##### 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, 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
    
    Smaller reporting company o(Do not check if smaller reporting company)
 o þ
 8,756,712




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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, 2009
and December 31, 2008
    
    
    2Consolidated Statements of Operations for the three and six
months ended June 30, 2009 and 2008
    
    
    3Consolidated Statements of Changes in Stockholders Equity
for the six months ended June 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows for the six
months ended June 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    16Item 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




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1:
    
    Financial Statements
 LEGACY BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCash and due from banks
    
    $
    11,412
    
    
    $
    13,245Short-term investments
    
    
    23,164
    
    
    
    20,350Cash and cash equivalents
    
    
    34,576
    
    
    
    33,595Securities  Available for sale
    
    
    161,114
    
    
    
    132,357Securities  Held to maturity
    
    
    97
    
    
    
    97Restricted equity securities and other investments  at cost
    
    
    19,319
    
    
    
    20,185Loans held for sale
    
    
    122
    
    
    
    Loans, net of allowance for loan losses of $8,813
in 2009 and $6,642 in 2008
    
    
    671,821
    
    
    
    695,264Premises and equipment, net
    
    
    20,002
    
    
    
    19,770Accrued interest receivable
    
    
    3,561
    
    
    
    3,633Goodwill, net
    
    
    9,730
    
    
    
    9,687Net deferred tax asset
    
    
    9,469
    
    
    
    10,023Bank-owned life insurance
    
    
    15,882
    
    
    
    15,551Other assets
    
    
    4,278
    
    
    
    4,495$
    949,971
    
    
    $
    944,657LIABILITIES AND STOCKHOLDERS EQUITYDeposits :Noninterest-bearing
    
    $
    70,151
    
    
    $
    66,545Interest-bearing
    
    
    566,026
    
    
    
    541,543Total deposits
    
    
    636,177
    
    
    
    608,088Securities sold under agreements to repurchase
    
    
    6,483
    
    
    
    5,238Federal Home Loan Bank advances
    
    
    176,395
    
    
    
    197,898Mortgagors escrow accounts
    
    
    932
    
    
    
    1,015Accrued expenses and other liabilities
    
    
    6,598
    
    
    
    8,276Total liabilities
    
    
    826,585
    
    
    
    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 June 30, 2009 and
December 31, 2008; 8,759,712 outstanding at June 30, 2009
and 8,781,912 outstanding at December 31, 2008)
    
    
    103
    
    
    
    103Additional paid-in-capital
    
    
    102,620
    
    
    
    102,475Unearned Compensation  ESOP
    
    
    (7,689
    )
    
    
    (8,055
    )Unearned Compensation  Equity Incentive Plan
    
    
    (2,307
    )
    
    
    (2,727
    )Retained earnings
    
    
    55,445
    
    
    
    58,534Accumulated other comprehensive income (loss)
    
    
    (3,084
    )
    
    
    (4,722
    )Treasury stock, at cost (1,548,888 shares at June 30, 2009
and 1,526,688 shares at December 31, 2008)
    
    
    (21,702
    )
    
    
    (21,466
    )Total stockholders equity
    
    
    123,386
    
    
    
    124,142$
    949,971
    
    
    $
    944,657
  2




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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Interest and dividend income:Loans
    
    $
    9,803
    
    
    $
    10,379
    
    
    $
    19,835
    
    
    $
    20,904Securities:Taxable
    
    
    1,613
    
    
    
    1,911
    
    
    
    3,359
    
    
    
    3,856Tax-Exempt
    
    
    168
    
    
    
    126
    
    
    
    322
    
    
    
    242Short-term investments
    
    
    3
    
    
    
    50
    
    
    
    7
    
    
    
    214Total interest and dividend income
    
    
    11,587
    
    
    
    12,466
    
    
    
    23,523
    
    
    
    25,216Interest expense:Deposits
    
    
    2,798
    
    
    
    3,545
    
    
    
    5,804
    
    
    
    8,061Federal Home Loan Bank advances
    
    
    1,859
    
    
    
    1,921
    
    
    
    3,813
    
    
    
    3,788Other borrowed funds
    
    
    18
    
    
    
    21
    
    
    
    36
    
    
    
    48Total interest expense
    
    
    4,675
    
    
    
    5,487
    
    
    
    9,653
    
    
    
    11,897Net interest income
    
    
    6,912
    
    
    
    6,979
    
    
    
    13,870
    
    
    
    13,319Provision for loan losses
    
    
    1,506
    
    
    
    346
    
    
    
    2,234
    
    
    
    571Net interest income after provision for loan losses
    
    
    5,406
    
    
    
    6,633
    
    
    
    11,636
    
    
    
    12,748Non-interest income:Customer service fees
    
    
    725
    
    
    
    863
    
    
    
    1,404
    
    
    
    1,609Portfolio management fees
    
    
    269
    
    
    
    304
    
    
    
    490
    
    
    
    582Income from bank owned life insurance
    
    
    156
    
    
    
    109
    
    
    
    329
    
    
    
    243Insurance, annuities and mutual fund fees
    
    
    37
    
    
    
    49
    
    
    
    59
    
    
    
    114Gain on sales of securities, net
    
    
    60
    
    
    
    385
    
    
    
    42
    
    
    
    472Total other-than temporary impairment losses
    
    
    (3,920
    )
    
    
    (344
    )
    
    
    (5,501
    )
    
    
    (590
    )Portion of loss recognized in other
comprehensive loss
    
    
    2,490
    
    
    
    
    
    
    
    2,490
    
    
    
    Net impairment losses
    
    
    (1,430
    )
    
    
    (344
    )
    
    
    (3,011
    )
    
    
    (590
    )Gain on sales of loans, net
    
    
    370
    
    
    
    52
    
    
    
    570
    
    
    
    117Miscellaneous
    
    
    11
    
    
    
    10
    
    
    
    23
    
    
    
    33Total non-interest income
    
    
    198
    
    
    
    1,428
    
    
    
    (94
    )
    
    
    2,580Non-interest expenses:Salaries and employee benefits
    
    
    3,451
    
    
    
    3,620
    
    
    
    6,896
    
    
    
    7,195Occupancy and equipment
    
    
    1,021
    
    
    
    931
    
    
    
    2,070
    
    
    
    1,843Data processing
    
    
    671
    
    
    
    647
    
    
    
    1,334
    
    
    
    1,283Professional fees
    
    
    232
    
    
    
    184
    
    
    
    477
    
    
    
    351Advertising
    
    
    379
    
    
    
    304
    
    
    
    705
    
    
    
    559FDIC Deposit Insurance
    
    
    665
    
    
    
    26
    
    
    
    897
    
    
    
    43Other general and administrative
    
    
    1,231
    
    
    
    1,034
    
    
    
    2,348
    
    
    
    2,136Total non-interest expenses
    
    
    7,650
    
    
    
    6,746
    
    
    
    14,727
    
    
    
    13,410Income (loss) before income taxes
    
    
    (2,046
    )
    
    
    1,315
    
    
    
    (3,185
    )
    
    
    1,918Provision (benefit) for income taxes
    
    
    (553
    )
    
    
    401
    
    
    
    (900
    )
    
    
    587Net income (loss)
    
    $
    (1,493
    )
    
    $
    914
    
    
    $
    (2,285
    )
    
    $
    1,331Earnings (loss) per shareBasic
    
    $
    (0.19
    )
    
    $
    0.11
    
    
    $
    (0.29
    )
    
    $
    0.16Diluted
    
    $
    (0.19
    )
    
    $
    0.11
    
    
    $
    (0.29
    )
    
    $
    0.16Weighted average shares outstandingBasic
    
    
    7,979,133
    
    
    
    8,095,109
    
    
    
    7,978,768
    
    
    
    8,187,925Diluted
    
    
    7,979,133
    
    
    
    8,129,991
    
    
    
    7,978,768
    
    
    
    8,219,011
  3




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##### Table of Contents



LEGACY BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 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:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,331
    
    
    
    
    
    
    
    
    
    
    
    1,331Net unrealized loss on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,273
    )
    
    
    
    
    
    
    (2,273
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (942
    )Cash dividends declared ($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (818
    )
    
    
    
    
    
    
    
    
    
    
    (818
    )Common stock repurchased - 5% Stock Repurchase
Program announced December 2007
    
    
    (303,600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,205
    )
    
    
    (4,205
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Restricted stock granted
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (7
    )
    
    
    
    
    
    
    49
    
    
    
    Common stock held by ESOP committed
to be released (27,490 shares)
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373Balance at June 30, 2008
    
    
    8,940,360
    
    
    $
    103
    
    
    $
    102,119
    
    
    $
    (8,421
    )
    
    $
    (3,147
    )
    
    $
    59,215
    
    
    $
    (2,003
    )
    
    $
    (19,554
    )
    
    $
    128,312Balance at December 31, 2008
    
    
    8,781,912
    
    
    $
    103
    
    
    $
    102,475
    
    
    $
    (8,055
    )
    
    $
    (2,727
    )
    
    $
    58,534
    
    
    $
    (4,722
    )
    
    $
    (21,466
    )
    
    $
    124,142Comprehensive loss:Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,285
    )
    
    
    
    
    
    
    
    
    
    
    (2,285
    )Net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,638
    
    
    
    
    
    
    
    1,638Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (647
    )Cash dividends declared ($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (804
    )
    
    
    
    
    
    
    
    
    
    
    (804
    )Common stock repurchased - 5% Stock Repurchase
Program announced March 2009
    
    
    (22,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (236
    )
    
    
    (236
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Common stock
held by ESOP committed to be released (27,490 shares)
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    274Balance at June 30, 2009
    
    
    8,759,712
    
    
    $
    103
    
    
    $
    102,620
    
    
    $
    (7,689
    )
    
    $
    (2,307
    )
    
    $
    55,445
    
    
    $
    (3,084
    )
    
    $
    (21,702
    )
    
    $
    123,386
  4




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##### Table of Contents



LEGACY BANCORP, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 Six months ended June 30,2009
    
    
    2008(Unaudited)Cash flows from operating activities:Net (loss) income
    
    $
    (2,285
    )
    
    $
    1,331Adjustments to reconcile net income (loss) to net
cash (used) provided by operating activities:Provision for loan losses
    
    
    2,234
    
    
    
    571Net (accretion) amortization of securities
    
    
    249
    
    
    
    (74
    )Amortization of core deposit intangible
    
    
    345
    
    
    
    327Depreciation and amortization expense
    
    
    807
    
    
    
    370Loss on sales/impairment of securities, net
    
    
    2,969
    
    
    
    118Gain on sales of loans, net
    
    
    (570
    )
    
    
    (117
    )Loans originated for sale
    
    
    (42,660
    )
    
    
    (4,522
    )Proceeds from sales of loans
    
    
    43,108
    
    
    
    5,034Share-based compensation expense
    
    
    657
    
    
    
    812Deferred tax (benefit) provision
    
    
    (434
    )
    
    
    382Employee Stock Ownership Plan expense
    
    
    274
    
    
    
    373Net change in:Bank-owned life insurance
    
    
    (331
    )
    
    
    (245
    )Accrued interest receivable
    
    
    72
    
    
    
    (20
    )Other assets
    
    
    157
    
    
    
    (682
    )Accrued expenses and other liabilities
    
    
    (1,678
    )
    
    
    (1,260
    )Net cash (used) provided by
operating activities
    
    
    2,914
    
    
    
    2,398Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    28,868
    
    
    
    32,625Maturities, prepayments and calls
    
    
    34,567
    
    
    
    29,415Purchases
    
    
    (91,245
    )
    
    
    (76,339
    )Purchase of other investments
    
    
    (673
    )
    
    
    (2,053
    )Loan originations and purchases, net of principal
payments
    
    
    21,209
    
    
    
    (29,891
    )Additions to premises and equipment
    
    
    (565
    )
    
    
    (1,038
    )Net cash received in branch acquisition
    
    
    9,031
    
    
    
    Net cash (used) provided by
investing activities
    
    
    1,192
    
    
    
    (47,281
    )
   5




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##### Table of Contents



LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in thousands)
 Six months ended June 30,2009
    
    
    2008(Unaudited)Cash flows from financing activities:Net (decrease) increase in deposits
    
    
    18,256
    
    
    
    (19,433
    )Net (decrease) increase in securities sold under
agreements to repurchase
    
    
    1,245
    
    
    
    1,087Repayment of Federal Home Loan Bank advances
    
    
    (21,503
    )
    
    
    (297,396
    )Proceeds from Federal Home Loan Bank advances
    
    
    
    
    
    
    322,508Net increase (decrease) in mortgagors escrow accounts
    
    
    (83
    )
    
    
    (160
    )Repurchase of common stock
    
    
    (236
    )
    
    
    (4,205
    )Payment of dividends on common stock
    
    
    (804
    )
    
    
    (818
    )Net cash provided (used) by financing activities
    
    
    (3,125
    )
    
    
    1,583Net change in cash and cash equivalents
    
    
    981
    
    
    
    (43,300
    )Cash and cash equivalents at beginning of period
    
    
    33,595
    
    
    
    62,225Cash and cash equivalents at end of period
    
    $
    34,576
    
    
    $
    18,925Supplemental cash flow information:Interest paid on deposits
    
    $
    5,901
    
    
    $
    8,061Interest paid on Federal Home Loan Bank advances
    
    
    3,907
    
    
    
    3,805Interest paid on other borrowed funds
    
    
    36
    
    
    
    48Income taxes paid
    
    
    710
    
    
    
    305
  6




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##### Table of Contents



LEGACY BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of presentation
  2. Recent Accounting Pronouncements
 Subsequent Events
 Accounting for
Transfers of Financial Assets .
 Amendments to
FASB Interpretation No. 46(R) . Consolidation of Variable Interest Entities,
  7




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##### Table of Contents



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 Impairments. Notes to Condensed Consolidated Financial Statements
 Business Combinations.
 
    
    Acquisition costs will be generally expensed as incurred,
    
    Noncontrolling interests (formerly known as minority interests will
be valued at fair value at the acquisition date,
    
    Acquired contingent liabilities will be recorded at fair value at the
acquisition date and subsequently measured at either the higher of such amount
or the amount determined under existing guidance for non-acquired
contingencies,
    
    Restructuring costs associated with a business combination will be
generally expensed subsequent to the acquisition date,
    
    Changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense, and
    
    Allowance for loan losses of an acquiree will not be permitted to be
recognized by the acquirer.
  Determining Whether Instruments Granted in Share-Based Payment Transactions
Are Participating Securities
 , Interim Disclosures about Fair Value of Financial Instruments. Disclosures about Fair Value of Financial Instruments, Interim
Financial Reporting
 8




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##### Table of Contents



3. Earnings Per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income applicable to common stock (000s)
    
    $
    (1,493
    )
    
    $
    914
    
    
    $
    (2,285
    )
    
    $
    1,331Average number of shares issued
    
    
    10,308,600
    
    
    
    10,308,600
    
    
    
    10,308,600
    
    
    
    10,308,600Less: average unallocated ESOP shares
    
    
    (590,725
    )
    
    
    (645,855
    )
    
    
    (597,710
    )
    
    
    (652,727
    )Less: average treasury shares
    
    
    (1,540,002
    )
    
    
    (1,298,996
    )
    
    
    (1,533,382
    )
    
    
    (1,200,000
    )Less: average unvested restricted stock awards
    
    
    (198,740
    )
    
    
    (268,640
    )
    
    
    (198,740
    )
    
    
    (267,948
    )Average number of basic shares outstanding
    
    
    7,979,133
    
    
    
    8,095,109
    
    
    
    7,978,768
    
    
    
    8,187,925Plus: dilutive unvested restricted stock awards
    
    
    
    
    
    
    34,882
    
    
    
    
    
    
    
    30,381Plus: diluted stock option shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    705Average number of diluted shares outstanding
    
    
    7,979,133
    
    
    
    8,129,991
    
    
    
    7,978,768
    
    
    
    8,219,011Basic earnings (loss) per share
    
    $
    (0.19
    )
    
    $
    0.11
    
    
    $
    (0.29
    )
    
    $
    0.16Diluted earnings (loss) per share
    
    $
    (0.19
    )
    
    $
    0.11
    
    
    $
    (0.29
    )
    
    $
    0.16
 4. Dividends
  5. Loan Commitments and Other Contingencies
  6. Securities
  9




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##### Table of Contents



June 30, 2009OTTI
    
    
    Gross
    
    
    GrossAmortized
    
    
    Recognized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    In OCI
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities Available for SaleDebt securities:Government-sponsored enterprises (GSE)
    
    $
    64,504
    
    
    $
    
    
    
    $
    437
    
    
    $
    (142
    )
    
    $
    64,799Municipal
    
    
    16,652
    
    
    
    
    
    
    
    163
    
    
    
    (249
    )
    
    
    16,566Corporate and other
    
    
    1,427
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    1,477GSE mortgage-backed
    
    
    57,418
    
    
    
    
    
    
    
    945
    
    
    
    (306
    )
    
    
    58,057Private issue mortgage-backed securities
    
    
    20,671
    
    
    
    (2,523
    )
    
    
    
    
    
    
    (3,156
    )
    
    
    14,992Total debt securities
    
    
    160,672
    
    
    
    (2,523
    )
    
    
    1,595
    
    
    
    (3,853
    )
    
    
    155,891Marketable equity securities  Large Cap
    
    
    4,739
    
    
    
    
    
    
    
    751
    
    
    
    (267
    )
    
    
    5,223Total securities available for sale
    
    $
    165,411
    
    
    $
    (2,523
    )
    
    $
    2,346
    
    
    $
    (4,120
    )
    
    $
    161,114Securities 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
    
    $
    36,459
    
    
    $
    463
    
    
    $
    (90
    )
    
    $
    36,832Municipal
    
    
    15,876
    
    
    
    176
    
    
    
    (420
    )
    
    
    15,632Corporate and other
    
    
    363
    
    
    
    
    
    
    
    
    
    
    
    363GSE mortgage-backed
    
    
    51,679
    
    
    
    921
    
    
    
    (110
    )
    
    
    52,490Private label mortgage-backed
    
    
    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
    
    $
    9,168
    
    
    $
    9,174
    
    
    $
    
    
    
    $
    Over 1 year to 5 years
    
    
    26,397
    
    
    
    26,497
    
    
    
    97
    
    
    
    97Over 5 years to 10 years
    
    
    12,163
    
    
    
    12,382
    
    
    
    
    
    
    
    Over 10 years
    
    
    34,855
    
    
    
    34,789
    
    
    
    
    
    
    
    Total bonds and obligations
    
    
    82,583
    
    
    
    82,842
    
    
    
    97
    
    
    
    97Mortgage-backed
    
    
    78,089
    
    
    
    73,049
    
    
    
    
    
    
    
    Total debt securities
    
    $
    160,672
    
    
    $
    155,891
    
    
    $
    97
    
    
    $
    97
  10




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##### Table of Contents



Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueJune 30, 2009:Debt securities:Government-sponsored enterprises
    
    $
    114
    
    
    $
    13,996
    
    
    $
    28
    
    
    $
    1,972Municipal
    
    
    109
    
    
    
    5,839
    
    
    
    140
    
    
    
    3,351GSE mortgage-backed
    
    
    295
    
    
    
    16,034
    
    
    
    11
    
    
    
    478Private issue mortgage-backed
    
    
    1,131
    
    
    
    2,679
    
    
    
    2,025
    
    
    
    12,313Total debt securities
    
    
    1,649
    
    
    
    38,548
    
    
    
    2,204
    
    
    
    18,114Marketable equity securities
    
    
    155
    
    
    
    1,429
    
    
    
    112
    
    
    
    739Total temporarily impaired securities
    
    $
    1,804
    
    
    $
    39,977
    
    
    $
    2,316
    
    
    $
    18,853December 31, 2008:Debt securities:Government-sponsored enterprises
    
    $
    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
    
    
    16
    
    
    $
    16,109
    
    
    $
    142
    
    
    
    0.9
    %Municipal securities
    
    
    24
    
    
    
    9,441
    
    
    
    249
    
    
    
    2.6
    %GSE mortgage-backed
    
    
    22
    
    
    
    16,818
    
    
    
    306
    
    
    
    1.8
    %Private issue mortgage-backed
    
    
    17
    
    
    
    20,671
    
    
    
    5,679
    
    
    
    27.5
    %
   11




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##### Table of Contents



For the threemonths endedJune 30, 2009Balance as of March 31, 2009
    
    $
    Credit losses for which OTTI impairment was not recognized in AOCL
    
    
    331Reductions for securities sold during the period
    
    
    Additional OTTI credit losses for which an OTTI charge was previously recognized
    
    
    Reductions for increases in cash flows expected to be collected that are recognized
that are recognized over remaining life of the security
    
    
    Balance as of June 30, 2009
    
    
    331
 7. Branch Acquisition
  12




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##### Table of Contents



8. Fair Values of Assets and Liabilities
 Fair Value Measurements
 Level 1
 Level 2
 Level 3
  Cash and cash equivalents
 Interest-bearing deposits in banks
 Securities available for sale
 Other equity securities
 13




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##### Table of Contents



Loans receivable
 Deposit liabilities
 Short-term borrowings
 Long-term borrowings
 Accrued interest
  June 30, 2009Assets/LiabilitiesLevel 1
    
    Level 2
    
    Level 3
    
    
    at Fair Value(Dollars in thousands)AssetsSecurities available for sale
    
    $
    5,223
    
    
    $
    140,760
    
    
    $
    15,131
    
    
    
    $
    161,114Total assets
    
    $
    5,223
    
    
    $
    140,760
    
    
    $
    15,131
    
    
    
    $
    161,114
 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
  AssetsAFS SecuritiesBalance as of January 1, 2009
    
    $
    21,859Total realized/unrealized gains (losses) included in net income
    
    
    (807
    )Total unrealized gains (losses) included in other comprehensive income
    
    
    1,164Purchases, sales, issuances and settlements
    
    
    (7,085
    )Transfers in and/or out of Level 3
    
    
    Balance as of June 30, 2009
    
    $
    15,131Change in unrealized gains/(losses) relating to
instruments still held at the reporting date
    
    $
    1,164
 14




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##### Table of Contents



Year-to-dateQuarter Ended
    
    
    EndedJune 30, 2009
    
    
    
    
    
    
    June 30, 2009
    
    
    June 30, 2009Total
    
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    
    Gains/(Losses)
    
    
    Gains/(Losses)(Dollars in thousands)AssetsLoans
    
    $
    
    
    
    $
    10,489
    
    
    $
    
    
    
    
    $
    (1,502
    )
    
    
    $
    (2,056
    )Total assets
    
    $
    
    
    
    $
    10,489
    
    
    $
    
    
    
    
    $
    (1,502
    )
    
    
    $
    (2,056
    )Year-to-dateQuarter Ended
    
    
    EndedJune 30, 2008
    
    
    
    
    
    
    June 30, 2008
    
    
    June 30, 2008Total
    
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    
    Gains/(Losses)
    
    
    Gains/(Losses)(Dollars in thousands)AssetsLoans
    
    $
    
    
    
    $
    973
    
    
    $
    
    
    
    
    $
    (1
    )
    
    
    $
    (53
    )Total assets
    
    $
    
    
    
    $
    973
    
    
    $
    
    
    
    
    $
    (1
    )
    
    
    $
    (53
    )
  Summary of Fair Values of Financial Instruments
  June 30, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    34,576
    
    
    $
    34,576
    
    
    $
    33,595
    
    
    $
    33,595Securities  Available for sale
    
    
    161,114
    
    
    
    161,114
    
    
    
    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
    
    
    6,678
    
    
    
    6,678
    
    
    
    7,544
    
    
    
    7,544Loans and loans held for sale
    
    
    671,943
    
    
    
    677,606
    
    
    
    695,264
    
    
    
    704,765Accrued interest receivable
    
    
    3,561
    
    
    
    3,561
    
    
    
    3,633
    
    
    
    3,633Financial liabilities:Deposits
    
    
    636,177
    
    
    
    640,904
    
    
    
    608,088
    
    
    
    613,251Repurchase agreements
    
    
    6,483
    
    
    
    6,482
    
    
    
    5,238
    
    
    
    5,237FHLB advances
    
    
    176,395
    
    
    
    184,206
    
    
    
    197,898
    
    
    
    200,836Mortgagors escrow accounts
    
    
    932
    
    
    
    932
    
    
    
    1,015
    
    
    
    1,015
 15




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  Critical Accounting Policies
  Allowance for Loan Losses. Allowance for
Loan Losses Comparison of Financial Condition
 Income Taxes.
 Other-Than-Temporary Impairment.
 16




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##### Table of Contents



Fair Values of Assets and Liabilities: Fair Value Measurements
 Goodwill. Goodwill and Other
Intangible Assets
   Comparison of Financial Condition at June 30, 2009 and December 31, 2008
 Overview:
 Investment Activities
 17




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##### Table of Contents



At June 30, 2009
    
    
    At December 31, 2008Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(Dollars in Thousands)Securities available for sale:Government-sponsored enterprises (GSE)
    
    $
    64,504
    
    
    $
    64,799
    
    
    $
    36,459
    
    
    $
    36,832Municipal bonds
    
    
    16,652
    
    
    
    16,566
    
    
    
    15,876
    
    
    
    15,632Corporate bonds and other obligations
    
    
    1,427
    
    
    
    1,477
    
    
    
    363
    
    
    
    363GSE mortgage-backed securities
    
    
    57,418
    
    
    
    58,057
    
    
    
    51,679
    
    
    
    52,490Private issue mortgage-backed securities
    
    
    20,671
    
    
    
    14,992
    
    
    
    28,588
    
    
    
    21,496Total debt securities
    
    
    160,672
    
    
    
    155,891
    
    
    
    132,965
    
    
    
    126,813Common stock
    
    
    4,739
    
    
    
    5,223
    
    
    
    6,314
    
    
    
    5,544Total securities available for sale
    
    
    165,411
    
    
    
    161,114
    
    
    
    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
    
    
    6,497
    
    
    
    6,497
    
    
    
    7,360
    
    
    
    7,360Other investments
    
    
    181
    
    
    
    181
    
    
    
    184
    
    
    
    184Total restricted equity securities
and other investments
    
    
    19,319
    
    
    
    19,319
    
    
    
    20,185
    
    
    
    20,185Total securities
    
    $
    184,827
    
    
    $
    180,530
    
    
    $
    159,561
    
    
    $
    152,639
 Lending Activities:
 At June 30, 2009
    
    
    At December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans on real estate:Residential
    
    $
    304,848
    
    
    
    44.88
    %
    
    $
    344,235
    
    
    
    49.15
    %Commercial
    
    
    256,811
    
    
    
    37.81
    
    
    
    246,374
    
    
    
    35.18Home equity
    
    
    68,707
    
    
    
    10.12
    
    
    
    63,138
    
    
    
    9.01630,366
    
    
    
    92.81
    
    
    
    653,747
    
    
    
    93.34Other loans:Commercial
    
    
    36,801
    
    
    
    5.42
    
    
    
    34,242
    
    
    
    4.89Consumer and other
    
    
    12,039
    
    
    
    1.77
    
    
    
    12,386
    
    
    
    1.7748,840
    
    
    
    7.19
    
    
    
    46,628
    
    
    
    6.66Total loans
    
    
    679,206
    
    
    
    100.00
    %
    
    
    700,375
    
    
    
    100.00
    %Other Items:Net deferred loan costs
    
    
    1,428
    
    
    
    
    
    
    
    1,531Allowance for loan losses
    
    
    (8,813
    )
    
    
    
    
    
    
    (6,642
    )Total Loans, net
    
    $
    671,821
    
    
    
    
    
    
    $
    695,264
  18




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##### Table of Contents



Non-performing Assets:
 At June 30,
    
    
    At December 31,2009
    
    
    2008(Dollars in Thousands)Non-accrual loans:Residential mortgage
    
    $
    4,489
    
    
    $
    1,190Commercial mortgage
    
    
    9,548
    
    
    
    5,777Commercial
    
    
    693
    
    
    
    410Home equity, consumer and other
    
    
    208
    
    
    
    172Total non-accrual loans
    
    
    14,938
    
    
    
    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
    
    $
    14,938
    
    
    $
    7,549Troubled debt restructurings
    
    $
    
    
    
    $
    Ratios:Non-performing loans to total loans
    
    
    2.20
    %
    
    
    1.08
    %Non-performing assets to total assets
    
    
    1.57
    %
    
    
    0.80
    %
  Allowance for Loan Losses :
  19




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##### Table of Contents



At or for the three months
    
    
    At or for the six monthsended June 30,
    
    
    ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in Thousands)Balance at beginning of period
    
    $
    7,330
    
    
    $
    5,656
    
    
    $
    6,642
    
    
    $
    5,568Charge-offs:Mortgage loans on real estate:
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (93
    )Other loans:Commercial
    
    
    
    
    
    
    (163
    )
    
    
    (14
    )
    
    
    (182
    )Consumer and other
    
    
    (69
    )
    
    
    (46
    )
    
    
    (126
    )
    
    
    (121
    )Total other loans
    
    
    (69
    )
    
    
    (209
    )
    
    
    (140
    )
    
    
    (303
    )Total charge-offs
    
    
    (69
    )
    
    
    (225
    )
    
    
    (140
    )
    
    
    (396
    )Recoveries:Mortgage loans on real estate
    
    
    1
    
    
    
    62
    
    
    
    1
    
    
    
    69Other loans:Commercial
    
    
    18
    
    
    
    8
    
    
    
    30
    
    
    
    8Consumer and other
    
    
    27
    
    
    
    19
    
    
    
    46
    
    
    
    46Total other loans
    
    
    45
    
    
    
    27
    
    
    
    76
    
    
    
    54Total recoveries
    
    
    46
    
    
    
    89
    
    
    
    77
    
    
    
    123Net recoveries (charge-offs)
    
    
    (23
    )
    
    
    (136
    )
    
    
    (63
    )
    
    
    (273
    )Provision for loan losses
    
    
    1,506
    
    
    
    346
    
    
    
    2,234
    
    
    
    571Balance at end of period
    
    $
    8,813
    
    
    $
    5,866
    
    
    $
    8,813
    
    
    $
    5,866Ratios:Net recoveries (charge-offs)
to average loans outstanding
- annualized
    
    
    (0.01
    %)
    
    
    (0.08
    %)
    
    
    (0.02
    %)
    
    
    (0.08
    %)Allowance for loan losses to
non-performing loans at end
of period
    
    
    59.00
    %
    
    
    91.13
    %
    
    
    59.00
    %
    
    
    91.13
    %Allowance for loan losses to
total loans at end of period
    
    
    1.30
    %
    
    
    0.85
    %
    
    
    1.30
    %
    
    
    0.85
    %
 20




---



##### Table of Contents



Deposits
 At June 30, 2009
    
    
    At December 31, 2008Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in Thousands)Deposit type:Demand
    
    $
    70,151
    
    
    
    11.03
    %
    
    $
    66,545
    
    
    
    10.94
    %Regular savings
    
    
    49,477
    
    
    
    7.78
    
    
    
    46,946
    
    
    
    7.72Relationship savings
    
    
    119,970
    
    
    
    18.86
    
    
    
    121,376
    
    
    
    19.96Money market deposits
    
    
    71,582
    
    
    
    11.25
    
    
    
    60,174
    
    
    
    9.89NOW deposits
    
    
    44,426
    
    
    
    6.98
    
    
    
    43,206
    
    
    
    7.11Total transaction accounts
    
    
    355,606
    
    
    
    55.90
    
    
    
    338,247
    
    
    
    55.62Term
certificates less than $100,000
    
    
    172,251
    
    
    
    27.08
    
    
    
    162,739
    
    
    
    26.76Term certificates $100,000 or more
    
    
    108,320
    
    
    
    17.02
    
    
    
    107,102
    
    
    
    17.62Total certificate accounts
    
    
    280,571
    
    
    
    44.10
    
    
    
    269,841
    
    
    
    44.38Total deposits
    
    $
    636,177
    
    
    
    100.00
    %
    
    $
    608,088
    
    
    
    100.00
    %
  Borrowings
 Stockholders Equity
 Comparison of Operating Results for the Three Months Ended June 30, 2009 and 2008
  Analysis of Net Interest Income
   21




---



##### Table of Contents



Three Months Ended June 30, 2009
    
    
    Three Months Ended June 30, 2008Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    685,660
    
    
    $
    9,803
    
    
    
    5.72
    %
    
    $
    670,887
    
    
    $
    10,379
    
    
    
    6.19
    %Investment securities
    
    
    183,022
    
    
    
    1,781
    
    
    
    3.89
    %
    
    
    164,048
    
    
    
    2,037
    
    
    
    4.97
    %Short-term investments
    
    
    18,488
    
    
    
    3
    
    
    
    0.06
    %
    
    
    10,971
    
    
    
    50
    
    
    
    1.82
    %Total interest-earning assets
    
    
    887,170
    
    
    
    11,587
    
    
    
    5.22
    %
    
    
    845,906
    
    
    
    12,466
    
    
    
    5.89
    %Non-interest-earning assets
    
    
    73,370
    
    
    
    
    
    
    
    
    
    
    
    66,881Total assets
    
    $
    960,540
    
    
    
    
    
    
    
    
    
    
    $
    912,787Interest-bearing liabilities:Savings deposits
    
    $
    51,768
    
    
    
    44
    
    
    
    0.34
    %
    
    $
    49,221
    
    
    
    47
    
    
    
    0.38
    %Relationship savings
    
    
    120,731
    
    
    
    380
    
    
    
    1.26
    %
    
    
    125,789
    
    
    
    600
    
    
    
    1.91
    %Money market
    
    
    72,699
    
    
    
    186
    
    
    
    1.02
    %
    
    
    57,159
    
    
    
    314
    
    
    
    2.20
    %NOW accounts
    
    
    44,548
    
    
    
    45
    
    
    
    0.40
    %
    
    
    42,362
    
    
    
    53
    
    
    
    0.50
    %Certificates of deposits
    
    
    281,784
    
    
    
    2,143
    
    
    
    3.04
    %
    
    
    255,176
    
    
    
    2,531
    
    
    
    3.97
    %Total interest-bearing deposits
    
    
    571,530
    
    
    
    2,798
    
    
    
    1.96
    %
    
    
    529,707
    
    
    
    3,545
    
    
    
    2.68
    %Borrowed funds
    
    
    189,940
    
    
    
    1,877
    
    
    
    3.95
    %
    
    
    186,201
    
    
    
    1,942
    
    
    
    4.17
    %Total interest-bearing liabilities
    
    
    761,470
    
    
    
    4,675
    
    
    
    2.46
    %
    
    
    715,908
    
    
    
    5,487
    
    
    
    3.07
    %Non-interest-bearing liabilities
    
    
    72,890
    
    
    
    
    
    
    
    
    
    
    
    65,847Total liabilities
    
    
    834,360
    
    
    
    
    
    
    
    
    
    
    
    781,755Equity
    
    
    126,180
    
    
    
    
    
    
    
    
    
    
    
    131,032Total liabilities and equity
    
    $
    960,540
    
    
    
    
    
    
    
    
    
    
    $
    912,787Net interest income
    
    
    
    
    
    $
    6,912
    
    
    
    
    
    
    
    
    
    
    $
    6,979Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.76
    %
    
    
    
    
    
    
    
    
    
    
    2.82
    %Net interest-earning assets (4)
    
    $
    125,700
    
    
    
    
    
    
    
    
    
    
    $
    129,998Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.12
    %
    
    
    
    
    
    
    
    
    
    
    3.30
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    116.51
    %
    
    
    
    
    
    
    
    
    
    
    118.16
    %
 
 (1)
    
    Yields and rates for the three months ended June 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 averageinterest-bearing liabilities for the three months ended June 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 June 30,2009 vs. 2008Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    236
    
    
    $
    (812
    )
    
    $
    (576
    )Investment securities
    
    
    292
    
    
    
    (548
    )
    
    
    (256
    )Short-term investments
    
    
    114
    
    
    
    (161
    )
    
    
    (47
    )Total interest-earning assets
    
    
    642
    
    
    
    (1,521
    )
    
    
    (879
    )Interest-bearing liabilities:Savings deposits
    
    
    2
    
    
    
    (5
    )
    
    
    (3
    )Relationship savings
    
    
    (23
    )
    
    
    (197
    )
    
    
    (220
    )Money market
    
    
    130
    
    
    
    (258
    )
    
    
    (128
    )NOW accounts
    
    
    3
    
    
    
    (11
    )
    
    
    (8
    )Certificates of deposits
    
    
    311
    
    
    
    (699
    )
    
    
    (388
    )Total deposits
    
    
    423
    
    
    
    (1,170
    )
    
    
    (747
    )Borrowed funds
    
    
    40
    
    
    
    (105
    )
    
    
    (65
    )Total interest-bearing liabilities
    
    
    463
    
    
    
    (1,275
    )
    
    
    (812
    )Change in net interest income
    
    $
    179
    
    
    $
    (246
    )
    
    $
    (67
    )
 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 Six Months Ended June 30, 2009 and 2008
  Analysis of Net Interest Income
   24




---



##### Table of Contents



Six Months Ended June 30, 2009
    
    
    Six Months Ended June 30, 2008Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/ Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/ Rate(1)(Dollars in thousands)Interest-earning assets:Loans  Net (2)
    
    $
    689,985
    
    
    $
    19,835
    
    
    
    5.75
    %
    
    $
    663,299
    
    
    $
    20,904
    
    
    
    6.30
    %Investment securities
    
    
    170,726
    
    
    
    3,681
    
    
    
    4.31
    %
    
    
    166,567
    
    
    
    4,098
    
    
    
    4.92
    %Short-term investments
    
    
    20,295
    
    
    
    7
    
    
    
    0.07
    %
    
    
    15,985
    
    
    
    214
    
    
    
    2.68
    %Total interest-earning
assets
    
    
    881,006
    
    
    
    23,523
    
    
    
    5.34
    %
    
    
    845,851
    
    
    
    25,216
    
    
    
    5.96
    %Non-interest-earning assets
    
    
    73,524
    
    
    
    
    
    
    
    
    
    
    
    66,606Total assets
    
    $
    954,530
    
    
    
    
    
    
    
    
    
    
    $
    912,457Interest-bearing
liabilities:Savings deposits
    
    $
    50,960
    
    
    
    93
    
    
    
    0.36
    %
    
    $
    50,446
    
    
    
    101
    
    
    
    0.40
    %Relationship savings
    
    
    122,164
    
    
    
    858
    
    
    
    1.40
    %
    
    
    121,277
    
    
    
    1,411
    
    
    
    2.33
    %Money market
    
    
    65,119
    
    
    
    385
    
    
    
    1.18
    %
    
    
    59,347
    
    
    
    812
    
    
    
    2.74
    %NOW accounts
    
    
    43,024
    
    
    
    94
    
    
    
    0.44
    %
    
    
    41,196
    
    
    
    112
    
    
    
    0.54
    %Certificates of deposits
    
    
    280,688
    
    
    
    4,374
    
    
    
    3.12
    %
    
    
    264,721
    
    
    
    5,625
    
    
    
    4.25
    %Total interest-bearing
deposits
    
    
    561,955
    
    
    
    5,804
    
    
    
    2.07
    %
    
    
    536,987
    
    
    
    8,061
    
    
    
    3.00
    %Borrowed funds
    
    
    194,408
    
    
    
    3,849
    
    
    
    3.96
    %
    
    
    177,287
    
    
    
    3,836
    
    
    
    4.33
    %Total interest-bearing
liabilities
    
    
    756,363
    
    
    
    9,653
    
    
    
    2.55
    %
    
    
    714,274
    
    
    
    11,897
    
    
    
    3.33
    %Non-interest-bearing
liabilities
    
    
    72,367
    
    
    
    
    
    
    
    
    
    
    
    65,826Total liabilities
    
    
    828,730
    
    
    
    
    
    
    
    
    
    
    
    780,100Equity
    
    
    125,800
    
    
    
    
    
    
    
    
    
    
    
    132,357Total liabilities and equity
    
    $
    954,530
    
    
    
    
    
    
    
    
    
    
    $
    912,457Net interest income
    
    
    
    
    
    $
    13,870
    
    
    
    
    
    
    
    
    
    
    $
    13,319Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.79
    %
    
    
    
    
    
    
    
    
    
    
    2.63
    %Net interest-earning assets
(4)
    
    $
    124,643
    
    
    
    
    
    
    
    
    
    
    $
    131,577Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    3.15
    %Average interest-earning
assets to interest-bearing
liabilities
    
    
    
    
    
    
    
    
    
    
    116.48
    %
    
    
    
    
    
    
    
    
    
    
    118.42
    %
 
 (1)
    
    Yields and rates for the six months ended June 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 six
months ended June 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



Six Months Ended June 30,2009 vs. 2008Increase
    
    Total(Decrease) Due to
    
    IncreaseVolume
    
    Rate
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans  Net
    
    $
    915
    
    
    $
    (1,984
    )
    
    $
    (1,069
    )Investment securities
    
    
    105
    
    
    
    (522
    )
    
    
    (417
    )Short-term investments
    
    
    80
    
    
    
    (287
    )
    
    
    (207
    )Total interest-earning assets
    
    
    1,100
    
    
    
    (2,793
    )
    
    
    (1,693
    )Interest-bearing liabilities:Savings deposits
    
    
    1
    
    
    
    (9
    )
    
    
    (8
    )Relationship savings
    
    
    10
    
    
    
    (563
    )
    
    
    (553
    )Money market
    
    
    88
    
    
    
    (515
    )
    
    
    (427
    )NOW accounts
    
    
    6
    
    
    
    (24
    )
    
    
    (18
    )Certificates of deposits
    
    
    367
    
    
    
    (1,618
    )
    
    
    (1,251
    )Total deposits
    
    
    472
    
    
    
    (2,729
    )
    
    
    (2,257
    )Borrowed funds
    
    
    112
    
    
    
    (99
    )
    
    
    13Total interest-bearing liabilities
    
    
    584
    
    
    
    (2,828
    )
    
    
    (2,244
    )Change in net interest income
    
    $
    516
    
    
    $
    35
    
    
    $
    551
 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
    
    RatioJune 30, 2009:Total capital to risk weighted assets
    
    $
    91,974
    
    
    
    13.1
    %
    
    $
    56,162
    
    
    
    8.0
    %
    
    $
    70,203
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:
    
    
    83,260
    
    
    
    11.9
    
    
    
    28,081
    
    
    
    4.0
    
    
    
    42,122
    
    
    
    6.0Tier 1 capital to average assets:
    
    
    83,260
    
    
    
    9.0
    
    
    
    27,820
    
    
    
    3.0
    
    
    
    46,367
    
    
    
    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
 June 30, 2009More than
    
    More thanOne Year
    
    Three Yearsthrough
    
    through
    
    Over FiveTotal
    
    One Year or Less
    
    Three Years
    
    Five Years
    
    Years(Dollars in Thousands)Federal Home Loan Bank of Boston advances
    
    $
    176,395
    
    
    $
    35,986
    
    
    $
    41,700
    
    
    $
    48,000
    
    
    $
    50,709Securities sold under agreements to repurchase
    
    
    6,483
    
    
    
    6,483
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    182,878
    
    
    $
    42,469
    
    
    $
    41,700
    
    
    $
    48,000
    
    
    $
    50,709
 Off-Balance Sheet Arrangements:
 27




---



##### Table of Contents



June 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)
    
    $
    19,930
    
    
    $
    19,930
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines-of-credit
    
    
    13,320
    
    
    
    13,320
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (2)
    
    
    65,210
    
    
    
    858
    
    
    
    5,824
    
    
    
    15,555
    
    
    
    42,973Unused portion of construction loans (3)
    
    
    13,512
    
    
    
    13,512
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of overdraft lines-of-credit(4)
    
    
    5,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,029Unused portion of personal lines-of-credit(5)
    
    
    844
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    844Standby letters of credit(6)
    
    
    3,426
    
    
    
    3,426
    
    
    
    
    
    
    
    
    
    
    
    Other commitments and contingencies(7)
    
    
    5,904
    
    
    
    
    
    
    
    5,904
    
    
    
    
    
    
    
    Total loan and other commitments
    
    $
    127,175
    
    
    $
    51,046
    
    
    $
    11,728
    
    
    $
    15,555
    
    
    $
    48,846
 
 (1)
    
    Commitments for loans are extended to customers for up to 60 days after which they expire.(2)
    
    Unused portions of home equity loans are available to the borrower for up to 10 years.(3)
    
    Unused portions of residential construction loans are available to the borrower for up to one year. Commercial construction loans maturities may be longer than one year.(4)
    
    Unused portion of checking overdraft lines-of-credit are available to customers in good standing indefinitely.(5)
    
    Unused portion of personal lines-of-credit are available to customers in good standing indefinitely.(6)
    
    Standby letters of credit are generally available for less than one year.(7)
    
    Other commitments relate primarily to potential additional capital calls the Company is committed to contribute as part of its investment
in certain real estate limited partnerships. 
 Item 3: Quantitative and Qualitative Disclosures about Market Risks
  
 Item 4: Controls and Procedures
   28




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##### 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
second quarter of 2009 were as follows:
 (d) Maximum Number or(c) Total Number of
    
    Approximate Dollar Value(a) Total Number
    
    
    
    
    
    Shares Purchased as Part
    
    of Shares that May Yet BeShares of
    
    (b) Average Price
    
    of Publicly announced
    
    Purchased Under the Plans orPeriod
    
    Purchased
    
    Paid per Share
    
    Plans or Programs
    
    ProgramsApril 1  30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439,095May 1  31
    
    
    10,000
    
    
    $
    10.38
    
    
    
    10,000
    
    
    
    429,095June 1  30
    
    
    12,200
    
    
    $
    10.80
    
    
    
    22,200
    
    
    
    416,895
  29




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##### Table of Contents



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
    
    WITHHELDEugene A. Dellea
    
    
    7,175,540
    
    
    
    1,606,372Dorothy B. Winsor
    
    
    7,184,727
    
    
    
    1,597,185
 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, 2009 was ratified by
the stockholders by the following vote:
 FOR
    
    WITHHELD
    
    ABSTAIN7,309,672
    
    1,456,823
    
    15,417
 
 Item 5 Other Information
  30




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##### 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 and
Michael A. Christopher (4)10.5.9
    
    Purchase Agreement by and between First Niagara Bank and Legacy Banks dated as of July 25, 2007 (6)10.5.10
    
    Change In Control Agreement between Legacy Bancorp, Inc. and Paul H. Bruce (7)10.5.11
    
    Change In Control Agreement between Legacy Bancorp, Inc. and Kimberly A. Mathews (7)10.5.12
    
    Purchase Agreement by and between The Bank of Western Massachusetts and Legacy Banks dated as of
December 15, 2008 (8)10.5.13
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)10.5.14
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and Steven F. Pierce (9)10.5.15
    
    Amended and Restated Employment Agreement effective as of November 20, 2008 by and between Legacy
Bancorp, Inc., Legacy Banks and Richard M. Sullivan (9)10.5.16
    
    Amended and Restated Supplemental Executive Retirement Agreement effective as of November 20, 2008
by and between Legacy Bancorp, Inc., Legacy Banks and J. Williar Dunlaevy (9)10.11
    
    2006 Equity Incentive Plan (3)11.0
    
    Statement re: Computation of Per Share Earnings is incorporated herein by reference to Notes to
Consolidated Financial Statementswithin Part I, Financial Statements31.1
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of J. Williar Dunlaevy31.2
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of Paul H. Bruce32
    
    Certification pursuant to 18 U.S.C. Section 1350
 
 (1)
    
    Incorporated by reference from the Registrants Quarterly Report on Form 10-Q for the Quarter
Ended June 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




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##### Table of Contents



SIGNATURES
  LEGACY BANCORP, INC.Date: August 5, 2009
    /s/ J. Williar DunlaevyJ. Williar DunlaevyChief Executive Officer and Chairman of the BoardDate: August 5, 2009
    /s/ Paul H. BrucePaul H. BruceSenior Vice President, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer) 32