WESTFIELD FINANCIAL INC (Form: 10-Q, Received: 11/08/2011 10:56:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

______________________

FORM 10-Q

S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission file number 001-16767

Westfield Financial, Inc.

(Exact name of registrant as specified in its charter)

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

141 Elm Street, Westfield, Massachusetts 01086

(Address of principal executive offices)

(Zip Code)

(413) 568-1911

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 S No £

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

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

Large accelerated filer £ Accelerated filer S

Non-accelerated filer £ Smaller reporting company £

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

At November 1, 2011 the registrant had 27, 623,420 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 Westfield Financial, Inc. and Subsidiaries

	Consolidated Balance Sheets (Unaudited) - September 30, 2011 and December 31, 2010	1

	Consolidated Statements of Income (Unaudited) - Three and Nine Months Ended September 30, 2011 and 2010	2

	Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income (Unaudited) - Nine Months Ended September 30, 2011 and 2010	3

	Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 2011 and 2010	4

	Notes to Consolidated Financial Statements (Unaudited)	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

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

Item 3.	Defaults upon Senior Securities	39

Item 4.	(Removed and Reserved)	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

FORWARD -LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements.” These forward-looking statements are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. These forward-looking statements may be subject to significant known and unknown risks, uncertainties and other factors, including, but not limited to, changes in the real estate market or local economy, changes in interest rates, changes in laws and regulations to which we are subject, and competition in our primary market area.

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. Westfield Financial undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS.
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(Dollars in thousands)

	September 30,			December 31,
	2011			2010
ASSETS
Cash and due from banks	$	10,605		$	9,247
Federal funds sold		20			13
Interest-bearing deposits and other short-term investments		8,940			2,351
Cash and cash equivalents		19,565			11,611

SECURITIES :
Available for Sale - at fair value		627,908			642,467

FEDERAL HOME LOAN BANK OF BOSTON AND OTHER RESTRICTED STOCK - AT COST		12,438			12,282

LOANS - Net of allowance for loan losses of $7,087 at September 30, 2011 and $6,934 at December 31, 2010		537,512			502,392

PREMISES AND EQUIPMENT, Net		11,131			11,603

ACCRUED INTEREST RECEIVABLE		4,181			4,279

BANK-OWNED LIFE INSURANCE		43,644			40,494

DEFERRED TAX ASSET, Net		999			8,811

OTHER REAL ESTATE OWNED		1,130			223

OTHER ASSETS		4,293			5,327
TOTAL ASSETS	$	1,262,801		$	1,239,489

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
DEPOSITS :
Noninterest-bearing	$	99,681		$	85,217
Interest-bearing		620,833			615,118
Total deposits		720,514			700,335

SHORT-TERM BORROWINGS		55,544			62,937

LONG-TERM DEBT		247,240			238,151
SECURITIES PENDING SETTLEMENT		-			7,791
OTHER LIABILITIES		9,699			9,030
TOTAL LIABILITIES		1,032,997			1,018,244

SHAREHOLDERS' EQUITY:
Preferred stock - $.01 par value, 5,000,000 shares authorized, none outstanding at September 30, 2011 and December 31, 2010		-			-
Common stock - $.01 par value, 75,000,000 shares authorized, 27,648,783 shares issued and outstanding at September 30, 2011; 28,166,419 shares issued and outstanding at December 31, 2010		276			282
Additional paid-in capital		178,680			181,842
Unearned compensation - ESOP		(9,265	)		(9,701	)
Unearned compensation - Equity Incentive Plan		(1,516	)		(2,158	)
Retained earnings		51,902			56,496
Accumulated other comprehensive loss		9,727			(5,516	)
Total shareholders' equity		229,804			221,245
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,262,801		$	1,239,489
See accompanying notes to unaudited consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
(Dollars in thousands, except per share data)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2011			2010			2011			2010
INTEREST AND DIVIDEND INCOME:
Debt securities, taxable	$	4,235		$	4,872		$	13,699		$	15,252
Residential and commercial real estate loans		4,984			4,524			14,503			13,407
Commercial and industrial loans		1,428			1,657			4,290			4,963
Debt securities, tax-exempt		420			387			1,257			1,143
Consumer loans		47			53			143			162
Equity securities		46			50			140			152
Other Investments - at cost		14			5			46			17
Federal funds sold, interest-bearing deposits and other short-term investments		-			2			1			5
Total interest and dividend income		11,174			11,550			34,079			35,101
INTEREST EXPENSE:
Deposits		1,811			2,381			5,891			7,490
Long-term debt		1,716			1,759			5,071			4,946
Short-term borrowings		28			61			122			200
Total interest expense		3,555			4,201			11,084			12,636
Net interest and dividend income		7,619			7,349			22,995			22,465
PROVISION FOR LOAN LOSSES		15			3,928			529			8,548
Net interest and dividend income after provision for loan losses		7,604			3,421			22,466			13,917

NONINTEREST INCOME (LOSS):
Total other-than-temporary impairment losses on debt securities		(536	)		-			(576	)		(1,071	)
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss on debt securities		474			-			474			971
Net other-than-temporary impairment losses recognized in income		(62	)		-			(102	)		(100	)
Service charges and fees		501			456			1,465			1,440
Income from bank-owned life insurance		398			380			1,150			1,140
Gain on sales of securities, net		131			2,609			208			3,926
(Loss) gain on disposal of OREO		(25	)		-			(25	)		1
Total noninterest income		943			3,445			2,696			6,407
NONINTEREST EXPENSE:
Salaries and employees benefits		3,997			3,661			11,710			10,930
Occupancy		691			656			2,027			1,952
Computer operations		473			461			1,437			1,443
Professional fees		524			391			1,525			1,258
OREO expense		31			62			52			326
FDIC insurance assessment		207			223			555			555
Other		716			730			2,307			2,056
Total noninterest expense		6,639			6,184			19,613			18,520
INCOME BEFORE INCOME TAXES		1,908			682			5,549			1,804
INCOME TAX PROVISION (BENEFIT)		414			(17	)		1,204			137
NET INCOME	$	1,494		$	699		$	4,345		$	1,667

EARNINGS PER COMMON SHARE:
Basic earnings per share	$	0.06		$	0.03		$	0.16		$	0.06
Weighted average shares outstanding		26,443,449			27,432,114			26,608,490			27,860,516
Diluted earnings per share	$	0.06		$	0.03		$	0.16		$	0.06
Weighted average diluted shares outstanding		26,544,257			27,586,142			26,723,947			28,082,399
See accompanying notes to unaudited consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME- UNAUDITED

NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Dollars in thousands, except share data)

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

BALANCE, DECEMBER 31, 2009		29,818,526		$	298		$	193,609		$	(10,299	)	$	(3,248	)	$	69,253		$	(2,314	)	$	247,299
Comprehensive income:
Net income		-			-			-			-			-			1,667			-			1,667
Net unrealized gains on securities available for sale arising during the period, net reclassification adjustment and tax effects		-			-			-			-			-			-			1,322			1,322
Net unrealized gains on securities resulting from transfer from held-to-maturity to available-for-sale, net of tax effects		-			-			-			-			-			-			8,351			8,351
Change in pension gains or losses and transition assets, net of tax		-			-			-			-			-			-			44			44
Total comprehensive income																							11,384
Common stock held by ESOP committed to be released (89,040 shares)		-			-			119			448			-			-			-			567
Share-based compensation - stock options		-			-			598			-			-			-			-			598
Share-based compensation - equity incentive plan		-			-			-			-			868			-			-			868
Excess tax benefits from equity incentive plan		-			-			34			-			-			-			-			34
Common stock repurchased		(1,813,237	)		(18	)		(14,708	)		-			-			-			-			(14,726	)
Issuance of common stock in connection with stock option exercises		336,527			3			2,942			-			-			(1,468	)		-			1,477
Common stock granted in connection with equity incentive plan		-			-			69			-			(69	)		-			-			-
Excess tax benefits in connection with stock option exercises		-			-			401			-			-			-			-			401
Cash dividends declared ($0.25 per share)		-			-			-			-			-			(8,666	)		-			(8,666	)
BALANCE, SEPTEMBER 30, 2010		28,341,816		$	283		$	183,064		$	(9,851	)	$	(2,449	)	$	60,786		$	7,403		$	239,236

BALANCE, DECEMBER 31, 2010		28,166,419		$	282		$	181,842		$	(9,701	)	$	(2,158	)	$	56,496		$	(5,516	)	$	221,245
Comprehensive income:
Net income		-			-			-			-			-			4,345			-			4,345
Net unrealized gains on securities available for sale arising during the period, net of reclassification adjustment and tax effects		-			-			-			-			-			-			15,191			15,191
Change in pension gains or losses and transition assets, net of tax		-			-			-			-			-			-			52			52
Total comprehensive income																							19,588
Common stock held by ESOP committed to be released (86,585 shares)		-			-			120			436			-			-			-			556
Share-based compensation - stock options		-			-			596			-			-			-			-			596
Share-based compensation - equity incentive plan		-			-			-			-			869			-			-			869
Excess tax benefits from equity incentive plan		-			-			24			-			-			-			-			24
Purchase of ESOP Shares		1,946			-			15			-			-			-			-			15
Common stock repurchased		(554,228	)		(6	)		(4,455	)		-			-			-			-			(4,461	)
Issuance of common stock in connection with stock option exercises		34,646			-			293			-			-			(142	)		-			151
Common stock granted in connection with equity incentive plan		-			-			227			-			(227	)		-			-			-
Excess tax benefits in connection with stock option exercises		-			-			18			-			-			-			-			18
Cash dividends declared ($0.33 per share)		-			-			-			-			-			(8,797	)		-			(8,797	)
BALANCE, SEPTEMBER 30,2011		27,648,783		$	276		$	178,680		$	(9,265	)	$	(1,516	)	$	51,902		$	9,727		$	229,804

See accompanying notes to unaudited consolidated financial statements

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
(Dollars in thousands)
	Nine Months Ended September 30,
	2011			2010
OPERATING ACTIVITIES:
Net income	$	4,345		$	1,667
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		529			8,548
Depreciation and amortization of premises and equipment		860			945
Net amortization of premiums and discounts on securities, mortgage-backed securities and mortgage loans		2,522			4,553
Net amortization of premiums on modified debt		140			5
Share-based compensation expense		1,465			1,466
Amortization of ESOP expense		556			567
Excess tax benefits from equity incentive plan		(24	)		(34	)
Excess tax benefits in connection with stock option exercises		(18	)		(401	)
Net gain on sales of securities		(208	)		(3,926	)
Other-than-temporary impairment losses on securities		102			100
Write-downs of other real estate owned		-			232
Loss (gain) on sale of other real estate owned		25			(1	)
Deferred income tax benefit		(156	)		(159	)
Income from bank-owned life insurance		(1,150	)		(1,140	)
Changes in assets and liabilities:
Accrued interest receivable		89			533
Other assets		1,034			(430	)
Other liabilities		790			1,074
Net cash provided by operating activities		10,901			13,599
INVESTING ACTIVITIES:
Securities, held to maturity:
Purchases		-			(62,111	)
Proceeds from calls, maturities, and principal collections		-			69,075
Securities, available for sale:
Purchases		(186,024	)		(436,038	)
Proceeds from sales		157,999			309,244
Proceeds from calls, maturities, and principal collections		55,543			80,504
Purchase of residential mortgages		(52,490	)		(32,282	)
Loan principal payments, net of originations		15,686			13,932
Purchase of Federal Home Loan Bank of Boston stock		(156	)		(1,855	)
Proceeds from sale of other real estate owned		198			1,693
Purchases of premises and equipment		(388	)		(512	)
Purchase of bank-owned life insurance		(2,000	)		-
Net cash used in investing activities		(11,632	)		(58,350	)
FINANCING ACTIVITIES:
Net increase in deposits		20,179			45,307
Net change in short-term borrowings		(7,393	)		(9,072	)
Repayment of long-term debt		(5,150	)		(45,000	)
Proceeds from long-term debt		14,099			69,970
Cash dividends paid		(8,797	)		(8,666	)
Common stock repurchased		(4,461	)		(13,110	)
Issuance of common stock in connection with stock option exercises		151			1,477
Excess tax benefits in connection with equity incentive plan		24			34
Excess tax benefits in connection with stock option exercises		18			401
Purchase of common stock in connection with employee benefit program		15			-
Net cash provided by financing activities		8,685			41,341

NET CHANGE IN CASH AND CASH EQUIVALENTS:		7,954			(3,410	)
Beginning of period		11,611			28,719
End of period	$	19,565		$	25,309

Supplemental cash flow information:
Transfer of loans to other real estate owned	$	1,130		$	538
Interest paid		11,163			12,630
Taxes paid		701			310
Net cash due to broker for common stock repurchased		-			1,616

See accompanying notes to unaudited consolidated financial statements

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

Basis of Presentation – In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of September 30, 2011, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results of operations for the year ending December 31, 2011. 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, 2010, included in our Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Annual Report”).

Reclassifications - Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation.

2. EARNINGS PER SHARE

Basic earnings per share represent income available to shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by us relate solely to outstanding stock options and are determined using the treasury stock method.

Earnings per common share for the three and nine months ended September 30, 2011 and 2010 have been computed based on the following:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(In thousands, except per share data)

Net income applicable to common stock	$	1,494		$	699		$	4,345		$	1,667

Average number of common shares outstanding		27,778			28,891			27,979			29,341
Less: Average unallocated ESOP Shares		(1,328	)		(1,415	)		(1,349	)		(1,437	)
Less: Average ungranted equity incentive plan shares		(7	)		(44	)		(22	)		(44	)

Average number of common shares outstanding used to calculate basic earnings per common share		26,443			27,432			26,608			27,680

Effect of dilutive stock options		101			154			115			222

Average number of common shares outstanding used to calculate diluted earnings per common share		26,544			27,586			26,723			28,082

Basic earnings per share	$	0.06		$	0.03		$	0.16		$	0.06

Diluted earnings per share	$	0.06		$	0.03		$	0.16		$	0.06

Stock options that would have an antidilutive effect on diluted earnings per share are excluded from the calculation. There were 1,662,227 and 1,630,758 shares that were antidilutive for the three and nine months ended September 30, 2011, respectively, and 1,576,024 and 1,559,357 shares that were antidilutive for the three and nine months ended September 30, 2010, respectively.

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.

The components of other comprehensive income and related tax effects are as follows:

	Nine Months Ended September 30,
	2011			2010
	(In thousands)

Unrealized holding gains on available-for-sale securities	$	23,238		$	6,156
Reclassification adjustment for gains realized in income		(208	)		(3,926	)
Reclassification adjustment for securities transferred from held-to-maturity to available-for-sale		-			12,653
Other-than-temporary impairment losses on available-for-sale securities charged to earnings		102			100
Net unrealized gains on available-for-sale securities		23,132			14,983
Tax effect		(7,941	)		(5,310	)
Net-of-tax amount		15,191			9,673

Gains and losses arising during the period pertaining to defined benefit plans		-			7
Reclassification adjustments for items reflected in earnings:
Actuarial loss recognized		87			69
Transition asset recognized		(8	)		(9	)
Net adjustments pertaining to defined benefit plan		79			67
Tax effect		(27	)		(23	)
Net-of-tax amount		52			44

Net accumulated other comprehensive income	$	15,243		$	9,717

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

	September 30,			December 31,
	2011			2010
	(In thousands)

Net unrealized gain (loss) on securities available-for-sale	$	17,864		$	(5,299	)
Tax effect		(6,134	)		1,817
Net-of-tax amount		11,730			(3,482	)

Noncredit portion of other-than-temporary impairment losses on available-for-sale securities		(474	)		(443	)
Tax effect		161			151
Net-of-tax amount		(313	)		(292	)

Unrecognized transition asset pertaining to defined benefit plan		36			44
Unrecognized deferred loss pertaining to defined benefit plan		(2,595	)		(2,682	)
Net components pertaining to defined benefit plan		(2,559	)		(2,638	)
Tax effect		869			896
Net-of-tax amount		(1,690	)		(1,742	)

Net accumulated other comprehensive income (loss)	$	9,727		$	(5,516	)

4. SECURITIES

Securities are summarized as follows:

	September 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available for sale:
Government sponsored residential mortgage-backed securities	$	380,089	$	10,133	$	(29	)	$	390,193
U.S. government guaranteed residential mortgage-backed securities		151,602		4,596		(31	)		156,167
Private-label residential mortgage-backed securities		2,152		-		(474	)		1,678
Municipal bonds		43,412		2,253		(1	)		45,664
Government sponsored enterprise obligations		27,776		873		(16	)		28,633
Mutual funds		5,448		121		(53	)		5,516
Common and preferred stock		39		18		-			57

Total	$	610,518	$	17,994	$	(604	)	$	627,908

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available for sale:
Government sponsored residential mortgage-backed securities	$	381,436	$	4,967	$	(5,419	)	$	380,984
U.S. government guaranteed residential mortgage-backed securities		192,609		396		(5,329	)		187,676
Private-label residential mortgage-backed securities		8,251		-		(673	)		7,578
Municipal bonds		42,119		1,298		(340	)		43,077
Government sponsored enterprise obligations		18,447		193		(776	)		17,864
Mutual funds		5,308		25		(61	)		5,272
Common and preferred stock		39		-		(23	)		16

Total	$	648,209	$	6,879	$	(12,621	)	$	642,467

The amortized cost and fair value of debt securities, excluding mortgage-backed securities, at September 30, 2011, by maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or repay obligations.

	September 30, 2011
	Amortized Cost		Fair Value
	(In thousands)

Available for sale:
Due in one year or less	$	575	$	586
Due after one year through five years		22,216		23,068
Due after five years through ten years		30,941		32,788
Due after ten years		17,456		17,855

Total available for sale	$	71,188	$	74,297

Gross realized gains and losses on sales of securities for the three and nine months ended September 30, 2011 and 2010 are as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(In thousands)

Gross gains realized	$	528		$	2,620		$	1,407		$	4,576
Gross losses realized		(397	)		(11	)		(1,199	)		(650	)
Net gain realized	$	131		$	2,609		$	208		$	3,926

Proceeds from the sale of securities available for sale amounted to $158.0 and $309.2 million for the nine months ended September 30, 2011 and 2010, respectively.

The tax provision applicable to net realized gains and losses was $44,000 and $73,000 for the three and nine months ended September 30, 2011, respectively. The tax provision applicable to net realized gains and losses was $887,000 and $1.3 million for the three and nine months ended September 30, 2010, respectively.

One security with a carrying value of $2.2 million at December 31, 2010, was pledged as collateral to the Federal Reserve Bank of Boston to secure public deposits. No securities were pledged to secure public deposits at September 30, 2011.

Information pertaining to securities with gross unrealized losses at September 30, 2011and December 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	September 30, 2011
	Less Than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
	(In thousands)

Available for sale:
Government-sponsored residential mortgage-backed securities	$	(29	)	$	7,901	$	-		$	-
U.S. government guaranteed residential mortgage-backed securities		(31	)		6,717		-			-
Private-label residential mortgage-backed securities		-			-		(474	)		1,678
Municipal bonds		(1	)		149		-			-
Government-sponsored enterprise obligations		(16	)		9,936		-			-
Mutual funds		-			-		(53	)		1,613
Common and preferred stock		-			-		-			-

Total	$	(77	)	$	24,703	$	(527	)	$	3,291

	December 31, 2010
	Less Than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
	(In thousands)
Available for sale:
Government-sponsored residential mortgage-backed securities	$	(5,419	)	$	225,105	$	-		$	-
U.S. government guaranteed residential mortgage-backed securities		(5,329	)		145,430		-			-
Private-label residential mortgage-backed securities		-			-		(673	)		7,578
Government-sponsored enterprise obligations		(776	)		15,674		-			-
Municipal bonds		(340	)		8,856		-			-
Mutual funds		-			-		(61	)		1,548
Common and preferred stock		-			-		(23	)		16

Total	$	(11,864	)	$	395,065	$	(757	)	$	9,142

At September 30, 2011, four government-sponsored and U.S. government guaranteed mortgage-backed securities had gross unrealized losses with aggregate depreciation of 0.4% from our amortized cost basis existing for less than twelve months. At September 30, 2011, one government-sponsored enterprise obligation had gross unrealized loss with aggregate depreciation of 0.2% from our amortized cost basis existing for less than twelve months. At September 30, 2011, one municipal bond had gross unrealized losses with aggregate depreciation of 0.7% from our amortized cost basis existing for less than twelve months. These losses are the result of interest rates and not credit quality. Because we do not intend to sell the securities and it is more likely than not that we will not be required to sell the investments before recovery of their amortized cost basis, no declines are deemed to be other-than-temporary.

At September 30, 2011, one mutual fund had a gross unrealized loss with aggregate depreciation of 3.2% from our cost basis existing for greater than twelve months and was principally related to fluctuations in interest rates. This loss relates to a mutual fund which invests primarily in short-term debt instruments and adjustable rate mortgage-backed securities. Because we do not intend to sell the security and it is more likely than not that we will not be required to sell it prior to the recovery of its amortized cost basis, the loss is deemed temporary.

At September 30, 2011, one private label mortgage-backed securities had a gross unrealized loss of 22.0% from our amortized cost basis which existed for greater than twelve months. Management uses a third party on a quarterly basis that is experienced in analyzing private-label mortgage-backed securities to determine if credit losses existed for these securities. The third party incorporated a number of factors to estimate the performance and possible credit loss of the underlying assets. These factors include but are not limited to: loans in various stages of delinquency i.e. 30, 60, 90 days delinquent, loans in foreclosure, projected prepayment rates (10 voluntary prepayment rate), severity of loss on defaulted loans (60%), current levels of subordination, current credit enhancement (0.21%), vintage (2006), geographic location and projected default rates. As a result of this analysis, one private label mortgage-backed security was deemed to have other-than-temporary impairment loss as of September 30, 2011. During the three months ended September 30, 2011, we had writedowns of $536,000 due to other-than-temporary impairment on mortgage-backed securities, of which $474,000 was recognized in accumulated other comprehensive loss and $62,000 was recognized as a credit loss and charged to income. We had no writedowns due to other-than-temporary impairment on mortgage backed securities during the three months ended September 30, 2010. During the nine months ended September 30, 2011, we had writedowns of $576,000 due to other-than-temporary impairment on mortgage-backed securities, of which $474,000 was recognized in accumulated other comprehensive loss and $102,000 was recognized as a credit loss and charged to income. During the nine months ended September 30, 2010, we had writedowns of $1.1 million due to other-than-temporary impairment on mortgage-backed securities, of which $971,000 was recognized in accumulated other comprehensive loss and $100,000 was recognized as a credit loss and charged to income.

The following table presents a roll-forward of the amount of credit losses on mortgage-backed securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income:

	Nine Months Ended September 30,
	2011			2010
	(In thousands)

Balance, beginning of period	$	425		$	278
Reductions for securities sold during the period		(85	)		-
Additional credit losses for which other-than-temporary impairment charge was previously recorded		102			100

Balance, end of period	$	442		$	378

5. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans consisted of the following amounts:	September 30,			December 31,
	2011			2010
	(In thousands)

Commercial real estate	$	220,850		$	221,578
Residential real estate		156,180			112,680
Home equity		36,723			36,116
Commercial and industrial		127,206			135,250
Consumer		2,610			2,960
Total Loans		543,569			508,584
Unearned premiums and deferred loan fees and costs, net		1,030			742
Allowance for loan losses		(7,087	)		(6,934	)
	$	537,512		$	502,392

During the nine months ended September 30, 2011 and 2010, we purchased residential real estate loans aggregating $52.5 million and $32.3 million, respectively.

We have transferred a portion of our originated commercial real estate 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 share ratably with our participating lenders in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. We continue to service the loans on behalf of the participating lenders and, as such, collect cash payments from the borrowers, remit payments (net of servicing fees) to participating lenders and disburse required escrow funds to relevant parties. At September 30, 2011 and December 31, 2010, we serviced loans for participants aggregating $5.3 million and $5.2 million, respectively.

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balances of these loans totaled $3.2 million and $3.9 million at September 30, 2011 and December 31, 2010, respectively. Net service fee income of $2,000, and $3,000 was recorded for three months ended September 30, 2011 and 2010. Net service fee income of $7,000, and $10,000 was recorded for nine months ended September 30, 2011 and 2010. Net service fee income is included in service charges and fees on the consolidated statements of income.

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 collectible. 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 and allocated 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, 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 percent and 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 throughout New England. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains rent rolls and tax returns 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 generally 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.

An analysis of changes in the allowance for loan losses by segment for the periods ended September 30, 2011 and 2010 is as follows:

	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
	(In thousands)
Balance at December 31, 2010	$	877		$	3,182		$	2,849		$	26		$	6,934
Provision		127			(9	)		234			(13	)		339
Charge-offs		-			-			(355	)		(4	)		(359	)
Recoveries		1			4			69			11			85
Balance at March 31, 2011	$	1,005		$	3,177		$	2,797		$	20		$	6,999
Provision		184			(93	)		84			-			175
Charge-offs		(2	)		(175	)		(77	)		(3	)		(257	)
Recoveries		3			132			20			1			156
Balance at June 30, 2011	$	1,190		$	3,041		$	2,824		$	18		$	7,073
Provision		272			(2	)		(254	)		(1	)		15
Charge-offs		-			-			(10	)		(6	)		(16	)
Recoveries		4			3			1			7			15
Balance at September 30, 2011	$	1,466		$	3,042		$	2,561		$	18		$	7,087

Balance at December 31, 2009	$	487		$	2,371		$	4,748		$	39		$	7,645
Provision		43			84			385			(12	)		500
Charge-offs		(1	)		-			(607	)		(8	)		(616	)
Recoveries		1			-			8			13			22
Balance at March 31, 2010	$	530		$	2,455		$	4,534		$	32		$	7,551
Provision		95			4,044			(7	)		(12	)		4,120
Charge-offs		-			(3,620	)		(238	)		(3	)		(3,861	)
Recoveries		2			2			(1	)		14			17
Balance at June 30, 2010	$	627		$	2,881		$	4,288		$	31		$	7,827
Provision		32			3,866			42			(12	)		3,928
Charge-offs		-			(3,602	)		-			(2	)		(3,604	)
Recoveries		6			1			-			10			17
Balance at September 30, 2010	$	665		$	3,146		$	4,330		$	27		$	8,168

Further information pertaining to the allowance for loan losses by segment at September 30, 2011 and December 31, 2010 follows:

	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
	(In thousands)
September 30, 2011
Allowance for loan and lease losses:
Individually evaluated for loss potential	$	40	$	254	$	25	$	-	$	319
Collectively evaluated for loss potential		1,426		2,788		2,536		18		6,768
Total	$	1,466	$	3,042	$	2,561	$	18	$	7,087

Loans and leases outstanding:
Individually evaluated for loss potential	$	235	$	15,775	$	1,147	$	-	$	17,157
Collectively evaluated for loss potential		192,668		205,075		126,059		2,610		526,412
Total	$	192,903	$	220,850	$	127,206	$	2,610	$	543,569

December 31, 2010
Allowance for loan and lease losses:
Individually evaluated for loss potential	$	-	$	-	$	19	$	-	$	19
Collectively evaluated for loss potential		877		3,182		2,830		26		6,915
Total	$	877	$	3,182	$	2,849	$	26	$	6,934

Loans and leases outstanding:
Individually evaluated for loss potential	$	125	$	1,891	$	539	$	-	$	2,555
Collectively evaluated for loss potential		148,671		219,687		134,711		2,960		506,029
Total	$	148,796	$	221,578	$	135,250	$	2,960	$	508,584

The following is a summary of past due and non-accrual loans by class at September 30, 2011 and December 31, 2010:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Past Due 90 Days or More and Still Accruing		Loans in Non- Accrual
	(In thousands)
September 30, 2011
Residential real estate:
Residential 1-4 family	$	483	$	71	$	175	$	729	$	-	$	720
Home equity		82		62		115		259		-		142
Commercial real estate		3,344		-		-		3,344		-		1,776
Commercial and industrial		2,981		583		147		3,711		-		147
Consumer		6		-		-		6		-		-
Total	$	6,896	$	716	$	437	$	8,049	$	-	$	2,785

December 31, 2010
Residential real estate:
Residential 1-4 family	$	196	$	459	$	172	$	827	$	-	$	629
Home equity		121		-		138		259		-		144
Commercial real estate		14,797		-		919		15,716		-		1,891
Commercial and industrial		204		1,000		150		1,354		-		539
Consumer		7		-		-		7		-		1
Total	$	15,325	$	1,459	$	1,379	$	18,163	$	-	$	3,204

The following is a summary of impaired loans by class:

							Three Months Ended				Nine Months Ended
	At September 30, 2011						September 30, 2011				September 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	120	$	126	$	-	$	122	$	-	$	123	$	-
Commercial real estate		1,575		1,685		-		1,591		-		1,660		-
Commercial and industrial		-		-		-		-		-		465		-
Total		1,695		1,811		-		1,713		-		2,248		-

Impaired loans with a valuation allowance:
Residential real estate		115		115		40		115		-		58		-
Commercial real estate		14,200		14,228		254		14,204		198		11,843		542
Commercial and industrial		1,147		1,150		25		1,147		11		982		44
Total		15,462		15,493		319		15,466		209		12,883		586

Total impaired loans	$	17,157	$	17,304	$	319	$	17,179	$	209	$	15,131	$	586

							Three Months Ended				Nine Months Ended
	At December 31, 2010						September 30, 2010				September 30, 2010
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	125	$	127	$	-	$	-	$	-	$	32	$	-
Commercial real estate		1,891		1,939		-		2,808		-		2,095		-
Commercial and industrial		389		1,374		-		25		-		321		-
Total		2,405		3,440		-		2,833		-		2,448		-

Impaired loans with a valuation allowance:
Commercial and industrial		150		150		19		1,691		-		2,180		-

Total impaired loans	$	2,555	$	3,590	$	19	$	4,524	$	-	$	4,628	$	-

No interest income was recognized for impaired loans on a cash-basis method during the three and nine months ended September 30, 2011 or 2010.

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

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

Performing loans modified as troubled debt restructuring during the nine months ended September 30, 2011, segregated by class, are shown in the table below. The modifications reduced the interest rate and extended the interest-only period. Both loans were performing assets at the date of modification and remained on accrual status. No loans were modified as a TDR during the three months ended September 30, 2011. Nonperforming TDRs are shown as nonperforming assets.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Commercial Real Estate		1		$14,000		$14,000
Commercial and Industrial		1		1,000		1,000
Total		2		$15,000		$15,000

Default occurs when a loan is 90 days or more past due or transferred to nonaccrual and is within twelve months of restructuring. One residential real estate loan with a recorded investment of $120,000 defaulted during the nine months ended September 30, 2011, which was modified in the quarter ended December 31, 2010. No TDRs defaulted during the three months ended September 30, 2011. As of September 30, 2011, we have not committed to lend additional amounts to customers with outstanding loans and leases that are classified as TDR’s. There were no charge-offs on TDRs during the three or nine months ended September 30, 2011.

Credit Quality Information

We utilize an eight-grade internal loan rating system for commercial real estate and commercial and industrial loans as follows:

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

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

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

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

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

Loans rated 8: Loans in this category are considered uncollectible ( “ Loss ” ) and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, we formally review the ratings on all commercial real estate and commercial and industrial loans. Construction loans are reported within commercial real estate loans and total $1.0 and $4.3 million at September 30, 2011 and December 31, 2010, respectively. We engage an independent third-party to review a significant portion of loans within these segments on at least an annual basis. We use the results of these reviews as part of our annual review process.

The following table presents our loans by risk rating at September 30, 2011 and December 31, 2010:

	Residential 1-4 family		Home Equity		Commercial Real Estate		Commercial and Industrial		Consumer		Total
	(In thousands)
September 30, 2011
Loans rated 1 – 3	$	155,762	$	36,677	$	172,285	$	89,495	$	2,601	$	456,820
Loans rated 4		102		-		26,935		19,522		-		46,559
Loans rated 5		3		-		1,457		2,804		9		4,273
Loans rated 6		313		46		19,973		15,385		-		35,717
Loans rated 7		-		-		200		-		-		200
	$	156,180	$	36,723	$	220,850	$	127,206	$	2,610	$	543,569

December 31, 2010
Loans rated 1 – 3	$	112,236	$	36,051	$	174,137	$	83,650	$	2,950	$	409,024
Loans rated 4		105		-		24,149		32,723		-		56,977
Loans rated 5		9		13		3,164		7,424		10		10,620
Loans rated 6		330		52		20,128		11,453		-		31,963
Loans rated 7		-		-		-		-		-		-
	$	112,680	$	36,116	$	221,578	$	135,250	$	2,960	$	508,584

6. SHARE-BASED COMPENSATION

Under our 2007 Recognition and Retention Plan and 2007 Stock Option Plan, we may grant up to 624,041 stock awards and 1,631,682 stock options, respectively, to our directors, officers, and employees.

Stock award allocations are recorded as unearned compensation based on the market price at the date of grant. Unearned compensation is amortized over the vesting period.

We may grant both incentive and non-statutory stock options. The exercise price of each option equals the market price of our stock on the date of grant with a maximum term of ten years. The fair value of each option grant is estimated on the date of grant using the binomial option pricing model with the following weighted average assumptions:

	Nine Months Ended September 30,
	2011			2010
Expected dividend yield		6.64	%		7.04	%
Expected volatility		34.19	%		35.83	%
Risk-free interest rate		3.12	%		2.48	%
Expected life	10 years			10 years

No stock options were granted during the three months ended September 30, 2011. All stock awards and stock options currently vest at 20% per year. At September 30, 2011, 6,941 stock awards and 56,232 stock options were available for future grants.

Our stock award and stock option plans activity for the nine months ended September 30, 2011 and 2010 is summarized below:

	Unvested Stock Awards Outstanding					Stock Options Outstanding
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Exercise Price

Outstanding at December 31, 2010		248,612		$	9.92		1,911,485		$	9.08
Granted		28,000			8.13		78,000			10.04
Stock options exercised		-			-		(34,646	)		4.39
Stock awards vested		(9,606	)		10.07		-			-
Outstanding at September 30, 2011		271,012		$	9.72		1,915,839		$	9.20

Outstanding at December 31, 2009		358,573		$	10.00		2,223,012		$	8.36
Granted		9,000			7.67		25,000			10.04
Stock options exercised		-			-		(336,527	)		4.39
Stock awards vested		(5,506	)		10.09		-			-
Outstanding at September 30, 2010		362,067		$	9.94		1,911,485		$	9.08

We recorded compensation cost related to the stock awards of $288,000 and $869,000 for the three and nine months ended September 30, 2011, respectively, and $289,000 and $868,000 for the three and nine months ended September 30, 2010 respectively.

We recorded compensation costs relating to stock options of $197,000 and $200,000 with related tax benefits of $51,000 and $53,000 for the three months ended September 30, 2011 and 2010, respectively. We recorded compensation costs relating to stock options of $596,000 and $598,000 with related tax benefits of $156,000 and $159,000 for the nine months ended September 30, 2011 and 2010, respectively.

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

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

Short-term borrowings are made up of Federal Home Loan Bank (“FHLB”) advances with an original maturity of less than one year as well as customer repurchase agreements, which have an original maturity of one day. Short-term borrowings issued by the FHLB were $35.5 million and $50.6 million at September 30, 2011 and December 31, 2010, respectively. Customer repurchase agreements were $20.0 million at September 30, 2011, and $12.3 million at December 31, 2010. A customer repurchase agreement is an agreement by us to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the U.S. government. This transaction settles immediately on a same day basis in immediately available funds. Interest paid is commensurate with other products of equal interest and credit risk. All of our customer repurchase agreements at September 30, 2011 and December 31, 2010 were held by commercial customers.

Long-term debt consists of FHLB advances, securities sold under repurchase agreements and customer repurchase agreements with an original maturity of one year or more. At September 30, 2011, we had $160.6 million in long-term debt with the FHLB and $81.3 million in securities sold under repurchase agreements with an approved broker-dealer. This compares to $151.7 million in long-term debt with FHLB advances and $81.3 million in securities sold under repurchase agreements with an approved broker-dealer at December 31, 2010. Customer repurchase agreements were $5.3 million at September 30, 2011 and $5.2 million at December 31, 2010. The securities sold under agreements to repurchase are callable at the issuer’s option beginning in the year 2012.

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

8. PENSION BENEFITS

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In thousands)
Service cost	$	247		$	233		$	742		$	698
Interest cost		223			193			668			580
Expected return on assets		(219	)		(196	)		(656	)		(587	)
Transition obligation		(3	)		(3	)		(8	)		(9	)
Actuarial loss		29			23			87			69
Net periodic pension cost	$	277		$	250		$	833		$	751

We maintain a pension plan for our eligible employees. We plan to contribute to the pension plan the amount required to meet the minimum funding standards under Section 412 of the Internal Revenue Code. 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 2011. No contributions have been made to the plan for the three and nine months ended September 30, 2011.

9. 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 generally 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 or liabilities. Level 1 assets and liabilities 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 or liabilities.

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 or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

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

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

Interest-bearing deposits in banks - The carrying amounts of interest-bearing deposits maturing within ninety days approximate their fair values. Fair values of other interest-bearing deposits are estimated using discounted cash flow analyses based on current market rates for similar types of deposits.

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

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

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

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

Deposit liabilities - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings - For short-term borrowings maturing within ninety days, carrying values approximate fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

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

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

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

	September 30, 2011
	Level 1		Level 2		Level 3		Total
Securities available-for-sale:	(In thousands)
Mutual funds	$	5,516	$	-	$	-	$	5,516
Common and preferred stock		57		-		-		57
U.S. government and federal agency debt securities		-		28,633		-		28,633
State and municipal bonds		-		45,664		-		45,664
Government sponsored residential mortgage-backed securities		-		390,193		-		390,193
U.S. government guaranteed residential mortgage-backed securities		-		156,167		-		156,167
Private label residential mortgage-backed securities		-		1,678		-		1,678
Total assets	$	5,573	$	622,335	$	-	$	627,908

	December 31, 2010
	Level 1		Level 2		Level 3		Total
Securities available-for-sale:	(In thousands)
Mutual funds	$	5,272	$	-	$	-	$	5,272
Common and preferred stock		16		-		-		16
U.S. government and federal agency debt securities		-		17,864		-		17,864
State and municipal bonds		-		43,077		-		43,077
Government sponsored residential mortgage-backed securities		-		380,984		-		380,984
U.S. government guaranteed residential mortgage-backed securities		-		187,676		-		187,676
Private label residential mortgage-backed securities		-		7,578		-		7,578
Total assets	$	5,288	$	637,179	$	-	$	642,467

Also, we may be required, from time to time, to measure certain other assets on a non-recurring basis in accordance with U.S. GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related assets at September 30, 2011 and 2010. Total losses represent the change in carrying value as a result of fair value adjustments related to assets still held at September 30, 2011 and 2010.

	At						Three Months Ended			Nine Months Ended
	September 30, 2011						September 30, 2011			September 30, 2011
							Total			Total
	Level 1		Level 2		Level 3		Gains (Losses)			Gains (Losses)
	(In thousands)
Impaired loans	$	-	$	-	$	1,079	$	8		$	(240	)
Total assets	$	-	$	-	$	1,079	$	8		$	(240	)

	At						Three Months Ended			Nine Months Ended
	September 30, 2010						September 30, 2010			September 30, 2010
							Total			Total
	Level 1		Level 2		Level 3		Gains (Losses)			Gains (Losses)
	(In thousands)
Impaired loans	$	-	$	-	$	1,681	$	(188	)	$	(1,051	)
Other real estate owned		-		-		276		-			(105	)

Total assets	$	-	$	-	$	1,957	$	(188	)	$	(1,156	)

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

The amount of other real estate owned represents the carrying value of the collateral based on the appraised value of the underlying collateral using a market approach less selling costs. During the three and nine months ended September 30, 2011, there were no fair value adjustments on other real estate owned.

There were no transfers to or from Level 1 and 2 during the three and nine months ended September 30, 2011.

We did not measure any liabilities at fair value on a recurring or non-recurring basis on the consolidated balance sheets.

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

	September 30, 2011				December 31, 2010
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
	(In thousands)
Assets:
Cash and cash equivalents	$	19,565	$	19,565	$	11,611	$	11,611

Securities available for sale		627,908		627,908		642,467		642,467

Federal Home Loan Bank of Boston and other restricted stock		12,438		12,438		12,282		12,282

Loans - net		537,512		538,875		502,392		505,791

Accrued interest receivable		4,181		4,181		4,279		4,279

Liabilities:
Deposits		720,514		722,529		700,335		697,815

Short-term borrowings		55,544		55,544		62,937		62,936

Long-term debt		247,240		256,930		238,151		243,800

Accrued interest payable		642		642		720		720

10. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2010, the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2010-20, Receivables (Topic 310), Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This ASU requires an entity to provide disclosures that facilitate financial statement users’ evaluation of (1) the nature of credit risk inherent in the entity’s loan portfolio (2) how that risk is analyzed and assessed in arriving at the allowance for loan and lease losses and (3) the changes and reasons for those changes in the allowance for loan and lease losses. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. We have provided the required disclosures in Note 5. The disclosure requirement in this ASU pertaining to Troubled Debt Restructuring was deferred by ASU No. 2011-01 issued in January 2011.

In January 2011, the FASB issued ASU No. 2011-01, Receivables (Topic 310) Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in ASU No. 2010-20. The amendments in this ASU temporarily delay the effective date of disclosures about troubled debt restructurings as required by ASU No. 2010-20 for public entities in order to allow FASB to complete deliberations on what constitutes troubled debt restructuring.

In April 2011, the FASB issued ASU No. 2011-02, Receivables (Topic 310), A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. This ASU provides additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. Early adoption is permitted. A provision in ASU 2011-02 also ends the FASB’s deferral of the additional disclosures about trouble debt restructurings as required by ASU 2010-20. We intend to adopt the methodologies prescribed by this ASU by the date required. We are evaluating the impact of adoption of this ASU.

In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements. This update revises the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The update will be effective for interim and annual reporting periods beginning on or after December 15, 2011, early adoption is prohibited, and the amendments will be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The adoption of this guidance is not expected to have a material impact on our financial condition or results of operations.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. The ASU expands ASC 820’s disclosure requirements, particularly for Level 3 inputs, including (1) a quantitative disclosure of the unobservable inputs and assumptions used, (2) a description of the valuation process in place and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs. The ASU is effective for the Company’s reporting periods beginning after December 15, 2011. As this ASU amends only the disclosure requirements for fair value measurements, the adoption is not expected to have a material impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income. This ASU amends the disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (OCI) as part of the statement of changes in stockholder’s equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early application is permitted. There will be no impact to the consolidated financial results as the amendments relate only to changes in financial statement presentation.

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

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

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

to supplement the commercial focus, grow the residential loan portfolio to diversify risk and deepen customer relationships. We will maintain our arrangement with a third-party mortgage company which assists in originating and servicing residential real estate loans. By doing this, we reduce the overhead costs associated with these loans.

You should read the following financial results for the three and nine months ended September 30, 2011 in the context of this strategy.

Net income was $1.5 million, or $0.06 per diluted share, for the quarter ended September 30, 2011, compared to $699,000, or $0.03 per diluted share, for the same period in 2010. For the nine months ended September 30, 2011, net income was $4.3 million, or $0.16 per diluted share, compared to $1.7 million, or $0.06 per diluted share, for the same period in 2010.

The provision for loans losses was $15,000 for the three months ended September 30, 2011, compared to $3.9 million for the same period in 2010. The provision for loan losses was $529,000 for the nine months ended September 30, 2011, compared to $8.5 million in the same period in 2010.The decreases in the provision for loan losses occurred because the 2010 periods included the reserve for and subsequent charge-off of $7.2 million on a single commercial real estate loan.

Net interest income increased $270,000 to $7.6 million for the three months ended September 30, 2011, compared to $7.3 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.64% for the three months ended September 30, 2011, compared to 2.58% for the same period in 2010. For the nine months ended September 30, 2011, net interest income increased $530,000 to $23.0 million, compared to $22.5 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.69% and 2.72% for the nine months ended September 30, 2011 and 2010, respectively.

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. For additional information on our critical accounting policies, please refer to the information contained in Notes 1 and 10 of the accompanying unaudited consolidated financial statements and Note 1 of the consolidated financial statements included in our 2010 Annual Report.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

Total assets increased $23.3 million to $1.3 billion at September 30, 2011. Securities decreased $14.4 million to $640.3 million at September 30, 2011 from $654.7 million at December 31, 2010. The decrease in securities was the result of using cash flow from securities to fund the loan portfolio as discussed below.

Net loans increased by $35.1 million to $537.5 million at September 30, 2011 from $502.4 million at December 31, 2010. The increase in net loans was primarily the result of an increase in residential real estate loans, which was partially offset by decreases in commercial and industrial and commercial real estate loans. Residential real estate loans increased $44.1 million to $192.9 million at September 30, 2011. Through our long standing relationship with a third-party mortgage company, we originated and purchased residential loans within and contiguous to our market area as a means of diversifying our loan portfolio and improving net interest income. During the nine months ended September 30, 2011, we purchased $52.5 million of residential loans within and contiguous to our market area as a means of diversifying our loan portfolio and improve net interest income.

Commercial and industrial loans decreased $8.0 million to $127.2 million at September 30, 2011 from $135.3 million at December 31, 2010. Commercial real estate loans decreased $800,000 to $220.8 million at September 30, 2011 from $221.6 million at December 31, 2010. Owner occupied commercial real estate loans totaled $97.0 million at September 30, 2011 and $107.0 million at December 31, 2010, while non-owner occupied commercial real estate loans totaled $123.9 million at September 30, 2011 and $114.6 million at December 31, 2010.

All loans where the interest payment is 90 days or more in arrears as of the closing date of each month are placed on nonaccrual status. Nonperforming loans decreased $419,000 to $2.8 million at September 30, 2011 compared to $3.2 million at December 31, 2010. At September 30, 2011, nonperforming loans were primarily made up of three commercial relationships totaling $1.9 million. If all nonaccrual loans had been performing in accordance with their terms, we would have earned additional interest income of $240,000 and $167,000 for the nine months ended September 30, 2011 and 2010, respectively. At September 30, 2011 and December 31, 2010, we had $1.1 million and $223,000 in foreclosed real estate, respectively. At September 30, 2011 and December 31, 2010, our nonperforming loans to total loans were 0.51% and 0.63%, respectively, while our nonperforming assets to total assets were 0.31% and 0.28%, respectively. A summary of our nonaccrual and past due loans by class are listed in Note 5 of the accompanying consolidated financial statements.

Total deposits increased $20.2 million to $720.5 million at September 30, 2011, from $700.3 million at December 31, 2010. The increase in deposits was due to an increase in savings and money market accounts and checking accounts. Savings and money market accounts increased $38.3 million to $215.8 million at September 30, 2011, from $177.5 million at December 31, 2010. Checking accounts increased $13.1 million to $181.9 million at September 30, 2011, from $168.8 million at December 31, 2010. The increases in savings and money market accounts and checking accounts were primarily due to a relationship-based product set introduced in 2010 which continues to show growth in 2011. Time deposit accounts decreased $31.2 million to $322.8 million at September 30, 2011, from $354.0 million at December 31, 2010.

Short-term borrowings decreased $7.4 million to $55.5 million at September 30, 2011 from $62.9 million at December 31, 2010. Long-term debt increased $9.0 million to $247.2 million from $238.2 million at December 31, 2010. Our short-term borrowings and long-term debt are discussed in Note 7 of the accompanying consolidated financial statements.

Shareholders’ equity at September 30, 2011 and December 31, 2010 was $229.8 million and $221.2 million, respectively, which represented 18.2% and 17.8% of total assets at September 30, 2011 and December 31, 2010. The increase in shareholders’ equity reflects an increase in other comprehensive income of $15.2 million primarily due to the change in market values of securities, net income of $4.3 million for the nine months ended September 30, 2011, an increase of $2.2 million related to the recognition of share-based compensation and the exercise of 34,646 stock options. This was partially offset by the payment of regular and special dividends amounting to $8.8 million and the repurchase of 554,228 shares of our common stock at a cost of $4.5 million, pursuant to our current stock repurchase plan.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 30, 2010

General

Net income was $1.5 million, or $0.06 per diluted share, for the three months ended September 30, 2011, as compared to net income of $699,000, or $0.03 per diluted share, for the same period in 2010. Net interest and dividend income was $7.6 million for the three months ended September 30, 2011 and $7.3 million for the same period in 2010.

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 September 30, 2011 and 2010, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilities comparison between taxable and tax-exempt assets.

	Three Months Ended September 30,
	2011								2010
	Average					Avg Yield/			Average					Avg Yield/
	Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans (1)(2)	$	547,539	$	6,498			4.75	%	$	490,283	$	6,273			5.12	%
Securities (2)		608,580		4,881			3.21			645,275		5,474			3.39
Other investments - at cost		14,048		14			0.40			13,551		5			0.15
Short-term investments (3)		8,080		-			0.00			11,481		2			0.07
Total interest-earning assets		1,178,247		11,393			3.87			1,160,590		11,754			4.05
Total noninterest-earning assets		69,586								78,019

Total assets	$	1,247,833							$	1,238,609

LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts	$	86,425		172			0.80		$	78,329		233			1.19
Savings accounts		103,297		112			0.43			123,033		216			0.70
Money market accounts		104,479		165			0.63			47,485		51			0.43
Time certificates of deposit		326,909		1,362			1.67			346,304		1,881			2.17
Total interest-bearing deposits		621,110		1,811						595,151		2,381
Short-term borrowings and long-term debt		300,448		1,744			2.32			310,853		1,820			2.34
Interest-bearing liabilities		921,558		3,555			1.54			906,004		4,201			1.85
Noninterest-bearing deposits		93,139								83,714
Other noninterest-bearing liabilities		9,179								8,580
Total noninterest-bearing liabilities		102,318								92,294

Total liabilities		1,023,876								998,298
Total equity		223,957								240,311
Total liabilities and equity	$	1,247,833							$	1,238,609
Less: Tax-equivalent adjustment (2)				(219	)							(204	)
Net interest and dividend income			$	7,619							$	7,349
Net interest rate spread (4)							2.33	%							2.20	%
Net interest margin (5)							2.64	%							2.58	%
Ratio of average interest-earning
assets to average interest-bearing liabilities							127.9								128.1

________________________

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

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

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

(4)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

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

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

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

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

·	The net change.

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

	Three Months Ended September 30, 2011 compared to Three Months Ended September 30, 2010
	Increase (Decrease) Due to
	Volume			Rate			Net
Interest-earning assets	(In thousands)
Loans (1)	$	733		$	(508	)	$	225
Securities (1)		(311	)		(282	)		(593	)
Other investments - at cost		-			9			9
Short-term investments		(1	)		(1	)		(2	)
Total interest-earning assets		421			(782	)		(361	)

Interest-bearing liabilities
NOW accounts		24			(85	)		(61	)
Savings accounts		(35	)		(69	)		(104	)
Money market accounts		61			53			114
Time deposits		(105	)		(414	)		(519	)
Short-term borrowing and long-time debt		(61	)		(15	)		(76	)
Total interest-bearing liabilities		(116	)		(530	)		(646	)
Change in net interest and dividend income	$	537		$	(252	)	$	285

__________________________

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

Net interest and dividend income increased $270,000 to $7.6 million for the three months ended September 30, 2011, from $7.3 million for the same period in 2010. Interest and dividend income, on a tax-equivalent basis, decreased $376,000 to $11.4 million for the three months ended September 30, 2011, from $11.8 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.64% for the three months ended September 30, 2011, as compared to 2.58% for the same period in 2010.

The average yield on interest-earning assets decreased 18 basis points to 3.87% for the three months ended September 30, 2011, from 4.05% for the same period in 2010. The average yield on interest-earning assets decreased due to cash flows from their pay downs being subsequently reinvested in products having a lower yield, which is reflective of the current market rate environment. The decrease in average yield was partially mitigated by increases in the average balances of loans, which increased $57.3 million for the three months ended September 30, 2011.

The decrease in interest income was partially offset by a decrease in interest expense. Interest expense decreased $646,000 to $3.6 million for the three months ended September 30, 2011, from $4.2 million for the same period in 2010. The average cost of interest-bearing liabilities decreased 31 basis points to 1.54% for the three months ended September 30, 2011, from 1.85% for the same period in 2010. The decrease in the cost of interest-bearing liabilities was primarily due to a decrease in rates on time deposits.

Provision for Loan Losses

The amount that we provided for loan losses during the three months ended September 30, 2011 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described in detail below, include a decrease in net loan charge-offs and commercial and industrial and commercial real estate loans, partially offset by an increase in residential real estate loans. After evaluating these factors, we provided $15,000 for loan losses for the three months ended September 30, 2011, compared to $3.9 million for the same period in 2010. The allowance was $7.1 million at September 30, 2011 and $6.9 million at December 31, 2010. The allowance for loan losses was 1.30% of total loans at September 30, 2011 and 1.36% at December 31, 2010.

Net charge-offs were $1,000 for the three months ended September 30, 2011. This was comprised of charge-offs of $17,000 for the three months ended September 30, 2011, partially offset by recoveries of $16,000 for the same period.

Net charge-offs were $3.6 million for the three months ended September 30, 2010. This was comprised of charge-offs of $3.6 million for the three months ended September 30, 2010, partially offset by recoveries of $17,000. The 2010 period included the reserve for and subsequent charge-off of $7.2 million on a single commercial real estate loan.

At September 30, 2011, commercial and industrial loans decreased $8.0 million to $127.2 million at September 30, 2011 from $135.3 million at December 31, 2010 while commercial real estate loans decreased $800,000 to $220.8 million at September 30, 2011 from $221.6 million at December 31, 2010. Residential real estate loans increased $44.1 million to $192.9 million compared to December 31, 2010. We consider these types of loans to contain less credit risk and market risk than both commercial and industrial and commercial real estate loans. A summary of our provision for loan losses by loan segment is listed in Note 5 of the accompanying consolidated financial statements.

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

Noninterest Income

Noninterest income decreased $2.5 million to $943,000 for the three months ended September 30, 2011, compared to $3.4 million for the same period in 2010. This was primarily due to a decrease in net gains on the sales of securities. Net gains on the sales of securities were $131,000 for the three months ended September 30, 2011, compared to net gains of $2.6 million for the same period in 2010.

Noninterest Expense

Noninterest expense increased $455,000 for the three months ended September 30, 2011 to $6.6 million from $6.2 million in the comparable 2010 period. Salaries and benefits increased $336,000 to $4.0 million for the three months ended September 30, 2011 primarily due to normal salary and benefits increases.

Income Taxes

For the three months ended September 30, 2011, we had a tax provision of $414,000 as compared to a tax benefit of $17,000 for the same period in 2010. The effective tax rate was 21.7% for the three months ended September 30, 2011 and 2.5% for the same period in 2010. The change in effective tax rate from September 30, 2010 is due primarily to the effect of higher pre-tax income while maintaining the same level of tax-advantaged income such as BOLI and tax-exempt municipal obligations.

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 30, 2010

General

Net income was $4.3 million, or $0.16 per diluted share, for the nine months ended September 30, 2011, as compared to $1.7 million, or $0.06 per diluted share, for the same period in 2010. Net interest and dividend income was $23.0 million for the nine months ended September 30, 2011 and $22.5 million for the same period in 2010.

Net Interest and Dividend Income

The following tables set forth the information relating to our average balance and net interest income for the nine months ended September 30, 2011 and 2010, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilities comparison between taxable and tax-exempt assets.

	Nine Months Ended September 30,
	2011								2010
	Average					Avg Yield/			Average					Avg Yield/
	Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans (1)(2)	$	533,222	$	19,057			4.77	%	$	477,710	$	18,642			5.20	%
Securities (2)		620,136		15,632			3.36			628,307		17,031			3.61
Other investments - at cost		14,004		46			0.44			12,621		17			0.18
Short-term investments (3)		6,918		1			0.02			14,158		5			0.05
Total interest-earning assets		1,174,280		34,736			3.94			1,132,796		35,695			4.20
Total noninterest-earning assets		71,294								79,432

Total assets	$	1,245,574							$	1,212,228

LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts	$	87,864		630			0.96		$	74,572		691			1.24
Savings accounts		105,563		427			0.54			117,462		672			0.76
Money market accounts		89,621		430			0.64			48,382		230			0.63
Time certificates of deposit		336,689		4,404			1.74			344,687		5,897			2.28
Total interest-bearing deposits		619,737		5,891						585,103		7,490
Short-term borrowings and long-term debt		306,619		5,193			2.26			293,456		5,146			2.34
Interest-bearing liabilities		926,356		11,084			1.60			878,559		12,636			1.92
Noninterest-bearing deposits		88,408								82,207
Other noninterest-bearing liabilities		9,494								8,299
Total noninterest-bearing liabilities		97,902								90,506

Total liabilities		1,024,258								969,065
Total equity		221,316								243,163
Total liabilities and equity	$	1,245,574							$	1,212,228
Less: Tax-equivalent adjustment (2)				(657	)							(594	)
Net interest and dividend income			$	22,995							$	22,465
Net interest rate spread (4)							2.35	%							2.28	%
Net interest margin (5)							2.69	%							2.72	%
Ratio of average interest-earning
assets to average interest-bearing liabilities							126.8								128.9

___________________________

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

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

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

(4)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

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

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

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

·	The net change.

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

	Nine Months Ended September 30, 2011 compared to Nine Months Ended September 30, 2010
	Increase (Decrease) Due to
	Volume			Rate			Net
Interest-earning assets	(In thousands)
Loans (1)	$	2,166		$	(1,751	)	$	415
Securities (1)		(221	)		(1,178	)		(1,399	)
Other investments - at cost		2			27			29
Short-term investments		(3	)		(1	)		(4	)
Total interest-earning assets		1,944			(2,903	)		(959	)

Interest-bearing liabilities
NOW accounts		123			(184	)		(61	)
Savings accounts		(68	)		(177	)		(245	)
Money market accounts		196			4			200
Time deposits		(137	)		(1,356	)		(1,493	)
Short-term borrowing and long-time debt		231			(184	)		47
Total interest-bearing liabilities		345			(1,897	)		(1,552	)
Change in net interest and dividend income	$	1,599		$	(1,006	)	$	593

_________________________________

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

Net interest and dividend income increased $530,000 to $23.0 million for the nine months ended September 30, 2011, from $22.5 million for the same period in 2010. Interest and dividend income, on a tax-equivalent basis, decreased $959,000 to $34.7 million for the nine months ended September 30, 2011, from $35.7 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.69% for the nine months ended September 30, 2011, as compared to 2.72% for the same period in 2010.

The average yield on interest-earning assets decreased 26 basis points to 3.94% for the nine months ended September 30, 2011, from 4.20% for the same period in 2010. The average yield on interest-earning assets decreased due to cash flows from their pay downs being subsequently reinvested in products having a lower yield, which is reflective of the current market rate environment. The decrease in average yield was partially mitigated by increases in the average balances of loans, which increased $55.5 million for the nine months ended September 30, 2011.

The decrease in interest income was offset by a decrease in interest expense. Interest expense decreased $1.5 million to $11.1 million for the nine months ended September 30, 2011, from $12.6 million for the same period in 2010. The average cost of interest-bearing liabilities decreased 32 basis points to 1.60% for the nine months ended September 30, 2011, from 1.92% for the same period in 2010. The decrease in the cost of interest-bearing liabilities was primarily due to a decrease in rates on time deposits.

Provision for Loan Losses

The amount that we provided for loan losses during the nine months ended September 30, 2011 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described in detail below, include a decrease in net loan charge-offs and commercial and industrial and commercial real estate loans, partially offset by an increase in residential real estate loans. After evaluating these factors, we provided $529,000 for loan losses for the nine months ended September 30, 2011, compared to $8.5 million for the same period in 2010. The allowance was $7.1 million at September 30, 2011 and $6.9 million at December 31, 2010. The allowance for loan losses was 1.30% of total loans at September 30, 2011 and 1.36% at December 31, 2010.

Net charge-offs were $376,000 for the nine months ended September 30, 2011. This was comprised of charge-offs of $633,000 for the nine months ended September 30, 2011, partially offset by recoveries of $257,000 for the same period.

Net charge-offs were $8.0 million for the nine months ended September 30, 2010. This was comprised of charge-offs of $8.1 million for the nine months ended September 30, 2010, partially offset by recoveries of $56,000. For the nine months ended September 30, 2010, a total of $7.2 million was charged off on a single commercial real estate loan.

Noninterest Income

Noninterest income decreased $3.7 million to $2.7 million for the nine months ended September 30, 2011, from $6.4 million for the same period in 2010. This was primarily due to a decrease in net gains on the sales of securities. Net gains on the sales of securities were $208,000 for the nine months ended September 30, 2011, compared to net gains of $3.9 million for the same period in 2010.

Noninterest Expense

Noninterest expense increased $1.1 million for the nine months ended September 30, 2011 to $19.6 million from $18.5 million in the comparable 2010 period. Salaries and benefits increased $780,000 to $11.7 million for the nine months ended September 30, 2011. This was primarily the result of normal increases in salaries and benefits. Professional fees expenses increased $267,000 to $1.5 million for the nine months ended September 30, 2011. These increases were partially offset by a $274,000 decrease in OREO expense. This was primarily due to write downs on foreclosed properties of $232,000 for the nine months ended September 30, 2010, which did not reoccur in 2011.

Income Taxes

For the nine months ended September 30, 2011, we had a tax provision of $1.2 million as compared to $137,000 for the same period in 2010. The effective tax rate was 21.7% for the nine months ended September 30, 2011 and 7.6% for the same period in 2010. The change in effective tax rate from September 30, 2010 is due primarily to the higher pre-tax income while maintaining the same level of tax-advantaged income such as BOLI and tax-exempt municipal obligations.

LIQUIDITY AND CAPITAL RESOURCES

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loan purchases, withdrawals of deposits and operating expenses. Our primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of securities and funds provided by operations. We also can borrow funds from the FHLB based on eligible collateral of loans and securities. Our maximum additional borrowing capacity from the FHLB at September 30, 2011 was $97.1 million.

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

At September 30, 2011, we exceeded each of the applicable regulatory capital requirements. As of September 30, 2011, the most recent notification from the Office of (Comptroller of the Currency (the "OCC") categorized us as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized” we must maintain minimum total risk-based, Tier 1 risk based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes would change our category. Our actual capital ratios of September 30, 2011 and December 31, 2010 are also presented in the following table.

	Actual					Minimum for Capital Adequacy Purposes					Minimum To Be Well- Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2011

Total Capital (to Risk Weighted Assets ):
Consolidated	$	225,856		33.40	%	$	54,104		8.00	%		N/A		-
Bank		218,083		32.32			53,974		8.00		$	67,468		10.00	%
Tier 1 Capital ( to Risk Weighted Assets ):
Consolidated		218,769		32.35			27,052		4.00			N/A		-
Bank		211,255		31.31			26,987		4.00			40,481		6.00
Tier 1 Capital ( to Adjusted Total Assets ):
Consolidated		218,769		17.59			49,751		4.00			N/A		-
Bank		211,255		17.03			49,620		4.00			62,025		5.00
Tangible Equity ( to Tangible Assets ):
Consolidated		N/A		-			N/A		-			N/A		-
Bank		211,255		17.03			24,810		2.00			N/A		-

December 31, 2010

Total Capital (to Risk Weighted Assets ):
Consolidated	$	231,272		34.05	%	$	54,339		8.00	%		N/A		-
Bank		221,643		32.69			54,238		8.00		$	67,797		10.00	%
Tier 1 Capital ( to Risk Weighted Assets ):
Consolidated		224,338		33.03			27,169		4.00			N/A		-
Bank		214,668		31.66			27,119		4.00			40,678		6.00
Tier 1 Capital ( to Adjusted Total Assets ):
Consolidated		224,338		18.07			49,662		4.00			N/A		-
Bank		214,668		17.37			49,434		4.00			61,793		5.00
Tangible Equity ( to Tangible Assets ):
Consolidated		N/A		-			N/A		-			N/A		-
Bank		214,668		17.37			24,717		2.00			N/A		-

We also have outstanding, at any time, a significant number of commitments to extend credit and provide financial guarantees to third parties. These arrangements are subject to strict credit control assessments. Guarantees specify limits to our obligations. Because many commitments and almost all guarantees expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows. We are obligated under leases for certain of our branches and equipment. A summary of contractual obligations and credit commitments at September 30, 2011 follows:

	Within 1 Year		After 1 Year But Within 3 Years		After 3 Year But Within 5 Years		After 5 Years		Total
	(In thousands)
Contractual Obligations:
Lease Obligations
Operating lease obligations	$	610	$	1,217	$	$1,078	$	9,913	$	12,818

Borrowings and Debt
Federal Home Loan Bank		52,745		67,439		75,934		-		196,118
Securities sold under agreements to repurchase		25,366		42,800		-		38,500		106,666
Total borrowings and debt		78,111		110,239		75,934		38,500		302,784

Credit Commitments:
Available lines of credit		59,172		-		-		21,731		80,903
Other loan commitments		9,276		407		-		-		9,683
Letters of credit		4,507		-		-		503		5,010
Total credit commitments		72,955		407		-		22,234		95,596

Total Obligations	$	151,676	$	111,863	$	77,012	$	70,647	$	411,198

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.

REGULATORY ORDER

On April 28, 2011, the board of directors of the Bank stipulated and consented to an Order to Cease and Desist (the “Order”) issued by the Office of Thrift Supervision (“OTS”) prior to its abolishment on July 21, 2011. The power and duties of the OTS were transferred to the OCC for savings banks and other thrifts. The Order was issued as a result of findings identified in the course of a regular examination of the Bank relating to non-compliance with certain laws and regulations, including the Bank Secrecy Act and Anti-Money Laundering. The Bank has responded to the OTS indicating the actions taken, or to be taken, to address the matters specified in the Order.

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 2010 Annual Report. Please refer to Item 7A of the 2010 Annual Report for additional information.

ITEM 4: CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

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

Changes in Internal Control Over Financial Reporting.

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

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

ITEM 1A. RISK FACTORS.

For a summary of risk factors relevant to our operations, see Part 1, Item 1A, “Risk Factors” in our 2010 Annual Report on Form 10-K. There are no material changes in the risk factors relevant to our operations.

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

The following table sets forth information with respect to purchases made by us of our common stock during the three months ended September 30, 2011.

Period	Total Number of Shares Purchased		Average Price Paid per Share ($)		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares that May Yet Be Purchased Under the Program (1)
July 1 - 31, 2011		800		8.05		800		1,221,322
August 1 - 31, 2011		170,168		7.49		170,168		1,051,154
September 1 - 30, 2011		52,866		7.34		52,866		998,288
Total		223,834		7.46		223,834		998,288

(1)	On May 25, 2010, the Board of Directors voted to authorize the commencement of a repurchase program, authorizing the repurchase of 2,924,367 shares, or ten percent of its outstanding shares of common stock.

There were no sales by us of unregistered securities during the three months ended September 30, 2011.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. [REMOVED AND RESERVED.]

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on November 8, 2011.

Westfield Financial, Inc.

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

By:	/s/ Leo R. Sagan, Jr.
	Leo R. Sagan, Jr.
	Vice President and Chief Financial Officer

EXHIBIT INDEX

2.1	Amended and Restated Plan of Conversion and Stock Issuance of Westfield Mutual Holding Company, Westfield Financial, Inc. and Westfield Bank (incorporated by reference to Exhibit 2.1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006.)
3.1	Articles of Organization of Westfield Financial, Inc. (incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2007.)
3.2	Amended and Restated Bylaws of Westfield Financial, Inc. (incorporated by reference to Exhibit 3.2 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2011.)
4.1	Form of Stock Certificate of Westfield Financial, Inc. (incorporated by reference to Exhibit 4.1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006.)
10.1*	Amended and Restated Employee Stock Ownership Plan of Westfield Financial, Inc.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	Financial statements from the quarterly report on Form 10-Q of Westfield Financial, Inc. for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Shareholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.

_______________________________

Field 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.

Exhibit 10.1

Employee Stock Ownership Plan

Westfield Financial, Inc.

Amended and Restated Effective as of September 27, 2011

Article I

Definitions

Section 1.1 Account			1
Section 1.2 Affiliated Employer			1
Section 1.3 Allocation Compensation			1
Section 1.4 Bank			2
Section 1.5 Board			2
Section 1.6 Beneficiary			2
Section 1.7 Change in Control			2
Section 1.8 Code			2
Section 1.9 Committee			2
Section 1.10 Company			2
Section 1.11 Designated Beneficiary			2
Section 1.12 Disability			3
Section 1.13 Discretionary Contribution			3
Section 1.14 Domestic Relations Order			3
Section 1.15 Eligibility Computation Period			3
Section 1.16 Effective Date			4
Section 1.17 Eligible Employee			4
Section 1.18 Eligible Participant			4
Section 1.19 Employee			4
Section 1.20 Employment Commencement Date			4
Section 1.21 ERISA			4
Section 1.22 Exchange Act			4
Section 1.23 Fair Market Value			4
Section 1.24 Financed Share			5
Section 1.25 Five Percent Owner			5
Section 1.26 Forfeitures			5
Section 1.27 Former Participant			5
Section 1.28 General Investment Account			5
Section 1.29 Highly Compensated Employee			5
Section 1.30 Hour of Service			5
Section 1.31 Investment Account			6
Section 1.32 Investment Fund			6
Section 1.33 Loan Repayment Account			6
Section 1.34 Loan Repayment Contribution			6
Section 1.35 Maternity or Paternity Leave			6
Section 1.36 Military Service			6
Section 1.37 Named Fiduciary			7
Section 1.38 Officer			7
Section 1.39 One-Year Break in Service			7
Section 1.40 Participant			7
Section 1.41 Participating Employer			7
Section 1.42 Plan			7
Section 1.43 Plan Administrator			7

Section 1.44 Plan Year			7
Section 1.45 Qualified Domestic Relations Order			7
Section 1.46 Qualified Military Service			7
Section 1.47 Qualified Participant			8
Section 1.48 Retirement			8
Section 1.49 Retroactive Contribution			8
Section 1.50 Share			8
Section 1.51 Share Acquisition Loan			9
Section 1.52 Share Investment Account			9
Section 1.53 Tender Offer			9
Section 1.54 Total Compensation			9
Section 1.55 Trust			9
Section 1.56 Trust Agreement			9
Section 1.57 Trust Fund			9
Section 1.58 Trustee			10
Section 1.59 Valuation Date			10
Section 1.60 Year of Eligibility Service			10
Section 1.61 Year of Vesting Service			10

Article II

Participation

Section 2.1 Eligibility for Participation.			10
Section 2.2 Commencement of Participation.			10
Section 2.3 Termination of Participation.			10

Article III

Special Provisions

Section 3.1 Military Service.			11
Section 3.2 Maternity or Paternity Leave.			11
Section 3.3 Adjustments to Years of Eligibility Service.			12
Section 3.4 Leave of Absence.			12
Section 3.5 Family and Medical Leave.			12
Section 3.6 Service with Uniformed Forces.			12

Article IV

Contributions by Participants Not Permitted

Section 4.1 Contributions by Participants Not Permitted.

iii

Article V

Contributions by the Employer

Section 5.1 In General.			13
Section 5.2 Loan Repayment Contributions.			13
Section 5.3 Discretionary Contributions.			13
Section 5.4 Retroactive Contributions.			14
Section 5.5 Time and Manner of Payment.			14

Article VI

Share Acquisition Loans

Section 6.1 In General.			15
Section 6.2 Terms and Conditions			15
Section 6.3 Collateral; Liability for Repayment.			15
Section 6.4 Loan Repayment Account.			16
Section 6.5 Release of Financed Shares.			17
Section 6.6 Restrictions on Financed Shares.			18

Article VII

Allocation of Contributions

Section 7.1 Allocation Among Eligible Participants.			18
Section 7.2 Allocation of Released Shares or Other Property.			18
Section 7.3 Allocation of Discretionary Contributions.			18

Article VIII

Limitations on Allocations

Section 8.1 Optional Limitations on Allocations.			19
Section 8.2 General Limitations on Contributions.			19

Article IX

Vesting

Section 9.1 Vesting.			23
Section 9.2 Vesting on Death, Disability, Retirement or Change in Control.			24
Section 9.3 Forfeitures on Termination of Employment.			24
Section 9.4 Amounts Credited Upon Re-Employment.			24
Section 9.5 Allocation of Forfeitures.			25

Article X

The Trust Fund

Section 10.1 The Trust Fund.			25
Section 10.2 Investments.			25

Section 10.3 Distributions for Diversification of Investments.			26
Section 10.4 Use of Commingled Trust Funds.			27
Section 10.5 Management and Control of Assets.			27

Article XI

Valuation of Interests in the Trust Fund

Section 11.1 Establishment of Investment Accounts.			27
Section 11.2 Share Investment Accounts.			27
Section 11.3 General Investment Accounts.			28
Section 11.4 Valuation of Investment Accounts.			28
Section 11.5 Annual Statements.			28

Article XII

Section 12.1 Specific Allocation of Shares.			28
Section 12.2 Dividends.			29
Section 12.3 Voting Rights.			29
Section 12.4 Tender Offers.			31

Article XIII

Payment of Benefits

Section 13.1 In General.			33
Section 13.2 Designation of Beneficiaries.			33
Section 13.3 Distributions to Participants.			35
Section 13.4 Manner of Payment.			35
Section 13.5 Minimum Required Distributions.			35
Section 13.6 Direct Rollover of Eligible Rollover Distributions.			37
Section 13.7 Valuation of Shares Upon Distribution.			39
Section 13.8 Put Options.			39
Section 13.9 Right of First Refusal.			39

Article XIV

Change in Control

Section 14.1 Definition of Change in Control; Pending Change in Control.			40
Section 14.2 Vesting on Change of Control.			42
Section 14.3 Repayment of Share Acquisition Loan.			42
Section 14.4 Plan Termination After Change in Control.			42
Section 14.5 Amendment of Section XIV.			42

Article XV

Administration

Section 15.1 Named Fiduciaries.			43
Section 15.2 Plan Administrator.			43
Section 15.3 Committee Responsibilities.			44
Section 15.4 Claims Procedure.			45
Section 15.5 Claims Review Procedure.			46
Section 15.6 Allocation of Fiduciary Responsibilities and Employment of Advisors.			46
Section 15.7 Other Administrative Provisions.			47

Article XVI

Amendment, Termination and Tax Qualification

Section 16.1 Amendment and Termination by Westfield Financial, Inc.			48
Section 16.2 Amendment or Termination Other Than by Westfield Financial, Inc.			48
Section 16.3 Conformity to Internal Revenue Code.			48
Section 16.4 Contingent Nature of Contributions.			48

Article XVII

Special Rules for Top Heavy Plan Years

Section 17.1 In General.			49
Section 17.2 Definition of Top Heavy Plan.			49
Section 17.3 Determination Date.			50
Section 17.4 Cumulative Accrued Benefits.			50
Section 17.5 Key Employees.			51
Section 17.6 Required Aggregation Group.			52
Section 17.7 Permissible Aggregation Group.			52
Section 17.8 Special Requirements During Top Heavy Plan Years.			52

Article XVIII

Miscellaneous Provisions

Section 18.1 Governing Law.			53
Section 18.2 No Right to Continued Employment.			53
Section 18.3 Construction of Language.			53
Section 18.4 Headings.			53
Section 18.5 Merger with Other Plans.			53
Section 18.6 Non-alienation of Benefits.			53
Section 18.7 Procedures Involving Domestic Relations Orders.			54
Section 18.8 Status as an Employee Stock Ownership Plan.			55

vii

Employee Stock Ownership Plan

Westfield Financial, Inc.

ARTICLE I

DEFINITIONS

The following definitions shall apply for the purposes of the Plan, unless a different meaning is clearly indicated by the context:

Section 1.1 Account means an account established for each Participant to which is allocated such Participant’s share, if any, of all Financed Shares and other property that are released from the Loan Repayment Account in accordance with section 6.5, together with his share, if any, of any Discretionary Contributions that may be made by a Participating Employer.

Section 1.2 Affiliated Employer means the Company; any corporation which is a member of a controlled group of corporations (as defined in section 414(b) of the Code) that includes the Company; any trade or business (whether or not incorporated) that is under common control (as defined in section 414(c) of the Code) with the Company; any organization (whether or not incorporated) that is a member of an affiliated service group (as defined in section 414(m) of the Code) that includes the Company; any leasing organization (as defined in section 414(n) of the Code) to the extent that any of its employees are required pursuant to section 414(n) of the Code to be treated as employees of the Company; and any other entity that is required to be aggregated with the Company pursuant to regulations under section 414(o) of the Code.

Section 1.3 Allocation Compensation during any period means the compensation taken into account in determining the allocation of benefits and contributions among Participants and consists of the aggregate compensation received by an Employee from the Employer or any Affiliated Employer with respect to such period that constitute wages within the meaning of section 3401 of the Code plus the amount by which such Employee’s compensation with respect to such period has been reduced pursuant to a compensation reduction agreement under the terms of any of the following plans which may be maintained by the Employer:

(a) a qualified cash or deferred arrangement described in section 401(k) of the Code;

(b) a salary reduction simplified employee pension plan described in section 408(k) of the Code;

(d) a cafeteria plan described in section 125 of the Code and a transportation plan described in Section 132(f) of the Code; but excluding any income related to any award or exercise of a stock option or the award, vesting or payment of dividends with respect to restricted stock.

In no event, however, shall an Employee’s Allocation Compensation for any Plan Year include any compensation in excess of $170,000 (in Plan Years beginning before January 1, 2002) and $200,000 (in Plan Years beginning after December 31, 2001). The $170,000 and $200,000 limitations set forth in the preceding sentence shall be indexed in accordance with regulations prescribed under section 401(a)(17) of the Code. If there are less than twelve (12) months in the Plan Year, the limitations (as adjusted) shall be prorated by multiplying such limitation by a fraction, the numerator of which is the number of months in the Plan Year and the denominator of which is twelve (12).

Section 1.4 Bank means Westfield Bank and any successor thereto.

Section 1.5 Board means the Board of Directors of Westfield Financial, Inc.

Section 1.6 Beneficiary means the person or persons designated by a Participant or Former Participant or other person entitled to a benefit under the Plan, or otherwise determined to be entitled to a benefit under the Plan. If more than one person is designated, each shall have an equal share unless the person making the designation directed otherwise. The word “person” includes an individual, a trust, an estate or any other person that is permitted to be named as a Beneficiary.

Section 1.7 Change in Control means an event described in section 14.1.

Section 1.8 Code means the Internal Revenue Code of 1986 (including the corresponding provisions of any succeeding law).

Section 1.9 Committee means the Compensation Committee described in section 15.3.

Section 1.10 Company means Westfield Financial, Inc., a Massachusetts corporation, and any successor thereto.

Section 1.11 Designated Beneficiary means a natural person designated by a Participant or Former Participant as a Beneficiary under section 13.2 and shall not include any Beneficiary designated by a person other than a Participant or Former Participant or any Beneficiary other than a natural person. If a natural person is the beneficiary of a trust which a Participant or Former Participant has named as his Beneficiary, such natural person shall be treated as a Designated Beneficiary if: (a) the trust is a valid trust under applicable state law (or would be a valid trust except for the fact that it does not have a corpus); (b) the trust is irrevocable or will, by its terms, become irrevocable upon the death of the Participant or Former Participant; (c) the beneficiaries of the trust who are beneficiaries with respect to the trust’s interest as a Beneficiary are identifiable from the terms of the trust instrument; and (d) the following information is furnished to the Committee:

(i) by the Participant or Former Participant, if any distributions are required to be made pursuant to section 13.5 prior to the death of the Participant or Former Participant and (in the case of distributions after December 31, 2002 only) the Participant’s or Former Participant’s spouse is his sole primary Beneficiary, either: (A) a copy of the trust instrument, together with a written undertaking by the Participant or Former Participant to furnish a copy of any subsequent amendment to the Committee within a reasonable time after such amendment is made; or (B)(I) a list of all of the beneficiaries of the trust (including contingent and remainderman beneficiaries with a description of the conditions on their entitlement); (II) a certification of the Participant or Former Participant to the effect that, to the best of his knowledge, such list is correct and complete and that the conditions of section 1.11(a), (b) and (c) are satisfied; (III) a written undertaking to provide a new certification to the extent that an amendment changes any information previously certified; and (IV) a written undertaking to furnish a copy of the trust instrument to the Committee on demand; and

(ii) by the trustee of the trust within nine months after the death of the Participant or Former Participant (prior to January 1, 2003) or by October 31st of the first calendar year that begins after the death of the Participant or Former Participant (subsequent to December 31, 2002), if any distributions are required to be made pursuant to section 13.5 after the death of the Participant or Former Participant, either: (A) a copy of the actual trust instrument for the trust; or (B)(I) a final list of all of the beneficiaries of the trust (including contingent and remainderman beneficiaries with a description of the conditions on their entitlement) as of the date of death (prior to January 1, 2003) or as of September 30th of the first calendar year that begins after the date of death (subsequent to December 31, 2002); (II) a certification of the trustee to the effect that, to the best of his knowledge, such list is correct and complete and that the conditions of section 1.11(a), (b) and (c) are satisfied; and (III) a written undertaking to furnish a copy of the trust instrument to the Committee on demand.

Section 1.12 Disability means a condition of total incapacity, mental or physical, for further performance of duty with all Participating Employers, which the Committee shall have determined, on the basis of competent medical evidence, is likely to be permanent.

Section 1.13 Discretionary Contribution means Shares or amounts of money contributed to the Plan by the Participating Employers in accordance with section 5.3.

Section 1.14 Domestic Relations Order means a judgment, decree or order (including the approval of a property settlement) that is made pursuant to a state domestic relations or community property law and relates to the provision of child support, alimony payments, or marital property rights to a spouse, child or other dependent of a Participant or Former Participant.

Section 1.15 Eligibility Computation Period means, with respect to any person, (a) the 12-consecutive month period beginning on such person’s Employment Commencement Date and (b) each 12-consecutive month period that begins on an anniversary of such person’s Employment Commencement Date.

Section 1.16 Effective Date means January 1, 2002.

Section 1.17 Eligible Employee means an Employee who is eligible for membership in the Plan in accordance with Article II.

Section 1.18 Eligible Participant means, for any Plan Year, an Employee who is a Participant during all or any part of such Plan Year and either remains a Participant on the last day of such Plan Year or terminated participation during such Plan Year on account of termination of employment, death, Disability or Retirement; provided, however , that no Employee shall be an Eligible Participant for the Plan Year that includes the effective date of the transaction pursuant to which the Bank becomes a wholly owned subsidiary of Westfield Financial, Inc. if he terminates employment for any reason with all Participating Employers prior to such effective date.

Section 1.19 Employee means any person, including an officer, who is employed by any Affiliated Employer.

Section 1.20 Employment Commencement Date means the date on which a person first performs an Hour of Service, except that if an Employee separates from service with the Employer, incurs a One-Year Break in Service and subsequently returns to service with the Employer, his Employment Commencement Date shall be the date on which he first performs an Hour of Service following the One-Year Break in Service.

Section 1.21 ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time (including the corresponding provisions of any succeeding law).

Section 1.22 Exchange Act means the Securities Exchange Act of 1934, as amended from time to time (including the corresponding provisions of any succeeding law).

Section 1.23 Fair Market Value on any date means:

(a) with respect to a Share:

(i) the final quoted sale price on the date in question (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) of a Share as reported in the principal consolidated reporting system with respect to securities listed or admitted to trading on the principal United States securities exchange on which like Shares are listed or admitted to trading; or

(ii) if like Shares are not listed or admitted to trading on any such exchange, the closing bid quotation with respect to a Share on such date on the National Association of Securities Dealers Automated Quotation System, or, if no such quotation is provided, on another similar system, selected by the Committee, then in use; or

(iii) if sections 1.23(a)(i) and (ii) are not applicable, the fair market value of a Share as determined by an appraiser independent of the Employer and experienced and expert in the field of corporate appraisal.

(b) with respect to property other than Shares, the fair market value determined in the manner selected by the Trustee.

Section 1.24 Financed Share means: (a) a Share that has been purchased with the proceeds of a Share Acquisition Loan, that has been allocated to the Loan Repayment Account in accordance with section 6.4 and that has not been released in accordance with section 6.5; or (b) a Share that constitutes a dividend paid with respect to a Share described in section 1.26(a), that has been allocated to the Loan Repayment Account in accordance with section 6.4 and that has not been released in accordance with section 6.5.

Section 1.25 Five Percent Owner means, for any Plan Year, a person who, during such Plan Year, owned (or was considered as owning for purposes of section 318 of the Code): (a) more than 5% of the value of all classes of outstanding stock of any Affiliated Employer; or (b) stock possessing more than 5% of the combined voting power of all classes of outstanding stock of any Affiliated Employer.

Section 1.26 Forfeitures means the amounts forfeited by Participants and Former Participants on termination of employment prior to full vesting, pursuant to section 9.3, less amounts credited because of re-employment, pursuant to section 9.4.

Section 1.27 Former Participant means a Participant whose participation in the Plan has terminated pursuant to section 2.3.

Section 1.28 General Investment Account means an Investment Account established and maintained in accordance with Article XI.

Section 1.29 Highly Compensated Employee means, for any Plan Year, an Employee who:

(i) was a Five Percent Owner at any time during such Plan Year or any prior Plan Year; or

(ii) received Total Compensation during the immediately preceding Plan Year (A) in excess of $85,000 (or such other amount as may be prescribed by the Secretary of the Treasury pursuant to section 401(a)(17) of the Code); and (B) if elected by the Plan Administrator in such form and manner as the Secretary of the Treasury may prescribe, in excess of the Total Compensation received for such preceding Plan Year by at least 80% of the Employees.

The determination of who is a Highly Compensated Employee will be made in accordance with section 414(q) of the Code and the regulations thereunder. The Company has not elected to use the top 20% election mentioned in subparagraph (ii)(B) of this section.

Section 1.30 Hour of Service means each hour for which a person is paid, or entitled to payment, for the performance of duties for any Affiliated Employer, plus:

(a) each hour for which such person is paid, or entitled to payments by an Affiliated Employer on account of a period during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. Hours under this section 1.30(a) shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor’s regulations (or any successor regulation), which are incorporated herein by reference; and

(b) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by any Affiliated Employer; provided, however , that such hours have not previously been credited under other provisions of this section 1.30; and provided, further, that not more than 501 Hours of Service shall be credited under section 1.30(a) to such person on account of a single continuous period during which such person performs no duties for an Affiliated Employer whether or not such period occurs in a single Plan Year. Hours under this section 1.30(b) shall be credited to the person for the Eligibility or Vesting Computation Period or Eligibility or Vesting Computation Periods to which the award or agreement pertains, rather than the Eligibility or Vesting Computation Period in which the award, agreement or payment is made.

Anything in this section 1.30 to the contrary notwithstanding, no Hours of Service shall be credited for a payment made or due under a plan maintained solely for the purpose of complying with applicable workmen’s compensation or disability insurance laws, or a payment which solely reimburses any person for medical or medically-related expenses incurred by such person.

Section 1.31 Investment Account means either a General Investment Account or a Share Investment Account.

Section 1.32 Investment Fund means any one of the three or more funds as may be established from time to time by the Com m ittee which, together with any and all Shares and other investments held under the Plan, constitute the Trust Fund.

Section 1.33 Loan Repayment Account means an account established and maintained in accordance with section 6.4.

Section 1.34 Loan Repayment Contribution means amounts of money contributed to the Plan by the Participating Employers in accordance with section 5.2.

Section 1.35 Maternity or Paternity Leave means a person’s absence from work for all Affiliated Employers: (a) by reason of the pregnancy of such person; (b) by reason of the birth of a child of such person; (c) by reason of the placement of a child with the person in connection with the adoption of such child by such person; or (d) for purposes of caring for a child of such person immediately following the birth of the child or the placement of the child with such person.

Section 1.36 Military Service means service in the armed forces of the United States, including but not limited to Qualified Military Service. It may also include, if and to the extent that the Board so provides and if all Participants and Former Participants in like circumstances are similarly treated, special service for the government of the United States and other public service.

Section 1.37 Named Fiduciary means any person, committee, corporation or organization described in section 15.1.

Section 1.38 Officer means an Employee who is an administrative executive in regular and continued service with any Affiliated Employer; provided, however , that at no time shall more than the lesser of (a) 50 Employees or (b) the greater of (i) 3 Employees or (ii) 10% of all Employees be treated as Officers. The determination of whether an Employee is to be considered an Officer shall be made in accordance with section 416(i) of the Code.

Section 1.39 One-Year Break in Service means an Eligibility or Vesting Computation Period during which an Employee fails to complete more than 500 Hours of Service.

Section 1.40 Participant means any person who has satisfied the eligibility requirements set forth in section 2.1, who has become a Participant in accordance with section 2.2, and whose membership has not terminated under section 2.3.

Section 1.41 Participating Employer means the Bank, and any successor thereto and any other Affiliated Employer which, with the prior written approval of the Board of Directors of Westfield Financial, Inc. and subject to such terms and conditions as may be imposed by the Board of Directors of Westfield Financial, Inc., shall adopt this Plan.

Section 1.42 Plan means the Employee Stock Ownership Plan of Westfield Financial, Inc., as amended from time to time.

Section 1.43 Plan Administrator means the Committee or any person, committee, corporation or organization designated in section 15.2, or appointed pursuant to section 15.2, to perform the responsibilities of that office.

Section 1.44 Plan Year means the period commencing on the January 1, 2002 and ending on December 31, 2002 and each fiscal year ending on each December 31st thereafter.

Section 1.45 Qualified Domestic Relations Order means a Domestic Relations Order that: (a) clearly specifies (i) the name and last known mailing address of the Participant or Former Participant and of each person given rights under such Domestic Relations Order, (ii) the amount or percentages of the Participant’s or Former Participant’s benefits under this Plan to be paid to each person covered by such Domestic Relations Order, (iii) the number of payments or the period to which such Domestic Relations Order applies, and (iv) the name of this Plan; and (b) does not require the payment of a benefit in a form or amount that is (i) not otherwise provided for under the Plan, or (ii) inconsistent with a previous Qualified Domestic Relations Order.

Section 1.46 Qualified Military Service means with respect to any person on any date, any service in the uniformed services of the United States (as defined in chapter 43 of Title 38 of the United States Code) completed prior to such date, but only if, on such date, such person is entitled to re-employment rights with respect to an Affiliated Employer on account of such service.

Section 1.47 Qualified Participant means a Participant who has attained age 55 and who has been a Participant of the Plan for at least 10 years.

Section 1.48 Retirement means: (a) any termination of membership in the Plan at or after attainment of age 65; and (b) any retirement under an applicable qualified defined benefit plan of the Employer as in effect from time to time with entitlement to a normal or early (but not vested, whether immediate or deferred) retirement allowance.

Section 1.49 Retroactive Contribution means a contribution made on a retroactive basis in respect of a period of Qualified Military Service in accordance with section 5.4.

Section 1.50 Share means a share of any class of stock issued by any Affiliated Employer; provided, however, that:

(a) If there is a Share Acquisition Loan outstanding, such share: (i) is readily tradable on an established securities market; (ii) has a combination of voting power and dividend rights equal to or in excess of (A) that class of common stock of the Affiliated Employer having the greatest voting power, and (B) that class of common stock of the Affiliated Employer having the greatest dividend rights; (iii) is noncallable preferred stock that is convertible at any time into stock which meets the requirements of (i) or (ii) at a conversion price which (as of the date of the acquisition by the Plan) is reasonable; or (iv) is nonvoting common stock of an Affiliated Employer described in the second sentence of Code Section 401(a)(22) if the Affiliated Employer has a class of nonvoting common stock outstanding and the specific shares that the Plan acquires have been issued and outstanding for at least 24 months; or

(b) If there is no Share Acquisition Loan outstanding, such share is stock, a marketable obligation or an interest in a publicly traded partnership, but only if such partnership is an existing partnership as defined in section 10211(c)(2)(A) of the Revenue Act of 1987. For purposes of this Section 1.50(b), the term “marketable obligation” means a bond, debenture, note or certificate, or other evidence of indebtedness, if:

(i) Such obligation is acquired: (A) on the market, either at the price of the obligation prevailing on a national securities exchange which is registered with the Securities and Exchange Commission or, if the obligation is not traded on such a national securities exchange, at a price no less favorable to the Plan than the offering price for the obligation as established by current bid and asked prices quoted by persons independent of the issuer; (B) from an underwriter, at a price not in excess of the public offering price for the obligation as set forth in a prospectus or offering circular filed with the Securities and Exchange Commission, and at which a substantial portion of the same issue is acquired by persons independent of the issuer; or (C) directly from the issuer, at a price not less favorable to the Plan than the price paid currently for a substantial portion of the same issue by persons independent of the issuer;

(ii) Immediately following acquisition of such obligation: (A) not more than 25 percent of the aggregate amount of obligations issued in such issue and outstanding at the time of acquisition is held by the Plan, and (B) at least 50 percent of the aggregate amount referred to in Section 1.50(b)(ii)(A) is held by persons independent of the issuer; and

(iii) Immediately following acquisition of the obligation, not more than 25 percent of the assets of the Plan is invested in obligations of the Employer or an affiliate of the Employer.

Section 1.51 Share Acquisition Loan means a loan obtained by the Trustee in accordance with Article VI.

Section 1.52 Share Investment Account means an Investment Account established and maintained in accordance with Article XI.

Section 1.53 Tender Offer means a tender offer made to holders of any one or more classes of Shares generally, or any other offer made to holders of any one or more classes of Shares generally to purchase, exchange, redeem or otherwise transfer Shares, whether for cash or other consideration whether or not such offer constitutes a “tender offer” or an “exchange offer” for purposes of the Exchange Act.

Section 1.54 Total Compensation during any period means an Employee’s aggregate total compensation paid by the Employer and any Affiliated Employer with respect to such period that constitutes wages within the meaning of section 3401 of the Code, plus any amounts by which the Employee’s compensation paid by the Employer or any Affiliated Employer has been reduced pursuant to a compensation reduction agreement under the terms of any qualified cash or deferred arrangement described in section 401(k) of the Code, any salary reduction simplified employee pension plan described in section 408(k) of the Code, any tax deferred annuity plan described in section 403(b) of the Code, any cafeteria plan described in section 125 of the Code, or any transportation program described in Section 132(f) of the Code. In no event, however, shall an Employee’s Total Compensation for any calendar year include any compensation in excess of $170,000 (or such other amount as may be permitted under section 401(a)(17) of the Code). In addition, for Limitation Years after 1997, each Employee’s Total Compensation shall include any amounts by which the Employee’s compensation paid by the Employer or any Affiliated Employer has been reduced pursuant to a compensation reduction agreement under the terms of any plan described in section 457 of the Code.

Section 1.55 Trust means the legal relationship created by the Trust Agreement pursuant to which the Trustee holds the Trust Fund in trust.

Section 1.56 Trust Agreement means the agreement between the Bank and the Trustee therein named or its successors pursuant to which the Trust Fund shall be held in trust.

Section 1.57 Trust Fund means the corpus (consisting of contributions paid over to the Trustee and investments thereof), and all earnings, appreciation or additions thereof and thereto, held by the Trustee under the Trust Agreement in accordance with the Plan, less any depreciation thereof and any payments made therefrom pursuant to the Plan.

Section 1.58 Trustee means the Trustee of the Trust Fund from time to time in office. The Trustee shall serve as Trustee until it is removed or resigns from office and is replaced by a successor Trustee appointed in accordance with the terms of the Trust Agreement.

Section 1.59 Valuation Date means the last business day of each Plan Year and such other dates as the Plan Administrator may prescribe; provided, however, that in the case of a transaction between the Plan and a “disqualified person” within the meaning of Code Section 4975(e)(2), Valuation Date means the date of the transaction.

Section 1.60 Year of Eligibility Service means an Eligibility Computation Period during which the Employee completed at least 1,000 Hours of Service.

Section 1.61 Year of Vesting Service means a Vesting Computation Period during which the Employee completed at least 1,000 Hours of Service.

ARTICLE II

PARTICIPATION

Section 2.1 Eligibility for Participation.

(a) Only Eligible Employees may be or become Participant of the Plan. An Employee shall be an Eligible Employee if he (i) is employed by one or more Participating Employers; (ii) has attained age 21; (iii) has completed at least one Year of Eligibility Service; and (iv) is not excluded under section 2.1(b).

(b) An Employee is not an Eligible Employee if he:

(i) does not receive Allocation Compensation from at least one Participating Employer; or

(ii) is an Employee who has waived any claim to participation in the Plan.

Section 2.2 Commencement of Participation.

Every Employee who is an Eligible Employee on the effective date of the transaction whereby the Bank becomes a wholly owned subsidiary of Westfield Financial, Inc. shall automatically become a Participant as of the Effective Date. An Employee who becomes an Eligible Employee after the Effective Date shall automatically become a Participant on the first day of the calendar month coincident with or next following the Eligibility Computation Period in which he becomes an Eligible Employee.

Section 2.3 Termination of Participation.

Participation in the Plan shall cease, and a Participant shall become a Former Participant, upon termination of employment with all Participating Employers, death, Disability or Retirement, failure to return to work upon the expiration of a leave of absence granted pursuant to section 3.3, becoming an Employee who is excluded under section 2.1(b) or distribution of the entire vested interest in his Account.

ARTICLE III

SPECIAL PROVISIONS

Section 3.1 Military Service.

In the case of a termination of employment of any Employee to enter directly into Military Service, the entire period of his absence shall be treated, for purposes of vesting and eligibility for participation (but not, except as required by law, for purposes of eligibility to share in allocations of contributions in accordance with Article VII), as if he had worked for the Employer during the period of his absence. In the event of the re-employment of such person by the Employer within a period of not more than six months:

(a) after he becomes entitled to release or discharge, if he has entered into the armed forces; or

(b) after such service terminates, if he has entered into other service defined as Military Service;

such period, also, shall be deemed to be Military Service.

Section 3.2 Maternity or Paternity Leave.

(a) Subject to section 3.2(c), in the event of an Employee’s absence from work in the service of the Employer and all Affiliated Employers for a period:

(i) that commences on or after October 1, 1985;

(ii) for which the person is not paid or entitled to payment by the Employer or any Affiliated Employer; and

(iii) that constitutes Maternity or Paternity Leave;

then the rules of section 3.2(b) shall apply.

(b) In cases of absence described in section 3.2(a), solely for purposes of determining whether a One-Year Break in Service has occurred, the person shall be credited for the period of an absence described in section 3.2(a) with the number of Hours of Service equal to the lesser of:

(i) (A) the number of Hours of Service that would have been credited to the person if he had continued working for the Bank or an Affiliated Employer during the period of such absence, or (B) if the number of Hours of Service prescribed under section 3.2(b)(i)(A) cannot be determined, 8 Hours of Service for each working day during the period of absence; or

(ii) 501 Hours of Service.

Such credit shall be given during the Computation Period during which such absence began, if necessary to prevent a One-Year Break in Service from occurring during such Computation Period, and in all other cases, such credit shall be given during the immediately following Computation Period.

(c) Notwithstanding anything in the Plan to the contrary, this section 3.2 shall not apply unless the person furnishes to the Plan Administrator such information as the Plan Administrator may reasonably require in order to establish (i) that the person’s absence is one described in section 3.2(a), and (ii) the number of working days during such absence.

Section 3.3 Adjustments to Years of Eligibility Service.

The Years of Eligibility Service of an Employee who returns to the employment of the Employer or any Affiliated Employer following a separation from service shall include his Years of Eligibility Service prior to such separation from service, and such an Employee shall be readmitted to participation immediately upon his return to service if he is then an Eligible Employee.

Section 3.4 Leave of Absence.

In the event of temporary absence from work in the service of the Employer and all Affiliated Employers for any period for which a Participant shall have been granted a leave of absence by the Employer, the entire period of his absence shall be treated for purposes of vesting and eligibility for participation (but not for purposes of eligibility to share in the allocation of contributions in accordance with Article VII), as if he had worked for the Employer during the period of his absence. Absence from work for a period greater than, or failure to return to work upon the expiration of, the period of leave of absence granted by the Employer shall terminate participation in the Plan as of the date on which such period ended. In granting leaves of absence for purposes of the Plan, all Employees in like circumstances shall be similarly treated.

Section 3.5 Family and Medical Leave.

In the event of absence for a period recognized a family and medical leave under the federal Family and Medical Leave Act of 1992, the period of such absence shall be recognized for purposes of vesting and eligibility to participate to the full extent required by law.

Section 3.6 Service with Uniformed Forces.

Periods of service with the uniformed forces of the United States shall be treated in the manner required pursuant to section 414(u) of the Code.

ARTICLE IV

CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED

Section 4.1 Contributions by Participants Not Permitted.

Participants shall not be required, nor shall they be permitted, to make contributions to the Plan.

ARTICLE V

CONTRIBUTIONS BY THE EMPLOYER

Section 5.1 In General.

Subject to the limitations of Article VIII, for each Plan Year, the Participating Employers shall contribute to the Plan the amount, if any, determined by the Board of Directors of Westfield Financial, Inc., but in no event less than the amount described in section 5.2(a). The amount contributed for any Plan Year shall be treated as a Loan Repayment Contribution, a Discretionary Contribution, or a combination thereof, in accordance with the provisions of this Article V.

Section 5.2 Loan Repayment Contributions.

For each Plan Year, a portion of the Participating Employers’ contributions, if any, to the Plan equal to the sum of:

(a) the minimum amount required to be added to the Loan Repayment Account in order to provide adequate funds for the payment of the principal and interest then required to be repaid under the terms of any outstanding Share Acquisition Loan obtained by the Trustee; plus

(b) the additional amount, if any, designated by the Committee to be applied to the prepayment of principal or interest under the terms of any outstanding Share Acquisition Loan obtained by the Trustee;

shall be treated as a Loan Repayment Contribution for such Plan Year. A Loan Repayment Contribution for a Plan Year shall be allocated to the Loan Repayment Account and shall be applied by the Trustee, in the manner directed by the Committee, to the payment of accrued interest and to the reduction of the principal balance of any Share Acquisition Loan obtained by the Trustee that is outstanding on the date on which the Loan Repayment Contribution is made. To the extent that a Loan Repayment Contribution for a Plan Year results in a release of Financed Shares in accordance with section 6.4, such Shares shall be allocated among the Accounts of Eligible Participants for such Plan Year in accordance with section 7.2.

Section 5.3 Discretionary Contributions.

In the event that the amount of the Participating Employers’ contributions to the Plan for a Plan Year exceeds the amount of the Loan Repayment Contributions for such Plan Year, such excess shall be treated as a Discretionary Contribution and shall be allocated among the Accounts of the Eligible Participants for such Plan Year in accordance with section 7.3.

Section 5.4 Retroactive Contributions.

A Participating Employer shall make a Retroactive Contribution in respect of any individual previously employed by it who is re-employed by any Affiliated Employer after December 12, 1994 following the completion of a period of Qualified Military Service. Such Retroactive Contribution shall be made in the following manner for each Plan Year that includes any part of the period of Qualified Military Service:

(a) An allocation percentage shall be computed by dividing (i) the sum of the Fair Market Value of all Financed Shares allocated to Eligible Participants for such Plan Year plus the dollar amount of all Discretionary Contributions made in cash for such Plan Year plus the Fair Market Value of all Discretionary Contributions made in Shares for such Plan Year, divided by (ii) the aggregate amount of Allocation Compensation used in the allocation for such Plan Year. Fair Market Value for such purposes shall be determined as of the last day of the Plan Year.

(b) A notional allocation shall be determined by multiplying (A) the percentage determined under section 5.4(a) by (B) the Allocation Compensation which the individual would have had for such Plan Year if he had remained in the service of his Participating Employer in the same capacity and earning Allocation Compensation and Total Compensation at the annual rates in effect immediately prior to the commencement of the Qualified Military Leave (or, if such rates are not reasonably certain, at an annual rate equal to the actual Allocation Compensation and Total Compensation, respectively, paid to him for the 12-month period immediately preceding the Qualified Military Service).

(c) An actual Retroactive Contribution for the Plan Year shall be determined by computing the excess of (A) the notional allocation determined under section 5.4(b) over (B) the sum of the dollar amount of any Discretionary Contribution in cash, the Fair Market Value of any Discretionary Contribution in Shares and the Fair Market Value of any Financed Shares actually allocated to such individual for such Plan Year.

Section 5.5 Time and Manner of Payment.

(a) Payment of contributions made pursuant to this Article V shall be made: (i) in cash, in the case of a Loan Repayment Contribution; and (ii) in cash, in Shares, or in a combination of cash and Shares, in the case of an Discretionary Contribution or a Retroactive Contribution.

(b) Contributions made pursuant to this Article V for a Plan Year shall be paid to the Trust Fund on or before the due date (including any extensions thereof) of the Employer’s federal income tax return for its taxable year during which such Plan Year ends. All such contributions shall be allocated to the Accounts of the Eligible Participants in the case of a Discretionary Contribution, to the Account of the Participant for whom it is made in the case of a Retroactive Contribution, and to the Loan Repayment Account in the case of a Loan Repayment Contribution, as soon as is practicable following the payment thereof to the Trust Fund.

ARTICLE VI

SHARE ACQUISITION LOANS

Section 6.1 In General.

The Committee may, with the prior approval of the Board of Directors of Westfield Financial, Inc., direct the Trustee to obtain a Share Acquisition Loan on behalf of the Plan, the proceeds of which shall be applied on the earliest practicable date:

(a) to purchase Shares; or

(b) to make payments of principal or interest, or a combination of principal and interest, with respect to such Share Acquisition Loan; or

(c) to make payments of principal and interest, or a combination of principal and interest, with respect to a previously obtained Share Acquisition Loan that is then outstanding.

Section 6.2 Terms and Conditions.

Any Share Acquisition Loan shall be obtained on such terms and conditions as the Committee may approve; provided, however , that:

(a) The Share Acquisition Loan is primarily for the benefit of Participants and their Beneficiaries;

(b) The interest rate payable with respect to the Share Acquisition Loan and the price of any Shares to be acquired with the proceeds thereof must not be such that the Trust Fund might be “drained off” (as such term is used in the applicable regulations under Code Section 4975);

(c) The terms of the Share Acquisition Loan are, at the time such Share Acquisition Loan is made, at least as favorable to the Trust Fund as the terms of a comparable loan resulting from arm’s length negotiations between independent parties;

(d) The Share Acquisition Loan is for a specific term, bears a reasonable rate of interest and is not payable upon demand except in the event of a default; and

(e) In the event of default, the value of plan assets transferred in satisfaction of the Share Acquisition Loan do not exceed the amount of default; provided, however, that if the lender of the Share Acquisition Loan is a “disqualified person” within the meaning of Code Section 4975(e)(2), the Share Acquisition Loan is only payable upon demand in the event of a default to the extent of any default in any required payments due and payable under the Share Acquisition Loan (without regard to any rights of acceleration on the part of the lender).

Section 6.3 Collateral; Liability for Repayment.

(a) The Committee may direct the Trustee to pledge, at the time a Share Acquisition Loan is obtained, the following assets of the Plan as collateral for such Share Acquisition Loan:

(i) any Shares purchased with the proceeds of such Share Acquisition Loan and any earnings attributable thereto;

(ii) any Financed Shares then pledged as collateral for a prior Share Acquisition Loan which is repaid with the proceeds of such Share Acquisition Loan and any earnings attributable thereto; and

(iii) pending the application thereof to purchase Shares or repay a prior Share Acquisition Loan, the proceeds of such Share Acquisition Loan and any earnings attributable thereto.

Except as specifically provided in this section 6.3(a), no assets of the Plan shall be pledged as collateral for the repayment of any Share Acquisition Loan.

(b) No person entitled to payment under a Share Acquisition Loan shall have any right to the assets of the Plan except for:

(i) Financed Shares that have been pledged as collateral for such Share Acquisition Loan pursuant to section 6.3(a);

(ii) Loan Repayment Contributions made pursuant to section 5.2; and

(iii) earnings attributable to Financed Shares described in section 6.3(b)(i) and to Loan Repayment Contributions described in section 6.3(b)(ii).

Except in the event of a default or a refinancing pursuant to which an existing Share Acquisition Loan is repaid or as provided in section 14.3, the aggregate amount of all payments of principal and interest made by the Trustee with respect to all Share Acquisition Loans obtained on behalf of the Plan shall at no time exceed the aggregate amount of all Loan Repayment Contributions theretofore made plus the aggregate amount of all earnings (other than dividends paid in the form of Shares) attributable to Financed Shares and to such Loan Repayment Contributions.

Section 6.4 Loan Repayment Account.

In the event that one or more Share Acquisition Loans shall be obtained, a Loan Repayment Account shall be established under the Plan. The Loan Repayment Account shall be credited with all Shares acquired with the proceeds of a Share Acquisition Loan, all Loan Repayment Contributions and all earnings (including dividends paid in the form of Shares) or appreciation attributable to such Shares and Loan Repayment Contributions. The Loan Repayment Account shall be charged with all payments of principal and interest made by the Trustee with respect to any Share Acquisition Loan, all Shares released in accordance with section 6.5 and all losses, depreciation or expenses attributable to Shares or to other property credited thereto. The Financed Shares, as well as any earnings thereon, shall be allocated to such Loan Repayment Account and shall be accounted for separately from all other amounts or property contributed under the Plan.

Section 6.5 Release of Financed Shares.

As of the last day of each Plan Year during which a Share Acquisition Loan is outstanding, a portion of the Financed Shares purchased with the proceeds of such Share Acquisition Loan and allocated to the Loan Repayment Account shall be released. The number of Financed Shares released in any such Plan Year shall be equal to the amount determined according to one of the following methods:

(a) by computing the product of: (i) the number of Financed Shares purchased with the proceeds of such Share Acquisition Loan and allocated to the Loan Repayment Account immediately before the release is effected; multiplied by (ii) a fraction, the numerator of which is the aggregate amount of the principal and interest payments (other than payments made upon the refinancing of a Share Acquisition Loan as contemplated by section 6.1(c) that does not result in (i) a net increase or decrease in the outstanding principal amount of the Share Acquisition Loan, or (ii) an extension of the period during which the Share Acquisition Loan is repaid) made with respect to such Share Acquisition Loan during such Plan Year, and the denominator of which is the numerator plus the aggregate amount of all principal and interest remaining to be paid with respect to such Share Acquisition Loan as of the first day of such Plan Year; or

(b) by computing the product of: (i) the number of Financed Shares purchased with the proceeds of such Share Acquisition Loan and allocated to the Loan Repayment Account immediately before the release is effected; multiplied by (ii) a fraction, the numerator of which is the aggregate amount of the principal payments (other than payments made upon the refinancing of a Share Acquisition Loan as contemplated by section 6.1(c) that does not result in (i) a net increase or decrease in the outstanding principal amount of the Share Acquisition Loan, or (ii) an extension of the period during which the Share Acquisition Loan is repaid) made with respect to such Share Acquisition Loan during such Plan Year, and the denominator of which is the numerator plus the aggregate amount of all principal remaining to be paid with respect to such Share Acquisition Loan as of the first day of such Plan Year; provided, however , that the method described in this section 6.5(b) may be used only if the Share Acquisition Loan does not extend for a period in excess of 10 years after the date of origination and only to the extent that principal payments on such Share Acquisition Loan are made at least as rapidly as under a loan of like principal amount with a like interest rate and term requiring level amortization of principal and interest.

The method to be used shall be specified in the documents governing the Share Acquisition Loan or, if not specified therein, prescribed by the Committee, in its discretion. In the event that property other than, or in addition to, Financed Shares shall be held in the Loan Repayment Account and pledged as collateral for a Share Acquisition Loan, then the property to be released pursuant to this section 6.5 shall be property having a Fair Market Value determined by applying the method to be used to the Fair Market Value of all property pledged as collateral for such Share Acquisition Loan; provided, however , that no property other than Financed Shares shall be released pursuant to this section 6.5 unless all Financed Shares have previously been released.

Section 6.6 Restrictions on Financed Shares.

Except to the extent required under any applicable law, rule or regulation, no Shares purchased with the proceeds of a Share Acquisition Loan shall be subject to a put, call or other option, or to any buy-sell or similar arrangement, while held by the Trustee or when distributed from the Plan. The provisions of this section 6.6 shall continue to apply in the event that this Plan shall cease to be an employee stock ownership plan, within the meaning of section 4975(e)(7) of the Code.

ARTICLE VII

ALLOCATION OF CONTRIBUTIONS

Section 7.1 Allocation Among Eligible Participants.

Subject to the limitations of Article VIII, Discretionary Contributions for a Plan Year made in accordance with section 5.3 and Financed Shares and other property that are released from the Loan Repayment Account for a Plan Year in accordance with section 6.5 shall be allocated among the Eligible Participants for such Plan Year, in the manner provided in this Article VII.

Section 7.2 Allocation of Released Shares or Other Property.

Subject to the limitations of Article VIII, in the event that Financed Shares or other property are released from the Loan Repayment Account for a Plan Year in accordance with section 6.5, such released Shares or other property shall be allocated among the Accounts of the Eligible Participants for the Plan Year in the proportion that each such Eligible Participant’s Allocation Compensation for the portion of such Plan Year during which he was a Participant bears to the aggregate of such Allocation Compensation of all Eligible Participants for such Plan Year.

Section 7.3 Allocation of Discretionary Contributions.

Subject to the limitations of Article VIII, in the event that the Participating Employers make Discretionary Contributions for a Plan Year, such Discretionary Contributions shall be allocated among the Accounts of the Eligible Participants for such Plan Year in the proportion that each such Eligible Participant’s Allocation Compensation for the portion of such Plan Year during which he was a Participant bears to the aggregate of such Allocation Compensation of all Eligible Participants for such Plan Year.

ARTICLE VIII

LIMITATIONS ON ALLOCATIONS

Section 8.1 Optional Limitations on Allocations.

If, for any Plan Year, the application of sections 7.2 and 7.3 would result in more than one-third of the number of Shares or of the amount of money or property to be allocated thereunder being allocated to the Accounts of Eligible Participants for such Plan Year who are also Highly Compensated Employees for such Plan Year, then the Committee may, but shall not be required to, direct that this section 8.1 shall apply in lieu of sections 7.2 and 7.3. If the Committee gives such a direction, then the Committee shall impose a maximum dollar limitation on the amount of Allocation Compensation that may be taken into account for each Eligible Participant. The dollar limitation which shall be imposed shall be the limitation which produces the result that the aggregate Allocation Compensation taken into account for Eligible Participant who are Highly Compensated Employees, constitutes exactly one-third of the aggregate Allocation Compensation taken into account for all Eligible Participants.

Section 8.2 General Limitations on Contributions.

(a) Notwithstanding any other provision of the Plan, no amount shall be allocated to a Participant’s Account for any Limitation Year to the extent that such allocation would result in an Annual Addition of an amount exceeding:

(i) for Limitation Years beginning before January 1, 2002, the lesser of (A) $30,000 (or such other amount as is permissible under section 415(c)(1)(A) of the Code), or (B) twenty-five percent (25%) of the Participant’s Total Compensation paid during such Limitation Year;

(ii) for Limitation Years beginning after December 31, 2001, the lesser of (A) $40,000 (or such other amount as is permissible under section 415(c)(1)(A) of the Code), or (B) one hundred percent (100%) of the Participant’s Total Compensation paid during such Limitation Year; and

(iii) for Limitation Years beginning after December 31, 2007, the lesser of (A) $46,000 (or such other amount as is permissible under section 415(c)(1)(A) of the Code), or (B) one hundred percent (100%) of the Participant’s Section 415 Compensation paid during such Limitation Year.

(b) In the case of a Participant who may be entitled to benefits under any qualified defined benefit plan (whether or not terminated) now in effect or ever maintained by the Employer, such Participant’s Annual Additions under this Plan shall, in addition to the limitations provided under section 8.2(a), be further limited so that the sum of the Participant’s Defined Contribution Plan Fraction plus his Defined Benefit Plan Fraction does not exceed 1.0 for any Limitation Year beginning prior to January 1, 2000; provided, however , that this limitation shall only apply if and to the extent that the benefits under the Employer’s qualified defined benefit plan or any other qualified defined contribution plan of the Employer are not limited so that such sum is not exceeded.

(i) Annual Addition means the sum of the following amounts allocated on behalf of a Participant for a Limitation Year:

(A) all contributions by the Employer (including contributions made under a salary reduction agreement pursuant to sections 401(k), 408(k) or 403(b) of the Code) under any qualified defined contribution plan or simplified employee pension (other than this Plan) maintained by the Employer, as well as the Participant’s allocable share, if any, of any forfeitures under such plans as well as all amounts allocated to an individual medical benefit account, as defined in section 415(l)(2) of the Code, which is part of a pension or annuity plan maintained by the Employer; plus

(B) (I) for Limitation Years that begin prior to January 1, 1987, the lesser of (1) one-half of all nondeductible voluntary contributions under any other qualified defined contribution plan (whether or not terminated) maintained by the Employer, or (2) the amount of the nondeductible voluntary contributions under qualified defined contribution plan (whether or not terminated) maintained by the Employer in excess of 6% of such Participant’s Total Compensation; and (II) for Limitation Years that begin after December 31, 1986, the sum of all of the nondeductible voluntary contributions under any other qualified defined contribution plan (whether or not terminated) maintained by the Employer;

(D) except as hereinafter provided in this section 8.2(c)(i), a portion of the Employer’s Loan Repayment Contributions to the Plan for such Limitation Year which bears the same proportion to the total amount of the Employer’s Loan Repayment Contributions for the Limitation Year that the number of Shares (or the Fair Market Value of property other than Shares) allocated to the Participant’s Account pursuant to section 7.2 or 8.1, whichever is applicable, bears to the aggregate number of Shares (or Fair Market Value of property other than Shares) so allocated to all Participants for such Limitation Year.

Notwithstanding section 8.2(c)(i)(D), if, for any Limitation Year, the aggregate amount of Discretionary Contributions allocated to the Accounts of the individuals who are Highly Compensated Employees for such Limitation Year, when added to such Highly Compensated Employees’ allocable share of any Loan Repayment Contributions for such Limitation Year, does not exceed one-third of the total of all Discretionary Contributions and Loan Repayment Contributions for such Limitation Year, then that portion, if any, of the Loan Repayment Contributions for such Limitation Year that is applied to the payment of interest on a Share Acquisition Loan shall not be included as an Annual Addition. In no event shall any Financed Shares, any dividends or other earnings thereon, any proceeds of the sale thereof or any portion of the value of the foregoing be included as an Annual Addition. In Limitation Years beginning after December 31, 2001, catch-up elective deferrals under section 414(v) of the Code shall not be included as Annual Additions.

(ii) Employer means Westfield Financial, Inc., and all members of a controlled group of corporations, as defined in section 414(b) of the Code, as modified by section 415(h) of the Code, all commonly controlled trades or businesses, as defined in section 414(c) of the Code, as modified by section 415(h) of the Code, all affiliated service groups, as defined in section 414(m) of the Code, of which Westfield Financial, Inc. is a member, as well as any leasing organization, as defined in section 18.8, that employs any person who is considered an employee under section 18.8 and any other entity that is required to be aggregated with the Employer pursuant to regulations under section 414(o) of the Code.

(iii) Defined Benefit Plan Fraction means, for any individual for any Limitation Year, a fraction, the numerator of which is the Projected Annual Benefit (determined as of the end of such Limitation Year) of the Participant under any qualified defined benefit plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years, and the denominator of which is as follows: (A) for Limitation Years ending prior to January 1, 1983, the lesser of (I) the dollar limitation in effect under section 415(b)(1) (A) of the Code for such Limitation Year, or (II) the amount which may be taken into account under section 415(b)(1)(B) of the Code with respect to such Participant for such Limitation Year; and (B) in all other cases, the lesser of (I) (except as provided in section 16.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied by the dollar limitation in effect under section 415(b)(1)(A) of the Code for such Limitation Year, or (II) the product of 1.4 multiplied by the amount which may be taken into account under section 415(b)(1)(B) of the Code with respect to such Participant for such Limitation Year.

(iv) Defined Contribution Plan Fraction means, for any individual for any Limitation Year, a fraction (A) the numerator of which is the sum of such individual’s Annual Additions (determined as of the end of such Limitation Year) under this Plan and any other qualified defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years, and (B) the denominator of which is as follows: (I) for Limitation Years ending prior to January 1, 1983, the sum of the lesser of the following amounts for such Limitation Year and for each prior Limitation Year during which such individual was employed by the Employer: (1) the Maximum Permissible Amount for such Limitation Year (without regard to section 415(c)(6) of the Code), or (2) the amount which may be taken into account under section 415(c)(1)(B) of the Code with respect to such individual for such Limitation Year; and (II) in all other cases, the sum of the lesser of the following amounts for such Limitation Year and for each prior Limitation Year during which such individual was employed by the Employer: (1) (except as provided in section 17.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied by the Maximum Permissible Amount for such Limitation Year (determined without regard to section 415(c)(6) of the Code), or (2) the product of 1.4 multiplied by the amount which may be taken into account under section 415(c)(1)(B) of the Code (or section 415(c)(7) of the Code, if applicable) with respect to such individual for such Limitation Year; provided, however , that the Plan Administrator may, at his election, adopt the transition rule set forth in section 415(e)(6) of the Code in making the computation set forth in this section 8.2(c)(iv). If the sum of an individual’s Defined Benefit Plan Fraction and Defined Contribution Plan Fraction exceeded 1.0 as of September 30, 1983, then such individual’s Defined Contribution Plan Fraction shall be determined under regulations to be prescribed by the Secretary of the Treasury so that the sum of the fractions does not exceed 1.0.

(v) Limitation Year means the Plan Year.

(vi) Maximum Permissible Amount means (A) $25,000 (or such higher amount as may be permitted under section 415(d) of the Code because of cost of living increases) for Limitation Years beginning prior to January 1, 1983, and (B) the greater of (I) $30,000, or (II) 25% of the dollar limitation in effect under section 415(b)(1)(A) of the Code for Limitation Years beginning on or after January 1, 1983.

(vii) Projected Annual Benefit means an individual’s annual retirement benefit (adjusted to the actuarial equivalent of a straight life annuity if expressed in a form other than a straight life or qualified joint and survivor annuity) under any qualified defined benefit plan maintained by the Employer, whether or not terminated, assuming that the individual will continue employment until the later of such individual’s current age or normal retirement age under such plan, and that the individual’s Total Compensation for the Limitation Year and all other relevant factors used to determine benefits under such plan will remain constant for all future Limitation Years.

(viii) Section 415 Compensation means an Employee’s aggregate total compensation paid by the Employer and any Affiliated Employer with respect to such period that constitutes wages within the meaning of section 3401 of the Code, plus amounts that would be included in wages but for an election under section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b) of the Code. An Employee’s Section 415 Compensation shall be determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2) of the Code). Section 415 Compensation shall also include wages paid after an Employee’s severance from employment if the amounts are paid before the later of two and a half months after the date of termination or the end of the Plan Year and if: (1) the amounts paid are regular compensation for services during the Employee’s regular working hours, or compensation outside the Employee’s regular working hours (including overtime), commissions, bonuses or other similar payments, and the payment would have been paid to the Employee prior to a severance from employment if the Employee had continued in employment with the Employer or Affiliated Employer; or (2) the amount is a payment of unused accrued bona fide sick, vacation, or other leave that would have been available to the Employee for use had employment continued, or is received by the Employee pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the Employee at the same time if the Employee had continued in employment with the Employer or Affiliated Employer and only to the extent that the payment is includible in the Employee’s gross income. In no event, however, shall an Employee’s Section 415 Compensation for any calendar year include any compensation in excess of $230,000 (or such other amount as may be permitted under section 401(a)(17) of the Code). Effective for Plan Years beginning on or after January 1, 2009, in accordance with Section 105(b) of the Heroes Earnings Assistance and Relief Tax Act of 2008 and the guidance promulgated thereunder, “Section 415 Compensation” also includes any differential wage payments, which (1) are made by the Company to an individual with respect to any period during which the individual is performing services in the uniformed services (as defined in chapter 43 of title 38 of the United States Code) while on active duty for a period of more than 30 days, and (2) represent all or a portion of the wages the individual would have received from the Company if the individual were performing service for the Company; provided that all employees of the Company performing services in the uniformed services (as defined in chapter 43 of title 38 of the United States Code) are entitled to receive differential wage payments on reasonably equivalent terms.

(d) Notwithstanding any provision of the Plan to the contrary, if the Annual Additions must be reduced to satisfy the limitations of section 8.2(a) or (b), such reduction may only be accomplished in accordance with the Employee Plans Compliance Resolution System as set forth in Revenue Procedure 2008-50 or any superseding guidance, including, but not limited to, the preamble of the final Code Section 415 regulations. The amount by which any Individual’s Annual Addition to this Plan is reduced shall be allocated in accordance with Articles V and VII as a contribution by the Participating Employers in the next succeeding Limitation Year.

(e) Prior to determining an individual’s actual Total Compensation for a Limitation Year, the Participating Employer may determine the limitations under this section 8.2 for an individual on the basis of a reasonable estimation of the individual’s Total Compensation for the Limitation Year that is uniformly determined for all individuals who are similarly situated. As soon as it is administratively feasible after the end of the Limitation Year, the limitations of this section 8.2 shall be determined on the basis of the individual’s actual Total Compensation for the Limitation Year.

ARTICLE IX

VESTING

Section 9.1 Vesting.

Subject to the provisions of sections 9.2 and 14.1(a), the balance credited to each Participant’s Account shall become vested in accordance with the following schedule:

Years of Vesting Service		Vested Percentage

less than 3 years		0%

3 or more years		100%

Section 9.2 Vesting on Death, Disability, Retirement or Change in Control.

Any previously unvested portion of the remainder of the balance credited to the Account of a Participant or of a person who is a Former Participant solely because he is excluded from membership under section 2.1(b) shall become fully vested immediately upon his attainment of age 65 while employed by any Applicable Employer, or, if earlier, upon the termination of his employment with all Affiliated Employers by reason of death, Disability, Retirement or upon the occurrence of a Change in Control.

Section 9.3 Forfeitures on Termination of Employment.

(a) Upon the termination of employment of a Participant or Former Participant for any reason other than death or Disability, that portion of the balance credited to his Account which is not vested at the date of such termination shall be forfeited upon the earliest of (a) full distribution of the vested portion of the Account or (b) the fifth anniversary following the date of re-employment. Such forfeiture shall be made with respect to the various types of assets in the Account of the Participant or Former Participant on the following basis:

(i) such forfeiture shall first be made with respect to assets other than Shares, if any;

(ii) to the extent that such forfeiture exceeds the amount of assets available under Section 9.3(a)(i), it shall next be made with respect to Shares. If interests in more than one class of qualifying employer securities have been allocated to the Account of the Participant or Former Participant, the Participant or Former Participant will be treated as forfeiting the same proportion of each such class.

(b) The proceeds of such forfeited amounts, reduced by any amounts required to be credited because of re-employment pursuant to section 9.4, shall be treated as Forfeitures and shall be disposed of as provided in section 9.5. If no portion of the balance credited to an Account of a Participant or Former Participant is vested as of the date of his termination of employment, a distribution of $0, representing full distribution of the Account, shall be deemed to have been made to the Participant or Former Participant on such date.

Section 9.4 Amounts Credited Upon Re-Employment.

If an Employee forfeited any amount of the balance credited to his Account upon his termination of employment, and is re-employed by any Affiliated Employer prior to the occurrence of five consecutive One-Year Breaks in Service, then:

(i) an amount equal to the Fair Market Value of the Shares forfeited, determined as of the date of forfeiture; and

(ii) the amount credited to his General Investment Account that was forfeited, determined as of the date of forfeiture;

shall be credited back to his Account; provided, however , that the Employee repays the amount distributed to him from his Account as a result of such termination no later than the fifth anniversary of his re-employment or the end of the fifth Plan Year to begin after such distribution, whichever is earlier. Such amounts to be re-credited shall be obtained from the proceeds of the forfeited amounts redeemed pursuant to section 9.3 during the Plan Year in which the repayment is made, unless such proceeds are insufficient, in which case the Employee’s Employer shall make an additional contribution in the amount of such deficiency. For purposes of this section 9.4, a Participant or Former Participant who received a distribution of $0, shall be deemed to have made repayment on the date of re-employment with an Employer.

Section 9.5 Allocation of Forfeitures.

Any Forfeitures that occur during a Plan Year shall be used to reduce the contributions required of the Employer under the Plan in the next Plan Year and shall be treated as Loan Repayment Contributions and Discretionary Contributions in the proportions designated by the Committee in accordance with Article V.

ARTICLE X

THE TRUST FUND

Section 10.1 The Trust Fund.

The Trust Fund shall be held and invested under the Trust Agreement with the Trustee. The provisions of the Trust Agreement shall vest such powers in the Trustee as to investment, control and disbursement of the Trust Fund, and such other provisions not inconsistent with the Plan, including provision for the appointment of one or more “investment managers” within the meaning of section 3(38) of ERISA to manage and control (including acquiring and disposing of) all or any of the assets of the Trust Fund, as the Board may from time to time authorize. Except as required by ERISA, no bond or other security shall be required of any Trustee at any time in office.

Section 10.2 Investments.

Except to the extent provided to the contrary in section 10.3, the Trust Fund shall be invested in:

(i) Shares;

(ii) such Investment Funds as may be established from time to time by the Committee; and

(iii) such other investments as may be permitted under the Trust Agreement;

in such proportions as shall be determined by the Committee or, if so provided under the Trust Agreement, as directed by one or more investment managers or by the Trustee, in its discretion; provided, however , that the investments of the Trust Fund shall consist primarily of Shares. Notwithstanding the immediately preceding sentence, the Trustee may temporarily invest the Trust Fund in short-term obligations of, or guaranteed by, the United States Government or an agency thereof, or may retain uninvested, or sell investments to provide, amounts of cash required for purposes of the Plan.

Section 10.3 Distributions for Diversification of Investments.

(a) Notwithstanding section 10.2, each Qualified Participant may:

(i) during the first 90 days of each of the first five Plan Years to begin after the Plan Year in which he first becomes a Qualified Participant, elect that such percentage of the balance credited to his Account as he may specify, but in no event more than 25% of the balance credited to his Account, be either distributed to him pursuant to this section 10.3(a)(i) or transferred to the 401(k) Plan as Adopted by Westfield Bank to the extent permitted by such plan, no later than 90 days after the last day that such election may be made; and

(ii) during the first 90 days of the sixth Plan Year to begin after the Plan Year in which he first becomes a Qualified Participant or of any Plan Year thereafter, elect that such percentage of the balance credited to his Account as he may specify, but in no event more than 50% of the balance credited to his Account, be either distributed to him pursuant to this section 10.3(a)(ii) or transferred to the 401(k) Plan as Adopted by Westfield Bank to the extent permitted by such plan, no later than 90 days after the last day that such election may be made.

For purposes of an election under this section 10.3, the balance credited to a Participant’s Account shall be the balance credited to his Account determined as of the last Valuation Date to occur in the Plan Year immediately preceding the Plan Year in which such election is made and the 25% and 50% limitations shall apply to such balance after the balance has been reduced by the amount of all amounts distributed or transferred to the 401(k) Plan as Adopted by Westfield Bank under this section 10.3.

(b) An election made under section 10.3(a) shall be made in writing, in the form and manner prescribed by the Plan Administrator, and shall be filed with the Plan Administrator during the election period specified in section 10.3(a). As soon as is practicable, and in no case later than 90 days following the end of the election period during which such election is made, the Plan Administrator shall take such actions as are necessary to cause the specified percentage of the balance credited to the Account of the Qualified Participant making the election to be distributed to such Qualified Participant.

(c) An election made under section 10.3(a) may be changed or revoked at any time during the election period described in section 10.3(a) during which it is initially made. In no event, however, shall any election under this section 10.3 result in more than 25% of the balance credited to the Participant’s Account being distributed to the Participant or transferred to the 401(k) Plan as Adopted by Westfield Bank, if such election is made during a Plan Year to which section 10.3(a)(i) applies, or result in more than 50% of the balance distributed to the Participant or transferred to the 401(k) Plan as Adopted by Westfield Bank, if such election is made during the Plan Year to which section 10.3(a)(ii) applies or thereafter.

Section 10.4 Use of Commingled Trust Funds.

Subject to the provisions of the Trust Agreement, amounts held in the Trust Fund may be invested in:

(a) any commingled or group trust fund described in section 401(a) of the Code and exempt under section 501(a) of the Code; or

(b) any common trust fund exempt under section 584 of the Code maintained exclusively for the collective investment of the assets of trusts that are exempt under section 501(a) of the Code; provided that the trustee of such commingled, group or common trust fund is a bank or trust company.

Section 10.5 Management and Control of Assets.

All assets of the Plan shall be held by the Trustee in trust for the exclusive benefit of Participants, Former Participants and their Beneficiaries. No part of the corpus or income of the Trust Fund shall be used for, or diverted to, purposes other than for the exclusive benefit of Participants, Former Participants and their Beneficiaries, and for defraying reasonable administrative expenses of the Plan and Trust Fund. No person shall have any interest in or right to any part of the earnings of the Trust Fund, or any rights in, to or under the Trust Fund or any part of its assets, except to the extent expressly provided in the Plan.

ARTICLE XI

VALUATION OF INTERESTS IN THE TRUST FUND

Section 11.1 Establishment of Investment Accounts.

The Plan Administrator shall establish, or cause to be established, for each person for whom an Account is maintained a Share Investment Account and a General Investment Account. Such Share Investment Accounts and General Investment Accounts shall be maintained in accordance with this Article XI.

Section 11.2 Share Investment Accounts.

The Share Investment Account established for a person in accordance with section 11.1 shall be credited with: (a) all Shares allocated to such person’s Account; (b) all Shares purchased with amounts of money or property allocated to such person’s Account; (c) all dividends paid in the form of Shares with respect to Shares credited to his Account; and (d) all Shares purchased with amounts credited to such person’s General Investment Account. Such Share Investment Account shall be charged with all Shares that are sold or exchanged to acquire other investments or to provide cash and with all Shares that are distributed in kind.

Section 11.3 General Investment Accounts.

The General Investment Account that is established for a person in accordance with section 11.1 shall be credited with: (a) all amounts, other than Shares, allocated to such person’s Account; (b) all dividends paid in a form other than Shares with respect to Shares credited to such person’s Share Investment Account; (c) the proceeds of any sale of Shares credited to such person’s Share Investment Account; and (d) any earnings attributable to amounts credited to such person’s General Investment Account. Such General Investment Account shall be charged with all amounts credited thereto that are applied to the purchase of Shares, any losses or depreciation attributable to amounts credited thereto, any expenses allocable thereto and any distributions of amounts credited thereto.

Section 11.4 Valuation of Investment Accounts.

(a) The Plan Administrator shall determine, or cause to be determined, the aggregate value of each person’s Share Investment Account as of each Valuation Date by multiplying the number of Shares credited to such Share Investment Account on such Valuation Date by the Fair Market Value of a Share on such Valuation Date.

(b) As of each Valuation Date, the Accounts of each Participant shall be separately adjusted to reflect their proportionate share of any appreciation or depreciation in the fair market value of the Investment Funds, any income earned by the Investment Funds and any expenses incurred by the Investment Funds, as well as any contributions, withdrawals or distributions and investment transfers not posted as of the last Valuation Date.

Section 11.5 Annual Statements.

There shall be furnished, by mail or otherwise, at least once in each Plan Year to each person who would then be entitled to receive all or part of the balance credited to any Account if the Plan were then terminated, a statement of his interest in the Plan as of such date as shall be selected by the Plan Administrator, which statement shall be deemed to have been accepted as correct and be binding on such person unless the Plan Administrator receives written notice to the contrary within 30 days after the statement is mailed or furnished to such person.

ARTICLE XII

Section 12.1 Specific Allocation of Shares.

All Shares purchased under the Plan shall be specifically allocated to the Share Investment Accounts of Participants, Former Participants and their Beneficiaries in accordance with section 11.2, with the exception of Financed Shares, which shall be allocated to the Loan Repayment Account.

Section 12.2 Dividends.

(a) Dividends paid with respect to Shares held under the Plan shall be credited to the Loan Repayment Account, if paid with respect to Financed Shares. Such dividends shall be: (i) applied to the payment of principal and accrued interest with respect to any Share Acquisition Loan, if paid in cash; or (ii) held in the Loan Repayment Account as Financed Shares for release in accordance with section 6.5, if paid in the form of Shares.

(b) Dividends paid with respect to Shares allocated to a person’s Share Investment Account shall be credited to such person’s Share Investment Account. Cash dividends credited to a person’s General Investment Account shall be, at the direction of the Committee, either: (i) held in such General Investment Account and invested in accordance with sections 10.2 and 11.3; (ii) distributed immediately to such person; (iii) distributed to such person within 90 days of the close of the Plan Year in which such dividends were paid; (iv) used to make payments of principal or interest on a Share Acquisition Loan; provided, however , that the Fair Market Value of Financed Shares released from the Loan Repayment Account as a result of such payment equals or exceeds the amount of the dividend; or (v) in calendar years beginning after December 31, 2001 either held as provided in section 12.2(b)(i) or distributed as provided in section 12.2(b)(ii), as each person shall elect for his own Account.

Section 12.3 Voting Rights.

(a) Each person shall direct the manner in which all voting rights appurtenant to Shares allocated to his Share Investment Account will be exercised, provided that such Shares were allocated to his Share Investment Account as of the applicable record date. Such person shall, for such purpose, be deemed a “named fiduciary” within the meaning of section 402(a)(2) of ERISA. Such a direction shall be given by completing and filing with the inspector of elections, the Trustee or such other person who shall be independent of the Participating Employers as the Committee shall designate, at least 10 days prior to the date of the meeting of holders of Shares at which such voting rights will be exercised, a written direction in the form and manner prescribed by the Committee. The inspector of elections, the Trustee or such other person designated by the Committee shall tabulate the directions given on a strictly confidential basis, and shall provide the Committee with only the final results of the tabulation. The final results of the tabulation shall be followed by the Committee in directing the Trustee as to the manner in which such voting rights shall be exercised. The Plan Administrator shall make a reasonable effort to furnish, or cause to be furnished, to each person for whom a Share Investment Account is maintained all annual reports, proxy materials and other information known by the Plan Administrator to have been furnished by the issuer of the Shares, or by any solicitor of proxies, to the holders of Shares.

(b) To the extent that any person shall fail to give instructions with respect to the exercise of voting rights appurtenant to Shares allocated to his Share Investment Account:

(i) the Trustee shall, with respect to each matter to be voted upon: (A) cast a number of affirmative votes equal to the product of (I) the number of allocated Shares for which no written instructions have been given, multiplied by (II) a fraction, the numerator of which is the number of allocated Shares for which affirmative votes will be cast in accordance with written instructions given as provided in section 12.3(a) and the denominator of which is the aggregate number of affirmative and negative votes which will be cast in accordance with written instructions given as aforesaid, and (B) cast a number of negative votes equal to the excess (if any) of (I) the number of allocated Shares for which no written instructions have been given over (II) the number of affirmative votes being cast with respect to such allocated Shares pursuant to section 12.3(b)(i)(A); or

(ii) if the Trustee shall determine that it may not, consistent with its fiduciary duties, vote the allocated Shares for which no written instructions have been given in the manner described in section 12.3(b)(i), it shall vote such Shares in such manner as it, in its discretion, may determine to be in the best interests of the persons to whose Share Investment Accounts such Shares have been allocated.

(c) (i) The voting rights appurtenant to Financed Shares shall be exercised as follows with respect to each matter as to which holders of Shares may vote:

(A) a number of votes equal to the product of (I) the total number of votes appurtenant to Financed Shares allocated to the Loan Repayment Account on the applicable record date; multiplied by (II) a fraction, the numerator of which is the total number of affirmative votes cast by Participants, Former Participants and the Beneficiaries of deceased Former Participants with respect to such matter pursuant to section 12.3(a) and the denominator of which is the total number of affirmative and negative votes cast by Participants, Former Participants and the Beneficiaries of deceased Former Participants, shall be cast in the affirmative; and

(B) a number of votes equal to the excess of (I) the total number of votes appurtenant to Financed Shares allocated to the Loan Repayment Account on the applicable record date, over (II) the number of affirmative votes cast pursuant to section 12.3(c)(i)(A) shall be cast in the negative.

To the extent that the Financed Shares consist of more than one class of Shares, this section 12.3(c)(i) shall be applied separately with respect to each class of Shares.

(ii) If voting rights are to be exercised with respect to Financed Shares as provided in section 12.3(c)(i)(A) and (B) at a time when there are no Shares allocated to the Share Investment Accounts of Participants, Former Participants and the Beneficiaries of deceased Former Participants, then the voting rights appurtenant to Financed Shares shall be exercised as follows with respect to each matter as to which holders of Shares may vote:

(A) Each person who is a Participant on the applicable record date will be granted a number of votes equal to the quotient, rounded to the nearest integral number, of (I) such Participant’s Allocation Compensation for the Plan Year ending on or immediately prior to such record date (or for the portion of such Plan Year during which he was a Participant); divided by (II) $1,000.00; and

(B) a number of votes equal to the product of (I) the total number of Financed Shares allocated to the Loan Repayment Account on the applicable record date; multiplied by (II) a fraction, the numerator of which is the total number of votes that are cast in the affirmative with respect to such matter pursuant to section 12.3(c)(ii)(A) and the denominator of which is the total number of votes that are cast either in the affirmative or in the negative with respect to such matter pursuant to section 12.3(c)(ii)(A), shall be cast in the affirmative; and

(C) a number of votes equal to the excess of (I) the total number of Financed Shares allocated to the Loan Repayment Account on the applicable record date, over (II) the number of affirmative votes cast with respect to such matter pursuant to section 12.3(c)(ii)(B), shall be cast in the negative.

To the extent that the Financed Shares consist of more than one class of Shares, this section 12.3(c)(ii) shall be applied separately with respect to each class of Shares.

Section 12.4 Tender Offers.

(a) Each person shall direct whether Shares allocated to his Share Investment Account will be delivered in response to any Tender Offer. Such person shall, for such purpose, be deemed a “named fiduciary” within the meaning of section 402(a)(2) of ERISA. Such a direction shall be given by completing and filing with the Trustee or such other person who shall be independent of the Participating Employers as the Committee shall designate, at least 10 days prior to the latest date for exercising a right to deliver Shares pursuant to such Tender Offer, a written direction in the form and manner prescribed by the Committee. The Trustee or other person designated by the Committee shall tabulate the directions given on a strictly confidential basis, and shall provide the Committee with only the final results of the tabulation. The final results of the tabulation shall be followed by the Committee in directing the number of Shares to be delivered. The Plan Administrator shall make a reasonable effort to furnish, or cause to be furnished, to each person for whom a Share Investment Account is maintained, all information known by the Plan Administrator to have been furnished by the issuer or by or on behalf of any person making such Tender Offer, to the holders of Shares in connection with such Tender Offer.

(b) To the extent that any person shall fail to give instructions with respect to Shares allocated to his Share Investment Account:

(i) the Trustee shall (A) tender or otherwise offer for purchase, exchange or redemption a number of such Shares equal to the product of (I) the number of allocated Shares for which no written instructions have been given, multiplied by (II) a fraction, the numerator of which is the number of allocated Shares tendered or otherwise offered for purchase, exchange or redemption in accordance with written instructions given as provided in section 12.4(a) and the denominator of which is the aggregate number of allocated Shares for which written instructions have been given as aforesaid, and (B) withhold a number of Shares equal to the excess (if any) of (I) the number of allocated Shares for which no written instructions have been given over (II) the number of Shares being tendered or otherwise offered pursuant to section 12.4(b)(i)(A); or

(ii) if the Trustee shall determine that it may not, consistent with its fiduciary duties, exercise the tender or other rights appurtenant to allocated Shares for which no written instructions have been given in the manner described in section 12.4(b)(i), it shall tender, or otherwise offer, or withhold such Shares in such manner as it, in its discretion, may determine to be in the best interests of the persons to whose Share Investment Accounts such Shares have been allocated.

(c) In the case of any Tender Offer, any Financed Shares held in the Loan Repayment Account shall be dealt with as follows:

(i) If such Tender Offer occurs at a time when there are no Shares allocated to the Share Investment Accounts of Participants, Former Participants and the Beneficiaries of deceased Former Participants, then the disposition of the Financed Shares shall be determined as follows:

(A) each person who is a Participant on the applicable record date will be granted a number of tender rights equal to the quotient, rounded to the nearest integral number, of (I) such Participant’s Allocation Compensation for the Plan Year ending on or immediately prior to such record date (or for the portion of such Plan Year during which he was a Participant), divided by (II) $1,000.00; and

(B) on the last day for delivering Shares or otherwise responding to such Tender Offer, a number of Shares equal to the product of (I) the total number of Financed Shares allocated to the Loan Repayment Account on the last day of the effective period of such Tender Offer; multiplied by (II) a fraction, the numerator of which is the total number of tender rights exercised in favor of the delivery of Shares in response to the Tender Offer pursuant to section 12.4(c)(i)(A) and the denominator of which is the total number of tender rights that are exercisable in response to the Tender Offer pursuant to section 12.4(c)(i)(A), shall be delivered in response to the Tender Offer; and

(C) a number of Shares equal to the excess of (I) the total number of Financed Shares allocated to the Loan Repayment Account on the last day of the effective period of such Tender Offer; over (II) the number of Shares to be delivered in response to the Tender Offer pursuant to section 12.4(c)(i)(B), shall be withheld from delivery.

(ii) If such Tender Offer occurs at a time when the voting rights appurtenant to such Financed Shares are to be exercised in accordance with section 12.3(c)(i), then:

(A) on the last day for delivering Shares or otherwise responding to such Tender Offer, a number of Financed Shares equal to the product of (I) the total number of Financed Shares allocated to the Loan Repayment Account on the last day of the effective period of such Tender Offer; multiplied by (II) a fraction, the numerator of which is the total number of Shares delivered from the Share Investment Accounts of Participants, Former Participants and the Beneficiaries of deceased Former Participants in response to such Tender Offer pursuant to section 12.4(a), and the denominator of which is the total number of Shares allocated to the Share Investment Accounts of Participants, Former Participants and Beneficiaries of deceased Former Participants immediately prior to the last day for delivering Shares or otherwise responding to such Tender Offer, shall be delivered; and

(B) a number of Financed Shares equal to the excess of (I) the total number of Financed Shares allocated to the Loan Repayment Account on the last day for delivering Shares or otherwise responding to such Tender Offer; over (II) the number of Financed Shares to be delivered pursuant to section 12.4(c)(ii)(A), shall be withheld from delivery.

To the extent that the Financed Shares consist of more than one class of Shares, this section 12.4(c) shall be applied separately with respect to each class of Shares.

ARTICLE XIII

PAYMENT OF BENEFITS

Section 13.1 In General.

The balance credited to a Participant’s or Former Participant’s Account under the Plan shall be paid only at the times, to the extent, in the manner and to the persons provided in this Article XIII.

Section 13.2 Designation of Beneficiaries.

(a) Subject to section 13.2(b), any person entitled to a benefit under the Plan may designate a Beneficiary to receive any amount to which he is entitled that remains undistributed on the date of his death. Such person shall designate his Beneficiary (and may change or revoke any such designation) in writing in the form and manner prescribed by the Plan Administrator. Such designation, and any change or revocation thereof, shall be effective only if received by the Plan Administrator prior to such person’s death and shall become irrevocable upon such person’s death.

(b) A Participant or Former Participant who is married shall automatically be deemed to have designated his spouse as his Beneficiary, unless, prior to the time such designation would, under section 13.2(a), become irrevocable:

(i) the Participant or Former Participant designates an additional or a different Beneficiary in accordance with this section 13.2; and

(ii) (A) the spouse of such Participant or Former Participant consents to such designation in a writing that acknowledges the effect of such consent and is witnessed by a Plan representative or a notary public; or (B) the spouse of such Participant or Former Participant has previously consented to such designation by signing a written waiver of any right to consent to any designation made by the Participant or Former Participant, and such waiver acknowledged the effect of the waiver and was witnessed by a Plan representative or a notary public; or (C) it is established to the satisfaction of a Plan representative that the consent required under section 13.2(b)(ii)(A) may not be obtained because such spouse cannot be located or because of other circumstances permitted under regulations issued by the Secretary of the Treasury.

(c) In the event that a Beneficiary entitled to payments hereunder shall die after the death of the person who designated him but prior to receiving payment of his entire interest in the Account of the person who designated him, then such Beneficiary’s interest in the Account of such person, or any unpaid balance thereof, shall be paid as provided in section 13.3 to the Beneficiary who has been designated by the deceased Beneficiary, or if there is none, to the executor or administrator of the estate of such deceased Beneficiary, or if no such executor or administrator is appointed within such time as the Plan Administrator, in his sole discretion, shall deem reasonable, to such one or more of the spouse and descendants and blood relatives of such deceased Beneficiary as the Plan Administrator may select. If a person entitled to a benefit under the Plan and any of the Beneficiaries designated by him shall die in such circumstances that there shall be substantial doubt as to which of them shall have been the first to die, for all purposes of the Plan, the person who made the Beneficiary designation shall be deemed to have survived such Beneficiary.

(d) If no Beneficiary survives the person entitled to the benefit under the Plan or if no Beneficiary has been designated by such person, such benefit shall be paid to the executor or administrator of the estate of such person, or if no such executor or administrator is appointed within such time as the Plan Administrator, in his sole discretion, shall deem reasonable, to such one or more of the spouse and descendants and blood relatives of such deceased person as the Plan Administrator may select.

Section 13.3 Distributions to Participants.

(a) Except as provided in section 13.5, the vested portion of the balance credited to a Former Participant’s Account shall be distributed to him in a single distribution as of the last Valuation Date to occur in the Plan Year in which he terminates employment with all Affiliated Employers or the Plan Year in which he attains age 65, whichever is later; provided, however , that if the Former Participant elects, at such time and in such manner as the Plan Administrator may prescribe, that distribution be made as of an earlier Valuation Date that coincides with or follows his termination of employment with all Affiliated Employers, distribution shall be made as of such earlier Valuation Date and if the entire vested balance credited to a Former Participant’s Accounts is not more than $1,000 then the full vested amount shall be paid as of the earliest practicable Valuation Date following his termination of employment and if at a later time such Account balance is reduced such that it is not greater than $1,000, the Former Participant will receive a distribution of such Account balance. The actual distribution shall be made within sixty days after the applicable Valuation Date. If an Account of a Participant or Former Participant does not contain any vested amounts as of the date of his termination of employment with all Affiliated Employers, a distribution of $0, representing full distribution of the Account, shall be deemed to have been made to the Participant or Former Participant on such date.

(b) In the event of the death of a Participant or Former Participant before the date of actual distribution of the vested portion of the balance credited to his Account, such vested portion shall be distributed to his Beneficiary in a single distribution as of the first Valuation Date to occur following the latest of (i) the date on which the Plan Administrator is notified of the Participant’s or Former Participant’s death; and (ii) the date on which the Plan Administrator determines the identity and location of the Participant’s or Former Participant’s Beneficiary or Beneficiaries. The actual distribution shall be made within sixty days after the applicable Valuation Date.

Section 13.4 Manner of Payment.

Distributions made pursuant to section 13.3 or section 13.5 shall be made in the maximum number of whole Shares that are available, plus, if necessary, an amount of money equal to any remaining amount of the distribution that is less than the Fair Market Value of a whole Share.

Section 13.5 Minimum Required Distributions.

(a) Required minimum distributions of a Participant’s or Former Participant’s Account shall commence no later than:

(i) if the Participant or Former Participant was not a Five Percent Owner at any time during the Plan Year ending in the calendar year in which he attained age 70½, during any of the four preceding Plan Years or during any subsequent years, the later of (A) the calendar year in which he attains or attained age 70½ or (B) the calendar year in which he terminates employment with all Affiliated Employers; or

(ii) if the Participant or Former Participant attains age 70½ after December 31, 1998 and is or was a Five Percent Owner at any time during the Plan Year ending in the calendar year in which he attained age 70½, during any of the four preceding Plan Years or during any subsequent years, the later of (A) the calendar year in which he attains age 70½ or (B) the calendar year in which he first becomes a Five Percent Owner.

(b) The required minimum distributions contemplated by section 13.5(a) shall be made as follows:

(i) The minimum required distribution to be made for the calendar year for which the first minimum distribution is required shall be no later than April 1st of the immediately following calendar year and shall be equal to the quotient obtained by dividing (A) the vested balance credited to the Participant’s or Former Participant’s Account as of the last Valuation Date to occur in the calendar year immediately preceding the calendar year in which the first minimum distribution is required (adjusted to account for any additions thereto or subtractions therefrom after such Valuation Date but on or before December 31st of such calendar year); by (B) the Participant’s or Former Participant’s life expectancy (or, if his Beneficiary is a Designated Beneficiary, the joint life and last survivor expectancy of him and his Beneficiary); and

(ii) the minimum required distribution to be made for each calendar year following the calendar year for which the first minimum distribution is required shall be made no later than December 31st of the calendar year for which the distribution is required and shall be equal to the quotient obtained by dividing (A) the vested balance credited to the Participant’s or Former Participant’s Account as of the last Valuation Date to occur in the calendar year prior to the calendar year for which the distribution is required (adjusted to account for any additions thereto or subtractions therefrom after such Valuation Date but on or before December 31st of such calendar year and, in the case of the distribution for the calendar year immediately following the calendar year for which the first minimum distribution is required, reduced by any distribution for the prior calendar year that is made in the current calendar year); by (B) the Participant’s or Former Participant’s life expectancy (or, if his Beneficiary is a Designated Beneficiary, the joint life and last survivor expectancy of him and his Beneficiary).

(i) for taxable years beginning before January 1, 2003, the life expectancy of a Participant or Former Participant (or the joint life and last survivor expectancy of a Participant or Former Participant and his Designated Beneficiary) for the calendar year in which the Participant or Former Participant attains age 70½ shall be determined on the basis of Tables V and VI, as applicable, of section 1.72-9 of the Income Tax Regulations as of the Participant’s or Former Participant’s birthday in such year. Such life expectancy or joint life and last survivor expectancy for any subsequent year shall be equal to the excess of (1) the life expectancy or joint life and last survivor expectancy for the year in which the Participant or Former Participant attains age 70½, over (2) the number of whole years that have elapsed since the Participant or Former Participant attained age 70½; and

(ii) for taxable years beginning after December 31, 2002, during the Participant’s or Former Participant’s lifetime, life expectancy shall be equal to:

(1) the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s age as of the Participant’s birthday in such calendar year; or

(2) if the Participant’s spouse is the sole Designated Beneficiary and the spouse is more than ten years younger than the Participant, the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in such calendar year.

(d) Payment of the distributions required to be made to a Participant or Former Participant under this section 13.5 shall be made in accordance with section 13.4.

Section 13.6 Direct Rollover of Eligible Rollover Distributions.

(a) A Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

(b) The following rules shall apply with respect to Direct Rollovers made pursuant to this section 13.6:

(i) A Distributee may only elect to make a Direct Rollover of an Eligible Rollover Distribution if such Eligible Rollover Distribution (when combined with other Eligible Rollover Distributions made or to be made in the same calendar year) is reasonably expected to be at least $200;

(ii) If a Distributee elects a Direct Rollover of a portion of an Eligible Rollover Distribution, that portion must be equal to at least $500; and

(iii) A Distributee may not divide his or her Eligible Rollover Distribution into separate distributions to be transferred to two or more Eligible Retirement Plans.

(c) For purposes of this section 13.6 and any other applicable section of the Plan, the following definitions shall have the following meanings:

(i) Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

(ii) Distributee means an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order are considered Distributees with regard to the interest of the spouse or former spouse. For distributions made on or after January 1, 2010, Distributee shall also include a non-spouse Beneficiary.

(iii) Eligible Retirement Plan means an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, and (for distributions after December 31, 2001 only) an annuity contract described in section 403(b) of the Code or an eligible deferred compensation plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision thereof and which agrees to separately account for amounts transferred into such plan from this Plan, that accepts the distributee’s eligible rollover distribution. However, in the case of an eligible rollover distribution made before January 1, 2002 to a current or former spouse who is the alternate payee under a qualified domestic relations order as defined in Code section 414(p) or to a surviving spouse, an eligible retirement plan is only an individual retirement account or individual retirement annuity. Notwithstanding the preceding, for distributions made on or after January 1, 2008, Eligible Retirement Plan shall include a Roth IRA as described in Section 408A of the Code to the extent required under Section 401(a)(31) of the Code, provided such Eligible Rollover Distribution is made in a manner permitted by guidance issued by the Internal Revenue Service. Notwithstanding the preceding, with respect to a Distributee who is a Beneficiary of an Employee, but not the Employee’s surviving spouse, the term Eligible Retirement Plan shall mean exclusively an individual retirement account described in Code section 408(a) or an individual retirement annuity described in Code section 408(b).

(iv) Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated Beneficiary, or for a specified period of ten (10) years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; any distribution made after December 31, 1999 on account of hardship; and in the case of a distribution made before January 1, 2002, the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). A portion of a distribution that is includible in the gross income of the distributee that is treated as an eligible rollover distribution may only be transferred in a direct rollover to an eligible retirement plan that agrees to separately account for such portion of the distribution. This section 13.6 shall not apply to any eligible rollover distributions during a year that are reasonably expected (as determined by the Committee) to total less than $200. In no event shall any withdrawal during service that is made on account of hardship be considered an “eligible rollover distribution”. This section 13.6 shall be interpreted to comply with the provisions of section 401(a)(31) of the Code.

Section 13.7 Valuation of Shares Upon Distribution.

Notwithstanding any contrary provision in this Article XIII, in the event that all or a portion of a payment of a distribution is to be made in cash, the recipient shall only be entitled to receive the proceeds of the Shares allocated to his Account that are sold in connection with such distribution and which are valued as of the date of such sale.

Section 13.8 Put Options.

(a) Subject to section 13.8(c) and except as provided otherwise in section 13.8(b), each Participant or Former Participant to whom Shares are distributed under the Plan, each Beneficiary of a deceased Participant or Former Participant, including the estate of a deceased Participant or Former Participant, to whom Shares are distributed under the Plan, and each person to whom such a Participant, Former Participant or Beneficiary gives Shares that have been distributed under the Plan shall have the right to require Westfield Financial, Inc. to purchase from him all or any portion of such Shares. A person shall exercise such right by delivering to Westfield Financial, Inc. a written notice, in such form and manner as Westfield Financial, Inc. may by written notice to such person prescribe, setting forth the number of Shares to be purchased by Westfield Financial, Inc., the number of the stock certificate evidencing such person’s ownership of such Shares, and the effective date of the purchase. Such notice shall be given at least 30 days in advance of the effective date of purchase, and the effective date of purchase specified therein shall be, either within the 60 day period that begins on the date on which the Shares to be purchased by Westfield Financial, Inc. were distributed from the Plan or within the 60 day period that begins on the first day of the Plan Year immediately following the Plan Year in which the Shares to be purchased by Westfield Financial, Inc. are distributed from the Plan. As soon as practicable following its receipt of such a notice, Westfield Financial, Inc. shall take such actions as are necessary to purchase the Shares specified in such notice at a price per Share equal to the Fair Market Value of a Share determined as of the Valuation Date coincident with or immediately preceding the effective date of the purchase.

(b) Westfield Financial, Inc. shall have no obligation to purchase any Share (i) pursuant to a notice that is not timely given, or on an effective date of purchase that is not within the periods prescribed in section 13.8(a), or (ii) during a period in which Shares are publicly traded on an established market.

Section 13.9 Right of First Refusal.

(a) For any period during which Shares are not publicly traded on an established market, no person who owns Shares that were distributed from the Plan, other than a person to whom such Shares were sold in compliance with this section 13.9, shall sell such Shares to any person other than Westfield Financial, Inc. without first offering to sell such Shares to Westfield Financial, Inc. in accordance with this section 13.9.

(b) In the event that a person to whom this section 13.9 applies shall receive and desire to accept from a person other than Westfield Financial, Inc. an offer to purchase Shares to which this section 13.9 applies, he shall furnish to Westfield Financial, Inc. a written notice which shall:

(i) include a copy of such offer to purchase;

(ii) offer to sell to Westfield Financial, Inc. the Shares subject to such offer to purchase at a price per Share that is equal to the greater of:

(A) the price per Share specified in such offer to purchase; or

(B) the Fair Market Value of a Share as of the Valuation Date coincident with or immediately preceding the date of such notice;

and otherwise upon the same terms and conditions as those specified in such offer to purchase; and

(iii) include an indication of his intention to accept such offer to purchase if Westfield Financial, Inc. does not accept his offer to sell.

Such person shall refrain from accepting such offer to purchase for a period of fourteen days following the date on which such notice is given.

(c) Westfield Financial, Inc. shall have the right to purchase the Shares covered by the offer to sell contained in a notice given pursuant to section 13.9(b), on the terms and conditions specified in such notice, by written notice given to the party making the offer to sell not later than the fourteenth day after the notice described in section 13.9(b) is given. If Westfield Financial, Inc. does not give such a notice during the prescribed fourteen day period, then the person owning such Shares may accept the offer to purchase described in the notice.

ARTICLE XIV

CHANGE IN CONTROL

Section 14.1 Definition of Change in Control; Pending Change in Control.

(a) A Change in Control shall be deemed to have occurred upon the happening of any of the following events:

(i) any event upon which any “person” (as such term is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than (A) a trustee or other fiduciary holding securities under any employee benefit plan maintained for the benefit of employees of Westfield Financial, Inc.; (B) a corporation owned, directly or indirectly, by the stockholders of Westfield Financial, Inc. in substantially the same proportions as their ownership of stock of Westfield Financial, Inc.; or (C) any group constituting a person in which employees of Westfield Financial, Inc. are substantial members, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities issued by Westfield Financial, Inc. representing 25% or more of the combined voting power of all of Westfield Financial, Inc. ‘s then outstanding securities; or

(ii) any event upon which the individuals who on the Effective Date were members of the Board of Directors of Westfield Financial, Inc. together with individuals whose election by such Board or nomination for election by Westfield Financial, Inc.’s stockholders was approved by the affirmative vote of at least two-thirds of the members of such Board then in office who were either members of such Board on the Effective Date or whose nomination or election was previously so approved, cease for any reason to constitute a majority of the members of such Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Westfield Financial, Inc. (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934)as amended; or

(iii) the consummation of either:

(A) a merger or consolidation of Westfield Financial, Inc. with any other corporation, other than a merger or consolidation following which both of the following conditions are satisfied:

(I) either (1) the members of the Board of Directors of Westfield Financial, Inc. immediately prior to such merger or consolidation constitute at least a majority of the members of the governing body of the institution resulting from such merger or consolidation; or (2) the shareholders of Westfield Financial, Inc. own securities of the institution resulting from such merger or consolidation representing 60% or more of the combined voting power of all such securities then outstanding in substantially the same proportions as their ownership of voting securities of Westfield Financial, Inc. before such merger or consolidation; and

(ii) the entity which results from such merger or consolidation expressly agrees in writing to assume and perform Westfield Financial, Inc.’s obligations under the Plan; or

(B) a complete liquidation of Westfield Financial, Inc. or an agreement for the sale or disposition by Westfield Financial, Inc. of all or substantially all of its assets; or

(iv) any event that would be described in section 16.1 if “Westfield Bank” were substituted for “Westfield Financial, Inc.” therein.

In no event, however, shall the transaction by which Westfield Bank converts from a mutual institution to a stock institution, or any transaction by which a company wholly owned by Westfield Bank becomes the parent company of Westfield Bank, be deemed a Change in Control.

(b) A Pending Change of Control shall be deemed to have occurred upon the happening of any of the following events:

(i) approval by the stockholders of Westfield Financial, Inc. of a transaction, or a plan for the consummation of a transaction, which, if consummated, would result in a Change in Control;

(ii) approval by the Board of Directors of Westfield Financial, Inc. of a transaction, or a plan for the consummation of a transaction, which, if consummated, would result in a Change in Control;

(iii) the commencement of a tender offer (within the meaning of section 14(d)(i) of the Exchange Act, as amended) for securities issued by Westfield Financial, Inc., which, if completed, would result in a Change in Control;

(iv) the furnishing or distribution of a proxy statement or other document, whether or not in opposition to management, soliciting proxies, consents or authorizations (within the meaning of section 14 of the Exchange Act) in respect of securities issued by Westfield Financial, Inc. in favor of any election, transaction or other action which, if effected, would result in a Change in Control; or

(v) any event which would be described in Sections 14.1(b)(i), (ii), (iii) or (iv) if “Westfield Bank” were substituted for “Westfield Financial, Inc.” therein.

Section 14.2 Vesting on Change of Control.

Notwithstanding any other provision of the Plan, upon the effective date of a Change in Control, the Account of each person who would then, upon termination of the Plan, be entitled to a benefit, shall be fully vested and nonforfeitable.

Section 14.3 Repayment of Share Acquisition Loan.

Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, the Committee shall direct the Trustee to sell a sufficient number of shares of Stock to repay any outstanding Share Acquisition Loan, all remaining Shares which had been unallocated (or the proceeds from the sale thereof, if applicable) shall be allocated among the accounts of all individuals with undistributed Account balances on the effective date of such Change in Control. Such allocation of Shares or proceeds shall be in proportion to the balance credited to their Accounts immediately prior to such allocation.

Section 14.4 Plan Termination After Change in Control.

Notwithstanding any other provision of the Plan, after repayment of the loan and allocation of Shares or proceeds as provided in Section 14.3, the Plan shall be terminated and all amounts shall be distributed as soon as practicable.

Section 14.5 Amendment of Section XIV.

Notwithstanding any other provision of the Plan, this Section 14 of the Plan may not be amended after the earliest date on which a Change in Control or Pending Change in Control occurs, except (i) to the extent any amendment is required by the Internal Revenue Service as a condition to the continued treatment of the Plan as a tax-qualified plan under section 401(a) of the Code or (ii) to the extent that the Company, in its sole discretion, determines than any such amendment is necessary in order to permit any transaction to which the Company, and/or its parent or affiliate, is or proposes to be a party to qualify for “pooling of interests” accounting treatment.

ARTICLE XV

ADMINISTRATION

Section 15.1 Named Fiduciaries.

The term “Named Fiduciary” shall mean (but only to the extent of the responsibilities of each of them) the Plan Administrator, the Committee, the Board and the Trustee. This Article XV is intended to allocate to each Named Fiduciary the responsibility for the prudent execution of the functions assigned to him or it, and none of such responsibilities or any other responsibility shall be shared by two or more of such Named Fiduciaries. Whenever one Named Fiduciary is required by the Plan or Trust Agreement to follow the directions of another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have been assigned a shared responsibility, but the responsibility of the Named Fiduciary giving the directions shall be deemed his sole responsibility, and the responsibility of the Named Fiduciary receiving those directions shall be to follow them insofar as such instructions are on their face proper under applicable law.

Section 15.2 Plan Administrator.

There shall be a Plan Administrator, who shall be the Director of Human Resources of Westfield Bank, or such Employee or officer as may be designated by the Committee, as hereinafter provided, and who shall, subject to the responsibilities of the Committee and the Board, have the responsibility for the day-to-day control, management, operation and administration of the Plan (except trust duties). The Plan Administrator shall have the following responsibilities:

(a) To maintain records necessary or appropriate for the administration of the Plan;

(b) To give and receive such instructions, notices, information, materials, reports and certifications to the Trustee as may be necessary or appropriate in the administration of the Plan;

(c) To prescribe forms and make rules and regulations consistent with the terms of the Plan and with the interpretations and other actions of the Committee;

(d) To require such proof of age or evidence of good health of an Employee, Participant or Former Participant or the spouse of either, or of a Beneficiary as may be necessary or appropriate in the administration of the Plan;

(e) To prepare and file, distribute or furnish all reports, plan descriptions, and other information concerning the Plan, including, without limitation, filings with the Secretary of Labor and communications with Participants, Former Participants and other persons, as shall be required of the Plan Administrator under ERISA;

(f) To determine any question arising in connection with the Plan, and the Plan Administrator’s decision or action in respect thereof shall be final and conclusive and binding upon the Employer, the Trustee, Participants, Former Participants, Beneficiaries and any other person having an interest under the Plan; provided, however , that any question relating to inconsistency or omission in the Plan, or interpretation of the provisions of the Plan, shall be referred to the Committee by the Plan Administrator and the decision of the Committee in respect thereof shall be final;

(g) Subject to the provisions of section 15.5, to review and dispose of claims under the Plan filed pursuant to section 15.4;

(h) If the Plan Administrator shall determine that by reason of illness, senility, insanity, or for any other reason, it is undesirable to make any payment to a Participant, Former Participant, Beneficiary or any other person entitled thereto, to direct the application of any amount so payable to the use or benefit of such person in any manner that he may deem advisable or to direct in his discretion the withholding of any payment under the Plan due to any person under legal disability until a representative competent to receive such payment in his behalf shall be appointed pursuant to law;

(i) To discharge such other responsibilities or follow such directions as may be assigned or given by the Committee or the Board; and

(j) To perform any duty or take any action which is allocated to the Plan Administrator under the Plan.

The Plan Administrator shall have the power and authority necessary or appropriate to carry out his responsibilities. The Plan Administrator may resign only by giving at least 30 days’ prior written notice of resignation to the Committee, and such resignation shall be effective on the date specified in such notice.

Section 15.3 Committee Responsibilities.

The Committee shall, subject to the responsibilities of the Board, have the following responsibilities:

(a) To review the performance of the Plan Administrator;

(b) To hear and decide appeals, pursuant to the claims procedure contained in section 15.5 of the Plan, taken from the decisions of the Plan Administrator;

(c) To hear and decide questions, including interpretation of the Plan, as may be referred to the Committee by the Plan Administrator;

(d) To review the performance of the Trustee and such investment managers as may be appointed in or pursuant to the Trust Agreement in investing, managing and controlling the assets of the Plan;

(e) To the extent required by ERISA, to establish a funding policy and method consistent with the objectives of the Plan and the requirements of ERISA, and to review such policy and method at least annually;

(f) To report and make recommendations to the Board regarding changes in the Plan, including changes in the operation and management of the Plan and removal and replacement of the Trustee and such investment managers as may be appointed in or pursuant to the Trust Agreement;

(g) To designate an Alternate Plan Administrator to serve in the event that the Plan Administrator is absent or otherwise unable to discharge his responsibilities;

(h) To remove and replace the Plan Administrator or Alternate, or both of them, and to fill a vacancy in either office;

(i) To the extent provided under and subject to the provisions of the Trust Agreement, to appoint “investment managers” as defined in section 3(38) of ERISA to manage and control (including acquiring and disposing of) all or any of the assets of the Plan;

(j) With the prior approval of the Board, to direct the Trustee to obtain one or more Share Acquisition Loans;

(k) To develop and provide procedures and forms necessary to facilitate voting and tendering directions on a confidential basis;

(l) To discharge such other responsibilities or follow such directions as may be assigned or given by the Board; and

(m) To perform any duty or take any action which is allocated to the Committee under the Plan.

The Committee shall have the power and authority necessary or appropriate to carry out its responsibilities.

Section 15.4 Claims Procedure.

Any claim relating to benefits under the Plan shall be filed with the Plan Administrator on a form prescribed by him. If a claim is denied in whole or in part, the Plan Administrator shall give the claimant written notice of such denial, which notice shall specifically set forth:

(a) The reasons for the denial;

(b) The pertinent Plan provisions on which the denial was based;

(c) Any additional material or information necessary for the claimant to perfect his claim and an explanation of why such material or information is needed; and

(d) An explanation of the Plan’s procedure for review of the denial of the claim.

In the event that the claim is not granted and notice of denial of a claim is not furnished by the 30th day after such claim was filed, the claim shall be deemed to have been denied on that day for the purpose of permitting the claimant to request review of the claim.

Section 15.5 Claims Review Procedure.

Any person whose claim filed pursuant to section 15.4 has been denied in whole or in part by the Plan Administrator may request review of the claim by the Committee, upon a form prescribed by the Plan Administrator. The claimant shall file such form (including a statement of his position) with the Committee no later than 60 days after the mailing or delivery of the written notice of denial provided for in section 15.4, or, if such notice is not provided, within 60 days after such claim is deemed denied pursuant to section 15.4. The claimant shall be permitted to review pertinent documents. A decision shall be rendered by the Committee and communicated to the claimant not later than 30 days after receipt of the claimant’s written request for review. However, if the Committee finds it necessary, due to special circumstances (for example, the need to hold a hearing), to extend this period and so notifies the claimant in writing, the decision shall be rendered as soon as practicable, but in no event later than 120 days after the claimant’s request for review. The Committee’s decision shall be in writing and shall specifically set forth:

(a) The reasons for the decision; and

(b) The pertinent Plan provisions on which the decision is based.

Any such decision of the Committee shall be binding upon the claimant and the Employer, and the Plan Administrator shall take appropriate action to carry out such decision.

Section 15.6 Allocation of Fiduciary Responsibilities and Employment of Advisors.

Any Named Fiduciary may:

(a) Allocate any of his or its responsibilities (other than trustee responsibilities) under the Plan to such other person or persons as he or it may designate, provided that such allocation and designation shall be in writing and filed with the Plan Administrator;

(b) Employ one or more persons to render advice to him or it with regard to any of his or its responsibilities under the Plan; and

Section 15.7 Other Administrative Provisions.

(a) Any person whose claim has been denied in whole or in part must exhaust the administrative review procedures provided in section 15.5 prior to initiating any claim for judicial review.

(b) No bond or other security shall be required of a member of the Committee, the Plan Administrator, or any officer or Employee of the Employer to whom fiduciary responsibilities are allocated by a Named Fiduciary, except as may be required by ERISA.

(c) Subject to any limitation on the application of this section 15.7(c) pursuant to ERISA, neither the Plan Administrator, nor a member of the Committee, nor any officer or Employee of the Employer to whom fiduciary responsibilities are allocated by a Named Fiduciary, shall be liable for any act of omission or commission by himself or by another person, except for his own individual willful and intentional malfeasance.

(d) The Plan Administrator or the Committee may, except with respect to actions under section 15.5, shorten, extend or waive the time (but not beyond 60 days) required by the Plan for filing any notice or other form with the Plan Administrator or the Committee, or taking any other action under the Plan.

(e) The Plan Administrator or the Committee may direct that the costs of services provided pursuant to section 15.6, and such other reasonable expenses as may be incurred in the administration of the Plan, shall be paid out of the funds of the Plan unless the Employer shall pay them.

(f) Any person, group of persons, committee, corporation or organization may serve in more than one fiduciary capacity with respect to the Plan.

(g) Any action taken or omitted by any fiduciary with respect to the Plan, including any decision, interpretation, claim denial or review on appeal, shall be conclusive and binding on all interested parties and shall be subject to judicial modification or reversal only to the extent it is determined by a court of competent jurisdiction that such action or omission was arbitrary and capricious and contrary to the terms of the Plan.

ARTICLE XVI

AMENDMENT, TERMINATION AND TAX QUALIFICATION

Section 16.1 Amendment and Termination by Westfield Financial, Inc.

The Participating Employers expect to continue the Plan indefinitely, but specifically reserve the right, in their sole discretion, at any time, by appropriate action of their respective boards of directors or other authorized officials , to amend, in whole or in part, any or all of the provisions of the Plan and to terminate the Plan at any time. Subject to the provisions of section 16.2, no such amendment or termination shall permit any part of the Trust Fund to be used for or diverted to purposes other than for the exclusive benefit of Participants, Former Participants, Beneficiaries or other persons entitled to benefits, and no such amendment or termination shall reduce the accrued benefit of any Participant, Former Participant, Beneficiary or other person who may be entitled to benefits, without his consent. In the event of a termination or partial termination of the Plan, or in the event of a complete discontinuance of the Participating Employer’s contributions to the Plan, the Accounts of each affected person shall forthwith become nonforfeitable and shall be payable in accordance with the provisions of Article XIII.

Section 16.2 Amendment or Termination Other Than by Westfield Financial, Inc.

In the event that a corporation or trade or business other than Westfield Financial, Inc. shall adopt this Plan, such corporation or trade or business shall, by adopting the Plan, empower Westfield Financial, Inc., to amend or terminate the Plan, insofar as it shall cover employees of such corporation or trade or business, upon the terms and conditions set forth in section 16.1; provided, however , that any such corporation or trade or business may, by action of its board of directors or other governing body, amend or terminate the Plan, insofar as it shall cover employees of such corporation or trade or business, at different times and in a different manner. In the event of any such amendment or termination by action of the board of directors or other governing body of such a corporation or trade or business, a separate plan shall be deemed to have been established for the employees of such corporation or trade or business, and the assets of such plan shall be segregated from the assets of this Plan at the earliest practicable date and shall be dealt with in accordance with the documents governing such separate plan.

Section 16.3 Conformity to Internal Revenue Code.

The Participating Employers have established the Plan with the intent that the Plan and Trust will at all times be qualified under section 401(a) and exempt under section 501(a) of the Code and with the intent that contributions under the Plan will be allowed as deductions in computing the net income of the Participating Employers for federal income tax purposes, and the provisions of the Plan and Trust Agreement shall be construed to effectuate such intentions. Accordingly, notwithstanding anything to the contrary hereinbefore provided, the Plan and the Trust Agreement may be amended at any time without prior notice to Participants, Former Participants, Beneficiaries or any other persons entitled to benefits, if such amendment is deemed by the Board to be necessary or appropriate to effectuate such intent.

Section 16.4 Contingent Nature of Contributions.

(a) All Discretionary Contributions to the Plan are conditioned upon the issuance by the Internal Revenue Service of a determination that the Plan and Trust are qualified under section 401(a) of the Code and exempt under section 501(a) of the Code. If the Participating Employers apply to the Internal Revenue Service for such a determination within 90 days after the date on which it files its federal income tax return for its taxable year that includes the last day of the Plan Year in which the Plan is adopted, and if the Internal Revenue Service issues a determination that the Plan and Trust are not so qualified or exempt, all Discretionary Contributions made by the Participating Employers prior to the date of receipt of such a determination may, at the election of the Participating Employers, be returned to the Participating Employers within one year after the date of such determination.

(b) All Discretionary Contributions and Loan Repayment Contributions to the Plan are made upon the condition that such Discretionary Contributions and Loan Repayment Contributions will be allowed as a deduction in computing the net income of the Employer for federal income tax purposes. To the extent that any such deduction is disallowed, the amount disallowed may, at the election of the Participating Employers, be returned to the Participating Employers within one year after the deduction is disallowed.

(c) Any contribution to the Plan made by the Participating Employers as a result of a mistake of fact may, at the election of the Participating Employers, be returned to the Participating Employers within one year after such contribution is made.

ARTICLE XVII

SPECIAL RULES FOR TOP HEAVY PLAN YEARS

Section 17.1 In General.

As of the Determination Date for each Plan Year, the Plan Administrator shall determine whether the Plan is a Top Heavy Plan in accordance with the provisions of this Article XVII. If, as of such Determination Date, the Plan is a Top Heavy Plan, then the Plan Year immediately following such Determination Date shall be a Top Heavy Plan Year and the special provisions of this Article XVII shall be in effect; provided, however , that if, as of the Determination Date for the Plan Year in which the Effective Date occurs, the Plan is a Top Heavy Plan, such Plan Year shall be a Top Heavy Plan Year, and the provisions of this Article XVII shall be given retroactive effect for such Plan Year.

Section 17.2 Definition of Top Heavy Plan.

(a) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as of a Determination Date: (i) it is not a member of a Required Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key Employees exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees (excluding former Key Employees), former Employees (excluding former Key Employees and other former Employees who have not performed any services for the Company or any Affiliated Employer during the immediately preceding 5 Plan Years if the Determination Date is before January 1, 2002 and one Plan Year if the Determination Date is after December 31, 2001) and their Beneficiaries.

(b) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as of a Determination Date: (i) the Plan is a member of a Required Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key Employees under all plans that are members of the Required Aggregation Group exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees (excluding former Key Employees), former Employees (excluding former Key Employees and other former Employees who have not performed any services for the Company or any Affiliated Employer during the immediately preceding 5 Plan Years if the Determination is before January 1, 2002 and one Plan Year if the Determination Date is after December 31, 2001), and their Beneficiaries under all plans that are members of the Required Aggregation Group.

(c) Notwithstanding sections 17.2(a) and 17.2(b), the Plan is not a Top Heavy Plan if, as of a Determination Date: (i) the Plan is a member of a Permissible Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key Employees under all plans that are members of the Permissible Aggregation Group does not exceed 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees (excluding former Key Employees), former Employees (excluding former Key Employees and other former Employees who have not performed any services for the Company or any Affiliated Employer during the immediately preceding 5 Plan Years if the Determination Date is before January 1, 2002 and one Plan Year if the Determination Date is after December 31, 2001), and their Beneficiaries under all plans that are members of the Permissible Aggregation Group.

Section 17.3 Determination Date.

The Determination Date for the Plan Year in which the Effective Date occurs shall be the last day of such Plan Year, and the Determination Date for each Plan Year beginning after the Plan Year in which the Effective Date occurs shall be the last day of the preceding Plan Year. The Determination Date for any other qualified plan maintained by the Employer for a plan year shall be the last day of the preceding plan year of each such plan, except that in the case of the first plan year of such plan, it shall be the last day of such first plan year.

Section 17.4 Cumulative Accrued Benefits.

(a) An individual’s Cumulative Accrued Benefits under this Plan as of a Determination Date are equal to the sum of:

(i) the balance credited to such individual’s Account under this Plan as of the most recent Valuation Date preceding the Determination Date;

(ii) the amount of any Discretionary Contributions or Loan Repayment Contributions made after such Valuation Date but on or before the Determination Date; and

(iii) the amount of any distributions of such person’s Cumulative Accrued Benefits under the Plan (including, for Plan Years beginning after December 31, 2001, distributions under terminated plans that would have been included in the Required Aggregation Group if not terminated) during the 5-year period (for all distributions for Plan Years beginning before January 1, 2002 and for in-service distributions for Plan Years beginning after December 31, 2001) or 1-year period (for all distributions other than in-service distributions for Plan Years beginning after December 31, 2001) ending on the Determination Date.

For purposes of this section 17.4(a), the computation of an individual’s Cumulative Accrued Benefits, and the extent to which distributions, rollovers and transfers are taken into account, will be made in accordance with section 416 of the Code and the regulations thereunder.

(b) For purposes of this Plan, the term “Cumulative Accrued Benefits” with respect to any other qualified plan, shall mean the cumulative accrued benefits determined for purposes of section 416 of the Code under the provisions of such plans.

(c) For purposes of determining the top heavy status of a Required Aggregation Group or a Permissible Aggregation Group, the Cumulative Accrued Benefits under this Plan and the Cumulative Accrued Benefits under any other plan shall be determined as of the Determination Date that falls within the same calendar year as the Determination Dates for all other members of such Required Aggregation Group or Permissible Aggregation Group.

Section 17.5 Key Employees.

(a) For purposes of the Plan, the term Key Employee means any employee or former employee of the Employer or any Affiliated Employer who is at any time during the current Plan Year or was at any time during the immediately preceding four Plan Years:

(i) a Five Percent Owner;

(ii) a person who would be described in section 1.26 if the number “1%” were substituted for the number “5%” in section 1.26 and who has an annual Total Compensation from the Employer and any Affiliated Employer of more than $160,000;

(iii) an Officer of the Employer or any Affiliated Employer who has an annual Total Compensation greater than 50% of the amount in effect under section 415(b)(1)(A) of the Code for any such Plan Year; or

(iv) in plan years beginning before January 1, 2002, one of the ten persons owning the largest interests in the Employer and having an annual Total Compensation from the Employer or any Affiliated Employer in excess of the dollar limitation in effect under section 415(c)(1)(A) of the Code for such Plan Year.

(b) For purposes of section 17.5(a):

(i) for purposes of section 17.5(a)(iii), in the event the Employer or any Affiliated Employer has more officers than are considered Officers, the term Key Employee shall mean those officers, up to the maximum number, with the highest annual compensation in any one of the five consecutive Plan Years ending on the Determination Date; and

(ii) for purposes of section 17.5(a)(iv), if two or more persons have equal ownership interests in the Employer, each such person shall be considered as having a larger ownership interest than any such person with a lower annual compensation from the Employer or any Affiliated Employer.

(c) For purposes of section 17.5(a): (i) a person’s compensation from Affiliated Employers shall be aggregated, but his ownership interests in Affiliated Employers shall not be aggregated; (ii) an employee shall only be deemed to be an officer if he has the power and responsibility of a person who is an officer within the meaning of section 416 of the Code; and (iii) the term Key Employee shall also include the Beneficiary of a deceased Key Employee.

Section 17.6 Required Aggregation Group.

For purposes of this Article XVII, a Required Aggregation Group shall consist of (a) this Plan; (b) any other qualified plans currently maintained (or previously maintained and terminated within the five year period ending on the Determination Date) by the Employer and any Affiliated Employers that cover Key Employees; and (c) any other qualified plans currently maintained (or previously maintained and terminated within the five year period ending on the Determination Date) by the Employer and any Affiliated Employers that cover Key Employees that are required to be aggregated for purposes of satisfying the requirements of sections 401(a)(4) or 410(b) of the Code.

Section 17.7 Permissible Aggregation Group.

For purposes of this Article XVII, a Permissible Aggregation Group shall consist of (a) the Required Aggregation Group and (b) any other qualified plans maintained by the Employer and any Affiliated Employers; provided, however , that the Permissible Aggregation Group must satisfy the requirements of sections 401(a)(4) and 410(b) of the Code.

Section 17.8 Special Requirements During Top Heavy Plan Years.

(a) Notwithstanding any other provision of the Plan to the contrary, for each Top Heavy Plan Year, in the case of a Participant (other than a Key Employee) on the last day of such Top Heavy Plan Year who is not also a participant in another qualified plan which satisfies the minimum contribution and benefit requirements of section 416 of the Code with respect to such Participant, the sum of the Discretionary Contributions and Loan Repayment Contributions made with respect to such Participant, when expressed as a percentage of his Total Compensation for such Top Heavy Plan Year, shall not be less than 3% of such Participant’s Total Compensation for such Top Heavy Plan Year or, if less, the highest combined rate, expressed as a percentage of Total Compensation at which Discretionary Contributions and Loan Repayment Contributions were made on behalf of a Key Employee for such Top Heavy Plan Year. The Employer shall make an additional contribution to the Account of each Participant to the extent necessary to satisfy the foregoing requirement.

ARTICLE XVIII

MISCELLANEOUS PROVISIONS

Section 18.1 Governing Law.

The Plan shall be construed, administered and enforced according to the laws of the Commonwealth of Massachusetts without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by federal law.

Section 18.2 No Right to Continued Employment.

Neither the establishment of the Plan, nor any provisions of the Plan or of the Trust Agreement establishing the Trust Fund nor any action of the Plan Administrator, the Committee or the Trustee, shall be held or construed to confer upon any Employee any right to a continuation of employment by any Affiliated Employer. Each Affiliated Employer reserves the right to dismiss any Employee or otherwise deal with any Employee to the same extent as though the Plan had not been adopted.

Section 18.3 Construction of Language.

Wherever appropriate in the Plan, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine and the neuter. Any reference to an Article or section number shall refer to an Article or section of the Plan, unless otherwise indicated.

Section 18.4 Headings.

The headings of Articles and sections are included solely for convenience of reference. If there is any conflict between such headings and the text of the Plan, the text shall control.

Section 18.5 Merger with Other Plans.

The Plan shall not be merged or consolidated with, nor transfer its assets or liabilities to, any other plan unless each Participant, Former Participant, Beneficiary and other person entitled to benefits, would (if that plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive if the Plan had terminated immediately before the merger, consolidation or transfer.

Section 18.6 Non-alienation of Benefits.

(a) Except as provided in section 18.6(b) and (c), the right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation or assignment, nor shall such right be liable for or subject to debts, contracts, liabilities or torts. Should any Participant, Former Participant or other person attempt to anticipate, alienate or assign his interest in or right to a benefit, or should any person claiming against him seek to subject such interest or right to legal or equitable process, all the interest or right of such Participant or Former Participant or other person entitled to benefits in the Plan shall cease, and in that event such interest or right shall be held or applied, at the direction of the Plan Administrator, for or to the benefit of such Participant or Former Participant, or other person or his spouse, children or other dependents in such manner and in such proportions as the Plan Administrator may deem proper.

(b) This section 18.6 shall not prohibit the Plan Administrator from recognizing a Domestic Relations Order that is determined to be a Qualified Domestic Relations Order in accordance with section 18.7.

(c) Notwithstanding anything in the Plan to the contrary, a Participant’s, Former Participant’s or Beneficiary’s Accounts under the Plan may be offset by any amount such Participant, Former Participant or Beneficiary is required or ordered to pay to the Plan if:

(i) the order or requirement to pay arises: (A) under a judgment issued on or after August 5, 1997 of conviction for a crime involving the Plan; (B) under a civil judgment (including a consent order or decree) entered by a court on or after August 5, 1997 in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA; or (C) pursuant to a settlement agreement entered into on or after August 5, 1997 between the Participant, Former Participant or Beneficiary and one or both of the United States Department of Labor and the Pension Benefit Guaranty Corporation in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA by a fiduciary or any other person; and

(ii) the judgment, order, decree or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant’s, Former Participant’s or Beneficiary’s benefits under the Plan.

Section 18.7 Procedures Involving Domestic Relations Orders.

Upon receiving a Domestic Relations Order, the Plan Administrator shall segregate in a separate account or in an escrow account or separately account for the amounts payable to any person pursuant to such Domestic Relations Order, pending a determination whether such Domestic Relations Order constitutes a Qualified Domestic Relations Order, and shall give notice of the receipt of the Domestic Relations Order to the Participant or Former Participant and each other person affected thereby. If, within 18 months after receipt of such Domestic Relations Order, the Plan Administrator, a court of competent jurisdiction or another appropriate authority determines that such Domestic Relations Order constitutes a Qualified Domestic Relations Order, the Plan Administrator shall direct the Trustee to pay the segregated amounts (plus any interest thereon) to the person or persons entitled thereto under the Qualified Domestic Relations Order. If it is determined that the Domestic Relations Order is not a Qualified Domestic Relations Order or if no determination is made within the prescribed 18-month period, the segregated amounts shall be distributed as though the Domestic Relations Order had not been received, and any later determination that such Domestic Relations Order constitutes a Qualified Domestic Relations Order shall be applied only with respect to benefits that remain undistributed on the date of such determination. The Plan Administrator shall be authorized to establish such reasonable administrative procedures as he deems necessary or appropriate to administer this section 18.7. This section 18.7 shall be construed and administered so as to comply with the requirements of section 401(a)(13) of the Code.

Section 18.8 Status as an Employee Stock Ownership Plan.

It is intended that the Plan constitute an “employee stock ownership plan,” as defined in section 4975(e)(7) of the Code and section 407(d)(6) of ERISA. The Plan shall be construed and administered to give effect to such intent.

EXHIBIT 31.1

CERTIFICATION

I, James C. Hagan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Westfield Financial, 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;

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 fi nancial 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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: November 8, 2011	/s/ James C. Hagan
	James C. Hagan
	President and Chief Executive Officer
	(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

I, Leo R. Sagan, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Westfield Financial, 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;

(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;

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):

(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: November 8, 2011	/s/ Leo R. Sagan, Jr.
	Leo R. Sagan, Jr.
	Chief Financial Officer
	(Principal Financial Officer)

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 Westfield Financial Corporation (the “Company”) for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James C. Hagan, President and Chief Executive Officer of the Company, 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.

November 8, 2011		/s/ James C. Hagan
Dated		James C. Hagan
		President and Chief Executive Officer

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 Westfield Financial Corporation (the “Company”) for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leo R. Sagan, Jr., Chief Financial Officer of the Company, 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.

November 8, 2011		/s/ Leo R. Sagan, Jr.
Dated		Leo R. Sagan, Jr.
		Chief Financial Officer