10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2019

OR

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

For the transition period from ____ to _____

Commission file number 001-16767

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. Employer Identification No.)

141 Elm Street, Westfield, Massachusetts 01086

(Address of principal executive offices)

(Zip Code)

(413) 568-1911

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such 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):

Large accelerated filer ☐	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 ☐

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

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

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

At May 3, 2019, the registrant had 26,953,429 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 – March 31, 2019 and December 31, 2018	1
	Consolidated Statements of Operations – Three Months Ended March 31, 2019 and 2018	2
	Consolidated Statements of Comprehensive Income – Three Months Ended  March 31, 2019 and 2018	3
	Consolidated Statements of Changes in Shareholders’ Equity – Three Months Ended  March 31, 2019 and 2018	4
	Consolidated Statements of Cash Flows – Three Months Ended  March 31, 2019 and 2018	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and  Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	42

FORWARD–LOOKING STATEMENTS

We may, from time to time, make written or oral “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements contained in our filings with the Securities and Exchange Commission (the “SEC”), our reports to shareholders and in other communications by us. This Quarterly Report on Form 10-Q contains “forward-looking statements” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of 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:

● changes in the interest rate environment that reduce margins;

● 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, except to the extent required by law.

i 

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(Dollars in thousands, except share data)

	March 31,			December 31,
	2019			2018
ASSETS
Cash and due from banks	$	19,782		$	20,616
Federal Funds Sold		1,275			1,246
Interest-bearing deposits and other short-term investments		23,425			4,927
Cash and cash equivalents		44,482			26,789
Securities available-for-sale, at fair value		244,878			253,748
Marketable equity securities, at fair value		6,518			6,408
Federal Home Loan Bank stock and other restricted stock, at cost		12,407			14,695
Loans, net of allowance for loan losses of $11,879 and $12,053 at March 31, 2019 and December 31, 2018, respectively		1,668,787			1,684,804
Premises and equipment, net		24,432			24,624
Accrued interest receivable		5,640			5,652
Bank-owned life insurance		69,677			69,252
Deferred tax asset, net		8,753			9,872
Goodwill		12,487			12,487
Core deposit intangible		3,594			3,688
Other assets		14,042			6,803
Total Assets	$	2,115,697		$	2,118,822
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest-bearing	$	345,077		$	355,389
Interest-bearing		1,284,757			1,240,604
Total deposits		1,629,834			1,595,993
Short-term borrowings		35,000			59,250
Long-term debt		196,039			208,018
Other liabilities		27,507			18,532
Total liabilities		1,888,380			1,881,793
SHAREHOLDERS’ EQUITY:
Preferred stock - $0.01 par value, 5,000,000 shares authorized, none outstanding at March 31, 2019 and December 31, 2018		—			—
Common stock - $0.01 par value, 75,000,000 shares authorized, 26,953,429 shares issued and outstanding at March 31, 2019; 28,393,348 shares issued and outstanding at December 31, 2018		270			284
Additional paid-in capital		167,812			182,096
Unearned compensation - ESOP		(5,022	)		(5,171	)
Unearned compensation - Equity Incentive Plan		(1,702	)		(872	)
Retained earnings		76,156			74,108
Accumulated other comprehensive loss		(10,197	)		(13,416	)
TOTAL SHAREHOLDERS’ EQUITY		227,317			237,029
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,115,697		$	2,118,822

See accompanying notes to unaudited consolidated financial statements.

1

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(Dollars in thousands, except per share data)

	Three Months Ended
	March 31,
		2019		2018
Interest and dividend income:
Residential and commercial real estate loans	$	14,971	$	13,799
Commercial and industrial loans		3,002		2,814
Consumer loans		85		89
Debt securities, taxable		1,629		1,748
Debt securities, tax-exempt		20		24
Equity securities		41		36
Other investments		236		201
Short-term investments		76		21
Total interest and dividend income		20,060		18,732
Interest expense:
Deposits		3,969		2,355
Long-term debt		1,139		855
Short-term borrowings		626		800
Total interest expense		5,734		4,010
Net interest and dividend income		14,326		14,722
Provision for loan losses		50		500
Net interest and dividend income after provision for loan losses		14,276		14,222
Non-interest income (loss):
Service charges and fees		1,633		1,583
Income from BOLI		425		442
Gain (loss) on available-for-sale securities, net		35		(201	)
Unrealized gains (losses) on marketable equity securities		70		(106	)
Gain on sale of other real estate owned		—		48
Other income		8		—
Total non-interest income		2,171		1,766
Non-interest expense:
Salaries and employees benefits		6,780		6,533
Occupancy		1,171		1,060
Furniture and equipment		405		367
Data processing		665		637
Professional fees		705		659
FDIC insurance assessment		176		158
Advertising		364		347
Other expenses		1,757		1,665
Total non-interest expense		12,023		11,426
Income before income taxes		4,424		4,562
Income tax provision		994		1,043
Net income	$	3,430	$	3,519
Earnings per common share:
Basic earnings per share	$	0.13	$	0.12
Weighted average shares outstanding		27,037,520		29,484,824
Diluted earnings per share	$	0.13	$	0.12
Weighted average diluted shares outstanding		27,153,160		29,620,929

See accompanying notes to unaudited consolidated financial statements.                

2

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – UNAUDITED

(Dollars in thousands)

	Three Months Ended March 31,
	2019			2018
Net income	$	3,430		$	3,519
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses)		4,327			(5,116	)
Reclassification adjustment for net (gains) losses realized in income (1)		(35	)		201
Cumulative-effect adjustment due to change in accounting principle (ASU 2017-08)		7			—
Cumulative-effect adjustment due to change in accounting principle (ASU 2016-01)		—			237
Unrealized gains (losses)		4,299			(4,678	)
Tax effect		(1,113	)		1,070
Net-of-tax amount		3,186			(3,608	)
Cash flow hedges:
Change in fair value of derivatives used for cash flow hedges		(328	)		678
Reclassification adjustment for loss realized in interest expense (2)		68			171
Reclassification adjustment for termination fee realized in interest expense (3)		264			264
Unrealized gains on cash flow hedges		4			1,113
Tax effect		(1	)		(313	)
Net-of-tax amount		3			800
Defined benefit pension plan:
Amortization of defined benefit plans actuarial loss(4)		32			57
Tax effect		(9	)		(16	)
Net-of-tax amount		23			41
Other comprehensive income (loss)		3,212			(2,767	)
Comprehensive income	$	6,642		$	752

(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 $10,000 and $(57,000) for the three months ended March 31, 2019 and 2018, respectively.

(2) 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 adjustments were $19,000 and $48,000 for the three months ended March 31, 2019 and 2018, respectively.

(3) 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 adjustments were $74,000 for the three months ended March 31, 2019 and 2018.

(4) Amounts represent the reclassification of defined benefit plans amortization and have been recognized as a component of non-interest expense. Income tax effects associated with the reclassification adjustments were $9,000 and $16,000 for the three months ended March 31, 2019 and 2018, respectively.

See accompanying notes to unaudited consolidated financial statements.

3

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(Dollars in thousands, except 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, 2017		30,487,309		$	305		$	203,527		$	(5,786	)	$	(791	)	$	62,578		$	(12,552	)	$	247,281
Comprehensive income		—			—			—			—			—			3,519			(2,767	)		752
Cumulative-effect adjustment due to change in accounting principle (ASU 2016-01)		—			—			—			—			—			(237	)		237			—
Common stock held by ESOP committed to be released (90,978 shares)		—			—			88			154			—			—			—			242
Share-based compensation - equity incentive plan		—			—			—			—			232			—			—			232
Common stock repurchased		(451,641	)		(5	)		(4,798	)		—			—			—			—			(4,803	)
Issuance of common stock in connection with stock option exercises		16,975			1			103			—			—			—			—			104
Issuance of common stock in connection with equity incentive plan		85,440			1			925			—			(926	)		—			—			—
Cash dividends declared and paid ($0.04 per share)		—			—			—			—			—			(1,185	)		—			(1,185	)
BALANCE AT MARCH 31, 2018		30,138,083		$	302		$	199,845		$	(5,632	)	$	(1,485	)	$	64,675		$	(15,082	)	$	242,623
BALANCE AT DECEMBER 31, 2018		28,393,348		$	284		$	182,096		$	(5,171	)	$	(872	)	$	74,108		$	(13,416	)	$	237,029
Comprehensive income		—			—			—			—			—			3,430			3,212			6,642
Cumulative-effect adjustment due to change in accounting principle (ASU 2017-08)																	(7	)		7			—
Common stock held by ESOP committed to be released (88,117 shares)		—			—			60			149			—			—			—			209
Share-based compensation - equity incentive plan		—			—			(45	)		—			240			—			—			195
Common stock repurchased		(1,555,352	)		(15	)		(15,432	)		—			—			—			—			(15,447	)
Issuance of common stock in connection with stock option exercises		12,550			—			64			—			—			—			—			64
Issuance of common stock in connection with equity incentive plan		102,883			1			1,069			—			(1,070	)		—			—			—
Cash dividends declared and paid ($0.05 per share)		—			—			—			—			—			(1,375	)		—			(1,375	)
BALANCE AT MARCH 31, 2019		26,953,429		$	270		$	167,812		$	(5,022	)	$	(1,702	)	$	76,156		$	(10,197	)	$	227,317

See accompanying notes to unaudited consolidated financial statements.

4

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollars in thousands)

	Three Months Ended March 31,
	2019			2018
OPERATING ACTIVITIES:
Net income	$	3,430		$	3,519
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		50			500
Depreciation and amortization of premises and equipment		529			494
Accretion of purchase accounting adjustments, net		(10	)		(225	)
Amortization of core deposit intangible		94			94
Net amortization of premiums and discounts on securities and mortgage loans		540			793
Share-based compensation expense		195			232
ESOP expense		209			242
Net (gain) loss on available-for-sale securities		(35	)		201
Change in unrealized (gain) loss on equity securities		(70	)		106
Net gain on sales of other real estate owned		—			(48	)
Income from bank-owned life insurance		(425	)		(442	)
Net change in:
Accrued interest receivable		12			68
Other assets		(7,249	)		977
Other liabilities		9,231			2,415
Net cash provided by operating activities		6,501			8,926
INVESTING ACTIVITIES:
Securities, available-for-sale:
Purchases		(15,294	)		(2,577	)
Proceeds from sales and redemption		21,642			5,635
Proceeds from calls, maturities, and principal collections		6,296			5,966
Loan originations and principal payments, net		15,912			(16,202	)
Redemption of Federal Home Loan Bank of Boston stock		2,288			868
Proceeds from sale of other real estate owned		—			203
Purchases of premises and equipment		(374	)		(677	)
Proceeds from sale of premises and equipment		27			20
Net cash provided by (used in) investing activities		30,497			(6,764	)
FINANCING ACTIVITIES:
Net increase in deposits		33,875			47,735
Net change in short-term borrowings		(24,250	)		(89,650	)
Repayment of long-term debt		(11,951	)		(31,992	)
Proceeds from long-term debt		—			80,000
Cash dividends paid		(1,375	)		(1,185	)
Common stock repurchased		(15,668	)		(4,868	)
Issuance of common stock in connection with stock option exercises		64			104
Net cash (used in) provided by financing activities		(19,305	)		144
NET CHANGE IN CASH AND CASH EQUIVALENTS:		17,693			2,306
Beginning of period		26,789			27,132
End of period	$	44,482		$	29,438
Supplemental cash flow information:
Interest paid	$	5,655		$	3,969
Taxes paid		832			30
Net change in cash due to broker for common stock repurchased		(221	)		(65	)

See the accompanying notes to unaudited consolidated financial statements.

5

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2019

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Bank’s deposits are insured up to the maximum Federal Deposit Insurance Corporation (“FDIC”) coverage limits. The Bank operates 22 banking offices in western Massachusetts and northern Connecticut, and its primary sources of revenue are interest income from loans as well as interest income from investment securities.

Wholly-owned Subsidiaries. Elm Street Securities Corporation, WFD Securities, Inc. and CSB Colts, Inc., are 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.

Principles of Consolidation. The 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 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 and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses for each. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the realizability of deferred tax assets.

Basis of Presentation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of March 31, 2019, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results of operations for the year ending December 31, 2019. 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, 2018, included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”).

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

6

2. EARNINGS PER SHARE

Basic earnings per share represents income available to common shareholders divided by the 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. Potential common shares that may be issued by us relate solely to stock options and are determined using the treasury stock method. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. There were no anti-dilutive shares outstanding during the three months ended March 31, 2019 and 2018.

Earnings per common share have been computed based on the following:

	Three Months Ended
	March 31,
	2019			2018
	(In thousands, except per share data)
Net income applicable to common stock	$	3,430		$	3,519
Average number of common shares issued		27,834			30,358
Less: Average unallocated ESOP Shares		(700	)		(791	)
Less: Average unvested equity incentive plan shares		(96	)		(82	)
Average number of common shares outstanding used to calculate basic earnings per common share		27,038			29,485
Effect of dilutive equity incentive plan		79			35
Effect of dilutive stock options		36			101
Average number of common shares outstanding used to calculate diluted earnings per common share		27,153			29,621
Basic earnings per share	$	0.13		$	0.12
Diluted earnings per share	$	0.13		$	0.12

7

3. COMPREHENSIVE INCOME (LOSS)

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

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

	March 31, 2019			December 31, 2018
	(In thousands)
Net unrealized losses on securities available-for-sale	$	(5,585	)	$	(9,891	)
Tax effect		1,378			2,491
Net-of-tax amount		(4,207	)		(7,400	)
Fair value of derivatives used for cash flow hedges		(1,518	)		(1,259	)
Termination fee on cancelled cash flow hedges		(2,332	)		(2,595	)
Total derivatives		(3,850	)		(3,854	)
Tax effect		1,083			1,084
Net-of-tax amount		(2,767	)		(2,770	)
Unrecognized actuarial loss on the defined benefit plan		(4,484	)		(4,516	)
Tax effect		1,261			1,270
Net-of-tax amount		(3,223	)		(3,246	)
Accumulated other comprehensive loss	$	(10,197	)	$	(13,416	)

The following table presents changes in accumulated other comprehensive loss for the periods ended March 31, 2019 and 2018 by component:

	Securities			Derivatives			Defined Benefit Plan			Accumulated Other Comprehensive Loss
	(In thousands)
Balance at December 31, 2017	$	(4,042	)	$	(4,181	)	$	(4,329	)	$	(12,552	)
Cumulative-effect adjustment due to change in accounting principle (ASU 2016-01)		237			—			—			237
Current-period other comprehensive (loss) income		(3,608	)		800			41			(2,767	)
Balance at March 31, 2018	$	(7,413	)	$	(3,381	)	$	(4,288	)	$	(15,082	)
Balance at December 31, 2018	$	(7,400	)	$	(2,770	)	$	(3,246	)	$	(13,416	)
Cumulative-effect adjustment due to change in accounting principle (ASU 2017-08)		7			—			—			7
Current-period other comprehensive income		3,186			3			23			3,212
Balance at March 31, 2019	$	(4,207	)	$	(2,767	)	$	(3,223	)	$	(10,197	)

8

4. SECURITIES

Securities available-for-sale are summarized as follows:

	March 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	25,150	$	—	$	(511	)	$	24,639
State and municipal bonds		2,965		38		(11	)		2,992
Corporate bonds		26,060		—		(389	)		25,671
Total debt securities		54,175		38		(911	)		53,302
Mortgage-backed securities:
Government-sponsored mortgage-backed securities		176,696		103		(4,177	)		172,622
U.S. government guaranteed mortgage-backed securities		19,592		19		(657	)		18,954
Total mortgage-backed securities		196,288		122		(4,834	)		191,576
Total available-for-sale	$	250,463	$	160	$	(5,745	)	$	244,878

	December 31, 2018
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
		(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	25,150	$	—	$	(1,203	)	$	23,947
State and municipal bonds		2,976		33		(65	)		2,944
Corporate bonds		49,819		—		(1,651	)		48,168
Total debt securities		77,945		33		(2,919	)		75,059
Mortgage-backed securities:
Government-sponsored mortgage-backed securities		165,605		1		(6,255	)		159,351
U.S. government guaranteed mortgage-backed securities		20,089		1		(752	)		19,338
Total mortgage-backed securities		185,694		2		(7,007	)		178,689
Total available-for-sale	$	263,639	$	35	$	(9,926	)	$	253,748

At March 31, 2019, government-sponsored enterprise obligations with a fair value of $6.9 million and mortgage-backed securities with a fair value $54.5 million were pledged to secure public deposits and for other purposes as required or permitted by law.

During the three months ended March 31, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the guidance on the amortization period of premiums on certain purchased callable debt securities from maturity to the earliest call date. The cumulative-effect adjustment resulting from the adoption of this ASU was to decrease retained earnings and reduce accumulated other comprehensive loss as of January 1, 2019 by $7,000.

9

The amortized cost and fair value of available-for-sale debt securities at March 31, 2019, by final maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations. Also, because mortgage-backed securities require periodic principal paydowns, they are not included in the maturity categories in the following maturity summary.

	March 31, 2019
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities::
Due in one year or less	$	240	$	240
Due after one year through five years		29,482		29,003
Due after five years through ten years		17,715		17,440
Due after ten years		6,738		6,619
Total debt securities		54,175		53,302
Mortgage-backed securities		196,288		191,576
Total available-for-sale securities	$	250,463	$	244,878

Gross realized gains and losses on securities available-for-sale for the three months ended March 31, 2019 and 2018 are as follows:

	Three Months Ended
	March 31,
	2019		2018
	(In thousands)
Gross gains realized	$	35	$	—
Gross losses realized		—		(201	)
Net loss realized	$	35	$	(201	)

Proceeds from the sales of securities available-for-sale amounted to $21.6 million for the three months ended March 31, 2019, while proceeds from the redemption of securities available-for-sale amounted to $5.6 million for the three months ended March 31, 2018.

10

Information pertaining to securities with gross unrealized losses at March 31, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	March 31, 2019
	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	$	12	$	1,044	$	4,165	$	146,695
U.S. government guaranteed mortgage-backed securities		—		—		657		15,414
Corporate bonds		—		—		389		25,671
State and municipal bonds		—		—		11		1,576
Government-sponsored enterprise obligations		—		—		511		24,639
Total available-for-sale	$	12	$	1,044	$	5,733	$	213,995

	December 31, 2018
	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	$	74	$	7,354	$	6,181	$	148,762
U.S. government guaranteed mortgage-backed securities		15		2,829		737		14,669
Corporate bonds		110		9,995		1,541		38,173
State and municipal bonds		—		—		65		1,532
Government-sponsored enterprise obligations		—		—		1,203		23,947
Total available-for-sale	$	199	$	20,178	$	9,727	$	227,083

During the three months ended March 31, 2019 and year ended December 31, 2018, the Company did not record any fair value impairment charges on its investments. Management regularly reviews the portfolio for securities with unrealized losses. At March 31, 2019, management did not consider any debt securities to have other-than-temporary impairment (“OTTI”) and attributes the unrealized losses 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.

The process for assessing investments for OTTI may vary depending on the type of security. In assessing the Company’s investments in government-sponsored mortgage-backed securities and 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.

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5. LOANS AND ALLOWANCE FOR LOAN LOSSES

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

	March 31,			December 31,
	2019			2018
	(In thousands)
Commercial real estate	$	770,776		$	768,881
Residential real estate:
Residential 1-4 family		575,561			577,641
Home equity		95,997			97,238
Commercial and industrial		228,709			243,493
Consumer		5,270			5,203
Total gross loans		1,676,313			1,692,456
Premiums and deferred loan fees and costs, net		4,353			4,401
Allowance for loan losses		(11,879	)		(12,053	)
Net loans	$	1,668,787		$	1,684,804

There were no purchases of loans during the three months ended March 31, 2019 and year ended December 31, 2018.

Loans Serviced for Others.

The Company has transferred a portion of its originated commercial loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in our accompanying consolidated balance sheets. We continue to service the loans on behalf of the participating lenders. We share with participating lenders, on a pro-rata basis, any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. At March 31, 2019 and December 31, 2018, the Company was servicing commercial loans participated out to various other institutions totaling $35.2 million and $35.4 million, respectively.

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 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 March 31, 2019, include weighted average prepayment speed for the portfolio using the Public Securities Association Standard Prepayment Model (148 PSA), weighted average internal rate of return (12.05%), weighted average servicing fee (0.25%), and net cost to service loans ($84.30 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.

At March 31, 2019 and December 31, 2018, the Company was servicing residential mortgage loans owned by investors totaling $55.2 million and $56.6 million, respectively. Net service fee income of $18,000 and $25,000 was recorded for the three months ended March 31, 2019 and 2018, respectively, and is included in service charges and fees on the consolidated statements of operations.

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

	Three Months Ended March 31,
	2019			2018
	(In thousands)
Balance at the beginning of year:	$	286		$	352
Capitalized mortgage servicing rights		—			—
Amortization		(17	)		(17	)
Balance at the end of period	$	269		$	335
Fair value at the end of period	$	416		$	537

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

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

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

General component

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

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

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

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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 three months ended March 31, 2019 and 2018 is as follows:

	Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Unallocated			Total
	(In thousands)
Balance at December 31, 2017	$	4,712		$	3,311		$	2,733		$	71		$	4		$	10,831
Provision (credit)		452			71			(59	)		25			11			500
Charge-offs		—			—			—			(36	)		—			(36	)
Recoveries		35			15			7			18			—			75
Balance at March 31, 2018	$	5,199		$	3,397		$	2,681		$	78		$	15		$	11,370
Balance at December 31, 2018	$	5,260		$	3,556		$	3,114		$	135		$	(12	)	$	12,053
Provision (credit)		24			108			(127	)		28			17			50
Charge-offs		(116	)		(94	)		(37	)		(46	)		—			(293	)
Recoveries		37			1			4			27			—			69
Balance at March 31, 2019	$	5,205		$	3,571		$	2,954		$	144		$	5		$	11,879

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The following table presents information pertaining to the allowance for loan losses by segment for the dates indicated:

	Commercial Real Estate		Residential Real Estate		Commercial and Industrial		Consumer		Unallocated			Total
	(In thousands)
March 31, 2019
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—		$	—
Amount of allowance for non-impaired loans		5,205		3,571		2,954		144		5			11,879
Total allowance for loan losses	$	5,205	$	3,571	$	2,954	$	144	$	5		$	11,879
Impaired loans	$	7,156	$	4,041	$	3,300	$	53	$	—		$	14,550
Non-impaired loans		753,175		664,340		224,530		5,217		—			1,647,262
Impaired loans acquired with deteriorated credit quality		10,445		3,177		879		—		—			14,501
Total loans	$	770,776	$	671,558	$	228,709	$	5,270	$	—		$	1,676,313
December 31, 2018
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—		$	—
Amount of allowance for non-impaired loans		5,260		3,556		3,114		135		(12	)		12,053
Total allowance for loan losses	$	5,260	$	3,556	$	3,114	$	135	$	(12	)	$	12,053
Impaired loans	$	5,237	$	4,754	$	2,345	$	60	$	—		$	12,396
Non-impaired loans		752,770		666,883		240,235		5,143		—			1,665,031
Impaired loans acquired with deteriorated credit quality		10,874		3,242		913		—		—			15,029
Total loans	$	768,881	$	674,879	$	243,493	$	5,203	$	—		$	1,692,456

Past Due and Non-accrual Loans.

The following tables present an age analysis of past due loans as of the dates indicated:

	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		Non-Accrual Loans
	(In thousands)
March 31, 2019
Commercial real estate	$	3,238	$	2,327	$	2,890	$	8,455	$	762,321	$	770,776	$	6,547
Residential real estate:
Residential		1,513		378		3,199		5,090		570,471		575,561		4,945
Home equity		301		—		197		498		95,499		95,997		369
Commercial and industrial		305		357		301		963		227,746		228,709		3,399
Consumer		77		17		3		97		5,173		5,270		52
Total loans	$	5,434	$	3,079	$	6,590	$	15,103	$	1,661,210	$	1,676,313	$	15,312
December 31, 2018
Commercial real estate	$	1,857	$	—	$	2,865	$	4,722	$	764,159	$	768,881	$	4,701
Residential real estate:
Residential		1,798		572		1,879		4,249		573,392		577,641		5,856
Home equity		600		5		242		847		96,391		97,238		391
Commercial and industrial		794		1,463		305		2,562		240,931		243,493		2,476
Consumer		93		1		21		115		5,088		5,203		60
Total loans	$	5,142	$	2,041	$	5,312	$	12,495	$	1,679,961	$	1,692,456	$	13,484

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Impaired Loans.

The following is a summary of impaired loans by class:

							Three Months Ended
	At March 31, 2019						March 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans (1)
Commercial real estate	$	17,601	$	20,722	$	—	$	16,856	$	131
Residential real estate		6,823		7,900		—		7,190		44
Home equity		395		445		—		417		—
Commercial and industrial		4,179		8,782		—		3,718		37
Consumer		53		64		—		57		—
Total impaired loans	$	29,051	$	37,913	$	—	$	28,238	$	212

							Three Months Ended
	At December 31, 2018						March 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans (1)
Commercial real estate	$	16,111	$	19,081	$	—	$	15,404	$	190
Residential real estate		7,558		8,614		—		6,578		10
Home equity		438		468				737		1
Commercial and industrial		3,258		7,788		—		3,990		44
Consumer		60		70				108		—
Total impaired loans	$	27,425	$	36,021	$	—	$	26,817	$	245

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

The majority of impaired loans are included within the non-accrual balances; however, not every loan on non-accrual status has been designated as impaired. Impaired loans include loans that have been modified in a troubled debt restructuring (“TDR”). 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 non-accrual status are applied to principal. There was no interest income recognized on nonaccrual impaired loans during the three months ended March 31, 2019 and March 31, 2018. 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. As of March 31, 2019, we have not committed to lend any additional funds for loans that are classified as impaired. Payments received on performing impaired loans are recorded in accordance with the contractual terms of the loan. Interest income recognized on impaired loans during the three months ended March 31, 2019 and 2018 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 may consist of a reduction in 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 Bank’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. All loans that are modified are reviewed by the Company to identify if a TDR has occurred. All TDR loans are classified as impaired.

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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 a specific allowance or a charge-off to the allowance. Non-performing TDRs are included in non-performing loans.

There were no significant loans modified in TDRs during the three months ended March 31, 2019 or 2018. During the three months ended March 31, 2019 and 2018, no TDRs defaulted (defined as 30 days or more past due) within 12 months of restructuring. As of March 31, 2019, we have not committed to lend any additional funds for loans that are classified as impaired. There were no charge-offs on TDRs during the three months ended March 31, 2019 and 2018.

Loans Acquired with Deteriorated Credit Quality.

The following is a summary of loans acquired in the Chicopee Bancorp, Inc. (“Chicopee”) acquisition with evidence of credit deterioration as of March 31, 2019 and 2018.

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)
Balance at December 31, 2018	$	24,793		$	19,883		$	4,910		$	4,854		$	15,029
Collections		(702	)		(646	)		(56	)		(158	)		(488	)
Dispositions		(71	)		(71	)		—			(31	)		(40	)
Balance at March 31, 2019	$	24,020		$	19,166		$	4,854		$	4,665		$	14,501

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)
Balance at December 31, 2017	$	29,362		$	23,158		$	6,204		$	6,033		$	17,125
Collections		(1,412	)		(1,194	)		(218	)		(175	)		(1,019	)
Balance at March 31, 2018	$	27,950		$	21,964		$	5,986		$	5,858		$	16,106

Credit Quality Information.

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. Non-performing residential real estate, home equity and consumer loans are monitored individually for impairment and risk rated as “substandard.”

Loans rated 1 – 4: Loans rated 1-4 represent groups of loans that are not subject to adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent acceptable risk.

Loans rated 5: Loans rated 5 are considered “Special Mention” and may exhibit potential credit weaknesses or downward trends and are being monitored by 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.

17

Loans rated 6: Loans rated 6 are considered “Substandard.” A loan is classified as substandard if the borrower exhibits a well-defined weakness 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.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation of the loan highly questionable and improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.

Loans rated 8: Loans rated 8 are considered uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not 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. In addition, management utilizes delinquency reports, the criticized report and other loan reports to monitor credit 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 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 for the periods indicated:

	Commercial Real Estate		Residential 1-4 Family		Home Equity		Commercial and Industrial		Consumer		Total
	(In thousands)
March 31, 2019
Pass (Rated 1 – 4)	$	732,542	$	569,124	$	95,422	$	191,580	$	5,218	$	1,593,886
Special Mention (Rated 5)		16,101		—		—		7,802		—		23,903
Substandard (Rated 6)		22,133		6,437		575		29,327		52		58,524
Total	$	770,776	$	575,561	$	95,997	$	228,709	$	5,270	$	1,676,313
December 31, 2018
Pass (Rated 1 – 4)	$	732,729	$	570,428	$	96,643	$	207,663	$	5,143	$	1,612,606
Special Mention (Rated 5)		17,929		—		—		12,248		—		30,177
Substandard (Rated 6)		18,223		7,213		595		23,582		60		49,673
Total	$	768,881	$	577,641	$	97,238	$	243,493	$	5,203	$	1,692,456

6. GOODWILL AND OTHER INTANGIBLES

At March 31, 2019 and December 31, 2018, 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, 2019 or the year ended December 31, 2018. Annually, or more frequently if events or changes in circumstances warrant such evaluation, the Company evaluates its goodwill for impairment.

Core Deposit Intangibles.

In connection with the acquisition of Chicopee, the Bank recorded a core deposit intangible of $4.5 million which is amortized over twelve years using the straight-line method. Amortization expense was $94,000 for the three months ended March 31, 2019 and the three months ended March 31, 2018. At March 31, 2019, future amortization of the core deposit intangible totaled $375,000 for each of the next five years and $1.7 million thereafter.

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7. SHARE-BASED COMPENSATION

Stock Options – Under the terms of the Chicopee merger agreement dated October 21, 2016, each option to purchase shares of Chicopee common stock issued by Chicopee and outstanding at the effective time of the merger 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 three months ended March 31, 2019 is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		238,075		$	6.33		3.44	$	877
Exercised		(12,550	)		5.12		0.74		60
Outstanding at March 31, 2019		225,525		$	6.40		3.33	$	633
Exercisable at March 31, 2019		225,525		$	6.40		3.33	$	633

Cash received for options exercised during the three months ended March 31, 2019 and 2018 was $64,000 and $104,000, respectively.

Restricted Stock Awards. In May 2014, the Company’s shareholders approved a stock-based compensation plan (the “RSA Plan”). Under the RSA Plan, up to 516,000 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 WNEB. Any shares that are not issued because vesting requirements are not met, will be available for future issuance under the RSA Plan.

In January 2015, there were 48,560 shares granted under the RSA Plan. These shares vest ratably over five years. The fair market value of shares awarded are based on the market price at the grant date and recorded as unearned compensation. The shares are amortized over the applicable vesting period.

In 2016, the Compensation Committee (the “Committee”) approved a long-term incentive program (“LTI Plan”). The 2016 LTI Plan provides a periodic award that is both performance and time-based and is designed to recognize the executive’s responsibilities, reward performance and leadership and as a retention tool. The objective of the 2016 LTI Plan 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 2016 LTI Plan includes eligible participants of the Company that are nominated by the Chief Executive Officer and approved by the Compensation Committee. The 2016 LTI Plan is triggered by the Company’s achievement of satisfactory safety and soundness results from its most recent regulatory examination and additional Company performance metrics. Stock grants made under the 2016 LTI Plan consist of 50% time-based stock and 50% performance-based stock.

In May 2016, there were 62,740 shares granted under the 2016 LTI Plan. Of the 62,740 shares granted, 36,543 shares were time-based stock, with 10,352 vesting in one year and 26,191 vesting ratably over a three year period. The remaining 26,197 shares granted were performance-based and are subject to the achievement of the 2016 LTI performance metrics. Under the 2016 LTI Plan, the primary performance metric was return on equity.

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As a result of the Tax Cuts and Jobs Act of 2017, the return on equity performance metrics were adjusted to incorporate the impact and benefits of the corporate tax rate reductions thereunder. The original and adjusted threshold and target metrics under the 2016 LTI Plan are as follows:

	Return on Equity Metrics
	Threshold		Target
Original metrics	5.85	%	6.32	%
Adjusted metrics	6.38	%	6.79	%

As of December 31, 2018, the three-year performance period for the 2016 LTI Plan performance-based share grant expired. Performance-based shares were earned based on the Company achieving the 2016 LTI Plan threshold and target metrics at the end of the three-year performance period. The Company’s return on equity for the year ended December 31, 2018 was 6.82%, which resulted in the achievement of the target return on equity metric for the 2016 LTI Plan grant. In February of 2019, 26,197 performance-based shares vested and were granted to eligible recipients under the Plan.

In May 2017, there were 89,042 shares granted under the 2017 LTI Plan. Of the 89,042 shares, 55,159 shares are time-based, with 21,276 vesting in one year and 33,883 vesting ratably over a three year period. The remaining 33,883 shares granted were performance-based and are subject to the achievement of the 2017 LTI performance metric. Vesting is realized after a three year period. Under the 2017 LTI Plan, the primary performance metric was return on equity. Performance-based 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 period. Participants will be able to earn between 50% (for threshold performance) and 100% (for target performance) of the performance shares but will not earn additional shares if performance exceeds target performance.

As a result of the Tax Cuts and Jobs Act of 2017, the return on equity performance metrics were adjusted to incorporate the impact and benefits of the corporate tax rate reductions thereunder. The original and adjusted threshold, target and maximum metrics for 2019 under the 2017 LTI Plan are as follows:

	Return on Equity Metrics
Performance Period Ending		Original Threshold	Adjusted Threshold		Original Target		Adjusted Target		Original Maximum		Adjusted Maximum
December 31, 2019		6.50%	7.09	%	7.20	%	7.85	%	7.90	%	8.61	%

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

In January 2018, there were 83,812 shares granted under the 2018 LTI Plan. Of the 83,812 shares, 50,852 shares were time-based, with 17,908 vesting in one year and 32,944 vesting ratably over a three-year period. The remaining 32,960 shares granted are performance-based and are subject to the achievement of the 2018 long-term incentive performance metric. Under the 2018 LTI Plan, the primary performance metric 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 period. The threshold, target and stretch metrics under the 2018 LTI Plan are as follows:

	Return on Equity Metrics
Performance Period Ending	Threshold		Target		Stretch
December 31, 2019	6.85	%	7.35	%	7.75	%
December 31, 2020	7.40	%	7.90	%	8.30	%

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

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

In February 2019, there were 108,718 shares granted under the 2019 LTI Plan. Of the 108,718 shares, 64,496 shares were time-based, with 20,262 vesting in one year and 44,234 vesting ratably over a three-year period. The remaining 44,222 shares granted are performance-based and are subject to the achievement of the 2019 long-term incentive performance metric. Under the 2019 LTI Plan, the primary performance metric 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 period. The threshold, target and stretch metrics under the 2019 LTI Plan 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	%

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 grant date, recorded as unearned compensation and amortized over the applicable vesting period. Performance-based metrics are monitored on a quarterly basis in order to compare actual results to the performance metric, with any necessary adjustments being recognized through share-based compensation expense and unearned compensation.

At March 31, 2019, there were an additional 127,335 shares available for future grants under the RSA Plan.

A summary of the status of restricted stock awards at March 31, 2019 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2018		155,712		$	9.87
Shares granted		108,718			9.77
Shares vested		(53,465	)		8.75
Balance at March 31, 2019		210,965		$	10.10

We recorded total expense for restricted stock awards of $195,000 and $232,000 for the three months ended March 31, 2019 and 2018, respectively.

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

As a member of the FHLB, the Bank has the potential capacity to borrow an amount up to the value of its discounted qualified collateral. Borrowings from the FHLB 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.

FHLB advances with an original maturity of less than one year totaled $35.0 million and $59.3 million at March 31, 2019 and December 31, 2018, respectively, with a weighted average rate of 2.69% and 3.28%, respectively. At March 31, 2019, based on qualifying collateral less outstanding advances, the Bank had the capacity to borrow up to approximately $229.5 million from the FHLB.

In addition, at March 31, 2019 and December 31, 2018, the Company had an available Ideal Way line of credit with the FHLB for up to $9.5 million. Interest on this line of credit is payable at a rate determined and reset by the FHLB on a daily basis. The outstanding principal is due daily and the portion not repaid will be automatically renewed. At March 31, 2019 and December 31, 2018, there were no advances outstanding under this line.

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The Bank also had a line of credit in the amount up to $15.0 million with a correspondent bank at an interest rate determined and reset on a daily basis. There were no advances outstanding under this line at March 31, 2019 and 2018. We also had a $50.0 million line of credit with another correspondent bank at an interest rate determined and reset on a daily basis. There were no advances outstanding under the line at March 31, 2019 and 2018.

Long-term debt consists of FHLBB advances with an original maturity of one year or more. At March 31, 2019, we had $196.0 million in long-term debt with the FHLBB. This compares to $208.0 million in long-term debt with FHLBB advances at December 31, 2018.

9. PENSION BENEFITS

We provide a defined benefit pension plan for eligible employees (the “Plan”). Employees must work a minimum of 1,000 hours per year to be eligible for the Plan. Eligible employees become vested in the Plan after five years of service. We plan to contribute to the pension plan the amount required to meet the minimum funding standards under Section 412 of the Internal Revenue Code of 1986, as amended. Additional contributions will be made as deemed appropriate by management in conjunction with the pension plan’s actuaries. We have not yet determined how much we expect to contribute to our pension plan in 2019. No contributions have been made to the plan for the three months ended March 31, 2019. The pension plan assets are invested in various pooled separate investment accounts offered by Principal Life Insurance Company, a division of Principal Financial Group, who is the Custodian of the Plan (the “Custodian”). The Plan is administered by an officer of Westfield Bank. On September 30, 2016, we effected a soft freeze on the Plan and 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,
	2019			2018
	(In thousands)
Service cost	$	274		$	303
Interest cost		284			253
Expected return on assets		(308	)		(347	)
Amortization of actuarial loss		32			57
Net periodic pension cost	$	282		$	266

10. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

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.

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Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments designated as hedging instruments as well as our classification on the balance sheet as of March 31, 2019 and December 31, 2018.

March 31, 2019	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Interest rate swaps	Other Assets	$	—	Other Liabilities	$	1,518

December 31, 2018	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Interest rate swaps	Other Assets	$	—	Other Liabilities	$	1,259

At March 31, 2019 and December 31, 2018, all derivatives were designated as hedging instruments.

Cash Flow Hedges of Interest Rate Risk

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

The following table presents information about our cash flow hedges at March 31, 2019 and December 31, 2018:

March 31, 2019	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	35,000		3.5		2.61	%		3.54	%	$	(1,518	)

December 31, 2018	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	35,000		3.7		2.79	%		3.54	%	$	(1,259	)

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. 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 for the three months ended March 31, 2019 or the year ended December 31, 2018.

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).

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

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Three Months Ended March 31,
	2019			2018
	(In thousands)
Interest rate swaps	$	(328	)	$	678

Amounts reported in accumulated other comprehensive loss related to these derivatives are reclassified to interest expense as interest payments are made on our designated rate sensitive liabilities. The amount reclassified from accumulated other comprehensive income into net income for interest rate swaps and termination fees was $332,000 and $435,000 during the three months ended March 31, 2019 and 2018, respectively. During the three months ended March 31, 2019 and 2018, no gains or losses were reclassified from accumulated other comprehensive loss into income for ineffectiveness on cash flow hedges.

Credit-risk-related Contingent Features

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

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

At March 31, 2019 and December 31, 2018, we had a net liability position of $1.5 million and $1.3 million with our counterparties, respectively. As of March 31, 2019, we had minimum collateral posting thresholds with certain of our derivative counterparties and had mortgage-backed securities with a fair value of $850,000 and $830,000 cash posted as collateral against our obligations under these agreements. If we had breached any of these provisions at March 31, 2019, we could have been required to settle our obligations under the agreements at the termination value.

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11. FAIR VALUE OF ASSETS AND LIABILITIES

Determination of Fair Value.

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

Fair Value Hierarchy.

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

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

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

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

Methods and assumptions for valuing our financial instruments 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.

Securities available-for-sale. The securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market. These securities include marketable equity securities. All other securities are measured at fair value in Level 2 and are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. 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.

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.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis.

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

	March 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Government-sponsored mortgage-backed securities	$	—	$	172,622	$	—	$	172,622
U.S. government guaranteed mortgage-backed securities		—		18,954		—		18,954
Corporate bonds		—		25,671		—		25,671
State and municipal bonds		—		2,992		—		2,992
Government-sponsored enterprise obligations		—		24,639		—		24,639
Marketable equity securities		6,518		—		—		6,518
Total assets	$	6,518	$	244,878	$	—	$	251,396
Liabilities:
Interest rate swaps	$	—	$	1,518	$	—	$	1,518

	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Government-sponsored mortgage-backed securities	$	—	$	159,351	$	—	$	159,351
U.S. government guaranteed mortgage-backed securities		—		19,338		—		19,338
Corporate bonds		—		48,168		—		48,168
State and municipal bonds		—		2,944		—		2,944
Government-sponsored enterprise obligations		—		23,947		—		23,947
Marketable equity securities		6,408		—		—		6,408
Total assets	$	6,408	$	253,748	$	—	$	260,156
Liabilities:
Interest rate swaps	$	—	$	1,259	$	—	$	1,259

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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 March 31, 2019 or December 31, 2018. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related assets at March 31, 2019 and December 31, 2018. Total losses represent the change in carrying value as a result of fair value adjustments related to assets still held at the periods indicated.

	At						Three Months Ended
	March 31, 2019						March 31, 2019
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	2,115	$	130

	At						Three Months Ended
	December 31, 2018						March 31, 2018
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	1,676	$	170

The amount of impaired loans represents the carrying value, and net of the related write-down or 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.

There were no liabilities measured at fair value on a non-recurring basis at March 31, 2019 and December 31, 2018.

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Summary of Fair Values of Financial Instruments.

The estimated fair values of our financial instruments are as follows:

	March 31, 2019
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	44,482	$	44,482	$	—	$	—	$	44,482
Securities available-for-sale		244,878		—		244,878		—		244,878
Marketable equity securities		6,518		6,518		—		—		6,518
Federal Home Loan Bank of Boston and other restricted stock		12,407		—		—		12,407		12,407
Loans - net		1,668,787		—		—		1,627,630		1,627,630
Accrued interest receivable		5,640		—		—		5,640		5,640
Mortgage servicing rights		269		—		416		—		416
Liabilities:
Deposits		1,629,834		—		—		1,628,896		1,628,896
Short-term borrowings		35,000		—		35,000		—		35,000
Long-term debt		196,039		—		195,575		—		195,575
Accrued interest payable		608		—		—		608		608
Derivative liabilities		1,518		—		1,518		—		1,518

	December 31, 2018
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	26,789	$	26,789	$	—	$	—	$	26,789
Securities available-for-sale		253,748		—		253,748		—		253,748
Marketable equity securities		6,408		6,408		—		—		6,408
Federal Home Loan Bank of Boston and other restricted stock		14,695		—		—		14,695		14,695
Loans - net		1,684,804		—		—		1,631,558		1,631,558
Accrued interest receivable		5,652		—		—		5,652		5,652
Mortgage servicing rights		286		—		456		—		456
Liabilities:
Deposits		1,595,993		—		—		1,592,521		1,592,521
Short-term borrowings		59,250		—		59,247		—		59,247
Long-term debt		208,018		—		206,789		—		206,789
Accrued interest payable		530		—		—		530		530
Derivative liabilities		1,259		—		1,259		—		1,259

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12. LEASES

The Company determines if an arrangement is a lease at inception. Effective in 2019, operating leases are included within other assets and other liabilities in our consolidated balance sheets. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. We have not elected the practical expedient to account for lease and non-lease components as one lease component. Additionally, the Company has elected the practical expedient whereby expired leases, existing operating lease classifications and initial direct costs will not be reassessed at inception. The Company has operating leases for certain of our banking offices and ATMs. Our leases have remaining lease terms of one year to 19 years, some of which include options to extend the leases for additional five-year terms up to 15 years.

The components of lease expense were as follows:

	Three Months Ended
	March 31, 2019
	(In thousands)
Amortization of right-of-use assets	$	242
Interest on lease liabilities		63
Operating lease cost	$	305

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	292

Supplemental balance sheet information related to leases was as follows:

	March 31, 2019
	(In thousands)
Operating lease right-of-use assets	$	6,993
Operating lease liabilities	$	7,005

The weighted average remaining lease term for our operating leases was 11 years with a weighted average discount rate of 3.52% at March 31, 2019.

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Maturities of the Company’s operating lease liabilities were as follows (in thousands):

Years Ending December 31,
2019	$	836
2020		995
2021		916
2022		887
2023		700
Thereafter		4,333
Total lease payments		8,667
Less imputed interest		(1,662	)
Total	$	7,005

13. RECENT ACCOUNTING PRONOUNCEMENTS

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 ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this ASU on January 1, 2019 and recorded an increase in assets of $7.2 million and an increase in liabilities of $7.2 million on the consolidated balance sheet as a result of recognizing the right-of-use assets and lease liabilities.

In June 2016, the FASB issued ASU 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 is effective for the first interim period in fiscal years beginning after December 15, 2019. The Company is in the process of 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 March 2017, the FASB issued ASU 2017-08—Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU 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 (that is, at a premium). The Company adopted this ASU on January 1, 2019, which reduced premiums on callable debt securities and resulted in a cumulative-effect adjustment directly to retained earnings, net of tax, of $7,000.

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In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early adoption, including adoption in the interim period, is permitted. Management does not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removes and modifies the previously required disclosures relating to fair value measurements. Specifically, the ASU removes the required disclosure of amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, the valuation process for Level 3 fair value measurements and the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of a reporting period. It also modifies the required roll forward of Level 3 fair value measurements to a disclosure of any transfers into and out of Level 3, increases disclosure for investments in entities that calculate net asset value, and clarifies the measurement of uncertainty disclosure. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As this standard relates to disclosures, Management does not expect adoption to have a material impact on our consolidated financial statements.

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

Overview.

We strive to remain a leader in meeting the financial service needs of 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, 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 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 the Company’s commercial loan portfolio and related commercial deposits by targeting businesses in our primary market area and northern Connecticut to increase the net interest margin and loan income;

● supplement the commercial portfolio by growing the residential real estate portfolio to diversify the loan portfolio and deepen customer relationships;

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

● invest in people, systems and technology to grow revenue, improve efficiency and enhance the overall customer experience;

● grow revenues, increase tangible book value, 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 months ended March 31, 2019 in the context of this strategy.

● Net income was $3.4 million, or $0.13 per diluted share, for the three months ended March 31, 2019, compared to $3.5 million, or $0.12 per diluted share, for the same period in 2018.

● The provision for loan losses was $50,000 for the three months ended March 31, 2019, compared to $500,000 for the same period in 2018.

● Net interest income decreased $396,000, or 2.7%, to $14.3 million, for the three months ended March 31, 2019, from $14.7 million, for the three months ended March 31, 2018. The decrease in net interest income was due to an increase of $1.7 million, or 43.0%, in interest expense, partially offset by an increase in interest and dividend income of $1.3 million, or 7.1%. Net interest income included $22,000 and $235,000 in favorable purchase accounting adjustments for the three months ended March 31, 2019 and 2018, respectively.

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CRITICAL ACCOUNTING POLICIES.

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

Critical accounting estimates are necessary in the application of certain accounting policies and procedures, and are particularly susceptible to significant change. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. There have been no material changes to our critical accounting policies during the three months ended March 31, 2019. 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 2018 Annual Report.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2019 AND DECEMBER 31, 2018

At March 31, 2019, total assets were $2.1 billion, a decrease of $3.1 million, or 0.2%, from December 31, 2018. During the same period, total loans decreased $16.2 million, or 1.0%, and securities decreased $8.9 million, or 3.5%, partially offset by the increase in cash and cash equivalents of $17.7 million or 66.1%.

Total loans were $1.7 billion, a decrease of $16.2 million, or 1.0%, from December 31, 2018 due to a decrease in commercial and industrial loans of $14.8 million, or 6.1%, and a decrease in residential loans, including home equity loans, of $3.3 million, or 0.5%. During the same period, commercial real estate loans increased $1.9 million, or 0.3%. The decrease in total loans at March 31, 2019 was a combination of payoffs in the commercial and industrial loan portfolio as well as seasonal factors. Total loan originations during the first quarter of 2019 were strong despite elevated levels of loan payoffs, particularly in the commercial and industrial loan portfolio. During the first quarter of 2019, the Company originated $57.9 million in new loans, which included $21.2 million in commercial and industrial loans, $22.2 million in commercial real estate loans and $14.5 million in residential real estate loans.

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. At March 31, 2019, non-performing loans increased $1.8 million, or 13.3%, to $15.3 million, or 0.91% of total loans, compared to $13.5 million, or 0.79% of total loans, at December 31, 2018. There were no loans 90 or more days past due and still accruing interest. At March 31, 2019, non-performing assets to total assets was 0.72%, an increase of eight basis points from 0.64% at December 31, 2018. The allowance for loan losses as a percentage of total loans was 0.71% at both March 31, 2019 and December 31, 2018. At March 31, 2019, the allowance for loan losses as a percentage of non-performing loans was 77.6%, compared to 89.4% at December 31, 2018. The allowance for loan losses as a percentage of total loans, excluding loans acquired, which were recorded at fair value with no related allowance for loan losses, was 0.96% at March 31, 2019 and 0.98% at December 31, 2018. A summary of our nonaccrual and past due loans by class are listed in Note 5 of the accompanying unaudited consolidated financial statements.

At March 31, 2019, total deposits were $1.6 billion, an increase of $33.8 million, or 2.1%, from December 31, 2018. Core deposits, which the Company defines as all deposits except time deposits, increased $11.0 million, or 1.2%, from $935.9 million, or 58.6% of total deposits, at December 31, 2018, to $946.9 million, or 58.1% of total deposits, at March 31, 2019. Non-interest bearing deposits decreased $10.3 million, or 2.9%, to $345.1 million, money market accounts remained relatively unchanged at $398.2 million, interest-bearing checking accounts increased $16.6 million, or 26.1%, to $80.2 million, and savings accounts increased $4.9 million, or 4.1%, to $123.4 million compared to December 31, 2018. Time deposits increased $23.0 million, or 3.5%, from $660.0 million at December 31, 2018 to $683.0 million at March 31, 2019. Brokered deposits, which are included within time deposits, increased $4.3 million to $28.1 million at March 31, 2019, from $23.8 million at December 31, 2018.

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FHLB advances decreased $36.3 million, or 13.6%, from $267.3 million at December 31, 2018, to $231.0 million at March 31, 2019. The Company utilized the increase in deposit balances during the quarter to pay down FHLB borrowings. Our short-term borrowings and long-term debt are discussed in Note 8 of the accompanying consolidated financial statements.

At March 31, 2019, shareholders’ equity was $227.3 million, or 10.8% of total assets, compared to $237.0 million, or 11.2% of total assets, at December 31, 2018. The decrease in shareholders’ equity during the three months ended March 31, 2019 reflects $15.4 million for the repurchase of the Company’s shares during the quarter and the payment of regular cash dividends of $1.4 million partially offset by net income of $3.4 million and a decrease of $3.2 million in accumulated other comprehensive loss. Total shares outstanding as of March 31, 2019 were 26,953,429.

The Company’s book value per share increased by $0.08, or 1.0%, to $8.43 at March 31, 2019, from $8.35 at December 31, 2018. The Company’s tangible book value per share increased by $0.06, or 0.8%, to $7.84 at March 31, 2019 from $7.78 at December 31, 2018. The Bank’s regulatory capital ratios continued to exceed the levels required to be considered “well-capitalized” under federal banking regulations.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND MARCH 31, 2018

General.

Net income was $3.4 million, or $0.13 per diluted share, for the three months ended March 31, 2019, compared to $3.5 million, or $0.12 per diluted share, for the same period in 2018. Net interest income was $14.3 million and $14.7 million for the three months ended March 31, 2019 and 2018, respectively.

Net Interest and Dividend Income.

The following tables set forth the information relating to our average balance and net interest income for the three months ended March 31, 2019 and 2018, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned 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.

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	Three Months Ended March 31,
	2019								2018
	Average					Average Yield/			Average					Average Yield/
	Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2)	$	1,684,094	$	18,179			4.38	%	$	1,626,738	$	16,827			4.20	%
Securities(2)		259,179		1,695			2.65			282,556		1,814			2.60
Other investments - at cost		15,942		236			6.00			17,111		201			4.76
Short-term investments(3)		15,112		76			2.04			5,946		21			1.43
Total interest-earning assets		1,974,327		20,186			4.15			1,932,351		18,863			3.96
Total non-interest-earning assets		133,870								137,017
Total assets	$	2,108,197							$	2,069,368
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking accounts	$	72,934	$	81			0.45	%	$	93,117	$	80			0.35	%
Savings accounts		122,608		33			0.11			142,890		40			0.11
Money market accounts		395,215		556			0.57			418,183		419			0.41
Time deposits		673,852		3,299			1.99			561,106		1,816			1.31
Total interest-bearing deposits		1,264,609		3,969			1.27			1,215,296		2,355			0.79
Short-term borrowings and long-term debt		248,982		1,765			2.87			282,710		1,655			2.37
Interest-bearing liabilities		1,513,591		5,734			1.54			1,498,006		4,010			1.09
Non-interest-bearing deposits		344,273								310,193
Other non-interest-bearing liabilities		20,370								15,886
Total non-interest-bearing liabilities		364,643								326,079
Total liabilities		1,878,234								1,824,085
Total equity		229,963								245,283
Total liabilities and equity	$	2,108,197							$	2,069,368
Less: Tax-equivalent adjustment(2)				(126	)							(131	)
Net interest and dividend income			$	14,326							$	14,722
Net interest rate spread							2.58	%							2.85	%
Net interest rate spread, on a tax equivalent basis(4)							2.61	%							2.87	%
Net interest margin							2.94	%							3.09	%
Net interest margin, on a tax equivalent basis(5)							2.97	%							3.12	%
Ratio of average interest-earning assets to average interest-bearing liabilities							130.44	%							128.99	%

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

(2) Securities income, loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 21%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported in the consolidated statements of operations.

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

(4) Net interest rate spread, on a tax-equivalent basis, represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. See “Explanation of Use of Non-GAAP Financial Measurements”.

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

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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.

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

	Three Months Ended March 31, 2019 compared to Three Months Ended March 31, 2018
	Increase (Decrease) Due to
	Volume			Rate			Net
Interest-earning assets	(In thousands)
Loans (1)	$	593		$	759		$	1,352
Securities (1)		(150	)		31			(119	)
Other investments - at cost		(14	)		49			35
Short-term investments		32			23			55
Total interest-earning assets		461			862			1,323
Interest-bearing liabilities
Interest-bearing checking accounts		(17	)		18			1
Savings accounts		(6	)		(1	)		(7	)
Money market accounts		(23	)		160			137
Time deposits		365			1,118			1,483
Short-term borrowing and long-time debt		(197	)		307			110
Total interest-bearing liabilities		122			1,602			1,724
Change in net interest and dividend income (1)	$	339		$	(740	)	$	(401	)

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

The net interest margin was 2.94% for the three months ended March 31, 2019, compared to 3.09% for the three months ended March 31, 2018. The net interest margin, on a tax-equivalent basis, was 2.97% for the three months ended March 31, 2019, compared to 3.12% for the three months ended March 31, 2018. The amortization of purchase accounting adjustments related to the merger with Chicopee increased net interest income by $22,000 and $235,000 during the three months ended March 31, 2019 and 2018, respectively. Excluding the favorable purchase accounting amortization, the net interest margin was 2.96% for the three months ended March 31, 2019 and 3.07% for the three months ended March 31, 2018.

Net interest and dividend income decreased $396,000, or 2.7%, to $14.3 million for the three months ended March 31, 2019, compared to $14.7 million for the three months ended March 31, 2018. The average yield on interest-earning assets increased 19 basis points to 4.15% for the three months ended March 31, 2019, from 3.96% for the three months ended March 31, 2018. During the three months ended March 31, 2019, the average cost of funds increased 45 basis points to 1.54%, from 1.09% for the three months ended March 31, 2018. The average cost of time deposits increased 68 basis points to 1.99% for the three months ended March 31, 2019 from 1.31% for the three months ended March 31, 2018. The average cost of borrowings increased 50 basis points to 2.87% for the three months ended March 31, 2019 from 2.37% for the three months ended March 31, 2018.

Average interest-earning assets increased $42.0 million, or 2.2%, to $2.0 billion for the three months ended March 31, 2019 from $1.9 billion for the three months ended March 31, 2018. The increase in average interest-earning assets was due to an increase in average loans of $57.4 million, or 3.5%, and an increase in short-term investments of $9.2 million, partially offset by a decrease in average securities of $23.4 million, or 8.3%.

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Provision for Loan 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 March 31, 2019 was based upon the changes that occurred in the loan portfolio during that same period. After evaluating these factors, we recorded a provision for loan losses of $50,000 for the three months ended March 31, 2019, compared to $500,000 for the same period in 2018, primarily due to a decrease in loan balances for the three months ended March 31, 2019. The allowance was $11.9 million and $12.1 million, respectively, and 0.71% of total loans at each of March 31, 2019 and December 31, 2018. At March 31, 2019, the allowance for loan losses as a percentage of nonperforming loans was 77.6%, compared to 89.4% at December 31, 2018. Net charge-offs were $224,000 for the three months ended March 31, 2019, compared to net recoveries of $39,000 for the three months ended March 31, 2018.

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.

Non-interest Income.

Non-interest income increased $405,000, or 22.9%, to $2.2 million for the three months ended March 31, 2019, from $1.8 million for the three months ended March 31, 2018 as a result of the Company recognizing $201,000 in previously unamortized premiums on a bond which was paid in full prior to its final maturity and $106,000 in unrealized losses on the Company’s marketable equity securities portfolio during the three months ended March 31, 2018.

Non-interest Expense.

Non-interest expense increased $597,000, or 5.2%, to $12.0 million, or 2.31% of average assets, for the three months ended March 31, 2019, from $11.4 million, or 2.24% of average assets, for the three months ended March 31, 2018. Salaries and benefits increased $247,000, or 3.8%, primarily due to annual merit increases as well as the addition of new staff to support the Company’s business initiatives. Occupancy expense increased $111,000, or 10.5%, data processing expense increased $28,000, or 4.4%, FDIC insurance expense increased $18,000, or 11.4%, advertising expense increased $17,000, or 4.9%, professional fees increased $46,000, or 7.0%, and other non-interest expense increased $92,000, or 5.5%. For the three months ended March 31, 2019, the efficiency ratio was 73.4%, compared to 68.2% for the three months ended March 31, 2018.

Income Taxes.

The Company’s effective tax rate was 22.5% and 22.9% for the three months ended March 31, 2019 and 2018, respectively.

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Explanation of Use of Non-GAAP Financial Measurements.

We believe that it is common practice in the banking industry to present interest income and related yield information on tax-exempt loans and securities on a tax-equivalent basis and that such information is useful to investors because it facilitates comparisons among financial institutions. However, the adjustment of interest income and yields on tax-exempt loans and securities to a tax-equivalent amount may be considered to 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,
	2019					2018
	(Dollars in thousands)
	Interest		Average Yield			Interest		Average Yield
Loans (no tax adjustment)	$	18,058		4.35	%	$	16,702		4.16	%
Tax-equivalent adjustment (1)		121					125
Loans (tax-equivalent basis)	$	18,179		4.38	%	$	16,827		4.20	%
Securities (no tax adjustment)	$	1,690		2.64	%	$	1,808		2.60	%
Tax-equivalent adjustment (1)		5					6
Securities (tax-equivalent basis)	$	1,695		2.65	%	$	1,814		2.60	%
Net interest income (no tax adjustment)	$	14,326				$	14,722
Tax-equivalent adjustment (1)		126					131
Net interest income (tax-equivalent basis)	$	14,452				$	14,853
Interest rate spread (no tax adjustment)				2.58	%				2.85	%
Net interest margin (no tax adjustment)				2.94	%				3.09	%

(1) The tax equivalent adjustment is based upon a 21% tax rate.

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 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 FHLB based on eligible collateral of loans and securities.

At March 31, 2019 and December 31, 2018, outstanding borrowings from the FHLB were $231.0 million and $267.3 million, respectively. At March 31, 2019, we had $229.5 million in available borrowing capacity with the 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 $15.0 million and $50.0 million with other correspondent banks. Interest rates on these lines are determined and reset on a daily basis by each respective bank. At March 31, 2019 and December 31, 2018, we did not have an outstanding balance under these lines. In addition, we may enter into reverse repurchase agreements with approved broker-dealers. Reverse repurchase agreements are agreements that allow us to borrow money using our securities as collateral.

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.

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At March 31, 2019, we exceeded each of the applicable regulatory capital requirements. As of March 31, 2019, 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, 2019
Total Capital (to Risk Weighted Assets):
Consolidated	$	234,322		14.28	%	$	131,230		8.00	%		N/A		N/A
Bank		222,102		13.56			131,046		8.00		$	163,808		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		222,443		13.56			98,423		6.00			N/A		N/A
Bank		210,223		12.83			98,285		6.00			131,046		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated		222,443		13.56			73,817		4.50			N/A		N/A
Bank		210,223		12.83			73,714		4.50			106,475		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		222,443		10.58			84,070		4.00			N/A		N/A
Bank		210,223		9.99			84,134		4.00			105,168		5.00
December 31, 2018
Total Capital (to Risk Weighted Assets):
Consolidated	$	247,361		14.87	%	$	133,089		8.00	%		N/A		N/A
Bank		235,569		14.18			132,892		8.00		$	166,115		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		235,308		14.14			99,817		6.00			N/A		N/A
Bank		223,516		13.46			99,669		6.00			132,892		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated		235,308		14.14			74,862		4.50			N/A		N/A
Bank		223,516		13.46			74,752		4.50			107,974		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		235,308		11.14			84,497		4.00			N/A		N/A
Bank		223,516		10.59			84,465		4.00			105,581		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.

39

The following table summarizes the contractual obligations and credit commitments at March 31, 2019:

	Amounts Due Within 1 Year		Amounts Due After 1 Year But Within 3 Years		Amounts Due After 3 Year But Within 5 Years		Amounts Due After 5 Years		Total
	(In thousands)
Borrowings
Federal Home Loan Bank	$	133,606	$	93,908	$	2,920	$	605	$	231,039
Credit Commitments:
Available lines of credit		186,538		—		—		75,740		262,278
Other loan commitments		82,243		33,577		1,630		352		117,802
Letters of credit		9,394		646		301		693		11,034
Total credit commitments		278,175		34,223		1,931		76,785		391,114
Other Obligations
Vendor Contracts		3,356		6,712		6,712		3,071		19,851
Total Obligations	$	415,137	$	134,843	$	11,563	$	80,461	$	642,004

OFF-BALANCE SHEET ARRANGEMENTS.

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

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in our assessment of our sensitivity to market risk since its presentation in our 2018 Annual Report. Please refer to Item 7A of the 2018 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.

40

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 2018 Annual Report. There are no material changes in the risk factors relevant to our operations.

41

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table sets forth information with respect to purchases made by us of our common stock during the three months ended March 31, 2019.

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)(3)
January 1 - 31, 2019		191,419			10.14		191,419		59,914
February 1 - 28, 2019		464,124	(2)		9.87		455,752		2,418,362
March 1 - 31, 2019		899,809			9.92		899,809		1,518,553
Total		1,555,352			9.93		1,546,980		1,518,553

(1) On January 31, 2017, the Board of Directors authorized a stock repurchase program under which the Company may purchase up to 3,047,000 shares, or 10%, of its outstanding common stock (the “2017 Plan”). The 2017 Plan began March 13, 2017 and on March 1, 2019, the Company announced the completion of the 2017 Plan.

(2) Number includes repurchases of 8,372 shares related to tax obligations for shares of restricted stock that vested on February 14, 2019 under our 2014 Omnibus Incentive Plan. These repurchases were reported by each reporting person on February 19, 2019.

(3) On January 29, 2019, the Board of Directors authorized an additional stock repurchase program under which the Company may purchase up to 2,814,200 shares, or 10%, of its outstanding common stock (the “2019 Plan”). As of March 31, 2019, the Company has repurchased 1,295,647 shares under the 2019 Plan.

There were no sales by us of unregistered securities during the three months ended March 31, 2019.

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.

42

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 8, 2019.

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	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 (the “SEC”) 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 March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (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.

* 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.

EX-31.1

Western New England Bancorp, Inc. 10-Q

 EXHIBIT 31.1

CERTIFICATION

I, James C. Hagan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Western New England Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 8, 2019	/s/ James C. Hagan
		James C. Hagan
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Western New England Bancorp, Inc. 10-Q 

EXHIBIT 31.2

CERTIFICATION

I, Guida R. Sajdak, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Western New England Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 8, 2019	/s/ Guida R. Sajdak
		Guida R. Sajdak
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Western New England Bancorp, Inc. 10-Q

EXHIBIT 32.1

statement furnished pursuant to section 906 of the
sarbanes-oxley act of 2002, 18 u.s.c. section 1350

In connection with the Quarterly Report on Form 10-Q of Western New England Bancorp, Inc. (the “Company”) for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James C. Hagan, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and

B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

May 8, 2019	/s/ James C. Hagan
Dated	James C. Hagan
	President and Chief Executive Officer

EX-32.2

Western New England Bancorp, Inc. 10-Q

EXHIBIT 32.2

statement furnished pursuant to section 906 of the
sarbanes-oxley act of 2002, 18 u.s.c. section 1350

In connection with the Quarterly Report on Form 10-Q of Western New England Bancorp, Inc. (the “Company”) for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Guida R. Sajdak, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and

B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

May 8, 2019	/s/ Guida R. Sajdak
Dated	Guida R. Sajdak
	Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 03, 2019
Document And Entity Information Abstract
Entity Registrant Name	Western New England Bancorp, Inc.
Entity Central Index Key	0001157647
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity's Reporting Status Current	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		26,953,429
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

XML

CONSOLIDATED BALANCE SHEETS - UNAUDITED - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 19,782	$ 20,616
Federal Funds Sold	1,275	1,246
Interest-bearing deposits and other short-term investments	23,425	4,927
Cash and cash equivalents	44,482	26,789
Securities available-for-sale, at fair value	244,878	253,748
Marketable equity securities, at fair value	6,518	6,408
Federal Home Loan Bank stock and other restricted stock, at cost	12,407	14,695
Loans, net of allowance for loan losses of $11,879 and $12,053 at March 31, 2019 and December 31, 2018, respectively	1,668,787	1,684,804
Premises and equipment, net	24,432	24,624
Accrued interest receivable	5,640	5,652
Bank-owned life insurance	69,677	69,252
Deferred tax asset, net	8,753	9,872
Goodwill	12,487	12,487
Core deposit intangible	3,594	3,688
Other assets	14,042	6,803
Total Assets	2,115,697	2,118,822
Deposits:
Non-interest-bearing	345,077	355,389
Interest-bearing	1,284,757	1,240,604
Total deposits	1,629,834	1,595,993
Short-term borrowings	35,000	59,250
Long-term debt	196,039	208,018
Other liabilities	27,507	18,532
Total liabilities	1,888,380	1,881,793
SHAREHOLDERS' EQUITY:
Preferred stock - $0.01 par value, 5,000,000 shares authorized, none outstanding at March 31, 2019 and December 31, 2018
Common stock - $0.01 par value, 75,000,000 shares authorized, 26,953,429 shares issued and outstanding at March 31, 2019; 28,393,348 shares issued and outstanding at December 31, 2018	270	284
Additional paid-in capital	167,812	182,096
Unearned compensation - ESOP	(5,022)	(5,171)
Unearned compensation - Equity Incentive Plan	(1,702)	(872)
Retained earnings	76,156	74,108
Accumulated other comprehensive loss	(10,197)	(13,416)
TOTAL SHAREHOLDERS' EQUITY	227,317	237,029
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 2,115,697	$ 2,118,822

XML

CONSOLIDATED BALANCE SHEETS - UNAUDITED (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for loan losses	$ 11,879	$ 12,053
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized	5,000,000	5,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized	75,000,000	75,000,000
Common stock, issued	26,953,429	28,393,348
Common stock, outstanding	26,953,429	28,393,348

XML

CONSOLIDATED STATEMENTS OF NET INCOME - UNAUDITED - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest and dividend income:
Residential and commercial real estate loans	$ 14,971	$ 13,799
Commercial and industrial loans	3,002	2,814
Consumer loans	85	89
Debt securities, taxable	1,629	1,748
Debt securities, tax-exempt	20	24
Equity securities	41	36
Other investments	236	201
Short-term investments	76	21
Total interest and dividend income	20,060	18,732
INTEREST EXPENSE:
Deposits	3,969	2,355
Long-term debt	1,139	855
Short-term borrowings	626	800
Total interest expense	5,734	4,010
Net interest and dividend income	14,326	14,722
Provision for loan losses	50	500
Net interest and dividend income after provision for loan losses	14,276	14,222
Non-interest income (loss):
Service charges and fees	1,633	1,583
Income from BOLI	425	442
Gain (loss) on available-for-sale securities, net	35	(201)
Unrealized gains (losses) on marketable equity securities	70	(106)
Gain on sale of other real estate owned		48
Other income	8
Total non-interest income	2,171	1,766
Non-interest expense:
Salaries and employees benefits	6,780	6,533
Occupancy	1,171	1,060
Furniture and equipment	405	367
Data processing	665	637
Professional fees	705	659
FDIC insurance assessment	176	158
Advertising	364	347
Other expenses	1,757	1,665
Total non-interest expense	12,023	11,426
Income before income taxes	4,424	4,562
Income tax provision	994	1,043
Net income	$ 3,430	$ 3,519
Earnings per common share:
Basic earnings per share (in dollars per share)	$ 0.13	$ 0.12
Weighted average shares outstanding (in shares)	27,037,520	29,484,824
Diluted earnings per share (in dollars per share)	$ 0.13	$ 0.12
Weighted average diluted shares outstanding (in shares)	27,153,160	29,620,929

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income		$ 3,430	$ 3,519
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses)		4,327	(5,116)
Reclassification adjustment for net (gains) losses realized in income	[1]	(35)	201
Cumulative-effect adjustment due to change in accounting principle (ASU 2017-08)		7
Cumulative-effect adjustment due to change in accounting principle (ASU 2016-01)			237
Unrealized gains (losses)		4,299	(4,678)
Tax effect		(1,113)	1,070
Net-of-tax amount		3,186	(3,608)
Cash flow hedges:
Change in fair value of derivatives used for cash flow hedges		(328)	678
Reclassification adjustment for loss realized in interest expense	[2]	68	171
Reclassification adjustment for termination fee realized in interest expense	[3]	264	264
Unrealized gains on cash flow hedges		4	1,113
Tax effect		(1)	(313)
Net-of-tax amount		3	800
Defined benefit pension plan:
Amortization of defined benefit plans actuarial loss	[4]	32	57
Tax effect		(9)	(16)
Net-of-tax amount		23	41
Other comprehensive income (loss)		3,212	(2,767)
Comprehensive income		$ 6,642	$ 752

[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 $10,000 and $(57,000) for the three months ended March 31, 2019 and 2018, respectively.

[2] 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 adjustments were $19,000 and $48,000 for the three months ended March 31, 2019 and 2018, respectively.

[3] 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 adjustments were $74,000 for the three months ended March 31, 2019 and 2018.

[4] Amounts represent the reclassification of defined benefit plans amortization and have been recognized as a component of non-interest expense. Income tax effects associated with the reclassification adjustments were $9,000 and $16,000 for the three months ended March 31, 2019 and 2018, respectively.

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Income tax benefits on realized gains and losses on available-for-sale securities	$ 10	$ (57)
Income tax benefit on derivative instruments	19	48
Income tax benefit on termination fee on derivative instruments	74	74
Income tax benefit, defined benefit plans	$ 9	$ 16

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - UNAUDITED (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Unearned Compensation - ESOP [Member]	Unearned Compensation - Equity Incentive Plan [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Total
BALANCE AT BEGINNING at Dec. 31, 2017	$ 305	$ 203,527	$ (5,786)	$ (791)	$ 62,578	$ (12,552)	$ 247,281
BALANCE AT BEGINNING (shares) at Dec. 31, 2017	30,487,309
Comprehensive income					3,519	(2,767)	752
Cumulative-effect adjustment due to change in accounting principle					(237)	237
Common stock held by ESOP committed to be released		88	154				242
Share-based compensation - equity incentive plan				232			232
Common stock repurchased	$ (5)	(4,798)					(4,803)
Common stock repurchased (in shares)	(451,641)
Issuance of common stock in connection with stock option exercises	$ 1	103					104
Issuance of common stock in connection with stock option exercises (shares)	16,975
Issuance of common stock in connection with equity incentive plan	$ 1	925		(926)
Issuance of common stock in connection with equity incentive plan (shares)	85,440
Cash dividends declared and paid					(1,185)		(1,185)
BALANCE AT ENDING at Mar. 31, 2018	$ 302	199,845	(5,632)	(1,485)	64,675	(15,082)	242,623
BALANCE AT ENDING (shares) at Mar. 31, 2018	30,138,083
BALANCE AT BEGINNING at Dec. 31, 2018	$ 284	182,096	(5,171)	(872)	74,108	(13,416)	237,029
BALANCE AT BEGINNING (shares) at Dec. 31, 2018	28,393,348
Comprehensive income					3,430	3,212	6,642
Cumulative-effect adjustment due to change in accounting principle					(7)	7
Common stock held by ESOP committed to be released		60	149				209
Share-based compensation - equity incentive plan		(45)		240			195
Common stock repurchased	$ (15)	(15,432)					(15,447)
Common stock repurchased (in shares)	(1,555,352)
Issuance of common stock in connection with stock option exercises		64					64
Issuance of common stock in connection with stock option exercises (shares)	12,550
Issuance of common stock in connection with equity incentive plan	$ 1	1,069		(1,070)
Issuance of common stock in connection with equity incentive plan (shares)	102,883
Cash dividends declared and paid					(1,375)		(1,375)
BALANCE AT ENDING at Mar. 31, 2019	$ 270	$ 167,812	$ (5,022)	$ (1,702)	$ 76,156	$ (10,197)	$ 227,317
BALANCE AT ENDING (shares) at Mar. 31, 2019	26,953,429

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - UNAUDITED (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Common stock held by ESOP committed to be released (shares)	88,117	90,978
Cash dividends declared (per share)	$ 0.05	$ 0.04

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
OPERATING ACTIVITIES:
Net income	$ 3,430	$ 3,519
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	50	500
Depreciation and amortization of premises and equipment	529	494
Accretion of purchase accounting adjustments, net	(10)	(225)
Amortization of core deposit intangible	94	94
Net amortization of premiums and discounts on securities and mortgage loans	540	793
Share-based compensation expense	195	232
ESOP expense	209	242
Net (gain) loss on available-for-sale securities	(35)	201
Change in unrealized (gain) loss on equity securities	(70)	106
Net gain on sales of other real estate owned		(48)
Income from bank-owned life insurance	(425)	(442)
Net change in:
Accrued interest receivable	12	68
Other assets	(7,249)	977
Other liabilities	9,231	2,415
Net cash provided by operating activities	6,501	8,926
Securities, available-for-sale:
Purchases	(15,294)	(2,577)
Proceeds from sales and redemption	21,642	5,635
Proceeds from calls, maturities, and principal collections	6,296	5,966
Loan originations and principal payments, net	15,912	(16,202)
Redemption of Federal Home Loan Bank of Boston stock	2,288	868
Proceeds from sale of other real estate owned		203
Purchases of premises and equipment	(374)	(677)
Proceeds from sale of premises and equipment	27	20
Net cash provided by (used in) investing activities	30,497	(6,764)
FINANCING ACTIVITIES:
Net increase in deposits	33,875	47,735
Net change in short-term borrowings	(24,250)	(89,650)
Repayment of long-term debt	(11,951)	(31,992)
Proceeds from long-term debt		80,000
Cash dividends paid	(1,375)	(1,185)
Common stock repurchased	(15,668)	(4,868)
Issuance of common stock in connection with stock option exercises	64	104
Net cash (used in) provided by financing activities	(19,305)	144
NET CHANGE IN CASH AND CASH EQUIVALENTS	17,693	2,306
Beginning of period	26,789	27,132
End of period	44,482	29,438
Supplemental cash flow information:
Interest paid	5,655	3,969
Taxes paid	832	30
Net change in cash due to broker for common stock repurchased	$ (221)	$ (65)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Bank’s deposits are insured up to the maximum Federal Deposit Insurance Corporation (“FDIC”) coverage limits. The Bank operates 22 banking offices in western Massachusetts and northern Connecticut, and its primary sources of revenue are interest income from loans as well as interest income from investment securities. 

Wholly-owned Subsidiaries. Elm Street Securities Corporation, WFD Securities, Inc. and CSB Colts, Inc., are 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. 

Principles of Consolidation. The 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 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 and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses for each. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the realizability of deferred tax assets. 

Basis of Presentation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of March 31, 2019, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results of operations for the year ending December 31, 2019. 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, 2018, included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”). 

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

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2019

Earnings per common share:

EARNINGS PER SHARE

2. EARNINGS PER SHARE 

Basic earnings per share represents income available to common shareholders divided by the 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. Potential common shares that may be issued by us relate solely to stock options and are determined using the treasury stock method. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. There were no anti-dilutive shares outstanding during the three months ended March 31, 2019 and 2018. 

Earnings per common share have been computed based on the following: 

	Three Months Ended
	March 31,
	2019			2018
	(In thousands, except per share data)
Net income applicable to common stock	$	3,430		$	3,519
Average number of common shares issued		27,834			30,358
Less: Average unallocated ESOP Shares		(700	)		(791	)
Less: Average unvested equity incentive plan shares		(96	)		(82	)
Average number of common shares outstanding used to calculate basic earnings per common share		27,038			29,485
Effect of dilutive equity incentive plan		79			35
Effect of dilutive stock options		36			101
Average number of common shares outstanding used to calculate diluted earnings per common share		27,153			29,621
Basic earnings per share	$	0.13		$	0.12
Diluted earnings per share	$	0.13		$	0.12

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COMPREHENSIVE INCOME (LOSS)

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

COMPREHENSIVE INCOME (LOSS)

3. COMPREHENSIVE INCOME (LOSS

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

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

	March 31,  2019			December 31,  2018
	(In thousands)
Net unrealized losses on securities available-for-sale	$	(5,585	)	$	(9,891	)
Tax effect		1,378			2,491
Net-of-tax amount		(4,207	)		(7,400	)
Fair value of derivatives used for cash flow hedges		(1,518	)		(1,259	)
Termination fee on cancelled cash flow hedges		(2,332	)		(2,595	)
Total derivatives		(3,850	)		(3,854	)
Tax effect		1,083			1,084
Net-of-tax amount		(2,767	)		(2,770	)
Unrecognized actuarial loss on the defined benefit plan		(4,484	)		(4,516	)
Tax effect		1,261			1,270
Net-of-tax amount		(3,223	)		(3,246	)
Accumulated other comprehensive loss	$	(10,197	)	$	(13,416	)

The following table presents changes in accumulated other comprehensive loss for the periods ended March 31, 2019 and 2018 by component: 

	Securities			Derivatives			Defined Benefit  Plan			Accumulated Other Comprehensive Loss
	(In thousands)
Balance at December 31, 2017	$	(4,042	)	$	(4,181	)	$	(4,329	)	$	(12,552	)
Cumulative-effect adjustment due to change in accounting principle (ASU 2016-01)		237			—			—			237
Current-period other comprehensive (loss) income		(3,608	)		800			41			(2,767	)
Balance at March 31, 2018	$	(7,413	)	$	(3,381	)	$	(4,288	)	$	(15,082	)
Balance at December 31, 2018	$	(7,400	)	$	(2,770	)	$	(3,246	)	$	(13,416	)
Cumulative-effect adjustment due to change in accounting principle (ASU 2017-08)		7			—			—			7
Current-period other comprehensive income		3,186			3			23			3,212
Balance at March 31, 2019	$	(4,207	)	$	(2,767	)	$	(3,223	)	$	(10,197	)

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SECURITIES

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

SECURITIES

4. SECURITIES

Securities available-for-sale are summarized as follows: 

	March 31, 2019
	Amortized Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses			Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	25,150	$	—	$	(511	)	$	24,639
State and municipal bonds		2,965		38		(11	)		2,992
Corporate bonds		26,060		—		(389	)		25,671
Total debt securities		54,175		38		(911	)		53,302
Mortgage-backed securities:
Government-sponsored mortgage-backed securitiess		176,696		103		(4,177	)		172,622
U.S. government guaranteed mortgage-backed securities		19,592		19		(657	)		18,954
Total mortgage-backed securities		196,288		122		(4,834	)		191,576
Total available-for-sale	$	250,463	$	160	$	(5,745	)	$	244,878

	December 31, 2018
		Amortized  Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses			Fair Value
		(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	25,150	$	—	$	(1,203	)	$	23,947
State and municipal bonds		2,976		33		(65	)		2,944
Corporate bonds		49,819		—		(1,651	)		48,168
Total debt securities		77,945		33		(2,919	)		75,059
Mortgage-backed securities:
Government-sponsored mortgage-backed securities		165,605		1		(6,255	)		159,351
U.S. government guaranteed mortgage-backed securities		20,089		1		(752	)		19,338
Total mortgage-backed securities		185,694		2		(7,007	)		178,689
Total available-for-sale	$	263,639	$	35	$	(9,926	)	$	253,748

At March 31, 2019, government-sponsored enterprise obligations with a fair value of $6.9 million and mortgage-backed securities with a fair value $54.5 million were pledged to secure public deposits and for other purposes as required or permitted by law. 

During the three months ended March 31, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the guidance on the amortization period of premiums on certain purchased callable debt securities from maturity to the earliest call date. The cumulative-effect adjustment resulting from the adoption of this ASU was to decrease retained earnings and reduce accumulated other comprehensive loss as of January 1, 2019 by $7,000. 

The amortized cost and fair value of available-for-sale debt securities at March 31, 2019, by final maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations. Also, because mortgage-backed securities require periodic principal paydowns, they are not included in the maturity categories in the following maturity summary. 

	March 31, 2019
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities::
Due in one year or less	$	240	$	240
Due after one year through five years		29,482		29,003
Due after five years through ten years		17,715		17,440
Due after ten years		6,738		6,619
Total debt securities		54,175		53,302
Mortgage-backed securities		196,288		191,576
Total available-for-sale securities	$	250,463	$	244,878

Gross realized gains and losses on securities available-for-sale for the three months ended March 31, 2019 and 2018 are as follows: 

	Three Months Ended
	March 31,
	2019		2018
	(In thousands)
Gross gains realized	$	35	$	—
Gross losses realized		—		(201	)
Net loss realized	$	35	$	(201	)

Proceeds from the sales of securities available-for-sale amounted to $21.6 million for the three months ended March 31, 2019, while proceeds from the redemption of securities available-for-sale amounted to $5.6 million for the three months ended March 31, 2018. 

Information pertaining to securities with gross unrealized losses at March 31, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows: 

	March 31, 2019
	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	$	12	$	1,044	$	4,165	$	146,695
U.S. government guaranteed mortgage-backed securities		—		—		657		15,414
Corporate bonds		—		—		389		25,671
State and municipal bonds		—		—		11		1,576
Government-sponsored enterprise obligations		—		—		511		24,639
Total available-for-sale	$	12	$	1,044	$	5,733	$	213,995

	December 31, 2018
	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	$	74	$	7,354	$	6,181	$	148,762
U.S. government guaranteed mortgage-backed securities		15		2,829		737		14,669
Corporate bonds		110		9,995		1,541		38,173
State and municipal bonds		—		—		65		1,532
Government-sponsored enterprise obligations		—		—		1,203		23,947
Total available-for-sale	$	199	$	20,178	$	9,727	$	227,083

During the three months ended March 31, 2019 and year ended December 31, 2018, the Company did not record any fair value impairment charges on its investments. Management regularly reviews the portfolio for securities with unrealized losses. At March 31, 2019, management did not consider any debt securities to have other-than-temporary impairment (“OTTI”) and attributes the unrealized losses 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. 

The process for assessing investments for OTTI may vary depending on the type of security. In assessing the Company’s investments in government-sponsored mortgage-backed securities and 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.

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LOANS AND ALLOWANCE FOR LOAN LOSSES

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

LOANS AND ALLOWANCE FOR LOAN LOSSES

5. LOANS AND ALLOWANCE FOR LOAN LOSSES

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

	March 31,			December 31,
	2019			2018
	(In thousands)
Commercial real estate	$	770,776		$	768,881
Residential real estate:
Residential 1-4 family		575,561			577,641
Home equity		95,997			97,238
Commercial and industrial		228,709			243,493
Consumer		5,270			5,203
Total gross loans		1,676,313			1,692,456
Premiums and deferred loan fees and costs, net		4,353			4,401
Allowance for loan losses		(11,879	)		(12,053	)
Net loans	$	1,668,787		$	1,684,804

There were no purchases of loans during the three months ended March 31, 2019 and year ended December 31, 2018. 

Loans Serviced for Others. 

The Company has transferred a portion of its originated commercial loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in our accompanying consolidated balance sheets. We continue to service the loans on behalf of the participating lenders. We share with participating lenders, on a pro-rata basis, any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. At March 31, 2019 and December 31, 2018, the Company was servicing commercial loans participated out to various other institutions totaling $35.2 million and $35.4 million, respectively.

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 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 March 31, 2019, include weighted average prepayment speed for the portfolio using the Public Securities Association Standard Prepayment Model (148 PSA), weighted average internal rate of return (12.05%), weighted average servicing fee (0.25%), and net cost to service loans ($84.30 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. 

At March 31, 2019 and December 31, 2018, the Company was servicing residential mortgage loans owned by investors totaling $55.2 million and $56.6 million, respectively. Net service fee income of $18,000 and $25,000 was recorded for the three months ended March 31, 2019 and 2018, respectively, and is included in service charges and fees on the consolidated statements of operations. 

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

	Three Months Ended March 31,
	2019			2018
	(In thousands)
Balance at the beginning of year:	$	286		$	352
Capitalized mortgage servicing rights		—			—
Amortization		(17	)		(17	)
Balance at the end of period	$	269		$	335
Fair value at the end of period	$	416		$	537

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

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

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

General component

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

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

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

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

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

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

Allocated component

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

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

Unallocated component

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

An analysis of changes in the allowance for loan losses by segment for the three months ended March 31, 2019 and 2018 is as follows: 

	Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Unallocated			Total
	(In thousands)
Balance at December 31, 2017	$	4,712		$	3,311		$	2,733		$	71		$	4		$	10,831
Provision (credit)		452			71			(59	)		25			11			500
Charge-offs		—			—			—			(36	)		—			(36	)
Recoveries		35			15			7			18			—			75
Balance at March 31, 2018	$	5,199		$	3,397		$	2,681		$	78		$	15		$	11,370
Balance at December 31, 2018	$	5,260		$	3,556		$	3,114		$	135		$	(12	)	$	12,053
Provision (credit)		24			108			(127	)		28			17			50
Charge-offs		(116	)		(94	)		(37	)		(46	)		—			(293	)
Recoveries		37			1			4			27			—			69
Balance at March 31, 2019	$	5,205		$	3,571		$	2,954		$	144		$	5		$	11,879

The following table presents information pertaining to the allowance for loan losses by segment for the dates indicated: 

	Commercial Real Estate		Residential Real Estate		Commercial and Industrial		Consumer		Unallocated			Total
	(In thousands)
March 31, 2019
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—		$	—
Amount of allowance for non-impaired loans		5,205		3,571		2,954		144		5			11,879
Total allowance for loan losses	$	5,205	$	3,571	$	2,954	$	144	$	5		$	11,879
Impaired loans	$	7,156	$	4,041	$	3,300	$	53	$	—		$	14,550
Non-impaired loans		753,175		664,340		224,530		5,217		—			1,647,262
Impaired loans acquired with deteriorated credit quality		10,445		3,177		879		—		—			14,501
Total loans	$	770,776	$	671,558	$	228,709	$	5,270	$	—		$	1,676,313
December 31, 2018
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—		$	—
Amount of allowance for non-impaired loans		5,260		3,556		3,114		135		(12	)		12,053
Total allowance for loan losses	$	5,260	$	3,556	$	3,114	$	135	$	(12	)	$	12,053
Impaired loans	$	5,237	$	4,754	$	2,345	$	60	$	—		$	12,396
Non-impaired loans		752,770		666,883		240,235		5,143		—			1,665,031
Impaired loans acquired with deteriorated credit quality		10,874		3,242		913		—		—			15,029
Total loans	$	768,881	$	674,879	$	243,493	$	5,203	$	—		$	1,692,456

Past Due and Non-accrual Loans. 

The following tables present an age analysis of past due loans as of the dates indicated: 

	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		Non-Accrual Loans
	(In thousands)
March 31, 2019
Commercial real estate	$	3,238	$	2,327	$	2,890	$	8,455	$	762,321	$	770,776	$	6,547
Residential real estate:
Residential		1,513		378		3,199		5,090		570,471		575,561		4,945
Home equity		301		—		197		498		95,499		95,997		369
Commercial and industrial		305		357		301		963		227,746		228,709		3,399
Consumer		77		17		3		97		5,173		5,270		52
Total loans	$	5,434	$	3,079	$	6,590	$	15,103	$	1,661,210	$	1,676,313	$	15,312
December 31, 2018
Commercial real estate	$	1,857	$	—	$	2,865	$	4,722	$	764,159	$	768,881	$	4,701
Residential real estate:
Residential		1,798		572		1,879		4,249		573,392		577,641		5,856
Home equity		600		5		242		847		96,391		97,238		391
Commercial and industrial		794		1,463		305		2,562		240,931		243,493		2,476
Consumer		93		1		21		115		5,088		5,203		60
Total loans	$	5,142	$	2,041	$	5,312	$	12,495	$	1,679,961	$	1,692,456	$	13,484

Impaired Loans.

The following is a summary of impaired loans by class:

							Three Months Ended
	At March 31, 2019						March 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans (1)
Commercial real estate	$	17,601	$	20,722	$	—	$	16,856	$	131
Residential real estate		6,823		7,900		—		7,190		44
Home equity		395		445		—		417		—
Commercial and industrial		4,179		8,782		—		3,718		37
Consumer		53		64		—		57		—
Total impaired loans	$	29,051	$	37,913	$	—	$	28,238	$	212

							Three Months Ended
	At December 31, 2018						March 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans (1)
Commercial real estate	$	16,111	$	19,081	$	—	$	15,404	$	190
Residential real estate		7,558		8,614		—		6,578		10
Home equity		438		468				737		1
Commercial and industrial		3,258		7,788		—		3,990		44
Consumer		60		70				108		—
Total impaired loans	$	27,425	$	36,021	$	—	$	26,817	$	245

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

The majority of impaired loans are included within the non-accrual balances; however, not every loan on non-accrual status has been designated as impaired. Impaired loans include loans that have been modified in a troubled debt restructuring (“TDR”). 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 non-accrual status are applied to principal. There was no interest income recognized on nonaccrual impaired loans during the three months ended March 31, 2019 and March 31, 2018. 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. As of March 31, 2019, we have not committed to lend any additional funds for loans that are classified as impaired. Payments received on performing impaired loans are recorded in accordance with the contractual terms of the loan. Interest income recognized on impaired loans during the three months ended March 31, 2019 and 2018 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 may consist of a reduction in 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 Bank’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. All 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 a specific allowance or a charge-off to the allowance. Non-performing TDRs are included in non-performing loans.

There were no significant loans modified in TDRs during the three months ended March 31, 2019 or 2018. During the three months ended March 31, 2019 and 2018, no TDRs defaulted (defined as 30 days or more past due) within 12 months of restructuring. As of March 31, 2019, we have not committed to lend any additional funds for loans that are classified as impaired. There were no charge-offs on TDRs during the three months ended March 31, 2019 and 2018. 

Loans Acquired with Deteriorated Credit Quality. 

The following is a summary of loans acquired in the Chicopee Bancorp, Inc. (“Chicopee”) acquisition with evidence of credit deterioration as of March 31, 2019 and 2018. 

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)
Balance at December 31, 2018	$	24,793		$	19,883		$	4,910		$	4,854		$	15,029
Collections		(702	)		(646	)		(56	)		(158	)		(488	)
Dispositions		(71	)		(71	)		—			(31	)		(40	)
Balance at March 31, 2019	$	24,020		$	19,166		$	4,854		$	4,665		$	14,501

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)
Balance at December 31, 2017	$	29,362		$	23,158		$	6,204		$	6,033		$	17,125
Collections		(1,412	)		(1,194	)		(218	)		(175	)		(1,019	)
Balance at March 31, 2018	$	27,950		$	21,964		$	5,986		$	5,858		$	16,106

Credit Quality Information. 

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. Non-performing residential real estate, home equity and consumer loans are monitored individually for impairment and risk rated as “substandard.” 

Loans rated 1 – 4: Loans rated 1-4 represent groups of loans that are not subject to adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent acceptable risk. 

Loans rated 5: Loans rated 5 are considered “Special Mention” and may exhibit potential credit weaknesses or downward trends and are being monitored by 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.” A loan is classified as substandard if the borrower exhibits a well-defined weakness 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.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation of the loan highly questionable and improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. 

Loans rated 8: Loans rated 8 are considered uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not 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. In addition, management utilizes delinquency reports, the criticized report and other loan reports to monitor credit 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 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 for the periods indicated: 

	Commercial Real Estate		Residential 1-4 Family		Home Equity		Commercial and Industrial		Consumer		Total
	(In thousands)
March 31, 2019
Pass (Rated 1 – 4)	$	732,542	$	569,124	$	95,422	$	191,580	$	5,218	$	1,593,886
Special Mention (Rated 5)		16,101		—		—		7,802		—		23,903
Substandard (Rated 6)		22,133		6,437		575		29,327		52		58,524
Total	$	770,776	$	575,561	$	95,997	$	228,709	$	5,270	$	1,676,313
December 31, 2018
Pass (Rated 1 – 4)	$	732,729	$	570,428	$	96,643	$	207,663	$	5,143	$	1,612,606
Special Mention (Rated 5)		17,929		—		—		12,248		—		30,177
Substandard (Rated 6)		18,223		7,213		595		23,582		60		49,673
Total	$	768,881	$	577,641	$	97,238	$	243,493	$	5,203	$	1,692,456

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GOODWILL AND OTHER INTANGIBLES

3 Months Ended

Mar. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLES

6. GOODWILL AND OTHER INTANGIBLES

At March 31, 2019 and December 31, 2018, 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, 2019 or the year ended December 31, 2018. Annually, or more frequently if events or changes in circumstances warrant such evaluation, the Company evaluates its goodwill for impairment. 

Core Deposit Intangibles. 

In connection with the acquisition of Chicopee, the Bank recorded a core deposit intangible of $4.5 million which is amortized over twelve years using the straight-line method. Amortization expense was $94,000 for the three months ended March 31, 2019 and the three months ended March 31, 2018. At March 31, 2019, future amortization of the core deposit intangible totaled $375,000 for each of the next five years and $1.7 million thereafter.

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SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

7. SHARE-BASED COMPENSATION

Stock Options – Under the terms of the Chicopee merger agreement dated October 21, 2016, each option to purchase shares of Chicopee common stock issued by Chicopee and outstanding at the effective time of the merger 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 three months ended March 31, 2019 is presented below:  

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		238,075		$	6.33		3.44	$	877
Exercised		(12,550	)		5.12		0.74		60
Outstanding at March 31, 2019		225,525		$	6.40		3.33	$	633
Exercisable at March 31, 2019		225,525		$	6.40		3.33	$	633

Cash received for options exercised during the three months ended March 31, 2019 and 2018 was $64,000 and $104,000, respectively. 

Restricted Stock Awards. In May 2014, the Company’s shareholders approved a stock-based compensation plan (the “RSA Plan”). Under the RSA Plan, up to 516,000 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 WNEB. Any shares that are not issued because vesting requirements are not met, will be available for future issuance under the RSA Plan. 

In January 2015, there were 48,560 shares granted under the RSA Plan. These shares vest ratably over five years. The fair market value of shares awarded are based on the market price at the grant date and recorded as unearned compensation. The shares are amortized over the applicable vesting period. 

In 2016, the Compensation Committee (the “Committee”) approved a long-term incentive program (“LTI Plan”). The 2016 LTI Plan provides a periodic award that is both performance and time-based and is designed to recognize the executive’s responsibilities, reward performance and leadership and as a retention tool. The objective of the 2016 LTI Plan 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 2016 LTI Plan includes eligible participants of the Company that are nominated by the Chief Executive Officer and approved by the Compensation Committee. The 2016 LTI Plan is triggered by the Company’s achievement of satisfactory safety and soundness results from its most recent regulatory examination and additional Company performance metrics. Stock grants made under the 2016 LTI Plan consist of 50% time-based stock and 50% performance-based stock. 

In May 2016, there were 62,740 shares granted under the 2016 LTI Plan. Of the 62,740 shares granted, 36,543 shares were time-based stock, with 10,352 vesting in one year and 26,191 vesting ratably over a three year period. The remaining 26,197 shares granted were performance-based and are subject to the achievement of the 2016 LTI performance metrics. Under the 2016 LTI Plan, the primary performance metric was return on equity. 

As a result of the Tax Cuts and Jobs Act of 2017, the return on equity performance metrics were adjusted to incorporate the impact and benefits of the corporate tax rate reductions thereunder. The original and adjusted threshold and target metrics under the 2016 LTI Plan are as follows: 

	Return on Equity Metrics
	Threshold		Target
Original metrics	5.85	%	6.32	%
Adjusted metrics	6.38	%	6.79	%

As of December 31, 2018, the three-year performance period for the 2016 LTI Plan performance-based share grant expired. Performance-based shares were earned based on the Company achieving the 2016 LTI Plan threshold and target metrics at the end of the three-year performance period. The Company’s return on equity for the year ended December 31, 2018 was 6.82%, which resulted in the achievement of the target return on equity metric for the 2016 LTI Plan grant. In February of 2019, 26,197 performance-based shares vested and were granted to eligible recipients under the Plan. 

In May 2017, there were 89,042 shares granted under the 2017 LTI Plan. Of the 89,042 shares, 55,159 shares are time-based, with 21,276 vesting in one year and 33,883 vesting ratably over a three year period. The remaining 33,883 shares granted were performance-based and are subject to the achievement of the 2017 LTI performance metric. Vesting is realized after a three year period. Under the 2017 LTI Plan, the primary performance metric was return on equity. Performance-based 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 period. Participants will be able to earn between 50% (for threshold performance) and 100% (for target performance) of the performance shares but will not earn additional shares if performance exceeds target performance. 

As a result of the Tax Cuts and Jobs Act of 2017, the return on equity performance metrics were adjusted to incorporate the impact and benefits of the corporate tax rate reductions thereunder. The original and adjusted threshold, target and maximum metrics for 2019 under the 2017 LTI Plan are as follows: 

	Return on Equity Metrics
Performance Period Ending		Original  Threshold	Adjusted Threshold		Original Target		Adjusted Target		Original Maximum		Adjusted Maximum
December 31, 2019		6.50%	7.09	%	7.20	%	7.85	%	7.90	%	8.61	%

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

In January 2018, there were 83,812 shares granted under the 2018 LTI Plan. Of the 83,812 shares, 50,852 shares were time-based, with 17,908 vesting in one year and 32,944 vesting ratably over a three-year period. The remaining 32,960 shares granted are performance-based and are subject to the achievement of the 2018 long-term incentive performance metric. Under the 2018 LTI Plan, the primary performance metric 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 period. The threshold, target and stretch metrics under the 2018 LTI Plan are as follows: 

	Return on Equity Metrics
Performance Period Ending	Threshold		Target		Stretch
December 31, 2019	6.85	%	7.35	%	7.75	%
December 31, 2020	7.40	%	7.90	%	8.30	%

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 grant date, recorded as unearned compensation and amortized over the applicable vesting period. Performance-based metrics are monitored on a quarterly basis in order to compare actual results to the performance metric, with any necessary adjustments being recognized through share-based compensation expense and unearned compensation. 

In February 2019, there were 108,718 shares granted under the 2019 LTI Plan. Of the 108,718 shares, 64,496 shares were time-based, with 20,262 vesting in one year and 44,234 vesting ratably over a three-year period. The remaining 44,222 shares granted are performance-based and are subject to the achievement of the 2019 long-term incentive performance metric. Under the 2019 LTI Plan, the primary performance metric 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 period. The threshold, target and stretch metrics under the 2019 LTI Plan 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	%

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 grant date, recorded as unearned compensation and amortized over the applicable vesting period. Performance-based metrics are monitored on a quarterly basis in order to compare actual results to the performance metric, with any necessary adjustments being recognized through share-based compensation expense and unearned compensation. 

At March 31, 2019, there were an additional 127,335 shares available for future grants under the RSA Plan. 

A summary of the status of restricted stock awards at March 31, 2019 is presented below: 

	Shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2018		155,712		$	9.87
Shares granted		108,718			9.77
Shares vested		(53,465	)		8.75
Balance at March 31, 2019		210,965		$	10.10

We recorded total expense for restricted stock awards of $195,000 and $232,000 for the three months ended March 31, 2019 and 2018, respectively.

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

As a member of the FHLB, the Bank has the potential capacity to borrow an amount up to the value of its discounted qualified collateral. Borrowings from the FHLB 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. 

FHLB advances with an original maturity of less than one year totaled $35.0 million and $59.3 million at March 31, 2019 and December 31, 2018, respectively, with a weighted average rate of 2.69% and 3.28%, respectively. At March 31, 2019, based on qualifying collateral less outstanding advances, the Bank had the capacity to borrow up to approximately $229.5 million from the FHLB. 

In addition, at March 31, 2019 and December 31, 2018, the Company had an available Ideal Way line of credit with the FHLB for up to $9.5 million. Interest on this line of credit is payable at a rate determined and reset by the FHLB on a daily basis. The outstanding principal is due daily and the portion not repaid will be automatically renewed. At March 31, 2019 and December 31, 2018, there were no advances outstanding under this line. 

The Bank also had a line of credit in the amount up to $15.0 million with a correspondent bank at an interest rate determined and reset on a daily basis. There were no advances outstanding under this line at March 31, 2019 and 2018. We also had a $50.0 million line of credit with another correspondent bank at an interest rate determined and reset on a daily basis. There were no advances outstanding under the line at March 31, 2019 and 2018. 

Long-term debt consists of FHLBB advances with an original maturity of one year or more. At March 31, 2019, we had $196.0 million in long-term debt with the FHLBB. This compares to $208.0 million in long-term debt with FHLBB advances at December 31, 2018.

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PENSION BENEFITS

3 Months Ended

Mar. 31, 2019

Defined Benefit Plan [Abstract]

PENSION BENEFITS

9. PENSION BENEFITS

We provide a defined benefit pension plan for eligible employees (the “Plan”). Employees must work a minimum of 1,000 hours per year to be eligible for the Plan. Eligible employees become vested in the Plan after five years of service. We plan to contribute to the pension plan the amount required to meet the minimum funding standards under Section 412 of the Internal Revenue Code of 1986, as amended. Additional contributions will be made as deemed appropriate by management in conjunction with the pension plan’s actuaries. We have not yet determined how much we expect to contribute to our pension plan in 2019. No contributions have been made to the plan for the three months ended March 31, 2019. The pension plan assets are invested in various pooled separate investment accounts offered by Principal Life Insurance Company, a division of Principal Financial Group, who is the Custodian of the Plan (the “Custodian”). The Plan is administered by an officer of Westfield Bank. On September 30, 2016, we effected a soft freeze on the Plan and 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,
	2019			2018
	(In thousands)
Service cost	$	274		$	303
Interest cost		284			253
Expected return on assets		(308	)		(347	)
Amortization of actuarial loss		32			57
Net periodic pension cost	$	282		$	266

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DERIVATIVES AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

10. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives 

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 table below presents the fair value of our derivative financial instruments designated as hedging instruments as well as our classification on the balance sheet as of March 31, 2019 and December 31, 2018. 

March 31, 2019	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Interest rate swaps	Other Assets	$	—	Other Liabilities	$	1,518

December 31, 2018	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Interest rate swaps	Other Assets	$	—	Other Liabilities	$	1,259

At March 31, 2019 and December 31, 2018, all derivatives were designated as hedging instruments. 

Cash Flow Hedges of Interest Rate Risk 

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

The following table presents information about our cash flow hedges at March 31, 2019 and December 31, 2018: 

March 31, 2019	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	35,000		3.5		2.61	%		3.54	%	$	(1,518	)

December 31, 2018	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	35,000		3.7		2.79	%		3.54	%	$	(1,259	)

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. 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 for the three months ended March 31, 2019 or the year ended December 31, 2018. 

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

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

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Three Months Ended March 31,
	2019			2018
	(In thousands)
Interest rate swaps	$	(328	)	$	678

Amounts reported in accumulated other comprehensive loss related to these derivatives are reclassified to interest expense as interest payments are made on our designated rate sensitive liabilities. The amount reclassified from accumulated other comprehensive income into net income for interest rate swaps and termination fees was $332,000 and $435,000 during the three months ended March 31, 2019 and 2018, respectively. During the three months ended March 31, 2019 and 2018, no gains or losses were reclassified from accumulated other comprehensive loss into income for ineffectiveness on cash flow hedges. 

Credit-risk-related Contingent Features  

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

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

At March 31, 2019 and December 31, 2018, we had a net liability position of $1.5 million and $1.3 million with our counterparties, respectively. As of March 31, 2019, we had minimum collateral posting thresholds with certain of our derivative counterparties and had mortgage-backed securities with a fair value of $850,000 and $830,000 cash posted as collateral against our obligations under these agreements. If we had breached any of these provisions at March 31, 2019, we could have been required to settle our obligations under the agreements at the termination value.

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FAIR VALUE OF ASSETS AND LIABILITIES

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE OF ASSETS AND LIABILITIES

11. FAIR VALUE OF ASSETS AND LIABILITIES

Determination of Fair Value.

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

Fair Value Hierarchy.

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

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

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

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

Methods and assumptions for valuing our financial instruments 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.

Securities available-for-sale. The securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market. These securities include marketable equity securities. All other securities are measured at fair value in Level 2 and are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. 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.

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. 

Assets and Liabilities Measured at Fair Value on a Recurring Basis.

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

	March 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Government-sponsored mortgage-backed securities	$	—	$	172,622	$	—	$	172,622
U.S. government guaranteed mortgage-backed securities		—		18,954		—		18,954
Corporate bonds		—		25,671		—		25,671
State and municipal bonds		—		2,992		—		2,992
Government-sponsored enterprise obligations		—		24,639		—		24,639
Marketable equity securities		6,518		—		—		6,518
Total assets	$	6,518	$	244,878	$	—	$	251,396
Liabilities:
Interest rate swaps	$	—	$	1,518	$	—	$	1,518

	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Government-sponsored mortgage-backed securities	$	—	$	159,351	$	—	$	159,351
U.S. government guaranteed mortgage-backed securities		—		19,338		—		19,338
Corporate bonds		—		48,168		—		48,168
State and municipal bonds		—		2,944		—		2,944
Government-sponsored enterprise obligations		—		23,947		—		23,947
Marketable equity securities		6,408		—		—		6,408
Total assets	$	6,408	$	253,748	$	—	$	260,156
Liabilities:
Interest rate swaps	$	—	$	1,259	$	—	$	1,259

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 March 31, 2019 or December 31, 2018. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related assets at March 31, 2019 and December 31, 2018. Total losses represent the change in carrying value as a result of fair value adjustments related to assets still held at the periods indicated.

	At						Three Months Ended
	March 31, 2019						March 31, 2019
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	2,115	$	130

	At						Three Months Ended
	December 31, 2018						March 31, 2018
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	1,676	$	170

The amount of impaired loans represents the carrying value, and net of the related write-down or 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.

There were no liabilities measured at fair value on a non-recurring basis at March 31, 2019 and December 31, 2018. 

Summary of Fair Values of Financial Instruments.

The estimated fair values of our financial instruments are as follows:

	March 31, 2019
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	44,482	$	44,482	$	—	$	—	$	44,482
Securities available-for-sale		244,878		—		244,878		—		244,878
Marketable equity securities		6,518		6,518		—		—		6,518
Federal Home Loan Bank of Boston and other restricted stock		12,407		—		—		12,407		12,407
Loans - net		1,668,787		—		—		1,627,630		1,627,630
Accrued interest receivable		5,640		—		—		5,640		5,640
Mortgage servicing rights		269		—		416		—		416
Liabilities:
Deposits		1,629,834		—		—		1,628,896		1,628,896
Short-term borrowings		35,000		—		35,000		—		35,000
Long-term debt		196,039		—		195,575		—		195,575
Accrued interest payable		608		—		—		608		608
Derivative liabilities		1,518		—		1,518		—		1,518

	December 31, 2018
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	26,789	$	26,789	$	—	$	—	$	26,789
Securities available-for-sale		253,748		—		253,748		—		253,748
Marketable equity securities		6,408		6,408		—		—		6,408
Federal Home Loan Bank of Boston and other restricted stock		14,695		—		—		14,695		14,695
Loans - net		1,684,804		—		—		1,631,558		1,631,558
Accrued interest receivable		5,652		—		—		5,652		5,652
Mortgage servicing rights		286		—		456		—		456
Liabilities:
Deposits		1,595,993		—		—		1,592,521		1,592,521
Short-term borrowings		59,250		—		59,247		—		59,247
Long-term debt		208,018		—		206,789		—		206,789
Accrued interest payable		530		—		—		530		530
Derivative liabilities		1,259		—		1,259		—		1,259

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LEASES

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

LEASES

12. LEASES

The Company determines if an arrangement is a lease at inception. Effective in 2019, operating leases are included within other assets and other liabilities in our consolidated balance sheets. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. 

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. We have not elected the practical expedient to account for lease and non-lease components as one lease component. Additionally, the Company has elected the practical expedient whereby expired leases, existing operating lease classifications and initial direct costs will not be reassessed at inception. The Company has operating leases for certain of our banking offices and ATMs. Our leases have remaining lease terms of one year to 19 years, some of which include options to extend the leases for additional five-year terms up to 15 years. 

The components of lease expense were as follows:

	Three Months Ended
	March 31, 2019
	(In thousands)
Amortization of right-of-use assets	$	242
Interest on lease liabilities		63
Operating lease cost	$	305

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	292

Supplemental balance sheet information related to leases was as follows: 

	March 31, 2019
	(In thousands)
Operating lease right-of-use assets	$	6,993
Operating lease liabilities	$	7,005

The weighted average remaining lease term for our operating leases was 11 years with a weighted average discount rate of 3.52% at March 31, 2019. 

Maturities of the Company’s operating lease liabilities were as follows (in thousands): 

Years Ending December 31,
2019	$	836
2020		995
2021		916
2022		887
2023		700
Thereafter		4,333
Total lease payments		8,667
Less imputed interest		(1,662	)
Total	$	7,005

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RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2019

Accounting Changes and Error Corrections [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

13. RECENT ACCOUNTING PRONOUNCEMENTS

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 ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this ASU on January 1, 2019 and recorded an increase in assets of $7.2 million and an increase in liabilities of $7.2 million on the consolidated balance sheet as a result of recognizing the right-of-use assets and lease liabilities. 

In June 2016, the FASB issued ASU 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 is effective for the first interim period in fiscal years beginning after December 15, 2019. The Company is in the process of 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 March 2017, the FASB issued ASU 2017-08—Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU 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 (that is, at a premium). The Company adopted this ASU on January 1, 2019, which reduced premiums on callable debt securities and resulted in a cumulative-effect adjustment directly to retained earnings, net of tax, of $7,000. 

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early adoption, including adoption in the interim period, is permitted. Management does not expect the adoption of this ASU to have a material impact on our consolidated financial statements. 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removes and modifies the previously required disclosures relating to fair value measurements. Specifically, the ASU removes the required disclosure of amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, the valuation process for Level 3 fair value measurements and the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of a reporting period. It also modifies the required roll forward of Level 3 fair value measurements to a disclosure of any transfers into and out of Level 3, increases disclosure for investments in entities that calculate net asset value, and clarifies the measurement of uncertainty disclosure. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As this standard relates to disclosures, Management does not expect adoption to have a material impact on our consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Nature of Operations and Basis of Presentation

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

The Bank’s deposits are insured up to the maximum Federal Deposit Insurance Corporation (“FDIC”) coverage limits. The Bank operates 22 banking offices in western Massachusetts and northern Connecticut, and its primary sources of revenue are interest income from loans as well as interest income from investment securities.

Wholly-owned Subsidiaries

Wholly-owned Subsidiaries. Elm Street Securities Corporation, WFD Securities, Inc. and CSB Colts, Inc., are 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.

Principles of Consolidation

Principles of Consolidation. The 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

Estimates. The preparation of 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 and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses for each. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses and the realizability of deferred tax assets.

Basis of Presentation

Basis of Presentation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of March 31, 2019, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results of operations for the year ending December 31, 2019. 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, 2018, included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”).

Reclassifications

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

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share, Basic [Abstract]

Schedule of earnings per common share

Earnings per common share have been computed based on the following: 

	Three Months Ended
	March 31,
	2019			2018
	(In thousands, except per share data)
Net income applicable to common stock	$	3,430		$	3,519
Average number of common shares issued		27,834			30,358
Less: Average unallocated ESOP Shares		(700	)		(791	)
Less: Average unvested equity incentive plan shares		(96	)		(82	)
Average number of common shares outstanding used to calculate basic earnings per common share		27,038			29,485
Effect of dilutive equity incentive plan		79			35
Effect of dilutive stock options		36			101
Average number of common shares outstanding used to calculate diluted earnings per common share		27,153			29,621
Basic earnings per share	$	0.13		$	0.12
Diluted earnings per share	$	0.13		$	0.12

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COMPREHENSIVE INCOME (LOSS) (Tables)

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Note [Abstract]

Schedule of accumulated other comprehensive loss included sharesholders equity

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

	March 31, 2019			December 31,  2018
	(In thousands)
Net unrealized losses on securities available-for-sale	$	(5,585	)	$	(9,891	)
Tax effect		1,378			2,491
Net-of-tax amount		(4,207	)		(7,400	)
Fair value of derivatives used for cash flow hedges		(1,518	)		(1,259	)
Termination fee on cancelled cash flow hedges		(2,332	)		(2,595	)
Total derivatives		(3,850	)		(3,854	)
Tax effect		1,083			1,084
Net-of-tax amount		(2,767	)		(2,770	)
Unrecognized actuarial loss on the defined benefit plan		(4,484	)		(4,516	)
Tax effect		1,261			1,270
Net-of-tax amount		(3,223	)		(3,246	)
Accumulated other comprehensive loss	$	(10,197	)	$	(13,416	)

Schedule of changes in accumulated other loss by component

The following table presents changes in accumulated other comprehensive loss for the periods ended March 31, 2019 and 2018 by component: 

	Securities			Derivatives			Defined Benefit  Plan			Accumulated Other Comprehensive Loss
	(In thousands)
Balance at December 31, 2017	$	(4,042	)	$	(4,181	)	$	(4,329	)	$	(12,552	)
Cumulative-effect adjustment due to change in accounting principle (ASU 2016-01)		237			—			—			237
Current-period other comprehensive (loss) income		(3,608	)		800			41			(2,767	)
Balance at March 31, 2018	$	(7,413	)	$	(3,381	)	$	(4,288	)	$	(15,082	)
Balance at December 31, 2018	$	(7,400	)	$	(2,770	)	$	(3,246	)	$	(13,416	)
Cumulative-effect adjustment due to change in accounting principle (ASU 2017-08)		7			—			—			7
Current-period other comprehensive income		3,186			3			23			3,212
Balance at March 31, 2019	$	(4,207	)	$	(2,767	)	$	(3,223	)	$	(10,197	)

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SECURITIES (Tables)

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Schedule of securities available for sale

Securities available-for-sale are summarized as follows: 

	March 31, 2019
	Amortized Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses			Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	25,150	$	—	$	(511	)	$	24,639
State and municipal bonds		2,965		38		(11	)		2,992
Corporate bonds		26,060		—		(389	)		25,671
Total debt securities		54,175		38		(911	)		53,302
Mortgage-backed securities:
Government-sponsored mortgage-backed securities		176,696		103		(4,177	)		172,622
U.S. government guaranteed mortgage-backed securities		19,592		19		(657	)		18,954
Total mortgage-backed securities		196,288		122		(4,834	)		191,576
Total available-for-sale	$	250,463	$	160	$	(5,745	)	$	244,878

	December 31, 2018
		Amortized  Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses			Fair Value
		(In thousands)
Available-for-sale securities:
Debt securities:
Government-sponsored enterprise obligations	$	25,150	$	—	$	(1,203	)	$	23,947
State and municipal bonds		2,976		33		(65	)		2,944
Corporate bonds		49,819		—		(1,651	)		48,168
Total debt securities		77,945		33		(2,919	)		75,059
Mortgage-backed securities:
Government-sponsored mortgage-backed securities		165,605		1		(6,255	)		159,351
U.S. government guaranteed mortgage-backed securities		20,089		1		(752	)		19,338
Total mortgage-backed securities		185,694		2		(7,007	)		178,689
Total available-for-sale	$	263,639	$	35	$	(9,926	)	$	253,748

Schedule of amortized cost and fair value of securities available for sale by maturity

The amortized cost and fair value of available-for-sale debt securities at March 31, 2019, by final maturity, are shown below.

	March 31, 2019
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale securities:
Debt securities::
Due in one year or less	$	240	$	240
Due after one year through five years		29,482		29,003
Due after five years through ten years		17,715		17,440
Due after ten years		6,738		6,619
Total debt securities		54,175		53,302
Mortgage-backed securities		196,288		191,576
Total available-for-sale securities	$	250,463	$	244,878

Schedule of gross realized gains and losses on sales of securities available for sale

Gross realized gains and losses on securities available-for-sale for the three months ended March 31, 2019 and 2018 are as follows: 

	Three Months Ended
	March 31,
	2019		2018
	(In thousands)
Gross gains realized	$	35	$	—
Gross losses realized		—		(201	)
Net loss realized	$	35	$	(201	)

Schedule of securities with gross unrealized losses in continuous loss position

Information pertaining to securities with gross unrealized losses at March 31, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows: 

	March 31, 2019
	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	$	12	$	1,044	$	4,165	$	146,695
U.S. government guaranteed mortgage-backed securities		—		—		657		15,414
Corporate bonds		—		—		389		25,671
State and municipal bonds		—		—		11		1,576
Government-sponsored enterprise obligations		—		—		511		24,639
Total available-for-sale	$	12	$	1,044	$	5,733	$	213,995

	December 31, 2018
	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	$	74	$	7,354	$	6,181	$	148,762
U.S. government guaranteed mortgage-backed securities		15		2,829		737		14,669
Corporate bonds		110		9,995		1,541		38,173
State and municipal bonds		—		—		65		1,532
Government-sponsored enterprise obligations		—		—		1,203		23,947
Total available-for-sale	$	199	$	20,178	$	9,727	$	227,083

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Schedule of loans

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

	March 31,			December 31,
	2019			2018
	(In thousands)
Commercial real estate	$	770,776		$	768,881
Residential real estate:
Residential 1-4 family		575,561			577,641
Home equity		95,997			97,238
Commercial and industrial		228,709			243,493
Consumer		5,270			5,203
Total gross loans		1,676,313			1,692,456
Premiums and deferred loan fees and costs, net		4,353			4,401
Allowance for loan losses		(11,879	)		(12,053	)
Net loans	$	1,668,787		$	1,684,804

Schedule of mortgage servicing rights

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

	Three Months Ended March 31,
	2019			2018
	(In thousands)
Balance at the beginning of year:	$	286		$	352
Capitalized mortgage servicing rights		—			—
Amortization		(17	)		(17	)
Balance at the end of period	$	269		$	335
Fair value at the end of period	$	416		$	537

Schedule of analysis of changes in allowance for loan losses by segment

An analysis of changes in the allowance for loan losses by segment for the three months ended March 31, 2019 and 2018 is as follows: 

	Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Unallocated			Total
	(In thousands)
Balance at December 31, 2017	$	4,712		$	3,311		$	2,733		$	71		$	4		$	10,831
Provision (credit)		452			71			(59	)		25			11			500
Charge-offs		—			—			—			(36	)		—			(36	)
Recoveries		35			15			7			18			—			75
Balance at March 31, 2018	$	5,199		$	3,397		$	2,681		$	78		$	15		$	11,370
Balance at December 31, 2018	$	5,260		$	3,556		$	3,114		$	135		$	(12	)	$	12,053
Provision (credit)		24			108			(127	)		28			17			50
Charge-offs		(116	)		(94	)		(37	)		(46	)		—			(293	)
Recoveries		37			1			4			27			—			69
Balance at March 31, 2019	$	5,205		$	3,571		$	2,954		$	144		$	5		$	11,879

Schedule of information pertaining to the allowance for loan losses by segment

The following table presents information pertaining to the allowance for loan losses by segment for the dates indicated: 

	Commercial Real Estate		Residential Real Estate		Commercial and Industrial		Consumer		Unallocated			Total
	(In thousands)
March 31, 2019
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—		$	—
Amount of allowance for non-impaired loans		5,205		3,571		2,954		144		5			11,879
Total allowance for loan losses	$	5,205	$	3,571	$	2,954	$	144	$	5		$	11,879
Impaired loans	$	7,156	$	4,041	$	3,300	$	53	$	—		$	14,550
Non-impaired loans		753,175		664,340		224,530		5,217		—			1,647,262
Impaired loans acquired with deteriorated credit quality		10,445		3,177		879		—		—			14,501
Total loans	$	770,776	$	671,558	$	228,709	$	5,270	$	—		$	1,676,313
December 31, 2018
Amount of allowance for impaired loans	$	—	$	—	$	—	$	—	$	—		$	—
Amount of allowance for non-impaired loans		5,260		3,556		3,114		135		(12	)		12,053
Total allowance for loan losses	$	5,260	$	3,556	$	3,114	$	135	$	(12	)	$	12,053
Impaired loans	$	5,237	$	4,754	$	2,345	$	60	$	—		$	12,396
Non-impaired loans		752,770		666,883		240,235		5,143		—			1,665,031
Impaired loans acquired with deteriorated credit quality		10,874		3,242		913		—		—			15,029
Total loans	$	768,881	$	674,879	$	243,493	$	5,203	$	—		$	1,692,456

Schedule of past due and nonaccrual loans by class

The following tables present an age analysis of past due loans as of the dates indicated: 

	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		Non-Accrual Loans
	(In thousands)
March 31, 2019
Commercial real estate	$	3,238	$	2,327	$	2,890	$	8,455	$	762,321	$	770,776	$	6,547
Residential real estate:
Residential		1,513		378		3,199		5,090		570,471		575,561		4,945
Home equity		301		—		197		498		95,499		95,997		369
Commercial and industrial		305		357		301		963		227,746		228,709		3,399
Consumer		77		17		3		97		5,173		5,270		52
Total loans	$	5,434	$	3,079	$	6,590	$	15,103	$	1,661,210	$	1,676,313	$	15,312
December 31, 2018
Commercial real estate	$	1,857	$	—	$	2,865	$	4,722	$	764,159	$	768,881	$	4,701
Residential real estate:
Residential		1,798		572		1,879		4,249		573,392		577,641		5,856
Home equity		600		5		242		847		96,391		97,238		391
Commercial and industrial		794		1,463		305		2,562		240,931		243,493		2,476
Consumer		93		1		21		115		5,088		5,203		60
Total loans	$	5,142	$	2,041	$	5,312	$	12,495	$	1,679,961	$	1,692,456	$	13,484

Schedule of impaired loans by class

The following is a summary of impaired loans by class: 

							Three Months Ended
	At March 31, 2019						March 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans (1)
Commercial real estate	$	17,601	$	20,722	$	—	$	16,856	$	131
Residential real estate		6,823		7,900		—		7,190		44
Home equity		395		445		—		417		—
Commercial and industrial		4,179		8,782		—		3,718		37
Consumer		53		64		—		57		—
Total impaired loans	$	29,051	$	37,913	$	—	$	28,238	$	212

							Three Months Ended
	At December 31, 2018						March 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired Loans (1)
Commercial real estate	$	16,111	$	19,081	$	—	$	15,404	$	190
Residential real estate		7,558		8,614		—		6,578		10
Home equity		438		468				737		1
Commercial and industrial		3,258		7,788		—		3,990		44
Consumer		60		70				108		—
Total impaired loans	$	27,425	$	36,021	$	—	$	26,817	$	245

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

Schedule of loans acquired with deteriorated credit quality

The following is a summary of loans acquired in the Chicopee Bancorp, Inc. (“Chicopee”) acquisition with evidence of credit deterioration as of March 31, 2019 and 2018. 

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)
Balance at December 31, 2018	$	24,793		$	19,883		$	4,910		$	4,854		$	15,029
Collections		(702	)		(646	)		(56	)		(158	)		(488	)
Dispositions		(71	)		(71	)		—			(31	)		(40	)
Balance at March 31, 2019	$	24,020		$	19,166		$	4,854		$	4,665		$	14,501

	Contractual Required Payments Receivable			Cash Expected To Be Collected			Non- Accretable Discount			Accretable Yield			Loans Receivable
	(In thousands)
Balance at December 31, 2017	$	29,362		$	23,158		$	6,204		$	6,033		$	17,125
Collections		(1,412	)		(1,194	)		(218	)		(175	)		(1,019	)
Balance at March 31, 2018	$	27,950		$	21,964		$	5,986		$	5,858		$	16,106

Schedule of loans by risk rating

The following table presents our loans by risk rating for the periods indicated: 

	Commercial Real Estate		Residential 1-4 Family		Home Equity		Commercial and Industrial		Consumer		Total
	(In thousands)
March 31, 2019
Pass (Rated 1 – 4)	$	732,542	$	569,124	$	95,422	$	191,580	$	5,218	$	1,593,886
Special Mention (Rated 5)		16,101		—		—		7,802		—		23,903
Substandard (Rated 6)		22,133		6,437		575		29,327		52		58,524
Total	$	770,776	$	575,561	$	95,997	$	228,709	$	5,270	$	1,676,313
December 31, 2018
Pass (Rated 1 – 4)	$	732,729	$	570,428	$	96,643	$	207,663	$	5,143	$	1,612,606
Special Mention (Rated 5)		17,929		—		—		12,248		—		30,177
Substandard (Rated 6)		18,223		7,213		595		23,582		60		49,673
Total	$	768,881	$	577,641	$	97,238	$	243,493	$	5,203	$	1,692,456

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SHARE-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of stock option activity

A summary of stock option activity for the three months ended March 31, 2019 is presented below:  

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		238,075		$	6.33		3.44	$	877
Exercised		(12,550	)		5.12		0.74		60
Outstanding at March 31, 2019		225,525		$	6.40		3.33	$	633
Exercisable at March 31, 2019		225,525		$	6.40		3.33	$	633

Schedule of original and adjusted threshold and target metrics

The original and adjusted threshold and target metrics under the 2016 LTI Plan are as follows: 

	Return on Equity Metrics
	Threshold		Target
Original metrics	5.85	%	6.32	%
Adjusted metrics	6.38	%	6.79	%

The original and adjusted threshold, target and maximum metrics for 2019 under the 2017 LTI Plan are as follows: 

	Return on Equity Metrics
Performance Period Ending		Original  Threshold	Adjusted Threshold		Original Target		Adjusted Target		Original Maximum		Adjusted Maximum
December 31, 2019		6.50%	7.09	%	7.20	%	7.85	%	7.90	%	8.61	%

The threshold, target and stretch metrics under the 2018 LTI Plan are as follows: 

	Return on Equity Metrics
Performance Period Ending	Threshold		Target		Stretch
December 31, 2019	6.85	%	7.35	%	7.75	%
December 31, 2020	7.40	%	7.90	%	8.30	%

The threshold, target and stretch metrics under the 2019 LTI Plan 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	%

Schedule of stock award plan activity

A summary of the status of restricted stock awards at March 31, 2019 is presented below: 

	Shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2018		155,712		$	9.87
Shares granted		108,718			9.77
Shares vested		(53,465	)		8.75
Balance at March 31, 2019		210,965		$	10.10

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PENSION BENEFITS (Tables)

3 Months Ended

Mar. 31, 2019

Defined Benefit Plan [Abstract]

Schedule of net pension benefit costs

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

	Three Months Ended   March 31,
	2019			2018
	(In thousands)
Service cost	$	274		$	303
Interest cost		284			253
Expected return on assets		(308	)		(347	)
Amortization of actuarial loss		32			57
Net periodic pension cost	$	282		$	266

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DERIVATIVES AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair values of derivative financial instruments

The table below presents the fair value of our derivative financial instruments designated as hedging instruments as well as our classification on the balance sheet as of March 31, 2019 and December 31, 2018. 

March 31, 2019	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Interest rate swaps	Other Assets	$	—	Other Liabilities	$	1,518

December 31, 2018	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Interest rate swaps	Other Assets	$	—	Other Liabilities	$	1,259

Schedule of information about cash flow hedges

The following table presents information about our cash flow hedges at March 31, 2019 and December 31, 2018: 

March 31, 2019	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	35,000		3.5		2.61	%		3.54	%	$	(1,518	)

December 31, 2018	Notional		Weighted Average		Weighted Average Rate						Estimated Fair
	Amount		Maturity		Receive			Pay			Value
	(In thousands)		(In years)								(In thousands)
Interest rate swaps on FHLBB borrowings	$	35,000		3.7		2.79	%		3.54	%	$	(1,259	)

Schedule of pre-tax net losses of cash flow hedges

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

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Three Months Ended March 31,
	2019			2018
	(In thousands)
Interest rate swaps	$	(328	)	$	678

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FAIR VALUE OF ASSETS AND LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value on recurring basis

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

	March 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Government-sponsored mortgage-backed securities	$	—	$	172,622	$	—	$	172,622
U.S. government guaranteed mortgage-backed securities		—		18,954		—		18,954
Corporate bonds		—		25,671		—		25,671
State and municipal bonds		—		2,992		—		2,992
Government-sponsored enterprise obligations		—		24,639		—		24,639
Marketable equity securities		6,518		—		—		6,518
Total assets	$	6,518	$	244,878	$	—	$	251,396
Liabilities:
Interest rate swaps	$	—	$	1,518	$	—	$	1,518

	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Government-sponsored mortgage-backed securities	$	—	$	159,351	$	—	$	159,351
U.S. government guaranteed mortgage-backed securities		—		19,338		—		19,338
Corporate bonds		—		48,168		—		48,168
State and municipal bonds		—		2,944		—		2,944
Government-sponsored enterprise obligations		—		23,947		—		23,947
Marketable equity securities		6,408		—		—		6,408
Total assets	$	6,408	$	253,748	$	—	$	260,156
Liabilities:
Interest rate swaps	$	—	$	1,259	$	—	$	1,259

Schedule of assets measured at fair value on non-recurring basis

The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related assets at March 31, 2019 and December 31, 2018. Total losses represent the change in carrying value as a result of fair value adjustments related to assets still held at the periods indicated. 

	At						Three Months Ended
	March 31, 2019						March 31, 2019
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	2,115	$	130

	At						Three Months Ended
	December 31, 2018						March 31, 2018
							Total
	Level 1		Level 2		Level 3		Losses
	(In thousands)						(In thousands)
Impaired loans	$	—	$	—	$	1,676	$	170

Schedule of estimated fair values of financial instruments

The estimated fair values of our financial instruments are as follows:

	March 31, 2019
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	44,482	$	44,482	$	—	$	—	$	44,482
Securities available-for-sale		244,878		—		244,878		—		244,878
Marketable equity securities		6,518		6,518		—		—		6,518
Federal Home Loan Bank of Boston and other restricted stock		12,407		—		—		12,407		12,407
Loans - net		1,668,787		—		—		1,627,630		1,627,630
Accrued interest receivable		5,640		—		—		5,640		5,640
Mortgage servicing rights		269		—		416		—		416
Liabilities:
Deposits		1,629,834		—		—		1,628,896		1,628,896
Short-term borrowings		35,000		—		35,000		—		35,000
Long-term debt		196,039		—		195,575		—		195,575
Accrued interest payable		608		—		—		608		608
Derivative liabilities		1,518		—		1,518		—		1,518

	December 31, 2018
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents	$	26,789	$	26,789	$	—	$	—	$	26,789
Securities available-for-sale		253,748		—		253,748		—		253,748
Marketable equity securities		6,408		6,408		—		—		6,408
Federal Home Loan Bank of Boston and other restricted stock		14,695		—		—		14,695		14,695
Loans - net		1,684,804		—		—		1,631,558		1,631,558
Accrued interest receivable		5,652		—		—		5,652		5,652
Mortgage servicing rights		286		—		456		—		456
Liabilities:
Deposits		1,595,993		—		—		1,592,521		1,592,521
Short-term borrowings		59,250		—		59,247		—		59,247
Long-term debt		208,018		—		206,789		—		206,789
Accrued interest payable		530		—		—		530		530
Derivative liabilities		1,259		—		1,259		—		1,259

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LEASES (Tables)

3 Months Ended

Mar. 31, 2019

Leases

Schedule of lease expense

The components of lease expense were as follows:

	Three Months Ended
	March 31, 2019
	(In thousands)
Amortization of right-of-use assets	$	242
Interest on lease liabilities		63
Operating lease cost	$	305

Schedule of supplemental information related to leases

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	292

Supplemental balance sheet information related to leases was as follows:

	March 31, 2019
	(In thousands)
Operating lease right-of-use assets	$	6,993
Operating lease liabilities	$	7,005

Schedule of maturities of operating lease liabilities

Maturities of the Company’s operating lease liabilities were as follows (in thousands):

Years Ending December 31,
2019	$	836
2020		995
2021		916
2022		887
2023		700
Thereafter		4,333
Total lease payments		8,667
Less imputed interest		(1,662	)
Total	$	7,005

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	Mar. 31, 2019 Number
Massachusetts and Granby and Enfield, Connecticut [Member]
Number of banking offices in which bank operates	22

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings per common share:
Net income applicable to common stock	$ 3,430	$ 3,519
Average number of common shares issued	27,834,000	30,358,000
Less: Average unallocated ESOP Shares	(700,000)	(791,000)
Less: Average unvested equity incentive plan shares	(96,000)	(82,000)
Average number of common shares outstanding used to calculate basic earnings per common share	27,037,520	29,484,824
Effect of dilutive equity incentive plan	79,000	35,000
Effect of dilutive stock options	36,000	101,000
Average number of common shares outstanding used to calculate diluted earnings per common share	27,153,160	29,620,929
Basic earnings per share (in dollars per share)	$ 0.13	$ 0.12
Diluted earnings per share (in dollars per share)	$ 0.13	$ 0.12

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COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), net of tax amount	$ (10,197)	$ (13,416)	$ (15,082)	$ (12,552)
Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss) before tax	(5,585)	(9,891)
Tax effect	1,378	2,491
Accumulated other comprehensive income (loss), net of tax amount	(4,207)	(7,400)	(7,413)	(4,042)
Derivatives [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Fair value of derivatives used for cash flow hegdes	(1,518)	(1,259)
Derivative Termination fee on cancelled cash flow hedges	(2,332)	(2,595)
Accumulated other comprehensive income (loss) before tax	(3,850)	(3,854)
Tax effect	1,083	1,084
Accumulated other comprehensive income (loss), net of tax amount	(2,767)	(2,770)	(3,381)	(4,181)
Defined Benefit Plan [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss) before tax	(4,484)	(4,516)
Tax effect	1,261	1,270
Accumulated other comprehensive income (loss), net of tax amount	$ (3,223)	$ (3,246)	$ (4,288)	$ (4,329)

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COMPREHENSIVE INCOME (LOSS) (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (13,416)	$ (12,552)
Cumulative-effect adjustment due to change in accounting principle	7	237
Current-period other comprehensive (loss) income	3,212	(2,767)
Ending balance	(10,197)	(15,082)
Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(7,400)	(4,042)
Cumulative-effect adjustment due to change in accounting principle		237
Current-period other comprehensive (loss) income	3,186	(3,608)
Ending balance	(4,207)	(7,413)
Derivatives [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(2,770)	(4,181)
Current-period other comprehensive (loss) income	3	800
Ending balance	(2,767)	(3,381)
Defined Benefit Plan [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(3,246)	(4,329)
Current-period other comprehensive (loss) income	23	(12)
Ending balance	$ (3,223)	$ (4,288)

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SECURITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale securities:
Amortized Cost	$ 250,463	$ 263,639
Gross Unrealized Gains	160	35
Gross Unrealized Losses	(5,745)	(9,926)
Fair Value	244,878	253,748
Government-Sponsored Enterprise Obligations [Member]
Available-for-sale securities:
Amortized Cost	25,150	25,150
Gross Unrealized Losses	(511)	(1,203)
Fair Value	24,639	23,947
State And Municipal Bonds [Member]
Available-for-sale securities:
Amortized Cost	2,965	2,976
Gross Unrealized Gains	38	33
Gross Unrealized Losses	(11)	(65)
Fair Value	2,992	2,944
Corporate Bonds [Member]
Available-for-sale securities:
Amortized Cost	26,060	49,819
Gross Unrealized Losses	(389)	(1,651)
Fair Value	25,671	48,168
Debt Securities [Member]
Available-for-sale securities:
Amortized Cost	54,175	77,945
Gross Unrealized Gains	38	33
Gross Unrealized Losses	(911)	(2,919)
Fair Value	53,302	75,059
Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities:
Amortized Cost	196,288	185,694
Gross Unrealized Gains	122	2
Gross Unrealized Losses	(4,834)	(7,007)
Fair Value	191,576	178,689
Government-Sponsored Mortgage-Backed Securities [Member]
Available-for-sale securities:
Amortized Cost	176,696	165,605
Gross Unrealized Gains	103	1
Gross Unrealized Losses	(4,177)	(6,255)
Fair Value	172,622	159,351
US Government Guaranteed Mortgage-Backed Securities [Member]
Available-for-sale securities:
Amortized Cost	19,592	20,089
Gross Unrealized Gains	19	1
Gross Unrealized Losses	(657)	(752)
Fair Value	$ 18,954	$ 19,338

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SECURITIES (Details 1) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Schedule of Investments [Line Items]
Available for Sale Securities, Amortized Cost, Total	$ 250,463	$ 263,639
Available for Sale Securities, Fair Value, Total	244,878
Debt Securities [Member]
Schedule of Investments [Line Items]
Available for Sale Securities, Amortized Cost, Due in one year or less	240
Available for Sale Securities, Amortized Cost, Due after one year through five years	29,482
Available for Sale Securities, Amortized Cost, Due after five years through ten years	17,715
Available for Sale Securities, Amortized Cost, Due after ten years	6,738
Available for Sale Securities, Amortized Cost, Total	54,175
Available for Sale Securities, Fair Value, Due in one year or less	240
Available for Sale Securities, Fair Value, Due after one year through five years	29,003
Available for Sale Securities, Fair Value, Due after five years through ten years	17,440
Available for Sale Securities, Fair Value, Due after ten years	6,619
Available for Sale Securities, Fair Value, Total	53,302
Collateralized Mortgage Backed Securities [Member]
Schedule of Investments [Line Items]
Available for Sale Securities, Amortized Cost, Total	196,288	$ 185,694
Available for Sale Securities, Fair Value, Total	$ 191,576

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SECURITIES (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]
Gross gains realized	$ 35
Gross losses realized		$ (201)
Net gain realized	$ 35	$ (201)

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SECURITIES (Details 3) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Available for sale, Less Than 12 Months Gross Unrealized Losses	$ 12	$ 199
Available for sale, Less Than 12 Months Fair Value	1,044	20,178
Available for sale, Over 12 Months Gross Unrealized Losses	5,733	9,727
Available for sale, Over 12 Months Fair Value	213,995	227,083
Government-Sponsored Mortgage-Backed Securities [Member]
Available for sale, Less Than 12 Months Gross Unrealized Losses	12	74
Available for sale, Less Than 12 Months Fair Value	1,044	7,354
Available for sale, Over 12 Months Gross Unrealized Losses	4,165	6,181
Available for sale, Over 12 Months Fair Value	146,695	148,762
Corporate Bonds [Member]
Available for sale, Less Than 12 Months Gross Unrealized Losses		110
Available for sale, Less Than 12 Months Fair Value		9,995
Available for sale, Over 12 Months Gross Unrealized Losses	389	1,541
Available for sale, Over 12 Months Fair Value	25,671	38,173
States and Municipal Bonds [Member]
Available for sale, Over 12 Months Gross Unrealized Losses	11	65
Available for sale, Over 12 Months Fair Value	1,576	1,532
Government-Sponsored Enterprise Obligations [Member]
Available for sale, Over 12 Months Gross Unrealized Losses	511	1,203
Available for sale, Over 12 Months Fair Value	24,639	23,947
US Government Guaranteed Mortgage-Backed Securities [Member]
Available for sale, Less Than 12 Months Gross Unrealized Losses		15
Available for sale, Less Than 12 Months Fair Value		2,829
Available for sale, Over 12 Months Gross Unrealized Losses	657	737
Available for sale, Over 12 Months Fair Value	$ 15,414	$ 14,669

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SECURITIES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Cumulative-effect adjustment due to change in accounting principle	$ 7	$ 237
Proceeds from redemptions and sales	21,642	5,635
Investments in restricted stock	12,407		$ 14,695
Government-Sponsored Enterprise Obligations [Member]
Fair value of collateralized public deposits	6,900
Collateralized Mortgage Backed Securities [Member]
Fair value of collateralized public deposits	54,500
Securities [Member]
Cumulative-effect adjustment due to change in accounting principle		$ 237
Securities [Member] | Accounting Standards Update (ASU) 2017-08 [Member]
Cumulative-effect adjustment due to change in accounting principle	$ 7

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans	$ 1,676,313	$ 1,692,456
Premiums and deferred loan fees and costs, net	4,353	4,401
Allowance for loan losses	(11,879)	(12,053)	$ (11,370)	$ (10,831)
Net loans	1,668,787	1,684,804
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans	770,776	768,881
Allowance for loan losses	(5,205)	(5,260)	(5,199)	(4,712)
Residential Real Estate - Residential 1-4 Family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans	575,561	577,641
Residential Real Estate - Home Equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans	95,997	97,238
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans	228,709	243,493
Allowance for loan losses	(2,954)	(3,114)	(2,681)	(2,733)
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total gross loans	5,270	5,203
Allowance for loan losses	$ (144)	$ (135)	$ (78)	$ (71)

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Servicing Asset
Balance at the beginning of period:	$ 286	$ 352
Amortization	(17)	(17)
Balance at the end of year	269	335
Fair value at the end of year	$ 416	$ 537

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Beginning Balance	$ 12,053	$ 10,831
Provision (credit)	50	500
Charge-offs	(293)	(36)
Recoveries	69	75
Ending Balance	11,879	11,370
Commercial Real Estate [Member]
Beginning Balance	5,260	4,712
Provision (credit)	24	452
Charge-offs	(116)
Recoveries	37	35
Ending Balance	5,205	5,199
Residential Real Estate [Member]
Beginning Balance	3,556	3,311
Provision (credit)	108	71
Charge-offs	(94)
Recoveries	1	15
Ending Balance	3,571	3,397
Commercial And Industrial [Member]
Beginning Balance	3,114	2,733
Provision (credit)	(127)	(59)
Charge-offs	(37)
Recoveries	4	7
Ending Balance	2,954	2,681
Consumer [Member]
Beginning Balance	135	71
Provision (credit)	28	25
Charge-offs	(46)	(36)
Recoveries	27	18
Ending Balance	144	78
Unallocated [Member]
Beginning Balance	(12)	4
Provision (credit)	17	11
Ending Balance	$ 5	$ 15

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 3) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Amount of allowance for non-impaired loans	$ 11,879	$ 12,053
Total allowance for loan losses	11,879	12,053	$ 11,370	$ 10,831
Impaired loans	14,550	12,396
Non-impaired loans	1,647,262	1,665,031
Impaired loans acquired with deteriorated credit quality	14,501	15,029
Total loans	1,676,313	1,692,456
Commercial Real Estate [Member]
Amount of allowance for non-impaired loans	5,205	5,260
Total allowance for loan losses	5,205	5,260	5,199	4,712
Impaired loans	7,156	5,237
Non-impaired loans	753,175	752,770
Impaired loans acquired with deteriorated credit quality	10,445	10,874
Total loans	770,776	768,881
Residential Real Estate [Member]
Amount of allowance for non-impaired loans	3,571	3,556
Total allowance for loan losses	3,571	3,556	3,397	3,311
Impaired loans	4,041	4,754
Non-impaired loans	664,340	666,883
Impaired loans acquired with deteriorated credit quality	3,177	3,242
Total loans	671,558	674,879
Commercial And Industrial [Member]
Amount of allowance for non-impaired loans	2,954	3,114
Total allowance for loan losses	2,954	3,114	2,681	2,733
Impaired loans	3,300	2,345
Non-impaired loans	224,530	240,235
Impaired loans acquired with deteriorated credit quality	879	913
Total loans	228,709	243,493
Consumer [Member]
Amount of allowance for non-impaired loans	144	135
Total allowance for loan losses	144	135	78	71
Impaired loans	53	60
Non-impaired loans	5,217	5,143
Total loans	5,270	5,203
Unallocated [Member]
Amount of allowance for non-impaired loans	5	(12)
Total allowance for loan losses	$ 5	$ (12)	$ 15	$ 4

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 4) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Total Past Due	$ 15,103	$ 12,495
Total Current Loans	1,661,210	1,679,961
Total loans	1,676,313	1,692,456
Non-Accrual Loans	15,312	13,484
30-59 Days Past Due [Member]
Total Past Due	5,434	5,142
60 - 89 Days Past Due [Member]
Total Past Due	3,079	2,041
Greater than 90 Days Past Due [Member]
Total Past Due	6,590	5,312
Commercial Real Estate [Member]
Total Past Due	8,455	4,722
Total Current Loans	762,321	764,159
Total loans	770,776	768,881
Non-Accrual Loans	6,547	4,701
Commercial Real Estate [Member] | 30-59 Days Past Due [Member]
Total Past Due	3,238	1,857
Commercial Real Estate [Member] | 60 - 89 Days Past Due [Member]
Total Past Due	2,327
Commercial Real Estate [Member] | Greater than 90 Days Past Due [Member]
Total Past Due	2,890	2,865
Residential Real Estate - Residential 1-4 Family [Member]
Total Past Due	5,090	4,249
Total Current Loans	570,471	573,392
Total loans	575,561	577,641
Non-Accrual Loans	4,945	5,856
Residential Real Estate - Residential 1-4 Family [Member] | 30-59 Days Past Due [Member]
Total Past Due	1,513	1,798
Residential Real Estate - Residential 1-4 Family [Member] | 60 - 89 Days Past Due [Member]
Total Past Due	378	572
Residential Real Estate - Residential 1-4 Family [Member] | Greater than 90 Days Past Due [Member]
Total Past Due	3,199	1,879
Residential Real Estate - Home Equity [Member]
Total Past Due	498	847
Total Current Loans	95,499	96,391
Total loans	95,997	97,238
Non-Accrual Loans	369	391
Residential Real Estate - Home Equity [Member] | 30-59 Days Past Due [Member]
Total Past Due	301	600
Residential Real Estate - Home Equity [Member] | 60 - 89 Days Past Due [Member]
Total Past Due		5
Residential Real Estate - Home Equity [Member] | Greater than 90 Days Past Due [Member]
Total Past Due	197	242
Commercial And Industrial [Member]
Total Past Due	963	2,562
Total Current Loans	227,746	240,931
Total loans	228,709	243,493
Non-Accrual Loans	3,399	2,476
Commercial And Industrial [Member] | 30-59 Days Past Due [Member]
Total Past Due	305	794
Commercial And Industrial [Member] | 60 - 89 Days Past Due [Member]
Total Past Due	357	1,463
Commercial And Industrial [Member] | Greater than 90 Days Past Due [Member]
Total Past Due	301	305
Consumer [Member]
Total Past Due	97	115
Total Current Loans	5,173	5,088
Total loans	5,270	5,203
Non-Accrual Loans	52	60
Consumer [Member] | 30-59 Days Past Due [Member]
Total Past Due	77	93
Consumer [Member] | 60 - 89 Days Past Due [Member]
Total Past Due	17	1
Consumer [Member] | Greater than 90 Days Past Due [Member]
Total Past Due	$ 3	$ 21

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 5) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Total Impaired loans:
Recorded Investment	[1]	$ 29,051		$ 27,425
Unpaid Principal Balance	[1]	37,913		36,021
Average Recorded Investment	[1]	28,238	$ 26,817
Interest Income Recognized	[1]	212	245
Commercial Real Estate [Member]
Total Impaired loans:
Recorded Investment	[1]	17,601		16,111
Unpaid Principal Balance	[1]	20,722		19,081
Average Recorded Investment	[1]	16,856	15,404
Interest Income Recognized	[1]	131	190
Residential Real Estate [Member]
Total Impaired loans:
Recorded Investment	[1]	6,823		7,558
Unpaid Principal Balance	[1]	7,900		8,614
Average Recorded Investment	[1]	7,190	6,578
Interest Income Recognized	[1]	44	10
Residential Real Estate - Home Equity [Member]
Total Impaired loans:
Recorded Investment	[1]	395		438
Unpaid Principal Balance	[1]	445		468
Average Recorded Investment	[1]	417	737
Interest Income Recognized	[1]		1
Commercial And Industrial [Member]
Total Impaired loans:
Recorded Investment	[1]	4,179		3,258
Unpaid Principal Balance	[1]	8,782		7,788
Average Recorded Investment	[1]	3,718	3,990
Interest Income Recognized	[1]	37	44
Consumer [Member]
Total Impaired loans:
Recorded Investment	[1]	53		60
Unpaid Principal Balance	[1]	64		$ 70
Average Recorded Investment	[1]	$ 57	$ 108

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

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 6) - Chicopee Bancorp Inc [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Loans receivable - Contractual Required Payments Receivable beginning	$ 24,793	$ 29,362
Collections - Contractually Required Payments Receivable	(702)	(1,412)
Dispositions - Contractually Required Payments Receivable	(71)	27,950
Loans receivable - Contractual Required Payments Receivable ending	24,020
Loans receivable - Cash Expected To Be Collected beginning	19,883	23,158
Collections - Cash Expected to be Collected	(646)	(1,194)
Dispositions - Cash Expected to be Collected	(71)
Loans receivable - Cash Expected To Be Collected ending	19,166	21,964
Loans receivable - Non-Accretable Discount beginning	4,910	6,204
Collections - Non-Accretable DIscount	(56)	(218)
Loans receivable - Non-Accretable Discount ending	4,854	5,986
Loans receivable - Accretable Yield beginning	4,854	6,033
Collections - Accretable Yield	(158)	(175)
Dispositions - Accretable Yield	(31)
Loans receivable - Accretable Yield ending	4,665	5,858
Loans receivable - Outstanding beginning	15,029	17,125
Collections	(488)	(1,019)
Dispositions	(40)
Loans receivable - Outstanding ending	$ 14,501	$ 16,106

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 7) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 1,676,313	$ 1,692,456
Pass (Rated 1 - 4) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,593,886	1,612,606
Special Mention (Rated 5) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	23,903	30,177
Substandard (Rated 6) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	58,524	49,673
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	770,776	768,881
Commercial Real Estate [Member] | Loans rated 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	732,542	732,729
Commercial Real Estate [Member] | Loans rated 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	16,101	17,929
Commercial Real Estate [Member] | Loans rated 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	22,133	18,223
Residential Real Estate - Residential 1-4 Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	575,561	577,641
Residential Real Estate - Residential 1-4 Family [Member] | Loans rated 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	569,124	570,428
Residential Real Estate - Residential 1-4 Family [Member] | Loans rated 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	6,437	7,213
Residential Real Estate - Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	95,997	97,238
Residential Real Estate - Home Equity [Member] | Loans rated 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	95,422	96,643
Residential Real Estate - Home Equity [Member] | Loans rated 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	575	595
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	228,709	243,493
Commercial And Industrial [Member] | Loans rated 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	191,580	207,663
Commercial And Industrial [Member] | Loans rated 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	7,802	12,248
Commercial And Industrial [Member] | Loans rated 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	29,327	23,582
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,270	5,203
Consumer [Member] | Loans rated 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,218	5,143
Consumer [Member] | Loans rated 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 52	$ 60

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details Narrative) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) $ / Loans	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)
Receivables [Abstract]
Serviced commercial loans for participants	$ 35,200		$ 35,400
Mortgage loans serviced for others	55,200		$ 56,600
Net service fee income	$ 18	$ 25
Weighted average internal rate of return	12.05%
Weighted average servicing fee	0.25%
Net cost to service loans | $ / Loans	84.30
Percentage of non-accrual loans	0.80%

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GOODWILL AND OTHER INTANGIBLES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Amortization of core deposit intangible	$ 94	$ 94
Future amortization of core deposit intangible assets years 1-5	375
Core Deposit Intangibles [Member]
Acquired core deposit liabilities	4,500
Future amortization of core deposit intangible assets thereafter	$ 1,700

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SHARE-BASED COMPENSATION (Details) - Stock Options [Member] $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) $ / shares shares
Options, Outstanding
Outstanding at beginning of period | shares	238,075
Exercised | shares	(12,550)
Outstanding at end of period | shares	225,525
Exercisable at end of period | shares	225,525
Options, Outstanding, Weighted Average Exercise Price
Outstanding at beginning of period | $ / shares	$ 6.33
Exercised | $ / shares	5.12
Outstanding at end of period | $ / shares	6.40
Exercisable at end of period | $ / shares	$ 6.40
Options, Outstanding, Weighted Average Remaining Contractual Term (in years)
Outstanding at beginning of period	3 years 5 months 8 days
Exercised	8 months 26 days
Outstanding at end of period	3 years 3 months 29 days
Exercisable at end of period	3 years 3 months 29 days
Options, Outstanding, Aggregate Intrinsic Value
Outstanding at beginning of period | $	$ 877
Exercised | $	60
Outstanding at end of period | $	633
Exercisable at end of period | $	$ 633

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SHARE-BASED COMPENSATION (Details 1)	3 Months Ended
	Mar. 31, 2019
LTI Plan for 2016 [Member] | Original Threshold [Member]
Original metrics	5.85%
Adjusted metrics	6.38%
LTI Plan for 2016 [Member] | Original Target [Member]
Original metrics	6.32%
Adjusted metrics	6.79%
LTI Plan for 2017 [Member] | Original Maximum [Member]
December 31, 2019	7.90%
LTI Plan for 2017 [Member] | Original Threshold [Member]
December 31, 2019	6.50%
LTI Plan for 2017 [Member] | Original Target [Member]
December 31, 2019	7.20%
LTI Plan for 2017 [Member] | Adjusted Threshold [Member]
December 31, 2019	7.09%
LTI Plan for 2017 [Member] | Adjusted Target [Member]
December 31, 2019	7.85%
LTI Plan for 2017 [Member] | Adjusted Maximum [Member]
December 31, 2019	8.61%
LTI Plan for 2018 [Member] | Original Threshold [Member]
December 31, 2019	6.85%
December 31, 2020	7.40%
LTI Plan for 2018 [Member] | Original Target [Member]
December 31, 2019	7.35%
December 31, 2020	7.90%
LTI Plan for 2018 [Member] | Stretch [Member]
December 31, 2019	7.75%
December 31, 2020	8.30%
LTI Plan for 2019 [Member] | Original Threshold [Member]
December 31, 2019	5.75%
December 31, 2020	6.00%
December 31, 2021	6.25%
LTI Plan for 2019 [Member] | Original Target [Member]
December 31, 2019	6.13%
December 31, 2020	6.75%
December 31, 2021	7.00%
LTI Plan for 2019 [Member] | Stretch [Member]
December 31, 2019	7.00%
December 31, 2020	7.75%
December 31, 2021	8.00%

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SHARE-BASED COMPENSATION (Details 2) - Restricted Stock [Member]	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Restricted Stock Awards
Beginning balance | shares	155,712
Shares granted | shares	108,718
Shares vested | shares	(53,465)
Ending balance | shares	210,965
Weighted Average Grant Date Fair Value
Beginning balance | $ / shares	$ 9.87
Shares granted | $ / shares	9.77
Shares vested | $ / shares	8.75
Ending balance | $ / shares	$ 10.10

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SHARE-BASED COMPENSATION (Details Narrative) - USD ($) $ in Thousands	1 Months Ended					3 Months Ended		12 Months Ended
	Feb. 28, 2019	Jan. 31, 2018	May 31, 2017	May 31, 2016	Jan. 31, 2015	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	May 31, 2014
Stock Options
Cash received for options exercised						$ 64	$ 104
Restricted Stock Awards
Share-based compensation expense						$ 195	$ 232
RSA Plan [Member]
Restricted Stock Awards
Share based compensation, shares available for grant						127,335
LTI Plan for 2016 [Member]
Restricted Stock Awards
Shares granted	26,197			62,740
Vesting term								3 years
Percent of awards participants may earn								6.82%
LTI Plan for 2017 [Member]
Restricted Stock Awards
Shares granted			89,042
LTI Plan for 2018 [Member]
Restricted Stock Awards
Shares granted		83,812
LTI Plan for 2019 [Member]
Restricted Stock Awards
Shares granted	108,718
New Stock-Based Compensation Plan ("RSA Plan") [Member]
Restricted Stock Awards
Shares authorized									516,000
Shares granted					48,560
Vesting term					5 years
Time Based Shares [Member] | LTI Plan for 2016 [Member]
Restricted Stock Awards
Shares granted				36,543
Percent of awards under plan						50.00%
Time Based Shares [Member] | LTI Plan for 2016 [Member] | Award, Tranche One [Member]
Restricted Stock Awards
Shares granted				10,352
Vesting term				1 year
Time Based Shares [Member] | LTI Plan for 2016 [Member] | Award, Tranche Two [Member]
Restricted Stock Awards
Shares granted				26,191
Vesting term				3 years
Time Based Shares [Member] | LTI Plan for 2017 [Member]
Restricted Stock Awards
Shares granted			55,159
Percent of awards participants may earn			100.00%
Time Based Shares [Member] | LTI Plan for 2017 [Member] | Award, Tranche One [Member]
Restricted Stock Awards
Shares granted			21,276
Vesting term			1 year
Time Based Shares [Member] | LTI Plan for 2017 [Member] | Award, Tranche Two [Member]
Restricted Stock Awards
Shares granted			33,883
Vesting term			3 years
Time Based Shares [Member] | LTI Plan for 2018 [Member]
Restricted Stock Awards
Shares granted		50,852
Time Based Shares [Member] | LTI Plan for 2018 [Member] | Award, Tranche One [Member]
Restricted Stock Awards
Shares granted		17,908
Vesting term		1 year
Time Based Shares [Member] | LTI Plan for 2018 [Member] | Award, Tranche Two [Member]
Restricted Stock Awards
Shares granted		32,944
Vesting term		3 years
Time Based Shares [Member] | LTI Plan for 2019 [Member]
Restricted Stock Awards
Shares granted	64,496
Time Based Shares [Member] | LTI Plan for 2019 [Member] | Award, Tranche One [Member]
Restricted Stock Awards
Shares granted	20,262
Vesting term	1 year
Time Based Shares [Member] | LTI Plan for 2019 [Member] | Award, Tranche Two [Member]
Restricted Stock Awards
Shares granted	44,234
Vesting term	3 years
Performance Shares [Member] | LTI Plan for 2016 [Member]
Restricted Stock Awards
Shares granted				26,197
Vesting term				3 years
Percent of awards under plan						50.00%
Performance Shares [Member] | LTI Plan for 2017 [Member]
Restricted Stock Awards
Shares granted			33,883
Vesting term			3 years
Percent of awards participants may earn			50.00%
Performance Shares [Member] | LTI Plan for 2017 [Member] | Original Maximum [Member]
Restricted Stock Awards
Percent of awards participants may earn			150.00%
Performance Shares [Member] | LTI Plan for 2017 [Member] | Original Threshold [Member]
Restricted Stock Awards
Percent of awards participants may earn			50.00%
Performance Shares [Member] | LTI Plan for 2017 [Member] | Original Target [Member]
Restricted Stock Awards
Percent of awards participants may earn			100.00%
Performance Shares [Member] | LTI Plan for 2018 [Member]
Restricted Stock Awards
Shares granted		32,960
Vesting term		3 years
Performance Shares [Member] | LTI Plan for 2018 [Member] | Original Maximum [Member]
Restricted Stock Awards
Percent of awards participants may earn		150.00%
Performance Shares [Member] | LTI Plan for 2018 [Member] | Original Threshold [Member]
Restricted Stock Awards
Percent of awards participants may earn		50.00%
Performance Shares [Member] | LTI Plan for 2018 [Member] | Original Target [Member]
Restricted Stock Awards
Percent of awards participants may earn		100.00%
Performance Shares [Member] | LTI Plan for 2019 [Member]
Restricted Stock Awards
Shares granted	44,222
Vesting term	3 years
Performance Shares [Member] | LTI Plan for 2019 [Member] | Original Maximum [Member]
Restricted Stock Awards
Percent of awards participants may earn	150.00%
Performance Shares [Member] | LTI Plan for 2019 [Member] | Original Threshold [Member]
Restricted Stock Awards
Percent of awards participants may earn	50.00%
Performance Shares [Member] | LTI Plan for 2019 [Member] | Original Target [Member]
Restricted Stock Awards
Percent of awards participants may earn	100.00%

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SHORT-TERM BORROWINGS AND LONG-TERM DEBT (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Long-term debt	$ 196,039	$ 208,018
FHLBB Ideal Way Line of Credit [Member]
Line of credit available	9,500	$ 9,500
Correspondent Bank [Member]
Line of credit available	50,000
Correspondent Bank [Member]
Line of credit available	$ 15,000
FHLBB Advances [Member]
Weighted average rate	2.69%	3.28%
Short-term borrowings	$ 35,000	$ 59,300
Long-term debt	196,000	$ 208,000
FHLBB Advances [Member] | Maximum [Member]
Borrowing capacity	$ 229,500

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PENSION BENEFITS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Defined Benefit Plan [Abstract]
Service cost	$ 274	$ 303
Interest cost	284	253
Expected return on assets	(308)	(347)
Amortization of actuarial loss	32	57
Net periodic pension cost	$ 282	$ 266

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PENSION BENEFITS (Details Narrative)	3 Months Ended
	Mar. 31, 2019 h
Pension Plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Minimum working hours needed for eligibility	1,000

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DERIVATIVES AND HEDGING ACTIVITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Other Liabilities [Member] | Interest Rate Swap Agreement [Member] | Designated as Hedging Instrument [Member]
Fair value of derivative liability	$ 1,518	$ 1,259

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DERIVATIVES AND HEDGING ACTIVITIES (Details 1) - Interest Rate Swap Agreement [Member] - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Notional Amount	$ 35,000	$ 35,000
Weighted Average Maturity	3 years 6 months	3 years 8 months 12 days
Weighted Average Rate Received	2.61%	2.79%
Weighted Average Rate Paid	3.54%	3.54%
Estimated Fair Value	$ (1,518)	$ (1,259)

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DERIVATIVES AND HEDGING ACTIVITIES (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest Rate Swap [Member] | Derivatives Designated As Cash Flow Hedges [Member]
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)	$ (328)	$ 678

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DERIVATIVES AND HEDGING ACTIVITIES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Termination value of derivatives in a net liability position	$ 1,500		$ 1,300
Collateralized Mortgage Backed Securities [Member]
Fair value of mortgage backed securities collateralized	850		$ 830
Interest Rate Swap [Member]
Interest rate swap amount reclassified accumulated other comprehensive income	$ 332	$ 435

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FAIR VALUE OF ASSETS AND LIABLITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Available for sale securities	$ 244,878
Marketable equity securities	6,518	$ 6,408
Interest rate swaps - Liabilities	1,518	1,259
Fair Value Level 1 [Member]
Marketable equity securities	6,518	6,408
Fair Value Level 2 [Member]
Interest rate swaps - Liabilities	1,518	1,259
Recurring [Member]
Marketable equity securities	6,518	6,408
Total assets	251,396	260,156
Interest rate swaps - Liabilities	1,518	1,259
Recurring [Member] | Government-Sponsored Mortgage-Backed Securities [Member]
Available for sale securities	172,622	159,351
Recurring [Member] | US Government Guaranteed Mortgage-Backed Securities [Member]
Available for sale securities	18,954	19,338
Recurring [Member] | Corporate Bonds [Member]
Available for sale securities	25,671	48,168
Recurring [Member] | States and Municipal Bonds [Member]
Available for sale securities	2,992	2,944
Recurring [Member] | Government-Sponsored Enterprise Obligations [Member]
Available for sale securities	24,639	23,947
Recurring [Member] | Fair Value Level 1 [Member]
Marketable equity securities	6,518	6,408
Total assets	6,518	6,408
Recurring [Member] | Fair Value Level 2 [Member]
Total assets	244,878	253,748
Interest rate swaps - Liabilities	1,518	1,259
Recurring [Member] | Fair Value Level 2 [Member] | Government-Sponsored Mortgage-Backed Securities [Member]
Available for sale securities	172,622	159,351
Recurring [Member] | Fair Value Level 2 [Member] | US Government Guaranteed Mortgage-Backed Securities [Member]
Available for sale securities	18,954	19,338
Recurring [Member] | Fair Value Level 2 [Member] | Corporate Bonds [Member]
Available for sale securities	25,671	48,168
Recurring [Member] | Fair Value Level 2 [Member] | States and Municipal Bonds [Member]
Available for sale securities	2,992	2,944
Recurring [Member] | Fair Value Level 2 [Member] | Government-Sponsored Enterprise Obligations [Member]
Available for sale securities	$ 24,639	$ 23,947

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FAIR VALUE OF ASSETS AND LIABLITIES (Details 1) - Nonrecurring [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Impaired Loans [Member]
Total losses	$ 130	$ 170
Fair Value Inputs Level 3 [Member]
Impaired loans	$ 2,115		$ 1,676

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FAIR VALUE OF ASSETS AND LIABLITIES (Details 2) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets:
Cash and cash equivalents	$ 44,482	$ 26,789
Securities available-for-sale	244,878	253,748
Marketable equity securities	6,518	6,408
Federal Home Loan Bank of Boston and other restricted stock	12,407	14,695
Loans - net	1,627,630	1,631,558
Accrued interest receivable	5,640	5,652
Mortgage servicing rights	416	456
Liabilities:
Deposits	1,628,896	1,592,521
Short-term borrowings	35,000	59,247
Long-term debt	195,575	206,789
Accrued interest payable	608	530
Derivative liabilities	1,518	1,259
Fair Value Level 1 [Member]
Assets:
Cash and cash equivalents	44,482	26,789
Marketable equity securities	6,518	6,408
Fair Value Level 2 [Member]
Assets:
Securities available-for-sale	244,878	253,748
Mortgage servicing rights	416	456
Liabilities:
Short-term borrowings	35,000	59,247
Long-term debt	195,575	206,789
Derivative liabilities	1,518	1,259
Fair Value Level 3 [Member]
Assets:
Federal Home Loan Bank of Boston and other restricted stock	12,407	14,695
Loans - net	1,627,630	1,631,558
Accrued interest receivable	5,640	5,652
Liabilities:
Deposits	1,628,896	1,592,521
Accrued interest payable	608	530
Carrying Value [Member]
Assets:
Cash and cash equivalents	44,482	26,789
Securities available-for-sale	244,878	253,748
Marketable equity securities	6,518	6,408
Federal Home Loan Bank of Boston and other restricted stock	12,407	14,695
Loans - net	1,668,787	1,684,804
Accrued interest receivable	5,640	5,652
Mortgage servicing rights	269	286
Liabilities:
Deposits	1,629,834	1,595,993
Short-term borrowings	35,000	59,250
Long-term debt	196,039	208,018
Accrued interest payable	608	530
Derivative liabilities	$ 1,518	$ 1,259

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LEASES (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Leases [Abstract]
Amortization of right-of-use assets	$ 242
Interest on lease liabilities	63
Operating lease cost	$ 305

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LEASES (Details 1) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 292

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LEASES (Details 2) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 02, 2019
Leases [Abstract]
Operating lease right-of-use assets	$ 6,993	$ 7,200
Operating lease liabilities	$ 7,005	$ 7,200

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LEASES (Details 3) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 02, 2019
Years Ending December 31,
2019	$ 836
2020	995
2021	916
2022	887
2023	700
Thereafter	4,333
Total lease payments	8,667
Less imputed interest	(1,662)
Total	$ 7,005	$ 7,200

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LEASES (Details Narrative)	Mar. 31, 2019
Weighted average remaining lease term for operating leases	11 years
Weighted average discount rate	3.52%
Minimum [Member]
Operating lease, term of contract	1 year
Operating lease, renewal term	5 years
Maximum [Member]
Operating lease, term of contract	19 years
Operating lease, renewal term	15 years

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RECENT ACCOUNTING PRONOUNCEMENTS (Details Narrative) - USD ($) $ in Thousands	Jan. 02, 2019	Mar. 31, 2019
Accounting Changes and Error Corrections [Abstract]
Right-of-use assets	$ 7,200	$ 6,993
Lease liabilities	7,200	$ 7,005
Cumulative-effect adjustment, tax	$ 7