Legacy Bancorp, Inc. (the �Company� or �Legacy�) (NASDAQ: LEGC),
the holding company for Legacy Banks (the �Bank�), today reported a
net loss of $494,000, or $0.06 per diluted share for the quarter
ended December 31, 2007, which represents an improvement of $97,000
from the net loss of $591,000 reported in the fourth quarter of
2006. For the full year, the Company has generated net income of
$1.2 million, or $0.14 per diluted share, a decrease of $1.6
million, or 55.6% from 2006. The decrease in year to date net
income is primarily a result of an increase in non-interest
expenses as described below. The total shares outstanding resulted
in a book value per share and tangible book value per share of
$14.40 and $13.01, respectively, at December 31, 2007. J. Williar
Dunlaevy, Chief Executive Officer, commented, �The major factors
resulting in a loss for the fourth quarter were the charges
associated with executive retirements and the reduction in
workforce, all of which were announced previously. It is
disappointing to report a loss for the quarter and as a result,
relatively weak earnings for the year. At the same time we are
pleased that the company is positioned for significantly stronger
performance and growth in 2008 and beyond. Previously we have
commented on our planning process and our determination to improve
efficiency. In the fourth quarter we took advantage of some
opportunities and took other necessary actions to deliver on that
commitment. We begin 2008 with fourteen fewer positions, a
workforce reduction of about 7%, much of which was from senior
management. We are pleased with the response of our associates to
the challenges and opportunities created by this restructuring�.
�The acquisition of the New York offices was completed in December
as planned with a very smooth transition and data conversion, the
result of careful preplanning, training and communications. We are
also continuing to seek and evaluate other opportunities to grow
and expand�. �Asset quality remains very strong and compares well
with the peer comparisons. While there was a modest increase in
non-performing loans from September to December, it is still
relatively low. Legacy has no subprime loans and no subprime,
collateralized debt obligation, or structured investment vehicle
exposure anywhere on our balance sheet. We make only loans and
investments that we would be comfortable holding on our balance
sheet from a quality perspective, and times like these certainly
validate that philosophy. While the acquisition of the New York
offices contributed to our funding growth for the quarter and year,
our total loan growth of $75.2 million, or 12.9%, was organic and
demonstrates our ability to generate loans while maintaining
quality�. The Company�s balance sheet increased by $116.2�million,
or 14.4%, from $808.3 million at December 31, 2006 to $924.5
million at December 31, 2007, largely due to the acquisition of
five branch offices of First Niagara Bank (First Niagara) located
in eastern New York completed on December 7, 2007. Within the
overall asset growth, the gross loan portfolio, excluding loans
held for sale, increased by $75.2 million, or 12.9% in 2007. Year
to date growth included an increase in residential mortgage
balances of $24.4 million, or 7.5%, to $349.8 million, and an
increase in commercial real estate and other commercial loans of
$46.0 million, or 23.7% to $239.9 million. The securities and other
investment portfolio has decreased by $24.1 million or 13.7%, while
short-term investments increased $37.1 million, or 331.1% at
December 31, 2007 as compared to the prior year end. Cash flow from
securities and other investments was utilized to partially fund
loan growth, purchase $9.9 million of new bank owned life insurance
(BOLI), and repurchase common shares as described below. The
increase in short-term investments was influenced by the receipt of
the acquired First Niagara deposits. Deposits increased by $92.2
million, or 17.8%, to $610.4�million at December 31, 2007 from
$518.3 million at December 31, 2006, with acquired First Niagara
deposits representing approximately $76.6 million of this growth.
Overall, demand deposits increased $13.6 million, or 26.8% while
relationship savings accounts increased $19.7 million, or 21.2%.
Certificates of deposit increased $45.5 million, or 20.0%, with
$38.3 million attributable to the acquired First Niagara deposits.
Advances from the Federal Home Loan Bank of Boston (FHLBB)
increased by $39.9 million or 31.3% at December 31, 2007 as the
Bank took advantage of some lower cost FHLBB funding during the
early part of 2007 in order to fund loan growth. The Company�s
stock repurchase programs have resulted in an overall decrease in
stockholders� equity of $16.9 million at December 31, 2007. Legacy
purchased 412,344 shares of Company stock at an average price of
$16.15 per share in the first quarter of 2007 in order to fund the
restricted stock portion of the 2006 Equity Incentive Plan (EIP)
approved by shareholders in November 2006. Additionally the Company
purchased 515,430 shares at an average price of $14.62 during the
second and third quarters of 2007 as part of a stock repurchase
program announced in April and completed in August 2007. More
recently the Company purchased 486,366 shares at an average price
of $13.95 during the third and fourth quarters of 2007 as part of a
stock repurchase program announced in August and completed in
December 2007. Total equity was positively impacted by a
contribution of $1.2 million from net income and the amortization
of unearned compensation. These increases to equity were offset by
the declaration of a $0.04 per share dividend in each quarter of
2007. Asset quality remains strong at the close of 2007, with
non-performing assets as a percentage of total assets at 0.17%. The
provision for loan losses increased from a credit of $12,000 in the
fourth quarter of 2006 to a provision of $453,000 in the fourth
quarter of 2007. Year to date, the provision increased by $818,000
or 351.1% as compared to the same period in 2006. This increase was
a reflection of both the difference in the amount of and mix of
loan growth for the respective periods, as well as loan recoveries
in 2006 which resulted in a provision credit in the third and
fourth quarters of 2006. The allowance for loan losses to total
loans stood at 0.85% at December 31, 2007 as compared to 0.80% at
December 31, 2006. The Company�s net interest income increased by
$262,000, or 4.6% in the fourth quarter of 2007 as compared to the
same period in 2006, and by $270,000, or 1.1% year to date as
compared to the same period in 2006. The net interest margin (NIM)
was 2.89% for the three months ended December 31, 2007 which
represents a decrease of 11 basis points from both the third
quarter of 2007 and the fourth quarter of 2006. Year to date the
NIM was 3.01%, a decrease of 14 basis points from the same period
in 2006. Both the yield curve and the non-core certificate of
deposit specials related to the Massachusetts branch office
openings in the first and second quarters of 2007 resulted in NIM
pressure during the year. Non-interest income for the fourth
quarter of 2007 totaled $1.4 million, an increase of $1.3 million
compared to the fourth quarter of 2006 primarily due to increases
in income from bank owned life insurance and net gains on the sale
of securities. Year to date, non-interest income has increased by
$2.4 million, or 70.5% as compared to 2006 for the same reasons.
The net loss on the sale of securities in 2006 included the effect
of the partial balance sheet restructuring completed in the fourth
quarter of 2006. Non-interest income in the prior year was also
impacted by the pension settlement gain of $605,000 in the fourth
quarter of 2006. Excluding these two income categories,
non-interest income increased by $56,000, or 3.9% for the quarter
and $793,000, or 17.3% for the year over the 2006 periods.
Operating expenses increased by $2.4 million, or 41.1% for the
fourth quarter of 2007 as compared to the same period of 2006, and
by $5.9 million, or 27.4% year to date. The expense increase is
primarily in the salaries and benefit categories which increased by
$2.0 million, or 61.9% in the fourth quarter and by $4.9 million,
or 41.3% year to date as compared to the same prior year periods.
The reduction in workforce and executive retirements announced in
the fourth quarter of 2007 resulted in a severance accrual of $1.1
million during the fourth quarter of 2007, as well as the
acceleration of $479,000 of amortization expense associated with
the EIP. For the full year the EIP amortization amounted to $3.0
million as compared to $417,000 expensed in the fourth quarter of
2006. Salary and benefits have also increased as a result of new
branch and lending personnel associated with the de novo and
acquired branch offices during the year. The Company�s effective
tax rate for the year has decreased from 48.6% in 2006 to 16.9% in
2007 primarily as a result of higher permanent tax vs. book
deductions, a lower adjustment to the tax valuation reserve related
to the federal charitable contribution carryforward, and lower
separate company state income taxes. The Company�s core efficiency
ratio for the fourth quarter of 2007 (GAAP efficiency ratio net of
effect of non-core adjustments) increased to 86.9% from 81.2% in
the comparable prior year period primarily due to the increase in
operating expenses and pressure on the net interest margin as
outlined above. For the full year, the Company�s core efficiency
ratio increased to 87.2% in 2007 from 75.8% in 2006. CONFERENCE
CALL J. Williar Dunlaevy, Chairman and Chief Executive Officer, and
Paul H. Bruce, Chief Financial Officer, will host a conference call
at 3:00 p.m. (Eastern Time) on Thursday, January 31, 2008. Persons
wishing to access the conference call may do so by dialing
877-407-9205. Replays of the conference call will be available
beginning January 31, 2008 at 6:00 p.m. (Eastern Time) through
February 8, 2008 at 11:59 p.m. (Eastern Time) by dialing
877-660-6853 and using Account #286 and Conference ID #268224 (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) December 31, �
2007 � � � 2006 � � ASSETS Cash and due from banks $ 13,931 $
10,442 Short-term investments � 48,294 � � 11,202 � Cash and cash
equivalents 62,225 21,644 Securities and other investments 152,054
176,132 Loans held for sale 395 - Loans, net of allowance for loan
losses of $5,568 in 2007 and $4,677 in 2006 653,629 578,802
Premises and equipment, net 18,866 15,416 Accrued interest
receivable 3,404 3,552 Goodwill, net 9,687 3,085 Net deferred tax
asset 5,580 4,474 Bank-owned life insurance 14,788 4,424 Other
assets � 3,913 � � 789 � � $ 924,541 � $ 808,318 � LIABILITIES AND
STOCKHOLDERS' EQUITY Deposits $ 610,447 $ 518,248 Securities sold
under agreements to repurchase 4,055 5,575 Federal Home Loan Bank
advances 167,382 127,438 Mortgagors' escrow accounts 1,034 944
Accrued expenses and other liabilities � 8,531 � � 6,116 � Total
liabilities � 791,449 � � 658,321 � 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 December 31, 2007 and 2006; 9,240,960 outstanding at December
31, 2007 and 10,308,600 outstanding at December 31, 2006) 103 103
Additional paid-in-capital 101,720 106,094 Unearned Compensation -
ESOP (8,787 ) (9,519 ) Unearned Compensation - Equity Incentive
Plan (3,525 ) (5,375 ) Retained earnings 58,709 58,863 Accumulated
other comprehensive income (loss) 270 (169 ) Treasury stock, at
cost (1,067,640 shares at December 31, 2007) � (15,398 ) � - �
Total stockholders' equity � 133,092 � � 149,997 � $ 924,541 � $
808,318 � LEGACY BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (Dollars in thousands, except per share data)
Three Months Ended December 31, � Twelve Months Ended December 31,
� 2007 � � � 2006 � � 2007 � � 2006 � � Interest and dividend
income: Loans $ 10,599 $ 9,296 $ 40,460 $ 35,905 Securities:
Taxable 1,870 1,884 7,979 7,308 Tax-Exempt 86 62 282 239 Short-term
investments � 223 � � 167 � � 636 � 463 � Total interest and
dividend income � 12,778 � � 11,409 � � 49,357 � 43,915 � Interest
expense: Deposits 4,509 4,102 17,846 13,808 Federal Home Loan Bank
advances 2,287 1,584 7,539 6,395 Other borrowed funds � 33 � � 36 �
� 126 � 136 � Total interest expense � 6,829 � � 5,722 � � 25,511 �
20,339 � Net interest income 5,949 5,687 23,846 23,576 Provision
(credit) for loan losses � 453 � � (12 ) � 1,051 � 233 � Net
interest income after provision for loan losses � 5,496 � � 5,699 �
� 22,795 � 23,343 � � Non-interest income: Customer service fees
711 839 3,059 2,832 Portfolio management fees 327 261 1,183 1,001
Income from bank owned life insurance 187 80 500 222 Insurance,
annuities and mutual fund fees 84 90 254 211 Gain (loss) on sales
of securities, net (49 ) (1,888 ) 510 (1,736 ) Gain on sales of
loans, net 98 86 270 210 Gain on curtailment and termination of
defined benefit plan - 605 - 605 Miscellaneous � 79 � � 74 � � 110
� 107 � Total non-interest income � 1,437 � � 147 � � 5,886 � 3,452
� Non-interest expenses: Salaries and employee benefits 5,222 3,226
16,812 11,897 Occupancy and equipment 787 597 2,924 2,482 Data
processing 641 516 2,314 1,987 Professional fees 259 463 1,008
1,564 Advertising 264 194 884 747 Other general and administrative
� 987 � � 786 � � 3,245 � 2,659 � Total non-interest expenses �
8,160 � � 5,782 � � 27,187 � 21,336 � � Income (loss) before income
taxes (1,227 ) 64 1,494 5,459 � Provision (benefit) for income
taxes � (733 ) � 655 � � 249 � 2,653 � � Net income (loss) $ (494 )
$ (591 ) $ 1,245 $ 2,806 � Earnings (loss) per share Basic $ (0.06
) $ (0.06 ) $ 0.14 $ 0.29 Diluted $ (0.06 ) $ (0.06 ) $ 0.14 $ 0.29
Weighted average shares outstanding Basic 8,366,643 9,580,275
8,856,419 9,559,791 Diluted 8,366,643 9,580,275 8,873,227 9,559,791
LEGACY BANCORP, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED
FINANCIAL HIGHLIGHTS AND OTHER DATA (Dollars in thousands except
per share data) � Three Months Ended December 31, � Twelve Months
Ended December 31, � 2007 � � � � 2006 � � � 2007 � � � 2006 �
Financial Highlights: Net interest income $ 5,949 $ 5,687 $ 23,846
$ 23,576 Net income (loss) (494 ) (591 ) 1,245 2,806 Per share
data: Earnings (loss) � basic (0.06 ) (0.06 ) 0.14 0.29 Earnings
(loss) � diluted (0.06 ) (0.06 ) 0.14 0.29 Dividends declared 0.04
0.03 0.16 0.12 Book value per share � end of period 14.40 14.55
14.40 14.55 Tangible book value per share � end of period 13.01
14.25 13.01 14.25 � Ratios and Other Information: Return (loss) on
average assets (0.22 ) % (0.30 ) % 0.15 % 0.36 % Return (loss) on
average equity (1.45 ) % (1.63 ) % 0.88 % 1.92 % Net interest rate
spread (1) 2.20 % 2.16 % 2.26 % 2.39 % Net interest margin (2) 2.89
% 3.00 % 3.01 % 3.15 % Efficiency ratio (3) 109.8 % 74.9 % 93.0 %
74.2 % Average interest-earning assets to average interest-bearing
liabilities 120.96 % 127.81 % 123.37 % 127.61 % � At period end:
Stockholders� equity $ 133,092 $ 149,997 Total assets 924,541
808,318 Equity to total assets 14.4 % 18.6 % Non-performing assets
to total assets 0.17 % 0.11 % Non-performing loans to total loans
0.23 % 0.15 % Allowance for loan losses to non-performing loans
363.45 % 532.08 % Allowance for loan losses to total loans 0.85 %
0.80 % Number of full service offices 16 10 � (1) The net interest
rate spread represents the difference between the weighted-average
yield on interest-earning assets and the weighted-average cost of
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 divided by the sum
of net interest income (before the loan loss provision) plus
non-interest income (not including gains or losses on the sales of
securities). � Three Months Ended December 31, 2007 � Three Months
Ended December 31, 2006 Average Outs-tanding Balance � Interest �
Yield/ Rate(1) Average Outs-tanding Balance � Interest � Yield/
Rate(1) (Dollars in thousands) Interest-earning assets: Loans - Net
(2) $ 643,828 $ 10,599 6.58 % $ 571,783 $ 9,296 6.50 % Investment
securities 158,907 1,956 4.92 % 174,663 1,946 4.46 % Short-term
investments � 20,791 � 223 4.29 % � 12,905 � 167 5.18 % Total
interest-earning assets 823,526 12,778 6.21 % 759,351 11,409 6.01 %
Non-interest-earning assets � 55,879 � 41,632 Total assets $
879,405 $ 800,983 Interest-bearing liabilities: Savings deposits $
45,756 51 0.45 % $ 52,968 59 0.45 % Relationship Savings 105,748
930 3.52 % 91,094 1,017 4.47 % Money market 50,934 470 3.69 %
53,049 447 3.37 % NOW accounts 34,699 58 0.67 % 36,071 49 0.54 %
Certificates of deposits � 246,216 � 3,000 4.87 % � 220,837 � 2,530
4.58 % Total interest-bearing deposits 483,353 4,509 3.73 % 454,019
4,102 3.61 % Borrowed Funds � 197,446 � 2,320 4.70 % � 140,121 �
1,620 4.62 % Total interest-bearing liabilities 680,799 6,829 4.01
% 594,140 5,722 3.85 % Non-interest-bearing liabilities � 62,461 �
61,618 Total liabilities 743,260 655,758 Equity � 136,145 � 145,225
Total liabilities and equity $ 879,405 $ 800,983 � Net interest
income $ 5,949 $ 5,687 � Net interest rate spread (3) 2.20 % 2.16 %
Net interest-earning assets (4) $ 142,727 $ 165,211 � Net interest
margin (5) 2.89 % 3.00 % Average interest-earning assets to
interest-bearing liabilities 120.96 % 127.81 % � (1) Yields and
rates for the three months ended December 31, 2007 and 2006 are
annualized. (2) Includes loans held for sale. (3) Net interest rate
spread represents the difference between the yield on total average
interest-earning assets and the cost of total average
interest-bearing liabilities for the three months ended December
31, 2007 and 2006. (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. � � Twelve Months Ended
December 31, 2007 � � Twelve Months Ended December 31, 2006 �
Average Out-standing Balance � Interest � Yield/ Rate(1) � Average
Out-standing Balance � Interest � Yield/ Rate(1) � (Dollars in
thousands) Interest-earning assets: Loans - Net (2) $ 614,567 $
40,460 6.58 % $ 564,446 $ 35,905 6.36 % Inves-tment securities
163,860 8,261 5.04 % 175,006 7,547 4.31 % Short-term invest-ments �
13,558 � 636 4.69 % � 9,386 � 463 4.93 % Total interest-earning
assets 791,985 49,357 6.23 % 748,838 43,915 5.86 %
Non-interest-earning assets � 50,212 � 41,187 Total assets $
842,197 $ 790,025 Interest-bearing liabil-ities: Savings deposits $
46,986 206 0.44 % $ 56,759 248 0.44 % Relat-ionship Savings 101,798
3,949 3.88 % 78,628 3,049 3.88 % Money market 53,523 1,961 3.66 %
52,911 1,556 2.94 % NOW accounts 35,333 230 0.65 % 37,633 130 0.35
% Certif-icates of deposits � 240,571 � 11,500 4.78 % � 213,448 �
8,825 4.13 % Total interest-bearing deposits 478,211 17,846 3.73 %
439,379 13,808 3.14 % Borrowed Funds � 163,750 � 7,665 4.68 % �
147,421 � 6,531 4.43 % Total interest-bearing liabil-ities 641,961
25,511 3.97 % 586,800 20,339 3.47 % Non-interest-bearing
liabil-ities � 58,024 � 57,185 Total liabil-ities 699,985 643,985
Equity � 142,212 � 146,040 Total liabil-ities and equity $ 842,197
$ 790,025 � Net interest income $ 23,846 $ 23,576 � Net interest
rate spread (3) 2.26 % 2.39 % Net interest-earning assets (4) $
150,024 $ 162,038 � Net interest margin (5) 3.01 % 3.15 % Average
interest-earning assets to interest-bearing liabilities 123.37 %
127.61 % � (1) Yields and rates for the twelve months ended
December 31, 2007 and 2006 are actual. (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 twelve
months ended December 31, 2007 and 2006. (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. 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
generally non-recurring, 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 December
31, � Twelve Months Ended December 31, 2007 � � � 2006 � � 2007 � �
� 2006 � � Net Income (loss) (GAAP) $ (494 ) $ (591 ) $ 1,245 $
2,806 Less: Gain on termination of defined benefit plan - (605 ) -
(605 ) Add back: Severance and other expenses related to reduction
in workforce and retirements 1,511 - 1,511 - Less: (Gain) loss on
sale of securities, net 49 1,888 (510 ) 1,736 Adjustment: Income
taxes related to non- recurring adjustments noted above (678 ) (496
) (450 ) (411 ) Adjustment to tax valuation reserve for charitable
contribution carryforward � 40 � � � 659 � � � 40 � � � 659 � � Net
Income (Core) $ 428 � � $ 855 � � $ 1,836 � � $ 4,185 � �
Efficiency Ratio (As Reported) 109.8 % 74.9 % 93.0 % 74.2 % Effect
of gain on termination of defined benefit plan - 6.3 - 1.6 Effect
of severance and other expenses related to reduction in workforce
and retirements (22.9 ) - (5.8 ) - Effect of gain on sale of
securities, net � - � � � - � � � - � � � - � � Efficiency Ratio
(Core) � 86.9 � % � 81.2 � % � 87.2 � % � 75.8 � %
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