Legacy Bancorp, Inc. (the “Company†or “Legacyâ€) (NASDAQ: LEGC), the bank holding company for Legacy Banks (the “Bankâ€), today reported a net loss of $591,000, or $0.06 per diluted share for the quarter ended December 31, 2006, which represents a bottom line improvement of $4.9 million from a $5.5 million net loss in the fourth quarter of 2005. For the twelve months ended December 31, 2006, the Company has generated net income of $2.8 million, an increase of $5.0 million from the same period of 2005.
In addition, the Company today announced that to fund the Company's 2006 Equity Incentive Plan, a trust was recently established which has been authorized to purchase shares of the Company's common stock in the open market with funds contributed by the Company. Purchases will be made from time to time at the discretion of the independent trustee of the trust and will amount up to 412,344 shares, or 4.0% of the Company's issued and outstanding common stock. Stockholders approved the 2006 Equity Incentive Plan at the Company's Special Meeting of Stockholders in November 2006.
For 2006, the fourth quarter loss is primarily a result of a partial balance sheet restructuring through the sale of approximately $64.5 million of bonds which were yielding an average of 3.89%. The Company incurred an after-tax loss of approximately $1.3 million, or $0.14 per share, on the sale of these bonds. Proceeds from the sale were reinvested in securities averaging 5.57%, and the transaction is expected to increase interest income by approximately $1.0 million in 2007. Furthermore, the Company incurred an additional $659,000 in tax expense in the fourth quarter of 2006 as a result of a reevaluation of the realizability of the deferred tax benefit resulting from the contribution of 763,600 shares of common stock to The Legacy Banks Foundation (the “Foundationâ€) in 2005. These non-core items were partially offset by a gain of $605,000 on the termination of the Bank’s defined benefit plan in the fourth quarter of 2006. Excluding these non-core items, the Company’s core earnings were $855,000 in the fourth quarter of 2006 as compared to $1.3 million in the same period of 2005. Year to date, core earnings were $4.2 million in 2006 as compared to $4.5 million in 2005. The total shares outstanding resulted in a book value per share and tangible book value per share of $14.55 and $14.25, respectively, at December 31, 2006.
The losses in the prior year were primarily the result of two non-core charges recorded in the fourth quarter of 2005: a $7.7 million charitable contribution made by the Company to the Foundation as part of the mutual to stock conversion, and a restructuring charge of $2.4 million paid by the Bank to the Federal Home Loan Bank of Boston (FHLBB) for the prepayment of $19.5 million of longer-term advances with a weighted average rate of 6.64%. These two items were partially offset by a gain of $905,000 on the curtailment of the Bank’s defined benefit 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 the shares issued to the Foundation.
J. Williar Dunlaevy, Chief Executive Officer, commented “We are pleased to report that Legacy generated steady deposit and loan growth throughout 2006, including the fourth quarter, despite the challenge of an inverted yield curve and an extremely competitive retail deposit market. Pressure on the net interest margin due to the inverted yield curve is endemic in the industry, and Legacy is no exception. This was mitigated to a great extent by the capital we raised a little over a year ago with our stock offering. We have continued to closely monitor the net interest margin and have utilized certificate of deposit specials to grow our retail deposit base while at the same time reducing borrowings from the Federal Home Loan Bank. Consistent deposit and loan growth is integral to our overall long term growth strategy.â€
“We anticipate completing, relocating, and opening our new office in North Adams, MA late in the first quarter. Our new office on the north side of Great Barrington should come on line early in the second quarter. This current year, 2007, will be our second full year as a public company and we look forward to improving our efficiency both through revenue growth and controlling and/or reducing various expense categories. However, one negative contributor to the efficiency ratio will be the expense attributable to the Equity Incentive Plan which we have elected to do on an accelerated basis. We continue to emphasize growing the company and the revenue base over the long term.â€
The Company’s balance sheet increased by $30.0 million, or 3.9%, from $778.3 million at December 31, 2005 to $808.3 million at December 31, 2006. Within the overall asset growth, the gross loan portfolio, excluding loans held for sale, increased by $31.3 million, or 5.7% in 2006. In particular, residential mortgage balances increased by $17.4 million, or 5.6% to $325.4 million, and the commercial real estate and other commercial loans increased $12.6 million, or 7.0% to $193.9 million.
The investment portfolio has decreased by $3.8 million, or 2.1% due primarily to the bond portfolio restructuring in the fourth quarter of 2006, as previously discussed. Cash and cash equivalents increased $2.4 million, or 12.5% at the end of 2006 as compared to the prior year end due to the receipt of funds at year end.
In the twelve months ended December 31, 2006, the Company’s deposits increased by $43.8 million, or 9.2%, to $518.2 million. Driving the success was the growth in certificates of deposit due to the Bank’s promotion of CD specials, as well as increases in LifePath Savings and certain money market accounts. Advances from the FHLBB have decreased by $18.5 million or 12.7% as of December 31, 2006 as compared to the end of 2005 due to the success in growing deposits. The overall increase in stockholders’ equity of $3.8 million during 2006 was driven primarily by a contribution of $2.8 million from net income, as well as a decrease of $0.9 million in the unrealized loss on available for sale investment securities, primarily due to the restructuring of this portfolio, as previously discussed. These increases to equity were offset somewhat by the payment of four separate dividends of $286,000 each. Stockholders Equity was also impacted by the release of 54,979 shares of common stock within the Company’s ESOP.
Asset quality remains strong at the close of the fourth quarter, with non-performing assets as a percentage of total assets at 0.11% as of December 31, 2006. The provision for loan losses decreased by $377,000 in the fourth quarter of 2006 as compared to the same period in 2005, resulting in a $12,000 credit in the 2006 quarter. The full year 2006 provision has decreased by $608,000 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 the receipt of loan recoveries in 2006. The allowance for loan losses stood at 0.80% of total loans at December 31, 2006 as compared to 0.77% at December 31, 2005.
The Company’s net interest income decreased $478,000, or 7.8% in the fourth quarter of 2006 as compared to the same period in 2005, but increased by $1.7 million, or 7.5% for the year 2006 over 2005. The net interest margin (“NIMâ€) was 3.00% for the three months ended December 31, 2006, a decrease of 11 basis points from the third quarter of 2006, and 31 basis points compared to the fourth quarter of 2005. The 2006 full year NIM was 3.15%, a decrease of 7 basis points compared to 2005. The 2006 NIM initially benefited from the increase in higher-yielding commercial and home-equity loans as well as the proceeds from the 2005 stock offering, but also saw significant pressure due to the yield curve being relatively flat and then partially inverted during 2006.
Non-interest income for the quarter totaled $147,000, an increase of $42,000, or 40.0% compared to the fourth quarter of 2005. For the year, non-interest income increased $75,000, or 2.2% to $3.5 million in 2006 from $3.4 million in the prior year. The increase was due to the FHLBB restructuring charge in 2005 being higher than the net loss on the sales of securities in 2006, more than offsetting a decrease in customer service fees in 2006. Operating expenses decreased by $7.3 million, or 55.9% for the fourth quarter of 2006 as compared to the same period of 2005 due to the contribution of $7.6 million to the Foundation in the fourth quarter of 2005. For the year, operating expenses decreased $5.1 million as compared to 2005, also primarily due to the contribution to the Foundation. Offsetting the decrease in charitable contributions in the quarter and year to date amounts were increases in most salaries and benefit categories 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.
Additionally, during the fourth quarter of 2006, the Company’s Compensation Committee awarded 892,200 stock options with an exercise price of $16.03 per share and 346,500 shares of restricted stock with a grant date fair value of $16.03 per share to directors and certain officers on November 29, 2006. These options and stock awards were granted in accordance with the Company’s 2006 Equity Incentive Plan approved by the shareholders on November 1, 2006. The stock options and awards granted vest over a period of approximately five years. The Company is employing an accelerated method of expense recognition for options, whereby compensation expense is measured on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in substance, multiple awards.
The scheduled opening of a new branch in Great Barrington, Massachusetts and a replacement branch in North Adams, Massachusetts in early 2007 will also serve to increase operating expenses in the near-term. The Company’s core efficiency ratio for the quarter (GAAP efficiency ratio net of effect of non-core adjustments) increased to 81.2% from 69.1% in the year earlier period primarily due to the increase in operating expenses and pressure on the net interest margin as outlined above. Year to date the efficiency ratio has increased to 75.8% in 2006 from 69.9% in 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, February 1, 2007. Persons wishing to access the conference call may do so by dialing 877-407-9205. Replays of the conference call will be available beginning February 1, 2007 at 6:00 p.m. (EST) through February 11, 2007 at 11:59 p.m. (EST) by dialing 877-660-6853 and using Account #286 and Conference ID #226423 (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.
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Senator Mark December Staff Office Hours
PITTSFIELD, Mass. — State Senator Paul W. Mark announced that his staff will host office hours at five locations in Berkshire County in December.
Residents of any of the 57 municipalities in the Senator's Berkshire, Hampden, Franklin, and Hampshire District are encouraged to share ideas on current or potential state legislation, or to ask for assistance with issues involving any state agency.
Appointments are not required.
Adams: Tuesday, Dec. 3 and Tuesday, Dec. 17th from 9 a.m. to noon. Town Hall, 8 Park St., Adams.
Dalton: Monday, Dec. 2 from 1 p.m. to 3:30 p.m.. Senior Center, 40 Field St., Dalton.
Great Barrington: Monday, Dec. 2 from 9 a.m. to noon. Town Hall, 334 Main St., Great Barrington.
North Adams: Tuesday, Dec. 3 and Tuesday, Dec. 17 from 1 p.m. to 3:30 p.m. MCLA Alumni Relations Building, 228 E. Main St., North Adams.
Pittsfield: Thursday, Dec. 12 from 9 a.m. to noon. District Office. 773 Tyler St., Pittsfield.
The owners say they are plagued by the costs of stabilizing a rundown property that should not have gotten to its current state and cite "inhibitive" taxation from the Baker Hill Road District.
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The sign highlights how, on June 13, 1825, Lafayette was welcomed into Dalton at Nelson's coffee house while passing from Pittsfield to Boston.
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The Parks Commission last week approved the annual tree lighting ceremony on Friday, Dec. 6, beginning at 6 p.m. It will include warm beverages, pictures with the Grinch, and a visit from Mr. and Mrs. Claus. click for more
