Legacy Bancorp, Inc. Reports Results for Quarter Ended June 30, 2006 and Announces Date for Special Meeting of Shareholders.PITTSFIELD, Mass. -- Legacy Bancorp, Inc. (the "Company" or "Legacy") (NASDAQ: LEGC), the bank holding company for Legacy Banks (the "Bank"), today reported net income of $1.0 million, or $0.11 per diluted share for the quarter ended June 30, 2006, which represents an increase of 1.5% from $998,000 net income in the same quarter of 2005. Year to date, the Company has generated net income of $2.1 million, an increase of $157,000, or 8.1% from the first six months of 2005. The Company also announced today that the Company's Board of Directors has set the date and agenda for a special meeting of shareholders. The special meeting will be held on Wednesday, November 1, 2006, at 9:00 a.m. (Eastern Time) at the Cranwell Conference Center, 55 Lee Road, Lenox, Massachusetts. The record date for shareholders entitled to vote at the meeting will be September 15, 2006. At the special meeting, shareholders will be asked to consider and approve the adoption of the 2006 Equity Incentive Plan. Legacy completed its mutual-to-stock conversion and related stock offering on October 26, 2005, with the issuance of 10,308,600 shares (including 763,600 shares issued to The Legacy Banks Foundation). The total shares outstanding resulted in a book value per share and tangible book value per share of $14.27 and $13.98, respectively, at June 30, 2006. J. Williar Dunlaevy, Chief Executive Officer, commented "Given the economic environment, and particularly a flat to inverted yield curve, we are pleased to be able to report a modest increase in earnings. We have utilized loan growth and disciplined pricing to limit the impact on the net interest margin. Given both economic and competitive factors, we also are pleased with our deposit and loan growth, and we continue to maintain strong asset quality. Increased expenses had an impact on earnings. As part of our business plan, we have added and are adding key producers in marketing and loan origination, and are in the process of opening our first loan production office in the Albany-Troy-Schenectady (NY) market. While these strategies have an immediate impact on payroll, they will help grow the company and revenue over the long term. Professional fees are higher related to our first year as a public company, including our Sarbanes Oxley internal control compliance program, which we are pursuing in a manner that should add value and efficiency on a long term basis." The Company's balance sheet increased by $29.8 million, or 3.8%, from $778.3 million at December 31, 2005 to $808.2 million at June 30, 2006. Within the overall asset growth, the gross loan portfolio, excluding loans held for sale, increased by $26.1 million, or 4.7% in the first half of 2006, $16.0 million of which occurred in the second quarter. In particular, residential mortgage balances increased by $10.0 million, or 3.3% to $318.0 million, and the commercial real estate and other commercial loans increased $13.7 million, or 7.6% to $195.0 million. The Company's growth plans should be enhanced by the recent opening of a loan production office in the Albany-Troy-Schenectady, NY market, as well as the pending design and construction of two new branch locations within the Berkshire County market. The investment portfolio has decreased by $2.1 million, or 1.2% as these funds, which had increased substantially in the fourth quarter of 2005 due to the short-term investment of a portion of the monies received in the stock offering, were used to partially fund loan growth. Cash and cash equivalents increased $5.3 million, or 27.4% primarily due to the receipt of significant direct deposits and certain money market funds at the end of the last day of the quarter. These and additional funds, however, were immediately used to repay $6.5 million of overnight advances from the Federal Home Loan Bank of Boston (FHLBB FHLBB - Federal Home Loan Bank Board) on the first business day in July. In the six months ended June 30, 2006, the Company's deposits increased by $23.4 million, or 4.9%, to $497.9 million. Driving the success was the growth in certificates of deposit, and certain money market accounts. The Bank has had success thus far in 2006 in attracting certificates of deposit due to its promotion of CD specials. Advances from the FHLBB increased by $6.1 million or 4.2% as of June 30, 2006 as compared to the end of 2005, however, with the repayment of the overnight advances mentioned above, the borrowing level has remained fairly flat throughout 2006. The overall increase in stockholders' equity of $987,000, or 0.7% for the first six months of 2006 was driven primarily by the contribution of $2.1 million from net income, offset somewhat by the payment of two separate dividends of $286,000 each, and an increase of $939,000 in the unrealized loss on available for sale investment securities caused by rising market rates. Asset quality remains strong at the close of the second quarter, with non-performing assets as a percentage of total assets at 0.13% as of June 30, 2006. The provision for loan losses increased by $46,000, or 35.4% in the second quarter of 2006 as compared to the same period of 2005, but was $37,000, or 9.8% less in the first six months of 2006 as compared to the same period in 2005. This decrease was a reflection of both the difference in the amount of and mix of loan growth for the respective periods, as well as a large loan recovery received in the second quarter of 2006. The allowance for loan losses stood at 0.81% of total loans at June 30, 2006 as compared to 0.77% at December 31, 2005. The Company's net interest margin ("NIM") was 3.18% for the three months ended June 30, 2006, a decrease of 3 basis points compared to the second quarter of 2005. Year to date the NIM was 3.25% which represents an increase of 6 basis points compared to the first six months of 2005. The 2006 year to date NIM has benefited from the increase in higher-yielding commercial and home-equity loans as well as the proceeds from the stock offering, but has also seen significant pressure due to the relatively flat yield curve. Non-interest income for the quarter totaled $1.1 million, an increase of $125,000, or 12.3% compared to the second quarter of 2005. Increases in portfolio management fees and gains on the sale of investment securities were offset in part by small decreases in customer service fees and gains on the sale of mortgages. Operating expenses increased by $788,000, or 17.5% for the second quarter of 2006, and $1.6 million, or 18.5% year to date as compared to the same periods in the prior year. These increases have been driven primarily by higher salaries and benefits and occupancy expenses, as well as the costs associated with being a public company, including audit, legal and consulting fees and fees related to complying with the provisions of the Sarbanes-Oxley Act of 2002. The Company's core efficiency ratio for the quarter (GAAP efficiency ratio net of effect of non-core adjustments) increased to 76.2% from 72.2% in the year earlier period primarily due to the increase in operating expenses as outlined above. Year to date the efficiency ratio has increased to 75.0% in 2006 from 72.0% in the first six months of 2005. CONFERENCE CALL J. Williar Dunlaevy, Chairman and Chief Executive Officer, and Stephen M. Conley, Chief Financial Officer, will host a conference call at 3:00 p.m. (EST) on Thursday, July 27, 2006. Persons wishing to access the conference call may do so by dialing 877-407-9205. Replays of the conference call will be available beginning July 27, 2006 at 6:00 p.m. (EST) through August 3, 2006 at 11:59 p.m. (EST) by dialing 877-660-6853 and using Account #286 and Conference ID #207573 (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.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
------------ -----------
2006 2005
------------ -----------
ASSETS (Unaudited)
Cash and due from banks $ 19,911 $ 12,331
Short-term investments 4,592 6,901
------------ -----------
Cash and cash equivalents 24,503 19,232
Securities and other investments 177,790 179,855
Loans held for sale 187 126
Loans, net of allowance for loan losses
of $4,693 in 2006 and $4,220 in 2005 573,388 547,500
Premises and equipment, net 13,988 14,236
Accrued interest receivable 3,602 3,235
Goodwill, net 3,085 3,085
Net deferred tax asset 5,842 5,258
Bank-owned life insurance 4,207 4,153
Other assets 1,578 1,650
------------ -----------
Total Assets $ 808,170 $ 778,330
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 497,913 $ 474,512
Securities sold under agreements to
repurchase 4,500 4,999
Federal Home Loan Bank advances 151,979 145,923
Mortgagors' escrow accounts 905 931
Accrued expenses and other liabilities 5,720 5,799
------------ -----------
Total liabilities 661,017 632,164
------------ -----------
Commitments and contingencies
Stockholders' Equity
Preferred Stock ($.01 par value,
10,000,000 shares authorized,
none issues or outstanding) - -
Common Stock ($.01 par value, 40,000,000
shares authorized, 10,308,600 issued
and outstanding at June 30, 2006
and December 31, 2005 103 103
Additional paid-in-capital 100,240 100,202
Unearned Compensation - ESOP (9,886) (10,252)
Retained earnings 58,724 57,202
Accumulated other comprehensive loss (2,028) (1,089)
------------ -----------
Total stockholders equity 147,153 146,166
------------ -----------
Total Liabilities and Stockholders'
Equity $ 808,170 $ 778,330
============ ===========
LEGACY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---------- --------- ---------- ----------
(Unaudited) (Unaudited)
Interest and dividend income:
Loans $ 8,861 $ 7,588 $ 17,375 $ 14,867
Securities:
Taxable 1,796 1,187 3,559 2,346
Tax-Exempt 60 43 115 73
Short-term
investments 131 52 211 94
---------- --------- ---------- ----------
Total interest and
dividend income 10,848 8,870 21,260 17,380
---------- --------- ---------- ----------
Interest expense:
Deposits 3,268 1,968 5,969 3,657
Federal Home Loan
Bank advances 1,608 1,636 3,183 3,289
Other borrowed funds 32 19 68 37
---------- --------- ---------- ----------
Total interest
expense 4,908 3,623 9,220 6,983
---------- --------- ---------- ----------
Net interest income 5,940 5,247 12,040 10,397
Provision for loan losses 176 130 340 377
---------- --------- ---------- ----------
Net interest income,
after provision for loan
losses 5,764 5,117 11,700 10,020
---------- --------- ---------- ----------
Non-interest income:
Customer service fees 653 676 1,307 1,338
Portfolio management
fees 261 226 499 439
Income from bank
owned life insurance 26 21 53 42
Insurance, annuities
and mutual fund fees 33 29 63 72
Gain on sales of
securities, net 127 35 166 77
Loss on impairment of
securities - (25) - (25)
Gain on sales of
loans, net 27 49 67 69
Miscellaneous 11 2 21 4
---------- --------- ---------- ----------
Total non-interest
income 1,138 1,013 2,176 2,016
---------- --------- ---------- ----------
Non-interest expenses:
Salaries and employee
benefits 2,951 2,566 5,785 5,073
Occupancy and
equipment 605 548 1,272 1,102
Data processing 490 482 971 920
Professional fees 397 132 766 261
Advertising 237 197 388 349
Other general and
administrative 618 585 1,361 1,191
---------- --------- ---------- ----------
Total non-interest
expenses 5,298 4,510 10,543 8,896
---------- --------- ---------- ----------
Income before income
taxes 1,604 1,620 3,333 3,140
Provision for income
taxes 591 622 1,239 1,203
---------- --------- ---------- ----------
Net income $ 1,013 $ 998 $ 2,094 $ 1,937
========== ========= ========== ==========
Earnings per share
Basic $ 0.11 n/a $ 0.22 n/a
Diluted $ 0.11 n/a $ 0.22 n/a
Weighted average shares
outstanding
Basic 9,552,787 n/a 9,545,953 n/a
Diluted 9,552,787 n/a 9,545,953 n/a
LEGACY BANCORP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA (UNAUDITED)
(Dollars in thousands except share and per share data)
Three months ended Six months ended
June 30, June 30,
---------------------------------------
2006 2005 2006 2005
--------- -------- -------- --------
Financial Highlights:
Net interest income $ 5,940 $ 5,247 $ 12,040 $ 10,397
Net income 1,013 998 2,094 1,937
Per share data:
Earnings -- basic 0.11 n/a 0.22 n/a
Earnings -- diluted 0.11 n/a 0.22 n/a
Dividends declared 0.03 n/a 0.06 n/a
Book value per share -- end
of period 14.27 n/a 14.27 n/a
Tangible book value per
share -- end of period 13.98 n/a 13.98 n/a
Ratios and Other Information:
Return on average assets 0.51% 0.58% 0.53% 0.56%
Return on average equity 2.74% 6.63% 2.84% 6.42%
Net interest rate spread (1) 2.46% 2.91% 2.57% 2.91%
Net interest margin (2) 3.18% 3.21% 3.25% 3.19%
Efficiency ratio (3) 76.2% 72.2% 75.0% 72.0%
Average interest-earning
assets to average interest-
bearing liabilities 127.13% 113.38% 127.60% 113.32%
At period end:
Stockholders' equity 147,153 61,050
Total assets 808,170 706,895
Equity to total assets 18.2% 8.6%
Non-performing assets to total
assets 0.13% 0.17%
Non-performing loans to total
loans 0.19% 0.23%
Allowance for loan losses to
non-performing loans 436.15% 342.43%
Allowance for loan losses to
total loans 0.81% 0.79%
Number of full service offices 10 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.
Three Months Ended June 30, Three Months Ended June 30,
2006 2005
--------------------------- ----------------------------
Average Average
Outstanding Yield/ Outstanding Yield/
Balance Interest Rate(1) Balance Interest Rate(1)
--------------------------------------------------------
(Dollars in thousands)
Interest-earning
assets:
Loans - Net (2) $562,199 $8,861 6.30% $518,092 $7,588 5.86%
Investment
securities 174,709 1,856 4.25% 128,436 1,230 3.83%
Short-term
investments 10,819 131 4.84% 7,591 52 2.74%
--------------------------- ----------------------------
Total
interest-
earning
assets 747,727 10,848 5.80% 654,119 8,870 5.42%
Non-interest-
earning
assets 43,507 36,787
------------ ------------
Total assets $791,234 $690,906
============ ============
Interest-
bearing
liabilities:
Savings
deposits $ 58,933 64 0.43% $ 70,769 76 0.43%
LifePath
Savings 70,169 614 3.50% 70,086 384 2.19%
Money market 54,579 382 2.80% 60,782 230 1.51%
NOW accounts 39,102 23 0.24% 38,838 20 0.21%
Certificates
of deposits 215,972 2,185 4.05% 178,259 1,258 2.82%
--------------------------- ----------------------------
Total
deposits 438,755 3,268 2.98% 418,734 1,968 1.88%
Borrowed
Funds 149,388 1,640 4.39% 158,210 1,655 4.18%
--------------------------- ----------------------------
Total
interest-
bearing
liabilities 588,143 4,908 3.34% 576,944 3,623 2.51%
Non-interest-
bearing
liabilities 55,333 53,730
------------ ------------
Total
liabilities 643,476 630,674
Equity 147,758 60,232
------------ ------------
Total
liabilities
and equity $791,234 $690,906
============ ============
Net interest
income $5,940 $5,247
======== ========
Net interest
rate spread
(3) 2.46% 2.91%
Net interest-
earning
assets (4) $159,584 $77,175
============ ============
Net interest
margin (5) 3.18% 3.21%
Average interest-
earning assets to
interest-bearing
liabilities 127.13% 113.38%
(1) Yields and rates for the three months ended June 30, 2006 and 2005
are annualized.
(2) Includes loans held for sale.
(3) Net interest rate spread represents the difference between the
yield on total average interest-earning assets and the cost of
total average interest-bearing liabilities for the three months
ended June 30, 2006 and 2005.
(4) Net interest-earning assets represents total interest-earning
assets less total interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by
average total interest-earning assets.
Six Months Ended June 30, Six Months Ended June 30,
2006 2005
--------------------------- ----------------------------
Average Average
Outstanding Yield/ Outstanding Yield/
Balance Interest Rate(1) Balance Interest Rate(1)
--------------------------------------------------------
(Dollars in thousands)
Interest-earning
assets:
Loans - Net
(2) $556,693 $17,375 6.24% $515,049 $14,867 5.77%
Investment
securities 175,467 3,674 4.19% 128,497 2,419 3.77%
Short-term
investments 9,086 211 4.64% 7,583 94 2.48%
--------------------------- ----------------------------
Total
interest-
earning
assets 741,246 21,260 5.74% 651,129 17,380 5.34%
Non-interest-
earning
assets 42,689 36,907
------------ ------------
Total assets $783,935 $688,036
============ ============
Interest-
bearing
liabilities:
Savings
deposits $59,773 130 0.43% $70,664 151 0.43%
LifePath
Savings 71,340 1,176 3.30% 68,548 735 2.14%
Money market 53,237 688 2.58% 59,190 389 1.31%
NOW accounts 38,636 44 0.23% 38,193 39 0.20%
Certificates
of deposits 206,648 3,931 3.80% 172,867 2,343 2.71%
--------------------------- ----------------------------
Total
deposits 429,634 5,969 2.78% 409,462 3,657 1.79%
Borrowed
Funds 151,287 3,251 4.30% 165,122 3,326 4.03%
--------------------------- ----------------------------
Total
interest-
bearing
liabilities 580,921 9,220 3.17% 574,584 6,983 2.43%
Non-interest-
bearing
liabilities 55,489 53,098
------------ ------------
Total
liabilities 636,410 627,682
Equity 147,525 60,354
------------ ------------
Total
liabilities
and equity $783,935 $688,036
============ ============
Net interest
income $12,040 $10,397
======== ========
Net interest
rate spread
(3) 2.57% 2.91%
Net interest-
earning
assets (4) $160,325 $76,545
============ ============
Net interest
margin (5) 3.25% 3.19%
Average interest-earning
assets to interest-
bearing liabilities 127.60% 113.32%
(1) Yields and rates for the six months ended June 30, 2006 and 2005
are annualized.
(2) Includes loans held for sale.
(3) Net interest rate spread represents the difference between the
yield on total average interest-earning assets and the cost of
total average interest-bearing liabilities for the six months
ended June 30, 2006 and 2005.
(4) Net interest-earning assets represents total interest-earning
assets less total interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by
average total interest-earning assets.
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 Six months
ended June 30, ended June 30,
----------------------------------
2006 2005 2006 2005
------- ------ ------- -------
Net Income (GAAP) $ 1,013 $ 998 $ 2,094 $ 1,937
Less: Gain on sale or impairment of
securities, net (127) (10) (166) (52)
Adjustment: Income taxes 47 4 62 20
------- ------ ------- -------
$ 933 $ 992 $ 1,990 $ 1,905
======= ====== ======= =======
Efficiency Ratio (GAAP) 76.2% 72.2% 75.0% 72.0%
Effect of non-core adjustments - - - -
---------------------------------
76.2% 72.2% 75.0% 72.0%
======= ====== ======= =======
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