
    
    
    $
    (73
    )
    
    $
    79,384Municipal
    
    
    16,773
    
    
    
    957
    
    
    
    
    
    
    
    17,730Corporate and other
    
    
    1,324
    
    
    
    23
    
    
    
    
    
    
    
    1,347GSE mortgage-backed
    
    
    59,890
    
    
    
    1,392
    
    
    
    (106
    )
    
    
    61,176Private issue mortgage-backed securities
    
    
    15,264
    
    
    
    
    
    
    
    (3,737
    )
    
    
    11,527Total debt securities
    
    
    172,062
    
    
    
    3,018
    
    
    
    (3,916
    )
    
    
    171,164Marketable equity securities  Large Cap
    
    
    3,962
    
    
    
    1,062
    
    
    
    (80
    )
    
    
    4,944Total securities available for sale
    
    $
    176,024
    
    
    $
    4,080
    
    
    $
    (3,996
    )
    
    $
    176,108Securities Held to MaturityOther bonds and obligations
    
    $
    97
    
    
    $
    
    
    
    $
    
    
    
    $
    97
 December 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities Available for SaleDebt securities:Government-sponsored enterprises (GSE)
    
    $
    36,459
    
    
    $
    463
    
    
    $
    (90
    )
    
    $
    36,832Municipal
    
    
    15,876
    
    
    
    176
    
    
    
    (420
    )
    
    
    15,632Corporate and other
    
    
    363
    
    
    
    
    
    
    
    
    
    
    
    363GSE mortgage-backed
    
    
    51,679
    
    
    
    921
    
    
    
    (110
    )
    
    
    52,490Private issue mortgage-backed securities
    
    
    28,588
    
    
    
    
    
    
    
    (7,092
    )
    
    
    21,496Total debt securities
    
    
    132,965
    
    
    
    1,560
    
    
    
    (7,712
    )
    
    
    126,813Marketable equity securities  Large Cap
    
    
    6,314
    
    
    
    92
    
    
    
    (862
    )
    
    
    5,544Total securities available for sale
    
    $
    139,279
    
    
    $
    1,652
    
    
    $
    (8,574
    )
    
    $
    132,357Securities Held to MaturityOther bonds and obligations
    
    $
    97
    
    
    $
    
    
    
    $
    
    
    
    $
    97
  Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin 1 year
    
    $
    12,305
    
    
    $
    12,318
    
    
    $
    
    
    
    $
    Over 1 year to 5 years
    
    
    40,108
    
    
    
    40,504
    
    
    
    97
    
    
    
    97Over 5 years to 10 years
    
    
    11,772
    
    
    
    12,043
    
    
    
    
    
    
    
    Over 10 years
    
    
    32,723
    
    
    
    33,596
    
    
    
    
    
    
    
    Total bonds and obligations
    
    
    96,908
    
    
    
    98,461
    
    
    
    97
    
    
    
    97Mortgage-backed
    
    
    75,154
    
    
    
    72,703
    
    
    
    
    
    
    
    Total debt securities
    
    $
    172,062
    
    
    $
    171,164
    
    
    $
    97
    
    
    $
    97
  10




---



##### Table of Contents



Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueSeptember 30, 2009:Debt securities:Government-sponsored
enterprises (GSE)
    
    $
    73
    
    
    $
    16,348
    
    
    $
    
    
    
    $
    GSE mortgage-backed
    
    
    64
    
    
    
    7,320
    
    
    
    42
    
    
    
    1,782Private issue mortgage-backed
    
    
    
    
    
    
    
    
    
    
    3,737
    
    
    
    11,527Total debt securities
    
    
    137
    
    
    
    23,668
    
    
    
    3,779
    
    
    
    13,309Marketable equity securities
    
    
    9
    
    
    
    370
    
    
    
    71
    
    
    
    683Total temporarily
impaired securities
    
    $
    146
    
    
    $
    24,038
    
    
    $
    3,850
    
    
    $
    13,992December 31, 2008:Debt securities:Government-sponsored
enterprises (GSE)
    
    $
    90
    
    
    $
    5,821
    
    
    $
    
    
    
    $
    Municipal
    
    
    354
    
    
    
    6,078
    
    
    
    66
    
    
    
    2,551GSE mortgage-backed
    
    
    81
    
    
    
    5,737
    
    
    
    29
    
    
    
    637Private issue mortgage-backed
    
    
    5,037
    
    
    
    16,172
    
    
    
    2,055
    
    
    
    5,324Total debt securities
    
    
    5,562
    
    
    
    33,808
    
    
    
    2,150
    
    
    
    8,512Marketable equity securities
    
    
    862
    
    
    
    2,530
    
    
    
    
    
    
    
    Total temporarily
impaired securities
    
    $
    6,424
    
    
    $
    36,338
    
    
    $
    2,150
    
    
    $
    8,512
   Gross# of
    
    Amortized
    
    Unrealized
    
    % ofSecurities
    
    Cost
    
    Loss
    
    DepreciationGovernment-sponsored enterprises
    
    
    17
    
    
    $
    16,421
    
    
    $
    73
    
    
    
    0.4
    %GSE mortgage-backed
    
    
    11
    
    
    
    9,208
    
    
    
    106
    
    
    
    1.2
    %Private issue mortgage-backed
    
    
    15
    
    
    
    15,264
    
    
    
    3,737
    
    
    
    24.5
    %
   11




---



##### Table of Contents



For the three
    
    
    For the ninemonths ended
    
    
    months endedSeptember 30, 2009
    
    
    September 30, 2009Balance at
the beginning of the period
    
    $
    331
    
    
    $
    Credit
losses for which OTTI impairment was not previously recognized in AOCL
    
    
    1,620
    
    
    
    1,951Reductions for securities sold during the period
    
    
    
    
    
    
    Additional OTTI credit losses for which an OTTI charge was
previously recognized
    
    
    197
    
    
    
    197Reductions for increases in cash flows expected to be collected that
are recognized over remaining life of the security
    
    
    
    
    
    
    Balance at
the end of the period
    
    $
    2,148
    
    
    $
    2,148
 8. Branch Acquisition
  9. Fair Values of Assets and Liabilities
  12




---



##### Table of Contents



Level 1
 Level 2
 Level 3
  Cash and cash equivalents
 Interest-bearing deposits in banks
 Securities available for sale
 Other equity securities
 Loans receivable
 13




---



##### Table of Contents



Deposit liabilities
 Short-term borrowings
 Long-term borrowings
 Accrued interest
  September 30, 2009Assets/LiabilitiesLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    at Fair Value(Dollars in thousands)AssetsSecurities available for sale
    
    $
    4,944
    
    
    $
    159,637
    
    
    $
    11,527
    
    
    $
    176,108Total assets
    
    $
    4,944
    
    
    $
    159,637
    
    
    $
    11,527
    
    
    $
    176,108
 December 31, 2008Assets/LiabilitiesLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    at Fair Value(Dollars in thousands)AssetsSecurities available for sale
    
    $
    5,544
    
    
    $
    104,954
    
    
    $
    21,859
    
    
    $
    132,357Total assets
    
    $
    5,544
    
    
    $
    104,954
    
    
    $
    21,859
    
    
    $
    132,357
  For the three
    
    
    For the ninemonths ended
    
    
    months endedSeptember 30, 2009
    
    
    September 30, 2009Balance at the beginning of the period
    
    $
    15,131
    
    
    $
    21,859Total realized/unrealized gains (losses) included in net income
    
    
    (1,912
    )
    
    
    (2,719
    )Total unrealized gains (losses) included in other comprehensive income
    
    
    1,821
    
    
    
    2,985Sales and settlements
    
    
    (3,513
    )
    
    
    (10,598
    )Transfers in and/or out of Level 3
    
    
    
    
    
    
    Balance at the end of the period
    
    $
    11,527
    
    
    $
    11,527Change in unrealized gains/(losses) relating to
instruments still held at the reporting date
    
    $
    1,903
    
    
    $
    3,355
  14




---



##### Table of Contents



Year-to-dateQuarter Ended
    
    
    EndedSeptember 30, 2009
    
    
    September 30, 2009
    
    
    September 30, 2009Total
    
    
    TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Gains/(Losses)
    
    
    Gains/(Losses)(Dollars in thousands)AssetsLoans
    
    $
    
    
    
    $
    8,744
    
    
    $
    
    
    
    $
    (20
    )
    
    $
    (1,943
    )Other
investments
    
    $
    
    
    
    $
    
    
    
    $
    4,761
    
    
    $
    (1,736
    )
    
    $
    (3,267
    )Total assets
    
    $
    
    
    
    $
    8,744
    
    
    $
    $4,761
    
    
    $
    (1,756
    )
    
    $
    (5,210
    )
 Year-to-dateQuarter Ended
    
    
    EndedSeptember 30, 2008
    
    
    
    
    
    
    September 30, 2008
    
    
    September 30, 2008Total
    
    
    TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Gains/(Losses)
    
    
    Gains/(Losses)(Dollars in thousands)AssetsLoans
    
    $
    
    
    
    $
    1,461
    
    
    $
    
    
    
    $
    (45
    )
    
    $
    (78
    )Total assets
    
    $
    
    
    
    $
    1,461
    
    
    $
    
    
    
    $
    (45
    )
    
    $
    (78
    )
   Summary of Fair Values of Financial Instruments
  September 30, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    38,528
    
    
    $
    38,528
    
    
    $
    33,595
    
    
    $
    33,595Securities  Available for sale
    
    
    176,108
    
    
    
    176,108
    
    
    
    132,357
    
    
    
    132,357Securities  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
    
    
    4,943
    
    
    
    4,943
    
    
    
    7,544
    
    
    
    7,544Loans and loans held for sale
    
    
    658,380
    
    
    
    664,738
    
    
    
    695,264
    
    
    
    704,765Accrued interest receivable
    
    
    3,347
    
    
    
    3,347
    
    
    
    3,633
    
    
    
    3,633Financial liabilities:Deposits
    
    
    647,960
    
    
    
    653,636
    
    
    
    608,088
    
    
    
    613,251Repurchase agreements
    
    
    6,400
    
    
    
    6,399
    
    
    
    5,238
    
    
    
    5,237FHLB advances
    
    
    167,491
    
    
    
    176,605
    
    
    
    197,898
    
    
    
    200,836Mortgagors escrow accounts
    
    
    1,138
    
    
    
    1,138
    
    
    
    1,015
    
    
    
    1,015
 
 Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  15




---



##### Table of Contents



Forward-Looking Statements
  Critical Accounting Policies
  Allowance for Loan Losses. Allowance for
Loan Losses Comparison of Financial Condition
 Income Taxes.
 Other-Than-Temporary Impairment.
 Fair Values of Assets and Liabilities:
 16




---



##### Table of Contents



Goodwill.
   Comparison of Financial Condition at September 30, 2009 and December 31, 2008
 Overview:
 Investment Activities
 17




---



##### Table of Contents



At September    30, 2009
    
    
    At December 31, 2008Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(Dollars in Thousands)Securities available for sale:Government-sponsored enterprises (GSE)
    
    $
    78,811
    
    
    $
    79,384
    
    
    $
    36,459
    
    
    $
    36,832Municipal bonds
    
    
    16,773
    
    
    
    17,730
    
    
    
    15,876
    
    
    
    15,632Corporate bonds and other obligations
    
    
    1,324
    
    
    
    1,347
    
    
    
    363
    
    
    
    363GSE mortgage-backed securities
    
    
    59,890
    
    
    
    61,176
    
    
    
    51,679
    
    
    
    52,490Private issue mortgage-backed securities
    
    
    15,264
    
    
    
    11,527
    
    
    
    28,588
    
    
    
    21,496Total debt securities
    
    
    172,062
    
    
    
    171,164
    
    
    
    132,965
    
    
    
    126,813Common stock
    
    
    3,962
    
    
    
    4,944
    
    
    
    6,314
    
    
    
    5,544Total securities available for sale
    
    
    176,024
    
    
    
    176,108
    
    
    
    139,279
    
    
    
    132,357Securities 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
    
    
    4,761
    
    
    
    4,761
    
    
    
    7,360
    
    
    
    7,360Other investments
    
    
    182
    
    
    
    182
    
    
    
    184
    
    
    
    184Total restricted equity securities
and other investments
    
    
    17,584
    
    
    
    17,584
    
    
    
    20,185
    
    
    
    20,185Total securities
    
    $
    193,705
    
    
    $
    193,789
    
    
    $
    159,561
    
    
    $
    152,639
 Lending Activities:
 At September 30, 2009
    
    
    At December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans on real estate:Residential
    
    $
    293,468
    
    
    
    44.10
    %
    
    $
    344,235
    
    
    
    49.15
    %Commercial
    
    
    255,999
    
    
    
    38.47
    
    
    
    246,374
    
    
    
    35.18Home equity
    
    
    68,572
    
    
    
    10.31
    
    
    
    63,138
    
    
    
    9.01618,039
    
    
    
    92.88
    
    
    
    653,747
    
    
    
    93.34Other loans:Commercial
    
    
    35,241
    
    
    
    5.30
    
    
    
    34,242
    
    
    
    4.89Consumer and other
    
    
    12,114
    
    
    
    1.82
    
    
    
    12,386
    
    
    
    1.7747,355
    
    
    
    7.12
    
    
    
    46,628
    
    
    
    6.66Total loans
    
    
    665,394
    
    
    
    100.00
    %
    
    
    700,375
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    1,443
    
    
    
    
    
    
    
    1,531Allowance for loan losses
    
    
    (8,836
    )
    
    
    
    
    
    
    (6,642
    )Total Loans, net
    
    $
    658,001
    
    
    
    
    
    
    $
    695,264
  Non-performing Assets:
 18




---



##### Table of Contents



At September 30,
    
    
    At December 31,2009
    
    
    2008(Dollars in Thousands)Non-accrual loans:Residential mortgage
    
    $
    5,052
    
    
    $
    1,190Commercial mortgage
    
    
    9,848
    
    
    
    5,777Commercial
    
    
    772
    
    
    
    410Home equity, consumer and other
    
    
    112
    
    
    
    172Total non-accrual loans
    
    
    15,784
    
    
    
    7,549Loans 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 loans
    
    
    15,784
    
    
    
    7,549Other real estate owned
    
    
    990
    
    
    
    Total non-performing assets
    
    $
    16,774
    
    
    $
    7,549Troubled debt restructurings
    
    $
    4,986
    
    
    $
    Ratios:Non-performing loans to total loans
    
    
    2.37
    %
    
    
    1.08
    %Non-performing assets to total assets
    
    
    1.76
    %
    
    
    0.80
    %
  Allowance for Loan Losses :
  19




---



##### Table of Contents



At or for the three months
    
    
    At or for the nine monthsended September 30,
    
    
    ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in Thousands)Balance at beginning of period
    
    $
    8,813
    
    
    $
    5,866
    
    
    $
    6,642
    
    
    $
    5,568Charge-offs:Mortgage loans on real estate:
    
    
    (22
    )
    
    
    (3
    )
    
    
    (22
    )
    
    
    (96
    )Other loans:Commercial
    
    
    (45
    )
    
    
    (6
    )
    
    
    (59
    )
    
    
    (188
    )Consumer and other
    
    
    (45
    )
    
    
    (68
    )
    
    
    (170
    )
    
    
    (189
    )Total other loans
    
    
    (90
    )
    
    
    (74
    )
    
    
    (229
    )
    
    
    (377
    )Total charge-offs
    
    
    (112
    )
    
    
    (77
    )
    
    
    (251
    )
    
    
    (473
    )Recoveries:Mortgage loans on real estate
    
    
    
    
    
    
    18
    
    
    
    1
    
    
    
    87Other loans:Commercial
    
    
    12
    
    
    
    5
    
    
    
    42
    
    
    
    13Consumer and other
    
    
    22
    
    
    
    13
    
    
    
    68
    
    
    
    59Total other loans
    
    
    34
    
    
    
    18
    
    
    
    110
    
    
    
    72Total recoveries
    
    
    34
    
    
    
    36
    
    
    
    111
    
    
    
    159Net recoveries (charge-offs)
    
    
    (78
    )
    
    
    (41
    )
    
    
    (140
    )
    
    
    (314
    )Provision for loan losses
    
    
    101
    
    
    
    4
    
    
    
    2,334
    
    
    
    575Balance at end of period
    
    $
    8,836
    
    
    $
    5,829
    
    
    $
    8,836
    
    
    $
    5,829Ratios:Net recoveries (charge-offs)
to average loans outstanding
- annualized
    
    
    (0.05
    %)
    
    
    (0.02
    %)
    
    
    (0.03
    %)
    
    
    (0.06
    %)Allowance for loan losses to
non-performing loans at end
of period
    
    
    55.98
    %
    
    
    93.07
    %
    
    
    55.98
    %
    
    
    93.07
    %Allowance for loan losses to
total loans at end of period
    
    
    1.33
    %
    
    
    0.84
    %
    
    
    1.33
    %
    
    
    0.84
    %
 20




---



##### Table of Contents



Deposits
 At September 30, 2009
    
    
    At December 31, 2008Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)Deposit type:Demand
    
    $
    68,327
    
    
    
    10.55
    %
    
    $
    66,545
    
    
    
    10.94
    %Regular savings
    
    
    49,025
    
    
    
    7.57
    
    
    
    46,946
    
    
    
    7.72Relationship savings
    
    
    126,048
    
    
    
    19.45
    
    
    
    121,376
    
    
    
    19.96Money market
deposits
    
    
    73,972
    
    
    
    11.42
    
    
    
    60,174
    
    
    
    9.89NOW deposits
    
    
    45,111
    
    
    
    6.96
    
    
    
    43,206
    
    
    
    7.11Total transaction
accounts
    
    
    362,483
    
    
    
    55.94
    
    
    
    338,247
    
    
    
    55.62Term certificates
less than $100,000
    
    
    177,157
    
    
    
    27.34
    
    
    
    162,739
    
    
    
    26.76Term certificates
$100,000 or more
    
    
    108,320
    
    
    
    16.72
    
    
    
    107,102
    
    
    
    17.62Total certificate
accounts
    
    
    285,477
    
    
    
    44.06
    
    
    
    269,841
    
    
    
    44.38Total deposits
    
    $
    647,960
    
    
    
    100.00
    %
    
    $
    608,088
    
    
    
    100.00
    %
  Borrowings
 Stockholders Equity
 Comparison of Operating Results for the Three Months Ended September 30, 2009 and 2008
  Analysis of Net Interest Income
   21




---



##### Table of Contents



Three Months Ended September 30, 2009
    
    
    Three Months Ended September 30, 2008Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    665,033
    
    
    $
    9,642
    
    
    
    5.80
    %
    
    $
    684,825
    
    
    $
    10,564
    
    
    
    6.17
    %Investment securities
    
    
    187,881
    
    
    
    1,719
    
    
    
    3.66
    %
    
    
    166,038
    
    
    
    2,030
    
    
    
    4.89
    %Short-term investments
    
    
    19,020
    
    
    
    3
    
    
    
    0.06
    %
    
    
    5,112
    
    
    
    24
    
    
    
    1.88
    %Total interest-earning assets
    
    
    871,934
    
    
    
    11,364
    
    
    
    5.21
    %
    
    
    855,975
    
    
    
    12,618
    
    
    
    5.90
    %Non-interest-earning assets
    
    
    72,929
    
    
    
    
    
    
    
    
    
    
    
    68,383Total assets
    
    $
    944,863
    
    
    
    
    
    
    
    
    
    
    $
    924,358Interest-bearing liabilities:Savings deposits
    
    $
    50,311
    
    
    
    40
    
    
    
    0.32
    %
    
    $
    50,235
    
    
    
    54
    
    
    
    0.43
    %Relationship savings
    
    
    123,762
    
    
    
    383
    
    
    
    1.24
    %
    
    
    124,647
    
    
    
    582
    
    
    
    1.87
    %Money market
    
    
    68,342
    
    
    
    160
    
    
    
    0.94
    %
    
    
    59,428
    
    
    
    298
    
    
    
    2.01
    %NOW accounts
    
    
    43,944
    
    
    
    40
    
    
    
    0.36
    %
    
    
    42,024
    
    
    
    53
    
    
    
    0.50
    %Certificates of deposits
    
    
    279,790
    
    
    
    2,033
    
    
    
    2.91
    %
    
    
    249,441
    
    
    
    2,274
    
    
    
    3.65
    %Total interest-bearing
deposits
    
    
    566,149
    
    
    
    2,656
    
    
    
    1.88
    %
    
    
    525,775
    
    
    
    3,261
    
    
    
    2.48
    %Borrowed funds
    
    
    177,321
    
    
    
    1,764
    
    
    
    3.98
    %
    
    
    201,279
    
    
    
    2,092
    
    
    
    4.16
    %Total interest-bearing
liabilities
    
    
    743,470
    
    
    
    4,420
    
    
    
    2.38
    %
    
    
    727,054
    
    
    
    5,353
    
    
    
    2.95
    %Non-interest-bearing liabilities
    
    
    75,263
    
    
    
    
    
    
    
    
    
    
    
    69,037Total liabilities
    
    
    818,733
    
    
    
    
    
    
    
    
    
    
    
    796,091Equity
    
    
    126,130
    
    
    
    
    
    
    
    
    
    
    
    128,267Total liabilities and equity
    
    $
    944,863
    
    
    
    
    
    
    
    
    
    
    $
    924,358Net interest income
    
    
    
    
    
    $
    6,944
    
    
    
    
    
    
    
    
    
    
    $
    7,265Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.83
    %
    
    
    
    
    
    
    
    
    
    
    2.95
    %Net interest-earning assets (4)
    
    $
    128,464
    
    
    
    
    
    
    
    
    
    
    $
    128,921Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.19
    %
    
    
    
    
    
    
    
    
    
    
    3.39
    %Average interest-earning assets
to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    117.28
    %
    
    
    
    
    
    
    
    
    
    
    117.73
    %
 
 (1)
    
    Yields and rates for the three months ended September 30, 2009 and 2008 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average interest-earning assets and the cost of total average
interest-bearing liabilities for the three months ended September 30, 2009 and 2008.(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.  22




---



##### Table of Contents



Three Months Ended September 30,2009 vs. 2008Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    (300
    )
    
    $
    (622
    )
    
    $
    (922
    )Investment securities
    
    
    340
    
    
    
    (651
    )
    
    
    (311
    )Short-term investments
    
    
    (33
    )
    
    
    12
    
    
    
    (21
    )Total interest-earning assets
    
    
    7
    
    
    
    (1,261
    )
    
    
    (1,254
    )Interest-bearing liabilities:Savings deposits
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Relationship savings
    
    
    (4
    )
    
    
    (195
    )
    
    
    (199
    )Money market
    
    
    54
    
    
    
    (192
    )
    
    
    (138
    )NOW accounts
    
    
    2
    
    
    
    (15
    )
    
    
    (13
    )Certificates of deposits
    
    
    363
    
    
    
    (604
    )
    
    
    (241
    )Total deposits
    
    
    415
    
    
    
    (1,020
    )
    
    
    (605
    )Borrowed funds
    
    
    (240
    )
    
    
    (88
    )
    
    
    (328
    )Total interest-bearing liabilities
    
    
    175
    
    
    
    (1,108
    )
    
    
    (933
    )Change in net interest income
    
    $
    (168
    )
    
    $
    (153
    )
    
    $
    (321
    )
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 Non-interest income
 23




---



##### Table of Contents



Non-interest expense
 Income tax expense
 Comparison of Operating Results for the Nine Months Ended September 30, 2009 and 2008
  Analysis of Net Interest Income
   24




---



##### Table of Contents



Nine Months Ended September 30, 2009
    

Nine Months Ended September 30, 2008Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    681,577
    
    
    $
    29,478
    
    
    
    5.77
    %
    
    $
    670,527
    
    
    $
    31,468
    
    
    
    6.26
    %Investment securities
    
    
    176,507
    
    
    
    5,399
    
    
    
    4.08
    %
    
    
    166,390
    
    
    
    6,129
    
    
    
    4.91
    %Short-term investments
    
    
    19,865
    
    
    
    10
    
    
    
    0.07
    %
    
    
    12,334
    
    
    
    238
    
    
    
    2.57
    %Total interest-earning assets
    
    
    877,949
    
    
    
    34,887
    
    
    
    5.30
    %
    
    
    849,251
    
    
    
    37,835
    
    
    
    5.94
    %Non-interest-earning assets
    
    
    73,324
    
    
    
    
    
    
    
    
    
    
    
    67,202Total assets
    
    $
    951,273
    
    
    
    
    
    
    
    
    
    
    $
    916,453Interest-bearing liabilities:Savings deposits
    
    $
    50,741
    
    
    
    133
    
    
    
    0.35
    %
    
    $
    50,375
    
    
    
    155
    
    
    
    0.41
    %Relationship savings
    
    
    122,703
    
    
    
    1,240
    
    
    
    1.35
    %
    
    
    122,409
    
    
    
    1,993
    
    
    
    2.17
    %Money market
    
    
    66,205
    
    
    
    545
    
    
    
    1.10
    %
    
    
    59,374
    
    
    
    1,109
    
    
    
    2.49
    %NOW accounts
    
    
    43,335
    
    
    
    134
    
    
    
    0.41
    %
    
    
    41,474
    
    
    
    165
    
    
    
    0.53
    %Certificates of deposits
    
    
    280,384
    
    
    
    6,408
    
    
    
    3.05
    %
    
    
    259,590
    
    
    
    7,900
    
    
    
    4.06
    %Total interest-bearing
deposits
    
    
    563,368
    
    
    
    8,460
    
    
    
    2.00
    %
    
    
    533,222
    
    
    
    11,322
    
    
    
    2.83
    %Borrowed funds
    
    
    188,650
    
    
    
    5,613
    
    
    
    3.97
    %
    
    
    185,343
    
    
    
    5,929
    
    
    
    4.27
    %Total interest-bearing
liabilities
    
    
    752,018
    
    
    
    14,073
    
    
    
    2.50
    %
    
    
    718,565
    
    
    
    17,251
    
    
    
    3.20
    %Non-interest-bearing liabilities
    
    
    73,344
    
    
    
    
    
    
    
    
    
    
    
    66,904Total liabilities
    
    
    825,362
    
    
    
    
    
    
    
    
    
    
    
    785,469Equity
    
    
    125,911
    
    
    
    
    
    
    
    
    
    
    
    130,984Total liabilities and equity
    
    $
    951,273
    
    
    
    
    
    
    
    
    
    
    $
    916,453Net interest income
    
    
    
    
    
    $
    20,814
    
    
    
    
    
    
    
    
    
    
    $
    20,584Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.80
    %
    
    
    
    
    
    
    
    
    
    
    2.74
    %Net interest-earning assets (4)
    
    $
    125,931
    
    
    
    
    
    
    
    
    
    
    $
    130,686Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.16
    %
    
    
    
    
    
    
    
    
    
    
    3.23
    %Average interest-earning assets
to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    116.75
    %
    
    
    
    
    
    
    
    
    
    
    118.19
    %
 
 (1)
    
    Yields and rates for the nine months ended September 30, 2009 and 2008 are annualized.(2)
    
    Includes loans held for sale.(3)
    
    Net interest rate spread represents the difference between the yield on total average interest-earning assets and the cost of total average
interest-bearing liabilities for the nine months ended September 30, 2009 and 2008.(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.  25




---



##### Table of Contents



Nine Months Ended September 30,2009 vs. 2008Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    531
    
    
    $
    (2,521
    )
    
    $
    (1,990
    )Investment securities
    
    
    411
    
    
    
    (1,141
    )
    
    
    (730
    )Short-term investments
    
    
    384
    
    
    
    (612
    )
    
    
    (228
    )Total interest-earning assets
    
    
    1,326
    
    
    
    (4,274
    )
    
    
    (2,948
    )Interest-bearing liabilities:Savings deposits
    
    
    1
    
    
    
    (23
    )
    
    
    (22
    )Relationship savings
    
    
    5
    
    
    
    (758
    )
    
    
    (753
    )Money market
    
    
    147
    
    
    
    (711
    )
    
    
    (564
    )NOW accounts
    
    
    7
    
    
    
    (38
    )
    
    
    (31
    )Certificates of deposits
    
    
    709
    
    
    
    (2,201
    )
    
    
    (1,492
    )Total deposits
    
    
    869
    
    
    
    (3,731
    )
    
    
    (2,862
    )Borrowed funds
    
    
    108
    
    
    
    (424
    )
    
    
    (316
    )Total interest-bearing liabilities
    
    
    977
    
    
    
    (4,155
    )
    
    
    (3,178
    )Change in net interest income
    
    $
    349
    
    
    $
    (119
    )
    
    $
    230
 Net interest income
 Interest income
 Interest expense
 Provision for loan loss expense
 Non-interest income
 Non-interest expense
 26




---



##### Table of Contents



Income tax expense
 Minimum Regulatory Capital Requirements:
 Minimum To Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioSeptember 30, 2009:Total capital to risk weighted assets
    
    $
    89,494
    
    
    
    13.3
    %
    
    $
    53,761
    
    
    
    8.0
    %
    
    $
    67,201
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:
    
    
    80,668
    
    
    
    12.0
    
    
    
    26,880
    
    
    
    4.0
    
    
    
    40,321
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    80,668
    
    
    
    8.9
    
    
    
    27,306
    
    
    
    3.0
    
    
    
    45,511
    
    
    
    5.0December 31, 2008:Total capital to risk weighted assets:
    
    $
    91,400
    
    
    
    13.0
    %
    
    $
    56,082
    
    
    
    8.0
    %
    
    $
    70,102
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:
    
    
    84,533
    
    
    
    12.1
    
    
    
    28,041
    
    
    
    4.0
    
    
    
    42,061
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    84,533
    
    
    
    9.4
    
    
    
    26,917
    
    
    
    3.0
    
    
    
    44,862
    
    
    
    5.0
 Contractual Obligations
 September 30, 2009More than
    
    More thanOne Year
    
    Three Yearsthrough
    
    throughTotal
    
    One Year or
Less
    
    Three Years
    
    Five Years
    
    Over Five Years(Dollars in Thousands)Federal Home Loan Bank of Boston advances
    
    $
    167,491
    
    
    $
    37,285
    
    
    $
    43,500
    
    
    $
    36,000
    
    
    $
    50,706Securities sold under agreements to repurchase
    
    
    6,400
    
    
    
    6,400
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    173,891
    
    
    $
    43,685
    
    
    $
    43,500
    
    
    $
    36,000
    
    
    $
    50,706
 Off-Balance Sheet Arrangements:
 27




---



##### Table of Contents



September 30, 2009More 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)
    
    $
    27,377
    
    
    $
    27,377
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    17,146
    
    
    
    17,146
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (2)
    
    
    67,670
    
    
    
    936
    
    
    
    6,064
    
    
    
    17,201
    
    
    
    43,469Unused portion of construction loans (3)
    
    
    12,399
    
    
    
    12,399
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft lines-of-credit(4)
    
    
    5,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,015Unused portion of personal lines-of-credit(5)
    
    
    828
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    828Standby letters of credit(6)
    
    
    3,448
    
    
    
    3,448
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies(7)
    
    
    5,466
    
    
    
    
    
    
    
    5,466
    
    
    
    
    
    
    
    Total loan and other commitments
    
    $
    139,349
    
    
    $
    61,306
    
    
    $
    11,530
    
    
    $
    17,201
    
    
    $
    49,312
 
 (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 commercial real estate limited partnerships. 
 Item 3:
    
    Quantitative and Qualitative Disclosures about Market Risks
  
 Item 4:
    
    Controls and Procedures
   28




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  Any Future FDIC Insurance Premiums Will Adversely Impact Our Earnings.
   
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Unregistered Sales of Equity Securities  Not applicable(b)
    
    Use of Proceeds  Not applicable(c)
    
    Repurchase of Our Equity Securities  In March 2009 the Company announced that its
Board of Directors authorized a stock repurchase program (the Stock Repurchase Program)
for the purchase of up to 439,095 shares of the Companys common stock or approximately 5%
of its outstanding common stock. Purchases under this Stock Repurchase Program in the
third quarter of 2009 were as follows:
 (d) Maximum Number or(a) Total
    
    
    
    
    
    (c) Total Number of
    
    Approximate Dollar ValueNumber of
    
    (b) Average
    
    Shares Purchased as Part
    
    of Shares that May YetShares
    
    Price
    
    of Publicly announced
    
    Be Purchased Under the PlansPeriod
    
    Purchased
    
    Paid per Share
    
    Plans or Programs
    
    or ProgramsJuly 1  31
    
    
    3,000
    
    
    $
    11.69
    
    
    
    3,000
    
    
    
    413,895August 1  31
    
    
    2,000
    
    
    $
    11.02
    
    
    
    2,000
    
    
    
    411,895September 1
 30
    
    
    7,900
    
    
    $
    10.87
    
    
    
    7,900
    
    
    
    403,995
 29




---



##### Table of Contents



Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5
    
    Other Information
  30




---



##### Table of Contents



Item 6 Exhibits
 2.1
    
    Amended and Restated Plan of Conversion  (1)3.1
    
    Certificate of Incorporation of Legacy Bancorp, Inc.(1)3.2
    
    Bylaws of Legacy Bancorp, Inc. (as amended) (1)10.1
    
    Legacy Banks ESOP Trust Agreement(2)10.2
    
    ESOP Plan Document (2)10.3
    
    ESOP Loan Documents (2)10.4.1
    
    Employment Agreement between Legacy Banks and J. Williar Dunlaevy (2)10.4.2
    
    Employment Agreement between Legacy Banks and Michael A. Christopher (2)10.4.3
    
    Employment Agreement between Legacy Banks and Steven F. Pierce (2)10.4.4
    
    Employment Agreement between Legacy Banks and Stephen M. Conley (2)10.4.5
    
    Employment Agreement between Legacy Banks and Richard M. Sullivan (2)10.5.1
    
    Employment Agreement between Legacy Bancorp, Inc. and J. Williar Dunlaevy (2)10.5.2
    
    Employment Agreement between Legacy Bancorp, Inc. and Michael A. Christopher (2)10.5.3
    
    Employment Agreement between Legacy Bancorp, Inc. and Steven F. Pierce (2)10.5.4
    
    Employment Agreement between Legacy Bancorp, Inc. and Stephen M. Conley (2)10.5.5
    
    Employment Agreement between Legacy Bancorp, Inc. and Richard M. Sullivan (2)10.5.6
    
    Separation Agreement and General Release dated as of November 5, 2007 between Legacy Bancorp,Inc., Legacy Banks and Michael A. Christopher (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 (4)10.5.8
    
    Consulting Agreement dated as of November 5, 2007 between Legacy Bancorp, Inc., Legacy Banks andMichael 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 ofDecember 15, 2008 (8)10.5.13
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between LegacyBancorp, 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 LegacyBancorp, 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 LegacyBancorp, Inc., Legacy Banks and Richard M. Sullivan (9)10.5.16
    
    Amended and Restated Supplemental Executive Retirement Agreement effective as of November 20, 2008by and between Legacy Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)10.11
    
    2006 Equity Incentive Plan (3)11.0
    
    Statement re: Computation of Per Share Earnings is incorporated herein by reference to Notes toConsolidated 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 September 30, 2005 filed October 27, 2005.(2)
    
    Incorporated by reference from the Registration Statement on Form S-1 (No. 333-126481) filed
July 8, 2005, as amended.(3)
    
    Incorporated by reference from the Registrants Definitive Proxy Statement on Form DEF 14A
filed September 25, 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. 31




---



##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date:  November 6, 2009
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and Chairman of the BoardDate:      November 6, 2009
    /s/ Paul H. BrucePaul H. BruceSenior Vice President, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer) 32