Western New England Bancorp, Inc. - Quarter Report: 2016 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission file number 001-16767

Westfield Financial, Inc.

(Exact name of registrant as specified in its charter)

Massachusetts	73-1627673
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

141 Elm Street, Westfield, Massachusetts 01086

(Address of principal executive offices)

(Zip Code)

(413) 568-1911

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

	Large accelerated filer ☐	Accelerated filer ☒

	Non-accelerated filer ☐	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At April 29, 2016, the registrant had 18,267,747 shares of common stock, $.01 par value, issued and outstanding.

TABLE OF CONTENTS


		Page

FORWARD-LOOKING STATEMENTS		i

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements of Westfield Financial, Inc. and Subsidiaries

	Consolidated Balance Sheets (Unaudited) – March 31, 2016 and December 31, 2015	1

	Consolidated Statements of Net Income (Unaudited) – Three Months Ended March 31, 2016 and 2015	2

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three Months Ended March 31, 2016 and 2015	3

	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) – Three Months Ended March 31, 2016 and 2015	4

	Consolidated Statements of Cash Flows (Unaudited) – Three Months Ended March 31, 2016 and 2015	5

	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	38

FORWARD–LOOKING STATEMENTS

We may, from time to time, make written or oral “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements contained in our filings with the Securities and Exchange Commission (the “SEC”), our reports to shareholders and in other communications by us. This Quarterly Report on Form 10-Q contains “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “would,” “plan,” “estimate,” “potential” and other similar expressions. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operation and business that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to:

changes in the interest rate environment that reduce margins;

changes in the regulatory environment;

the highly competitive industry and market area in which we operate;

general economic conditions, either nationally or regionally, resulting in, among other things, a deterioration in credit quality;

changes in business conditions and inflation;

changes in credit market conditions;

the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions;

changes in the securities markets which affect investment management revenues;

increases in Federal Deposit Insurance Corporation deposit insurance premiums and assessments could adversely affect our financial condition;

changes in technology used in the banking business;

the soundness of other financial services institutions which may adversely affect our credit risk;

certain of our intangible assets may become impaired in the future;

our controls and procedures may fail or be circumvented;

new line of business or new products and services, which may subject us to additional risks;

changes in key management personnel which may adversely impact our operations;

the effect on our operations of governmental legislation and regulation, including changes in accounting regulation or standards, the nature and timing of the adoption and effectiveness of new requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Basel guidelines, capital requirements and other applicable laws and regulations;

severe weather, natural disasters, acts of war or terrorism and other external events which could significantly impact our business; and

other factors detailed from time to time in our SEC filings.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from the results discussed in these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(Dollars in thousands)

	March 31,			December 31,
	2016			2015
ASSETS
CASH AND DUE FROM BANKS	$	9,721		$	9,891
FEDERAL FUNDS SOLD		1,022			100
INTEREST-BEARING DEPOSITS AND OTHER SHORT-TERM INVESTMENTS		144,451			3,712
CASH AND CASH EQUIVALENTS		155,194			13,703

SECURITIES AVAILABLE FOR SALE – AT FAIR VALUE		302,224			182,590
SECURITIES HELD TO MATURITY (Fair value of $237,619 at December 31,2015)		—			238,219
FEDERAL HOME LOAN BANK OF BOSTON AND OTHER RESTRICTED STOCK - AT COST		14,080			15,074
LOANS - Net of allowance for loan losses of $8,855 and $8,840 at March 31, 2016 and December 31, 2015, respectively		818,108			809,373
PREMISES AND EQUIPMENT, Net		13,310			13,564
ACCRUED INTEREST RECEIVABLE		3,385			3,878
BANK-OWNED LIFE INSURANCE		50,591			50,230
DEFERRED TAX ASSET, Net		9,863			10,881
OTHER ASSETS		2,189			2,418
TOTAL ASSETS	$	1,368,944		$	1,339,930

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
DEPOSITS:
Noninterest-bearing	$	161,625		$	157,844
Interest-bearing		766,499			742,519
Total deposits		928,124			900,363

SHORT-TERM BORROWINGS		158,593			128,407
LONG-TERM DEBT		90,943			153,358
SECURITIES PENDING SETTLEMENT		30,570			—
OTHER LIABILITIES		17,719			18,336
TOTAL LIABILITIES		1,225,949			1,200,464

SHAREHOLDERS’ EQUITY:
Preferred stock - $.01 par value, 5,000,000 shares authorized, none outstanding at March 31, 2016 and December 31, 2015		—			—
Common stock - $.01 par value, 75,000,000 shares authorized, 18,267,747 shares issued and outstanding at March 31, 2016; 18,267,747 shares issued and outstanding at December 31, 2015		183			183
Additional paid-in capital		108,236			108,210
Unearned compensation - ESOP		(6,822	)		(6,952	)
Unearned compensation - Equity Incentive Plan		(279	)		(313	)
Retained earnings		50,761			49,316
Accumulated other comprehensive loss		(9,084	)		(10,978	)
Total shareholders’ equity		142,995			139,466
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,368,944		$	1,339,930

See accompanying notes to unaudited consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME – UNAUDITED

(Dollars in thousands, except share and per share data)

	Three Months
	Ended March 31,
	2016			2015
INTEREST AND DIVIDEND INCOME:
Residential and commercial real estate loans	$	6,512		$	5,595
Commercial and industrial loans		1,696			1,598
Consumer loans		42			36
Debt securities, taxable		2,427			2,658
Debt securities, tax-exempt		75			186
Equity securities		52			41
Other investments - at cost		132			68
Federal funds sold, interest-bearing deposits and other short-term investments		25			6
Total interest and dividend income		10,961			10,188
INTEREST EXPENSE:
Deposits		1,472			1,341
Long-term debt		842			1,070
Short-term borrowings		404			187
Total interest expense		2,718			2,598
Net interest and dividend income		8,243			7,590
(CREDIT) PROVISION FOR LOAN LOSSES		(600	)		300
Net interest and dividend income after (credit) provision for loan losses		8,843			7,290

NONINTEREST INCOME (LOSS):
Service charges and fees		884			638
Income from bank-owned life insurance		361			367
Loss on prepayment of borrowings		(915	)		(593	)
Gain on sales of securities, net		685			817
Total noninterest income		1,015			1,229
NONINTEREST EXPENSE:
Salaries and employee benefits		3,871			3,821
Occupancy		801			840
Computer operations		621			585
Professional fees		516			472
FDIC insurance assessment		190			193
Merger related expenses		154			—
Other		919			800
Total noninterest expense		7,072			6,711
INCOME BEFORE INCOME TAXES		2,786			1,808
INCOME TAX PROVISION		822			470
NET INCOME	$	1,964		$	1,338

EARNINGS PER COMMON SHARE:
Basic earnings per share	$	0.11		$	0.08
Weighted average shares outstanding		17,304,088			17,684,498
Diluted earnings per share	$	0.11		$	0.08
Weighted average diluted shares outstanding		17,304,088			17,684,498

See accompanying notes to unaudited consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) – UNAUDITED

(Dollars in thousands)

	Three Months Ended March 31,
	2016			2015

Net income	$	1,964		$	1,338

Other comprehensive income (loss):
Unrealized gain (loss) on securities:
Unrealized holding gains on available for sale securities		8,149			1,214
Reclassification adjustment for gains realized in income (1)		(685	)		(817	)
Amortization of net unrealized gain (loss) on held-to-maturity securities (2)		26			(76	)
Net unrealized loss upon transfer of held-to-maturity to available-for-sale (3)		(2,288	)		—
Net unrealized gains		5,202			321
Tax effect		(1,797	)		(112	)
Net-of-tax amount		3,405			209

Derivative instruments:
Change in fair value of derivatives used for cash flow hedges		(2,551	)		(2,769	)
Reclassification adjustment for loss realized in interest expense (4)		95			131
Reclassification adjustment for termination fee realized in interest expense (5)		152			—
Net adjustments relating to derivative instruments		(2,304	)		—
Tax effect		783			897
Net-of-tax amount		(1,521	)		(1,741	)

Defined benefit pension plans:
Gain arising during the period pertaining to defined benefit plans		—			(62	)
Reclassification adjustment (6):
Actuarial loss		16			31
Net adjustments pertaining to defined benefit plans		16			(31	)
Tax effect		(6	)		10
Net-of-tax amount		10			(21	)

Other comprehensive income (loss)		1,894			(1,553	)

Comprehensive income (loss)	$	3,858		$	(215	)

(1) Gain realized in income on available-for-sale securities is recognized as a component of noninterest income. The tax provision applicable to net realized gains was $236,000 and $281,000 for the three months ended March 31, 2016 and 2015, respectively.
(2) Amortization of net unrealized gain (loss) on held-to-maturity securities is recognized as a component of interest income on debt securities. Income tax effects associated with the reclassification adjustments were $9,000 and $25,000 for the three months ended March 31, 2016 and 2015, respectively.
(3) Income tax effect associated with the reclassification adjustments upon transfer of held-to-maturity to available-for-sale was $790,000 for the three months ended March 31, 2016.
(4) Loss realized in interest expense on derivative instruments is recognized as a component of interest expense on short-term debt. Income tax benefits associated with the reclassification adjustment were $32,000 and $45,000 for the three months ended March 31, 2016 and 2015, respectively.
(5) Termination fee on derivative instruments is recognized as a component of interest expense on short-term debt. Income tax benefit associated with the reclassification adjustment was $52,000 for the three months ended March 31, 2016.
(6) Amounts represent the reclassification of defined benefit plans amortization and have been recognized as a component of salaries and employee benefit expense. Income tax effects associated with the reclassification adjustments were $5,000 and $11,000 for the three months ended March 31, 2016 and 2015, respectively.

See accompanying notes to unaudited consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Dollars in thousands, except share data)


																			Accumulated
	Common Stock												Unearned						Other
							Additional			Unearned			Compensation-						Comprehensive
	Shares			Par Value			Paid-in Capital			Compensation - ESOP			Equity Incentive Plan			Retained Earnings			Income (Loss)			Total

BALANCE AT DECEMBER 31, 2014		18,734,791		$	187		$	111,696		$	(7,469	)	$	(95	)	$	45,699		$	(7,475	)	$	142,543
Comprehensive income		—			—			—			—			—			1,338			(1,553	)		(215	)
Common stock held by ESOP committed to be released (76,888 shares)		—			—			10			129			—			—			—			139
Share-based compensation - equity incentive plan		—			—			—			—			28			—			—			28
Excess tax benefit from equity incentive plan		—			—			1			—			—			—			—			1
Common stock repurchased		(225,041	)		(2	)		(1,673	)		—			—			—			—			(1,675	)
Issuance of common stock in connection with equity incentive plan		48,560			1			348			—			(349	)		—			—			—
Cash dividends declared and paid ($0.03 per share)		—			—			—			—			—			(531	)		—			(531	)
BALANCE AT MARCH 31, 2015		18,558,310		$	186		$	110,382		$	(7,340	)	$	(416	)	$	46,506		$	(9,028	)	$	140,290

BALANCE AT DECEMBER 31, 2015		18,267,747		$	183		$	108,210		$	(6,952	)	$	(313	)	$	49,316		$	(10,978	)	$	139,466
Comprehensive income		—			—			—			—			—			1,964			1,894			3,858
Common stock held by ESOP committed to be released (74,430 shares)		—			—			23			130			—			—			—			153
Share-based compensation - equity incentive plan		—			—			—			—			34			—			—			34
Excess tax benefit from equity incentive plan		—			—			3			—			—			—			—			3
Cash dividends declared and paid ($0.03 per share)		—			—			—			—			—			(519	)		—			(519	)
BALANCE AT MARCH 31, 2016		18,267,747		$	183		$	108,236		$	(6,822	)	$	(279	)	$	50,761		$	(9,084	)	$	142,995

See accompanying notes to unaudited consolidated financial statements

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)

	Three Months Ended March 31,
	2016			2015
OPERATING ACTIVITIES:
Net income	$	1,964		$	1,338
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for loan losses		(600	)		300
Depreciation and amortization of premises and equipment		323			335
Net amortization of premiums and discounts on securities and mortgage loans		1,212			1,283
Net amortization of premiums on modified debt		44			122
Share-based compensation expense		34			28
ESOP expense		153			139
Excess tax benefits from equity incentive plan		(3	)		(1	)
Net gains on sales of securities		(685	)		(817	)
Loss on prepayment of borrowings		915			593
Income from bank-owned life insurance		(361	)		(367	)
Changes in assets and liabilities:
Accrued interest receivable		493			62
Other assets		229			228
Other liabilities		(2,903	)		638
Net cash provided by operating activities		815			3,881
INVESTING ACTIVITIES:
Securities, held to maturity:
Purchases		—			(2,619	)
Proceeds from calls, maturities, and principal collections		6,835			13,218
Securities, available for sale:
Purchases		(25,843	)		(81,243	)
Proceeds from sales		136,826			52,711
Proceeds from calls, maturities, and principal collections		5,457			11,334
Purchase of residential mortgages		(9,587	)		(6,209	)
Loan originations and principal payments, net		1,436			304
Redemption of Federal Home Loan Bank of Boston stock		994			—
Purchases of premises and equipment		(89	)		(2,417	)
Proceeds from sale of premises and equipment		20			23
Net cash provided by (used in) investing activities		116,049			(14,898	)
FINANCING ACTIVITIES:
Net increase in deposits		27,761			39,085
Net change in short-term borrowings		30,186			(11,372	)
Repayment of long-term debt		(32,845	)		(20,593	)
Proceeds from issuance of long-term debt		41			36
Cash dividends paid		(519	)		(531	)
Common stock repurchased		—			(1,675	)
Excess tax benefits in connection with equity incentive plan		3			1
Net cash provided by financing activities		24,627			4,951

NET CHANGE IN CASH AND CASH EQUIVALENTS:		141,491			(6,066	)
Beginning of period		13,703			18,785
End of period	$	155,194		$	12,719

Supplemental cash flow information:
Securities held to maturity reclassified to available for sale	$	(232,817	)	$	—
Interest paid		2,845			2,631
Taxes paid		35			35
Net cash due to broker for common stock repurchased		30,570			—

See the accompanying notes to unaudited consolidated financial statements

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2016

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations – Westfield Financial, Inc. (“Westfield Financial,” “we” or “us”) is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank (the “Bank”), a federally chartered stock savings bank (the “Bank”).

The Bank’s deposits are insured to the limits specified by the Federal Deposit Insurance Corporation (“FDIC”). The Bank operates 13 banking offices in western Massachusetts and Granby and Enfield, Connecticut, and its primary sources of revenue are income from securities and earnings on loans to small and middle-market businesses and to residential property homeowners.

Elm Street Securities Corporation and WFD Securities Corporation, Massachusetts-chartered security corporations, were formed by Westfield Financial for the primary purpose of holding qualified securities. WB Real Estate Holdings, LLC, a Massachusetts-chartered limited liability company was formed for the primary purpose of holding real property acquired as security for debts previously contracted by the Bank.

Principles of Consolidation – The unaudited consolidated financial statements include the accounts of Westfield Financial, the Bank, Elm Street Securities Corporation, WB Real Estate Holdings, LLC and WFD Securities Corporation. All material intercompany balances and transactions have been eliminated in consolidation.

Estimates – The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of income and expenses for both at the date of the unaudited consolidated financial statements. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, other-than-temporary impairment of securities, and the valuation of deferred tax assets.

Basis of Presentation – In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of March 31, 2016, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results of operations for the year ending December 31, 2016. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2015, included in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”).

Reclassifications - Amounts in the prior period financial statements are reclassified when necessary to conform to the current year presentation.

2. BUSINESS COMBINATION

On April 4, 2016, we announced the signing of a definitive merger agreement to acquire Chicopee Bancorp, Inc. (“Chicopee”), the holding company for Chicopee Savings Bank, whereby Chicopee will merge with and into Westfield Financial. Thereafter, pursuant to the terms of the plan of bank merger to be entered into by the Bank and Chicopee Savings Bank, Chicopee Savings Bank will be merged with and into the Bank, with the Bank surviving. Under the terms of the merger agreement, each outstanding share of Chicopee common stock will be converted into the right to receive 2.425 shares of the Westfield Financial’s common stock. The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions, including receipt of regulatory approvals and the approvals of the shareholders of Westfield Financial and Chicopee.

3. EARNINGS PER SHARE

Basic earnings per share represent income available to shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential shares had been issued, as well as any adjustment to income that would result from the assumed issuance. No dilutive potential shares were outstanding during the periods presented. Share-based compensation awards that qualify as participating securities (entitled to receive non-forfeitable dividends) are included in basic earnings per share.

Earnings per common share for the three months ended March 31, 2016 and 2015 have been computed based on the following:

	Three Months Ended
	March 31,
	2016			2015
	(In thousands, except per share data)

Net income applicable to common stock	$	1,964		$	1,338

Average number of common shares issued		18,268			18,725
Less: Average unallocated ESOP Shares		(964	)		(1,041	)

Average number of common shares outstanding used to calculate basic and diluted earnings per common share		17,304			17,684

Basic and diluted earnings per share	$	0.11		$	0.08

4. COMPREHENSIVE INCOME/LOSS

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

The components of accumulated other comprehensive loss included in shareholders’ equity are as follows:

	March 31, 2016			December 31, 2015
	(In thousands)

Net unrealized gains (losses) on securities available for sale	$	544		$	(2,343	)
Tax effect		(185	)		812
Net-of-tax amount		359			(1,531	)

Net unrealized losses on securities transferred from available-for-sale to held-to-maturity		—			(2,314	)
Tax effect		—			799
Net-of-tax amount		—			(1,515	)

Fair value of derivatives used for cash flow hedges		(5,101	)		(6,064	)
Termination fee		(5,537	)		(2,270	)
Total derivatives		(10,638	)		(8,334	)
Tax effect		3,616			2,833
Net-of-tax amount		(7,022	)		(5,501	)

Unrecognized deferred loss pertaining to defined benefit plan		(3,669	)		(3,685	)
Tax effect		1,248			1,254
Net-of-tax amount		(2,421	)		(2,431	)

Accumulated other comprehensive loss	$	(9,084	)	$	(10,978	)

The following table presents changes in accumulated other loss for the periods ended March 31, 2016 and 2015 by component:

	Securities			Derivatives			Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2014	$	(728	)	$	(3,788	)	$	(2,959	)	$	(7,475	)
Current-period other comprehensive income (loss)		209			(1,741	)		(21	)		(1,553	)
Balance at March 31, 2015	$	(519	)	$	(5,529	)	$	(2,980	)	$	(9,028	)

Balance at December 31, 2015	$	(3,046	)	$	(5,501	)	$	(2,431	)	$	(10,978	)
Current-period other comprehensive income (loss)		3,405			(1,521	)		10			1,894
Balance at March 31, 2016	$	359		$	(7,022	)	$	(2,421	)	$	(9,084	)

5. SECURITIES

Securities available for sale and held to maturity are summarized as follows:

	March 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available for sale securities:
Government-sponsored mortgage-backed securities	$	194,757	$	931	$	(808	)	$	194,880
U.S. government guaranteed mortgage-backed securities		18,696		75		(208	)		18,563
Corporate bonds		52,838		453		(103	)		53,188
State and municipal bonds		2,938		41		(21	)		2,958
Government-sponsored enterprise obligations		24,668		2		(2	)		24,668
Mutual funds		6,474		24		(152	)		6,346
Common and preferred stock		1,309		312		—			1,621

Total	$	301,680	$	1,838	$	(1,294	)	$	302,224

	December 31, 2015
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
		(In thousands)
Available for sale securities:
Government-sponsored mortgage-backed securities	$	138,186	$	—	$	(2,227	)	$	135,959
U.S. government guaranteed mortgage-backed securities		11,030		—		(127	)		10,903
Corporate bonds		21,176		45		(85	)		21,136
State and municipal bonds		2,794		7		—			2,801
Government-sponsored enterprise obligations		4,000		—		(49	)		3,951
Mutual funds		6,438		—		(191	)		6,247
Common and preferred stock		1,309		284		—			1,593

Total available for sale securities		184,933		336		(2,679	)		182,590

Held to maturity securities:
Government-sponsored mortgage-backed securities	$	148,085	$	1,319	$	(1,515	)	$	147,889
U.S. government guaranteed mortgage-backed securities		29,174		166		(66	)		29,274
Corporate bonds		23,969		64		(316	)		23,717
State and municipal bonds		6,845		68		(102	)		6,811
Government-sponsored enterprise obligations		30,146		254		(472	)		29,928

Total held to maturity securities		238,219		1,871		(2,471	)		237,619

Total	$	423,152	$	2,207	$	(5,150	)	$	420,209

U.S. government-sponsored and guaranteed mortgage-backed securities are collateralized by both residential and multifamily loans.

Our repurchase agreements and advances from the Federal Home Loan Bank of Boston (“FHLBB”) are collateralized by government-sponsored enterprise obligations and certain mortgage-backed securities (see Note 8).

The amortized cost and fair value of securities available for sale at March 31, 2016, by maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or repay obligations.

	March 31, 2016
	Amortized Cost		Fair Value
	(In thousands)
Mortgage-backed securities:
Due after five years through ten years	$	40,198	$	40,538
Due after ten years		173,255		172,905
Total	$	213,453	$	213,443

Debt securities:
Due in one year or less	$	2,219	$	2,224
Due after one year through five years		27,070		27,299
Due after five years through ten years		50,821		50,977
Due after ten years		334		314
Total	$	80,444	$	80,814

Gross realized gains and losses on sales of securities available for sale for the three months ended March 31, 2016 and 2015 are as follows:

	Three Months Ended
	March 31,
	2016			2015
	(In thousands)

Gross gains realized	$	1,519		$	887
Gross losses realized		(834	)		(70	)
Net gain realized	$	685		$	817

Proceeds from the sale of securities available for sale amounted to $136.8 million and $52.7 million for the three months ended March 31, 2016 and 2015, respectively.

Information pertaining to securities with gross unrealized losses at March 31, 2016, and December 31, 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	March 31, 2016
	Less Than 12 Months				Over 12 Months
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(In thousands)

Available for sale:
Government-sponsored mortgage-backed securities	$	67	$	21,929	$	741	$	80,131
U.S. government guaranteed mortgage-backed securities		—		—		208		5,601
Corporate bonds		103		17,526		—		—
State and municipal bonds		—		—		21		313
Government-sponsored enterprise obligations		—		11,500		2		1,667
Mutual funds		13		1,071		139		1,802
Total	$	183	$	52,026	$	1,111	$	89,514

	December 31, 2015
	Less Than 12 Months				Over 12 Months
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(In thousands)

Available for sale:
Government-sponsored mortgage-backed securities	$	2,090	$	129,731	$	137	$	6,228
U.S. government guaranteed mortgage-backed securities		116		10,290		11		613
Corporate bonds		85		13,374		—		—
Government-sponsored enterprise obligations		49		3,951		—		—
Mutual funds		32		4,478		159		1,769

Total available for sale		2,372		161,824		307		8,610

Held to maturity:
Government-sponsored mortgage-backed securities	$	947	$	45,760	$	568	$	32,825
U.S. government guaranteed mortgage-backed securities		37		2,522		29		15,401
Corporate bonds		204		5,412		112		13,382
State and municipal bonds		—		—		102		4,809
Government-sponsored enterprise obligations		—		—		472		20,193

Total held to maturity		1,188		53,694		1,283		86,610

Total	$	3,560	$	215,518	$	1,590	$	95,220

	March 31, 2016
	Less Than 12 Months									Over 12 Months
	Number of Securities		Amortized Cost Basis		Gross Loss		Depreciation from AC Basis (%)			Number of Securities		Amortized Cost Basis		Gross Loss		Depreciation from AC Basis (%)
	(Dollars in thousands)

Government-sponsored mortgage-backed securities		8	$	21,996	$	67		0.3	%		21	$	80,872	$	741		0.9	%
U.S. government guaranteed mortgage-backed securities		0		—		—		—			2		5,809		208		3.6
Corporate bonds		6		17,629		103		0.6			0		—		—		—
State and municipal bonds		0		—		—		—			1		334		21		6.3
Government-sponsored enterprise obligations		2		11,500		—		—			1		1,669		2		0.1
Mutual funds		1		1,084		13		1.2			1		1,941		139		7.2
			$	52,209	$	183						$	90,625	$	1,111

These unrealized losses are the result of changes in interest rates and not credit quality. Because we do not intend to sell the securities and it is more likely than not that we will not be required to sell the investments before recovery of their amortized cost basis, no declines are deemed to be other-than-temporary.

6. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans consisted of the following amounts:	March 31,			December 31,
	2016			2015
	(In thousands)
Commercial real estate	$	323,050		$	303,036
Residential real estate:
Residential		296,082			298,052
Home equity		45,093			43,512
Commercial and industrial		157,456			168,256
Consumer		1,415			1,534
Total Loans		823,096			814,390
Unearned premiums and deferred loan fees and costs, net		3,867			3,823
Allowance for loan losses		(8,855	)		(8,840	)
	$	818,108		$	809,373

During the three months ended March 31, 2016 and 2015, we purchased residential real estate loans aggregating $9.6 million and $6.2 million, respectively.

We have transferred a portion of our originated commercial real estate and commercial and industrial loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in our accompanying unaudited consolidated balance sheets. We share ratably with our participating lenders in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. We continue to service the loans on behalf of the participating lenders and, as such, collect cash payments from the borrowers, remit payments (net of servicing fees) to participating lenders and disburse required escrow funds to relevant parties. At March 31, 2016 and December 31, 2015, we serviced loans for participants aggregating $19.7 million and $19.5 million, respectively.

Loans are recorded at the principal amount outstanding, adjusted for charge-offs, unearned premiums and deferred loan fees and costs. Interest on loans is calculated using the effective yield method on daily balances of the principal amount outstanding and is credited to income on the accrual basis to the extent it is deemed collectable. Our general policy is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more based on the contractual terms of the loan, or earlier if the loan is considered impaired. Any unpaid amounts previously accrued on these loans are reversed from income. Subsequent cash receipts are applied to the outstanding principal balance or to interest income if, in the judgment of management, collection of the principal balance is not in question. Loans are returned to accrual status when they become current as to both principal and interest and perform in accordance with contractual terms for a period of at least six months, reducing the concern as to the collectability of principal and interest. Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income over the estimated average lives of the related loans.

The allowance for loan losses is established through provisions for loan losses charged to expense. Loans are charged-off against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated, and unallocated components, as further described below.

General component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate (includes one-to-four family and home equity), commercial real estate, commercial and industrial, and consumer. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: trends in delinquencies and nonperforming loans; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; and national and local economic trends and industry conditions. There were no changes in our policies or methodology pertaining to the general component of the allowance for loan losses during the periods presented for disclosure.

The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate – We require private mortgage insurance for all loans originated with a loan-to-value ratio greater than 80% and we do not grant subprime loans. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment. Home equity loans are secured by first or second mortgages on one-to-four family owner occupied properties.

Commercial real estate – Loans in this segment are primarily income-producing investment properties and owner occupied commercial properties throughout New England. The underlying cash flows generated by the properties or operations can be adversely impacted by a downturn in the economy due to increased vacancy rates or diminished cash flows, which in turn, would have an effect on the credit quality in this segment. Management obtains financial information annually and continually monitors the cash flows of these loans.

Commercial and industrial loans – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Consumer loans – Loans in this segment are secured or unsecured and repayment is dependent on the credit quality of the individual borrower.

Allocated component

The allocated component relates to loans that are classified as impaired. Impaired loans are identified by analysis of loan performance, internal credit ratings and watch list loans that management believes are subject to a higher risk of loss. Impairment is measured on a loan by loan basis for commercial real estate and commercial and industrial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, we do not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. We determine the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Unallocated component

An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance, if any, reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

An analysis of changes in the allowance for loan losses by segment for the periods ended March 31, 2016 and 2015 is as follows:

	Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Unallocated			Total
	(In thousands)
Three Months Ended
Balance at December 31, 2014	$	3,705		$	2,053		$	2,174		$	15		$	1		$	7,948
Provision (credit)		134			(76	)		247			11			(16	)		300
Charge-offs		—			—			(212	)		(13	)		—			(225	)
Recoveries		—			1			2			9			—			12
Balance at March 31, 2015	$	3,839		$	1,978		$	2,211		$	22		$	(15	)	$	8,035

Balance at December 31, 2015	$	3,856		$	2,431		$	2,485		$	22		$	46		$	8,840
Provision (credit)		(751	)		47			105			13			(14	)		(600	)
Charge-offs		(170	)		(50	)		—			(23	)		—			(243	)
Recoveries		851			1			—			6			—			858
Balance at March 31, 2016	$	3,786		$	2,429		$	2,590		$	18		$	32		$	8,855

Further information pertaining to the allowance for loan losses by segment at March 31, 2016 and December 31, 2015 follows:


	Commercial Real Estate		Residential Real Estate		Commercial and Industrial		Consumer		Unallocated		Total
	(In thousands)
March 31, 2016

Amount of allowance for loans individually evaluated and deemed impaired	$	—	$	—	$	—	$	—	$	—	$	—
Amount of allowance for loans collectively or individually evaluated for impairment and not deemed impaired		3,786		2,429		2,590		18		32		8,855
Total allowance for loan losses	$	3,786	$	2,429	$	2,590	$	18	$	32	$	8,855

Loans individually evaluated and deemed impaired	$	3,504	$	451	$	3,463	$	—	$	—	$	7,418
Loans collectively or individually evaluated and not deemed impaired		319,546		340,724		153,993		1,415		—		815,678
Total loans	$	323,050	$	341,175	$	157,456	$	1,415	$	—	$	823,096

December 31, 2015

Amount of allowance for loans individually evaluated and deemed impaired	$	—	$	—	$	—	$	—	$	—	$	—
Amount of allowance for loans collectively or individually evaluated for impairment and not deemed impaired		3,856		2,431		2,485		22		46		8,840
Total allowance for loan losses	$	3,856	$	2,431	$	2,485	$	22	$	46	$	8,840

Loans individually evaluated and deemed impaired	$	3,732	$	399	$	3,363	$	—	$	—	$	7,494
Loans collectively or individually evaluated and not deemed impaired		299,304		341,165		164,893		1,534		—		806,896
Total loans	$	303,036	$	341,564	$	168,256	$	1,534	$	—	$	814,390

The following is a summary of past due and non-accrual loans by class at March 31, 2016 and December 31, 2015:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Past Due 90 Days or More and Still Accruing		Loans on Non-Accrual
	(In thousands)
March 31, 2016
Commercial real estate	$	642	$	—	$	410	$	1,052	$	—	$	3,011
Residential real estate:
Residential		183		262		817		1,262		—		1,481
Home equity		155		38		—		193		—		123
Commercial and industrial		69		—		629		698		—		3,664
Consumer		9		—		—		9		—		9
Total	$	1,058	$	300	$	1,856	$	3,214	$	—	$	8,288

December 31, 2015
Commercial real estate	$	348	$	730	$	20	$	1,098	$	—	$	3,237
Residential real estate:
Residential		638		—		908		1,546		—		1,470
Home equity		230		124		—		354		—		—
Commercial and industrial		127		649		445		1,221		—		3,363
Consumer		30		—		—		30		—		10
Total	$	1,373	$	1,503	$	1,373	$	4,249	$	—	$	8,080

The following is a summary of impaired loans by class at March 31, 2016 and December 31, 2015:

					Three Months Ended
	At March 31, 2016				March 31, 2016
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired loans without a valuation allowance:
Commercial real estate	$	3,504	$	4,392	$	3,618	$	12
Residential real estate		451		609		425		—
Commercial and industrial		3,463		4,559		3,413		—
Total impaired loans	$	7,418	$	9,560	$	7,456	$	12

					Three Months Ended
	At December 31, 2015				March 31, 2015
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized
	(In thousands)

Commercial real estate	$	3,732	$	4,403	$	3,082	$	—
Residential real estate		399		543		289		—
Commercial and industrial		3,363		4,408		4,223		—
Total impaired loans	$	7,494	$	9,354	$	7,594	$	—

No interest income was recognized for impaired loans on a cash-basis method during the three months ended March 31, 2015.

We may periodically agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (“TDR”). These concessions could include a reduction in the interest rate on the loan, payment extensions, postponement or forgiveness of principal, forbearance or other actions intended to maximize collection. All TDRs are classified as impaired.

When we modify loans in a TDR, we measure impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or use the current fair value of the collateral, less selling costs for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, we evaluate all TDRs, including those that have payment defaults, for possible impairment and recognize impairment through the allowance.

There were no significant loans modified in TDRs during the three months ended March 31, 2016 or 2015.

A default occurs when a loan is 30 days or more past due and is within 12 months of restructuring. No TDRs defaulted during the three months ended March 31, 2016 or 2015.

There were no charge-offs on TDRs during the three months ended March 31, 2016. There were $212,000 in charge-offs on TDRs during the three months ended March 31, 2015.

Credit Quality Information

We utilize an eight-grade internal loan rating system for commercial real estate and commercial and industrial loans. Performing residential real estate, home equity and consumer loans are grouped with “Pass” rated loans. Nonperforming residential real estate, home equity and consumer loans are monitored individually for impairment and risk rated as “Substandard.”

Loans rated 1 – 3 are considered “Pass” rated loans with low to average risk.

Loans rated 4 are considered “Pass Watch,” which represent loans to borrowers with declining earnings, losses, or strained cash flow.

Loans rated 5 are considered “Special Mention.” These loans exhibit potential credit weaknesses or downward trends and are being closely monitored by us.

Loans rated 6 are considered “Substandard.” Generally, a loan is considered substandard if the borrower exhibits a well-defined weakness that may be inadequately protected by the current net worth and cash flow capacity to pay the current debt.

Loans rated 7 are considered “Doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable and that a partial loss of principal is likely.

Loans rated 8 are considered uncollectible and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, we formally review the ratings on all commercial real estate and commercial and industrial loans. Construction loans are reported within commercial real estate loans and total $24.8 million and $23.1 million at March 31, 2016 and December 31, 2015, respectively. We engage an independent third party to review a significant portion of loans within these segments on a semi-annual basis. We use the results of these reviews as part of our annual review process. In addition, management utilizes delinquency reports, the watch list and other loan reports to monitor credit quality in other segments.

The following table presents our loans by risk rating at March 31, 2016 and December 31, 2015:

	Commercial Real Estate		Residential 1-4 Family		Home Equity		Commercial and Industrial		Consumer		Total
	(In thousands)
March 31, 2016
Loans rated 1 – 3	$	286,993	$	294,601	$	44,970	$	124,946	$	1,406	$	752,916
Loans rated 4		29,464		—		—		16,405		—		45,869
Loans rated 5		136		—		—		408		—		544
Loans rated 6		6,457		1,481		123		15,697		9		23,767
	$	323,050	$	296,082	$	45,093	$	157,456	$	1,415	$	823,096

December 31, 2015
Loans rated 1 – 3	$	269,124	$	296,582	$	43,512	$	135,416	$	1,524	$	746,158
Loans rated 4		27,053		—		—		16,060		—		43,113
Loans rated 5		138		—		—		434		—		572
Loans rated 6		6,721		1,470		—		16,346		10		24,547
	$	303,036	$	298,052	$	43,512	$	168,256	$	1,534	$	814,390

7. SHARE-BASED COMPENSATION

Restricted Stock Awards – During 2002 and 2007, we adopted equity incentive plans under which 652,664 and 624,041 shares, respectively, were reserved for issuance as restricted stock awards to directors and employees, all of which are currently issued and outstanding as of March 31, 2016.

In May 2014, our shareholders approved a new stock-based compensation plan under which up to 516,000 shares of our common stock have been reserved for future grants of stock awards, including stock options and restricted stock, which may be granted to any officer, key employee or non-employee director of Westfield Financial. Authorized but unissued shares are issued to awardees upon vesting of such awards. Any shares not issued because vesting requirements are not met will again be available for issuance under the plans.

Restricted shares awarded vest ratably over five years. The fair market value of shares awarded, based on the market price at the date of grant, is recorded as unearned compensation and amortized over the applicable vesting period. At March 31, 2016, 48,560 shares had been granted under this plan.

Our stock award and stock option plans activity for the three months ended March 31, 2016 and 2015 is summarized below:


	Unvested Stock Awards Outstanding

	Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2015		54,160		$	7.28
Shares vested		(11,200	)	$	7.18
Outstanding at March 31, 2016		42,960		$	7.30

Outstanding at December 31, 2014		13,000		$	8.07
Shares granted		48,560		$	7.18
Outstanding at March 31, 2015		61,560		$	7.37

We recorded compensation cost related to the stock awards of $34,000 and $28,000 for the three months ended March 31, 2016 and 2015, respectively.

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

We utilize short-term borrowings and long-term debt as an additional source of funds to finance our lending and investing activities and to provide liquidity for daily operations.

Short-term borrowings are made up of FHLBB advances with an original maturity of less than one year, a line of credit with the FHLBB and customer repurchase agreements, which have an original maturity of one day. Short-term borrowings issued by the FHLBB were $120.0 million and $93.8 million at March 31, 2016 and December 31, 2015, respectively. We have an “Ideal Way” line of credit with the FHLBB for $9.5 million at March 31, 2016 and December 31, 2015. Interest on this line of credit is payable at a rate determined and reset by the FHLBB on a daily basis. The outstanding principal is due daily, but the portion not repaid will be automatically renewed. There were no advances outstanding on the line of credit as of March 31, 2016 and December 31, 2015, respectively. Customer repurchase agreements were $38.6 million at March 31, 2016 and $34.7 million at December 31, 2015. A customer repurchase agreement is an agreement by us to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the U.S. government. This transaction settles immediately on a same day basis in immediately available funds. Interest paid is commensurate with other products of equal interest and credit risk. In addition, we have lines of credit of $4.0 million and $50.0 million with Bankers Bank Northeast (“BBN”) and PNC Bank, respectively. The interest rates on these lines are determined and reset on a daily basis by each respective bank. There were no advances outstanding under these lines of credit at March 31, 2016 or December 31, 2015. As part of our contract with BBN, we are required to maintain a reserve balance of $300,000 with BBN for our use of this line of credit.

Long-term debt consists of FHLBB advances with an original maturity of one year or more and customer repurchase agreements linked to deposit accounts with no stated maturity. At March 31, 2016, we had $85.0 million in long-term debt with the FHLBB. This compares to $147.4 million in long-term debt with FHLBB advances at December 31, 2015. Long-term customer repurchase agreements were $6.0 million and $5.9 million at March 31, 2016 and December 31, 2015, respectively.

During the three months ended March 31, 2016, we prepaid FHLBB borrowings in the amount $42.5 million and incurred a prepayment expense of $915,000. The borrowings had a weighted average rate of 2.29%.

Customer repurchase agreements are collateralized by government-sponsored enterprise obligations with fair value of $6.7 million and $6.5 million, and mortgage backed securities with a fair value of $67.3 million and $63.5 million, at March 31, 2016 and December 31, 2015, respectively. The securities collateralizing repurchase agreements are subject to fluctuations in fair value. We monitor the fair value of the collateral on a periodic basis, and would pledge additional collateral if necessary based on changes in fair value of collateral or the balances of the repurchase agreements.

All FHLBB advances are collateralized by a blanket lien on our owner occupied residential real estate loans and certain mortgage-backed securities.

9. PENSION BENEFITS

The following table provides information regarding net pension benefit costs for the periods shown:

	Three Months Ended March 31,
	2016				2015
	(In thousands)
Service cost	$	293		$	309
Interest cost		240			226
Expected return on assets		(274	)		(284	)
Amortization of actuarial loss		16			31
Net periodic pension cost	$	275		$	282

We maintain a pension plan for our eligible employees. We plan to contribute to the pension plan the amount required to meet the minimum funding standards under Section 412 of the Internal Revenue Code of 1986, as amended. Additional contributions will be made as deemed appropriate by management in conjunction with the pension plan’s actuaries. We have not yet determined how much we expect to contribute to our pension plan in 2016. No contributions have been made to the plan for the three months ended March 31, 2016. The pension plan assets are invested in group annuity contracts with the Principal Financial Group, who also acts as third-party administrator for our 401(k) and ESOP plans.

10. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our assets and liabilities and the use of derivative financial instruments. Specifically, we entered into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to certain variable rate loan assets and variable rate borrowings.

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments designated as hedging instruments as well as our classification on the balance sheet as of March 31, 2016 and December 31, 2015.

March 31, 2016

Asset Derivatives

Liability Derivatives

Balance Sheet
Location

Fair Value

Balance Sheet
Location

Fair Value

(In thousands)

Interest rate swaps

Other Assets

—

Other Liabilities

5,101

December 31, 2015

Asset Derivatives

Liability Derivatives

Balance Sheet
Location

Fair Value

Balance Sheet
Location

Fair Value

(In thousands)

Interest rate swaps

Other Assets

—

Other Liabilities

6,064

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest income and expense and to manage our exposure to interest rate movements. To accomplish this objective, we entered into interest rate swaps in September 2013 as part of our interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for our making fixed payments.

The following table presents information about our cash flow hedges at March 31, 2016 and December 31, 2015:

March 31, 2016	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	40,000		2.0		0.62	%		1.52	%	$	(616	)
Forward starting interest rate swaps on FHLBB borrowings		35,000		6.5		—			3.54	%		(4,485	)
Total cash flow hedges	$	75,000		4.1							$	(5,101	)

December 31, 2015	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	40,000		2.3		0.32	%		1.52	%	$	(330	)
Forward starting interest rate swaps on FHLBB borrowings		67,500		6.5		—			3.42	%		(5,734	)
Total cash flow hedges	$	107,500		4.9							$	(6,064	)

The forward-starting interest rate swaps with notional amounts of $35.0 million commence in 2016.

During the first quarter of 2016, we terminated a forward-starting interest rate swap with a notional amount of $32.5 million and incurred a termination fee of $3.4 million. During 2015, we terminated forward-starting interest rate swaps with a notional amount of $47.5 million and incurred a termination fee of $2.4 million. The termination fees will be amortized as a reclassification of other comprehensive income into interest expense over the terms of the

previously hedged borrowings, which were six and five years for the swaps terminate in 2016 and 2015, respectively.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. We did not recognize any hedge ineffectiveness in earnings during the three months ended March 31, 2016 or 2015.

We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of six years (excluding forecasted payment of variable interest on existing financial instruments).

The table below presents the pre-tax net losses of our cash flow hedges for the periods indicated.

	Amount of Loss Recognized in OCI on Derivative (Effective Portion)
	Three Months Ended March 31,
	2016			2015
	(In thousands)
Interest rate swaps	$	(2,551	)	$	(2,769	)

Amounts reported in accumulated other comprehensive loss related to these derivatives are reclassified to interest expense as interest payments are made on our rate sensitive assets/liabilities. The amount reclassified from accumulated comprehensive income into income for the effective portion of interest rate swaps was $247,000 and $131,000 during the three months ended March 31, 2016 and 2015, respectively. During the three months ended March 31, 2016 and 2015, no gains or losses were reclassified from accumulated other comprehensive loss into income for ineffectiveness on cash flow hedges.

Credit-risk-related Contingent Features

By using derivative financial instruments, we expose ourselves to credit risk. Credit risk is the risk of failure by the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative is negative, we owe the counterparty and, therefore, it does not possess credit risk. The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that we believe to be creditworthy and by limiting the amount of exposure to each counterparty.

We have agreements with our derivative counterparties that contain a provision where if we default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations. We also have agreements with certain of our derivative counterparties that contain a provision where if we fail to maintain our status as well capitalized, then the counterparty could terminate the derivative positions and we would be required to settle our obligations under the agreements. Certain of our agreements with our derivative counterparties contain provisions where if a formal administrative action by a federal or state regulatory agency occurs that materially changes our creditworthiness in an adverse manner, we may be required to fully collateralize our obligations under the derivative instrument.

As of March 31, 2016, the termination value of derivatives in a net liability position related to these agreements, which includes accrued interest but excludes any adjustment for nonperformance risk, was $5.2 million. As of March 31, 2016, we have minimum collateral posting thresholds with certain of our derivative counterparties and have no collateral posted against our obligations under these agreements. If we had breached any of these provisions at March 31, 2016, we could have been required to settle our obligations under the agreements at the termination value.

11. FAIR VALUE OF ASSETS AND LIABILITIES

Determination of Fair Value

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for our various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair Value Hierarchy - We group our assets and liabilities that are measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted prices in active markets for identical assets. Level 1 assets generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Methods and assumptions for valuing our financial instruments are set forth below. Estimated fair values are calculated based on the value without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications or estimated transaction cost.

Cash and cash equivalents – The carrying amounts of cash and short-term instruments approximate fair values based on the short-term nature of the assets.

Securities – Fair value of securities are primarily measured using unadjusted information from an independent pricing service. The securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market. These securities include marketable equity securities. All other securities are measured at fair value in Level 2 and are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

Federal Home Loan Bank and other restricted stock - These investments are carried at cost which is their estimated redemption value.

Loans receivable – For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans (e.g., commercial real estate and investment property mortgage loans, commercial and industrial loans and residential real estate loans) are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Accrued interest – The carrying amounts of accrued interest approximate fair value.

Deposit liabilities – The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate

certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings and long-term debt – The fair values of our debt instruments are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Interest rate swaps - The valuation of our interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. We have determined that the majority of the inputs used to value our interest rate derivatives fall within Level 2 of the fair value hierarchy.

Commitments to extend credit - Fair values for off-balance sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the term and credit risk. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. Such differences are not considered significant.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

		March 31, 2016
		Level 1		Level 2		Level 3		Total
Assets:		(In thousands)
Government-sponsored mortgage-backed securities	$	—	$	194,880	$	—	$	194,880
U.S. Government guaranteed mortgage-backed securities		—		18,563		—		18,563
Corporate bonds		—		53,188		—		53,188
State and municipal bonds		—		2,958		—		2,958
Government-sponsored enterprise obligations		—		24,668		—		24,668

Mutual funds		6,346		—		—		6,346

Common and preferred stock		1,621		—		—		1,621

Total assets	$	7,967	$	294,257	$	—	$	302,224

Liabilities:
Interest rate swaps, net	$	—	$	5,101	$	—	$	5,101

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Assets:	(In thousands)
Government-sponsored mortgage-backed securities	$	—	$	135,959	$	—	$	135,959
U.S. Government guaranteed mortgage-backed securities		—		10,903		—		10,903
Corporate bonds		—		21,136		—		21,136
State and municipal bonds		—		2,801		—		2,801
Government-sponsored enterprise obligations		—		3,951		—		3,951
Mutual funds		6,247		—		—		6,247
Common and preferred stock		1,593		—		—		1,593
Total assets	$	7,840	$	174,750	$	—	$	182,590

Liabilities:
Interest rate swaps	$	—	$	6,064	$	—	$	6,064

Also, we may be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with U.S. GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related assets at March 31, 2016 and 2015. Total losses represent the change in carrying value as a result of fair value adjustments related to assets still held at March 31, 2016 and 2015.

	At						Three Months Ended
	March 31, 2016						March 31, 2016
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	2,010	$	170
Total assets	$	—	$	—	$	2,010	$	170

	At						Three Months Ended
	March 31, 2015						March 31, 2015
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	2,237	$	212
Total assets	$	—	$	—	$	2,237	$	212

The amount of impaired loans represents the carrying value and related write-down and valuation allowance of impaired loans for which adjustments are based on the estimated fair value of the underlying collateral. The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on real estate appraisals performed by independent licensed or certified appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management will discount appraisals as deemed necessary based on the date of the appraisal and new information deemed relevant to the valuation. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. The resulting losses were recognized in earnings through the provision for loan losses. Impaired loans with adjustments resulting from discounted cash flows or without a specific reserve are not included in this disclosure.

There were no transfers to or from Level 1 and 2 during the three months ended March 31, 2016 and 2015. We did not measure any liabilities at fair value on a recurring or non-recurring basis on the consolidated balance sheets.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Where quoted market prices are not available, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment. Changes in assumptions could significantly affect the estimates. The estimated fair values of our financial instruments are as follows:

	March 31, 2016
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	155,194	$	155,194	$	—	$	—	$	155,194
Securities available for sale		302,224		7,967		294,257		—		302,224
Federal Home Loan Bank of Boston and other restricted stock		14,080		—		—		14,080		14,080
Loans - net		818,108		—		—		816,194		816,194
Accrued interest receivable		3,385		—		—		3,385		3,385

Liabilities:
Deposits		928,124		—		—		930,888		930,888
Short-term borrowings		158,593		—		158,599		—		158,599
Long-term debt		90,943		—		91,717		—		91,717
Accrued interest payable		318		—		—		318		318
Derivative liabilities		5,101		—		5,101		—		5,101

	December 31, 2015
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	13,703	$	13,703	$	—	$	—	$	13,703
Securities available for sale		182,590		7,840		174,750		—		182,590
Securities held to maturity		238,219		—		237,619		—		237,619
Federal Home Loan Bank of Boston and other restricted stock		15,074		—		—		15,074		15,074
Loans - net		809,373		—		—		797,596		797,596
Accrued interest receivable		3,878		—		—		3,878		3,878
Derivative assets		—		—		—		—		—

Liabilities:
Deposits		900,363		—		—		901,400		901,400
Short-term borrowings		128,407		—		128,407		—		128,407
Long-term debt		153,358		—		155,433		—		155,433
Accrued interest payable		446		—		—		446		446
Derivative liabilities		6,064		—		6,064		—		6,064

12. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this Update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual reporting periods, including interim periods, beginning after December 15, 2017. Early application is permitted, but only for annual reporting periods beginning after December 31, 2016. We do not expect the application of this guidance to have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall, (Subtopic 825-10). The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Targeted improvements to generally accepted accounting principles include the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We do not expect the application of this guidance to have a material impact on our consolidated financial statements.

In February of 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this Update is permitted for all entities. Management is currently evaluating the impact to the consolidated financial statements of adopting this Update.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). This Update was issued as part of the FASB’s simplification initiative. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. In addition, amendments eliminate the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. Management is currently evaluating the impact to the consolidated financial statements of adopting this Update.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

We strive to remain a leader in meeting the financial service needs of our local community, and to provide quality service to the individuals and businesses in the market areas that we have served since 1853. Historically, we have been a community-oriented provider of traditional banking products and services to business organizations and individuals, including products such as residential and commercial loans, consumer loans and a variety of deposit products. We meet the needs of our local community through a community-based and service-oriented approach to banking.

We have adopted a growth-oriented strategy that has focused on increasing commercial lending. Our strategy also calls for increasing deposit relationships and broadening our product lines and services. We believe that this business strategy is best for our long-term success and viability, and complements our existing commitment to high-quality customer service. In connection with our overall growth strategy, we seek to:

grow our commercial and industrial and commercial real estate loan portfolios by targeting businesses in our primary market areas of western Massachusetts and northern Connecticut as a means to increase the yield on and diversify our loan portfolio and build transactional deposit account relationships;

focus on expanding our retail banking franchise and increase the number of households served within our market area; and

supplement the commercial focus, grow the residential loan portfolio to diversify risk and deepen customer relationships.

You should read the following financial results for the three months ended March 31, 2016 in the context of this strategy.

Net income was $2.0 million, or $0.11 per diluted share, for the three months ended March 31, 2016, compared to $1.3 million, or $0.08 per diluted share, for the same period in 2015.

The (credit) provision for loan losses was $(600,000) and $300,000 for the three months ended March 31, 2016 and 2015, respectively. The credit to the provision for the 2016 period was primarily the result of an $852,000 recovery on a single commercial real estate loan.

Net interest income was $8.2 million and $7.6 million for the three months ended March 31, 2016 and 2015, respectively. The net interest margin, on a tax-equivalent basis, was 2.61% for the three months ended March 31, 2016, compared to 2.52% for the same period in 2015. The increase in net interest income was primarily due to a 13 basis point increase in the yield on average interest-earning assets along with a $37.4 million increase in the average balance of interest-earning assets, which was offset partially by a 3 basis point increase in the cost of interest-bearing liabilities.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with U.S. GAAP and practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Actual results could differ from those estimates.

Critical accounting estimates are necessary in the application of certain accounting policies and procedures, and are particularly susceptible to significant change. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. There have been no material changes to our critical accounting policies during the three months ended March 31, 2016. For additional information on our critical accounting policies, please refer to the information contained in Note 1 of the accompanying unaudited consolidated financial statements and Note 1 of the consolidated financial statements included in our 2015 Annual Report.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2016 AND DECEMBER 31, 2015

Total assets were stable at $1.37 billion at March 31, 2016 and $1.34 billion at December 31, 2015. Cash and cash equivalents increased $141.5 million to $155.2 million at March 31, 2016. Securities totaling $136.8 million were sold late in the first quarter of 2016, which did not allow adequate time to redeploy the cash prior to the end of the quarter.

Securities decreased $119.6 million to $316.3 million at March 31, 2016, from $435.9 million at December 31, 2015 resulting from the sale of $136.8 million in securities during the first quarter of 2016. During the first quarter of 2016, we transferred our securities classified as held to maturity into available-for-sale. Market conditions allowed for us to take advantage of opportunities to further reduce our securities portfolio along with our borrowings. In doing so, we have also reduced the dollar amount of instruments that are marked to market impacting accumulated other comprehensive income, and therefore, tangible book value.

Total loans increased by $8.8 million to $827.0 million at March 31, 2016 from $818.2 million at December 31, 2015. Commercial real estate loans increased $20.1 million to $323.1 million at March 31, 2016 from $303.0 at December 31, 2015. Non-owner occupied commercial real estate loans increased $13.6 million to $202.8 million at March 31, 2016 from $189.2 million at December 31, 2015, while owner occupied commercial real estate loans increased $6.5 million to $120.3 million at March 31, 2016, from $113.8 million at December 31, 2015. Commercial and industrial loans decreased $10.8 million to $157.5 million at March 31, 2016 from $168.3 million at December 31, 2015. The decrease in commercial and industrial loans from December 31, 2015 was primarily due to the payoff of an $8.8 million loan relationship that occurred late in the first quarter 2016.

Residential loans decreased $400,000 to $341.2 million at March 31, 2016 from $341.6 million at December 31, 2015. We purchased $9.6 million in residential loans from a New England-based bank. While management has used residential loan growth to supplement the loan portfolio, the long-term strategy remains focused on commercial lending.

All loans where the interest payment is 90 days or more in arrears as of the closing date of each month are placed on nonaccrual status. Nonperforming loans were $8.3 million at March 31, 2016 and $8.1 million at December 31, 2015. If all nonaccrual loans had been performing in accordance with their terms, we would have earned additional interest income of $136,000 and $124,000 for the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016 and December 31, 2015, there was no real estate in foreclosure. At March 31, 2016 and December 31, 2015, our nonperforming loans to total loans were 1.00% and 0.99%, respectively, while our nonperforming assets to total assets were 0.61% and 0.60%, respectively. A summary of our nonaccrual and past due loans by class are listed in Note 6 of the accompanying unaudited consolidated financial statements.

Total deposits increased $27.7 million to $928.1 million at March 31, 2016 from $900.4 million at December 31, 2015. The increase in deposits was due to a $13.5 million increase in money market accounts to $256.1 million at March 31, 2016 from $242.6 million at December 31, 2015. Checking account increased $7.6 million to $194.4 million at March 31, 2016 from $186.8 million at December 31, 2015. Time deposit accounts increased $5.5 million to $401.2 million at March 31, 2016 from $395.7 million at December 31, 2015. Regular savings accounts increased $1.2 million to $76.4 million at March 31, 2016 from $75.2 million at December 31, 2015.

Borrowings decreased $32.2 million to $249.5 million at March 31, 2016 from $281.8 million at December 31, 2015. Long-term debt decreased $62.5 million to $90.9 million at March 31, 2016 from $153.4 million at December 31, 2015. We prepaid $42.5 million in FHLBB borrowings with a weighted average rate of 2.29% and incurred a prepayment expense of $915,000 for the first quarter 2016. In addition, we utilized cash on hand to pay off maturing advances in the amount of $20.0 million. Short-term borrowings increased $30.2 million to $158.6 million at March 31, 2016 from $128.4 million at December 31, 2015 primarily due to an increase in short-term FHLBB funding. Our short-term borrowings and long-term debt are discussed in Note 8 of the accompanying consolidated financial statements.

Shareholders’ equity was $143.0 million and $139.5 million, which represented 10.4% of total assets at March 31, 2016 and December 31, 2015, respectively. The increase in shareholders’ equity during the quarter reflects net income of $2.0 million for the three months ended March 31, 2016, an increase in other comprehensive income of $1.9 million due to changes in the market value of securities and the transfer of our securities classified as held-to-maturity into available-for-sale. This was partially offset by the payment of regular dividends amounting to $519,000.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND MARCH 31, 2015

General

Net income was $2.0 million, or $0.11 per diluted share, for the quarter ended March 31, 2016, compared to $1.3 million, or $0.08 per diluted share, for the same period in 2015. Net interest income was $8.2 million and $7.6 million for the three months ended March 31, 2016 and 2015, respectively.

Net Interest and Dividend Income

The following tables set forth the information relating to our average balance and net interest income for the three months ended March 31, 2016 and 2015, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets.

	Three Months Ended March 31,
	2016								2015
	Average					Avg Yield/			Average					Avg Yield/
	Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans⁽¹⁾⁽²⁾	$	823,335	$	8,280			4.02	%	$	727,447	$	7,260			3.99	%
Securities⁽²⁾		411,034		2,590			2.52			481,919		2,975			2.47
Other investments - at cost		16,051		132			3.29			16,234		68			1.68
Short-term investments⁽³⁾		28,276		25			0.35			15,744		6			0.15
Total interest-earning assets		1,278,696		11,027			3.45			1,241,344		10,309			3.32
Total noninterest-earning assets		80,510								78,084

Total assets	$	1,359,206							$	1,319,428

LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts	$	30,531		20			0.26		$	38,079		21			0.22
Savings accounts		76,958		20			0.10			75,725		19			0.10
Money market accounts		248,597		227			0.37			233,418		220			0.38
Time certificates of deposit		398,598		1,205			1.21			368,463		1,081			1.17
Total interest-bearing deposits		754,684		1,472						715,685		1,341
Short-term borrowings and long-term debt		290,069		1,246			1.72			308,379		1,257			1.63
Interest-bearing liabilities		1,044,753		2,718			1.04			1,024,064		2,598			1.01
Noninterest-bearing deposits		155,887								134,902
Other noninterest-bearing liabilities		17,987								18,473
Total noninterest-bearing liabilities		173,874								153,375

Total liabilities		1,218,627								1,177,439
Total equity		140,579								141,990
Total liabilities and equity	$	1,359,206							$	1,319,429
Less: Tax-equivalent adjustment⁽²⁾				(66	)							(121	)
Net interest and dividend income			$	8,243							$	7,590
Net interest rate spread⁽⁴⁾							2.41	%							2.31	%
Net interest margin⁽⁵⁾							2.61	%							2.52	%
Ratio of average interest-earning assets to average interest-bearing liabilities							122.39								121.22

(1)	Loans, including non-accrual loans, are net of deferred loan origination costs, and unadvanced funds.

(2)	Securities and loan income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported in the statements of income.

(3)	Short-term investments include federal funds sold.

(4)	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.

(5)	Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest earning assets.

The following table shows how changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to:

interest income changes attributable to changes in volume (changes in volume multiplied by prior rate);

interest income changes attributable to changes in rate (changes in rate multiplied by current volume); and

the net change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	Three Months Ended March 31, 2016 compared to Three Months Ended March 31, 2015
	Increase (Decrease) Due to
	Volume			Rate			Net
Interest-earning assets				(In thousands)
Loans ⁽¹⁾	$	957		$	63		$	1,020
Securities ⁽¹⁾		(438	)		53			(385	)
Other investments - at cost		(1	)		65			64
Short-term investments		5			14			19
Total interest-earning assets		523			195			718

Interest-bearing liabilities
Interest-bearing accounts		(4	)		3			(1	)
Savings accounts		—			1			1
Money market accounts		14			(7	)		7
Time deposits		88			36			124
Short-term borrowing and long-time debt		(75	)		64			(11	)
Total interest-bearing liabilities		23			97			120
Change in net interest and dividend income ⁽¹⁾	$	500		$	98		$	598

(1)

Securities, loan income and change in net interest and dividend income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest income.

The increase in net interest income was primarily driven by a 13 basis point increase in the yield on interest-earning assets driven by the favorable shift of interest-earning assets from securities and into loans along with a $37.4 million increase in the average balance of interest-earning assets. The average yield on interest-earning assets increased 13 basis points to 3.45% for the three months ended March 31, 2016 from 3.32% for the same period in 2015. The average balance of securities decreased $70.9 million to $411.0 million from $481.9 million, while the average balance of loans increased $95.9 million to $823.3 million from $727.4 million for the three months ended March 31, 2016 from the same period in 2015. Interest on earning-assets increased $773,000 to $11.0 million for the three months ended March 31, 2016, from $10.2 million for the same period in 2015. The average balance of interest-earning assets increased $37.4 million to $1.3 billion for March 31, 2016. The change in average asset balances is the result of continued loan growth along with executing on our strategy to gradually shift our asset mix out of securities and into loans.

Interest expense increased $120,000 to $2.7 million for the three months ended March 31, 2016 from $2.6 million for the same period in 2015. The average cost of interest-bearing liabilities increased 3 basis points to 1.04% for the three months ended March 31, 2016 from 1.01% for the same period in 2015. The increase in the cost of interest-bearing liabilities was primarily due to an increase in rates on short-term borrowings and long-term debt and time deposits along with an increase in the average balance of time deposits. The cost of short-term borrowings and long-term debt increased 9 basis points to 1.72% for the three months ended March 31, 2016 from 1.63% for the three months ended March 31, 2015. This was primarily due to the amortization of $152,000 in fees in conjunction with the early termination of three forward-starting interest rate swaps. Notional amount of forward-starting swaps terminated totaled $35.0 million and $47.5 million during the three months ended March 31, 2016 and the year ended December 31, 2015, respectively. All fees are amortized monthly as a component of interest expense and other comprehensive income over the term of the previously hedged FHLBB borrowing.

During the first quarter of 2016, we prepaid $42.5 million in FHLBB borrowings with a weighted average rate of 2.29% in order to eliminate higher-cost borrowings. In addition, we utilized cash on hand to pay off $20.0 million in maturing FHLBB borrowings. Because both transactions occurred late in the first quarter of 2016, they did not have an impact on the cost of funds. In addition, the average balance of time deposit accounts increased $30.1 million to $398.6 million from $368.5 for the three months ended March 31, 2016. The interest expense on time deposits increased $124,000 to $1.2 million due to a 4 basis point increase in the cost of time deposits to 1.21% for the three months ended March 31, 2016 from 1.17% for the comparable 2015 period.

Provision (Credit) for Loan Losses

The provision (credit) for loan losses is reviewed by management based upon our evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as new loan products, credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectability of the loan portfolio.

The amount of the credit provision for loan losses during the three months ended March 31, 2016 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described below and in the comparison of financial condition, include an increase in net loan recoveries, an increase in commercial real estate loans, which were both partially offset by a decrease in commercial and industrial loans. After evaluating these factors, we recorded a credit provision for loan losses of $600,000 for the three months ended March 31, 2016, compared to $300,000 in provision expense for the same period in 2015. The allowance was $8.9 million and $8.8 million and 1.07% and 1.08% of total loans at March 31, 2016 and December 31, 2015, respectively.

Net recoveries were $615,000 for the three months ended March 31, 2016. This comprised recoveries of $858,000 for the three months ended March 31, 2016, offset partially by charge-offs of $243,000 for the same period. During the first quarter of 2016, we received a partial recovery of $852,000 related to a single commercial real estate loan previously charged-off in 2010.

Net charge-offs were $213,000 for the three months ended March 31, 2015. This comprised charge-offs of $225,000 for the three months ended March 31, 2015, offset partially by recoveries of $12,000 for the same period.

Although we believe that we have established and maintained the allowance for loan losses at adequate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment.

Noninterest Income

Noninterest income decreased $214,000 to $1.0 million for the three months ended March 31, 2016, compared to $1.2 million for the same period in 2015. We incurred $915,000 in expense on the prepayment of borrowings during the three months ended March 31, 2016, while the comparable 2015 period included $593,000 in prepayment expense. Net gains on the sale of securities decreased $132,000 to $685,000 for the three months ended March 31, 2016. Service charges and fees increased $246,000 to $884,000 at March 31, 2016, from $638,000 at March 31, 2015. Fees collected from card-based transactions increased $104,000 for the three months ended March 31, 2016, which primarily reflects an increase in customer debit card interchange income.

Noninterest Expense

Noninterest expense increased $361,000 to $7.1 million for the three months ended March 31, 2016, from $6.7 million for the comparable 2015 period. The increase was primarily due to $154,000 in merger-related expenses for the quarter ended March 31, 2016, compared to none in the comparable 2015 period.

Income Taxes

For the three months ended March 31, 2016, we had a tax provision of $822,000 as compared to $470,000 for the same period in 2015. The effective tax rate was 29.5% for the three months ended March 31, 2016 and 26.0% for the same period in 2015. The change in effective tax rate from March 31, 2015 reflects lower levels of tax-exempt municipal obligations and lower levels of tax-advantaged income such as bank-owned life insurance (“BOLI”).

LIQUIDITY AND CAPITAL RESOURCES

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loan purchases, withdrawals of deposits and operating expenses. Our primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of securities and funds provided by operations. We also can borrow funds from the FHLBB based on eligible collateral of loans and securities. Our maximum additional borrowing capacity from the FHLBB at March 31, 2016, was $57.2 million. In addition, we have lines of credit of $4.0 million and $50.0 million with Bankers Bank Northeast (“BBN”) and PNC Bank, respectively. The interest rates on these lines are determined and reset on a daily basis by each respective bank. As of March 31, 2016, our additional borrowing capacity from BBN and PNC Bank was $4.0 million and $50.0 million, respectively.

Liquidity management is both a daily and long-term function of business management. The measure of a company’s liquidity is its ability to meet its cash commitments at all times with available cash or by conversion of other assets to cash at a reasonable price. Loan repayments and maturing securities are a relatively predictable source of funds. However, deposit flow, calls of securities and repayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds. Management believes that we have sufficient liquidity to meet its current operating needs.

At March 31, 2016, we exceeded each of the applicable regulatory capital requirements. As of March 31, 2016, the most recent notification from the Office of Comptroller of the Currency categorized us as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized” we must maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes would change our category. Our actual capital ratios of March 31, 2016, and December 31, 2015, are also presented in the following table.

	Actual					Minimum For Capital Adequacy Purpose					Minimum To Be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
						(Dollars in thousands)
March 31, 2016
Total Capital (to Risk Weighted Assets):
Consolidated	$	161,077		17.30	%	$	74,491		8.00	%		N/A		N/A
Bank		152,989		16.46			74,378		8.00		$	92,973		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		152,079		16.33			55,868		6.00			N/A		N/A
Bank		144,074		15.50			55,784		6.00			74,378		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated		152,079		16.33			41,901		4.50			N/A		N/A
Bank		144,074		15.50			41,838		4.50			60,432		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		152,079		11.19			54,385		4.00			N/A		N/A
Bank		144,074		10.61			54,331		4.00			67,914		5.00
Tangible Equity (to Adjusted Total Assets):
Consolidated		N/A		N/A			N/A		N/A			N/A		N/A
Bank		144,074		10.47			27,533		2.00			N/A		N/A
December 31, 2015
Total Capital (to Risk Weighted Assets):
Consolidated	$	159,386		17.20	%	$	74,136		8.00	%		N/A		N/A
Bank		151,327		16.36			74,006		8.00		$	92,508		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		150,444		16.23			55,602		6.00			N/A		N/A
Bank		142,427		15.40			55,505		6.00			74,006		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated		150,444		16.23			41,702		4.50			N/A		N/A
Bank		142,427		15.40			41,629		4.50			60,130		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		150,444		11.16			53,876		4.00			N/A		N/A
Bank		142,427		10.58			53,871		4.00			67,339		5.00
Tangible Equity (to Adjusted Total Assets):
Consolidated		N/A		N/A			N/A		N/A			N/A		N/A
Bank		142,427		10.56			26,985		2.00			N/A		N/A

We also have outstanding, at any time, a significant number of commitments to extend credit and provide financial guarantees to third parties. These arrangements are subject to strict credit control assessments. Guarantees specify limits to our obligations. Because many commitments and almost all guarantees expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows. We are obligated under leases for certain of our branches and equipment. The following table summarizes the contractual obligations and credit commitments at March 31, 2016:

	Within 1 Year		After 1 Year But Within 3 Years		After 3 Year But Within 5 Years		After 5 Years		Total
	(In thousands)
Lease Obligations
Operating lease obligations	$	593	$	888	$	670	$	3,514	$	5,665

Borrowings and Debt
Federal Home Loan Bank		134,983		47,000		23,000		—		204,983
Securities sold under agreements to repurchase		44,553		—		—		—		44,553
Total borrowings and debt		179,536		47,000		23,000		—		249,536

Credit Commitments
Available lines of credit		90,260		—		44		29,046		119,350
Other loan commitments		72,307		12,080		—		275		84,662
Letters of credit		3,578		500		392		255		4,725
Total credit commitments		166,145		12,580		436		29,576		208,737

Other Obligations
Vendor Contracts		902		951		279		—		2,132

Total Obligations	$	347,176	$	61,419	$	24,385	$	33,090	$	466,070

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our assessment of our sensitivity to market risk since its presentation in our 2015 Annual Report. Please refer to Item 7A of the 2015 Annual Report for additional information.

ITEM 4: CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, to ensure that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended, is (i)

recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.

Changes in Internal Control Over Financial Reporting.

There have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

We are subject to claims and legal actions in the ordinary course of business. We believe that all such claims and actions currently pending against us, if any, are either adequately covered by insurance or would not have a material adverse effect on us if decided in a manner unfavorable to us.

ITEM 1A.

RISK FACTORS.

For a summary of risk factors relevant to our operations, see Part 1, Item 1A, “Risk Factors” in our 2015 Annual Report. There are no material changes in the risk factors relevant to our operations.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table sets forth information with respect to purchases made by us of our common stock during the three months ended March 31, 2016.

Period		Total Number of Shares Purchased		Average Price Paid per Share ($)		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares that May Yet Be Purchased Under the Program (1)
	January 1 - 31, 2016		—		—		—		484,668
	February 1 - 29, 2016		—		—		—		484,668
	March 1 - 31, 2016		—		—		—		484,668
	Total		—		—		—		484,668

(1)

On June 24, 2015, the Board of Directors announced a renewal of the repurchase program under which the Company may purchase up to 711,733 shares of its outstanding common stock, to be affected via a combination of Rule 10b5-1 plans and discretionary share repurchases. This plan began July 24, 2015 and as of March 31, 2016, there were 484,668 shares remaining to be purchased under the new repurchase program.

There were no sales by us of unregistered securities during the three months ended March 31, 2016.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURE.

Not applicable.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Exhibit Index attached hereto and are incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 6, 2016.

	Westfield Financial, Inc.

	By :	/s/ James C. Hagan
		James C. Hagan
		President and Chief Executive Officer

By :

/s/ Leo R. Sagan, Jr.

Leo R. Sagan, Jr.

Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of April 4, 2016, by and between Westfield Financial, Inc. and Chicopee Bancorp, Inc. (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the Securities and Exchange Commission on April 7, 2016).

3.1		Articles of Organization of New Westfield Financial, Inc. (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form S-1 (No. 333-137024) filed with the Securities and Exchange Commission on August 31, 2006).

3.2		Articles of Amendment of New Westfield Financial, Inc. (incorporated by reference to Exhibit 3.3 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2007).

3.3		Amended and Restated Bylaws of Westfield Financial, Inc. (incorporated by reference to Exhibit 3.2 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2011).

4.1		Form of Stock Certificate of Westfield Financial, Inc. (incorporated by reference to Exhibit 4.1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006).

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101**		Financial statements from the quarterly report on Form 10-Q of Westfield Financial, Inc. for the quarter ended March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Shareholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.

Filed herewith.

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.