04.27.2009
Legacy Bancorp, Inc. Reports Results for Quarter Ended March 31, 2009
PITTSFIELD, MASSACHUSETTS (April 27, 2009): Legacy Bancorp, Inc. (the “Company” or “Legacy”) (NASDAQ: LEGC), the holding company for Legacy Banks (the “Bank”), today reported a net loss of $792,000, or $0.10 per diluted share for the quarter ended March 31, 2009, which represents a decrease of $1.2 million from net income of $417,000 in the first quarter of 2008. The decrease was primarily the result of an increase in the loss taken on investments deemed to be other-than-temporarily impaired (OTTI), and an increase in the provision expense for loan losses. The total shares outstanding resulted in a book value per share and tangible book value per share of $14.13 and $12.69, respectively, at March 31, 2009.
J. Williar Dunlaevy, Chief Executive Officer, commented “Our operating loss for the first quarter of 2009 is reflective of the precipitous decline that occurred in the markets and the national economy in the fourth quarter of 2008 and that continues into 2009. A major item in this loss was our determination to take a $1.6 million charge for investments deemed to be other-than-temporarily-impaired. Because we continue to hold these investments, these are non-cash and unrealized losses.
“Our Provision for Loan Losses for the quarter was $728,000, which was an increase of $503,000 compared to the first quarter of 2008. The first quarter of 2009 reflects an entirely different economic environment. The impact from the problems in the housing and construction sectors, rising job losses, and reduced consumer spending manifest themselves throughout the economy and we are starting to see that in the markets that we serve. While our non-performing asset and delinquent loan levels have increased they are still well in line with peers. This provision increases our overall Loan Loss Reserve to 1.05% of loan balances compared with 0.86% a year ago, and represents a more appropriate level in this challenging economic environment.
“Legacy is a very well capitalized institution with capital of $124 million, or 12.8% of assets. While it is disappointing to report a quarterly loss, the loss for the quarter represents 0.6% of capital. Increased loan losses are a factor of life for banks in economic recessions. We are very confident that our team is managing the process well and that both our financial and intellectual capital will see us through the storm.
“On a brighter note, we originated $41 million dollars in loans in the first quarter. This is more than a third greater than a year ago and is an indication that Legacy continues to meet the credit needs in the communities that it serves. It also underscores why it would have been superfluous for us to have subscribed to additional capital in the Treasury’s TARP Capital Purchase Program.
“Over the weekend of March 13th we completed the acquisition of our newest office in Haydenville, MA. That office opened as Legacy Banks on Monday, March 16th and has already grown in both deposits and accounts.
“We are mindful that our customers, both depositors and borrowers, have found us to be a safe haven in the storm. We will continue to be that and continue to be focused on our long term strategic goals of achieving profitable growth and creating shareholder value.”
The Company’s balance sheet increased by $23.4million, or 2.5%, from $944.7 million at December 31, 2008 to $968.1 million at March 31, 2009. Within the overall asset balances, the gross loan portfolio, excluding loans held for sale, decreased by $2.7 million, or 0.4% in the first three months of 2009. While the overall loan balance decreased, commercial real estate and other commercial loans did increase by $11.0 million, or 3.9% to $291.7 million. This increase was offset by a decrease in residential mortgages of $17.8 million, or 5.2% 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. The investment portfolio increased by $22.7 million or 17.2%, while cash and cash equivalents increased $2.4 million, or 7.2% at March 31, 2009 as compared to year end.
Deposits have increased by $35.6 million, or 5.9%, to $643.7million from a balance of $608.1 million at December 31, 2008. In March of 2009, the Bank closed on the acquisition of a single, full-service branch office located in Haydenville, Massachusetts, which resulted in the assumption of approximately $9.8 million of deposit liabilities. Deposits increased primarily in money market accounts and certificates of deposit (CDs) which increased $10.6 million, or 17.6% and $15.7 million or 5.8%, respectively. Other, smaller increases in relationship and regular savings were partially offset by a decrease in demand accounts. Advances from the Federal Home Loan Bank of Boston (FHLBB) have decreased by $10.5 million, or 5.3% at March 31, 2009 as compared to the end of 2008 as the increase in overall deposits allowed the Bank to pay off high rate FHLBB borrowings as they matured during the quarter.
Overall stockholders’ equity remained virtually flat during the first quarter of 2009, decreasing by $30,000. The decrease in equity due to the net loss of $792,000 and the declaration of a dividend of $0.05 per share during the first quarter was partially offset by the amortization of unearned compensation and a decrease in the unrealized loss on available-for-sale investment securities.
Overall nonperforming loans were $11.2 million at March 31, 2009, an increase of $3.6 million as compared to year end. Nonperforming loans as a ratio to total assets was 1.16% at March 31, 2009 as compared to 0.80% at December 31, 2008. Legacy is, and always has been, very diligent in evaluating its loan portfolio, especially given the current volatility in the credit markets. The provision for loan losses was $728,000 in the first quarter of 2009, an increase of $503,000 as compared to the same period in 2008. This increase was a reflection of both the difference in the amount of and mix of loan growth for the period, a continuous review and analysis of current market and economic conditions by management, as well as higher reserves established against certain loans in 2009. The allowance for loan losses to total loans was 1.05% at March 31, 2009, as compared to 0.95% at December 31, 2008 and 0.86% at March 31, 2008.
The Company’s net interest income increased by $619,000, or 9.8% in the first quarter of 2009 as compared to the same period in 2008. The net interest margin (NIM) was 3.18% for the three months ended March 31, 2009, an increase of 18 basis points from the first quarter of 2008, but a decrease of 21 basis points from the fourth quarter of 2008 as interest rate changes have caused the amount of average interest-bearing assets to reprice downward faster than average interest-earning liabilities.
Non-interest income for the first quarter was a net charge of $294,000 a decrease of $1.4 million from the same period of 2008. The primary cause of this decrease was an increase in the amount of writedowns taken on investments deemed to be OTTI. The Bank incurred $1.6 million of OTTI charges on certain equities, bonds and limited partnership investments in 2009 as compared to OTTI charges of $246,000 in the first quarter of 2008. The Bank also had decreases in fees from customers, portfolio management and insurance and investment products, partially offset by an increase on the gain on sale of mortgages.
Operating expenses increased by $413,000, or 6.2% for the first quarter of 2009 as compared to the same period of 2008. The new full-service denovo branches opened in July 2008 in Albany, New York and in January 2009 in Latham, New York, as well as the Haydenville branch acquired in the first quarter of 2009 contributed to increases in occupancy and equipment, data processing, advertising and other general and administrative (G&A) expenses. Additionally, changes in the deposit insurance assessment formula by the Federal Depository Insurance Corporation (FDIC) resulted in an expense of $249,000 in the first quarter of 2009 as compared to $17,000 in the same period of 2008. The Company’s core efficiency ratio (reported efficiency ratio net of effect of non-core adjustments) improved to 83.6% from 87.1% in the first quarter of 2009 compared to the same period in 2008.
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 Tuesday April 28, 2009. Persons wishing to access the conference call may do so by dialing 877-407-9205. Replays of the conference call will be available beginning April 28, 2009 at 6:00 p.m. (Eastern Time) through May 5, 2009 at 11:59 p.m. (Eastern Time) by dialing 877-660-6853 and using Account #286 and Conference ID #319099 (both numbers are needed to access the replay).
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