Legacy Bancorp, Inc. (the ?Company? or ?Legacy?) (NASDAQ: LEGC), the holding company for Legacy Banks (the ?Bank?), today reported a net loss of $779,000, or $0.10 per diluted share, for the quarter ended September 30, 2010, compared to a net loss of $1.7 million, or $0.21 per diluted share, in the third quarter of 2009. Year to date, the Company has incurred a net loss of $3.4 million, or $0.42 per diluted share, as compared to a net loss of $4.0 million, or $0.50 per diluted share for the same period in 2009. The year to date decrease in net loss includes a decrease in charges on investments deemed to be other-than-temporarily impaired (OTTI), offset by an increase in the provision for loan losses and a decrease in net interest margin. The total shares outstanding resulted in a book value per share and tangible book value per share of $13.57 and $11.81, respectively, at September 30, 2010.

J. Williar Dunlaevy, Chief Executive Officer, commented, ?I am very pleased with the transition in leadership with the addition of Pat Sullivan as CEO of Legacy Banks and president of Legacy Bancorp. Additionally, the Renaissance acquisition has allowed for an integration of our existing customer platform resulting in a substantial increase in our wealth management business.?

Patrick J. Sullivan, President, added, ?We are taking the steps necessary to reverse the trends of the past few quarters and improve earnings going forward. This quarter we continued to see steady and consistent deposit growth at 6.7% despite aggressive pricing reductions in all deposit categories. Additionally, we have strengthened our management team in key areas including risk management, human resources and business banking. We are also pleased to have maintained a well-capitalized balance sheet as well as excess liquidity to diversify toward business lending. Notwithstanding, we are committed to vigorously reducing expenses 8-10% from our current run rate. We will also continue to take proactive steps to strengthen asset quality as is evidenced by our loan loss provision increase and other actions, which have already begun to show signs of improvement. We look forward to continuing that trend in coming quarters.?

The Company's total assets increased by $25.8 million from $946.3 million at December 31, 2009 to $972.0 million at September 30, 2010. Within the overall asset balances, the gross loan portfolio, excluding loans held for sale, decreased by $10.4 million, or 1.6%, in the first nine months of 2010. Residential mortgages have decreased $5.2 million, or 1.8%, as the majority of the residential mortgage activity was in the 30 year fixed rate category, a product which the Bank currently sells in the secondary market with servicing retained, while Home Equity Lines of Credit increased by $2.7 million or 3.8%. Commercial real estate loans decreased $6.5 million, or 2.5%, primarily due to loan payoffs and specific loan charge-offs, while other commercial loans had a slight decrease of $506,000, or 1.6%. The available-for-sale investment portfolio increased by $32.1 million, or 19.2%, while cash and cash equivalents decreased by $7.6 million, or 19.0%, at September 30, 2010 as compared to year end.

Deposits have increased by $43.6 million, or 6.7%, to $695.0 million from a balance of $651.4 million at December 31, 2009. The Company had increases in all deposit categories, with the largest increase in relationship savings and money market deposits, which increased $16.6 million, or 13.3% and $8.1 million or 12.9%, respectively. Advances from the Federal Home Loan Bank of Boston (FHLBB) have decreased by $15.3 million, or 9.5%, at September 30, 2010 as compared to the end of 2009 as the increase in overall deposits allowed the Bank to pay off high rate FHLBB borrowings as they matured during 2010.

Overall stockholders' equity decreased by $3.9 million, or 3.2%, for the first nine months of 2010. Total equity was impacted by the net loss of $3.4 million, the declaration of a dividend of $0.05 per share during each of the first three quarters and the purchase of 91,000 shares of stock at an average price of $8.68 per share as part of the Stock Repurchase Program announced in March 2009. These decreases to equity were partially offset by the amortization of unearned compensation and an increase in the unrealized gain on available-for-sale investment securities.

Total nonperforming assets (NPAs) were $17.1 million at September 30, 2010, a decrease of $3.7 million as compared to the end of 2009. This decrease was primarily the result of the Bank charging off $10.1 million of loan balances, $4.3 million of which had been reserved for prior to 2010. These charge-offs also reduced the overall ratio of nonperforming assets to total assets to 1.76% at September 30, 2010 as compared to 2.20% at December 31, 2009. The provision for loan losses was $2.2 million in the third quarter of 2010, an increase of $2.1 million as compared to the same period in 2009. Through September 30, 2010 the provision expense was $8.4 million, which represents an increase of $6.0 million as compared to the first nine months of 2009. This increase reflected both the difference in the amount of and mix of the net change in loan balances in each period as well as higher specific reserves established against certain loans in 2010. Additionally, as part of a continuous review and analysis of current market and economic conditions by management, the Company adjusted the reserve ratio applied to certain loan categories in 2010. The loan charge-offs also resulted in the reduction in the ratio of the allowance for loan losses to total loans to 1.44% at September 30, 2010, as compared to 1.67% at December 31, 2009.

The Company's net interest income decreased by $342,000, or 4.9%, in the third quarter of 2010 as compared to the same period in 2009 and by $708,000, or 3.4%, year to date. The net interest margin (NIM) was 3.03% for the three months ended September 30, 2010, a decrease of 9 basis points from the second quarter of 2010, and a decrease of 16 basis points from the third quarter of 2009. Year to date, the NIM was 3.11% in 2010 as compared to 3.16% in the same period of 2009 as decreases to the cost of funds resulting from the Bank's diligent efforts in lowering deposit costs were offset by a decrease in asset yields.

Non-interest income for the third quarter increased $4.2 million from the same period of 2009. Year to date, non-interest income totaled $5.7 million as compared to a net charge of $2.3 million for the first nine months of 2009. The primary cause of the increase in both periods was the decrease in the amount of writedowns taken on investments deemed to be OTTI as well as an increase in the net gain on the sale of investment securities. The Bank incurred $379,000 of OTTI credit losses on certain limited partnership and equity investments during the first nine months of 2010 as compared to a charge of $6.7 million on certain bonds, equities and limited partnership investments in the same period of 2009. The Bank also had increases in customer fees, portfolio management, insurance and other fees, partially offset by a decrease on the gain on sale of mortgages.

Operating expenses increased by $665,000, or 9.5%, for the third quarter of 2010 as compared to the same period of 2009, and by $876,000, or 4.0%, year to date. The Company incurred one time severance and other management restructuring expenses of $124,000 and $429,000 in the three and nine month period ending September 30, 2010. Other increases in occupancy, data processing and professional fees were partially offset by a decrease in FDIC insurance and advertising expense. The increase in other general and administration expenses was primarily due to higher expenses related to other real estate owned (OREO) as the Company incurred $84,000 and $444,000, respectively in OREO charges in the three and nine months ending September 30, 2010 as compared to $17,000 and $20,000 in the same periods of 2009. 2010 other general and administrative expenses also include $40,000 and $67,000, respectively in amortization of intangibles acquired as part of the Company's acquisition of substantially all of the assets of the Renaissance Investment Group in April. The Company's core efficiency ratio (reported efficiency ratio net of effect of non-core adjustments) for the quarter has increased to 89.9% as compared to 82.9% in the third quarter of 2009 primary due to the decrease in net investment income and the increase in operating expenses. Year to date the core efficiency ratio has increased to 89.5% in 2010 from 83.2% in the first nine months of 2009.

CONFERENCE CALL

J. Williar Dunlaevy, Chairman and Chief Executive Officer, Patrick J. Sullivan, President, and Paul H. Bruce, Chief Financial Officer, will host a conference call at 3:00 p.m. (Eastern Time) on Thursday October 28, 2010. Persons wishing to access the conference call may do so by dialing 877-407-0778. Replays of the conference call will be available beginning October 28, 2010 at 6:00 p.m. (Eastern Time) through November 28, 2010 at 11:59 p.m. (Eastern Time) by dialing 877-660-6853 and using Account #286 and Conference ID #358441 (both numbers are needed to access the replay).

FORWARD LOOKING STATEMENTS

Certain statements herein constitute ?forward-looking statements? within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and expectations of management, as well as the assumptions made using information currently available to management. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties and assumptions. As a result, actual results may differ from those contemplated by these statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like ?believe,? ?expect,? ?anticipate,? ?estimate,? and ?intend? or future or conditional verbs such as ?will,? ?would,? ?should,? ?could? or ?may.? Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the businesses in which Legacy Bancorp is engaged and changes in the securities market. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release and the associated conference call. The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. We believe that providing certain non-GAAP financial measures, such as core efficiency ratio, provides investors with information useful in understanding our financial performance, our performance trends and financial position. A reconciliation of non-GAAP to GAAP financial measures is included in the accompanying financial tables, elsewhere in this report.

 
LEGACY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
         
September 30, December 31,
  2010     2009  
ASSETS (Unaudited)
Cash and due from banks $ 18,152 $ 11,281
Short-term investments   14,371     28,874  
Cash and cash equivalents 32,523 40,155
Securities - Available for sale 199,569 167,426
Securities - Held to maturity 97 97
Restricted equity securities and other investments - at cost 19,595 17,193
Loans held for sale 2,470 706
Loans, net of allowance for loan losses of $9,375
in 2010 and $11,089 in 2009 643,834 652,628
Premises and equipment, net 19,427 19,568
Accrued interest receivable 2,942 3,306
Goodwill, net 11,558 9,730
Other intangible assets 3,676 2,654
Net deferred tax asset 9,270 10,202
Bank-owned life insurance 16,832 16,263
Foreclosed assets 2,103 1,195
Other assets   8,144     5,142  
$ 972,040   $ 946,265  
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 80,510 $ 75,232
Interest-bearing   614,488     576,146  
Total deposits 694,998 651,378
Securities sold under agreements to repurchase 4,169 6,386
Federal Home Loan Bank advances 145,092 160,352
Mortgagors' escrow accounts 1,098 1,058
Accrued expenses and other liabilities   9,238     5,724  
Total liabilities   854,595     824,898  
Commitments and contingencies
Stockholders' Equity
Preferred Stock ($.01 par value, 10,000,000 shares
authorized, none issued or outstanding) 		- -
 

Common Stock ($.01 par value, 40,000,000 shares
authorized and 10,308,600 issued at September 30, 2010 and
December 31, 2009; 8,653,712 outstanding at September 30,
2010 and 8,734,712 outstanding at December 31, 2009)

 
 
103 103
Additional paid-in-capital 103,031 102,788
Unearned Compensation - ESOP (6,956 ) (7,322 )
Unearned Compensation - Equity Incentive Plans (1,479 ) (2,078 )
Retained earnings 44,213 48,998
Accumulated other comprehensive income 992 711
Treasury stock, at cost (1,654,888 shares at September 30, 2010
and 1,573,888 shares at December 31, 2009)   (22,459 )   (21,833 )
Total stockholders' equity   117,445     121,367  
$ 972,040   $ 946,265  
                   
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,
  2010     2009     2010     2009  
(Unaudited) (Unaudited)
Interest and dividend income:
Loans $ 9,005 $ 9,642 $ 27,328 $ 29,478
Securities:
Taxable 1,106 1,552 3,534 4,911
Tax-Exempt 83 167 409 488
Short-term investments   4     3     17     10  
Total interest and dividend income   10,198     11,364     31,288     34,887  
Interest expense:
Deposits 2,193 2,656 6,910 8,460
Federal Home Loan Bank advances 1,398 1,748 4,249 5,561
Other borrowed funds   5     16     23     52  
Total interest expense   3,596     4,420     11,182     14,073  
Net interest income 6,602 6,944 20,106 20,814
Provision for loan losses   2,174     101     8,350     2,334  
Net interest income after provision for loan losses   4,428     6,843     11,756     18,480  
 
Non-interest income:
Customer service fees 731 736 2,216 2,140
Portfolio management fees 595 233 1,355 723
Income from bank owned life insurance 177 90 474 418
Insurance, annuities and mutual fund fees 19 25 103 84
Gain on sales of securities, net 343 199 1,573 241
Impairment losses on securities, net (14 ) (3,652 ) (379 ) (6,663 )
Gain on sales of loans, net 119 156 249 725
Miscellaneous   12     9     72     33  
Total non-interest income   1,982     (2,204 )   5,663     (2,299 )
Non-interest expenses:
Salaries and employee benefits 3,786 3,447 10,979 10,343
Occupancy and equipment 974 931 2,956 3,001
Data processing 750 691 2,204 2,025
Professional fees 359 287 950 765
Advertising 249 367 949 1,072
FDIC deposit insurance 285 250 824 1,190
Other general and administrative   1,232     997     3,712     3,302  
Total non-interest expenses   7,635     6,970     22,574     21,698  
 
Loss before income taxes (1,225 ) (2,331 ) (5,155 ) (5,517 )
 
Benefit for income taxes   (446 )   (633 )   (1,756 )   (1,533 )
 
Net loss $ (779 ) $ (1,698 ) $ (3,399 ) $ (3,984 )
Earnings (loss) per share
Basic $ (0.10 ) $ (0.21 ) $ (0.42 ) $ (0.50 )
Diluted $ (0.10 ) $ (0.21 ) $ (0.42 ) $ (0.50 )
Weighted average shares outstanding
Basic 7,996,245 7,978,928 8,015,066 7,981,042
Diluted 7,996,245 7,978,928 8,015,066 7,981,042
                 
LEGACY BANCORP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA
(Dollars in thousands except per share data)
 
Three Months Ended September 30, Nine Months Ended September 30,
  2010     2009     2010     2009  
Financial Highlights:
Net interest income $ 6,602 $ 6,944 $ 20,106 $ 20,814
Net income (loss) (779 ) (1,698 ) (3,399 ) (3,984 )
Per share data:
Earnings (loss) ? basic (0.10 ) (0.21 ) (0.42 ) (0.50 )
Earnings (loss) ? diluted (0.10 ) (0.21 ) (0.42 ) (0.50 )
Dividends declared 0.05 0.05 0.15 0.15
Book value per share ? end of period 13.57 14.21 13.57 14.21
Tangible book value per share ? end of period 11.81 12.78 11.81 12.78
Ratios and Other Information:
Return (loss) on average assets (0.33 )% (0.72 )% (0.48 )% (0.56 )%
Return (loss) on average equity (2.57 )% (5.39 )% (3.69 )% (4.21 )%
Net interest rate spread (1) 2.77 % 2.83 % 2.83 % 2.80 %
Net interest margin (2) 3.03 % 3.19 % 3.11 % 3.16 %
Efficiency ratio (3) 89.9 % 82.9 % 89.5 % 84.9 %
Average interest-earning assets to average
interest-bearing liabilities
115.93 % 117.28 % 115.82 % 116.75 %
At period end:
Stockholders' equity $ 117,445 $ 124,298
Total assets 972,040 953,546
Equity to total assets 12.1 % 13.0 %
Non-performing assets to total assets 1.76 % 1.76 %
Non-performing loans to total loans 2.30 % 2.37 %
Allowance for loan losses to non-performing loans 62.43 % 55.98 %
Allowance for loan losses to total loans 1.44 % 1.33 %
Number of full service offices 19 19
 
(1) The 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 period.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) The efficiency ratio represents non-interest expense for the period minus expenses related to the amortization of intangible assets other than the amortization of mortgage servicing rights, divided by the sum of net interest income (before the loan loss provision) plus non-interest income (excluding net gains or losses on the sale or impairment of securities).
 

Analysis of Net Interest Margin – Third Quarter:

               
Three Months Ended September 30, 2010 Three Months Ended September 30, 2009

Average
Outstanding
Balance

   Interest  

Yield/ Rate(1)

  

Average
Outstanding
Balance

   Interest   Yield/ Rate(1)
(Dollars in thousands)
Interest-earning assets:
Loans - net (2) $ 646,355 $ 9,005 5.57 % $ 665,033 $ 9,642 5.80 %
Investment securities 214,961 1,189 2.21 % 187,881 1,719 3.66 %
Short-term investments   10,543     4   0.15 %   19,020     3   0.06 %
Total interest-earning assets 871,859 10,198 4.68 % 871,934 11,364 5.21 %
Non-interest-earning assets   80,325   72,929
Total assets $ 952,184 $ 944,863
Interest-bearing liabilities:
Savings deposits $ 53,412 30 0.22 % $ 50,311 40 0.32 %
Relationship savings 142,016 271 0.76 % 123,762 383 1.24 %
Money market 66,227 100 0.60 % 68,342 160 0.94 %
NOW accounts 46,265 33 0.29 % 43,944 40 0.36 %
Certificates of deposit   292,611     1,759   2.40 %         279,790     2,033   2.91 %
Total interest-bearing deposits 600,531 2,193 1.46 % 566,149 2,656 1.88 %
Borrowed funds   151,510     1,403   3.70 %         177,321     1,764   3.98 %
Total interest-bearing liabilities 752,041 3,596 1.91 % 743,470 4,420 2.38 %
Non-interest-bearing liabilities   78,719   75,263
Total liabilities 830,760 818,733
Equity   121,424   126,130
Total liabilities and equity $ 952,184 $ 944,863
 
Net interest income $ 6,602 $ 6,944
 
Net interest rate spread (3) 2.77 % 2.83 %
Net interest-earning assets (4) $ 119,818 $ 128,464
 
Net interest margin (5) 3.03 % 3.19 %
Average interest-earning assets to interest-bearing liabilities 115.93 % 117.28 %
 
(1) Yields and rates for the three months ended September 30, 2010 and 2009 are annualized.
(2) Includes loans held for sale and non-accrual loans.
(3) Net interest rate spread represents the difference between the yield on total average interest-earning assets and the cost of total average interest-bearing liabilities for the three months ended September 30, 2010 and 2009.
(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.
                 

Analysis of Net Interest Margin – Year to date:

 

 

Nine Months Ended September 30, 2010 Nine Months Ended September 30, 2009

Average
Outstanding
Balance

   Interest   Yield/ Rate(1)  

Average
Outstanding
Balance

   Interest   Yield/ Rate(1)
(Dollars in thousands)
Interest-earning assets:
Loans - net (2) $ 645,187 $ 27,328 5.65 % $ 681,577 $ 29,478 5.77 %
Investment securities 203,984 3,943 2.58 % 176,507 5,399 4.08 %
Short-term investments   14,136     17   0.16 %   19,865     10   0.07 %
Total interest-earning assets 863,308 31,288 4.83 % 877,949 34,887 5.30 %
Non-interest-earning assets   79,099   73,324
Total assets $ 942,406 $ 951,273
Interest-bearing liabilities:
Savings deposits $ 51,873 98 0.25 % $ 50,741 133 0.35 %
Relationship savings 136,512 894 0.87 % 122,703 1,240 1.35 %
Money market 66,283 346 0.70 % 66,205 545 1.10 %
NOW accounts 45,099 98 0.29 % 43,335 134 0.41 %
Certificates of deposit   289,925     5,474   2.52 %   280,384     6,408   3.05 %
Total interest-bearing deposits 589,691 6,910 1.56 % 563,368 8,460 2.00 %
Borrowed funds   155,665     4,272   3.66 %   188,650     5,613   3.97 %
Total interest-bearing liabilities 745,356 11,182 2.00 % 752,018 14,073 2.50 %
Non-interest-bearing liabilities   74,498   73,344
Total liabilities 819,854 825,362
Equity   122,552   125,911
Total liabilities and equity $ 942,406 $ 951,273
 
Net interest income $ 20,106 $ 20,814
 
Net interest rate spread (3) 2.83 % 2.80 %
Net interest-earning assets (4) $ 117,951 $ 125,931
 
Net interest margin (5) 3.11 % 3.16 %
Average interest-earning assets to interest-bearing liabilities 115.82 % 116.75 %
 
(1) Yields and rates for the nine months ended September 30, 2010 and 2009 are annualized.
(2) Includes loans held for sale and non-accrual loans.
(3) Net interest rate spread represents the difference between the yield on total average interest-earning assets and the cost of total average interest-bearing liabilities for the nine months ended September 30, 2010 and 2009.
(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.
                   

Loan Portfolio Information:

 
At September 30, 2010:
                           
Portfolio Balance Nonperforming (NPAs) Troubled Debt Restructurings
% of Included Not Included
Amount     Percent   Amount   Portfolio   In NPAs   In NPAs   Total
(Dollars in Thousands)
Mortgage loans on real estate:
Residential $ 280,464 43.02 % $ 2,717 0.97 % $ - $ 325 $ 325
Commercial - In market 187,516 28.76 11,585 6.18 2,496 1,580 4,076
Commercial - Out of market 69,875 10.72 - - - 2,762 2,762
Home equity   72,302       11.09     68     0.09     -     -     -
  610,157       93.59     14,370     2.36     2,496     4,667     7,163
Other loans:
Commercial 30,867 4.74 647 2.10 63 223 286
Consumer and other   10,885       1.67     1     0.01     -     -     -
  41,752       6.41     648     1.55     63     223     286
Total loans 651,909 100.00 % $ 15,018 2.30 % $ 2,559 $ 4,890 $ 7,449
Other Items:
Net deferred loan costs 1,300
Unamortized premiums -
Allowance for loan losses   (9,375 )
Total loans, net $ 643,834  
Other information:
Other real estate owned (OREO)   2,103  
Total nonperforming assets $ 17,121  
Non-performing assets to total assets   1.76 %
 
At December 31, 2009:
                           
Portfolio Balance Nonperforming (NPAs) Troubled Debt Restructurings
% of Included Not Included
Amount     Percent   Amount   Portfolio   In NPAs   In NPAs   Total
(Dollars in Thousands)
Mortgage loans on real estate:
Residential $ 285,618 43.12 % $ 4,822 1.69 % $ - $ - $ -
Commercial - In market 189,945 28.68 12,041 6.34 5,804 892 6,696
Commercial - Out of market 73,951 11.17 1,901 2.57 - 3,994 3,994
Home equity   69,625       10.51     70     0.10     -     -     -
  619,139       93.48     18,834     3.04     5,804     4,886     10,690
Other loans:
Commercial 31,373 4.74 743 2.37 100 - 100
Consumer and other   11,791       1.78     1     0.01     -     -     -
  43,164       6.52     744     1.72     100     -     100
Total loans 662,303 100.00 % $ 19,578 2.96 % $ 5,904 $ 4,886 $ 10,790
Other Items:
Net deferred loan costs 1,414
Allowance for loan losses   (11,089 )
Total loans, net $ 652,628  
Other information:
Other real estate owned (OREO)   1,195  
Total nonperforming assets $ 20,773  
Non-performing assets to total assets   2.20 %
 

Securities and Other Investment Portfolio Composition:

           
At September 30, 2010 At December 31, 2009

Amortized
Cost

Fair Value

Amortized
Cost

Fair Value

(Dollars in Thousands)
Securities available for sale:
Government-sponsored enterprises (GSE) $ 138,772 $ 139,509 $ 80,393 $ 79,976
Municipal bonds 3,597 3,778 17,521 17,875
Corporate bonds and other obligations 1,311 1,339 1,321 1,351
GSE residential mortgage-backed 12,410 12,997 29,591 30,503

U.S. Government guaranteed residential mortgage-backed

  40,207   40,859   33,625   33,636
Total debt securities   196,297   198,482   162,451   163,341
Common stock   1,112   1,087   3,239   4,085
Total securities available for sale   197,409   199,569   165,690   167,426
Securities held to maturity:        
Other bonds and obligations   97   97   97   97
Restricted equity securities and other investments:
Federal Home Loan Bank of Boston stock 10,932 10,932 10,932 10,932
Savings Bank Life Insurance 1,709 1,709 1,709 1,709
Real estate partnerships 6,801 6,801 4,397 4,397
Other investments   153   153   155   155
Total restricted equity securities
and other investments   19,595   19,595   17,193   17,193
Total securities $ 217,101 $ 219,261 $ 182,980 $ 184,716
               

Deposit Accounts Composition:

 
At September 30, 2010 At December 31, 2009
Balance Percent   Balance Percent
(Dollars in Thousands)
Deposit type:
Demand $ 80,510 11.58 % $ 75,232 11.55 %
Regular savings 54,196 7.80 49,883 7.66
Relationship savings 141,956 20.43 125,328 19.24
Money market deposits 71,189 10.24 63,077 9.68
NOW deposits   51,999 7.48     48,546 7.45  
Total transaction accounts   399,850 57.53     362,066 55.58  
Term certificates less than $100,000 165,823 23.86 174,284 26.76
Term certificates $100,000 or more   129,325 18.61     115,028 17.66  
Total certificate accounts   295,148 42.47     289,312 44.42  
Total deposits $ 694,998 100.00 % $ 651,378 100.00 %

Reconciliation of Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (?GAAP?). The Company's management uses these non-GAAP measures in its analysis of the Company's performance. These measures typically adjust GAAP performance measures to exclude significant gains or losses that are expected to be non-recurring and to exclude the effects of amortization of intangible assets (in the case of the efficiency ratio). Because these items and their impact on the Company's performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

       
Three Months Ended September 30, Nine Months Ended September 30,
  2010         2009     2010         2009  
Net Income (loss) (GAAP) $ (779 ) $ (1,698 ) $ (3,399 ) $ (3,984 )
Less: (Gain) loss on sale or impairment of securities, net (329 ) 3,453 (1,194 ) 6,422

Add: FDIC deposit insurance special assessment

- - - 425
Adjustment: Income taxes related to non- recurring adjustments noted above
120 (975 ) 407 (1,939 )
Adjustment to deferred tax valuation reserves   150     -     300     -  
Net Income (loss) (Core) $ (838 ) $ 780   $ (3,886 ) $ 924  
Efficiency Ratio (As Reported) 89.9 % 82.9 % 89.5 % 84.9 %
Effect of gain or loss on sale or impairment of securities, net - - - -
Effect of FDIC deposit insurance special assessment   -     -     -     (1.7 )
Efficiency Ratio (Core)   89.9 %   82.9 %   89.5 %   83.2 %

Legacy Bancorp, Inc.
Patrick J. Sullivan, 413-445-3554
President
pat.sullivan@legacybanks.com
or
Paul H. Bruce, 413-445-3513
Chief Financial Officer
paul.bruce@legacybanks.com