UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, ~~D. C.~~D.C. 20549

FORM 10-Q

~~FORM 10-Q~~

☒

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

For the quarterly period ended ~~September 30, 2017~~March 31, 2022

ORor

☐

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~~ File Number: 001-16767

Western New England Bancorp, Inc.

(Exact name of registrant as specified in its charter)

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

141 Elm Street, Westfield, Massachusetts		01086
(Address of principal executive offices)		(Zip Code)

~~141 Elm Street, Westfield, Massachusetts 01086~~(413)568-1911

~~(Address of principal executive offices)~~

~~(Zip Code)~~

~~(413) 568-1911~~

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	WNEB	NASDAQ

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☐~~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☐~~files). Yes ☒ No ☐

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

Large accelerated ~~filer☐~~filer ☐	Accelerated filer☒	~~Non-accelerated filer~~☐
Non-accelerated filer ☐
Smaller reporting company☐☒
	Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange ~~Act☐~~Act. ☐

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

At ~~November 3, 2017,~~May 2, 2022 the registrant had~~30,634,170~~22,642,038 shares of common stock, $0.01 par value, issued and outstanding.

TABLE OF CONTENTS

		Page

FORWARD-LOOKING STATEMENTS		i

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements of Western New England Bancorp, Inc. and Subsidiaries (Unaudited)

	Consolidated Balance Sheets – ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021	1

	Consolidated Statements of Net Income – Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	2

	Consolidated Statements of Comprehensive Income – Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	3

	Consolidated Statements of Changes in Shareholders’ Equity – ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	4

	Consolidated Statements of Cash Flows – ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3231

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4443

Item 4.	Controls and Procedures	44

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	4544

Item 1A.	Risk Factors	4544

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4544

Item 3.	Defaults upon Senior Securities	45

Item 4.	Mine Safety ~~Disclosures~~Disclosure	45

Item 5.	Other Information	45

Item 6.	Exhibits	4645

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” with respect to the Company’s financial condition, liquidity, results of operations, future performance, business, measures being taken in response to the coronavirus disease 2019 (“COVID-19”) pandemic and the impact of COVID-19 on the Company’s business. Forward-looking statements~~” which~~ may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” ~~“would,~~“planned,” ~~“plan,~~“estimated,” ~~“estimate,” “potential”~~ and ~~other similar expressions.~~“potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of ~~operation~~operations 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:

●

the duration and scope of the COVID-19 pandemic and the local, national and global impact of COVID-19;

●

actions governments, businesses and individuals take in response to the COVID-19 pandemic;

●

the speed and effectiveness of any COVID-19 vaccines and treatment developments and their deployment, including public adoption rates of any COVID-19 vaccines;

●

the emergence of new COVID-19 variants, such as the Omicron variant, and the response thereto;

●

the pace of recovery when the COVID-19 pandemic subsides;

●

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 Act Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), Basel guidelines, capital requirements and other applicable laws and regulations;

●

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;

●

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 lines 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;

●

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.~~events, except to the extent required by law.

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL ~~STATEMENTS (UNAUDITED)~~STATEMENTS.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

~~(Dollars in thousands, except share data)~~

September 30, December 31,
2017 2016
ASSETS
CASH AND DUE FROM BANKS $ 25,108 $ 23,297
FEDERAL FUNDS SOLD 885 4,388
INTEREST-BEARING DEPOSITS AND OTHER SHORT-TERM INVESTMENTS 2,907 42,549
CASH AND CASH EQUIVALENTS 28,900 70,234

SECURITIES AVAILABLE-FOR-SALE – AT FAIR VALUE 297,919 300,115
FEDERAL HOME LOAN BANK OF BOSTON AND OTHER RESTRICTED STOCK - AT COST 15,704 16,124
LOANS - Net of allowance for loan losses of $10,518 and $10,068 at September 30, 2017 and December 31, 2016, respectively 1,608,255 1,556,416
PREMISES AND EQUIPMENT, Net 23,440 20,885
ACCRUED INTEREST RECEIVABLE 5,764 5,782
BANK-OWNED LIFE INSURANCE 68,307 66,938
DEFERRED TAX ASSET, Net 15,636 16,159
GOODWILL 12,487 13,747
CORE DEPOSIT INTANGIBLE 4,156 4,438
OTHER REAL ESTATE OWNED 103 298
OTHER ASSETS 5,707 4,882
TOTAL ASSETS $ 2,086,378 $ 2,076,018

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
DEPOSITS :
Non-interest-bearing $ 308,934 $ 303,993
Interest-bearing 1,206,264 1,214,078
Total deposits 1,515,198 1,518,071

SHORT-TERM BORROWINGS 192,465 172,351
LONG-TERM DEBT 106,339 124,836
SECURITIES PENDING SETTLEMENT 137 455
OTHER LIABILITIES 19,684 21,909
TOTAL LIABILITIES 1,833,823 1,837,622

SHAREHOLDERS’ EQUITY:
Preferred stock - $0.01 par value, 5,000,000 shares authorized, none outstanding at September 30, 2017 and December 31, 2016 — —
Common stock - $0.01 par value, 75,000,000 shares authorized, 30,816,813 shares issued and outstanding at September 30, 2017; 30,380,231 shares issued and outstanding at December 31, 2016 309 304
Additional paid-in capital 206,914 205,996
Unearned compensation - ESOP (5,946 ) (6,418 )
Unearned compensation - Equity Incentive Plan (950 ) (536 )
Retained earnings 61,695 51,711
Accumulated other comprehensive loss (9,467 ) (12,661 )
Total shareholders’ equity 252,555 238,396
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,086,378 $ 2,076,018

~~See accompanying notes to unaudited consolidated financial statements.~~

~~WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF NET INCOME~~

(Dollars in thousands, except per share data)

Three Months Nine Months
Ended September 30, Ended September 30,
2017 2016 2017 2016
INTEREST AND DIVIDEND INCOME:
Residential and commercial real estate loans $ 13,474 $ 7,367 $ 40,042 $ 20,803
Commercial and industrial loans 2,883 1,728 8,180 5,098
Consumer loans 88 43 260 126
Debt securities, taxable 1,828 1,618 5,529 5,723
Debt securities, tax-exempt 25 32 81 136
Equity securities 35 45 105 140
Other investments 172 130 501 398
Federal funds sold, interest-bearing deposits and other short-term investments 11 14 103 67
Total interest and dividend income 18,516 10,977 54,801 32,491

INTEREST EXPENSE:

Deposits 2,111 1,582 6,180 4,589
Long-term debt 534 446 1,633 1,749
Short-term borrowings 1,075 621 2,946 1,580
Total interest expense 3,720 2,649 10,759 7,918
Net interest and dividend income 14,796 8,328 44,042 24,573
PROVISION FOR LOAN LOSSES 200 375 850 400
Net interest and dividend income after provision for loan losses 14,596 7,953 43,192 24,173

NON-INTEREST INCOME (LOSS):
Service charges and fees 1,714 953 4,789 2,696
Income from bank-owned life insurance 450 369 1,369 1,133
Loss on prepayment of borrowings — — — (915 )
Gain on sales of securities, net 70 1 52 684
Gain on sale of OREO 67 — 67 —
Other income 111 — 227 —
Total non-interest income 2,412 1,323 6,504 3,598

NON-INTEREST EXPENSE:
Salaries and employee benefits 6,490 4,057 18,954 11,709
Occupancy 891 555 2,815 1,712
Furniture and equipment 410 242 1,149 723
Data processing 680 404 1,740 1,167
Professional fees 642 656 1,919 1,717
FDIC insurance assessment 163 214 466 594
Merger related expenses — 830 626 1,913
Advertising 328 192 961 696
Other 1,552 1,075 4,792 3,064
Total non-interest expense 11,156 8,225 33,422 23,295
INCOME BEFORE INCOME TAXES 5,852 1,051 16,274 4,476
INCOME TAX PROVISION 2,037 423 3,600 1,495
NET INCOME $ 3,815 $ 628 $ 12,674 $ 2,981

EARNINGS PER COMMON SHARE:
Basic earnings per share $ 0.13 $ 0.04 $ 0.42 $ 0.17
Weighted average shares outstanding 30,103,095 17,377,844 29,895,621 17,340,101
Diluted earnings per share $ 0.13 $ 0.02 $ 0.42 $ 0.17
Weighted average diluted shares outstanding 30,219,083 17,377,844 30,074,361 17,340,101

	March 31,			December 31,
	2022			2021
ASSETS
Cash and due from banks	$	16,983		$	15,233
Federal funds sold		2,456			4,901
Interest-bearing deposits and other short-term investments		43,459			83,322
Cash and cash equivalents		62,898			103,456

Available-for-sale securities, at fair value		173,910			194,352
Held-to-maturity securities, at amortized cost (Fair value of $220,279 and $219,748 at March 31, 2022 and December 31, 2021, respectively)		237,575			222,272
Marketable equity securities, at fair value		11,643			11,896
Federal Home Loan Bank of Boston stock and other restricted stock, at cost		2,594			2,594
Loans, net of allowance for loan losses of $19,308 at March, 31, 2022 and $19,787 at December 31, 2021		1,906,977			1,844,929
Premises and equipment, net		25,686			26,162
Accrued interest receivable		7,723			7,775
Bank-owned life insurance		73,343			72,895
Deferred tax asset, net		14,981			12,092
Goodwill		12,487			12,487
Core deposit intangible		2,469			2,563
Other assets		23,152			24,952
TOTAL ASSETS	$	2,555,438		$	2,538,425

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest-bearing	$	630,208		$	641,284
Interest-bearing		1,647,956			1,615,614
Total deposits		2,278,164			2,256,898

Federal Home Loan Bank advances		1,686			2,653
Subordinated debt		19,643			19,633
Securities pending settlement		146			—
Other liabilities		36,736			35,553
TOTAL LIABILITIES		2,336,375			2,314,737

SHAREHOLDERS' EQUITY:
Preferred stock - $0.01 par value, 5,000,000 shares authorized, NaN outstanding at March 31, 2022 and December 31, 2021		—			—
Common stock - $0.01 par value, 75,000,000 shares authorized, 22,742,189 shares issued and outstanding at March 31, 2022; 22,656,515 shares issued and outstanding at December 31, 2021		227			227
Additional paid-in capital		133,459			132,821
Unearned compensation – Employee Stock Ownership Plan		(3,307	)		(3,441	)
Unearned compensation - Equity Incentive Plan		(1,943	)		(981	)
Retained earnings		111,358			107,376
Accumulated other comprehensive loss		(20,731	)		(12,314	)
TOTAL SHAREHOLDERS’ EQUITY		219,063			223,688
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	2,555,438		$	2,538,425

See accompanying notes to unaudited consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME – UNAUDITED

(Dollars in thousands, except per share data)


	Three Months
	Ended March 31,
	2022			2021
Interest and dividend income:
Residential and commercial real estate loans	$	15,343		$	14,509
Commercial and industrial loans		2,544			4,542
Consumer loans		60			69
Debt securities, taxable		1,923			824
Debt securities, tax-exempt		3			3
Marketable equity securities		24			27
Other investments		25			35
Short-term investments		21			24
Total interest and dividend income		19,943			20,033

Interest expense:
Deposits		992			1,734
Long-term debt		—			273
Subordinated debt		253			—
Total interest expense		1,245			2,007
Net interest and dividend income		18,698			18,026

(Credit) provision for loan losses		(425	)		75
Net interest and dividend income after (credit) provision for loan losses		19,123			17,951

Non-interest income:
Service charges and fees		2,174			1,883
Income from bank-owned life insurance		448			441
Loss on available-for-sale securities, net		(4	)		(62	)
Net unrealized loss on marketable equity securities		(276	)		(89	)
Gain on sale of mortgages		2			227
Gain on non-marketable equity investments		—			546
Other income		4			58
Total non-interest income		2,348			3,004

Non-interest expense:
Salaries and employees benefits		8,239			7,682
Occupancy		1,363			1,289
Furniture and equipment		543			490
Data processing		723			721
Professional fees		577			544
FDIC insurance assessment		286			298
Advertising		399			338
Other expenses		2,326			1,965
Total non-interest expense		14,456			13,327
Income before income taxes		7,015			7,628
Income tax provision		1,696			1,837
Net income	$	5,319		$	5,791

Earnings per common share:
Basic earnings per share	$	0.24		$	0.24
Weighted average shares outstanding		22,100,076			24,486,146
Diluted earnings per share	$	0.24		$	0.24
Weighted average diluted shares outstanding		22,172,909			24,543,554
Dividends per share	$	0.06		$	0.05

See accompanying notes to unaudited consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) – UNAUDITED

(Dollars in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016

Net income $ 3,815 $ 628 $ 12,674 $ 2,981

Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) on available for sale securities 381 (359 ) 2,133 5,820
Reclassification adjustment for gains realized in income⁽¹⁾ (70 ) (1 ) (52 ) (684 )
Amortization of net unrealized loss on held-to-maturity securities⁽²⁾ — — — 26
Net unrealized loss upon transfer of held-to-maturity to available-for-sale⁽³⁾ — — — 2,288
Net unrealized gains (losses) 311 (360 ) 2,081 7,450
Tax effect (100 ) 125 (627 ) (2,567 )
Net-of-tax amount 211 (235 ) 1,454 4,883

Derivative instruments:
Change in fair value of derivatives used for cash flow hedges (14 ) 417 (307 ) (2,863 )
Reclassification adjustment for loss realized in interest expense⁽⁴⁾ 228 128 751 313
Reclassification adjustment for termination fee realized in interest expense⁽⁵⁾ 269 269 799 687
Net adjustments relating to derivative instruments 483 814 1,243 (1,863 )
Tax effect (133 ) (277 ) 32 633
Net-of-tax amount 350 537 1,275 (1,230 )

Defined benefit pension plans:
Amortization of defined benefit plans actuarial loss⁽⁶⁾ 51 24 153 71
Tax effect 28 (8 ) 312 (24 )
Net-of-tax amount 79 16 465 47

Other comprehensive income 640 318 3,194 3,700

Comprehensive income $ 4,455 $ 946 $ 15,868 $ 6,681


	Three Months Ended March 31,
	2022			2021

Net income	$	5,319		$	5,791

Other comprehensive income (loss):
Unrealized losses on available-for-sale securities:
Unrealized holding losses		(11,468	)		(4,469	)
Reclassification adjustment for net losses realized in income ⁽¹⁾		4			62
Unrealized losses		(11,464	)		(4,407	)
Tax effect		2,934			1,081
Net-of-tax amount		(8,530	)		(3,326	)

Cash flow hedges:
Reclassification adjustment for termination fee realized in interest expense		—			140
Tax effect		—			(39	)
Net-of-tax amount		—			101

Defined benefit pension plan:
Amortization of defined benefit plans actuarial loss		158			234
Tax effect		(45	)		(66	)
Net-of-tax amount		113			168

Other comprehensive loss		(8,417	)		(3,057	)

Comprehensive (loss) income	$	(3,098	)	$	2,734

(1)

Realized gains and losses on available-for-sale securities are recognized as a component of non-interest income. The tax effects applicable to net realized gains and losses were ~~$29,000~~ $(1,000) and ~~$407~~ $(14,000) for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

(1)		Realized gains and losses on available-for-sale securities are recognized as a component of non-interest income. The tax effects applicable to net realized gains and losses were ~~$21,000~~$(1,000) and ~~$236,000 for the nine months ended September 30, 2017 and 2016, respectively.~~

~~(2)~~		Amortization of net unrealized gains 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) for the nine months ended September 30, 2016.

~~(3)~~		~~Income tax effect associated with the reclassification adjustments upon transfer of held-to-maturity to available-for-sale was $790,000 for the nine months ended September 30, 2016.~~

~~(4)~~		Loss realized in interest expense on derivative instruments is recognized as a component of interest expense on short-term debt. Income tax effects associated with the reclassification adjustment were $93,000 and $44,000$(14,000) for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively. Income tax effects associated with the reclassification adjustment were $307,000 and $106,000 for the nine months ended September 30, 2017 and 2016, respectively~~

~~(5)~~		Loss realized in interest expense on derivative instruments is recognized as a component of interest expense on short-term debt. Income tax effects associated with the reclassification adjustment were $110,000 and $91,000 for the three months ended September 30, 2017 and 2016, respectively. Income tax effects associated with the reclassification adjustment were $326,000 and $234,000 for the nine months ended September 30, 2017 and 2016, respectively

~~(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 $(21,000) and $8,000 for the three months ended September 30, 2017 and 2016, respectively. Income tax effects associated with the reclassification adjustments were $(63,000) and $24,000 for the nine months ended September 30, 2017 and 2016,2021, respectively.

~~Tax rate on reclassification adjustments was 40.85% for the 2017 period and 34.0% for the comparable 2016 period.~~

See accompanying notes to unaudited consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS' EQUITY - UNAUDITED

~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND ~~2016~~2021

(Dollars in thousands, except per share data)

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

BALANCE AT DECEMBER 31, 2015 18,267,747 $ 183 $ 108,210 $ (6,952 ) $ (313 ) $ 49,316 $ (10,978 ) $ 139,466
Comprehensive income — — — — — 2,981 3,700 6,681
Common stock held by ESOP committed to be released (74,430 shares) — — 62 382 — — — 444
Share-based compensation - equity incentive plan — — — — 186 — — 186
Excess tax benefit from equity incentive plan — — 5 — — — — 5
Issuance of common stock in connection with equity incentive plan 62,740 1 484 — (485 ) — — —
Cash dividends declared and paid ($0.09 per share) — — — — — (1,559 ) — (1,559 )
BALANCE AT SEPTEMBER 30, 2016 18,330,487 $ 184 $ 108,761 $ (6,570 ) $ (612 ) $ 50,738 $ (7,278 ) $ 145,223

BALANCE AT DECEMBER 31, 2016 30,380,231 $ 304 $ 205,996 $ (6,418 ) $ (536 ) $ 51,711 $ (12,661 ) $ 238,396
Comprehensive income — — — — — 12,674 3,194 15,868
Common stock held by ESOP committed to be released (93,679 shares) — — 226 472 — — — 698
Share-based compensation - equity incentive plan — — — — 490 — — 490
Common stock repurchased (574,309 ) (5 ) (5,667 ) — — — — (5,672 )
Issuance of common stock in connection with stock option exercises 921,849 9 5,456 — — — — 5,465
Issuance of common stock in connection with equity incentive plan 89,042 1 903 — (904 ) — — —
Cash dividends declared and paid ($0.09 per share) — — — — — (2,690 ) — (2,690 )
BALANCE AT SEPTEMBER 30, 2017 30,816,813 $ 309 $ 206,914 $ (5,946 ) $ (950 ) $ 61,695 $ (9,467 ) $ 252,555


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

BALANCE AT DECEMBER 31, 2020		25,276,193		$	253		$	154,549		$	(3,997	)	$	(1,240	)	$	88,354		$	(11,279	)	$	226,640
Comprehensive income		—			—			—			—			—			5,791			(3,057	)		2,734
Common stock held by ESOP committed to be released (81,893 shares)		—			—			8			139			—			—			—			147
Share-based compensation - equity incentive plan		—			—			—			—			231			—			—			231
Forfeited equity incentive plan shares reissued (19,154 shares)		—			—			(212	)		—			212			—			—			—
Common stock repurchased		(711,635	)		(7	)		(5,770	)		—			—			—			—			(5,777	)
Issuance of common stock in connection with stock option exercises		19,400			—			113			—			—			—			—			113
Issuance of common stock in connection with equity incentive plan (19,827 shares)		—			—			162			—			(162	)		—			—			—
Cash dividends declared and paid on common stock ($0.05 per share)		—			—			—			—			—			(1,232	)		—			(1,232	)
BALANCE AT MARCH 31, 2021		24,583,958		$	246		$	148,850		$	(3,858	)	$	(959	)	$	92,913		$	(14,336	)	$	222,856

BALANCE AT DECEMBER 31, 2021		22,656,515		$	227		$	132,821		$	(3,441	)	$	(981	)	$	107,376		$	(12,314	)	$	223,688
Comprehensive income		—			—			—			—			—			5,319			(8,417	)		(3,098	)
Common stock held by ESOP committed to be released (78,526 shares)		—			—			45			134			—			—			—			179
Share-based compensation - equity incentive plan		—			—			—			—			301			—			—			301
Forfeited equity incentive plan shares (6,651 shares)		—			—			(57	)		—			57			—			—			—
Forfeited equity incentive plan shares reissued (7,289 shares)		—			—			71			—			(71	)		—			—			—
Common stock repurchased		(132,358	)		(2	)		(1,178	)		—			—			—			—			(1,180	)
Issuance of common stock in connection with stock option exercises		80,881			1			509			—			—			—			—			510
Issuance of common stock in connection with equity incentive plan		137,151			1			1,248			—			(1,249	)		—			—			—
Cash dividends declared and paid on common stock ($0.06 per share)		—			—			—			—			—			(1,337	)		—			(1,337	)
BALANCE AT MARCH 31, 2022		22,742,189		$	227		$	133,459		$	(3,307	)	$	(1,943	)	$	111,358		$	(20,731	)	$	219,063

See accompanying notes to unaudited consolidated financial ~~statements~~. statements.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollars in thousands)

Nine Months Ended September 30,
2017 2016
OPERATING ACTIVITIES:
Net income $ 12,674 $ 2,981
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 850 400
Depreciation and amortization of premises and equipment 1,468 969
Accretion of purchase accounting adjustments, net (1,431 ) —
Amortization of core deposit intangible 282 —
Net amortization of premiums and discounts on securities and mortgage loans 2,577 2,758
Net amortization of premiums on modified debt — 60
Share-based compensation expense 490 186
ESOP expense 698 444
Excess tax benefits from equity incentive plan — (5 )
Net gains on sales of securities (52 ) (684 )
Gain on sale of other real estate owned (67 ) —
Loss on prepayment of borrowings — 915
Deferred income tax benefit (973 ) —
Income from bank-owned life insurance (1,369 ) (1,133 )
Changes in assets and liabilities:
Accrued interest receivable 18 300
Other assets (3,578 ) (1,468 )
Other liabilities 1,995 (2,184 )
Net cash provided by operating activities 13,582 3,539

INVESTING ACTIVITIES:

Securities, held to maturity:
Proceeds from calls, maturities, and principal collections — 6,835
Securities, available for sale:
Purchases (67,246 ) (59,595 )
Proceeds from sales 22,453 136,825
Proceeds from calls, maturities, and principal collections 46,576 46,639
Purchase of residential mortgages (48,205 ) (107,632 )
Loan originations and principal payments, net (4,133 ) (21,185 )
Redemption of Federal Home Loan Bank of Boston stock 420 2,880
Proceeds from sale of other real estate owned 365 —
Purchases of premises and equipment (1,645 ) (565 )
Proceeds from sale of premises and equipment — 20
Net cash (used in) provided by investing activities (51,415 ) 4,222

FINANCING ACTIVITIES:

Net (decrease) increase in deposits (2,120 ) 62,195
Net change in short-term borrowings 20,114 51,866
Repayment of long-term debt (19,700 ) (84,333 )
Proceeds from long-term debt 1,420 1,165
Cash dividends paid (2,690 ) (1,559 )
Common stock repurchased (5,990 ) —
Issuance of common stock in connection with stock option exercises 5,465 —
Excess tax benefits in connection with equity incentive plan — 5
Net cash (used in) provided by financing activities (3,501 ) 29,339

NET CHANGE IN CASH AND CASH EQUIVALENTS: (41,334 ) 37,100
Beginning of period 70,234 13,703
End of period $ 28,900 $ 50,803

Supplemental cashflow information:
Securities reclassified from held-to-maturity to available-for-sale $ — $ (232,817 )
Net change in cash due to broker for common stock repurchased (318 ) —
Interest paid 10,774 8,036
Taxes paid 3,658 2,150


	Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,319		$	5,791
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for loan losses		(425	)		75
Depreciation and amortization of premises and equipment		584			584
(Accretion) amortization of purchase accounting adjustments, net		(29	)		55
Amortization of core deposit intangible		94			93
Net amortization of premiums and discounts on securities and mortgage loans		441			670
Net amortization of premiums on subordinated debt		10			—
Share-based compensation expense		301			231
ESOP expense		179			147
Gain on sale of mortgages		—			(227	)
Principal balance of loans originated for sale		(277	)		—
Principal balance of loans sold		277			—
Net loss on available-for-sale securities		4			62
Net change in unrealized loss on marketable equity securities		276			89
Income from bank-owned life insurance		(448	)		(441	)
Net change in:
Accrued interest receivable		52			(6	)
Other assets		(954	)		2,603
Other liabilities		1,661			1,276
Net cash provided by operating activities		7,065			11,002

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of held-to-maturity securities		(20,627	)		(63,973	)
Proceeds from calls, maturities and principal collections of held-to-maturity securities		5,190			—
Purchases of available-for-sale securities		—			(15,821	)
Proceeds from sales and redemption of available-for-sale securities		20			14
Proceeds from calls, maturities, and principal collections of available-for-sale securities		8,630			17,163
Loan originations and principal payments, net		(61,603	)		(5,205	)
Redemption of Federal Home Loan Bank of Boston stock		—			668
Proceeds from sale of portfolio mortgages		—			7,801
Purchases of premises and equipment		(118	)		(907	)
Proceeds from payout on bank-owned life insurance		2,435			—
Net cash used in investing activities		(66,073	)		(60,260	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		21,275			116,012
Repayment of long-term debt		(964	)		(15,170	)
Cash dividends paid on common stock		(1,337	)		(1,232	)
Common stock repurchased		(1,034	)		(5,785	)
Issuance of common stock in connection with stock option exercises		510			113
Net cash provided by financing activities		18,450			93,938

NET CHANGE IN CASH AND CASH EQUIVALENTS:		(40,558	)		44,680
Beginning of period		103,456			87,444
End of period	$	62,898		$	132,124

Supplemental cash flow information:
Interest paid	$	1,267		$	2,046
Taxes paid		1,020			828
Net change in cash due to broker for common stock repurchased		146			(8	)

See the accompanying notes to unaudited consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30, 2017~~MARCH 31, 2022

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations – and Basis of Presentation. Western New England Bancorp, Inc. (“Western New England Bancorp,” “WNEB,” ~~the~~ “Company,” ~~“we”~~“we,” or “us”) is a Massachusetts-chartered stock holding company for Westfield Bank, a ~~federally chartered stock~~federally-chartered savings bank ~~(the “Bank”~~(“Bank”).

~~The Bank’s deposits are insured to the limits specified by the Federal Deposit Insurance Corporation (“FDIC”).~~ The Bank operates 2125 banking offices in Hampden and Hampshire counties in western Massachusetts and Hartford and Tolland counties in northern Connecticut, and its primary sources of revenue are ~~earnings on loans to small and middle-market businesses and to residential property homeowners and~~interest income from loans as well as interest income from investment securities. The West Hartford Financial Services Center serves as the Company’s Connecticut hub, housing Commercial Lending, Cash Management and a Mortgage Loan Officer. The Bank’s deposits are insured up to the maximum Federal Deposit Insurance Corporation (“FDIC”) coverage limits.

~~Wholly-Owned~~Wholly-owned Subsidiaries ~~and Acquisition~~of the Bank–. Elm Street Securities Corporation, WFD Securities, Inc. and CSB Colts, Inc., are ~~Massachusetts-chartered~~Massachusetts chartered securities corporations, formed for the primary purpose of holding qualified securities. WB Real Estate Holdings, LLC, is a Massachusetts-chartered limited liability company that holds real property acquired as security for debts previously contracted by the Bank. On October 21, 2016, we acquired Chicopee Bancorp, Inc. (“Chicopee”), the holding company for Chicopee Savings Bank. The acquisition added eight full-service banking offices located in western Massachusetts.

Principles of Consolidation –. The ~~unaudited~~ consolidated financial statements include the accounts of Western New England Bancorp, the Bank, CSB Colts, Inc., Elm Street Securities Corporation, WB Real Estate Holdings, LLC and WFD Securities, Inc. 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~~and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses for ~~both at the date of the unaudited consolidated financial statements.~~each. Actual results could differ from those estimates. ~~Estimates~~An estimate that ~~are~~is particularly susceptible to significant change in the near-term ~~relate~~relates to the determination of the allowance for loan ~~losses, other-than-temporary impairment of securities, and the realizability of deferred tax assets.~~losses.

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 ~~September 30, 2017,~~March 31, 2022, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of the results of operations for the year ending December 31, ~~2017.~~2022. 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, ~~2016,~~2021, included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 (the ~~“2016~~“2021 Annual Report”).

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

2. EARNINGS PER SHARE

Basic earnings per share ~~represent~~represents income available to common shareholders divided by the ~~weighted average~~weighted-average number of common shares outstanding during the period. If rights to dividends on unvested awards are non-forfeitable, these unvested awards are considered outstanding in the computation of basic earnings per share. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. ~~No dilutive potential~~Potential common shares that may be issued by us relate to stock options and certain performance-based restricted stock awards and are determined using the treasury stock method. Unallocated Employee Stock Ownership Plan (“ESOP”) shares are not deemed outstanding for earnings per share calculations. There were no anti-dilutive shares 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.~~three months ended March 31, 2022 and 2021.

Earnings per common share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 have been computed based on the following:


	Three Months Ended
	March 31,
	2022			2021
	(In thousands, except per share data)

Net income applicable to common stock	$	5,319		$	5,791

Average number of common shares issued		22,705			25,118
Less: Average unallocated ESOP Shares		(445	)		(527	)
Less: Average unvested equity incentive plan shares		(160	)		(105	)

Average number of common shares outstanding used to calculate basic earnings per common share		22,100			24,486
Effect of dilutive equity incentive plan		41			28
Effect of dilutive stock options		32			30
Average number of common shares outstanding used to calculate diluted earnings per common share		22,173			24,544

Basic earnings per share	$	0.24		$	0.24
Diluted earnings per share	$	0.24		$	0.24

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands, except per share data)

Net income applicable to common stock $ 3,815 $ 628 $ 12,674 $ 2,981

Average number of common shares issued 31,001 18,330 30,799 18,298
Less: Average unallocated ESOP Shares (838 ) (926 ) (861 ) (945 )
Less: Average unvested equity incentive plan shares (60 ) (26 ) (42 ) (13 )

Average number of common shares outstanding used to calculate basic earnings per common share 30,103 17,378 29,896 17,340

Effect of dilutive equity incentive plan 26 — 12 —
Effect of dilutive stock options 90 — 166 —

Average number of common shares outstanding used to calculate diluted earnings per common share 30,219 17,378 30,074 17,340

Basic earnings per share $ 0.13 $ 0.04 $ 0.42 $ 0.17
Diluted earnings per share $ 0.13 $ 0.04 $ 0.42 $ 0.17

3. COMPREHENSIVE ~~INCOME/LOSS~~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.~~income (loss).

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

	March 31, 2022			December 31, 2021
	(In thousands)

Net unrealized losses on available-for-sale securities	$	(16,149	)	$	(4,685	)
Tax effect		4,094			1,160
Net-of-tax amount		(12,055	)		(3,525	)

Unrecognized actuarial loss on the defined benefit plan		(12,067	)		(12,225	)
Tax effect		3,391			3,436
Net-of-tax amount		(8,676	)		(8,789	)

Accumulated other comprehensive loss	$	(20,731	)	$	(12,314	)

September 30,
2017
December 31,
2016
(In thousands)

Net unrealized losses on securities available-for-sale $ (3,782 ) $ (5,863 )
Tax effect 1,397 2,024
Net-of-tax amount (2,385 ) (3,839 )

Fair value of derivatives used for cash flow hedges (2,709 ) (3,152 )
Termination fees on forward starting interest rate swaps (3,933 ) (4,733 )
Total derivatives (6,642 ) (7,885 )
Tax effect 2,713 2,681
Net-of-tax amount (3,929 ) (5,204 )

Unrecognized actuarial loss on defined benefit plan (5,329 ) (5,482 )
Tax effect 2,176 1,864
Net-of-tax amount (3,153 ) (3,618 )

Accumulated other comprehensive loss $ (9,467 ) $ (12,661 )

~~The following table presents changes in accumulated other comprehensive loss for the periods ended September 30, 2017~~4. INVESTMENT SECURITIES

Available-for-sale and ~~2016 by component:~~

Securities Derivatives Defined
Benefit
Plans Accumulated
Other
Comprehensive
Loss
(In thousands)
Balance at December 31, 2015 $ (3,046 ) $ (5,501 ) $ (2,431 ) $ (10,978 )
Current-period other comprehensive income (loss) 4,883 (1,230 ) 47 3,700
Balance at September 30, 2016 $ 1,837 $ (6,731 ) $ (2,384 ) $ (7,278 )

Balance at December 31, 2016 $ (3,839 ) $ (5,204 ) $ (3,618 ) $ (12,661 )
Current-period other comprehensive income 1,454 1,275 465 3,194
Balance at September 30, 2017 $ (2,385 ) $ (3,929 ) $ (3,153 ) $ (9,467 )

~~4. SECURITIES~~

~~Securities available-for-sale~~held-to-maturity investment securities at March 31, 2022 and December 31, 2021 are summarized as follows:

	March 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	14,904	$	—	$	(1,758	)	$	13,146
State and municipal bonds		405		1		—			406
Corporate bonds		3,022		—		(26	)		2,996
Total debt securities		18,331		1		(1,784	)		16,548

Mortgage-backed securities:
Government-sponsored mortgage-backed securities		163,148		39		(13,489	)		149,698
U.S. government guaranteed mortgage-backed securities		8,580		—		(916	)		7,664
Total mortgage-backed securities		171,728		39		(14,405	)		157,362

Total available-for-sale		190,059		40		(16,189	)		173,910

Held-to-maturity securities:
Debt securities:
U.S. Treasury securities		9,981		—		(461	)		9,520
Total debt securities		9,981		—		(461	)		9,520

Mortgage-backed securities:
Government-sponsored mortgage-backed securities		227,594		—		(16,835	)		210,759
Total mortgage-backed securities		227,594		—		(16,835	)		210,759

Total held-to-maturity		237,575		—		(17,296	)		220,279

Total	$	427,634	$	40	$	(33,485	)	$	394,189

September 30, 2017
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
(In thousands)
Available-for-sale securities:
Government-sponsored mortgage-backed securities $ 193,037 $ 120 $ (2,836 ) $ 190,321
U.S. government guaranteed mortgage-backed securities 17,408 — (447 ) 16,961
Corporate bonds 56,192 582 (221 ) 56,553
State and municipal bonds 3,223 39 (37 ) 3,225
Government-sponsored enterprise obligations 25,150 — (697 ) 24,453
Mutual funds 6,691 — (285 ) 6,406
Total available-for-sale $ 301,701 $ 741 $ (4,523 ) $ 297,919

	December 31, 2016									December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
		(In thousands)								(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations										$	14,902	$	—	$	(676	)	$	14,226
State and municipal bonds											405		1		—			406
Corporate bonds											3,026		86		—			3,112
Total debt securities											18,333		87		(676	)		17,744

Mortgage-backed securities:
Government-sponsored mortgage-backed securities	$	184,127	$	33	$	(4,024	)	$	180,136		171,011		427		(3,929	)		167,509
U.S. government guaranteed mortgage-backed securities		17,753		—		(403	)		17,350		9,693		8		(602	)		9,099
Corporate bonds		50,255		265		(203	)		50,317
State and municipal bonds		4,117		13		(122	)		4,008
Government-sponsored enterprise obligations		43,140		—		(1,132	)		42,008
Mutual funds		6,586		—		(290	)		6,296
Total available-for-sale securities	$	305,978	$	311	$	(6,174	)	$	300,115
Total mortgage-backed securities											180,704		435		(4,531	)		176,608

Total available-for-sale											199,037		522		(5,207	)		194,352

Held-to-maturity securities:
Debt securities:
U.S. Treasury securities											9,979		—		(6	)		9,973
Total debt securities											9,979		—		(6	)		9,973

Mortgage-backed securities:
Government-sponsored mortgage-backed securities											212,293		—		(2,518	)		209,775
Total mortgage-backed securities											212,293		—		(2,518	)		209,775

Total held-to-maturity											222,272		—		(2,524	)		219,748

Total										$	421,309	$	522	$	(7,731	)	$	414,100

~~Our repurchase agreements are collateralized by~~At March 31, 2022, U.S. Treasury securities with a fair value of $4.7 million, government-sponsored enterprise obligations with a fair value of $8.8 million and ~~certain~~ mortgage-backed securities ~~(see Note 8).~~with a fair value of $55.4 million were pledged to secure public deposits and for other purposes as required or permitted by law. The securities collateralizing public deposits are subject to fluctuations in fair value. We monitor the fair value of the collateral on a periodic basis, and pledge additional collateral if necessary based on changes in fair value of collateral or the balances of such deposits.

The amortized cost and fair value of available-for-sale ~~debt~~and held-to-maturity securities at ~~September 30, 2017,~~March 31, 2022, by final maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or ~~repay~~prepay obligations. ~~Also, because mortgage-backed securities require periodic principal paydowns, they are not included in the maturity categories in the following maturity summary.~~

September 30, 2017
Amortized Cost Fair Value
(In thousands)
Available for securities:
Debt securities:
     Due in one year or less $ —   $ —
     Due after one year through five years 28,079 28,497
     Due after five years through ten years 49,735 49,149
     Due after ten years 6,751 6,585
Total securities $ 84,565 $ 84,231
Mortgage-backed securities 210,445 207,282
Total $ 295,010 $ 291,513

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Debt securities:
Due after one year through five years	$	3,427	$	3,402	$	9,981	$	9,520
Due after five years through ten years		9,904		8,869		—		—
Due after ten years		5,000		4,277		—		—
Total debt securities		18,331		16,548		9,981		9,520
Mortgage-backed securities:
Due after five years through ten years		1,901		1,823		—		—
Due after ten years		169,827		155,539		227,594		210,759
Total mortgage-backed securities		171,728		157,362		227,594		210,759

Total securities	$	190,059	$	173,910	$	237,575	$	220,279

Gross realized gains and losses on sales of available-for-sale securities ~~available-for-sale~~ for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 are as follows:


	Three Months Ended					Nine Months Ended						Three Months Ended
	September 30,					September 30,						March 31,
	2017			2016		2017			2016			2022			2021
	(In thousands)											(In thousands)

Gross gains realized	$	71		$	1	$	117		$	1,521		$	—		$	—
Gross losses realized		(1	)		—		(65	)		(837	)		(4	)		(62	)
Net gain realized	$	70		$	1	$	52		$	684
Net loss realized												$	(4	)	$	(62	)

Proceeds from the ~~sale~~sales and redemption of available-for-sale securities ~~available-for-sale amounted to $22.5 million~~totaled $20,000 and ~~$136.8 million~~$14,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

Information pertaining to securities with gross unrealized losses at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	March 31, 2022
	Less Than Twelve Months									Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Loss		Depreciation from Amortized Cost Basis (%)			Number of Securities		Fair Value			Gross Unrealized Loss		Depreciation from Amortized Cost Basis (%)
	(Dollars in thousands)
														��
Available-for-sale:
Government-sponsored mortgage-backed securities		39	$	74,897	$	5,877		7.3	%		27	$	70,790		$	7,612		9.7	%
U.S. government guaranteed mortgage-backed securities		2		1,093		55		4.8			7		6,571			861		11.6
Government-sponsored enterprise obligations		—		—		—		—			3		13,146			1,758		11.8
Corporate Bonds		1		2,996		26		0.9			—		—			—
Total available-for-sale		42		78,986		5,958					37		90,507			10,231

Held-to-maturity:
U.S. Treasury securities		2		9,520		461		4.6	%		—		—			—		—	%
Government-sponsored mortgage-backed securities		33		198,246		15,523		7.3			2		12,513			1,312		9.5
Total held-to-maturity		35		207,766		15,984					2		12,513			1,312

Total		77	$	286,752	$	21,942					39	$	103,020		$	11,543

	September 30, 2017								December 31, 2021
	Less Than 12 Months				Over 12 Months				Less Than Twelve Months									Over Twelve Months
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Number of Securities		Fair Value		Gross Unrealized Loss		Depreciation from Amortized Cost Basis (%)			Number of Securities		Fair Value		Gross Unrealized Loss		Depreciation from Amortized Cost Basis (%)
	(In thousands)								(Dollars in thousands)

Available-for-sale:
Government-sponsored mortgage-backed securities	$	1,022	$	105,596	$	1,814	$	61,415		34	$	105,221	$	2,088		1.9	%		18	$	42,506	$	1,841		4.2	%
U.S. government guaranteed mortgage-backed securities		160		9,874		287		7,086		2		2,426		142		5.5			5		5,107		460		8.3
Corporate bonds		210		20,915		11		2,058
State and municipal bonds		—		—		37		1,564
Government-sponsored enterprise obligations		129		5,021		568		19,432		—		—		—		—			3		14,226		676		4.5
Mutual funds		57		3,508		228		2,898
Total available-for-sale	$	1,578	$	144,914	$	2,945	$	94,453		36		107,647		2,230					26		61,839		2,977

Held-to-maturity:
U.S. Treasury securities										2		9,973		6		0.1	%		—		—		—		—	%
Government-sponsored mortgage-backed securities										31		209,775		2,518		1.2			—		—		—		—
Total held-to-maturity										33		219,748		2,524					—		—		—

Total										69	$	327,395	$	4,754					26	$	61,839	$	2,977

During the three months ended March 31, 2022 and year ended December 31, 2021, the Company did not record any other-than-temporary impairment (“OTTI”) charges on its investments. Management regularly reviews the portfolio for securities with unrealized losses. Management attributed the unrealized losses at March 31, 2022 to increases in current market yields compared to the yields at the time the investments were purchased by the Company and not due to credit quality.

December 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 $ 3,016 $ 147,691 $ 1,008 $ 27,303
U.S. government guaranteed mortgage-backed securities 192 12,536 211 4,814
Corporate bonds 203 18,481 — —
State and municipal bonds 95 1,507 27 305
Government-sponsored enterprise obligations 1,132 42,008 — —
Mutual funds 79 3,429 211 2,867
Total available-for-sale $ 4,717 $ 225,652 $ 1,457 $ 35,289

The process for assessing investments for OTTI may vary depending on the type of security. In assessing the Company's investments in government-sponsored and U.S. government guaranteed mortgage-backed securities and government-sponsored enterprise obligations, the contractual cash flows of these investments are guaranteed by the respective government-sponsored enterprise; Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), Federal Farm Credit Bank (“FFCB”), or Federal Home Loan Bank (“FHLB”). Accordingly, it is expected that the securities would not be settled at a price less than the par value of the Company's investments. Management's assessment of other debt securities within the portfolio includes reviews of market pricing, ongoing credit quality evaluations, assessment of the investments' materiality, and duration of the investments' unrealized loss position. At March 31, 2022, the Company's corporate and municipal bond portfolios did not contain any securities rated below investment grade, as reported by major credit rating agencies.

September 30, 2017
Less Than 12 Months Over 12 Months
Number of Securities Amortized
Cost Basis Gross
Loss Depreciation from Amortized Cost Basis (%) Number of Securities Amortized Cost Basis Gross Loss Depreciation from Amortized Cost Basis (%)
(Dollars in thousands)

Government-sponsored mortgage-backed securities 41 $ 106,618 $ 1,022 1.0 % 27 $ 63,229 $ 1,814 2.9 %
U.S. government guaranteed mortgage-backed securities 3 10,034 160 1.6 4 7,373 287 3.9
Corporate bonds 7 21,125 210 1.0 1 2,069 11 0.5
Government-sponsored enterprise obligations 1 5,150 129 2.5 8 20,000 568 2.8
State and municipal bonds — — — — 3 1,601 37 2.3
Mutual funds 1 3,565 57 1.6 2 3,126 228 7.3
$ 146,492 $ 1,578 $ 97,398 $ 2,945

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.

5. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans consisted of the following amounts: September 30, December 31,
2017 2016
(In thousands)
Commercial real estate $ 716,890 $ 720,741
Residential real estate:
Residential 555,768 522,083
Home equity 92,359 92,083
Commercial and industrial 244,374 222,286
Consumer 4,467 4,424
Total Loans 1,613,858 1,561,617
Unearned premiums and deferred loan fees and costs, net 4,915 4,867
Allowance for loan losses (10,518 ) (10,068 )
$ 1,608,255 $ 1,556,416

Major classifications of loans at the periods indicated were as follows:

	March 31,			December 31,
	2022			2021
	(In thousands)
Commercial real estate	$	1,039,487		$	979,969
Residential real estate:
Residential one-to-four family		564,339			552,332
Home equity		100,165			99,759
Total residential real estate		664,504			652,091

Commercial and industrial:
Paycheck Protection Program (“PPP”) loans		6,052			25,329
Commercial and industrial		209,890			201,340
Total commercial and industrial		215,942			226,669

Consumer		4,252			4,250
Total gross loans		1,924,185			1,862,979
Unamortized PPP loan fees		(255	)		(781	)
Unearned premiums and deferred loan fees and costs, net		2,355			2,518
Total loans, net		1,926,285			1,864,716
Allowance for loan losses		(19,308	)		(19,787	)
Net loans	$	1,906,977		$	1,844,929

~~During the nine months ended September 30, 2017 and 2016, we purchased residential real estate loans aggregating $48.2 million and $107.6 million, respectively.~~Loans Serviced for Others.

~~We have~~The Company has transferred a portion of ~~our~~its 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 continue to service the loans on behalf of the participating lenders. We share ~~ratably~~ with ~~our~~ participating lenders, inon a pro-rata basis, 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 ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016, we serviced~~2021, the Company was servicing commercial loans ~~for participants aggregating $32.4~~participated out to various other institutions totaling $78.3 million and ~~$42.6~~$63.2 million, respectively.

Residential mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balances of these loans totaled $67.8 million and $75.2 million at September 30, 2017 and December 31, 2016, respectively. Service fee income of $49,000 and $3,000 was recorded for the nine months ended September 30, 2017 and 2016, respectively, and is included in service charges and fees on the consolidated statements of net income.

Residential real estate mortgages are originated by the Bank both for its portfolio and for sale into the secondary market. The Bank may sell its loans to institutional investors such as the ~~Federal Home Loan Mortgage Corporation.~~FHLMC. Under loan sale and servicing agreements with the investor, the Bank generally continues to service the residential real estate mortgages. The Bank pays the investor an agreed upon rate on the loan, which is less than the interest rate received from the borrower. The Bank retains the difference as a fee for servicing the residential real estate mortgages. The Bank capitalizes mortgage servicing rights at their fair value upon sale of the related loans, amortizes the asset over the estimated life of the serviced loan, and periodically assesses the asset for impairment. The significant assumptions used by a third party to estimate the fair value of capitalized servicing rights at ~~September 30, 2017,~~March 31, 2022, include weighted average prepayment speed for the portfolio using the Public Securities Association Standard Prepayment Model ~~(203~~(122 PSA), weighted average internal rate of return ~~(10.05%~~(9.02%), weighted average servicing fee ~~(0.2501%~~(0.25%), and average ~~net~~ cost to service loans ($~~59.32~~83.63 per loan). The estimated fair value of capitalized servicing rights may vary significantly in subsequent periods primarily due to changing market interest rates, and their effect on prepayment speeds and discount rates. For the three months ended March 31, 2022 and 2021, the Company sold $277,000 and $7.6 million in residential real estate mortgages with servicing retained and recorded gains on the sale of mortgages of $2,000 and $227,000, respectively, within non-interest income.

At March 31, 2022 and December 31, 2021, the Company was servicing residential mortgage loans owned by investors totaling $85.5 million and $88.2 million, respectively. Servicing fee income of $53,000 and $24,000 was recorded for the three months ended March 31, 2022 and 2021, respectively, and is included in service charges and fees on the consolidated statements of net income.

A summary of the activity in the balances of mortgage servicing rights follows:

Three Months
Ended
September 30,
2017

Nine Months
Ended
September 30,
2017

(In thousands)

Balance at the beginning of period: $ 408 $ 465
Capitalized mortgage servicing rights — —
Amortization (28 ) (85 )
Balance at the end of period $ 380 $ 380
Fair value at the end of period $ 538 $ 538


	Three Months Ended March 31,
	2022			2021
	(In thousands)

Balance at the beginning of year:	$	693		$	153
Capitalized mortgage servicing rights		2			48
Amortization		(36	)		(15	)
Balance at the end of period	$	659		$	186
Fair value at the end of period	$	813		$	235

~~Prior to the acquisition of Chicopee in 2016, mortgage servicing rights were not material to the consolidated financial statements, and therefore, were not recorded.~~

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~~Company’s policies and procedures surrounding the allowance for loan losses during the ~~periods presented~~three months ended March 31, 2022. In addition, during the year ended December 31, 2020, the Company determined that it was prudent to provide an allowance for ~~disclosure.~~loan losses related to the loan portfolio acquired on October 24, 2016 from Chicopee Bancorp, Inc. (“Chicopee”) due to the ongoing impacts and extended nature of the pandemic.

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%~~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. Home equity loans are secured by first or second mortgages on one-to-four family owner occupied properties. 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~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 is as follows:

	Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Unallocated			Total
	(In thousands)
Balance at December 31, 2020	$	13,020		$	4,240		$	3,630		$	241		$	26		$	21,157
Provision (credit)		295			(135	)		(60	)		(13	)		(12	)		75
Charge-offs		—			—			(9	)		(24	)		—			(33	)
Recoveries		—			8			1			19			—			28
Balance at March 31, 2021	$	13,315		$	4,113		$	3,562		$	223		$	14		$	21,227

Balance at December 31, 2021	$	12,970		$	3,964		$	2,643		$	197		$	13		$	19,787
Provision (credit)		(639	)		90			89			27			8			(425	)
Charge-offs		(37	)		(16	)		(7	)		(45	)		—			(105	)
Recoveries		—			30			1			20			—			51
Balance at March 31, 2022	$	12,294		$	4,068		$	2,726		$	199		$	21		$	19,308

Commercial Real Estate Residential Real Estate Commercial and Industrial Consumer Unallocated Total
(In thousands)
Three Months Ended
Balance at June 30, 2016 $ 3,956 $ 2,804 $ 2,797 $ 20 $ (7 ) $ 9,570
Provision (credit) 62 189 83 43 (2 ) 375
Charge-offs — (40 ) — (46 ) — (86 )
Recoveries 59 — — 9 — 68
Balance at September 30, 2016 $ 4,077 $ 2,953 $ 2,880 $ 26 $ (9 ) $ 9,927

Balance at June 30, 2017 $ 4,472 $ 3,126 $ 2,754 $ 53 $ 13 $ 10,418
Provision (credit) (68 ) 146 (109 ) 83 148 200
Charge-offs — (107 ) — (104 ) — (211 )
Recoveries — 80 3 28 — 111
Balance at September 30, 2017 $ 4,404 $ 3,245 $ 2,648 $ 60 $ 161 $ 10,518

Nine Months Ended
Balance at December 31, 2015 $ 3,856 $ 2,431 $ 2,485 $ 22 $ 46 $ 8,840
Provision (credit) (614 ) 610 395 64 (55 ) 400
Charge-offs (170 ) (90 ) — (87 ) — (347 )
Recoveries 1,005 2 — 27 — 1,034
Balance at September 30, 2016 $ 4,077 $ 2,953 $ 2,880 $ 26 $ (9 ) $ 9,927

Balance at December 31, 2016 $ 4,083 $ 2,862 $ 3,085 $ 38 $ — $ 10,068
Provision (credit) 239 427 (180 ) 203 161 850
Charge-offs (36 ) (148 ) (285 ) (237 ) — (706 )
Recoveries 118 104 28 56 — 306
Balance at September 30, 2017 $ 4,404 $ 3,245 $ 2,648 $ 60 $ 161 $ 10,518

~~Further~~The following table presents information pertaining to the allowance for loan losses by segment, ~~at September 30, 2017 and December 31, 2016 follows:~~excluding PPP loans, for the dates indicated:

	Commercial Real Estate		Residential Real Estate		Commercial and Industrial		Consumer		Unallocated		Total		Commercial Real Estate		Residential Real Estate		Commercial and Industrial		Consumer		Unallocated		Total
	(In thousands)												(In thousands)
September 30, 2017

March 31, 2022
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Amount of allowance for non-impaired loans		4,404		3,245		2,648		60		161		10,518		12,294		4,068		2,726		199		21		19,308
Total allowance for loan losses	$	4,404	$	3,245	$	2,648	$	60	$	161	$	10,518	$	12,294	$	4,068	$	2,726	$	199	$	21	$	19,308

Impaired loans	$	3,993	$	3,854	$	2,869	$	127	$	—	$	10,843	$	9,527	$	2,976	$	620	$	—	$	—	$	13,123
Non-impaired loans		699,945		640,622		240,421		4,340		—		1,585,328		1,025,725		659,784		208,907		4,252		—		1,898,668
Loans acquired with deteriorated credit quality		12,952		3,651		1,084		—		—		17,687
Impaired loans acquired with deteriorated credit quality														4,235		1,744		363		—		—		6,342
Total loans	$	716,890	$	648,127	$	244,374	$	4,467	$	—	$	1,613,858	$	1,039,487	$	664,504	$	209,890	$	4,252	$	—	$	1,918,133

December 31, 2016

December 31, 2021
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Amount of allowance for non-impaired loans		4,083		2,862		3,085		38		—		10,068		12,970		3,964		2,643		197		13		19,787
Total allowance for loan losses		4,083		2,862		3,085		38		—		10,068	$	12,970	$	3,964	$	2,643	$	197	$	13	$	19,787

Impaired loans	$	3,335	$	452	$	3,042	$	—	$	—	$	6,829	$	9,601	$	3,223	$	699	$	22	$	—	$	13,545
Non-impaired loans		701,766		609,107		217,972		4,424		—		1,533,269		965,577		647,098		200,271		4,228		—		1,817,174
Loans acquired with deteriorated credit quality		15,640		4,607		1,272		—		—		21,519
Impaired loans acquired with deteriorated credit quality														4,791		1,770		370		—		—		6,931
Total loans	$	720,741	$	614,166	$	222,286	$	4,424	$	—	$	1,561,617	$	979,969	$	652,091	$	201,340	$	4,250	$	—	$	1,837,650

Past Due and Nonaccrual Loans.

The following ~~is a summary~~tables present an age analysis of past due ~~and non-accrual~~ loans, ~~by class at September 30, 2017 and December 31, 2016:~~excluding PPP loans, as of the dates indicated:

	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		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days or More Past Due		Total Past Due Loans		Total Current Loans		Total Loans		Nonaccrual Loans
	(In thousands)												(In thousands)
September 30, 2017
March 31, 2022
Commercial real estate	$	196	$	295	$	136	$	627	$	—	$	2,181	$	301	$	—	$	436	$	737	$	1,038,750	$	1,039,487	$	660
Residential real estate:
Residential		2,308		570		572		3,450		—		1,744		561		270		853		1,684		562,655		564,339		2,846
Home equity		218		135		72		425		—		73		230		—		88		318		99,847		100,165		112
Commercial and industrial		472		59		108		639		—		2,700		42		—		24		66		209,824		209,890		370
Consumer		54		18		5		77		—		17		3		—		—		3		4,249		4,252		—
Total legacy loans		3,248		1,077		893		5,218		—		6,715
Total loans													$	1,137	$	270	$	1,401	$	2,808	$	1,915,325	$	1,918,133	$	3,988

Loans acquired from Chicopee Savings Bank		2,957		1,610		1,279		5,846		—		6,450

Total	$	6,205	$	2,687	$	2,172	$	11,064	$	—	$	13,165

December 31, 2016
December 31, 2021
Commercial real estate	$	302	$	555	$	137	$	994	$	—	$	2,740	$	139	$	—	$	436	$	575	$	979,394	$	979,969	$	1,224
Residential real estate:
Residential		791		262		689		1,742		—		1,658		787		41		507		1,335		550,997		552,332		3,214
Home equity		208		36		—		244		—		37		57		5		63		125		99,634		99,759		94
Commercial and industrial		326		32		—		358		—		3,214		58		10		22		90		201,250		201,340		410
Consumer		27		9		7		43		—		14		5		—		11		16		4,234		4,250		22
Total legacy loans		1,654		894		833		3,381		—		7,663

Loans acquired from Chicopee Savings Bank		3,854		1,907		551		6,312		—		6,394

Total past due loans	$	5,508	$	2,801	$	1,384	$	9,693	$	—	$	14,057
Total loans													$	1,046	$	56	$	1,039	$	2,141	$	1,835,509	$	1,837,650	$	4,964

Impaired Loans.

The following is a summary of impaired loans by ~~class at and for the periods ended September 30, 2017 and December 31, 2016:~~class:

							Three Months Ended
	At March 31, 2022						March 31, 2022
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans ⁽¹⁾
Commercial real estate	$	13,762	$	14,907	$	—	$	14,078	$	53
Residential real estate:
Residential real estate		4,590		5,422		—		4,735		16
Home equity		130		153		—		121		1
Commercial and industrial		983		3,748		—		1,026		15
Consumer		—		—		—		11		—
Total impaired loans	$	19,465	$	24,230	$	—	$	19,971	$	85

	Impaired Loans⁽¹⁾⁽²⁾																		Three Months Ended
					Three Months Ended				Nine Months Ended				At December 31, 2021						March 31, 2021
	At September 30, 2017⁽¹⁾				September 30, 2017				September 30, 2017				Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		(In thousands)
	(In thousands)
Impaired loans without a valuation allowance⁽²⁾:
Impaired Loans ⁽¹⁾
Commercial real estate	$	16,945	$	19,380	$	17,731	$	199	$	18,788	$	650	$	14,392	$	15,563	$	—	$	17,403	$	108
Residential real estate:
Residential rea estate:
Residential real estate		6,939		7,410		7,016		11		6,548		34		4,881		5,381		—		6,357		104
Home equity		566		590		407		1		260		3		112		136		—		143		4
Commercial and industrial		3,953		10,242		4,442		54		4,538		183		1,069		3,850		—		4,827		62
Consumer		127		131		122		—		83		—		22		37		—		26		—

Total impaired loans	$	28,530	$	37,753	$	29,718	$	265	$	30,217	$	870	$	20,476	$	24,967	$	—	$	28,756	$	278

⁽¹⁾

Includes loans acquired with deteriorated credit quality and performing troubled debt restructurings.

~~(1) Includes~~With the exception of loans acquired with deteriorated credit quality, ~~and performing troubled debt restructurings.~~

~~(2) Includes loans acquired with deteriorated credit quality from~~ the ~~Chicopee Bancorp merger.~~

Impaired Loans⁽¹⁾⁽²⁾
Three Months Ended Nine Months Ended
At December 31, 2016⁽¹⁾ September 30, 2016 September 30, 2016
Recorded
Investment Unpaid
Principal
Balance Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized
(In thousands)
Impaired loans without a valuation allowance⁽²⁾:
Commercial real estate $ 18,975 $ 21,330 $ 3,487 $ 17 $ 3,551 $ 49
Residential real estate 5,059 5,676 515 — 482 —
Commercial and industrial 4,314 11,049 3,356 — 3,434 —

Total impaired loans $ 28,348 $ 38,055 $ 7,358 $ 17 $ 7,467 $ 49

⁽¹⁾~~Includes loans acquired with deteriorated credit quality from the Chicopee Bancorp, Inc. merger.~~

⁽²⁾~~Includes loans acquired with deteriorated credit quality from the Chicopee Bancorp merger.~~

~~No interest income was recognized for~~majority of impaired loans are included within the nonaccrual balances; however, not every loan on a cash-basis method during the three and nine months ended September 30, 2017 or 2016. Interest income recognized on an accrual basis during the three and nine months ended September 30, 2017 related to performing purchase impairednonaccrual status has been designated as impaired. Impaired loans ~~while activity~~include loans that have been modified in ~~the comparable 2016 periods related to performing TDR loans.~~

~~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~~Impaired loans are individually evaluated and exclude large groups of smaller-balance homogeneous loans, such as residential mortgage loans and consumer loans, which are collectively evaluated for impairment, and loans that are measured at fair value, unless the loan is amended in a TDR.

All payments received on impaired loans in nonaccrual status are applied to principal. There was no interest income recognized on nonaccrual impaired loans during the three months ended March 31, 2022 and March 31, 2021. The Company's obligation to fulfill the additional funding commitments on impaired loans is generally contingent on the borrower's compliance with the terms of the credit agreement. If the borrower is not in compliance, additional funding commitments may or may not be made at the Company's discretion. At March 31, 2022 and 2021, we had not committed to lend any additional funds for loans that are classified as impaired. Payments received on impaired loans in accrual status are recorded in accordance with the contractual terms of the loan. Interest income recognized on impaired loans during the three months ended March 31, 2022 and 2021 pertained to performing TDRs and purchased impaired loans.

Troubled Debt Restructurings.

Loans are designated as a TDR when, as part of an agreement to modify the original contractual terms of the loan as a result of financial difficulties of the borrower, the Bank grants the borrower a concession on the terms that would not otherwise be considered. Typically, such concessions ~~could include~~may consist of a reduction in ~~the~~ interest rate to a below market rate, taking into account the credit quality of the note, extension of additional credit based on receipt of adequate collateral, or a deferment or reduction of payments (principal or interest) which materially alters the ~~loan, payment extensions, postponement~~Bank's position or ~~forgiveness~~significantly extends the note's maturity date, such that the present value of ~~principal, forbearance or other actions intended~~cash flows to ~~maximize collection.~~be received is materially less than those contractually established at the loan's origination. All ~~TDRs~~loans that are modified are reviewed by the Company to identify if a TDR has occurred. All TDR loans 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 ana specific 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.~~

Nonperforming TDRs are ~~shown as~~included in nonperforming ~~assets.~~ loans.

There were no ~~loans modified in~~loan modifications classified as TDRs during the three ~~and nine~~ months ended ~~September 30, 2017. A substandard impaired loan relationship in~~March 31, 2022 and 2021. During the ~~amount of $4.6 million was designated a TDR during the nine~~three months ended September 30, 2016. The bank entered into a forbearance agreement which offered an interest only period. Due to the borrower continuing to experience declining sales, the interest only period was extended during the second quarter of 2016, resulting in the TDR classification. The loans are on non-accrualMarch 31, 2022 and ~~are current. The loans are measured for impairment quarterly and appropriate reserves/charge offs have been taken.~~

Nine Months Ended
September 30, 2016
Number of
Contracts Pre-Modification
Outstanding
Recorded
Investment Post-Modification Outstanding
Recorded
Investment
(Dollars in thousands)
Troubled Debt Restructurings
Commercial Real Estate 1 $ 1,940 $ 1,940
Commercial and Industrial 3 2,681 2,681
Residential 2 161 161
Total 6 $ 4,782 $ 4,782

~~A default occurs when a loan is~~2021, no TDRs defaulted (defined as 30 days or more past ~~due. No TDRs defaulted~~due) within ~~twelve~~12 months of ~~restructuring during the three and nine months ended September 30, 2017 or 2016.~~

restructuring. There were no charge-offs on TDRs during the three ~~and nine~~ months ended ~~September 30, 2017 and 2016.~~March 31, 2022 or 2021.

Loans Acquired with Deteriorated Credit ~~Quality~~Quality.

The following is a summary of loans acquired ~~from~~with deteriorated credit quality in the Chicopee ~~with evidence of credit deterioration as of September 30, 2017.~~acquisition.

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable			Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)															(In thousands)

Balance at December 31, 2016	$	37,437		$	29,040		$	8,397		$	7,521		$	21,519
Balance at December 31, 2021																$	12,134		$	9,430		$	2,704		$	2,499		$	6,931
Collections		(3,860	)		(3,326	)		(534	)		(1,003	)		(2,323	)		(669	)		(639	)		(30	)		(50	)		(589	)
Dispositions		(1,833	)		(1,503	)		(330	)		6			(1,509	)		(58	)		(58	)		—			(58	)		—
Balance at September 30, 2017	$	31,744		$	24,211		$	7,533		$	6,524		$	17,687
Balance at March 31, 2022																$	11,407		$	8,733		$	2,674		$	2,391		$	6,342

Credit Quality ~~Information~~Information.

~~We utilize~~The Company utilizes 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.~~“substandard.”

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

4: Loans rated 41-4 represent groups of loans that are ~~considered “Pass Watch,” with an acceptable level of risk.~~not subject to adverse criticism as defined in regulatory guidance. Loans in ~~this category remain “pass”~~these groups exhibit characteristics that represent acceptable risk.

Loans rated ~~and are not a criticized or classified loan, however, represent borrowers which may exhibit tight cash flows and/or leveraged balance sheets.~~

5: Loans rated 5 are considered ~~“Special Mention.~~“Special Mention” ~~These loans~~and may exhibit potential credit weaknesses or downward trends and are being ~~closely~~ monitored by ~~us.~~management. Loans in this category are currently protected based on collateral and repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may result in deterioration of the repayment process at some future date. This classification is used if a negative trend is evident in the obligor’s financial situation. Special mention loans do not sufficiently expose the Company to warrant adverse classification.

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

Loans rated 7: Loans rated 7 are considered ~~“Doubtful.~~“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~~of the ~~basis of currently existing facts,~~loan highly questionable and ~~improbable~~improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and ~~that a partial~~strengthening of the asset, its classification as an estimated loss ~~of principal~~ is ~~likely.~~deferred until its more exact status may be determined.

Loans rated 8: Loans rated 8 are considered ~~uncollectible and of such little~~uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that ~~their continuance as loans~~it is not ~~warranted.~~practical or desirable to defer writing off the asset because recovery and collection time may be affected in the future.

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 $67.6 million and $88.9 million at September 30, 2017 and December 31, 2016, 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~~criticized loan report and other loan reports to monitor credit ~~quality~~quality. In addition, at least on an annual basis, the Company contracts with an external loan review company to review the internal credit ratings assigned to loans in ~~other segments.~~
the commercial loan portfolio on a pre-determined schedule, based on the type, size, rating, and overall risk of the loan. During the course of its review, the third party examines a sample of loans, including new loans, existing relationships over certain dollar amounts and classified assets.

The following table presents our loans by risk rating ~~at September 30, 2017~~for the periods indicated:

	Commercial Real Estate		Residential 1-4 Family		Home Equity		Commercial and Industrial		Consumer		Total
	(In thousands)
March 31, 2022
Pass (Rated 1 – 4)	$	973,892	$	560,425	$	99,891	$	199,763	$	4,232	$	1,838,203
Special Mention (Rated 5)		47,729		—		—		7,464		—		55,193
Substandard (Rated 6)		17,866		3,914		274		8,715		20		30,789
Total	$	1,039,487	$	564,339	$	100,165	$	215,942	$	4,252	$	1,924,185


December 31, 2021
Pass (Rated 1 – 4)	$	913,063	$	547,980	$	99,503	$	215,605	$	4,228	$	1,780,379
Special Mention (Rated 5)		48,765		—		—		2,777		—		51,542
Substandard (Rated 6)		18,141		4,352		256		8,287		22		31,058
Total	$	979,969	$	552,332	$	99,759	$	226,669	$	4,250	$	1,862,979

6. GOODWILL AND OTHER INTANGIBLES

Goodwill.

At March 31, 2022 and December 31, ~~2016:~~

Commercial
Real Estate Residential
1-4 Family Home
Equity Commercial
and Industrial Consumer Total
(In thousands)
September 30, 2017
Loans rated 1 – 3 $ 647,599 $ 549,936 $ 91,854 $ 192,968 $ 4,340 $ 1,486,697
Loans rated 4 45,339 95 — 35,585 — 81,019
Loans rated 5 14,724 — — 7,521 — 22,245
Loans rated 6 9,228 5,737 505 8,300 127 23,897
$ 716,890 $ 555,768 $ 92,359 $ 244,374 $ 4,467 $ 1,613,858

December 31, 2016
Loans rated 1 – 3 $ 673,957 $ 516,339 $ 91,964 $ 180,675 $ 4,391 $ 1,467,326
Loans rated 4 24,207 — — 16,621 6 40,834
Loans rated 5 14,068 — — 6,727 — 20,795
Loans rated 6 6,604 5,744 119 15,379 27 27,873
Loans rated 7 1,905 — — 2,884 — 4,789
$ 720,741 $ 522,083 $ 92,083 $ 222,286 $ 4,424 $ 1,561,617

~~6. GOODWILL AND OTHER INTANGIBLES~~

~~Goodwill~~

~~Goodwill for the nine months ended September 30, 2017 is summarized as follows:~~

Nine Months
Ended
September 30,
2017

(In thousands)
Balance at December 31, 2016 $ 13,747
Current period adjustments (1,260 )
Balance at September 30, 2017 $ 12,487

~~At September 30, 2017 and December 31, 2016,~~2021, the Company’s goodwill was related to the acquisition of Chicopee in October 2016. There was no goodwill impairment recorded during the three months ended March 31, 2022 or the year ended December 31, 2021. Annually, or more frequently if events or changes in circumstances warrant such evaluation, the Company evaluates its goodwill for impairment. ~~No goodwill impairment was recorded for the nine months ended September 30, 2017.~~

During the three months ended March 31, 2017, management completed their evaluation of premises and equipment acquired from Chicopee, which resulted in a $2.4 million adjustment to the provisional fair values of bank premises acquired and a $1.4 million reduction in goodwill. The remaining adjustments to goodwill of $140,000 during the three months ended March 31, 2017 resulted from information obtain during the quarter about events and circumstances that existed as of the acquisition date.

Core Deposit ~~Intangibles~~Intangible.

In connection with the ~~assumption~~acquisition of ~~$545.7 million of deposit liabilities from the~~ Chicopee, ~~acquisition in October 2016, of which $345.2 million were core deposits,~~ the Bank recorded a core deposit intangible of ~~$4.5 million. The resulting core deposit intangible~~$4.5 million which is amortized over twelve years using the straight-line method. ~~Core deposit intangibles are summarized as follows:~~

Nine Months
Ended
September 30,
2017

(In thousands)
Balance at December 31, 2016 $ 4,438
Amortization (282 )
Balance at September 30, 2017 $ 4,156

Amortization expense was ~~$282,000~~$94,000 for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2022 and $93,000 for the three months ended March 31, 2021. At ~~September 30, 2017,~~March 31, 2022, future amortization of the core deposit intangible ~~totals $375,000~~totaled $375,000 for each of the next five years and ~~$2.3 million~~$594,000 thereafter.

7. SHARE-BASED COMPENSATION

Stock ~~Options –~~Options.Under the terms of the Chicopee merger agreement dated April 4, 2016, each option to purchase shares of Chicopee common stock issued by Chicopee and outstanding at the effective time of the merger, October 21, 2016, pursuant to the Chicopee 2007 Equity Incentive Plan fully vested and converted into an option to purchase shares of WNEB common stock on the same terms and conditions as were applicable before the merger, except (1) the number of shares of WNEB common stock subject to the new option was adjusted to be equal to the product of the number of shares of Chicopee common stock subject to the existing option and the exchange ratio (rounding fractional shares to the nearest whole share) and (2) the exercise price per share of WNEB common stock under the new option was adjusted to be equal to the exercise price per share of Chicopee common stock of the existing option divided by the exchange ratio (rounded to the nearest whole cent).

A summary of stock option activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 is presented ~~below. No options were outstanding during the nine months ended September 30, 2016.~~below:

Shares Weighted
Average
Exercise
Price
Weighted
Average
Remaining Contractual
Term
(in years)

Aggregate
Intrinsic
Value
(in thousands)

Outstanding at December 31, 2016 1,178,899 $ 6.01 1.98 $ 3,930
Exercised (921,849 ) 5.93 0.91 3,675
Outstanding at September 30, 2017 257,050 $ 6.31 4.66 $ 1,175

Exercisable at September 30, 2017 257,050 $ 6.31 4.66 $ 1,175

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2021		177,881		$	6.57		0.81	$	388
Exercised		(80,881	)		6.29		0.43		211
Outstanding at March 31, 2022		97,000		$	6.80		0.81	$	206

Exercisable at March 31, 2022		97,000		$	6.80		0.81	$	206

Cash received for options exercised during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and 2021 was ~~$5.5 million.~~$510,000 and $113,000, respectively.

Restricted Stock ~~Awards~~Awards.–

In May 2014, ~~our~~the Company’s shareholders approved the 2014 Omnibus Incentive Plan, a stock-based compensation plan ~~under which~~(the “2014 RSA Plan”). Under the 2014 RSA Plan, up to 516,000 shares of ~~our~~the Company’s common stock were reserved for grants of stock awards, including stock options and restricted stock, which may be granted to any officer, key employee or non-employee director of WNEB. ~~Authorized but unissued~~Any shares that are ~~issued to awardees upon vesting of such awards. Any shares~~ not issued because vesting requirements are not met ~~will again be~~were available for future issuance under the ~~plans.~~2014 RSA Plan.

In January 2015, 48,560 shares were granted under this plan and vest ratably over five years. The fair market value of shares awarded, based on the market price at the date of grant, was recorded as unearned compensation and is being amortized over the applicable vesting period.

~~In 2016,~~On an annual basis, the Compensation Committee (the “Committee”) ~~approved the~~approves long-term incentive ~~program (the “LTI Plan”). The LTI~~awards out of the 2014 RSA Plan, ~~provides~~whereby shares will be granted to eligible participants of the Company that are nominated by the Chief Executive Officer and approved by the Committee, with vesting over a three-year term for employees and a one-year term for directors. Annual employee grants provide for a periodic award that is both performance and ~~retention based in that it~~time-based and is designed to recognize the executive’s responsibilities, reward ~~demonstrated~~ performance and leadership and ~~to retain such executives.~~as a retention tool. The objective of the ~~LTI Plan~~award is to align compensation for the named executive officers and directors over a multi-year period directly with the interests of our shareholders by motivating and rewarding creation and preservation of long-term financial strength, shareholder value and relative shareholder return.

The LTI Plan includes eligible officers of the Company who are nominated by the Company’s Chief Executive Officer and approved by the Committee. The LTI Plan is triggered by the Company’s achievement of satisfactory safety and soundness results from its most recent regulatory examination. Employee stock grants made through the 2016 LTI plan will be a combination of 50% time-vested restricted stock and 50% performance-based restricted stock.

In ~~May 2016, 62,740~~February 2019, 108,718 shares were ~~granted under~~granted. Of the ~~LTI Plan. Of this total, 36,543~~108,718 shares, ~~are retention-based,~~64,496 shares were time-based, with ~~10,352~~20,262 vesting in one year and ~~26,191~~44,234 vesting ratably over a three ~~year~~-year period. The remaining ~~26,197~~44,222 shares granted are ~~performance based~~performance-based and are subject to the achievement of the ~~2016 LTI~~2019 long-term incentive performance ~~metric before vesting is realized after a three year period. For the performance shares, the~~metric. The primary performance metric for 2016 awards is return on equity. Performance shares will be earned based upon how the Company performs relative to threshold and target absolute goals (i.e. Company-specific, not relative to a peer index) over the three-year performance period. The threshold amount for the performance period will be a return on equity of 5.85% and a target amount of 6.32%. Participants will be able to earn between 50% (for threshold performance) and 100% of the target amount for the performance shares but will not earn additional shares if performance exceeds target performance.

In May 2017, 89,042 shares were granted under the LTI Plan. Of this total, 55,159 shares are retention-based, with 21,276 vesting in one year and 33,883 vesting ratably over a three year period. The remaining 33,883 shares granted are performance based and are subject to the achievement of the 2017 LTI performance metric before vesting is realized after a three year period. For the performance shares, the primary performance metric for 2017 awards is2019 grants was return on equity. Performance shares will be earned based upon how the Company performs relative to threshold, target and maximum absolute goals (i.e. Company-specific, not relative to a peer index) on an annual performance period, but will be distributed at the end of the three ~~year~~-year period.

The threshold, target and ~~maximum for the three year period~~stretch metrics under the ~~2017 Plan is~~2019 grants are as follows:


	Return on Equity Metrics
Performance Period Ending		Threshold		Target		Stretch
December 31, 2019		5.75	%	6.13	%	7.00	%
December 31, 2020		6.00	%	6.75	%	7.75	%
December 31, 2021		6.25	%	7.00	%	8.00	%

Return on Equity Targets

Performance Period Ending Threshold Target Maximum

December 31, 2017 6.00 % 6.60 % 7.30 %
December 31, 2018 6.30 % 7.00 % 7.60 %
December 31, 2019 6.50 % 7.20 % 7.90 %

~~Participants~~Eligible participants will be able to earn between ~~50% (for threshold~~50% (“threshold” performance), ~~100% (for target~~100% (“target” performance) and ~~150% (for~~150% (“maximum” performance). As of December 31, 2021, the three-year performance period for the 2019 grants ended. The 2019 long term incentive plan included a “catch-up” provision allowing unearned performance-based shares from the 2019 and 2020 performance periods to be earned at the end of the three-year period based on the final year performance. Of the original 44,222 performance-based shares granted in 2019, 40,003 shares were eligible for vesting based on achieving target. Because of the “catch-up” provision within the plan, 60,009 performance-based shares vested and were issued to eligible recipients in February 2022 based on achieving stretch for each performance period.

In February 2020, 120,053 shares were granted. Of the 120,053 shares, 69,898 shares were time-based, with 19,760 vesting in one year and 50,138 vesting ratably over a three-year period. The remaining 50,155 shares granted are performance-based and are subject to the achievement of the 2020 long-term incentive performance metrics, with 50% of the performance-based shares vesting for each performance metric. The primary performance metrics for the 2020 grants are return on equity and earnings per share. Performance shares will be earned based upon how the Company performs relative to threshold, target and maximum ~~performance).~~absolute goals (i.e. Company-specific, not relative to a peer index) on an annual performance period for return on equity metrics and for a three-year cumulative performance period for earnings per share, but will be distributed at the end of the three-year period as earned.

The threshold, target and stretch metrics under the 2020 grants are as follows:


	Return on Equity Metrics
Performance Period Ending		Threshold		Target		Stretch

December 31, 2020		5.00	%	5.48	%	6.00	%
December 31, 2021		5.62	%	6.24	%	6.86	%
December 31, 2022		6.29	%	6.99	%	7.69	%


	Earnings Per Share Metrics
Performance Period Ending	Threshold		Target		Stretch

Three-year Cumulative Diluted Earnings Per Share	$	1.50	$	1.65	$	1.80

Eligible participants will be able to earn between 50% (“threshold” performance), 100% (“target” performance) and 150% (“maximum” performance).

The fair market value of shares awarded is based on the market price at the ~~date of~~ grant isdate, recorded as unearned compensation and amortized over the applicable vesting period. ~~Shares granted under performance-based conditions~~Performance-based metrics are monitored on a quarterly basis in order to compare actual results to the performance metric, ~~established,~~ with any necessary adjustments being recognized through share-based compensation expense and unearned compensation.

In February 2021, 19,827 shares were granted to our directors, with a one-year vesting period. At ~~September 30, 2017, an additional 315,658~~December 31, 2021, there were no remaining shares available to grant under the 2014 RSA Plan.

In May 2021, the Company’s shareholders approved the 2021 Omnibus Incentive Plan, a stock-based compensation plan (the “2021 RSA Plan”). Under the 2021 RSA Plan, up to 700,000 shares of the Company’s common stock were reserved for grants of stock awards, including stock options and restricted stock, which may be granted to any officer, key employee or non-employee director of the Company. Any shares that are not issued because vesting requirements are not met will be available for future issuance under the 2021 RSA Plan.

In May 2021, 122,362 shares were granted. Of the 122,362 shares, 61,181 shares were time-based, vesting ratably over a three-year period. The remaining 61,181 shares granted are performance-based and are subject to the achievement of the 2021 long-term incentive performance metrics, with 50% of the performance-based shares vesting for each performance metric. The primary performance metrics for the 2021 grants are return on equity and earnings per share. Performance shares will be earned based upon how the Company performs relative to threshold, target and maximum absolute goals (i.e. Company-specific, not relative to a peer index) on an annual performance period for return on equity metrics and for a three-year cumulative performance period for earnings per share, but will be distributed at the end of the three-year period as earned.

The threshold, target and stretch metrics under ~~this plan.~~the 2021 grants are as follows:


	Return on Equity Metrics
Performance Period Ending	Threshold			Target			Stretch

December 31, 2021		5.63	%		6.25	%		7.50	%
December 31, 2022		5.85	%		6.50	%		7.80	%
December 31, 2023		6.08	%		6.75	%		8.10	%


	Earnings Per Share Metrics
Performance Period Ending	Threshold		Target		Stretch

Three-year Cumulative Diluted Earnings Per Share	$	1.58	$	1.97	$	2.36

~~Our stock award plan activity~~In March 2022, 137,151 shares were granted. Of the 137,151 shares, 77,463 shares were time-based, with 17,775 vesting in one year and 59,688 vesting ratably over a three-year period. The remaining 59,688 shares granted are performance-based and are subject to the achievement of the 2022 long-term incentive performance metrics, with 50% of the performance-based shares vesting for each performance metric. The primary performance metrics for the ~~nine months ended September 30, 2017~~2022 grants are return on equity and ~~2016~~earnings per share. Performance shares will be earned based upon how the Company performs relative to threshold, target and maximum absolute goals (i.e. Company-specific, not relative to a peer index) on an annual performance period for return on equity metrics and for a three-year cumulative performance period for earnings per share, but will be distributed at the end of the three-year period as earned.

The threshold, target and stretch metrics under the 2022 grants are as follows:


	Return on Equity Metrics
Performance Period Ending	Threshold			Target			Stretch

December 31, 2022		7.79	%		8.20	%		8.61	%
December 31, 2023		7.93	%		8.35	%		8.77	%
December 31, 2024		8.03	%		8.45	%		8.87	%


	Earnings Per Share Metrics
Performance Period Ending	Threshold		Target		Stretch

Three-year Cumulative Diluted Earnings Per Share	$	2.35	$	2.61	$	2.85

At March 31, 2022, there were 440,487 remaining shares available to grant under the 2021 RSA Plan.

A summary of the status of restricted stock awards at March 31, 2022 and 2021 is ~~summarized~~presented below:

	Shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2021		213,381		$	8.91
Shares granted		144,440			9.14
Shares forfeited		(6,651	)		8.66
Shares vested		(60,009	)		9.77
Balance at March 31, 2022		291,161		$	8.85

	Unvested Stock Awards Outstanding				Shares			Weighted Average Grant Date Fair Value
	Shares			Weighted Average Grant Date Fair Value

Outstanding at December 31, 2016	91,371		$	7.51
Balance at December 31, 2020						178,766		$	9.63
Shares granted	89,042			10.15		19,827			8.17
Shares forfeited						(19,154	)		11.05
Shares vested	(21,552	)		7.44		(27,727	)		9.81
Outstanding at September 30, 2017	158,861		$	9.00

Outstanding at December 31, 2015	54,160		$	7.28
Shares granted	62,740			7.73
Shares vested	(11,200	)		7.18
Outstanding at September 30, 2016	105,700		$	7.56
Balance at March 31, 2021						151,712		$	9.23

We recorded ~~compensation cost related to the~~total expense for restricted stock awards of ~~$490,000~~$301,000 and ~~$186,000~~$231,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

~~We utilize short-term~~Total borrowing capacity includes borrowing arrangements at the FHLB, the Federal Reserve Bank (“FRB”), and borrowing arrangements with correspondent banks.

The Company is a member of the FHLB and uses borrowings ~~and long-term debt~~ as an additional source of ~~funds~~funding to finance ~~our~~the Company’s lending and investing activities and to provide liquidity for daily operations.

~~Short-term~~ FHLB advances also provide more pricing and option alternatives for particular asset/liability needs. The FHLB provides a central credit facility primarily for member institutions. As an FHLB member, the Company is required to own capital stock of the FHLB, calculated periodically based primarily on its level of borrowings from the FHLB. FHLB borrowings are secured by certain securities from the Company’s investment portfolio not otherwise pledged as well as certain residential real estate and commercial real estate loans. Advances are made upunder several different credit programs with different lending standards, interest rates and range of ~~FHLBB advances with~~maturities. This relationship is an ~~original maturity~~integral component of ~~less than one year, a~~the Company’s asset-liability management program. At March 31, 2022, the Bank had $464.1 million in additional borrowing capacity from the FHLB.

The Company also has an available overnight Ideal Way line of credit with the ~~FHLBB and customer repurchase agreements, which mature daily. Short-term borrowings issued by the FHLBB were $174.0~~FHLB of $9.5 million ~~at September 30, 2017 and $155.0 million at December~~as of March 31, ~~2016. We have an “Ideal Way” line of credit with the FHLBB for $9.5 million at September 30, 2017 and December 31, 2016.~~2022. Interest on this line of credit is payable at a rate determined and reset by the ~~FHLBB~~FHLB on a daily basis. The outstanding principal is due daily but the portion not repaid will be automatically renewed. ~~There~~As of March 31, 2022 and December 31, 2021, there were no advances outstanding ~~on the~~under this line.

The Company has an available line of credit as of ~~September 30, 2017 or December 31, 2016. Customer repurchase agreements were $18.5~~$5.7 million ~~at September 30, 2017 and $17.4 million at December 31, 2016. A customer repurchase agreement is an agreement by us to sell to and repurchase from~~with the ~~customer~~FRB Discount Window at 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 arerate determined and reset on a daily ~~basis~~basis. Borrowings from the FRB Discount Window are secured by ~~each respective bank. There~~certain securities from the Company’s investment portfolio not otherwise pledged. As of March 31, 2022 and December 31, 2021, there were no advances outstanding under this line.

The Company also has pre-established, non-collateralized overnight borrowing arrangements with large national and regional correspondent banks to provide additional overnight and short-term borrowing capacity for the Company. The Company has a $15.0 million line of credit with a correspondent bank and a $50.0 million line of credit with another correspondent bank, both at an interest rate determined and reset on a daily basis. As of March 31, 2022 and December 31, 2021, there were no advances outstanding under these ~~lines of credit at September 30, 2017 or December 31, 2016. 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.~~lines.

Long-term debt consists of ~~FHLBB~~FHLB advances with an original maturity of one year or more. At ~~September 30, 2017,~~March 31, 2022, we had ~~$106.3~~$1.7 million in long-term debt with the ~~FHLBB. This compares~~FHLB, compared to ~~$124.8~~$2.7 million in long-term debt with ~~FHLBB advances~~the FHLB at December 31, ~~2016.~~2021.

~~Customer repurchase agreements are collateralized by government-sponsored enterprise obligations with fair value~~9. SUBORDINATED DEBT

On April 20, 2021, the Company completed an offering of ~~$6.8~~$20 million in aggregate principal amount of its 4.875% fixed-to-floating rate subordinated notes (the “Notes”) to certain qualified institutional buyers in a private placement transaction.

Unless earlier redeemed, the Notes mature on May 1, 2031. The Notes will bear interest from the initial issue date to, but excluding, May 1, 2026, or the earlier redemption date, at a fixed rate of 4.875% per annum, payable quarterly in arrears on May 1, August 1, November 1 and ~~$24.6 million,~~February 1 of each year, beginning August 1, 2021, and ~~mortgage backed securities with a fair value of $61.1 million~~from and ~~$57.6 million, at September 30, 2017 and December 31, 2016, respectively. The securities collateralizing repurchase agreements are subject~~including May 1, 2026, but excluding the maturity date or earlier redemption date, equal to ~~fluctuations in fair value. We monitor~~ the ~~fair value~~benchmark rate, which is the 90-day average secured overnight financing rate, plus 412 basis points, determined on the determination date of the ~~collateral~~applicable interest period, payable quarterly in arrears on ~~a periodic basis,~~May 1, August 1, November 1 and ~~would pledge additional collateral if necessary based~~February 1 of each year. The Company may also redeem the Notes, in whole or in part, on ~~changes~~or after May 1, 2026, and at any time upon the occurrence of certain events, subject in ~~fair value of collateral or~~each case to the ~~balances~~approval of the ~~repurchase agreements.~~Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Notes were designed to qualify as Tier 2 capital under the Federal Reserve’s capital adequacy regulations.

~~All FHLBB advances~~The Notes are ~~collateralized by a blanket lien on our owner occupied residential real estate loans and certain eligible commercial real estate loans.~~presented net of issuance costs of $357,000 as of March 31, 2022, which is being amortized into interest expense over the life of the Notes. Amortization of issuance costs into interest expense was $10,000 for the three months ended March 31, 2022.

9. 10. PENSION BENEFITS

We ~~maintain~~provide a defined benefit pension plan for ~~our~~ eligible ~~employees. On September 30, 2016, we effected~~employees (the “Plan”). Employees must work a ~~soft freeze on~~minimum of 1,000 hours per year to be eligible for the ~~Plan and therefore no new participants will be included~~Plan. Eligible employees become vested in the Plan after ~~such effective date.~~five years of service. We plan to contribute to the ~~pension plan~~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~~Plan’s actuaries. We have not yet determined how much we expect to contribute to ~~our pension plan~~the Plan in ~~2017.~~2022. No contributions have been made to the ~~plan~~Plan for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2022. The ~~pension plan~~Plan’s assets are invested in ~~group annuity contracts with the~~various pooled separate investment accounts offered by Principal Life Insurance Company, a division of Principal Financial Group, who ~~also acts as third-party administrator for our 401(k)~~is the custodian of the Plan. The Plan is administered by an officer of Westfield Bank. On September 30, 2016, we effected a soft freeze on the Plan and ~~ESOP plans.~~therefore no new participants will be included in the Plan after such effective date.

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


	Three Months Ended March 31,
	2022			2021
	(In thousands)
Service cost	$	334		$	454
Interest cost		313			295
Expected return on assets		(427	)		(439	)
Amortization of actuarial loss		158			234
Net periodic pension cost	$	378		$	544

Three Months Ended
September 30, Nine Months Ended,
September 30,
2017 2016 2017 2016
(In thousands)
Service cost $ 245 $ 283 $ 778 $ 854
Interest cost 254 240 761 719
Expected return on assets (298 ) (275 ) (895 ) (823 )
Amortization of actuarial losses 51 24 153 71
Net periodic pension cost $ 252 $ 272 $ 797 $ 821

~~10.~~ 11. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using ~~Derivatives~~Derivatives.

~~We are~~The Company is 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 following 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 September 30, 2017~~information about interest rate swaps at March 31, 2022 and December 31, ~~2016.~~2021:

March 31, 2022	Notional		Weighted Average		Weighted Average Rate						Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Non-hedging derivatives:
Loan-level swaps – dealer counterparties	$	15,951		10.9		2.13	%		3.76	%	$	449
Loan-level swaps – borrower counterparties		15,951		10.9		3.76	%		2.13	%		(449	)
Forward starting loan-level swaps - dealer counterparties		22,390		10.3								2,363
Forward starting loan-level swaps - borrower counterparties		22,390		10.3								(2,363	)
Total	$	76,682									$	0

September 30, 2017 Asset Derivatives Liability Derivatives
Balance Sheet Location Fair Value Balance Sheet Location Fair Value
(In thousands)

Interest rate swaps Other Assets $ 1 Other Liabilities $ 2,710

December 31, 2021	Notional		Weighted Average		Weighted Average Rate						Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Non-hedging derivatives:
Loan-level swaps – dealer counterparties	$	16,023		11.1		1.99	%		3.76	%	$	(662	)
Loan-level swaps – borrower counterparties		16,023		11.1		3.76	%		1.99	%		662
Forward starting loan-level swaps - dealer counterparties		22,390		10.5								1,030
Forward starting loan-level swaps - borrower counterparties		22,390		10.5								(1,030	)
Total	$	76,826									$	0

December 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 $ 3,152

Cash Flow Hedges of Interest Rate ~~Risk~~Risk.

~~Our~~The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage ~~our~~its exposure to interest rate movements. To accomplish ~~this objective,~~these objectives, we entered into interest rate swaps 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 September 30, 2017 and December 31, 2016:~~

Notional Weighted
Average Weighted Average Rate Estimated Fair
September 30, 2017 Amount Maturity Receive Pay Value
(In thousands) (In years) (In thousands)
Interest rate swaps on FHLBB borrowings $ 75,000 2.6 1.31 % 2.46 % $ (2,709 )

Notional Weighted
Average Weighted Average Rate Estimated Fair
December 31, 2016 Amount Maturity Receive Pay Value
(In thousands) (In years) (In thousands)
Interest rate swaps on FHLBB borrowings $ 75,000 3.4 0.92 % 2.46 % $ (3,152 )

During 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 notional amounts of $47.5 million and incurred a termination fee of $2.4 million. The termination fees are 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 terminated 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 nine months ended September 30, 2017 or 2016.

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).

Non-hedging Derivatives.

Derivatives not designated as hedges are not speculative, but rather result from a service the Company provides to certain customers. The Company executes loan level derivative products such as interest-rate swap agreements with commercial banking customers to aid them in managing their interest-rate risk by converting floating-rate loan payments to fixed-rate loan payments. The Company concurrently enters into offsetting swaps with a third party financial institution, effectively minimizing its net risk exposure resulting from such transactions. The third-party financial institution exchanges the customer's fixed-rate loan payments for floating-rate loan payments. As the interest-rate swap agreements associated with this program do not meet hedge accounting requirements, changes in the fair value are recognized directly in earnings.

Fair Values of Derivative Instruments on the Balance Sheet.

The table below presents the ~~pre-tax net losses~~fair value of our ~~cash flow hedges for~~derivative financial instruments not designated as hedging instruments as well as our classification on the ~~periods indicated.~~balance sheet as of March 31, 2022 and December 31, 2021.

March 31, 2022	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Derivatives not designated as hedging instruments:
Interest rate swap – with borrower counterparties		$	0		$	2,812
Interest rate swap – with dealer counterparties			2,812			0
Total derivatives not designated as hedging instruments	Other Assets	$	2,812	Other Liabilities	$	2,812

Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Interest rate swaps $ (14 ) $ 417 $ (307 ) $ (2,863 )

December 31, 2021	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Derivatives not designated as hedging instruments:
Interest rate swap – with borrower counterparties		$	662		$	1,030
Interest rate swap – with dealer counterparties			1,030			662
Total derivatives not designated as hedging instruments	Other Assets	$	1,692	Other Liabilities	$	1,692

Effect of Derivative Instruments in the Consolidated Statements of Net Income and Changes in Shareholders’ Equity.

There were gains or losses recognized in accumulated other comprehensive income during the three months ended March 31, 2021 or 2020.

Amounts reported in accumulated other comprehensive loss related to ~~these~~cash flow hedge derivatives are reclassified to interest expense as interest payments are made on our designated rate sensitive ~~assets/~~liabilities. The ~~amount reclassified from accumulated other comprehensive income into net income for~~table below presents the effective portion of interest rate swaps and termination fees was $497,000 and $397,000 during the three months ended September 30, 2017 and 2016, respectively and $1.6 million and $1.0 million during the nine months ended September 30, 2017 and 2016, respectively. During the next 12 months, we estimate that $1.8 million will be reclassified as an increase in interest expense. During the nine months ended September 30, 2017 and 2016, no gains or losses wereamount reclassified from accumulated other comprehensive loss into net income for ~~ineffectiveness on~~interest rate swaps and termination fees:

	Amount of Loss Reclassified from OCI into Expense (Effective Portion)
	Three Months Ended March 31,

	2022		2021

Interest rate swaps	$	0	$	140

As of December 31, 2021, the Company no longer has any outstanding 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.

At March 31, 2022, we had minimum collateral posting thresholds with certain of our derivative counterparties. As of ~~September 30, 2017, the termination value of~~March 31, 2022, we were not required to post collateral under these agreements because we did not have any derivatives in a ~~net~~ liability position ~~related to these agreements, which includes accrued interest but excludes any adjustment for nonperformance risk, was $2.7 million. As of September 30, 2017, we have mortgage-backed securities~~ with a fair value of $3.0 million and $50,000 cash posted as collateral against our obligations under these agreements. If we had breached any of these provisions at September 30, 2017, we could have been required to settle our obligations under the agreements at the termination value.those counterparties.

~~11.~~

12. FAIR VALUE OF ASSETS AND LIABILITIES

Determination of Fair ~~Value~~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~~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 measured at fair value on a recurring basis 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~~Securities Available-for-Sale. ~~– The carrying amounts of cash and short-term instruments approximate fair values based on the short-term nature of the assets.~~

~~Securities and mortgage-backed 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 and U.S. Treasury 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. These securities include government-sponsored enterprise obligations, state and municipal obligations, residential mortgage-backed securities guaranteed and sponsored by the U.S. government or an agency thereof. Fair value measurements are obtained from a third-party pricing service and are not adjusted by management.

~~Federal Home Loan Bank and other stock~~Interest Rate Swaps. ~~– 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, 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 time deposits approximate their fair values at the reporting date. Fair values for fixed-rate time deposits are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on time deposits 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~~ –Assets and Liabilities Measured at Fair ~~values for off-balance sheet lending commitments are based~~Value 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.a Recurring Basis.

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

September 30, 2017
Level 1 Level 2 Level 3 Total
Assets: (In thousands)
Securities available-for-sale
Government-sponsored mortgage-backed securities $ — $ 190,321 $ — $ 190,321
U.S. government guaranteed mortgage-backed securities — 16,961 — 16,961
Corporate bonds — 56,553 — 56,553
State and municipal bonds — 3,225 — 3,225
Government-sponsored enterprise obligations — 24,453 — 24,453
Mutual funds 6,406 — — 6,406
Total securities available-for-sale 6,406 291,513 — 297,919

Interest rate swaps — 1 — 1
Total assets $ 6,406 $ 291,514 $ — $ 297,920

Liabilities:
Interest rate swaps $ — $ 2,710 $ — $ 2,710

December 31, 2016
Level 1 Level 2 Level 3 Total
Assets: (In thousands)
Government-sponsored mortgage-backed securities $ — $ 180,136 $ — $ 180,136
U.S. government guaranteed mortgage-backed securities — 17,350 — 17,350
Corporate bonds — 50,317 — 50,317
State and municipal bonds — 4,008 — 4,008
Government-sponsored enterprise obligations — 42,008 — 42,008
Mutual funds 6,296 — — 6,296
Total assets $ 6,296 $ 293,819 $ — $ 300,115

Liabilities:
Interest rate swaps $ — $ 3,152 $ — $ 3,152


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:	(In thousands)
Securities available-for-sale	$	—	$	173,910	$	—	$	173,910
Marketable equity securities		11,643		—		—		11,643
Interest rate swaps		—		2,812		—		2,812
Total assets	$	11,643	$	176,722	$	—	$	188,365

Liabilities:
Interest rate swaps	$	—	$	2,812	$	—	$	2,812

~~Also, we~~


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:	(In thousands)
Securities available-for-sale	$	—	$	194,352	$	—	$	194,352
Marketable equity securities		11,896		—		—		11,896
Interest rate swaps		—		1,692		—		1,692
Total assets	$	11,896	$	196,044	$	—	$	207,940

Liabilities:
Interest rate swaps	$	—	$	1,692	$	—	$	1,692

Assets Measured at Fair Value on a Non-recurring Basis.

We may also 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. There were no assets measured at fair value on a non-recurring basis at ~~September 30, 2017. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value~~March 31, 2022 or 2021.

Summary of ~~the related assets at September 30, 2016. Total losses represent the change in carrying value as a result~~Fair Values of ~~fair value adjustments related to assets still held at September 30, 2016.~~Financial Instruments.

At September 30, 2016 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
Total Total
Level 1 Level 2 Level 3 Gains (Losses) Gains (Losses)
(In thousands)
Impaired Loans $ — $ — $ 2,059 $ — $ (220 )

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 and nine months ended September 30, 2017 and 2016. We did not measure any liabilities at fair value on a 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, 2022
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	62,898	$	62,898	$	—	$	—	$	62,898
Securities held-to-maturity		237,575		9,520		210,759		—		220,279
Securities available-for-sale		173,910		—		173,910		—		173,910
Marketable equity securities		11,643		11,643		—		—		11,643
Federal Home Loan Bank of Boston and other restricted stock		2,594		—		—		2,594		2,594
Loans - net		1,906,977		—		—		1,882,419		1,882,419
Accrued interest receivable		7,723		—		—		7,723		7,723
Mortgage servicing rights		659		—		813		—		813
Derivative asset		2,812		—		2,812		—		2,812

Liabilities:
Deposits		2,278,164		—		—		2,275,572		2,275,572
Long-term debt		21,329		—		21,835		—		21,835
Accrued interest payable		168		—		—		168		168
Derivative liabilities		2,812		—		2,812		—		2,812


	December 31, 2021
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	103,456	$	103,456	$	—	$	—	$	103,456
Securities held-to-maturity		222,272		9,973		209,775		—		219,748
Securities available-for-sale		194,352		—		194,352		—		194,352
Marketable equity securities		11,896		11,896		—		—		11,896
Federal Home Loan Bank of Boston and other restricted stock		2,594		—		—		2,594		2,594
Loans - net		1,844,929		—		—		1,838,045		1,838,045
Accrued interest receivable		7,775		—		—		7,775		7,775
Mortgage servicing rights		693		—		739		—		739
Derivative asset		1,692		—		1,692		—		1,692

Liabilities:
Deposits		2,256,898		—		—		2,256,834		2,256,834
Long-term debt		22,286		—		23,099		—		23,099
Accrued interest payable		191		—		—		191		191
Derivative liabilities		1,692		—		1,692		—		1,692

September 30, 2017
Carrying Value Fair Value
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Cash and cash equivalents $ 28,900 $ 28,900 $ —   $ —   $ 28,900
Securities available-for-sale 297,919 6,406 291,513 —   297,919
Federal Home Loan Bank of Boston and other restricted stock 15,704 —   —   15,704 15,704
Loans - net 1,608,255 —   —   1,577,309 1,577,309
Accrued interest receivable 5,764 —   —   5,764 5,764
Mortgage servicing rights 380 —   380 —   380
Derivative assets 1 —   1 —   1

Liabilities:
Deposits 1,515,198 —   —   1,514,641 1,514,641
Short-term borrowings 192,465 —   192,482 —   192,482
Long-term debt 106,339 —   106,517 —   106,517
Accrued interest payable 394 —   —   394 394
Derivative liabilities 2,710 —   2,710 —   2,710

December 31, 2016
Carrying Value Fair Value
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Cash and cash equivalents $ 70,234 $ 70,234 $ —   $ —   $ 70,234
Securities available-for-sale 300,115 6,296 293,819 —   300,115
Federal Home Loan Bank of Boston and other restricted stock 16,124 —   —   16,124 16,124
Loans - net 1,556,416 —   —   1,525,274 1,525,274
Accrued interest receivable 5,782 —   —   5,782 5,782
Mortgage servicing rights 465 —   628 —   628

Liabilities:
Deposits 1,518,071 —   —   1,521,580 1,521,580
Short-term borrowings 172,351 —   172,351 —   172,351
Long-term debt 124,836 —   125,183 —   125,183
Accrued interest payable 1,012 —   —   1,012 1,012
Derivative liabilities 3,152 —   3,152 —   3,152

~~12.~~ 13. RECENT ACCOUNTING PRONOUNCEMENTS

In ~~May 2014,~~June 2016, 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. We do not expect the application of this guidance to have a material impact on our consolidated financial statements other than expanded disclosures regarding non-interests income.

~~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 due to the limited amounts of marketable equity securities owned by the Company.

~~In February 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 but does not expect adoption to have a material impact on our consolidated financial statements. As of September 30, 2017, the Company had $9.9 million of outstanding operating leases pertaining to banking premises, which would be recognized as assets and corresponding liabilities upon adoption.

~~In March 2016, the FASB issued ASU 2016-09,~~~~Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting~~ (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. The Company adopted this Update during the nine months ended September 30, 2017 which resulted in the recognition of $821,000 in income tax benefit that would have previously been recognized in additional paid in capital.

~~In June 2016, the FASB issued ASU No.~~ 2016-13,Financial Instruments—Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. This ASU, as amended, is effective for the Company in fiscal years beginning after December 15, ~~2019, and for interim periods within that fiscal years. Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.~~2022. The Company is in the process of ~~evaluating~~implementing the standard. We have put together a project team that has begun to identify appropriate loan segments along with related historical losses for each segment and potential models that would be most appropriate for each individual segment. We have not quantified the effects of any models, but do expect the standard to significantly change the approach to calculating our allowance for loan losses.

~~In August 2016, the FASB issued ASU No. 2016-15,~~~~Statement of Cash Flows~~ ~~(Topic 230),~~~~Classification of Certain Cash Receipts and Cash Payments~~. This Update provides guidance on eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; separately identifiable cash flows and application of the predominance principle. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. We do not expect the application of this guidance to have a material impact on our consolidated financial statements.

~~In March 2017, the FASB issued ASU No. 2017-08—~~~~Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20)~~:~~Premium Amortization on Purchased Callable Debt Securities~~. This Update amends guidance on the amortization period of premiums on certain purchased callable debt securities. Specifically, the amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We do not expect the application of this guidance to have a material impact on our consolidated financial statements.

~~In August 2017, the FASB issued ASU 2017-12,~~~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~(ASU 2017-12). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The Company plans to adopt ASU 2017-12 on January 1, 2018. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. While the Company continues to assess all potential impacts of the standard, we do not expect the application of this guidance to have a material impact on our consolidated financial statements.

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

~~Overview~~Overview.

We strive to remain a leader in meeting the financial service needs of ~~our~~the 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 real estate loans, commercial and industrial 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~~continues to focus on increasing commercial lending and residential lending. Our strategy also calls for increasing deposit relationships, specifically core deposits, 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~~Grow the Company’s commercial loan portfolio and ~~industrial and~~related commercial ~~real estate loan portfolios~~deposits by targeting businesses in our primary market ~~areas~~area of Hampden County and Hampshire County in western Massachusetts and Hartford and Tolland Counties in northern Connecticut ~~as a means~~ to increase the ~~yield on~~net interest margin and loan income;

●

Supplement the commercial portfolio by growing the residential real estate portfolio to diversify ~~our~~the loan portfolio and ~~build transactional deposit account~~deepen customer relationships;

●

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

●

~~supplement~~Invest in people, systems and technology to grow revenue, improve efficiency and enhance the ~~commercial focus, grow the residential loan portfolio to diversify risk and deepen~~overall customer ~~relationships.~~experience;

●

Grow revenues, increase book value and tangible book value per share, continue to pay competitive dividends to shareholders and utilize the Company’s stock repurchase plan to leverage our capital and enhance franchise value; and

●

Consider growth through acquisitions. We may pursue expansion opportunities in existing or adjacent strategic locations with companies that add complementary products to our existing business and at terms that add value to our existing shareholders.

You should read the following financial results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 in the context of this strategy. The third quarter financial results for 2016 reflect the pre-merger operations of the Company. As a result, the Company’s 2017 third quarter may not be comparable to financial results for the third quarter of 2016.

●

Net income was ~~$3.8~~$5.3 million, or ~~$0.13~~$0.24 per diluted share, for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$628,000,~~$5.8 million, or ~~$0.04~~$0.24 per diluted share, for the same period in 2016. For the nine months ended September 30, 2017, net income was $12.7 million, or $0.42 per diluted share, as compared to net income of $3.0 million, or $0.17 per diluted share, for the same period in 2016.2021.

●

The provision for loan losses ~~was $200,000 and $375,000~~decreased $500,000, from a provision for loan losses of $75,000 for the three months ended ~~September 30, 2017 and 2016, respectively, and $850,000 and $400,000~~March 31, 2021 to a credit for loan losses of $425,000 for the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2022. The ~~lower provision~~Company recorded net charge-offs of $54,000 for the ~~nine~~three months ended ~~September 30, 2016 was primarily~~March 31, 2022, as compared to net charge-offs of $5,000 for the ~~result~~three months ended March 31, 2021. The decrease in the provision versus comparative periods reflects management’s current assessment of ~~a $1.0 million partial recovery~~the impact of the COVID-19 pandemic on ~~a previously charged-off single commercial real estate~~the Bank’s loan ~~during the first quarter of 2016.~~portfolio.

●

Net interest income ~~was $14.8 million and $8.3~~increased $672,000, or 3.7%, to $18.7 million, for the three months ended ~~September 30, 2017 and 2016, respectively. The net interest margin, on a tax-equivalent basis, was 3.09%~~March 31, 2022, from $18.0 million for the three months ended ~~September 30, 2017, compared to 2.65% for the same period~~March 31, 2021. The increase in ~~2016. Net~~net interest income was ~~$44.0 million and $24.6 million for the nine months ended September 30, 2017 and 2016, respectively. The net~~due to a decrease in interest ~~margin,~~expense of $762,000, or 38.0%, primary due to a $742,000, or 42.8%, decrease in interest expense on ~~a tax-equivalent basis, was 3.09% and 2.62% for the nine months ended September 30, 2017 and 2016, respectively.~~deposits.

CRITICAL ACCOUNTING ~~POLICIES~~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 ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2022. 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 ~~2016~~2021 Annual Report.

RECENT DEVELOPMENTS: CORONAVIRUS PANDEMIC RESPONSE AND ACTIONS.

The Company continues to monitor COVID-19’s impact on its business and customers, however, the extent to which COVID-19 will continue to impact its results and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures.

Our business is dependent upon the willingness and ability of our employees and customers to conduct banking and other financial transactions. The COVID-19 global public health crisis and the resulting “stay-at-home” orders resulted in widespread volatility, severe disruptions in the U.S. economy at large, and for small businesses in particular, deterioration in household, business, economic and market conditions.

Paycheck Protection Program.

As a Preferred Lender with the Small Business Administration (“SBA”), the Company was in a position to react quickly to the PPP component of the March 27, 2020 $2.2 trillion fiscal stimulus bill known as the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) launched by the U.S. Department of the Treasury and the SBA. An eligible business was able to apply for a PPP loan up to the lesser of: (1) 2.5 times its average monthly “payroll costs,” or (2) $10.0 million. PPP loans have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity, subsequently extended to a five-year loan term maturity for loans granted on or after June 5, 2020 and (c) principal and interest payments deferred from six months to ten months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses. As of March 31, 2022, the Company received funding approval from the SBA for 2,146 applications totaling $302.2 million. As of March 31, 2022, the Company processed 2,093 PPP loan forgiveness applications totaling $296.1 million. Total PPP loans decreased $19.3 million, or 76.3%, from $25.3 million at December 31, 2021 to $6.1 million at March 31, 2022.

During the three months ended March 31, 2022, the Company recognized $562,000 in PPP income, compared to $2.4 million during the three months ended March 31, 2021. As of March 31, 2022, the Company had $255,000 in remaining deferred PPP loan processing fees.

The table below breaks out the PPP income recognized for the periods noted:

	For the Three Months Ended
	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
	($ in thousands)

PPP origination fee income	$	526	$	868	$	1,556	$	1,240	$	1,999
PPP interest income		36		105		201		387		412
Total PPP Income	$	562	$	973	$	1,757	$	1,627	$	2,411

Loan Modifications/Troubled Debt Restructurings.

The banking regulatory agencies, through an Interagency Statement dated April 7, 2020, have encouraged financial institutions to work “prudently” with borrowers who request loan modifications or deferrals as a result of the economic impacts of COVID-19. Pursuant to Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. Financial institutions can then suspend the requirements under U.S. GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting under U.S. GAAP. The Company has adopted this policy election to address COVID-19 loan modification requests that have been received from the earlier of either January 1, 2022 or the 60^th day after the end of the COVID-19 national emergency.

The Company implemented a modification deferral program under the CARES Act, which allowed residential, commercial and consumer borrowers who were adversely affected by the COVID-19 pandemic, to defer loan payments for a set period of time. As of March 31, 2022, the Company had two remaining commercial real estate loans, with an outstanding principal balance of $12.1 million, under CARES Act modification. The two borrowers were granted a principal deferral under the Company’s modification deferral program, but continue to make their interest and real estate tax payments. There were no outstanding deferrals related to residential and consumer loans under CARES modification as of March 31, 2022.

Allowance for Loan Losses.

In determining the allowance for loan losses, the Company considers quantitative loss factors and a number of qualitative factors, such as underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral and the financial strength of the borrower. The ongoing COVID-19 pandemic could cause us to experience higher credit losses in our lending portfolio, reduce demand for our products and services and other negative impacts on our financial position, results of operations and prospects. As of March 31, 2022, the Company’s delinquency and nonperforming assets have not been materially impacted by the COVID-19 pandemic, and therefore, have not resulted in material credit losses within the lending portfolio.

The Company is continuing to monitor COVID-19’s impact on its business and its customers, however, the extent to which COVID-19 will further impact its results and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures.

COMPARISON OF FINANCIAL CONDITION AT ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND DECEMBER 31, ~~2016~~2021

~~Total~~At March 31, 2022, total assets were ~~$2.1~~$2.6 billion, ~~at September 30, 2017 and~~an increase of $17.0 million, or 0.7%, from December 31, ~~2016. A slight increase in total assets of $10.4~~2021. During the three months ended March 31, 2022, cash and cash equivalents decreased $40.6 million, or ~~0.5%~~39.2%, ~~was primarily due~~ to $62.9 million, investment securities decreased $5.4 million, or 1.3%, to $423.1 million and total loans, excluding PPP loans, increased $80.8 million, or 4.4%, to $1.9 billion.

At March 31, 2022, the Company’s available-for-sale securities portfolio decreased $20.4 million, or 10.5%, from $194.4 million at December 31, 2021 to $173.9 million at March 31, 2022. The held-to-maturity securities portfolio, recorded at amortized cost, increased $15.3 million, or 6.9%, from $222.3 million at December 31, 2021 to $237.6 million at March 31, 2022. The Company allocated a portion of its excess liquidity to the investment portfolio as an alternative to cash and cash equivalents. This shift from overnight investments to held-to-maturity securities will assist the Company with managing the yield on interest-earning assets in the low interest rate environment that we are experiencing while providing ongoing cash flows from payments and pay downs. The primary objective of the investment portfolio is to provide liquidity and maximize income while preserving the safety of principal.

At March 31, 2022, total loans were $1.9 billion, an increase of $61.6 million, or 3.3%, from December 31, 2021. Excluding PPP loans, total loans increased $80.8 million, or 4.4%, driven by an increase in ~~total~~commercial real estate loans of ~~$52.3~~$59.5 million, or ~~3.3%~~6.1%, partially offset by a decrease in ~~cash and cash equivalents of $41.3 million, or 58.8%, and a decrease in investments of $2.6 million, or 0.8%.~~

Total loans of $1.6 billion increased $52.3 million, or 3.3%, at September 30, 2017, from $1.6 billion at December 31, 2016. The increase was due to a $33.9 million, or 5.5%, increase in residential loans, including home equity loans, an increase of $22.1 million, or 9.9%, intotal commercial and industrial loans ~~partially offset by~~of $10.7 million, or 4.7%. Excluding a decrease of ~~$3.9~~$19.3 million in PPP loans from December 31, 2021, commercial and industrial loans increased $8.6 million, or ~~0.5%~~4.2%, ~~in commercial~~at March 31, 2022. Residential real estate ~~loans. The decrease in~~loans, which include home equity loans, increased $12.4 million, or 1.9%. In accordance with the ~~commercial~~Company’s asset/liability management strategy, during the three months ended March 31, 2022, the Company sold $277,000 of fixed rate, low coupon residential real estate ~~portfolio was largely related~~loans to the ~~expected payoff~~secondary market. As of ~~a $7.5~~March 31, 2022, the Company serviced $85.5 million ~~completed commercial real estate construction project during first quarter 2017.~~in loans sold to the secondary market, compared to $88.2 million at December 31, 2021. Servicing rights will continue to be retained on all loans written and sold to the secondary market.

All loans where the payments are 90 days or more in arrears as of the closing date of each month are placed on nonaccrual status. ~~Nonperforming loans were $13.2 million at September 30, 2017 and $14.1 million at December 31, 2016.~~ If all nonaccrual loans had been performing in accordance with their terms, we would have earned additional interest income of ~~$580,000~~$60,000 and ~~$371,000~~$80,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

At ~~September 30, 2017, we had $103,000 in other real estate owned (“OREO”). At September 30, 2017 and~~March 31, 2022, nonperforming loans totaled $4.0 million, or 0.21% of total loans, compared to $5.0 million, or 0.27% of total loans, at December 31, ~~2016, our nonperforming~~2021. At March 31, 2022, there were no loans ~~to total loans were 0.81%~~90 or more days past due and ~~0.90%, respectively, while our nonperforming~~still accruing interest. Nonperforming assets to total assets, ~~were 0.64% and 0.69%~~was 0.16% at March 31, 2022, compared to 0.20% at December 31, 2021. The allowance for loan losses as a percentage of total loans, was 1.00% at March 31, 2022, compared to 1.06% at December 31, 2021. At March 31, 2022, the allowance for loan losses as a percentage of nonperforming loans was 484.2%, ~~respectively.~~compared to 398.6%, at December 31, 2021. A summary of our ~~nonaccrual~~past due and ~~past due~~nonaccrual loans by class are listed in Note 5 of the accompanying unaudited consolidated financial statements.

~~During the three months ended~~At March 31, 2017, management completed an evaluation of premises and equipment acquired from Chicopee, which resulted in a $2.4 million adjustment to the provisional fair values of bank premises acquired and a $1.4 million reduction to goodwill. The remaining adjustments to goodwill of $140,000 during the three months ended March 31, 2017 resulted from information obtain during the quarter about events and circumstances that existed as of the acquisition date. There were no adjustments to goodwill during the three months ended September 30, 2017.

~~At September 30, 2017,~~2022, total deposits were $2.3 billion, an increase of ~~$1.5 billion decreased $2.9~~$21.3 million, or ~~0.2%~~0.9%, from December 31, ~~2016. Savings accounts decreased $5.2~~2021, primarily due to an increase in core deposits of $44.2 million, or 3.5%, to $144.3 million. Time deposits decreased $6.3 million, or 1.1%, from $572.9 million at December 31, 2016 to $566.7 million at September 30, 2017. The decrease in time deposits was due to non-relationship customers and brokered deposits seeking higher yields. We are focused on allowing high cost non-relationship deposits to mature and be replaced with low cost relationship-based core deposits.2.4%. Core deposits, ~~defined~~which the Company defines as all deposits except time deposits, ~~represented 62.6%~~increased to $1.9 billion and were 83.4% and 82.2% of total deposits at March 31, 2022 and ~~increased $3.4~~December 31, 2021, respectively. Non-interest-bearing deposits decreased $11.1 million, or ~~0.4%~~1.7%, to $630.2 million, interest-bearing checking accounts decreased $6.4 million, or 4.4%, to $139.3 million, savings accounts increased $7.0 million, or 3.2%, to $224.6 million, and money market accounts increased $54.7 million, or 6.4%, to $905.1 million. Time deposits decreased $23.0 million, or 5.7%, from ~~$945.1~~$402.0 million at December 31, ~~2016~~2021 to ~~$948.5~~$379.0 million at ~~September 30, 2017. Non-interest bearing~~March 31, 2022. The Company did not have any brokered deposits ~~increased $4.9~~at March 31, 2022 or December 31, 2021.

At March 31, 2022, total borrowings decreased $1.0 million, or ~~1.6%~~4.5%, ~~to $308.9 million, money market accounts increased $3.4 million, or 0.8%, to $412.7 million, and interest-bearing checking accounts increased $228,000, or 0.3%, to $82.6 million.~~

~~Borrowings increased $1.6 million, or 0.5%, to $298.8 million at September 30, 2017~~ from ~~$297.2~~$22.3 million at December 31, ~~2016. Short-term borrowings increased $20.1~~2021, to $21.3 million. FHLB advances decreased $1.0 million, or ~~11.7%~~36.5%, to ~~$192.5~~$1.7 million and subordinated debt outstanding totaled $19.6 million at ~~September 30, 2017 from $172.4 million~~March 31, 2022 and at December 31, ~~2016 due to an increase in short-term FHLBB funding. Long-term debt decreased $18.5~~2021.

At March 31, 2022, shareholders’ equity was $219.1 million, or ~~14.8%, to $106.3 million at September 30, 2017 from $124.8 million at December 31, 2016.~~

~~Shareholders’ equity was $252.6 million, or 12.1%~~8.6% of total assets, ~~at September 30, 2017 and $238.4~~compared to $223.7 million, or ~~11.5%~~8.8% of total assets, at December 31, ~~2016.~~2021. The ~~increase~~decrease in shareholders’ equity ~~during the nine months~~ reflects ~~net income of $12.7~~$1.2 million ~~the exercise of stock options~~ for ~~$5.7 million and other comprehensive income of $3.2 million. These increases were offset by~~ the repurchase of the Company’s common stock, ~~for $5.7 million and~~ the payment of regular cash dividends of ~~$2.7~~$1.3 million and an increase in accumulated other comprehensive loss of $8.4 million, partially offset by net income of $5.3 million. Total shares outstanding as of March 31, 2022 were 22,742,189.

The Company’s book value per share was $9.63 at March 31, 2022 compared to $9.87 at December 31, 2021, while tangible book value per share, a non-GAAP financial measurement, decreased $0.24, or 2.6%, from $9.21 at December 31, 2021 to $8.97 at March 31, 2022. AOCI reduced the tangible book value per common share by $0.37 as of March 31, 2022, primarily due to the impact of higher interest rates on the fair value of available-for-sale securities. As of March 31, 2022, the Company’s and the Bank’s regulatory capital ratios continued to exceed the levels required to be considered “well-capitalized” under federal banking regulations. See “Explanation of Use of Non-GAAP Financial Measurements” for more information regarding our uses of non-GAAP financial measurements.

The Company’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements and internal target minimal levels. At March 31, 2022, the ~~nine months ended September 30, 2017.~~Company’s Tier 1 leverage, common equity tier 1 capital, and total risk-based capital ratios were 8.9%, 11.9%, and 14.0%, respectively, and the Bank’s Tier 1 leverage, common equity tier 1 capital, and total risk-based capital ratios were 9.1%, 12.1%, and 13.1%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 6.5%, and 10.00%, respectively.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND ~~SEPTEMBER 30, 2016~~MARCH 31, 2021

~~General~~General.

Net income was ~~$3.8~~$5.3 million, or ~~$0.13~~$0.24 per diluted share, for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$628,000,~~$5.8 million, or ~~$0.04~~$0.24 per diluted share, for the same period in ~~2016.~~2021. Net interest income was ~~$14.8~~$18.7 million and ~~$8.3~~$18.0 million for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

Net Interest and Dividend ~~Income~~Income.

The following tables set forth the information relating to our average balance and net interest income for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, 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 annualized interest income by the average balance of interest-earning assets and annualized 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 September 30,
2017 2016
Average Average
Yield/ Average Average
Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans⁽¹⁾⁽²⁾ $ 1,605,376 $ 16,681 4.16 % $ 932,140 $ 9,168 3.93 %
Securities⁽²⁾ 302,030 1,901 2.52 296,406 1,709 2.31
Other investments 17,748 172 3.88 12,728 130 4.09
Short-term investments⁽³⁾ 5,206 11 0.85 17,380 14 0.32
Total interest-earning assets 1,930,360 18,765 3.89 1,258,654 11,021 3.50
Total non-interest-earning assets 141,119 79,032
Total assets $ 2,071,479 $ 1,337,686

LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking accounts $ 82,164 81 0.39 $ 31,194 24 0.31 %
Savings accounts 148,433 43 0.12 75,566 20 0.11
Money market accounts 400,400 386 0.39 278,257 293 0.42
Time deposit accounts 568,578 1,601 1.13 383,288 1,245 1.30
Total interest-bearing deposits 1,199,575 2,111 0.70 768,305 1,582 0.82
Short-term borrowings and long-term debt 301,715 1,609 2.13 229,718 1,067 1.86
Interest-bearing liabilities 1,501,290 3,720 0.99 998,023 2,649 1.06
Non-interest-bearing deposits 300,757 177,802
Other non-interest-bearing liabilities 16,147 16,261
Total Non-interest-bearing liabilities 316,904 194,063

Total liabilities 1,818,194 1,192,086
Total equity 253,285 145,601
Total liabilities and equity $ 2,071,479 $ 1,337,687
Less: Tax-equivalent adjustment⁽²⁾ (249 ) (44 )
Net interest and dividend income $ 14,796 $ 8,328
Net interest rate spread⁽⁴⁾ 2.90 % 2.44 %
Net interest margin⁽⁵⁾ 3.09 % 2.65 %
Ratio of average interest-earning assets to average interest-bearing liabilities 128.58 % 126.11 %

	Three Months Ended March 31,
	2022								2021
	Average					Average Yield/			Average					Average Yield/
	Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans⁽¹⁾⁽²⁾	$	1,894,870	$	18,067			3.87	%	$	1,923,477	$	19,220			4.05	%
Securities⁽²⁾		423,437		1,950			1.87			227,330		854			1.52
Other investments - at cost		10,595		25			0.96			9,663		35			1.47
Short-term investments⁽³⁾		57,030		21			0.15			95,004		24			0.10
Total interest-earning assets		2,385,932		20,063			3.41			2,255,474		20,133			3.62
Total non-interest-earning assets		143,635								144,588
Total assets	$	2,529,567							$	2,400,062

LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking accounts	$	132,192		95			0.29	%	$	90,503	$	105			0.47	%
Savings accounts		218,448		36			0.07			187,217		37			0.08
Money market accounts		878,393		521			0.24			675,662		653			0.39
Time deposits		389,063		340			0.35			567,102		939			0.67
Total interest-bearing deposits		1,618,096		992			0.25			1,520,484		1,734			0.46
Short-term borrowings and long-term debt		21,975		253			4.67			52,670		273			2.10
Interest-bearing liabilities		1,640,071		1,245			0.31			1,573,154		2,007			0.52
Non-interest-bearing deposits		633,082								561,581
Other non-interest-bearing liabilities		32,857								38,360
Total non-interest-bearing liabilities		665,939								599,941

Total liabilities		2,306,010								2,173,095
Total equity		223,557								226,967
Total liabilities and equity	$	2,529,567							$	2,400,062
Less: Tax-equivalent adjustment⁽²⁾				(120	)							(100	)
Net interest and dividend income			$	18,698							$	18,026
Net interest rate spread⁽⁴⁾							3.08	%							3.08	%
Net interest rate spread, on a tax equivalent basis⁽⁵⁾							3.10	%							3.10	%
Net interest margin⁽⁶⁾							3.18	%							3.24	%
Net interest margin, on a tax equivalent basis⁽⁷⁾							3.20	%							3.26	%
Ratio of average interest-earning assets to average interest-bearing liabilities							145.48	%							143.37	%

(1)

Loans, including ~~non-accrual~~nonaccrual loans, are net of deferred loan origination costs and unadvanced funds.

(2)

~~Securities~~Loan and ~~loan~~securities income are presented on a tax-equivalent basis using a tax rate of ~~35% for the 2017 period and 34% for the 2016 period.~~21%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported inon the ~~unaudited~~ consolidated statements of net 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 rate spread, on a tax-equivalent basis, represents the difference between the tax-equivalent weighted average yield on interest-earning assets and the tax-equivalent weighted average cost of interest-bearing liabilities.

(6)

Net interest margin represents net interest and dividend income as a percentage of average interest-earning assets.

(7)

Net interest margin, on a tax-equivalent basis, represents tax-equivalent net interest and dividend income as a percentage of average ~~interest earning~~interest-earning assets. See “Explanation of Use of Non-GAAP Financial Measurements”.

Rate/Volume Analysis.

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 and dividend income and interest expense during the periods indicated. Information is provided in each category with respect to: (1) interest income changes attributable to changes in volume (changes in volume multiplied by prior rate); (2) interest income changes attributable to changes in rate (changes in rate multiplied by prior volume); and (3) the net change.

●

~~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 September 30, 2017 compared to Three Months Ended September 30, 2016									Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Net			Volume			Rate			Net
Interest-earning assets	(In thousands)									(In thousands)
Loans⁽¹⁾	$	6,622		$	891		$	7,513		$	(286	)	$	(867	)	$	(1,153	)
Securities⁽¹⁾		32			160			192			737			359			1,096
Other investments		51			(9	)		42
Other investments - at cost											3			(13	)		(10	)
Short-term investments		(10	)		7			(3	)		(10	)		7			(3	)
Total interest-earning assets		6,695			1,049			7,744			444			(514	)		(70	)

Interest-bearing liabilities
Interest-bearing checking accounts		39			18			57			48			(58	)		(10	)
Savings accounts		19			4			23			6			(7	)		(1	)
Money market accounts		129			(36	)		93			196			(328	)		(132	)
Time deposit accounts		602			(246	)		356
Time deposits											(295	)		(304	)		(599	)
Short-term borrowing and long-time debt		334			208			542			(159	)		139			(20	)
Total interest-bearing liabilities		1,123			(52	)		1,071			(204	)		(558	)		(762	)
Change in net interest and dividend income⁽¹⁾	$	5,572		$	1,101		$	6,673		$	648		$	44		$	692

(1)

Securities, loan income and change in net interest and dividend income are presented on a tax-equivalent basis using a tax rate of ~~35%~~21%. The tax-equivalent adjustment is deducted from tax-equivalent net interest income.

Net interest ~~and dividend~~ income increased ~~$6.5 million,~~$672,000, or ~~78.3%~~3.7%, to ~~$14.8~~$18.7 million for the three months ended ~~September 30, 2017, compared to $8.3~~March 31, 2022, from $18.0 million for the three months ended ~~September 30, 2016.~~March 31, 2021. The increase ~~reflected~~in net interest income was due to a ~~$7.5~~decrease in interest expense of $762,000, or 38.0%, primary due to a $742,000, or 42.8%, decrease in interest expense on deposits. Excluding PPP income, interest income increased $1.8 million, or ~~68.2%~~10.0%, ~~increase in interest income as average interest-earning assets increased $671.7 million, or 53.4%,~~from the three months ended March 31, 2021 to the three months ended March 31, 2022 primarily due to higher investment and loan ~~growth as a result of the merger. The yield on interest-earning assets increased 39 basis points from 3.50%~~income.

Net interest income for the three months ended ~~September 30, 2016~~March 31, 2022 included PPP income of $562,000, compared to ~~3.89%~~$2.4 million for the three months ended ~~September 30, 2017.~~

~~For~~March 31, 2021. During the three months ended ~~September 30, 2017,~~March 31, 2022 interest ~~expense~~income included $39,000 in positive purchase accounting adjustments, compared to $45,000 in negative purchase accounting adjustments during the three months ended March 31, 2021. Net interest income as adjusted for the preceding items increased ~~$1.1~~$2.4 million, or ~~42.3%~~15.6%, from $15.7 million during the three months ended March 31, 2021, to $18.1 million during the three months ended March 31, 2022.

The net interest margin was 3.18% for the three months ended March 31, 2022, compared to 3.24%, for the three months ended March 31, 2021. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended March 31, 2022, compared to 3.26% for the three months ended March 31, 2021. Excluding the adjustments discussed above, the net interest margin increased six basis points from 3.04% for the three months ended March 31, 2021 to 3.10% for the three months ended March 31, 2022. The Company’s net interest margin was positively impacted by higher average balances for loans and securities and a decrease in lower yielding interest-earning assets.

The loan yield decreased 19 basis points from 4.03% for the three months ended March 31, 2021 to 3.84% for the three months ended March 31, 2022. Excluding PPP loans and purchase accounting adjustments, the average loan yield decreased 13 basis points from 3.87% for the three months ended March 31, 2021 to 3.74% for the three months ended March 31, 2022. The average yield on interest-earning assets decreased 21 basis points from 3.60% for the three months ended March 31, 2021 to 3.39% for the three months ended March 31, 2022.

During the three months ended March 31, 2022, average interest-earning assets increased $130.5 million, or 5.8%, to $2.4 billion compared to the three months ended ~~September 30, 2016. During the same period, interest-bearing liabilities increased $431.3~~March 31, 2021. The increase was primarily due to an increase in average securities of $197.0 million, or ~~56.1%, while non-interest bearing liabilities, such as demand accounts,~~83.1%. Excluding the $151 million decrease in average PPP loans, average loans increased ~~$123.0~~$122.9 million, or ~~69.2%. The net interest margin of 3.09% for~~7.0%, from the three months ~~ending September 30, 2017 increased 44 basis points, compared~~ended March 31, 2021 to ~~2.65%~~the three months ended March 31, 2022. Total average loans, excluding average PPP loans, were 78.8% of total average interest-earning assets for the three months ended ~~September 30, 2016. The~~March 31, 2022, compared to 77.9% for the three months ended ~~September 30, 2017 include amortization~~March 31, 2021.

During the three months ended March 31, 2022, the average cost of ~~purchase accounting adjustments related to the Chicopee acquisition, which increased net interest income by $448,000. Excluding these items, net interest margin~~funds, including non-interest bearing demand accounts and borrowings, decreased 16 basis points, from 0.38% for the ~~third quarter~~three months ended March 31, 2021 to 0.22% for the three months ended March 31, 2022. The average cost of ~~2017 would have been 3.00%.~~core deposits, including non-interest bearing demand deposits, decreased 7 basis points from 0.21% for the three months ended March 31, 2021 to 0.14% for the three months ended March 31, 2022. The average cost of time deposits decreased 32 basis points from 0.67% for the three months ended March 31, 2021 to 0.35% for the three months ended March 31, 2022, while the average cost of borrowings increased from 2.10% for the three months ended March 31, 2021 to 4.67% for the three months ended March 31, 2022. Average demand deposits, an interest-free source of funds, increased $71.5 million, or 12.7%, from $561.6 million, or 27.0% of total average deposits, for the three months ended March 31, 2021 to $633.1 million, or 28.1%, of total average deposits, for the three months ended March 31, 2022.

Provision for Loan ~~Losses~~Losses.

The provision 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~~ provision for loan losses during the three months ended September 30, 2017 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio primarily includes an increase in residential loans and a higher level of net charge-offs. After evaluating all factors, we recordeddecreased $500,000, from a provision for loan losses of ~~$200,000~~$75,000 for the three months ended ~~September 30, 2017, compared~~March 31, 2021 to ~~$375,000~~a credit for ~~the same period in 2016. The allowance was $10.5 million, or 0.65%~~loan losses of ~~total loans, and $10.1 million, or 0.64% of total loans, at September 30, 2017 and December 31, 2016, respectively.~~

~~For~~$425,000 for the three months ended ~~September 30, 2017,~~March 31, 2022. The Company recorded net charge-offs ~~were $100,000. This was comprised~~ of ~~$211,000 in charge-offs, partially offset by recoveries of $111,000.~~

~~For~~$54,000 for the three months ended ~~September 30, 2016,~~March 31, 2022, as compared to net charge-offs ~~were $18,000. This was comprised~~ of ~~$86,000~~$5,000 for the three months ended March 31, 2021. The decrease in ~~charge-offs, partially offset~~the provision versus comparative periods reflected management’s current assessment of the impact of the COVID-19 pandemic on the Bank’s loan portfolio. Management continues to assess the exposure of the Company’s loan portfolio to the COVID-19 pandemic, economic trends and their potential effect on asset quality. As of March 31, 2022, the Company’s delinquencies and nonperforming assets had not been materially impacted by ~~recoveries of $68,000.~~the COVID-19 pandemic.

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. If the COVID-19 pandemic has an adverse effect on the ability of our borrowers to satisfy their obligations to us, the demand for our loans or our other products and services, other aspects of our business operations, or on financial markets, real estate markets, or economic growth, this could, depending on the extent of the loan defaults, materially and adversely affect our liquidity and financial condition and our results of operations could be materially and adversely affected.

Non-Interest Income.

Non-interest ~~Income~~

~~For the three months ended September 30, 2017, non-interest~~ income ~~of $2.4 million increased $1.1 million,~~decreased $656,000, or ~~84.6%~~21.8%, ~~compared~~ to ~~$1.3~~$2.3 million for the three months ended September 30, 2016. The increase was primarily due to the merger with Chicopee. The increase was primarily driven by an increase in service charges and fee income of $761,000, or 79.9%, an increase in other income of $111,000, an increase of $81,000, or 22.0%, in incomeMarch 31, 2022, from ~~bank-owned life insurance and an increase of $48,000 in gains on sales of securities.~~

~~Non-interest Expense~~

~~For the three months ended September 30, 2017, non-interest expense of $11.2 million increased~~ $3.0 ~~million, or 36.6%, from $8.2~~ million for the three months ended ~~September 30, 2016.~~March 31, 2021. The ~~increase was~~three months ended March 31, 2021, included a gain on non-marketable equity investments of $546,000. Service charges and fees on deposits increased $291,000, or 15.5%, and income from bank-owned life insurance increased $7,000, or 1.6%, from $441,000 for the three months ended March 31, 2021 to $448,000, for the three months ended March 31, 2022. Income from mortgage banking activities decreased $225,000, or 99.1%, and other income decreased $54,000. During the three months ended March 31, 2022, unrealized losses on marketable equity securities were $276,000, compared to unrealized losses of $89,000 during the three months ended March 31, 2021. During the three months ended March 31, 2022, the Company reported realized losses on the sale of securities of $4,000, compared to realized losses of $62,000 during the three months ended March 31, 2021.

Non-Interest Expense.

For the three months ended March 31, 2022, non-interest expense increased $1.1 million, or 8.5%, to $14.5 million from $13.3 million, for the three months ended March 31, 2021. Salaries and employee benefits expense increased $638,000, or 8.4%, to $8.2 million, primarily due to ~~a $2.4 million, or 58.5%, increase in salaries and benefits due to the addition of the Chicopee staff and normal~~annual merit increases ~~that typically occur during the first quarter of each year. Occupancy~~and benefit costs. Other non-interest expense increased ~~$336,000,~~$280,000, or ~~60.5%~~13.7%, ~~due to the acquisition of the Chicopee branches,~~occupancy expense increased $74,000, or 5.7%, furniture and equipment increased $53,000, or 10.8%, professional fees increased $33,000, or 6.1%, advertising expenses increased $61,000, or 18.0%, and data processing ~~expense increased $276,000, or 68.3%, while merger~~ related expenses increased $2,000, or 0.3%. FDIC insurance expense decreased ~~$830,000.~~$12,000, or 4.0%. The increase to non-interest expense reflects generally higher level of expenses associated with operating a larger financial institution, which include additional employees, increased costs for data processing, occupancy, and professional services. Although there are overall added expenses, the merger provided the opportunity to achieve greater economies of scale as reflected in the improvement in the efficiency ratio ~~from 76.6%~~was 68.7% for the three months ended March 31, 2022, compared to 63.4% for the three months ended March 31, 2021. The adjusted efficiency ratio, a non-GAAP financial measure, was 67.8% for the three months ended March 31, 2022, compared to 64.6% for the three months ended March 31, 2021. The adjusted efficiency ratio is a non-GAAP measure. See “Explanation of Use of Non-GAAP Financial Measurements” for the related efficiency ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.

Income Taxes.

Income tax expense for the three months ended March 31, 2022 was $1.7 million, or an effective tax rate of 24.2%, compared to $1.8 million, or an effective tax rate of 24.1%, for the three months ended ~~September 30, 2016,~~March 31, 2021.

Explanation of Use of Non-GAAP Financial Measurements.

We believe that it is common practice in the banking industry to ~~65.4% for the three months ended September 30, 2017.~~

~~Income Taxes~~

For the three months ended September 30, 2017, we had a tax provision of $2.0 million as compared to $423,000 for the same period in 2016. The effective tax rate was 34.8% for the three months ended September 30, 2017 and 40.2% for the same period in 2016. The three months ended September 30, 2017 include higher levels of pre-tax income as a result of the merger, while the comparable 2016 period includes nondeductible merger expenses of $691,000.

~~COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016~~

~~General~~

~~Net income was $12.7 million, or $0.42 per diluted share, for the nine months ended September 30, 2017, compared to $3.0 million, or $0.17 per diluted share, for the same period in 2016. Net~~present interest income ~~was $44.0 million~~ and ~~$24.6 million for~~related yield information on tax-exempt loans and securities on a tax-equivalent basis, as well as presenting tangible book value per share and adjusted efficiency ratio, and that such information is useful to investors because it facilitates comparisons among financial institutions. However, the ~~nine months ended September 30, 2017 and 2016, respectively.~~

~~Net Interest and Dividend Income~~

~~The following tables set forth the information relating to our average balance and net~~adjustment of interest income ~~for the nine months ended September 30, 2017~~ and 2016, 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. 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 earnedyields on tax-exempt ~~assets is adjusted~~loans and securities to a tax-equivalent ~~basis~~amount, as well as the presentation of tangible book value per share and adjusted efficiency ratio, may be considered to ~~recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets.~~include financial information that is not in compliance with GAAP. A reconciliation from GAAP to non-GAAP is provided below.

	Three Months Ended
	March 31, 2022						December 31, 2021						March 31, 2021
	(Dollars in thousands)
				Average Yield						Average Yield						Average Yield
Loans (no tax adjustment)	$	17,947			3.84	%	$	18,089			3.88	%	$	19,120			4.03	%
Tax-equivalent adjustment ⁽¹⁾		120						108						100
Loans (tax-equivalent basis)	$	18,067			3.87	%	$	18,197			3.90	%	$	19,220			4.05	%

Securities (no tax adjustment)	$	1,950			1.87	%	$	1,763					$	854			1.52	%
Tax-equivalent adjustment ⁽¹⁾		—						1						—
Securities (tax-equivalent basis)	$	1,950			1.87	%	$	1,764			1.74	%	$	854			1.52	%

Net interest income (no tax adjustment)	$	18,698					$	18,582					$	18,026
Tax-equivalent adjustment ⁽¹⁾		120						109						100
Net interest income (tax-equivalent basis)	$	18,818					$	18,691					$	18,126

Interest rate spread (no tax adjustment)		3.08	%					2.97	%					3.08	%
Net interest margin (no tax adjustment)		3.18	%					3.08	%					3.24	%
Net interest margin (tax-equivalent)		3.20	%					3.10	%					3.26	%


Net interest income (no tax adjustment)	$	18,698					$	18,582					$	18,026
Less:
Purchase accounting adjustments		39						(31	)					(45	)
Prepayment penalties and fees		21						21						35
PPP fee income		562						973						2,411
Adjusted net interest income (non-GAAP)	$	18,076					$	17,619					$	15,625

Average interest-earning assets	$	2,385,932					$	2,394,397					$	2,255,474
Average interest-earnings asset, excluding average PPP loans	$	2,370,852					$	2,352,858					$	2,088,910

Adjusted net interest margin, excluding purchase accounting adjustments, PPP fee income, prepayment penalties and average PPP loans (non-GAAP)		3.10	%					2.97	%					3.04	%

Book Value per Share (GAAP)	$	9.63					$	9.87					$	9.07
Non-GAAP adjustments:
Goodwill		(0.55	)					(0.55	)					(0.51	)
Core deposit intangible		(0.11	)					(0.11	)					(0.12	)
Tangible Book Value per Share (non-GAAP)	$	8.97					$	9.21					$	8.44

Income Before Income Taxes (GAAP)	$	7,015					$	8,215					$	7,628
(Credit) provision for loan losses		(425	)					300						75
Income Before Taxes and Provision (non-GAAP)	$	6,590					$	8,515					$	7,703

Nine Months Ended September 30,
2017 2016
Average
Balance Interest Average Yield/
Cost Average
Balance Interest Average Yield/
Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans⁽¹⁾⁽²⁾ $ 1,589,423 $ 49,202 4.13 % $ 875,325 $ 26,118 3.98 %
Securities⁽²⁾ 305,111 5,761 2.52 334,938 6,062 2.41
Other investments 17,665 501 3.78 14,703 398 3.61
Short-term investments⁽³⁾ 24,023 102 0.57 33,457 67 0.27
Total interest-earning assets 1,936,222 55,566 3.83 1,258,423 32,645 3.46
Total Non-interest-earning assets 137,775 77,626
Total assets $ 2,073,997 $ 1,336,049

LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking accounts $ 86,841 249 0.38 $ 31,353 64 0.27
Savings accounts 150,975 137 0.12 76,381 63 0.11
Money market accounts 398,400 1,150 0.38 264,354 785 0.40
Time deposit accounts 568,728 4,643 1.09 391,793 3,677 1.25
Total interest-bearing deposits 1,204,944 6,179 0.68 763,881 4,589 0.80
Short-term borrowings and long-term debt 302,254 4,579 2.02 250,462 3,329 1.77
Interest-bearing liabilities 1,507,198 10,758 0.95 1,014,343 7,918 1.04
Non-interest-bearing deposits 304,492 165,156
Other non-interest-bearing liabilities 13,774 15,273
Total non-interest-bearing liabilities 318,266 180,429

Total liabilities 1,825,464 1,194,772
Total equity 248,533 141,277
Total liabilities and equity $ 2,073,997 $ 1,336,049
Less: Tax-equivalent adjustment⁽²⁾ (766 ) (154 )
Net interest and dividend income $ 44,042 $ 24,573
Net interest rate spread⁽⁴⁾ 2.86 % 2.42 %
Net interest margin⁽⁵⁾ 3.09 % 2.62 %
Ratio of average interest-earning assets to average interest-bearing liabilities 128.47 % 124.06 %

	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
	(Dollars in thousands)

Efficiency Ratio:
Non-interest Expense (GAAP)	$	14,456		$	13,923		$	13,327

Net Interest Income (GAAP)	$	18,698		$	18,582		$	18,026

Non-interest Income (GAAP)	$	2,348		$	3,856		$	3,004
Non-GAAP adjustments:
Bank-owned life insurance death benefit		—			(555	)		—
Loss on securities, net		4			—			62
Unrealized loss on marketable equity securities		276			96			89
Gain on non-marketable equity investments		—			(352	)		(546	)
Non-interest Income for Adjusted Efficiency Ratio (non-GAAP)	$	2,628		$	3,045		$	2,609
Total Revenue for Adjusted Efficiency Ratio (non-GAAP)	$	21,326		$	21,627		$	20,635

Efficiency Ratio (GAAP)		68.69	%		62.05	%		63.37	%
Adjusted Efficiency Ratio (Non-interest Expense (GAAP)/Total Revenue for Adjusted Efficiency Ratio (non-GAAP))		67.79	%		64.38	%		64.58	%

(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~~The tax ~~rate of 35% for the 2017 period and 34% for the 2016 period. The tax-equivalent~~equivalent adjustment is ~~deducted from tax-equivalent net interest and dividend income to agree to the amount reported in the statements of net 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~~based upon 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);~~21% tax 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~~Liquidity and ~~rate have been allocated proportionately to the changes due to volume and the changes due to rate.~~Capital Resources.

Nine Months Ended September 30, 2017 compared to
Nine Months Ended September 30, 2016
Increase (Decrease) Due to
Volume Rate Net
Interest-earning assets (In thousands)
Loans⁽¹⁾ $ 21,307 $ 1,777 $ 23,084
Securities⁽¹⁾ (540 ) 239 (301 )
Other investments 80 23 103
Short-term investments (19 ) 54 35
Total interest-earning assets 20,828 2,093 22,921

Interest-bearing liabilities
Interest-bearing checking accounts 113 72 185
Savings accounts 62 12 74
Money market accounts 398 (33 ) 365
Time deposit accounts 1,661 (695 ) 966
Short-term borrowing and long-term debt 688 562 1,250
Total interest-bearing liabilities 2,922 (82 ) 2,840
Change in net interest and dividend income $ 17,906 $ 2,175 $ 20,081

~~(1)~~

Securities, loan income and change in net interest and dividend income are presented on a tax-equivalent basis using a tax rate of 35%. The tax-equivalent adjustment is deducted from tax-equivalent net interest income.

Net interest income was $44.0 million for the nine months ended September 30, 2017 and $24.6 million for the nine months ended September 30, 2016. The increase in net interest income was primarily due to the increase in interest and dividend income of $22.3 million, or 68.7%, partially offset by the increase in interest expense of $2.8 million, or 35.9%, from the nine months ended September 30, 2016. The net interest margin, on a tax-equivalent basis, was 3.09% and 2.62% for the nine months ended September 30, 2017 and 2016, respectively.

The average balance sheet comparison for the nine months ended September 30, 2016 to September 30, 2017 largely reflects the merger with Chicopee. Average interest-earning assets increased $677.8 million, or 53.9%, from $1.3 billion for the nine months ended September 30, 2016 to $1.9 billion for the nine months ended September 30, 2017. The increase in average interest-earning assets was due to a $714.1 million, or 81.6%, increase in average loans, partially offset by a $29.8 million, or 8.9%, decrease in average investments and a $9.4 million, or 28.2%, decrease in other interest-earning assets. The average balance of demand deposit accounts, an interest-free source of funds, increased $139.3 million, or 84.4%, for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.

The net interest margin increased 47 basis points, from 2.62% for the nine months ended September 30, 2016 to 3.09% for the nine months ended September 30, 2017. During the nine months ended September 30, 2017, amortization of purchase accounting adjustments related to the Chicopee acquisition increased net interest income by $1.4 million. Excluding these items, net interest margin for the nine months ended September 30, 2017 was 2.99%. The average asset yield increased from 3.46% for the nine months ended September 30, 2016 to 3.83% for the nine months ended September 30, 2017. The average cost of funds decreased 9 basis points from 1.04% for the nine months ended September 30, 2016 to 0.95% for the nine months ended September 30, 2017 primarily due to purchase accounting adjustments on time deposits and borrowings as well as the continuation of low market interest rates, which allowed us to renew or replace maturing time deposits at lower costs. The average cost of time deposits decreased 16 basis points, from 1.25% for the nine months ended September 30, 2016 to 1.09% for the nine months ended September 30, 2017. The average cost of borrowings increased 25 basis points, from 1.77% for the nine months ended September 30, 2016 to 2.02% for the nine months ended September 30, 2017. The increase in cost of funds in FHLB borrowings was primarily due to the increase in the Federal Funds target rate in December 2016, March 2017 and mid-June 2017.

~~Provision for Loan Losses~~

The amount that we provided for loan losses during the nine months ended September 30, 2017 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio for the nine months ended September 30, 2017, described in the comparison of financial condition, include increases in residential real estate loans and commercial and industrial loans as well as an increase in net charge-offs over the comparable period. After evaluating these factors, we recorded a provision for loan losses of $850,000 for the nine months ended September 30, 2017, compared to $400,000 for the same period in 2016. The allowance was $10.5 million, or 0.65% of total loans, at September 30, 2017 and $10.1 million, or 0.64% of total loans, at December 31, 2016.

For the nine months ended September 30, 2017, net charge-offs were $400,000. This was comprised of charge-offs of $706,000 for the nine months ended September 30, 2017, partially offset by recoveries of $306,000.

For the nine months ended September 30, 2016, net recoveries were $687,000. This was comprised of recoveries of $1.0 million for the nine months ended September 30, 2016, partially offset by charge-offs of $347,000. During the nine months ended September 30, 2016, we received a partial recovery of $1.0 million related to a single commercial real estate loan previously charged-off in 2010.

~~Non-interest Income~~

For the nine months ended September 30, 2017, non-interest income of $6.5 million increased $2.9 million, or 80.8%, compared to $3.6 million for the nine months ended September 30, 2016. The increase of $2.9 million was primarily due to an increase in service charges and fees of $2.1 million, or 77.6%, and an increase in income from bank-owned life insurance of $236,000, or 20.8%. The increase in non-interest income was primarily due to the merger with Chicopee. For the nine months ended September 30, 2017, wealth management fees of $404,000 earned by Westfield Financial Management Services, the Company’s investment management subsidiary, were included in service charges and fee income. Total assets under management increased to $111.7 million at September 30, 2017, compared to $91.6 million at December 31, 2016 due to positive market movements and additions from new and existing clients. Pre-tax realized gains on the sale of securities decreased $632,000, or 92.4%. Additionally, there was a $915,000 decrease on the prepayment of borrowings reported during the nine months ended September 30, 2016 as there were no such prepayments in 2017.

~~Non-interest Expense~~

For the nine months ended September 30, 2017, non-interest expense increased $10.1 million, or 43.5% to $33.4 million, or 2.15% of average assets, compared to $23.3 million, or 2.33% of average assets, for the nine months ended September 30, 2016. The increase in non-interest expense was primarily due to a $7.2 million, or 61.9%, increase in salaries and benefits due to the addition of the Chicopee staff and normal merit increases. Occupancy expense increased $1.1 million, or 64.4%, due to the acquisition of the Chicopee branches. Data processing expense increased $573,000, or 49.1%, from $1.2 million for the nine months ended September 30, 2016 to $1.7 million for the nine months ended September 30, 2017. Furniture and equipment increased $426,000, or 58.9%, from $723,000 for the nine months ended September 30, 2016 to $1.1 million for the nine months ended September 30, 2017. Advertising expense increased $265,000, or 38.1%, professional fees increased $202,000, or 11.8%, and other non-interest expense increased $1.7 million, or 56.4%. These increases were partially offset by a $1.3 million, or 67.3%, decrease in merger related expenses as well as a decrease in FDIC insurance expense of $128,000, or 21.5%. The increase to non-interest expense reflects generally higher level of expenses associated with operating a larger financial institution, which includes additional employees, increased costs for data processing, occupancy, and professional services. The merger provided the opportunity to achieve greater economies of scale as reflected in the improvement in the efficiency ratio from 75.3% for the nine months ended September 30, 2016 to 65.0% for the nine months ended September 30, 2017.

~~Income Taxes~~

For the nine months ended September 30, 2017, we had a tax provision of $3.6 million as compared to $1.5 million for the same period in 2016. The effective tax rate was 22.1% for the nine months ended September 30, 2017 and 33.4% for the same period in 2016. The 2017 period includes $1.8 million in tax benefits recorded on the reversal of a deferred tax valuation allowance and stock option exercises.

~~LIQUIDITY AND CAPITAL RESOURCES~~

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loan purchases, deposit 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 investment securities and funds provided by our operations. We also can borrow funds from the ~~FHLBB~~FHLB based on eligible collateral of loans and securities. Our ~~maximum additional~~material cash commitments include funding loan originations, fulfilling contractual obligations with third-party service providers, maintaining operating leases for certain of our Bank properties and satisfying repayment of our long-term debt obligations.

Primary Sources of Liquidity

At March 31, 2022 and December 31, 2021, outstanding borrowings from the FHLB were $1.7 million and $2.7 million, respectively. At March 31, 2022, we had $464.1 million in available borrowing capacity ~~from~~with the ~~FHLBB at September 30, 2017, was $132.0 million.~~ FHLB. We have the ability to increase our borrowing capacity with the FHLB by pledging investment securities or additional loans.

In addition, we have available lines of credit of ~~$4.0~~$15.0 million and $50.0 million with ~~Bankers Bank Northeast (“BBN”) and PNC Bank, respectively. The interest~~other correspondent banks. Interest rates on these lines are determined and reset on a daily basis by each respective bank.

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 September 30, 2017, we exceeded each of the applicable regulatory capital requirements. As of September 30, 2017, the most recent notification from the Office of Comptroller of the Currency categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized” the Bank 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 September 30, 2017March 31, 2022 and December 31, ~~2016~~2021, we did not have an outstanding balance under either of these lines of credit. In addition, we may enter into reverse repurchase agreements with approved broker-dealers. Reverse repurchase agreements are ~~also presented in the following table.~~agreements that allow us to borrow money using our securities as collateral.

Actual Minimum For Capital
Adequacy Purpose Minimum To Be Well
Capitalized
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
September 30, 2017
Total Capital(to Risk Weighted Assets):
Consolidated $ 257,936 15.76 % $ 130,935 8.00 % N/A N/A
Bank 247,801 15.18 130,610 8.00 $ 163,263 10.00 %
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 247,358 15.11 98,201 6.00 N/A N/A
Bank 237,223 14.53 97,958 6.00 130,610 8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated 247,358 15.11 73,651 4.50 N/A N/A
Bank 237,223 14.53 73,468 4.50 106,121 6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated 247,358 12.01 82,396 4.00 N/A N/A
Bank 237,223 11.53 82,313 4.00 102,891 5.00

December 31, 2016
Total Capital(to Risk Weighted Assets):
Consolidated $ 245,389 15.10 % $ 130,037 8.00 % N/A N/A
Bank 237,626 14.64 129,879 8.00 $ 162,349 10.00 %
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 235,261 14.47 97,528 6.00 N/A N/A
Bank 227,498 14.01 97,409 6.00 129,879 8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated 235,261 14.47 73,146 4.50 N/A N/A
Bank 227,498 14.01 73,057 4.50 105,527 6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated 235,261 12.19 77,187 4.00 N/A N/A
Bank 227,498 11.86 76,745 4.00 95,931 5.00

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 also obligated under agreements with the FHLB to repay borrowed funds and are obligated under leases for certain of our branches and equipment.

Maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of securities and prepayments 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.

The ~~following table summarizes~~Company’s primary activities are the origination of commercial real estate loans, commercial and industrial loans and residential real estate loans, as well as and the purchase of mortgage-backed and other investment securities. During the three months ended March 31, 2022 and 2021, we originated $149.4 million and $108.3 million in loans, respectively. We purchased securities totaling $20.6 million for the three months ended March 31, 2022 and $79.8 million for the three months ended March 31, 2021. At March 31, 2022, the Company had approximately $206.8 million in loan commitments and letters of credit to borrowers and approximately $320.8 million in available home equity and other unadvanced lines of credit.

Deposit in flows and out flows are affected by the level of interest rates, the products and interest rates offered by competitors and by other factors. At March 31, 2022, time deposit accounts scheduled to mature within one year totaled $330.7 million. Based on the Company’s deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain on deposit. We monitor our liquidity position frequently and anticipate that it will have sufficient funds to meet our current funding commitments for the next 12 months and beyond.

Material Cash Commitments

The Company entered into a long-term contractual obligation with a vendor for use of its core provider and ancillary services beginning in 2016. Total remaining contractual obligations outstanding with this vendor as of March 31, 2022 were estimated to be $13.1 million, with $4.5 million expected to be paid within one year and the remaining $8.6 million to be paid within the next five years. Further, the Company has operating leases for certain of its banking offices and ATMs. Our leases have remaining lease terms of less than one year to seventeen years, some of which include options to extend the leases for additional five-year terms up to fifteen years. Lease liabilities totaled $10.1 million as of March 31, 2022. Principal payments expected to be made on our lease liabilities during the twelve months ended March 31, 2023 are $1.4 million. The remaining lease liability payments totaled $8.7 million and are expected to be made after March 31, 2023.

In addition, the Company completed an offering of $20 million in aggregate principal amount of its 4.875% fixed-to-floating rate subordinated Notes to certain qualified institutional buyers in a private placement transaction on April 20, 2021. Unless earlier redeemed, the Notes mature on May 1, 2031. The Notes will bear interest from the initial issue date to, but excluding, May 1, 2026, or the earlier redemption date, at a fixed rate of 4.875% per annum, payable quarterly in arrears on May 1, August 1, November 1 and February 1 of each year, beginning August 1, 2021, and from and including May 1, 2026, but excluding the maturity date or earlier redemption date, equal to the benchmark rate, which is the 90-day average secured overnight financing rate, plus 412 basis points, determined on the determination date of the applicable interest period, payable quarterly in arrears on May 1, August 1, November 1 and February 1 of each year. The Company may also redeem the Notes, in whole or in part, on or after May 1, 2026, and at any time upon the occurrence of certain events, subject in each case to the approval of the Board of Governors of the Federal Reserve.

We do not anticipate any material capital expenditures during the calendar year 2022, except in pursuance of the Company’s strategic initiatives. The Company does not have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than the commitments and unused lines of credit noted above.

At March 31, 2022, we exceeded each of the applicable regulatory capital requirements. As of March 31, 2022, the most recent notification from the Office of Comptroller of the Currency categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” the Bank 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.

	Actual					Minimum For Capital Adequacy Purpose					Minimum To Be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
March 31, 2022
Total Capital (to Risk Weighted Assets):
Consolidated	$	264,483		13.97	%	$	151,486		8.00	%		N/A		N/A
Bank		247,643		13.09			151,340		8.00		$	189,175		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		225,532		11.91			113,614		6.00			N/A		N/A
Bank		228,335		12.07			113,505		6.00			151,340		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated		225,532		11.91			85,211		4.50			N/A		N/A
Bank		228,335		12.07			85,129		4.50			122,964		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		225,532		8.94			100,931		4.00			N/A		N/A
Bank		228,335		9.07			100,720		4.00			125,900		5.00

December 31, 2021
Total Capital (to Risk Weighted Assets):
Consolidated	$	261,093		14.27	%	$	146,347		8.00	%		N/A		N/A
Bank		243,788		13.35			146,135		8.00		$	182,669		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		221,673		12.12			109,761		6.00			N/A		N/A
Bank		224,001		12.26			109,601		6.00			146,135		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated		221,673		12.12			82,320		4.50			N/A		N/A
Bank		224,001		12.26			82,201		4.50			118,735		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		221,673		8.75			101,320		4.00			N/A		N/A
Bank		224,001		8.86			101,101		4.00			126,377		5.00

We also have outstanding, at any time, a significant number of commitments ~~at September 30, 2017:~~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.

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⁽¹⁾ $ 1,110 $ 2,069 $ 1,716 $ 4,995 $ 9,890

Borrowings and Debt
Federal Home Loan Bank 223,938 45,502 10,138 761 280,339
Securities sold under agreements to repurchase 18,465 — — — 18,465
Total borrowings and debt 242,403 45,502 10,138 761 298,804

Credit Commitments
Available lines of credit 156,127 9 7 59,721 215,864
Other loan commitments 54,019 13,667 2,053 2,194 71,933
Letters of credit 7,058 392 — 255 7,705
Total credit commitments 217,204 14,068 2,060 62,170 295,502

Other Obligations
Vendor Contracts 2,644 5,288 5,288 6,390 19,610

Total Obligations $ 463,361 $ 66,927 $ 19,202 $ 74,316 $ 623,806

⁽¹⁾

~~Payments are for the lease of real property~~

OFF-BALANCE SHEET ~~ARRANGEMENTS~~ARRANGEMENTS.

~~We do~~The Company does not have any off-balance sheet arrangements, other than noted above under Material Cash Commitments, 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~~our presentation in our ~~2016~~2021 Annual Report. Please refer to Item 7A of the ~~2016~~2021 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 ~~2016~~2021 Annual Report. There are no material changes in the risk factors relevant to our ~~operations.~~operations since December 31, 2021.

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 ~~September 30, 2017.~~March 31, 2022.

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)
July 1 - 31, 2017 — — — 3,011,837
August 1 - 31, 2017 99,589 9.87 99,589 2,912,248
September 1 - 30, 2017 153,705 10.51 153,705 2,758,543
Total 253,294 10.26 253,294 2,758,543

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)(2)
January 1 - 31, 2022		46,640		8.57		46,640		630,679
February 1 - 28, 2022		23,878		9.13		4,194		626,485
March 1 - 31, 2022		61,840		9.08		61,840		564,645
Total		132,358		8.91		112,674		564,645

(1)

On ~~January 31, 2017,~~April 27, 2021, the Board of Directors authorized an additional stock repurchase ~~program~~plan under which the Company may purchase up to ~~3,047,000~~2,400,000 shares, or 10%, of its outstanding common stock.

(2)

Repurchase of 19,684 shares related to tax obligations for shares of restricted stock that vested on February 24, 2022 under our 2019 LTI Recognition & Retention Plan. These repurchases were reported by each reporting person on February 28, 2022.

There were no sales by us of unregistered securities during the three months ended ~~September 30, 2017.~~March 31, 2022.

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 November 7, 2017.

	~~Western New England Bancorp, Inc.~~

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

	~~By:~~	~~/s/ Guida R. Sajdak~~
		~~Guida R. Sajdak~~
		~~Executive Vice President and Chief Financial~~
		~~Officer~~

~~EXHIBIT INDEX~~

Exhibit Number		Exhibit Description
~~2.1~~		Agreement and Plan of Merger, dated as of April 4, 2016, by and between Western New England Bancorp, Inc. (f/k/a 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).

3.2		Restated Articles of Organization of Western New England Bancorp, Inc. (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the SEC on October 26, 2016).

3.3		Amended and Restated Bylaws of Western New England Bancorp, Inc. (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the SEC on February 2, 2017).

4.1		Form of Stock Certificate of Western New England Bancorp, Inc. (f/k/a 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 Western New England Bancorp, Inc. for the quarter ended ~~September 30, 2017,~~March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Net Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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.

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, 2022.

	Western New England Bancorp, Inc.

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

	By:	/s/ Guida R. Sajdak
		Guida R. Sajdak
		Executive Vice President and Chief Financial Officer


	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
INTEREST AND DIVIDEND INCOME:
Residential and commercial real estate loans	$	13,474	$	7,367	$	40,042	$	20,803
Commercial and industrial loans		2,883		1,728		8,180		5,098
Consumer loans		88		43		260		126
Debt securities, taxable		1,828		1,618		5,529		5,723
Debt securities, tax-exempt		25		32		81		136
Equity securities		35		45		105		140
Other investments		172		130		501		398
Federal funds sold, interest-bearing deposits and other short-term investments		11		14		103		67
Total interest and dividend income		18,516		10,977		54,801		32,491

INTEREST EXPENSE:
Deposits		2,111		1,582		6,180		4,589
Long-term debt		534		446		1,633		1,749
Short-term borrowings		1,075		621		2,946		1,580
Total interest expense		3,720		2,649		10,759		7,918
Net interest and dividend income		14,796		8,328		44,042		24,573
PROVISION FOR LOAN LOSSES		200		375		850		400
Net interest and dividend income after provision for loan losses		14,596		7,953		43,192		24,173

NON-INTEREST INCOME (LOSS):
Service charges and fees		1,714		953		4,789		2,696
Income from bank-owned life insurance		450		369		1,369		1,133
Loss on prepayment of borrowings		—		—		—		(915	)
Gain on sales of securities, net		70		1		52		684
Gain on sale of OREO		67		—		67		—
Other income		111		—		227		—
Total non-interest income		2,412		1,323		6,504		3,598

NON-INTEREST EXPENSE:
Salaries and employee benefits		6,490		4,057		18,954		11,709
Occupancy		891		555		2,815		1,712
Furniture and equipment		410		242		1,149		723
Data processing		680		404		1,740		1,167
Professional fees		642		656		1,919		1,717
FDIC insurance assessment		163		214		466		594
Merger related expenses		—		830		626		1,913
Advertising		328		192		961		696
Other		1,552		1,075		4,792		3,064
Total non-interest expense		11,156		8,225		33,422		23,295
INCOME BEFORE INCOME TAXES		5,852		1,051		16,274		4,476
INCOME TAX PROVISION		2,037		423		3,600		1,495
NET INCOME	$	3,815	$	628	$	12,674	$	2,981

EARNINGS PER COMMON SHARE:
Basic earnings per share	$	0.13	$	0.04	$	0.42	$	0.17
Weighted average shares outstanding		30,103,095		17,377,844		29,895,621		17,340,101
Diluted earnings per share	$	0.13	$	0.02	$	0.42	$	0.17
Weighted average diluted shares outstanding		30,219,083		17,377,844		30,074,361		17,340,101

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

BALANCE AT DECEMBER 31, 2015		18,267,747		$	183		$	108,210		$	(6,952	)	$	(313	)	$	49,316		$	(10,978	)	$	139,466
Comprehensive income		—			—			—			—			—			2,981			3,700			6,681
Common stock held by ESOP committed to be released (74,430 shares)		—			—			62			382			—			—			—			444
Share-based compensation - equity incentive plan		—			—			—			—			186			—			—			186
Excess tax benefit from equity incentive plan		—			—			5			—			—			—			—			5
Issuance of common stock in connection with equity incentive plan		62,740			1			484			—			(485	)		—			—			—
Cash dividends declared and paid ($0.09 per share)		—			—			—			—			—			(1,559	)		—			(1,559	)
BALANCE AT SEPTEMBER 30, 2016		18,330,487		$	184		$	108,761		$	(6,570	)	$	(612	)	$	50,738		$	(7,278	)	$	145,223

BALANCE AT DECEMBER 31, 2016		30,380,231		$	304		$	205,996		$	(6,418	)	$	(536	)	$	51,711		$	(12,661	)	$	238,396
Comprehensive income		—			—			—			—			—			12,674			3,194			15,868
Common stock held by ESOP committed to be released (93,679 shares)		—			—			226			472			—			—			—			698
Share-based compensation - equity incentive plan		—			—			—			—			490			—			—			490
Common stock repurchased		(574,309	)		(5	)		(5,667	)		—			—			—			—			(5,672	)
Issuance of common stock in connection with stock option exercises		921,849			9			5,456			—			—			—			—			5,465
Issuance of common stock in connection with equity incentive plan		89,042			1			903			—			(904	)		—			—			—
Cash dividends declared and paid ($0.09 per share)		—			—			—			—			—			(2,690	)		—			(2,690	)
BALANCE AT SEPTEMBER 30, 2017		30,816,813		$	309		$	206,914		$	(5,946	)	$	(950	)	$	61,695		$	(9,467	)	$	252,555

	Nine Months Ended September 30,
	2017			2016
OPERATING ACTIVITIES:
Net income	$	12,674		$	2,981
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		850			400
Depreciation and amortization of premises and equipment		1,468			969
Accretion of purchase accounting adjustments, net		(1,431	)		—
Amortization of core deposit intangible		282			—
Net amortization of premiums and discounts on securities and mortgage loans		2,577			2,758
Net amortization of premiums on modified debt		—			60
Share-based compensation expense		490			186
ESOP expense		698			444
Excess tax benefits from equity incentive plan		—			(5	)
Net gains on sales of securities		(52	)		(684	)
Gain on sale of other real estate owned		(67	)		—
Loss on prepayment of borrowings		—			915
Deferred income tax benefit		(973	)		—
Income from bank-owned life insurance		(1,369	)		(1,133	)
Changes in assets and liabilities:
Accrued interest receivable		18			300
Other assets		(3,578	)		(1,468	)
Other liabilities		1,995			(2,184	)
Net cash provided by operating activities		13,582			3,539

INVESTING ACTIVITIES:
Securities, held to maturity:
Proceeds from calls, maturities, and principal collections		—			6,835
Securities, available for sale:
Purchases		(67,246	)		(59,595	)
Proceeds from sales		22,453			136,825
Proceeds from calls, maturities, and principal collections		46,576			46,639
Purchase of residential mortgages		(48,205	)		(107,632	)
Loan originations and principal payments, net		(4,133	)		(21,185	)
Redemption of Federal Home Loan Bank of Boston stock		420			2,880
Proceeds from sale of other real estate owned		365			—
Purchases of premises and equipment		(1,645	)		(565	)
Proceeds from sale of premises and equipment		—			20
Net cash (used in) provided by investing activities		(51,415	)		4,222

FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(2,120	)		62,195
Net change in short-term borrowings		20,114			51,866
Repayment of long-term debt		(19,700	)		(84,333	)
Proceeds from long-term debt		1,420			1,165
Cash dividends paid		(2,690	)		(1,559	)
Common stock repurchased		(5,990	)		—
Issuance of common stock in connection with stock option exercises		5,465			—
Excess tax benefits in connection with equity incentive plan		—			5
Net cash (used in) provided by financing activities		(3,501	)		29,339

NET CHANGE IN CASH AND CASH EQUIVALENTS:		(41,334	)		37,100
Beginning of period		70,234			13,703
End of period	$	28,900		$	50,803

Supplemental cashflow information:
Securities reclassified from held-to-maturity to available-for-sale	$	—		$	(232,817	)
Net change in cash due to broker for common stock repurchased		(318	)		—
Interest paid		10,774			8,036
Taxes paid		3,658			2,150

	September 30, 2017			December 31, 2016
	(In thousands)

Net unrealized losses on securities available-for-sale	$	(3,782	)	$	(5,863	)
Tax effect		1,397			2,024
Net-of-tax amount		(2,385	)		(3,839	)

Fair value of derivatives used for cash flow hedges		(2,709	)		(3,152	)
Termination fees on forward starting interest rate swaps		(3,933	)		(4,733	)
Total derivatives		(6,642	)		(7,885	)
Tax effect		2,713			2,681
Net-of-tax amount		(3,929	)		(5,204	)

Unrecognized actuarial loss on defined benefit plan		(5,329	)		(5,482	)
Tax effect		2,176			1,864
Net-of-tax amount		(3,153	)		(3,618	)

Accumulated other comprehensive loss	$	(9,467	)	$	(12,661	)

	Securities			Derivatives			Defined Benefit Plans			Accumulated Other Comprehensive Loss
	(In thousands)
Balance at December 31, 2015	$	(3,046	)	$	(5,501	)	$	(2,431	)	$	(10,978	)
Current-period other comprehensive income (loss)		4,883			(1,230	)		47			3,700
Balance at September 30, 2016	$	1,837		$	(6,731	)	$	(2,384	)	$	(7,278	)

Balance at December 31, 2016	$	(3,839	)	$	(5,204	)	$	(3,618	)	$	(12,661	)
Current-period other comprehensive income		1,454			1,275			465			3,194
Balance at September 30, 2017	$	(2,385	)	$	(3,929	)	$	(3,153	)	$	(9,467	)

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
	(In thousands)

Balance at the beginning of period:	$	408		$	465
Capitalized mortgage servicing rights		—			—
Amortization		(28	)		(85	)
Balance at the end of period	$	380		$	380
Fair value at the end of period	$	538		$	538

	Nine Months Ended
	September 30, 2016
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Commercial Real Estate		1	$	1,940	$	1,940
Commercial and Industrial		3		2,681		2,681
Residential		2		161		161
Total		6	$	4,782	$	4,782

	Commercial Real Estate		Residential 1-4 Family		Home Equity		Commercial and Industrial		Consumer		Total
	(In thousands)
September 30, 2017
Loans rated 1 – 3	$	647,599	$	549,936	$	91,854	$	192,968	$	4,340	$	1,486,697
Loans rated 4		45,339		95		—		35,585		—		81,019
Loans rated 5		14,724		—		—		7,521		—		22,245
Loans rated 6		9,228		5,737		505		8,300		127		23,897
	$	716,890	$	555,768	$	92,359	$	244,374	$	4,467	$	1,613,858

December 31, 2016
Loans rated 1 – 3	$	673,957	$	516,339	$	91,964	$	180,675	$	4,391	$	1,467,326
Loans rated 4		24,207		—		—		16,621		6		40,834
Loans rated 5		14,068		—		—		6,727		—		20,795
Loans rated 6		6,604		5,744		119		15,379		27		27,873
Loans rated 7		1,905		—		—		2,884		—		4,789
	$	720,741	$	522,083	$	92,083	$	222,286	$	4,424	$	1,561,617

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2016		1,178,899		$	6.01		1.98	$	3,930
Exercised		(921,849	)		5.93		0.91		3,675
Outstanding at September 30, 2017		257,050		$	6.31		4.66	$	1,175

Exercisable at September 30, 2017		257,050		$	6.31		4.66	$	1,175

	Return on Equity Targets

Performance Period Ending	Threshold		Target		Maximum

December 31, 2017	6.00	%	6.60	%	7.30	%
December 31, 2018	6.30	%	7.00	%	7.60	%
December 31, 2019	6.50	%	7.20	%	7.90	%

	Three Months Ended September 30,						Nine Months Ended, September 30,
	2017			2016			2017			2016
	(In thousands)
Service cost	$	245		$	283		$	778		$	854
Interest cost		254			240			761			719
Expected return on assets		(298	)		(275	)		(895	)		(823	)
Amortization of actuarial losses		51			24			153			71
Net periodic pension cost	$	252		$	272		$	797		$	821

	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
September 30, 2017	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	75,000		2.6		1.31	%		2.46	%	$	(2,709	)

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(In thousands)
Interest rate swaps	$	(14	)	$	417	$	(307	)	$	(2,863	)

	At September 30, 2016						Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016
							Total		Total
	Level 1		Level 2		Level 3		Gains (Losses)		Gains (Losses)
	(In thousands)
Impaired Loans	$	—	$	—	$	2,059	$	—	$	(220	)

	Actual					Minimum For Capital Adequacy Purpose					Minimum To Be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2017
Total Capital(to Risk Weighted Assets):
Consolidated	$	257,936		15.76	%	$	130,935		8.00	%		N/A		N/A
Bank		247,801		15.18			130,610		8.00		$	163,263		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		247,358		15.11			98,201		6.00			N/A		N/A
Bank		237,223		14.53			97,958		6.00			130,610		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated		247,358		15.11			73,651		4.50			N/A		N/A
Bank		237,223		14.53			73,468		4.50			106,121		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		247,358		12.01			82,396		4.00			N/A		N/A
Bank		237,223		11.53			82,313		4.00			102,891		5.00

December 31, 2016
Total Capital(to Risk Weighted Assets):
Consolidated	$	245,389		15.10	%	$	130,037		8.00	%		N/A		N/A
Bank		237,626		14.64			129,879		8.00		$	162,349		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		235,261		14.47			97,528		6.00			N/A		N/A
Bank		227,498		14.01			97,409		6.00			129,879		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated		235,261		14.47			73,146		4.50			N/A		N/A
Bank		227,498		14.01			73,057		4.50			105,527		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		235,261		12.19			77,187		4.00			N/A		N/A
Bank		227,498		11.86			76,745		4.00			95,931		5.00

	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⁽¹⁾	$	1,110	$	2,069	$	1,716	$	4,995	$	9,890

Borrowings and Debt
Federal Home Loan Bank		223,938		45,502		10,138		761		280,339
Securities sold under agreements to repurchase		18,465		—		—		—		18,465
Total borrowings and debt		242,403		45,502		10,138		761		298,804

Credit Commitments
Available lines of credit		156,127		9		7		59,721		215,864
Other loan commitments		54,019		13,667		2,053		2,194		71,933
Letters of credit		7,058		392		—		255		7,705
Total credit commitments		217,204		14,068		2,060		62,170		295,502

Other Obligations
Vendor Contracts		2,644		5,288		5,288		6,390		19,610

Total Obligations	$	463,361	$	66,927	$	19,202	$	74,316	$	623,806

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)
July 1 - 31, 2017		—		—		—		3,011,837
August 1 - 31, 2017		99,589		9.87		99,589		2,912,248
September 1 - 30, 2017		153,705		10.51		153,705		2,758,543
Total		253,294		10.26		253,294		2,758,543